The operator introduces the conference call for Hormel Foods Corporation's third quarter earnings and provides instructions for the Q&A session. The call will be led by Jim Snee, Jacinth Smiley, and Deanna Brady, who will discuss the company's financial results and outlook. A webcast replay will be available after the call. The speaker also mentions the Safe Harbor statements and encourages listeners to refer to the company's annual and quarterly reports for more information.

The company will discuss non-GAAP financial results and believes it provides a better understanding of their operating performance. The core business remains healthy with growth in retail, Foodservice, and International segments. The company is making progress on their transform and modernize initiative. The Foodservice segment had above industry sales growth for the fifth consecutive quarter.

Despite some challenges in the industry, the company was able to grow volume and net sales, thanks to its differentiated value proposition. The Foodservice segment remained strong and healthy, with a balanced approach and diverse channels protecting it from macro headwinds. The company saw strong demand for premium and solutions-based products, and its direct selling team played a key role in connecting with operators and finding solutions for their challenges. The company's diverse channel presence in foodservice also helped drive steady top line growth. In the International segment, the company showed improvement compared to the previous year's challenging environment.

The business saw a 78% increase in segment profit, driven by improved export sales and strong performance of branded products like SPAM and Skippy peanut butter. Commodity exports were down due to improved inventory management and increased sales in the domestic market. The China business rebounded and investments in the Philippines and Indonesia are showing strong results. The retail sector had some nuanced results, but overall the core business performed well.

In the third quarter, several Hormel brands, including Black Label bacon, Jennie-O lean ground turkey, and SPAM, saw an increase in sales. The company's investments in key brands have paid off, as seen in the growth of categories like bacon, canned meats, turkey, and peanut butter. New products, such as SPAM Korean barbecue and Black Label cinnamon toast crunch bacon, have been well-received by consumers. The bacon and emerging brands verticals have also shown strong performance, with Applegate products growing in various categories. The company has also introduced Applegate organic pepperoni, the first nationally available organic pepperoni.

The company is pleased with the progress of the emerging category and overall category performance, but has been impacted by turkey dynamics and a production disruption at a facility. They have taken corrective action and secured partnerships to improve fill rates. The contract manufacturing business is experiencing softness, but the company remains focused on driving category growth and creating value for consumers. They will now discuss their enterprise wide strategic initiatives.

The company's transform and modernize initiative is showing positive results in various areas, including inventory management and production capacity. The company plans to provide a comprehensive update on these initiatives during their fourth quarter earnings call. The company is updating its net sales guidance due to market conditions and production disruptions, but expects continued momentum in key brands and categories. They are also committed to supporting their brands through strategic investments and are expecting successful execution of fourth quarter innovations and improvements.

The company expects continued growth in the Foodservice segment, particularly in bacon, turkey, pizza toppings, and premium prepared proteins. They also anticipate significant profit growth in the International segment and continued benefits from their cost-saving initiative. The company forecasts net sales of $11.8 to $12.1 billion and diluted net earnings per share of $1.45 to $1.51 for the full year. The retirement of Executive Vice President Deanna Brady was announced, with her contributions and leadership during the COVID pandemic being recognized. John Ghingo will be returning to the company to lead the Retail Group, bringing his expertise and understanding of the business to drive growth.

The speaker, Jacinth Smiley, provides a detailed overview of the company's financial performance in the third quarter. Net sales were $2.9 billion, with growth in the Foodservice segment but declines in international and retail. Gross margin remained steady at 16.8%, and SG&A decreased due to the lapping of an unfavorable arbitration ruling. However, adjusted SG&A increased due to planned higher employee-related expenses. There was also a decrease in equity and earnings from the MegaMex joint venture, but an increase in interest and investment income. Overall, earnings before income taxes increased by 9% compared to the prior year.

In the third quarter, the company's adjusted earnings before income taxes were $256 million, with an effective tax rate of 21.7%. Diluted net earnings per share were $0.32 and adjusted diluted earnings per share were $0.37. Year-to-date cash flow from operations increased by 18%. The company remains committed to dividend growth, investing in their business, and maintaining an investment grade credit rating. They also invested $65 million in capital projects during the quarter and expect to spend $280 million in total for the year. They used a combination of cash and debt to pay off a $950 million note and are comfortably within their long-term leverage ratio range. The company has updated their full-year net sales range and narrowed their earnings expectations due to various factors, including lower pork costs and disruptions in their business. They expect fourth quarter pork input costs to decrease seasonally but overall to be higher than last year and above five year averages.

The paragraph discusses the current state of the turkey supply in Turkey and the projected growth in the Jennie-O branded turkey business. It also mentions the impact of production disruptions and storm damage on earnings for the third and fourth quarter. The company's full year outlook includes increased investments and expenses, but they are maintaining their EPS guidance. The paragraph concludes by highlighting the release of their 2023 Global Impact Report, which shows progress towards their goals, including achieving the safest year in the company's history.

The company's sustainability initiatives have resulted in significant material savings and investments in communities. They have also provided free college education for employees' dependents. The company has released a Global Impact Report with more updates and expresses gratitude to the teams working towards their corporate responsibility goals. The company has updated their guidance with a range of $300 million for the top line, but no change in the profit line. The CEO and CFO will answer questions in a Q&A session.

The decline in the third quarter's top line is due to three main factors: the turkey contract manufacturing for Planters, the impact of pricing on convenient meals and protein, and the comparison to last year's high volume, low margin commodity business in the International group. The fourth quarter will also be impacted by these factors, as well as the continued headwind of contract manufacturing and the lapping in HFIC. However, the company is able to maintain the same bottom line due to improvements in the international and retail businesses, with key brands performing well.

The speaker discusses their expectations for Q4 and the impact of their transform and modernize initiative on their top and bottom line. They also mention the continued growth in their foodservice business and the potential impact of a recent storm on their production but clarify that it will not affect their sales.

The cost being discussed will not affect the company's top line as it is for repairing their facility. The company sells products with zero or negative margin in order to spread fixed overhead costs over a larger revenue base. However, they are working on optimizing their portfolio to reduce the need to sell these types of products. This will be seen in the coming years as the company takes action to improve their profitability.

Peter Galbo asks about the impact of turkey on earnings for fiscal year 2024 and if there is a possibility of recovering some of the losses. Kenneth Goldman confirms that the previously stated $0.15 headwind still stands, and Jim Snee explains that there are many unknowns and uncertainties in the marketplace that make it difficult to predict the recovery of losses in the future. The company's focus is on becoming a more demand-driven organization.

The speaker discusses the initial thesis behind the Planters deal, which involved investing more in marketing and addressing underinvestment in operations. They mention the positive results seen before the recent recall and production disruption, and how their food safety protocols allowed them to address the issue early. The plant was down for five weeks and the ramp-up has taken longer than expected.

The company expects demand to correct as they ramp back up and are confident in their ability to deliver on their original business goals. The third quarter saw lower than expected volumes, mainly due to lower Planters volume and contract manufacturing. The company is not yet discussing 2025, but expects Planters to rebound and continue to build momentum in their key retail brands through their transform and modernize initiative.

The company's international business is growing and they are making sure they have the necessary capacity to support this growth. The turkey part of the business is dynamic and has many moving parts. Despite facing headwinds, the company is excited about their position. In regards to Planters, the additional $0.03 impact is due to the sales impact they are experiencing and they have not had any distribution losses so far. The brand is important to customers and they are working to resume production as quickly as possible.

The company is working to address the decline in net sales, which was largely driven by lower sales of whole bird turkey and co-man products. These products also contributed to a decline in volume, but it is too early to predict when this trend will be reversed. The company is closely monitoring demand and supply for these products during the holiday season in 2024.

The speaker discusses the difficulty in predicting the future of the company's sales and mentions that the decline in net sales was largely due to contract manufacturing and not co-manufacturing. They also mention the goal of achieving a $250 million EBIT improvement by 2026, which they are currently on track for.

The speaker discusses the upcoming investor call and mentions that 2024 will be a year of investment, leading to a ramp up in 2025-2026. They also mention that there has been a significant impact on margins and bottom line in 2024. When asked about the savings from the transform and modernize initiatives, the speaker says they will provide a deeper dive in the fourth quarter call and highlights the benefits from procurement, logistics, and portfolio optimization. They mention that they are not able to discuss the financial aspect today, but will do so in the Q4 call.

The speakers discuss the benefits of savings and efficiency in the company's supply chain, which will lead to margin expansion. They also provide guidance for the fourth quarter, with retail business expected to be down mid-single digits and food service up mid-single digits. International business will see improved mix and sales in the low single-digits. The core business is healthy for retail, food service, and international.

Jim Snee, the speaker, thanks the audience for joining the call and highlights their positive earnings for the quarter. He acknowledges challenges but expresses confidence in finishing the year strong. The operator then ends the call.

This summary was generated with AI and may contain some inaccuracies.