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

Thank you. Good morning, everyone. Thank you for joining us on our fourth quarter earnings conference call. Mark Smucker, President and Chief Executive Officer, and Mark Belgya, Vice Chair and Chief Financial Officer will provide our prepared comments. Also, participating in the Q&A are Steven Oakland, Vice Chair and President, U.S. Food and Beverage, and Barry Dunaway, President, Pet Food and Pet Snacks. During this call, we will make forward-looking statements that reflect the company's current expectations about future plans and performance. These statements rely on assumptions and estimates and actual results may differ materially due to risks and uncertainties. I encourage you to read the full disclosure concerning forward-looking looking statements in this morning’s press release, which is located on our corporate website at jmsmucker.com. Additionally, please note the company uses non-GAAP results to evaluate performance internally as detailed in the press release. These non-GAAP results exclude certain items that affect comparability. One such item for the fourth quarter was a $58 million or $0.34 per share non-cash impairment charge, primarily related to related to certain trademark of the Pet Food business, representing less than 1% of the company’s total non-goodwill intangible assets. This charge is excluded from segment profit and the non-GAAP profit measures we will discuss this morning. We have posted to our website a supplementary slide deck summarizing the quarterly results and our fiscal 2018 outlook, which can be accessed through the link to the webcast of this call. These slides and a replay of this call will be archived on our website. If you have additional questions after today’s call please contact me. I will now turn the call over to Mark Smucker.

Thank you, Aaron. Good morning, everyone, and thank you for joining us. The end of the fiscal year is a good time to take stock of where we’ve been, but more importantly to talk about where we’re going in the future. So today, I’ll spend a few minutes highlighting 2017 accomplishments, but I’ll spend most of my time talking about our strategic roadmap for the next three fiscal years. Here are a few thoughts that I hope you’ll take away today. We are well down the past of transforming our company with new capabilities and specific actions to ensure sustainable long-term growth. We are well positioned for success with great brands in some of the best food categories. And we are capitalizing on current consumer and retail trends shifting our focus to faster growth areas. Our goal in all of this is to deliver on three key financial priorities. First, achieving year-over-year earnings per share growth; second, growing the top-line both organically and through acquisitions; and third, achieving significant cost savings that will provide the fuel for investments in growth and supports the bottom line. Fiscal 2017 has proven to be a pivotal year and gearing up for future growth. Well, topline stock mix persisted throughout the year both for the broader industry and our business we were able to deliver near term earnings growth by accelerating synergy delivery and managing budgets and costs effectively. Here what we accomplish. We achieve adjusted earnings per share in line with our projection for the year, representing a 7% increase over 2016, excluding a prior year gain and tax benefit. We returned over $775 million to shareholders in the form of dividend and share repurchases. We grew key on-trend brands, sales of Smucker’s Uncrustables frozen sandwiches were up 10%, Café Bustelo coffee up…

Thank you, Mark, and good morning, everyone. I’ll start off by sharing information on the Company’s recent performance, specifically fourth quarter results and 2017 cash flow performance before shifting to focus on the road ahead and a little more detail and how we expect fiscal 2018, the first year of our three-year roadmap to look. GAAP earnings per share were $0.96 in the quarter, this represented a decline from $1.61 in the prior year, which included a $0.42 non-cash deferred tax benefit related to the integration of Big Heart Pet Brands into the Smucker Company. The current quarter results included $0.34 impairment charge, which was primarily attributable to certain Pet Food trademarks reflecting a reduction in near-term sales expectations for these brands. However, longer term growth rates used in its most recent Pet Food impairment analysis remain relatively unchanged from prior tests. In addition, the latest analysis continued to indicate no impairment of goodwill. Excluding the impairment charge and reflecting other non-GAAP adjustments, which is summarized in this morning’s press release adjusted earnings per share were $1.80. This compares to adjusted EPS in the $1.81 in the prior year excluding the $0.42 deferred tax benefit. Net sales decreased by $24 million or 1% in the fourth quarter. Primarily attributable to declines in Pet Food and to a lesser extends the coffee segment. Adjusted gross profit decreased $13 million or 2%, mostly reflecting the impact of lower coffee volume mix. Gross margin declined 20 basis points to 37.5%. SD&A decrease $17 million in the fourth quarter or 5% compared to 2016, reflecting the incremental synergies that Mark referenced earlier. A 10% increased in marketing and higher distribution expense partially offset this benefit. A lower SD&A led to adjusted operating income growth of 2% over the prior year. Below operating income, the…

Thank you. The question-and-answer session will begin at this time. [Operator Instructions]. Our first question comes from the line of David Driscoll with Citi. Your line is open,

I'm going to use my two questions, one on pet food and then one on just the philosophy on cost cutting. So on pet food, our data suggest that the company’s key brands of Natural Balance and Nature’s Recipe are being outspent back [technical difficulty].

Can you repeat that, we started losing on Natural Balance and Nature’s Recipe.

Sorry about that. So our data suggest that the company’s brands Natural Balance and Nature’s Recipe are being outspent by the rival brands on advertising. We’d just like to hear some of your comments on the size of the reinvestment on both brands as they seem to be rather key to the growth algorithm in pet food.

Hi David, it's Barry. Let me provide some commentary on the Nature's brand and also Natural Balance. First, on the Nature’s Recipe launch, it has gone as expected and we’ve delivered on the distribution, the point of distribution that we anticipated here early into this fiscal year. The retailer feedback on the brands has been incredibly positive and we had just begun our national advertising campaign. We indicated that we were going to be spending about $15 million [ph] to support this launch, that is the largest support behind any of our brands in the company’s history. We think the support that we have behind this brand is appropriate based on the sizes of the opportunity. Clearly, we’re competing with other major competitors in the category, but we think we've put together a very robust marketing plan behind this brand with TV advertising, in-store support, digital across every marketing medium. So we are confident that our marketing plan for Nature’s Recipe is appropriate and is competitive. And as far as Natural Balance is concerned, that brand has been built through in-store recommendations over the years and when that brand was exclusive to the Indi channel and for one of the major retailers, that brand grew through in-store personals recommending that brand. When we moved that brand to natural distribution, we lost that exclusivity and that in-store support. We spend significant dollars on shopper marketing in in-store support for those brands. We’re going to have to shift those dollars from that in-store support, because it’s not driving incremental sales. We’re going to have to shift that to advertising support for the brand to be more competitive with some of the other major players in the pet specialty channel. We can't do that overnight, we’re going to have to work with our retail partners to shift those dollars and to demonstrate that by shifting those dollars, we can then drive incremental traffic to the store, as well as incremental purchases across the brand.

Thanks, and if I can move topics to the philosophy on cost cutting. If really seen Mark that you have change materially in your view on cost cutting on the company. I think the 200 million in savings, it’s been announced just simply since February that nearly doubles the company’s prior goal. Can you talk to us a little bit about this, what looks like a philosophy change and just the key items that caused such as sizeable change in I think your view as to what the company had to do to be competitive?

David, this is Mark Smucker. I don’t think it’s fundamentally a philosophical shift, but as we got deep into our strategic plan, our roadmap for the three years and specifically for this year, we really stepped back and look at; First of all, have we done enough and what is going to be required to drive both earnings growth and then overall total company growth over the strategic timeframe? So as we dug a little bit deeper, we realized that we do have some other opportunities. We had already started down a path, everybody's been talking about in ZBD, and we have already set down attach similar to that. I think what you’re seeing now at some more formalize approach and some of those initiatives. But I think the key point is that by undertaking that work and as we match out, our three-year roadmap. We believe that those savings and we are incrementally building in investment in things like marketing similar to what Barry just referenced along the way that will continue to help fuel our overall growth. So philosophically, not a significant shift, but you’re correct, I mean we recognize that we needed to do a little bit more to make that roadmap work.

Thank you. Our next question comes from the line of Ken Goldman of JP Morgan. Your line is open.

Two questions from me. First, thank you for the guidance, I think one of the things you suggested or said was that, as we look at fiscal ’19 and ’20 perhaps the topline in your plan will be better than usual. I was a little surprised to hear that, not because I don’t believe that you have some strong innovation coming, I’m true you do, because speak us a general environment we’re in. As you guys discussed and as many of your peers have discussed, it's still a very challenging food environment. So I just wanted to think about or get a better sense of, in your plan, are you assuming any stabilization, any rebound of the general food-at-home environment? Are you assuming any slowdown in sort of pressure you’re getting from your customers, I think you mentioned at some point that you’re not able to take as much pricing as usual? I’m just trying to get a better sense of what’s drawing that confidence out of you?

Ken, it’s Mark Smucker. Thanks for the question. At the core is making sure that we’re going with the growth is and that can be not only in the smaller brand, but it can actually be in our core iconic brands. So as we think about the -- organically the innovation that is required to continue to support both core and sort of new segments, we have spent a lot of time and lot of work as I mentioned in my scripted comments just on the consumer trends and I feels really good about what we’ve got in the pipeline. You’ll start to see some of that in the back end of this year and then into the next couple of years. So our goal of course is to grow the topline which in turn of course will grow earnings. So I think that sort of at the root of it.

Ken this is, Mark Belgya. Just maybe to add a little bit and time a little bit to David’s previous question from a philosophical perspective and change. One of the things that we’ve talked about a fair amount internally and I think you’ll hear us talk continually out on an external perspective is this whole concept of fueling the topline and the relationship that exists with innovation, topline growth and cost savings. And so as we look to that, as we -- obviously, a lot of support, the innovation that we're bringing to market in '19 and '20, sort of to your point about how we're also addressing base business and some of the assumptions assumed there is that as we do generate company savings particularly some of the $50 million that we talked about, in the excess of the 200 million Big Heart. We can plough that back in and for example we can beef up some of our marking support around the Folgers brand or some varied variance. So again a lot of the supporting platform based innovation in those brands, it also allows us to get the market trends particular like in coffee up to maybe a little higher level, but can address some of the roasting ground trends that we’ve seen in the last couple of years. So there is some of that that is being directed to help address some of the base business just to shore up some of the volume challenges.

Okay, that’s helpful. And then for my follow up, I just wanted to sort of expand a little bit on the topic that I touched on a minute ago, which is sort of your customers' I guess, for the lack of the better word, not allowing you to pass on as much pricing or as much cost as you once had. Few months ago we had talked with a bunch of food producers and they suggested that although the environment is difficult now that it really wasn’t much more difficult than it was previously. Your comments today maybe signaled a change and have things changed in the last couple of months, perhaps as the [indiscernible] entry is getting closer because it's not often that we hear companies say that they’re enough pressure from their customers, their grossers that they actually can’t take pricing, that’ kind of the new phenomenon. So just if you could help us with a that a little bit that would be great.

Ken it's Mark Smucker again. I’ll start and maybe Steve has some additional commentary, but the first thing I would say is we have been successful and effectively pushing through price changes, particularly increases. I think that speaks to our customer relationships and that they’ve always been strong. So we have heard a lot about this additional pressure, I think one way you could think about it is in a few instances with a couple of the larger customer it might take us maybe a little bit longer, but to get the prices through, but at the end of the day we’ve been very effective in explaining to our customers and justifying that these prices increases truly are needed. And therefore, I think that’s why we've been successful.

Ken, it's Steve Oakland here. I would say, to add to what Mark has said. The level of rigor and support is probably the greatest we’ve ever seen, when we have pricing to have our customer understand why. We’re fortunate to have the bulk of our volume, at least our U.S. retail volume to be number one brands. And those brands that are commodity type, it’s important that the leader is priced right with the commodity, because that drives the umbrella for private label, it drives all of those things. So in the end, those dialogues have been difficult. But we’ve been successful in oils, we’ve successful in coffee, we’ve been successful in peanut butter, Uncrustables. Now those are market driven, as you know, we’ve been in a long trough [ph] of low commodity cost. And as those things affirm, as the future looks a little stronger for some of those commodities, we’ve been able to reflect those. To your point though, there has been a tremendous amount of rigor to get that done.

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

Could you guys give some more color on coffee? You highlighted that volumes in the quarter were soft. How does it appear in the first quarter? How do you anticipate volumes to progress into the year?

Farha, Steve Oakland. Farha, I think if you go back and look at last year’s numbers. You’ll see that the first quarter a year ago was one of the better quarters we’ve had in mainstream roasting ground in a long time. So we’ve got a pretty steep comp. We’ve got higher green costs earlier in the year. As you know, the current green market probably will hit us later this year. And so, I would expect as Mark Belgya said in his opening comments, I would expect the coffee segment in particular to have a back half loaded year. So I think the first quarter trends might be difficult in that business. We don’t see that fighting us all year ago. We do see some real opportunities in all of our segments in mainstream roasting ground in premium. We did tough very briefly on the KCup opportunity. We've talk about that at Cagney [ph], we do feel more confidence than ever in our relationship with Green Mountain that we are going to be able to unlock that potential in that business as we get later into our fiscal year.

That’s helpful. And then could you comment on your Milk-Bones and your Pet Food, sorry Pet Snack portfolio. You highlighted that you’re introducing the innovation of grain free snack and the marketing support behind it. Can we expect Milk-Bone to accelerate and how should we think about the entire snacking portfolio in Pet Foods?

Farha, it’s Barry. Let me just add commentary to that. As you know, we are the category leader in snacks and then we’ve driven that category grow. As far as Milk-Bone is concerned that brand remains strong. Over the last few weeks, we stepped backed and developed a master brand strategy really to reinforce and build relevancy at the Milk-Bone brand and we also think that, we’ll also help provide a solid foundation for us to move into some other segments, growth segments that the Milk-Bone brand doesn’t participate in. We launched the grain free products that Mark referenced earlier, we’re supporting that with some marketing investment. We have some closer innovation that we'll launch in fiscal year that also will be under the Milk-Bone brand and we have a tremendous pipeline of innovation that we’re building that you’ll see come to life in ’19. So that will allow us to grow the Milk-Bone brand significantly as we’ve moving into some new segments. So we’ve developed these innovation platforms that have multi-year growth opportunities for Milk-Bone. One of the other challenges we’ve faced this year is in the natural meat segment with the Milo's brand and our plans going forward for fiscal '18 we have incremental marketing, we have new packaging, we have new product innovation that we'll be launching in fiscal '18. So we think that will also drive some incremental growth in '18 across our snacks portfolio. So those would be some highlights I would add, both near-term for '18 and then longer term into '19 and '20.

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

I had two questions if I could, the first one as I think about this new strategic roadmap kind of the three-year plan. Is fiscal '18 sort of setting the stage for fiscal '19 and fiscal '20. Is this sort of an investment year, is marketing going up a lot? Just trying to get an idea, you obviously have a lot of innovation coming later in the year, and then in '19. Is this the investment year to kind of get ready for that or does that come as the innovation hits?

Chris, its Mark Belgya. Thank you for the observation. It is an investment year particularly in marketing obviously we'll need to support this brand as we bring our innovation in '19 and '20 but we do see '18 as an opportunity to invest in a host of things. And again, to go back to the stuff I said earlier, we did take about $50 million of those over delivery of Big Heart synergy and are ploughing those back into the business both in investment and marketing as well as other capability going. So we do see this as a year, I think the point real positives though is that despite a fairly significant increase in marketing which is share drivers [ph] were low double digit over '17 numbers. We’re still showing reasonable good EPS growth as we indicated by earnings guidance range. So more to come, but all-in-all it is a bit of an investment year.

Maybe along those lines, if you've got a total pool savings of $450 million and we had talked before of our 50 million savings being earmarked for reinvestment. Is there a larger number you can give now in relation to that total 450 million, how much you intend or hope to reinvest back in the business or is that getting too far ahead of ourselves?

Yeah, so let me just give you a couple of points, actually I appreciate the question because we wanted to get a couple of things out, just as it relates to our cost program. As to differentiate a little bit what we do with synergies. First of all, we really are looking at the pool at 250 million, so despite the fact that we’re sort of build incrementally, we would like for everyone to think of it that way. And the first 50 million, as we’ve just talked, is being reinvested. The second thing is, we’re not going to go through a lot of detail in future quarters to outline the buckets worth of savings that come from. I think the measure for you will be, are we delivering margin enhancement and growth, but to say to be specific where the savings are coming from. That’s just -- I don’t think that benefits and candidly gets a little bit more difficult as the savings sort of merge and lines feel more blurring. But to your question specifically, I think what you’re going to see is, there is not going to be a penny-to-penny drop to the bottom-line. We still feel at the end of the day we’ll see a lot of profit growth and most of those dollars will hit the P&L, but as we innovate, we expect to bring the market very profitable product that will drive margin growth. So at this point, and certainly the majority of it will, but I don’t want everyone to take away that we’re just going to take the $200 million and sort of portion it out between now and 2020, that’s the way it will hit the bottom-line. So and I think Mark and I both said, we’ll continue to keep everyone abreast to our delivering of our savings, so you’ll be able to track it along. And I think it’s been materialize, too, how the spends will occur. But we feel very confident that a vast majority of that will ultimately hit the bottom-line.

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

A couple of quick questions. First, I think you guys mentioned the potential savings really to your KCup business. On that front, any chance you can quantify. What you’re thinking, can you let us know, if it’s burred in guidance? And can you let us to know, if it’s assumed in your incremental cost savings?

Hi Jason. It would be not prudent for us to get specific numbers on exact amount of savings, but it is in our guidance. And we feel confident with our partner KGM, under Bob Gamgort's leadership. We feel like both companies understand that there is a real opportunity here and the Folgers brand, the Dunkin' brands are key to the system, they need to be successful and I think we'll aligned on our whole new level of cooperation. So unfortunately, it’s going to be in the back half and it’s going to be in future years. But I might qualify one other comment, if you look at the KCup category, the KCup category right now 41%-ish, the would be around number of the dollars for KCups, it’s only 21% of the Smucker Company sales. So if we have the right agreement, the right partnership with KGM, this is significant unlock over the next couple of years for us at KCup.

It’s Mark Smucker. I make just added to Steve’s comment that really. One of the couple of things that we like, you guys to take away from the Keurig comment is that, as you all know over the last, I don’t know maybe couple of years. Our KCup business, particularly our Folgers business has been under developed versus the rest of our portfolio and as you compare us with potentially some of our other competitors. What we would love for you to take away is that, with this partnership and the level of cooperation that we’re getting between both companies that we will be on a level playing field, that we will have better distribution and potentially an expanded portfolio. So relatively speaking that portion of our business should come more in line with the category.

Okay. Good luck with that. My second question is on cash flow. It seems like, you guys are spending a lot of cash to make, I guess what you call, cash EPS. In free cash flow, you continue to fall short of the bogeys that you’re putting out there and it looks like it’s going to be another disappointed year ahead. What is the pass to try to get back to your targets of cash from ops and free cash flow? Is this just going to be more burn through the P&L to keep the savings going or is there something surely episodic here? And is the reason to look forward and see an inflection going forward?

It’s Mark Belgya. A couple of things, and we had this conversation internally. Free cash flow measurement, in this we're going to count elementary [ph], I admit, but it is, as a point in time. And so while this year we delivered call it 870 [ph], if you add that to what we delivered last year, which is 1.2 billion, we delivered over $2 billion in two years, which is pretty much right in line where we thought we would be after two fiscal years. So -- but recognize that we just fall short of our estimates this year. So to just point that out, I think in terms of future, you know this year and next year you are going to see an accelerated CapEx number primarily because of [indiscernible], we’ve disclosed those numbers, but that will drive. I think what we need to do is as we continue to drive earnings growth, I mean earnings growth is going to be a big driver of our free cash flow and then I think the other opportunity and this is some of the cost that is under delivery this year is that we have opportunities still in our working capital. While we did a great job in fiscal '16 around inventory I think there is continued opportunity cross all components of working capital, inventory, receivables, payables to continue to improve those to capture some cash there. So I think as you see earnings growth, the CapEx requirements drop off like in 2020 and 2021 and then I don’t want to see we’re going to put a large program in place with working capital, but I think just kind of putting our nose to the grindstone, those three components will get us back on track to what we talked about a few years ago.

Cool. Thanks a lot guys I’ll pass it on.

Thank you. Our next question comes from the line of John Baumgartner with Wells Fargo. Your line is open.

Steve I’d like to come back on the coffee business, really in two areas. On the single serve side, it seems as if you’re selling a product that isn’t private label or attached to a food service name like in the Café or a Dunkin' or a Starbucks. Growth is pretty hard to come by and that’s just the need for the category. So I guess A, how do you stabilize Folgers KCup, is it really just the pricing game at this point and then B, the regular roasting ground business the category of volumes have been weaker there I guess calendar year-to-date. What do you attribute that to and how do you feel about the price points there relative to demands?

Okay. Let me touch on the KCup opportunity first. Clearly, there has been a segmentation within KCups and there is a super-premium segment, there is a premium segment and there is mainstream segment, right. And then there is a value entry point segment. We’ve got to get Folgers positioned and priced right. And if you can imagine we were the first big brand in this. So the agreements that we have are not contemporary. Volumes in KCups this last year grew 10% in volume, but only 3% in dollars. So the deflation in this category was not contemplated in our legacy agreement. So we’ve got to get an agreement that allows us to have the right pack sizes, the right items in the right channels with the right price points. So we’re convinced that if you dig into that you’ll see other mainstream items that do well if they’re priced and merchandized in a right place with the right price points and the right sizes. So we’ve got some work to do there and our partner understands that. So with regards to Folgers. Now will Folgers be the fastest growing piece of that business, probably not, Dunkin' will be. And so having the same characteristics for Dunkin' the right economics and the right access to the right spots, well we think Dunkin' will lead the growth in or one-cup segment, but we think Folgers can play the right role, Folgers has a great opportunity. So that’s with regard to it, if I go back and I look at mainstream roasting ground. If you dig deeper into the IRI you’ll see that the Folgers business did pretty well in some of the discount channels in some of the mass retailers channels and some of the club accounts, right. The traditional grosser in the United States has a lot more options today and with 41% of the dollars coming from KCup, roasting ground has to be able to give that retailer the right price point, the right margin requirement which is new in this, roasting ground usually didn’t provide the retailer enough margin. In order to get the kind of excitement in merchandizing. So as we go forward both the innovation, the marketing support and the trade dollars will be designed to give that retailers a viable options for roasting ground to make roasting ground again an attractive merchandising opportunity. And that’s what you see reflected in our plan for next year. So we think roasting ground has its place, it’s a big business for us, does it need to grow for us to be successful, no. Do we need to perform at or a little better than the category for us to be successful, yes. And we think that’s a reasonable objective for that for that team.

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

I just had a question very generally on the long-term guidance you set forth, I guess, kind of walk through when you purchased Big Heart Pet. And if we think about 3% net sales growth rate for next year, I don’t know depending on the timing of Wesson comes in, 1%, organic sales growth potentially actually could hit a 3% number on the top-line. But just in terms of some of the growth targets you had outlined, which kind of always come up the Pet Food growing 4% to 5%, coffee 2%-3%, et cetera. And then as it kind of flows down into the 3% net sales and 8% earnings per share. Is there from a timing perspective, you say '18 is kind of somewhat of an investment year, '19 and '20 should be better or maybe a little bit ahead of plan on the top-line, which I’m assuming if you translate into maybe a little bit obviously better earnings growth in the bottom-line. Is there any change in those buckets and then also in total aggregate long-term growth targets over let’s say, the next three years, given the plan, given reinvestment need, given the uptick in savings or is basically everything still status quo even though we have all these kinds of pretty volatile moving parts within the business?

This is Mark Belgya. Thanks for the question. I think the short answer is there is nothing dramatically difference from our long-term growth objective. I appreciate the question since we have talked about the three-year roadmap, with where we’re guiding this year, obviously to get to an 8% earnings growth we would have to take that number up in '19 and '20. We really are talking more longer term, when we speak about our growth rate. We do think that the earnings should accelerate as we see more of the cost program flow through the bottom-line. And I think the other thing again, this is a little bit longer process, we continue to de-lever, we get the benefit of obviously lower interest and then share repurchases as those opportunities come available. So I think we still feel good about that longer-term sort of 8% plus that we’ve talk about. As the year ago and we get it next year, we'll be more specific about growth rate and in the timeframe of '19 and '20. And then on the top-line, we still feel good about the growth rate that are out there. If you just -- like you said, if you look at less Wesson, than what that’s in the company, that’s accounts for a couple percentage points of growth, and so that 3% still feels right even in the environment we’re facing. So again, a little bit of added on there. But we still feel that the 3% top-line and ultimately 8% EPS is still the right way to think about Smucker Company.

Okay, great. And then secondly, just on the Wesson acquisition in your guidance as now excludes Wesson like on the top-line and also for the bottom-line. I think you said, when you announce that it was -- I think it was $0.10 potentially accretive first year post closing, so I guess you know the number one is what are the expectations for that closing and then after that $0.10, let's say if they were to close at the end of Q1, is guidance obviously, then whenever 75% of the $0.10. So really kind of true guidance or whatever you have plus $0.07 and maybe their upside from that?

Yeah, it is Mark again. You know at this point as we announced -- you got the numbers right. When the first full year after the closing will be a dime, you know we're really not in a position at this point to comment on the closing. Its obviously going to be subject to regulatory review and approval, we’re nearing this initiative back, so that clock will start. What we will do is we will provide updates as we can, as we move through the course of the quarters and were appropriately adjusted the guidance to include or not, but at this point we have just specifically excluded because we just are uncertain as to the actual closing date.

Thank you. Our next question comes from the line of Alexia Howard with Bernstein. Your line is open.

So can I ask about the retailer environment and then some consumer trends. On the retail side, we’ve been hearing that some of the retailers have been promoting that private label product pretty heavily. I’m just wondering if you could comment on whether you’ve seen that, where its concentrated and how you’re responding to that. And then my follow up would be, on the consumer side we’re hearing that consumers are sort of flocking at to the edge of the store. Obviously, your Uncrustables areas is in the chill section, but if that’s going to continue to be structural trend away from the center into the edge. How do you respond to that strategically overtime? Thank you.

Alexia, it's Steve Oakland and I’ll start with regard to the customer private label. There is no question that a number of our customer see the growth of [technical difficulty], right $1 of all the entrance of [indiscernible] as a threat, especially those large mass merchants, right. And I think they see private label as one of the arrows in their quiver to get them price points to compete with those channels. And so we’ve seen aggressive activity in all the commodity based things and coffee and across a number of different categories, right. So are we concerned about that, yes, does it interact with some of our business, yes. We are fortunate in most cases to be the brand leader in our core categories of peanut butter, of roasting ground coffee those things. So we’re probably a little less impacted than the number two or number three brand is. But we do have Folgers in particular we understand what price points we need to hit on that product to maintain the right pricing gaps. In the best world business, we understand we have great detail on the gap we need to have those private labels. We can be above private label in all of those cases, but we can’t with those gaps gets too large. And so we’ve got pretty good analytics on that, I think we’ve got pretty good line of sight on that and then I would say it's in our plans for next year. Those activities are reflected in our plans.

Steve maybe I would add, as commented on pet. Alexia, one of the reasons we were so attracted to the pet category initially was because it has one of the lowest concentrations of private label cross any other category really, across the retail environment. So although we’re seeing some increased focused by a couple of retailer and private labels, we don’t see any significant shift there from overall category perspective relative to pet.

And Alexia, it’s Mark Smucker, I’ll take you consumer question. So you’re right, as we all know, we’ve been talking that this been a trend for some time, the shift of -- some shift to the perimeter of the store. I would say that is one trend of several that we sort of outlined in the prepared remarks. What I would say is that, the reason we still feel so good about our business is because we’re in good categories. We’re not in -- we in categories that still have growth potential. And so part of our objective is to make sure that we are shifting to those parts of the respective categories where the growth is. And so the consumer is not going to abandon the center of the store, it will focus on some of those key categories and there is value. If you think about the mainstream consumer and the value consumer thus folks will continue to shop in the center of the store as well as the higher end consumers. So we think that we’re well position, we still have confidence in the center of the store. Are we opposed, as we think about our portfolio overtime, would we participate in the refrigerated section? Potentially. It’s certainly not out of the realm of possibilities. In our frozen business, the frozen category has been challenged, but again we’re in the right part of that category. So I think that’s overall, why we still feel good about where we’re positioned.

Our next question comes from the line of Akshay Jagdale with Jefferies. Your line is open.

Two questions, first on organic growth and second on M&A. Historically, obviously you’ve done a great job with M&A. But just going back to a question your answered on the long-term growth algorithm. When you looked at the next three years, why is it still the right algorithm to be -- to show 3% growth, when you look at the last three years in each of the segments you have underperform that pretty significantly, especially in Pet Food and Coffee. So can you just help me understand, why you still feel that in the tougher environment potentially where you've had last three years, where you’ve underperformed significantly, those long-term algorithms? Why is it still the right algorithm to look at? And then I have a follow-up on M&A.

Actually, it’s Mark Belgya. So a couple of things here. I think you have to look at our expectations holistically. So again, not to put too much weight on Wesson, but Wesson is a 3% top-line growth rate. So we think that those bolt-on opportunities do exist in a host of categories for us. But I think it comes back to, what we have experienced in the last few years. As Steve mentioned earlier, we were in a period of low commodity costs, so those have been reflected in deflation. Yes, we had some challenges in that category, we're not going to [indiscernible] deflation. But as we’ve talked throughout the course of the morning, we are generating these additional dollars to support growth through innovation. And we’ve talk over the last few quarters about platform developing and not just line extensions and we firmly believe that the categories or the platforms we are going to bring to market are going to allow these numbers. And again, its why we felt it was so important to talk about this three-year roadmap and this constantly circling back to see how we’re delivering because we feel that these innovation capabilities are going to allow us to be at 3%. And while we have to be aware of what’s happened in the past, we can’t be driven by what’s happened in the past, we have to take responsibility for growth and that’s what we’re doing.

Okay. And so again it seems like M&A is part of that. I was focusing more on the organic side. But on M&A, the large deal that you’ve done recently. I mean what are your learnings from the business that you just recently acquired where there has clearly been some challenges relative to what you would have expected from that business when you bought it. So what are the learnings from that one that you can apply to future deals. Obviously, over a long period of time, it has created a lot of value with deals, but can you just help me from that lens, if you look at pet food what you’ve learned? Thanks.

Akshay, it's Mark Smucker. I'll start and ask that others if they have any additional comments. So first of all, you know again, Pet it’s a fantastic category, we’ve got some great brands in there. As we’ve acknowledged in the past, I think the integration was little more difficult than we would have expected historically. But we’re through that now and so that’s why we continue to feel optimistic about the pet business. I guess another learning would be is, we’re up against two very formidable and well-respected competitors and you know we have to continue to compete with them and they do a great job. So I think you know just thinking about the competitive set. And then as part of the integration, as we dig into the integration, we inherited some nice innovation, but as we were integrating the business we probably maybe took our eye of the ball a little bit on making sure that that pipeline was full. And so, we’re back and we’ve got a great pipeline as Barry alluded. And so over the next year or two you are going to start to see some things come to market that should help the business overall. So there is components of the business that are -- we have to be mindful of getting our pricing right. There are other parts of business that are really less about value and more about benefits to or perceive benefits of the pet and the consumer. And so it’s a broad portfolio, we play in basically every segment of the pet business and so again I think that’s why we continue to feel optimistic about it. I don’t know if you guys have anything to add?

No, I would agree to that Mark, in fact just one other point is at the same time we were integrating the pet business. We were also transforming other parts of the organization building an innovation, organization for the entire company. We’re building a market development organization as part of our sales team, another transformational capability for long-term growth. So I think that just added to the complexity of the integration, but things that we are doing that we thought made sense for the long-term. So it's just one other perspective but I agree with your comments relative to the pet business, that’s a great business, it's a great category, great brands and we still think we still see tremendous growth potential for the business.

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

Just two brief questions about industry by countries. In the case of pet food, can you give us an update for the industry level, where specialty is versus March [ph]. It just seems that March channel is doing better than specialty now. That’s the first question. And the second one for Steve maybe, in terms of KCups, I know the question has been asked in different ways, but the volume was up 10% of the category level said and then value just 3% only. So that’s not because of price deflation, but you have to go through a value brand from private label. So what has to happen at the category level in terms of innovation, in terms of category management of the shelf level in terms of new [indiscernible] in the category? Thank you.

Pablo its Barry. Let me speak to that channel dynamic. As I think you are aware pet specialty continues to be challenged with in-store traffic. And so that is a continuing challenge across that specific channel. But as we’re seeing consumers shift to ecommerce, a lot of those consumers are moving into ecommerce and obviously one of the major retailers just acquired a major player in ecom. So part of their strategy, Mark talked earlier about initiatives we have in place as we’re putting more resources against ecommerce. So that not only can we capture those consumers that are shifting out of store into ecommerce, but how do we drive incremental sales through ecommerce. And then to your point if the consumer is looking to buy their products wherever they’re shopping, the category is healthier in the mass in U.S. retail channels. Just getting back the Nature’s Recipe launch. Our retailers are telling us that launch is anywhere between 25% to 50% incremental to them. So again it just speak to where the consumer is looking to buy their products.

Pablo, Steven Oakland. I talk a little bit about our thoughts on the KCup, the macro situation in KCups. And you are right -- the category in the system needs to win for that category to continue to grow. The good news is units are up. So the consumer is voting with their share of coffee cups, that they like the system. It is fair to say that we’ve seen a low in new products in innovation in the machinery point of view. I’m really not in a position to comment about what KGM has shared with us beyond the fact that I think they have a renewed focus on that. They understand the exact things that you’re talking about that household penetration regardless of the top end and the bottom end of the price scale needs to happen in order for those to continue to grow. So they have a plan to, they don’t comment as much public anymore. But they have a plan for that and we’re encouraged by that. And so we do think though, it is important that we get the right sizes and the right price points in the right venues. And as you can imagine, the agreements that we did that as the first player in this, the legacy agreements just did not provide the flexibility, that the current agreements do. And so as we transition to that, we think there is an opportunity for us to give our fair share of the current pie and then we got to count on KGM to help us grow that pie. That doesn’t mean that we won't all work together, I think the bigger manufactures all recognize that grow of the systems in our best interest. So our media mix, our efforts have to support what Keurig is doing.

That’s great color. Thank you for that. Can I just squeeze one last one. In terms of the agreement portfolio, I know it’s only 20% of the input sale. You just said up/down 1%, can you rate that between Natural Balance and Nature’s Recipe and then remind me, I think Nature’s Recipe is $100 million in sales, so you're spending $50 million to ramp up distribution and mass. I mean obviously the opportunity must be quite big, but that seems a big number when the sales at 100 million. Thanks.

Pablo, I apologize. Let me, I think I caught the first part of your question as far as the sales for the quarter. The primary driver of that was Natural Balance, that was the softest component of the specialty decline. About a third of the decline of Natural Balance was due to supply issues not relative to some unique proteins. We’re back in a much better position relative to supply, that’s why we’re projecting low single digit growth for natural balance going into the next fiscal year. And that Nature’s Recipe will provide significant incremental net sales to the overall pet business for '18 as well. So we see strong growth across both of those brands into '18.

And Pablo this is Mark Smucker. I think your question was about the relative amount of investment in marketing versus the net sales of the business. Barry commented about the investment was over a two year period.

Thank you. Our next question comes from the line of Chuck Cerankosky with NorthCoast Research. Your line is open.

Mark Belgya, if you could quickly explain why the new Uncrustables plant will have an $8 million cost to this year. I’m thinking more of a capital expenditure, I’m wondering how that will flow through the P&L? Then I have a follow-up.

Yeah, Chuck basically there as you could imagine, most of the spend is really capital, but there are certain costs that will be associated with, for example if we have some [indiscernible] Uncrustables plant in Kentucky. You know just an example like a real location type cost, or a training cost, your other site related costs that just can’t be capitalized in their accounting rules. That’s what it would include, and I would just run through the segment that's through the consumer food segment profitability. So I guess in building their plan, but that’s where it would show up throughout the course of the fiscal year.

Could you reiterate what Uncrustables sales were in the past year?

It is 220 million in total, that includes both the food service and the retail side.

Okay. And how would you look at the stacked repo activity during fiscal '18. What are some of the puts and takes there, how aggressive would the company be in that? Thank you.

You know as we’ve said in the past, I mean the stock repurchase is a way that will support earnings or EPS. You know we tell people and we talk to our rating agencies and others over we kind of average 2% a year. But that does fluctuate and it really is a combination of what our cash needs are at the time. Obviously we’re managing our deleveraging of our balance sheet and then you know certainly where the share price is at. So we did view it as an opportunity and its been a key driver for us over the years. But for modeling you know what I think most have done historically is sort of use that 2% overtime.

Thank you. I would now like to turn the conference back to Mr. Mark Smucker for closing comments.

Thank you. First of all just wanted to thank all of you for taking the time to listen in today and you know just reiterate that you know we have proven ability to deliver earnings per share growth and shareholder value. We are in the right categories, we clearly understand our consumer and the customer trends and really focusing on the right areas and we have a clear plan to get there. So thank you for your time and thank you to our employees for their dedication and efforts and we’ll see you soon.

Ladies and gentlemen, if you wish to access the re-broadcast after this live call, you may do so by dialing 855-859-2056 or 404-537-3406 with a pass code of 17957323. This concludes our conference call for today. Thank you all for participating and have a nice day. All parties may now disconnect.