Mark Pogharian - Director, IR John Bilbrey - President and CEO David Tacka - SVP and CFO

Robert Moskow - Credit Suisse Bryan Spillane - Bank of America Merrill Lynch Kenneth Zaslow - BMO Capital Markets Eric Katzman - Deutsche Bank Andrew Lazar - Barclays Capital David Driscoll - Citigroup Kenneth Goldman - JP Morgan David Palmer - RBC Capital Markets Matthew Grainger - Morgan Stanley John Baumgartner - Wells Fargo Alexia Howard - Sanford Bernstein Robert Dickerson - Consumer Edge Research

Good morning. My name is Crystal, and I will be your conference operator today. At this time, I would like to welcome everyone to the Hershey Company's First Quarter 2014 Results Conference Call. [Operator Instructions] Mr. Mark Pogharian, please go ahead.

Thank you, Crystal. Good morning, ladies and gentlemen. Welcome to the Hershey Company's first quarter 2014 conference call. J.P. Bilbrey, President and CEO; Dave Tacka, Senior Vice President and CFO; and I, will represent Hershey on this morning's call. We also welcome all of you listening via the web cast. Let me remind everyone listening that today's conference call may contain statements which are forward-looking. These statements are based on current expectations, which are subject to risk and uncertainty. Actual results may vary materially from those contained in the forward-looking statements because of factors such as those listed in this morning's press release and in our 10-K for 2012 filed with the SEC. If you have not seen the press release, a copy is posted on our corporate website in the Investor Relations section. Included in the press release is a consolidated balance sheet and a summary of consolidated statements of income prepared in accordance with GAAP. Within the Notes section of the press release, we have provided adjusted or pro forma reconciliations of select income statement line items quantitatively reconciled to GAAP. The company uses these non-GAAP measures as key metrics for evaluating performance internally. These non-GAAP measures are not intended to replace the presentation of financial results in accordance with GAAP. Rather, the company believes the presentation of earnings, excluding certain items, provides additional information to investors to facilitate the comparison of past and present operations. As a result, we will discuss 2014 first quarter results excluding net pre-tax charges of $13.4 million or $0.04 per share diluted, related to the net acquisition and transaction costs, primarily associated with Shanghai Golden Monkey, project Next Century, and non-service-related pension income. Our discussion of any future projections will also exclude the impact of these net charges. And with that out of the way, let me turn the call over to J.P. Bilbrey.

Thanks Mark. Good morning to everyone on the phone and web cast. During the first quarter, we made solid progress against the initiatives we discussed earlier this year that gives us confidence Hershey will deliver on its 2014 expectation. As we stated back in January and at CAGNY, we expected the first quarter to be pressured by year ago comp, and the timing of our 2014 innovation. However, Q1 topline results were a bit softer than we anticipated due to some unexpected anomalies related to U.S. consumer trip within the various classes of trade, and weakness in our Latin America business. Despite Q1 store traffic issues, U.S. net sales increased 3.4% less than our expectations. Specifically in channels such as convenience stores and dollar stores, we are profitable and also instant consumable pack types drive sales, consumer trips declined more than we anticipated. In the traditional food and mass channels, consumer trips were relatively in line with our expectation. However, the basket included a greater focus on staples. Importantly, as we got closer to the end of March and into April, it appears the consumer shopping behavior was returning to normal. While preliminary April Nielsen data for the four week ended April 19th, indicate a strong sell-through for the Easter season, and a sequential improvement in non-seasonal trend. Additionally, net sales declines in Latin America were impacted by the timing of Easter, macroeconomic challenges and new tax legislation in Mexico on certain food products, and volume elasticity in Brazil due to a price increase. Overall, total company Q1 net sales increased 2.4%, driven primarily by volume. Unfavorable foreign currency exchange rates was a 0.8 point headwind. Organic net sales growth of 3.2% generated earnings growth that was slightly greater than we anticipated, due to the timing of SM&A expenses. Dave will provide you with additional financial detail, so let me provide you with an overview of the [indiscernible]. Before we get into the specifics, the U.S. retail takeaway, recall, that in 2014, Easter occurred on April 21, and in 2013 on March 31. Therefore, the timing of Easter has and will impact Nielsen and IRI data related to the March, April and May quiet period. Including Easter seasonal activity in the year ago and current period, the candy mint and gum, or CMG category declined 2.7% for the 12 weeks ended March 22, 2014, within the xAOC+C channel. As a reminder, this is xAOC+C-store data consisting of food, drug, MassX and C-store channels, plus the inclusion of Walmart, partial dollar, club and military channels. Gum continues to be a drag on total CMG performance and excluding it, the chocolate, sweet and the refreshment categories 2.2%. Excluding Easter, seasonal activity in the current and year ago period combined category growth of chocolate, sweet and refreshment, was plus 2.4%. Given the investment we continue to see in the category, in the form of innovation and consumer marketing, including the new product news and related activity we have planned over the remainder of the year, we continue to expect a candy of mixed category to increase 3.5% to 4.5% in 2014. We are particularly excited about our innovation that ramps up in May, with the launch of YORK Minis and Hershey's Spreads as the consumable items in the third quarter launches of ICE BREAKERS Cool Blast's Chews and Brookside Crunchy Clusters. Given the timing of Easter and our innovation calendar, Hershey's CMG retail takeaway for the 12 weeks ending March 22 declined 3%. Excluding Easter seasonal activity at both the current and year ago period of better, yet still in perfect measure, our retail takeaway was up 1.4%. Despite the Easter comp, this was less than our expectation and reflects the impact of the lower trip that I referred to earlier. A better way to assess performance given seasonal timing and therefore noise in the datas [ph] by looking at absolute market results. Hershey's first quarter market share within the U.S. non-chocolate candy, mint and gum categories increased. However, this was offset by a decline in chocolate market share, given the timing of new product launches, and related advertising and consumer marketing. As a result, Hershey's U.S. CMG market share, including Easter seasonal activity in the year ago and current period declined 0.1 point. While results are preliminary, we had a solid Easter and will gain share in this important season. First quarter xAOC+C chocolate category growth, excluding Easter in the current a year ago period, was 3.6%. Hershey's xAOC+C chocolate retail takeaway excluding Easter was up 1.2% and resulting in a loss of 1.1 market share points. Looking at absolute market share results, KIT KAT and Brookside Chocolate market share was up in the quarter, however this was offset by Hershey franchise softness and Cadbury, which lost 0.5 chocolate share points. Cadbury is primarily sold during the Easter timeframe, so we would fully expect a reversal of the share loss over the next two quiet periods. Switching to non-chocolate candy or NCC in the xAOC+C channels, the NCC category, including and excluding Easter in the current and year ago periods, declined 5.2% and 0.2% respectively. Hershey's xAOC+C store NCC business, including and excluding Easter in the current year-ago periods declined 4.9% and 2.7%. As a result, our NCC market share was slightly up, as Lancaster gains offset declines in JOLLY RANCHER TWIZZLER bites. Lancaster is off to a good start and distribution is tracking to expectations. Advertising started on February 16, and is driving trial and repeat. While early, Lancaster results are similar to where Brookside was at this stage of the launch. While not as large as chocolate and NCC, we continue to do well within the gum and mint categories. Specifically, our Q1 gum and mint retail takeaway within the xAOC+C universe was up 29% and 6% respectively. As a result, our gum market share increased to 1.3 points, and we now have a modest 4.8% share of the market. Our mint market share increased 0.7 points, expanding our segment leading position to 39.8%. In the C-store class of trade, where the Easter impacts are minimal, the CMG category was up 3%. However, this was significantly impacted by the mid single digit percentage of decline in the gum category. Excluding gum and despite trips being down in this channel in Q1, C-store candy and mint category growth was up a combined 5%, driven by news and activity by major manufacturers. Hershey instant consumable innovation and programming accelerates over the remainder of the year, and we would expect our C-store performance to materially exceed our Q1 retail takeaway of 1.5%, that resulted in a market share decline of 0.5 points. In the U.S. marketplace, in addition to the many exciting new products I had previously mentioned, we had many exciting promotions, programs and merchandising in place across all channels. These include a Reese's NCAA Gameday football program; new and highly effective Hershey S'mores! advertising; a relaunch of Hershey's Miniatures, with improved taste and new packaging, supported with refreshed advertising; and a sweet summer showdown program, featuring TWIZZLERS and JOLLY RANCHERS. The Hershey Spreads launch has gotten off to a good start. Retailer response has been extremely positive, driving spreads category growth of around 10%. Category growth has been driven by the chocolate spread sub-segment, which is up about 40%. Most major retailers have accepted all three flavors of Hershey Spreads. Advertising and couponing started in February, and is driving initial trial and brand awareness which were leveraged when we launched the Hershey Spreads instant consumable product in May. Outside of the U.S. and Canada, international results were mixed. China continues to be a standout. Net sales increased in the mid-teens on a percentage basis versus last year and exceeded plan. In China, Hershey continues to be one of the fastest growing international chocolate companies. For the three months ended February, chocolate category growth accelerated, driven by gifting and timing of the holiday and Chinese New Year season. As a result, our chocolate retail takeaway of about 50% was more than double the category growth rate of almost 20%. Our seasonal sell-through was solid, as evidenced by a 2.3 point share gain and overall China market share of 10.1%. Reese's testing and expansion continues, and we are pleased with what we continue to learn. The team continues to refine the messaging, based on what we have learned to-date, and we will apply these best practices during a broader roll-out later this year. In Mexico, our year-to-date chocolate market share in the Modern Trade increased 1.1 points. However, category growth slowed to the start of the year, given Easter timing, the VAT tax and a sluggish economy that's impacting consumer purchasing power and confidence. As a result, Mexico Modern Trade chocolate category sales declined about 1%. This represents a slowdown, versus the low double digit growth -- [Technical Difficulty] Similar information related to insights driven performance initiatives. Now let me provide a brief update on our international business. Similar to last year, our expectation entering the year, was that 2014 international sales growth would be back-half weighted. We still --

Ladies and gentlemen, Mark Pogharian here. We apologize for the technical difficulty. We believe JP, you got cut off. When JP started his remarks related to international commentary. So we will pick it up from there, and just the moment. Again, we apologize for the delay, and, please be patient while we pick up. JP, I will now turn it back to you, if you start with your international commentary.

Okay. Thank you everyone for your patience, and I am going to have to move here in the room, as we continue to make some adjustments, so please bear with us. So assuming that you can hear me now, I will pick up with our international comments. Outside of the U.S. and Canada, international results were mixed. China continues to be a standout, net sales increased mid-teens on a percentage basis versus last year, and exceeded plan. In China, Hershey continues to be one of the fastest growing international chocolate companies. For the three months ended February, chocolate category growth accelerated, driven by gifting and the timing of the holiday in Chinese New Year season. As a result, our chocolate retail takeaway of about 50%, was more than double the category growth rate of almost 20%. Our seasonal sell-through was solid, as evidenced by a 2.3 point share gain and overall, China chocolate share of 10.1%. Reese's testing and expansion continues and we are pleased with what we continue to learn. The Team continues to refine the messaging, based on what we have learnt to-date, and we will apply these best practices during a broader roll out later this year. In Mexico, our year-to-date chocolate market share and the Modern Trade increased 1.1 points. However, category growth slowed to start the year, given Easter timing, the VAT tax, and a sluggish economy, that is impacting consumer purchasing power and confidence. As a result, Mexico Modern Trade chocolate category sales declined about 1%. This represents a slowdown versus the low double digit growth in 2013. Given these headwinds, we expect Mexico net sales growth to be pressured this year. In Brazil, local currency net sales were a bit below our plan and year ago, as volume elasticity related to a price increase was greater than anticipated. Year-to-date, the chocolate category, the Modern Trade declined 4.9%, due to the timing of Easter. We primarily participate in the tablet/bar and chocolate snack subsegments, and the categories declined here as well. However, Hershey tablet/bar and chocolate snacks retail takeaway was up, and we gained share. We expect our business in Brazil to accelerate over the remainder of the year on a local currency basis, and be up low double digits. We have a good foundation in our key international markets. We are building on our go-to-market capabilities, driving trial and repeat and gaining market share. We are focused on the long term, and not guided by the impacts of foreign currency exchange rates, which is the factor on [ph], while we'd most likely see international net sales growth of around 15% in 2014. I am pleased with the progress we are making. There are exciting things happening in our focus markets, and we remain on-track towards the aspirational goals, and we have shared with you over the last year. Now to wrap up. We were not pleased with our overall performance in the first quarter. However, core brand merchandising, programming, innovation and advertising accelerates, and is expected to generate solid net sales growth over the remaining three quarters. As a result, we continue to expect 2014 full year net sales growth of 5% to 7%, and a 9% to 11% increase in adjusted earnings per share diluted. I will now turn it over to Dave, who will provide some additional financial details.

Thank you, JP. Good morning to everyone on the phone and on the web cast. First quarter net sales of $1.87 billion increased 2.4% versus last year, generating adjusted earnings per share diluted of $1.15, an increase of 5.5% from last year. The sales growth was below our expectation for the quarter, primarily because of the U.S. market anomalies JP discussed, combined with lower sales in Mexico and Brazil. We expected first quarter sales growth to be tempered by the comparison to the strong Brookside distribution gains last year, our innovation calendar in 2014, and foreign currency headwinds. In fact, foreign currency exchange rates, primarily the Canadian dollar and Brazilian real, negatively impacted sales growth by 0.8 points, resulting in organic sales growth of 3.2% for the quarter. Sales growth was driven primarily by North America, which increased 3%. U.S. net sales growth of 3.4% was essentially all volume related. Canada achieved slightly higher volume growth, offset by unfavorable FX. Outside of the U.S. and Canada, net sales declined 2.4%. Results varied by country, with declines in Latin America and increases in Asia, driven primarily by growth in China. Turning now to margins; adjusted gross margin declined by 10 basis points in the quarter, as higher input costs and an unfavorable sales mix, more than offset supply chain productivity and cost savings initiatives. We incurred higher than forecasted dairy and minor raw material costs in the quarter, as well as lower fixed cost absorption, resulting from the lower than forecast volumes. For the year, we now expect gross margin expansion of around 20 basis points. This is lower than our previous estimate of around 50 basis points, due primarily to higher input costs, primarily dairy, and a less favorable sales mix. Adjusted EBIT in the first quarter increased 3.7% versus last year, generating adjusted EBIT Margin of 22.3%, a 30 basis point improvement. The increase was driven by lower SM&A expenses. Advertising expense in related consumer marketing decreased about 3% versus last year. Importantly, we executed our planned advertising programs in the quarter, including the recent CAA program, seasonal celebrations advertising, and launched support for the Lancaster and spreads introductions. We expect advertising spending to increase over the remainder of the year, supporting our new product launches and core brands in North American and international markets. SG&A, excluding advertising, increased 4% versus last year, but less than our previous estimate, as we delayed certain discretionary items, in light of first quarter market trends, higher input costs, and our initiatives to achieve SG&A leverage. We will continue to invest in expanded root-to-market capabilities, as well as knowledge based consumer information, related to the insights driven performance initiatives. Now let me provide a brief update on our international business. Similar to last year, our expectation entering the year was that 2014 international sales growth would be back half weighted. We still believe that will be the case, given the seasonality of our business, together with our plans for advertising, merchandising, programming and new products, including the broader distribution of Reese's in Q3 and Q4. Q1 international net sales declined 2.4% in the quarter. On a constant currency basis, they increased 2%. In our focus markets, China net sales increased high teens on a percentage basis, and continues to do well. Importantly, Chinese New Year sell-through was solid, and we are gaining market share. In Mexico, sales declined. Our chocolate business in the Modern Trade is responding to merchandising and programming. However, our sweets, refreshment and beverage businesses have been pressured, given the sugar tax and other macroeconomic headwinds impacting Mexican consumers. We expect the Mexico business to continue to be challenged, but to improve over the remainder of the year. In Brazil, sales declined as consumers are adjusting to higher price points. We expect that our business will grow over the remainder of the year. For the full year, we expect international sales growth to be around 15%. Note, that this excludes the Shanghai Golden Monkey business, which we estimate will close in the second quarter of 2014. Moving down the P&L, first quarter interest expense of $21.4 million declined $2.2 million versus last year. For the full year, we continue to expect interest expense to be around $85 million. The adjusted tax rate for the first quarter was 34.3%, essentially in line with last year, but slightly less than our expectations of 35%, due to the timing of favorable tax issue resolution. For the full year, we expect the adjusted tax rate to be around 34.5%. For the first quarter of 2014, weighted average shares outstanding on a diluted basis were approximately 227 million shares. Turning now to the balance sheet and cash flow; at the end of the first quarter, net trading capital increased versus last year's first quarter by $103 million. Accounts receivable was higher b $104 million, primarily because of sales timing and remains extremely current. Inventory was higher by $52 million and accounts payable increased by $53 million. Capital additions, including software, were $80 million in the first quarter. For the year, we continue to expect total capital expenditures to be about $355 million to $375 million, including the capital related to the Johor, Malaysia project of $120 million to $130 million. Depreciation and amortization was $49 million in the first quarter, in line with our estimates. Cash outflows in Q1 included dividends of $105 million, and the repurchase of approximately $272 million of our common shares, to replace shares issued, in connection with stock option exercises. All shares were repurchased in the open market. In 2014, we will make progress against the old share buyback authorization, which has $125 million remaining on it, before buying back shares related to the new authorization. At the end of the first quarter, cash on hand was just over $1 billion. Let me close by providing some context on our 2014 outlook; as JP outlined. We have initiatives in place that we believe will drive net sales growth across our business. We are confident of our plans, and we expect 2014 net sales growth within our targeted range of 5% to 7%, including the impact of foreign currency exchange rates. We believe we have concluded a strong Easter season and April Nielsen data is showing solid improvements in our every day business. We expect net sales gains to build through the year, driven by core brand volume growth, and innovation in U.S. and international markets. Complemented by in-store merchandising, programming and greater levels of advertising and consumer marketing. We now expect gross margin expansion of around 20 basis points for the year. We expect higher input costs and a less favorable sales mix versus 2013, offset by supply chain productivity and improved fixed cost absorption. We have good visibility into our input costs, with the exception of dairy costs which we are unable to hedge. As we look at timing and year ago comps, we expect second quarter gross margin to be similar to what we had in Q1. Advertising and related consumer marketing is expected to increase mid-single digits on a percentage basis versus last year, slightly below our previous estimate. This change does not impact advertising spending on core brands, but instead reflects decisions on return on investment analysis on non-scale brands, and reductions in non-media consumer spending. SG&A expenses are expected to increase at a more modest level than previous years, as we start to achieve SG&A leverage. This increase will build on the investments and go-to-market capabilities, as well as consumer knowledge based projects related to our insights driven performance initiatives. As a result, we expect full year adjusted earnings per share diluted to increase within our long term targeted growth rate of 9% to 11%. Note that this outlook excludes estimated operating results related to Shanghai Golden Monkey. Upon approval of the agreement, expected in the second quarter of 2014, and excluding acquisition and transaction costs, the company expects the acquisition to be slightly accretive on an adjusted basis in 2014. Thank you for your time this morning. JP, Mark and I will now take any questions you may have.

Thank you JP and Dave for your remarks. For everybody on the line and the web cast, we again apologize for the technical difficulty this morning. But, out of the respect to a lot of you, couple of other peers that are reporting this morning and holding conference calls, just so we can facilitate time here, we would ask that you please limit yourselves to one question. Thank you, and operator, we will now open it up for Q&A.

Your first question comes from the line of Robert Moskow with Credit Suisse.

Good morning. Rob? Operator, we are not hearing any question.

His line is open sir.

Okay. Why don't we go to the next question? Robert Moskow - Credit Suisse: Hello?

Yes. Robert Moskow - Credit Suisse: I am sorry. This is Rob. I guess my question is to do with the decision to cut advertising. I wanted to know why make that decision to lower the advertising growth so early in the year, its only first quarter. It seems to be related to the gross margin cut as well. Thank you.

I think Rob, the way to think about it is that, we have really taken a look at some of the secondary brands that we have been supporting, and we have limited some of our advertising there. On our core brands, there really isn't any reduction, and in fact, advertising GRPs would be increased on a couple of levels. One, the dollar spend against core, because of moving some of that mix around. And then the other thing is, is in GRP efficiency. So as we become a more scaled purchaser, one of the things that's happening is that, we also are more efficient. So if you really look at GRPs against those core brands, and against the new item initiatives that we have, we really feel as though we are executing against the strong plan, and what we need. And of course, we will continue to assess that as we go forward. But that's how I think you might want to think about that, and then the other thing with innovation, you also have then stronger consumer events there as well, which we need to support. So we really feel as though, we have got a solid plan. Robert Moskow - Credit Suisse: But John, it seems like your competition is increasing advertising right now. Are you concerned that you're kind of scaling back, when they are scaling up?

No I think -- well first of all, your assessment is absolutely right, and in fact, in the first quarter, we saw with new item introduction, as well as some other strong support from competitors. The absolute advertising level in the category was significantly higher than it has been. So our advertising was higher as well, but not as high as some of the competitive initiatives. So I think, as others move into higher advertising spends, that's something that we have to be cognizant of. I think a lot of that however was really in support of what was happening with new item introductions, and then of course, with Easter being later, some of that advertising also -- for us, also falls into April as well. But your point is noted. Robert Moskow - Credit Suisse: Thank you.

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

Good morning Bryan. Bryan Spillane - Bank of America Merrill Lynch: Hey, good morning. So I guess the one question I wanted to ask was just based or relative to gross margin outlook and the potential of the raised prices. I guess, last couple of years -- or the last five years I guess, whatever; there has been some meaningful change in raw material costs, you have been able to price it through. So I guess, is that in the realm of expectations or possibilities looking forward if we are going to see elevated input costs going forward, is there a chance that may be there would be ability to price that through, or at this point do you think that the elasticities just don't work in your favor in that regard? Thanks.

Dave and I will take that, it’s a two-part; and the first part is we don't talk about or speculate around what we think pricing will be in the category. But what I would say is, as you have heard us say before, we will continue to be a gross margin focused organization, it would be tough to necessarily have the levels of gross margin expansion we had in 2013, but we continue to be very gross margin focused, and then from a commodity perspective, I will let Dave make any comment he feels appropriate.

As we said, we are seeing slightly higher commodity costs, particularly dairy as we look at 2014. But we do have good visibility on our cost basket other than dairy for 2014, and we will be addressing 2015 later in the year.

Our next question comes from the line of Ken Zaslow with Bank of Montreal. Kenneth Zaslow - BMO Capital Markets: Good morning everyone. Just continuing on the ad spending, what changed with the analysis of the ad spend; because you guys do typically have pretty good analytics. So I am not sure exactly what changed, as you were looking through it. Then just to follow-up on that is, how much leeway do you have for the cut, just say the sales or your numbers don't come within -- the top line doesn't come within your expectations again, at least there is another leeway for you to reduce that excitement a little bit more?

Well I think first of all, philosophically, we want to make sure that we are fully supporting our brands against the strategies that we have articulated. There are brands, which we have chosen to not support, that we have been supporting, or reduce some support. So again, I think that, that's a decision driven by analytics, and its a good decision. And then, we really feel as though, based on the ROIs and what we know at this point in time, that we are fully supporting those brands, and then our innovation in the second half. If there were to be a material change in the category, we are very committed to being brand builders, then we would assess that as we would believe appropriate. Kenneth Zaslow - BMO Capital Markets: Great. Thank you.

Your next question comes from Eric Katzman with Deutsche Bank.

Good morning Eric. Eric Katzman - Deutsche Bank: I am a bit confused on some of the international stuff between local currency and dollar results. I think JP you said that, and this was kind of split up, but I think you said China was up mid-teens, but then Dave said it was up high teens. I think you mentioned something about being up 50% and two times the category --?

Eric, to just put clarification around that. So one is a sales number, and the others were off-take numbers, during that period of time. So those would be what the difference is, but those are -- and remember with Chinese New Year and so forth, you get -- some of that shipment is actually, would have been in the fourth quarter of last year, and then the off-take really is happening in the quarter. So that's why you would see differences in that, and Mark can help you with greater detail around that. And then, if you look at the other markets, in local currency, we made good progress in Brazil, but the real, hurt us on FX. You had some of that in Mexico and Canada as well. So on a local currency basis, in both Brazil and Canada, we felt good about our progress, but FX hurt us a little bit more there. Eric Katzman - Deutsche Bank: Thanks, and just as a --

Eric, the profile for international will probably be very similar to last year, where you get much greater part of the growth in the second half. Eric Katzman - Deutsche Bank: So the international dollar sales are down 2.4 in the quarter. You're saying that for the year, international sales will be up 15% in dollars, or is that local currency?

Its in dollars.

That would be dollars including FX impact.

Including FX impact. Eric Katzman - Deutsche Bank: But ex-M&A. Okay, I will pass it on. Thank you.

Thanks Eric.

Your next question comes from the line of Andrew Lazar with Barclays.

Hi Andrew. Andrew Lazar - Barclays Capital: Hi, good morning everybody. Just want to pick up on the pricing theme as well. And again, not whether you will or won't take it of course, but I remember the last time you took a price increase. It was the first time in quite some time that promotive price points went up as ell. And I think, because you were bumping up against some key retail, sort of price thresholds. I think the promotive price points went up like 20% or so, and you ended up managing it very well in hindsight, [indiscernible] and all of that. So I guess what I am trying to get a sense of is, is there any way to may be hard to do the -- kind of characterize where you are today and the next time you take pricing, whenever that may be, if it’s a year, if its three years. But are you bumping up against any key retail sort of promotive price point thresholds, or is there some room to kind of work with them there?

I think, the way that I would think about it is, if you look over an extended period of time, the category has been pretty unelastic, and so its 50% volume and 50% price realization historically in the category. As we have crossed price thresholds, which we always watch very-very closely. Our experience has been pretty positive, that the category digests that pricing. So the category in general, I think, has demonstrated its ability to again be pretty accessible and affordable, and that really has sort of won the day. And then there is a couple of things to think about, in terms of how companies may think about pricing, is obviously there is a commodities element, and then there is an element of how you invest in the business, and I don't think its exclusively one or the other, but we look at both of those. And I think both of those things are intrical to how you would think about that particular topic, and that's probably -- Andrew, I don't know if that satisfies you, but that's probably about as far as I can go on that. Andrew Lazar - Barclays Capital: That's helpful. I appreciate your perspective. Thank you.

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

Hi Dave. David Driscoll - Citigroup: Hi guys. Thank you. Good morning. Wanted to go back to advertising for a minute; just to be clear, at least as much as we can. So add spending in the quarter down 3%, full year at mid single digit increase. So clearly its going up, you're supporting your products, not as much as before, but you're supporting it. I think what this suggests, is that the change was almost entirely in the first quarter, and as I look at Qs two, three and four, you're going to have fairly substantial increases in two, three and four. So first off, is that right, and is that pretty much consistent with the plans? I think it kind of helps people to understand that may be the big change was Q1, and its not something that's massively different in the next bunch of quarters. Can we just start there?

Yeah, I think that's a very good assessment. David Driscoll - Citigroup: Okay. Then on the increases that you have coming in Qs two, three and four, where are they going to be deployed? Because I think what everybody is just going to want to understand as best they can, is your expectation that sales growth will accelerate, and I think its going to be directly related to where all this additional ad spending goes. So can you talk about how you deploy it?

Well if you think about the innovation we have this year, its actually spread across our different segments of the business, and so, you will see the appropriate amount of advertising supporting a broad piece of the portfolio, but appropriately, you will see it supporting the new initiatives. Then you have Lancaster and spreads, which really just started in February and we are building distribution there. So you will see strong support for those, as we go throughout the year, we feel very good about our distribution progress. We have had a coupon drop, and we should continue to build on our merchandising and then advertising support for both of those as well. So those will be brands that are supported. And just to be clear, coming back, the support on our core brands continues to grow. So a lot of that growth again is out of GRP purchase efficiency, and it is not making a choice, not to advertise on some secondary brands. And if you recall historically, we have talked about how we like to rotate across those brands, so that's also money that comes back against the core. David Driscoll - Citigroup: Really appreciate it. Thank you.

Your next question comes from the line of Ken Goldman with JP Morgan.

Good morning Ken. Kenneth Goldman - JP Morgan: Hey everybody, thanks for the questions. My guess is, you're cutting ad spending on may be some brands like, I don't know, Bliss, Simple Pleasures. At least in Nielsen data, they're lagging a bit. So first of all, is that correct?

That's correct. Kenneth Goldman - JP Morgan: That's right. So AIR DELIGHTS too I would imagine. Can you talk a little bit about the future of those brands? How should we think about them? I guess I am asking, is there a risk they get delisted, is there some [indiscernible] coming because -- often when step one is cutting advertising, step two can be the brand loses whatever, I don't want to say shaky, but whatever legs it had?

I think the way to think about it is, it doesn't mean that we would not be supporting those brands. I think in a couple of instances, those -- there may be some other brands that you talked about, that have ended up playing more of a niche role, than maybe we would have hoped at one point in time. Then, in the case of bliss, it’s a meaningful brand, and within a position, but that whole trade-up space has sort of evolved over time. And so it doesn't mean that we wouldn't support a brand like Bliss, but we are in an environment where we believe making choices is important and these brands will evolve and consumers will ultimately decide, how they do. Kenneth Goldman - JP Morgan: Great, thanks JP.

You bet.

Your next question comes from the line of David Palmer with RBC. David Palmer - RBC Capital Markets: Good morning guys.

Good morning. David Palmer - RBC Capital Markets: Typically, Hershey starts the year rather quickly, and this year, obviously its not the case but some of that seems to be your timing of new product news. But some of it seems to be, from what we are hearing Mars, which has been rather aggressive on promotion, and that's a big contract for the last couple of years, could you comment on that? And then specifically related to the seasonal share, which I guess was down significantly, if I look at the numbers in your release. We hear there may have been something of a co-packer issue, where orders weren't filled right away for Hershey, one of your co-packers, was that a factor at all in the quarter?

No, let me talk about kind of -- le make a broad statement here about the quarter. So first all, you have the timing of Easter being three weeks later. So there is just a lot of noise in the data. Yet, strong competitive program, it included new items, and also increased advertising. Our plan, as you point out, is much more back-half loaded than it was before. So even though we had introductions with -- kick out many, as you have spreads, you have Lancaster, all of those are currently building. And then you have anomalies in the consumer purchasing pattern. So all of those things clearly had an influence, I wouldn't focus on one much more than the other. As we look at weekly data, and as I've said to you guys many times, I don't get overly enamored by weekly data. But I guess in this case, what I would tell you is, I continue to be encouraged that our hypothesis around the quarter and the things that we are describing to you, I feel good about, because as we look at the weekly data, it continues to strengthen and in fact, in the latest weekly data on year-to-date basis, our total CMG share has turned positive, which again, gives me confidence that as I talk to retailers, consumers seem to be back in stores, I can't comment on for anybody, what their spending is. But it appears to feel as though, some of the trips issues, some of the basket mix etcetera, I am more comfortable calling it an anomaly. I do believe going forward, there is some degree of bifurcation in the total consumer environment, but we will sort that out for all CPG, as we go forward. But I am just feeling a lot better, as I see some of this weekly data come in that we have called this about right. David Palmer - RBC Capital Markets: Thank you.

Your next question comes from the line of Matthew Grainger with Morgan Stanley.

Good morning. Matthew Grainger - Morgan Stanley: Hi. Good morning everyone. I just wanted to focus on the factors underlying the lower gross margin outlook. I know there are some specific external things like higher dairy and Q1 traffic that have had an incremental impact. But looking beyond the lower, sort of Q1 fixed cost allocations and what already know about dairy prices, to what extent does that lower gross margin outlook also reflect of you that the competitive and the promotional environment could be sustainably a bit more intense than you originally envisioned?

Well the biggest chunk of the gross margin change is in fact the dairy outlook. There are some impacts around the sales mix, which are principally in the first quarter, and we have programming very well set for the balance of the year, and so we think that we are in the right place on that and we have a good view of the commodity cost, with the exception of dairy.

And I would say too Matt, even if you continue to look your IRI and Nielsen data, you just don't see a lot of positive or negative price in that category, which would help answer your question as well of what's really going on. I mean, as JP alluded to, there is just a lot of activity in the first quarter, which is what we expected in news, coming into this year. Matthew Grainger - Morgan Stanley: Okay. All right. Thank you.

Your next question comes from the line of John Baumgartner with Wells Fargo.

Good morning. John Baumgartner - Wells Fargo: Good morning JP. Just in terms of the elasticity in Brazil. Did the magnitude of that surprise you at all? And then maybe related, if you look around some of these snacking categories in developing markets, biscuits, gum, one can may be argue here that they category level growth hasn't really snapped back from the recession. Is that your sense that these categories are kind of prone for more tempered growth going forward? Just your thoughts there?

You know, I actually would tell you that I continue to be very positive on the category, especially on the chocolate segment across just about all of these markets, and I think that, we are going to have some of these different dynamics, the real got awfully strong, unusually strong from my historical experience, and now its moving the other direction. So I think as we look at, what do we believe are the right plans within a given market? Do we feel on a local currency basis, we are managing our business correctly for the long term? And then, we have a relatively modest sized business in a country like Brazil, and with that being the case, sometimes when you have negatives from a translation standpoint, the impact is accentuated. So we sometimes probably have that as a bit of a greater influence, on how those numbers come out. But I continue to feel good about the progress, the distribution we are building across the country and our brand portfolio there. I think for our company, part of what you see there may be less macro and a little bit more unique to us, given the size of our business there. John Baumgartner - Wells Fargo: Great. Thanks JP.

You bet.

Your next question comes from the line of Alexia Howard with Sanford Bernstein.

Good morning Alexia. Alexia Howard - Sanford Bernstein: Hi. Just wanted to pick up on your comments about the lower consumer trip in the instant consumable channel and the irregular approach in patterns and traditional mass. Could you just give us a little bit of a handle on what that was, and I know it's settled down now, but what caused it to settle down? Thank you.

If you looked at just trips in general and you went back to about June-July 2013, you could start to see a change in the frequency of trips and then the distances people drove from their home to do their primary shopping, and so that was one of the reasons the food channel is an example, continue to do a little bit better, as people got a higher percentage of their primary trip there, and so, that was one of the influences. It continued through the fall and into the first quarter, and what we observed, as we look at total store data and household panel data etcetera, is that the mix in the basket changed. So you got a little bit greater focus on staples versus instant consumables. If you think about people who may have been impacted by the weather, and then when we saw differences across the country, if weather wasn't an issue versus whether being an issue. And then you also have changes in some of the government programs that people had to adjust to and figure out what that meant for them. And so I think this concept of bifurcation also is an issue in terms of how people build their basket. And so, there was just a lot of moving parts in what we believe we are seeing is a bit of an emergence from that, where things, both in terms of traffic, primary shopping, outlets, as well as mix of the basket, is returning to what we might call a more historical norm. I think the trips data of course will continue to follow and see if you know that changes and it comes back. But those are really some of the influences that were in that comment. Alexia Howard - Sanford Bernstein: Great. Thank you very much. I will pass it on.

Operator, we have time for one more question.

Thank you. Your last question is from Rob Dickerson with Consumer Edge Research.

Good morning. Robert Dickerson - Consumer Edge Research: Hello. So just a question on balance sheet and cash flow. I understand Q1 is a little bit more pressured than expected. Part of it is coming out of international advertising's pullback. We have seen share loss in the U.S., coming from lower end, but we are also seeing it from Russell and some of the higher end guys. There has also been some discussion though on the M&A front for some smaller players, one of the company executives is getting very old, to be frank, and in another company there has been rumors, that the brothers might be looking to sell. I am just curious, if you were to come under pressure, you are now running at a net debt level, its about a 15 year low. I understand all the near term pressures in the business, but could you may be just kind of discuss a bit what your theory is around capital allocation outside of Golden Monkey over the next two years, haven't seen any shares purchased really, or repurchased to effect EPS over the past two years, for the most part. I don't really feel like I thought you were talking about the balance sheet, thanks.

Okay. Well I guess, we feel very good about the balance sheet. We have a very strong balance sheet, and as we look at -- and we had about $1 billion in cash at the end of the quarter. As we look at both our cash and our debt capacity, our priority first continues to be to grow, and so we are continuing to look at M&A opportunities, and we are also investing in capital to support our business growth. We have got new plant under construction in Malaysia, and we will have some additional need for additional volume as our business grows. So our number one priority for cash and debt continues to be growth, and we expect that to be M&A and also to be the capital investments. Our second priority is dividends. We have a policy of about 50% dividend pay out of our earnings, and so that's where we would go. And then third, we would go to share buyback. We buy back what is exercised in options, and as I reported, we bought back a bit over $200 million in the first quarter for replenishing option exercises and we also have $125 million on an old authorization, and an additional $250 million on a new authorization that we did earlier in the year, and we expect to be making progress against those, as we go through the year. But that's kind of our priorities, first is growth, second is dividend and then we will buy back shares after that. Robert Dickerson - Consumer Edge Research: Okay. Thank you.

Thank you very much for joining us for today's conference call. Again, we apologize for the technical difficulties, and Sergio Flores and I will be available to take any follow-up calls that you may have. Thank you very much.

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