Good morning, my name is Denise, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Hershey Company Third Quarter 2011 Results Conference Call. [Operator Instructions] Mr. Mark Pogharian, you may begin your conference.

Thank you, Denise. Good morning, ladies and gentlemen. Welcome to the Hershey Company's Third Quarter 2011 Conference Call. J.P. Bilbrey, President and CEO; Bert Alfonso, Senior Vice President and CFO; and I will represent Hershey on this morning's call. We also welcome those of you listening via the webcast. Let me remind everyone listening that today's conference call may contain statements, which are forward-looking. These statements are based on current expectations, which are subject to risks and uncertainty. Actual results may vary materially from those contained in the forward-looking statements because of factors such as those listed in this morning's press release and in our 10-K for 2010 filed with the SEC. If you have not seen the press release, a copy is posted on our corporate website in the Investor Relations section. Included in the press release is a consolidated balance sheet and a summary of consolidated statements of income prepared in accordance with GAAP. Within the Notes section of the press release, we have provided adjusted pro forma reconciliations of select income statement line items quantitatively reconciled to GAAP. As we've said within the Notes, the company uses these non-GAAP measures as key metrics for evaluating performance internally. These non-GAAP measures are not intended to replace the presentation of financial results in accordance with GAAP. Rather, the company believes the presentation of earnings excluding certain items, provides additional information to investors to facilitate the comparison of past and present operations. We will discuss third quarter results excluding net pretax charges related to Project Next Century of $13.5 million in 2011 and $4.5 million in 2010, as well as our third quarter 2011 net pretax gain on the sale of non-core trait licensing rights of $17 million. Our discussion of any future projections will also exclude the impact of these net charges. With that out of the way, let me now turn the call over to J.P. Bilbrey.

Thanks, Mark, and good morning, everyone. Before I start, I just want to make sure that this question doesn't come up later. Bert Alfonso is the Executive Vice President, CFO and CIO, so nothing happened to him on the way to this call. Results for the third quarter were solid, and I'm pleased with our financial and marketplace performance despite the macroeconomic challenges that persists. The CMG -- candy, mint and gum category continues to grow above the historical growth rate and is outpacing salty snacks, cookies and crackers. Our business is strong in all classes the trade and our collaborative partnership with retailers continues as they value the importance of the confectionery category in the leadership that Hershey provides. Hershey's third quarter results reflect the continued momentum of our brands. Net sales increased 5%, slightly ahead of our expectations. Seasonal volume which were sold in at previously agreed upon price points and represents about 1/3 of our total U.S. net sales in the third quarter increased and, for the year, will be greater than our initial expectations. Price realization on nonseasonal items in the U.S. was also ahead of our estimates. Importantly, volume elasticity on these pack types was in line with our modeling and better than the historical staples group average. For a profitability perspective, earnings came in a bit better than our expectations. Our overall commodity cost profile was significantly higher this quarter than in 2010. However, cost savings and productivity initiatives as well as net price realization helped mitigate the impact. Our solid results enabled us to be flexible in our approach to incremental brand investment. In 2011, we estimate that advertising will increase high single digits on a percentage basis versus the prior year, enabling us to support new advertising on Jolly Rancher and Hershey's…

Thank you, J.P., and good morning, everyone. First, we closed another quarter of volume results as net sales increased at the higher end of our long-term target. Topline growth was balanced across the U.S. and international markets and retail takeaway continued to be strong leading to market share gains. These results allow the flexibility and the timing of incremental brand investments during the third quarter and over the remainder of the year. The third quarter 5% net sales gain was driven primarily by the continued growth of our core brands and new products. Net price realization, primarily in the U.S., was about a 5.4-point benefit. As J.P. mentioned, price realization are non-seasonal items in the us was ahead of our estimates. Seasonal volume gains that were better than initial expectations were driven by Halloween and new products, primarily Reese's Minis and Hershey's Drops, that continued to perform well in the marketplace. Offsetting these gains were modest volume declines in line with our price elasticity model resulting in an overall volume decline of about 1 point. In addition, favorable foreign currency rates contributed approximately 0.5 point. Importantly, on a portion of the portfolio where pricing was in effect, we were pleased that net price realization involving elasticity, which was relatively in line with our estimates. Turning to margins. Third quarter adjusted gross margin was 42.5%. As expected, the third quarter adjusted gross margin decline of 20 basis points, sequentially improved versus Q2 and was in line with our estimates. Net price realization and productivity improvements were offset by increased commodity and supply chain costs. Input costs were about $45 million unfavorable in the quarter and in line with our expectations. We have good visibility into our cost structure for the remainder of the year. And there's no change to our full…

[Operator Instructions] And your first question comes from the line of David Palmer with UBS.

The retail inventory levels, how do they look lately? I guess, I'm really getting at do you see your sales tracking with what looks to be very healthy consumer takeaway numbers?

Yes, I would say, yes, David. Our shipments are roughly in line with that consumption pattern, and so we've not seen a change of what we consider good inventory levels at the trade.

And then going forward, I guess, that price elasticity that you talked about in this quarter -- I mean, if we were to take a step back and look at consumer price elasticity and think of it that way, how do you see that playing out in terms of that changing your volume momentum for that change in price realization? What do you think that price elasticity is?

I mean, are you referring to Q4? How we think about next year?

For this year like how do you think it is indeed playing out because it doesn't look like from the consumer data that you're nearly having the price elasticity, for instance, you had in the previous price increases.

Yes. If you look at how we had talked about this historically in models that even though all the way back to 2008, as you know, we talked about it kind of being a one-for-one sort of relationship that current reported increase you would see a point of volume decline. As we've revised our both models and experiences and we've mentioned this a couple of times as well, it's really much closer to about a half in volume decline for a point of increase. And then we continue to see that the pricing is -- it's being passed through faster following each of our experiences with recent price declines. Then the other point, I think, that is important to think about and we're also learning from, when some of the commodity cost inflation begin, our investment levels and advertising in our brands were certainly significantly lower than it is today. So I think reminding consumers why they participate in the category in the face of the news of pricing, et cetera, has really helped us. So we think that's really been fundamental to the better conversion that we've seen over time.

And if I could just squeeze one more. As far as the inflation you're expecting for 2012, any comments there? And then if there's even a feeling as to how the earnings growth for next year might be weighted back half first half, that would be helpful.

Yes, in terms of -- we said we're really expect today -- we do expect meaningful commodity cost inflation to continue from this year into next year. Having said that, we're very focused on our gross margin, and we believe that maintain the gross margin structure is important to us. We have a lot productivity programs next year. We've got an episode fixed from Project Next Century as we bring some lines in. It's a little early -- a little early for us at this stage to start providing any seasonalization to the earnings for next year. But needless to say, we do expect continued inflation. But we also believe that we have good progress in place to help mitigate those.

Your next question comes from the line of Alexia Howard with Sanford Bernstein. Alexia Howard - Sanford C. Bernstein & Co., LLC., Research Division: We've seen reports that you're setting up a supply chain and distribution collaboration with Ferrero here in the U.S. Could you tell us a little bit more about the arrangement, how that's going to work and the potential costs savings?

Well, I won't detail the specific cost savings piece of it. Bert may talk about that within a more holistic basket. But as we look at our overall distribution opportunities, we look across the total CPG group for opportunities that we may be able to combine efforts. As you know, in China, we have a joint asset with Lotte and as we were looking at building additional distribution capability. And, by the way, this distribution facility will be in Canada, but it will serve a broader market. We found that we had similar needs. It's pretty common in a number of other geographies where manufacturers go together for some of these noncompetitive types of things where you can get synergies via cost sharing, et cetera. And so that's really -- there's not a lot more to it than that. That's really the complexion of what we're looking at with that particular project. Alexia Howard - Sanford C. Bernstein & Co., LLC., Research Division: Okay. And just a quick follow-up. Last quarter, you mentioned that there might be some changes in how you participate in India. Could you perhaps comment on how you're thinking developing on that?

Well, we continue to be very excited about India. If you look at the combination -- and I'll talk a little bit about this -- is that the Indian market for us, we have a joint venture with Godrej. That business is doing well this year. It's up versus previous year. We've learned a lot. We continue to be committed to the Indian market. We're going to be assessing over time what's the best way for us to participate in India. But right now, our joint venture with Godrej is the way forward for us in India.

Your next question comes from the line of Eric Katzman with Deutsche Bank.

I have a couple of questions on the top line. I mean, maybe I'm just not correctly understanding it. But let's just talk about the category first. The category I think you said off take was up like 8% or so, and yet your sales are up 5%? And then, Bert, I think you talked about how you were shipping to consumption. So is it that the retailers are taking greater price if what you're shipping in terms of volume is equal to what's being taken off at retail? I'm not exactly clear how these 2 figures kind of match up.

What we said was that the category in the quarter had performed at 4.5%, and year-to-date, around 4.4%. So it is -- the category is tracking ahead of the 3% to 4%, which we see historically. So a little bit ahead of the 4%. The 8% is the Hershey takeaway number. And so obviously, we're gaining share within the category, about 1 point year-to-date and about 1.25 points. And so what I'm referring to in terms of inventory levels across the different classes of trade. And obviously, you have some of the impacts of Halloween going in that we don't see a big change in inventory levels at the trade level and that we're shipping in approximately what consumption patterns are. But the category itself is not the 8% number. That's our number.

I'm talking about your takeaway. Europe 8 or 9 at retail and your sales at revenue-to-revenue are up, let's say, 4 to 5? Because you got the international component which is going to be my next question. But, right so you were -- either retailers are taking higher pricing than you're putting through or the volume, you're under shipping volume, right?

Yes, and I think J.P. did refer to that. What we are seeing -- and I think I spoke to it. I said if you look at the quarter, net price realization was about 5.5 points. We got a volume -- we had a point of volume decline, and then about 0.5 point of FX to the positive. So that's how we get to our 5. But J.P. did mentioned that we are seeing greater performance at convenience, because within that 8%, we were up almost 13%. And we are seeing that price is something that the retailers are being more aggressive about, so you're right about that point and I think we alluded to that.

Okay. So volume for volume is roughly okay, but the retailers are taking more pricing and that's why you're seeing greater dollar revenue growth at retail for your business versus what you're reporting.

Yes. And the mix we think influences that. Because while our total takeaways is around 8%, convenience stores, where we do see a lot of pricing coming through, is almost 13%.

And king as an example was up 18% in conveniences, part of that price mix equation.

Right. So there is a mix benefit as well in terms of the channels.

Okay. And then just a follow up. On the sales that you mentioned for international, you talked about, I think, Bert, 25% growth and is that on the -- does that include Canada and export or whatever, so that's like 15% to the business?

It does not include Canada but it would include exports. And markets -- some of our markets are export markets and -- but in Mexico, Brazil and China, we actually have production on the ground so that includes the focus market, exports, but not Canada.

So is it -- given that, that's -- I have to imagine that's mostly volume. Does that mean that your U.S. volume was actually down, let's call it, 2 or 3?

We didn't give an exact U.S. number. We did say 1 was the composite number. And so -- yes, but U.S. would have been a little bit more than the 1 and the international numbers would have been positive volume.

Your next question comes from the line of David Driscoll with Citi Investment Research.

Just a couple of quick questions. Bert, wanted to go back to the 2012 commodity costs. So you mentioned both in the press release and then in your prepared comments about the costs in comparison to the 2-year average. You guys are always a little bit murky about how the commodity costs kind of flow through the system and how we should look at it. This is, I think, the first time I've seen you like mention kind of a 2-year trailing look at where commodities were on the spot versus that historical basis. Can you just expand upon why you choose that kind of a timeframe? How that flows into the company's thinking on commodity costs and then consequently, pricing?

Yes. The reason we made that comparison, David, was more to put in perspective the fact that there has been some recent decline. And so the spot market, as you know, ourselves and our competitors, they have some degree of hedging, in fact our 10-K says we could be anywhere from 3 to 24 months. And so it was really only a reference point because commodities have come down as a basket, but they still remain high. And that was really the key message that they still remain high. Cocoa has come off a bit, but we see sugar prices -- even oil yesterday closed about $92, so energy prices remain high. And so the message really for us was to put some perspective around the recent decline that, yes, there's been a recent decline but so on relative basis, we have high commodity costs and they're quite volatile. Even in today's market, you've seen cocoa creep back up as the dollar weakens a bit against the euro. So I think the real takeaway that we try to put across was that we're very gross margin focused and that we have good programs against those commodity cost increases.

Is it then correct to say that the recent declines are not beneficial to Hershey because of the hedging program? Meaning to say, you'd already locked in a great amount at 2012, so don't get so excited about the recent declines because you won't see them. Is that the right message?

No, that's really not the message. Declines are always good so -- in any context. We're just not trying to put any one-to-one relationship between the declines in any particular period. That's all. But declines are good in any case.

You mentioned headwinds. You mentioned that in your prepared comments as well. What do current rates suggest about the EPS headwinds from pensions? Can you give us a ballpark?

No, we're not giving any specifics on those. The markets today are relatively flat. And you would expect that our pension assumption has some return. And so if they ended today, we would have some impact. I would say that it's still -- we still believe within that context that we will be within our 6 to 8, and it could go any way. Could end the year up, 10%. In which case, it may not be an issue at all, but it could end down 10%, in which case it might be a bigger issue. But as of today, it's relatively flat rate. Our 6 to 8 still feels good.

So that's not a discount rate issue. That's the return issue and how it's amortized over the life of the...

No, it's both. It's both. The fact that the rates have come from roughly 5% to 4%, it has a pretty significant impact.

Yes, I would've thought that was the bigger one. And then final question, you mentioned the likelihood of a note issuance. Can you talk about the size? And I believe that that's just incremental to the balance sheet, so I would expect interest expense to rise upon the completion of a note offering. Am I thinking correctly?

I wouldn't figure that's an interest rate increase and no, I'm not going to comment on the size.

Your next question comes from the line of Jason English with Goldman Sachs.

I want to circle back to Eric's question because it sounded like on the back and forth, the takeaway was -- that yes, indeed, retailers are pricing ahead of you and therefore margining up the category. Is that what's really happening or is this just a factor of 2/3 of your shipments went out at an 8% to 9% price increase, which is what we see in consumption data, and 1/3 went out with 0, which has yet to pop up in the consumption data?

Well, I think that's probably a reasonable assumption to make, that a higher percentage is going out at the higher price, and that would be affecting also the mix that we would have forecasted for the quarter. And then I come back to the fact that retailers seem to be converting price at retail faster than they had before. The seasons, of course, are going to be a deal price. So the good news is that the conversion is good, especially on the instant consumables, which have already taken the pricing, and people are participating in the marketplace. And then for me, one of the most encouraging things around the pricing environment is the fact that king continues to do so well as consumers see it as a value and it's not an obstacle to participate in the category.

The king information's interesting and I think you said 18% in C-store. I know last time you guys took price, we saw a tailwind on that. That was a nice margin boost. But your margins remain sort of confoundingly lower than I would expect. You gave us an inflation number of around 45 and prices around 83 million on that 5 4. Just mathematically, not even accounting for productivity, that gets me to a margin number that's above where you came in. Is there a mix effect? Is this maybe the international factor or are there expenses in the COGS line that are incremental or maybe haven't called out?

No, I wouldn't say that. There is some mix as we grow more rapidly and internationally, we said 25%. It's not the same margin. So I would -- that part would be true. And in any case, our margins, we said, would be flat versus last year. We continue to believe that. We continue to see sequential improvement. I think we're down a bit over 100 basis points in the second quarter and about 20 this quarter. We expect a further sequential improvement in the fourth quarter. And so there is a lot of commodity inflation built into this year. And while we do have strong productivity programs, we expect to be about flat margin to the year.

Your next question comes from the line of Rob Moskow with Credit Suisse. Robert Moskow - Crédit Suisse AG, Research Division: I just had a couple of quick questions. First one is why not guide to the high end of your normal sales guidance for 2012? You've said today that you're seeing a better elasticity of demand relationship than you have historically. You are taking market share. You say that the category is performing quite well. And now you have the international on top of it. It seems like if anything -- you've also had 2 years where you have been above your range. So it seems like we're going to have another year just like that. And then secondly, can you tell me, is there any negative impact to your mix from the shift of consumers to king-sized items? And then also, we noticed in the Nielsen data a lot of bagged items growing faster than your regular single serve. Have you done the math on that?

Well, let me take the king-sized first. So there's no negative impact to the growth of king from a margin standpoint. And we'll provide additional perspective on how we're looking at 2012 when we get together the next time. We've still got a couple of months of the year left. We don't know what Halloween sell-through looks like yet, although we feel very good about where Halloween is headed. And we don't know how consumers are going to act through the holiday as they look at their total macroeconomic perspective. So we feel very comfortable about the outlook of our business, and we'll provide greater texture to that the next time we get together.

Your next question comes from the line of Jonathan Feeney with Janney Capital Markets.

When I look back over the past few quarters now, looks like this consistent pattern of you guys are beating at the gross profit line and investing more at the SG&A line. I think particularly in advertising, if you look at the past 2 or 3 years but the marketing and advertising this quarter and, I guess, do you reach a saturation point both as a category and a company, where there's a diminishing marginal return to those investments and maybe you pocket some more of that? Or are there would -- are there other places to invest at the expense line as we look forward to 2012 that would impact the way you're going to talk about guidance?

Jonathan, let me talk about it in a little bit of a broader sense that may give you some perspective there. I look over the 5-year plan that we have in place. There's really 4 things that I'd like you to think about. First of all, we want to drive predictable, profitable and sustainable growth in our North American business. We continue to believe there's a lot of potential with our North American business. We also want to deliver geographic expansion in the key markets we talked about. And one of the ways you do that is by creating density in each of those markets around the organization, economic density and the coverage that we need in our business. And then we want to create and expand consumer preferred portfolios in each of those markets. So in a lot of these markets, our portfolio on some level is not as broad as we have the potential for it to be within our own existing portfolio and the new brands that we would be able to add to that. And then the fourth thing that we're very focused on is building the people, the processes and the capability to leverage the intellectual capital we have. So what I feel really good about is this enables us to deliver a very strong foundation to be very consistent that we deliver the things that we say we're going to deliver, and we create a company that has a better platform and foundation than the one we even have today. It's as good as we feel about it. And if you think about the potential of that story, it makes our brands available to an incremental 1/3 of the world's population by focusing on only those key markets and building out our business there. And as we do that, it's going to change the mix of some of the investments we make from what we've done historically. But if we do that in a thoughtful and mindful way, we believe it's a very compelling boost for our company.

That's very helpful. And I think the -- just one follow-up that I had. The 8.7% retail takeaway numbers you give, the IRI data correspond into that is 6.3% as I see it in sales and a 10-basis-point decline in volume generally given the mix shift. Can you tell us what the volume component if you haven't them already of that 8.7% is?

Yes, I spoke to it earlier. And you're talking about the quarter, yes?

Yes, on the quarter. The 12 week ended September 30.

Yes. The 8.7% that J.P. refer to was our custom database, which would include Walmart. And so that would be different than the syndicated FDMxC at 8.4%. And then the volume impact in the quarter was the minus 1 point.

But that's shipment volume, right?

Yes, yes.

I was wondering if you could give us the volume component of that 8.7%, the same way IRI gives us the volume component of the correspondent 6.3%.

Well, I mean...

I was going to say -- Jonathan, it's Mark. Again, J.P. referenced how we look at the volume elasticity and -- I mean, if you'll assume you got -- you assume that all gist on the pricing component of the business, because Halloween has yet to show up in those numbers in a meaningful way. And again, just being liberal here for our discussion. You'll assume that's all 9 points of price almost, okay? Let's assume it's less than a one-for-one relieve volume to price relationship that staples group averages. But it's not quite 0.5 to 1 so it's somewhere in between that.

Let me just add one additional piece of texture that may or may not help you on this, but the only thing it was different in Q3 that if you go back over the last couple of years, you've heard us talk a lot about how we needed to do better in the drug channel than we've been doing. 2 particular pieces of our business were not only in Q3, but as we begin to build a better base here going forward, we've now -- I'll call it turned our business around a more positive results in the food channel. It made significant strides in drug as well. So if you look at the way the business is performing, we've been performing well across channels. We've really also benefited from a bit of a channel mix change as well as we do better and better in those particular channels. So we're almost participating in those segments in a way that we haven't for quite some time.

Okay, I get all that but -- and maybe it's because I've had like 6 Kit Kats this morning. But I think the -- is it -- am I asking for a number you've already given us or you're not giving me the number?

We didn't get into that level of specificity.

Your next question comes from the line of Bryan Spillane with Bank of America.

Just a clarification on how pricing -- how the price increases flow through your P&L. I guess, when -- after the -- you had disclosed or announced your price increase back in March, that the, I guess, the impression or the commentary that you guys were making about how that would flow through your P&L, was essentially that there wouldn't be much in the, I guess, second and third quarters because of the mix. And it seems like it's come in better than what we had modeled and better than what you would expect it. So I guess one thing I'm trying to understand is how much of that is just that the mix has been different. You've done better in single bar and in convenience store, how much of it has been that you haven't had the support the price increases much with promotions. Meaning, your net -- you've been net more effective. You've net seen more of the pricing flow through your P&L.

It's certainly did more about the mix than the -- we can give us supporting the price increase. And so think of Halloween in the third quarter, if that's the old prices and mechanically from accounting perspective the way that would work is that between gross and net, we would have a higher trade promotion number that supports that price increase. But it's more mix than it is that we're spending less to promote -- to protect the prices if that's your question.

Okay. So relative to what you were expecting going into the quarter, your mix was just much different than you thought it was going to be?

Well, the mix was different, yes, and you know part of that you can see in the almost 13% takeaway in convenience. J.P. also talked about drug stores which also has a decent amount of consumable on the front end. So it would certainly be mix that will be important. And then within the context of that one-to-one of historical CPG price conversion and the 0.5 point that we talked about. Mark mentioned we're somewhere in between there, so a little bit better than we anticipated.

And then with retailers pricing up or taking more price at the shelf and being successful with it. Is there any chance that on your seasonal items is this -- I guess, as we go through Halloween and the holidays that we'll see more -- some of that as well that if they've been successful pricing on -- raising prices on the nonseasonal that it makes sense to maybe go up on the seasonal as well?

I mean that's not something that's predictable for us. Obviously, retailers set their own prices. What we do is provide the price protection because we've already agreed on the demand equation 6, 8, 9, 10 months ago on a particular season. So that could happen but again, J.P. may want to speak to some of the programs.

As I look at some of the pricing and all that we're seeing in the market, it really looks as though that the prices are the prices we would have anticipated because we had not taken up prices on Halloween. So I don't think that's an area where people are taking pricing earlier. I think they're really looking at it as a good destination for the consumers. They want to have a proactive pricing. It's competitive. And so you wouldn't really see against the Halloween promotion any kind of pricing inflation.

Your next question comes from the line of Eric Serotta with Wells Fargo.

Clearly, your overall category growth has been stronger than historical averages. And you also alluded to it being stronger than what you're seeing in some substitute categories like salty snacks. I'm wondering whether you could give some color as to why you think you're outperforming salty snacks and what's going on in some of these substitute categories or your category that's enabling that?

Well, I think what I would say is that as we move through the last couple of years with broad economic pressure on the consumer, our category has really, on some level, benefited from the fact that it's an accessible indulgence. And rather than contrast things against cookies, crackers, et cetera. I just think that our category participates in this kind of environment almost at a higher level than it does on a regular basis, because you pick up business from people who maybe have left something else. They still want to feel good. They know that it's something that's within an arm's reach of desire. We have broad-based availability for our products, similar to some of those other categories. But I think this is just one of the real magic benefits of this category is that it's accessible. It's affordable. Chocolate is one of the most business -- frankly, the most affordable country in the world on a cost per pound that participate in the category. And I think that's as important as anything. And then remember, we have ubiquitous distribution. So as we talked about being within an arm's reach of desire, we're in the front end of the store, near the checkouts or at the counters and a lot of places. And then the convenience store businesses continue to do very, very well. And then one of the things -- one of the dynamics we've seen there is some people had pressure on not filling their tank and making multiple trips per week versus -- or maybe they're making one and filling their entire take. They still seem to be going in the store. And we've also benefited from that. So that's really the color commentary I would give that versus trying to contrast us versus 2 or 3 other segments.

Your next question comes from the line of Robert Dickerson with Consumer Edge Research.

Just a couple quick questions. So I hate to beat the dead horse again, but back to the question on the takeaway of the 8.7%, I think you said it was 8.4% in FDMxC channels? And, I mean, what we're seeing in the 4 channels though is that volumes were actually still a little bit up in the quarter. So if that's the case, I mean, does that imply then that volumes could have been a little bit pressured at Walmart? Or are we just missing something?

Walmart was fantastic in that number. The 8.7% is with Walmart.

Right. But the 8.4% that you mentioned.

8 4 is the FDMxC. That excludes Walmart. The 8 7 includes Walmart.

Right. I'm just saying, we actually look at the 4 channels. And the 4 channels that we're looking at show volumes up a little bit. So that would -- I guess, the question is if there were any volume pressure in that 8.7% number we're seeing and that would imply that the volume pressure would not be in FDMxC, it would be in Walmart. I'm just trying to get a little color on it.

I think -- we're not going to talk about any specific retail volumes. But I think in total, we continue to feel very good about the Q3 trends and the areas of issue.

Okay, fair enough. I'll leave it at that. And then another question back on interest expense. You said earlier that you -- that we shouldn't look at the potential credit raise as an increase in interest expense now. With rates where they are, it could also mean a decrease in interest expense as we get into 2012. Is that credit raise factored in already into the 6% to 8% EPS growth for next year?

Yes, in terms of what I mentioned is that we paid down the $250 and we're looking at the credit markets, we like the current rates and that there's certainly potential to reissue. That would be neutral to next year.

Your next question comes from the line of Thilo Wrede with Jefferies. Thilo Wrede - Jefferies & Company, Inc., Research Division: First I'll ask a question about your new products -- revenues from new products. Can you tell us what the revenue contribution was from new products during the quarter? And now that you're about to lap the minis and drops introduction, what do you expect for the next few quarters?

Sure. First of all, let me go back and anchor us in our overall objectives and that is we get about 1 point of our growth algorithm from innovation. Certainly in 2011, we're well ahead of that. We're very pleased with the innovation stream that we have in the pipeline. What we're doing is probably differently from the path is where I think that category in many ways is focused on just introducing a number of items. I think we're far more consumer-centric than we were before. And when we have the innovation that's working hard for us, we want to make sure that we continue to invest in that in year 2 and year 3. So we're very comfortable and I think our retail partners here are pleased with the innovation stream that we have. We do have new things that we're introducing it. In the fourth quarter, we will be lapping the introduction of both minis and drops, and we won't have in the fourth quarter the same innovation contribution that we did in 2010. And then we believe we have a good pipeline of products that enable us to continue to deliver against that growth algorithm going forward. I think there's going to be some years we do better than that. Certainly, this is the last couple of that, that's been true. And there's going to be others that we are about on that pace and that's why we talk about it that way. Our goal is not about quantity, but it's about quality and ensuring that they have net contribution as after cannibalization to our business. So when we talk about those numbers, that's not a gross number of new things selling within the year, but it's really about sticky innovation that's additive to both ourselves and retailers. Thilo Wrede - Jefferies & Company, Inc., Research Division: But can you give us an idea if the new products innovation contributed -- how much more contributed than the target 1% during the quarter?

Well, I'm not going to give the exact contribution level but I can tell you we're very, very pleased and it was well above what all of our bases testing and forecasting would have told us. So we're -- we just feel really good about it and rather than break that out. I would leave it at that. We have innovation coming in June of next year that we're excited about that we think will also be good news for us. We haven't introduced that in the marketplace yet. We've certainly gotten some retailer input during the development phase. But you'll see us back in the middle of the summer with some things that we'll be taking to retailers. Thilo Wrede - Jefferies & Company, Inc., Research Division: Okay, that is helpful. One more question maybe on the retail takeaway. You said that the retailers' priced higher than you actually price. Did volumes for retailers were, therefore, lower than what you saw for your own shipment volume?

I think what we're really saying is that the timing of when pricing is happening in the marketplace seems to have changed over the historical reference points. Because with all of the broad level of pricing that's happened in the market and with all the broad commodity basket inflation, I think what's happening is that retailers are taking that pricing maybe sooner than it would have happened historically. And, therefore, we're seeing that passthrough. That's really the effect. I don't think anybody is necessarily taking pricing beyond what's being passed through from manufacturers. Thilo Wrede - Jefferies & Company, Inc., Research Division: Is the timing -- but does that mean that there's also timing issue about the volume impact of this pricing?

No. We believe that as we look at the conversion modeling that we've done, it continues to be on track versus what we've said. And then we said it's moved from broad stables number of what's historically been a one-to-one effect to really a 1 to much closer to 0.5 effect in terms of pricing volume ratio.

Yes, Phil. And that's what's built into our forecasts, so we would expect the volume trends to actually improve going forward, especially here into the fourth quarter.

Your next question comes from the line of Todd Duvick with Bank of America.

Quick question on the balance sheet. Just with respect to financial leverage, obviously your leverage is lower now since you paid off the note, but it's been coming down the last couple of years. So as you look at the credit markets, can you tell us what you're looking at in terms of how much you may look to issue? Is it -- is there a leverage ratio or is there a credit rating? And is that coming from the management team or the board or a combination?

Yes, I would say that the -- let me start with your latter point and I'll work back to your initial question. Certainly the capital structure of the company is ultimately a board level decision. Now management has a view, and we certainly inform the board what we think is the appropriate position to take. We think of it less in terms of a debt-to-equity or a particular metric, although clearly you have to pay attention to those with the rating agencies. But we think about more in terms of the desired credit rating. And we're an A1P1 issuer. We like the A credit rating. We've talked in the past about with strategically for M&A purposes, would you come off those ratings. We said that for something that was strategic and transformational you would. You'd want to see a clear path back. And so right now, we're at about 1.5 in terms of debt-to-equity. And we paid down the bond, but we're looking at the credit market to see if it's not an appropriate time given the interest rate environment to get back into the marketplace. So it's more about the credit rating and, absolutely, to your point, it is ultimately a board level decision.

Your next question comes from the line of Ken Goldman with JPMorgan. Kenneth Goldman - JP Morgan Chase & Co, Research Division: I just wanted to follow up little bit on Rob Moscow's question on guidance. When you look back, your initial guidance for both 2010 and '11, you pointed to 6% to 8%. And then you finished or will finish healthily above that. Look back to 2009, you got it to below 6% to 8% initially and you finished well above that. And now you're guiding to that 6% to 8% range again for next year. So given your history, why should we not believe that you're being fairly conservative? I appreciate you don't want to give a lot of detail on that today. But any insights into the thoughts on what's some of the general pushes and pulls there would be helpful that maybe we're not thinking about. Just something on the tax line or is it just something in the general market for confectionery items. I know I'm fishing here. Just hoping for a little nibble.

Yes. In terms of the guidance, what we've said in the past was that the 3% to 5%, 6% to 8% gives us the flexibility in terms of investment posture. And we've increased some of the -- increasingly have been investing more not that just in the U.S. but outside of the U.S. And given the scale differences, there are different margin structures in non-U.S. markets. The guidance around -- last year, I think around this time, we did give guidance for around the 3% to 5%, 6% to 8%. And as the fourth quarter ended and we had more visibility into the year, we did change to sort of the upper end of those ranges. And we gave that indication early in the year. And so our intent would be somewhat similar. And as we see the year come to a close, as we get a better read on next year, whether it's cost basket wise or how we see our sell throughs on an important season like a Halloween and a holiday, that we will provide further detail and further color around how we feel within those ranges. So I understand the point in terms of being more specific. For us, it's really time of year. It gives us the flexibility to invest buying our business. We think we do that in a disciplined way. And we want to be predictable and to the extent that we can manage our business within those ranges. Kenneth Goldman - JP Morgan Chase & Co, Research Division: Okay. And then just one more brief question. Can you talk a little bit about currency? I don't think you mentioned this yet. Forgive me if you did. How it affects, right now, given spot rates, your top line and margins next year?

Yes. The currency markets in the first, let's call it -- certainly the first half of the year, we saw that the dollar was weakening. We saw somewhat of reversal of that as you know in the third quarter, mostly precipitated by concerns around Europe, obviously, in flight to safety. And then we've seen that tail off a little bit again to where the dollar's started to weaken again. And so right now, we would anticipate that we have less exposure obviously than some of our competitors in the international market. And yet, this year we've seen about a 1 point benefit from FX, less so in the third quarter. We think that, that trend could continue in terms of a flat-to-down dollar. And so -- but it cuts both ways. On the one hand, while it may provide a better top line, there is some commodity inflation that occurs from a weaker dollar because of the commodity markets just straight in U.S. dollars. So it's not that it drives you in one direction. It really depends on how much commodity and prices are influenced by lower dollars versus the benefit that you get from translation. Kenneth Goldman - JP Morgan Chase & Co, Research Division: Interesting. I would have thought you had suggested that currency would be a little bit of a headwind given spot rates into next year, but doesn't sound like you're saying that.

Well, I guess, it's a little bit unpredictable. You have to believe to some degree that the flight to safety element stays in place versus whether people can be convinced that the European markets can take care of themselves and then the focus may get right back to the U.S. deficit. So we don't think there's going to be a dramatic change at this point. But should you know, needless to say, it affects you both ways, translation wise and unfortunately, commodity wise.

Your last question comes from the line of John Baumgartner with Telsey Advisory Group.

I just wanted to ask about your thoughts on estimate expense for 2012. Maybe this relates back to John's question a bit but in the U.S. specifically, do you feel you're at a place right now or maybe you're comfortable at the sales force given you've continued share gains here or is it more opportunity maybe going forward to either increase the size of the sales force or at least your hours spent within each store next year?

I think that from a coverage standpoint, we feel very good about where we're at, the results we're getting and we probably have a more flexible sales organization today given some of the technology investments that we've made and we've had in the past. So I do think we're at a good place and certainly over the last couple of years where we thought we could benefit from incremental coverage we've done that. As the same time, as I talked about earlier, as we think about building density around our coverage in key markets, we want to continue to be able to be flexible to do that. So I think what you'll see that may be a bit different is that we build out our distribution in China as an example where our business is growing very, very nicely in what is a growing category. We'll continue to be making certainly investments there, as well as couple of other places. So again, I think going back to driving a predictable, profitable and sustainable business in North America, we feel good that we're doing that. And then the second goal that we have around delivering geographical expansion in key markets to be places where we make investments around coverage and capability.

J.P., thinking about the retailers that we kind of merchandise in the confectionery category here, do you tend to see that we're seeing increased shelf base for the category? That you're more end caps, more free standing displays than historically? I mean, is there a way to think about the extent to which retailers might be using the category more of the traffic driver or capacity.

One of the things that's been clear over the last couple of years, 2011 was certainly no exception is that because the category has performed well, it's been one of the most attractive categories in the entire box. And so we've benefited from that. I think where we've seen some retailers who have gone through periods where they said, well, we may do less of this and more of something else. I think the category has really proven itself there. One example I'd give you, which I find really interesting and compelling is that as we've done some of our IDP work, we work with one of our large retailers and we realize that while they were doing a really good job in gum and mint on what we would call a snack grab trip mission, They weren't doing so well in the overall, it's a consumable candy bar segment. So we put together a cross-functional team. We worked with them at their headquarters. We used our center of excellence group here, and we did a number of pieces and research as well as some testing. And now as we've implemented those results of the test and the way we think is the right way to go about it. And if you look at the total instant consumable categories, these are your category results. We're not talking specifically just our brands. But in the year 1 roll out of that in these clusters of stores. The sales increase for the category is up 15%. And as we've gotten now into the second round of expansion again, taking this IDP approach to getting very specific consumer insights and trip missions and combining those, the results were up almost 20%. So you're now -- it's an [indiscernible] to engage further around specific trip missions where we take our consumer insights, their shopper data, we look in store clustering and really are able to move the levers across individual and unique stores. So the interest in the category for our retailers continues to be very high and the performance of the category certainly has allowed all of the store and things that we think are good for all of our mutual businesses.

Great. And then, Bert, last question. Thinking about your input costs for 2012, you mentioned in the press release the 2-year average. Can you say at all whether you may have been buying below market for some of your input costs in 2011 at all? Because I feel like dairy is usually the wildcard here and that seems to be tracking deflationary year-on-year for 2012. So is there anything somewhere in your hedge basket or in terms of your source that could maintain that this cost push in the new year.

Yes, we really don't talk about our hedging programs or how far out we are and so on and so forth. And a part of that, obviously, is some of our competitors report any of that information. Needless to say, we have an active hedging program and we take a view on there's value in the marketplace and look at all the things that you expect us to look at whether it's fundamental supply and demand, or really fits along the technical factors given all the financial money out there in terms of the asset class. Dairy, you're quite right. It's the one that that's least hedge-able and always presents the most uncertainty. The really -- the message that we wanted to put across was that this year has been an inflationary year for commodities and next year will be as well, but that we do think we have the right programs and our focused on the margin will continue to be just as strong next year as it has been this year. Okay. Well, Thank you for joining us for today's conference call. Matt Miller and myself will be available all day to answer any follow up questions you may have. Thank you.

This concludes today's conference call. You may now disconnect.