Robert Moskow: Okay. Is there anything, in particular, that the team came prepared for the next 6 months to accelerate the performance. Like you’ve gotten to see their business plans now. One in particular, are they doing to improve the execution with that one customer and then maybe introduce new products to accelerate sales.
Mark Smucker: Rob, it’s Mark. First of all, where there was maybe a bit of a hiccup on the customer side, the teams have largely worked through that. And so as we approach our next fiscal, we would expect that issue to abate and are very confident there. As I mentioned in my earlier comments, where we continue to be very excited about the business is just from a macro standpoint, the consumer continues to snack, right? And there are — consumers are eating at more times a day, often one of those snacks is a sweet snack. So that supports, obviously, the Hostess business but it also supports things even like Uncrustables and coffee, where folks may choose a sweet coffee beverage at some point in the afternoon. So we’re very confident in the consumer environment around snacking but specifically to Hostess where they have a lot of great capabilities is their cadence of innovation.
They have the ability to be very agile in terms of the way they approach different times of the year, sometimes seasonal, their abilities around net revenue optimization and the way they merchandise products. So those capabilities are in part what drove us to have Dan as a leader over both Hostess and pet because there are some — those are things that are similar to our pet snacks business, the merchandising, the NRO and the innovation cycles. So we feel very confident in those capabilities. And we also like, of course, their expertise in C-store which over time, will benefit the broader Smucker portfolio. So just a great complementary fit at a time when our base business is performing exceptionally well. And so just, again, feeling very confident about the way this deal has come together.
Operator: Next question today is coming from Peter Galbo from Bank of America.
Peter Galbo: Tucker, in the detail you gave around kind of the twin impact for the rest of the year. The one thing I didn’t notice was just did you clarify what you thought purchase accounting was going to be to kind of the gross margin, maybe at least in the third quarter. I don’t know if that carries forward but anything you can do to help us there?
Tucker Marshall: So within the $0.40 impact associated with the acquisition, $0.05 of it is associated with opening balance sheet items which predominantly is the step-up in inventory. So that should give you a sense of the impact from a gross margin standpoint.
Peter Galbo: Okay. Got it. And then maybe more just a bigger picture question. I think if you kind of back out the impact of the supplier termination in coffee. Your margins in the quarter would have been north of 30% for that business. And just curious, with the lower coffee cost flowing through, just any direction you can give us on how you’re thinking about coffee segment margins kind of on the go forward here for the rest of the year?
Tucker Marshall: So Peter, you are correct. In our second quarter, the segment profit margin would have been closer to 30% without the $39 million termination of a supplier agreement. As you think about the balance of the year, we will continue to see a little bit softer third quarter gross margin just as we lap some of the green coffee costs year-over-year. And then we will see a stronger fourth quarter to finish the fiscal year.
Operator: Next question today is coming from Matt Smith from Stifel.
Matt Smith: Wanted to ask a question about the updated guidance range. At the midpoint, it’s down about $0.20 but that includes the $0.40 in initial dilution from the Hostess acquisition. So can you talk about the drivers of the outperformance on the base business. I know there was some timing differences in SG&A between the first quarter and second quarter. Are you now at a point where SG&A, your level of investment should be fairly consistent with your prior expectations in the second half of the year?
Tucker Marshall: Yes. So as we came into our second quarter, the midpoint of our guidance range was $9.65 and we had approximately a $0.10 over delivery in our second quarter which was largely a result of improved gross profit margins along with some other SG&A favorability and we’ve locked that $0.10 into the guidance range. In the back half, we also see an additional $0.10, again, largely driven by the improvement in our outlook for gross profit margin that enabled us to capture another $0.10. So absent the impact of the dilution associated with the Hostess acquisition, the midpoint of the guidance range is $9.85 which demonstrates 10 points of growth.
Matt Smith: And if I could ask a follow-up as it relates to the coffee business. You’ve been making investments in liquid coffee, do you have a time line when we could start to see that benefit? And is that a top line benefit? Or is that more of a margin capture with you currently using outside manufacturers for some of your liquid coffee products?
Mark Smucker: Matt, it’s Mark. It’s predominantly a sales component. And keep in mind, this is something that we’re going to be working on over time and time, I mean, over a year-plus time period. And so we have begun that journey. We have a venture team that is very engaged in the liquid coffee space, both with some of our smaller Bustelo, single-serve options but more recently with some multiserve, shelf-stable Dunkin’ cold brew items that you can find in the normal coffee aisle. So we’re at the early days of our liquid coffee journey, acknowledge that it is an important journey and that we will continue to expand our offerings in liquid which include in the — later in the fiscal year, some offerings in the Bustelo. So it is going to be modest contribution in the near to medium term but we are committed to that journey and we’ll continue to look to ways to expand our liquid coffee presence in the across the entire grocery space.
