Q3 2024 Lancaster Colony Corp Earnings Call

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Tawanda: Good morning. My name is Tawanda, and I will be your conference call facilitator today. At this time, I would like to welcome everyone to the Lancaster Colony Corporation Fiscal Year 2024 Third Quarter Conference. Conducting today's call will be Dave Ciesinski, President and CEO, and Tom Pigott, CFO. All lines have been placed on mute to prevent any background noise.

Wanda: Good morning, My name is to Wanda and I will be your conference call facilitator today.

Tawanda: After the speakers have completed their prepared remarks, there will be a question and answer period. If you would like to ask a question during this time, simply press star 11 on your telephone keypad. If you would like to withdraw your question, press star, one, one again.

Wanda: At this time I would like to welcome everyone to the Lancaster Colony Corporation fiscal year, 'twenty 'twenty four third quarter conference call.

Dave Soski: Conducting today's call will be Dave So St ski President and CEO and Tom Pigott CFO.

Speaker Change: All lines have been placed on mute to prevent any background noise.

Speaker Change: After the speakers have completed their prepared remarks, there would be a question and answer period.

Speaker Change: If he would like to ask a question. During this time simply press star one on your telephone keypad.

Speaker Change: If he would like to withdraw your question Press Star one again, thank you.

Dale N. Ganobsik: Thank you. And now to begin the conference call. Here is Dale Ganobsik, Vice President of Corporate Finance and Investor Relations for Lancaster Colony Corporation. You may begin.

Speaker Change: And now to begin the conference call here.

Speaker Change: There is still cannot sick vice president of corporate finance and Investor Relations for Lancaster Colony Corporation.

Cannot Sick: You may begin.

Dale N. Ganobsik: Good morning, everyone, and thank you for joining us today for Lancaster Colony's fiscal year 2024 third quarter conference call. Our discussion this morning may include forward-looking statements which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially, and the company undertakes no obligation to update these statements based upon subsequent events.

Scott Hanson: Good morning, everyone and thank you for joining us today for Lancaster colony's fiscal year 2024 third quarter conference call.

Dale N. Ganobsik: A detailed discussion of these risks and uncertainties is contained in the company's filings with the FCC. Also, note that the audio replay of this call will be archived and available at our company's website, LancasterColony.com, later this afternoon. For today's call, Dave Ciesinski, our president and CEO, will begin with a business update and highlights for the quarter. Tom Pigott, our CFO, will then provide an overview of the financial results. Dave will then share some comments regarding our current strategy and outlook. At the conclusion of our prepared remarks, we'll be happy to answer any questions you may have.

Scott Hanson: <unk>. This morning May include forward looking statements, which are subject to the safe Harbor provisions of the private Securities Litigation Reform Act of 995.

Scott Hanson: These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially.

Cannot Sick: The company undertakes no obligation to update these statements based upon subsequent events.

Cannot Sick: A detailed discussion of these risks and uncertainties is contained in the company's filings with the SEC.

Cannot Sick: Also note that the audio replay of this call will be archived and available at our company's website Lancaster colony Dot Com later this afternoon.

Cannot Sick: For today's call, Dave Demski, our president and CEO will begin with a business update and highlights of the quarter. Tom Pigott. Our CFO will then provide an overview of the financial results.

Dave Demski: Dave will then share some comments regarding our current strategy and outlook.

Dave Demski: At the conclusion of our prepared remarks, we'll be happy to answer any questions you may have.

Thomas K. Pigott: Once again, we appreciate your participation. This morning, I'll now turn the call over to Lancaster, colony's President and CEO, Dave <unk> Dave.

Dale N. Ganobsik: Once again, we appreciate your participation this morning. I'll now turn the call over to Lancaster Colony's President and CEO, Dave Ciesinski.

David A. Ciesinski: Thanks, Dale, and good morning, everyone. It's a pleasure to be here with you today as we review our third quarter results for fiscal year 2024. In our fiscal third quarter, which ended March 31st, we were pleased to report record net sales and gross profit, as consolidated net sales increased 1.4% to $471.4 million, and gross profit grew 10.9% to $104.5 million. Operating income increased 19.5% to $35.1 million, driven by solid growth in the underlying performance of the business.

Dave: Thanks, Dale and good morning, everyone. It's a pleasure to be here with you today as we review our third quarter results for fiscal year 2024.

David A. Ciesinski: This was partially offset by the impact of charges arising from the decision to exit our perimeter-of-the-store bakery product lines, specifically Flat Out and Angelic Bake House, which reduced operating income by $14.7 million. In our retail segment, net sales growth of 30 basis points was driven by volume gains for our successful licensing program, led by Chick-fil-A Sauces and Dressings, Olive Garden Dressings, and our newly introduced Subway Sandwich Sauces and Texas Roadhouse Steak Sauce.

Dave: In our fiscal third quarter, which ended March 31, we were pleased to report record net sales and gross profit as consolidated net sales increased one 4% to 471 $4 million and gross profit grew 10, 9% to $104 five.

Dave Demski: <unk>.

Dave Demski: Operating income increased 19, 5% to $35 $1 million driven by solid growth in the underlying performance of the business.

Dave Demski: This was partially offset by the impact of charges arising from the decision to exit our perimeter of the store bakery product lines, specifically flat out and angelic bakehouse, which reduced operating income by $14 7 million.

Dave Demski: In our retail segment net sales growth of 30 basis points was driven by volume gains for our successful licensing program <unk>.

Dave Demski: Led by Chick Fil, a sauces and dressings, olive garden dressings, and our newly introduced subway sandwich sauces in Texas Roadhouse stick sources.

David A. Ciesinski: Retail segment volume measured in pounds shift increased 1.5 percent, driven by the growth from licensed items and investments in trade spending that drove household penetration gains across our portfolio. Excluding the impact of product downweighting initiatives and sales attributed to flat-out Angelic Bakehouse product lines that we exited, Q3 retail sales volume increased 2.8%. SIRCONA retail scanner data for the 13-week period ending March 31st shows our brands, including licensed items, perform very well, with consumption measured in pounds growing 5.6%. The increased consumption was driven by three primary factors.

Dave Demski: Retail segment volume measured in pounds shipped increased one 5% driven by the growth from licensed items and investments in trade spending that drove household penetration gains across our portfolio.

Dave Demski: Excluding the impact of product down weighting initiatives and sales attributed to flat out an angelic bakehouse product lines that we exited Q3 retail sales volume increased two 8%.

Dave Demski: So kind of retail scanner data for the 13 week period, ending March 31 shows our brands, including license items performed very well with consumption measured in pounds growing five 6%.

Dave Demski: The increased consumption was driven by three primary factors.

David A. Ciesinski: First, we successfully invested in promotional activity to drive trial and household penetration across a range of our brands. Second, our consumer-relevant licensed brands continue to deliver strong consumption behind notable gains for Chick-fil-A dressings and sauces. Olive Garden Dressings, in addition to new contributions from the launches of Subway and Texas Roadhouse Sauce. And finally, we experienced a modest benefit in retail consumption attributed to the shift in Easter timing for holiday favorites such as Sister Schubert rolls and Marzetti dips. Surcona's retail scanner data for the quarter showed Chick-fil-A sauces up 8.3% to $42.8 million, and Olive Garden Dressings up 7.5% to $41.3 million.

Dave Demski: First we successfully invested in promotional activity to drive trial and household penetration across a range of our brands.

Dave Demski: Second our consumer relevant licensed brands continued to deliver strong consumption behind notable gains, particularly dressings and sauces.

David A. Ciesinski: Buffalo Wild Wing sauces were down 2.6% to $26.1 million, but compared to a strong quarter last year when sales increased 47.9%. New York Bakery garlic bread was up 5.8% to $94.7 million, resulting in a category-leading market share of 44.3%. Sister Schubert's brand was up 13% to $35 million and extended its leading share to 55.5% in the frozen general category. And finally, we were pleased to share that Chick-fil-A refrigerated salad dressings, which we launched nationally last May, continue to perform well, with Circona's data showing sales of $10.8 million and a 7.9% share of the category.

Dave Demski: Olive Garden dressings. In addition to new contributions from the launches of subway and Texas Roadhouse sources.

Dave Demski: And finally, we experienced a modest benefit in retail consumption attributed to the shift in Easter timing for holiday favorites, such as sister Schubert Rolls Mr's at Egypt.

Dave Demski: Sir Connors retail scanner data for the quarter showed chick fillet sources up eight 3% to $42 8 million olive.

Dave Demski: Olive garden dressings up seven 5% to $41 3 million.

Dave Demski: Hello, Wild wings sauces were down two 6% to $26 1 million compared to a strong quarter last year when sales increased 47, 9%.

Dave Demski: New York Bakery, garlic bread was up five 8% to $94 $7 million, resulting in a category leading market share of 44, 3%.

Dave Demski: Sister, Schubert's brand was up 13% to $35 million and extended its leading share to 55, 5% and the frozen general category and finally, we were pleased to share that Chick Fil, a refrigerated salad dressings, which we launched nationally last may continue to perform well with <unk> data showing.

Dave Demski: Sales of $10 $8 million and a seven 9% share of the category when combined with the sales of our <unk> brand salad dressings, our refrigerated dressing market share has grown over five percentage points to our category, leading 28, 7%.

David A. Ciesinski: When combined with the sales of our Marzetti brand salad dressings, our refrigerated dressing market share has grown over 5 percentage points to a category leading 28.7%. In the food service segment, net sales growth of 2.6 percent was led higher by demand from several of our national chain restaurant accounts and volume gains for our branded food service products. Food service sales volume measured in pound shift increased 3.9%.

Dave Demski: In the Foodservice segment net sales growth of two 6% was led higher by demand from several of our national chain restaurant accounts and volume gains for our branded foodservice products.

Dave Demski: Foodservice sales volume measured in pounds shipped increased three 9%.

David A. Ciesinski: As anticipated, the food service segment net sales growth was adversely impacted by pass-through price decreases during the quarter due to commodity cost deflation. However, during Q3, we were pleased to deliver a record gross profit of $104.5 million and a gross margin increase of 190 basis points versus last year. This increase was driven by favorability in our Pricing Net of Commodities, or PNOC, following two years of unprecedented inflation, as well as the beneficial impacts of our cost-saving initiatives and volume growth.

Dave Demski: As anticipated the foodservice segment net sales growth was adversely impacted by pass through price decreases during the quarter due to commodity cost deflation.

Dave Demski: During Q3, we were pleased to deliver record gross profit of $104 5 million and a gross margin increase of 190 basis points versus last year. This.

Dave Demski: This increase was driven by favorability in our pricing net of commodities, our Penang following two years of unprecedented inflation as well as the beneficial impacts of our cost saving initiatives and volume growth.

David A. Ciesinski: Our focus on supply chain productivity, value engineering, and revenue management all remain core elements to further improve our financial performance. Before I turn it over to Tom, I would like to share a few additional comments regarding Lancaster Colony's recent decision to exit our perimeter-of-the-store bakery lines, specifically Flat Out and Angelic Bakehouse. Both brands were typically sold in the deli section of the grocery store.

Dave Demski: Our focus on supply chain productivity value engineering and revenue management, all remain core elements to further improve our financial performance.

David A. Ciesinski: Unfortunately, due to a lack of scale and direct-to-store distribution capabilities, we were not able to achieve the required operational or financial performance for these product lines, and subsequent efforts to sell these product lines were unsuccessful. I can assure you this was a very difficult decision, with 80 of our employees impacted by the closures of our flat-out facility in Saline, Michigan, and the Angelic Bakehouse facility in Cudahy, Wisconsin. Since the announcement of the plant closures on March 12th, we've provided financial assistance and outplacement support for the impacted employees.

Speaker Change: Before I turn it over to Tom I would like to share a few additional comments regarding Lancaster colony's recent decision to exit our perimeter of the store bakery lines, specifically flat out and angelic bakehouse.

Speaker Change: Both brands were typically sold in the Deli section of the grocery store.

Speaker Change: Unfortunately, due to a lack of scale and direct to store distribution capabilities, we were not able to achieve the required operational or financial performance for these product lines.

Speaker Change: And subsequent efforts to sell these product lines were unsuccessful.

Speaker Change: Can assure you. This was a very difficult decision with 80 of our employees impacted by the closures of our flat out facility in saline, Michigan and the angelic bakehouse facility in Cudahy, Wisconsin.

Speaker Change: Since the announcement of the plant closures on March 12, we have provided financial assistance and outplacement support for the impacted employees.

David A. Ciesinski: I extend my sincere thanks to all of them for their dedication and commitment to our business during their time with us. With our exit from these product lines now complete, we intend to direct even greater focus towards categories where we believe we have strategic scale, such as dressings and sauces, and focus scale, such as Broson Bakery. I'll now turn the call over to Tom Pigott, our CFO, for his commentary on our third quarter results.

Speaker Change: I extend my sincere thanks to all of them for their dedication and commitment to our business during their time with us.

Speaker Change: With our exit from these product lines now complete we intend to direct even greater focus towards the categories, where we believe we have strategic scale, such as dressings, and sauces and focused scale such as frozen bakery I'll now turn the call over to Tom Pigott, our CFO for his commentary on our third quarter results.

Thomas K. Pigott: Thanks, Dave. This quarter, the company was able to achieve top-line growth, improve gross margin performance, and higher operating income despite the impacts of the product line discontinuations that Dave mentioned. The net sales and gross profit results set fiscal third quarter records. Third quarter consolidated net sales increased by 1.4% to $471.4 million. Decomposing the revenue performance, approximately 2.9 percentage points was driven by volume mix. This growth was partially offset by deflationary pricing in our food service segment and promotional trade spending investments in our retail segment. These reductions in revenue were funded through commodity input cost favorability.

Thomas K. Pigott: Consolidated gross profit increased by $10.3 million, or 10.9%, versus the prior year quarter to $104.5 million. Gross margins expanded by 190 basis points to 22.2%. Gross profit growth was primarily driven by favorable PNOC performance, the company's cost-savings initiatives, and volume growth. However, these drivers were partially offset by a $2.6 million inventory write-down recorded in our Cost of Goods Sold resulting from our decision to exit the flat-out and angelic product line. Commodity costs were deflationary versus a prior year, but remained elevated versus historical levels. Selling general and administrative expenses decreased 11.8% or $7.6 million to $57.2 million. The decrease reflects reduced expenditures for Project Ascent, our ERP initiative. Costs related to the project continued to wind down, totaling $1.9 million in the current year quarter versus $7.6 million in the prior year quarter.

Speaker Change: <unk>.

Speaker Change: Tom.

Thomas K. Pigott: In addition, we have lower legal expenditures this quarter versus a higher level in the prior year. Additionally, as Dave mentioned, the company chose to exit the flat-out and angelic product lines during the quarter. As a result, we recorded restructuring impairment charges of $12.1 million dollars related to these exits, as well as $2.6 million write-down of inventories recorded in our cost of sales. The restructuring impairment charges, which consisted of impairment charges for fixed assets and intangible assets, one-time termination benefits, and other closing costs, were not allocated to our two reportable segments due to their unusual nature, whereas the $2.6 million write-down of inventories was recorded The non-cash portion of these charges totaled $10.7 million.

Thomas K. Pigott: Thanks, Dave this quarter the company was able to achieve top line growth improved gross margin performance and higher operating income despite the impacts of the product line discontinuation that Dave mentioned.

Thomas K. Pigott: The net sales and gross profit results set fiscal third quarter Records.

Thomas K. Pigott: The Flat Out and Angelic product lines combined reported $15.5 million in net sales through the first three quarters of the year and did not have a significant impact on profitability. Consolidated operating income increased $5.7 million, or 19.5%, due to the gross profit improvement and the SG&A reduction, partially offset by the exit costs I previously mentioned, which totaled $14.7 million. Our tax rate for the quarter was 23.2%. We estimate our fiscal Q4 tax rate to be 23%. Third quarter diluted earnings per share increased 14 cents, or 15.7%, to $1.03.

Thomas K. Pigott: Third quarter consolidated net sales increased by one 4% to $471 4 million.

Thomas K. Pigott: The exit costs drove a $0.41 decline in EPS, $0.34 of which was charged for restructuring impairment, and the remaining $0.07 was charged to cost of goods sold. The reduction in project ascent costs drove a $0.16 increase in EPS. The remaining $0.39 of EPS growth was driven by the underlying performance of the business, with regard to capital expenditures. Our year-to-date payments for property additions totaled $52 million.

Speaker Change: Decomposing the revenue performance approximately two nine percentage points was driven by volume mix. This growth was partially offset by deflationary pricing in our foodservice segment and promotional trade spending investments in our retail segments.

Speaker Change: These reductions in revenue, we're funded through commodity input costs favorability.

Speaker Change: Consolidated gross profit increased by $10 3 million or 10, 9% versus the prior year quarter to $104 $5 million gross margins expanded by 190 basis points to 22, 2% the.

Speaker Change: The gross profit growth was primarily driven by favorable <unk> performance, the company's cost savings initiatives and volume growth.

Speaker Change: These drivers were partially offset by a $2 6 million inventory write down recorded in our cost of goods sold resulting from our decision to exit the flat out and <unk> product lines.

Speaker Change: Commodity costs were deflationary versus the prior year, but remained elevated versus historical levels.

Speaker Change: Selling general and administrative expenses decreased 11, 8% or $7 6 million to $57 2 million.

Speaker Change: The decrease reflects reduced expenditures for project ascent, our ERP initiative.

Speaker Change: Costs related to the project continued to wind down totaling $1 $9 million in the current year quarter versus seven 6 million in the prior year quarter.

Speaker Change: In addition, we had lower legal expenditures this quarter versus a heightened level in the prior year quarter.

Speaker Change: As Dave mentioned the company chose to exit the plant out in an jelic product lines during the quarter. As a result, we recorded restructuring and impairment charges of $12 $1 million related to these exits as well as the $2 $6 million write down of inventories recorded in our cost of sales.

Speaker Change: The restructuring and impairment charges, which consisted of impairment charges for fixed assets and intangible assets onetime termination benefits and other closing costs were not allocated to our two reportable segments due to the unusual nature, whereas the $2 $6 million write down of inventories was.

Speaker Change: We recorded in our retail segment.

Speaker Change: The noncash portion of these charges totaled $10 7 million.

Speaker Change: The flat out in Jelic product lines combined reported $15 $5 million net sales through the first three quarters of the year and did not have a significant impact on profitability.

Speaker Change: Consolidated operating income increased $5 7 million or 19, 5% due to the gross profit improvement in the SG&A reduction, partially offset by the exit costs I previously mentioned, which totaled $14 7 million.

Speaker Change: Our tax rate for the quarter was 23, 2%, we estimate our fiscal Q4 tax rate to be 23%.

Speaker Change: Third quarter diluted earnings per share increased 14, or 15, 7% to $1 <unk>.

Speaker Change: The exit costs drove a 41.

Speaker Change: Decline in EPS 34 of which was charged to restructuring impairment and the remaining seven was charged to cost of goods sold the.

Speaker Change: The reduction in project ascent costs drove a 16% increase in EPS. The remaining 39 of EPS growth was driven by the underlying performance of the business.

Speaker Change: With regard to capital expenditures, our year to date payments for property additions totaled $52 million for fiscal 'twenty for our forecasted total capital expenditures are estimated to be approximately $65 million.

Thomas K. Pigott: For fiscal 24, our forecasted total capital expenditures are estimated to be approximately $65 million. This forecast reflects a decline versus the previous year's spending, with the horse cave expansion now complete. In addition to investing in our business, we also return funds to shareholders. Our quarterly cash dividend of $0.90 per share paid on March 29th represented a 6% increase from the prior year's amount. Our enduring streak of annual dividend increases stands at 61 years. Net cash provided by operating activities for the third quarter was $75.9 million, a $32.2 million increase versus the prior year quarter.

Speaker Change: This forecast reflects a decline versus the previous year spending with the horse cave expansion now complete.

Speaker Change: In addition to investing in our business. We also returned funds to shareholders. Our quarterly cash dividend of <unk> 90 per share paid on March 29th represented a 6% increase from the prior year's amount.

Speaker Change: Our enduring streak of annual dividend increases stands at 61 years.

Speaker Change: Net cash provided by operating activities for the third quarter was $75 9 million or $32 $2 million increase versus the prior year quarter.

Thomas K. Pigott: Our financial position remains strong with a debt-free balance sheet and $164.8 million in cash. So, to wrap up my commentary, our third quarter results reflected record top-line gross profit performance. Operating income also grew nicely, despite the charges I mentioned, and we took action to streamline our product offerings to provide more focus for future growth. I'll now turn it back over to Dave for his closing remarks. Thank you.

Speaker Change: Our financial position remains strong with a debt free balance sheet and 164.8.

Speaker Change: $8 million in cash.

Speaker Change: So to wrap up my commentary our third quarter results reflect the record top line and gross profit performance.

Speaker Change: Operating income also grew nicely. Despite the charges I mentioned and we took action to streamline our product offerings to provide more focus for future growth I'll now turn it back over to Dave for his closing remarks. Thank you.

David A. Ciesinski: As we look ahead, Lancaster Colony will continue to leverage the combined strength of our team, our operating strategy, and our balance sheet in support of three simple pillars of our global plan: one, accelerate core business growth, simplify our supply chain to reduce our costs and grow our margins, and three, expand our core with focused M&A and strategic licensing. Looking ahead to our fiscal fourth quarter, we project retail net sales will continue to benefit from our expanding licensing program, including incremental growth from the recent additions of Subway and Texas Roadhouse Sauce. In the food service segment, we expect continued volume growth from select QSR customers and our branded food service products. Deflationary pricing is projected to remain a headwind for food service segment net sales.

Dave: Thanks, Tom as we look ahead Lancaster colony will continue to leverage the combined strength of our team our operating strategy and our balance sheet in support of three simple pillars of our growth plan.

Dave: To one accelerate core business growth.

Dave: <unk> to simplify our supply chain to reduce our cost and grow our margins.

Dave: And three to expand our core with focused M&A and strategic licensing.

Dave: Looking ahead to our fiscal fourth quarter, we project retail net sales will continue to benefit from our expanding licensing program, including incremental growth from the recent additions of subway and Texas Roadhouse sources.

Dave: In the Foodservice segment, we expect continued volume growth from select <unk>, our customers and our branded foodservice products.

Dave: Deflationary pricing is projected to remain a headwind for our foodservice segment net sales.

Operator: With respect to our gross profit, we anticipate reduced PNOC favorability in fiscal Q4 when compared sequentially to Q3, as commodity deflation becomes less pronounced. Gross profit will continue to benefit from our ongoing cost savings program. In closing, I would like to extend my sincere thanks to the entire Lancaster Colony team for their ongoing commitment and contributions to our improved operational and financial performance this past quarter. This concludes our prepared remarks for today, and we'd be happy to answer any questions you might have. Thank you. Ladies and gentlemen, as a reminder to ask a question, please press star 11 on your telephone and then wait to hear your name announced. To withdraw your question, please press star 11 again.

Dave: With respect to our gross profit, we anticipate reduced peanut favorability in fiscal Q4, when compared sequentially to Q3 as commodity deflation becomes less pronounced gross profit will continue to benefit from our ongoing cost savings program.

Speaker Change: In closing I would like to extend my sincere thanks to the entire Lancaster colony team for their ongoing commitment and contributions to our improved operational and financial performance. This past quarter. This concludes our prepared remarks for today and we'd be happy to answer any questions.

Dave: You might have.

Speaker Change: Thank you.

Speaker Change: Ladies and gentlemen, as a reminder to ask a question. Please press star one on your telephone and then wait to hear your name announced.

Dave: To withdraw your question. Please press star one again please.

Operator: Please stand by while we compile the Q&A roster. Our first question comes from the line of Brian Holland with DA Davidson. Your line is open. Yeah, thanks. Good morning. Dave, I typically answer in the fresh release.

Dave: Please standby, while we compile the Q&A roster.

Dave: Yes.

Brian Patrick Holland: Typically, in the press release, you make reference to, you know, kind of below the top line, whether that's, and the favorability there, or just commodity cost inflation. So forgive me if I missed that somewhere, but if not, maybe just an update on kind of where you see that going into 4Q and maybe more broadly the balance of calendar year 24. Okay, so I want to make sure I understand your question, Brian. Are you asking just for our view on PNOP through Q4 and then the remainder of the calendar year? Yes, yes.

Dave: Our first question comes from the line of Brian Holland with D. A Davidson your line is open.

Brian Patrick Holland: Yes, thanks, good morning.

Dave: Dave.

Dave: Our press release.

Brian Patrick Holland: Typically in the press release, you make reference to.

Brian Patrick Holland: Kind of below the top line.

Brian Patrick Holland: Whether that's P knock in the favorability there or just commodity cost inflation. So forgive me if I missed that somewhere but if not maybe just an update on kind of where you see that going into <unk>.

Brian Patrick Holland: Maybe more broadly the balance of calendar year 'twenty four.

Speaker Change: Okay. So I want to make sure I understand your question. Brian are you asking just for our view on Peanuts through Q4, and then the remainder of the calendar year.

Speaker Change: Yes, yes.

David A. Ciesinski: Yeah, so as you noticed, in the most recent quarter, PNOC was an important contributor in Q3, and we expect PNOC to be an important contributor into Q4, but it's ultimately going to be diminishing as we're lapping more and more of those price increases and we're seeing commodities flatten out. Tom, I don't know if you want to provide- Yeah, no, I think that, so Brian, this quarter we saw some nice deflation as we get into Q4. We don't expect as much PNOC favorability.

Brian Patrick Holland: Yeah, So as you noticed in the.

Brian Patrick Holland: Most recent quarter <unk> was an important contributor in Q3, and we expect <unk> to be a contributor into Q4, but it's ultimately going to be diminishing as we're lapping more and more of those price increases and we're seeing commodities flatten out Tom if you want to provide you know that beyond that I think I think that so Brian or.

Brian Patrick Holland: This quarter, we saw some nice deflation as you get into Q4, we don't expect as much peanut favorability.

Thomas K. Pigott: That said, we do expect nice contributions from our cost savings initiatives, which is also driving the margin growth you saw in the quarter, and we expect that to continue to help us drive margin as we get out into the future. Okay, thanks, that's helpful. And then...

Speaker Change: That said.

Brian Patrick Holland: We do expect nice contributions from our cost savings initiatives, which is also driving the margin growth you saw in the quarter and we expect that to be continue to help us drive margin as we get out into the future.

Speaker Change: Okay. Thanks, that's helpful and then.

Brian Patrick Holland: It may be skipping right into kind of a bigger picture question, but, you know, if I pair, you know, the perimeter bakery exit that you disclosed this morning, and you're coming out of this period of heavy capital investment, I mean..., and we talk about refocusing, you know, reallocating resources, and others elsewhere. Maybe an update on kind of what the pipeline looks like from a standpoint, you know, I guess, you know, I guess one thing that I would, which I understand you can't announce beforehand, but just kind of curious, that's my takeaway, so I don't know if that's something you want to throw cold water on, that it's not possibly related, or maybe just a sense of what the M&A backdrop and pipeline look So maybe, Brian, I appreciate that question. I'll start by just providing a little bit more information about the decision regarding Angelic Bakehouse and Flat Out.

Speaker Change: Maybe skipping rate into kind of a bigger picture question, but if I pair.

Speaker Change: The Premier bakery exit that you disclosed this morning.

Speaker Change: And Youre coming out of this period of heavy capital investment I mean.

Speaker Change: If we talk about refocusing reallocating resources increased focused elsewhere.

Speaker Change: No.

Speaker Change: Maybe update on kind of what the pipeline looks like from an M&A standpoint.

Speaker Change: I get to I guess, one thing that I would sort of take from this.

Speaker Change: Clearing the deck to do something.

Speaker Change: Which I understand you can't announce beforehand, but we're just kind of curious that's my takeaway. So I don't know if thats something you want to throw cold water on them.

Speaker Change: Possibly related or or maybe just a sense of what the M&A backdrop and pipeline look like for you all in what is obviously a challenging environment for food right now.

Speaker Change: Yeah, So maybe Brian I appreciate that question and I'll start by just providing a little bit more texture about the decision regarding angelic bakehouse and flat out. So those two businesses were purchased in 2015, and 2016, respectively predicated on assumptions of growth in the perimeter of store and the reality is.

David A. Ciesinski: So those two businesses were purchased in 2015 and 2016, respectively, predicated on assumptions of growth in the perimeter of the store. But the reality is, as we worked our way through those businesses, what we found is that, one, they lacked scale, and two, we lacked the capabilities that we believe you really need to win in that part of the store, which is direct-to-store distribution capabilities. And, you know, as it sort of played out from period to period, in spite of our very best efforts, you know, one day you're on display exactly where you're supposed to be, and it looks awesome, and the next day some of your items are near the cat litter.

Speaker Change: As we worked our way through those businesses. What we found is that one they lacked scale and two we lacked the capabilities that we believe you really need to win in that part of the store, which is direct to store distribution capabilities and sort of played out from period to period in spite of our very best efforts one day.

Speaker Change: You're on display exactly where you are supposed to be and it looks awesome and the next day. Some of your items are near the cat litter. So as we looked at those businesses versus a lot of or others. For example that are more tightly plan to grant in frozen or in dry grocery or even in produce.

David A. Ciesinski: So, as we looked at those businesses versus a lot of our others, for example, that are more tightly planogrammed in frozen or dry grocery, or even in produce, the combination of the fact that they lacked the right scale and we didn't have the right capabilities just made it a really tough situation.

Speaker Change: The combination of the fact that they lack the right scale, we didn't have the right capabilities just made it a really tough situation and our view was discretion is the better part of valor, we've given it a good try lets back away from this and let's move on and really focus on our core what this wasn't was a grand review of our whole portfolio as much as it was us.

David A. Ciesinski: And our view was discretion is the better part of valor. We've given it a good try. Let's back away from this, and let's move on and really focus on our core. What this wasn't was a grand review of our whole portfolio, as much as it was us just looking at these two businesses that we liked a lot, but we just couldn't get to work. And we moved on.

Speaker Change: Just looking at these two businesses that we liked a lot, but we just couldnt get to work.

Speaker Change: And we moved on so as far as our view on M&A, maybe I'll turn it over to Tom Tom If you want to talk about where we intend to focus on a go forward basis, absolutely So Brian I think over.

Thomas K. Pigott: So as far as our view on M&A, maybe I'll turn it over to Tom. Tom, if you want to talk about where we intend to focus on a go-forward basis, absolutely.

Thomas K. Pigott: So Brian, I think over the last few years, we've evolved our M&A strategy to really focus in on our core competencies in dressings and sauces. So certainly, we feel like we've got good culinary expertise in that space, really good manufacturing with the Horse Cave expansion, and then a strong retail selling arm to enable us to really do better in that space through M&A, should the right opportunities come to us.

Thomas K. Pigott: Over the last few years, we've evolved our M&A strategy to really focusing on our core competencies in dressings and sauces. So certainly.

Thomas K. Pigott: We feel like we've got good culinary expertise in that space really good manufacturing with the horse cave expansion and then a strong retail selling arm to enable us to really.

Thomas K. Pigott: To do better in that space on M&A should the right opportunities to come to US. In addition from a deployment of capital we continue to look at cost savings initiatives.

Thomas K. Pigott: In addition, from a deployment of capital standpoint, we continue to look at cost savings initiatives, things that can reduce our reliance on labor, as well as opportunistically, how can we continue to support the growth algorithm? With Horse Cave behind us, we're starting to look at kind of the next phase of expansion, and could there be potential brownfield sites or other opportunities for us to support continued growth, providing good returns to shareholders. Great, I appreciate all that color.

Thomas K. Pigott: Things that can reduce our reliance on labor as well as Opportunistically. How can we continue to support the growth algorithm with horse cave behind US we're starting to look at kind of the next phase of expansion and could there be potential brownfield sites or other opportunities for us to support.

Thomas K. Pigott: Continued growth providing good returns to shareholders.

Speaker Change: Great I appreciate all that color I'll leave it there for now thank you.

Brian Patrick Holland: I'll leave it there for now. Okay, thank you, Brian. Please stand by for our next question. Our next question comes from the line of Alton Stump with Luke Capital. Your line is open.

Speaker Change: Okay. Thank you Brian.

Speaker Change: Please standby for our next question.

Speaker Change: Our next question comes from the line of Allison <unk> with loop capital. Your line is open.

Operator: Thank you, you know, good morning. Thanks for taking my questions. I guess the first thing I want to ask him, I apologize if I missed his time, but did you mention your overall basket as far as commodities is concerned, how much they were down during a quarter? Yeah, they were, I didn't mention it, but they were down in the mid to high single digits on a percentage basis.

Allison: Great. Thank you.

Allison: Good morning. Thanks.

Allison: Thanks for taking my questions I guess, the first I wanted to ask and I apologize if I missed this topic could you mention what your overall basket as far as commodities, how much they were down during the quarter.

Allison: Yes, they were I didnt mention it but they were down in the mid to high single digits on a percentage basis.

Alton Kemp Stump: Okay, great, and then, you know, um... I guess, I just kind of look ahead to, you know, the fourth quarter or, you know, even next year. You know, I mean, any kind of ballpark range as far as, you know, where you think that's real ball combined basketball will go. Yeah, yeah. So, right now in Q4, we don't, we do expect it to be deflationary, but not as deflationary as it was in Q3.

Speaker Change: Okay great.

Speaker Change:

Allison: I guess, that's kind of look at the.

Allison: Fourth quarter or even into next year.

Allison: I mean, any kind of ballpark range as far as where you think that your overall commodity basket will go.

Allison: So so right now in Q4, we don't we do expect it to be deflationary.

Allison: But not as deflationary as it was in Q3 so.

Thomas K. Pigott: So, as we mentioned, we don't expect as big a PNOC contribution in Q4. That said, into the future, we continue to focus on driving margins through our productivity initiatives, and we feel good about the pipeline there. From a fiscal 25 commodity outlook, we're right now looking at a flattish profile.

Allison: As we mentioned, we don't expect as big a peanut contribution.

Allison: In Q4 that said into the future.

Allison: We continue to focus on driving margins through our productivity initiatives and we feel good about the pipeline there from.

Allison: From a fiscal 'twenty five commodity outlook, we're right now looking at a flattish profile.

Alton Kemp Stump: Okay, great. Thank you. And then, um, you know, I just want to ask you about the Horseshoe facility, you know, plan. Obviously, it's been up and running now for the last, you know, eight, nine months, you know, so now that you are further along in that process, yeah, how are things going there? You know, are you up to full operational capability yet? Or just, you know, kind of what your learning curve has been over the last couple quarters since opening that facility? Yeah. So, Alton, really, two things.

Speaker Change: Okay, great. Thank you and then.

Speaker Change: I just wanted to ask you about the horse cave facility.

Speaker Change: Obviously, it's been up and running now.

Speaker Change: Here for the last eight nine months.

Speaker Change: So that now that you're further along.

Speaker Change: And that process, yet how are things going there are you up to full operational capabilities, yet or just kind of what has been your learning curve over the last couple of quarters.

Speaker Change: Since opening that facility.

David A. Ciesinski: If you go back to a little more than a year ago, not only did we stand up the facility, but we also installed SAP, as you remember. So, we really put that facility, our flagship, through an intense period of change, and we're pleased to report that the factory is running very well, that we're seeing the volumes run through there that we would like to see. We're seeing very high engagement from employees.

Speaker Change: Yeah.

Speaker Change: So all in really two things if you go back to.

Speaker Change: Little more than a year ago, not only did we stand up the facility, but we also installed SAP as you remember so we really put that that facility our flagship through an intense period of change and we're pleased to report that the factory is running very well.

Speaker Change: That we're seeing the volumes run through there that we would like to see we're seeing very high engagement from the employees.

David A. Ciesinski: You know, it continues to be a big area of focus from our supply chain leadership team, just because of the magnitude of the promise that that facility affords us. In some of my earlier comments during the script, I mentioned the idea that by exiting the perimeter of the store, it allowed us to focus on a couple of areas. One, our center-of-the-store bakery business, where we have focused scale, particularly around dinner rolls and things like garlic toast, but also focus on areas where we believe we have strategic scale, where I would put our capabilities, you know, our ability to source, manufacture, and ship against many of the very biggest players in CPG. So we can't compete against them across the board, obviously.

Speaker Change: It continues to be a big area of focus from our supply chain leadership team just because of the magnitude of the promise that that facility affords us.

Speaker Change: And some of my earlier comments during the script I mentioned the idea that by exiting the perimeter of the store it allowed us to focus in a couple of areas. One are centered in store bakery business, where we have focused scale, particularly around dinner rolls.

Speaker Change: And things like garlic toast.

Speaker Change: But also focus on areas, where we believe we have strategic scale, where I would put our capabilities our ability to source and manufacture a ship against many of the very biggest players in CPG. So we can't compete against them across the board, obviously, but when you talk about.

David A. Ciesinski: But when you talk about those categories, dressings, and sauces, which for lots of reasons we could talk about maybe a little bit later in the call, we believe are really relevant today and into the future. That plant is really a cornerstone of our ability to deliver on that strategic scale, and it's coming along very much in line with our expectations. Great. Thank you so much, Tom. I'll hop back in the queue.

Speaker Change: Those categories dressings, and sauces, which for lots of reasons, we can talk about maybe a little bit later in the call. We believe are really relevant today and into the future that plant is really a cornerstone of our ability to deliver on that strategic scale and its coming along very well.

Speaker Change: Much in line with our expectations.

Speaker Change: Great. Thank you so much Tom I'll hop back in the queue.

Alton Kemp Stump: Thank you. Thank you all. Our next question comes from the line of Connor Rattigan with Consumer Edge. Your line is open. Hey, guys. Morning. Morning. Good morning, Connor.

Speaker Change: Thank you. Thank you.

Speaker Change: These standby for our next question.

Speaker Change: Our next question comes from the line of Connor <unk> with consumer edge. Your line is open.

Connor: Hey, guys good morning.

Connor: Good morning, good morning Connor.

Operator: Yes, so I guess I'm curious what you're seeing as it relates to food service traffic. We've heard commentary from peers and, you know, even restaurant reporters. It just seems like traffic is really down across the board. I guess, are you guys seeing the same thing in your business? And if not, I suppose that may be driven by your Chick-fil-A exposure. And if you are, I guess what gives you the confidence?

Connor: Yes so.

Connor: Im curious what youre seeing as it relates to foodservice traffic. So we've heard commentary out of peers and even the restaurant law quarters.

Operator: Seems like traffic was down across the board.

Speaker Change: I guess are you guys seeing the same thing in your business and if no disposal that may be driven by OE exposure and if you are I guess what gives you this awesome.

Connor Rattigan: We continue to deliver that volume growth and food service over the years. Well, I'm glad you asked this, Connor. It's an important question.

Connor: Continuing to deliver that volume growth in foodservice over the coming quarters.

Speaker Change: I'm glad you asked this corner, it's an important question. So we subscribe to a range of different syndicated data sources and when you look at the whole industry broadly.

David A. Ciesinski: So, you know, we subscribe to a range of different syndicated data sources. And when you look at the whole industry broadly, and you look at it 52 weeks, 12 weeks, 4 weeks, you can see a very modest slowdown. And it's across the board. You see full-service restaurants have pulled back modestly.

Speaker Change: And you look at it 52 weeks 12 weeks four weeks you can see a very modest slowdown.

David A. Ciesinski: And it's across the board you see full service restaurants have pulled back modestly <unk> has pulled back modestly.

David A. Ciesinski: QSR has pulled back modestly. You know, these are single-digit pullbacks that we're looking at here. And it's really impacting all of our customers. Everybody in the mix is being impacted by this. You kind of step back and say, "What is it that's driving this?"

Speaker Change: These are single digit pullbacks that we're looking at here and its really impacting all of our our customers everybody in the mix has been impacted by this kind of step back and you say what is it that's driving this our view is that consumers are continuing to work their way through a period of transition not an inflection but appear to.

David A. Ciesinski: Our view is that, you know, consumers are continuing to work their way through a period of transition, not an inflection, but a period of transition, driven by the combined effects of higher interest rates and, importantly, inflation, which is continuing to bite. And whether you're talking retail or food service, what really happens in these times is that consumers are really, they go off autopilot. Instead of just going to the store and grabbing what they've always bought because they've always bought that, or going into a restaurant because that's the place that they've always gone, they start to think about these choices.

Speaker Change: Transition driven by the combined effects of higher interest rates, but importantly, inflation, which is continuing to bite and whether you are talking retail or foodservice, what really happens in these times as consumers are really they go off auto pilot instead of just going to the store and grabbing what they've always thought.

David A. Ciesinski: Because they've always bought that are pulling into the restaurant because thats the place that they have always gone.

Speaker Change: They start to think about these choices and consequently, sometimes they might buy and sometimes they might consider buying somebody else. So if you look at it very very broadly we are seeing that modest single digit slow down across the portfolio foods, a full service impacted more than quick service, but across the board now is <unk>.

David A. Ciesinski: And consequently, sometimes they might buy, and sometimes they might consider buying somebody else. So if you look at it very, very broadly, we are seeing that modest single-digit slowdown across the portfolio. Food's full service impacted more than quick service but across the board. Now, as far as our view, what we've seen in these times is that our business has really two hedges built in. One is, as consumers become concerned about away-from-home dining and they eat at home, it typically goes to the benefit of our portfolio.

David A. Ciesinski: Far as our view what we've seen in these times as our business has really two hedges built in one is as consumers become concerned about away from home dining and they eat at home are typically a newer to the benefit of our portfolio as we look at what's happening away from home, though importantly, as traffic starts to model.

David A. Ciesinski: As we look at what's happening away from home, though, importantly, As traffic starts to moderate at any one of our concepts, or really any operator's concept, period, they typically will back off and say, "What do we need to do to drive traffic back into these stores?" And it really creates an intense period of innovation for a lot of these operators.

Speaker Change: Right at any one of our concepts or really any operator's concept period.

David A. Ciesinski: They typically will back off and say what do we need to do to drive traffic back into the stores and it really creates an intense period of innovation for a lot of these operators and if past is prologue, we get those calls and we work with them on signature items signature sauces that they can advertise to drive traffic back.

David A. Ciesinski: And if it passes prologue, we get those calls, and we work with them on signature items, signature sauces that they can advertise to drive traffic back into the store. What I would share with you, Connor, is that we're already starting to see that activity happen, and we're already engaged in those sorts of discussions with our operators. So, you know, what I would tell you about the business is that we believe that we're always going to be positioned to have the chance to perform in the top quartile of our peer group, and we continue to believe that that was true, you know, a year and a half ago, and we believe that it's true going forward. Thanks for the color there.

David A. Ciesinski: Into the store, what I would share with you Conor is that we're already starting to see that activity.

David A. Ciesinski: Happen and we're already engaged in those sorts of discussions with our operators. So what I would tell you our view on the business is we believe that we're always going to be positioned to have the chance to perform in the top quartile of our peer group and we continue to believe that that's true.

Speaker Change: A year and a half ago and we believe that it's it's true going forward.

Connor Rattigan: And then I guess, um, changing gears to pricing. Um, so it looks like pricing was down roughly the same in food service and retail. So I understand food service is primarily past year pricing and that it's expected to be down year over year, but I guess could you maybe give us some color on maybe what's going on in retail to drive pricing down so much? Because I mean, in the data that we see, right, it looks like you're dialing up, you know, too, too much promotion.

Speaker Change: Got it thanks for the color there.

Connor Rattigan: Then I guess, just changing gears to pricing.

Connor Rattigan: So it looks like pricing was down roughly the same in foodservice and retail.

Connor Rattigan: I understand and food services, primarily pass through pricing and that is expected to be down year over year, but I guess could you maybe give us some color on maybe what's going on at retail to drive pricing down so much because I mean, the data that we can see right, but youre dialing up.

Connor Rattigan: Two two months promo. So I guess, just trying to get a depth of where we should expect prices to trend in foodservice and retail.

Connor Rattigan: So I guess I'm just trying to get a sense of where we should expect prices to trend in food service and retail. Yeah, no, I'm glad you asked this question. They were down about the same amount, but it was more of a coincidence and it wasn't necessarily a plan. We didn't say, OK, we're going to back them up.

Connor Rattigan: Quarters.

Speaker Change: Yes, no I'm glad you asked this question.

Connor Rattigan: They were down about the same amount, but it was more a coincidence than it was necessarily a plan. We didn't say, okay. We're going to back them up a couple of things that we'll share with you Tom I think nicely pointed out that we are seeing favorable <unk> commodities have backed off that has given us the incremental firepower to step into the consumer part of the business the retail business.

David A. Ciesinski: A couple of things that we'll share with you, Tom. I think you've nicely pointed out that we are seeing favorable PNAC as commodities have backed off. That's given us the incremental firepower to step into the consumer part of the business, the retail business, and do a couple of things. I mentioned the fact that in these times, consumers take themselves off autopilot, and they start to look at more carefully what they're buying. In some cases, it's a price point.

David A. Ciesinski: And to do a couple of things I mentioned, the fact that in these times consumers take themselves off auto pilot and they start to look at more carefully what theyre buying in some cases, it's a price point in other cases, it might be a gap versus private label or even a promoted price points and what we're doing is using the benefit that we.

David A. Ciesinski: In other cases, it might be a gap versus private label or even a promoted price point. And what we're doing is using the benefit that we're seeing from the PNAC deflation to strategically invest back to make sure that as consumers come off autopilot and they're making these choices, we're still getting converted into the basket. So that was really one component of the spend. But the other thing is, really, as you look longer term, we have some great brands in our portfolio, both our own core brands and our licensed brands that we think have the opportunity to drive significantly more household penetration.

David A. Ciesinski: We're seeing from the peanut deflation to strategically invest back to make sure that as consumers come up auto pilot and they are making these choices, we're still getting converted into the basket. So that was really one component of the spend but the other thing is really as you look longer term, we have some great brands in our portfolio of both our own.

David A. Ciesinski: Core brands and our licensed brands that we think have the opportunity to drive significantly more household penetration. So some of the investment that we are driving this period behind a range of brands to include things like Chipotle and others were intended to help us drive household penetration because.

David A. Ciesinski: So some of the investment that we're driving this period behind a range of brands, including things like Chick-fil-A and others, was intended to help us drive household penetration because if we can get it into the basket and we can get it at home and get consumers to try it, our repeat rates on these products are extremely high. And we think it's in our strategic best interest to continue to drive that process. So really, two components of what we're doing, ultimately funded by PNAC deflation.

David A. Ciesinski: If we can get it into the basket and we can get it at home and get consumers to try it or repeat rates on these products are extremely high and we think it's in our strategic best interest to continue to drive that that process. So really two components of what we're doing ultimately funded by pinard deflation. One part is just being really sure.

David A. Ciesinski: One part is just being really shrewd about managing a price point. But the second is, while we have the opportunity, let's invest to drive that penetration because we know once we get them converted, it becomes an annuity. That makes total sense to me. Thanks for the color, as always, Dave.

David A. Ciesinski: Rude about managing our price points, but the second is while we have the opportunity, let's invest to drive that penetration because we know once we get them converted it becomes.

David A. Ciesinski: If we treat them right it becomes an annuity.

David A. Ciesinski: That makes total sense to me thanks for the color as always I appreciate it.

Connor Rattigan: I appreciate it. Of course. Thanks, Connor.

Dave: Of course, thank you please.

Operator: Please stand by for our next question, which comes from the line of Andrew Wolf with C.A.O. King.

Speaker Change: Please standby for our next question.

Operator: Our next question comes from the line of Andrew Wolf with C. L. King Your line is open.

Andrew Paul Wolf: The line is open. Hi, good morning. Morning. Follow-ups here on the subway and the Texas Roadhouse Distribution. Is that fully distributed? Was it fully distributed in the Corps? No.

Andrew Paul Wolf: Hi, good morning.

Andrew Paul Wolf: A couple <unk> morning, and good morning, Andy.

Andrew Paul Wolf: Yes.

David A. Ciesinski: Did you give us the date of distribution? No, it wasn't. We started to ship it early in the quarter, so it's still building. And is it going to get the same, similar ATV as the other licensed products? and Olive Garden. It really remains to be seen; they're different brands, they're different occasions, so it remains to be seen. So I don't know if I can give you a firm answer there in that we don't necessarily, You know, Texas Roadhouse, for example, plays in a much more narrow occasion. The steak sauce is compared to, let's say, an all-purpose sauce like some of the others that we have.

Andrew Paul Wolf: And a follow ups here on the.

David A. Ciesinski: Subway and the Texas Roadhouse.

David A. Ciesinski: Distribution.

David A. Ciesinski: Is that fully distributed was it fully distributed in the quarter.

David A. Ciesinski: Sure.

David A. Ciesinski: Was not.

David A. Ciesinski: Hey.

David A. Ciesinski: Could you give us you know it wasn't distributions we started to ship it early on in the quarter. So it's still building.

David A. Ciesinski: Okay.

David A. Ciesinski: And is it going to get the same similar HCV as the other licensed products.

David A. Ciesinski: Should play in Olive garden.

David A. Ciesinski: I mean theres two does it really remains to be.

David A. Ciesinski: Either different brands they are different occasions, so it remains to be seen.

David A. Ciesinski: So I don't know if I can give you a firm answer there and that we don't necessarily.

David A. Ciesinski: Texas Roadhouse for example plays in a much more narrow occasion steak sources compared to let's say, an all purpose us like some of the others that we have so I think that will probably impact at some level certainly the tdp's that we're able to generate behind these items, but there will be important.

David A. Ciesinski: So I think that'll probably impact at some level. Certainly, the TDPs that we're able to generate behind these items, but they'll be important. Thank you. And, you know, you mentioned Kasse a couple times.

Speaker Change: Well thank you.

David A. Ciesinski: And you mentioned cost savings a couple of times.

David A. Ciesinski: And I know in the past you've talked about value, sort of reviewing some of your... other things, you know. Strategic Procurement. Many companies, including yourselves, are focused on that. Just give us a sense of how impactful cost-saving these types of cost-saving efforts have been. And probably more importantly, what's the runway like for them going forward?

David A. Ciesinski: And I know in the past you've talked about value engineering, and just sort of reviewing some yearend.

David A. Ciesinski: Other things.

David A. Ciesinski: I think strategic procurement.

Speaker Change: Uh huh.

David A. Ciesinski: Many companies, including yourselves are focused on that.

David A. Ciesinski: Could you just give us a sense how impactful.

David A. Ciesinski: Yes.

David A. Ciesinski: Cost savings these types of cost savings efforts were.

David A. Ciesinski: Probably more importantly.

David A. Ciesinski: What's the runway like four for them going out.

Thomas K. Pigott: So Tom, maybe if you want to talk about the quarter, I can talk more broadly about the outlook and how we're thinking about it. Sure. So as we look at the margin growth we experienced in the quarter, it was fairly evenly split, maybe slightly more driven by PNOC, but the cost savings were a key driver as well. And then I think I'll let Dave talk about the forward outlook.

David A. Ciesinski: So Tom if you can maybe talk about the quarter I can talk more broadly about the outlook and how we're thinking about it sure. So as we look at the.

Thomas K. Pigott: The margin growth, we experienced in the quarter. It was it was fairly.

Tom: Fairly evenly split maybe slightly more driven by <unk>, but the cost savings were a key driver as well.

Thomas K. Pigott: And then I think I'll, let Dave talk to the forward outlook.

David A. Ciesinski: So as we look into the future, Andrew, we're focusing on a couple of areas. You know, we continue to believe that there are big opportunities around automation. You know, for those of you that have been following the stock for a while, you know that we went through a period of years where we invested behind the front of line and back of line automation in our dressing business. And we're in a season today where we're investing in the automation of our bakery business.

Dave: As we look into the future Andrew we're focusing in a couple of areas. We continue to believe there are big opportunities around automation.

David A. Ciesinski: For those of you that have been following the stock for a while.

David A. Ciesinski: Went through a period of years, where we invested behind upfront offline and backup line automation on our dressing business and we're in a season today, where we're investing in the automation of our bakery business. So thats going to be an important contributor really for the next year and probably then some.

David A. Ciesinski: So that's going to be an important contributor for the next year and probably then some. As we move beyond other areas where we believe there are opportunities, we continue to be focused on primary and secondary packaging, where we think there are opportunities to drive savings as well. And then I think leveraging the power of SAP, you know, which is, you know, fortunately, you know, sort of moving a little bit farther into the rear view mirror.

David A. Ciesinski: As we move beyond other areas, where we believe there are opportunities. We continue to be focused on primary and secondary packaging, where we think there are opportunities to drive savings as well and then I think leveraging the power of SAP.

David A. Ciesinski: Which is fortunately.

David A. Ciesinski: Moving a little bit farther into the rearview mirror, but SAP.

David A. Ciesinski: But SAP provides us with a lot of information to seek out cost savings opportunities in areas such as reducing waste and being more effective at utilizing our materials, but also looking at things like unplanned downtime and what we need to do to make sure that our plants are running more efficiently. So if you put those together, the combination of automation, the better utilization of resources, and the better utilization of labor and plants, we continue to believe that there is a multi-year opportunity for us to go after cost savings in the business. Okay, thanks. Just a quick question, Mary Mrs., did you quantify the impact of the Easter ship? It was for the quarter.

David A. Ciesinski: Affords us with a lot of information to seek out cost savings opportunities in areas, such as reducing waste and being more effective at utilizing our materials, but also looking at things like.

David A. Ciesinski: Unplanned downtime and what we need to do to make sure that our plants are running more efficiently. So if you put those together the combination of automation.

David A. Ciesinski: Utilization of resources, and the better utilization of labor and plants. We continue to believe that there is a multiyear opportunity for us.

Speaker Change: To go after cost savings in the business.

Speaker Change: Okay. Thanks, Dave.

Speaker Change: Just a quick.

Speaker Change: I have missed this did you quantify the impact.

Speaker Change: The Easter shift what it was for the quarter and I assume it's going to be a bit of a drag for the fourth quarter there.

Andrew Paul Wolf: It's going to be a bit of a drag. So, for this fiscal year, we had all the shipments in this quarter in the prior year. And I think as we look at, as you look at the consumption, some of the consumption last year was in Q4, where we got all of it in Q3 this year. So, from a shipment standpoint, we were neutral. [inaudible] Yep, as you know, it was a one-week gift, so it...

Andrew Paul Wolf: So for this fiscal.

Andrew Paul Wolf: Had.

Andrew Paul Wolf: In the prior year fiscal all of the shipments in this quarter.

Andrew Paul Wolf: And.

Andrew Paul Wolf: I think as we look as you look at the consumption. Some of the consumption last year was in Q4, where we got all of it in Q3. This year. So from a shipment shipment standpoint, we were neutral.

Andrew Paul Wolf: Okay.

Andrew Paul Wolf: Yep.

Andrew Paul Wolf: You know as a one week shift so.

Thomas K. Pigott: It just wasn't going to be that big of a difference in terms of shipments, more on the consumption side. Sure. Yeah. Okay, great.

Andrew Paul Wolf: It just wasn't going to be that big of a difference in terms of shipments or on the consumption side.

Speaker Change: Sure, yes, okay. Okay.

Thomas K. Pigott: Okay.

Speaker Change: Great. Thank you.

Speaker Change: Thank you.

Andrew Paul Wolf: Thank you. Please stand by for our next question. Our next question comes from the line of James Salera with Stevens. Your line is open. Hi guys, good morning. Thanks for taking our questions. Hey, good morning, Jeff. I wanted to drill down a little bit more on the food service volume. I think everyone is encouraged to see it go up, given the backdrop of the restaurant.

Speaker Change: Please standby for our next question.

James Ronald Salera: Our next question comes from the line of Jim <unk> with Stephens. Your line is open.

Operator: Can you just disaggregate how much of that is your exposure to, you know, best in class operators like Chick-fil-A versus maybe some share gains where you're servicing larger amounts of some of your existing customers? In a GMI, I'm trying to think how I would answer that question. Maybe I'll start by setting the context.

James Ronald Salera: Hi, guys. Good morning, Thanks for taking our question.

Speaker Change: Morning, Jim Hi, Jim.

Operator: To drill down a little bit more on the foodservice volume I think all encouraged to see it up given the backdrop with restaurants.

Operator: Can you just disaggregate how much of that is your exposure to best in class operators like Chick fillet versus maybe some share gains where you're servicing larger amounts of some of your existing customers.

Operator: Jim.

Operator: Trying to think how I'd answer that question, maybe I'll start by setting the context about 75% of our business our large national chain restaurant accounts.

James Ronald Salera: About 75% of our business is large national chain restaurant accounts, and we enjoyed growth in the period both on the branded side, which is our own products, where we are picking up share. This would be Marzetti items sold up and down the street.

James Ronald Salera: <unk>.

James Ronald Salera: We enjoyed growth in the period, both on the branded side, which is our own products, where we are picking up share. This would be March 30 items sold up and down the street as we look at what's happening on the restaurant side, what I can tell you is that.

David A. Ciesinski: As we look at what's happening on the restaurant side, what I can tell you is that we continue to believe that we have a favorable portfolio of customers that's allowing us to grow better than the average today. That's what's really driving it. As far as sort of an account-by-account basis, are we picking up share? Are we not? There really haven't been many changes there.

David A. Ciesinski: We continue to believe that we have a favorable portfolio of customers, that's allowing us to grow better than the average today, that's what's what's really driving it as far as sort of an account by account basis are we picking up share we not that really haven't been many changes there.

David A. Ciesinski: And I think, really, the bigger point that we're seeing, and that, Jim, this is an important way to think about it going forward, is that we continue to believe that chicken is having its moment. If you look at the mix of growth that's happening in QSR today, it's really focused on concepts that are selling chicken. And whether it's Chick-fil-A, which has been doing it enormously well since 1982, or any one of a number of other operators, that seems to be where the growth is.

David A. Ciesinski: And I think really the bigger point that we're seeing and then Jim. This is an important way to think about it going forward.

David A. Ciesinski: Is that we continue to believe that chicken is having its moment. If you look at the mix of growth that's happening in <unk> today, it's really focused around concepts.

David A. Ciesinski: Theyre selling chicken and whether it's chick Fil, a which has been doing it enormously well since 1982 or any one of a number of other operators that seems to be where the growth is if you sort of pull a part of you and we have the data we looked at sort of the share of pizza and burgers and chicken even.

David A. Ciesinski: If you sort of pull apart, and we have the data, we looked at sort of the share of pizza and burgers and chicken. Even if you look at 52-week, 12-week, and 4-week, chicken continues to drive share, even within the year. In one of your reports, you did a nice job of pointing out the long-term trend toward chicken. We're seeing that, even in a little bit more of a challenging environment, continuing to play out.

David A. Ciesinski: If you look 52 week 12 week and four week chicken continues to drive share even within the year. One of your reports you did a nice job of pointing out the long term trends towards chicken, we're seeing that even in a little bit more of a challenging environment continuing to play out and we believe that we see.

David A. Ciesinski: And we believe that we sit in a good spot. We have the right capabilities, and those are capabilities we want to continue to leverage with those operators so they can offer consumer-relevant items to their customers. Great, that's helpful.

David A. Ciesinski: And in a good spot we have the right capabilities and those are capabilities that we want to continue to leverage with those operators. So they can offer consumer relevant items to their customers.

Speaker Change: Great. That's helpful and then I think as it ties the.

David A. Ciesinski: And then, I think, as it ties the environment and restaurants back to the licensed sauce. Given the, let's say, heightened uncertainty around the restaurant piece of the business. Do you find that your partners or potential partners are much more receptive to either new licensing offerings or expanding their license portfolio, given the reliability of that royalty check that they get in helping diversify some of their revenue streams, given the uncertainty on the traffic side? Well, I think, I mean, as much as I'd like to tell you that was true, I don't know of...

David A. Ciesinski: The environment in restaurants back to the license SaaS business.

David A. Ciesinski: Given the let's say heightened uncertainty around the restaurant piece of the business do you find that your partners or potential partners are much more receptive to either new licensing offerings or expanding their license portfolio given the reliability of that royalty.

David A. Ciesinski: <unk> that they get and helping diversify some of their revenue streams given the uncertainty on the traffic side.

Speaker Change: Well I think I.

Speaker Change: And as much as I'd like to tell you that was true I don't know if I can necessarily say it because I think there our partners take a strategic view of decisions like this so rather than focusing on the near end pressure, they're going to take a longer term view and.

David A. Ciesinski: I can't necessarily say it, because I think that our partners take a strategic view of decisions like this. So rather than, you know, focusing on the near-end pressure, they're going to take a longer-term view and figure out, is this going to help them diversify their business and grow their revenue? And what we've seen is, pretty consistently, the answer to that is yes.

David A. Ciesinski: And figure out is this going to help them diversify their business and grow their revenue and what we've seen is pretty consistently the answer to that is yes, I can't see tell you that we've seen an uptick on that what I can tell you.

David A. Ciesinski: I can't tell you that we've seen an uptick in that. What I can tell you is, what usually happens in this season, and we've all been doing it a while here, is as traffic starts to slow down, the operators come together, and it's usually the chief marketing officer, the head of menu development, maybe the head of the concept, and others in the business, and they work together to figure out ideas, menu ideas, that they can talk about in advertising to drive traffic in stores.

David A. Ciesinski: What usually happens in this season and we've all been doing it a while here is as traffic starts to slow down the operators come together and it's usually the chief marketing officers ahead of menu development, maybe the head of the concept and others in the business and they worked together to figure out ideas menu.

David A. Ciesinski: That they can talk about in advertising to drive traffic in stores and I think importantly for us.

David A. Ciesinski: And I think, importantly for us, we're seeing that activity spin up, and we believe that it is to our benefit. We're seeing even concepts that haven't played with chicken start to talk more about chicken, like wings, on their menus. And wings, of course, need sauces.

David A. Ciesinski: We're seeing that activity spin up.

David A. Ciesinski: And we believe that are newer to our benefit we're seeing even concepts that havent played in chicken start to talk more about chicken like wings on their menu and wings of course. These sources. So as we think about sort of our overall algorithm may even our work with our licensed partners.

David A. Ciesinski: So, as we think about sort of our overall algorithm, and even our work with our licensed partners... I think the biggest driver for the food service business is going to be activity around new sauces for new menu items. Licensing, we continue to be bullish that it's a big opportunity for us. Great. Appreciate all the calls, guys. Thank you. Thank you, Jim.

David A. Ciesinski: I think the biggest driver to the foodservice business is going to be activity around new sources for new menu items lights.

David A. Ciesinski: Licensing we continue to be bullish that it's it's a big opportunity for us.

Speaker Change: Great I appreciate all the color guys I'll hop back in the queue.

Speaker Change: Thank you.

Speaker Change: Thank you Jim.

James Ronald Salera: Please stand by for our next question. Our next question comes from the line of Todd Brooks with the Benchmark Company. Your line is open. Hey, good morning, everyone.

Speaker Change: Please standby for our next question.

James Ronald Salera: Our next question comes from the line of Todd Brooks with the Benchmark Company. Your line is open.

Todd Morrison Brooks: Hey, good morning, everyone.

Operator: Hey, Todd. Morning, Todd. Morning, Todd.

Todd Morrison Brooks: Hi, Todd.

James Ronald Salera: Peter.

Todd Morrison Brooks: If, um... A couple follow-up questions. Digging in on licensing, it looks like the capability and the bandwidth to introduce multiple products and support them have expanded. I think this will be in conjunction with our views on the two recent launches, kind of three launches in a year, year and a half, bandwidth to handle further new partners as you're supporting two rollouts simultaneously now. And then the second question that I have is on the horse cave side.

Todd Morrison Brooks: Just a couple of follow up question sticking your normalized you're saying it looks like.

Todd Morrison Brooks: Kind of the capability and the bandwidth to introduce multiple products and support.

Todd Morrison Brooks: Has expanded I think it will be.

Todd Morrison Brooks: <unk> reviewed the two recent launches.

Todd Morrison Brooks: Three launches in a year year and a half.

Todd Morrison Brooks: Bandwidth to handle.

Todd Morrison Brooks: Further new partners Andrew.

Todd Morrison Brooks: Andrew supporting two Rollouts.

Todd Morrison Brooks: Multi uniquely now.

Todd Morrison Brooks: And then the second question I have is on the <unk> side, you hinted at a potential use of capital maybe be brownfield facility, you're figuring out what's next.

Todd Morrison Brooks: You hinted at a potential use of capital, maybe being a brownfield facility or figuring out what's next. Capacity-wise, with the growth that you've seen in your business, what's the remaining..., kind of time frame until Horse Cave starts to get full again from a capacity standpoint? Yeah. So, you know, Tom, do you want to talk about it, maybe if you want to first, Kate, first?

Todd Morrison Brooks: <unk> wise with the growth that you've seen in new business, which kind of the remaining.

Todd Morrison Brooks: Kind of timeframe in tools <unk> storage to get full again from a capacity standpoint.

Todd Morrison Brooks: Yeah.

Todd Morrison Brooks: So.

Todd Morrison Brooks: Tom do you want to talk about maybe a view on horse cave first yes. So so from a from a capacity standpoint.

Thomas K. Pigott: Yeah, so from a capacity standpoint, On the food service side, we're running it full out. Now, what I would tell you is that we are, what we have today, and we are going to continue to focus on improving OEE and maybe adding some manufacturing to it on the food service side. On the retail side, we still have capacity to grow bottles. So, we feel good about where we stand with Horse Cave and certainly we're focused on, you know, there's been a lot of change in Horse Cave with both the SAP implementation and the expansion, and we think we can continue to drive more production out of that facility into the future.

Thomas K. Pigott: On the foodservice side.

Thomas K. Pigott: We are running at full out now what I would tell you is that we are what we have today, we are going to continue to.

Thomas K. Pigott: Our focus on improving OE and maybe adding.

Thomas K. Pigott: Some some manufacturing to it on the foodservice side on the retail side, we still we still have capacity to grow bottles. So so we feel good about where we stand with horse cave and certainly we're focused on.

Thomas K. Pigott: There's been a lot of change in horse cave with both SAP implementation and the expansion and we think we can continue to drive more.

Thomas K. Pigott: Production out of that facility into the future.

Thomas K. Pigott: In terms of the longer term, I think it's just prudent for us to begin to think about the next phase given the tailwinds the business has. As Dave mentioned, certainly, we're in a sweet spot from a consumer standpoint, and no specific plans at this stage, but we're starting a process on that front. And Dave, if you have... Yeah.

Thomas K. Pigott: In terms of longer term.

Thomas K. Pigott: It's just prudent for us to begin to think about the next phase given the tailwind to the business has.

Thomas K. Pigott: As Dave mentioned, certainly we're in a sweet spot from from a consumer standpoint, and and no specific plans at this stage, but we are starting to starting a process on that front.

Speaker Change: I will go back and then Todd the first part of your question was.

David A. Ciesinski: No, I'll go back, and Todd, the first part of your question was, you know, how are we in terms of being able to handle multiple partners? And I would tell you that we would have the capacity to take on incremental partners and products. I mean, the nature of the Horse Cave factory is that we make lots of different sauces there.

David A. Ciesinski: How are we in terms of able to handle multiple.

David A. Ciesinski: Partners and I would tell you that we would have.

David A. Ciesinski: The capacity to take on incremental partners and products and the nature of the horse cave factories that we make lots of different sources. There. So we would certainly have the manufacturing and the sourcing capability to do that and one of the areas, where we think we're extremely strong in execution is in our sales team both in <unk>.

David A. Ciesinski: So, we would certainly have the manufacturing and the sourcing capability to do that. And you know, one of the areas where we think we're extremely strong in execution is in our sales team, both inside sales that handle price points and trade, and outside sales that are calling on customers. So, as we've added additional items and additional partners, it's really just giving us more and more scale. You know, we're at a point now where, you know, we have some of these big customers come and meet with us here in Columbus because they view us as innovators and people driving excitement in these categories.

David A. Ciesinski: <unk> sales that handles.

David A. Ciesinski: <unk> points and trade in outside sales that are calling on customers as we've added additional items in additional partners, it's really just giving us more and more scale.

David A. Ciesinski: We're at a point now where we're having some of these big customers and come and meet with US here in Columbus, because they view us as innovators and people driving excitement in these categories. So as we bring more items. It gives us more scale and more relevance with our retail partners. Our retail team has stepped up and their exit.

David A. Ciesinski: So, as we bring more items, it gives us more scale and more relevance with our retail partners; our retail team has stepped up, and they're executing well. So, Tom and I and the rest of the leadership team would feel comfortable that, hey, if we had the right partner to come in on board, we could support them and continue to focus on driving growth on our existing brands. I mean, one of the milestones that we hit in this most recent period is that Chick-fil-A sauce entered the top 10 of all SKUs in the sauce category. And when I'm talking about the top 10, I'm talking, you know, Hellman's mayonnaise is on that list.

David A. Ciesinski: <unk>, well, so I think Tom and I and the rest of the leadership team would feel comfortable that hey, if we had the right partner coming on board, we could support them and continue to focus on driving growth on.

David A. Ciesinski: On our existing brands.

David A. Ciesinski: One of the milestones that we hit it.

David A. Ciesinski: This most recent period as that Chick Fil a sauce entered into the top 10 of all skus in the sauces category and when I'm talking the top 10 I'm talking.

David A. Ciesinski: <unk> is on that list some of the highest catch up items are on that list and we still believe that that brand, even though between dressings and sauces now on retail sales is about $200 million in sales.

Todd Morrison Brooks: Some of the Heinz ketchup items are on that list, and we still believe that that brand, you know, even though between dressings and sauces now in retail sales is about 200 million, there's a lot of chicken left on that bone. There's a lot of room for us to continue to grow. We'll put just two quick follow-ups, are in some way or any of the partners selling product in restaurants, and is that, With that, if they were doing that, would that show up in food service, or would you take that back to the retail side of the operation?

Todd Morrison Brooks: A lot of.

Todd Morrison Brooks: A lot of chicken left on that bone Theres, a lot of room for us to continue to grow.

Speaker Change: Well put.

Speaker Change: Two quick follow ups.

Todd Morrison Brooks: Or is simply or any of the partners selling product in restaurant and is not.

Todd Morrison Brooks: With that if they were doing that show up in foodservice or would you take that back to the retail side of the operation and then Tom where you talked about.

Todd Morrison Brooks: Cabling pullout for foodservice.

Todd Morrison Brooks: And then, Tom, where you talked about Horse Cave running full out for food service. Have we started to need to go back to kind of those co-manufacturer arrangements that we had leading up to Horse Cave to meet the demand on that side of the house? Thank you all. Yeah, you know, on the Copacker front, not really, you know, what we're focused on here is, I think, the decisions when we're investing. I think what Tom is trying to share is, a brownfield or a greenfield decision is, you're talking two or three years. These are long-term things, and it takes time to bring them to fruition. So just as a matter of keeping pace with the lead times that are required, you begin to think about these things earlier than you might think. And I think that's the point he's trying to make.

Todd Morrison Brooks: Started to need to go back to.

Todd Morrison Brooks: Kind of those co manufacturer arrangements that we had leading up into <unk> to meet the demand on that side of the house. Thank.

Speaker Change: Thank you will.

Speaker Change: Yeah on the co Packer front not really.

Speaker Change: We're focused on here is I think the decisions when we're investing I think what Tom was trying to share is a brownfield or greenfield decision is youre talking two or three years. These are long term things and it takes time to bring them to fruition. So just as a matter of.

Speaker Change: Keeping pace with the lead times that are required you begin to think about these things earlier than you might think and I think thats. The point. He is trying to make so we're not trying to give the impression that were pinched up capacity because thats not the case.

David A. Ciesinski: So we're not trying to give the impression that we're pinched on capacity because that's not the case. These are just decisions that require time to make sure you get the right place, it's designed the right way, and if it's a new site, you work with the government on things like incentives and stuff like that.

David A. Ciesinski: These are they are just decisions that require time to make sure you get the right place is designed the right way and if it's a new site you work with the government on things like incentives and stuff like that so I think what Tom was trying to foreshadow is that as we continue to see growth in recent periods as we continue to project for growth.

David A. Ciesinski: So I think what Tom is trying to foreshadow is that as we continue to see growth in recent periods, as we continue to project for growth, it's going to necessitate us to think about another site and also our network more broadly in terms of where we want that site to be to make sure that it's, you know, maximizing utility and profit. Thank you. As a reminder, ladies and gentlemen, that's star 11 to ask the question.

David A. Ciesinski: Necessitate us to think about another site, but also kind of our network more broadly in terms of where we want that to sites to be to make sure that it's maximizing utility and profit.

Speaker Change: Thank you.

Speaker Change: As a reminder, ladies and gentlemen that star one to ask a question. Please.

David A. Ciesinski: Please standby for our next question.

Operator: Please stand by for our next question. Our next question comes from the line of Scott Mox with Jeffrey. Your line is open. Hey, good morning, guys. This is Scott here to take my question.

David A. Ciesinski: Our next question comes from the line of Scott <unk> with Jefferies. Your line is open.

Scott Mox: Hey, Good morning, guys. This is Scott <unk> on for Ron Thanks for taking my question.

Scott Mox: Just want to come back to the subway and Texas Roadhouse items you launched at retail. I was just wondering how those are performing relative to your initial expectations. And then, secondly, to that how some of the other licensed brands are performing relative to expectations for where they are in their life cycle. Yeah, so maybe starting first with Subway and Texas Roadhouse, Scott. In the period, we had very modest sales in Q3.

Scott Mox: Just wanted to be.

Scott Mox:

Scott Mox: Subway in Texas Roadhouse items, you'll once the retail just wondering how those are performing relative to your initial expectations and then.

Scott Mox: Secondly to that how with some of the other license brands.

Scott Mox: Are performing relative to expectations for where they are in their lifecycle.

Scott Mox: Yeah.

Scott Mox: So maybe starting first with.

Scott Mox: Subway and Texas Roadhouse Scott in.

Scott Mox: In the period, we had very modest sales in Q3, so I would tell you. It's certainly projecting off of Q3 results too early to say one way or another to look at the data.

Scott Mox: So I would tell you it's certainly projecting off of Q3 results too early to say one way or another to look at the data. I would tell you that we're building distribution in line with our expectations, but it's a slow build from customer to customer. It doesn't happen, as you know, in one overnight tranche.

Scott Mox: I would tell you that we're building distribution in line with our expectations, but it's a slow build from from customer to customer it doesn't happen as you know and one.

Scott Mox: One overnight.

Scott Mox: <unk>.

David A. Ciesinski: So I would tell you we're just taking an optimistic wait and see approach to you, and our sales team is aggressively working with our retail partners to make sure that we're getting the items in the right number of facings in the right place on the shelf. Now, as you just asked a bigger question, which is around how we feel about the performance of these items and the long-term opportunity, we continue to be very bullish across and all of our licensed partners.

Scott Mox: So.

Scott Mox: I would tell you we're just taken an optimistic wait and see a view and our sales team is aggressively working with our retail partners to make sure that we're getting the items and the right number of facings in the right place on the shelf now as you just asked.

David A. Ciesinski: Asked a bigger question, which is around how do we feel about the performance of these items in the long term opportunity.

David A. Ciesinski: We continue to be very bullish.

David A. Ciesinski: Really across.

David A. Ciesinski: All of our licensed partners.

David A. Ciesinski: I mentioned that if you look at Chick-fil-A, one of the important points we would point to is that on a 52-week basis today, Chick-fil-A's household penetration is only 10.5 percent. Our own New York Bakery garlic bread is almost 19 percent household penetration.

David A. Ciesinski: Mentioned that if you look at Chipotle and one of the points.

David A. Ciesinski: Points, we would point to on a 52 week basis today, the Chick Fil A's household penetration is only 10, 5% our own New York bakery garlic bread is almost a 19% household penetration. So we feel like there continues to be a lot of opportunity.

David A. Ciesinski: So we feel like there continues to be a lot of opportunity to drive household penetration. If you look at the number of consumers that visit Chick-fil-A restaurants, I mean, it's probably three times what that number is, if not higher than that. So, again, you know, just taking that brand close, we believe there's plenty of room to continue to build household penetration on the core. We think the Chick-fil-A brand has big shoulders, and there are other sauces and dressings that we could launch behind that.

David A. Ciesinski: To drive household penetration if you look at the number of consumers that visit Chipotle restaurants.

David A. Ciesinski: It's probably three times, what that number is if not higher than that so again, just taking that brand close and we believe there is plenty of room to continue to build household penetration on the core we think the Chipotle brand has big shoulders, and there are other sauces and dressings that we could launch.

David A. Ciesinski: Behind that you move around the portfolio talk about olive garden.

David A. Ciesinski: You move around the portfolio, you talk about Olive Garden. In the really early days, we launched into Italian. Then we moved into Ranch. As we entered into Ranch, we were able to get more facings on the shelf, which improved velocity for all of the items.

David A. Ciesinski: Really early days, we launched into Italian then we moved into ranch as we entered into ranch, we were able to get more facings on the shelf, which improved velocity for us all of the items, we came out behind that with Caesar.

David A. Ciesinski: We came out behind that with Caesar, which has performed very, very well, and then most recently with a balsamic. So in some brands, it's just driving penetration and getting sizing right. I think that's the case with Chick-fil-A because that brand just has big shoulders, like a Heinz ketchup, for example.

David A. Ciesinski: Which has performed very very well and then most recently out with the <unk> and some brands. It's just driving penetration in getting sizing right I think thats the case with Chick fillet because that brand just has been.

David A. Ciesinski: Big shoulders like our highest catch up for example in the case of an olive garden. The way you manage a brand like that is you drive assortment.

David A. Ciesinski: In the case of Olive Garden, the way you manage a brand like that is, you know, you drive the assortment. And we think that the Olive Garden brand continues to have more room to continue to grow as well. You know, with Buffalo Wild Wings, it's kind of a combination of the two.

David A. Ciesinski: And we think that the olive garden brand continues to have more room to continue to grow as well with Buffalo Wild wings Thats kind of a combination of the two.

David A. Ciesinski: We think theres more different flavor dimensions that we can go out with but most recently now we're taking some of their best selling items and we're converting those to larger sizes. So.

David A. Ciesinski: We think there are more different flavor dimensions that we can go out with, but most recently, we're taking some of their best-selling items and we're converting those to larger sizes. So, you know, whether Tom or me or any one of a number of people on our team, we all grew up managing big brands. You know, I spent time at Heinz and Kraft and worked on Blue Box and Heinz Ketchup, and most of our team comes from bigger companies like that.

David A. Ciesinski: Whether Tom or me or any one of a number of people on our team. We all grew up managing big brands I spent time at Heinz and Kraft and worked on Blue box and highest catch up in most of our team comes from bigger companies like that and in essence, what we're doing is we're using the same sort of playbook.

David A. Ciesinski: And in essence, what we're doing is we're using the same sort of playbook tailored for each of these brands to help them uniquely grow. But with our existing partners, we think that there's plenty more room to continue to grow. That's helpful, thank you. And then, just as a second question, I know there's been a lot of discussion around food service and just the general macro environment impacting, obviously, restaurants.

David A. Ciesinski: <unk> for each of these brands to help them uniquely grow but with our existing partners. We think that there's plenty more room to continue to grow.

David A. Ciesinski: That's helpful. Thank you and then just as a second question I know theres been a lot of discussion around foodservice and just general macro environment.

David A. Ciesinski: Impacting obviously restaurants wondering if you could talk about.

Scott Mox: I wonder if you could talk about your outlook for the next six months or the balance of the year. I think we've heard from some others that they expect the consumer to improve a little, feel a little less pressured later in the year. Wondering if you guys kind of feel the same way and any general thoughts you may have.

Speaker Change: Your outlook maybe for for the next six months so the balance of the year.

Scott Mox: We've heard from some others that.

Scott Mox: The consumer to to improve a little feel a little less pressured later in the year.

Scott Mox: Wondering if you guys kind of feel the same and any general thoughts you may have that would be great.

Thomas K. Pigott: That would be great. Yeah, we expect our algorithm to remain essentially the same with the ability to deliver both top line growth, sales growth, and volumetric growth on both sides of the business. And, Tom, I don't know if you want to provide any other textures than that. Yeah, I think, where we sit in the marketplace, as Dave hit on earlier, there's certainly some concern about the consumer. But I think when we look at our broader portfolio, the QSR exposure we have, particularly with Chick-fil-A, we feel very good about that.

Speaker Change: Yeah, we we expect our algorithm to remain essentially the same but the ability to deliver both.

Tom: Topline growth sales growth and volumetric growth on both sides of the business.

Thomas K. Pigott: Tom I don't know if you want to provide any other texture.

Tom: Yes, I think.

Tom: Where we sit in the marketplaces, Dave hit on earlier.

Tom: There is certainly some concern about the consumer I think when we look at our broader portfolio.

Tom: <unk> exposure, we have particularly with <unk>, we feel very good about that and then on the retail side as you saw this last quarter, we reinvested a bit of trade.

Thomas K. Pigott: And then on the retail side, as you saw this last quarter, we reinvested a bit of trade. We were able to drive more volume growth, protect our position in the marketplace, and grow penetration. And so I think overall, we're responding to the softness that a lot of folks see.

Thomas K. Pigott: We were able to drive more volume growth.

Thomas K. Pigott: Our position in the marketplace grow penetration.

Thomas K. Pigott: So I think overall, we're responding to the softness that a lot of folks see.

David A. Ciesinski: And I think we're well-positioned to continue to do so. So that's where Dave and I both feel we can continue the algorithm through Q4 and into next year. All right. It is much appreciated. Thanks a lot. Thank you. Maybe the last thing that I'll offer on that question is sort of how we're thinking about Q4 and the next fiscal year. It's really focusing on three key things: consumer relevant innovation because in a great economy it's important, and in an economy that's slightly more challenging, it's equally important. So, consumer relevant innovation. The second point is just smart cost management, and then finally, just good execution and avoiding unforced errors.

Thomas K. Pigott: And I think we're well positioned to continue to do it so that's where I think Dave and I. Both feel we can continue the algorithm through Q4 and into next year.

Speaker Change: Much appreciate it thanks, so much.

David A. Ciesinski: Thank you maybe the last thing that I'll offer to that question is sort of how we're thinking about Q4 and the next fiscal year, its really focusing on three key things.

David A. Ciesinski: So the team is pretty narrowly focused on those three items, and we think you know if we can just continue to execute what we're bullish about the outlook. Thank you. I'm showing no further questions in the queue. I would now like to turn the call back over to Dave for his closing comments. Very good. Well, thank you. And thank you to everybody that joined the call. We look forward to being with you again in August, where we will take you through our Q4 results and talk a little bit about our outlook for the next fiscal year.

David A. Ciesinski: Consumer relevant innovation because in a great economy, it's important and an economy that is slightly more challenging it's equally important so consumer relevant innovation second point is just smart cost management and then finally, just good execution and avoiding and forced air. So the team is pretty narrowly focused on those three items.

David A. Ciesinski: If we think if we can.

Dave: Just continue to execute well.

Dave: Bullish about the outlook.

Speaker Change: Thank you.

David A. Ciesinski: I'm showing no further questions in the queue I would now like to turn the call back over to Dave for his closing comments.

Dave: Very good well. Thank you and thank you to everybody that joined on the call. We look forward to being with you again in August where we take you through our Q4 results and talk a little bit about our outlook for the next fiscal year. We hope you guys have a great rest of the day.

David A. Ciesinski: We hope you guys have a great rest of the day. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect. [inaudible] ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Music Music Music ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?

Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.

David A. Ciesinski: [music].

David A. Ciesinski: Okay.

David A. Ciesinski: Okay.

David A. Ciesinski:

David A. Ciesinski: Okay.

David A. Ciesinski: Okay.

David A. Ciesinski: Yes.

David A. Ciesinski: Yeah.

David A. Ciesinski: Okay.

David A. Ciesinski: Okay.

David A. Ciesinski: Okay.

David A. Ciesinski: [music].

David A. Ciesinski: Yes.

David A. Ciesinski: [music].

David A. Ciesinski: Sure.

David A. Ciesinski: Yes.

David A. Ciesinski: [music].

David A. Ciesinski: Okay.

David A. Ciesinski: Okay.

David A. Ciesinski: Yes.

David A. Ciesinski: Yes.

David A. Ciesinski: Yes.

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David A. Ciesinski: Yes.

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David A. Ciesinski: [music].

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David A. Ciesinski: [music].

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David A. Ciesinski: Yes.

David A. Ciesinski: [music].

David A. Ciesinski: Yes.

David A. Ciesinski: Okay.

David A. Ciesinski: Okay.

David A. Ciesinski: Okay.

David A. Ciesinski: [music].

David A. Ciesinski: Hum.

David A. Ciesinski: Sure.

David A. Ciesinski: [music].

David A. Ciesinski: Yes.

David A. Ciesinski: Okay.

David A. Ciesinski: [music].

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David A. Ciesinski: Okay.

David A. Ciesinski: Yes.

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David A. Ciesinski: [music].

David A. Ciesinski: Yes.

David A. Ciesinski: [music].

David A. Ciesinski: Okay.

David A. Ciesinski: [music].

David A. Ciesinski: Yes.

David A. Ciesinski: Okay.

David A. Ciesinski: Okay.

David A. Ciesinski: Okay.

David A. Ciesinski: Okay.

David A. Ciesinski: Okay.

David A. Ciesinski: Sure.

David A. Ciesinski: Yes.

David A. Ciesinski: Okay.

David A. Ciesinski: Yes.

David A. Ciesinski: Yes.

David A. Ciesinski: Yes.

David A. Ciesinski: Okay.

David A. Ciesinski: Okay.

David A. Ciesinski: [music].

David A. Ciesinski: Okay.

David A. Ciesinski: Yes.

David A. Ciesinski: Okay.

David A. Ciesinski: Okay.

David A. Ciesinski: Okay.

David A. Ciesinski: Okay.

David A. Ciesinski: Yes.

David A. Ciesinski: Yes.

David A. Ciesinski: Okay.

David A. Ciesinski: Okay.

David A. Ciesinski: Yes.

David A. Ciesinski: Okay.

David A. Ciesinski: Okay.

David A. Ciesinski: Yes.

David A. Ciesinski: Okay.

David A. Ciesinski: Thanks.

David A. Ciesinski: Yes.

David A. Ciesinski: Okay.

David A. Ciesinski: [music].

David A. Ciesinski: Thanks.

David A. Ciesinski: Sure.

David A. Ciesinski: Okay.

David A. Ciesinski: Okay.

David A. Ciesinski: Yes.

David A. Ciesinski: Okay.

David A. Ciesinski: Okay.

David A. Ciesinski: Sure.

David A. Ciesinski: Yes.

David A. Ciesinski: Yes.

David A. Ciesinski: Yes.

David A. Ciesinski: Right.

David A. Ciesinski: Yes.

David A. Ciesinski: Okay.

David A. Ciesinski: Sure.

David A. Ciesinski: Yes.

David A. Ciesinski: <unk>.

David A. Ciesinski: [music].

David A. Ciesinski: Okay.

David A. Ciesinski: Okay.

David A. Ciesinski: Okay.

David A. Ciesinski: Okay.

David A. Ciesinski: Okay.

David A. Ciesinski: Yes.

David A. Ciesinski: Okay.

David A. Ciesinski: Thanks.

David A. Ciesinski: Okay.

David A. Ciesinski: Okay.

David A. Ciesinski: Okay.

David A. Ciesinski: Okay.

David A. Ciesinski: Yes.

David A. Ciesinski: Yes.

David A. Ciesinski: Okay.

David A. Ciesinski: Okay.

David A. Ciesinski: Sure.

David A. Ciesinski: Okay.

David A. Ciesinski: Okay.

David A. Ciesinski: Okay.

David A. Ciesinski: Okay.

David A. Ciesinski: Yes.

David A. Ciesinski: Yes.

David A. Ciesinski: Okay.

David A. Ciesinski: Yes.

David A. Ciesinski: Okay.

David A. Ciesinski:

David A. Ciesinski: Yes.

David A. Ciesinski: Okay.

David A. Ciesinski: Yeah.

David A. Ciesinski: Yes.

Speaker Change: Thank you.

David A. Ciesinski: Yes.

David A. Ciesinski: Yes.

David A. Ciesinski: Okay.