ConAgra Brands, Inc.

Good day and welcome to the Conagra Brands fourth quarter fiscal year 2019 earnings conference call. Our participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Brian Carney. Please go ahead.

Good morning, everyone. Thanks for joining us. I'll remind you that we will be making some forward-looking statements during today's call. While we are making those statements in good faith, we do not have any guarantee about the results that we will achieve. Descriptions of risk factors are included in the documents we filed with SEC. Also, we will be discussing some non-GAAP financial measures. References to adjusted items, including organic net sales growth, refer to measures that exclude items management believes impact the comparability for the period referenced. Please see the earnings release for additional information on our comparability items. The reconciliations of those adjusted measures to the most directly comparable GAAP measures can be found in either the earnings press release or in the earnings slides, both of which can be found in the investor relations section of our website, ConAgraBrands.com. Finally, we will be making some references to total ConAgra brands as well as legacy ConAgra brands. References to legacy ConAgra brands refer to measures that exclude any income or expenses associated with their recently acquired Pankow Foods business.

With that, I'll turn it over to Sean. Thanks, Brian. Good morning, everyone, and thanks for joining our fourth quarter fiscal 2019 earnings call. We have a lot to discuss, so let's start with what I want you to take away from today. First, we remain confident that we will deliver long-term value by continuing to implement the ConAgra Way to profitable growth. Our unwavering commitment to the ConAgra Way will serve both legacy ConAgra and Pinnacle well into the future. Fiscal 2019 was a year of remarkable transition. We did a major deal that required more attention than originally anticipated, but I'm pleased to report that we continue to make progress stabilizing the Pinnacle business. We've hit several key integration milestones and our deleveraging initiative is on track. As you saw in our release this morning, our Q4 results were disappointing. This was largely due to discrete issues on a few businesses as a result of non-economic behavior from competitors, as well as unfavorable market conditions for our Ardent Mills joint venture. These issues accelerated late in the quarter, and we see them as transitory headwinds. Now, I'm going to unpack the drivers of our Q4 performance in a moment, but before I do, I want to comment on the year, because fiscal 2019, in fiscal 2019, we took several very important steps, both organic and inorganic, to enhance the long-term health of our business. These will help us play offense in fiscal 2020 as we bring to market another robust slate of on-trend innovation. That innovation is also a major factor in reiterating our earnings guidance and increasing our organic growth guidance for fiscal 2020. Dave will provide more guidance information later. I'll wrap up by sharing some thoughts on our opportunities within plant-based meat alternatives. Now that we own Gardein, we are very well positioned to capitalize on the explosive growth in this exciting space. So before I jump into the details of the quarter, I want to frame up the big picture. Fiscal 2019 was transformative for us, and we made very good progress securing our foundation during the year. We significantly advanced the ConAgraWave playbook by deploying our principles across the portfolio. Our principles dictate that it's important to be lean so you can be agile, but that you can't cut your way to prosperity. Growth is essential and not all growth is equal. The consumer has to be top of mind and innovation capability counts. Fiscal 2019 also brought the launch of our largest innovation slate to date, along with an emphasis on supporting our brands with efficient marketing programs. As a result, you can see we've had sustained consumption growth over the past two years. We also delivered organic net sales growth for the second year in a row. Our disciplined approach to innovation and brand building, particularly across our frozen and snacking portfolios, is paying off. The result has provided us with a rock solid foundation from which to deliver on our new long-term growth algorithm. Our successful completion of the Pinnacle Foods acquisition during the year accelerated the next wave of change at ConAgra. Pinnacle was an obvious fit that increased our scale, enhanced our frozen platform, and added leading iconic brands in attractive categories. We've made tremendous progress integrating the businesses, realizing synergies, and positioning Pinnacle's big three brands for a return to growth. We also continued to reshape our overall portfolio for better growth and better margins during fiscal 19 by divesting non-core assets. Let's take a closer look at the Pinnacle businesses. Starting with the integration on slide nine, we achieved a critical milestone at the end of the fiscal year. We successfully transitioned Pinnacle's legacy order to cash and financial ERP systems onto ConAgra's SAP platform. This took a tremendous effort by the integration team and it went off without a hitch. In fact, across the board, the integration continues to run smoothly and our synergy capture remains on schedule. Since the transaction closed in late October, we have recognized $31 million of synergies. From a balance sheet perspective, I'm pleased to report that we remain on track with our deleveraging plan, having reduced debt by $450 million in the fourth quarter and $886 million from the close of the acquisition through the end of the fiscal year. We remain fully committed to achieving our goal of a net debt to adjusted EBITDA leverage ratio of 3.6 to 3.5 times in fiscal 2021 and maintaining a solid investment-grade credit rating. Turning to business performance, the legacy Pinnacle business came in at the high end of our net sales guidance and operating profit expectations in the quarter. I'm very happy to report that the big three brands, Birdseye, Wishbone, and Duncan Hines, all progressed towards stabilization in Q4. We've begun to implement our value over volume playbook with the Pinnacle portfolio, and overall, We feel good about our progress just seven months after closing this major strategic acquisition. As expected, the implementation of our value over volume approach resulted in short-term sales declines as we pruned the low-performing SKUs to clear the decks for our new innovations. The good news is that the products in the market are performing well. The increase in base sales velocities, as shown in the graphic on the right, demonstrate that our approach is working. we're building a stronger base on which to layer new innovations coming to the market later this year. Let's move on to the legacy ConAgra business. While we're confident in our long-term trajectory and that fiscal 2019 overall positions us well for the future, our financial results for Q4 did not meet our expectations. Our Q4 results were hampered by several unique items, each of which we will unpack for you today. Q4 organic net sales growth in the legacy ConAgra business missed our guidance by 240 basis points, which equates to about $43 million. The unexpected items that drove this shortfall included negative impacts of intensified promotional competition in our Hunts, Chef Boyardee, and Marie Callender's businesses. This drove about three-fourths of our sales miss this quarter. We view this as a transitory renting of market share That happens from time to time. We are not going to let these near-term events disrupt our disciplined approach to brand building. We also experienced some unexpected manufacturing and co-packer related challenges in the quarter. These issues were one-off in nature and have been addressed. Our PPS miss was primarily due to these items combined with weak performance in our Ardent Mills joint venture during the quarter, driven by lower than expected wheat prices and a lack of market volatility. Let's take a closer look at how this merchandising dynamic affected our Marie Callender's brand. Fiscal 19 was an important year for Marie Callender's as we undertook significant changes to modernize the brand and improve profitability. These changes included adding modern attributes and flavor profiles with simplified, higher quality ingredients, transitioning from trays to bowls, right-sizing portions, and optimizing lower performing SKUs. As a result of these changes, the underlying brand health is far better and our new Marie Callender's items have significantly higher velocities than the meals they replaced. Unfortunately, some of our competitors took a different approach in recent months and prioritized short-term growth via heavy promotion. Slide 14 highlights one example where a competitor's product was discounted to drive significant incremental or promoted growth. As we moved through the fourth quarter, our competition became more aggressive on price and displaced some of the very valuable merchandising support that we had anticipated for Marie Callender's. We don't believe that this short-term renting of our market share is a sustainable way to compete. We'll stay true to the ConAgra Way playbook and our principled approach. Holding fast to principles can be difficult especially when competitors are making different choices and heading down a path that could be viewed as profitless prosperity. We will not adopt a volume over value approach here and will not return to the old habits that we've worked so hard to eradicate. But we may, from time to time, take short-term actions to protect our share as we look to continue to build for the long term. We also experienced some unanticipated effects of our disciplined approach to pricing in our grocery portfolio. As you can see on slide 15, the cost of steel cans increased 14% year over year. As we took inflation justified pricing on Hunts and Chef Boyardee to partially offset the increased cost, we experienced higher than expected volume declines. In our Hunts canned tomato business, our pricing actions translated to shelf price increases. Last quarter, we said that we saw competition announcing price increases, and you can see that reflected in the all other increase of 4.5%. But what we did not anticipate is that private label would stay flat, and in some instances, actually decrease price. By the end of the quarter, price gaps were simply too wide for consumers to ignore, and we lost volume. Similarly, on Chef Boyardee, we took price increases throughout the year. In Q4, the elasticity impacts of these increases were exacerbated by a decrease in merchandising support that was beyond our expectations. Each of these brands, Marie Callender's, Hunt's, and Chef Boyardee, has a leadership role in its respective category. When on-shelf price gaps grow too wide or merchandising becomes uncompetitive, volume can be impacted quickly and significantly in these short-term windows. And that was the case in Q4. In response, we will not change our principles. We continue to believe that profitable growth is key. And historically, aggressive pricing actions have proven to be unsustainable. But we will remain agile in the face of hyper-promotional behavior by the competition and will tactically defend our share where it makes sense. A second transitory factor that impacted us in Q4 was manufacturing and co-packer issues. P.F. Chang's Dukes, and Peter Pan were affected by isolated production challenges during the quarter. Importantly, we are confident that we have the right resources in place to manage food safety and quality issues across the enterprise. The root cause for each of these issues has been identified and properly addressed, and the related customer service disruptions have been corrected and restored. Finally, our Q4 EPS was also impacted by weakness in the Ardent Mills joint venture. Ardent Mills' profit eroded during the quarter. Lower than anticipated wheat prices and reduced volatility in the wheat markets negatively impacted Ardent's results. Q4 presented a variety of headwinds to navigate. Ultimately, our results did not meet our expectations, but we were not thrown off course. While we had our challenges, there were also clear signs of continued progress during the quarter. With respect to our legacy ConAgra business, Q4 saw a continuation of the strong performance in our snacks business and positive results from frozen single-serve meals that we have talked about all year. We also delivered solid performance in our international and food service segments during the quarter. Finally, we over-delivered our free cash flow target for the year and remain on track with our deleveraging goals. Dave will add more detail on our strong cash flow during his remarks. Slide 19 shows the continued growth in total sales and average weekly TPEs in our frozen single-serve meals portfolio. Notably, in Q4, we lapped the 13% growth we delivered in Q4 of fiscal 2018, which was one of the best quarters we've ever had in frozen single-serve meals. We still delivered nearly 6% growth on top of that this quarter. So, as we look at the continuing trends in our sales in this key category, as well as the trends in TPEs, We're very pleased with our progress. Our approach is not only having a positive impact on our results, it's also driving overall category growth in frozen single-serve meals. Our competition is aware of this growth, and they certainly want in on the action. We believe it's part of why we're seeing some of the unsustainable promotional activity. Our strategy is not driven by price, but a rigorous approach to modernizing and premiumizing our brands through renovation and innovation. you can see on slide 21 that our innovation is driving growth and performing far better than that of our key competitors. Let's turn to our snacks business, which continues to exceed our expectations. Slide 22 details the growth we delivered in Q4, which included contributions from every key snacking vertical. Popcorn, meat snacks, sweet treats, and seeds. Overall, Retail dollar sales in our legacy ConAgra snacking portfolio grew 12.6% on a two-year basis in the fourth quarter. You can see a sustained improvement in our performance following last year's snacks show, where we unveiled our new approach to snacks. Our international segment performed extremely well throughout fiscal 19, and in the fourth quarter in particular. These strong results have been driven by our successful efforts to reinvent frozen meals in Canada, drive snacks growth in Mexico, modernize iconic brands internationally, and implement our value over volume strategy to realize the power of our strong brand equities. The continued execution of our value over volume strategy also benefited our food service segment in the quarter. We're continuing to build a higher quality revenue base in our food service segment and accomplishing considerable margin expansion. I next want to spend some time previewing our robust innovation slate for fiscal 2020. Slide 26 shows just some of the frozen innovation we have in store for this year. Yet again, we'll be delivering products with modern brand attributes, simplified labels and ingredients, and bold flavor profiles. Retailers have responded very well to these products, some of which will start shipping soon. We expect to see these products reaching the marketplace in the first half of fiscal 2020 and hitting their full stride in the second half. We have plans to continue to build upon our snacking success in fiscal 2020 with the launch of our strongest lineup of snacking innovations to date. That includes these provocative new meat snacks with bold flavors, new forms, and optimized price pack architecture. We're also launching our salty snacks into neglected and growing coves of the market where we can extend our brands through innovations. We're reframing our sweet treats brands to unlock significant growing demand spaces that meet modern trends. We're reinvigorating Snack Pack and reaching out to Hispanic audiences with products like the co-branded Fanta gels you see here. With this innovation, we clearly have confidence that our snacking portfolio will maintain its momentum in fiscal 2020. We also have big plans for the Pinnacle portfolio. You can see some of those upcoming innovations on slide 30. We believe we have a tremendous opportunity to contemporize our newly acquired leadership brands to capitalize on key growth pockets. One area of the Pinnacle portfolio where we now see far greater growth and innovation opportunities than previously forecast is the Gardein brand. I'm sure you've seen all the recent attention on the plant-based meat alternative space. We think there's no brand that better illustrates the enormous long-term opportunity ahead than Gardein, a real jewel in the portfolio that we haven't spent a lot of time talking to you about or capitalizing on in market. Gardein has a solid presence in food service and a leadership role in plant-based meat alternatives at retail. Here's how we're thinking about this exciting, high-growth space between now and fiscal 2022. We start by sizing the total opportunity. Based on our analysis of product substitution in other categories, almond milk for cow's milk as an example, we can reasonably predict the opportunity for plant-based meat alternatives. And here's where it gets really exciting, because the opportunity shouldn't be viewed as just a percentage of fresh meat. We think the opportunity is a percentage of all foods that contain meat. Based on this view, our analysis shows that plant-based meat alternatives could achieve a 15% share of both of these market segments. That means the opportunity here could be in the range of $30 billion, just in the U.S. And you know there's even more opportunity internationally. So the financials are compelling. I think many of you may be surprised by the numbers on slide 33, showing just how large the Gardein brand is already. It has quadrupled in size over the past four years and is now the second largest brand in the meat alternative space with annual sales of more than $170 million at retail and across food service channels. Importantly, we will be well positioned to support continued growth because we have new capacity coming online in the coming months. These expanded resources are already well underway and we expect them to be operational in the fall of 2019. and we anticipate that capacity will be used to produce more than just burgers. While plant-based burgers are getting a lot of press these days, it's instructive to take a step back and look at what's really going on in meat consumption. Slide 35 outlines overall consumption of animal proteins. The numbers to the right of the bars demonstrate the average annual number of meals eaten per person by type of animal proteins. As you can see, Burgers are important, but this market extends well beyond beef patties or even beef. Chicken is by far the most popular animal protein in the U.S., both in home and away from home. I would also highlight the significant consumption of pork, hot dogs, and fish. Importantly, eating occasions for animal proteins cover all day parts. is that the relative size of animal protein consumption serves as a useful guide for how to think about the market opportunity for plant-based alternatives. And if you're wondering whether chicken eaters are really interested in trying plant-based alternatives, the answer is clearly yes. Slide 36 focuses just on the plant-based meat alternative space within the retail channel. As you can see here, plant-based alternatives to beef are the largest protein alternative today, driven by the fact that products like veggie burgers have been available at retail for a long time. However, alternatives to chicken have built a substantial beachhead, and this space is the fastest growing plant-based alternative by far. We believe that over the next several years, Gardein is extremely well positioned to capitalize on the rapid growth of plant-based meat alternatives. The brand already provides a diversified portfolio of products, particularly in the underappreciated alternative to chicken segment. And if there's a segment of the meat space that consumers care about, there's a good chance that Gardein is already there or will be soon with a deliciously meat-free product. This includes offerings across all day parts. We're also going to expand Gardein's reach. Gardein is well-established and well-known, but we see plenty of opportunities to grow this brand. First up, is an improved burger. Gardein's Cart Burger platform is underdeveloped, and we are in the process of creating the next generation of beefless burger to better compete in this popular segment. As we do this, we expect accelerated growth at retail and in food service. But we also plan to compete across the important hot dog and sausage categories. We believe the winner in each of these categories will have the best taste, appearance, and aroma, which is what we're focusing on delivering across our plant-based alternative portfolio. What we believe ConAgra can do better than anyone else is leverage iconic brands, superior culinary capabilities, and proven innovation muscle to reach consumers across multiple categories in plant-based protein. During our investor day, you heard me talk about a key tenet of the ConAgra way to profitable growth. Iconic brands, plus modern attributes, equals superior velocities. And that formula is perfect for this space. Across food service and retail channels of trade, we believe that ConAgra Brands, leveraging and co-branded with Gardein, is ideally positioned. We have the best culinary capability, differentiated packaging, and the broadest portfolio of tower brands to leverage. Gardein contributes the modern benefit. Overall, we're excited about the opportunities in plant-based meat alternatives. This together with our entire innovation pipeline will help us reach our long-term algorithm. Looking ahead, we remain confident that we'll continue to deliver quality long-term growth at ConAgra by implementing the ConAgra way and prioritizing value over volume. We will continue to introduce on-trend innovation to the marketplace. We'll also continue to execute our pinnacle action plan including leveraging the Gardein brand to tap into the plant-based meat alternative opportunity. We expect the market will continue to be highly dynamic. We will need to stay both principle-based and agile as we remain committed to delivering our guidance and navigate a dynamic marketplace. But notwithstanding a difficult Q4, we're confident that we will meet our fiscal 2020 guidance and deliver on our long-term goals. With that, I'll turn it over to Dave.

Thank you, Sean, and good morning, everyone. This morning, I'll walk through Q4 and fiscal year 2019 for both the legacy ConAgra and pinnacle businesses before we open it up for questions. Slide 42 outlines our performance for the quarter and the full fiscal year. I'll walk through more detail in a moment, but I'll start here by hitting the key points. Compared to the year-ago period, net sales for the fourth quarter and full fiscal year were up 32.9 and 20.2% respectively, primarily reflecting the acquisition of Pinnacle Foods. Organic net sales, excluding Trenton, were down 0.7% for the quarter. While the quarter did not come in as we expected, we believe the issues in the quarter are transitory, as Sean discussed, and do not impact our fiscal year 20 guidance or long-term algorithm. Despite the Q4 challenges, We delivered organic net sales growth of 0.3% for the fiscal year, which is above last year's organic growth rate. Adjusted operating profit was up 25.7% in the fourth quarter and up 23.4% for the full year. These increases are primarily driven by the inclusion of Pinnacle's profit. A few points on margins. Our fourth quarter adjusted operating margin was 13.2% and full year was 15.4%. up 40 basis points versus the prior year and above our guidance range. While adjusted gross margin decreased for the full year, adjusted operating margin increased 40 basis points. This relationship reflects the gross margin impact of our ongoing shift of marketing investments from A&P to above-the-line retailer marketing, as well as leverage at the SG&A line, where we have benefited from our commitment to a lean operating environment and Pinnacle synergies. For the quarter, adjusted EBITDA increased 22.2% versus the previous year, while full fiscal year adjusted EBITDA rose 16.7% to approximately $1.9 billion, reflecting the inclusion of approximately seven months of Pinnacle's results. Adjusted diluted EPS was 36 cents for the quarter, down 28% from the prior year. For the full year, adjusted diluted EPS was $2.01, down 4.7% as the Q4 transitory items and the shortfall in Ardent Mills negatively impacted our performance versus expectations. Slide 43 outlines the drivers of our fourth quarter and full year net sales changes versus the same periods a year ago. It should be noted that for both the fourth quarter and full fiscal year, We saw improvements in price mix, even after taking into account our increases in retailer investments to support brand building. Slide 44 provides a summary of net sales by segment for the quarter and fiscal year 2019. For the quarter, grocery and snacks net sales and organic net sales declined 7.1% and 2.5% respectively. as the divestiture of the Wesson Oil business subtracted 460 basis points from the net sales growth rate. Despite continued strong in-market performance by our snacking businesses, net sales were impacted by the Q4 transitory items Sean discussed. For the full fiscal year, grocery and snacks organic net sales remained largely in line with the prior year. The refrigerated and frozen segment continued to benefit from innovation during Q4 across multiple brands, including Banquet, Healthy Choice, Marie Calendars, and ReadyWeb. However, these benefits were more than offset by lower-than-expected merchandising support on Marie Calendars, the P.F. Chang's manufacturing challenges that resulted in a recall, and to a lesser extent, continued declines in certain refrigerated businesses. These headwinds led to a decrease in reported and organic net sales in Q4. For the full year, however, the segment reported good growth, with net sales and organic net sales up 1.9% and 0.9% respectively. As Sean mentioned, the implementation of our ConAgra playbook led to improved results in international for the quarter and full year. The segment's fourth quarter reported numbers were impacted by the divestitures of the Canadian Del Monte business and Western Oil business. which combined to reduce the net sales growth rate by approximately 10.2%. The segment was also negatively impacted, 2.8%, by foreign exchange. Notwithstanding these factors, international's organic net sales were up 5.6% for the quarter and up 3.7% for the full year. For the quarter, the food service segments reported in organic net sales were down 12.6% and 0.6%, respectively. The sale of the Trenton facility, investiture of the Wesson Oil business, reduced the net sales growth rate by 12% in the aggregate. The segment's Q4 organic net sales results reflect continued execution of our value over volume strategy and the impact of inflation-justified pricing. Volume declined 5.9% in the quarter, but price mix increased 5.3%. Organic net sales were down 2.7% for the full year. Pinnacle sales for the quarter and full fiscal year were $756 million and $1.7 billion respectively, in line with our expectations for the quarter and full year. Slide 45 outlines the puts and takes on our Q4 and full year adjusted gross margin versus the prior year. It's important to keep in mind that for Q4, The 1% benefit you see on the left side of the page includes a headwind of approximately 50 basis points related to the isolated manufacturing challenges and recalls we experienced during the quarter. Moving to slide 46, you can see that Legacy ConAgra adjusted operating profit decreased 9.2% during the quarter, and Legacy ConAgra's adjusted operating margin was 13.4%. total adjusted operating profit, including Pinnacle, increased 25.7% in Q4. In the grocery and snack segment, adjusted operating profit was down in Q4 due to the loss of profit associated with the divestiture of the Wesson oil business, as well as higher transportation and packaging costs, primarily in metal packaging. The grocery and snack segment was also negatively impacted by the manufacturing challenges we faced in the quarter. The refrigerated and frozen segments adjusted operating profit decreased 6.1% in Q4. Realized productivity improvements were offset by lower net sales, in part due to the manufacturing and merchandising impacts we discussed earlier, as well as higher transportation and input costs. The food service segments adjusted operating profit increased 4% in Q4, while operating margin expanded to 12.2% due to the impacts of favorable price mix, supply chain realized productivity, and the sale of the lower margin business produced in our Trenton facility. Pinnacle's adjusted operating profit, including the corporate expense related to Pinnacle, totaled $95 million for the quarter, and adjusted operating margin was 12.6%, in line with our expectations. On slide 47, you can see that Legacy ConAgra adjusted operating profit increased 1.2% for the full year, and legacy ConAgra's adjusted operating margin increased by 43 basis points to 15.4%. The pinnacle segment's adjusted operating profit totaled $264 million, and adjusted operating margin was 15.3%, above our fiscal year 19 guidance range of 14.6% to 14.9%. Total ConAgra adjusted operating profit was up 23.4% versus a year ago, and adjusted operating margin was 15.4% above our fiscal year 19 guidance range of 14.9 to 15.2%. Slide 48 outlines the drivers of our adjusted EPS decrease versus Q4 a year ago. As you can see, legacy ConAgra adjusted EPS decreased 7 cents. Approximately 2 cents of this decline was from divested businesses, Two cents was from the manufacturing challenges discussed. Two cents was from a larger-than-expected decline in Ardett Mills. And two cents was from lower pension and post-retirement service income, resulting from fully funding the pension plan in fiscal 18, which we have now wrapped as we head into fiscal 20. The pinnacle acquisition reduced total company-adjusted EPS by seven cents during the quarter. Slide 49 outlines the drivers of our 4.7% decrease in full-year adjusted EPS versus a year ago. Adjusted EPS for Legacy ConAgra increased $0.04 for the year, despite $0.08 of headwind from the reduced pension retirement service income I just mentioned and $0.06 of headwind from Arnett Mills. The pinnacle acquisition reduced total company adjusted EPS by $0.14 for fiscal 2019. Slide 50 summarizes net debt and cash flow information and demonstrates the clear progress we continue to make in enhancing our overall financial position this year. Overall, we remain on schedule with our fiscal 21 target of a net debt to trailing 12-month adjusted EBITDA ratio of 3.6 to 3.5 times. Between the close of the pinnacle acquisition in Q2 and fiscal year-end, we reduced total debt by $886 million. And our estimated ratio for pro forma net debt to trailing 12-month adjusted EBITDA was 4.88 times as of the end of fiscal 19. For the full fiscal year, ConAgra generated $761 million of free cash flow, exceeding our guidance of $700 million. As we consistently state, we are committed to solid investment-grade credit ratings. As noted in our release, we are essentially reaffirming our fiscal 20 EPS guidance this morning. On slide 51, you can see that we've reduced our estimated fiscal 20 earnings by two cents solely to remove the historical profit contribution from the now divested Jell-It business. Excluding the adjustment for Jell-It, our earnings guidance range has not changed from what we provided at the company's investor day in April 2019. And slide 52 outlines our fiscal 2020 outlook across all metrics. We are updating our organic net sales guidance to be in the range of 1 to 1.5% compared to our prior expectation of approximately 1% provided at investor day. Note that this growth rate excludes the impact of the fiscal 20's 53rd week. All other metrics on this slide include the impact of the 53rd week. We expect adjusted operating margin to improve to a range of 16.2% to 16.8% in fiscal 20, as we continue the integration of Pinnacle to generate estimated synergies while implementing the ConAgra Way playbook. Also, we expect free cash flow to continue to improve in fiscal 20, benefiting from the expected Pinnacle cost synergies and the expected increase in organic net sales. we expect free cash flow to reach approximately $1 billion for fiscal 20. Importantly, we also remain committed to the long-term algorithm we provided in our investor day. As our financial progress accelerates through fiscal year 22, and we benefit from the full synergy opportunity of the Pinnacle acquisition, we look to capitalize on new sources of growth, like the Gardein opportunity Sean highlighted earlier. To conclude my formal remarks today, I'd like to turn to slide 53. Here, I've summarized the more important planning assumptions that underpin our fiscal year 20 guidance. These can be broken into two buckets, organic growth and margins. Overall, we see results being more heavily weighted towards the second half of fiscal 20. With respect to our organic net sales growth, we anticipate higher innovation-related investment during the first half of fiscal 20. with the related sales growth weighted towards the second half as our distribution, trial, and repeat builds throughout the year. We also expect the highly promotional environment in select categories that we experience in Q4 to continue in the near term. As Sean mentioned, we have seen these situations before and will remain agile in how we respond to competition. Consistent with what we've been saying since December, we continue to expect legacy Pinnacle sales trends to improve in the second half of fiscal 20. We also expect margins to improve during the second half of fiscal 20, as the innovation-related investment will be higher in the first half, as I just mentioned. And for Pinnacle, by the second half of fiscal 20, we expect to laugh the elevated input cost inflation in transportation and crops that the business has been experiencing. We also expect synergies to increase as we move through the course of the year. Finally, we expect Pinnacle will continue to be dilutive to our year-over-year gross margin until we anniversary the acquisition in late October. Thank you for listening. That concludes my remarks. I'll now pass it to the operator as Sean, Tom McGuff, Darren Surow, and I are ready to take your questions.

Thank you. We will now begin the question-and-answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. As a reminder, we ask that you limit your questions to one question and one follow-up to allow equal access to all participants. At this time, we will pause momentarily to assemble our roster. The first question today comes from Andrew Lazar of Barclays. Please go ahead.

Morning, everyone, and thanks for the question. Morning, Andrew. I guess sort of a two-parter here. Given the top-line challenges experienced in fiscal 19, some of the inventory reductions, some of the merchandising and competitive challenges that you noted today that are expected to continue at least in the near term, some elasticity and I guess the question is why raise the fiscal 20 top-line guidance range? And then more broadly, you know, with the Pinnacle deal, there is always some concern among investors that maybe the company could well lose some focus and momentum on its core or legacy business as a result. And in light of the 4Q results, I guess how can investors have confidence that that's not the case in terms of what we're seeing play out more recently? Thank you.

Let me take that in reverse order, Andrew, in terms of this first, this notion of, you know, distraction. I can appreciate that that's an easy notion to grab onto, but it's just not accurate. The issues we faced in Q4 literally had nothing to do with Pinnacle, which has been a highly efficient work stream for us. As I pointed out in my remarks a few minutes ago, they were mostly, the Q4 issues were mostly about macro factors that were not assumed in our forecast. So things like non-economic decisions by competitors, isolated recalls, and Arden Mills is an example. But each of these items, they were not expected. They did add up to the miss you saw in Q4, but they are transitory events that we do not expect to repeat. And that really is the story. But if I step back, here's how I think about the big picture of the quarter and fiscal 20 in kind of one thought. If you look at 19 as a whole, 19 undoubtedly was a year of remarkable transition for ConAgra Brands. We did advance our innovation agenda. We did see continued traction in frozen meals and snacks, and we made a transformative acquisition that did end up requiring more near-term fixes than we had expected, but we wrapped our arms around those very quickly and efficiently, and now we've got that business stabilizing and on track in terms of integration. Q4 clearly was disappointing, but the fact is it was largely due to transitory issues. But now we are in a position to play offense and our innovation pipeline is both broad and full. So despite the speed bump, we are clearly still advancing our playbook. And that's why in terms of fiscal 20, we feel very good about the top line drivers we have in place. Our innovation pipeline is the best we've had yet. and as it works its way into the marketplace and really hits its stride in the second half, we're very confident that we will all like what we see. In terms of raising the high end of the sales guidance for fiscal 20, you can think about that as largely recovering the transitory volume losses we experienced at the end of this year. it doesn't hurt that we're beginning to see some improvement in our scanner data as well. Dave, you want to build on that?

Yes. So we haven't changed our estimate of net sales in fiscal 20 from where we were previously. So because we missed Q4 driven by transitory reasons, we expect that business will come back. So the fiscal 19 base is lower, but we're holding our estimate for fiscal 20 sales. So the math adds 50 basis points of growth. So we added that to the guidance.

Thanks very much.

Our next question comes from Ken Goldman with JP Morgan. Please go ahead.

Hi, good morning. It seems that 1H19, the first half, will be a little bit worse than what you previously expected, and I'm saying that because you talked about the headwinds in the fourth quarter being late in the quarter, so I assume they bleed into 1Q20, but you're maintaining your annual guidance, and I guess the implication is the back half of the year will have to be somewhat better than you initially anticipated, or maybe you're thinking about the bottom half of guidance. I'm just curious, what's better in 2H20, the second half, if anything, than you initially modeled?

Ken, we're not going to guide to quarters, obviously, but you've got the shape of the curve right. As we've said all along, H2 is going to be a stronger year or stronger half than H1, and obviously now that Q4 came in light due to transitory issues, we expect recovery of that transitory loss next Q4. In terms of the things like Q4 issues lingering into Q1, and does that mean it's a worse Q1? I wouldn't think about it that way. We've got a vast portfolio here. Things are always moving around. Some things will come in below what we initially anticipate. We manage risk and opportunity approach to dealing with that, which means we look for other opportunities that offset things we didn't expect. So today on the call, I talked a little bit about Gardein. We've got other things. Snacks, obviously, in the back half of this year exceeded our expectations. So, you know, we've got a lot that we feel really good about that probably has some upside to it on the year. We've got some other things like these near-term competitive dynamics that we've got to navigate. We've got multiple ways we can do that. But I think to your point, big picture is really we haven't changed our cadence on the year. We're expecting our innovation to go into the marketplace in the first half, get its footing, and really build momentum in the second half. And then on Pinnacle in particular, as we've talked before, getting those TPDs back that were lost last year, that should really start to kick in as we get to the middle part of the year and the back half of the year. Dave, you want to add to that?

Yeah, just to add one thing, and I mentioned in my comments that we are increasing pretty significantly our investment for innovation, and that hits

in the first half relative to prior year so that that impact not just profit but net sales so that that dynamic flows first half second half as well thank you and then follow up from me um i'm surprised a competitor you talked about in frozen took some merchandising business from you um do you have enough visibility from your customers as to when your competitors are going to promote like that so that your merchandising isn't redundant with theirs and i guess The broader question is, isn't really this one of the risks of shifting marketing to promotions from advertising that you become more reliant on some of the whims of merchandising and what your competitors can do?

No, on that latter piece, the answer is no, because as we thought before, to the degree we have moved below the line money, It's below-the-line money that wasn't doing anything. So when you're moving money away that's not doing anything, you're not taking anything away. And instead, you know, a lot of the spend, as we've talked many times, it covers a multitude of tools across a multitude of brands. Here at Mont Marie, we're talking about one brand, and we're talking about a particular time of year where we count on some high-quality merchandising that we got displaced from a very aggressive competitor. And What I would say is that it is very hard to anticipate those things. It is not the first time we have seen this in this industry. In fact, if you know Conagra's history, you know we know this move as well as anybody. It's called volume over value, and it does happen from time to time, but it is not sustainable because, as we learned, when you put all your human and financial resources into price-based competition, there's very little left in the enterprise to actually study consumer behavior or design new quality innovations. and then market it in a personalized fashion. And what you're left with over time is a weak product lineup and a consumer that is trained to buy a deal. And that's not our playbook. From time to time, we will encounter it, and we've got to deal with it. But that's really not what we're after. We'd rather follow our approach, stay consistently focused on moving the center line of our profitability and our sales north over time, even if we've got to deal with some standard deviation in any given quarter based on this kind of behavior. Thank you.

Our next question comes from Brian Spilling with Bank of America. Please go ahead.

Hey, good morning, everyone. Hi, Brian. Dave, I guess I just wanted to get a little bit more color from you on gross profit, how we should be thinking about gross profits for 20. I think you talked a little bit about some investment above the line in terms of supporting new products, but if you can just give us some sense of you know, COGS inflation for fiscal 20, if there's any pricing contemplated to cover inflation, and just, you know, some of the other factors that might influence gross margins for 2020.

Yeah, Brian, let me try to unpeel that. So overall, we have not given specific guidance on gross margin. We gave it on operating margin because of the dynamics. But to your question, generally speaking, Inflation, you know, right now there's a lot of moving pieces. The transportation inflation we saw heavy in the first half of the year in 19 is moderated, although now we're seeing increases in you know, areas like proteins, and then there's obviously, you know, some of the weather-related inflation that we're dealing with. But as we go into fiscal 20, we think given the overall mix of the portfolio and inflation, we're probably going to be close to where we finished this year, you know, 2.7%, 2.8%, something in that area. We expect to continue to deliver on our realized productivity, and we do have pricing actions that we've taken this year that will roll into next year. Then as inflation comes and as you saw, we had a lot of inflation related to steel and we took pricing to deal with that. As 20 develops and we see inflation and if it hits certain brands, we will plan on taking pricing where it's inflation justified. We just have to manage those dynamics as we go as it relates to the investment. I think overall for the year, there's definitely going to be more of an increase in the innovation-related investment in the first half. And in the second half, although we will still have a healthy rate of investment, year on year it won't be up. So that will be another kind of benefit to the second half. So overall, you put all those things together, you know, there's puts and takes that kind of even out over the whole year. for gross margin, but it's clearly, you know, more investment first half, you know, more benefit second half. And then there's synergies that come in as well, you know, that's split between SG&A and cost of goods sold. So as the year ramps up, you know, the synergies will increase and that will improve margins as well as we move into the second half.

All right. Thanks for that. And just – I don't know if I missed it, but did you give guidance on capital spending for the year? No.

No, we did not. Not in our remarks. We gave it on free cash flow. So overall free cash flow, we're still estimating approximately a billion dollars in free cash flow. Okay. Thank you.

Our next question comes from Steve Chikula with UBS. Please go ahead.

Hi. Good morning. Sean, just to kind of piggyback on Andrew Lazar's question, Wanted to kind of understand a little bit of the glide path of the organic sales as they get better as we move throughout the year. Given where we started in Q4, should at least out of the gate in Q1, should we be definitionally positive for organic sales just to kind of help investors understand the trajectory of the business? And then I've got to follow up.

Yeah, again, Steve, I don't want to give quarterly guidance here. It's not something that we typically like to do. We were in a position where we had to do it last year and didn't like that whole heck of a lot. I think what I can tell you is that this is kind of a first half, second half story. Obviously, as Dave pointed out, we've got some investments in the first half of the year. You know, obviously, that means NQ1 as well because we've got new items coming into the marketplace that we will invest behind. We also are in the midst of doing some value over volume, in particular, on the Pinnacle business as we clear the decks for our new innovations. So, you know, in terms of the year, what we said before is that we expect the trend to as we move from the first half into the second half without giving kind of quarter-to-quarter, month-to-month specificity on the slopes of those curves. I think we'd leave it at that in part because, as we've said many times with respect to the pinnacle TPDs, we are trying to accelerate where possible getting some of these new innovations into the marketplace ahead of a normal planogram cadence. And that work, as it has been going on, continues. especially when we get in some customers, some of these new innovations in there and can demonstrate that they're working and we've got traction. So we'll stay flexible on that and continue to kind of update you should we see that the trajectory is changing.

But that's how we see it right now. Okay. And then, Dave, on the Synergy piece, should we still think that about $150 million contribution and Fiscal 20 is the right number with maybe a third to COGS, two-thirds to SG&A. Is that the right way to kind of frame it for this year?

Yeah, that's right, Steve. We had guided to by the end of fiscal 20, we'll be at about 55% of our synergy realized, and we're still at the $285 million of total synergy, and the split between SG&A and cost of goods sold hasn't changed.

Okay, so with that piece, if you're getting $50 million coming through COGS, Should that be enough for the full year? Nothing quarterly, but should that give us a close about flat gross margins for the full year?

Here again, I don't want to give specific gross margin guidance, but it's clearly going to be a tailwind for us.

All right. Thank you.

Our next question comes from Jason English with Goldman Sachs. Please go ahead.

Hey, good morning folks. Thank you. Thank you for sliding me in. Um, And Sean, I suppose in part you've probably conditioned us to think about your business this way, but looking at the base performance and kind of the cycles you've gone through of cleansing the portfolio and entering a rebuild mode with innovation, which is what I think we were really looking for this year, which, as you mentioned, the biggest slate of innovation you've had. But as we look at the total points of distribution and the progression through the year, I'm We came in with growth, and as we mined the data, it looks like we've seen accelerating declines on distribution, including the three brands that you were highlighting, Marie Callender's, Hunt's, Chef Boyardee, all seeing sort of distribution declines. Can you talk about what's driving that? Are we sort of in an innovation replacement cycle where the innovation's kind of netting out past innovation that's falling away, or – And we found sort of another leg of rationalization that may be weighing on performance.

It's a little bit of everything, Jason. Let me try to break it down for you, give you an example of kind of the diversity of it. So, for example, on Hunts, we've got some restages coming out, which means we've got the old products going out, the new products coming in. There'll be a gap between the two where the new product doesn't scan, and that will show up in a short-term window as if the TPDs have gone down, but then they come back. That's a dynamic, but we also have things going on. Marie Callender is a good example of it. Slim Jim and Swiss Miss are other good examples where part of our playbook is to actually reduce TPDs and put more facings against high-velocity TPDs and drive growth. I'll point you back to the case study I gave, I think it was last quarter, on Slim Jim. where we're doing that pretty aggressively. That's a piece of it as well, and it's one of the reasons I point out usually every other quarter that TPDs can be helpful, but they can also be a bit misleading at times. You've got to look at kind of the total results of the business as well as particularly the velocities, because when we intentionally reduce TPDs, it's usually to pick up basings on higher velocity items, and it drives overall sales growth. So, you know, that's what you've got going on. I think, you know, just as I look back on this – this whole year, we build these plans based on certain planning assumptions. And clearly, for fiscal 19 overall, something's played out differently than we expected when we built the plan. For example, we didn't plan for acute inflate inflation. We didn't plan for the ensuing need to price or the non-economic follow-on behaviors by certain players in some of our categories. We didn't obviously plan for recalls and co-packer issues. So it's been a dynamic environment, including some of Pinnacle's challenges. But all things considered, as we think about fiscal 20 and the innovation slate we've got, the fact that we've got our arms wrapped around Pinnacle pretty well right now, we think we've navigated some of these things we didn't anticipate pretty well. We have posted our second consecutive year of organic growth, which is something that not all can point to in this environment. And as we pointed out earlier, I think that gives us a solid foundation on which to build going forward here with our best innovation slate yet. So overall, pretty positive about kind of how things stack up as we move from first half to second half and throughout our strategic planning horizon.

That's helpful. And one more for me. You mentioned the planning assumptions that you start with at the beginning of the year. You've suggested that you expect this competitive intensity to abate as you progress through the year. But as we've seen before, when companies pursue volume over value, it can take years before it ends poorly. So what gives you confidence that it will abate? And second part to that question, what's the risk to your guidance if it does not, in fact, abate?

Well, if you look at our company as an example, it can take years to abate as a total portfolio, but it usually doesn't take a long time to abate at a category level because you simply can't afford to sustain it for very long across multiple categories. So if you're doing that as a portfolio enterprise, It's just too expensive to do this for too long, especially when you're doing it in the face of inflation. Using the tomato example today, it's not an affordable strategy. It just draws too many resources from other parts of the P&L to be able to hold it. We've seen it before. It historically has almost always proven to be transitory. There are some things that we can do from time to time that help it to be transitory if we need to do those things. That's how we'll navigate it.

Okay. Thank you.

Thanks. Our next question comes from Chris Gurley with Stifel. Please go ahead.

Hi. Good morning. Good morning, Chris. Hi. Just had a question for you first on this, obviously, kind of abrupt change in the promotional environment and the quarter. It's not clear to me yet how you're responding to these challenges. So it sounds like you're selectively responding. Is that the way to think about it? Is that a pressure point on gross margin in the first half of the year as you selectively respond to these challenges?

Yeah, I think what we're conveying is we're not going to unveil our response on each and every case study. That probably wouldn't be a wise competitive approach to doing things. You know, principally, we don't want to, you know, look at all these things and just say automatically, hey, we think we should respond because these things tend to be transitory in nature even in the absence of a response from us. But should somebody want to rent market share and try to sustain it for longer than a narrow window, then we will absolutely consider responding. We'll look at each and every – you know, thankfully, we don't see a lot of these things across the portfolio. We haven't seen – this kind of behavior in, you know, quite some time now. But it does come up, and we will look at it on a case-by-case basis. And, you know, that's probably as much detail as I can get into on it.

Okay. And then just another question in relation to fiscal 20. So think about some of the unique factors that occurred in fiscal 19. I just want to understand which ones get better, don't recur, maybe improve a bit year over year. Obviously, one that comes to mind is Ardett Mills. Do you expect that to make up that sort of six-cent differential this coming year based on your outlook? Any other unique factors you call out for fiscal 20 that help support that rate of EPS growth for the year?

Chris, related to Ardent, you know, given the volatility of the business, you know, we don't give specific guidance, but generally our planning posture is, you know, we're roughly in line for fiscal 20 of where we landed for fiscal 19. So just, you know, that's generally how we will plan that. You know, in terms of year-on-year things, there are a lot of puts and takes, you know, as you go into fiscal 20. I think, you know, specific to Q4, clearly we had some manufacturing challenges. I called out specifically 50 basis points of impact on our gross margins in Q4 that were just pure costs of the recall and some write-offs. So they will not recur in Q4 next year. So they're discrete costs. We have synergies that are obviously ramping up, so that's going to be a big benefit. But we're also investing some of that synergy back in to drive our innovation slate. So there's going to be a clear increase in our innovation-related investment. So, you know, realized productivity, we're humming on that. But we also have inflation. So there's just a lot of puts and takes and balances. But as we went through it all, we planned it. We scenario planned. We came up with our fiscal year 20 plan, and that drove our guidance, and we feel good about it.

Okay. Thank you for that.

Our next question comes from Robert Moscow, Credit Suisse. Please go ahead.

Hi. Thanks. You know, the Gardein brand, really good brand, really good products, and you're clearly talking about plans to leverage it further here. Is this an incremental investment beyond what you've already planned for the next few years? And if not, where is it coming from? Are you having to take it from other brands that you had plans to invest behind, particularly in Pinnacle? And then just a tactical question, I noticed that you're co-branding Gardein in the frozen category. That tends to be a risky proposition, gets a little confusing for the consumer. Have you thought through the risks of having two brands on one pack? Thanks.

Yeah, first of all, Rob, we've always, since we acquired it, viewed Gardena as an attractive growth asset. That's why we talked about it yesterday. We served it at Cagney, and we spent capital to build the capacity. I think what's changed, I think we can all acknowledge, is that it was hard to see the consumer fever pitch for this space gathering quite the head of steam yesterday. it has done as quickly as it's done. So the upshot of all of this is that the market opportunity is quite a bit bigger than we're counting on. Does that mean that the investment behind it will be bigger? Potentially so to take advantage of it, but keep in mind that investment is not a tax on EBIT. Guardian's got pretty good gross margins. So as we sell more and if we pick up the kind of tailwinds we get in a compounding curve over the strategic plan horizons, those sales will generate additional fuel for growth that we will invest back to even accelerate those sales further. So it's kind of a virtuous cycle here we've got going on at Gardein. And overall, the additional upside to it just helps us feel that much better about our long-term prospects and our fiscal 2022 outlook. With respect to this kind of partner branding approach, let me just try to explain how we're thinking about Gardein. To the degree we sell kind of a pure blood meat product, so a chicken alternative, a burger alternative, a hot dog alternative, a sausage alternative, that will stand alone as a Gardein brand. But one of the things we have learned over and over and over again at ConAgra is that the name of the game is velocity. And velocity is always stronger when it's not a new brand in an established space, for example, single-serve frozen meals. but it's an icon brand that has brought modern attributes into that space. In this case, we have a power brand such as Healthy Choice as an example. Healthy Choice is an absolute juggernaut and icon in single-serve meals. But each and every year, we will look to find new modern attributes to bring to the consumer. In this particular window that we're in here now over the next several years, one of these new attributes that we know the consumer is going to be looking for is meat alternatives in the space where meat used to be. So, for example, in Healthy Choice, if a consumer used to buy 20 chicken-based Healthy Choice bowls a year, they may buy 16 and buy four meat alternatives. And Gardein, because we will have a presence in the meat space, we already have almost a $200 million business out there, has tremendous credentials in the plant alternative space, credentials in taste, credentials in texture, credentials in aroma, and credentials across all day parts, breakfast, lunch, dinner, and protein types. So instead of showing up as the thousandth brand in this plant-based alternative space with no credentials, we think the power of Gardein, which has tremendous credentials in plant-based, with the icon of a healthy choice in single-serve healthy meals, works even stronger for us. We are doing similar things right now, by the way, in our sweet treats business with Duncan Heinz Perfect Size where we co-branded with Oreo. We like what we see there. We've done it before. This is not an ingredient inside piece. This is a way to really quickly break through at the point of purchase and make it immediately evident to the consumer within two seconds flat what they're getting and give them confidence that it's going to be a good eating experience. We actually think that that is not a risky proposition, but that's the optimum way to build ubiquity in kind of holistic meals in this plant-based space. Okay, thank you.

Our next question comes from David Driscoll of Citi. Please go ahead.

Great, thank you, and I appreciate you taking the question given the hour. This is going to go back over some ground, but I want to be clear on something. So your stock is obviously reacting negatively. You've upgraded your revenue guidance for the next year. Sean, can you just be clear about something? It sounded like the problems within the fourth quarter got worse as the quarter progressed. So you then mentioned in one of your responses to a question that Nielsen data was giving you maybe some confidence that things were getting better. So maybe can you just bridge the gap here? If things were getting worse as it got closer to the end of the fourth quarter, do you have knowledge that the pricing in canned tomatoes has recovered from private label? Do you have confidence that these negative promotional events going on in frozen single-serve meals, has that ended at this point? Is that why you can be so confident to raise the revenue guidance for fiscal 2020?

Well, David, when we're looking at quarterly results and change versus a year ago, it's not just a function of what's happening right now. It's a function of what happened in the year-ago period, right? So as an example, if you look at more recent SHF results, you'll see better optics than we saw at the end of Q4, and that reflects the fact that there were significant merchandising activities in the end of Q4 a year ago that we didn't get this year. It dropped off. In terms of the drop-off as the quarter unfolded, simply put, we were expecting a fairly strong period 11 and period 12, which were the last two months of our year and at the end of the fourth quarter, and we just didn't get it at the level we discussed, which was the Marie merch, the Chef merch, and the private label pricing actions within canned tomatoes, as well as some of these manufacturing challenges that really hit us toward the end of the quarter. So that's really what it's about. You know, we will have things that will improve in Q1. We'll still be doing things to upgrade the portfolio and do value over volume as we move Q1 and Q2, but then we will also be folding in the new innovation slate. So, you know, a lot going on this year as we get the pinnacle business back up and running, but that's really kind of how it unfolded there in the fourth quarter, particularly in our period 11 and period 12.

If I could do a follow-up, it's related but a bit separate. But given the difficulties that you had in the canned operations, I mean, it's pretty disappointing if private label doesn't raise prices when the cost of the can goes up so much. So what I hear from you guys at your analyst day and today is this amazing amount of new products in very exciting portions of the portfolios. but the canned portion just doesn't feel like it, and then we get this negative hit with private label just not acting well. Why not sell those canned portions of the portfolio so that the residual leftover, we really just get to focus on all these exciting new product opportunities that you lay out? I mean, they all sound great, but it hurts when you suddenly get these you know, oddball activities going on within the canned portion of the portfolio. How do you think about that? How would you respond to that?

Yeah, we've got – it's a fair question, David. We've got a number of grocery businesses that we put under this heading we call reliable contributors, which is basically saying that's what we expect of them. We expect them to contribute reliably in the fullness of time. We have a variety of canned food businesses – that have, quite frankly, been very reliable contributors over the last several years. Hunt's is a good example of one of those businesses, as has Chef. It is quite possible that from time to time, for all the reasons we've discussed quite a bit today, that we can see kind of this non-economic behavior by competition. That will happen from time to time, but it doesn't tend to happen often and it does tend to be transitory. to label a reliable contributor as no longer reliably contributing as if that's a perpetual notion is a bit of an overreaction. But I'm not going to say that, you know, we don't evaluate these kinds of things all the time. I don't think you'll find a company in our space that's been as active as we have over the last five years in reshaping the portfolio, and that includes divesting things that are kind of a chronic drag on what we're trying to accomplish. So we're always looking at that. We did more of that this quarter. I just wouldn't want you to paint, to label canned foods as not reliably contributing as a perpetual notion when that's just not been what we experienced. In fact, what we've experienced is historically it's been a high cash flow business and it's thrown off a lot of cash for us and a lot of fuel for growth elsewhere in the portfolio like frozen.

I appreciate the color. Thank you. Thank you.

Our last question today comes from David Palmer with Evercore ISI. Please go ahead.

Thanks. I can imagine investors are coming out of today with the impression that your guidance for fiscal 20 is more optimistic than it was in the past, or at least eating into a margin of safety as you need more things to come together to hit the plan, given what you said about Hans and Chef Bardi and Marie Callenders, which are likely a negative versus original planning into the first half. If that's true, perhaps you could tell us what positive offsets you're thinking about versus your original thinking for fiscal 20 that are keeping you at that same guidance today. Have a quick follow-up.

Well, I think, you know, again, we're not sitting here patting ourselves on the back for, you know, for what I would call a real raise for the 20 guidance at the high end of sales. It's not that. It's really – a recovery of Q4 because the issues we experienced in Q4, we don't expect to repeat. So really, we're just getting back to basically the same place we planned to all along, and underpinning that is an operating plan that is counting on a lot from some very robust innovation that transcends not only our most strategic segments, Frozen and Snacks and Legacy Cag, but also some of the big businesses in Pinnacle, which will contribute for part of the year as organic. So we're counting on continued performance like we've seen on our innovation the last few years, but now we're seeing it on a bigger slate. And we're excited about this Gardein opportunity, which is really not just a 20 opportunity, but that's to tee up the point that that will continue to serve us well and help us navigate other things we're doing as we move through fiscal 2022.

And then just to follow up, you've talked about Hunt's Canned Tomatoes and Chef Berdy after the pricing actions. What's the confidence and the potential timing of a recovery there? Perhaps there's even visibility already that that's going to get out of the promotion penalty box. Thanks.

Well, we will get out of it. I'm not going to give you the exact timing. You know, these are good businesses. I mean, got unbelievable relative market share on both of those businesses. How we navigate through it, I'm not going to disclose that. It may come a number of different ways, but we'll keep our powder dry on that. You're talking about two brands here that are number one market share by far in their categories. As I mentioned earlier, when we get our price gaps right and our merchandising right, we can recover volume rather quickly on these businesses. So it's just a question of, you know, how is that going to unfold and exactly when is that going to unfold. We're not going to get into that detail quite here today.

Thank you.

This concludes our question and answer session. I would like to turn the conference back over to Brian Carney for any closing remarks.

Great, thank you. So as a reminder, this call has been recorded and will be archived on the web as details in our press release. The investor relations team is available for any follow-up discussions anyone may have. Thank you for your interest in ConAgra Brands.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.