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

Good morning and thank you for joining us for our second quarter 2017 earnings call. This morning, we issued our earnings release which is available on our website lambweston.com. Please note that our remarks, that during our remarks, we will make some forward-looking statements about the Company’s performance. These statements are based on how we see things today. Actual results may differ materially due to risks and uncertainties. Please refer to the cautionary statements and risk factors contained in our filings with the SEC for more details on our forward-looking statements. In addition, some of today’s prepared remarks include non-GAAP financial measures. These non-GAAP financial measures should not be considered a replacement for and should be read together with our GAAP results. You can find the GAAP to non-GAAP reconciliations within our earnings release. With me today is, Tom Werner, our President and CEO, who will provide an overview of our total company results as well as for each of our reporting segments. Also joining today is John Gehring, our Interim Chief Financial Officer, who will provide a brief review of the financial impacts related to our spinoff from ConAgra, some highlights on our quarter and year-to-date results and some comments on our debt profile and cash flow. Tom will then wrap up with our capital allocation priorities and our updated outlook for the year before opening it up for questions. Let me now turn the call over to Tom.

Thanks, Dexter, and good morning everyone. I’d like to thank you for joining us today. We’re excited to be here for first Lamb Weston earnings call as a standalone company. On today’s call, I’m going to take a few minutes to provide some context on where we are and our expectations going forward. We’ve made a tremendous amount progress in a short period of time to prepare for awhile as a standalone public company. As I stated at our Investor Day, Lamb Weston is well positioned in a category that is growing worldwide. We’re in the process of adding capacity that will come online in the back half of calendar 2017, which is well ahead of recently announced capacity expansions in North America by our competitors. We expect this to provide us with the ability to gain share and support our customers' growth plans in the near term. Over the long-term, we believe we are well positioned to grow through our strong customer relationships with our domestic and international customers, our innovation capabilities and our global footprint. I am confident in our future and while we are in the early stages of our journey as an independent public company, we are on track on building new capabilities and our business is off to a great start to the first half of fiscal 2017. As you all know on November 9th, we are spun off from ConAgra Foods. Since then, we rounded out our senior management team with the addition Rob McNutt, as our Chief Financial Officer. I am looking forward to working with Rob. He has a tremendous background of executive leadership and I’m confident, it will be a great addition to the Lamb Weston leadership team. I’m sure that you’ll be impressed with Rob, as you get to meet…

Thanks, Tom, and good morning everyone. Over the next few minutes, I’ll address the number of topics including the impact of the spin on our financial statements, a brief recap of our second quarter and year-to-date results including a review of the key drivers of our performance and our current debt profile and cash flow. Let’s start with the spin, as Tom mentioned our spin-off from ConAgra was effective on November 9th, which is towards the end of our quarter. Accordingly, fiscal second quarter financial statements reflect results on a curved out basis prior to the completion of the spin, and on the standalone basis for the balance of the quarter. Since we do not apply purchasing accounting for the spin transaction, the changes to our financial results pre-and post-spin relate primarily to interest expense and selling, general and administrative expenses including the ramp up of cost to operate as a standalone company and certain transaction related cost. We have treated the transaction related cost as items impacting comparability. And on a pre-tax basis, we incurred about $9 million of these costs in the second quarter and $19 million in the first half. In addition, our balance sheet reflects the various debt and shareholders equity transactions necessary to affect the spin and to establish our new capital structure. We’ve also recognized certain other assets and liabilities on our balance sheet in connection with the spin transaction. Now, let’s take a look at our second quarter and first half results. As Tom described, we’re pleased with our performance so far this year. We delivered strong net sales growth driven by both volume and price mix gains, and through the first half sales were up more than 5% with volume up three points and price mix up two. Gross profit was up…

Thanks, John. We believe our balance sheet and cash flow will support our balanced capital allocation policy based on returns and executed with discipline. As we outline in our Investor Day, our priorities are first, investment growth both organic and through M&A. Our current capacity expansion projects attached to our commitment to invest in and support growth. Second, we will return capital shareholders. Last month, we declared our first quarterly dividend of $18.75 per share or $0.75 on an annualized basis. And third, we will reduce debt to achieve our long-term leverage target of 3.5 to 4 times adjusted EBITDA given our high CapEx this year. We don’t expect to pay down debt beyond what is required in the near-term. Now, with respect to our outlook, our performance in the quarter and year-to-date were better than expected due to all the operating factors mentioned. As a result, we are raising our outlook for the year while we delivered well above our centerline of profitability in the first half. We do expect our earnings growth to normalize in the back half of the year. And we’ve taken a prudent view in our revised guidance. We now expect to net sales to grow in the mid-single digits, up from our initial estimate of low-single-digits. In addition, our full year basis, we expect sales growth to be relatively balance between price mix and volume, as we continue to stretch existing capacity to meet demand. For adjusted EBITDA including unconsolidated joint ventures, we now expected to grow at a rate in the mid-teens, up from our previous estimate of high-single-digits. This reflects strong adjusted operating income growth driven by sales growth and supply chain operating leverage while our raw materials for the balance of the year will be essentially flat to a year ago levels. We do expect SG&A for the second half and full year to be higher as a result of higher incentive compensation costs and approximately 10 million to 15 million of incremental standalone costs. These are consistent with the estimates provided during our Investor Day. The increase in adjusted operating income is expected to be partially offset, but significantly lower contribution from our unconsolidated joint ventures. We expect adjusted diluted EPS to be in the range of 220 to 228. This includes total interest expense of about $60 million and an effective tax rate of approximately 34%. So to wrap it up, we are off to a great start and we have tremendous momentum in the business. We are on track in our transition activities and the organization is doing a terrific job executing against our initiatives. I want to thank you for your interest in Lamb Weston. And, we are now happy to take your questions.

Thank you. [Operator Instructions] We’ll take our first question from Andrew Lazar with Barclays.

Two questions for you, if I could. I guess first with sweet expectations, I think clearly where you’re looking for some upside to full year EBITDA estimates. Just I’m curious how fiscal 2Q came in really well for your internal expectations? And really what primarily drill that delta, just one thing stood out more than some of the operating factors that you mentioned? And then, I've got a follow-up.

Sure, Andrew. This is Tom Werner. I would say, internally, the biggest drivers on Q2, is our volume performance across all of our segments came in better than expected. So that was obviously a big contributor. I would say another contributor as we had strong price mix, which was also better than we expected, specifically across our Foodservice segment. So, those two things coupled with, our plants are running well, really well right now, as we start processing the new crops. So, essentially, we had three areas that were better than expected and that really what drove the over performance in Q2.

Thanks for that. And then to good lead into the question on Foodservice. If we think about the year-over-year improvement in gross margin, we try and parse out a couple other key factors. I guess how much of a factor was the faster growth that you saw in the Foodservice segment, which clearly has much higher margins versus maybe some of the other drivers such as supply chain and things of that nature?

I would say, Andrew, we have couple of initiatives in the organization. We are laser focused on our product mix, and some of our lower end products getting them out of a system at this point. So, we’ve been really focused on the product mix. Obviously, there is some customer mix that plays into that well, and we are also driving our Lamb Weston brand in that space too. So, that’s certainly has driven to some of the performance in that segment in the quarter.

We’ll go next to Chris Growe with Stifel.

I had two questions for you as well. A bit of a follow-up on the previous -- on Andrew’s previous question, as you’re looking at the mix improvement, I guess I’m curious in how you’re achieving that as it opposed to just new product innovation? And then as a possible thing on how much mix benefitted the sales overall, then particularly I am looking at the Global division? And how mix may have helped there in that division?

Yes, I think, again, within that segment, we continued to be focused on both our customer product mix. There is some innovation that we're driving, but it's largely our pricing actions that we’ve taken along with our customer product mix initiatives that we’ve been driving in that segment.

Can you say how much mix benefitted the sales overall in divisions of -- and I should say that -- so the overall company is it possible to peace that out?

This is John, Chris. We really don’t peace that out, and we don’t -- into the extent, we have any details on that we are just -- we are not positioned to share them.

Okay. And then I have just another question on the Global division. If you were to look at the just the breakdown of revenue growth between North American and international, I'm just trying to understanding of how much of that growth has been driven by international and how much is coming from North America and [Indiscernible]?

It’s really pretty balanced across both segments. So, there is not one -- one market area that’s out lane another, I would its balanced then both are doing well. So, as you -- as we look at -- as we look at North America and the international segment, things are balanced right now.

Okay. That was seeing contrary to some of the QSR sales has been a little softer overall. I guess you’re seeing better growth there that means you’re likely taking market share that would look at that or?

No, I would point you towards as we look at it. We have a great customer mix in our portfolio. So, we work at that extremely hard to be positioned with the growing customers to the marketplace. We’ve done a great job over that, over the past years. So, it’s really attributed to our customer mix in North America.

We’ll go next to Akshay Jagdale with Jefferies.

I wanted to ask about the tight industry capacity that you’ve talked about. So, in relation to that, what we’re hearing in the market place that there is double digit price increases that are being realized by your competitors. So, how do I put that into context with sort of the price mix that you’re reporting which is high-single digit? And then, I was really surprise and it’s a positive surprise that you’re able to produce 4% more volume, it’s from what I understand your plans and the industry’s plans in general already operating at a 100% capacity. So, can you just help me that those two issues?

Sure, Akshay. I would say first of all we are squarely focused on our pricing and mix initiatives as I stated earlier. So, we’re happy with the progress we are making within our own portfolio. So that’s number one. I would say number two, I would go back to the comment our factories are running really efficient right now. So, we are gaining a lot of throughput everything is hitting on all positive stones and the factories. That said, they are running at levels that are not sustainable, and we expect that we’re going adjust that in the back half, we’ve got some capital things that are coming out that we plan for. So, it’s really a function of throughput efficiency right now and the plans and how they’re operating and the supply chain organization is doing a fantastic job getting that throughput to meet demand that we’re continued to see in our business.

Okay, and then on the raw potato costs. First, I’m under the impression that none of the new crop potatoes really sloped to you cost this quarter. But, from what we understand the cost of production for potatoes this crop season is down double digits. So, when you say you’re raw material costs are going to be flattish for the year. Can you help me square that with the industry data points which are pointing to significant decreases year-over-year in the new crop potatoes?

Sure, Akshay. I’m not -- sure what data sources you’re looking at for starters, but I will say that as I’ve stated through our Investor Day, we contract a lot of our supply needs prior to our fiscal year. So, we have a high level of contracted potatoes which translate into contracted cost base for us. There is variability in our portfolio from a raw standpoint as it relates to overall crop yield and quality as we go through the growing season in the harvest. But, as we take a look at the back half of the year, we’re seeing a pretty known cost, and we think things are going to be relatively flat to the prior year. So, we feel comfortable with where our cost basis is.

And just one last one, this is more of a longer term question. But some of your competitors have recently announced some capacity expansion plans. Obviously, you are talking about capacity being tight right now. Can you give us your perspective, I mean, the expansion plans that have been announced are two years down the road, but they seemed to be pretty unprecedented in terms of the absolute role that’s being announced. So, can you give us your general perspective and so what these expansion plans might do to supply demand balance, couple of years down the road?

Sure, Akshay. I think first of all as we have anticipated this Global expansion in added capacity several years ago and as everybody knows, we’re in the process right now of adding additional capacity that will be online in the back half of 2017. Second, I believe the category growth projection. We talk about at investor day have not changed, and there is going to be a need to add capacity in addition to our capacity. Our competitors have announced that. We believe that demand is still going to outpace supply over the long-term. There may be some mismatches at times because of timing of the capacity add and the demand. But we’re confident in our overall view of the category going forward, and we feel we’re positioned right now in the near-term in the next couple of years, as you stated that as our capacity comes online ahead of our competitors and will make in these investments to meet our customer needs. And we’ve been highly committed to that over the last couple of years, and we’ll continue to do that. But we think long-term the demand is going to continue to outpace supply, we feel good about how we’re positioned going forward.

Our final question comes from Matthew Grainger of Morgan Stanley.

Just two from me and I apologize, but I am going to go back to price mix again just given the positive surprise there year-to-date. You’ve talked in the past about the Company’s ability to price through inflation when necessary in your conference there, but in historical context when you look back to the data that’s available, your ability to realize pricing in a flat cost environment seems like a newer driver of the Company’s earnings growth. So, I guess just to elaborate on that, is the industry just capacity constrained enough at the risk of pricing concessions coming back into play is really limited for the time being? And if that’s the case, what’s the risk of pricing normalizing of it when we look out a year or two as that capacity does come online?

Yes, Matt, you're saying there is certainly the operating environment we’re in with the capacity is driving us to evaluate our customer mix and our product mix, and certainly we’ve taken pricing actions across the portfolio. It is a dynamic, and I would say we’re confident that we have the ability to carry that, those actions forward. I would say, as capacity comes online specifically ours in the next year from now, we’re going to have opportunities to gain additional volume. It may be as some different margin levels, but will evaluate that as we go forward.

Okay, thanks Tom. And then just on the full year outlook, you see very strong start to the year 30% EBITDA growth and you're looking from ’18 for the full year. As we think about, I guess one as we think about the sustainability of the progress you’ve been this year and your ability to continue growing EBITDA high-single digits of higher based. Are there any other factors that we should be thinking about looking ahead to fiscal 2018 beyond the incremental corporate costs, that you would going back to your Q1 commentary characterizes maybe being non-recurring in terms of the benefits that they’ve provided to EBITDA this year? And the second piece just on the tax rate. What’s driving the step-up in the second half?

Yes, I would say in terms of FY18, we’ll provide that guidance as we close out ’17 in Q4. So, I’m not going to get into any outlook there. And as far as the tax rate, I’ll go with the John.

Yes. On the tax rate, I would emphasize the first half tax rate was around 33%. That’s pretty close to the range we called for the year of 34%. So, we’ve seen maybe a little bit of pressure above 34% in the back half, but it's we expect to be in the range.

And that concludes our question-and-answer session. I would like to turn the conference back over to Mr. Congbalay for any additional or closing remarks.

Thank you for joining us for our second quarter call. If you’ve any follow-up questions, I can be reached via email or via phone at any time over the next few days. And we look forward to your continued interest in the Company. Thank you.

And that concludes today’s conference. We thank you for your participation.