Welcome to the TreeHouse Foods Third Quarter 2022 Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. To ask a question, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. Please note that this event is being recorded. At this time, I would like to turn the call over to TreeHouse Foods for the reading of the Safe Harbor statement. Good morning. Thanks for joining us today. This morning, we issued our earnings release, which is available along with the slide deck in the investor relations section of our website at treehousefoods.com. Before we begin, we'd like to advise you that all forward-looking statements made on today's call are intended to fall within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and projections and involve risks and uncertainties that may cause actual results to differ materially from our forward-looking statements. Information concerning those risks is contained in the company's filings with the SEC. On August 11, we announced the sale of a significant portion of our meal preparation business. On October third, we completed the divestiture of that business, now known as Winland Foods, to Investindustrial for a base purchase price of $950 million. For the purposes of our discussion today, we will first cover our third quarter results on a whole company basis as we own the divested business through the entirety of the quarter. On August 11, we announced the sale of a significant portion of our meal preparation business. On October third, we completed the divestiture of that business, now known as Winland Foods, to Investindustrial for a base purchase price of $950 million. For the purposes of our discussion today, we will first cover our third quarter results on a whole company basis as we own the divested business through the entirety of the quarter. On August 11, we announced the sale of a significant portion of our meal preparation business. On October third, we completed the divestiture of that business, now known as Winland Foods, to Investindustrial for a base purchase price of $950 million. For the purposes of our discussion today, we will first cover our third quarter results on a whole company basis as we own the divested business through the entirety of the quarter. Results for the quarter are provided on a continuing and discontinued operations basis in the press release. However, the majority of our discussion today around our operating and financial results will center around performance on an adjusted continuing operations basis. We have provided recast historical financials for TreeHouse continuing operations for 2019 and 2020 on an annual basis, and 2021 and 2022 on a quarterly basis, so that you can best compare past and future operating performance. Please note that these financial statements differ from the GAAP pro forma financials filed shortly after the transaction closed because they take into account historical one-time adjustments and certain costs associated with the divested business, as well as certain pro forma adjustments only required by SEC rules. A reconciliation of non-GAAP measures to their most direct comparable GAAP measures can be found in the release and the appendix tables of today's earnings deck. With that, let me now turn the call over to our CEO and President, Mr. Steve Oakland. Thank you, PI, and thank you all for joining us today. It's been a very busy few months since we last spoke. We reached a strategic milestone, having completed the divestiture of a significant portion of our meal prep business in early October. The transaction is a major step in our strategic transformation to drive greater focus, simplification, and growth across our portfolio and reflects the culmination of the board's strategic review process, launched literally a year ago. The $950 million transaction, comprised of $530 million in cash and a $420 million note receivable, represented a compelling value of 13.6x 2022 adjusted EBITDA for the divested business. I want to express my gratitude to our teams. I'm proud of all that we have accomplished to date. Over the last month, I've been to several plants, met with leaders at key customers, and spent time in person with our leadership teams across the organization. As we embark on this journey as a new TreeHouse, the outpouring of enthusiasm and ideas has been energizing, further building my confidence in our future. Today, we are a simpler business, having divested 11 categories and 14 plants. Our portfolio is now more focused around snacking and beverages. On slide five, we've listed many of our categories. We operate across attractive, growing categories fueled by strong consumer demand trends. We have positioned ourselves to capture the continued momentum in private label and improve the consistency of our execution to drive more profitable growth. We plan to come back to you in 2023 with an investor day to provide more detail around our future plans. Slide six gives you a sense of the historical private label growth rates for the categories across our portfolio today. While 2020 and 2021 were unusual years due to COVID, over the longer term, we expect these categories to grow in the 3%-5% range. As a result, we now have a stronger financial profile with healthier margins. Pat will get into this in more detail, but we also have a stronger balance sheet following the transaction. After the close in October, we used $500 million in proceeds to significantly reduce our debt. Let me now turn to slide seven and say a couple of words about the macro environment, private label, and the third quarter before I turn it over to Pat to walk you through the financials. Today, 65% of consumers have a high level of concern about the economy, as seen in the first chart. Inflation is up over 8% and personal savings has declined. Shelf prices for total edibles on the bottom left have continued to increase. As a result, shopper behavior is shifting. You've heard this from several retailers. Consumers are recognizing the strong value proposition of private label. In the third quarter, private label continued to post share gains. On the left of slide eight, you see price gaps to national brands remain wide. At 27%, which is at the high end of the historical range of 21%-24% for the categories within the new TreeHouse Foods. As I've said before, this combination of high shelf prices and wide price gaps translates to a basket of private label goods that represents significant savings for the consumer. On the right, we've taken a shopper basket of national brand goods across our categories and compared it to that same basket for private label. We estimate the absolute dollar savings for just this one shopping trip is about $20. The private label value proposition has never been greater on a dollar basis. On slide nine, on the left, is sales and volume growth for total edibles. Units for private brands outpaced national brands by 400 basis points. N arrowing the data set a bit further, the right-hand chart indicates the performance in our new TreeHouse categories. Here, the margin by which private brands outpaced national brands was more than double. About 900 basis points in the third quarter, demonstrating that our new portfolio is advantaged. While demand is strong, service was 96% in October. Service continues to improve sequentially, but it's still not back to where we need it to be for us to take advantage of the full opportunity. We continue to make progress in our efforts to mitigate the disruption and anticipate that service will continue to improve over the next few quarters. We do face the challenges in the operating environment which are impacting our industry. I'm also pleased by our efforts around continuous improvement across our network, which we believe will improve not only capacity and production in the near term, but will drive savings and profit improvement well into the future. With that, let me turn it over to Pat to take you through the quarter, our recast financials and guidance, and I'll come back at the end to wrap it up and talk about the work we've done to position the new TreeHouse for the future. Pat. Thanks, Steve, and good morning, everyone. Let me start by providing our third quarter results on the basis of total TreeHouse, inclusive of the divested business as seen on slide 10. In the third quarter, we delivered top line growth of 18% and a sequential improvement of 130 basis points in adjusted EBITDA margin to 6.9%. This result was slightly better than we had anticipated in our guidance due to the more favorable customer and category mix. With that, I'll now focus our discussion on the results and outlook of the continuing operations starting on slide 11. As Pi mentioned earlier, we provided the historical comparable information for the continuing operations in the press release and the appendix tables to today's deck. Third quarter revenue grew 16.4% to $875 million. P ricing rose 20.7% as the impact of our pricing efforts to recover inflation continued to be realized. Volume declined 4.2% due to continued supply chain disruption, which constrained service. We intentionally exited some low-margin pickle business. Foreign exchange was unfavorable by 10 basis points. Slide 12 covers our year-over-year adjusted EBITDA drivers. Third quarter adjusted EBITDA totaled $77 million or 8.8% margin. This represents a sequential improvement of 220 basis points as we continue our efforts to address the labor and supply chain disruption that has pressured our margins over the past year. Volume and mix, including absorption, contributed $8 million in the quarter. This was primarily driven by the positive mix from the lower margin business exits I mentioned earlier. Pricing net of commodities was positive for the first time in several quarters and contributed $33 million versus last year. Pricing is now catching up to the commodity inflation we incurred earlier in the year, consistent with the lag effect we have discussed previously. Although we have seen several commodities retreat in the near term, the vast majority of our inputs remain elevated on a year-over-year basis. Input cost inflation has continued across certain commodities such as cocoa, and we are also seeing the impact of higher input costs across non-trading commodities such as foil lids and some commodity derivatives like corn syrup and casein. Turning next to operations, labor and supply chain continues to affect the entire industry. On a year-over-year basis, our operations declined $41 million. We have several plants performing very well, where the commonality is a stable workforce with teams actively engaged in continuous improve ment efforts. We are working to build those common threads across more of our plants and redoubling our efforts around labor and line reliability. Importantly, we continue to invest heavily in training, engagement, and retention across the entire network, which are the right steps to improve efficiencies and returns over the longer term. The supply chain environment continues to be dynamic, but our teams have done a good job securing multiple new suppliers and either working with customers to adjust product specifications based on material availability or working with suppliers to ensure that they have the capacity to meet our needs. Slide 13 demonstrates the progress we have made thus far to restore service levels and improve on-time delivery. The divestiture significantly reduced our complexity in terms of the number of plants and categories, which is better enabling us to focus on service. On average this year, we've seen a 50-100 basis point improvement in service each quarter. During the third quarter, service averaged 93%, posting improvement each month. As Steve mentioned, our service in October was 96%. Similarly, our on-time delivery percentage is improving anywhere from 100 to 400 basis points sequentially. Our teams have demonstrated great agility as we identify and creatively address disruption, and we anticipate continued progress sequentially, improving margins as we finish the year and head into 2023. Turning now to the balance sheet on slide 14. We finished the third quarter with approximately $1.9 billion in total debt. Shortly after the transaction closed, we used $500 million of the proceeds to pay down our term loans payable. Currently, total debt sits at about $1.4 billion, and we expect our debt covenant leverage to be comfortably below 4x at year-end. As part of the transaction close, we reevaluated our liquidity needs. First, we reduced the size of our revolver by $250 million, given that we are now a smaller company. Our revolver remains largely undrawn and total liquidity was just under $800 million at the end of the third quarter. Second, as a condition of the transaction close, we reduced the amount of receivables sold under our receivable sale program, which impacted working capital by approximately $90 million. This had a one-time negative effect on our cash flow, which was recovered in October upon closing. Because we are now a smaller and simpler business with less sales and therefore less receivables, we anticipate significantly lower utilization of the AR program versus prior years. Turning now to guidance on slide 15. For the fourth quarter, we anticipate revenue growth of 22%-24% over last year, driven primarily by pricing. Our assumptions on the top line are as follows. As we discussed back in August, we took additional pricing that started flowing through late September and early October. We anticipate labor and supply chain related challenges to continue, and while we are making good progress on service, we do face some production constraints. We think it will take some time before service returns to target levels. As a result, we anticipate volume to be flattish in the fourth quarter. I'll also note that beginning in Q4, we will have income related to the Transition Services Agreement that will continue for at least the next year. The income will offset the related expenses for things like IT, HR, and customer service, giving the divested business time to establish its infrastructure. We are actively working with them to address these costs well before the related TSA services expire. We are guiding our fourth quarter adjusted EBITDA margin to be 10.5%-12%, representing strong improvement both on a sequential basis and compared to last year. On slide 16, we've also given you a way to think about what the earnings power of the business can be on a more normal, less disrupted basis. Beginning on the left, we've started with a full year 2022 EBITDA of $280 million, which when you do the math for the fourth quarter, represents the midpoint of the continuing operations guidance. The next bar is the net PNOC lag effect in the 2022 calendar year, which totals about $80 million. We've had si gnificant inflation this year and we've taken significant pricing as a result, but there is a timing delay in the recovery of those higher input costs. As I noted earlier, in the third quarter, the pricing contribution began to recover the lag. When you think about the timing of when we effected new pricing this year, not all of it will be realized in 2022 and some will wrap into next year. The third bar represents our dollar estimate for this year of cost interruption due to the supply chain and service constraints that we think will recover over time, a total of about $40 million. The net impact of these factors totals $120 million. Over time, the environment will reach a new normal, and we believe the earnings power of our business as it is now constructed, is about $400 million. We have the right action steps in place, but it will likely take several more quarters to get there. Before I turn it back to Steve, I wanna make sure I recognize the effort of our team members. We have not only been running the business day-to-day in a very dynamic environment, but we have completed a major divestiture at a strong valuation in a challenging financial market. We have been hard at work. I'm so proud of the progress we've made and grateful for the team's contributions. I'm confident we'll continue to deliver improvements in 2023, and I'm bullish about our prospects as the new TreeHouse. With that, let me now turn it back to Steve. Thanks, Pat. I wanna close by covering two areas. First, how our new statement of corporate purpose supports our higher growth, higher margin, private label snacking and beverage company. Second, how we think about 2023 and beyond at a high level. Earlier this fall, we held our annual summit with our management team and our top leaders across th e company. After a couple of years of COVID, followed by many months of strategic review, it was great to get together to not only celebrate our accomplishments, but to position our teams in the best manner possible so that we could hit the ground running on day one following the close. We spent time team-building, generating ideas, and acknowledging the challenges and opportunities as we evolve our organization design into one better suited to support not only a faster-growing portfolio, but an organization with a new purpose. Our new corporate purpose statement is to engage and delight one customer at a time. While you may initially think that by customer, we simply mean retail customers, our intention is to go way beyond that to represent all of our stakeholders, retailers, consumers, employees, and shareholders, as well as the communities in which we operate. We have chosen the words engage and delight very purposefully. Engagement is about participating. It's about listening, connecting, and collaborating. We define delight very simply, to exceed our stakeholders' expectations. This comes to life in a very tangible way for our retail customers. Our goal is to bring these consumer-advantaged categories to life in their stores under their brands. We'll continue to collaborate with our customers and delight them by driving mutually profitable growth. For our consumers, as many of you know, there's a real passion around a number of our products. Whether it's our chocolate peanut butter cups, our Lofthouse seasonal cookies, or Everything Seasoned crackers, our products have the ability to generate consumer delight, excitement, even fervor, and frankly, build private label franchises. As we succeed to engage and delight our customers and consumers, it assures our ability to grow the top line and expand profitability, enabling us to drive long-term sustainable growth and shareholder value. For our employees and the communities in which we operate, I've said it before, people and talent are critical to our future. We are focused on employee engagement and satisfaction. We are committed to making TreeHouse Foods the employer of choice in the markets in which we operate. With that, I'll turn our attention to slide 18. Pat walked you through the macro headwinds and their impact on our business this year. More importantly, he covered what the more normalized profitability for our business should look like. I'd like to wrap up my prepared remarks with some final thoughts more specific to 2023 as you digest today's information and build out your models. First, we expect private label demand to continue to be strong next year given the economic backdrop. During historical downturns, as consumers look to stretch their dollars, private label has benefited. Second, as I shared with you earlier, we have a faster-growing, higher-margin portfolio. Pre-pandemic, these categories grew between 3%-5% per year. Although we're not ready to provide formal 2023 guidance, given next year's wrap of pricing to recover inflation as well as healthy demand, we would expect revenue growth to be very strong. Third, we will continue to aggressively address labor and supply chain disruption and focus on improving service. Having the labor back in our plants enables us to serve our customers and to deliver cost savings. We are making very good progress in each of these areas, and we expect that will be reflected in our adjusted EBITDA margin progress next year. Finally, I'd like to point out that our net interest will be very different in 2023. Our $500 million debt repayment in October translates into roughly $20 million in interest expense savings on an annual basis. In addition, the interest income on the notes receivable from the transaction will total roughly $40 million next year, of which the first payment is expected in the fourth quarter, netting us a very efficient capital structure. I'll close my remarks today by saying again, we took a tremendous strategic step this year transforming the company. It will take some time to get back to a new normal, but I hope you share my excitement around our future, starting with our new purpose and looking ahead to 2023 and beyond as a simpler, faster-growing, higher margin snacking and beverage company. With that, let's open the call up to your questions. Thank you. As a reminder to ask a question, please press star followed by the number one on your telephone keypad. To withdraw your question, please press star one again. We'll pause for just a moment to compile the Q&A roster. Our first question comes from Andrew Lazar from Barclays. Please go ahead, your line is open. Great. Thank you. Good morning, everybody. Morning, Andrew. Maybe to start off, Steve, thanks for sharing your thoughts on what you think the sort of normalized, you know, earnings power can be of the business as it's currently constructed now. I realize this is not guidance for 2023 per se, but if we look at PNOC for starters, I think you mentioned in the prepared remarks for the first time in quite a while, righ t, PNOC finally turned positive in the third quarter as pricing has sort of better caught up to costs. If we think about that $80 million in PNOC lag, over you know over the last year or so, I guess why would that be expected to be you know a drag at all in 2023 specifically if it's already turned positive? Unless, I guess, you're expecting incremental inflation from here for which you would need to take incremental pricing. Andrew, this is Pat. I think the way to look at that is that's the drag that we've sort of experienced to date. As we continue to normalize, that drag or that lag would go away. I think you're right. If there were incremental inflation, that could be a drag on 2023. That, you know, most of the pricing that we've taken to date is in market and effective, and we'll lap a lot of that pricing into 2023 throughout the year. Okay. You at least expect a good portion, and we don't know exactly how much yet, but a good portion of that $80 million probably wouldn't necessarily be a factor in 2023, at least as we're thinking of things here today. I know that can change. Yeah, I think that's right, 'cause I think that pricing's been in market for some time now. Andrew, this is Steve. You know, that was the purpose of that slide, right? I think, you know, we all thought, you know, a year ago that the world would be normalized now. It's not quite there. The pricing piece is in market. The labor and supply chain piece is getting better, but it's getting better a little slower than we all thought. Yeah. Right? We expect that to normalize over the next couple of quarters, and we'll hopefully have a little better look at that when we guide in early February. The supply chain part, that is obviously very consistent with what we've heard from pretty much everybody, right? It's persistent. It's getting better, but it's slow, but it's persistent. Yeah. I guess the second one would be. I realize it's very hard to talk about sort of 4Q results as the portfolio was, you know, before the deal closed, but really just trying to get a sense of, you know, if the business is sort of clicking along as you would have, you know, initially anticipated, you know, relative to that initial guidance. If I just look at, I guess, the difference in EBITDA, for instance, pre and post the deal for 4Q of last year, in the appendix there, it's like a 15% difference. Then I look at this year's 4Q, the difference between the EBITDA guidance you provide and kinda what the street was estimating, it's like a 30% difference. There could be seasonality or maybe the divested business was more depressed than the year ago period, but really just trying to gauge whether you were essentially on track to achieve this year's guidance pre-divestiture. You know, as we've heard from others, there's clearly still supply chain issues that persist. Thanks so much. Sure. Well, you know, why don't I start, and I'll have Pat jump in. I would tell you that we are on track from a sales standpoint. We are, we're struggling a little bit with the external headwinds, right? The supply chain and inflation. I do think that business had a softer last year. Yes, there's a little more recovery in the business that we sold. Candidly, we're a little bit behind from a labor and supply chain piece. Those external headwinds in the fourth quarter are pressuring margins a little bit more than they are sales. Great. That's helpful. Thanks so much. Thanks. Our next question comes from John Anderson from William Blair. Please go ahead, your line is open. Good morning. It's John Anderson with William Blair. Morning, John. Morning. I was gonna circle back on Andrew's first question and just, you know, the bridge that you provided to the normalized EBITDA of $400 million, I'm curious if you could talk a little bit more about the timeframe associated with closing the $80 million gap on PNOC and the $40 million gap on labor and supply chain and some of the mechanics of doing that. It sounds like on the PNOC, it's just a matter of benefiting over time from the pricing that's already in the market. Correct me if I'm wrong on that. If there's some more color around maybe the actions you're taking and the progress you're seeing with respect to labor and supply chain. A A gain, it's kind of the timeframe associated with it, best that you can estimate at this point to close those gaps, and some of the mechanics of making that happen. Thanks so much. Yeah. John, I'll start with the pricing. This is Pat. You know, I think we took several different waves of pricing throughout the year. I think each quarter we had sort of a wave of pricing that hit with the most recent sort of wave culminating here in Q3. You really won't lap all that pricing, you know, until you get into Q4 of next year. In Canada, we even have some pricing that'll be effective in January on some business from that perspective. We'll continue to see that throughout next year as we've had kind of waves of pricing each year from that perspective. The more significant pricing from a dollar magnitude perspective was earlier than later, but, you know, certainly there was pricing throughout the year. Sure. I'll touch on the labor and supply chain. Labor, first of all, is getting slowly better. You know, you don't hope for the economic situation to be slow, but if it is, I think that'll continue to improve at maybe a little better pace. We think the labor activation, it's both wages and it's a lot of other things. It's scheduling, it's a number of different things we're doing to make TreeHouse that manufacturing employer of choice. Those actions are helping us, so I would expect that to improve over the next several quarters. With regard to supply chain, we put a slide in the appendix, and I apologize, it doesn't give actual numbers on it, but slide 21 in the appendix. It's fair to say that our the on-time and full from our vendors is in the low 70s% right now on an aggregate. We're turning that low 70s% into low 90s% service levels, right? That's the disruption that, you know, you have. When goods don't arrive, you have to change schedules. You're not as efficient an operator. You know, the commitment I have, I meet with the CEOs of, quite frankly, our top 4 or 5 vendors on a monthly basis personally, right? You know, that drives recognition through our organization and their organization that we're working together to get those right. The commitments I'm getting is that that will continue to improve. I would expect both of those to get pretty close to normal, you know, and again, we'll try to guide this better in February, but I would hope in the next several quarters. Thanks so much. Appreciate it. Next question comes from Chris Growe from Stifel. Please go ahead, your line is open. Thank you. Good morning. Hi, Chris. Hi. I had a question for you, if I could first just understand the kind of volume performance in your categories. For the fourth quarter, you indicated that volume should be about flat. It seems like a relatively similar rate of pricing, maybe up a little. I just want to understand, you know, why is that better sequentially in the fourth quarter? Is there anything unique that weighed on the third quarter volume that led to that decline that you mentioned, for example, walking away from a contract in the pickle business? Anything else that's worth noting for volume currently in the business? Sure, Chris. You know, you mentioned that and I think in Pat's prepared remarks, we talked about a large, and that was a food service pickle volume. When we make volume comments in our scripts, we use total company volume, right? Not retail grocery private label volume. Our retail grocery private label volume was up a couple% in the quarter, right? We think that'll be up in the fourth quarter as well. A couple of things, you know, we did exit a large pickle contract in food service. You know, our contract pack business, although small, it's about 10% of our total business, tends to be very upscale premium branded items that we make for other people, and those businesses are down. Most of the impact on our negative volume is either places where we've chosen to apply that capacity against, you know, much more profitable business or, quite frankly, where there's headwinds in their business. I'd point you to slide 12 in our deck, right? You see that volume mix is positive on lower volume, right? That means that we are applying limited capacity against more profitable business. I give our teams a lot of credit for that, and I think reflects that our core business is pretty solid, and we expect that to continue. Yeah, that's good answer. Thank you for that color there. Just one other question I wanted to ask. In relation to the pricing, you had something like 21% pricing in the quarter. I know it can cut across more than just, you know, retail businesses. When I look at, you know, IRI data for your categories, I come out somewhere around 16%. Is that the retailers holding back on pricing, or are you seeing more of that flow through? To what degree is that aiding your volume performance as the pricing isn't pushed through quite at the rate at which you push through to the retailers, if that makes sense? You know, Chris, that's a tough one because it's so different by customer, by category, right? We have categories where customers were way out ahead of us and took price ahead of us if the national brands were. We have categories where they've really held it. There's a couple of retailers in the country that are gaining share in private label and using private label in this high inflationary environment to send a message to draw traffic, right? It's really a tough one to say. I think in general, the category pricing is up, right? I think the retailers have passed through in general. You could pick an individual category and that may be higher or may be lower. I think, as we look across our, especially our major customers, we track each one of those, and I think most of them have passed our pricing through. Okay. Thank you for the time today. Yeah, thanks, Chris. Thanks. Our next question comes from Bill Chappell from Truist Securities. Please go ahead, your line is open. Thanks. Good morning. Morning, Bill. Just to follow up on kind of the volume, maybe, so what? Any idea of how much the service levels and also the pickle business affect the volumes in the quarter? Kind of the expectations for volume in 2023? Sure. Sure. Sure. Bill, it's Pat. I would think about it as about half and half. About half of the sort of volume is related to s ort of the lag in service, and then the other half would be related to the pickle business. I guess the way we try to think about the volumes is, you know, as we continue to make sequential improvement in service, right? We've said it's slow but steady. We expect that to continue as we think about sort of the normalization of the supply chain environment that we talked about, you know, headed into 2023. Yeah. I would also take you back to a year ago in the third quarter. We had pretty solid service, right? That was the beginning of Omicron. We started to get disruption in our factories, but our inventory levels were really good. I think service was like 97% to commit. I think we said in the prepared remarks, if we didn't, it was 93% or so in the third quarter of this year. You know, we did not have those same supply chain headwinds a year ago, so we did have a better inventory base. That started to decline pretty aggressively as we went into specifically the first and second quarter. We think the volume lap, given that we think service will be significantly better in the first and second quarters this year, we also think the economic environment is gonna drive demand. You add those two things together, we think there's a nice volume upside in the first two quarters. We'll try to quantify that when we get closer. Got it. Just, I guess, on that pickle business, I just think of it as the, I guess, original business. Is it a 1-2 point drag going forward? Separately, a kind of accounting geek question. As I look at that, I guess, note receivable or seller's note, how is that calculated into your leverage? Is that a contra item so that it's an asset that offsets debt, so your net leverage is actually lower like it does on the interest expense line with interest income? Or does it not affect, you know, how we should be looking at your leverage ratio going forward? Thanks. You know, I'm gonna let Pat offer one of those. You know, Will, that's exactly the feeling that I have, right? We've got an asset out there, a debt instrument paying us 10% interest, but unfortunately we don't get to count it against our leverage. That's why we made the statements at the end of my remarks right on interest, right? The pay down in fact does affect our leverage ratio. The reality is, outside our leverage ratio, we've got an instrument paying us $40 million in interest, right? You know, the net impact to the company is dramatically different than it was a year ago. The cash flow that we can invest in our business is very different this year than next. We've got constrained growing categories. We now have the resources to invest in them to take advantage of that. I don't know, Pat, if you'd like to comment any further. No. Yeah. I think the interest. The note will generate significant interest, which will generate cash, right? That cash will be used in sort of our net debt calculation and then the cash flow to the business as Steve said. Yeah. Unfortunately, no, we don't get to offset the two in our leverage calculation. Got it. Thank you. Our next question comes from Rob Moskow from Credit Suisse. Please go ahead. Your line is open. Hi. Thank you for the question. Morning, Rob. Steve, Pat, I just wanted to make sure I understood what's changed in the guidance for continuing ops. I saw that in second quarter, you estimated EBITDA for continuing ops at $330, and the slide 16 indicates that it's now the starting point is $280. Is that correct that you've lowered guidance by $50 million? If so, can you give a little more color as to the labor challenges that you're having that caused it? Yeah. Hey, Rob, this is Pat. I think, you know, the $3.30 was sort of wasn't really guidance, but was our sorta estimate of the business at the time that we completed the transaction. I think your thoughts are right and that, you know, the fourth quarter guidance really reflects the current environment. When we talked to you in August, the supply chain was recovering, you know, at a reasonable pace, but it's dynamic and that recovery hasn't progressed as fast as we would have anticipated. You know, we are seeing good progress across many of our plants, but we do have a select few plants in certain markets where labor remains challenging, line reliability is an issue, or we're facing material shortages. You know, Steve talked about sort of the supplier on time and full issue that we're experiencing and how we need to try to convert that into more positive service. I will say being, you know, a simpler, more focused company with a smaller footprint is benefiting us. Those handful of plants where we're experiencing it, you know, the greater disruption, you know, we're able to focus more of our time and effort on those couple plants to help drive some of the improvement. We are seeing the benefits of that as, you know, I think you heard in our prepared remarks service in October did tick up to sort of 96% or so. While supply chain is a big factor, we've also seen some additional inflation in some of our non-traded commodities, things like foil lids, other, you know, commodity derivatives like casein and corn syrup, you know, which we'll price for as needed. We're making positive progress on a sequential basis this year, and we've improved the profit meaningfully since the beginning of the year. Yeah, Rob, this is Steve. I would suggest that the third quarter actuals and the guidance show the solid progress. Given the disruption that remains, so those external headwinds that remain, we thought the guidance had to reflect that. You know, we have the opportunity to get in the higher end of that guidance if you know, if we can continue to mitigate that. We thought it was prudent to put those numbers in there if that continues. Well, I guess it is a significant reduction in the guidance for the continuing ops business, isn't it, for the full year? A significant improvement in the guidance for the divested business. Yeah. I don't think we can do that math, Rob, because I don't know that we know what Q4 for the divested business really looks like, you know, in terms of that mix. You know, we don't have a sense of how they're performing relative to the original guidance we put out. Yeah, I don't think we can. We can't comment on their progress. Okay. Can you give us any kind of color on what percent of the portfolio you still need to take pricing on in January? I think there's a very small amount, Rob, that's where we just have contracts that renew sort of in the January timeframe, and so we'll put out that pricing in connection with those contracts. There'll probably be some non-commodity pricing that happens in the fourth quarter. It's very cumbersome with a lot of retailers to do pricing between Thanksgiving and Christmas, but that pricing will roll out right after that on some of the non-commodity things that Pat mentioned either in the prepared remarks or the remarks here on Q&A. When you say non-commodity, do you mean labor, overhead? No, it's usually t hings like casein and corn starch and some of the derivative products of commodities have been priced pretty aggressively this quarter. They tend to be small percentages of formulas, but they're material increases, and so those increases will roll into the next year. We don't see inflation anywhere near what we saw a year ago, but we do see inflation in the first quarter. I agree. All right. Thank you. Thank you. Our next question comes from Connor Rattigan from Consumer Edge Research. Please go ahead. Your line is open. Hey there. Good morning. Thanks for the question. Morning. Just stepping back and thinking about private label as a whole, we've seen remarkable consumer resilience in the face of rising prices across CPG. With price gaps versus branded products largely widening, savings dwindling, and seemingly a slowing economy, it really seems like a perfect storm for a major step change in private label share, yet that's really largely yet to materialize across many categories in retail. You know, I guess could you just share some thoughts on maybe what's taking so long for many consumers to take that plunge and trade down? You know, that's a great question, Connor. We have information, you know, from some of our largest customers. Some of the discount retailers that service virtually all private label, their traffic is up dramatically. I think you heard in the Walmart call. I think Doug McMillon talked about the trade down in their mix, and the new consumers walking into their stores. I would suggest that it's happening. It may not be happening at the pace that it will. If what we see, you know, the continued decline in the economic situation continues, we're convinced it'll continue to happen. I can tell you the retailers doing their best to position private label to drive trial, right? They're looking forward to merchandising. They're looking forward to promoting doing those things that they wanna do. We're working hard with a number of customers. The supply chain is limiting our ability to do that in all cases, but where we can, we're positioning the business to do that. I don't know if that's helpful or not, but I think you're right. I just think it's gonna happen over a little longer period of time. No, that was great. Thank you. Our next question comes from Hale Holden from Barclays. Please go ahead. Your line is open. Good morning. Thanks for taking the question. On the seller note from the divested business, I was wondering how long you guys were planning on holding that or what type of market conditions you would look for to potentially monetize that into the market? Yeah. That's Pat. You know, it's difficult to speculate on the state of the leverage loan market, so I don't know that we can really comment on a timeframe from that perspective. I think, you know, certainly the way that note is structured and the interest rate that it derives, we're sort of happy with the cash interest that provides. You know, we'll continue to monitor those markets to see what might make sense. You know, we're sort of happy with where we sit right now in terms of the structure of that note. Great. Thank you very much. This will conclude our question and answer session. I would like to turn the conference back over to Steve Oakland. Thanks, Hale. - for closing remarks. Yes. Hi, I'd like to, again, thank everybody for being with us today, and we look forward to all the follow-up calls we'll have in the future. Have a great day. This concludes today's conference call.