Good morning, and welcome to today's ConAgra Foods Fourth Quarter Earnings Conference Call. This program is being recorded. My name is Jessica Morgan, and I will be your conference facilitator. [Operator Instructions] At this time, I'd like to introduce your host for today's program, Gary Rodkin, Chief Executive Officer of ConAgra Foods. Please go ahead, Mr. Rodkin.

Thank you, and good morning. Welcome to our fourth quarter earnings call. Thanks for joining us today. I'm Gary Rodkin and I'm here with John Gehring, our CFO; and Chris Klinefelter, VP of Investor Relations. We're pleased with the results of our fiscal 2013 fourth quarter, capping off a transformational and successful year for ConAgra Foods. For the fourth quarter, we posted EPS of $0.60 on a comparable basis, which is 18% growth. This brought our comparable EPS to $2.16 for the year, which is 17% growth and above the full year goal we shared with you previously. Consumer Foods volume increased for the quarter as we expected. This is a significant improvement from volume trends seen earlier this year, which were impacted by past price increases. Operating profits for the Consumer Foods and Commercial Foods segments grew and the operating performance for the Ralcorp business came in as planned. All in all, a good performance. We continue to make good progress on integrating the Ralcorp business and have established the operating structure for our new company. As part of the integration process, we have identified additional synergies and increased our fiscal 2017 synergy goal by a significant amount. And we've already repaid a significant amount of debt, which is a very, very good progress toward our fiscal 2015 debt reduction target. John and I will provide more detail on those accomplishments this morning and share our goals for fiscal year '14 and beyond. After that, we'll open up the call for your questions. At that point, Tom McGough, recently appointed President of Consumer Foods; and Paul Maass, President of Commercial Foods, will join us. Before we get started, Chris has a few remarks.

Good morning. During today's remarks, we will make some forward-looking statements. And while we're making those statements in good faith and are confident about our company's direction, we do not have any guarantee about the results that we will achieve. So if you'd like to learn more about the risks and factors that could influence and impact our expected results, perhaps materially, I'll refer you to the documents we file with the SEC, which include cautionary language. Also, we'll be discussing some non-GAAP financial measures during the call today and the reconciliations of those measures to the most directly comparable measures for Regulation G compliance can be found in either the earnings press release, the Q&A or on our website. Now, I'll turn it back -- the call back over to Gary. Thank you.

Thanks, Chris. As I indicated before, I'm pleased with our results for the fiscal fourth quarter and the full year and I'm very confident on our strong EPS outlook going forward. I'll speak to that after offering some remarks about our segment performance and John will discuss our outlook as well. I'll start my segment remarks with Consumer Foods. Sales for the Consumer Foods segment were up 7%, driven by acquisitions and good organic volume performance. Many of our brands grew sales, shares and volumes. Along those lines, organic volumes increased 3%. This is an important turning point and a strong improvement from what we saw earlier this fiscal year. We've lapped last year's price increases and are benefiting from increased investment in our brands. Let me offer a little context in terms of our recent brand investment. We're using point-of-difference communication, along with strong innovation, to increase consumer pull for our brands. Last quarter, we talked about our canned tomato portfolio, Hunt's and Ro*Tel, and that point-of-difference advertising that is really resonating with consumers and driving sales, volume and share gains and category growth. Similar messaging has been very effective for PAM and Reddi-wip as well. Emphasizing their usage occasions and promoting from new locations in the store are also driving more demand for a number of our brands. Effective marketing will be a key driver in the success of the innovations we're launching this summer. We're very excited about the new desserts, frozen breakfasts and other items you heard us talk about at CAGNY. Take frozen breakfast, for example. This category has grown significantly over the past 5 years and frozen breakfast sandwiches have driven quite a bit of that growth, but frozen breakfast sandwiches are still an underdeveloped breakfast option. That's where Marie Callender's and Banquet come…

Thank you, Gary, and good morning, everyone. I'm going to touch on 4 topics this morning. First, I'll discuss some fiscal fourth quarter and full year performance highlights; next, I'll address comparability matters; then on to cash flow, capital and balance sheet items, including some details related to our recent acquisition activity; and finally, I will provide some comments on our outlook for fiscal 2014 and our updated long-term algorithm. Let's start with some performance highlights. Overall, the fourth quarter and full year results were in line with our expectations and reflect a strong performance in fiscal 2013. On the full year, let me provide a few highlights. First, for fiscal 2013, we reported fully diluted earnings per share from continuing operations of $1.85 versus $1.12 last year. Adjusting for items impacting comparability, fully diluted earnings per share from continuing operations were $2.16 versus $1.84 in the prior fiscal year, a 17% increase. Our Consumer Foods and Commercial Foods segments both posted strong year-over-year performance. And our Consumer Foods segment significantly increased marketing investments to support our brands and innovation. And over our 4 months of ownership, Ralcorp operating segments delivered approximately $132 million of operating profit on a comparable basis. When we take into account the additional corporate expense of approximately $13 million relating to Ralcorp, the results were in line with our expectations. Turning to our fourth quarter results. For the fiscal fourth quarter, we reported net sales of $4.6 billion, up 34%, driven by the addition of Ralcorp, improved volumes and acquisitions in our Consumer Foods segment and pricing and mix improvements in our Commercial Foods segment. The impact of higher year-over-year wheat prices in our flour milling operations also contributed to sales growth this quarter. For the quarter, we reported fully diluted earnings per share from…

[Operator Instructions] And it looks like our first question today will come from Andrew Lazar with Barclays Capital.

Just 2 questions for me. First one would be on the Ralcorp synergies. You've raised those to $300 million through 2017. If some of that is expected to fall in '14, I guess why is the net accretion for the year still $0.25? I guess either the Ralcorp base EBIT is expected to be a bit lower than you thought or maybe you're just being so much conservative. So I guess, in other words, do you still expect the $400 million in Ralcorp EBIT that you discussed at CAGNY?

Yes. Andrew, this is John. Let me try to take those pieces. First of all, I think on the synergies, I do think the large portion of the additional synergies are going to take time, so I'd say we're probably going to get a little bit more benefit in FY '14. I would say related to our expectations about the base EBIT for Ralcorp, I'd say those are still in line with what we've talked about earlier, approximately $400 million. And then is there some conservatism in there? I think the straightforward answer is, yes, there probably is a little bit of a contingency in our plans. I think everybody can appreciate that we're just starting out the first full year of ownership. We're in the process of changing the organization. So I think it's only prudent that we plan for some disruption as we move the organization around.

And then, Gary, you mentioned a lot of the top-to-top conversations that you've been having with key retail customers. I guess there's been some chatter out there that maybe certain customers are more concerned with having a company like yourself with scale now across branded and private label and looking to thwart that in some way or separating the way you come to customers. And I guess it sounded like you've had some, frankly, much more encouraging conversations than a lot of key customers. So maybe could you just put some of that in perspective to see if what I'm talking about is even something that you've been hearing?

Yes, happy to, Andrew. What you mentioned about fear of -- or concern about scale, we've heard it a couple of times, but it's very scattered. I wouldn't say that it's prevalent. And the way that we've addressed that is really talking about you're able to, as a customer, really leverage a lot of the smaller suppliers to do a lot of kind of special projects that bigger guys might not see as being very efficient in their supply chain. And what we've talked about is let's think very holistically, that we're willing to do some of those one-offs because the pot in terms of the total business opportunities are so much greater. That is -- that works extremely well virtually every time that we have that discussion. I'd say what we feel best about coming out of those discussions is the understanding that it's going to take a little time but that we are going to get the sales structure in a much better place. Our vision is to have one ConAgra point person at the head of each customer and then the organization splits underneath that. So knowing that there's going to be one ConAgra with dedicated resources to the branded side and dedicated resources to the private brand side and more resources than we have today on the private branded side is very welcome. And the second is they are extremely excited about our innovation capabilities that we've demonstrated on the consumer side of the business that they have seen. And they are very excited about the opportunity to leverage that on the private brand side. And in fact, we have some of those big customers coming to Omaha, already scheduled, just to work through that.

And we'll move now to David Driscoll with Citigroup.

First thing I'd just like to say is after, I think, 10 quarters of negative volumes in Consumer Foods, it feels great to see a plus 3% on that figure. So congratulations on that. Nice job in establishing some momentum there. My questions are going to go to Ralcorp. The first one, and I think maybe most important, is the $300 million of synergies, if I do my math right, guys, that would suggest something like $0.46 a share benefit over the course of the period, which I think goes through 2017. Said differently, it looks to me like it's about a contribution of 5 percentage points to EPS each and every year if I just kind of allocated it equally. And maybe the question that I'd like you to respond to is if your guidance in '15, '16 and '17 is for about 10% growth, it sounds to me like you get half of it simply from the realization of the synergies. And that would mean that the other half, just 5 points of it, comes from all of the rest of your operations. So the first question is, do I have the math right? And the second question is, it seems like that the component of the organic growth is really achievable, maybe I would use the word conservative.

David, this is Chris. So the thing that I would offer on that is I think your general logic is right. We're assuming mid-single-digit performance in the base business and the aggregate contribution of the synergies is largely what you're saying. The other thing to mention about the reason that we're signing up for a mid-single-digit performance in base business is, as you've heard us talk about our capital allocation priority during -- particularly during the early years of owning Ralcorp, it's toward debt reduction. So in our prior EPS long-term goal of kind of 6% to 8%, we did have a point or 2 from allocating capital that we don't have. So with that, yes, the rest of your math works.

Yes. And David, what I would say is having been in this industry forever, being able to -- starting with the year that we just finished, being able to commit to 5 straight years of double-digit EPS growth while still staying committed to strong dividend is pretty compelling. So we plan with the appropriate level of risk management and I think we're quite pleased where we are.

All right, makes sense. If I could just ask one more question on RH. So the sales in the quarter would annualize out at something like $3.85 billion. You gave guidance just a moment ago in the script of, I think, $4.2 billion in sales for F '14. Can you talk a little bit about how quickly this changes, like what we should be expecting within this number to see such a -- I mean, I think that's a quality improvement right there over the current run rate, but how fast does it take before we start to see those actions show up in results?

Yes. So David, this is John. A couple of things to keep in mind. There is a fair amount of seasonality in this business. So I think to take any 3-month period and multiply it by 4 probably doesn't land you necessarily in the right place. A lot of seasonality, in particular in the fall and -- particularly in the fall, where you have strength. So the other thing I'd say is there have been some areas -- there are some softness in some of the categories. There's also some business that we've walked away from -- or collectively, we've walked away from around some co-packing things that were in the base, which accounts for some of the softness right now. I would expect, in terms of the impact that our changes are going to have on reversing some of the trends, I think that's going to be more in the back half of our fiscal year. It's going to take us time to -- not that we're not working on things right now, but I think to really fully deploy our capabilities, to fully align our sales teams against this business and really start to have an impact with customers is probably going to be late in the fiscal year, second half.

And Bryan Spillane with Bank of America has our next question.

I just wanted to get a little more color on Commercial Foods and the potato business, the frozen potato business. Can you talk a little bit about maybe some of the factors that led to this customer switching vendors? Is there more capacity in the industry? Is it getting more competitive bidding for contracts? And also, if I'm understanding it right, some of the customers of this customer who switched vendors may not be entirely happy with the switch. So if you could just talk a little bit about how that occurred and if there's been any other change in the industry?

Bryan, this is Paul, and I appreciate the question. The perspective I'd share first is if you think about RFPs or request for proposals contracting, it's kind of the nature of the business in Commercial Foods, so it's something that we normally navigate through. We do have a track record of working our way through that in a successful way. What makes this one unique is this is a customer we partnered with for a long time and have built business towards pretty large business. So it's a big change and that makes it a little bit unique. And as we work through it, because of the long-term relationship that we have had, there's a lot of complexity and transition in it. And frankly, there's some costs involved with that. We are underway as far as transitioning to other customers. And I would describe it as the silver lining in a change like this is it enables our Lamb Weston business to truly strategically partner with some new and other customers. And we feel really good about the outlook after we get through the short-term transition.

And JPMorgan's Ken Goldman has our next question. Kenneth Goldman - JP Morgan Chase & Co, Research Division: Your Consumer Foods volume came in much better than what Nielsen data would have suggested. And I realize lower pricing was the impetus for your actual performance improvement. I suppose I'm just interested in the difference between that actual performance and what was measured. Was there maybe a bit of a sell-in of new products that happened over the summer? Did non-measured channels just perform that much better? Maybe some color on that would be helpful.

Sure, Ken. This is Tom McGough. As we look at our Q4 results, there's a couple of things that highlight. One, we did demonstrate very strong sequential improvement in the fourth quarter as a result of lapping comparable pricing but also as a result of increasing our marketing investments. We've improved our margins throughout the year and we're seeing very positive share impact from our marketing investments, particularly in frozen, our shelf-stable and refrigerated portfolio. As you highlighted, we continue to see non-measured channels grow at a much faster rate than the measured channels. And as we enter the summer season, we have secured some very strong seasonal merchandising programs that have put us in a position for good volume performance. So overall, we're very pleased with the quality of our organic volume growth.

Yes. And I would just add that we are staying disciplined on our pricing architecture. We're certainly going to be competitive, but we're staying disciplined there.

And we'll move now to Akshay Jagdale with KeyBanc Capital Markets.

My question's mainly on Ralcorp. So if I -- if David's math was correct, as I think you agreed to, implies something like 20% growth over the next 3 years starting in '14 in the Ralcorp EBIT. And that's not something that any private label company that's publicly traded has ever been able to achieve. So I just want to play devil's advocate here and understand why a private label business in a volatile commodity environment would be able to grow its earnings at those -- at that rate. And I think your guidance also implies stronger sales growth than the company's -- than Ralcorp is currently producing and has produced historically. So you're cost-cutting and you're going to see an acceleration in sales growth and, at the end of the day, you're going to produce 20% or so growth in EBITDA. I understand that some of that is related to an easy comp because they're coming from some depressed earnings. Could you just conceptually help me understand what the step change here is going to be? And so what's the risk that you're not able to achieve these targets on the Ralcorp side?

Yes. Akshay, this is John. Let me start with that, then I might turn it over to others for some comments. But I think as others have highlighted the math, the earnings growth is driven an awful lot by the synergies. That's what's driving the math. We feel very confident about the source of those synergies. And just to reiterate things we've talked about earlier, most of those synergies are going to come from our supply chain. We have good line of sight in terms of the opportunities, in terms of procurement and as well as opportunities we think we have around rationalizing manufacturing and logistics networks. Those latter 2 tend to take more time. The other thing I would just point out mechanically is those synergies apply to the whole enterprise, not just to the Ralcorp business. So as those synergies are realized, what you'll actually see is some additional tailwinds apply to some of the other businesses. The other thing that I think we feel very good about is the fact that we see an opportunity in the marketplace. We see good tailwinds that we believe in, in terms of the long-term tailwinds from -- and trends in private label. We think we are uniquely positioned to capitalize on that. And when we look at the kinds of customer relationships we have, combined with the customer relationships that the Ralcorp team brings, we do think there is a 1 plus 1 equals 3. And maybe I'll have Gary comment a little bit more on the customer side.

Yes. You heard me talk earlier about those customer meetings. I'll tell you 2 reasons why we believe that we can impact the top line on Ralcorp. And we're not shooting for the moon here, but we do expect that we can drive better top line growth starting later this year. And those 2 reasons are: one, as we mentioned, Ralcorp's own restructuring efforts that started maybe 6 months or so before the acquisition frankly cut the organization too deeply, particularly on the sales front; and number two, as we've said before, Ralcorp got upside-down on a few key commodities and priced beyond the appropriate price gaps in some categories at some customers. So we are very diligently working on both issues. Obviously, it takes some time to get it right and to work through the system, including getting the pricing all the way to the shelf, but it's very much in process. So we're in this for the long haul and we're going to do it right. And that's why we have so much confidence in those numbers.

And we'll take a question now from Thilo Wrede with Jefferies.

This is Scott Barber [ph] filling in for Thilo. Unfortunately, all my questions have been asked and answered, so I have no further questions at this time.

And we'll move now to Jason English with Goldman Sachs.

Maybe I missed this, but can you give us some color on what you're expecting for inflation in both Ralcorp and Consumer Foods for next year?

Yes. I think across our whole portfolio, Jason, we're looking at low single digits. I'd call that probably in the 2% to 3% range right now as we enter the year.

You mentioned being upside-down in some contracts for Ralcorp this past year. Should we expect any of that to reverse? It sounds like low single digits would be, no, not really, it's not like you've got a windfall coming there.

Yes. I don't know that -- I wouldn't view it as a windfall. I think we've got the problem out of the way. And this is on some of the limit areas where they had some issues. And as we look at a very, very large buy across the whole enterprise, I'm not sure any benefits there would be significant.

Yes. I think the benefit there is we will be able to reverse some of the price gap issues that we've had. And again, that takes time to work through the system, Jason, as you know, but I think that's where the real benefit comes from. That top line, it'll take a bit of time, but we'll see a better performance there because of that.

And we'll move now to Deutsche Bank's Eric Katzman.

I guess I have 2 questions. First, on the Lamb Weston business, how quickly can you change that? What accounts are available to you? I assume you have to take it from somebody else who supply in the frozen french fries, so why are you going to get that? And then on the Ralcorp business, I understand your comfort level, I guess, at some point in raising sales guidance beyond fiscal '18 to 3% to 4%, which implies an acceleration in that business. But with the weakness this year, I mean, what should we look forward from that, I guess, new kind of Private Labels segment or the Ralcorp business between now and fiscal '17, top line?

I'll go and hit on the -- this is Paul -- on the Lamb Weston question. And the transition, it will be relatively short. The capacity kind of in the industry is one that I'd describe as relatively capacity-constrained, so it's relatively tight. So it's fair to describe it as more of a 0 sum game. It doesn't exactly work out one month to the next, but when you think about it over the course of the year, I believe the transition will work its way through in that type of a time frame.

Yes. And Eric, on the Ralcorp question, this is John, I'll take that. Kind of consistent with my comments earlier, I think '14, we're going to work to stabilize the business and I think we'll start to see some improvement in the back half of FY '14. As I commented earlier, I think 2015 will be a year where we start to see some organic growth in that Ralcorp business. And then from there out to 2018, I would just expect us to see a gradual improvement as we'll then start to approach that higher growth rate over time. So kind of stabilized improvement in '15 and gradual or sequential improvement after that.

And we'll hear a question now from Alexia Howard with Sanford Bernstein. Alexia Howard - Sanford C. Bernstein & Co., LLC., Research Division: Can I come back to Ralcorp and cereals? Other companies are saying that adult cereals are quite weak right now and private label trends look weak in the measured channels. I think you mentioned price gaps being a factor there, but what gives you the confidence that those trends can be reversed and reinvigorated?

Sure. Alexia, you're right about the price gaps. That's one of the places where it's the most egregious and we will get those price gaps back to the appropriate levels. We also have a pretty significant amount of innovation coming in that space and we think we can do even more there with our innovation capabilities. And then probably, most importantly, while cereal is certainly an important category for us, we have a very, very broad portfolio. So there may be some more challenges in some categories than others, more opportunities in some than others, so I wouldn't really speak to the macro in cereal from our perspective. I'd probably leave that best to the bigger branded players.

And we have a question now from Robert Moskow with Credit Suisse.

This is Clay Crumbliss on for Rob. I know you guys said that you're not in a position to provide financial details on the Ralcorp integration, but I wanted to see if you could maybe provide us with a time line that you'd be able to give us that clarity. And then two, maybe even if you could just give us a directional number, that would be helpful. Even though we'll strip those out, it would be good to get a sense for how onerous the integration will be to know if we're talking in the $50 million range or $500 million.

Yes. And I think -- this is John -- I'm going to address it from a restructuring standpoint. Is that the restructuring, what you're referring to?

Yes, that's right.

Yes. I'm not going to provide a lot of details here. I think from a timeline standpoint, I think some of the early activities you're expecting in integration and some of the early costs, I think, are already underway. And we talked about those in some of our comparability items the last couple of quarters, things related to severance, et cetera. And I think some of those will go on for a few more quarters. I think the things that are a little harder to quantify right now will be things related really to changing our manufacturing network, optimizing our logistics networks. I think as you can appreciate, those questions tend to be fairly complex. We do a lot of modeling and a lot of complex planning on that. So I don't have specific numbers, but as I said in my comments, we're confident that the cash requirements for those are not going to cause any significant change in our capital allocation plans or debt repayment plans. We think that will all be very manageable within the cash resources we have and the commitments we've made.

And there are no further questions. Mr. Klinefelter, I'll hand the conference back to you for final remarks or closing comments.

Just as a reminder, this conference is being recorded and will be archived on the Web as detailed in our news release. And as always, we are available for discussions. Thank you very much for your interest in ConAgra Foods.

This concludes today's ConAgra Foods Fourth Quarter Earnings Conference Call. Thank you, again, for attending and have a good day.