Dexter Congbalay - Vice President of Investor Relations Thomas Werner - President and Chief Executive Officer Robert McNutt - SVP and Chief Financial Officer.

Bryan Spillane - Bank of America Merrill Lynch Andrew Lazar - Barclays Akshay Jagdale - Jefferies Adam Samuelson - Goldman Sachs Andrew Carter - Stifel Matthew Grainger - Morgan Stanley Adam Mizrahi - Berenberg Capital Markets Michael Gallo - C.L. King.

Good day, and welcome to the Lamb Weston’s Fourth Quarter Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Dexter Congbalay, VP Investor Relations of Lamb Weston. Please go ahead sir..

Good morning, and thank you for joining us for Lamb Weston’s fourth quarter and fiscal year 2017 earnings call. This morning, we issued our earnings press release which is available on our website lambweston.com. Please note that during our remarks, we will make some forward-looking statements about the Company’s performance.

These statements 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 filings with the SEC for more details on our forward-looking statements.

In addition, some of today’s prepared remarks include non-GAAP financial measures. These non-GAAP financial measures should not be considered a replacement for and should be read together with our GAAP results. You can find the GAAP to non-GAAP reconciliations in our earnings release.

With me today are Tom Werner, our President and Chief Executive Officer; and Rob McNutt, our Chief Financial Officer.

On our call today, Tom will provide an overview of the operating environment and our overall performance, Rob will then provide the details on our fourth quarter and full year results, as well as on our debt and cash flow and our fiscal 2018 outlook. Tom will then highlight our capital allocation priorities before opening up the call for questions.

With that, let me now turn the call over to Tom..

Thank you, Dexter. Good morning everyone, and thank you for joining our call today. Fiscal 2017 was a transformational year for Lamb Weston. As everyone knows, a little over eight months ago we became a standalone public company. The separation required an incredible amount of work and effort of our employees across our great company.

We have built a talented executive team and have added many talented employees that have been instrumental in getting Lamb Weston to this point in our journey. I want to acknowledge and thank all the team members for their dedication and tireless effort to set Lamb Weston up with a solid foundation for a tremendous future as an independent company.

We have a lot of work to do to complete the separation but we are well on track. I am proud that our organization has been laser focused on executing with our customers and supporting their growth agendas. And that we have remained focused while supporting the countless activities surrounding a spin transaction.

Our ability to execute our business at the level we have during a time of significant transition reflects the dedication and commitment of the entire Lamb Weston organization to all of our stakeholders. Now let me comment on fiscal 2017.

We executed our business with excellence during the course of fiscal 2017 by focusing on delivering the right product at the right time, every time. The business environment and our operating fundamentals were favorable throughout the entire year.

Our efforts to improve product and customer mix, as well as pricing execution across all our segments increased the profitability of our company. We are entering fiscal 2018 with momentum. But let me first give you some specific highlights on 2017. Sales increased 6% with a good balance of price mix and volume growth.

Adjusted EBITDA including unconsolidated joint ventures increased 19% to $707 million. We generated about $450 million of cash flow from operations. We reinvested nearly $290 million of that cash flow into capital expenditures to support future growth.

We made good progress in reducing our leverage to about 3.7 times adjusted EBITDA well within our target range of 3.5 to 4 times. And in the eight months, since the spin in November, we returned a little over $54 million to our shareholders and just last week declared another regular quarterly dividend of $0.1875 per share.

Our commercial and supply chain teams have done a great job remaining focused on supporting our customers. This dedication to serving our customers and their priorities is truly what differentiates Lamb Weston in this competitive marketplace.

For Lamb Weston, serving our customers also means partnering closely with them to understand and support their longer-term growth ambitions both in North America and internationally. Our investments to expand capacity are one way we back that commitment.

In fiscal 2017, we completed two state-of-the-art production lines which added more than 300 million pounds of capacity.

In November, our Lamb-Weston/Meijer joint venture started up its more than 250 million pound French fry line at Bergen I Zoom in the Netherlands to support increasing demand in Europe, as well as fast-growing International markets like the Middle East.

In March, we started up our 50 million pound chopped and formed production line in Boardman, Oregon to help support our customers’ growth in the breakfast occasion in North America. And for the coming year, our expansion and integration projects are on track.

We continue to target our 300 million pound French fry line in Richland, Washington to be operational in late calendar 2017. This line incorporates the latest manufacturing technology and will support customer initiatives in North America, as well as in our export markets.

Lamb-Weston/Meijer’s investment in a joint venture to build an approximately 180 million pound French fry factory in Russia remains on schedule to open in early calendar 2018 and will support increasing demand in that market.

Lamb-Weston/Meijer is also just getting underway with integrating and upgrading the 185 million pound capacity facility in the Netherlands that it recently acquired from Oerlemans Foods’. We are also supporting our customers’ growth through innovation by working with them to expand menu options, increase consumer traffic and drive profitability.

For example, in North America, we are partnering with a national chain as they test a coated French fry product, the first fry product on their menu. In addition, we are teaming up with other national chains on a range of limited time offerings.

Outside North America, we continued to support global and regional chains with limited time offerings including new products or new uses of core potato products.

For instance in Latin America, we recently launched our Waffle-Waffle Fry, a sweet potato, criss cut fry covered in a crispy waffle batter that’s being featured as an advertiser side dish and even a dessert.

In food service, we are meeting the increasing consumer demand for clean label offerings by expanding our simple recipe product platform including recently adding a range of Lamb Weston branded offerings that include just for ingredients, potatoes, oil and sea salt.

In addition, we are partnering with a regional, fast casual chain with a clean label alternative to their higher cost house cut French fry. And in retail, we recently launched a mainstream brand grown in Idaho to complement our licensed brand products, as well as our Alexia premium products.

Our growth and performance this year in the marketplace is especially noteworthy given the potential for distractions associated with the spin-off. Just as with our commercial and supply chain teams, we have executed well across the organization to build a solid foundation to operate as a publicly traded standalone company.

As I mentioned, our fiscal 2017 results reflect the favorable environment in which we’ve been operating including solid demand growth for frozen potato products in both domestic and export markets, high levels of capacity utilization in our factories as well as across the industry and modest cost inflation in our manufacturing base in North America.

Fundamentally, we anticipate that this favorable environment will largely continue in fiscal 2018 and as a result, we are targeting another year of solid sales and earnings growth.

Overall, we expect the demand growth for frozen potato products in both North America and International markets will continue at levels similar to this past year barring any unforeseen economic event that would significantly impact consumer sentiments.

We also believe the industry’s production capacity will continue to be tight around the world through this fiscal year. By working closely with our customers, we’ve been able to anticipate this increasing demand and the need for additional capacity allowing us to be well positioned to meet this growing demand.

For example, in North America, we are in a good position to capture volume growth in the back half of fiscal 2018 when our new French fry capacity in Richland becomes available. And in Europe, Lamb Weston/Meijer is well positioned to capture volume growth as its new capacity has been up and running for over six months.

Although we expect demand and capacity environment to be similar to fiscal 2017, we do anticipate the cost environment in North America to be different this year. As we discussed previously through much of fiscal 2017, we saw little to no inflation in supply chain costs.

Raw potato cost per pound were essentially flat and other manufacturing and transportation costs only begin to increase in late Q3. Since it’s only July, it’s too early in the growing season to determine this year’s crop processing quality and yield and how they will perform in our plants.

We will have much better insight as we enter the September and October harvesting period. As Rob will discuss later, we do expect our other manufacturing and supply chain cost to increase modestly, continuing the trend that we began to see in late 2017. In Europe, it’s a similar story.

On a preliminary basis, we are anticipating an average potato crop and expect other manufacturing and supply chain cost to increase.

With solid demand growth and tight capacity throughout the industry, we believe the environment to improve; both price and mix will remain relatively favorable in the near term and will be at least sufficient to offset modest supply chain cost inflation.

However, it’s important to note that we will continue to take a balanced approach to improving price and mix, an approach that is designed to maintain and reinforce our strategic customer relationships, so that we can deliver sustainable, profitable growth over the long-term.

So as you can see, this is the category that has been growing and we anticipate that demand will continue to increase. We are strengthening our relationships with our customers, growers and suppliers, while strategically investing in capacity and innovation capabilities around the world.

I am confident that we will continue to operate with excellence across our commercial, supply chain and support functions to support our customers’ growth initiatives, deliver solid sales, earnings and cash flow growth both this year and over the long-term and create value for all of our stakeholders.

Now, let me turn the call over to Rob to provide the details on our results and our outlook for the coming year. .

Thanks, Tom. Good morning, everyone. As Tom noted, we’re pleased with our performance. The Lamb Weston team that runs the business day-to-day has continued to deliver the highest level of service that our customers expect, operate our assets at high levels of productivity, and manage cost effectively to delivery strong financial results.

At the same time, the team continues to invest to ensure we can continue to support our customers’ growth and continue to grow value for Lamb Weston’s owners. Specifically, Lamb Weston delivered solid sales growth both in the quarter and for the year. Net sales in the quarter were up 7% over Q4 of 2016, to $833 million.

Volume grew 4% with increases across each of our business segments, we were able to meet this demand growth by continuing to run our assets at peak levels and pulling from finished goods inventory.

Price mix was up 3% as we continue to benefit from the impact of pricing actions taken earlier in fiscal 2017 along with continued improvement in customer and product mix. I note that we will begin to cycle some of those price increases and mix improvement efforts in the first fiscal quarter of 2018.

For the year, sales grew 6% with price mix up 4% and volume up 2%. With respect to earnings, gross profit was up 10% for the quarter and gross margin expanded by 50 basis points versus the prior year to 24%. As expected, our fourth quarter gross margin contracted versus Q3 reflecting the normal seasonality that I discussed on our last earnings call.

Also as we anticipated, and as discussed in our last call, in fourth quarter we began to realize low single-digit inflation for a number of our cost including packaging, labor, edible oil, transportation and warehousing.

In addition, there were some unusual costs related to higher than normal maintenance levels and associated expenditures in the period as well as a few minor inventory-related adjustments that also affected profitability in the quarter. Together, these unusual costs tampered our fourth quarter gross margins by about 50 to 60 basis points.

While these were not identified as one-time costs in our financials, we do not anticipate that these unusual costs have much effect on our future results. For the year, gross profit was up 18% and gross margin was nearly 25%, up 250 basis points. This improvement was largely driven by favorable price mix, volume growth and supply chain productivity.

In the quarter, SG&A expense excluding items impacting comparability increased versus the prior year as we continue to build capabilities to operate as a standalone public company. SG&A also increased due to higher incentive compensation costs based on our actual performance for all of fiscal 2017.

As a result, adjusted operating income was up 5% to $122 million, this was driven largely by increase in gross profit. For the full year, adjusted operating income was up 24% to $542 million, again due to higher gross profit, partially offset by higher SG&A.

Equity earnings from our unconsolidated joint ventures in the quarter increased $24 million from $15 million in the prior year. This result was driven by strong price mix realization and effective cost containment efforts at Lamb Weston Meijer, which more than offset the impact of higher potato costs in Europe.

For the year, equity earnings excluding items impacting comparability were down modestly to $53 million from $54 million. So putting it all together, adjusted EBITDA including the proportional EBITDA from our two unconsolidated joint ventures increased 12% in the quarter to $176 million. For the year, it was $707 million, up 19%.

Turning to earnings per share. Adjusted diluted EPS declined 11% to $0.51 in the quarter. This was a result of an incremental $25 million of interest expense from debt incurred in connection with spin-off. For the year, adjusted EPS was up 10% to $2.32. This was driven by adjusted operating income growth, partially offset by higher interest expense.

Now let’s take a quick look at the results for each of our business segments. First is our Global segment, which is comprise of the top 100 North American based restaurant chain customers, as well as our International business and accounts for a little more than half of our total sales. Net sales were up 6% in the quarter.

Volume was up 4% driven by growth in both Domestic and International markets. Price mix increased 2% reflecting price increases, as well as improvement in customer and product mix. For the year, net sales increased 5% with volume up 4% and price mix up 1%.

Product contribution margin which is gross profit less advertising and promotional expense increased 10% in the quarter, primarily driven by favorable volume and price mix. For the year, it was up 16%.

Next is our Food Service segment, which services our North American Food Service distributors and restaurant chains outside the top 100 restaurant customers. It accounts for about a third of our total sales. Net sales increased 9% in the quarter and for the full year.

For each period, price mix added eight points of growth reflecting pricing actions, as well as improvement in customer and product mix while volume was up a point. Product contribution margin in the quarter increased 24%, again reflecting favorable price mix and for the year, the product contribution margin increased 31%.

Finally, there is our Retail segment, which includes sales of Alexia branded, license branded and private-label products to grocery, mass merchant and club customers in North America. It accounts for about 12% of our total sales. Net sales grew 5%, volume was up 7% primarily driven by growth of private-label products.

Price mix declines 2% largely due to higher trade spending in support of the launch of our Grown In Idaho branded products in late Q4. In addition, price mix fell as growth in private-label led to unfavorable mix. For the year, net sales increased 3% with price mix up 2% and volume up 1%.

Retail’s product contribution margin in the quarter was down 17% largely due to higher trade spending and product mix issues as I mentioned earlier. For the year, it increased 13%. Switching to balance sheet and cash flow, our total debt at the end of the year was a little more than $2.4 billion.

This puts our net debt-to-adjusted EBITDA ratio at 3.7 times, which is inside our target range at 3.5 to 4 times. With respect to cash flow for the year, we generated nearly $450 million of cash from operations, up from about $380 million in 2016. For capital expenditures, we invested about $290 million.

As we’ve discussed previously, this is an elevated level of CapEx due to capacity expansion efforts that Tom described earlier. The remainder of the cash we generated went to pay dividends to our shareholders, as well as service debt. Now let me turn to our fiscal 2018 outlook.

As Tom noted, we anticipate the overall operating environment to remain generally favorable with continued growth in demand for frozen potato products in North America and across most of our International markets that we serve. At this point, our forecast anticipates average potato crop.

We will have more insight on this as the harvest takes place later in the year. Consistent with past practice, we are taking a prudent approach to our fiscal 2018 outlook. Specifically, we are targeting net sales to grow at low to mid-single-digit rate for the year although we anticipate growth in the first half to be relatively modest.

With respect to volume, we will continue to be capacity constrained until the latter part of the second half when our new French fry capacity becomes available for the customers’ growth initiatives.

With respect to price mix, we expect it will improve in the back half as well, as new pricing structures for an increasing number of contract renewals become effective.

We anticipate adjusted EBITDA including unconsolidated joint ventures to be in the range of $740 million to $760 million using the midpoint of this range as an 8% increase versus the pro forma 2017 amount of $692 million.

The pro forma amount for 2017 assumes an additional $15 million of SG&A expense to reflect the full year impact of incremental cost associated with being a standalone public company. We expect the increase in adjusted EBITDA including unconsolidated JVs to be driven by sales growth and gross margin expansion.

Although we are targeting gross margins to expand, it will be at a much more modest pace than the 250 basis points that we delivered in 2017, especially in the first half of the year. This is largely the result of a few factors. First, higher inflation for packaging edible oils, labor, transportation and warehousing costs.

In aggregate, we expect these costs to increase at low single-digit rate similar to what we experienced in late fiscal 2017. Second, we will be lapping the pricing actions that we took in fiscal 2017. And third, we will book about $15 million of higher depreciation associated with our new production lines.

With respect to SG&A, we expect it to increase versus the pro forma 2017 baseline of $260 million due to higher advertising and promotional expense in support of the rollout of our Grown in Idaho products in retail as well as inflation.

We anticipate total interest expense in the range of $105 million to $110 million, which is an increase of about $50 million from fiscal 2017 due to the full year impact of our post spin-off capital structure. This increase will be a year-over-year headwind to our earnings per share in the first half. We anticipate an effective tax rate of 33% to 34%.

Finally, we expect total cash used for capital expenditures of about $225 million. The majority will be spent in the first half of the year as we complete the construction of our French fry capacity line at our Richland, Washington facility.

In summary, we delivered a strong 2017, with growth in sales and EBITDA over the long-term targets that we provided in October Investor Day Meeting and we expect to follow that with a solid 2018. Let me now turn the call back over to Tom to discuss capital allocation. .

Thanks Rob. In summary, our priorities have not changed and reflect a balanced capital allocation policy based on returns and executed with discipline. Our priorities continue to be, first, investing to support growth.

We believe that demand for frozen potato products will continue to grow at an attractive rate over the long-term, both in North America and in the International markets.

As a result, we believe that there are a number of opportunities to generate solid returns by investing strategically through both capacity expansions and M&A to support our customers as they look to grow around the world.

Second, given that we are continuing to make good progress towards the low-end of our leverage target through EBITDA growth, we do not anticipate paying down debt beyond what is required in the near term. And finally, we will continue to support our dividend which is currently $0.75 per share on an annualized basis.

We will evaluate alternative uses of cash down the road as we continue to grow and return to a more normalized CapEx level. As you may have already seen in yesterday’s press release, our Executive Chairman, Tim McLevish has decided not to seek re-election to our Board of Directors in September.

We were fortunate to have someone with Tim’s valuable experience on ConAgra’s Board at the time of our spin and we were even more fortunate that he was willing to step in as Executive Chairman to help with the spin, provide seasoned leadership and help build the foundation for independent Lamb Weston.

In a short amount of time, we have established standalone capabilities, we’ve recruited a great senior leadership team. We have also recruited two new independent directors bringing the total to seven. For all these reasons, Tim decided it was the right time for him to transition out of his role with the company.

I want to thank Tim for his partnership and guidance over the past year and wish him all the best. Finally, let me just say that my Lamb Weston team and I are proud of what we have accomplished in our first year as an independent company.

We are executing well across the organization and confident that we will continue to operate with excellence to deliver another year of solid top and bottom-line growth in fiscal 2018. We will do this by remaining focused on serving our customers and investing in and strengthening our capabilities.

We are well positioned to create value for all our stakeholders over the long-term. I want to thank you for your interest in Lamb Weston and now we are happy to take your questions. .

[Operator Instructions] We will take our first question from Bryan Spillane with Bank of America. .

Hi, good morning everyone. .

Good morning..

I’ve got two questions. One, just related to - the first one just related to gross margins.

I guess, as we’re looking out into 2018 and sort of listening to some of the variables you laid out, it seems like you’ve got a pretty good fix in terms of what your pricing will be given the view you have with your contracts and also the visibility into sort of the non-agricultural related input costs.

So, as we are kind of thinking about gross margins and what could drive upside or downside in 2018. Is the biggest sort of variable just going to be the potato crop or is there something else that we should be focusing on in terms of what could drive sort of some variability in gross margins for 2018? And then I have a follow-up. .

Thank you, Bryan, it’s Tom. Certainly, at this time of the year, as we stated, the crop is an unknown until it matures further down the cycle. So that will be a variability and like we said, as the crop matures, we get into harvest in the September, October timeframe.

We certainly will have a better view on what the impact of the overall cost structure of our raw potato crop is going to be. So that does drive the variability. And like Rob stated, we will give some insight into that down the road. But that’s one of the major factors that impacts our business at this time a year. .

Okay, and then, second question, just in terms of the equity income line this quarter, I think it was certainly much better than what we were modeling and I think a lot better than where the consensus was.

So, I guess, could you give us a little bit more color in terms of the step-up sequentially from I to I why the profitability and then just as we are thinking about that the JV I guess, going into 2018, I know that we were thinking about it was - it would look more like I and I in the first half and then sort of get back to normal levels of profitability in the second half.

Is that still the way should we should think about it or, is there something else that’s changed there?.

Yes, Bryan, this is Rob. In terms of Lamb Weston/Meijer in Q4 performance, the team there has really driven a lot of improvement in price and customer mix that has picked up a lot of the slack that we saw in terms of higher potato cost. At the same time, they’ve done a good job controlling controllable costs that have really helped make that up.

We did get a little bit of tailwind in currency as well. Now as we look forward, I don’t want to independently forecast individual operations and so forth and so, again, at this point, in Europe, we don’t have anything that says we are going to have an abnormal potato crop going forward. So we are forecasting based around an average potato crop. .

And that average potato crop would be applied for the full year or would it be more back half loaded, getting back to normal level of the profitability?.

Yes, Bryan, this is Tom. So, in terms of, we are working through the old crop, new crop transition right now at this particular point just like we do every year. So the new crop will come online starting really in Q2 and going forward. So, it’s pretty similar cycle to what happens here in North America. .

Okay, great. I’ll leave it there. Thank you, guys. .

Thanks, Bryan..

We will take our next question from Andrew Lazar with Barclays..

Hey everybody. .

Good morning, Andrew..

Hi, there is two questions for you. The first one will be just following up on Bryan’s. I guess, at the midpoint of the EBITDA range for 2018, it seems like you do anticipate still some additional EBITDA margin expansion off of what obviously is already higher margin than we have seen for the past few years.

And that also incorporates a still unknown in terms of crop quality as you just talked about. So, clearly, you’ve still got some visibility to additional margin even off of a high base already.

So is it primarily just, I guess, you are far enough through some of your negotiations with customers to give you a sense of that and obviously including what you hear or what you are seeing from the volume demand piece of this as well.

Trying to get a sense of where the visibility to the improved margin comes from even in light of the unknown on the crop side?.

Sure, Andrew, thank you for the question. Right now, we are working through negotiations across all of our segments and well, I am not going to get into the specifics on those negotiations. I will tell you that we feel good about where we are at and our plan how we plan those.

So I think, as this unfolds further down the cycle, we will continue to work through our opportunities not only in our negotiations, but also with our product mix that we’ve been executing against over the past 12 to 18 months. So there is a couple things happening.

It’s certainly the negotiations with the customers and the contracts and then obviously we’ve been laser focused on our mix across the product portfolio. .

Andrew, Rob, if I can add to that, just in terms of supply demand balance or capacity demand balance, as we continue to see growth in the category with no new capacity or significant new capacity coming online until we start up Richland late in the year. We’ve been communicating that to our customers and they realize that.

And so, as we’ve been going through the negotiations on contracts, the outcome thus far has been consistent with what is in our forecast for 2018. .

Thanks for that. And then, just a quick follow-up would be, Rob, as you talked about, obviously, sales growth will be much more modest in the first half versus the fiscal second half, but you still expected growth in the first half on the top-line.

And I am just trying to get a sense of, would you expect that to be balanced between a little bit of price mix and little bit of volume? Or based on what you are lapping in the year ago and the fact that you’ve been running at sort of beyond, just sort of full capacity if you will.

Do you think there could be even a step back on a year-over-year basis in one of those metrics in the first half?.

Well, I think price mix again contracts are open through the year, comes through the year in different timings. Some of that, you are right, we are lapping, but we will continue to get some price mix improvement is what we are anticipating in the first half of the year.

Again, volume because we are constrained on capacity it’s really tough for us to get a lot more volume. So we are not anticipating much volume improvement until we get in the back half of the year. .

Great. Thanks very much..

Thanks, Andrew..

Thank you, Andrew. .

We will take our next question from Akshay Jagdale with Jefferies. .

Good morning and congratulations on a good quarter. .

Thanks, Akshay. .

Good morning, Akshay. .

So, just, first question relates to price mix, but before I get into that, I just want make sure I understand your guidance correctly. So, the EBITDA guidance adjusted for the SG&A cost implies like a 100 basis point margin expansion at the midpoint and I think what you are saying is most of that will come from gross margins.

So, number one, am I understanding that correctly? And you are saying it will be more back half weighted.

Is that the right way to think about sort of margin expansion in general?.

Yes. .

Okay.

And then, as it relates to price mix, there is obviously - I am guessing you are not going to comment on what pricing actions are in the market right now, but in terms of the timing, can you help understand the contract timings? Because from what we understand a lot of the contracts renew August and September, so I know you are saying that some amount of volume that’s renewing I guess, in the back half of the fiscal year.

So, can you give us some color around contract timing? And how that plays through in any given year? Because that’s a bit confusing from what we understand most of the contracts renew August, September. .

Yes, Akshay, this is Tom. Thanks for the question. We are again right in the middle of all these negotiations and the timing is spread out over really Q1, Q2, Q3 when the new contracts get into place.

So, it’s not as specific as August, September, it’s going to flow over the course of Q2, Q3 and the back half of next year and that’s just the typical protocol how the contract start within their new agreement going forward. .

Okay. And just one on cash flow, the CapEx number for this year is pretty significantly higher than what we had expected.

I know it looks like $10 million or so this year’s spend is going into next year, maybe that’s timing-related, but what’s - can you remind us, what you consider a normal CapEx level versus what you call elevated? Obviously, you have a very good balance sheet and cash flow situation, but can you give us, it looks like there is a good $100 million above normal that you are spending again this year.

So I’d really love to know where that spending is targeted towards. Thank you..

Yes. Thanks, Akshay, Rob. Our normal level of CapEx to really maintain the assets and some modest improvement in productivity is in that $110 million range is the way we think about it. And you are right, our CapEx for 2018 is elevated over what we previously anticipated early in 2017.

And driven by a couple of things, as you properly point out, there is some carryover related to CapEx, really related primarily to that Richland number five project. And so some of that’s carryover.

In addition, as we continue to see opportunities for high return investments and we continue to cash flow the business well, we will take advantage of those opportunities.

So that the engineers and the operators they identify a stream of opportunities to make improvements and as we can support those opportunities, we will pull some things forward and that’s what we’ve done. .

Great. I’ll pass it on. .

We will take our next question from Adam Samuelson with Goldman Sachs. .

Yes, thanks. Good morning everyone. .

Good morning, Adam..

Maybe first, on the revenue outlook that you provided the low to mid single-digits and maybe just trying to help think about what drives you the upper or lower end of that? I mean, the capacity constraints in the first half of the year are well taken, but at the same time your volume growth in this most recent quarter was actually quite healthy.

So is it timing of the Richland expansion? Is it uncertainty on potato availability before you get to the new crop? Just help me think about the band on the top-line as you look at the fiscal 2018 guidance. .

Adam, this is Tom. There is a couple things. We’ve got the capacity situation which our opportunities will come online in the back half to drive volume growth. So that’s a big component of it certainly. The other thing to think about is, about a year ago this time, we started running our capacity wide open in the business.

And we are selling up a high level of it. So we are going to have be lapping some high comparables until we get that capacity online and also some price mix things that we action in the last year well ahead of the first half. So those are really the two components as you are thinking about the top-line that are impactful. .

Okay. It’s very helpful. And then, within the global business, and again this is a bit more of a revenue question that the 4% volume growth in the quarter, any way to characterize the Domestic versus the Export performance there. Obviously, one of your bigger customers there point some pretty healthy U.S.

same-store sales earlier this morning, but maybe help us think about just mix of the volume gains that you’ve experienced recently?.

Sure, Adam. I am not going to dissect International to Domestic at this point, but I will give you some color around the trends that we are seeing some of our really strategic customers.

Right now, I am not going to get into specific customers, but that we are seeing some good positive trends in a lot of their markets and that’s healthy obviously for our business but the entire industry. .

Okay. It’s helpful. I’ll pass it on..

We will take our next question from Andrew Carter with Stifel. .

Hi, good morning guys.

Can you hear me?.

Yes..

Good morning, Andrew, yes. .

Okay, yes, so, just kind of getting back to his point, kind of being surprised at the volume growth kind of outstripping what we were modeling and of course, what you will kind of telegraphed last quarter about the capacity kind of running too hot and happened to take some online.

So, one, we are just kind of wondering where did it come from, you mentioned inventory draw down of course and then productivity and then of course, you kind of called out some unique expenses a bit around that on impeded gross margins. Just some of that continues if volumes outside your expectations? Thanks..

In terms - you are right, we - the teams that operate our assets have continued to run the assets at a very high level of productivity and so we are getting more production out of those assets than what we had previously anticipated really to meet customer demand.

So as the demand growth that Tom talks about and we pull from the strategic customers, we are running the assets hard. We are also, as you noted, pulling a bit out of inventory as well. Recall that we had built some inventory ahead of some of our capital projects, specifically the Boardman rebuild that’s going on right now to take us through that.

So we pulled some of that inventory to service customer demand. In terms of the maintenance - increased maintenance cost, it had a minor impact on overall production across the system. .

Okay, thanks. And then, last question, I’ll pass it on. Balance sheet position has obviously improved dramatically by your estimates you are easily be down to three times by the end of this fiscal year.

When should we start thinking of about a share repurchase or is just given how volumes have done, is it likely free cash flow going to more capacity?.

Well, first, as I’ve stated, we are going to continue first of all to invest in our business in the growth, that’s good returns and secondly, I would say, we are going to evaluate our free cash flow position down the road and as we develop our capital allocation policies, we will communicate some of that down the road. .

Thanks. .

Thank you, Andrew..

We will take our next question from Matthew Grainger with Morgan Stanley. .

Hi, good morning everyone. .

Good morning, Matthew. .

Thanks.

So just wanted to ask first about the Grown in Idaho launch and could you talk a bit more about the rationale for launching and supporting that product now when you are in a period of constrained capacity and given the trade spend that you incurred during the quarter, the fact that you have somewhat below average EBITDA margins in the Retail segment.

How do you think about the longer term trade-offs between investing today to expand your presence in the Retail segment as opposed potentially just pursuing higher margin business on the food service side, while competitors are still, for lack of a better word, just have their hands tied on capacity there?.

Thanks, Matthew, this is Tom. We have hadn’t saw an opportunity in the marketplace to round out our strategy in the Retail segment. So, we have participated in our private brands. We have a private brands offering. We have a premium offering in Alexia and we certainly have license brands.

The Grown in Idaho was an opportunity for us to compete at the mid-tier Retail positioning and we feel good about how that has been positioned to sell in. It’s going pretty well and it’s off to a pretty good start.

I would say, in terms of capacity and the part of your question, that particular product runs on a very different part of our asset base and while we talk about we are running all the plants wide open. That’s an area where in the Retail with the packaging in the line - how the line flow goes, we did have some opportunity.

So it’s not compressing the system so to speak in terms of taking away from any other part of our business. It’s just an opportunity for us to expand and we believe based on certainly the category in Retail has been tough.

We’ve been growing and we’ve been doing some things for our customers and they’ve been - they have welcomed it that we are bringing some news to the category. .

Okay, that’s great. Thanks, Tom.

And, just one follow-up there, with respect to the trade spending you had in the fourth quarter and what’s your aspirations are for distribution for the product line overall? Can you give us a sense of where you are in that process? Are we going to continue to see some trade spend way on the EBITDA margins of the Retail segment during the next quarter or two? And just roughly where you are on ACV relative to where you hope to be over the next year?.

Yes, Matthew, it’s really, really early in the process. So, I think, we will give you some updates as we move down the path. We certainly have a program in place that’s measured and I don’t anticipate a significant amount of impact with trade going forward.

We have lots, we had slotting and all the things that you pay coming out of the gate, but it’s really, really early in the process. .

Okay, thanks. And then, just one last one, I wanted to follow-up on Bryan’s question about the JV results, which were pretty strong here in the quarter.

And you talked about some of the improvements in price and mix, but my sense, just more generally around the operating environment in Europe has been that, you have some near-term capacity constraints across the industry right now, supply and demand is relatively balanced.

But there is quite a bit of capacity coming on across the industry by mid 2018.

And I know you are not really giving guidance for that segment, but what are your expectations for the broader pricing environment as we move through the year? And is there the potential for some of that pricing and mix improvement to potentially be pressured as we get towards the back half?.

I would say, the way to think about it is, right now, the team over there is going through a similar process. What we do here in North America in terms of contracting with customers.

Certainly there is, as you pointed out, capacity coming online in 2018, I feel really, really confident with the team over there and how they’ve got this fiscal year position. As the capacity comes online, certainly, I believe that’s going to be some, we are going to keep our eye on and it will be potentially more impactful in 2019.

But 2018 is well positioned right now in my mind. .

Okay. Great, thanks again, Tom. .

Thank you. .

We will take our next question from Adam Mizrahi with Berenberg Capital Markets..

Good morning guys. Just going back to….

Good morning..

European JV, could you comment on whether you believe there is still room for further operational improvements in the European JV? And then, just another one, it sounds like you’ve continued to run the assets quite hard in Q4.

Will you still able to take lines down for the routine maintenance as expected or do you think there may be a need to potentially cool off and how hard you run the assets in the first half of next year? Thank you. .

Thank you, Adam. In terms of the joint venture question, the team three four months, four five months ago, six months ago now, with the crop situation they took actions ahead of it to get ahead of it, there is always a lag in terms of the actions they’ve taken to help offset some of the impact of the crop.

So, again, they have well positioned the joint venture. We will work through the crop. We’ve taken actions to improve profitability back to normalized level. As the new crop comes on, we are anticipating an average crop just like we do every year and the actions the joint venture has taken will help augment their performance next year.

The second part of your question is, as Rob noted, we took actions to build inventory in Q3 and part of Q4 ahead of some of our planned maintenance that we are executing on right now this summer. So, we have not put any of our key maintenance things off to run the plants. We plan around it.

The operations and supply chain team do a great job in scheduling those things and working the inventory levels ahead of any big planned maintenance down time. But we are very disciplined to manage against those programs. .

Great. Thanks very much. .

Thank you..

We will take our next question from Michael Gallo with C.L. King..

Hi, good morning..

Good morning, Michael. .

Just a quick question. You mentioned and you referenced in your prepared remarks a test of a coated product at a chain customer.

I was wondering how we should think about the potential for coated products, your capacity and ability to shift towards them and the potential margin impact both for you and your customers assuming that that’s a successful and ultimately what that means in terms of your ability to drive improved mix within the Global segment? Thanks. .

Thanks, Michael.

Certainly, our capabilities across our network, we have multiple factories that have coated product capabilities and certainly there is some advantages to the product, I think, I am not going to comment specifically on the customer, but we have a number of customers that utilize that product and it’s - has a whole time and a lot of great attributes.

But it is not a - it is not capacity constraints by any means because of the fact that we have capabilities across lot of our factories to produce multiple products in our portfolio. .

Just the potential margin implications of being able to shift more of the mix to coated products?.

Well, I am not going to get into specific product margin, but when we step back, this is about partnering with the customer and meeting the needs that they are trying to drive to meet their consumers’ interest. So, it varies from customer-to-customer based on their consumers and what they are trying to accomplish with them.

So it just really all depends on our customers and how they are thinking about their business going forward. .

Okay, thank you. .

You bet. .

That does concludes today’s question-and-answer session. I would now like to turn the conference back over to management for any additional or closing remarks. .

Hi, it’s Dexter Congbalay. Thanks for joining in the call today. If anybody has some pop up questions like to schedule call, please email me as the best way to reach me today. And I look forward to talking to you later. Thank you. .

This does conclude today’s conference call. Thank you all for your participation. And you may now disconnect..