Ingredion Incorporated (INGR) Q4 2014 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Ingredion Fourth Quarter 2014 Earnings Call. At this time, all lines are in a listen-only mode. Later there will be an opportunity for your questions and instructions will be given at that time. [Operator Instructions] And as a reminder, this conference is being recorded. I'll now turn the conference over to Heather Kos, Vice President of Investor Relations and Corporate Communications. Please go ahead.

Good morning, and welcome to Ingredion's fourth quarter 2014 earnings call. Joining me on the call this morning are Ilene Gordon, our Chairman and CEO; and Jack Fortnum, our Chief Financial Officer. Our results were issued this morning in a press release that can be found on our Web site ingredion.com. The slides accompanying this presentation can also be found on the Web site and were posted about an hour ago for your convenience. As a reminder, our comments within this presentation may contain forward-looking statements. These statements are subject to various risks and uncertainties. Actual results could differ materially from those predicted in the forward-looking statements, and Ingredion is under no obligation to update them in the future as or if circumstances change. Additional information concerning factors that could cause actual results to differ materially from those discussed during today's conference call or in this morning's press release can be found in the Company's most recently filed annual report on Form 10-K and subsequent reports on Forms 10-Q and 8-K. Now I'm pleased to turn the call over to Ilene.

Thanks, Heather, and let me add my welcome to everyone joining us today. We appreciate your time and interest. I’ll go deeper into the fourth quarter in a moment, but first I’d like to look back on 2014. Clearly the year was not without its challenges. However, we ended the year with modest growth and adjusted operating income and adjusted EPS and generated strong operating cash flow of $731 million. Volumes grew 2% overall and our higher valued specialty ingredient volumes grew by 5%. We are expanding our higher value specialty ingredient portfolio by capitalizing on sustainable fast growing consumer trends like health and wellness, authentic ingredients and gluten-free. In the regions, our operating results were mixed. Two of our four regions were up year-over-year. North America increased volumes in the U.S and Canada, but results were impacted by adverse weather in the first quarter. Despite a good second and third quarter, higher than expected net corn costs caused margins to compress at the end of the year. Volumes of specialty sweetener products including crystalline dextrose continued to grow. Overall, our Mexico business performed well for the year, including double-digit specialty ingredient volume growth in every quarter. However, the pesos rapid devaluation at the end of the year resulted in lower than expected returns on our Co-Products, which contributed to the regions margin decline in the fourth quarter. In fact, the Mexican peso devaluation impacted our performance below the line as well, given the higher taxes we recorded as a result of the currency driven gains on our dollar denominated net assets. Jack will talk more about this later. For the year, North America delivered operating income of $375 million down about 6% from the year before. South America as we’ve consistently communicated throughout the year remains in the grip of an unfavorable economic situation, specifically in Argentina and Brazil. In fact, as a result of the continued uncertainty over the rate of recovery in Argentina, we recorded a $33 million non-cash impairment charge to write-off the remaining balance of goodwill from an acquisition years ago in Southern Cone. I’d like to point out that we continue to believe in the long-term viability of Argentina for our business. We have operated successfully for over seven decades in the country. While we’ve faced stiff challenges in 2013 and 2014 and expect another challenging year in 2015, we believe this is truly a cyclical event and not to permanent structural change. We have stabilized our business to operate in this environment and performed, met our forecast for the year. Adjusted operating income in the region for the year was $108 million. In fact, operating income in Brazil and the Indian region were up year-over-year, but not enough to offset the decline in Southern Cone from the first half in 2013. The South America team is dealing with these issues and is focused on continuous improvement opportunities and cost management action. Moving along to Asia Pacific, this region delivered $104 million of record operating income for the year, bolstered by strength in our specialty food business. Finally, the EMEA region reported record volume in operating income. Operating income reached $95 million driven by strong results in Europe and lower energy costs in Pakistan. Additionally, our food technologists at our Innovation Idea Lab innovation center are collaborating with our customers across the globe. As customers look to formulate more healthy eating options, as well as seek lower cost alternatives, we’ve several programs to help our customers optimize formulas to provide nutritional benefits, as well as reduce costs, processing time, and capital. Despite this year's operational challenges, our solid cash flow from operations and strong balance sheet enabled us to strategically deploy cash to generate excellent shareholder returns. We made significant strides in the advancing of our strategic blueprint. Our pending acquisition of Penford Corporation, a leader in specialty potato-based starches, is expected to be complete in the first quarter, pending regulatory approval. This will nicely expand our product portfolio with complimentary specialty ingredient solutions and will be immediately accretive to our earnings. In fact, yesterday Penford shareholders approved our proposed acquisition. I am very excited about Penford joining our organization. We completed our accelerated share repurchase program of approximately $300 million, which will be accretive to earnings per share this year and going forward. Our Board of Directors has authorized the repurchase of an additional 5 million shares giving us the ability to deploy our cash in shareholder friendly ways. We also continue to appropriately invest in capital projects focusing on growing our specialty portfolio and driving cost savings and process improvements. Given our specialty ingredient expertise, our focus on expanding our portfolio is based on evolving consumer trends. For example, in September we committed to spend about $100 million in capital investments in North America and Asia over the next few years to increase capacity for our fast growing specialty portfolio in the areas of texture and clean label ingredients. These products deliver against key consumer trends and have richer margin. Overall, I’m pleased our return on capital employed for the year was 10.6% exceeding our stated long-term objective of 10%. Now let's spend a moment on each regions performance in the quarter. North America had 5% higher volumes than last year, driven by strength in the U.S and Canada, partially offset by lower volumes in Mexico. The obesity tax in Mexico continues to affect our core products. However, specialty sales in Mexico continued to grow up more than 10% year-over-year for the fourth consecutive quarter. The rapid devaluation of the Mexican peso and Canadian dollar late in the fourth quarter resulted in unfavorable returns on our Co-Products. Additionally, higher than expected net corn costs resulted in margin compression throughout the region. We took numerous actions to manage controllable costs, but at the end of the day we experienced lower operating income by 7%. In South America, operating income was down 8%, largely as a result of foreign exchange headwinds caused by the strong U.S dollar. As we’ve commented in the past, we expect to reprice our contracts for currency effects, but it can take 3 to 6 months. The Indian region delivered modest volume growth and continues to be a bright spot in the area. Bakery and nutritional products offset weakness in confectionery. Brazil experienced weakness given the industrial slowdown and slight GDP growth. With brewing offsetting lower volumes in confectionery and food products, our local leadership team continues to manage through the slowdown through cost reductions and price mix management. As I mentioned earlier, the Southern Cone economic challenges continue. Volumes in the South America region were off 4% from last year, driven by the economic headwinds as well as power outages in our Argentine plant. The management team has been able to adjust to the difficult operating conditions and remained profitable. Asia Pacific delivered solid volume growth behind double-digit specialty and solid core growth, highlighting the strength of the underlying business. Throughout the region, we managed through a challenging price environment, especially in Korea which negatively impacted price mix. Additionally, we pay significant currency headwinds as a result of the strengthening U.S dollar. These impacts resulted in an operating income decline in the quarter of about $3 million versus last year. In EMEA, we delivered record volume growth in our specialty portfolio and record operating income which was up just over 30%. Our portfolio in Europe, which is primary specialties continue to deliver on-trend products and continue to perform well despite the sluggish economy. Volumes remain resilient despite the euros devaluation relative to the dollar. Pakistan volumes remain with the prior year and the team there has done an excellent job of implementing cost reductions and managing an unreliable energy environment, which impacts our customers ability to operate as much are more than our own manufacturing facilities. In fact, operating income was up double-digits in Pakistan for both the quarter and the full-year. I’m pleased to now turn the time over to Jack, who will spend time on our financials. Jack?

Thank you, Ilene. Good morning, everyone. Let me start by covering the highlights of our -- of the income statement. Sales were down $131 million for the quarter. The effects of foreign exchange and lower-priced corn, which is pass-through in our selling prices were partially offset by the solid volume growth. Gross profit was down $19 million, as a result of unfavorable currency, primarily in South America and modest margin compression in North America from higher net corn costs. Adjusted operating income was lower than last year by $8 million as the decline in gross profit was partially offset by a reduction in operating expenses. Reported operating income was lower than adjusted operating income by $35 million. This reflects $33 million from a non-cash charge of goodwill impairment in Southern Cone, given the political and economic volatility and continued uncertainty. In addition, we incurred $2 million from the acquisition costs related to the Penford transaction. Our earnings per share reported and adjusted EPS were $0.83 and $1.30 per share respectively. For the quarter, our adjusted earnings per share was $0.05 lower than last year's earnings per share. Moving on to the sales bridge, our sales of $1.4 billion are lower than last year by $131 million. Volume growth contributed $44 million, but was more than offset by $74 million of foreign exchange headwinds. Approximately two thirds of the foreign exchange impact is attributed to South America, with over a half of that amount from Southern Cone. The remaining reduction in net sales is largely due to lower pricing from passing along lower corn costs relative to last year. As we look more closely by region, you can see foreign exchange headwinds affected us across all four regions, however, most prominently in South America. Good volume growth in North America, Asia Pacific, and EMEA help to offset weaker volumes in South America, specifically Brazil and Argentina. Lower pricing was largely due to North America with a small portion coming from Asia Pacific from passing through lower corn costs in both regions. Price mix was favorable by 7% in South America as we started to reprice to recover the currency devaluations. Adjusted operating income fell $6 million in the quarter with modest margin compression in North America. In North America, we typically don't talk about foreign exchange given the stability of the Canadian dollar and the fact that Mexico’s functional currency is the U.S dollar. However, both the Canadian dollar and the Mexican peso rapidly devalued at the end of the year causing a squeeze on our margins as we experienced lower dollar-based Co-Product returns. In addition, the Canadian corn crop proved to be smaller than anticipated driving higher basis costs for our corn. Outside North America, foreign exchange headwinds in South America and Asia Pacific along with pricing pressures were offset by good performance in EMEA. EMEA’s results includes a small benefit from a land sale and even without this transaction the region would have posted a record operating income. We will wrap up the quarter with the earnings per share. On the left side of the page, you can see the reconciliation from reported to adjusted. As mentioned earlier, our impairment charges on the remaining Southern Cone goodwill and the acquisition costs are from the pending Penford transaction. On the right side, operationally, we saw a hit of $0.08 per share driven by the items Ilene and I’ve been discussing, primarily foreign exchange headwinds and some margin compression partially offset by higher volumes. The non-operational benefits of $0.03 provided a partial offset to the negative $0.08 operational charge. Our tax rate was higher primarily due to the rapid devaluation of the Mexican peso during the quarter. This increase the U.S dollar tax expense of our Mexican subsidiaries, which uses the U.S dollar as the functional currency. From Thanksgiving week to the end of the year, the peso exchange climbed from $13.66 per U.S dollar to $14.75, a devaluation of 8%.We estimated this impact can be both $0.10 per share negatively. This was partially offset by other favorable items for net impact of negative $0.06 per share. Financing costs were favorable both $0.03, which also included both $0.02 favorable impact in foreign exchange related to Mexico. Therefore the net impact of the rapid devaluation of the Mexican peso was about $0.08 below the line, when considering both the taxes and financing costs. The accelerated share repurchase resulted in a $0.06 per share benefit and this program will continue to favorably benefit earnings per share throughout 2015. Let's now roll back to the summary chart for the full-year. Net sales were down $660 million and gross profit was up about 1%. Adjusted operating income and adjusted earnings per share up modestly for the full-year. As mentioned for the quarter's results, reported operating income and reported earnings per share include a non-cash goodwill impairment charge of $33 million or about $0.44 per share. And acquisition cost relating to the pending Penford acquisition of about $2 million or $0.02 per share. Breaking down the $660 million decline in net sales, we see that price mix was down from the pass-through of lower price corn to our customers as expected. However, we can also see the significant negative impact from foreign exchange, which was partially offset by steady volume growth throughout the year. Moving to the sales bridge for the regions, we can see foreign exchange impacted us in almost all the regions, but primarily South America. In fact, over $200 million of the $253 million of negative foreign exchange came from South America. The vast majority of which was in Argentina and Brazil. Volumes were up in North America, Asia Pacific, and EMEA and were flat in South America. Price mix was up in South America and EMEA, but down in North America and Asia Pacific reflecting the pass-through of lower raw material cost. Operating income in North America and South America is below last year. North America was weighed down by the first quarter's adverse weather and the fourth quarter's margin compression due to the higher net corn costs as discussed earlier. South America remains challenging, especially in Argentina and Brazil. However, we remain positive over the long-term. Asia Pacific and EMEA continue to be a bright spot and with strong presence in the specialty products in both regions, we continue to feel confident about our prospects going forward. Corporate expenses were favorable primarily due to the classification of the tax indemnity in Germany we recorded in the third quarter, which is fully offset as an increase in our provision for taxes. For the year, adjusted earnings per share is up $0.15, with operations contributing $0.05 and non-operational items having a $0.10 positive impact. Volume growth is the largest contributor to the operational gains adding $0.30 of earnings per share. But this is offset by some margin compression in foreign exchange headwinds I discussed earlier. Other income of $0.08 a share is primarily attributable to the classification of the tax indemnity in Germany we recorded in the third quarter, which is fully offset as an increase in our provision for taxes. There is no impact to earnings per share for the indemnity. In the non-operational items, the $0.14 negative impact from taxes is primarily the result of the two unusual items, the rapid devaluation in the Mexican peso, which I mentioned previously and the classification of the tax indemnity recorded in the third quarter. These two unusual items were offset slightly by smaller favorable items. Financing costs were slightly favorable and non-controlling interests were slightly negative given the strong earnings in the majority owned business in Pakistan. Earnings per share for the year benefited from the -- from lower shares outstanding and from the share repurchase made in 2013, as well as the accelerated share repurchases we made in 2014. Turning to our guidance. I’d like to point out that it is -- that it generally excludes the impact from the pending Penford transaction. We expect net sales and total volumes to be in line with 2014, while specialty volumes are expected to show continued growth. Earnings per share are expected to be in the range of $5.40 to $5.90. As we expect the Penford transaction to close in the first quarter, we are adjusting our expected accretion to $0.08 to $0.12 in calendar 2015, reflecting the timing of the close, with no changes to underlying earnings or synergy assumptions. As more than two thirds of our sales were outside the U.S., we expect foreign exchange headwinds around the world to continue as a result of the strengthening U.S dollar. Therefore, we’ve factored in a negative $0.25 to $0.30 per share impact on our guidance, which we expect to be partially offset by incremental pricing. As we’ve explained in our business model, these pricing actions typically takes 3 to 6 months for full effect. We anticipate our operating income to be up mid to high single-digits. Corporate expenses will be up year-over-year to a more normalized level. Recall that the 2014 corporate expenses are lower than normal due to the classification of the German indemnity and other small items. We expect financing costs to be up slightly as we refinance a portion of our debt coming due late -- later in the year. The effective annual tax rate is expected to be in the range of 29% to 30%. As you recall, our 24 (sic) [2014] adjusted tax rate was 28.3%. Finally, the ASR we completed in 2014 will continue to benefit us in 2015. In North America, we expect volume sales to be in line with 2014. Our contracting with customers is generally complete and has been factored into our guidance. We expect operating income to increase in North America to low double digits as we lap the adverse weather effect in the first quarter of last year and from improved product mix and margins. South America sales are expected to be in line with the prior year. We anticipate slow economic growth and foreign exchange headwinds to continue in the region. In Argentina, the situation remains challenging and uncertain, and our outlook is for operating income to be flat relative to 2014. In other countries, such as Brazil and Columbia, we continue to actively manage our costs and drive efficiencies is that will offset inflationary pressures. Overall, we expect modest operating income growth in South America, primarily as a result of good cost management. Asia Pacific should continue to deliver operating income growth. The business will be negatively impacted by currency headwinds associated with the strengthening U.S dollar, but we expect to overcome these headwinds with good cost management and product mix enhancement from continued growth in our specialty portfolio. We expect our EMEA region to continue top and bottom line growth after a record 2014 performance. The underlying European business is anticipated to continue to grow fueled by our specialty ingredients portfolio and our investments in the region. Pakistan is expected to continue its effective cost management and core product growth, which will contribute to EMEA’s overall performance improvement in 2015. Moving on to our cash flow, our cash flow provided by operations was a strong -- was strong at $731 million, which is about a $100 million more than last year, primarily a result of lower working capital used versus last year. We continue to put our cash to work from -- in the form of capital expenditures, dividend payments, and share repurchases. This speaks to a very healthy business that has the ability to both reinvest and return capital to shareholders, which we will continue to do. Looking to 2015, we expect cash from operations of $650 million to $750 million. This is slightly down from last year as working capital normalizes after a year-over-year benefit in 2014 from significantly lower corn cost versus 2013, which impacts our inventories, payables and receivables. Importantly, we will continue to deploy our cash for capital expenditures, remain active in looking for M&A, and continue to return cash in shareholder friendly ways including our share repurchase program. We expect to spend about around $300 million in capital expenditures in 2015 for growth as well as costs and process improvements around the world. We remain interested buyers for potential M&A. We look for complementary businesses that add long-term value to our portfolio. But I’ll stress, as we always have, we will be disciplined buyers. We will look for the right strategic fit at an appropriate price. As Ilene mentioned, our Board authorized a 5 million share repurchase program in late 2014. We generally expect a buyback dilution going forward, but we have the flexibility to buyback additional shares giving us the ability to deploy our cash in shareholder friendly ways. That brings my section of the presentation to a close. So now I’ll turn the time back over to Ilene.

Thanks, Jack. As we said a few times this morning, our business model which is reflected in the strategic blueprint is working. In spite of economic challenges and slowing economies, our underlying business is doing well. Our balanced geographic footprint, broad product portfolio, and focus on higher value specialty products are expected to drive growth and minimize risk. North America is well positioned to return to growth. South America continues to manage through its challenges. And Asia Pacific and EMEA are projecting modest growth in the face of currency headwinds from a strengthening U.S dollar. We continue to demonstrate a track record of good stewardship of shareholder capital. As I mentioned earlier on the call, we’re excited about the Penford announcement. This expand our higher value specialty portfolio addressing growing consumer trends including nutrition, gluten-free, food textures and sustainable green solutions. Excluding one-time costs, we expect this to be $0.08 to $0.12 accretive to earnings during 2015. And in 2016 and beyond, we expect earnings accretion to be even greater. This coupled with attractive dividends and significant share repurchases demonstrates our ongoing commitment to shareholders. And as Jack said, with the benefit of our strong balance sheet we continue to explore other M&A opportunities that will accelerate our growth. We continue to look for ways we can broaden our portfolio, as well as expand geographically. Taking together, we’re confident that we will continue to deliver excellent shareholder value. And now we're glad to take your questions.

Thank you. [Operator Instructions] And our first question will come from Brett Hundley with BB&T Capital Markets. Go ahead please.

Hi. Good morning, everyone.

Good morning.

Good morning.

I’ve three questions. My first one is regarding your Mexican business. Specialty continues to perform really well there and that's clearly a focus for you guys. I'm curious Ilene, if you can give some color on your view specific to the Mexican business as to how you see that performing overall over the interim, just given the specialty strength and then maybe some of that lingering pressure on the core?

Okay. It’s interesting. Mexico as you’ve seen the forecast, the GDP there actually right now according to the IMF is 3.2%. So overall the Mexican economy is looking pretty good. Now as we’ve talked about before, our core business continues to be able to serve the sweetener market as well as some of the brewery market and some of the other base business and our specialty growth is very much focused on this -- focus on obesity taxes that we expect to continue when we had a lot of success there and what we’ve done is we’ve taken recipes and formulations from other regions and brought them into Mexico and Mexicanize them. And this is not only for the Mexican taste, but we actually have been able to show our customers how we can take cost out of their formula. We call it save money or value matters. And in fact in things like spreads, low-fat spreads we can take use our modified starches to reduce vegetable oil and reduce some of the costs in those formulations. So it's not just lower calories, but its lower formulations that have been very exciting. And so I’ll turn it over to Jack to see if he has any other view on the Mexican market. But in general, we think between the GDP and the way contracting went and our growth in specialty, we’re excited about our position in the Mexico market.

Yes, Ilene, I think the only thing I have to add really is, in terms of the core it’s fairly stable down there and we see the growth in the brewery sector continuing and being fairly stable and even with the sugar, with the lower corn prices, we’re fairly competitive with sugar in general. So I think that the market is very positive markets for us. I’ve always been impressed by our operations down in Mexico and we’ve three very efficient facilities down there.

That's helpful. I appreciate it. My second question is just -- you guys have alluded to North American contracting here and there. And as we understand it, pricing across sweeteners looks to be pretty favorably contracted across North America. I am wondering if you can give us a picture globally into your modified starch business and just talk may be qualitatively about what pricing trends look like there in 2015? I think some of us struggle to understand the margin dynamics there, how they flow year-to-year. And I think it might just be helpful to understand qualitatively how pricing went across modified starches?

Okay. This is Ilene. I'll start out and then Jack will add some comments. If you take a region like Europe, which we talked a lot about, where we’re very much focused on a specialty ingredient market. Our specialty modified starches have continued to perform very well in Europe and a lot of that is due to capacity that we’ve added for some of our strong products that are physically modified with heat, rather than enzymes and are particularly attractive to the trends in Europe in terms of clean label. So we’ve been able to demonstrate success with modified starches in Europe. Asia would be another example. Take a place like China where I’ve talked about -- that our business there is largely specialty food with modified starches and again we’ve been able to grow our position there and deliver value to customers. South America is an early modified starch market. We do have capacity in several plants and have been the leader there. And again I think I said in the last quarter call, that it’s interesting to see how the dairy segment in particular had started to grow in South America with the demand for healthy products dairy. And our modified starches have done well and delivering value there to customers and for our shareholders. And then you come back to North America, and again when you look at the three different countries and our modified starch capabilities in a number of different places, again we are delivering value and able to grow. And it's interesting that modified starch business in North America is in a more contractor type environment whereas the other markets are much more spot markets. And so, it moves very similar in terms of the flow of the year with the North America contracting of the core products. And again, the raw materials are a lower percent of the total cost. We talk about our specialty margins being 2x the core and so we’ve been able to create value for customers and that has manufactured itself in appropriate pricing. So Jack, I’m not sure what you would add.

Yes, Brett, I think just in terms of even modeling and things, if you think about how we sell our modified starches, it's principally a value pricing where you know its what value are we bringing to our customers, which then is not as much correlation to the raw material input and as Ilene mentioned, they’ve significantly higher margins. Gross margins will move a little bit with the raw material input, but fundamentally it's based on the value we bring to our customers versus on the core business, its more correlated to a cost plus type of marketplace. So I think that may help you in terms of how you’re looking at it.

Yes, exactly. Thank you. And then, just quickly my last question, I just wanted to go back into South America and I'm just curious what you're seeing from a new plant build competitive stance in South America. You guys have long been the leader in the majority or all of those markets and you talk about your desire to take pricing to recover some of these currency headwinds. So I’m wondering if you could give us an update on what you're seeing from a competitive standpoint there and what you think gives you competitive advantages longer term. Thank you.

Okay. I'll start out and see if Jack wants to add anything, but if you look at Brazil as you’ve probably seen in the press, one of our competitors there Cargill has opened up a second plant and obviously has a portfolio of different customers there. You know that we have six facilities there in South America with different product portfolio, and so we’ve been a leader there for many years. And of course we talked about building capacity ahead of the growth in terms of being able to serve customers and of course building these plants takes many years and so we’ve added capacity for the brewing industry and other food industries in the Northeast as an example, which has been growing and we will continue to have some opportunities. It’s interesting, because there has been a drought as you read about in Brazil this year and certainly in the Sao Paulo state, which has been causing some issues to some of the manufacturers, but we’ve managed very well. In fact, in the Northeast where we added capacity recently, there hasn't been a drought. It's been a kind of a more normal summer. And so, I think that in Brazil it will continue to be a very good place to be operating with again the future growth in GDP, looking over the five years. In Argentina, we have two facilities there, and there is competition and occasionally we do see some people adding capacity. But again, as Jack said it’s a tough economic environment, but we believe in it long-term. And in Colombia where we have a number of facilities, we haven’t seen any local capacity being added, but of course with the free trade agreement there’s always an opportunity for people to ship in from the outside. Anything you would add, Jack?

The only thing I would add Brett is, particularly on the core business which most of South America is, we continue to drive our cost per low delivered cost, and we have a network of plans throughout the region, and we try to drive our low delivery cost throughout the region. And that really gives us the ability to at least be the low cost producer in the marketplace, and these are from estimation. And we continue to look at our entire network of facilities to say okay, how do we improve them? How do we drive continuous improvement through them? And how are we actually utilizing the network very similar to what we did in North America from a total network optimization perspective to drive the low delivery cost thought process.

I appreciate it. Thank you.

You are welcome.

Thank you. Our next question will come from Robert Moskow with Crédit Suisse. Go ahead please.

Hi. Thank you. A couple of things about looking at the first quarter; I was just wondering Jack and Ilene like, some of these issues like the co-product values related to currency, the price mix pressure in Asia Pacific. I wanted to know, to what extent is that just isolated to fourth quarter or are you going to have to live with that into 2015? And then secondly, with the way I’m modeling the business, North America really has to carry the load for 2015, and I imagine with the price increases that will be -- it can happen. But North America really hasn’t done that great for the last two years, and the volume continues to be under pressure for macro issues. Is the volume getting better and once you take all these price increases, do you still expect the volume to hold up? Thanks.

Let me start. I think, let me talk first about co-products in corn for just a moment. We mentioned that, with the sudden devaluation near the end of the quarter particularly in Mexico, we couldn’t adjust our prices. Our prices stay in the market there for a few weeks actually, and it takes a little bit of time to adjust them upward to U.S. dollar equivalencies. And so, that problem is it basically should be corrected now, really it was really a fourth quarter -- late fourth quarter issue from my perspective, and where we’ve seen that collapse. I also mentioned the Canadian corn crop was an issue where we’ve seen some run up in basis, and as well as the quality of the corn. And really, if you think about North America in total, it is abundant corn this year, and so we can source corn from other locations. I think it was just the timing of it. We didn’t realize the quality of the crop wasn’t as good and we had to source it from further away, so it added to our cost as well. And so, and from North America, I would say from a co-product perspective and in a corn perspective, it’s primarily a fourth quarter issue. Obviously these are competitive products. It depends on how the market moves plus or minus. But I expect with the abundance that corn, corn to be relatively stable in the current year. So, I don’t see many major issues there. You had also asked about APAC and EMEA, and it is reflected in our guidance accordingly, is some of the strong U.S. dollars and how we can get our prices up in those regions. One of the things that we look at and it’s factored into the guidance, and that’s why the guidance might be a little bit lower than some people’s expectation, versus the fact that we are having some currency issues in APAC in terms of getting our prices up. And that’s largely because if you think about the dollar strengthening it impacted all currencies including Europe. And so, if we’re seeing competition it’s probably coming under the European market versus a local market at this point in time. So, it’s probably a little bit more challenging. It may take us a little bit longer to get our prices up in those regions. I think that those things have all been factored into our goals. But as you know, EMEA and APAC both have specialty products and they sell more for functionality as well. I’m going to pass it over to Ilene to see if she has anything to add.

Well, on that North America question Robert, I think that we feel good about North America and our prospects for 2015 and beyond. And I think you got to remember when you talk about the last year, we’re starting to lap the bad weather from last year. So, we articulated specifically that impact it had on our business. So, I think obviously that one will be a positive. But I think more importantly to the long-term outlook is growing our specialty business, and again I talked a little bit earlier about Mexico and the GDP growth and the desire for healthy eating. But even in U.S. Canada, when you look at the food companies, while there are some challenges there, they continue to want to develop new products and the consumers really want food that is healthy, low in calories, has good nutritional value, and we are the go-to texture guys to help them formulate, so we’re working with all the major companies. And with the GDP growth for us U.S. forecast to be 3.6% for 2015, and lower gasoline prices, consumers are going to have more disposable income, and they like to eat, they have to eat, they like to go to restaurants. All of that boards very well for our ability to grow with the demand for food products.

Okay. Thank you.

You are welcome.

Thank you. Our next question will come from Ken Zaslow with Bank of Montreal. Go ahead please.

Hi. Good morning, everyone.

Good morning.

Good morning, Ken.

Just couple of questions; one is, on a philosophical question it is -- look, over the last several years Ingredion has done, made a conservative effort to increase Ingredion products and reduce the volatility, and then this North America number comes out which again I don’t think anybody kind of expected that. So philosophically, it seems like all the work you’ve been doing is like look, you should be taking down this volatility, but yes the volatility seemed very high particularly in the business that should not be as high. Can you just talk to that? That just seems again, I saw a contrast to what your strategy has been for the last several years.

What I would say Ken, and it’s a good question. We’re in the middle of the story, which is what we said at our Analyst Day in November. In that, as we reposition the company, first we had the National Starch acquisition which brought on specialty products, we’re in the middle of getting ready to close on the Penford acquisition. So, we’re using our strong balance sheet to focus on specialty products with modified starches and other nutritional focused products. And so, as we reposition the company, we said that actually we were 24% in revenues for specialty products for 2014, and our five year outlook was to grow that to 28%. So we’re making progress, but we’re not -- we’re still in the middle of the story. So clearly, our strategy and our blueprint is moving in the right direction, but our intent is, as we’ve said is to use our strong balance sheet and look at other M&A opportunities to broaden the portfolio and build on the specialty products that were more important to our customers, and at the same time use our excellent R&D and product development capabilities in our idea centers around the world to work with customers to build our specialty business organically. So, those two together organically and using balance sheet to grow M&A should put our wealth growing in our specialty and smoothing out some of that volatility. And Jack, you want to add something to that?

Yes, Ken, I guess, I agree with you to a large extent. I think we’ve made significant strides in terms of keeping our core relatively stable as well. It wasn’t, what I will call a noisy quarter, and you might highlight North America where we have seen corn prices going up, some product comes with our co-products, and a lot of this happened very late in the year. Some of it was exchange related. Some of it was actually just even the crop related that which surprised us a little bit. That’s not usually. We are fairly comfortable there. We have got a good business model. We utilized grain related pricing on half of our contracts and fixed pricing on the other contracts. They try to stabilize the risk associated with our business. So, I do think we have made some good, I’ll say movements in terms of the -- keeping our quarters stable and things. I think that this was a fairly noisy quarter, that’s all I would say. Well a lot of the different things happen simultaneously, that kind of negatively impacted the business.

Yes, I think, I mean, most [indiscernible] to me, I mean everything else seemed reasonably within range. North America seems really out of whack. But if I continue to [indiscernible] if you did not have the steep devaluation in the back, last couple of weeks of the quarter, where do you think that penalized you?

Well, I guess, if I look at Mexico itself, and I will start below the line first, because that one is very evident to us, is because we have the monitory -- U.S. dollar monitory assets in Mexico, and for tax purposes they are considered actually a gain in pesos, but that actually impacted us about $0.10 negatively. And then we also got a benefit because we now had this incremental tax payable, so at a pause of $0.02 type of thing. So net-net it was about an $0.08 hit there. It’s much challenging to understand the impact of the devaluation pertaining to both the co-products and things because it’s really just chasing the market a little bit. And you don’t know how much is the market, and how much is the exchange in those market places. And so, there I would say that it’s at least another $0.05 type of range just in Mexico itself. And so, I would put it into that framework that, those last few weeks probably cost us about $0.13 just for Mexico itself. Ilene, I don’t know if we’ve kind of talked about the issues. Do you have anything to add?

Well, I would say that down the other part of the exchange noise that we talked about in the script was the Canadian exchange that sometimes we take for granted and that was an unusual movement at the very end of the year, and so that pricing of co-products had a squeeze there and so we said that, that was a couple of cents, and then of course we talked about the exchange in Asia also. So, yes, by the end of the year we had to deal with that, and -- but you’re right Jack that Mexico was the biggest impact.

Okay. And I will [indiscernible] one more point, but if I take out the adjustment for the weather, adjust for the fourth quarter; you probably have at least $40 million of loss profits throughout the year, just on that. But yeah, you’re only calling for double-digit growth in 2015 even though you have really strong pricing. So, this was truly one time in nature. I feel like the guidance on the North American business again seems light and I feel like I’m missing something more than what you’re saying. And again, I’m not trying to be difficult, it just seems …

And if I could just add a couple of comments on that though; one of those things that we talked about the $20 million in terms of the cold. During the remaining portion of the year, we did a lot in terms of our controllable cost within North America as well. And our plants ran very efficiently and effectively causing us to be able to satisfy the volume needs as well. So, we were able to offset some of those numbers in the year as well. So, I don’t think that -- I think in the prior year we said that we would come back from the drought with some incremental dollars. But our teams do an excellent job in terms of actually trying to minimize some of the impacts throughout the year, and they do offset some of those costs. So, it’s not totally additive in nature.

Okay. I appreciate it. Thank you.

You’re welcome.

Thank you. We’ll go next to David Driscoll with Citi. Please go ahead.

Hi. Good morning.

Good morning.

Good morning.

So, just a quick statement. So, Ilene, and this -- maybe this is a little tough luck here, because it’s a great company. But you said a number of times that the business model is working. I mean, EPS was down 10% in ’13, and it grew just 3% in ’14 on what should have been an “easy comp”. I think when you make this kind of statement that your business model is working, it’s considered to work, if you’re growing 10% to 12% kind of per year outline, and I certainly recognize the five year track record is better. But you guys are still a bit more optimistic than I think what the actual results are. So, two quick questions, I just follow-up on this fourth quarter issue. The $0.20 miss was pretty big. I mean, that was a large number to us. I mean, there was too much to play from the time of your last call, November and December. So, it sounds to be Jack, its $0.10 for Mexico, Asia contributes a few cents, and then other miscellaneous. Is that the $0.20 reconciliation relative to where your consensus was?

Yes, and I would say that there’s probably a little bit more in the exchange in South America as well David, from what we expect.

Okay. Good picture is ’15. This range is enormous. I mean, it’s enormous. I mean, Ken just gave like this very optimistic view that everything you’ve given is low. But I mean, your initial guidance this year was $5.35 to $5.70, you’re coming at $5.20. So, I get the optimistic side of it, but obviously there are some factors out there that have been hard for you guys to call. I really think it would be helpful to people just to talk about, what is going to -- what shows up in the numbers if you produce $5.40 in earnings? And what shows up in the numbers if you produce $5.90, because again, an enormously wide range. I mean, its what, 4% or 3%, have the 13% growth, there were 14% growth, I mean, the range here is quite huge. And I think in any of us trying to explain this to investors in the coming months, we really need to hear kind of the details as to what drives low and high end?

Well, David, I’ll start out and when you -- I appreciate your comment. And when I talk about the business model working, I have talked a lot about our global footprint being a strength. And being in a lot of different economies and being in 40 different countries has been a positive, when you look over five years to be able to take advantage of the different global trends with the rise of the middle class, the focus on consumers wanting healthy food, lower calories. And so, it’s a positive, but of course you have to take the headwinds in a company like ours when you have this foreign exchange at the very end of the year that really goes against us in most economies. But our job is to really deal with that and build shareholder value over the long-term, and that’s why I feel that our company and our people are focused on the right things in terms of growing with the right formulations in R&D and product development not just waiting for M&A to happen, so that we can serve these consumers and our food companies over the next five years. So that’s what our job is. And in the meantime, when there are headwinds you got to focus on continuous improvement, so we have a very good six sigma process that we’re implementing especially in South America when you have this kind of low in the GDP. So, that’s when I say our business model is working that we got to contemn with that over the long-term. Now in terms of the range, and then I’ll turn it over to, Jack. Its interesting because while they maybe 4% above and below, and he’ll talk about what could drive that. The reality is, is that it’s a lower number than when we were giving our ranges back in a much lower EPS world. But there is some volatility, and we don’t like to miss our numbers. So, we like to deliver on our commitments and we feel that from a shareholder value point of view and return on capital employed, we’re delivering on our commitments, but clearly we didn’t in terms of the guidance. So, Jack, why don’t you explain the different parts of the range?

Yes, let me first of all start with the higher end of the range, because I think that, that is the one that I would like to focus on first, and maybe you might say its optimistic, David. But I will tell you the -- if you look at the higher end of the range, that’s really driven by the fact that as we have some of these devaluations, how hard will it be to get pricing in these markets when the economies are operating at relatively slow levels? And so, usually it’s about three to six months. We’ve seen Argentina that gets stabilized, but we haven’t seen the same recovery rates as we anticipated and so it’s been elongated out there. And so, will there be something that we can really start to drive some of these price increases to offset the exchange and this is happening in both. EMEA is very challenging from that perspective, it’s potentially a specialty market, and so therefore you’re selling in euros, and so therefore it’s much more challenging to get the exchange out. So, can we still get pricing through there? And APAC is basically the same, is will we get the pricing out of our APAC region to offset some of the exchange differences. If we do, then we’re going to hit the top of the range, and included with that, if some of these economies start to pick up or start to see volume growth as well in these regions. The other piece is, is and Ilene has commented on it quite a bit in terms of what's hitting on the top end of the range. Can we really execute on our continuous improvement programs particularly in South America where we have changed from a growth environment to a low delivery cost type of environment, and we’re really driving our efficiencies there and what we have to do to get our network actually optimized there and how quickly can we do that? And so that, those actions that we have laid out in South America in terms of costs are a major driver to get to the top part of our range. And those are within our control, and so you would think that, that should be there. But some them take time to actually execute upon because it’s a configuration of some the facilities. And then in the lower end, if we can't get the pricing through and the volumes soften because of the challenges in some of these economies or we do see our forecast right now is a relatively stable Southern Cone. When I say stable, I mean, stable in terms of earnings. If we see major slowdown or a crash in Argentina that would take away some of that volume we’d hit the bottom end of our ranges. And I think if you look at some of the questions around North America. Obviously there is still some -- we haven’t become 100% completed all the contracting. Its 99% their type of thing for our volumes, but there’s always some pluses and minuses on the volumes there as well. And so, we just want to make sure that we’re comfortable with those volumes as we go through the rest of the year and get a quarter behind us to say, where did the actual contracting come in.

Jack, at current exchange rates can you put a figure on this pricing number, I mean, sometimes I don’t even think that the rest of us on the outside know what you’re talking about. I mean, are you talking, you need five points of pricing in ’15 in order to recover 10 points of pricing. What's victory to get to that $5.90?

Well, I think it’s different in all markets. I don’t know whether I want to put very specific points, because it’s different in some places like Korea versus Thailand versus Argentina. So, I don’t know whether I would want to quantify it that way.

That’s why you get paid the big bucks. So, definitely any guidance you can get to at this time, next time, I’ll tell you what, it’s greatly appreciated, because it’s a hard thing. I mean, certainly we’re dealing with these currencies that are going haywire and trying to think about how much pricing you need to both catch up from last years issues and the forward year issues, its hard. I mean, its hard -- I mean, I get why the range is wide, but kind of putting some points on what it takes to get there I think is very helpful for the street itself, but I’ll leave it right there. Thank you.

Thank you.

Thank you.

Thank you. We’ll go next to Farha Aslam with Stephens. Please go ahead.

Hi, good morning.

Good morning.

Good morning.

Discussion about North America, and in particular your guidance; is it really just the recovery of what you think the first quarter loss is due to the weather? Could you quantify that roughly that what we should add back into numbers?

Well, Farha we disclosed that the cost was around $20 million. And as I indicated that, some of those costs were made up during the course of the year, so it will be something less than the $20 million. But that’s a good number in terms of our -- the cost that the cold actually impacted us.

Right. And then in terms of contracting, how did the contracting season go? We’re all talking that it went well, but did you feel like it went well? And about what portion of your volumes in North America are really solid and contracted? And what portion can be impacted if all the ethanol crush plants swing out of ethanol because that’s barely breakeven and swing that capacity into sweetener and starches products?

Well, as you know we contracted for volumes as well as pricing at the beginning of the year. And so, if you’re looking at the sweetener market where most of that swing capacity would move to, that is virtually all contracted at this point in time, and I think it met our expectations in terms of contracting. There’s always some variability on the spot market but we don’t do very much spot marking -- spot market in the sweetener business. In some of the other businesses more than some of the specialty businesses, that there is always a little bit of business, some of it as Ilene mentioned is fairly much contracted during the contracting season. But there’s always a lot that goes through distributors and things like that, that is more of a spot type of business, because they’re going into smaller manufacturers as well. And that would represent probably 20% of our specialty business in that category. So, there’s always some spot business but in general. And then in Mexico we always have 10% to 20% of our business which is spot business in North America just by the nature of how some of that -- not everybody contracts down in Mexico.

And the other thing I would say is, we talked about capacity utilization in the industry, and I think last year it was something like 86% and then with some of the actions that we’ve seen in terms of that being tightened up was very positive. And so, the thresh utilization is expected to be in the high 80’s during the year. But in terms of ethanol, we -- and again we haven’t been in that business, and the piece that will come with Penford is a very small kind of cost optimization model. So, in terms of people switching over, as Jack said the contracting has been pretty much done for the year and did go well given those dynamics that I just talked about. So, we don’t see a lot switching over in the short-term.

Thank you very much.

You’re welcome.

Thank you. Our next question is from Akshay Jagdale with KeyBanc. Go ahead please.

Good morning.

Good morning.

Good morning.

So continuing on North America; can you give us a sense of what your net corn costs are likely to be? I mean, just looking at the future strip, it looks like flat to slightly up when I take into account current co-products. Is that -- can you give us directionally a sense of what your net corn cost might be this year?

Yes, Akshay, we don’t really even disclose our net corn cost anywhere. I think you can look at the strip like we can and kind of say okay, where is the market right now? As you could see, it was interesting in the fourth quarter how we’ve seen the increase in corn cost after what was a phenomenal harvest really. And so, the cost did go up kind of saying here is the true value of corn I guess, is the only way I could interpret that. So, it partly depends on when you’re buying the corn? When you’re -- how you’re laying out your co-products, and where your facilities are located a little bit? So I don’t think we really ever give those type of numbers.

Yes, you report gross corn cost percentage change in your filing, I’m just directionally trying to get a sense, is 2015 it seems like its going to be relatively stable from a cost perspective on corn, correct?

I would agree with that. I would say that, if you think about, there’s abundant corn in the market place, so the supply and demand balance is nothing that’s going to be driving any usual anomalies that we can foresee today. Now the one thing, I having been in this business for a long time, I also have to highlight that there’s always huge little nuances that happen in the course of any year that could even drive it, that we didn’t expect. But at this point in time, I don’t see anything that’s going to make it volatile.

So, then the next part is on the other side of the equation on North America. I’m still trying to understand how I come to your net sales guidance for North America being flat. We’re seeing -- we’re hearing pricing off double-digits on these contracts and volume trends despite what you’re seeing in Mexico in ’14 were positive. Now I know there is, you’re probably thinking of some elasticity as you take prices up, but how do we get to flat net sales growth in North America. I mean, even if I assume a 4% FX headwind, with pricing expected to be up significantly, I’m not sure how we should be thinking about flat sales growth?

Well when you say pricing up significantly, the corn numbers as you indicated are relatively flat year-over-year. And when we’re talking about margins, that’s a small percentage of the actual numbers, and so I don’t -- I’m not too sure that I follow your thought process, but pricing should be up significantly from that perspective. I guess, as we’ve gone through contracting it does, it varies directly with the corn prices. But I’m not too sure why you would see that, there being such a large increase in the price as a percentage of the total.

And I think -- okay, so on the operating income, which is really what we do in terms of the profit. How do we drive profit improvement in terms of contracting went well. We’re looking at a better mix in terms of specialty products, delivering that higher margin product, and then wrapping the cold weather. I think that, that’s how we’re looking at improving the business, and then getting the benefit of some of our cost reduction investments even in North America.

Yes. I was just trying to get granular, but the bottom line is, in terms of the EBIT growth estimate that you have out there for North America or guidance, its obviously double digits coming from a year that you had, I mean, still pretty good. But why shouldn’t -- is there a possibility that it could be better. I mean, I’m just looking at the overall industry and I don’t know when the last time you had close to 90% utilization levels, but I think, I would say 2012 would be the most comparable year. So in that year your EBIT was up 20% plus. So is there a possibility that North America could be better than what you’re projecting?

I think what we’re trying to do with our guidance is put it right down the center as best as we can in terms of the pluses and minuses that we see. So North America obviously it could be up of everything, brakes [ph] well for them. But on the other side, there could be also some headwinds that are there as well. And so I think we’re in a pretty good spot with respect to guidance from that advantage point. Obviously, if we -- if there is positives, it may be still in that upper end of the guidance range, I would say.

Okay. And just one -- last one on South America. A lots going on, there is lot of moving parts. Where did we end up in terms of EBIT in the Southern Cone? Because I think you had given some guidance on that early in ’14. And more importantly what -- you took an impairment charge, but what’s your view -- latest view on sort of normalized EBIT in that region? Thanks.

Yes, let me give you a little bit of how we ended the year, because in the past I’ve commented very specifically on the Southern Cone. We said that we will be in that $27 million, $28 million, $29 million range, and that’s exactly where we came in for the year. So that was one of the areas that actually hit very close to where we anticipated them to. If you looked at going into next year, one of the issues we’re seeing is that some of the same issues are still persisting particularly within Argentina, which really drives the Southern Cone results. And we’re forecasting a relatively flat type of number, because we're not anticipating a significant devaluation or anything until after the elections in the fall, where it could impact 2016 more. And so, I guess, what we’re looking at for the Southern Cone even we still expect it to come back over the course of a number of years. But one of the reasons we took the impairment is the fact that we’re seeing that the business -- while it’s still profitable and a good business, if the recovery up to that $60 million to $70 million that we’ve talked to in the past has been elongated out there for probably until past 2016, and so when we’re discounting it back at a very high discount rate, it really didn’t justify keeping the goodwill on our books. But we still think that Argentina from a fundamentals perspective, it has low corn costs and it has a -- we have two good facilities there. I would say that in the longer term we’re still very bullish on it.

Okay, great. I’ll pass it on. Thank you.

Thank you. And our final question will come from Adam Samuelson with Goldman Sachs. Go ahead please.

Yes, thank you. So I guess a longer term question and just goes back to the Analyst Meeting in November where you laid out the medium-term kind of growth, the new growth path tends to double-digit EPS growth. And certain -- and most of your guidance range for this year really doesn’t [indiscernible] came in below the range for ’14, but the ’15 guidance most of the range would fall below that growth path. It really just the incremental FX pressures or what -- how is your -- if at all your long-term thinking changed relative to November that would get your most of your plan below kind of the trajectory you thought you’re going to be few months ago?

Yes, Adam. No, we’ve not changed our long-term outlook. We feel that its very -- the algorithm is exactly what we said in November. And that looking long-term, we see the ability to grow in our specialty products driven by the rise in middle class and the other consumer trends for healthy eating. So that we think we should be able to drive two thirds of the low double-digit EPS growth from our organic capabilities around the world and that the other one-third would come from using our balance sheet including M&A. And that pipeline remains very robust and these bolt-ons that I’ve talked about before, we continue to work those just because we announced Penford and we're working on that process. We continue to work that equation and have -- again, having generated $731 million in cash flow, having a great balance sheet, we continue to look at this M&A around the world and places that can add value and broaden our portfolio and geographic expansion. So we believe in that algorithm that we laid out in November.

Okay. I guess, I would just -- I just commented the -- it's hard to -- it’s difficult to reconcile that with the reported results and really the reported results on last two years were you fell below the guide path that you laid out a couple of years ago. And now already kind of trailing what was the expected path that you laid out three months ago. So I just -- I think there is -- I presume there is an expectation for an acceleration at some point to get back there and I’m still struggling to see how we get there. And just -- a couple of quick clean-ups. How much did the EPS in the fourth quarter and the full-year benefit presumably from lower incentive compensation accruals, if you missed your initial 2014 targets? And then, the reduction in the accretion expectation for Penford, is that really just a function of timing as to closing later than you thought, or is there lower contribution from ethanol which I presume the margins in ’15 will be lower than what Penford has actually realized in the LTM [ph] that you saw in September?

I’ll start and then I'll turn it to Jack. But on the Penford, we had -- when we modeled the accretion we hadn't given a huge margin to the ethanol knowing that once we get in there we’re going to try to figure out how to optimize that. So we’ve not changed the Penford equation at all. We haven’t close, so we’ve no new information and the change that we put in was purely the timing. We expect to close in the first quarter and we’ve the shareholder vote that they approved and we're working through the regulatory. So that purely was just the arithmetic on the timing. And I’ll let Jack address the incentive that we obviously lowered.

Yes. Just to reiterate, we're still looking at $20 million of synergies out of the Penford acquisition and that really have a year's synergies that we are looking for and then prorated it over the 12 month -- the 12 month period to close. So it’s more or less in line with what we’re saying. In terms of compensation, I think it depends on how you're looking at it. If you're looking at it year-over-year, our compensation has been reduced in two years primarily, because last year we didn't hit our targets and this year we didn't hit our targets as you pointed out. And so effectively you're not seeing a big swing in our compensation numbers year-over-year. Obviously, as we look at our guidance, we're anticipating hitting all our targets and that's one of the reasons why we are saying there would be some increase in our operating expenses as we move forward because of the fact that the variable compensation will kick in and we will pay it accordingly.

Any way to quantify that, and what's the incremental on the guidance?

No, we don’t really break that out.

Okay, all right. Thank you very much. End of Q&A

Thank you. So before we sign off, I just want to reiterate our confidence in our long-term outlook and the long-term view of our business. And we remain keenly focused on shareholder value creation and we’re committed to deliver shareholder value. That brings our fourth quarter 2014 earnings call to a close. Thanks again for your time today.

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.