Sonal P. Robinson - Director of Corporate Finance, Vice President of Investor Relations and Assistant Secretary Richard K. Smucker - Chief Executive officer and Director Mark R. Belgya - Chief Financial officer and Senior Vice President Steven T. Oakland - President Of International, Foodservice And Natural Foods Mark T. Smucker - President Of Us Retail Coffee And Director Paul Smucker Wagstaff - Director and President of U.S. Retail Consumer Foods Vincent C. Byrd - President, Chief Operating Officer and Director

Andrew Lazar - Barclays Capital, Research Division Charles Edward Cerankosky - Northcoast Research Alexia Howard - Sanford C. Bernstein & Co., LLC., Research Division Robert Dickerson - Consumer Edge Research, LLC Edward Aaron - RBC Capital Markets, LLC, Research Division Farha Aslam - Stephens Inc., Research Division Alexis Borden - Citigroup Inc, Research Division Mike Otway - Jefferies & Company, Inc., Research Division Eric R. Katzman - Deutsche Bank AG, Research Division Brian Holland - Janney Montgomery Scott LLC, Research Division Kenneth Goldman - JP Morgan Chase & Co, Research Division

Good day, and welcome to The J. M. Smucker Company's Second Quarter 2012 Earnings Conference Call. At this time, I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. [Operator Instructions] I would now like to turn the conference over to Sonal Robinson, Vice President of Investor Relations. Please go ahead. Sonal P. Robinson: Good morning, everyone, and welcome to our second quarter earnings conference call. Thank you for joining us today. On the call with me are Richard Smucker, Chief Executive Officer; Vince Byrd, President and Chief Operating Officer; Mark Belgya Senior Vice President and Chief Financial Officer; Steve Oakland, President, International, Foodservice and Natural Foods; Mark Smucker, President, U.S. Retail Coffee; and Paul Smucker Wagstaff, President, U.S. Retail Consumer Foods. After this brief introduction, I will turn the call over to Richard for opening remarks. Vince will then provide an update on our business segments, and Mark will close with additional comments on our financial results for the quarter and our outlook for the year. We will then open up the call for questions. During the call today, we may make forward-looking statements that reflect the company's current expectations about future plans and performance. These forward-looking statements rely on a number of assumptions and estimates, and actual results may differ materially due to risks and uncertainties. I invite you to read the full disclosure statement in the press release concerning forward-looking statements. Let me also remind you that the company uses non-GAAP results for the purpose of evaluating performance internally. Additional discussion on non-GAAP information is detailed in our press release located on our website at smuckers.com. A replay of this call will also be available on the website. If you have any follow-up questions or comments after today's call, please contact me or Mark Belgya. I will now turn the call over to Richard. Richard K. Smucker: Thank you, Sonal. Good morning, everyone, and thank you for joining us on the call. Let me begin by summarizing some of the key highlights for the quarter. First, as you have seen in our press release, we achieved sales growth of 18% over the prior year, reaching a record level for the second quarter. Pricing actions taken over the course of the past 12 months to offset significant commodity cost increases resulted in strong net price realization. Also a positive mix of sales, notably increases in peanut butter and K-Cups and the recently acquired Rowland Coffee business also contributed to sales growth. Volume, while down 1% from last year's second quarter, showed growth in a number of categories and improved sequentially from the first quarter. As in previous quarters, innovation was a key driver of growth as new products contributed significantly to the top line gains. Incremental K-Cup sales for the quarter were $30 million, providing 2 percentage points of the sales increase. Sales of Folgers and Millstone branded K-Cups, which marked their first anniversary during the quarter, now exceed $100 million on an annual basis, and we expect continued growth in this area. Seasonal baking and coffee items also performed exceptionally well. Second, the quarter's cost of goods sold hit the expected peak in our overall commodity cost curve for the fiscal year. And although total costs of goods sold were up approximately $230 million or 30%, our gross profit increased for the quarter. Finally, non-GAAP earnings per share for the quarter were $1.29, down 9% from last year. Included in our results is the onetime loss of approximately $0.07 per share related to the divestiture of the Europe's Best business in Canada. Based on our desire to focus on categories that are more strategic to Canada's portfolio and prioritize resources to capitalize on key opportunities, we made the decision to exit this business. Results for the second quarter were also impacted by a higher effective tax rate compared to the prior year. Apparently, we are in the midst of our important Fall Bake and Holiday promotional period. Our team has excellent consumer and merchandising programs in place. We have seen an increase in the number of retail bake centers and in the number of Smucker items included on these bake centers. This is supplemented with the strong consumer marketing program including our multi-brand event that we launched earlier this month, as well as TV, print and digital advertising. We feel good about our initiatives. And while we recognize that consumer takeaway will ultimately determine the success of our Fall Bake, we believe our business is very well positioned. Higher food prices have resulted in market data that shows consumers have decreased home pantry inventory levels across many categories throughout the food industry. This IRI data also shows the number of Smucker products in the pantries has actually increased and thus, represents a larger portion of total items. Looking ahead, we are comforted that most commodity costs appear to have peaked in early fall and have retreated modestly in the past couple of months. As such, we believe our price-to-cost position is in good shape. Thus, the need for most price increases is behind us as we head into the remainder of the fiscal year. Looking at the full year, we are revising our guidance range for non-GAAP income per diluted share to $4.90 to $5 a share. While this is down from our original estimate, most of the adjustment reflects the onetime loss associated with the Europe's Best sale and incremental interest expense related to our recent $750 million public note offering. Although we are operating in a challenging environment, we remain confident in our long-term position as our team continues to focus on balancing volume, market share and profitability. Let me conclude by briefly commenting on last month's announcement regarding our plans to acquire the majority of Sara Lee's North American foodservice coffee business. We're extremely excited about this transaction as it encompasses our definition of all 3 classes of acquisitions that we have spoken about in the past. First, it is enabling as it allows us to participate in the liquid coffee business, aligning with our desire to compete in all forms of coffee. Second, the acquisition transforms our foodservice business by adding significant scale and nearly doubling its net sales. By providing liquid Coffee technologies and adding a direct sales force to our team, it allows us to extend our reach within the foodservice coffee channels. Third, it bolts on nicely to our existing North American coffee business and expands our overall coffee footprint. In addition to all of these benefits, it provides a unique opportunity to establish a multi-year innovation partnership with Sara Lee's new CoffeeCo that will allow us to collaborate on new technologies in the liquid coffee category for the foodservice market. True to form, our teams are actively working on steps necessary to close the transaction and seamlessly integrate it into our existing businesses. We expect the transaction to close in January and look forward to welcoming nearly 450 employees to the Smucker family. With that, I'll now turn the call over to Vince for additional details on our businesses and our brands. Vincent C. Byrd: Thank you, Richard, and good morning, everyone. Let me begin by reinforcing that our team is successfully managing through this dynamic cost and pricing environment, and we believe our efforts to balance growing share, volume and profit continue to position us for the long term. Turning to the segment results for the quarter. Net sales increased 29% for the U.S. Retail Coffee segment, primarily driven by price increases and strong contributions from innovation and acquisitions. Incremental K-Cup sales provided 6 percentage points of the sales growth, including the 2 new K-Cup varieties launched earlier this year. In addition, our Dunkin' Donuts seasonal items continue to perform exceptionally well, and our new filter packs and instant single-serve packets have been well received by consumers. The recently acquired Rowland Coffee brand also contributed 6 percentage points of the sales growth, and we remain excited about the opportunity to expand the Cafe Bustelo and Cafe Pilon brands in Hispanic markets. During the quarter, we achieved a key integration milestone as we successfully completed the transaction of our customer-facing and distribution network activities with no interruption to the business. This is a testament to the hard work and dedication of our team. Overall, we are very pleased with this acquisition and its opportunities for continued growth. Coffee segment volume, excluding acquisitions, decreased 4% for the quarter with Folgers and Dunkin' Donuts brands experiencing volume declines of 4% and 3%, respectively, representing an improvement over the first quarter. We are pleased that our Folgers brand has continued to grow market share in the mainstream roasting ground segment in the most recent 12- and 52-week periods. Coffee segment profit decreased for the quarter as a result of lower volume and the impact of significantly higher green coffee costs, which were more pronounced in the second quarter, as well as an unfavorable $7 million increase in unrealized mark-to-market adjustments on commodity contracts. As expected, the favorable pricing position that benefited the first quarter partially reversed in the second quarter. Looking at the first 2 quarters combined, coffee segment profit was up 7% over the prior year. We continue to expect higher green coffee costs to be recognized for the remainder of the year, although to a lesser extent than the second quarter. The higher cost will be reflected more in the third quarter, moderating in the fourth. Also from a comparison standpoint, keep in mind that the segment profit in last year's third quarter was at an all-time high. Overall, we remain encouraged with our coffee business as we enter the back half of the year and our key promotional periods. Turning now to the U.S. Retail Consumer Food segment. Net sales increased 13%, reflecting significant pricing actions taken across all major categories to offset higher raw material costs along with favorable sales mix. Overall volume was comparable to the prior year. Product innovation also added to the sales growth for the quarter with contributions from our Pillsbury seasonal items, Jif To Go Peanut Butter and Orchard's Finest premium fruit spreads. Segment profit increased 2% from net price realization and favorable sales mix. Let me now provide some additional commentary on the dynamics within the key categories. Peanut butter volume was up 11%, reflecting contributions from both Jif and our Natural Peanut Butter brands. During the quarter, we resumed promotional activities following a pullback in the first quarter to manage the peanut availability related to the 2010 peanut crop. This, combined with incremental consumer demand in advance of our previously announced November price increase, led to strong results for the quarter. Jif Natural peanut butter continued its solid performance with significant volume growth in the period. Looking forward, we believe our prudent actions taken to manage challenges related to the 2011 peanut crop have positioned us well. We remain comfortable with our peanut supply heading into the remainder of the fiscal year. Our 30% price increase went into effect this month with the exception of the holiday promotions, which have been price protected. Similar price increases have been taken by all major peanut butter brands. The ultimate level of price elasticity associated with an increase of this magnitude will depend on a number of factors, but we expect the net price realization will fully offset our recognized costs, and our peanut butter outlook for the full year remains positive. Turning to Crisco. Our base oils business was impacted significantly in the quarter by aggressive private label price points at a few key retailers. As a result, volume for the Crisco brand was down 10% in the quarter. While we continue to manage this challenge, which we expect to continue in the near term, we are pleased with the performance of our base oil business at the majority of our customers. Further, our shortening business rebounded to post a slight volume gain in the second quarter. Finally, volume in our baking category was up for the quarter. Although flour volume was down, baking mixes had yet another strong quarter leading to market share gains. Our baking business continues to be driven by the success of product innovations in the Pillsbury brand, including a number of new seasonal items. Overall, as Richard mentioned, we have in place exceptional quality merchandising programs as we continue through the Fall Bake and Holiday period. For the International, Foodservice and Natural Foods segment, excluding the impact of acquisitions, divestitures and foreign exchange, net sales increased 6% with price increases more than offsetting a 3% decline in volume and unfavorable mix. Volume gains were realized in Santa Cruz Organic beverages, Five Roses flours, Bick's pickles, but were offset by declines in nonbranded natural beverages and Folgers Coffee. Excluding the onetime loss on the divestitures of Europe's Best, segment profit was down approximately 2%, reflecting an increase in marketing expense over the prior year. Before turning the call over to Mark, let me provide a brief update on our restructuring project. Activities continue to progress well and the overall project remains on track, including the expansion of our New Orleans coffee operations and the construction of our new fruit spreads manufacturing facility in Orrville, Ohio. As planned, our Canadian pickle facility will close at the end of this month with the production of these items successfully transitioned to contract manufacturers. We would like to thank our employees for those efforts and their dedication during the transition. In closing, we remain confident in underlying fundamentals of our business, the strengthening of our brands and our ability to execute. I'll now turn the call over to Mark to discuss our consolidated results and outlook for the year. Mark R. Belgya: Thanks, Vince. Consolidated net sales increased $235 million reflecting a 15% impact in net price realization, contributions from the Rowland Coffee brand, favorable sales mix and FX. Volume was down slightly. GAAP earnings per share were $1.12 this quarter and $1.25 in the second quarter of last year, including restructuring and merger and integration costs. Excluding these special project costs, earnings per share were $1.29 this quarter and $1.38 in last year's second quarter, a decrease of $0.09 or 7%. As Richard noted, results in the current quarter included the $0.07 per share loss on Europe's Best and a higher effective tax rate compared to the prior year. These factors were partially offset by the benefit of a lower share count in the current year. The cost of goods sold increase of 30% for the quarter was primarily due to higher recognized green coffee, oils and flour costs in the current year. Net price increases taken over the past year largely offset these higher costs resulting in an increase in gross profit of $5 million. Included in the current year's results was a $10 million unfavorable adjustment from unrealized mark-to-market adjustments on derivative contracts compared to a $6 million unfavorable adjustment in the prior year. SG&A expenses increased 6% for the quarter, reflecting higher selling and administrative expenses and the acquisition of Rowland Coffee. Total marketing expense was equal to the prior year. The increase in SG&A expenses and the loss on the Europe's Best divestiture were the primary causes of a $22 million decline in operating income, excluding special project costs. Excluding the loss on Europe's Best, operating income was down 4%. The effective income tax rate was 34.1% in the second quarter compared to 32.5% in the prior year. The increase is primarily due to a higher Canadian effective tax rate and an increase in state income tax expense. We now anticipate a full year effective tax rate between 33.5% and 34%, consistent with the rates for the first half of the year. Capital expenditures were $68 million in the quarter, bringing the total to $136 million for the first half of the year. This level of spending puts us right on track with our full year expectation of $250 million to $275 million. Free cash flow of approximately $450 million is expected contingent upon our year-end inventory balance and other changes in working capital. During the quarter, we entered the public debt market for the first time in the company's history issuing $750 million in 10-year notes. The combination of a historically low rate environment, a strong interest in our initial issuance, and a solid investment grade rating allowed us to issue the debt at a favorable 3.5% coupon rate. A portion of the proceeds were used to repay borrowings outstanding under our revolving credit facility. We also anticipate using a portion of the proceeds to fund the expected Sara Lee foodservice beverage acquisition. As a result of the additional debt, we now project full year net interest expense of approximately $80 million. This increase reflects the incremental interest expense and the impact of terminating our interest rate swaps. While we settle the swap and realize a significant net gain, the accounting rules require us to recognize the benefit over the remaining life of the underlying debt. Lastly, during the quarter, we repurchased approximately 540,000 common shares that remain available under the 10b5-1 plan entered into in March of this year, utilizing nearly $40 million of cash. An additional 2.5 million shares remain available for repurchase under previous board authorization. We will continue to evaluate the appropriate timing to execute any future buybacks. Let me conclude by updating our outlook for the remainder of the fiscal year. Contributions from the expected Sara Lee foodservice acquisitions are not reflected in this guidance. Based on current estimates, the impact on earnings per share is not expected to be material in the current fiscal year. For the full year, we expect net sales percent growth in the mid-teens, driven primarily by net price realization. We anticipate a year-over-year COGS increase in the low 20% range, excluding the acquisition. Although the second quarter represented a peak in our commodity cost curve, we still expect significantly higher costs in the back half of the year, most notably for green coffee in the third quarter and peanuts in the fourth. While continuing to recover higher cost through pricing actions, this will further pressure gross margin. We are aggressively manage administrative expenses and discretionary spending and expect SD&A to come in below the 10% year-over-year increase included in our original guidance. We're revising our guidance range for non-GAAP income per diluted share of $4.90 to $5, primarily to reflect the Europe's Best loss and the incremental interest expense. Placement in the range will depend on a number of factors but most significantly on volume in the back of the year, which we expect to be down 2% to 3% from the prior year. We'd also like to point out that we expect to see swings in the performance of our Coffee and consumer food segments over the last 2 quarters. The impact of the higher green coffee costs will negatively impact the U.S. Retail Coffee segment in the third quarter with improvement expected in the fourth. Conversely, Consumer Food should have a very strong third quarter followed by a weaker fourth. In summary, we achieved record sales in the quarter while successfully managing through the expected high point in our commodity cost curve for the year. We continue to realize strong contributions from our strategic growth drivers of product innovation and acquisitions. We have excellent merchandising programs in place for the holiday period, and we feel confident about the underlying fundamentals of our business as we head into the remainder of our fiscal year. I would now like to turn the call back to Richard. Richard K. Smucker: Before we move on to take your questions, I want to discuss one additional item. As you know, product quality and consumer safety have always been a priority for our company, and we take pride in our track record in this area. When we do experience an issue on this front, we always approach it with an abundance of caution for consumers. Working with the FDA and our retail customers, we have recalled a small quantity of Smucker's 16-ounce Natural Chunky peanut butter due to a quality issue. We are confident that this issue is isolated and identified it as a result of the thorough testing methods that are in place in at all of our manufacturing facilities. We have been successful in retrieving the majority of this product. But as you may have seen, we issued a press release last evening in an effort to further ensure consumer safety. Our team continues to work diligently to retrieve the remaining product, which is approximately 300 cases, and we thank them for their efforts. We do not expect any material financial impact on the company. We thank you for your time today and now are happy to answer your questions.

[Operator Instructions] And we'll go to Eric Katzman with Deutsche Bank. Eric R. Katzman - Deutsche Bank AG, Research Division: Just some clarifications first up on Mark on what you said. Just to be clear, so your tax rate is a bit higher. So that's a hit to your annual guidance. And the -- sorry, I think you said $80 million of net interest expense over the year, that doesn't include the swap mentioned like $17 million or $18 million, does it? Mark R. Belgya: No, it doesn't Eric. What it includes is the swap actually is a favorable. It will reduce interest expense, but that will be over the next several years. So it's primarily the impact of the additional debt. Eric R. Katzman - Deutsche Bank AG, Research Division: Okay. So all right. And then I guess to a, I don't know who will take this, but the difference between the third quarter and the fourth quarter and reversal of what's happening with coffee versus consumer, can you go into that not just from a, I guess, a cost perspective, but is there also a top line relevance to that comment? Mark R. Belgya: Eric, this is Mark Belgya. I'll just start. In terms of the cost that we've called out, obviously, peanuts in the fourth quarter, but also as the guidance, they want to add to it, but there's really no top line. It's just driven more by the commodity costs of peanuts in the fourth and green coffee in the third. Eric R. Katzman - Deutsche Bank AG, Research Division: I guess nobody else cares to comment? Mark R. Belgya: I think everyone's in agreement with that.

We'll go next to Chuck Cerankosky with Northcoast Research. Charles Edward Cerankosky - Northcoast Research: Richard and Mark and all the others, Vince, what are you judging right now is the consumer tolerance for shelf price increases? Richard K. Smucker: This is Richard. And then I'll turn it to Vince. But we have a lot of models that say if you take your prices up as much as we've taken them and had to take them because of commodity price increases, that would have a much significant -- more significant impact on volume than it has. And so my gut feel and my feeling is that we've done a very good job of passing these on and making sure that we're competitive in the marketplace with our competition. So being down 1% in volume for the quarter with the size price increases that we've had to endure, we think is much better than models would show, and I think is benefit to our team for doing what they've been able to do. Vincent C. Byrd: Yes, I really don't have much more to add. I think we're very, very pleased with where our volume is given the pricing actions that we've taken. There are some categories that we mentioned that are being challenged primarily from a competitive standpoint as opposed to a consumer takeaway perspective. So net-net, we feel very, very good at this point. Charles Edward Cerankosky - Northcoast Research: That's nice. Next question is the competitive activity. What are you seeing there, especially on the private label side and in areas where there's just a shortage of the raw products such as peanuts? Can private label even respond well in that situation?

Chuck, this is Paul. First off, on oils, we are seeing an increase in some private label discounting, and it's primarily at some -- a few retailers, not across the board. And I think other than these key retailers, we're actually doing pretty well in the oils business. So we know it's a challenge. We'll be facing probably for a little bit ongoing, but overall, we feel pretty good about our business there. On the peanut side again, as you know, we feel very good about our peanut supply and our commitment going forward. And I think there is going to be a challenge for other peanut butter producers, but I think in our case, we're going to be in good shape. Mark T. Smucker: This is Mark Smucker. Just on coffee, I echo Richard's comments, I think very succinct there. I would say just on the private label side, that private label has seen some good growth in the nonmeasured channel. But again, I think where our pricing is and the activities that we have in place, we have been doing a pretty good job of managing the business through that.

We'll go next to Scott Mushkin with Jefferies & Company. Mike Otway - Jefferies & Company, Inc., Research Division: This is actually Mike Otway in for Scott. First question we have was around K-Cups. We've seen Green Mountain K-Cups and Folgers at retail now at the same price, and with Starbucks doing K-Cups and Dunkin' K-Cups available at the franchises, how should we be thinking about all of this vis-à-vis your K-Cup business, as well as your traditional ground coffee business? Mark T. Smucker: Well, this is Mark Smucker again. First of all, I would say our K-Cup sales continue to outperform our expectations, and we feel that there is tremendous upside continuing in the segment. And frankly, we think that the new entry by Starbucks will actually help grow the category. So we think that long term, it's probably good for the category, and we're very confident that we can continue to grow in that area. Mike Otway - Jefferies & Company, Inc., Research Division: Okay. That's helpful. And then secondly, it sounds like the -- some of the volume growth in peanut butter was due to you guys kind of stepping back in on the promotional side and as well maybe some folks buying ahead of the price increases. Any color on maybe what that split was? And I guess, secondly, do you think you'll be stepping up the promotional level with some of your other brands to try and drive volume?

Yes, Mike. This is Paul. On the peanut butter side, we did experience a little bit of the volume in the second quarter, but we implemented and mandated an allocation process by customer, and that really mitigated a lot of that buying. So we did see some -- a little bit of consumer hoarding, you could say. But it really wasn't that significant, and we'd anticipate some good growth going forward on peanut butter. As far as some of the other brands are concerned, again, we feel going through this fall bake time period, we're well positioned and feel good about where we are.

We'll hear next from David Driscoll with Citi Investment Research. Alexis Borden - Citigroup Inc, Research Division: This is Alexis Borden in for David this morning. We were wondering if you could talk a little bit about the decline in green coffee costs and, specifically, on the effect on the business and specifically focusing on 2 issues. One, a year ago, you guys, if we remember correctly, had gained from -- we believe you had favorable gains from hedges. And two, given that the green cost -- the cost of coffee has gone down, do you feel pressure now to lower prices on coffee? Mark T. Smucker: This is Mark Smucker, again. Thanks for the question. I think it really goes back to precisely what was in the script. As you know, we experienced very favorable margins in the first quarter, expected our highest costs in the second quarter and fortunately, costs have tapered off more or less as we expected. And we have reflected much of that in our August price increase. So going forward, just to reiterate I think what's been said before, costs will continue to moderate, but they will continue to be higher than last year in the third quarter and begin to continue that tapering effect in the fourth. Vincent C. Byrd: Yes, I would just add that the pricing action that we took in August, the price decrease is in good position relative to our coffee cost for the balance of the year. And so we would not anticipate any further action at this point. Alexis Borden - Citigroup Inc, Research Division: Okay. So even though prices are going down, you're not expecting at this point to lower the price even more? Vincent C. Byrd: But again, we took that into account in the pricing action we took in August given our position at that time.

We'll go next to Ed Aaron with RBC Capital Markets. Edward Aaron - RBC Capital Markets, LLC, Research Division: So your sales guidance changed a little bit for the full year, but it doesn't sound like your cost outlook really came down. So wondering if you could just tell us, the sales guidance change, is that a reflection of different volume expectations or different levels of pricing? Mark R. Belgya: This is Mark Belgya. It really was pretty much reflective of the volume. As I've mentioned in my scripted comments, we expect the back half to be pretty close to the first half performance in terms of overall volumes, down 2 to 3 percentage points, but it was really that as opposed to pricing. Edward Aaron - RBC Capital Markets, LLC, Research Division: And from a category perspective, the volume change versus expectations, where would you -- how would you kind of break that down? Mark T. Smucker: Well, I think mix will continue to be favorable.

Mix will be favorable. We see some declines on the oil side. Flour, obviously, is probably going to be down. Peanut butter should be up. Edward Aaron - RBC Capital Markets, LLC, Research Division: And just one quick follow-up question. The back half of the year from an inflation perspective, I know you have higher coffee cost in Q3 and then moderating from there, but then peanuts are kind of the inverse of that. Do you expect your overall inflation levels to be higher in Q3 or Q4, or should they be about the same by quarter? Mark R. Belgya: I would estimate them to be pretty much in line quarter-to-quarter. I mean, overall I think our COGS, as we said, are going to be 20%. So I mean it could swing a couple percentage points up or down from that.

We'll go next to Ken Goldman with JPMorgan. Kenneth Goldman - JP Morgan Chase & Co, Research Division: I just wanted to clarify your core operating guidance a bit better. If there were no loss on sale, if there were no mark-to-market charge in gain... Mark R. Belgya: Excuse me, Ken. This is Mark. Kenneth Goldman - JP Morgan Chase & Co, Research Division: There were hedging issues, no changes to tax rates, none of that, would you have adjusted your guidance at all? Mark R. Belgya: Ken, this is Mark Belgya. I'm sorry, but the volume -- we just couldn't hear your question. Kenneth Goldman - JP Morgan Chase & Co, Research Division: Is this better? Mark R. Belgya: A little. Kenneth Goldman - JP Morgan Chase & Co, Research Division: Can you hear me now? Mark R. Belgya: Go ahead. Kenneth Goldman - JP Morgan Chase & Co, Research Division: Okay, I'll try again. I'm on the road. I just wanted to clarify your core operating guidance a bit better. If there were no loss on sale, if there were no mark-to-market charges, none of these other gains or hedging issues, and really if your tax rate had come in, in line, would you have adjusted your guidance at all? Mark R. Belgya: Well, yes, we would have because, again, if you look at between the Europe's Best and the interest, I mean, that's about $0.14 to $0.15 in total. So yes, we would have. And I know that everyone kind of looks at the loss differently, but we felt it was appropriate to reduce our guidance by that $0.07 and then also the interest. So yes, we would have. But our base... Kenneth Goldman - JP Morgan Chase & Co, Research Division: Okay. But what [indiscernible]... Mark R. Belgya: If your question is, is our base business still solid and still within original plans, the answer is yes, it is. So those adjustments really -- so our adjustments... Kenneth Goldman - JP Morgan Chase & Co, Research Division: That's my exact question. Mark R. Belgya: Well, then that's the answer. Kenneth Goldman - JP Morgan Chase & Co, Research Division: Okay, and then one more. One of your largest customers said yesterday it was not taking its food retail prices up nearly as quickly as its costs were rising. And then privately, speaking with some of that competitors' -- with that customers' competitors, they said these claims were overstated, that really no retailers were being particularly irrational now, that pricing across all the retailers was not -- and without naming names, of course, have you seen rational retail pricing behavior from all of your primary customers, or are any of them purposefully eating some margin in your opinion to attract more volume? Yes, I guess to me this is important because if retailers are willing to eat more margin, you and your -- and other manufacturers, right, they can take pricing and maybe not experience quite as much elasticity as you might have thought. Just curious how you're seeing that right now. Vincent C. Byrd: Ken, this is Vince. I think it is fair to say if you look over the past 12 to 18 months when prices were escalating across all manufacturers, that there were some key categories, including some of ours, where pricing was not being fully reflected up or down. And I think that's fair when you even look at their results and in terms of their margin expectations. So I think that is a fair comment. At this particular point, net-net, I think we feel that our pricing is probably where it should be. There are a couple of exceptions to that, but it is a fair comment that your -- your point you're trying to make.

We'll go next to Farha Aslam with Stephens. Farha Aslam - Stephens Inc., Research Division: First, just a modeling question. Mark, you had said that $17 million to $18 million interest rate hits, swap benefit is going to come in the next several years. Could you just give us some color? Is it 3-year, 5-year or 7 years? Mark R. Belgya: Yes, Farha, it's actually attributed to 2 underlying debt issuances. So the first one, I believe, expire -- or matures in 2018, and then the second piece applies to debt we just issued. So I mean ballpark-ish, I would say, sort of $3 million to $4 million between 2012 and 2017, 2018, and then you'll actually see some interest or some additional interest expense in these last couple years that relate to the most recent issue. Farha Aslam - Stephens Inc., Research Division: Okay. And then, could you just share with us the synergies you anticipate from your acquisitions going into next year, particularly, with Rowland and Sara Lee? Did Rowland help you launch those individual sticks this quarter? And what the synergies were and kind of how you're thinking about earnings. Of course, the first year of Sara Lee is going to be neutral, but how you expect that growth and cost synergies to flow through the P&L in future periods. Mark T. Smucker: Yes, Farha, this is Mark Smucker. First of all, I think your question was around the instant sticks. That is not a Rowland related. That's a strictly Folgers branded product. That is essentially our Folgers instant in an individual serving. And in terms of the synergies, we would expect that they will be on track. The integration of the business has gone well, but really, the synergies will happen once we transition the operations to New Orleans from Miami. And as we've said, that is on a 2- to 4-year time frame from the time of the acquisition. Steven T. Oakland: Farha, Steve. With regard to Sara Lee, we anticipate closing early in the calendar year and the synergies for that will start to happen similar to Rowland when we can, number one, put it on our systems; and number two, integrate the operations into New Orleans. We think the first will happen sort of midway through next fiscal year, and then the operations will happen sometime 12 to 36 months later. We'll have some detail on that later in -- probably, in this fiscal year, we'll have better plans that we can announce on that.

We'll go next to Alexia Howard with Sanford Bernstein. Alexia Howard - Sanford C. Bernstein & Co., LLC., Research Division: Just following up on Ken Goldman's question. You've effectively reiterated profit guidance for the year. Despite the new challenges that have come up in the peanut butter category, are there other parts of the business that are coming through better than expected at the beginning of the year? And what do you see is the key uncertainties that are going to shape the outcome in the second half because there's a lot of moving pieces here? Mark R. Belgya: Alexia, it's Mark Belgya. In terms of managing really the couple percentage point volume decline we'd see, I think you're aware that we have actually delivered SD&A below our expectations for the first half of the year. I think early on in June, we said we were going to get about 10%, and average is probably closer to 6% right now. We'll probably be able to continue that trend of 6% to 7% year-over-year SD&A kind of growth. We're really spending a lot of time focusing on discretionary spending and identifying opportunities to help to manage that a bit. And that's where a good portion of it will come for the last 6 months. Alexia Howard - Sanford C. Bernstein & Co., LLC., Research Division: And then in terms of uncertainties for the second half, I'm thinking more on the operational side within the segment? Richard K. Smucker: This is Richard. In general, I think we feel really pretty good because we build it from a pricing standpoint, we're well positioned versus where the commodity costs are. We have our plans in place certainly for Fall Bake. Those are all, and we're really just waiting for the sell-through and which seems to be going very well. Our indication's doing well. And then the back half of the year, we have a number of programs that are already in place and in line with our customers. So I guess we're feeling pretty good about that it's going to be pretty stable business for the remainder of the year and right in line with our expectations. And again, our base business is very solid and really no changes to those forecasts.

[Operator Instructions] We'll go to Rob Dickerson with Consumer Edge Research. Robert Dickerson - Consumer Edge Research, LLC: Okay, I just had a couple quick questions, clarification. And I don't mean to beat the dead horse, as you've always say, for -- on guidance. But I do want to be clear here that, I guess, guidance comes down basically by $0.10 to $0.15. $0.15, $0.07 of that is from a onetime charge from the loss, from the business that you bought and 2008 sold to [indiscernible], but there's no commentary around loss of run rate profitability for the rest of this year or there's no readjustment of last year of taking that out, it's just a loss. That's kind of what I'm hearing from the $0.07. And so then I guess the question is, is there any additional color around any other effect from last year or this year from the asset sale, one? And then two, is could you provide any color when we could see some benefit in EPS potentially just be it buyback, what have you, from the increase in credit and therefore, interest? Mark R. Belgya: Rob, it's Mark Belgya. Couple comments around Europe’s Best. And just to frame it, and I know you guys know most of this, but last year, we had an impairment charge in the third quarter and then the loss this quarter. In terms of impact on run rate, it really is not material. The sales for the business had decreased over the last year or 2, and so the sales takeout for the back half of the year will just not be material. We'll cover that through growth in existing Canadian business. So you'll see no additional commentary or impact. In terms of ways to potentially drive a little more EPS growth, in the scripted comments, we talked about we still have 2.5 million shares available under authorization. And I think we've been pretty true to our word that when appropriate, we'll go into the market and repurchase shares to help support the EPS. We have those shares there, and we will continue to look at opportunities to do that. And then again, as I mentioned, we will continue to look at the SD&A side. We feel comfortable about being able to reduce the overall or to grow it at a slower rate, I should say, and we'll just continue to challenge the team to find opportunities to do that. But I think those are the 2 or 3 triggers that may offer up some additional EPS outside of the normal business units. Robert Dickerson - Consumer Edge Research, LLC: Okay. Perfect. And then one quick one. I know before you've targeted $450 million, I believe, in free cash flow for the year. It looks like so far for 6 months, you're negative. So I guess one is, if the expectation is that there will be a sizable ramp in free cash flow or cash from ops in the back half. And then also if you could provide any color, update us to what could cause free cash flow to ramp in next fiscal year. Mark R. Belgya: Yes, in terms of the free cash flow, you're basically seeing a trend that is pretty much the norm in the last couple -- our first half of the year, as you know, we have to build inventories in advance of a couple things. One is our Fall Bake and Holiday. One is in advance of the Atlantic hurricane season as it relates to coffee. Add to that, we're in the transition, as we've talked about, with the facilities in New Orleans, so we've actually built a little bit more coffee inventory to make that move smooth. Layer on top of all that the cost environment that we're dealing in. So that's why our inventory and our working capital use in the first half has been significant. That will turn just through the normal sell-through of Fall Bake and as well, we're going to actively try to manage down some of that inventory. Lower costs will certainly help as well. So you will see a big increase in cash from operations in the back half, particularly, probably in the third quarter. You'll have seen the same trend last year. And then again, I think looking at what we can do from an inventory perspective is the best way that we can sort of ramp up working capital and cash generation. And again, lower commodity cost will go a long way in helping that. But you will see a turn, and thus we feel good about the free cash flow number.

We'll go next to Andrew Lazar with Barclays. Andrew Lazar - Barclays Capital, Research Division: I know you all try and match to the best you can in businesses like coffee your pricing and cost dynamics to try and, at least, protect sort of the profit dollars piece of it. And I guess, that's what was toughest to do in coffee this quarter, and it didn't happen that way. As you think forward into the third quarter, I know costs in coffee have peaked. They'll still be high in the fiscal third quarter. Can you get to a place where the profit dollars are, at least, protected and up year-over-year in coffee in the third quarter? And the reason I ask is because if not, I guess that will be 2 quarters in a row where that didn't happen, and that just seems to be, I guess, a longer period of time than you typically like to have when you're trying to match those 2 things in that business. Vincent C. Byrd: Andrew, this is Vince. In a broad sense, yes, we do -- first of all, we manage the business for the long term and to grow gross profit dollars for the year. We know that from time to time, we're going to have a quarter based upon our position and what our pricing strategy is, those margins may fluctuate. As we look at the -- as Mark said and as we said it formally in the script, we feel very good that we'll be able to grow the gross profit dollars by the end of the fiscal year, and we're not coming off of that. We will have some quarter fluctuations, and last year's third quarter was a record quarter that we need to keep in mind. The other thing is as we said in the formal remarks in the second quarter, we had a $7 million hit on mark-to-market adjustment. So a lot of things going on and a lot of play. At the end of the day, we're managing towards the business for the long term to grow these gross profit dollars. Richard K. Smucker: Andrew, I might just comment, this is Richard. You know these commodity costs have been more volatile not just on coffee but on every commodity that we've purchased than they have been historically... Andrew Lazar - Barclays Capital, Research Division: Yes, they've been extreme. Richard K. Smucker: And managing that is tough. And I think our teams and the positions we take both hedging and puts and calls, have done pretty good job of doing that. But to do it quarter-by-quarter, it's difficult because we really do take a long-term perspective. So I guess, what my feeling is we've done a good job in the very volatile markets that we have. Fortunately, at least, the last couple of months, the volatility seems to have dropped a little bit but not where we all would like to see it. But again, we manage for the long term. Andrew Lazar - Barclays Capital, Research Division: I appreciate that. And then the cost dynamic clearly has been truly extreme. So I appreciate the perspective. One quick follow-up would just be, is the innovation agreement or partnership that you have with Sara Lee going forward, can that ultimately extend beyond just the sort of the foodservice piece or just the liquid foodservice piece and -- or is it just a matter of let's kind of see how it goes and we'll kind of take it year by year? Steven T. Oakland: Andrew, Steve. The innovation agreement with Sara Lee is focused on foodservice, and we're excited about that because there's a pipeline of some great new equipment for us to bring to market in North America, but it's not limited. Obviously, no agreement is limited for the long term, but we're going to focus on foodservice. We're going to get to know each other. And if opportunities come up, as we go forward, we're going to take a look at those together, and there's a commitment on both sides to do that. But we're going to try to get it focused on getting this liquid business achieving the opportunities that we see in front of us for the liquid. Richard K. Smucker: Yes, Andrew, this is Richard again. Just -- but this is a partnership and we see it -- regardless of what's on paper, we see this as a real partnership going forward. And the great thing is they're in markets that we're not in geographically. They're in Europe and South America, and we're in North America. So it does provide us a good partnership.

We'll go next to Brian Holland with Janney Capital Markets. Brian Holland - Janney Montgomery Scott LLC, Research Division: This is Brian stepping in for Mitch this morning. Just a couple questions on the coffee side here. First of all, can you talk at all about any impact that the Dunkin' Donuts K-Cup launch on the franchisee side, what impact that might have had on the bag business in the quarter on volume if you're seeing any? Mark T. Smucker: It's Mark here. Very little, if any. I think going back to what we've said previously, the Dunkin’ K-Cups that are being sold in their coffee shops again will help to grow the category, and we have not seen any impact on bag coffee sales. Brian Holland - Janney Montgomery Scott LLC, Research Division: Okay. And then if you could talk at all about some of the recent acquisitions you've had within the coffee business, any opportunity to roll out those brands, any of those brands out into the K-Cup platform, the Keurig platform at all in the future? Mark T. Smucker: As we've said I think in the past, we obviously value our partnership with Green Mountain. And at this point, we look at all of our opportunities. But at this point, we are holding firm with the brands that we currently are selling in the marketplace.

And we'll go to Eric Katzman for a follow-up. Eric R. Katzman - Deutsche Bank AG, Research Division: I guess, this goes to maybe Richard and Steve. I guess, I understand the technology associated with the Sara Lee agreement, et cetera. But I kind of question the interest in the foodservice side. I mean, I know Procter really didn't care about that. So it's, to a certain extent, wide open. But historically, hasn't that been a much, much lower margin business? How does that jive with kind of the retail side of things? And how does that like kind of come together from a profit perspective over time? Steven T. Oakland: Sure. Eric, Steve. Let me try to address that, and Richard, if you have some thoughts. A couple key. If you look at it macro, okay? 2/3 of the coffee consumed in America, and in North America, is consumed away from home, okay? So it's a big universe. And we think it's important as the leader in North America to have our brands in those key segments, okay? And if you look at all the major competitors, they've got brands away from home, at the office, at home, okay? So if you look at that, the Sara Lee piece, we didn't buy the whole thing. We just bought a slice of that. We bought primarily their liquid coffee technology, which is that's where Douwe Egbert and the brands we've got there are clearly the leaders, right? And so there are segments of foodservice, candidly, they are very attractive. This deal gives us not just that technology, but it gives us a direct sales force, and E&S, equipment and service organization. It will allow us to pick and choose where we play. And what they didn't have and a lot of the foodservice folks don't have is a big brand. So we think those things combined will allow us to pick our spots. It's not an all-inclusive. We're not going after everything. We did not take the operations. So we're not saddled with capacity we have to fill like they had. We think it gives us a nice opportunity to pick those profitable segments and do it with technology, do it with brand. Richard K. Smucker: Yes, Eric, this is Richard. Steve said it very well. The one operations we did take was their Suffolk plant in Virginia, which is a "state of the art" facility. It's one of the best plants I've seen anywhere. And then I would also just add that the good thing about liquid coffee technology, it reminds me very much of coke syrup and coke concentrate, and that's been pretty successful for them over the last 100 years or so. So in a small way, we're participating in something similar technologically. Steven T. Oakland: Right. The plants we did not take are the roasting ground plants. We took their "state of the art" liquid coffee extract plant. Eric R. Katzman - Deutsche Bank AG, Research Division: Richard, maybe in 50 years, we can kind of discuss that. Richard K. Smucker: Yes, maybe 40. Yes, we may not... Eric R. Katzman - Deutsche Bank AG, Research Division: So the protest going on outside my office, it may only be a couple of days, so I don't know. So do you intend to -- so basically, you're not taking the Douwe Egberts brand. You're going to -- are you going to put the Folgers brand on their machines, and that's going to be kind of your approach within that market? Steven T. Oakland: Eric, we think 2 things. We have a license agreement for Douwe Egbert that gives us plenty of room to transition the right brands. And as you know, we have the Folgers brand, the Millstone brand, the Bustelo brand. We've got brands that play in different segments, and they've got equipment that makes everything from a cappuccino and a latte to an iced coffee to a traditional long cup of coffee. So depending on where they are, if it's front of house unlimited lodging, if it's back of house in an upscale white tablecloth restaurant, we've got brands that fit those different segments. So I think it will be a variety of brands, and it will be the formula and the taste profile that meets the operators' needs and best reaches the consumer. So it will be all of those brands. Eric R. Katzman - Deutsche Bank AG, Research Division: Okay. And then just as a quick follow-up to Richard, on the M&A front, you've obviously been pretty active with Rowland and now Sara Lee. Do you think are you pausing for a bit? Or do we -- do you think the organization is ready for even additional M&A if it presents itself? Richard K. Smucker: Well, you really can never pause in M&A in the sense that if there's a brand out there or a relationship that you want to have. That is time sensitive most of the time. And so I think everybody would like to take a pause a little bit while we integrate these. But if the right thing comes around, we have a great team, and I have 100% confidence that they could execute.

We'll take our last question from Ken Goldman. Kenneth Goldman - JP Morgan Chase & Co, Research Division: Not to have all grocery-oriented questions here, but I did a bunch of supermarket store tours recently and looking at some of the peanut butter shelves, they were cleaned out a bit. And a couple of the CEOs told me they literally couldn't get enough peanut butter, that Smucker, Unilever and ConAgra all are putting some items in allocation. Maybe this isn't a national issue, maybe it's not even accurate. And I realize you cut out a few SKUs months ago. But on those items you're making, are you able to supply right now 100% of the peanut butter that I guess your customers are asking for?

Ken, this is Paul. I think the answer to that question is, again, we are in a mandatory allocation situation. That being said, we're able to supply the demand that we're primarily being requested on from a customer perspective. There are some customers that would like to have more always because of the current situation. But again, we feel very good with our position, what we've been able to supply and our supply going forward through the rest of this fiscal year, we feel very good about. Kenneth Goldman - JP Morgan Chase & Co, Research Division: And as far as you can tell, are your competitors in anywhere in a particularly worse or better situation that you're in, without naming names again. But just I'm curious as you get into this situation more and more, what you're seeing there.

I would again just say from our perspective, I think we're in very good shape, and our relationships we have with our peanut shellers are very good, and so I just comment that our supply is sound.

I will now turn the conference back to management to conclude. Richard K. Smucker: Well, we wanted to thank everybody for their attention today, and we're confident that the year is going to be solid, and we appreciate your time.

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