Good morning and welcome to the Hormel Foods Third Quarter Fiscal 2020 Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today’s presentation there will be an opportunity to ask questions. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Nathan Annis, Director of Investor Relations, Hormel Foods Corporation. Please go ahead.

Good morning. Welcome to the Hormel Foods conference call for the third quarter of fiscal 2020. We released our results this morning before the market opened around 6:30 A.M. Eastern. If you did not receive a copy of the release, you can find it on our website at hormelfoods.com under the Investors section. On our call today is Jim Snee, Chairman of the Board, President, and Chief Executive Officer; and Jim Sheehan, Executive Vice President and Chief Financial Officer. Jim Snee will provide a review of the company's current and future operating condition, commentary regarding each segment's performance for the quarter, and an update on the company’s response to the COVID-19 pandemic. Jim Sheehan will provide detailed financial results and commentary regarding the company's current and future financial condition. The line will be open for questions following Jim Sheehan's remarks. As a courtesy to other analysts, please limit yourself to one question with one follow-up. If you have additional questions, you are welcome to get back into the queue. An audio replay of this call will be available beginning at noon today, Central Standard Time. The dial-in number is 888-317-6003, and the access code is 9237894. It will also be posted on our website and archived for one year. Before we get started, I need to reference the Safe Harbor statement. Some of the comments made 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 Pages 35 through 42 in the company's Form 10-Q for the fiscal quarter ended April 26, 2020. It can be accessed on our website. Additionally, please note the company uses non-GAAP results to provide investors with a better understanding of the company's operating performance. Non-GAAP measures include organic volume, organic sales, and operating free cash flow. Discussion on non-GAAP information is detailed on our press release located on our corporate website. I will now turn the call over to Jim Snee.

Thank you, Nathan. Good morning everyone. Before we get into the business results of the third quarter, I want to take this opportunity to say thank you to all of our dedicated plant professionals for showing up every day in our manufacturing facilities. They are the true heroes of our company in this crisis. It has been remarkable to see our team work together to provide safe, high quality food for millions of consumers impacted by the pandemic. I'm very proud of how all our team members rose to the challenge with a sense of responsibility, purpose, and pride. From the very beginning of this pandemic, we committed to putting the safety of our team members first. I believe this safety-first commitment is what has set us apart during the pandemic. Since we last updated you in May, our COVID leadership team including operations, quality control, communications, legal, R&D, and human resources have continued to enhance and refine our safety practices. These include expanded automated temperature screenings, the addition of more staggered production shifts, and increased training on COVID-19 best practices. Our awareness campaign, Keep COVID Out is also helping prevent the spread of the virus in the communities where we live and work and keep the virus out of our production facilities by outlining the various preventative measures we can all practice in order to stay safe. We partnered with the CDC to review our efforts related to COVID-19 and how we have implemented guidance from the CDC and OSHA at one of our production facilities. Their review included a multiple day visit to the facility, along with surveying employees regarding their knowledge, attitude, and practices on COVID-19. I am pleased with their findings, namely that we had implemented virtually all recommended controls to prevent transmission of COVID-19. The…

Thank you, Jim. Good morning. You heard Jim give a few examples of how uncommon Hormel Foods is, I'd like to share another example. Early in the pandemic, the Project Orion team made the commitment to push forward with the go lines of the financial system. In spite of the difficult circumstances, the team was able to fully convert the financial systems to the cloud, train the finance team, and deliver our third quarter financials on time. By doing so, the Orion team kept us on track to achieve the benefits of this best in class financial system. These benefits include improved analytics, robotic process automation, and real time financial data. Further implementation of the supply chain remains on track and will take place later in 2020 and 2021. Net sales for the third quarter increased 4% to $2.4 billion, which was a record. Higher sales were driven by strong value added retail sales across all segments. Segment profit declined 3% compared to the prior year as the business absorbed incremental COVID-19 related investments of $40 million and generated lower earnings from the food service businesses. Net earnings were $203 million up 2%, earnings per share of $0.37 was flat to last year. SG&A excluding advertising modestly increased to 6.6% of sales compared to 6.5% last year. Higher employee related expenses were mostly offset by reduced travel expenses. Advertising investment for the third quarter were $24 million. Net and allocated expenses declined $5 million for the quarter due to improved return on investments. Operating margins were 10.5% compared to 11.2% last year. Margins were impacted by additional investments into the safety of our plant professionals, employee bonuses, higher operating costs, and the impact of operating pauses [ph] at Jennie-O Turkey Store. The effective tax rate was 21.6%, compared to 23.6%…

[Operator Instructions]. The first question comes from Ben Theurer of Barclays. Please go ahead.

Yes, good morning Jim and Jim, and first of all, congrats on the results and on all the initiatives you announced, especially one on education. I think this is a very good way of supporting your workers. Now, I wanted to dig a little bit into what you said about the inventory levels and the decline here, and what it means for the fourth quarter. So, thanks for sharing a little bit of detail already in the prepared remarks on the impact where it mainly is within grocery and refrigerated foods. Now, how do you think this is going to impact your ability to supply the demand into the fourth quarter which usually obviously has an impact and an uptick in sales, so just to understand a little bit what might be prohibited in terms of sales and what might be the impact if demand remains as strong, particularly retail channels, as we've seen? That would be my one question. Thank you very much.

Yeah, Ben thanks for the comments. We sincerely appreciate them. With regards to the business question around inventory levels, I mean really as we've said multiple times in the comments, the supply chain team since the start of this pandemic has done heroic work to meet the increased demand. And really what we're trying to convey here is as we think about what happened in Q2 to Q3, as we had more -- we had the initial outbreaks and we had plant pauses and more significant disruptions to the supply chain, we did have inventory as a buffer and we're able to continue to fill orders as we were working our way through the initial stages. Over the course of those quarters, though, I mean what we have burned through that inventory. And so now as we head into the fourth quarter, I mean it's going to be very important paramount, if you will, that we keep our supply chain operational. And like I said, the team's done a great job but we can't afford any disruptions. And although we're not seeing the level of outbreaks of COVID cases and we are still having cases on occasion and those cases can have production impact. So, the team is doing a great job as you heard, keeping COVID out of our facilities, working with team members in the facilities to make sure they understand the importance, but But really it's the messaging that says, we were able to have inventory as a buffer. We really in some areas don't have that now and so making sure that our supply chain and our production efficiencies are where they need to be is going to be critical to meet the increased demand. And so, I mean, if you look at some of the demand that we have met, I mean significant increases in pepperoni, in bacon and in spam, some of our center store items. So, we've been able to meet that increased demand, but we just have to make sure that we keep that supply chain in our production facilities going.

Okay, very clear. And then just the technical; one of the 40 million direct-indirect cost supply chain disruption and so on, can you break that out on a segment basis just to understand where the majority was impacting, is it I suppose, refrigerated foods, but also in Jennie-O, how much of an impact that you had there because of some of the plant pauses that you had?

Yeah, and a majority of them, a majority of those costs were in refrigerated foods and JOTS and obviously in our comments we were pretty specific to talk about that. That outsized impact if you will in JOTS so, that's probably the right way to think about it.

Ben what I would add to that is because JOTS is vertically integrated, the impact on JOTS not only is in the products they sell and the availability of that product and their production lines, it goes all the way to the growth side.

Yeah, okay, great. I'll leave it here. Congrats again, thank you.

Thank you.

The next question comes from Rupesh Parikh of Oppenheimer. Please go ahead.

Good morning, thanks for taking my questions and also congrats on the nice quarter. So I guess I want to go back to Jennie-O, so clearly profitability was challenged during the quarter. Are we now past the plant pauses or is that still an ongoing headwind? And just curious, just any thoughts in terms of how you see the profit recovery unfolding per year for JOTS?

Yeah, thanks for your comment. So, I mean we haven't had any plant pauses since the beginning of the third quarter, and I mean, we continue to bring labor into the plants. I mean, that's a key ingredient in making sure that we can run the harvest facilities. Of those three plant pauses that we had in Jennie-O Turkey Store and the costs associated, and that had a big impact. Jim just mentioned that it goes all the way back in the vertical supply chain. And, when we can't harvest herbs, we have higher like production costs or higher feed, and then other issues. So, on the supply chain side; big, big impact. But as we think about the dynamics of the business, my comment about why I feel good about it is, we saw the benefits of the distribution that we had regained pre-COVID-19. Now, we understand the impact of consumers going and eating at home more. But obviously, we had to be on a shelf for them to be able to find us. So the distribution gains that we had, we benefited from. We did have a negative impact on our food service business, especially early in the third quarter. You know, like our Hormel Food service business, we've seen some recovery. The Jennie-O Turkey Store food service business is a little more skewed to schools and they have the impact of K through 12 and we're trying to understand how that plays out this semester. So, I mean all in all, it really is COVID related costs that negatively impacted the business. We feel good about the retail side, we’ve got to have recovery in the food service side, but everything that we put in place pre-COVID is playing out and that’s why we are optimistic about the business heading into the future.

Okay, great. And I guess my one follow-up question, just on e-commerce, you guys had very positive commentary in terms of what you are seeing in e-commerce, both direct to consumer and the clicking collective of your consumers. From a brand perspective, where are you seeing the most strength right now and is anything surprising to you in terms of where you are seeing that strength?

Yeah, we are pleased, Rupesh, because we saw it across the Board. We saw it in a lot of our refrigerated products and also in our in our grocery items. So, it wasn't skewed to any one brand or product line. Really good balance across the portfolio.

Great, thank you.

The next question comes from Ben Bienvenu of Stephens, Inc. Please go ahead.

Hey, thanks. Good morning. Appreciate you taking the questions. I've got one for Jim Snee and then one for Jim Sheehan. Jim Snee, I'd be curious to hear your thoughts on what impact if any there's been from COVID on the product innovation cycle, you noted some of the call outs around new packaging for SKIPPY, you also had a pretty successful heritage of new product innovations that have driven incremental market share, is COVID and operational heavy lifting that you have pushing that innovation cycle out or you still making headway on that front?

Yeah, great, that's a great question Ben and I will tell you, we are making great headway on that front. I will reference the SKIPPY products that we're bringing into the marketplace and having some really good early success in multiple items. I just recently had an update in terms of the pipeline that is coming this fall. And I mean, it continues to be very strong. It's exciting. It's on trend. And our customers are looking for that innovation. So, I've been really, really impressed with the work that our innovation team, which of course, encompasses so many other functional areas, has been able to do remotely. The other thing that I would mention, and we talked about it, I know on our last call, I don't think we mentioned at this time, but we have continued to track at our 15% goal in regards to innovation. And so, in the midst of everything else that's going on, we haven't lost sight of the fact that innovation is part of our lifeblood and it's something that we need to continue to deliver to drive the company forward. And our team has just done an amazing job responding.

That's great, okay, thanks. Jim Sheehan, you called out some of the color around your hedging strategy for hogs, makes perfect sense in light of what 2020 was supposed to look like in light of African swine fever and what that meant [ph] for hog prices. Would you expect with your current hedge book, would you expect continued headwinds from hog hedges in the fourth quarter in light of hog prices still being down pretty materially?

Yeah, good morning Ben. But as I said, the hogs are -- hit a 20-year low during the quarter and obviously our hedge positions where we thought were favorable, but any time you take hedge position, you're really mitigating your risk and not trying to time it, that's our strategy. We look at that purchasing hogs on a balanced model that has some on the open market, some on the Western Corn Belt, some on the composite value and utilizing hedges. So the hedges will be a headwind as we expect hog prices to be continued to be down. You know, production has backed up a bit during the time period that there has been some pauses in production. But again, it's a balanced model and as we've looked at our hog costs, our hog costs were still down 20% compared to the prior year. So it takes an approach that is viewing both the future and the current circumstances.

Understood, okay, great, thanks. Best of luck.

The next question comes from Michael Lavery of Piper Sandler. Please go ahead.

Thank you. Good morning. Can you give a little bit more color on the food service, that channel splits you gave us really helpful, maybe just some of how that progressed over the course of the quarter and what you've seen since in terms of just the momentum or volatility around them?

Sure, early -- late second quarter, early third quarter I mean significant decline that we saw in our food service business. And early in the third quarter we started to see recovery. The business was on a very nice trend, upward trend and then as we started to see more COVID outbreaks around the country, what happened and it actually was kind of nice to see, is we saw the business or the recovery kind of plateau. And so at the outset what we saw was that initial significant decline in the business and what we saw this time with some of the outbreaks was that the business maintains a level it was at, it just plateaued. So it didn't continue its recovery. And now, we are starting to see a bit more recovery as different states do get it under control. But I mean the fact is that it's still significantly behind a year ago. For us, it is all about what does food service look like in the future, how does the industry reimagine itself, what are the emerging segments that will come from this. We do believe that food away from home is just such an ingrained behavior in our society that it is going to continue in some way, shape, or form but it probably will look different for the foreseeable future.

Okay, that's helpful. And then just on M&A, I want to follow-up on your prepared remarks. You obviously mentioned it as something you consider your balance sheet as great for that and there's nothing new there. Maybe just was a little interested that it stayed in the prepared remarks or it's getting mentioned in an environment like this where it looks like -- it feels like it could be more difficult to get deals done. Is that not your sense or is there some better amount of activity there you're doing than it might seem with just the disruptions and some of the things, remotes and everything else?

Yeah, I think the key takeaway there is, again, you go back to the early stages. You had so many companies, so many people just really trying to figure out which way was up. And so the idea of having M&A activity was not at the top of anyone's list. It was about really running, running the day to day business. And I think that's moderated a little bit and people have figured out maybe a little bit of what a new normal might look like. There are more conversations, there is more interest, and I would tell you that the communication is picking up a little bit. So, from our perspective we believe that we're -- we continue to be in a really good spot with the strength of our balance sheet. Jim talked about our debt offering, when we did it, why we did it, but then also what that could mean for us down the road. So, we continue to value M&A as an important part of our growth strategy going forward.

Alright, thank you very much.

The next question comes from Ken Zaslow of Bank of Montreal. Please go ahead.

Hey, good morning guys. The grocery sales seems a little lighter than I would have expected. How much of that is reflecting in the demand side versus how much is it operational inability to get the product to the consumer or the retailer? And then in addition to that is when you're looking at your inventory levels and your higher ability to get to the retailer, what are the longer-term implications on shelf space and relationships in terms of shorting customers given the demand?

Sure, I'll answer both of those Ken and I'll -- Jim has any inventory follow-up, I'll let him do that. You know, as you think about grocery products, I mean, the core is right -- the SPAM, the SKIPPY, the Chili, the Dinty Moore and all of that business was very, very strong and able to meet the demand. Probably that gap you're describing and we had a little bit of this I believe in the second quarter is -- this offset by food away from home and contract manufacturing. So the food away from home exists in our MegaMex business and that, like our Hormel food service and our Jennie-O food service business was down. And then we also saw a decline in our contract manufacturing business. So as you think about that delta, those are probably the two pieces that would lead you to that underperformance comment. But I mean, from our perspective, our legacy, our core grocery products business was really, really strong. And even our MegaMex business was up. But we did have a negative impact from their food away from home business. On the inventory piece. I mean, your comment is well made that if over a long-term, you're not able to supply a customer there's going to be ramifications. And I mean, we're not in that position. I mean, we're able to meet and maintain our shelf space with our customers. And going back to my earlier comments, the whole comment around inventory is just that it's shifted, right. We don't have that as a buffer so we do need to make sure that the operations are running as efficiently as they can. So yeah, we're as you would expect and I'm sure you're hearing from others, we're in a constant dialogue with retailers in terms of making sure that where we're meeting their needs, they understand what our situation is and certainly we're not going to put any of our business or our shelf space at risk.

Ken the only thing that I would add to that is that as you think about the inventory decrease, the decreases don't all have the same impact. For instance, we know our food service business is down, so we have purposely decreased our food service inventory so that we could reallocate resources into the retail production. So the supply chain is doing that all of the time and we're trying to meet every need we can. So there are some -- there are some areas that are not going to have much of an impact because they're short, such as some of the areas of food service.

And my follow-up, just a clarification on the turkey business, is everything working now and we should be thinking more normal margins at this point relative to whatever the industry is, or is there still operational legacy issues, I just didn't understand the commentary? And I'll leave it there.

Well happy to clarify that. I mean, the plants are all up and running. I think from an industry perspective, I mean our margins, our business are always at the top of the industry. We do continue to have higher COVID related costs. And so, PPE, some of the labor issues that would lead to lower volumes, lower overhead recovery, I mean those are still there as we progress in the quarter. But I mean, the plants are still running. We haven't had any pauses since the beginning of the quarter. And so, the retail demand, especially in the lean ground turkey area really, really strong. The food service business is recovering, but still trailing last year. Jim, I don't know if you want to add anything.

Yeah, and as you -- again we are being vertically integrated. As you've held birds longer, they are heavier birds, they don't perform as well. We're starting to move through that inventory but that's why the impact on Jennie-O has a longer tail than in areas where we're not vertically integrated.

And did you clarify if the plants were running what the operating margins would have been and I really will leave it there, I'm sorry?

No, Ken I want to -- you can have that offline with Nathan and see if he can give you more clarification.

Great, thank you guys.

The next question comes from Tom Palmer of J.P. Morgan. Please go ahead.

Good morning. Thanks for the question. In the refrigerated foods segment price mix was down pretty meaningfully. Just wanted to better understand to what extent this reflected a flow through of lower industry commodity prices whether mix such as the higher fresh pork sales at retail were a factor and then as we think about how the fourth quarter might play out, how pricing could proceed especially considering that it sounds like supply is a bit of a constraint right now and thus some pricing for at least pullback in promo could make some sense?

Tom, as you look at the sales of refrigerated foods, they certainly were impacted by lower commodity prices. They had volatility, but prices generally were lower. I mean, as you look at the at the various items, for instance, even bellies it’s had volatility, but it ended closer to the below last year. It was below last year. So that certainly had an impact in the sales prices in refrigerated foods, less than a miss [ph].

And as you think about the fourth quarter, I mean on the markets, I mean it feels like all of the supply plants are running at very solid levels and the supplies are going to be adequate going forward. So I would expect more of the levels that we're seeing right now.

Okay, thank you. And I guess just to follow-up on co-packers. So how do you see this margin overhang going away over time. Is it driven by over the next couple of quarters taking certain products in-house or is it more that as demand can -- the increased demand for product starts to ease essentially that is a co-packer issue solve itself? Thanks.

So Tom, just to just to clarify, I mean we have already a very well developed and trusted network of co-packers, co-manufacturers that support different areas of our business. I guess what we were saying is as we think about, the need to continue to meet increased demand and make sure that we have the right appropriate risk mitigation. We are finding ways to expand the capacity with some of those trusted coal packers. So it's really less about bringing it back in-house. It's more about finding those opportunities to expand the supply side of the business.

Okay, thank you.

The next question comes from Heather Jones of Heather Jones Research. Please go ahead.

Good morning. Thanks for taking the questions. I just have a couple of quick ones, one on Q4, I just wanted to make sure I'm understanding correctly. Jim Snee, you're saying that if your plants run well that you should be able to sustain the sales gains you saw in Q3, you don't have the inventory buffer, but your plants are running at higher capacity, am I understanding that correctly?

I guess what we're saying there, Heather, is I mean we know that there's going to be increased demand and continue to be increased demand and to meet that demand we have to have our plants run as efficiently and effectively as possible because we don't have that safety stock to draw. So I think we're saying the same thing.

Okay, perfect. And then the second thing is you've mentioned the impact from hog hedges that you have put in place last year, but then some lower cash hog prices so for the quarter, did I understand you correctly and I think this was Jim Sheehan comment, did I understand you correctly though, that net-net even of the hedge impact that hog costs were more favorable in Q3 than they were in Q3 of 2019?

That's correct Heather.

Okay, perfect. Thank you so much.

The next question comes from Peter Galbo, Bank of America. Please go ahead.

Hey guys, good morning. Thanks for taking the question. Jim, I guess just as we're thinking about food service out over the next couple of quarters, you guys have a large direct sales force, right that probably has more touch points with some of your restaurant customers, maybe in some of your competitors and I guess the question we're kind of grappling with at this point is, as the weather starts to turn, maybe people go or are forced to go back inside, outdoor dining isn't really as much of a possibility, just what are some of the high level conversations that your salespeople are having with customers at this point that you are willing to share with us?

Sure, I mean that's a great question, and that is certainly a risk to the next couple of quarters. But I think the other part that we've seen, Peter is so many restaurants have become so much more proficient at a takeout, right. I mean again, as this started takeout was not a big part of the food service operators MO. I mean, some did it better than others and clearly you had drive through, I get all that. But, some of that casual dining locations, they had it as an option but it wasn't a very well developed option. But I think it's fair to say that operationally from a packaging perspective, so many food service operators have become so much more better, so much more proficient with that. And then I go back to this idea of how does food service reimagine itself. And so, this idea that over all these years we've developed this behavior of food away from home and now that's just going to -- I guess that it went away for a period of time but to think that it's going to go away forever just seems to be a bit of a stretch, if you ask me. So I do think that food prepared away from home is going to continue to be on everyone's radar. And I think as more and more especially casual dining segments get comfortable with to go, take out, that's going to continue to be an opportunity. We also are seeing and working with operators on different grab and go options. So not just food that you bring back into your house, but as you think about where individuals would maybe want to go and sit and have a meal, they're not doing that. It is more of a grab and go. And so everything that we have in our portfolio that we described around all of our pre-options sets us up really well to take advantage of that as food service continues to reimagine itself. So in our direct sales force, as you mentioned, is going to play a critical role in making sure that we understand and that we're on the front end of this re-imagination. It's going to be really, really important for us. So, I mean, those are just some of the conversations we're having. But, I mean, it's still this is going to be a work in process, but we feel good about where we're at in the cycle.

Okay, now that's helpful, thanks very much. And maybe just Jim Sheehan a quick one, just you're kind of a month into the quarter at this point, you still have a pretty wide range on the COVID costs for the fourth quarter, just what would drive you to the high end versus the low end of the 20 million to 40 million? Thanks very much, guys.

The issue that would create the highest cost would be a play or pause. The fact that, you know, we talked about this I think even last quarter, every day we're getting better at running our facilities under the current structures and the current cost matrix that we have. And we'll be -- we were better at the end of the quarter than we were at the beginning of the quarter. And the end of the fourth quarter we will be much better. So we continue to improve and we address these costs. But they are real costs and they are there. So we're building efficiencies. If there's a plant pause that would have the biggest risk of increasing our costs.

The next question comes from Adam Samuelson of Goldman Sachs. Please go ahead.

Hi, yes, thanks. Good morning everyone, appreciate letting me squeezing in. So my question is just taking -- wrapping it all up a lot of ground covered. The comments on the fiscal fourth quarter kind of mirrors the dynamics of the third quarter. I'm just trying to translate that into kind of operating performance a little bit and is that intended to reflect sales and year-on-year sales and year-on-year margin performance would look similar absent kind of a substantial change in the COVID kind of outlook or just help me think about kind of what that actually means as we think about sales margins in your business?

Yeah so, Adam, good morning. I guess I'll take it more from a sales perspective. And so when we say similar dynamics to Q3, I mean, we're thinking about continued strong retail demand both from grocery products, refrigerated foods, and JOTS. Still experiencing recovery in the food service businesses and just a reminder that they're a big part of refrigerated foods and JOTS. So, we have continued to work to do. Our international demand is strong across most geographies. We expect that to continue. As I said earlier, from a supply chain perspective, not having outbreaks but we continue to battle on the production front as we do have individual cases and that can create production challenges. We've talked about the safety stock as a buffer and the need to have a supply chain hitting on all cylinders. And so, that's when we say the dynamics are similar to Q3. I mean, that's how we're thinking about it from a demand and a supply perspective. So hopefully that's helpful to you.

It is and just last quick one, the $80 million to $100 million of COVID related costs that you're expecting to incur in fiscal 2020, do you have any rough idea of what that could look like in fiscal 2021, I imagine there's a portion of that of bonuses that you wouldn't necessarily plan on, on repeating?

Yeah, we don't have -- we don't have an estimate on that for 2021 yet. We're starting that whole process and we're trying to get a better read on those that are permanent or longer-term and those that were temporary. So, we don't have that today and as soon as we get more clarity on that we'll pass that along.

Okay, thank you.

The last question today will come from Robert Moskow of Credit Suisse. Please go ahead.

What an honor to be the wrap up question. Believe or not it's all about inventory levels. So one point of clarification I guess, last quarter, I think what we learned is that maybe 20% of the grocery division is contract manufacturing, also some alternative channels that are not growing within grocery. So is it fair to say that that's the reason why your grocery division is not demonstrating the same level of growth that most of us see in Nielsen measured channels at retail, it's -- I'm having trouble figuring out whether retailers reduced inventory or not, it sounds like they really did in third quarter but really the difference between the Nielsen measured and what you're reporting here is really just the alternative channels?

I think that's right Rob. First I would say it's always an honor to back clean up, so we're honored. But you're right, I mean, we do have that delta in grocery products. That is that the food away from home that's in MegaMex and then the contract manufacturing that I know we talked about last quarter. And so that is the delta. From a retailer perspective, I mean, we haven't seen anything significantly different in terms of what they're doing with their inventory levels.

Okay, got it. So it's not like we're going to have a big resale in the October quarter related to the fall season or anything like that, you will ship to consumption in the fall in the October quarter, is your expectation?

Yes, exactly.

Okay, and then last question, on refrigerated, you said that your commodity costs are also down, you used to give us fresh pork profits in the past when it was kind of normalizing lower, so are fresh pork profits higher in this quarter versus year ago as a result of those higher costs being down?

They're actually relatively comparable.

Comparable.

Yeah, they're comparable because obviously there's been so much volatility in the markets. I mean, it's just been wild, that ways we are as low as 89 and as high as 267. And the timing of when you're buying and winning when you're selling just could have a -- play havoc on that. So Rob, this fresh pork is probably the most -- this isn't the best quarter to measure profitability of fresh pork, but it was in the range.

Okay, and when you're talking about fresh pork, you're talking about also including those hedges as well that were unfavorable in the quarter?

That’s true.

Alright, guys. Thank you very much.

Yup, thank you, Robert.

This concludes our question-and-answer session. I would like to turn the conference back over to Jim Snee for any closing remarks.

Well, thank you for joining us on our call today and one of our cultural beliefs is results matter. And as you heard today, we delivered results. We delivered results in many areas. We delivered results in our business, we delivered results in keeping our team members safe, and once again, we delivered results as a great corporate citizen. To our team members listening in thank you for all you do. Stay safe.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.