Good morning, ladies and gentlemen, and welcome to the Hormel Foods Corporation Third Quarter Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. This call is being recorded on Wednesday, September 4, 2024. I would now like to turn the conference over to Jess Blomberg. Please go ahead.

Good morning. Welcome to the Hormel Foods' conference call for our third quarter results of fiscal 2024. We released our results this morning before the market opened. A copy of the release can be found on our website, hormelfoods.com under the Investors section. On our call today is Jim Snee, Chairman of the Board, President and Chief Executive Officer; Jacinth Smiley, Executive Vice President and Chief Financial Officer; and Deanna Brady, Executive Vice President of the Retail Segment. Jim will review our third quarter results and provide a perspective on the rest of fiscal 2024. Jacinth will provide detailed financial results and further commentary on our outlook. Deanna will join Jim and Jacinth for the Q&A portion of the call. The line will be made open for questions following Jacinth's remarks. As a courtesy, please limit yourself to one question with one follow-up. If you have additional questions, you are welcome to rejoin the queue. At the conclusion of this morning's call, a webcast replay will be posted to our Investor website and archived for one year. Before we get started this morning, I'd like to reference our Safe Harbor statements. Some of the comments we make today will be forward-looking and actual results may differ materially from those expressed in or implied by the statements we will be making. Please refer to our most recent annual report on Form 10-K and quarterly reports on Form 10-Q, which can be accessed at hormelfoods.com under the Investors section. Also, we will discuss certain non-GAAP financial results this morning. Management believes that doing so provides investors with a better understanding of the company's underlying operating performance. The presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Further information about our non-GAAP financial measures, including our comparability items and reconciliations, are detailed in our press release, which can be accessed from our corporate or investor website. I will now turn the call over to Jim Snee.

Thank you, Jess. Good morning, everyone. We delivered solid third quarter results and another quarter of better-than-expected earnings. Our core business remains healthy, led by retail takeaway growth, top line growth in our Foodservice business, further recovery in our International business, and continued progress on our transform and modernize initiative. Specifically, many of our key retail brands grew during the quarter, outperforming their categories and continuing to resonate with our customers and consumers. Our Foodservice business delivered another quarter of above industry sales growth, highlighting the value of our solutions-based portfolio, direct selling team, and diverse customer and operator base. We continued to experience significant recovery in our International segment in the quarter, led by our global brands, and we continue to realize growing benefits from our transform and modernize initiative. We remain on a realistic and achievable path to improve our business, deliver on our commitments and execute against our long-term strategic priorities. Going a bit deeper into our performance for the quarter, I'll start with our Foodservice segment. Our Foodservice team delivered another quarter of above industry growth, marking our fifth consecutive quarter of year-over-year volume growth. We grew volume and net sales despite pockets of industry softness, proving the effectiveness of our differentiated value proposition. As expected, Foodservice segment profit was generally in line with last year. Foodservice segment profit remains historically strong and healthy, having grown nine out of the last 11 quarters. Our balanced approach, including our portfolio, direct selling team, and the diverse channels we operate in, continues to protect our Foodservice segment from many macro headwinds. We continue to see strong demand for our premium and solutions-based items, including premium bacon and pepperoni, premium prepared proteins, and turkey. Products such as Bacon 1 cooked Bacon, Fire Braised meats, Jennie-O turkey, Cafe H globally inspired proteins, and Old Smokehouse bacon each delivered double-digit net sales gains. Additionally, innovative offerings such as Hormel Flash 180 sous vide style chicken breast and Hormel ribbon pepperoni contributed growth during the quarter. Our direct selling organization remains key in times of industry slowdown. Our team can connect directly with operators to strategize solutions for their challenges, reduce costs, and create meaningful long-lasting relationships. We were once again named to Selling Power's 60 Best Companies to Sell For, recognizing the direct sales teams that support each of our segments. We believe that our diverse channel presence in foodservice enables resilience in the face of industry pressures. We have continued to deliver steady top-line growth in both our commercial and non-commercial businesses. Taken together, our Foodservice business continues to be exceptionally well positioned to drive innovation, value, and operator engagement. Transitioning to our International segment, our performance in the quarter shows continued improvement versus the challenging environment we experienced last year. From a profitability standpoint, the business generated impressive segment profit growth of 78% compared to the prior year. Our results in the quarter were driven primarily by a greatly improved export environment. Branded exports performed well in the third quarter with SPAM luncheon meat delivering a second consecutive quarter of double-digit top line growth. Skippy peanut butter also had a strong quarter as we expanded distribution in the South Korean market. In addition, our branded refrigerated exports continued to perform well in global foodservice channels. Commodity exports, which have historically benefited the International segment's top line but delivered lower profitability than other elements of the portfolio, were down significantly year-over-year. This is a result of improved inventory management and stronger sales of value-added turkey items in the domestic U.S. market this year. Our China business continued to rebound in the quarter and is off to a strong start for the fourth quarter. An important part of China's improvement is our strategy within the retail space. We saw positive results from innovation launches with our largest retail customers in the quarter, a direct result of our in-country innovation center. Finally, we are realizing strong results from our investments in the Philippines and Indonesia, delivering on our commitment to strategically expand our global presence and restore sustainable growth in our International business. Overall, we remain confident that we have the right strategy and structure in place to drive growth in our International business over the long term. Shifting now to retail, where our third quarter results are a bit nuanced on the top line, so I'll spend some time explaining them. First, and most importantly, there is strength in the underlying core business. We were pleased with the end market performance of key brands in the quarter. According to Circana, brands such as Hormel Black Label bacon, Jennie-O lean ground turkey, SPAM luncheon meat, Skippy peanut butter, Hormel Chili, Mary Kitchen hash, Lloyd's barbecue, Applegate natural and organic meats, and Wholly Guacamole grew dollar sales in the third quarter. Additionally, we are outperforming in many of our categories. Our performance in key categories such as bacon, canned meats, turkey, and peanut butter demonstrates that our investments in key brands are working. We are also optimistic about the trend line we are seeing in our convenient meals and proteins business, which has stabilized over the last quarter. We continue to support the center store with innovation, including SPAM Korean barbecue during the third quarter, which is the 12th permanent variety in the SPAM family of products. This product is garnering a lot of excitement because the flavor profile is on trend and reaching new SPAM consumers. Second, business momentum continues in our important bacon and emerging brands verticals. The bacon vertical again delivered strong results, both in terms of shipments and consumer takeaway. Black Label raw and convenient bacon products are resonating with consumers and showed growth in dollar sales, volume, and household penetration during the quarter. According to Circana, Black Label bacon is the leading growth brand in the bacon category over the last 12 months. We expect these trends to continue into Q4 as we support our bacon brands through advertising investments and introduce exciting new innovations to the marketplace, such as oven-ready bacon and Black Label cinnamon toast crunch bacon. Within the emerging brands vertical, Applegate items grew across all major categories in the quarter, including bacon, breakfast sausage, hot dogs, deli meats, and breaded chicken. We also launched Applegate organic pepperoni, the first and only nationally available organic pepperoni. We are excited to see the results and development for this emerging category. Growth from our key brands, our overall category performance, and our innovative launches show the strength and health of our underlying core retail business. However, as we discussed during our second quarter earnings call, overall top line results in our retail segment remain nuanced. We continue to be negatively impacted by turkey dynamics. The growth in branded Jennie-O items is being more than offset by whole bird commodity markets. Our expectations for the year have largely unfolded as discussed on our first quarter earnings call. Next, as we mentioned on our second quarter earnings call, we experienced a production disruption at our Planters facility in Suffolk, Virginia, which was impactful to the third quarter. Production is back up and running as we have taken corrective action within the facility. As production continues to ramp up, we have secured co-packer partnerships to help support our snack nuts portfolio to improve fill rates while we finish upgrades within the Suffolk plant. By the end of this fiscal year, we believe the production disruption will be largely resolved and we will be in a much better position to return the business to full service levels. Jacinth will provide more color on the financial impacts during her commentary. I want to thank our broader team for the work they have done to help control the disruption, service the business, and protect the Planters brands. Lastly, we continue to see softness in our high volume, low margin contract manufacturing business. We expect continued top line headwinds in this business due to lower demand for some items. So to wrap up our retail discussion, the underlying core business is healthy. We remain focused on working with our retail customers to drive category growth and create meaningful value for our end consumers. Moving now to our enterprise-wide strategic initiatives. We are seeing a growing benefit from our transform and modernize initiative. All of our pillars, plan, buy, make, move, and portfolio optimization, progressed in the third quarter and the work streams continue to mature. This quarter, we are highlighting two pillars: Plan and Make. For Plan, significant work was done during the quarter on the implementation of our new end-to-end planning process and technology. While this upgrade will have many benefits for years to come, we are quickly generating new insights, which have helped in our focus on improved inventory management. For the Make pillar, our operational improvements have generated encouraging results. We continue to unlock additional production capacity and realize cost savings across our network. These wins, as well as our ongoing focus on continuous improvement across all our facilities are resulting in impactful advancements across our vast supply chain. On our fourth quarter earnings call, we look forward to providing you with a comprehensive update on our transform and modernize initiatives, including recaps from 2024 and our plans for 2025 and beyond. Shifting now to our fiscal 2024 outlook. We are updating our net sales guidance to account for commodity market conditions, impacts from the production disruption at our Suffolk facility, and continued softness in our contract manufacturing business within the retail segment. We are also narrowing our earnings guidance range as we approach the fourth quarter. This update includes an incremental impact from the production disruption at our Suffolk facility. In our Retail segment, we expect continued momentum across our key brands and categories led by bacon, value-added turkey, and emerging brands. We are also committed to supporting our brands through strategic trade and advertising investments for the remainder of the year. We expect successful execution of our fourth quarter innovations and improvements to our Planter service levels. In Foodservice, we expect continued broad-based volume and net sales growth led by bacon, turkey, pizza toppings, and our line of premium prepared proteins. We expect another quarter of significant segment profit growth in the International segment. Importantly, we expect continued benefits to net earnings from our transform and modernize initiative, which is expected to deliver its strongest level of savings in our fourth quarter. Taking all these factors into account for the full year, we expect net sales in the range of $11.8 billion to $12.1 billion and diluted net earnings per share in the range of $1.45 to $1.51, and adjusted diluted net earnings per share of $1.57 to $1.63. We continue to demonstrate our ability to execute our clear and achievable plan and are on track to deliver on our earnings commitments for the year. In closing, I'd like to take a moment to recognize Deanna Brady, Executive Vice President of Retail, leader, mentor, advocate, and a friend. Last month, we announced Deanna's decision to retire after almost three decades of service to Hormel Foods. Deanna has impacted almost every area of our company. Her leadership during COVID and the go-forward reorganization was critical to our success, and the culture of accountability she has created will last for years. I wish her the best in her well-deserved retirement. Deanna's ambition, passion for our business, and leadership will be greatly missed. We also announced the return of John Ghingo to Hormel Foods. Enabled by our intentional and well-developed succession process, we are fortunate to welcome John back to the organization to lead the Retail Group. John is a dynamic leader, known for building strong teams and strong brands. He is the ideal person to drive continued focus, innovation, and growth within the retail segment and our company. At this time, I will turn the call over to Jacinth Smiley to discuss detailed financial information related to the third quarter and additional color on our outlook.

Thank you, Jim. Good morning, everyone. As Jim noted in his opening comments, we delivered another quarter of solid results and better-than-expected earnings. Volume for the third quarter was 1 billion pounds and net sales were $2.9 billion. Top line growth in Foodservice was more than offset by declines in our International and retail segments. To provide more color on our Retail segment's top line results, approximately three quarters of the net sales declines were related to lower sales of whole bird turkeys, contract manufacturing, and Planters. Gross margin was comparable to the prior year period at 16.8%; the benefits of our transform and modernize initiative offset headwinds from lower commodity turkey pricing and lower sales of Planters snack nuts. SG&A decreased $31 million in the third quarter due to the lapping of our unfavorable arbitration ruling in the prior year. Adjusted SG&A increased 4%, driven primarily by planned higher employee-related expenses. We continue to support our leading brands in the marketplace and expect to increase advertising expenses for the fourth quarter and full year, including an advertising campaign to support our new Planters Nut Duos. Equity and earnings for the third quarter decreased due to lower results from our MegaMex joint venture, partially offset by improvement from our international investments. MegaMex was impacted by higher avocado costs, partially resulting from the temporary suspension of USDA inspections during the quarter. Interest and investment income from the third quarter increased as interest income from favorable market rates offset higher interest expense associated with the recent debt issuance. Earnings before income taxes were $226 million, an increase of 9% compared to the prior year. On an adjusted basis, earnings before income taxes for the third quarter were $256 million. The effective tax rate was 21.7% for the third quarter, in line with last year. We continue to expect our effective tax rate for fiscal 2024 to be between 22% and 23%. Our third quarter performance resulted in diluted net earnings per share of $0.32. Third quarter adjusted diluted earnings per share was $0.37. We have delivered strong operating cash flow during the year. Year-to-date cash flow from operations was $858 million, an increase of 18%. We remain committed to dividend growth, investing in our business, and maintaining an investment grade credit rating. We paid our 384th consecutive quarterly dividend effective August 15, at an annual rate of $1.13 per share. This dividend marks the 96th year of uninterrupted dividends returned to our shareholders. We invested $65 million in capital projects during the third quarter. Our outlook for capital expenditures in 2024 remains at $280 million. During the quarter, we used a combination of cash on hand and proceeds from debt issued in the second quarter to pay off a $950 million note that came due. With this debt repayment, we remain comfortably within our stated long-term leverage ratio range. Shifting to our outlook, we're updating the full-year net sales range and narrowing our earnings expectations. Our revised top line range encompasses the current projection for the business, including declines due to: One, updated commodity market expectations as third quarter pork costs did not rise to the level as expected; two, the impact of the Suffolk disruption; and three, continued softness in our contract manufacturing business. We expect fourth quarter pork input cost to decrease seasonally. We continue to assume full year pork input cost to be higher than last year and above five-year averages. In turkey, our supply remains healthy, and we are in a strong position to service our customers and attract new business opportunities. We are projecting growth across several parts of our Jennie-O branded turkey business, including lean ground turkey in retail and value-added turkey in foodservice. Lower volumes and pricing for commodity whole turkeys are expected to continue to pressure earnings. As Jim noted, the Suffolk production disruption impacted our third quarter earnings. We realized a $0.03 earnings per share drag during the third quarter and are now estimating an additional $0.03 earnings per share impact in the fourth quarter. This update accounts for a slower production restart than was originally estimated, commercial impacts, facility and maintenance expenses, incremental co-packer costs, and reduced marketing expenses. Additionally, we experienced storm damage to our Papillion, Nebraska facility early in the fourth quarter. We are assessing the financial impact resulting from this event. Consistent with our prior guidance, our full year outlook assumes higher salaries, normalized employee-related expenses, and costs associated with planned investments in the business, including higher year-over-year advertising investments. Finally, our earnings per share guidance assumes the strongest contribution of the year from our transform and modernize initiative in the fourth quarter. Taken together, we are maintaining the midpoint of our EPS guidance and narrowing the range. To conclude my remarks, I would like to highlight the release of our 2023 Global Impact Report, a comprehensive update to our 20 By 30 Challenge. The report highlights meaningful progress against our goals and I would like to mention four key wins that I'm particularly proud of: One, we achieved the safest year in our company's history with our lowest recordable incident rate ever. Two, our packaging team's sustainability initiatives resulted in nearly 1.7 million pounds in material savings, resulting from optimized package designs and improved shipping efficiencies. Three, more than 200 dependents of our U.S. team members are utilizing the opportunity for a free two-year college education through the company's groundbreaking tuition program, Inspired Pathways. Four, we continue to invest in the communities in which we operate, contributing more than $12.5 million in cash and products to uplift communities. This includes investment in the hometown food security project across sector coalition working to alleviate food insecurity in Mower County, Minnesota. There are many other meaningful updates featured in our Global Impact Report, and I encourage you to take a look. I would like to extend my thanks to the teams committed to achieving our corporate responsibility goals and completing our 20 By 30 Challenge. Now, I will turn the call over to the operator for the question-and-answer session.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Your first question comes from Ben Theurer with Barclays. Your line is now open.

Yes. Good morning, and thanks for taking my question, Jim, Jacinth. So, just wanted to start off maybe with the update to the guidance and if you could give us a little bit more clarity on what you're seeing in terms of like the high end versus the low end? I mean, you took down sales by about $300 million, but there's still a range of about $300 million. So, what are the potential outcomes here as it relates to the top line? And then if you can break this down, why the lower top line has no impact down on the profit line as EPS was essentially just narrowed, but not changed?

Yeah. Good morning, Ben. Thanks for the question. Obviously, there's a lot there. I think it's important for us to start with the third quarter. The performance in the third quarter on the top line, the decline really is driven by three primary things. We talked about the three quarters of the top line being driven by turkey contract manufacturing and Planters. The second thing is, we still have some impact in our convenient meals and protein pricing that we've taken. We're seeing the benefit of the pricing, but that is still having some minimal impact. And the third factor in the quarter is the comparison in our International group, where we're really lapping some high volume, low margin commodity business from last year in the third quarter. So, that's the decline in there for the third quarter. As we look forward into the fourth quarter, there are a couple of things that are similar, but also some that are different. From a market perspective, they are high, but they’re not as high as we expected. That will continue to impact us. Jacinth and I both talked about the impact of our Suffolk product or plant disruption, which had an impact in the third quarter, and will continue to have an impact in Q4 as we continue to ramp back up and get improved fill rates, alongside the continued headwind of our contract manufacturing. You put all those things together, and that's how we get to the range. When we think about what could take us one way or another and why we're able to really keep the bottom line the same is a lot of the declines were high volume, low margins, in some cases negative margins piece of the business. What we're talking about in terms of improvement on the bottom line, we've got our international business, which continues to rebound and improve off of last year. Our retail business has strength in the underlying core business. I mean, we’re seeing key retail brands, Bacon, Jennie-O, Skippy, Applegate, SPAM all perform really well. We expect Q4 to continue to build in terms of our transform and modernize initiative. We’ll have an opportunity to provide more detail on the Q4 call. So when you package all those things, that’s what gets us to that top line guide while still being able to maintain the bottom line midpoint and narrow the range.

Okay. Perfect. Thanks for that clarity. I have a quick follow-up regarding the foodservice dynamics. We're still observing volume growth, though not as high as earlier in the year. As we approach the fourth quarter, what insights do you have from your foodservice customers regarding the volume momentum?

Yeah. I mean, we still expect solid volume and sales growth from our Foodservice business. That top line growth has been really broad-based, which has been encouraging, not only across our product categories but the different segments within foodservice in which we compete. Foodservice is on track for a record year. So foodservice remains strong and well positioned to drive value for us.

Your next question comes from Ken Goldman with JP Morgan. Your line is now open.

Hi. Good morning, and thank you. My first question is whether your guidance takes into account any potential financial effects from the storm damage. I would also like to understand what the possible impact on your bottom line could be due to the storm.

Yeah. Good morning, Ken. So yes, we did have this unfortunate damage from the storm earlier in the quarter, and our production is fully back up and running. In addition, we also have redundant capacity as well for our plant. When we think about impact from a sales perspective, it doesn't at all impact sales. The costs that we're talking about and calling out is really to repair our facility, so it has no impact at all on our top line.

Okay. I'll follow-up on that one. And then my second question, and maybe this is a little more direct than I intended to be, but why are you selling products for zero or negative margin? Is it mainly to spread fixed overhead over a bigger revenue base? And I guess the broader question there is, how do we think about the potential down the road for maybe incremental supply chain efficiencies that could allow you to reduce your need or desire to sell product from a co-man or commodity perspective that doesn't really help your bottom line directly?

Yeah. Ken, there's a couple of things there. So the first part of it is, we do have, on the pork side and the turkey side, live harvests. When you're harvesting animals, we sell everything. Our goal, and we've been very successful at it, is to continue to move up that value-added ladder. So we feel really good about the progress we've made over the decades, but there's always going to be elements of that that are more commodity-driven. Depending on market conditions, we may find ourselves in that situation, and that part isn't going to change. The second part, which is important, is the work that we are doing in transform and modernize, particularly related to total portfolio optimization. We don't want to find ourselves in a position of selling non-strategic items at negative margin. Our team has worked hard on that over the last year and we will start to see the effects of that towards the end of this year into 2025 and 2026. We’ll again be able to provide more clarity on the Q4 call, but there are two distinct areas. There's a part of the business that just naturally flows, and the second part is a piece that we can and will take action on.

Understood. Thank you.

Your next question comes from Peter Galbo with Bank of America. Your line is now open.

Hey, guys. Good morning. I maybe just wanted to start with turkey. I believe previously you had said it was about a $0.15 headwind into the earnings for fiscal '24. So I just wanted to confirm that that's still the number? And then the second part of that question just, Jim, if turkey fundamentals just don't improve from here, let's say they don't get worse, they don't get better, they just kind of flatline, is there any sense of how much of that $0.15 you can recover next year, simply if the supply-demand situation stays the same, but maybe some other inputs or supply chain get better at this point?

Yeah, Peter. Thanks for the question. The first part of your question, really, there's no change. That goes back to what we guided on the Q1 call. That $0.15 is still the number. The second part of your question is, it's more nuanced and there are so many moving parts in terms of what's happening in the marketplace right now. As we look into '25, there are still many unknowns. We have seen that egg sets are way down, and there is uncertainty regarding disease and the grain markets. Our focus, as we said two years ago when we worked through the JOTS integration, is becoming a more demand-driven organization. We have had a lot of success doing that, and we'll continue on that journey in both retail and foodservice. We've experienced some dynamics in '24 that have negatively impacted the whole bird business, but as we go to '25, it's still a bit too early given all the moving parts.

Okay. Thanks for that. And then, Jim, if I go back to when the Planters deal was initially announced, I think a lot of the thesis that the management team had was, if we invested more in marketing and this was a business that was kind of starved for capital, that the results could improve pretty dramatically. And I guess there's been an improvement on the marketing side. But just as you've evaluated it, with the recall and the issues at the plant, what levels of underinvestment were there in the operations or in the facility, as we think about if this is truly contained at this point from an impact standpoint on the next few quarters?

Yeah. Thanks. The thesis going back for the business at the time of acquisition still holds. Before the production disruption, we were demonstrating the value of what we could do for the business and it was hitting on all cylinders. When we think about distribution gains, innovation gains, connecting with younger consumers on retail, and driving the convenience store business, it was playing out as expected. After acquiring facilities, we did significant due diligence and felt we were in a good position. But as we took over the business, we implemented our food safety protocols which included enhanced environmental and product testing, allowing us to find this issue early and address it. The plant was down for five weeks and the ramp-up has taken longer than expected. But we expect demand to correct, and we will be able to get back on track to deliver on our original thesis of driving our whole enterprise entertaining and snacking portfolio. We’re still excited about the business. This disruption is never good, but we remain optimistic.

Your next question comes from Rupesh Parikh with Oppenheimer. Your line is now open.

Good morning. Thanks for taking my question. And Deanna, also congrats on your retirement. Just starting out with volumes. How did volumes play out versus your expectations for the quarter?

The biggest things for us, Rupesh, in the third quarter was that the Planters volume was lower than we expected. We talked about the contract manufacturing piece, that was another part significantly lower than expected. Turkey decreased year-over-year, but largely in line with what we expected.

Great. I'm not sure how much you can share about this, but as we look to the next fiscal year, could you provide any initial insights? Planters may be a positive factor as we move into next year, but I would like to understand the outlook for whole bird turkey and contract manufacturing; could these be neutral or even beneficial as we plan for next year?

Yeah. I mean, it's early for us to be talking about 2025, but there are some specific areas that as we're starting to look into that timeframe. We expect Planters to rebound and hit on all cylinders, both retail and foodservice. We also expect to maintain some momentum in our key retail brands. Our international business is really hitting its stride and we expect that to continue to grow. Additionally, we have spent a lot of time making sure we have the necessary capacity for our strategic growth areas. As I mentioned earlier regarding turkey, that part is dynamic with many moving parts, making it really early at this point. But there’s a lot to like about the work we've been doing, and that's why we're excited about our position, despite navigating some headwinds.

Your next question comes from Michael Lavery with Piper Sandler. Your line is now open.

Thank you. Good morning. Just one more back on Planters. You mentioned with the additional $0.03 expected impact stretching into Q4. But you had said, I think, the term was commercial impact along with some of the other things you cited. And I just want to make sure I understand exactly what that means. And does that point to any potential distribution losses you might have to recover? And if so, could that stretch into fiscal '25?

Yeah. Michael, the commercial impact is the sales impact that we're missing out on. At this point, we have not had any distribution losses. Obviously, we’re working through inventory, ramping up production supplemented with co-manufacturing. While we're not where we need to be, we are navigating the situation and in constant communication with our customers. We don't want to lose sight of the importance of Planters in this category. So when we're talking to customers, there is that recognition. They always want us back up and running faster. We want to be back up and running faster. But it's a critical part of the category. While we can't tell you today the type of spillover there might be into 2025, we're doing everything we can to fill those needs.

Thank you. Regarding the CapEx guidance you are maintaining, it indicates a significant expenditure in the fourth quarter. Is that accurate? Could you provide some insight into what that spending might entail? Since there were no adjustments, I assume it's not related to repair costs from the storm damage. Can you share any details about the apparent increase in CapEx towards the end of the year?

Yeah. Good morning, Michael. So you are correct, and this is fairly consistent with how it sequences during the year. In Q4, we typically do see a big spend. We're comfortable with achieving that $280 million that we have put out for the year. So, nothing really unusual in terms of the spend this time of the year.

Our engineering team does a really good job of scrubbing the projects and the spend rate throughout the year. So we feel like we're in a good position.

Your next question comes from Heather Jones with Heather Jones Research. Your line is now open.

Good morning. Thanks for the question. My first question is going back to whole bird turkey and the co-man comment. I think you all said they represented roughly three quarters of the net sales declines. But given their lower price points, is it fair to think that they were a bigger chunk of the volume decline? And just wondering when those comparisons will be cycled?

Yeah. I mean, I think it’s fairly equal from a volume perspective. As we're working through the holiday season for 2024, we'll get better visibility in terms of what the demand is, what the sell-through is, and what the supply side of the business is. While it would be nice to say that you’ll have a clear read heading into 2025, those read-throughs tend to be a bit delayed. It will probably be spring of 2025 before we’re really able to give a better view of how that cycle looks.

What about the co-man side? Are you discussing that, or were your comments mainly focused on the whole bird side?

That was more on the whole bird side. I apologize, Heather, I missed your co-man question. Could you go ahead and elaborate on that again?

Well, you all said that co-man, Planters and whole bird were roughly three quarters of the net sales decline in the quarter. And they were lower-price points. I was assuming they were a bigger chunk of the volume decline. I was wondering when you think you'll cycle the co-man softness?

That was more about the whole bird side. So I mean, again, contract manufacturing refers to that facility Century Foods what we own. We're working on that business to drive demand and attract new business into the facility. That is not a co-manufacturing issue.

Good morning, Heather. I just want to clarify, you mentioned that we're down year-over-year. I'm not sure I'm clear on that piece of it. We are tracking really well towards achieving that $250 million by 2026 and we'll definitely give more color in the Q4 call. We called this year as being 2024 a year of investment for sure. There will be a pretty good ramp from '25 to '26. That being said, we are seeing meaningful impact to our margins and our bottom line here in 2024, irrespective of that.

Your next question comes from Adam Samuelson with Goldman Sachs. Your line is now open.

Yes. Thank you. Good morning, everyone.

Good morning, Adam.

Maybe kind of following up on Heather's question in a slightly different way. I know you're going to give a bigger discussion of the transform and modernize initiatives on the fourth quarter call, but can you help dimensionalize the amount of savings that you have realized year-to-date from those initiatives? You talked about the fourth quarter being the strongest contributor from those initiatives of the year. So what ballpark are those expected to be on a year-on-year basis as we start to then think about that annualized run rate into 2025?

Yeah. And Adam, we are going to provide a deeper dive in Q4. So that will offer a better opportunity for us to talk about what we've been able to achieve financially in '24 and how we're thinking about '25. What I can say is that we talked today in the prepared remarks about planning the business and making the business. Equally important is the work on the buy side, realizing benefits from procurement savings, expected logistics supplies. Having analytics across our refrigerated network is enhancing our service levels, and that's all maturing well. We’re not in a position to provide financial figures today, but rest assured we will in the upcoming Q4 call.

Additionally, Adam, you’ll see some of the benefits in margin expansion in the business are a direct result of those savings falling through the bottom line in various areas of the P&L, whether from a gross margin perspective or truly profits where we're driving savings and efficiency in our supply chain.

Okay. I appreciate that. If I could just ask a follow-up just on the sales guidance for the fourth quarter, which implies down 6% to up 4% year-over-year. Any kind of rough framing on the split between volume versus price mix and at a company level by segment for the fourth quarter?

Thanks, Adam. As we're thinking about the Q4 outlook, we expect retail business to be down mid-single digits. A lot of the retail dynamics will be similar. Contract manufacturing had impacts while we continue working through the Planters situation. We expect foodservice to be up mid-single digits. For International, we expect low single digits. The core business is robust across retail, foodservice, and International.

There are no further questions at this time. I will now turn the call over to Jim Snee for closing remarks.

We are pleased to have delivered another quarter of better-than-expected earnings. While we continue to navigate several identified headwinds, our team remains focused on finishing the year strong and delivering on our commitments. I want to thank all of you for joining us this morning and hope you have a good rest of the week.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.