Maple Leaf Foods Inc.

Michael McCain - President and Chief Executive Officer Deborah Simpson - Chief Financial Officer

George Doumet - Scotiabank GBM Irene Nattel - RBC Capital Markets Mark Petrie - CIBC World Markets Derek Dley - Canaccord Genuity Michael Van Aelst - TD Securities Ken Zaslow - BMO Capital Markets

Thank you. And good afternoon, everyone, and thank you for joining us this afternoon.

On today's webcast we are going to review Maple Leaf Foods financial and operating results for the first quarter of 2016. The news release and today's webcast presentation are available at mapleleaffoods.com under the Investors section.

Some of the statements made in this call may constitute forward-looking information and future results may differ materially from what we discuss. Please refer to our 2015 annual MD&A and other information on our website for a broader description of operations and risk factors that could affect the company's performance.

As normally is the case, I'll begin with an operating review; followed by Debbie Simpson, our Chief Financial Officer, who's here with me today, who is going to provide you with other financial highlights; and then we'll open the call to your questions. I could begin by turning your attention please to Page 2 in the slide deck.

Clearly, the big news for the first quarter was delivering on our EBITDA margin goal of 10%. That's a five-year financial target that we set back in 2010.

And we committed to delivering that through executing one of the largest transformations in the North American food industry. Our goal, when we launched this strategy, was to make our company a significant leaner, stronger and more profitability organization, one that delivers higher margins based on great brands, value-added innovation and products and lower costs.

I'm proud of the fact that we took a longer-term view and we achieved our goal. That's been a long road for the company, for our people, our customers, our shareholders.

So I want to take this opportunity, if I could, to recognize the perseverance of our people, who never lost sight of this strategy over that period of time and what it would deliver. And I would like to thank many of you who are on the call today, who've invested in this company with a shared belief in the value that we could create on this journey.

Turning to Slide number 3. Let's briefly recap what we have accomplished.

We've invested over $1 billion in capital to substantially lower our cost structure and improve in our network efficiencies. We consolidated 11 prepared meets plants into four scale facilities and 19 centers of distribution into two.

We converted multiple legacy information technology systems into one integrated SAP platform. We eliminated or reformulated over 1,800 products to run in our longer faster lines with new technologies.

We sold several non-core businesses and strengthened our balance sheet in the process, and we streamlined our organization and the cost of running our business. I believe now we have amongst the most modern and efficient prepared meats plants in the food industry, which are delivering a return on the investment that we set out.

Turning to Slide number 4. We delivered record earnings in the quarter, reflecting the benefit of these years, these many years of investment and change.

These charts reinforce the negative financial impact that we experienced in 2013 and 2014, through the period of transformation and also the steady improvements that we made through 2015. Our adjusted earnings per share for the quarter were $0.28 compared to $0.05 last year and our adjusted operating earnings were $54 million, which is an increase of $44 million in the first quarter of the prior year.

Turning to Slide number 5. You can see the steady margin progression expansion, as we completed the closure of legacy plants through 2015.

Eliminated our duplicative supply chain and continue to reduce ramp up cost in our new prepared meats network. We've structurally shifted our margin from what was in historic level of around 3.5% to the 10% level today.

In the short-term, we expect some fluctuations from quarter-to-quarter of course, not unlike our peers in the consumer package goods industry. However, we fundamentally shifted our cost and migrated to a value-added portfolio to build structural margin expansion in the business.

Over a longer period of time, as I've said consistently for the last couple of years, we believe that this 10% overtime is a floor, not a ceiling for our business. Turning your attention to Slide number 6.

The primary drivers of improved earnings in the quarter were a combination of strong commercial and operating gains. During the quarter, we made very good progress in reducing the ramp up costs at our new Hamilton facility, which contributed approximately 100 basis points in margin expansion.

Our team has made excellent strides in increasing yields and productivity with more upside in front of us. While we've realize steady improvements over the past year, the final leg of eliminating remaining branches is often the most complicated and exacting and is going to continue to take a little bit of time, but it moves into a much smaller zone and largely won't affect our business in total.

Turning to Slide number 7. This highlights some of our commercial gains in the quarter.

One of the leaders was continued market expansion in sustainable meat or more specifically pork that is 100% raised without antibiotics amongst other sustainability practices in our supply chain. In a recent Canadian market survey, a shocking statistic, over 80% of the people stated that they are concerned about antibiotics in meat.

The most important concern they share after food safety. Consumers prioritize eliminating hormones and antibiotics in meat production and particularly think it's important to eliminate or reduce antibiotic use in animals.

Maple Leaf is now one of the largest processors of pork from animals raised without antibiotics in North America and sustainable meat continues to be a core area of growth for this company. We're also the largest in this genre of products in Canadian poultry.

Maple Leaf has the leading brands of chicken in our markets, including the Prime brand, Maple Leaf brand and the Mina Halal brands. In the quarter, we drove increased volumes across all of these platforms, which increased our earnings from this business.

We also increased margins from the sale of our value-added pork products, both in the Canadian retail sector and in export markets. Our prepared meats business also contributed to a margin expansion in the quarter.

We grew our market leadership in package meats and in several key categories, including wieners, bacon, sausages and canned meats. We did exit some lower margin business and took a broad price increase in February to manage higher cost and the impact of currency, which is having a short-term impact on volume.

Price always has a corresponding transitory effect on demand, always has, and likely always will. And we expect some continuing demand in the second quarter from that.

So continuing impact, I should say. Turning to Slide number 8, what we have done is laid the foundation for Maple Leaf to be globally competitive and highly profitable company well into the future.

We believe that that foundation is based on a driven culture of highly-talented people, their leading brands and market shares and a low-cost structure today. But what we've built is just that foundation.

We've given ourselves the tools to realize more potential ahead. There are two themes that we see going forward.

The first is maintaining the momentum of our cost culture and investing in our assets. And the second is driving strategic profitable growth.

I'd like to go into a little more detail on both of those please. Turning to Slide number 9.

As many of you know that a high-performing growth-oriented food company today recognizes the low-cost culture, providing fuel for that growth. And here is where we expect to find those opportunities.

First, we've adopted materially more aggressive cost planning and review methods throughout the company to identify any efficient spend and support ongoing reduction in overhead and SG&A. Identifying these cost reductions everyday isn't just about growing the bottomline, we expected a material portion of savings that we find in our overhead structure and our SG&A, will in fact be reinvested in growth.

That includes brand building, product innovation and sustainability, all of which we would expect to drive further success in the very near future. This is exactly what we've done in 2016 and illustrated in the first quarter to supercharge our marketing and promotional activities.

We also see more opportunity to drive further productivity and efficiency gains, lowering our cost in the supply chain from our assets, particularly in our poultry operations. You should know, this will involve capital spending, selective capital spending, but we expect very attractive returns attached to that.

Turning to Slide number 10. As we pivot the Maple Leaf organization towards accelerating sustainable growth, 2016 will see us execute our most ambitious innovation and marketing plans ever.

With supporting our core business portfolio by investing in our leading brands, by executing on our robust innovation pipeline and concentrating on three platforms, sustainable meat, healthy protein snacking and alternative proteins. Turning to Slide number 11.

Our first priority this year was the rejuvenation of the Schneiders brand. This is a leading brand in the packaged meats market in Canada.

It's an iconic brand with a 126-year old history, known for quality and craftsmanship. We know from talking to consumers across the country that Schneiders has been a huge part of Canadian traditions, big and small, from coast-to-coast.

And the Schneiders relaunch which includes everything from new packaging and new logo, new products, in-store promotions and marketing and advertising reinforces that brands role in creating memorable traditions and its place in our social fabric. Turning to Slide number 11.

An important component of our marketing push is enhancing how we engage with consumers. We launch several in-store television and social media promotions in the first quarter, including some very exciting relationships with Kevin Pillar of the Toronto Blue Jays and the Schneiders brand.

We also drew on the support of the five time Olympic medalists Hayley Wickenheiser, as an ambassador of our Protinis healthy meat snacks. Our promotional videos have been viewed more times in the first quarter of 2016, more times in the first quarter than in the entire year in 2015.

Over 6.8 million views on social medial channels alone. We've rethought our entire approach to our media buy, which includes balancing strong television advertising with an increased investment in social media in order to reach consumers on their laptops, their tablets and certainly their smartphone screens.

Turning to Slide number 13. We've always been an innovation leader in our categories and markets.

Meaning, consumers' needs in these categories is increasingly all things natural. We launched our naturals line of prepared meats six years ago, and since then sales have climbed to almost $250 million, an astonishing number.

The launch of Maple Leaf Canadian Craft, we believe takes this to a whole new level. This new brand in line of Craft meats is designed to leverage the strong reputation of Maple Leaf to create a distinctive line of artisanal premium products that have wide consumer appeal.

Our goal is to make these artisanal products more accessible. It takes the nationalist credentials of Maple Leaf and puts Canadian right in the name, drawing on iconic foods from across the country to inspire the recipes.

They truly are fantastic products. Products like Atlantic, Sea Salt Prosciutto, Quebec Maple Ham and Canadian Whisky and Apple Bacon.

They're all made with simpler natural ingredients, and I think they're amongst the best tasting products we've ever developed. We expect a very strong consumer response to Canadian Craft, which is being unveiled in retail stores across the country over the coming weeks and the early indications are extraordinarily positive.

Turning to Slide number 14. We're also innovating to meat the growing demand for wholesome turkey products, and we see this as a platform that is poised for growth.

We've expanded our Maple Leaf Prime Turkey line, a fully cooked portfolio with some exciting new products. These include Prime Turkey bacon, wieners and sausage that are lean, high protein and flavorful foods made from 100% Canadian raised turkeys.

Very exciting growth platform for us and opportunity, on Slide number 15. Going forward is the sustainable platform that we're developing and the genre of products, which we classify as sustainable meat.

We have a leading North American share in raised without antibiotic pork. We believe this is a competitive advantage for us, and we'll drive sales in Canada and targeted U.S.

expansion. In addition, we're the largest source of RWA poultry in this country.

Sustainable meat is a premium growth area in the marketplace and we're not only seeing increased volume across our fresh pork and poultry platforms, but we're also transitioning this into a full line our prepared meats. In addition, this is supported by our advanced animal care practices and environmental commitment and practices as part of this commitment.

With that, I'd like to turn over the call to Debbie Simpson, our Chief Financial Officer, to provide some additional color and financial information. Debbie, would you take it away please?

Thank you, Michael. Turning to Slide 16, you can see the impact of the transformation on our income statement.

We have increased our structural gross margin from 11% of sales in Q1 2015 to 16.4% in Q1 2016. Selling, general and administrative expenses for the first quarter increased by 3% to $77.3 million or 9.7% of sales compared to $75 million last year.

Core SG&A expenses have decreased significantly, as a result of efficiencies realized by the reduction of non-strategic cost. Offsetting this was a higher investment in advertising and promotional activities, as the company invests in market growth.

Turning to Slide 17. I'd like to provide a little more detail on our cash flow position and recent capital allocation initiatives.

Cash flow from operations was $45 million in Q1 2016 versus negative $35 million in Q1 2015. Correspondingly, free cash flow was $25 million in Q1 2016 versus negative $61 million last year, an $86 million change.

Cash on hand at the end of the quarter was $291 million. As mentioned on our last call, we completed purchases up to the limit of the 2015 NCIB during the first quarter.

In aggregate, we acquired 8.65 million shares over 10 months for a cumulative investment of $195 million at a volume weighted average price of $22.48 per share. Approximately $12 million of this was invested to acquire 0.5 million shares in this program during the quarter.

We also announced an increase in the regular quarterly dividend by 12.5% to $0.09 per share. This follows a substantial dividend increase made earlier in 2015.

Our capital expenditures in the quarter were $20 million compared to $26 million last year. We still expect to be in line with our estimate of $175 million for the year.

We know that the question of capital allocation is important to our shareholders. Let me assure you that optimizing use of capital is top of mind for management and the Board.

The Board evaluates this on an ongoing basis with a view to opportunities, organic growth investments, a competitive dividend, bolt-on M&A to supplement the growth strategy and potential return of capital to shareholders. I will now turn the call back to Michael for summary comments.

Thank you, Debbie. The theme of my remarks today at the Annual Meeting were around building a sustainable future.

Increasingly creating value for the longer-term depends on addressing social and environmental issues, which also unlock significant business opportunities. We've embedded sustainability in this triple bottomline approach to our business, focusing on four broad areas of health and nutrition, people and communities, animal care and environmental sustainability.

Today, our 2015 Sustainability Report goes live, and I have to tell you that I am deeply proud of the commitments, the progress and the transparent reporting that guides this report. We are following the GRI reporting standards, which is a global best practice.

And I would encourage you to view this report, the videos and other materials that are attached to it by going to mapleleafsustainability.com. In closing, it was a very good quarter.

We reached an important milestone for this company and we are taking enough time to celebrate that. Our results are driven by the benefits of our network strategy, which has been in the making and execution for many, many years; and by solid commercial performance, as we continue to expand our brand leadership to investing in innovation and marketing and the early contribution from some market expansion into sustainable protein.

We've built the foundation to deliver a higher level of profitability overtime, supported by maintaining a very strong cost culture and we're taking a very disciplined approach to capital allocation. We're excited about the years ahead and the opportunities ahead.

And mostly, we're committed to making sure that the next chapter is as lucrative as the last. With that, we'd like to open up the call to your questions.

At this point, I guess thinking of the 10% EBITDA margin as a potential longer-term floor. Can you guys provide some color on the specific initiatives that you can do to further improve efficiencies?

I believe, you guys mentioned non-strategic SG&A rightsizing in the past.

So, George, there are two themes. The first is maintaining cost reduction is a focus of the organization.

We think there are two components to that. We believe that there is more cost reduction opportunities in our supply chain, particularly in our poultry operations that through prudent capital spending we can get at, and we intend to launch projects that support that over the course of the next few years.

And secondly, we believe that there are opportunities to reduce our costs in the supply chain through better and more efficient operations. That's something that you continue to look under every stone, looking for opportunities and finding ways to optimize your cost structure in your factory overheads and SG&A structures.

We've been very aggressive in that over the course of the last several years. But we think there is more and we'll continue to drive that going forward.

So cost reduction will continue to be a major theme going forward, both in asset investments and in operating cost reductions. Secondly, driving profitable and strategic growth.

We believe we can margin up our business through innovation and growth. We think there are opportunities in the areas particularly that we've highlighted in many occasions in the past, the three platforms that are most important to us, namely our strategic advantage and sustainable meat, healthy snacking and an emerging category in non-animal proteins.

So finding the balance between continued cost reduction and strategic profitable growth, we believe will drive further expansion of our margin performance over time.

We've seen also a material move, I guess, in the Canadian dollar in the last quarter. Can you maybe comment on the attractiveness of the current export opportunity and U.S.-based competition?

Has it changed at all? Is there a certain level that we should be looking out for?

We build all our strategic plans around parity in the dollar, and all of our capital investments have been made. And we typically review our investments on the basis of currency agnostic in and around parity.

Obviously, the fact that it's materially lower than parity is a long-term benefit for us. Although, in the short-term, I would tell you, George, that we have a relatively balanced portfolio, so it's one of those paradoxes of our business that short-term more balanced and not impacted by currency.

But with the passage of some lag factor, some passage of time, it's a strategic positive for us. And so generally speaking, the lower Canadian dollar is good for our business overtime, but neutral for our business in the short-term.

And one last one, if I may. I know that we've attained our 10% EBITDA margin target.

How should we think of capital deployment to shareholders? And just wondering if you guys will renew your NCIB?

So as Debbie pointed out, George, that's obviously a very topical and important question. And I would tell you that it's a question that it's constantly reviewed by management and the Board, and I can tell you the optimal use of capital is top of mind for everybody.

We evaluate it on an ongoing basis, as Debbie said, and we will fully expect to continue to do that. We would prioritize the opportunities for the use of capital as basically organic growth investments.

Capital -- competitive dividend, which we've increased our dividend materially over the course of the last year and expect to progressively continue to increase our dividend. Built on M&A opportunities to supplement our growth strategy, which we think there are many opportunities throughout the North America to investigate and explore obviously at appropriate value.

And then, at the end of the day if it's appropriate and deemed appropriate, potentially returning capital to shareholders. It's a delicate balance.

The board looks at it continuously, but there is nothing specific beyond that directional feedback that we have to offer today.

Michael, both in your speech this morning at the AGM and in the presentation that you just walked through, it seems to me that effectively what you've done is laid out the broad brush strokes of a blueprint for where we should expect Maple Leaf to go over the next five years, let's say. Is that a fair statement?

Clearly, yes. Our remarks today at the shareholders meaning, Irene, were one part, describing the accomplishment of the last five-plus years and bring closer to that chapter in our history.

And two parts, excitement and enthusiasm about the foundations for growth that we've built for the next chapter of profitable growth in this company. And we're as excited about the next chapter and that blueprint that you described as the last and think it can be as or more lucrative than the last one.

So, again, if I listen to what you say and I read what you said this morning, you repeatedly messaged, messaging globally competitive in the U.S. market.

And if we look back last year, about 20% of your revenues were generated outside of Canada, let's say, 6% in the U.S., 9% in Japan. If we look ahead five years, where do you think that number is?

And how do you get there and how much capital is required?

I can't answer those questions with specificity. I can give you directional answers and say to you that very clearly, the U.S.

market is a big opportunity for growth for Maple Leaf. We believe that our competitive advantages in sustainable meat will underpin that growth.

And it's a market that is ready and open for such opportunities. We also believe that there are possibilities for M&A activity to provide an enhancement to our platform for growth in the U.S.

And if those opportunities came along and they were appropriately valued, then that's an important conservation obviously, then we would actively consider that as well.

So to tie this in with the last question, if you have, let's call it, $290 million on your balance sheet at quarter end and the CapEx for this year is $175 million and you are generating substantial free cash flow. Why wouldn't you renew the NCIB unless there is something that you're looking at in the near term?

Well, there are many levers in capital allocation. And without providing specificity as to which lever is prioritized any moment in time, I would tell you that the Board and management collaboratively look at all of those constantly and continue to.

And, yes, they're all in the radar screen and they're all under consideration. And we just don't have anything to add in the short-term, Irene, that would be specific to discuss today.

I guess, I would like to start with the competitive environment and wondering if you could just sort of talk about that broadly? And maybe just contrasts the relative activity from your Canadian competitors with your U.S.-based competitors?

We operate in the food industry, which is perennially competitive, it's always competitive, always has been, I suspect always will be. I don't think there was anything fundamentally changed in that competitive architecture today.

The retail landscape continues to evolve, but our task is to always evolve with that and collaboratively with that and bring tools to the table to our customers to participate in any kind of market condition. The relative competitiveness between Canada and United States is an important question.

It was probably more intense with U.S. competitors, when the dollar was at parity than it is today.

And I think that's a good thing, and we will certainly take advantage of that more so in the United States, and our ability to attract new business opportunities in that market than the Canadian marketplace. But I don't think it's a big shift in the changing competitiveness in our categories over the recent past and I don't anticipate that in the near future.

And then just in terms of the recent price increase, I mean, did everyone sort of participate on a relatively equal basis?

Yes. Underline relatively equal basis.

Timing is always a big thing. This is very normal in packaged goods as brands lead typically private label lag in those factors, but that the same cost pressures of currency and other inflationary factors exist in the private label and food service arenas as they do to the brands and so there can be some flux around timing.

But for the most part, yes, there has been followership in the marketplace.

And then on the RWA business, I guess, I just wanted to ask you about the production side of that. I mean, how much of your RWA product is from your own hog production?

And how is that changing or how do you expect that to change over the next couple of years?

It's over 90% our own production. And I suspect that that percentage will go higher actually.

It's predominantly our own production.

And what's involved in flipping that over?

It's a massive operational effort. And I would underline massive.

There is capital involved in it. And there is animal husbandry techniques and practices that are critical to success to be able to effectively raise animals without antibiotics.

We've been building our skill set, our competitive skill set, and operating knowledge around that practice and those animal production techniques for over five years. I believe we have competitive advantage in that field, where we can do it.

And not just do it, but do it at scale. We also are not just raising animals without antibiotics, but in the case of pork, we're doing it and migrating towards gestation crate free.

There is a timeline attached to that, which we've been very public about, but doing those in combination is a fundamentally a competitive advantage and skill set of our organization.

So I guess, obviously, it's more expensive to produce. I'm just curious how the utilization of each hog is affected when you go to RWA.

I mean, obviously, certain cuts are going to be more popular at a premium price point. How do you see that evolving over the course of time in terms of utilization of the animal?

That's an incredibly insightful question. It's probably the single most important factor in migrating to RWA animals and meat production, because this is a business that absolutely defines success in something we describe as balance, which in that balance means selling the entire supply of meat that's available in balance across all of the cuts.

One of the things that is a another strategic advantage of the Maple Leaf organization is we are a company that not only has expertise upstream in the animal husbandry and efficient production of sustainable meat, but also has the downstream capabilities to produce a very wide array of products of all classes and all forms using the maximum supply of meat from the animals that are raised without antibiotics and sustainable meat. So that gives us the ability to go to a customer and offer them programs in balance with a full array of products.

Of course, it's never perfectly in balance and utilization is a key metric in our performance in that class of product, but we're very happy with the utilization today and it continues to improve month-over-month.

Just following up on some of Mark's questions there. In terms of your internal capacity for RWA, would it be fair to say that the hog farm that you purchased in 2012 from Puratone is now something that you would consider core, and so then helping to supply that RWA?

Yes. We have an integrated system that is really focused its attention on value-added production.

And in this case, its animals that are raised without antibiotics; that are raised gestation crate free, that we practice all of the animal husbandry connected to our animal welfare strategy, which is leading edge and highlighting the five freedoms of animal welfare. So yes, I would say, Derek, those are very much an integral part of our strategy going forward.

And in terms of the increase in advertising and promotional spending, can you quantify or at least directionally how much of that was put towards some of the new brand initiatives in relaunching the Schneiders brand and how much of it will be put towards RWA?

No. I can't really give you segmentation to that.

I would tell you that we've had a very broad promotional support initiative over the course of the first quarter. We've got such an incredibly robust pipeline of innovation coming out in the marketplace.

Actually, at the start of the second quarter in April, which was our biggest portfolio of new item launches, I think in our history in the month of April. So between the promotional efforts in the first quarter, which included things like off season promotions, we called it the great indoors program, which was very effective, the relaunch of the Schneiders brand with new packaging, some new products and new promotional efforts, a whole new advertising campaign connected to that.

We've done some tremendous things in the hot dog category, particularly connected to the, everybody's household favorite, the Toronto Blue Jays. So we have a really robust portfolio, but it covers the whole span of products including RWA initiatives and our core portfolio.

On the RWA product line most of that was the launch of a new product line called the Greenfield Natural Meat Co., which we launched last summer. And most of the effort behind that line of products is through social media.

And just one more, if I can. More of a housekeeping question, but just to be clear, in terms of the Hamilton facility, would it be right to say there is still about 100 basis points of inefficiencies left in the plant?

And granted it's going to take longer to drive these through than what we have seen with the first run of efficiencies, but is it still about 100 basis points left?

Yes. We'll make continued progress on that.

We fully expect to make continued progress, Derek, but yes, in the first quarter it was about 100 basis points.

And moving to Winnipeg, where I believe you guys are now operating ahead of what your target or design capacity or design productivity was five years ago, is that where we're going to see a lot of the margin enhancement capital allocated for this year you put towards in Winnipeg?

Yes, we discussed that at the last quarter where we have identified and are in the execution of some significant projects to enhance bacon manufacturing, and profit enhancing capital in 2016, that is one of two major initiatives in the year.

Congratulations on achieving your targets. First question.

Just getting back to the RWA and your efforts to get that into the states, you've talked about this for a little while now. It seems like you are starting to make some progress, but will it require or do you think you can get the penetration that you want without an acquisition of a platform of sales and distribution platform in the U.S.

or is that required?

I wouldn't say, we couldn't without, I think, an appropriate platform, and I underline appropriate, would certainly accelerate it.

And what is appropriate to you? Is it a size, is it brand?

Appropriate for -- what do you mean as a size?

When you say is an appropriate platform, are you like -- how would you define appropriate?

Well, one that would be well-positioned to take advantage of our investments in sustainable meat. Certainly the strategic advantage in that category is having the meat itself.

And a product portfolio that was well-positioned to take advantage of that meat supply and could leverage that in their own portfolio would probably be at the top of the list.

And then, on the topic of the capital allocation, do you have a target payout yield or payout ratio or target dividend yield?

No, we don't have a dividend policy with a target dividend yield. I would tell you today it's running in the [ph] 1, 5 range somewhere in that plus and minus a bit.

But no, I think when you originally doubled it, you had set some -- you had looked at some benchmarks and where you want it to be.

We had. And I think we are in the zone of where we want to be today, but I think, again, that's constantly reviewed by the Board.

And I don't think we're going to establish a formulaic policy around that. But today, we're in the range of packaged goods peers.

And we'll continue to review it. But I think we've made an adjustment.

If I understand your question correctly, Michael is, are we going to offer up a specific formulaic range. And the answer is probably not, we're going to review it on a constant basis.

And then a little more specifically, on the quarter, so you hit your target or exceeded your target margin with still having that 100 basis points of inefficiencies. So are you able to kind of breakdown a little bit how much of that extra margin that you got in the quarter was tied to the above average spreads and how much was related to your own internal growth and mix improvements and things like that.

I'd say it was all the internal growth and mix improvements.

So market factors were not?

No.

So you would be suggesting that your 10% floor has been hit, and if you can get rid of that extra 100 basis points, we could see you go high

Yes.

A couple questions. One is, do you plan to outline another five-year plan for cost savings or margin opportunities going out or is it kind of year-by-year, and how do you plan on tackling that?

We haven't decided that yet, Ken. I mean, we certainly we do think in those types of horizons, probably even longer, whether it's prudent or not to provide that kind of forward guidance or not is undecided.

It was clearly important for us to do that in 2010, because we were asking the shareholders for $1 billion of capital and it want imprudent to articulate why they should support that investment. Now that that's behind us, I don't know that the same case is there, but we're going to consider that.

And I just would say that that's a Board's decision that has not yet been made. That doesn't meant that we're not looking in that horizon, whether or not we're going to provide that kind of forward guidance if the decision is yet to be made.

The other question or another question I have is, is there a magnitude of cost savings, so you said there is another 100 basis points out there. But in addition to that, is there an order of magnitude that you kind of see?

A lot of companies tend to say, hey, over the next three years, we have $150 million, $200 million, whatever it is. Is there some sense of cost savings opportunities that you kind of can identify now?

Ken, I'm sorry to have to get you to repeat, but maybe it's just me, but you're cutting out a bit in your questions. I'm sorry, but could you maybe try and restate that again, because you were cutting out a bit.

My question is, in terms of the cost savings, is there a magnitude of cost savings that you might be able to give us in terms of like a three-year, four-year period of, we are looking to cut out x $100 million of cost savings over a certain period of time? Is that something that you would consider doing as well or helping out with that?

It is certainly something that we would consider, but that's not something that I can offer you today.

The comments that you said to the last question was none of the marketing conditions have really benefited your business model this quarter. We are in a somewhat of a favorable cost environment.

Do you think that there is an opportunity for you to enjoy some of this lower input cost and benefit for your margin structure outside of just what you opened? Is there part of that that could be also assessed?

We certainly would highlighted if market conditions had an impact on our business in this particular quarter, it didn't. In overall, they were neutral to our Q1 earnings.

And I say that in comparison to a five-year averages. The pork and poultry markets in isolation were positive, but they're offset by byproducts.

Hog production, obviously, as you well know, Ken, is very negative. It was negative for us and you saw that in our numbers.

And the impact of very high-belly markets, which compresses bacon margins on the other end. So in total, that was very negative.

So it's not been a material factor for our business right now.

My very last question is, when I think about the outlook, is it on sort of [ph] lucrative or would we expect an ongoing sequential improvement in your margin structure or have they basically reached a level now, we kind of work around that level or do we expect to see, again, sequential improvement throughout the year to continue to go up? I just couldn't figure out the seasonality versus the sequential improvement, and I will leave it at that.

Well, the seasonality, Ken, typically seasonality is reasonably consistent, maybe a slightly lower in the first quarter, slightly, but reasonably consistent throughout the year. And then usually, see, we have a seasonal benefit in the fourth quarter, just a nature of the business.

I think we've been progressing our margin expansion. I think it's our sixth consecutive quarter.

And probably the average increased median, I'm guessing a little bit, that is probably somewhere around 130 basis points a quarter. I don't think you should expect that to continue at that pace, but again, what we've achieved is a structural margin shift.

I think the volatility around that 10% has a baseline structural margin will be in line with other package goods companies and should be nothing different than what normal volatility would be for package group peers around that, but we will see more strategic growth in that margin over the course of the next several years as we drive these additional initiatives that I've referred to you today, and as Irene describe that the blueprint for the next four five years.

So again, we'll thank you, very much. This has been a very long journey for us.

I think as I said this morning, the shareholders should be very happy and our people should be very proud. We've come through a long journey over the course of the last five plus years.

And I want to say very clearly between the shareholder community that invested in us and believed in us, especially those going back to 2010 and prior, as well as the analyst community and the capital markets community, it's been a long journey and you preserved with us right alongside of the management team and the Board. And we really appreciate that and we look forward to having the same level of dialog and interest as we embark on this next journey Maple Leaf organization We've got lot more to do and this a management team that just doesn't feel inclined to rest, so we're off one to the next chapter as we speak.

So thank you for your all attention, your commitment, and we look forward to the next time. Thank you.