Good morning, everyone and welcome to The Hershey Company's First Quarter 2017 Results Conference Call. My name is Leo, and I will be your conference operator today. All participants have been placed in a listen-only mode. After the speakers' remarks, there will be a question-and-answer session. This call is scheduled to end at about 9:30 AM, so please limit yourself to one question so we can get to as many of you as possible. Please note this call may be recorded. Thank you. Mr. Mark Pogharian, you may begin your conference.

Thank you, Leo. Good morning, ladies and gentlemen. Welcome to The Hershey Company's first quarter 2017 conference call. Michele Buck, President and CEO; and Patricia Little, Senior Vice President and CFO will provide you with an overview of results which will then be followed by a Q&A session. Let me remind everyone listening that today's conference call may contain statements which are forward-looking. These statements are based on current expectations which are subject to risk and uncertainty. Actual results may vary materially from those contained in the forward-looking statements because of factors such as those listed in this morning's press release and in our 10-K for 2016 filed with the SEC. If you have not seen the press release, a copy is posted on our corporate website in the Investor Relations section. Included in the press release is a consolidated balance sheet and a summary of consolidated statements of income, prepared in accordance with GAAP. Within the Note section of the press release, we have provided adjusted pro forma reconciliations of select income statement line items quantitatively reconciled to GAAP. The company uses these non-GAAP measures as a key metric for evaluating performance internally. These non-GAAP measures are not intended to replace the presentation of financial results in accordance with GAAP. Rather, the company believes the presentation of earnings, excluding certain items, provides additional information to investors to facilitate the comparison of past and present operations. As a result, we will discuss first quarter 2017 results excluding net pre-tax charges of $216.6 million, or $0.71 per share diluted, which are primarily related to business realignment cost and long-lived asset impairment charges. These charges are defined in the appendix of this morning's earnings release, which is available on our website at www.thehersheycompany.com. Our discussion of any future projections will also exclude the impact of these net charges. And with that out of the way, let me turn the call over to Michele Buck.

Thanks, Mark, and good morning to all of you on the phone and webcast. Hershey's first quarter results were solid and I'm pleased with our performance. Net sales growth was 2.8%, delivering our fourth consecutive quarter of at least 2% sales growth, which we're happy with, given the choppy food industry retail trends in the U.S. and the macroeconomic challenges in some international markets. Gross margin was up nicely in Q1 and is expected to increase for the full year, fueling higher levels of advertising and other brand building initiatives. Adjusted EPS was $1.31, a strong start to the year and puts us in a position to deliver on our commitments. The Margin for Growth Program we discussed on March 1st is on track. This will not be a big benefit to our 2017 results. However, this multiyear program should enable us to achieve strong margin and EPS growth in 2018 and 2019 and provide us with the fuel to deliver consistent annual net sales and EPS growth post implementation. Preliminary analysis of Easter data indicates that we had a good season with sell-through in line with estimates, putting us in a position to gain share in this important season. We believe this will result in total Hershey U.S. candy, mint and gum, or CMG, April year-to-date retail takeaway of about 2.5%. While we don't like getting ahead of ourselves before results are final, given the timing of Easter, we thought this was an important metric to share. Hershey U.S. retail takeaway for the 12 weeks ending April 8, 2017, in the xAOC+C-store channels declined 7.9%. As we stated on last quarter's conference call, first quarter net sales would be greater than retail takeaway due to Easter timing. Recall that Easter occurred on April 16th in 2017 compared to March…

Thank you, Michele. Good morning to everyone on the phone and on the webcast. First quarter net sales of $1.88 billion increased 2.8% versus last year. Adjusted earnings per share diluted came in at $1.31, an increase of about 19% versus last year, driven by solid gross profit margin growth as well as the timing of some SG&A investments that are expected to flow through over the remainder of the year. Excluding favorable foreign currency translation of 10 basis points, net sales increased 2.7% versus the year ago period. Net price realization was a two point benefit due to lower levels of trade. Net volume increased 70 basis points, including the contribution from the barkTHINS acquisition of 90 basis points. By segment, North America net sales increased 2.7% versus the same period last year. Volume was a 30 basis point contribution to sales growth, driven by seasonal growth; and as anticipated, net price realization was a 1.2 point benefit due to lower direct trade. The barkTHINS acquisition and foreign exchange currency rates were a 1 point and 20 basis points benefit, respectively. We were pleased with seasonal results, the initial rollout and off-take of Hershey's Cookie Layer Crunch, and Reese's NCAA basketball programming. However, similar to trends experienced by the broader U.S. food group, other portions of our everyday or non-seasonal business were softer than the anticipated. Importantly, in the first quarter, retail trips within xAOC+C-store channels were about the same as the year-ago period. Our preliminary Easter sell-through is in line with expectations, and we expect non-seasonal U.S. CMG trends to improve over the remainder of the year, although the growth rate is slightly lower than our previous forecast. Over the remainder of the year, we feel good about the level of innovation, brand investment and in-store merchandising and…

We'll take our first question from Ken Goldman of JPMorgan. Your line is open.

Hi, thank you, everyone. Question – two for me. First, you've reduced your sales guidance, raised your gross margin guidance. Thank you, I appreciate some of the color you gave on the call today about that. I'm just curious maybe if you could help us bucket how much of that change in terms of the increase in the gross margin or maybe I guess the decrease in the COGS is due to cost savings versus maybe some commodity costs like dairy coming in maybe a bit more favorably than what you were looking for.

Patricia, do you want to handle that one?

Yeah. The overall year-over-year increase is primarily driven by the efficiency and cost savings initiatives that our supply chain is delivering for us in COGS. The change between what we gave guidance to you on a few weeks ago, the biggest driver of that is the lower expectations around input cost inflation.

Great. Follow-up for me would be, last week, and I know they've talked about this before, but CVS has been discussing a little more aggressively moving some candy away from their checkouts. I appreciate Hershey's, there are some offsets there in terms of what Hershey can add to the front of store and so forth. And I'm just curious a little bit how you're looking at the risk of other customers may be following CVS' footsteps, or maybe you're thinking this is more of a one-off situation. Just trying to get some of your thoughts on what's happening there.

Absolutely. So as you know, we work closely with all of our retail customer partners. And I think we mentioned last July that we were partnering with CVS on some of the work that they were doing around evolving their store layouts. And we partner with all of our retailers along those lines. And March 1st, we mentioned a different customer we're also working with those efforts on. I guess how I would tell you to think about it is, we service a broad range of retail customers. They all have very different strategies. And as some of our customer partners are making certain decisions on portfolio regarding store layout or front end, we have other of our customer partners who are actually looking to add incremental space behind confection, who are looking to take some other non-durable goods off the front end and put increased consumables and edibles; either overall at the front of store or as they have built their self checkouts and they hadn't yet built impulse around those. So we feel good about the growth we're seeing in the marketplace in indulgent categories. And if you look at the growth in categories, in indulgence and better-for-you, we're seeing growth across both and we have several customers who are really looking to leverage that growth.

Great. Thanks so much.

Thank you. We'll move next to David Driscoll of Citi. Your line is open.

Thank you so much. Good morning.

Good morning, David.

I wanted to ask about the revenue guidance. If the April year-to-date is expected to be at 2.5%, then maybe I'm just curious why guide to the low end of the 2% to 3%. Why guide to the 2% number? Said differently, if the full year average is 2%, doesn't that mean like the second half of the year would need to be something like 1.5% in order to kind of weight it out? And basically, this just comes down to why do you expect this to be a slowdown from this 2.5% rate of growth that you talked about year-to-date through April? Thank you.

Thanks, David. No, I would say two things. First of all, if you think about year-to-date, a large part of the acceleration of growth was driven by Easter. So, Easter is a big piece of what you see year-to-date. At the same time, we really look at the impact of the slowdown that we saw in the total box in Q1. And we saw that have an impact on everyday. So as we look at the balance of the year, we are looking for our everyday business to accelerate. And we believe that that takes to make for the back half of the year is very achievable. We'll be looking at ensuring we have adequate investments. So we'll actually have some higher levels of spending in the back part of the year to drive that acceleration in the form of advertising. And we feel good about that. But a lot of it is that Easter, the big boost in Easter and we really are looking and calling for an acceleration of everyday as we go into the back part of the year.

Our next question is from Chris Growe of Stifel. Your line is open. Christopher Growe - Stifel, Nicolaus & Co., Inc.: Hi, good morning.

Good morning. Christopher Growe - Stifel, Nicolaus & Co., Inc.: Good morning. I just have two quick ones. One is just a follow-up to David's question. When you look at the 2.5% year-to-date sales growth through April, could you disaggregate that between like seasonal growth and non-seasonal growth, kind of, how is it going year-to-date? If you did that already, I'm sorry I missed that.

Yeah. If you – without getting in too many specifics, if you think about that year-to-date performance, you would see seasonal items grew about double digits. So think about that in that double-digit range. And if you look at our non-seasonal core power brands, kind of the biggest five brands, they were up mid-single digits. So, obviously, there was a little bit of softness across some of the non-core piece of our portfolio. But really double-digit growth on seasonal is what's a big component of 2.5%. Christopher Growe - Stifel, Nicolaus & Co., Inc.: Okay. And then just to...

This was all planned to be the driver of Q1 no matter how the box started the year. I think looking out over the remaining parts of the year and where the in-store merchandising and programming from S'mores to the innovation, that all comes the remainder of the way. So I think we feel pretty good about that. Christopher Growe - Stifel, Nicolaus & Co., Inc.: Okay. That's helpful. Thank you. And just a quick follow-up then on the level as SM&A that's down in the quarter. So when I see advertising flat, trade promotion down and then SM&A overall down. I guess what you're telling me is that in Q2 it's going to start to pick up. So as I think about this being more of a reinvestment year, it sounds like that really starts in earnest in the second quarter. Is that the right way to look at that? So SM&A probably will be up as a percentage of sales?

Yes, that's right. So in the first quarter, trade was down as we lapped some incremental trade merchandising that we had shared with you last year. We made some big investments in incremental trade. And as we have constantly worked to optimize our blend across trade and advertising, we made some different decisions this year. And yes, our advertising expense was closer to flat in Q1. And as we go out to the balance of the year, we'll see increases. Christopher Growe - Stifel, Nicolaus & Co., Inc.: Okay. Thank you for the time.

We'll take our next question from Alexia Howard of Bernstein. Your line is open. Alexia Jane Howard - Sanford C. Bernstein & Co. LLC: Good morning, everyone.

Good morning, Alexia. Alexia Jane Howard - Sanford C. Bernstein & Co. LLC: Two really short ones on the input costs side of things. Are you already starting to see some deflation on the cocoa side within that or is it other ingredients that you're seeing release on? And then on price realization in the U. S., you've obviously got good price realization this quarter with the cutback in promotional spending. Do you anticipate that, that will continue throughout the year even if competition steps up and maybe given further deflation on the input cost side? Thank you and I'll pass it on.

Thanks, Alexia, it's Patricia. Let me talk about the input cost first. So, as you know, we hedge a number of our input costs, our commodity basket out somewhere between 3 months and 24 months. We don't hedge all of them. There a few commodities for which there is not a good market to do that and those obviously flow-through directly in the year. So it's a mix of both of the pieces that you're talking about. And that's what we're seeing come through that allowed us to raise our gross margin guidance. Alexia Jane Howard - Sanford C. Bernstein & Co. LLC: And then on the pricing?

On the price realization, you definitely saw the biggest impact of that in the first quarter. As Michele said, we're lapping some heavier direct trades that we put in, in the U.S. We're also not seeing a repeat of a lot of trade and recurrent discounts and allowances that we had in China last year. So the biggest impact of that price realization is absolutely in the first quarter and we would expect it to moderate over the rest of the year. Alexia Jane Howard - Sanford C. Bernstein & Co. LLC: Thank you very much. I'll pass it on.

Thank you. We'll take our next question from Andrew Lazar of Barclays. Your line is open.

Good morning everybody.

Good morning, Andrew.

Hi. Just two things. One, with your margin targets that you laid out at the Analyst Day going out to 2019. I know you've given some pieces here and there to help put it together. But if we take it sort of all in and we think about how that margin comes through in either from gross margin versus SG&A. Just trying to get a better sense of holistically whether it's more heavily weighted out to 2019 between one or the other or fairly equal? And then just curious if some of the lower tax rate you've talked about, given some of the reorganizations you're doing. Is that thought to be more sustainable going forward as well?

I'll go ahead and tackle those. So what we said is that we would expect improvement in our operating margin to be about half COGS and about half SG&A. And we're on track to continue to deliver that. Yes, I would expect that, overall, the tax rate, all things being equal in the tax world to be sustainable going forward.

Thank you very much.

Thank you. We'll take our next question from Matthew Grainger of Morgan Stanley. Matthew C. Grainger - Morgan Stanley & Co. LLC: Hi, good morning. Thanks, everyone. I guess just to follow up on some of the snack, sort of the snackfection initiatives that you have had in place for the past few quarters, perhaps if you could just give us an update on the momentum of KRAVE and barkTHINS. And given some of the weakness you saw in non-seasonal and the confectionery part of the portfolio, how immune were takeaway trends in these adjacent categories to the broader weakness that we saw across food industry in Q1?

So, we have continued to see some very strong growth on barkTHINS as we are still in the process of driving against expanding distribution and gaining trial amongst consumers on that franchise. So, I would say given the big piece of the growth curve that we're on, on that business; we've continued to see very strong growth there. And I think we mentioned that it was a pretty significant piece of growth for us in Q1. And as I look at KRAVE, we're continuing to feel good about the momentum that we are seeing there. So we've continued to gain share. We feel good about where velocities are. Like any new brand, we're learning in terms of really optimizing how we make sure that we drive that hardest in the right – to the right consumers and into the right channels. So, in some cases, we overextended distribution, and we've right-sized that a bit. But we continued to see very nice growth there. Matthew C. Grainger - Morgan Stanley & Co. LLC: Okay. Thanks Michele.

We'll take our next question from Rob Moskow of Credit Suisse. Robert Moskow - Credit Suisse Securities (USA) LLC: Hi, thanks. I just wanted to try to get a sense of how aggressive the assumptions are for back half growth in North America. A couple of headwinds I thought I saw was, unlike in the first half, where you were shipping ahead of consumption, you're probably going to ship behind consumption in the back half, because you're up against a December launch from the Cookie Layer Crunch item? And then the second element, I guess, I would raise is, it requires every day confectionery to start reaccelerating. And I think it also seems to imply that the non-core piece also gets better, too. Is that correct that all those things kind of have to happen and to what degree? Is it – does your consumption have to improve also? Or can the consumption kind of continue on at 2.5 points in the first half and 2.5 points in the second half. That's a lot of questions, but I hope you can help.

So – yeah. Our consumption and retail takeaway does not have to be at 2.5 points. So we're actually planning for the takes to make there to be less than that, closer to slightly below 2 points.

More in line with the takes to make.

Yeah, exactly. In line with the takes to make on that sales end. And we anticipate that generally, our net sales and our takeaway are directionally pretty in line. So you're right that we had a big benefit in shipments in Q4 behind Cookie Layer Crunch. But as we look out to the back half of the year, across all the quarters, we think that we'll be relatively in line, plus or minus in that 0.5 point range. Robert Moskow - Credit Suisse Securities (USA) LLC: Got you. Okay. Thank you.

We'll take our next question from John Baumgartner of Wells Fargo. Your line is open.

Hi, good morning. Thanks for the question. Michele, I'm wondering if you could speak a bit more on the top line algorithm in terms of the net pricing contribution? I think since the start, we've seen Hershey's implement a sizable list price increase every few years. But it seems that now trade promotion is becoming a larger component. And looking at the price points of some of the recent launches, mix is also now a much larger factor as well. So as you think about those levers on pricing, list prices, the mix, the trade support, how is the category or consumer changing, and maybe what are your analysts telling you about managing that balance going forward?

Yeah. That's a great question. I mean, obviously, we can't speak directly to pricing or any kind of foreshadowing around the pricing piece. But I would say that we think about all of those as very viable levers and probably even more so today than we did in the past. So I think you're right that price mix is something we aggressively have our teams focused on, which we can drive through, focus on pack-types, focus on channels, build it into the innovation. And I think perhaps that's a lever that we have not used as aggressively in the past. We've spoken to you before about our whole focus on strategic revenue growth management and a lot of that as well is about really maximizing that net price realization by really, really scrutinizing all of the investments we make in trade and getting the value equation right on every pack-type and brand. So, we're putting more focus there than we have in the past.

Yeah. And I'd add if you remember on March 1st that we talked about 2018, and we just talked about looking at the most productive SKUs and do we need to have all these different pack-types out there. We said, no. It could be a little bit of a headwind in 2018. We're, actually – there's a little bit in 2017 less than what we had expected from 2018. But to your point, that's how we're thinking about it.

Okay. So, maybe just to build on that. In terms of the cognizance around the year-to-date softness in your non-core brands thus far. Is that softness more a function of reduced brand support on your end, or maybe just managing that as expected, or is it more of a change in consumer preferences where these drags are continuing for the non-core part of the portfolio?

Well, I guess I'd say if I think about the first part of the year, I'd look and say Easter drove a lot of sales. And there is some sourcing from Easter across the base portfolio. So, I think it's hard to look just at the everyday business trends because there's interaction there with Easter. Certainly, I feel good about the fact that we have increased consumer investment as we go into the rest of the year, because we know that our category is very responsive. We continue to get very strong lift, and I feel really good that that combined with the very strong innovation that we have this year and customers are very excited about consumers are – are really going to help to drive consumers to the category and really boost the everyday business.

Thank you very much.

We'll take our next question from Pablo Zuanic of Susquehanna International Group. Your line is open.

Thank you. Just two questions. First up, can you comment on your exposure to the border adjustment tax either in terms of what percent of your sales in the U.S. or Mexico, or what percent of COGS come from outside the U.S. and contingency plans that you could have around that, please? And then the second question, are there any plans for J. P. Bilbrey to become a member of the Hershey Trust Board? Thanks.

Hi, Pablo, it's Patricia. I'll answer that. We continue to stay very close in monitoring all the proposals for tax reform out there. In terms of the border adjustment tax, specifically, the vast majority, over 85% of our U.S. product is sourced here in the U.S. We really want to do that to provide the freshest product sourced closest to our consumer. And that's an important part of satisfying our customer and our consumer. As I said, we keep close look at all of our responses that would happen to any kind of tax reform. Frankly, without any details out there, it's hard to know what we would actually do. But we have a lot of contingency plans in the event that something does come out. In terms of your question about J.P., no, we would never comment on the Trust. That's a separate entity from us.

Right. And I just have a very quick follow-up. Regarding last week's announcements about all these adjustments you are making in terms of low-calorie in the various products that you sell. Would you say that these concerns are bigger than they were – with the consumer are bigger than they were one year ago or five years ago, or is it just this part continuing? It's just there seems to be a bigger issue now with the consumer than before. But correct me if I'm wrong. Thanks.

So I would say, Pablo, we continue to see, if you at look category growth of various snack categories across the store that there is strong growth. There's growth in indulgence and there's also growth in health and wellness. So I don't know that I see a greater acceleration. We always start with the consumer in mind. And we are delighted to delight consumers with our indulgent portfolio. At the same time, we've been a leader in choice and transparency, and we always want to provide options to consumers. Now our Hershey's Kiss was one of the first forms of portion control at 25 calories for a Kiss. We led the smart labeling initiative in the industry. So we are just constantly evolving and updating our portfolio to help to meet consumer needs as best possible.

Great. Thank you.

Thank you. We'll take our next question from Bryan Spillane of Bank of America. Your line is open.

Hey, good morning, everyone.

Good morning.

I'm not sure if I caught this or if you said this earlier. So if you have, forgive me. But I guess in terms of just total snacking in North America in the first quarter, appreciate your comments about the CMG category and the non-seasonal maybe being a little softer than you thought. But was total snacking also just sort of softer in 1Q than you expected?

Yes, it was. It was consistent with the total box. If you look at every category in the box, the trend was the same across the board. And as we mentioned in the comments, we think that there – I think everybody's been looking to say, okay, what was that factor that really drove that across the board, and common thinking tends to be the tax refund delay had a big impact. There were some lapping issues on a year-to-year basis. And then there's some continued pressures. But we feel good that we still see a rebound in March really. And we are focused on watching that very closely going forward.

Yeah. That's what I was just going to follow up on. It seems as we've gone through this reporting cycle, even Pepsi earlier today. It seems like it was better coming out of the quarter. Again just thinking about total snacking not specific categories, but it did seem like it improved coming out of the first quarter. And I guess that's what underlies your sort of confidence that it gets better throughout the rest of the year?

Yes. And dollars per trip were actually up in March after having been down.

Okay.

So yes. We have started to see that rebound and agree with that.

Okay. And then just one last one for me. In terms of the Easter holiday sales, was there any notable impact at all from a change in channel mix or sales from e-commerce? Is there anything that you've begun to see there where more of the sales might have shifted to online than previous years?

No. Nothing that we saw there at all.

Okay, great. Thank you.

We'll take our next question from Steven Strycula of UBS Securities. Your line is open.

Hi, good morning, guys. Two quick questions for you. The first would be on China. If I'm listening to Patricia's comments accurately, I think that the gross sales in China for the year sounds like Hershey – you're forecasting to lose implicit market share in China. If that is the case, can you clarify whether that's to local or multinational brands?

Thanks. Yeah, we are anticipating lower gross sales in China. And that would be a combination of competitive activity but also the overall impulse category in China and the way that's being addressed by the modern trade in particular. As Michele has laid out, we have a lot of change going on in our go-to-market model in China, looking at different brands, distribution models, cities, channels. And we expect that that will have some impact in our business in China for the rest of the year.

Okay. And a quick follow-up would be for the other expense and income item. What are you expecting that to be for the full year? You said the second quarter should be about $10 million.

We said around $55 million.

$55 million.

Okay. Got you. All right. thank you.

We'll take our next question from David Palmer of RBC Capital Markets. Your line is open.

Thanks. Just one question on sources of growth in the U.S. It looks like if you look at the data, the chocolate continues to be a key driver for you and you're getting very good contribution and have continued to do this from Reese's and now doing so with line extensions. And you're getting nice smaller contributions from snack, mix is great, barkTHINS and a drag perhaps from non-chocolate candy. Do you see the general growth drivers remaining the same through the year? And what is your outlook to maybe improve the things that aren't working for you and improve upon maybe tough comparisons for Reese's and other? Thanks.

Thanks for the question. Yeah, we continue to feel really good with the programs that we have on the core brands. And so I think in terms of the continuing the growth on something like Reese's, it is continuing the news. And some of our incremental investments in advertising towards the back part of the year will be made against those core brands to continue to leverage the momentum. And then at the same time, we are absolutely focused on turning around and accelerating our growth trajectory on some of the other pieces of portfolio, namely on the non-chocolate sweets area. So we will be increasing our investment there. Although at the same time, we've right-sized those brands a bit. So as Mark mentioned, SKU rationalization, there are some areas where we have extended those brands and we had items in the marketplace that just weren't productive or profitable. And so we made a decision to take the hit on pulling back on some of that. But we do have teams very focused on accelerating the growth there. And I think that's an opportunity for us going forward.

Is your thinking on non-chocolate confectionery that that's simply not as well-positioned as some of your other categories and there's sort of a tip of the hat to the consumer trends in the day?

No. I don't really think it's not as well-positioned. I would say, I think that we have opportunities to just fix our execution on that piece of the portfolio. There was a little bit more competition from smaller players last year where they went really aggressively on price. Some of the things that we weren't willing to do given our focus on margin. So I really think it's more about what we do versus that there's any kind of consumer trend issue there.

Got it. Thank you very much.

We'll take our next question from Jonathan Feeney of Consumer Edge. Your line is open.

Thanks very much. Just a follow-up, kind of, detailed question and another detailed question. Do you ship any Easter at all in Q2, because I know when I go back to the quarter with the exact same calendar split in 2014, it looks like you shipped some Easter in Brazil in Q2, and that was 20 days in the second quarter. Now you have 16 days in the second quarter. If you could kind of clarify that. And if there's any shipment impact at all to Easter from it moving later? And second question, if you don't mind, is how much of what's going on in China, you talked about, you took some PP&E write-down and this coincides with the ramp up of this Malaysia plant. Do any of those PP&E write-downs relate to the Malaysia plant costs? And how much, if you could – anyway of giving us a ballpark of how much of the absorption cost of that plant, which are presumably at below plant capacity, impacting gross margin on the quarter? Thank you.

Sure. So, let me start, and then I'll transfer it over to Patricia. There is almost no – there is no shipment impact from that timing of Easter. I mean, we shipped almost nothing in terms of Easter into the second quarter. So that's not an issue at all. And relative to the write-offs, we feel great about Malaysia. So the write-offs that we talked about are not at all related to Malaysia.

And in terms of the cost base, that came online April 1st of last year. So that impact will be getting smaller going forward or really going away in terms of fixed cost absorption.

So you already would have taken the – I guess most pain for that that wouldn't really be a possibility going forward?

Yeah. It's all in the base now.

Great. Thank you very much.

Okay.

Thank you. We'll take a follow-up question from Rob Moskow of Credit Suisse. Your line is open. Robert Moskow - Credit Suisse Securities (USA) LLC: Just a quick one about second quarter. I think you said it's your tougher comp on the revenue side also. I know its North America in particular has a tough comparison. Is it possible that revenue for the overall company would go negative in second quarter, or do you still think you're in positive territory?

Yeah. We still feel good that we're in positive territory. Yeah, the quarters always come in a little bit different depending on the promotion and innovation calendar. But there's nothing that we'd be fallen off that kind of a cliff in the second quarter. Robert Moskow - Credit Suisse Securities (USA) LLC: Got it. All right. Thank you.

Well, great. That's all we have operator. We'll thank everybody for joining us for today's call, and we'll be available for any follow up questions you may have.

We do have a follow up if you're available.

Okay. Well, patch in. Operator, thank you.

Very good. We do have a question from Kenneth Zaslow of BMO Capital Markets. Your line is open, sir.

He, good morning, everyone. Thanks for taking my question. I'll keep it short. On China, can you guys just talk about what is the key steps and timeline for us to get a better understanding of which markets you're going to go into? And how are you going to assess that situation? Can you talk about how we're going to be thinking about this in the timeline?

So as part of our Margin for Growth and Margin Expansion Program, we've started immediately in terms of taking the necessary steps to reset our investment in that marketplace and make some of the tough decisions. At the same time, the local teams have built very focused plans in terms of where we are focusing to grow and build a sustainable business model. So we are focused on multiyear program. But beginning now to really focus on a couple of key provinces on our core portfolio and on a profitable mix of brands across the portfolio. As you all know, the cost structure in some of the channels in China have changed and so we are shifting to more profitable channels and really try to capture some of the growth both in the second and third tier cities as well as e-commerce. So it's a multi-year program that's underway now and I'd say we can continue to update you as the year goes on.

Do you plan on letting us into the information as you kind of feel like which cities, which avenues, which products or is it going to be one of the things we'll see in the results as they come? I just don't know what's the timing and how we should think about the strategy there?

Yeah. I mean, I think for competitive purposes, we prefer not to go into all of the details. But we can give some thoughts to you, what we can share that might help you as you're building your model.

And just my final question on China. The online side of it. How – what type of infrastructure do you have? Is that enough to offset some of the weaknesses across the other part of it and how do you see that growing over the next two years to three years?

We see – we've done very well with online e-commerce in China. As it's a big piece of the marketplace, it's been a nice growth driver for our business. We've continued to see nice growth there and it is clearly amongst the channels, probably our number one area of focus from a channel perspective in that marketplace. So we have – we've built some infrastructure and that will continue to be a place that we'll want to invest in China going forward as in the U.S.

Great. I appreciate. Thank you.

Okay.

Thanks so much for joining us today. And like I said earlier, we're available for any follow-up questions you may have.

Thank you. This does conclude today's Hershey Company's First Quarter 2017 Results Conference Call. You may now all disconnect your lines, and everyone have a great day.