Lamb Weston Holdings, Inc.

and welcome to the Lamb Weston fourth quarter earnings call. Today's conference is being recorded. At this time, I would like to turn the conference over to Dexter Congolet. Please go ahead, sir.

Good morning, and thank you for joining us for Lamb Weston's fourth quarter and fiscal 2023 earnings call. This morning, we issued our earnings press release, which is available on our website, lambweston.com. Please note that during our remarks, we'll make some forward-looking statements about the company's expected performance, that are based on how we see things today. Actual results may differ materially due to risks and uncertainties. Please refer to the cautionary statements and risk factors contained in our SEC filings for more details on our forward-looking statements. Some of today's remarks include non-GAAP financial measures. These non-GAAP financial measures should not be considered a replacement for and should be read together with our GAAP results. You can find the gap to non-gap reconciliations in our earnings release. With me today are Tom Warner, our President and Chief Executive Officer, and Bernadette Madriada, our Chief Financial Officer. Tom will provide some highlights from the past year, as well as an overview of the current operating environment. Bernadette will then provide details on our fourth quarter results, as well as our outlook for fiscal 2024. With that, let me now turn the call over to Tom.

Thank you, Dexter. Good morning and thank you for joining our call today. We delivered strong financial results in the fourth quarter in physical 2023. I want to start by thanking the entire Lemwesson team for driving these results and their incredible commitment to supporting our customers. I'm proud of the work we did and continue to do to grow our business and build momentum as we enter a new year. Specifically in physical 2023, We delivered record sales of nearly $5.4 billion and drove strong profit growth in each of our core business segments through a combination of pricing actions, mix improvement, and supply chain productivity. We acquired the remaining interest in our European joint venture, which added 1,500 new colleagues, six processing facilities, and nearly 2 billion pounds of capacity. The business integration is well underway, and we believe this strategic transaction strengthens our capabilities to serve customers as a unified global land western. We acquired a controlling interest in our joint venture in Argentina, and we broke ground on a 250 million pound capacity expansion, which will improve our ability to serve the growing South American market. We also made progress on major capital expansion projects in China, Idaho, and the Netherlands, all of which are on track to be completed within the next 18 months. We opened an innovation center in Bergen-Opzum, the Netherlands, where in close partnership with our innovation center in Richland, Washington, we'll develop and test new product and processing ideas for customers in Europe and around the world. We launched new groundbreaking products with proprietary technologies that address customer and consumer needs in non-traditional, frozen potato channels, such as pizza outlets, expanding our total addressable market. We further stabilized our supply chain by targeting staffing levels and managing through a second consecutive challenging crop cycle, all while executing productivity initiatives and upgrading capabilities at our processing facilities. We continued to strengthen our operational infrastructure by completing the design work for the next phase of our new enterprise resource planning system. We'll begin implementing this new system across a portion of our supply chain in North America later this year. And finally, we return more than $190 million to shareholders, including increasing our dividend for the sixth straight year and continuing to execute against our share repurchase plan. I'm especially proud that we delivered this performance in a highly challenging operating environment, and I'm excited to see what our Lamb-Wesson team can deliver in fiscal 2024 and beyond. Let me now turn to the current operating environment. The overall global frozen potato category remains healthy. The fry attachment rate in the U.S., which is the rate at which consumers order fries when visiting a restaurant or other food service outlets, was largely steady throughout physical 2023 and remained well above pre-pandemic levels. Servings in Europe and our other key international markets also held up well. However, the cumulative effect of inflation and other macro pressures on the consumer over the past few years have continued to temper traffic in certain restaurant channels. In the quarter, total restaurant traffic in the U.S. grew versus the prior year quarter as QSR traffic growth more than offset declines in casual dining and full-service restaurants. However, total traffic growth decelerated sequentially each month during the fourth quarter as QSR traffic growth slowed and as traffic declines at casual dining and full-service restaurants softened further. Overall restaurant traffic picked up in June behind strength in QSRs. However, traffic at casual dining and full-service remained soft. We expect that near-term demand may be somewhat choppy because of the variabilities of restaurant traffic trends and continued macro pressures on the consumer. which makes forecasting global demand for frozen potatoes very difficult. As a result, we incorporated a cautious view of demand and volume when developing our physical 2024 financial targets. Despite this added volatility, we remain confident in the long-term growth prospects of the global category and will continue to invest behind the capabilities to support that growth across our key markets. With respect to costs and pricing, While we expect input cost inflation to moderate relative to the double-digit rates that we experienced in each of the last two fiscal years, we believe it will continue to have a meaningful impact on our cost structure. We expect most of our input cost inflation will be driven by higher contract prices for potatoes. In North America, we have agreed to a 20% increase for this year's crop, while in Europe we have agreed to an increase of 35% to 40%. We believe the overall environment for inflation-driven pricing actions remains generally favorable. However, it's important to note that any price actions that we may take this year will likely be more modest than what we implemented in fiscal 2023, given that, first, our pricing actions last year were intended to catch up to the effect of multiple years of high inflation, and second, we expect total input cost inflation to grow at a lower rate. Although we expect pricing actions will continue to be the primary lever to offset inflation over the long term, we'll continue to derive improvements in product and customer mix resulting from our revenue growth management initiatives, as well as supply chain productivity to benefit sales growth and profitability. With respect to the upcoming potato crop, We're harvesting and processing the early potato varieties, and initial indications are that this portion of the crop, which represents about 10% of our potato needs in North America this year, is broadly consistent with historical averages. At this time, the crops in the Columbia Basin, Idaho, Alberta, and the Midwest that will be harvested in the fall appear to be largely in line with historical averages as growing conditions in these regions have been generally favorable. In Europe, a wet and cold spring impacted planting, which may delay the timing of the harvest in some of our growing regions. We'll provide more detail on the crop when we report our first quarter results in early October in line with our past practice. Before Bernadette shares details on our fourth quarter financial performance and physical 2024 outlook, I'd like to update you on a change we're making to our reportable segments. Effective at the start of Physical 2024, in connection with our recent acquisition and to align with our expanded global footprint, we began managing our business in two reportable segments, North America and International. The North America segment includes products sold in restaurant, food service, and retail channels in the U.S., Canada, and Mexico, including our large multinational chain customers. The international segment includes products sold in restaurant, food service, and retail channels outside of North America. These two segments, as well as our global supply chain, will report to Mike Smith, our Chief Operating Officer. Mike's role is focused on execution and is designed to help us drive growth and unlock efficiencies by providing a truly end-to-end view of our global business. I'll continue to maintain responsibility for driving our long-term strategies and priorities, including allocating capital and resources to support sustainable profitable growth and create value for our shareholders. We'll begin to provide our financial results under the new reportable segments with our first quarter results. So in summary, we delivered a record year of sales and earnings growth and continue to build operating momentum across each of our core segments. While near-term demand may be difficult to predict, the category remains healthy, and we remain confident about its long-term growth prospects. And finally, at this time, the potato crop in North America is largely in line with historical averages, while late planting may delay the harvest in Europe. Let me now turn the call over to Bernadette.