ConAgra Brands, Inc.

Good day, and welcome to the ConAgra Brands first quarter fiscal year 2020 earnings conference call. All 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. To ask a question, you may press star, then run on your telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Brian Carney of Investor Relations. Please go ahead.

Good morning, everyone. Thanks for joining us. I 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 the 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, Legacy ConAgra Brands, and Legacy Pinnacle. References to Legacy ConAgra Brands refer to measures that exclude any income or expenses associated with the recently acquired Pinnacle Foods business. With that, I'll turn it over to Sean.

Thanks, Brian. Good morning, everyone, and thank you for joining our first quarter fiscal 2020 earnings call. Fiscal 2020 is on track following a very solid Q1. We continue to implement the ConAgra way to profitable growth by executing against the principles and plan we shared at Investor Day. We're applying our value over volume playbook to the legacy Pinnacle portfolio, and we've made important progress strengthening the foundation of the business and repositioning Pinnacle's leadership brands for profitable growth. We're also pleased to report that our ongoing integration and synergy capture related to the pinnacle business and our deleveraging progress remain squarely on track. In Legacy ConAgra, we continued to deliver solid execution and maintained our momentum in the first quarter, particularly in our leading frozen and snacks businesses. Looking ahead, we remain confident that our second half results will reflect stronger growth than the first half. We'll lap the anniversary of the Pinnacle acquisition and the easier comps due to the start of our value over volume execution across its portfolio. We'll also begin to benefit from the exciting new innovations that are being introduced to the market. Therefore, we are reaffirming our fiscal 2020 guidance for all previously communicated metrics. Our agenda this morning is to provide an update on our work on the legacy Pinnacle business, discuss our continued progress on legacy ConAgra, and share some additional details on our expectations for the remainder of the year. Turning to the Legacy Pinnacle Portfolio. Before diving into the details here, I'd like to take a step back and review the central tenets of our Value Over Volume Playbook, which is essentially our approach to optimizing the base business and establishing a stronger foundation on which to build. As you've heard me say before, Value Over Volume is a disciplined approach to growth that acknowledges not all volume is created equal and consumer demands are always evolving. The approach dictates that we consistently apply rigor to portfolio management. Value over volume involves eliminating weaker SKUs in advance of the launch of higher performing new products and the associated brand building investments. It also involves renovating the core and getting the fundamentals right. These fundamentals include pricing, promotion, assortment, distribution, product quality, and packaging. We've previously shared that our application of value over volume to the Legacy Pinnacle portfolio would be a key priority. As you can see on slide seven, we're making real progress. In fact, we're seeing very similar patterns to what we saw in Legacy ConAgra a few years ago. We've trimmed low-quality SKUs from the marketplace. We've seen TPDs decline year-term, but importantly, We've also seen base velocities improve sharply. We demonstrated on brands like Banquet and Healthy Choice and Legacy ConAgra. This creates a much stronger foundation on which to infuse brand-building investments. Wishbone is one of the key legacy pinnacle brands where we're furthest along in strengthening the foundation. As we've discussed previously, Wishbone was challenged by several issues, service, quality, and the label change executions. We identified the issues and took action, fixing the service challenges, improving labels for better variety communication, and also upgrading the product quality. As you can see on slide eight, we've stabilized the business. In fact, we grew it in Q1. We also remain highly focused on executing our playbook on the Birdseye and Duncan Heinz brands. Low-performing SKUs have come out of the market and fundamentals are improving. Keep in mind, that we're in the very early stages of recognizing the benefits from our new innovations in these categories. The shelf reset windows at large customers are different than they are for Wishbone, so the timing of their recoveries is different. We do anticipate improvement in the second half of fiscal 2020 for both of these brands as they begin to benefit from the addition of our new innovation slate. We're confident that the Birdseye and Duncan Hines brands will continue to stabilize and are on track for profitable growth. We also remain on track across all our integration, synergy, and deleveraging initiatives, as highlighted on slide 10. Across the board, we're very pleased with the execution of our integration activities. Our employee-related transitions are now substantially complete, and since the close of the transaction through the end of Q1, we've realized $71 million of cost synergies. From a balance sheet perspective, we're on schedule with our deleveraging plan, having reduced total gross debt by $148 million in the first quarter and by more than $1 billion from the transaction close through the end of Q1. As we consistently said, we remain firmly committed to maintaining a solid investment-grade credit rating. Overall, we had a solid first quarter on Legacy Pinnacle. We've made good progress in strengthening the foundation across the portfolio and look forward to continued improvement in the back half of the year as we begin to benefit from the new innovations. Turning to Legacy ConAgra. The business started the year well, and we're pleased with the trends we're seeing. The Legacy ConAgra business delivered solid performance during the quarter. Together, the two large domestic retail businesses outperformed their planned organic net sales growth. Yet again, we saw terrific momentum in our Legacy ConAgra frozen and snacks businesses. As expected, Our grocery sales performance in Q1 was impacted by some holdover from the Hunts and Chef OERD dynamics that we detailed last quarter. As we'll share with you today, we have action plans in place and trends are already improving. But we also experienced some unplanned softness in our international and food service segments during the quarter, and this negatively impacted our top-line performance. This softness relates to some one-time issues, and both segments are expected to recover in the second half. Importantly, despite these top-line headwinds, our international and food service segments over-delivered their profit plans for the quarter. Let's get into each of these items in more detail. Turning to slide 13, you can see that total retail sales for the legacy ConAgra business were up 0.9% from the same period a year ago, demonstrating 2.7% growth over the two-year period. While I'll walk you through the year-on-year drivers of the fiscal year in a moment, You can see in this chart that the two-year growth rate has been fairly stable for the past four quarters and we're entering a period of easier comparisons on a one-year basis. On slide 14, you can see that we continued our momentum in the legacy ConAgra frozen portfolio throughout the first quarter with retail sales growing 2.5%. In addition, our legacy ConAgra frozen meals business continued to outperform our peers in Q1. In fact, It has become the industry leader in the frozen category. Our legacy ConAgra frozen meals business now has the number one position in share of total retail sales and gained share of category dollars in Q1. Slide 16 demonstrates that we're also gaining share of shelf. As we've discussed, in some instances, our actions to remove low-performing products drives lower TPDs. as we create more holding power for our higher velocity items. In other cases, we've seen TPDs expand. In either event, our goal is to grow share of shelf, and that's exactly what we're doing. As we know, our retail customers run the ultimate meritocracy. They will give more space to the products that move off the shelf the fastest. This data demonstrates that we're earning more shelf space by having products that consumers demand. Importantly, shelf space is a leading indicator that bodes well for our opportunity to grow sales. Frozen wasn't the only leader in our legacy ConAgra portfolio in Q1. Snacks also maintained momentum through the first quarter and delivered strong results across a variety of brands and categories. Total retail sales in snacks were up an impressive 7.2% versus a year ago. Meat, snacks, and seeds emerged as particularly strong leaders with an increase in retail sales of 9.4% and 8.5% respectively. Overall, retail dollar sales in snacks demonstrated sustained performance improvement throughout the first quarter, having grown 9.8% on a two-year basis. Similar to frozen, our legacy ConAgra snacks business is also outperforming its peers and gaining share as demonstrated on slide 18. Turning to the legacy ConAgra grocery portfolio for a moment, if you recall, last quarter we faced headwinds in our grocery portfolio related to pricing and promotional challenges. As the cost of steel cans increased, we implemented inflation-justified pricing on Hunt's canned tomatoes and Chef Boyardee to partially offset the increased cost. However, our private label competition in canned tomatoes kept prices flat and, in some instances, actually decreased prices. And on Chef Boyardee, we lost some high quality merchandising. The effect of these dynamics was a higher than expected volume decline in Q4. We planned for this decline to continue through the first quarter as a carryover from Q4, and it did. We've already begun implementing action plans for each of these brands to reverse this trend. But before I get to the year to go, I'll cover food service and international. As I mentioned earlier, we faced some unplanned softness in the top-line performance in our international and food service segments during the quarter. The international segment was impacted by external events in Puerto Rico and India that shifted the timing of sales previously expected in Q1 to the second half. While this shift in timing impacts our quarter-to-quarter results, we expect that it will have no net impact on the top-line for the fiscal year. Partially offsetting this time and shift, our international segment benefited from growth in snacks and frozen. The improved mix, as well as cost savings, resulted in higher than planned operating profit and margins in the quarter. In our food service segment, we made the strategic decision this quarter to opt out of a particularly low margin contract consistent with our value over volume strategy. While this decision negatively impacted our top line in the near term, It was the right thing to do for the health of the business and benefited our Q1 margins in the segment. Furthermore, we expect stronger top line performance in food service for the balance of the year with new items coming to market. We also expect better than anticipated performance from Gardein within the food service segment, which will start to be included in our organic number during the second quarter. Looking ahead, we're excited about what's to come in the back half of the year. First, we are providing more promotional support on Hunts and Chef Boyardee to better compete in market. Second, we've got a strong investment plan for Q2 for the new innovation that's about to hit the market. In fact, the second quarter will mark the peak of our investment cycle as we incur launch expenses to tee up our slate of new products. And third, we expect terrific second half growth. We'll see innovation build across many of our segments in the second half of the year. we expect our in-store presence to be much stronger and drive growth. Some categories, this will be on the back of increased TPDs, and in others, it will come on the back of increased facings on high-velocity items. You'll also benefit from easier comparisons in the back half of the year as we lap prior year value over volume activity and increased competition. In addition, we'll lap the anniversary of our pinnacle acquisition discrete supply chain disruptions, and the higher interest expense and share count that started in Q2 of last year. Let's go into each of these items in a bit more detail. Starting in the second quarter, we began launching new smart promotional support for Hunts and Chef Boyardee to improve volume trends. Remember, Hunts and Chef Boyardee continue to maintain the number one position in their categories among branded competitors. Both brands are of critical importance to consumers. We're already seeing early traction on both brands, as demonstrated on slide 23. The first two weeks of our second quarter have shown the benefit of these strategic promotions. It's certainly early days, and we have some tougher comps in the weeks ahead given the year-ago hurricane activity, but we're confident that we have the right marketplace strategies now in place to deliver sequential improvement throughout the second half of the year. We're also excited to introduce exciting new products to our $2 billion snacks portfolio throughout the remainder of the fiscal year. Our latest innovation slate, a portion of which is shown here, will premiere at NACS in October. We're delivering products with bold flavors, new forms, and optimized price pack architecture. If any of you are at NACS, please stop by our booth to see this great work for yourself. We're proud of our snacks portfolio. It's one of the fastest growing. We're confident that our continued innovation in the space will further differentiate and elevate our already iconic brands. We're also excited about our new ConAgra Brands Center for Food Design, which we expect to open in the first calendar quarter of 2020 next door to our headquarters in Chicago. This is an expansion of our state-of-the-art R&D and culinary capabilities and will be exclusively focused on snacking-related innovation. This facility will combine culinary, food and packaging design expertise in one space, enabling the rapid development of even more contemporary snacking products. We're also introducing reinvigorated innovation to our sweet treats portfolio in the back half of the year across both Legacy Pinnacle and Legacy ConAgra brands. Duncan Hines is being reframed as a sweet treat to unlock significant growing demand spaces with refreshed packaging, fun and novel flavors, and new snacking platforms. Legacy ConAgra's snacking brands will also receive an injection of innovation to capture consumer excitement with trending kid-friendly themes. We plan to build upon our category-leading position in Frozen by introducing our strongest innovation slate to date throughout the balance of fiscal 2020. We've been strategically tailoring our products to fit the needs of today's busy consumers by providing them with premium nutritious ingredients, and increasing sustainability, all at affordable price points. Birdseye is expected to benefit meaningfully from these efforts. We expect Birdseye performance to accelerate in the second half, as we see the impacts of our recently launched innovation slate, as well as upcoming new product introductions, including spiralized zucchini. As one of the largest brands in frozen vegetables, we're confident that Birdseye is well-positioned to capitalize on contemporary forms and trending flavors. Another brand in our portfolio with significant growth opportunity is Gardein, which we spoke about at length last quarter. We're working hard to continue to build out the Gardein brand to capitalize on the explosive growth in the plant-based meat alternative space. The Gardein food service business grew an impressive 25% in the first quarter and continues to accelerate penetration across multiple food service channels. As we shared with you last quarter, the brand is the second largest in the plant-based meat alternative space and has already quadrupled in size over the past four years. In retail, we expect Gardein to gain prominence in both frozen and refrigerated as we introduce more high-quality innovations. an on-trend brand with modern attributes, Gardein is uniquely positioned to generate superior velocities by leveraging ConAgra's culinary capabilities, differentiated packaging techniques, and our diverse portfolio of power brands. And we are well positioned to support Gardein's continued growth with new capacity coming online during Q2. Overall, we're pleased with the progress ConAgra has made in the first quarter of fiscal 2020. We're on track with our plan, and confident in our ability to accelerate growth in the second half of the year and deliver our fiscal 2020 guidance. With that, I'll turn it over to Dave.