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

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

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

Thank you and good morning [indiscernible]. Thank you for joining us for Lamb Weston’s first quarter 2018 earnings call. This morning, we issued our 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. During this call, Tom will provide an overview of our overall performance and operating environment, Rob will then provide the details on our first quarter results, our debt and cash flow and our fiscal 2018 outlook.

Tom will wrap up with some closing remarks and then open 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. Let me start by saying that we’re pleased with our performance in the first quarter and our strong start to the year.

We executed well across the organization as we continue to focus on delivering the right product at the right time, every time to support our customer’s growth and innovation initiatives. Similar to what we’ve experienced over the past year, the operating environment in the quarter was favorable.

Demand for frozen potato products continued to grow at an attractive rate, while available manufacturing capacity remain tight. This provided us with the ability to continue to deliver solid sales and earnings growth. Specifically, sales increased 5%, driven by a good balance of volume growth and price/mix.

Adjusted EBITDA including unconsolidated joint ventures increased 11% to $191 million. As we – and we generated nearly $145 million of cash flow from operations. These results reflect how well our commercial and supply chain teams continue to execute on our strategic and operational objectives and serve our customers.

For example, our global team have made good progress in renewing customer contract, winning business with new customers and leading innovation by supporting customers, limited time offers and promotional plans in North America and internationally. Our Foodservice team continues to strengthen product mix.

The team has continued to be price disciplined when competing for distributor label volume, which is the private label business in Foodservice. This allows us to focus scarce capacity on higher margin Lamb Weston branded products.

Our retail team continues to broaden distribution of our Grown in Idaho branded products and has achieved more than 40% ACV in supermarkets, since introducing the brand in May. In addition, the team has delivered distribution gains for our Alexia branded family packs.

Our supply chain team recently began the process of starting up our new 300 million pound French fry line in Richland, Washington on time and on budget. While production has been limited today, we expect to ramp up the line in the coming months, providing additional capacity to support continuing growth for our customers.

And finally, our Lamb Weston/Meijer joint venture in Europe performed well in the quarter. The cost pressures resulting from last year’s potato crop are now largely behind them as they begin to process the new crop.

Of course, our performance in the quarter also reflects today’s favorable operating environment, solid demand growth and tight manufacturing capacity.

We believe the environment will remain generally positive for the remainder of fiscal 2018, providing us with the opportunity to continue to improve price/mix and capture good volume growth with our capacity additions in North America and Europe.

But with only one quarter behind us, we are taking a prudent approach by reaffirming our outlook for fiscal 2018. While it’s still too early to fully assess the impact of ongoing customer contract renewals and the potato crop, let me give you an update on where we currently stand with each of these.

As we’ve discussed previously, we have a number of customer contracts up for renewal this year, especially in our Global segment. We’ve already renewed a number of these contracts and have been able to agree on terms, which are in aggregate in line with our expectations.

The new pricing structure for these contracts will become effective as the year progresses. So we continue to expect price/mix accelerating in the back-half of the year. A number of key contracts need to be negotiated and we anticipate finalizing them in the coming month.

For these remaining contracts, we’ll continue to take a balanced approach to improve price and mix in order to help offset inflationary pressures and importantly to maintain and reinforce our strategic customer relationships. With respect to the potato crop, we’re in the middle of the fall harvest period right now.

So it’s still too early to have a definitive view on the crops yield and quality. However, based on what we’ve harvested today, we can provide a preliminary view. We believe that the crop to be harvested in all of our growing areas are consistent with overall historical averages.

While production yields are slightly down versus last year, we do not currently see any risk in our ability to secure sufficient potato supply as price is consistent with our expectation. Overall, quality appears to be generally in line with historical averages.

To be clear, we do not expect any significant issues with this year’s crop based on what we’ve seen today.

However, we do need to see how the potatoes perform in our production facilities in the coming weeks and get a sense for how the potatoes are going to take the storage before we can make a final assessment on the crop’s overall quality as well as the financial impact versus our expectation.

So with our first quarter performance shows we’ve executed well in a favorable environment. We delivered solid top line growth with a good balance of volume gains and price/mix improvement, expanded gross margin and made good progress developing our infrastructure to operate as a standalone company.

In addition, we’ve continued to grow our business by supporting our customers through well-timed investment in new capacity, driving product innovation and strengthening partnerships with our growers and suppliers. Now let me turn the call over to Rob to provide the details on our results and our outlook..

Thanks, Tom. Good morning, everyone. As Tom noted, we’re pleased with our financial performance. Our underlying results in the first quarter were in line with our expectations and reflected good balance of sales growth, supply chain productivity and cost discipline to drive earnings and cash flow growth.

Specifically, Lamb Weston delivered solid top line growth in the quarter with net sales up 5% to $817 million. Price/mix was up 3% as we continued to benefit from the impact of pricing and mix improvement actions taken in fiscal 2017, as well as pricing actions implemented this quarter.

Volume grew 2% with increases across each of our business segment. Gross profit was up $16 million or 9% versus a prior year. Higher price/mix, volume growth and productivity drove the improvement more than offsetting the impact of commodity, manufacturing, transportation and warehouse cost inflation.

Gross margin expanded 80 basis points to just over 24%. While we continue to target gross margin expanding for the full-year, gross margin in the second quarter maybe pressured by startup costs related to the new fry production line in Richland.

We anticipate total startup cost will be about $5 million with the vast majority of that affecting the second quarter. SG&A expense in the quarter, excluding items impacting comparability was $57 million, that’s up $11 million or 24% versus a prior year.

Essentially, all of that increase was related to incremental cost associated with building capabilities to operate as a standalone public company. We’ve made good progress building these capabilities and are continuing to fill certain support functions.

As a result, going forward on a run rate basis, we expect to incur modestly higher SG&A cost than we did in the first quarter. Just a reminder and it’s important to note that in the first-half of fiscal 2017, we were still part of ConAgra and did not incur any standalone public company costs.

When we provided our EBITDA guidance outlook earlier this year, we highlighted a pro forma adjustment that increased fiscal 2017 SG&A by $15 million in order to provide a more appropriate base line for 2018 results. Nearly, all of the $15 million adjustment should be applied to the first-half of fiscal 2017.

Adjusted operating income in the quarter was up $5 million or 4% to $140 million, with the benefits of strong sales growth and gross margin expansion more than offsetting the increase in SG&A. Equity method investment earnings from our unconsolidated joint ventures increased to $20 million from about $11 million in the prior-year period.

This increase included an unrealized gain of about $3.5 million related to mark-to-market adjustment associated with foreign currency hedging contracts..

Going forward, early indications are that both yield and quality of this year’s potato crop in Europe will be well above last years. This is likely to result in significantly lower raw potato prices relative to last year’s crop.

So putting it all together, adjusted EBITDA, including the proportional EBITDA from our two unconsolidated joint ventures increased about $20 million, or 11% to $191 million. About half of that increase was due to performance by our base business with the other half from our joint ventures.

With respect to earnings per share, adjusted diluted EPS declined a $0.01 to $0.57. Interest expense increased by about $24 million as a result of the additional debt incurred in connection with our spinoff from ConAgra, resulting in a headwind of about $0.11 in the quarter.

This essentially offset the strong increase in our operating earnings and equity income. Now let’s take a look at the results for each of our business segment. First is our Global segment, which accounts for a little more than half of our total sales. Net sales for the segment were up 4% in the quarter.

Price/mix increased 3%, reflecting price increases as well as improvement in customer and product mix. As we’ve discussed previously, we’re heavy this year in global contracting renegotiations, but the impact of the bulk of those won’t take place until the back-half of the year.

Volume was up 1%, as growth in North America more than offset the effect of our decision to exit lower-margin volumes in some international markets.

Product contribution margin, which is gross profit, less advertising and promotional expense increased 1% in the quarter, as favorable price and volume gains were largely offset by commodity, manufacturing, transportation and warehousing cost inflation.

While improved price/mix offset our higher manufacturing cost on a dollar basis, it was insufficient to hold our product contribution percentage. As a result, global product contribution margin percentage declined about 40 basis points versus the prior year.

We expect global product contribution margin percentage will expand in the second-half as we begin to implement new pricing structures associated with contract renewals. Next is our Foodservice segment, which accounts for about a third of our total sales.

Net sales increase 7% in the quarter, price/mix increased 6%, reflecting the carryover impact of pricing actions taking in – taken in the latter half of fiscal 2017, as well as some pricing actions taken in the quarter. We also continue to improve customer and product mix.

Volume was up a point, driven by broad-based growth across segments customer base. Product contribution margin in the quarter increased 14% largely due to favorable price/mix. As a result, product contribution margin percentage expanded by 200 basis points. Net sales for our Retail segment, which accounts for about a 11% of our total sales grew 3%.

Volume was up 9%, primarily driven by the introduction of Grown in Idaho branded products and increased sales of private label products. Price/mix declined 6% due to higher trade spending in support of expanding distribution for Grown in Idaho.

Retail’s product contribution margin in the quarter was down 16% as a result of the higher trade spending, as well as transportation and warehousing cost inflation. Product contribution margin percentage declined 400 basis points.

We expect retail’s product contribution margin to be pressured for the remainder of the year due to continued elevated trade spending for Grown in Idaho. Finally, net sales for our other segment, which includes our non-core businesses accounts for about 4% of our total sales increased 18%.

The increase was due to improved sales volume and mix in our vegetable business. Product contribution margin increased $8 million to about a third of the increase relates to year-over-year increase in mark-to-market adjustments associated with commodity contracts in our overall Lamb Weston business.

A significant portion of the increase also reflects expenses incurred in the prior year associated with the recall of some vegetable products, which were produced by a third-party.

Switching to our balance sheet and cash flow, our total debt at the end of the quarter was a little more than $2.4 billion, which is about the same as it was at the end of fiscal 2017. Our net debt to adjusted EBITDA ratio remain 3.7 times, which is inside our target range of 3.5 to 4 times.

With respect to cash flow, we generated nearly $145 million in cash from operations, up from about $115 million in the prior-year period. It’s important to note that, we do have some seasonality for our operating cash flow.

It tends to be lowest in the second quarter when we build raw potato and finished goods inventory during the fall harvest period and when we pay our growers. We finance a portion of our seasonal working capital with our revolving credit line. Operating cash flow improves in the third and fourth quarters as we work down potato inventories.

With respect to capital expenditures, we invested nearly $105 million with much of this spent on our new French fry production line in Richland, Washington. As Tom mentioned, we’re in the process of starting that – up that line right now and remain on track to ramp up production in the back-half of the year.

Remainder of the cash we generated went to pay dividends to our shareholders as well as service our debt. Now let me turn to our fiscal 2018 outlook. As Tom mentioned, despite our first quarter results and overall favorable environment, it’s still early in the year. So we’re taking a prudent approach by reaffirming our outlook for fiscal 2018.

In addition, we’ve not adjusted our outlook for any impact of the hurricanes that hit Texas, Florida and the Caribbean. Clearly, there are some puts and takes and we’re still working through the underlying net impact, if any. However, we expect any effect would be short-term and modest relative to our full-year results.

We may have a more pronounced impact on our second quarter. So for our full-year fiscal 2018 outlook, we continue to target adjusted EBITDA, including unconsolidated joint ventures to be in the range of $740 million to $760 million. Using the midpoint of this range that’s an 8% increase versus the pro forma 2017 amount of $692 million.

We expect this increase will be driven by sales growth and gross margin expansion in the second-half of the year. We continue to target net sales to grow at low, mid – low to mid single-digit rate with our volume growth capacity constrained until the latter part of the second-half of the year as we ramp up the new production line.

We anticipate price/mix to improve in the back-half of the year as new pricing structures for recently renewed contracts become effective. Our outlook also assumes an average potato crop.

As Tom mentioned, while we’ve not seen any significant issues with this crop – this year’s crop to-date, it’s too early to know how the fall potato crop will perform in our plants or store in our warehouses over the full processing season.

As we indicated a couple of months ago, we see cost of goods inflation trending a bit higher than in recent years with non-potato costs up low single-digit. Nonetheless, we anticipate that our improvements in price/mix, volume growth and productivity will more than offset cost inflation, resulting in gross margin expansion.

We expect this expansion will be partially offset by higher SG&A costs versus the pro forma 2017 baseline of $260 million. This increase in SG&A is due to higher advertising and promotional expense in support of the roll out of our Grown in Idaho products in retail, as well as inflation.

We continue to see interest expense in the range of $105 million to $110 million, that’s up about $50 million from fiscal 2017, due to the full-year impact of our post spinoff capital structure.

As you saw in our first quarter results, higher interest expense was a significant headwind for our earnings per share and will pose a similar headwind in the second quarter. We anticipate an effective tax rate of 33% to 34%. In the first quarter, our effective tax rate was a little over 33%.

And finally, we expect cash use for capital expenditures of about $225 million with the majority spent in the first-half of the year on the completion of our Richland production line. In the first quarter, our CapEx was about $105 million. Let me turn the call back over to Tom for some closing comments..

Thanks, Rob. In summary, we’re pleased with our operating performance and our strong results in the first quarter. We’re executing well across the organization and remain on track to deliver our outlook for the year.

We continue to implement our growth strategy to support our customer success with well-timed investments and new capacity and creating product innovation.

While remain focused on growing with and serving our customers, while investing in and strengthening our capabilities, we’re well positioned to grow value for all of our stakeholders over the long-term. I want to thank you for your interest in Lamb Weston, and we’re now happy to take your questions..

Thank you. [Operator Instructions] Our first question today comes from Andrew Lazar from Barclays..

Good morning, everybody..

Andrew, are you there?.

I’m here, can you hear?.

Hi, good morning, Andrew..

Yep..

Yep..

Good, thank you. Two quick questions from me if I could. I guess, the first one would be perhaps you can help maybe characterize a little bit for us of the volume in your Global segment that is sort of up for renewal maybe directionally.

About what percent of that volume is, let’s say, has been renewed and maybe what percent still is left to go? And what I’m really trying to do is just get a sense of your level of visibility on that piece of things?.

Thanks, Andrew, this is Tom. I would say right now we have line of sight about 75% of our volume renewed in that – in the Global business unit. And as I’ve stated in my prepared remarks, over the coming months, we expect to work through the remaining 25% of the contract renewals..

Yes, thanks for that. And then I think at one point over the course of the last fiscal year with volume growth being as strong as it has been. I know that the plants are running at pretty high levels of utilization.

And I thought at one point maybe you’d mentioned that you’d need to back that down a little bit just a normal maintenance and things of that nature.

I was curious if that – if you’ve been able to sort of do that in the context of volume still being pretty solid or some of that needs to happen as we go through this fiscal year, how you go through that?.

Yes, Andrew, I would say over the course of the past couple of quarters, we have been able to address some of our maintenance needs in the factories. And we’ve done a great job supply chain team managing around that as we continue to service our customers. So we look for opportunities.

At times, you take some downtime maintenance and address our – some of our maintenance issues..

Okay. Thank you very much..

And moving on, we have a question from Matt Grainger from Morgan Stanley..

Hi, good morning, everyone. Just had two questions as well..

Congratulations..

Well, hi, thanks. So I wanted to ask the obvious question on the sales guidance, if you’re still calling for low to mid single-digit growth second-half weighted. we had 5% growth in the first quarter. And I know it’s still early in the year and – but apart from some of the recent weather-related disruptions that might factor into Q2.

It really seems like most of the uncertainty in the outlook at this point is around crop quality and processing. So as we’re thinking about top line for the balance of the year, what are the key swing factors that could result in that being a bit higher, a bit higher in the range.

So what still gives you a pause in terms of raising the guidance?.

Yes, Matthew, the way I think about it is that Q2 last year we had an extremely strong quarter. And I would characterize it in terms of – that’s when we were really running the factories full out across the board. So we’ve got a pretty strong comp coming at us this quarter. And the good news is, as we’ve stated, we’ve got our production capacity.

We’re in the front-end of the startup and we’ll work through our vertical startup process over the coming months and we’ll have available capacity in the back-half of the year as we’ve stated the last couple of calls. That’s the – that is the big key for me for the balance of this fiscal year on top line..

Okay..

And as far as your question around the crop, as I’ve said, we feel pretty comfortable where it is right now. We certainly have to process the crop in the factories and understand, how that quality is going to process into our product base. And again, it’s – thinking about and monitoring the store ability of our crop going forward.

But right now, as it sits, feel comfortable across historical averages..

Okay. All right. Thank you, Tom..

Matt, I’m sorry, this is Rob. Just to add to Tom’s point on the volume ramp up also recognize we had some price increases that took place in Q2 and through the back-half of the year, especially in our Foodservice business. So the year-over-year comp is going to be a little tougher there as well, for both on volume and on price..

Okay, that’s really helpful. Thanks. And then can I just follow-up on the contribution margin in the Global segment, Rob? You had a quite a bit of favorable price/mix, but you still saw margins contract a bit year-on-year, and I know you spoke to this.

But could you just elaborate a bit more on some of the factors that played into the lack of operating leverage there? I don’t know if that was kind of the residual flow-through of some of the leftover higher cost inventory from last year’s crop, or maybe lumpy inflation that came into the segment this quarter? And then just to confirm, you expect margins to expand in Q2 off of a prior year basis sequentially much higher than it was in Q1?.

Yes, and thanks for the question. The – in terms of what we saw in the Global segment relative to the other segments, Global did not have as much of a year-over-year price improvement.

And in fact, it’s much mix, I mean, when you think about price and mix, mix was – customer and product mix was a significant part of that improvement in the top line in Global. In terms of the cost inflation, yes, we are seeing some of that cost inflation showing up now.

And where in the Foodservices business, we’ve got some price improvement over first quarter of prior year. We didn’t have as much of that in the Global segment. And so it just wasn’t enough to offset that inflation on a percentage basis..

Okay. Great. Thanks, again..

Thank you..

Our next question comes from Akshay Jagdale from Jefferies..

Good morning. Congratulations on a solid quarter. I have two questions. The first question is related to the outlook for COGS inflation and the impact it has on the magnitude of your pricing action. So I believe today was the first time you actually disclosed that you have taken incremental pricing actions in foodservice this quarter.

So, it’s our view and I don’t know if you agree with this, but the cost of raising potatoes over the next three years likely is going to move up slightly. And then you’ve already talked about non-potato COGS inflation. So it looks like, there’s going to be some modest inflation more so than you’ve seen in your COGS.

So I’m just wondering how that is playing through and how you’re thinking about pricing this year and just maybe over the medium-term, if I may, not just this year, but if you’re thinking through the next couple of years.

Can you just help me understand how you’re thinking about that?.

Yes, Akshay, it’s Tom. As we’ve gone through our pricing actions this year relative to what the inflation that we – our point of view is on 2018, we certainly consider that and that influences our pricing decisions.

In terms of the outlook and forward inflation thought that we have, I’m not going to get into expectations on how we’re thinking about doing it at this point. But as we have in the past and will continue to do.

When we take pricing actions into the market, we take that all into consideration as we’re thinking about the forward curve of our business cycle..

So is it fair to assume that the magnitude of the actions this year are greater than last year, or that’s not better?.

I think, Akshay, it’s hard to compartmentalize this year versus last year. We’d have to go back and take a look at the overall percentage increases. We have a lot of moving pieces when it comes to pricing in terms of customers negotiations and we have different channels that we evaluate based on our overall cost complex and the market.

And so it’s kind of comparing apples to oranges from year-to-year based on how I think about it..

Okay. And then just on the crop quality issue, what the – I’m just trying to assess the potential downside in dollar terms relative to, let’s say, what you have budgeted.

And if you can while answering that, maybe you can compare and contrast what happened in that 2013/2014 crop when you were part of ConAgra and there were certain callout in terms of crop quality, because from the outside looking in, there isn’t really any data that points to a major quality issue even in 2014.

So can you just help us think through what is the magnitude downside at this point knowing what you know about the crop and maybe just give us a sense of what happened back in 2014? Thanks..

Sure, Akshay, the order of magnitude right now as I’ve stated, we think right now the crops going to be at historical average, so it’s right. What that means financially is, we believe it’s going to be right at our planned levels, but we still have the next 30, 60 days to evaluate overall performance in our factories and store ability, as I’ve said.

And in terms of what happened a couple of years ago that was an extreme situation and the order magnitude, if I remember right, was in the neighborhood of $15 million to $25 million of downside..

Perfect. Thank you..

And we’ll take our next question from Chris Growe from Stifel..

Hi, good morning. This is Andrew Carter on for Chris Growe.

Can you hear me?.

Yep..

Yes, Andrew..

Morning. So what we’re trying to – what we’re struggling with a little bit and this is still kind of on Matt’s question. Your guidance implies 2%, 6% EBITDA growth in the final nine months of the year, significant deceleration from a 11% growth.

But it goes against kind of an expectation you’ve outlined for stronger pricing benefit, the volume coming online, much stronger contribution from international is likely and kind of the headwind from SG&A is going to kind of fall down as well, and do you feel comfortable with the crop.

So just trying to get really kind of a better understand of what the puts and takes are here?.

Yes, I will address it in terms of, we’re a quarter in the year and we’re taking a prudent approach. Certainly, everything you stated is positive at this point, but we have a – we have to get through the remaining contract negotiations with our customers. I want to feel completely comfortable with how the crops performing.

And we will always, as we have in the past, take a prudent approach as we think through the outlook for our business going forward..

Fair enough. And I’ll ask one follow-up if can.

So given kind of the tight capacity and a little bit on what Andrew was asking, how were you, I guess, we’re still kind of confuse how were you able to get the 2% volume growth against the prior year? And were there any costs associated with the kind of this volume growth, which you’re obviously capacity constrained similar to 4Q 2017?.

Yes, Andrew, this is Rob, I’ll take that. In terms of capacity, if you look at what we did last year and we talked about it a little bit on prior calls, we did have some inventory build ahead of some planned downtime related to major capital projects in Boardman.

And so we had built that inventory, and so that sucked up some of that production capacity and now we’ve been releasing that inventory as we’ve got through that Boardman product – project.

And so, that’s really coming out of inventory and a lot of that, plus again the supply chain folks, the guys running the plants are – they have just done a super job and continue to maintain strong operating rate across the business..

Well, thanks. I’ll pass it on..

Thanks, Andrew..

Adam Samuelson from Goldman Sachs is our next question..

Great. Thanks very much. So I guess, the first question has been a lot of ground covered already.

I’d be interested to understand the other segment this quarter, which had a 35% contribution margin, there wasn’t any real color on that? I know it’s a smaller business, but what was an outsized contributor? I’d be interested on any color there, expectations on how you think about that business going forward?.

Yes, this is Rob. In terms of the other segment, again, it’s non-core, but the key issue there was in the vegetable business, where prior year comp, we had a cost related to recall that hurt us in the prior year. And so the comp there is a real difference.

The other piece is, as I’d mentioned, some mark-to-market on unrealized commodity contract gains..

And that just doesn’t relate to the vegetable business, that’s for the entire [Multiple Speakers].

Yes, thank you. Yes, that’s caused…..

We just slug that into the other segment..

Okay, that’s helpful. And then maybe just holistically, following on the spirit of some of the earlier questions trying to reconcile the performance in the fiscal first quarter, the desire for prudence on the guidance versus kind of understanding the moving pieces of the outlook.

In the first quarter itself, do the results meaningfully exceed your own internal expectations whether that’s international in parts of the base business? Just trying to calibrate where you guys are running versus your plan, if everyone’s quarterly kind of calibration was often, just understand some of the moving pieces relative to the full-year outlook?.

Yes, the – in terms of Q1, we were really in line with our expectations. I mean, things like mark-to-market adjustments in currency and things like that, frankly, we don’t forecast and fall outside of that.

But really within the base business operationally really pretty well on plan modestly above and then in our joint ventures again modestly above the plan in terms of how the business is operated..

Okay, that’s helpful color. That’s all..

Our next caller is Bryan Spillane from Bank of America..

Hi, good morning, everyone..

Good morning, Bryan..

I just had one question and it’s kind of related to the overall demand outlook.

I guess, as you’ve gone through the process of working through contract with your customers, can you give us a sense of in their planning and specifically thinking about like volume and demand, do you get a sense that there’s an expectation that maybe demand is accelerating or the sales outlook is improving.

And maybe more specifically, what we’ve heard across a lot of other companies early in this earning season has been a little bit more optimism on developing in emerging markets and also really in Europe as well.

So you could just kind of give us a sense for how you feel your customers are thinking about kind of the demand outlook going forward from here? And then also specifically about some of the international markets?.

Thanks, Bryan. I feel pretty confident as we sit today and how the demand is going to continue pacing at levels we’ve experienced in the past. Again, as I’ve stated, the North America demand has picked up based on our customer mix and how we positioned our portfolio with our customers.

So we’re aligned with customers that are winning in the marketplace domestically and as well as in Europe. I would say, in terms of the international markets, I’m extremely bullish on a number of different markets in which I met with customers recently and they have pretty aggressive expansion plans over the near-term.

So as we sit today and I think about the category globally going forward, I’m confident that the demand is going to continue and as it has in the past on recent trends..

All right. Thank you..

All right..

Our next question is from Adam Mizrahi from Berenberg Capital Markets..

Good morning, guys. In your Foodservice position, can you talk about the balance of the 6% price/mix growth.

How much of this is coming from what you call carryover pricing versus current pricing? And could you also comment on the contribution of product mix in the quarter in the Foodservice position?.

In terms of price/mix and price is a significant component, because again, as I mentioned, that we had some price increases in the later part of prior year in fiscal 2017.

And so that’s a significant component of that price/mix, but we also continue to and the team does a super job of, in these capacity constrained environment really, really getting the best bang for the buck in terms of capacity available. And so there are also some efforts around both customer and product mix improvement..

Okay. Thank you. And just more generally on Europe, can you talk about the ability – your ability to put the price increases there and how that compares to the U.S? Thank you..

Yes, this is Tom. It’s pretty similar to the U.S. and the team in our Lamb-Weston/Meijer joint venture has done a terrific job managing the balance of customer mix, product mix and pricing through the marketplace.

We’ve had pressure in a couple of different markets, but overall and in general, it’s pretty consistent with how we operate our pricing plans in the U.S..

Great. Thanks very much..

We’ll go next to Michael Gallo from C.L. King..

Hi, good morning. One question and one follow-up. First, when we look at your CapEx obviously, you spent almost half of what you’re going to spend for the fiscal in Q1. And so free cash flow really is going to accelerate from here fairly significantly, particularly as you get to the back-half of the fiscal.

So I was wondering how we should think about the uses of that cash what kind of things you might be looking at? And then also if you can provide us with an update of the coated fry test, and I think you alluded to on the last conference call with a global customer. Thanks..

Yes, in terms of use of cash, I think as we’ve said consistently, this is a growth business and a growing business. We’ll continue to invest in the business, well within the band of our debt service or our leverage target, but still have some room there and we’ll continue to make the required debt pay down.

And then, as always, we consider what the appropriate use of the remainder in terms of rewarding shareholders. And so those are conversations we continue to have with the board and don’t have anything specifically to speak to today. But we continue to consider that, but really first target is continue to invest in an attractive and growing business..

And in terms of the coated product that’s progressing well and we expect that to be in market. So in calendar 2018, so that continues to move along. We’re excited about it. It’s a big opportunity for us. And I think, we believe it’s going to do well in the marketplace..

Great. Thanks a lot..

Okay..

And that concludes today’s question-and-answer session. Mr. Congbalay, I’ll turn the conference back to you for additional or closing remarks..

Thank you for joining us today. If you have any follow-up questions, please e-mail me, and then we can set up a call or if it’s a quick question, obviously, I’ll get back to you via e-mail as well. Have a good day, everyone. Thank you..

Thanks, everybody..

And that does conclude our conference today. Thank you for your participation. You may now disconnect..