Q3 2024 Lamb Weston Holdings Inc Earnings Call

Operator: Thank you for standing by. You're on hold for the Lamb Weston conference call. At this time, we are gathering additional participants and should be underway shortly. We appreciate your patience and ask that you continue to hold. ?? Good day, and welcome to the Lamb Weston third quarter earnings call. Today's conference is being recorded. At this time, I'd like to turn the call over to Dexter Congbalay. Please go ahead.

Thank you for sitting in my ear on hold for the Lamb Weston Conference call. At this time, we're gathering additional participants it should be underway. Shortly we appreciate your patience and ask that you continue to hold.

[music].

Good day and welcome to the Lamb Weston third quarter earnings call. Today's conference is being recorded at this time I'd like to turn the call over to Dexter Congress. Please go ahead.

Dexter P. Congbalay: Good morning, and thank you for joining us for Lamb.

Dexter P. Congbalay: for Lamb Weston's third quarter 2024 earnings call. This morning, we issued our earnings press release, which is available on our website lambweston.com. Please note that during our remarks, we will make some forward-looking statements about the company's expected performance that are based on how we see things today, but actual results may differ materially due to risks and uncertainty.

Dexter P. Congbalay: Good morning, and thank you for joining us for Lamb Weston third quarter 2024 earnings call. This morning, we issued our earnings press release, which is available on our website Lamb Weston Dot com.

Dexter P. Congbalay: Please note that during our remarks, we'll make some forward looking statements about the company's expected performance or based on how we see things today.

Dexter P. Congbalay: Actual results may differ materially due to risks and uncertainties.

Dexter P. Congbalay: Please refer to the cautionary statements and risk factors contained in our SEC filings for more details on our forward-looking statements. Some of today's remarks include non-GAAP financial measures. These non-GAAP financial measures should not be considered a replacement for and should be read together with our GAAP results. You can find the GAAP to non-GAAP reconciliations in our earnings release. With me today are Tom Warner, our President and Chief Executive Officer, and Bernadette Madarieta, our Chief Financial Officer. Tom will provide an overview of the ERP transition, the current demand environment, and the status of this year's potato crop. Bernadette will then provide details on our third quarter results, as well as our updated outlook for the remainder of fiscal 2024. With that, I now turn the call over to Tom.

Dexter P. Congbalay: Please refer to the cautionary statements and risk factors contained in our SEC filings for more details on our forward looking statements.

Dexter P. Congbalay: Some of today's remarks include non-GAAP financial measures. These non-GAAP financial measures should not be considered a replacement for that should be read together with our GAAP results you can find the GAAP to non-GAAP reconciliations in our earnings release.

Dexter P. Congbalay: With me today are Tom Warner, our President and Chief Executive Officer, Bernadette <unk>, our Chief Financial Officer.

Thomas P. Werner: Tom will provide an overview of the ERP transition the current demand environment and the status of this year's potato crop.

Bernadette: Brendan will then provide details on our third quarter results as well as our updated outlook for the remainder of fiscal 2024.

Thomas P. Werner: With that let me now turn the call over to Tom. Thank you Victor Good morning, and thank you for joining our call today.

Thomas P. Werner: Thank you, Dexter. Good morning, and thank you for joining us on our call today. This was a challenging quarter as we transitioned certain central systems and functions in North America from a decades-old legacy enterprise resource planning system to SAP. The transition is the first step toward a multi-year global rollout. Among other areas, the scope of this transition affected receiving and processing customer orders, trade pricing and promotion management, managing inventories and warehousing, scheduling transportation and shipments, invoicing customers, and treasury and cash management. While the transition went well in many areas, it proved more difficult than we expected despite the countless hours we spent planning, testing, and preparing for the transition. Specifically, we experienced significant challenges with inventory visibility at distribution centers, which led to shipment delays, canceled orders, and ultimately lower than expected volumes in the quarter.

Thomas P. Werner: This was a challenging quarter as we transition certain central systems and functions in North America from a decades old legacy enterprise resource planning system to S. P.

Thomas P. Werner: The transition is the first step towards a multi year global rollout among other areas. The scope of this transition affected receiving and processing customer orders trade pricing and promotion management, managing inventories and warehousing scheduling transportation and shipments invoicing customers and treasury and cash man.

Thomas P. Werner: You bet.

Thomas P. Werner: While the transition went well in many areas. It proved more difficult than we expected. Despite the countless hours, we spent planning testing and preparing for the transition.

Thomas P. Werner: Specifically, we experience experienced significant challenges with inventory visibility at distribution centers, which led to shipment delays cancel orders and ultimately lower than expected volumes in the quarter.

Thomas P. Werner: In particular, we had more difficulty filling shipments of mixed product loads, which are generally higher-margin than shipments of single product loads. This pressured margins in the quarter. We partner closely with our third-party and company-owned distribution centers to minimize the impact of these challenges. This included co-locating Lamb Weston team members at our distribution centers to resolve data errors and processing issues in real time and adjusting systems and processes for balancing inventory between distribution centers and SAP. We also work closely with our customers to limit the impact on their operations, and I want to thank them for their patience and commitment as we manage through the transition. Importantly, I also want to thank our Lamb Weston team members who worked around the clock to help restore customer shipments and service back to pre-transition levels.

Thomas P. Werner: In particular, we had more difficulty filling shipments a mixed product loads, which are generally higher margin than shipments of single product loads. This pressured margins in the quarter.

Thomas P. Werner: We partner closely with our third party and company owned distribution centers to minimize the impact of these challenges. This included co locating Lamb Weston team members at our distribution centers to resolve data errors in processing issues in real time, and adjusting systems and processes for balancing inventory between distribution centers.

Thomas P. Werner: And S P.

Thomas P. Werner: We also work closely with our customers to limit the impact on their operations and I want to thank them for their patience and commitment as we manage through the transition.

Thomas P. Werner: Importantly, I also want to thank our Lamb Weston team members, who worked around the clock to help restore customer shipments and service back to pre transition levels.

Thomas P. Werner: As Vernon that we'll cover in more detail later, we estimate that the ERP transition reduced net sales by about $135 million and volume growth by approximately eight percentage points in the third quarter.

Bernadette M. Madarieta: As Bernadette will cover in more detail later, we estimate that the ERP transition reduced net sales by about $135 million and volume growth by approximately 8 percentage points in the third quarter. We also estimate that adjusted EBITDA was negatively impacted by approximately $95 million, with more than half of that due to lower sales and unfulfilled customer orders, and the remainder due to incremental costs and expenses directly related to the transition. As with any transition, our teams are still adapting to the new system.

Thomas P. Werner: We also estimate that adjusted EBITDA was nevertheless negatively impacted by approximately $95 million.

Thomas P. Werner: With more than half of that due to lower sales and then fulfill customer orders and the remainder due to incremental costs and expenses directly related to the transition.

Thomas P. Werner: As with any transition our teams are still adapting to the new system I am pleased that we have contained the effect of the inventory visibility issues to our physical third quarter and are restored customer order fulfillment rates to pre transition levels.

Thomas P. Werner: I'm pleased that we have contained the effect of the inventory visibility issues to our physical third quarter and have restored customer order fulfillment rates to pre-transition levels. We understand that some customers affected by either delayed or canceled shipments may have temporarily secured supply from alternative sources until they gain confidence in our service level. With healthy warehouse inventory levels and flows throughout the system, we're actively engaging customers with our direct sales force to earn their trust and their business.

Thomas P. Werner: We understand that some customers effective by either delayed or canceled shipments may have temporarily secured supply from alternative sources until they gain confidence in our service levels.

Thomas P. Werner: With healthy warehouse inventory levels and flows throughout the system. We are actively engaging customers with our direct sales force to earn their trust and their business.

Thomas P. Werner: Turning now to the demand environment, overall, global French fry demand remains resilient, but we believe it's currently at or below the historical annual growth rate of about 2 to 4 percent. According to restaurant industry data providers, restaurant traffic trends in the U.S. have been generally flat to slightly down during the past six to nine months as consumers continue to adjust to the cumulative effect of inflation on menus. USR traffic during the third quarter was flat versus the prior year after growing modestly during the first half of fiscal 2024. Several QSRs have attributed this to fewer visits by lower income consumers as their disposable income has been more affected by the overall inflationary environment. Meanwhile, traffic at full service restaurants declined each quarter during fiscal 2024.

Thomas P. Werner: Turning now to the demand the demand environment.

Thomas P. Werner: Overall global French Fry demand remains resilient, but we believe it's currently at or below the historical annual growth rate of about 2% to 4%.

Thomas P. Werner: According to restaurant industry data providers restaurant traffic trends in the U S have been generally flat to slightly down during the past six to nine months as consumers continue to adjust to the cumulative effect of inflation on menus.

Thomas P. Werner: USR traffic during the third quarter was flat versus the prior year after growing modestly during the first half of fiscal 2024.

Thomas P. Werner: Several <unk> have attributed this to less visits by lower income consumers as their disposable income has been more affected by the overall inflationary environment.

Thomas P. Werner: While traffic at full service restaurants has declined each quarter during fiscal 2024.

Thomas P. Werner: Outside the U S restaurant traffic continued to increase versus the prior year and most of our key market.

Thomas P. Werner: Outside the U.S., restaurant traffic continued to increase versus the prior year in most of our key markets, but growth has also slowed sequentially from our physical second quarter. Similar to the U.S., we believe traffic in these markets is also affected by consumers adjusting to the cumulative effect of inflation, as well as other macro headwinds. However, restaurant traffic growth in our larger markets in Europe in the third quarter was mixed. Traffic was up in France, Germany, and Italy, but at notably slower rates than during the first half of fiscal 2024. However, traffic was down in the UK and Spain. In Asia, traffic growth in both China and Japan was solid, while in the Middle East, traffic was down.

Thomas P. Werner: But growth has also slowed sequentially from our physical second quarter similar to the U S. We believe traffic in these markets is also affected by consumers adjusting to the cumulative effect of inflation as well as other macro headwinds.

Thomas P. Werner: Restaurant traffic growth in our larger markets in Europe in the third quarter was mixed traffic.

Thomas P. Werner: Traffic was up in France, Germany, and Italy, but it's notably slower rates than during the first half of fiscal 2024.

Thomas P. Werner: Traffic was down in U K and Spain.

Thomas P. Werner: In Asia traffic growth in both China, and Japan was solid while in the middle East traffic was down.

Thomas P. Werner: While global restaurant traffic has slowed, fry attachment rates in North America and in our key international markets have been generally stable. So, on the one hand, fries remain as popular as ever with consumers. But, on the other hand, consumers are going out to eat less often.

Thomas P. Werner: While global restaurant traffic has slowed the fry attachment rates in North America and in our key international markets have been generally stable. So on the one hand fries remains as popular as ever with consumers, but on the other hand consumers are going out to eat less often.

Thomas P. Werner: Because of these recent trends, we're taking taking a more cautious view of the consumer in our previous financial outlook, we expect our restaurant traffic and demand would pick up in the fourth quarter.

Thomas P. Werner: Because of these recent trends, we're taking a more cautious view of the consumer. In our previous financial outlook, we expected restaurant traffic and demand to pick up in the fourth quarter. As Bernadette will cover in more detail, we're now taking a more prudent approach to our expected sales and volume performance in the near term. We currently anticipate volume will decline mid-single digits as opposed to our previous expectation of modest volume growth in the fourth quarter. Despite this near-term caution, we believe the pressure on restaurant traffic and demand is temporary, and we remain confident that the global fry category will return to its historical growth rates as consumers continue to adjust to higher menu prices.

Thomas P. Werner: As burner that we'll cover in more detail. We're now taking a more prudent approach to our expected sales and volume performance in the near term weaker.

Thomas P. Werner: We currently anticipate volume will decline mid single digits as opposed to our previous expectation of modest volume growth in the fourth quarter.

Thomas P. Werner: Despite this near term caution we believe their pressure on restaurant traffic and demand is temporary.

Thomas P. Werner: And we remain confident that the global Fry category will return to its historical growth rates as consumers continue to adjust to higher menu prices.

Thomas P. Werner: Turning now to the upcoming potato crop. In North America, we've agreed to a 3% decline in the aggregate and contract prices for the 2024 potato crop and have largely secured the targeted number of acres to be planted across our primary growing region. Planning is on schedule for the early potato varieties, and we expect planning for the main harvest to be completed by the end of April. Although we expect our potato costs in North America to decline somewhat during the second half of fiscal 2025, assuming an average crop, they will likely be offset by a rise in our other input costs. In Europe, prices governed under fixed price contracts are up mid to high single digits, and we've contracted for our targeted amount of acres.

Thomas P. Werner: Turning now to the upcoming potato crop.

Thomas P. Werner: In North America, we've agreed to a 3% decline in the aggregate and contract prices for the 2024 potato crop.

Thomas P. Werner: And have largely secured the targeted number of acres to be planted across our primary growing regions.

Planning is on schedule for the early potato varieties and we expect planning for the main harvest to be completed by the end of April.

Thomas P. Werner: Although we expect our potato costs in North America to decline somewhat during the second half of physical 2025, assuming an average crop they will likely be offset by a rise in our other input costs.

Thomas P. Werner: In Europe prices governed under fixed price contracts are up mid to high single digits and we've contracted for our targeted amount of acres.

Thomas P. Werner: We'll provide our typical update on the outlook for potato crops in North America and Europe when we issue our fourth quarter earnings in late July. So, in summary... We believe the impact of the order fulfillment issues has been contained in the third quarter as service levels have been restored to pre-transition levels. Overall, global fry demand remains resilient, although restaurant traffic trends continue to be challenged as consumers adjust to higher menu prices. We have reduced our physical 2024 financial targets to reflect the softer traffic trend and the higher-than-expected financial impact of the ERP transition. And finally, we have largely locked in the pricing and acreage needed for this year's crop in North America and Europe. I will now turn the call over to Bernadette for a more detailed discussion on our third quarter results and updated outlook.

Thomas P. Werner: We will provide our typical update on the outlook for potato crops in North America, and Europe, when we issue our fourth quarter earnings in late July.

Thomas P. Werner: So in summary.

Thomas P. Werner: We believe the impact of the order fulfillment issues has been contained to the third quarter as service levels have been restored to pre print pre transition levels.

Thomas P. Werner: Overall global Fry demand remains resilient, although restaurant traffic trends continue to be challenged as consumers adjust to higher menu prices.

Thomas P. Werner: We have reduced our physical 2024 financial targets to reflect the softer traffic trends.

Thomas P. Werner: And the higher than expected financial impact of the ERP transition.

Thomas P. Werner: And finally, we have largely locked in the pricing and acreage needed for this year's crop in North America and Europe.

Thomas P. Werner: Let me now turn the call over to BARDA dead for a more detailed discussion on our third quarter results and updated outlook.

Bernadette M. Madarieta: Thanks, Tom, and good morning, everyone. As Tom noted, we're not happy with the magnitude of the impact of the ERP transition on our customers, our business, and our P&L. However, I do want to take a moment and say how proud I am of our Lamb Weston team members who worked tirelessly to remedy the issues we experienced and bring our customer order fulfillment rates back to pre-transition levels within the quarter. I also want to thank our sales team members who stayed close to our customers to limit the impact as much as possible on their businesses. Let's review our third quarter results.

Thanks, Tom and good morning, everyone.

BARDA: As Tom noted, we're not happy with the magnitude of the impact of the ERP transition on our customers our business and our P&L. However.

BARDA: However, I do want to take a moment and say how proud I am of our Lamb Weston team members, who did worked tirelessly to remedy the issues, we experienced in bringing our customer order fulfillment rates back to pre transition levels within the quarter.

BARDA: I also want to thank our sales team members, who stayed close to our customers to limit the impact as much as possible on their businesses.

BARDA: Let's review our third quarter results.

Bernadette M. Madarieta: Sales increased $205 million, or 16%, to $1.46 billion. The entire increase was driven by $357 million of incremental sales from the acquisition of the EMEA business. This is the last quarter that will receive the incremental benefit from the EMEA consolidation since we began to consolidate EMEA sales beginning in the fourth quarter of fiscal 2023.

BARDA: Sales increased $205 million or 16% to 146 billion.

BARDA: Tire increase was driven by $357 million of incremental sales from the acquisition at the EMEA business.

This is the last quarter that well received the incremental benefit from the EMEA consolidation since we began to consolidate EMEA sales beginning in the fourth quarter of fiscal 2023.

Bernadette M. Madarieta: If we exclude the incremental sales from the EMEA acquisition, net sales declined $152 million, or 12%. We estimate that the majority of the decline, or approximately $135 million, was due to unfilled orders attributable to the ERP transition. Price mix was up 4% as we continued to benefit from inflation-driven pricing actions taken in fiscal 2023 and pricing actions taken this year in both our North America and international segments. However, unfavorable mix related to the type of orders we were able to fill during the ERP transition partially offset the benefit of the pricing actions. In addition, lower freight charges to customers were nearly a five-point headwind, which was driven by lower volume shipped and the pass-through of lower freight rates when shipping products to customers.

BARDA: If we exclude the incremental sales from the EMEA acquisition net sales declined $152 million or 12%.

BARDA: We estimate that the majority of the decline or approximately $135 million was due to unfilled orders attributable to the ERP transition.

BARDA: Price mix was up 4% as we continued to benefit from the inflation driven pricing actions taken in fiscal 2023 and pricing actions taken this year in both our North America and international segments.

BARDA: However, unfavorable mix related to the type of orders, we were able to fill during the ERP transition, partially offset the benefit of the pricing actions.

BARDA: In addition, lower freight charges to customers, where nearly a five point headwind, which was driven by lower volumes shipped and the pass through of lower freight rate when shipping products to customers.

Bernadette M. Madarieta: Total sales volumes declined 16%, with about 8 points of the decline associated with unfilled customer orders due to the ERP system transition. The other eight points of the decline were primarily driven by two factors. First, more than half reflected softer-than-expected restaurant traffic trends in North America and key international markets. As Tom mentioned, we believe the traffic trends remain challenging as consumers continue to adapt to higher menu prices.

BARDA: Total sales volumes declined 16% with about eight points of the decline associated with unfilled customer orders due to the ERP system transition.

BARDA: Other eight points of the decline was primarily driven by two factors.

BARDA: First more than half reflected softer than expected restaurant traffic trends in North America and key international markets.

BARDA: As Tom mentioned, we believe the traffic trends remain challenging as consumers continue to adapt to higher menu prices.

Bernadette M. Madarieta: In addition, unusually poor weather in January negatively affected traffic in the U.S. Second, the remainder of the volume decline reflected the carryover impact of exiting lower-margin business during the second half of fiscal 2023. This is the last quarter in which we will see any meaningful headwind from the four notable contracts that we exited last year to strategically manage our customer and product mix. Moving on from sales, adjusted gross profit increased $24 million to $427 million, which was driven by the benefit of inflation-driven pricing actions and incremental earnings from the consolidation of the EMEA business. The increase was partially offset by mid-single-digit input cost inflation on a per-pound basis and a $20 million charge for the write-off of excess raw potatoes as we consider the softer restaurant traffic trends in North America, as well as the higher-than-expected impact on volume from the ERP transition.

BARDA: In addition, unusually poor weather in January negatively affected traffic in the U S.

BARDA: Second the remainder of the volume decline reflected the carryover impact of exiting lower margin business during the second half of fiscal 2023.

BARDA: This is the last quarter in which we will see any meaningful headwind from the four notable contracts that we exited last year to strategically manage customer and product mix.

BARDA: Moving on from sales adjusted gross profit increased $24 million to $427 million, which was driven by the benefit of inflation driven pricing actions and incremental earnings from the consolidation of the EMEA business.

BARDA: The increase was partially offset by mid single digit input cost inflation on a per pound basis.

And a $20 million charge for the write off of excess raw potatoes, as we considered the softer restaurant traffic trends in North America as.

BARDA: As well as the higher than expected impact on volume from the ERP transition.

BARDA: In addition, we estimate that the ERP transition negatively impacted adjusted gross profit by approximately $88 million.

Bernadette M. Madarieta: In addition, we estimate that the ERP transition negatively impacted adjusted gross profit by approximately $88 million. We estimate that approximately $55 million was due to lower volumes and a negative mix, and that the remaining $33 million was due to about $26 million from reduced fixed cost coverage and inefficiencies arising from planned downtime for the ERP transition in our factories, as well as additional freight charges as we sought to reduce the impact of shipment delays on our customers, and about $7 million for penalties associated with delayed shipments or the inability to fill customer orders. Adjusted SG&A increased $30 million to $164 million, primarily due to incremental SG&A with the consolidation of EMEA, as well as higher expenses associated with the ERP system transition, including non-cash amortization. The increase includes approximately $7 million of incremental costs to support the system post-go-live, including efforts to restore customer order fulfillment rates to pre-transition levels. A reduction in compensation and benefit accruals tempered the increase in SG&A.

BARDA: We estimate that approximately $55 million was due to lower volumes and negative mix and that the remaining $33 million was due to about $26 million from reduced fixed cost coverage and inefficiencies arising from planned downtime for the ERP transition in our.

BARDA: Factories.

BARDA: As well as additional freight charges as we start to reduce the impact of shipment delays on our customers.

BARDA: And about $7 million for penalties associated with delayed shipments or the inability to fill customer orders.

BARDA: Adjusted SG&A increased $30 million to $164 million, primarily due to incremental SG&A with the consolidation of EMEA as well as higher expenses associated with the ERP system transition, including noncash amortization.

The increase includes approximately $7 million of incremental cost to support the system post go live including efforts to restore customer order fulfillment rates to pre transition levels.

BARDA: A reduction in compensation and benefit accruals tempered the increase in SG&A.

Bernadette M. Madarieta: All of this led to adjusted EBITDA of $344 million, which is down 2% versus the prior year. Lower income in the Lamb Weston-based business, which includes an estimated $95 million impact from the ERP transition and a $25 million write-off of excess potatoes, more than offset incremental earnings from consolidating the EMEA business and the benefit of inflation-driven pricing actions. So, on an underlying basis, excluding these items, adjusted EBIDTA would have been around $465 million, while sales excluding acquisitions and the impact of the ERP transition would have been down 1 to 2 percent. Moving to our segment.

BARDA: All of this led to adjusted EBITDA of $344 million, which is down 2% versus the prior year.

BARDA: Lower income in the Lamb Weston base business, which includes an estimated $95 million impact from the ERP transition and a $25 million write off of excess potatoes, more than offset incremental earnings from consolidating the EMEA business and the benefit of inflation driven pricing actions.

BARDA: So on an underlying basis, excluding these items adjusted EBITDA would have been around $465 million, while sales, excluding acquisitions and the impact of the ERP transition would've been down 1% to 2%.

BARDA: Moving to our segments.

Bernadette M. Madarieta: Sales in our North America segment, which includes sales to customers in all channels in the U.S., Canada, and Mexico, declined $123 million, or 12%, in the quarter. We estimate that essentially all of that decline was due to unfilled orders and an unfavorable mix attributable to the ERP transition. Price mix was up 5% driven by the carryover benefit of pricing actions that took effect in fiscal 2023 across each of our primary sales channels, as well as some pricing actions taken this year. However, mix was unfavorable as higher-margin, lower-volume customers, which typically have more complex mixed product orders, were harder to fill until the inventory visibility issues related to the ERP transition were resolved. In addition, lower freight charges to customers partially offset the increase in price mix by more than four percentage points.

BARDA: Sales in our North America segment, which includes sales to customers in all channels in the U S, Canada, and Mexico declined $123 million or 12% in the quarter.

BARDA: We estimate that essentially all of that decline was due to unfilled orders and unfavorable mix attributable to the ERP transition.

BARDA: Price mix was up 5% driven by the carryover benefit of pricing actions that took effect in fiscal 2023 across each of our primary sales channels as well as some pricing actions taken this year.

BARDA: Mix was unfavorable as higher margin lower volume customers, which typically have more complex mix product orders were harder to fill until the inventory visibility issues related to the ERP transition were resolved.

In addition, lower freight charges to customers, partially offset the increase in price mix by more than four percentage points.

Bernadette M. Madarieta: Volume declined 17%, with more than half of the decline reflecting unfilled customer orders resulting from the ERP transition. The remainder of the decline primarily reflects soft restaurant traffic and retail trends, as well as the carryover impact of exiting lower-margin business during the second half of fiscal 2023. North America's segment-adjusted EBITDA declined 14% to $286 million. The decline was largely driven by an estimated $83 million impact from the ERP transition and a $23 million charge for the write-off of excess potatoes, of which about $5 million of the excess potato write-off was incurred at our North American joint venture. The impact of lower volumes and higher cost per pound also contributed to the decline. These factors more than offset the benefit of inflation-driven pricing actions.

BARDA: Volume declined 17% with more than half of the decline, reflecting unfilled customer orders, resulting from the ERP transition.

BARDA: The remainder of the decline primarily reflects soft restaurant traffic and retail trends as well as the carryover impact of exiting lower margin business during the second half of fiscal 2023.

BARDA: North America segment, adjusted EBITDA declined 14% to $286 million.

BARDA: The decline was largely driven by an estimated $83 million impact from the ERP transition and a $23 million charge for the write off of excess potatoes of which about $5 million of the excess potato write off was incurred at our north American joint venture.

BARDA: The impact of lower volumes and higher cost per pound also contributed to the decline.

BARDA: These factors more than offset the benefit of inflation driven pricing actions.

Bernadette M. Madarieta: Sales in our international segment, which includes sales to customers in all channels outside of North America, grew nearly $330 million, of which $357 million were incremental sales from the EMEA acquisition. Excluding the EMEA acquisition, net sales declined $29 million, or 16%. We estimate approximately $12 million of that decline relates to unfilled orders attributable to the ERP transition. Price mix was up 1%, driven primarily by the carryover benefit of pricing actions taken last year, as well as pricing actions taken this year. Lower freight charges to customers partially offset the increase in price mix by about five percentage points. However, sales volume declined 17%, with more than half of the decline reflecting the carryover impact of exiting lower-margin business during the second half of fiscal 2023. The remainder of the volume decline reflects unfilled customer orders served by North American exports as a result of the ERP transition.

BARDA: Sales in our international segment, which includes sales to customers in all channels outside of North America grew nearly $330 million of which $357 million or incremental sales from the EMEA acquisition.

BARDA: Excluding the EMEA acquisition, net sales declined $29 million or 16%.

BARDA: We estimate approximately $12 million of that decline relates to unfilled orders attributable to the ERP transition.

Price mix was up 1% driven primarily by the carryover benefit of pricing actions taken last year as well as pricing actions taken this year.

BARDA: Lower freight charges to customers, partially offset the increase in price mix by about five percentage points.

BARDA: Sales volume declined 17% with more than half of the decline, reflecting the carryover impact of exiting lower margin business during the second half of fiscal 2023.

The remainder of the volume decline reflects unfilled customer orders served by North American exports as a result of the ERP transition.

BARDA: International segment, adjusted EBITDA increased 88% to $102 billion.

Bernadette M. Madarieta: International segments adjusted EBITDA increased 88% to $102 billion. Incremental earnings from the consolidation of EMEA's financial results drove the increase. Excluding the EMEA acquisition, higher cost per pound, an estimated $5 million impact from the ERP transition, lower volumes, and a $2 million allocated charge for the write-off of excess raw potatoes more than offset favorable prices.

BARDA: Incremental earnings from the consolidation of EMEA financial results drove the increase.

BARDA: Excluding the EMEA acquisition higher cost per pound, an estimated $5 million impact from the ERP transition.

BARDA: <unk> volumes and a $2 million allocated charge for the write off of excess raw potatoes, more than offset favorable price mix.

Bernadette M. Madarieta: Let's move to our liquidity position in cash flow. Our balance sheet remains strong. We ended the quarter with a net debt leverage ratio of 2.6 times adjusted EBITDA, up from 2.4 times at the end of the fiscal second quarter. Our net debt increased about $270 million to $3.8 billion as we drew on our revolver to largely finance increased working capital needs during the ERP system transition, as well as increased capital expenditures. We continue to have ample liquidity, including more than $900 million available under our revolving credit facilities. In the first nine months of the year, we generated more than $480 million of cash from operations, up about $145 million versus the prior year period, primarily due to higher earnings. We spent nearly $830 million in capital expenditures, which is up about $330 million from the prior year period. The increase primarily reflects construction and equipment costs for our new Chinese factory that started up in November.

None: Let's move to our liquidity position and cash flow.

None: Our balance sheet remains strong.

None: We ended the quarter with a net debt leverage ratio of two six times adjusted EBITDA up from two four times at the end of the fiscal second quarter.

None: Our net debt increased about $270 million to $3 8 billion as we drew on our revolver to largely finance increased working capital needs during the ERP system transition as well as increased capital expenditures.

We continue to have ample liquidity, including more than $900 million available under our revolving credit facilities.

None: And the first nine months of the year, we generated more than $480 million of cash from operations.

None: About $145 million versus the prior year period, primarily due to higher earnings.

None: We spent nearly $830 million in capital expenditures, which is up about $330 million from the prior year period.

None: The increase primarily reflects construction and equipment cost for our new China factory that started up in November.

Bernadette M. Madarieta: as well as costs related to our capacity expansion projects in Idaho, the Netherlands, and Argentina. And finally, we've returned more than $270 million of cash to our shareholders, comprised of $122 million in dividends and $150 million in share repurchases.

None: As well as costs related to our capacity expansion projects in Idaho, Netherlands, and the Argentina.

None: And finally, we have returned more than $270 million of cash to our shareholders comprised of $122 million in dividends and $150 million and share repurchases.

Bernadette M. Madarieta: Turning to our updated fiscal 2024 outlook, we updated our full-year sales and earnings targets to reflect the impact of the ERP system transition, as well as near-term demand trends. Specifically, we reduced our annual net sales target to $6.54 to $6.6 billion from our previous target range of $6.8 to $7 billion. The updated range includes $1.1 billion of incremental sales attributable to the EMEA acquisition during the first three quarters of the year. Our updated sales target implies sales of $1.69 to $1.75 billion in our fiscal fourth quarter, which is flat to up 3% compared with the same period a year ago. We expect price mix to drive our sales growth in the fourth quarter, reflecting the continued carryover benefit of inflation-driven pricing actions taken in fiscal 2023 and actions we've taken in fiscal 2024. We expect lower freight charges to customers will continue to partially offset the increase in price mix.

None: Turning to our updated fiscal 2020 for outlook.

None: We updated our full year sales and earnings targets to reflect the impact of the ERP system transition as well as near term demand trends.

None: Specifically, we reduced our annual net sales target to 654 to six 6 billion from our previous target range of $6 $8 billion to $7 billion.

None: The updated range includes $1 $1 billion of incremental sales attributable to the EMEA acquisition during the first three quarters of the year.

None: Our updated sales target implies sales of $1 69 to $1 75 billion in our fiscal fourth quarter, which is flat to up 3% compared with the same period a year ago.

None: We expect price mix will drive our sales growth in the fourth quarter, reflecting the continued carryover benefit of inflation driven pricing actions taken in fiscal 2023 and actions we've taken in fiscal 2024.

None: We expect lower freight charges to customers will continue to partially offset the increase in price mix.

Bernadette M. Madarieta: As Tom noted, we expect volumes in the fourth quarter to decline by mid-single digits, which is down from our previous target of positive volume growth. The primary reasons for the change include our expectation that soft restaurant traffic trends in North America will continue longer than we initially anticipated, and that restaurant traffic trends in several of our key international markets have also softened more than expected. We point to softer restaurant traffic trends as the driver affecting our volume performance since our fry attachment rates in North America and our key international markets have generally been stable, and that our customer order fulfillment rates that were affected as part of the ERP transition in North America are back to pre-transition levels. In addition, we expect volume in the fourth quarter may be impacted by some customers in North America that were affected by the ERP transition seeking supply, at least temporarily, from alternative sources.

None: As Tom noted, we expect volumes in the fourth quarter will decline mid single digits, which is down from our previous target of positive volume growth.

The primary reasons for the change include our expectation that soft restaurant traffic trends in North America will continue longer than we initially anticipated.

None: And that restaurant traffic trends in several of our key international markets have also softened more than expected.

None: We point to softer restaurant traffic trends as the driver affecting our volume performance since our Fry attachment rates in North America, and our key international markets have generally been stable.

None: And that our customer order fulfillment rates that were affected as part of the ERP transition in North America are back to pre transition levels.

None: In addition, we expect volume in the fourth quarter may be impacted by some customers in North America that were affected by the ERP transition seeking supply at least temporarily from alternative sources.

None: For earnings we reduced our adjusted EBITDA range to $1 four eight to $1 five 1 billion from a previous range of 154 to 162 billion.

Bernadette M. Madarieta: For earnings, we reduced our adjusted EBITDA range to $1.48 to $1.51 billion from a previous range of $1.54 to $1.62 billion. That's down about $85 million using the midpoints of the two ranges. The decrease largely reflects an estimated $95 million impact from the ERP transition, a $25 million charge for the write-off of excess raw potatoes, and the impact of softer restaurant traffic trends in North America and our key international markets. We partially offset the decrease by absorbing some of the financial impact of the ERP transition, as well as reducing compensation and benefit accruals. Our updated target implies adjusted EBITDA of $350 to $375 million in the fourth quarter, an increase of 9% versus the prior year quarter when using the midpoint of the range.

None: That's down about $85 million using the midpoint of the two ranges.

None: The decrease largely reflects an estimated $95 million impact from the ERP transition at.

None: A $25 million charge for the write off of excess raw potatoes, and the impact of softer restaurant traffic trends in North America, and our key international markets.

None: We partially offset the decrease by absorbing some of the financial impact of the ERP transition as well as reducing compensation and benefit accruals.

None: Our updated target implies adjusted EBITDA of $350 million to $375 million in the fourth quarter.

None: An increase of 9% versus the prior year quarter using the midpoint of the range, we expect higher sales and adjusted gross profit to drive the growth, partially offset by adjusted SG&A of $190 million to $195 million.

Bernadette M. Madarieta: We expect higher sales and adjusted gross profit to drive the growth, partially offset by adjusted SG&A of $190 to $195 million. With respect to adjusted diluted earnings per share, we lowered our full-year target to $5.50 to $5.65. We're also updating a couple of other financial targets. We expect capital expenditures of $950 million, which is the upper end of our previous range of $900 to $950 million. We also expect our annual effective tax rate to be around 23%, which is at the low end of our targeted range of 23 to 24%. Our targets for depreciation and amortization expense of $300 million and interest expense of $140 million are unchanged. Let me now turn it back over to Tom for some closing comments.

With respect to adjusted diluted earnings per share, we lowered our full year target to $5 50 to $5 65.

None: We're also updating a couple of other financial targets.

None: We expect capital expenditures of $950 million, which is the upper end of our previous range of $900 million to $950 million.

None: We also expect our annual effective tax rate to be around 23%, which is at the low end of our targeted range of 23% to 24%.

None: Our targets for depreciation and amortization expense of $300 million and interest expense of $140 million are unchanged.

Let me now turn it back over to Tom for some closing comments, thanks Marni debt.

Thomas P. Werner: Thanks, Bernadette. With the impact of the order fulfillment issues behind us, we remain focused on serving our customers as we close out fiscal 2024. While near-term demand trends may be soft, we remain confident in the long-term growth outlook and the health of the category. And by continuing to execute our strategies, we believe that we will remain well positioned to deliver sustainable, profitable growth and create value for our shareholders over the long term. Thank you for joining us today, and now we're ready to take your questions.

Thomas P. Werner: With the impact of the order fulfillment issues behind US we remain focused on serving our customers as we close out fiscal 2024.

Thomas P. Werner: While near term demand trends may be soft we remain confident in the long term growth outlook and the health of the category.

Thomas P. Werner: And by continuing to execute our strategies, we believe that we will remain well positioned to deliver sustainable profitable growth and create value for our shareholders over the long term.

None: Thank you for joining us today and now we're ready to take your questions.

Operator: Thank you. If you would like to ask a question, you may signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment.

None: Thank you if you would like to ask a question you may signal by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment. Once again star one for questions well go first to Andrew Lazar with Barclays.

Andrew Lazar: Great great. Thanks, so much good morning, everybody.

Operator: Once again, star one for questions. We'll go first to Andrew Lazar with Barclays. Great. Great. Thanks so much.

Andrew Lazar: Good morning, Good morning, Andrew.

Andrew Lazar: I think one of the one of the questions Im getting probably most this morning frankly separate from from all things sort of ERP related really has to do much more with your comments around slowing restaurant traffic all the time when sort of industry capacity is set to start building once again and what that could portend for sort of pricing.

Thomas P. Werner: Good morning, everybody. Good morning. Morning, Andrew. Tom, I think one of the questions I'm getting probably most this morning, Frankly, separate from all things sort of ERP-related, really has to do much more with your comments around slowing restaurant traffic, you know, all the time when sort of industry capacity is set to start building once again, and what that could portend for sort of pricing going forward, you know, particularly with cost pressure not being anywhere near what it was the last couple of years So I guess as a starting point, I'd really be curious to get your perspective on how you would address sort of that concern at this point.

Andrew Lazar: Going forward, particularly with cost pressure not being anywhere near what it was the last couple of years, So I guess as a starting point.

Andrew Lazar: Be curious to get your perspective on how you would address sort of that concern at this point.

None: Yes, Andrew Thank you for the question.

None: Certainly.

None: The restaurant traffic trends have been soft as we stated in our comments and.

None: He knows we've got capacity coming on in the industry and.

Thomas P. Werner: Yeah, Andrew, thank you for the question. You know, certainly, the restaurant traffic trends have been soft, as we stated in our comments. And, you know, everybody knows we've got capacity coming on in the industry. And, you know, the thing to remember is that as capacity comes on, it's not all created equal. You know, the capabilities of the capacity are different. And as we have in the past when we've had capacity coming online, we're going to be very, we're going to manage it very closely and look at the opportunities we have in the different markets based on the capacity coming online, as we have in the past. And, you know, so. The difference is, obviously, the trends in restaurant traffic are softer. We expect that to be a temporary outlier at this point. Time will tell, but we'll manage the capacity coming online like we have in the past with ourselves and competitors, and the category's been resilient, and we remain confident in the long-term trajectory of this category, which we expect to get back to 2% to 4% growth at a minimum.

None: The thing to remember is as.

None: You know the capacity comes on it's not all created equal.

None: So the capabilities of the capacity are different.

None: And as we have in the past when we've had capacity coming online.

None: We're going to be very we're going to manage it very closely and be.

None: And look at the opportunities we have in the different markets based on the capacity coming online.

None: As we have in the past and so.

None: No.

None: The difference is obviously that the trends in the restaurant traffic are softer we expect that to be a temporary outlier at this point.

None: Time will tell but we'll manage the capacity coming online like we have in the past with ourselves and competitors and the category has been resilient and we remain confident in the long term trajectory of this category, which.

None: We expect to get back to 2% to 4% growth at a minimum.

None: And then.

None: I know there are a number of costs right Lamb Weston absorbed in fiscal 'twenty four.

None: I don't think you would expect to necessarily repeat next year. So some of the inventory write offs the costs associated with obviously this ERP disruption as such.

None: Just back of the envelope it would seem like again, if it werent for those things.

Bernadette M. Madarieta: And then I know there are a number of costs, right, that Lamb Weston absorbed in Fiscal 24 that I don't think you would necessarily expect to necessarily repeat next year. So some of the inventory write-offs, the costs associated with, obviously, the CRP disruption, and such. I mean, just back of the envelope, it would seem like, again, if it weren't for those things, maybe EBITDA would be even closer to, like, $1.7 billion this year as sort of a baseline. So I'm trying to get a sense of, you know, if we excluded those costs, would that kind of be a baseline for EBITDA for 24 off of what you would expect to grow EBITDA, hopefully, Or am I missing something in that sort of math? Thank you.

None: Maybe EBITDA would be closer to even closer to like $1 7 billion. This year.

None: As sort of a base and I'm, just trying to get a sense of.

None: If we exclude those costs with that kind of behavior.

None: How do we think about a base line for EBITDA for 24 off of which you would expect to grow EBITDA, but hopefully closer to your algorithm, let's say in fiscal 'twenty, five or am I missing something in that sort of math. Thank you.

None: Hi, Andrew this is bernadette.

Bernadette: Youre, absolutely thinking about it correctly, we did absorb those costs and I think you would add those back as you look to fiscal 'twenty five I think what's going to be key is we'll need to take a look at the restaurant traffic trends and impact on volume as we move forward.

Bernadette: And how that translates to fiscal 'twenty five and we're in the process of rolling that up right now and we'll have more information when we give our outlook in July.

Bernadette M. Madarieta: Hi Andrew, this is Bernadette. You're absolutely thinking about it correctly; we did absorb those costs. And I think you should add those back as you look to fiscal 25. I think what's going to be key is we'll need to take a look at the restaurant traffic trends and impact on volume as we move forward. And you know how that translates to fiscal 25. And we're in the process of rolling that out right now. And we'll have more information when we give our outlook in July.

None: Okay. Thank you.

None: Thank you we will go next to Peter Galbo with Bank of America.

Hey, guys good morning.

Peter Thomas Galbo: Good morning, Good morning, Scott.

None: Scott.

Peter Thomas Galbo: I wanted to unpack, maybe just the underlying volume comment that you made bernadette. So I mean, the total company level right. If we strip out the eight points from ERP and Theres, obviously, a piece that was walkaway business.

Peter Thomas Galbo: It seems like underlying volumes would've been down I don't know four 5%.

Operator: Thank you. Thank you. We'll go next to Peter Galbo with Bank of America.

It's kind of what Youre extrapolating into <unk>, just want to understand if that's kind of the logic is.

Bernadette M. Madarieta: Hey guys, good morning. Morning. Good morning.

Bernadette M. Madarieta: I wanted to unpack maybe just the underlying volume comment that you made, Bernadette. So, I mean, at a total company level, right, if we strip out the eight points from ERP, and there's obviously a piece that was walk-away business, it seems like underlying volumes would have been down, I don't know, 4 or 5 percent. And that's kind of what you're extrapolating into 4Q. I want to understand if that's the logic as to how you're applying kind of whatever the 3Q rate was forward.

Peter Thomas Galbo: As to how you're applying.

Peter Thomas Galbo: Whatever the <unk> rate was forward.

Peter Thomas Galbo: Yeah.

None: You're exactly right. It was a 16% decline in the quarter eight points related to the ERP transition and then the underlying volume we had expected it to improve sequentially, but that the softer traffic trends that we did see we do expect those to remain soft in <unk>.

Q4 of this year and that's what we're updating in our outlook.

None: That continued softness.

None: Okay got it.

Bernadette M. Madarieta: Yeah, so you're exactly right. It was a 16% decline in the quarter, eight points related to the ERP transition. And then you know, the underlying volume, we had expected it to improve sequentially, but the softer traffic trends that we did see, we do expect those to remain soft in Q4 of this year. And that's what we're updating in our outlook, that continued softness.

None: And I think what's implied again in the fourth quarter guidance and again just thinking about this as it as it starts rolling forward into next year.

Is that price mix kind of steps back up at least sequentially or the contribution rate based on kind of the updated guidance and I wasn't sure. How much of that is just just mix as you get back to fulfillment versus anything else that we might be considering thanks very much.

None: Yeah, Youre going to see a couple of things mix will be part of it as we said in the third quarter, we weren't able to fill a lot of those orders that are more higher margin just given the more mixed loads and the order fulfillment issues. We were having so you will see that impact then into the fourth quarter, but there's generally a sequential change.

Bernadette M. Madarieta: Okay, got it. And I think what's implied, again, in the fourth quarter guidance, and again, just thinking about this as it starts rolling forward into next year, is that price mix kind of steps back up, at least sequentially, or the contribution rate based on kind of the updated guidance. And I wasn't sure how much of that is just a mix as you get back to fulfillment versus anything else that we might be considering. Thanks very much.

None: <unk> between third and fourth quarter, and you'll continue to see that as you have in previous periods.

None: Thank you we'll go next to Adam Samuelson with Goldman Sachs.

None: Okay.

Operator: Yeah, you're going to see a couple of things mixed in there. As we said, in the third quarter, we weren't able to fill a lot of those orders that are higher-margin just given the more mixed loads and the order fulfillment issues we were having. So you will see that impact then into the fourth quarter. But there's generally a sequential change between the third and fourth quarters. And you'll continue to see that as you have in previous periods.

Adam L. Samuelson: Yes. Thank you good morning, everyone.

Adam L. Samuelson: Good morning, good morning.

Adam L. Samuelson: So I guess first and kind of continuing on theaters.

Adam L. Samuelson: <unk> line of questioning.

Adam L. Samuelson: I wanted to think about the volume impact of customers, who are seeking alternative sources of supply.

And.

Adam L. Samuelson: We're meeting definition only thats market share no one could say that that is temporary but just get your perspective on your ability to get that volume and that share back and on a related point kind of.

Operator: Thank you. We'll go next to Adam Samuelson with Goldman Sachs. Yes, thank you. Good morning, everyone.

Adam L. Samuelson: We've talked about the headwinds from foregone volumes from business you've walked away from.

Operator: Good morning. Good morning.

Operator: Oh, hi.

Operator: First, and kind of continuing on Peter's

Adam L. Samuelson: Ian kind of at the time. The explanation was that you were going to be trying to backfill that with higher margin and higher mix products. It doesn't seem like we're getting that incremental uplift on the back end and I'm just trying to make.

Thomas P. Werner: I want to think about the volume impact of customers who are seeking alternative sources of supply and where I mean, definitionally, that's market share. Now, one could say that that is temporary, but just get your perspective on your ability to get that volume and that share back. And on a related point, kind of we've talked about the headwinds from foregone volumes from business you've walked away from, the kind of the time the explanation was that you were going to be trying to backfill that with higher margin and higher mixed products doesn't seem like we're getting that incremental uplift, on the back end and I'm just trying to make get a update on where you are with those targeted volumes and targeted customers and categories.

Adam L. Samuelson: Update on where you are with.

Adam L. Samuelson: Those targeted volumes and targeted customers in categories.

Adam L. Samuelson: Yeah, Adam this is Tom.

Thomas P. Werner: So a couple of things.

Thomas P. Werner: We're getting ready to go through our contracting season as we do every year at this time, we're on the front end of it so we have a.

Thomas P. Werner: Robust plan on how we're going to work through that and.

Thomas P. Werner: I'm confident the team in our direct sales force and Mike Smith and his commercial leaders.

Thomas P. Werner: Our focus on that so more to come on that but it's going to take some time, it's not perfectly match as we've stated in the past in terms of the volume we've exited versus what were targeting in the marketplace and we're going to do it at.

Thomas P. Werner: Yeah, and this is Tom. So a couple things, you know, that we're getting ready to go through our contracting season. As we do every year at this time, we're on the front end of it, so we have a robust plan for how we're going to work through that. And, you know, I'm confident the team and our direct sales force, and Mike Smith and his commercial leaders are focused on that. So more to come on that.

Thomas P. Werner: Right.

Thomas P. Werner: The right margin levels. So that's number one number two.

Thomas P. Werner: This is a tough transition there is no question about it and.

Thomas P. Werner: Materially impacted the company.

Thomas P. Werner: We're not happy about it and so we have to win back the trust of a lot of some of our smaller customers.

Thomas P. Werner: But you know, it's going to take some time, it's not perfectly matched, as we've stated in the past, in terms of the volume we've exited versus what we're targeting in the marketplace. And we're going to do it at, you know, the right price levels. So that's number one. Number two, you know, this was a tough transition. There's no question about it.

Thomas P. Werner: And we're working hard to do that with our direct sales force.

Thomas P. Werner: And but it's going to take some time and.

Thomas P. Werner: It's an unfortunate thing that has happened, but I am confident we have a plan.

Thomas P. Werner: And we've got everybody activated our direct Salesforce 300, salespeople on the street and but it's going to take some time and your question about.

Thomas P. Werner: And it it materially impacted the company, and we're not happy about it. And so we have to win back the trust of a lot of some of our smaller customers, and we're working hard to do that with our direct sales force. And, you know, but it's going to take some time. And, you know, that's an unfortunate thing that has happened. But I'm confident we have a plan. We've got everybody activated our direct sales force, 300 salespeople on them in the street. And but it's going to take some time, and your question about Unknown Speaker is absolutely true. And so we're going to have to work hard to get it back, and we will. We have a resilient sales force, but it's going to take some time, and I'm confident that the team we have a great plan in place, but it will take some time, and, you know, we're going to get there.

Thomas P. Werner: Your point about market share is absolutely true.

Thomas P. Werner: We're going to have to work hard to get it back and we will we have a resilient salesforce, but it's going to take some time and I'm confident that the team we got a great plan in place, but it will take some time and we're going to get there.

Thomas P. Werner: Okay.

None: Helpful. And then second question I had on on capital allocation and Capex.

None: And I guess I'm, just trying to get a sense for.

None: Higher at the high end of the range on capital spend this year and Thats just the timing of payments on projects as they have been with a slower demand environment.

None: In the nearby in the near term is there any thoughts.

None: Thoughts about timing of capital spend in 'twenty, five and 'twenty six.

None: Related to the Netherlands, and our Argentina facilities.

None: Quickly those need to be brought on or how quickly.

None: <unk> of other facilities needs to happen.

None: And should we still be thinking about capex.

Operator: Okay, that's helpful. And then a second question I had on capital allocation and CapEx. Um, I guess I'm just trying to get a sense, for Unknown Speaker. We've got the high end of the range on capital spend this year, and some of that's just the timing of payments on projects. Has there been a slower demand environment?

None: 20th how should we think about capex in 'twenty five given slightly higher spend this year.

None: Yes, so Adam as we as we communicated in our <unk>.

None: Faster day in October we're going to have an elevated level. This year next year.

None: The projects that you mentioned those are baked and we're committed to it and so.

Operator: ....

Thomas P. Werner: In the near term, are there any thoughts about timing of capital spend in 25 and 26 as it relates to the Netherlands and Argentina facilities and how quickly those need to be brought on or how quickly the upgrading of other facilities needs to happen? And should we still be thinking about CapEx? How should we think about CapEx in 2025 given slightly higher spend this year?

None: We expect 25 will be elevated as we stated and.

None: As we continue to evaluate the market and what's happening.

None: We will evaluate all of our capital expenditures going forward in terms of base capital levels that are needed.

None: Yes, the guidance would be consistent with what we shared at Investor day, 12% to 13% of sales for 25.

None: Okay Alright.

None: That's helpful I'll pass it on thank you.

Bernadette M. Madarieta: Yeah, so Adam, as we communicated on our Investor Day in October, we're going to have an elevated level this year and next year. The projects that you mentioned, those are baked, and we're committed to them. And so we expect 25 to be elevated, as we stated. And as we continue to evaluate the market and what's happening, we'll evaluate all of our capital expenditures going forward in terms of base capital levels that are needed. Yeah,

None: Thank you we will go next to Tom Palmer with Citi.

Thomas Hinsdale Palmer: Hi, good morning, Thanks for the question.

Thomas Hinsdale Palmer: Tom.

Thomas Hinsdale Palmer: I wanted to follow up.

Thomas Hinsdale Palmer: I guess a little one.

Thomas Hinsdale Palmer: Peter and Adam's question just on some of these customers.

Thomas Hinsdale Palmer: When might you have clarity.

Thomas Hinsdale Palmer: Whether these customers have kind of dropped you on a more sustained basis or whether you are starting to kind of win them back.

Bernadette M. Madarieta: Yeah, the guidance would be consistent with what we shared yesterday, 12 to 13 percent of sales for fiscal 25.

Thomas Hinsdale Palmer: It's really going to play out over <unk> and by next quarter, we'll have real visibility over that trajectory or could it take even longer.

Operator: Okay. All right. That's helpful.

None: No right now as we said.

Operator: I'll pass it on. Thank you. We'll go next to Tom Palmer with Citi.

None: My belief is over the next three to five months, we'll have some clarity on it.

Operator: Good morning. I think we have a question. Good morning, Tom.

None: And that's going to be in conjunction to a lot of the contracting that we go through with the customers the cycle.

Thomas P. Werner: I wanted to follow up on Peter and Adam's question, just on some of these customers. When might you have clarity, whether these customers have kind of dropped you on a more sustained basis or whether you're starting to kind of win them back? Is this really going to play out over 4Q and by next quarter, we'll have real visibility over that trajectory? Or could it take even longer?

None: So Tom I think we will have <unk>.

None: Good visibility by the time, we get to our next call in July and we will give some more color on it by then.

None: Okay. Thank you and then just the mid single digit volume decline and for Q. If we were kind of break that down.

None: Between industry, and then versus Lamb Weston specific.

None: Just any help here I mean is it the industry is smaller piece to consider in the Lamb Weston piece is more meaningful.

Thomas P. Werner: No, right now, as we sit here. You know, my belief is that over the next three to five months, we'll have some clarity on that. You know, that's going to be in conjunction with a lot of the contracting that we go through with the customers this cycle. You know, so Tom, I think we'll have good visibility by the time we get to our next call in July, and we'll get some more color on it by then.

None: Yeah, No I would say that it's more industry is where youre going to be seeing that with the softer traffic trends and then.

None: The other piece will be any hangover that we have from the ERP transition, but definitely more traffic trends softening that's impacting that.

Okay. Thank you.

None: We'll go next to Robert Moskow with TD Cowen.

None: Okay.

Robert Bain Moskow: Quick question.

Robert Bain Moskow: A few small ones.

Robert Bain Moskow: I don't know maybe you wait a few months before you tell us this but you say you've contracted with growers all raffi for potatoes, I would imagine you have a volume assumption like internally related to that in terms of demand for fiscal 'twenty five.

Bernadette M. Madarieta: Okay, thank you. And then just the mid single-digit volume decline in 4Q, if we were to kind of break that down between industry and then versus Lamb Weston specifically, would you be able to give me some help here? I mean, is the industry piece a smaller piece to consider, and the Lamb Weston piece is more meaningful?

Bernadette M. Madarieta: Yeah, no, I would say that it's more industry where you're going to be seeing that with the softer traffic trends. And then, you know, the other piece will be any hangover that we have from the ERP transition, but definitely more traffic trends softening that's impacting that.

Robert Bain Moskow: Or you can give us on how much volume you're contracting with those growers.

Robert Bain Moskow: And then secondly, you say that the ERP project is multi year.

None: I guess I need to know about it but.

None: Are there any other steps along the way that you think will it.

Operator: Okay, thank you. We'll go next to Robert Moskow with Katie Cowan.

None: Possibly impact your execution with customers.

Thomas P. Werner: Good question. There are a few small ones. I don't know, maybe you'll wait a few months before you tell us this, but you say you've contracted with growers already for potatoes. I would imagine you have a volume assumption, like internally, related to that in terms of demand for fiscal 25. Is there any color you can give us on how much volume you're contracting with those growers? And then secondly, you say the ERP project is multi-year, and I guess I need to know more about it, but are there any other steps along the way that you think will possibly impact your execution with customers? Thank you.

None: Thanks, Robert but first I'll take your last question first in terms of the ERP.

None: The next phase of the ERP will be in North America, and that will be at our plants.

None: We will do a pilot plant first where we will test all of its capabilities before we earn the right to move to the other plants and we will do that in waves. So we're right now in the middle of completing design Bill for the plants and then we will roll that out in in phases, but it will have much.

None: It's less of an impact given our deployment strategy, whereas this one was a much larger in scope.

Bernadette M. Madarieta: Thanks, Robert. First, I'll take your last question first in terms of the ERP. You know, the next phase of the ERP will be in North America, and that will be at our plants. We will do a pilot plant first, where we will test all of its capabilities before we earn the right to move to other plants, and we'll do that in waves. So we're right now in the middle of completing a design build for the plants, and then we'll roll that out in phases, but it will have much less of an impact given our deployment strategy, whereas this one was much larger in scope. And then, as it relates to the potato crop that we contracted for 2024, yes, we do use volume estimates, just like we do every year. We have taken down the number of acres that we did contract this year, just given the elevated level of inventories that we're going to have at the end of this year with the excess crop. But we don't share any of the information in terms of number of acres but have taken into consideration what we're seeing from restaurant traffic trends.

None: And then as it relates to the potato crop that we contracted for 2024.

None: Yes, we do use volume estimates just like we do every year, we have taken down the number of acres that we did contract. This year just given the elevated level of inventories that were going to have at the end of this year with the excess crop.

None: But we don't share any of the information in terms of number of acres, but have taken into consideration what we're seeing from restaurant traffic trends.

Okay.

None: Okay.

None: Follow up to that.

None: Just just mathematically I think you said traffic is kind of flattish at restaurants and attachment rates are still pretty good.

None: How does that translate to a mid single digit volume decline.

Qualitatively put those two numbers together I would I would think volume would have held up a little bit better.

Bernadette M. Madarieta: Okay. It's maybe a I think you said traffic is kind of flat-ish at restaurants and attachment rates are still pretty good. How does that translate to a mid-single-digit volume decline? If I just qualitatively put those two numbers together, I would think volume would have held up a little bit better.

None: Yeah, I think from a volume perspective.

None: <unk>, we are seeing sequential declines in volume and that's what's driving a lot of the volume decreases that youre seeing.

None: Sequential declines.

None: Yes.

None: Is that a year over year decline also or is it kind of yes, yeah data absolutely, it's a year over year as well as sequential we've continued to see QR SAR traffic decline.

Bernadette M. Madarieta: Yeah, I think from a volume perspective, our QSRs are seeing sequential declines in volume, and that's what's driving a lot of the volume decreases that you're seeing.

None: When we were saying about Rick lagging that was more in the foodservice space.

Bernadette M. Madarieta: A sequential decline. Yes. Is that a year-over-year decline also, or is it kind of like that? Yeah, it is.

The service Okay separate got it thank you.

None: Thank you we'll go next to.

Robert Frederick Dickerson: Rob Dickerson with Jefferies.

Bernadette M. Madarieta: Absolutely. It's a year-over-year comparison as well as sequential. We've continued to see QRSAR traffic decline. When we were saying about F.L.A.S.T., that was more in the food service space.

Robert Frederick Dickerson: Great a.

Robert Frederick Dickerson: A couple of quick ones for me I guess.

Robert Frederick Dickerson: Hum.

Robert Frederick Dickerson: More broadly speaking.

Robert Frederick Dickerson: Kind of given the shift in let's say at least the near term.

Bernadette M. Madarieta: Service. Okay, separate. Got it. Thank you. Thank you. We'll go next to. Rob Dickerson with Jeffrey.

Robert Frederick Dickerson: Traffic outlook.

Robert Frederick Dickerson: Is there anything.

Robert Frederick Dickerson: Broadly speaking it kind of changes.

Robert Frederick Dickerson: Youre kind of everything you walked through at the Investor Day in October.

Operator: Great stuff. A couple quick ones for me. I guess, Tom, kind of more broadly speaking, you know, given the, I guess, shift in, let's say, at least the near-term traffic outlook, you know, is there anything, broadly speaking, that kind of changes, you know, everything you walked through at Investor Day in October, you know, just regarding the long-term outlook. Like, you know, the long-term outlook, right, is based on the 2% to 4% You, you know, were saying you think it's temporary. I'm not sure kind of how temporary that is. But then there was also an implied, you know, margin, you know, uptick each year over the next few years. So, just trying to gauge, you know, kind of all the moving pieces as we think forward longer term.

Robert Frederick Dickerson: <unk> has a long term outlook.

Robert Frederick Dickerson: The long term outlook rate base with 2% to 4% you were saying you think temporary.

I'm not sure kind of held temporary that is.

Robert Frederick Dickerson: But then there was also an implied margin.

Robert Frederick Dickerson: Uptick each year over the next few years, so I'm just trying to gauge it.

Robert Frederick Dickerson: All the moving pieces as we think forward longer term.

None: Yes, Rob.

Rob: As I sit here right now, yes, we've got we've been talking about softer traffic in and Thats been in the market for a while.

None: You know I don't.

None: Have any.

None: As I sit here right now our long term algorithm.

None: Confident in.

None: <unk>.

None: If this is prolonged.

None: We have certain things that we can activate to adjust.

None: The company and the footprint, but right now.

Thomas P. Werner: Yeah, Rob, as I sit here right now, yes, we've got softer traffic and that's been on the market for a while. You know, I don't have any.

None: We've made some investment decisions two years ago based on what we believe the category is going to continue to do I believe it's going to continue to grow.

Thomas P. Werner: As I sit here right now, our long-term algorithm, I'm confident in it, and, you know, if this is prolonged, we have certain things that we can activate to adjust. The company in the footprint. But right now, you know, we made some investment decisions two years ago based on what we believe the category is going to continue to do. I believe it's going to continue to grow, even though, you know, we got a softer period. And, you know, so I don't have any reason to believe that in the long term. We need to adjust our algorithm at this point.

None: Even through you know where you got a softer period and so I don't have any reason to believe that over the long term.

None: We need to adjust our algorithm at this point.

Super: Alright Super that's clear.

None: And then just very quickly.

None: I also think.

None: You had stated back in October.

None: Increase in the dividend over time, but then potentially some incremental repurchase activity.

None: Outside of employee.

None: <unk>.

None: Option exercises. So I'm just curious I mean, we can all see clearly stock looks little pressure today.

None: Just trying to gauge sort of appetite.

None: Buyback potential as you think for the next 12 months not yet thanks.

Thomas P. Werner: Sorry, super. That's clear. And then just very quickly, I also think, you know, you had stated back in October, right, an increase in the dividend over time, but then, you know, potentially some incremental repurchase activity, you know, outside of employee option exercises. So, I'm just curious, you know, I mean, we can all see clearly that the stock looks a little pressured today to try to gain your appetite for buyback potential as you think forward the next 12 months Not yet. Thanks.

None: Yes, so we're committed to the dividend.

None: As we evaluate our capex.

None: Well certainly.

None: Take a look at our share buyback as we always do.

None: And we will stay committed to our dividend over time, and so yes absolutely.

None: Based on what's going on today with our equity price.

We're going to evaluate that.

None: Alright Super Thanks, so much.

We'll go next to Matt Smith with Stifel.

Matthew Edward Smith: Hi, Thanks for taking the question.

Matthew Edward Smith: Good morning.

Matthew Edward Smith: When you look at the slowdown in restaurant traffic.

Matthew Edward Smith: One of the factors has been the level of pricing, we've continued to see away from home inflation moving higher so a couple of questions here any thoughts on what's needed to firm traffic up is that consumers adjusting to inflation or would you expect operators to lean more heavily into value offerings and promotions related to that one of the considered.

Thomas P. Werner: Yeah, so we're committed to a dividend and, you know, as we evaluate our CapEx... We'll certainly take a look at our chair buyback as we always do. And you know, we'll stay committed to our dividend over time. And you know, absolutely. Based on what's going on today with our equity price, we're going to evaluate that.

Matthew Edward Smith: In the past you've talked about in periods of economic softness and pressure on <unk> Sars Fry performance has been fairly resilient benefiting from.

Operator: All right, super. Thanks so much. We'll go next to Matt Smith with Stiefel.

Thomas P. Werner: Hi, thanks for taking the question. When you look at the slowdown in restaurant traffic, one of the factors has been the level of pricing. We've continued to see away from home inflation moving higher. So a couple questions here.

Matthew Edward Smith: Value menu featuring fries heavily are you seeing that level of activity today.

Matthew Edward Smith: Okay.

Matthew Edward Smith: As we sit here today.

Thomas P. Werner: Any thoughts on what's needed to firm traffic up? Is that consumers adjusting to inflation, or would you expect operators to lean more heavily into value offerings and promotions related to that? One of the considerations in the past you've talked about, in periods of economic softness and pressure on QSRs, fry performance has been fairly resilient, benefiting from value menus featuring fries heavily. Are you seeing that level of activity today?

I think theres two things I think the consumers.

Matthew Edward Smith: Perhaps adjust to the menu pricing in terms of the inflation.

Matthew Edward Smith: I believe.

Matthew Edward Smith: We're going to start seeing more.

When you value mill offerings going forward to drive traffic trends that's been typically the case in the past when <unk>.

Matthew Edward Smith: We have slowed down a bit so I think it's a combination of both going forward, but it's going to take some time.

Thomas P. Werner: You know, as we sit here today, I think there are two things. I think consumers have to adjust to the menu pricing in terms of inflation. I believe, you know, we're going to start seeing more menu value mill offerings going forward to drive traffic trends. That's typically the case in the past when things have slowed down a bit. So I think it's a combination of both going forward, but it's going to take some time.

Matthew Edward Smith: Okay.

Matthew Edward Smith: Thank you Tom and then just a follow up question on potato costs. It sounds like they are expected to be down low single digits in North America for the 2020 for crop. That's one of the few instances where potato costs are actually down year over year.

Matthew Edward Smith: Is that is the pressure from.

The potential of lower pricing to your customers is that offset by higher input costs across the rest of your basket.

Thomas P. Werner: Thank you, Tom. And then just a follow-up question on potato costs. It sounds like they're expected to be down low single digits in North America for the 2024 crop. That's one of the few instances where potato costs are actually down year over year. Is that the pressure from the potential of lower pricing for your customers? Is that offset by higher input costs across the rest of your basket? Or would you expect some pressure on your pricing going forward from lower potato costs?

Matthew Edward Smith: Or would you expect some some pressure on your pricing going forward from lower potato costs.

None: Yes so.

None: He said.

None: Even though it's down.

None: We stated 2% to 3% if you go back and stack it up the last two years.

None: It's been up significantly.

None: So.

None: And when we're in the middle of Rolling up our entire input basket right now for 25.

Thomas P. Werner: Yeah, so, just to reset. Even though it's down, like we stated two to 3%, if you go back and stack it up over the last two years, it's been up significantly. You know, so and when you know, we're in the middle of rolling up our entire input basket right now for 25.

None: As we've stated.

There are commodity inflationary pressures.

None: In other areas of our input basket, so while our inflation, we don't expect it to be double digits like it has been the last two to three years.

None: Me.

It's still we're still going to be dealing with some.

Thomas P. Werner: As we've stated...

None: Some inflation at this point I'm not going to give you a specific number we will talk about that in July because we are in the middle of kind of rolling up our our 25 operating plan right now.

Thomas P. Werner: You know, there are commodity inflationary pressures in other areas of our input basket. So while our inflation, we don't expect it to be double digits like it has been the last two to three years, excuse me. It's still, we're still going to be dealing with, you know, some inflation at this point. I'm not going to give you a specific number; we'll talk about that in July because we're in the middle of kind of rolling up our 25 operating plan right now.

None: Thanks, Tom I'll leave it there.

None: We'll go next to Mark <unk> with Wells Fargo Securities.

Mark: Hey, good morning, Thank you for the question.

Mark: Joining or does it.

Mark: On the ERP process.

Thomas P. Werner: Thanks, Tom. I'll leave it there. Next is Marc Torrente with Wells Fargo Security.

Mark: The recent implementation was a heavy lift it sounds as though you are more confident in our ability to limit the transition impacts are the next steps maybe how are those next steps different and some of the learnings gained from the recent transition.

Bernadette M. Madarieta: Hey, good morning. Thank you for the question on the ERP process. The recent implementation was a heavy lift. It sounds as though you were more confident in your ability to limit the transition impact for the next steps. Maybe how are those next steps different and some of the learnings you have gained from the recent transition?

None: Yeah sure so.

None: Some of the next steps are different and that we're able to go live at one plant and isolate them.

Bernadette M. Madarieta: Yeah, sure. Some of the next steps are different in that we're able to go live at one plant and isolate it, therefore limiting the impact. Whereas, you know, with all of the central systems that were affecting customer ordering, inventory management, and others this time, that was more difficult. I think that, as we've shared, from an inventory visibility perspective and lessons learned, there are always more things that you're going to be able to do in terms of change management and other things, and those are the things that we will continue to focus on as we move forward into our plant phase.

None: And therefore, limiting the impact, whereas with all of the central systems that were affecting customer ordering inventory management and others. This time.

None: That was more difficult.

None: Think that as we've shared from an inventory visibility perspective and lessons learned.

None: You know, there's there's always more things that youre going to be able to do in terms of change management and other things and those are the things that we will continue to focus on as we move forward into our plant phases.

None: Okay. Thank you.

Bernadette M. Madarieta: Okay, thank you, and then the third quarter due to the transition. As fulfillment normalizes, how should we think about, I guess, price mix trends flowing through the next several quarters, considering both wraparound pricing, potentially more muted new pricing on the horizon, and then actual underlying mix, and how much of a contributor will that underlying mix be going forward?

None: Great.

None: In the third quarter due to.

None: Transition as fulfillment normalizes, how should we think about I guess price mix trends flowing through the next several quarters considering boats wrap around pricing.

None: Potentially more muted.

New pricing on the Horizon and then.

None: Actual underlying mix and how much.

None: Contributor will be.

Bernadette M. Madarieta: Yeah, so as it relates to mix, we talked about the impact in the fourth quarter and coming off of the ERP transition. As we go to fiscal 25, we will continue to see more favorable mix impact as we bring on our new capacity in American Falls, for example, where we are able to offer more premium products. So those are some of the things that you'll see by way of changes in mix. And then next year, we won't be lapping some of those lower margin exits that we had made in fiscal 23.

None: That underlying mix going forward.

None: Yes, so as it relates to mix, we talked about the impact in fourth quarter and coming off of the ERP transition.

None: As we go into fiscal 'twenty five we will continue to see more mix favorable mix impact as we bring on our new capacity and American Falls for example, where we are able to offer more premium products.

None: So those are some of the things that youll see by way of changes in mix and then next year, we won't see lapping some of those lower margin exits that we had made in fiscal 'twenty three.

None: Okay. Thank you.

Thomas P. Werner: Okay, thank you. We'll go next to Max Gumport with BNP Paribas. Hey, thanks for the question. Turning back to the comments on solar restaurant traffic trends and your expectation that they'll be temporary in nature, I'm just curious what type of visibility you have right now that's giving you the confidence in seeing some improvement in restaurant traffic trends in the horizon. I know you talked about the impact of the higher menu prices and how consumers will adjust to that eventually, but just curious what's impacting that confidence and any sort of sense of a timeline for how we could see it play out. Thanks.

None: We'll go next to Max <unk> with BNP Paribas Perry Bob.

Max: Hey, Thanks for the question turning back to the comments on solar restaurant traffic trends and your expectation that there'll be temporary in nature I'm just curious.

Max: What type of visibility you have right now that's giving you the confidence and see some improvement in restaurant traffic trends in the horizon and I know you talked about the impact of the higher menu prices and how consumers will adjust to that eventually but just curious.

Max: What's impacting that confidence.

Max: And how was it any sort of central timeline for how we could see it play out thanks.

Thomas P. Werner: Yeah, you know, so number one, we got the fry attachment rate has stayed pretty consistent. It's been above Unknown Executive, Andrew Lazar, Unknown Executive, Andrew Lazar, Unknown Executive, Continually is restaurant traffic every month that we look at. And while it's been slowing recently, as we discussed on the call, you know, we believe based on kind of how we model some things that we expect the consumer to get adjusted to the inflationary menu pricing, and you know that we expect that to return here going forward. So it's not it's not a perfect linear assumption that we're making, but, you know, over time, we think it's going to return back to, you know, in-store restaurant visits.

None: Yes, so number one we got the right catchment rate has stayed pretty consistent.

None: It's been above historical levels over the past two three years so.

None: That's one thing the other.

None: Thing that we monitor is.

None: You continually is restaurant traffic every month, we look at and.

None: While it's been slowing recently.

None: As we've discussed on the call.

None: We believe based on kind of how we model some things that we expect that to the consumer to get adjusted to the inflationary.

None: Menu pricing and.

None: We expect that to return here going forward. So it's not it's not a.

None: Perfect linear assumption that we're making but.

None: Over time, we think it's going to return back to that.

None: In store restaurant visits.

Bernadette M. Madarieta: Yeah, and the only other thing that I'd comment on that we've talked a lot about in the past is related to French fries and the fact that they are one of the highest-margin items on, you know, restaurants' menus, and we will likely then continue to see restaurants pushing for those types of products by the restaurants.

None: Yeah, and the only other thing that I'd comment on that we've talked a lot about in the past is related to French fries and the fact that they are one of the highest margin items on.

None: Restaurant menus, and we will likely then continued its steep pushing for those types of products by the restaurants.

Bernadette M. Madarieta: Product. Thank you. And then turning back to the sort of the backfilling of the contracts that you exited in 23, it feels like it's been pushed off a bit, right, given the ERP transition. I'm just curious.

None: Got it. Thank you and then turning back to the <unk>.

Back filling of the contracts that you're exiting 'twenty three it feels like it's been pushed off a bit right given the ERP transition I am just curious.

Thomas P. Werner: Right now, it feels like you're going to be trying to maintain relationships with customers that were impacted by the ERP transition. So how far back has your ability to start to make progress on backfilling been pushed? Some of those contracts you exited with higher margin business have been pushed. Is that more of a middle of the 25 type event now? Thanks, I'll leave it there.

None: Right now it feels like youre going to be trying to.

None: We maintain relationships with customers that were impacted by the ERP transition to how far back.

None: Yes.

None: <unk> to start to make progress on back filling some of those contracts you exited with higher margin margin basics has been pushed does that more of a middle of 'twenty type event now thanks I'll leave it there.

Thomas P. Werner: Yeah, so we're on the front end of a lot of our contracting with customers right now, as I stated earlier, and, you know, we've got a plan put together as we start thinking about FY25 and targeted customers and rebuilding the relationships with some of the customers that we impacted, unfortunately, with our ERP situation, and, you know, it's going to take the next several months to work through all that. But I expect, you know, as our team will recapture that business, our approach to that will be targeted. And, you know, it's going to take some time to rebuild those relationships. And we're going to be mindful, as we always are this time of year, as we talk to our customers that we're contracting with about the opportunities that we feel we need to, you know, target and go after.

None: Yes. So we're on the front end of a lot of our contracting with customers right now as I stated earlier and we've got.

None: Our plan put together as we start thinking about FY, 'twenty, five and targeted customers and rebuilding the relationships with some of the customers that we impacted unfortunately with our ERP situation.

None: And that's going to take the next.

None: Several months to work through all that but I expect.

None: Our team will.

None: Recapture that business will be targeted in our approach to that and so it's going to take some time.

None: To rebuild those relationships and we're going to be mindful as we always are this time of year as we talk to our customers that we're contracting with.

None: On the opportunities that we feel we need to.

None: Target and go after.

Bernadette M. Madarieta: Great, thank you. We'll go next to William Reuter with Bank of America. Hi, I just have two. The first is, at this point, are there any orders that continue to be delayed? I just wanted to put a finer point on that.

None: Great. Thank you.

None: We'll go next to William Reuter with Bank of America.

William Michael Reuter: Hi, I just have two the first is at this point are there any orders that continue to be delayed I just wanted to put a finer point on that.

Bernadette M. Madarieta: We're back to our previous order fulfillment rates.

William Michael Reuter: We're back to our previous order fulfillment rates.

Thomas P. Werner: Okay, good to hear. And then, second, given your early conversations with customers and the fact that you are in the midst of contract negotiations, have you gotten any sense that customers are leaning on you more than they would have in the past based upon the recent, you know, challenges that have existed?

William Michael Reuter: Okay. Good to hear and then the second given your early conversations with customers and the fact that you are in the midst of contract negotiations have you gotten any sense that customers are leaning on you more than they would have in the past based upon the recent challenges that existed.

Thomas P. Werner: No, I don't, you know, we don't have any. From a customer standpoint, you know, we were communicating well with them about the challenges we had. A lot of our bigger customers, you know, we made sure they understood all the things we were going through. So, you know, generally, they didn't like it, but they understood. But, you know, there was no fallout from a lot of our bigger customers as we went

William Michael Reuter: No.

William Michael Reuter: We don't have any.

William Michael Reuter: <unk>.

William Michael Reuter: From a customer standpoint, we were communicating well with them.

William Michael Reuter: With the challenges we had.

William Michael Reuter: A lot of our bigger customers.

William Michael Reuter: We made sure they understood all the things we're going through so.

William Michael Reuter: Generally they didn't like it but they understood but.

William Michael Reuter: There is no fallout from a lot of our bigger customers.

Bernadette M. Madarieta: I have one more. I think the ERP implementation that's going on right now is just in North America and that you'll be doing...

William Michael Reuter: As we went through this.

William Michael Reuter: We did our best to protect everybody as we could.

Got it and actually I have one more.

I think the ERP implementation, that's going on right now is just in North America that youll be doing it in international regions in the future is that right.

Bernadette M. Madarieta: That's correct. So we did the central systems in North America. The next phase will be plants in North America. And then after that, we will go international.

None: That's correct.

None: We did though okay central systems in North America. The next phase will be plant in North America and then after that we will go international.

Operator: Great. That's all for me. Thank you.

Operator: Thank you.

Operator: We'll go next to Carla Casella with J.P. Morgan. Hi, thanks for taking the question.

None: Great. That's all for me thank you.

None: Thank you.

None: We'll go next to Carla Casella with JP Morgan.

Operator: Unknown Speaker.

Operator: Unknown Speaker ________________________________________________

Thomas P. Werner: M&A and internationally. Is that all kind of off the table for now until you get the ERP system done? Or are you still looking at opportunities? And can you talk about what you're seeing in the market?

Carla Marie Casella Hodulik: Hi, Thanks for taking the question.

Carla Marie Casella Hodulik: In the past you've talked about M&A and internationally is that all kind of off the table for now until you get the ERP system done or are you still looking at opportunities and can you talk about what youre seeing in the market.

Thomas P. Werner: Yeah, you know that it's not off the table. And, you know, I've been pretty clear on this that we're always continuing to evaluate...

None: Yeah, you know the.

None: It's not off the table and I've been pretty clear on this that we're always continuing to evaluate.

Thomas P. Werner: International Acquisition Opportunities, certainly, you know, the timing of those depends on, you know, it depends on the other side of the table, so to speak. So you can't always time these perfectly, and we'll continue to evaluate them. And if something, you know, presents itself. You know, based on what's going on today, we're going to continue to move forward. But, you know, we've got to be mindful about what's going on in the organization, but you can't you can't predict. When these things are going to happen, we have a sense of it, but we're absolutely going to continue to pursue them.

None: International acquisition opportunities certainly the timing of those depends on.

None: It depends on the other side of the table so to speak so you can't always time these perfectly.

None: And we will continue to evaluate it and if something.

None: Presents itself.

None: Based on what's going on today, where we're going to continue to move forward, but we got to be mindful about what's going on in the organization, but.

None: Can't you can't predict when these things are going to happen, we have a sense of it but we're absolutely going to continue to pursue those.

None: And it has the market I mean, given the kind of softness in the U S are today internationally.

Thomas P. Werner: And has the market, I mean, given the kind of softness in the QSR today internationally, is the market opening up more? Are there more, are you getting more looks than in the past? Anything you can give us on the market?

None: Market opening up more are there more are you getting more looks at in the past any anything you can give us on the market.

None: Yes, I mean, im not going to get into a lot of specifics on that question obviously.

Thomas P. Werner: Yeah, I mean, I'm not going to get into a lot of specifics on that question, obviously. But, you know, the.

None: But.

Thomas P. Werner: The thing to remember is we have a belief in the long-term resilience of this category and have, and yes, we're dealing with some softness right now. We believe the category is going to return globally. And we're seeing some pockets of international markets that are performing well, as I stated in my prepared remarks. So over the long term, if something presents itself, we're absolutely going to evaluate it.

None: The thing to remember is we have a belief in the long term resilience of this category in half.

None: And yes, we're.

None: Dealing with some softness right now we believe the category is going to return globally and we're seeing some pockets of international markets that are performing well as I stated in my prepared remarks.

None: <unk>.

None: So over the long term.

None: If something presents itself, we're absolutely going to evaluate it.

None: Okay, great. Thank you.

None: With no additional questions in queue at this time I would like to turn the call back over to our speakers for any additional or closing remarks.

Thomas P. Werner: Okay, great. Thank you.

Dexter P. Congbalay: With no additional questions in queue at this time, I'd like to turn the call back over to our speakers for any additional or closing remarks. Hi, this is Dexter.

Hi. This is Dexter if you have any follow up questions or would like to schedule a call. Please.

Dexter P. Congbalay: Rail and we can do so other than that have a good day and thanks for joining the call.

Dexter P. Congbalay: If you have any follow-up questions or would like to schedule a call, please send me an email, and we can do so. Other than that, have a good day, and thanks for joining the call. That will conclude today's call. We appreciate your participation.

Dexter P. Congbalay: Yes.

None: That will conclude today's call. We appreciate your participation.

None: [music].