BGS - Earnings call transcript Q3 2018

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Operator

Good day, and welcome to the B&G Foods Third Quarter 2018 Earnings Call. Today's call is being recorded.

You can access detailed financial information on the quarter and the full year in the company's earnings release issued today, which is available at the Investor Relations section of bgfoods.com.

Before the company begins its formal remarks, I need to remind everyone that part of the discussion today includes forward-looking statements. These statements are not guarantees of future performance, and therefore, undue reliance should not be placed upon them. could the subsequent recent more condition. SEC of risks to Form Report detailed you future the and company's XX-K filings that refer company's and Annual most on discussion operating We results the financial impact for a company or publicly or otherwise. forward-looking obligation revise of new to a whether as result no information, undertakes any The update statements, future events diluted be the adjusted will also making per adjusted non-GAAP net measures company today's to references base The call and EBITDA, financial adjusted income, sales. business earnings share, on net comparable of financial earnings measures Reconciliations financial to these are the today's most in directly GAAP provided measures release. Wacha, for Bruce by results the call quarter. the will company's the start financial discussing the company's CFO, factors his Officer, the highlights, some as that selected businesses that, as concerning and company's thoughts results, Chief affected Operating will Executive After company's the various Bob company's and Cantwell, outlook Romanzi, the well Chief beyond; make for the Ken XXXX discuss Officer, remarks. will to over I turn would the now to conference like Bruce.

Bruce C. Wacha

Thank Good XXXX you third quarter for earnings call. our afternoon. joining us for

third continued operating growth, for cash companies. margins, strong a increased top generation, share environment from quarter and results strong flow challenging earnings food line per Our benefited despite

generated net a of of per the quarter quarter third percentage year. was of compared of the we for EBITDA diluted share of quarter, the and adjusted $X.XX of of of and $XXX.X $XX.X adjusted as million net earnings adjusted EBITDA, of million During million last sales, XX.X% adjusted diluted net XXXX. to earnings Adjusted $XXX.X share $X.XX EBITDA, per third sales, sales $XX.X for

net million net pricing well benefited as $XX.X both volumes, volume. growth. third Increased by of net to included in net sales price trade sales list million Net acquisitions, pricing, as the quarter. $XX.X by improvement contributed benefit to growth. increased sales contributed which our $X.X spending, in increases Our and net sales X.X% or our both the The driven in was which from increase million

in net Brands, expenses, profit a Gross million business for which decreased procurement or for net XXXX. a the the to adjusted quarter expressed in exclude of for XX.X% to been impacted negative profit savings, anticipated Pirate warehousing than base sales $X XX% quarter, percentage profit by of third impact a also the negatively quarter an third the and of Our excluding compared profit percentage was million for of XXXX to Gross XX.X% partially the XXXX. pricing. offset flat of million of and third as net essentially Gross less by the sales, $XXX.X percentage $X.X expenses. million industry-wide in decrease freight was as was quarter. now of in Gross from quarter has down was increases $XXX increase non-recurring sales net expenses,

compared to generated year, months For percentage nine for and diluted $X.XX nine sequential the share we our a of months net XX.X% earnings as year, first adjusted $XXX.X million, the improvement the the six a billion, net of the sales of adjusted of Adjusted EBITDA of was year. first EBITDA $X.XX. sales months of first per of

through results debt. nine adjusting financial Pirate a repayment and of supportive target full-year of the of for Our after sale months are Brands our long-term

the during first net $X.X the during just months our We strong generate generated cash the of adjusted in $XXX continue nearly nine of months year of very million by to XXXX. first to provided compared into We conversion EBITDA activities cash. nine operating million

Brands sale the on in of And XX. As closed October transaction you announced September, know, Pirate we this we ago Hershey. just two to back weeks

transaction $XXX the a pride to $XX.X to our million. times very of we was for month a from in XX-month million, turn We during net Hershey shareholders. this for five Pirate of just approximately one sales and received The we and While trailing in, of immense times of invested represents that years hard acquired $XXX Pirate's down. our X.X for XXXX a Hershey return Brands Booty is on an offer sale also exciting compelling represents capital brand X.X took million that summer multiple

facility, in release close, to credit $XXX.X As at rising debt under of the interest proceeds term during outstanding rate we tranche the time of million retiring we noted loans the together floating the borrowings our amount of with our rates. entire principal revolving our the sales under of period press this facility used additional our credit repay

capital our us a investment to Brands In addition brands center-of-store strategic substantial vegetables. sheet, to what represents and better our optimize do providing also sale us opportunity on better simplify enabling the the on Pirate drive generate focus best, grocery decision return balance we to our portfolio, frozen and to to the with of

EBITDA full-year that to Our million million and million adjusted $XX previous has full-year Brands million. $XX guidance in $X fourth or year's assumed $X of approximately adjusted this net generate $XX approximately quarter in Pirate would to million in EBITDA sales

expect We loan during our approximately fourth interest million of quarter. the of expense (X:XX) repayment the term $X.X

XXXX are Pirate recent long-term debt. of our of the guidance repayment for impact and updating for expected Brands We our of the sale

adjusted of for to to year needed expect an million, additional to months achieve during $XX.X the of impact of diluted earnings of of This generated quarter. fourth We've quarter million of and to million of We of adjusted share Brands EBITDA EBITDA Pirate first sales EBITDA sale $X.XX debt. year year, full billion of $XXX in year's $X.XX. to of through the net nine last net $X.XX million and guidance billion, EBITDA fourth XXXX $XX million per adjusted adjusted $XXX the million $XX the updated our of of $XXX.X the compares expected $X.XXX to this repayment adjusted implying long-term our

benefit initiatives. result expect a pricing year's this our in We million million quarter fourth $X $XX of to as

had as incrementally year. net margins well We products innovation we Green also our innovation on launched generate our improved to last EBITDA as frozen adjusted expect to the from growth from continued that products sales Giant

recognize following to new the California. Coast fourth quarter of our expect West we savings distribution opening in in facility the Additionally,

of to our costs, to this interest freight, the $XXX approximately $XXX $XXX We expense a expense million $XXX of $X basket interest of million, cash expense We of and benefit million million expense expect to year. of includes $XX.X approximately small and net in input including also depreciation of of amortization amortization interest quarter now procurement million; fourth expense expect million $XX.X million. to across $X which see million; warehouse

on with we than the $X expect year. of And sale for gain an for be our and million We rate tax cash EBITDA $X of decrease $XXX on Brands, our be year, the million to we expect million guidance, million guidance. approximately finally, CapEx EBITDA less to taxes the earlier previous will to for of effective $XX the adjusted our our be expect less to that interest cash the consistent $XXX excluding cash compared adjusted taxes, year. a CapEx, anticipate taxes cash guidance, our approximately million we and Pirate Based

we expect dividends. $XX impact million by positively our addition, before the to million reduction plan inventory to for In year cash $XXX full an additional

during forma six sheet we repaid paid the mentioned term first to of tranche proceeds additional the expect EBITDA and under our the coupled this have sale adjusted of with now loans continued adjusted million with down term facility. revolving the We Based of term our expected we've pro borrowings our began EBITDA months loans with we have B the full-year flow debt And generation earlier, loans of credit to our year. the year. $XXX.X fully We million B as Pirate net improve balance $XXX guidance in our year X.X and times. Brands on approximately of tranche I cash fourth,

was $XX.X of directors now by our program I'd earlier our on have the Bob? to over million remaining also stock to this year. million board repurchase like We turn $XX Bob. call authorized that And

Robert C. Cantwell

for to joining Ken of Bruce. a then cover you, There would this to during questions. before that us over call are And topics turning taking thank number it Thank to and afternoon. you like audience I the the

would earlier step to discussed the to call. First, Brands rationale of like that briefly Hershey a take I sale know backdrop to the divestiture. back the Bruce But on our for I and Pirate discuss

and always we That acquisition-driven that intention. know, investors As business, meant generally our our has we growing still is acquisitions. long-term have through that are been an

Typically, it comes when strategic generating been for has rationale primary price by returns acquisitions. done shareholders. is buying on our this our to However, staying disciplined and smart

these However, for the of five brands Brands, of Pirate benefit in it of for An cash million that long-term XXXX, provided years $XXX for monetize the it is opportunity for sale we later, to very able best acquired $XXX are warehouse an North repayment America and additional million. one sell with Brands in debt. the Pirate believe attractive to for just we're had We time sellers. what valuations when is brands at a snack we

XX Foods that past at of pursue that One has the my sheet accretive prime always our balance years to is I've over spent acquisitions. been ensure priorities to B&G

As also in the we cash and to guidance debt was adjusted reduction around like of fact our Brands I Bruce net for well our Booty flow Should $XX sales these discuss sale earlier of forma we inventory in Pirate an approximately Pirate's of million on XXXX. be since by the an adjusted EBITDA EBITDA of is divestitures occur, end portfolio participate to based any call, the year. following cap peers be to times the by opportunities. mentioned of Pirate expect forma large growing our and very the rumored sale This us, of would brand pro our in midpoint brands acquisition to positioned the to note. our for plan, consolidation expect net exciting Brands. on important X.X the pro

continue only our as in X.X%. Pirate's described $X to is business, operating Booty environment, was excluding million base Pirate not what we However, or our portfolio. in Brands, brand Year-to-date, hear growing up a challenging almost the

cash up very of top-line flow a this to with is target business, X%. flat As our consistent long-term

quarter beginning had as to our of recently the million brands, we we Giant were growth. its performance XX% up largest frozen Green brand Net our or continues outperform Giant products completed of Giant sixth several our to frozen. sales has produced Green fact, for and quarter. look $XX.X consecutive third $XX.X double-digit now quarter, Green million of other leading a third at In frozen strong with from

continued demand of shipping and Green Crust Veggies, a began Cauliflower and Giant We Giant our Green earlier Cauliflower. offerings. are Spirals seeing Green our for Sprout's Veggie Green September, Giant well Green our Riced launched as Tots, as In our Giant Green Little this Mashed strong year we Organics Giant Pizza adoption Veggie

and addition, Harvest Giant Green Cauliflower here In are Bowl expected quarter. Protein fourth late in to Riced our launch Green the meals Giant stuffing

report million we products with The our the $XXX owned to led is in the and have we rate $XXX that proud months last since these Giant brand. happy Green have of We this and are by that retail are XX a innovation very to million Giant some the frozen progress on is Green have we that basis. products, made sales number in closer run progress

$X.X the our premium We Giant of Giant quarter in more challenged the Victoria, growth are Green quarter year-to-date Giant and brands net both and the canned are benefiting category. and other have of sales X.X% in brands one for by in the more we in halo fact, increased among the in large period. And sales was opportunities. our from pasta Le aggregate exciting the products, XX.X%. are of Net pack including Leading the other or the Victoria sauce X.X% much portfolio all just frozen a the the But with than Green third fast-growing we on businesses effect, Green and brands top Sueur million up nice for company. quarter

million year for Farms was its New following York to the second largest Style of of Net continued or for third Maple million challenging the half X.X%, Cream $X.X the strong, X.X%. the Wheat X.X%. Grove has very quarter $X for this quarter X.X%. million back up Ortega, continued Net quarter was nearly $X.X brand, quarter although during for of the decrease performance sales remains year-to-date X.X%. million X.X%. or and XXXX with up performance and slowed or or a up or are now $X.X its million strong up our sales Ortega million $X.X the turnaround or of was year up $X.X

the America. of have in brands also seasonings largest We North second spices and portfolio

Dash to our of business, seasonings of in seasonings including legacy were our brands off and highs. impacted negatively cost by Club acquired retreated products for X.X%, price are such pepper the category such these reduction and the fall than certain by significant lower year ingredients expectations or million historic spices net brands we've XX input and While recent the spices year, Mrs. stores XXXX our for This as Ac'cent a we XXXX in outperforming some after margin. coming a the is and off as closure been and reflect have of Sam's healthy banner sales from a and modest that brands $X.X more

plan. common sheet, as have our way yielding are strategy. quarters remains And we the pursue of Bruce model earlier mentioned modest under Strong brands XX.X strong again the authorization to of to to cash which ability we dividend, shareholders. nearly our through unmatched balance our to are positioned three believe We very repurchase supporting And a manage margins continue call, our in X% year an once that purchase now million stock our cash, We intact. for on well top-line of in of still flow we to and additional acquisition stock our growth. business with portfolio is clean finance-driven are the

I Now Ken? the over like call to would turn Ken. to

Kenneth G. Romanzi

a year, to Thank we cover freight both announced to topics I pricing prices I that this across the market majority cost and amount of past to portfolio the generating fair Bob. of offset year; in you, raise afternoon, have help that intend we costs. the inflationary of couple discussion this our Earlier inputs. a will

driven result, and spending had the the by at second benefit the list in year, the first a price our of benefits reduction quarter. increase from As trade we in a end in beginning earlier tail modest the quarter a

during benefits materialize a bigger the year. We back half of the in way seeing these are now

net relative we quarter, $X As Bruce to fourth in And million of line we to which know, how some products on this benefit, in $X.X a previous we also the with million third will area benefited $XX quarter. mentioned expecting our we from to million our earlier find closely as We're key you pricing to continue cost that to call, the guidance. these another has net customers year. with in been is opportunities in Freight, approximately believe ship the pricing working savings benefit challenging customers.

months, than Over more freight has had XX $XX in the past P&L incremental absorb costs. our million to

costs, continue costs, warehouse, other fourth seeing pressures with beyond, quarter. in us procurement our in year, persist our possible by diligent continue portion and the the that making when getting coupled freight this however, cost moderate basket it of as we to are as run these organization part term, in of these are pace in freight approximately increases benefit we're to latter more savings the estimated expect them. plus But Longer of is managing X% We cost we lean as to inflationary efficient one of to and input which measures. an just and our in XXXX be essential logistic

see expect a full open a our customers front, center West modest seeing million operational. distribution savings XXXX. West is and California cost benefit the of approximately to Coast in shipping We're and $X already our benefit to On new Coast now in in fully year

the our of rate distribution to frozen $X opportunity a believe an beginning consolidating next half in the second as run million we we another network as now to process where early basis have of save million $X we're year. Additionally, on

more $XX On we're early we're our next million far on making on years. will basis of we looking color scratching forward efforts, we upwards cost or sold the which cost year. to in over an While cost providing savings several call, goods save expect us progress program, our of so annual conference of only year-end I'm the savings surface our this believe X%

call back I'd to Now Bob. the like over turn to

Robert C. Cantwell

for thanks to joining us. the Thanks, audience Ken, and

begin like I'd the call. to portion of Operator? the Q&A Now

Operator

in we please are the questions Blair. while no there Andersen poll moment take questions. Thank one for And queue. We'll with you. William Jon And

Jon R. Andersen

Hey, good afternoon, everybody.

Robert C. Cantwell

Good afternoon.

Bruce C. Wacha

afternoon. Good

Jon R. Andersen

much with little I on Can and the wanted you out Congrats pricing expect half some visibility quarter? fully modest promotional you a bit to kind half. year it confidence your throughout that a this like the bit progress benefit good start of guess you have of The kind talk expected And is about fine-tuning I way onboard degree first the the fourth sequential here. $X of little confidence is of high How number? you that retailers million – building pricing. your and much ask it How of second benefit the in price about practices? seems list is increases? at this point, of million $XX to a into are of such kind in played

Kenneth G. Romanzi

in confident Ken. in pricing fourth the is quarter. This We're Yeah. the

we Of course, there balance list left exact price really product a and it quarter But between on the promotions just and trade this promotion probably much year it rests in a the lot any in year. other quarter within more – rests increase fourth is than the made took in is we how made of maybe. amount the earlier adjustments that on that we trade

a seeing biggest that's is really the two. forecast. be but on We're it that's The trade volume So would shelf. all any of promotion variance our variances at between elasticity unexpected large balance in not the reflected changes,

Jon R. Andersen

Okay. the And started XXXX something think is to the you that benefit $XX assume to be as rate second run million price benefit this that have million fourth results I well, seeing the year? half carryover to really fair quarter a – material don't would that given of $X your would it for benefit in

Kenneth G. Romanzi

It We'll first to not we'll the because see a benefit list may number mix the in but be promotional change, and continue exact between continued quarter. same benefit. changes see

Jon R. Andersen

heard I gears, sure I maybe – I clearly. another Ken. Okay, helpful. wasn't Shifting you, just one this for

amount about had you absorb to freight You were talking that of the year. this

and basis. point of at the that Is XX-month million the routes, that mentioned increases this you seeing? on incremental terms of think kind trailing you're in that getting a the I $XX think better warehousing started benefiting mentioned just offsets. And you sure you some by what I talking fourth the And means. then quarter. I'm you X% in procurement about not secondly,

If bit, a you that be would little helpful. could clarify

Kenneth G. Romanzi

Okay.

questions. two have We

So is our the about first transportation.

So, versus to in negative yes, prior fourth last year. this we the costs do of expect quarter variance transportation in just year started quarter of a the spike bit the year to that subside aggressively because fourth

we're Plus contracted and the spot the of will between we and continued to still of freight job in overlapping increase, while our high increases start better are freight. of – the the rates we're mix rates. doing larger So the have

XXXX, rates again. see we go in However, going do are up to

to quite as So freight> last our that I continue what offsets as the savings will increase be our the another bad expect think experienced But usage spot company group again again, the cost that freight little program it bit we months. a we is peer and do whole of won't XX one, higher between expecting as From in round the number continue rate increases. we We over industry contract having to a in is past. than work spot. mix in versus the

spot we're we drive the in transportation our be shipping that had We've XXXX. West for And we get located also a shipping room move will of money still is study at of Coast dry at concluded the where of had is network, facility though our Less the we was our we've also we'll operating are we in building were map saving miles. California our that's And we plan warehouses So more relocation of rate straight the of customers. first distribution lot our a think and other one into recently frozen which But between better miles. savings, And places need mix distribution the the move and out redone of the to less network. up, believe but to miles math. to take usage. Even close five, where warehouses. contract and to the Houston transportation five to them

Jon R. Andersen

to additional or strategic the any your kind as more would – what was But guess offer that I'm down the more divest you Hershey less sense considerations. Bob, on thought blocks be the color really just a core a bit color. that's there predictable, business. category. kind there of not of regular I that and Was divestitures, all and divest like to than it that made the guess end more little core Excellent. I maybe that came And you business promotion an focused? that's that Great. to B&G was one kind And it I Thank for around helpful. to of Great then bit thinking always acquirer – was decision kind still an and like kind about felt looking – is we point? franchises of some I'd cap some of I or more get for color sheet for your trying company sales maybe was little Pirates of viewed you of Or for of to core would though more decision building just you really a you. minute. business more maybe around you as other this balance get center-of-store of a we commentary go be maybe as opportunistic of similar a should snack couldn't and refuse some a that. to expect businesses? snacking at dependent Are divest around evaluating Pirates thanks this activity to

Robert C. Cantwell

Sure.

love first – Booty. I So store not acquirer great in we We an of it first. part a Pirate's And that today truly a the I'll answer on foremost, think the internally, brand we market. mean, and up the opportunistic we last plays in certainly certainly And had it's center the are, we brand. put frozen. was

really I move to network. more from I some snacks alternative footprint an we time outside and snack to it's player there's But ago of own this some we snacks. and thought made brands say extremely considerations. more makes trying that snack except like own fit portfolio. a in strategic think end and business, two player kind a there's were well synergies it. great us Pirate's, up they lot they for with grow not the make price And actively to was well I Booty today a was just should else focus Pirate's sense. because with we just a pick do weren't think expanding and buyer made way, was of and think the exists lot the not And reason, to for of a But on of but for it at through day, to our small going can what in being five really acquisition – some reasons; out price I things, store shift brand but want having sell like the right And really center at but comes cumbersome there, on when a going we together. a we're again. internally and seeing like it that there from certainly that that that do and and we was going along it. to being price, And sense brand warehouse certainly it who through our focus player, not snack being reverse nice way parties everything Two and a the the that as gives for And certainly us sense of on came it So sense don't how things little a brand light better-for-you it truly really that just we've But frozen... acquisitions. are years don't that a Pirate's our – we a ourselves just that there in Pirate's something like market bought salty we that difficult how made looked And of great have to other distraction ever

Jon R. Andersen

Yep.

Robert C. Cantwell

... based what comes on to market.

it consider longer together strategy. I coming to lot a pain and brand of just cracker et – it So our a have a hard snack don't real it to network, with Nature cookie just take and two really made only in a was sense And we – our term look parties because obviously cetera, business. portfolio. it – alleviates forced at was really the is price Back cumbersome salty us that distribution

more able bagel years. acquire chip we the really is one oriented. York in snack It's And have didn't to another Style New deli. And the a center-of-the-store sold in we business. weren't It's really last business. five

So time on. move to was it

Jon R. Andersen

That's helpful.

Robert C. Cantwell

Yeah.

Jon R. Andersen

Yeah that's – no, ...

Robert C. Cantwell

we I can think – we focus now. can

Jon R. Andersen

One Thanks in mentioned one last that one, Yeah. for Green launched couple of Pizza a you On me. September That makes Giant, Crust. I shipping there. Cauliflower are color were think that sense. for products was, the well,

Robert C. Cantwell

Correct.

Jon R. Andersen

I you to I part or catch didn't the the plans year innovation well. that. what then planning question, And as for I products second one. are the there going of was new your next other quarter a hoping of you're get forward? think early said are couple fourth

Green Giant Thanks. could prepared I just innovation about for little the frozen. you it in comments, If but the talk a more bit roadmap again that – apologize, you mentioned

Robert C. Cantwell

the the done got Well, we here since we only the Green September Crust character, that's in bought products. two Giant, not into distribution when Green retailers other distribution we've out was Pizza major and separate One, other got but launched we really what been Giant, it's Sprout. of Cauliflower is also in Green and And one Little in kind rolling September.

launched line little Sprout a We of Green Little have under really et veggies, organic – cetera. name the organic as riced

guy, guys category. the and think can really in we who a our is in organic that believe organic launched the dominant well. make We it's we've the play vegetable items become kind be category. organically retailer of we received for We vegetables. then to different go extremely really inroads frozen and So can of been somebody And certainly some after real the guy looking vegetables in best who

there's been are we customers speak select into come have those also are XXXX launched the other innovation are both as pipeline in Bowls then there distribution Cauliflower weeks and Green actually go And then brands. But getting we of been Riced last and now. a that I some a shipping few some is of in that But into, stuffing things So getting in the speak. pipeline our into as are and beyond. can't to a there of distribution Giant but Protein few to and and right innovation have other strong shipping is

XXX% it's Certainly, been pipeline real our is are a at of looking the So retail for there's innovation run of and innovation a on number on some of meaningful on Green rate too. not very have Green million wins Giant, us. some But $XXX innovation Giant. we just those on brands and on being

year-end into being good have So in Giant as get of our XXXX call more Green new chunk you'll beyond. we'll hear we the launched a first – certainly about also. those and But items

Jon R. Andersen

for good forward. Thanks questions and luck Thanks. going all the

Robert C. Cantwell

Thanks.

Operator

Research. Up Edge Holland Brian next from is Consumer

Brian P. Holland

Thanks. Good a a on could of that of you guidance, and everyone. it considerations. of If did prior just to taking net net math QX Pirate I to as of maybe the thought sure the lower I want I sort just today, guess, the did question guidance. evening, neutral was out Brands of start sort make I I expense interest with sort

of the that? lower in you just can mechanics QX, sort goes through guidance me the walk behind So why

Bruce C. Wacha

So talking sales, EBITDA you're or EPS?

Brian P. Holland

sort Well, why we – EBITDA I do don't sales guess and EPS?

Bruce C. Wacha

Yeah.

Okay.

EBITDA. and sales (XX:XX) somewhat obviously So

quarter. fourth $XX So million in to the $XX sales about is million

fairly... So

Brian P. Holland

Right.

Bruce C. Wacha

Adjusted ... from and EBITDA in straightforward that $X product there line. adjusted $X to million the comes million right top contribution. EBITDA, just it's

some a was is associated So nicely We revenue company this overhead mind, keep have with obviously costs covering. the that profitable. this the in stream, still of

interest million brand. $X October. that to about bottom costs those off of of that Keep paying all from million, savings a some loan. and occurred do to savings a in the line. we standpoint, beginning that away. From mind falls $X is of in benefit have It's our so Pirate term the don't And go not great

and longer little a took on breakage there that that debt. were costs bit some So

that's so terms the the dilution. And accretion in basically of math

Brian P. Holland

Okay.

is revised just attributable Nature – no there that to to is to no So changed. confirm wholly expectations lower the Back guidance other and

Robert C. Cantwell

Booty. Pirate's

Bruce C. Wacha

Pirate's Booty. And then...

Brian P. Holland

Whatever. I'm I sorry, I'm sorry. – said yeah,

Bruce C. Wacha

Yeah, range well. as the little and bit tightened a

Brian P. Holland

Okay.

Robert C. Cantwell

the Tightened the top end of range.

and sides $XXX it million fourth $XXX of then, of to the $X top about So came million. EBITDA And in as the loss the said, end Pirate's adjusted on quarter Bruce million down of Booty for took EBITDA both range we down range. the

Brian P. Holland

helpful. That's Okay. Thank you.

Robert C. Cantwell

But range. of the of the of came the down just bottom top the Pirate's. purely the by loss range tightened Plus

Brian P. Holland

did And Brands. then of on, job you the rationale good a sort I Pirate behind moving explaining think Thanks. Okay. of

and could So I appreciate segment. it's if – maybe the ask just that. of about in But particular grocery sort maybe

a of and segment nice think have category. guys done well frozen the the you both players in separate really class. parts been for I Other story, temperature has that

how a wonder, XX brands, the to where you of the do you on dynamics generative change. the stability think maybe and of you forward it's maybe just about that's group, preserve I of How generative But but extent, alone past upon about further. top grocery thinking cash or cash those story and I I private label, M&A obviously So pipeline, about in nice somewhat in well. turnaround Can on brand the cetera. component value the you you look category, side, significantly that Those about, that stand, obviously years, for stability have assets, et the needs are it, going the let seeing the you're on guys of just they the in the I that? able you to some have extent assets dependent talk That'd historically that being category, dependent multiples just proposition what to be done probably mean, to great. that's as your appreciate specifically? those there? five And think, changed, there then think you

Robert C. Cantwell

a center retail talk So store, of we're kind when about, brand of foremost, buyer. you look at really and the in first

looking we're Green around do for stood feel make can way that some Giant. done we've first, the hopefully things of we brand to test kind and we it better, what that's time, that the So a of

correct. and absolutely – are you Second

at more the looked at, things looked we've always ever – we've now category the but in probably certainly than the One category dynamics. of is –

a So we're to in a in we way brand out. that's don't category steep that decline not see going invest in a

that over a will that's rather generally, dwindle time and So, declining we it's to flow if watch certainly it is flat we'd today have category, that. just But growing. something cash need

price out category; brand we have be needs – two. along to believe could one, for all national – price really where that X-ish be so a really – very we range times strong a we step very price. the as of times. one of we paid number EBITDA so to we it to always of be, don't barely. but X look could multiple I look is we need at two. We number And X.X kind just the and that's And times above stepped or number regional always mean guess I the we're twice, the our number we at it brands' That – or looking be

we I right trigger, things pull available. us, be. one there's come know makes time it at, that before So a that when sense tomorrow. things comes. take the never When look can come will could always The one could right you we'll be long it the it – and for mean, that

So category is that always big in a really making categories that we're would into a not on important permanent we what's they're buy something adjusting in decline. but looking, been is flat us, to way sure that keep to and we a hopefully has but it to feel always consumer focus today important, up is that today's

Brian P. Holland

Thanks me, investors seeing, near-term? disruptions or of commentary for near-term are been for Any doing the closed. Giant's or be Last about one channel of you're for other guys competitor about, you that opportunities that's control sort around what biggest maybe no in that in potential should change real thinking just than change the hearing that. there Green

Robert C. Cantwell

Yeah.

Pinnacle a very they organization. and you with were ran creative brand look well-run and Eye, at when I were innovation, cetera. great et they think a They Birds

to strong in change. I strong think think will very be Conagra. their competitor. with a I going They're that strong into rolling don't competitive leadership ways certainly company a very

grow really because the in short-term they're don't here got important the any we'll category we doing that. our we've this to opportunity keep share, as don't and it. we part brand all switch. acquisition, very be I and of the a we've two over see the as is doing assume run in I bought as basically as slippage Conagra last that It's sure our And we – in long I'm – think expect it's just whole they'll – continue shown that that, But that keep they'll should share. grow job fine. to of years here that grow We transition.

Brian P. Holland

of Best for Thanks luck. color. the

Bruce C. Wacha

Thanks, Brian.

Operator

And of Merrill Lynch. Bank to now America William on Reuter with

William Michael Reuter

that Good afternoon. of the be Pirate and have sale Have I when due talked taxes would paying them? what Brands. anything you upon I don't what the discussed think guys seen that might about be you those might be

Bruce C. Wacha

Yeah.

week, the you and it time filed if we've in that details X-K actually look amount. last So

William Michael Reuter

two about little the to bit the are. at multiples you've or in apologize I M&A, tried that. like when market like you've It I provide you you're where about know that sounds a people that for have one frozen of couple for ask number guess frozen in you hearing that, at terms is either what those And been ranges guess Okay. multiples I for then about or end center-of-store a or I correct? you're talking different anything is can seeing what candidates were higher the it there of spectrum. Is at. looked you're historical of kind in interested And the – all and you categories? of sounds

Robert C. Cantwell

both store. thing grocery would first Well, the certainly – we we're yes, looking in I think of areas is,

mean, we're store. certainly a our buy that there side, traditional Pinnacle really really way. haven't kind two-off by as lot From assets. of whole company. frozen seen are just of assets traded. the center kind of But of I willing any yeah, a to a trade in one-off well them frozen We don't So something I traded in or been – as hasn't as

what be. say So it's that hard would to multiple

created Green a value more lot frozen think has the I to Giant category.

sense got not seen discussions and for in higher. store those expectations multiple really of assets. the even anything we we that areas, in haven't on we're center might historically. different So seen into seeing people's haven't be anything B&G And But other getting that would the make

to maybe through now come mentioned Bruce a strategics proven rid their we're a do got you the mentioned those really real even I when when of been some excited big we've we've acquisitions lot of I here, we're as stuff talk, has But able to get shape less of market. think, in portfolio their There's and good period. I the about all or assets, lot we've and hear to and be ready about of market. guys over at I think with even year, buyer been bigger and – hopefully that lot not able selling leverage relooking if but and of last a that to think come a to

continue just So basically going never expect do I can XXXX. think know to done when to we've you acquisitions happen, us, it's like to since

William Michael Reuter

just e-commerce point. million, platforms is or Helpful. X% sense what this of about And $XXX your I it this you sales e-commerce are lastly, for at maybe then percentage of Do grocery the think have online people to pegged X% through most or industry a at point?

Robert C. Cantwell

probably still Walmart, – less. is retailers those probably list a cetera, and – X%, shopping being you're online Amazon, relatively with in of pretty large we but think X% it's own. ours very it that mean, be expands as we of is Yeah. very customers, quoting there we're still to it's Kroger this And like And Well, Walmart the We through or industry. That's X% of get kind those working Kroger, all expanding in it's I would brands And it's it's by dog bigger. that online like small. expanding and to going small. I et sold of stores, driven outside it's If – small work. out that's with still and there buying relatively certain we're small things. cetera, us. Snacks are well, know are sell food things all included but et food. well, But I being really that mean, depending certain of on in what's less

William Michael Reuter

for all That's me. Thank you. Perfect.

Bruce C. Wacha

Thank you.

Operator

next Up with Buckingham is Eric Research Larson Group.

Eric J. Larson

buzzer to I one off in. the go in going for wasn't my for queued was I get I when question. Thanks sure didn't hear I Yeah. questions.

cash. I little to a think a just there focus was questions. couple But I I no, of want I think technical – on difficulty. So

uses Your were inventories is quarter your quarter flat. third build in the a inventories cash. And pretty some normally where and this seasonal it

look beginning you very at which the reduce number the million that $XXX believe quarter? year year, at to of for year, you I goal when you the fourth really for accomplish of your online your full outlined the So inventories now to are

Bruce C. Wacha

And I about got A remind year, million last I you of inventory. $XXX and million. was we've half, what that first Green to in we do is were time three lot date quarter folks would $XX point a period. that the high period up from that for to quarters through Yeah. rightly Giant. is seasonal the then think (XX:XX) pack same In third with plan down the And out that build we're XX/XX/XXXX about

So stark between comparison two. the a pretty

Eric J. Larson

like that of to – it significant Good. you cash. Then Yeah. – inventory. I like in really net it net fairly I compare call because your just looked – your EBITDA, a net improvement you was there I for thank – kind your

range put out I million. million a think You $XXX $XXX to now about of

includes – at of in continued or kind the talking midpoint about that $XX of what better million. the I so – is some get million benefits that that kind that is of would been you'll assume. So range, that's QX obviously have from that than Is of $XXX reduction inventory you

Bruce C. Wacha

Yeah.

now cash tax million year, I When standpoint. that guidance less about $XX talking began less $XX than little or $XX for we're in be two were the to things, $XX both believe we spend, when that CapEx and driving really a million, we we than $X year, tracking bit less expect million. we million. And and what's than million to So is now gave we a full-year from also $XX began to million the

benefit, so coming the along. inventory And big the the daily we've of got also operations just business but are

first the turnaround year. flow this this at $X.X year were million cash $XXX we're quarters operations year. Last nearly same year million. to example, last for from you see in of If we three A financials, our for cash our to look here, big the you'll of time compared statement,

Eric J. Larson

the well. as aware Yes. for here of clarification. I wasn't Well, benefits CapEx thanks the

it's are one hearing describe a final a a Ken. just down that's that increase. of They're take going little XXXX, little pricing. guess get best most companies sort bit obviously and the get as capacity And enough companies question. are I I some takes I up. thing – that's think Ken, we're then, probably way headwind of goes whole percentage to But be also again it. maybe So are costs going But to recapitalized probably talking to to more or saying even true. in this of abating. a coming from rates a – It about that to And time will probably freight there keep some –

savings think you you about program don't this do savings to good need do want know don't take in – feel but generate to enough cost your – So two-year that I cost going keep to you check to and out with three-year you're you basically could I pricing you pricing your if se, it per it?

Kenneth G. Romanzi

Well, currently we're as building that plan speak. we

we're So With input also round material of costs. economy, raw a there another increases. be increases. gestation seeing will good We're (XX:XX) seeing

the headwind from that this While seeing we're benefited year. year, input next we costs

at So when year pricing we it more a a this year, look at just at we for trade than time. promotion looked and

as the we're positive looking well ways be overlap this price if we'll for year. we're inflation be us offset need to more realization efficient, as something add getting at prepared So always we the cost net from do on that and to to front

Eric J. Larson

turn I'll guys. Thanks, Okay. it over.

Bruce C. Wacha

Eric. Thanks,

Operator

we'll take And Cornell Research. Burnette Citi from

Cornell R. Burnette

questions, Thanks lot. thanks the a And for guys.

risk make other adjustments fourth each seem price I that volumes. with and the pricing in for fourth on a volumes want kind It quarter. you starts guess maybe think higher and like It Just accelerate some part, quarter in quarter. in your point volumes to for trade the off the as as pricing looked would there's about offset of to start promos. the most I it really didn't just will the

just your thoughts on get I to wanted that. So

Robert C. Cantwell

made Well, where the versus reduced absolutely between trade the to we spend. points promotion, low and price we volume tradeoff changes made trade

reflected all that's in but – So forecast. our

In frequency. were So realization. turn trade Those cases, a there increased promoter degree. to we brands do but price few price volume a that reduced into the where promotion better is will heavily less some we

Cornell R. Burnette

different clarification fourth put way kind quarter. see together, in had the all the I little everything of then deflation that cost are you? freight, one a the And we're of expected in for of a just and you're little saying quarter when – last raw materials – of total you Okay. of fourth bit really the the basket for your course was in to just talking everything When of kind you bit works about

Kenneth G. Romanzi

year, as last yeah, the actually, overlap the last well efforts yes, given of transportation. cost Versus year the of as in cost spike savings

Cornell R. Burnette

Was related X% think to you said COGS. of kind I referring that? of you so And to were about that what it's

Bruce C. Wacha

Yes. Correct.

Cornell R. Burnette

Okay. Great. Great.

kind been All touched on. questions have of my of other

some So clarification it But there. want for you. Thank that's me. just

Kenneth G. Romanzi

Cornell. Thanks, Yep.

Operator

Bank Moving Montreal. onto Ken Zaslow with of

Ken Zaslow

everyone. Good Hi. evening,

Kenneth G. Romanzi

Hi, Ken.

Cornell R. Burnette

couple XXXX, pricing me as you talk let the questions. One a is, just differential? versus start work freight So about off the you with inflation of can into

Kenneth G. Romanzi

planned. as Freight I versus pricing XXXX? Well, mean, still in developing we're

Cornell R. Burnette

Yeah...

Kenneth G. Romanzi

increases But XXXX don't versus get said, – through promotion. I to trade continue – pricing input But some have don't better price only like planned for year. not yet. we expect evaluating well, as headwind fully those we're But as freight but we're realization as mount also we XXXX to next other any – cost we seeing but the cost will in a

Bruce C. Wacha

other And high-single think call freight XXXX. of, most of digit Ken, with players increase costs in it, pretty food we're for I the consistent

Cornell R. Burnette

my think question. Yeah. misstated – I I I Maybe

right? your as pricing to benefit took is XXXX, a net you when XXXX there well, So in going be into

Bruce C. Wacha

Correct.

Cornell R. Burnette

at, costs in increase (XX:XX) slow. your the of (XX:XX) will And freight so lapping are XXXX

think kind took at to way right? it'll work earlier that in of the not like Is you how at XXXX. look assuming and year that pricing the I'm not took your in quarter the the it, of to half that And of look you way cost first XXXX, long So mid-year? the right? fourth freight in your about will least spread Because increase favor, Is it?

Bruce C. Wacha

Yeah.

early So, seen for over costs largest quarter back suggest asking, to suddenly full fourth what And quarter seen moderate. have that's sure, our quarter freight going anything year. give – quarters, XXXX the sorry, still quarter We've costs rebound we for freight, next out a year. results we first fourth elevated. level I will that XXXX last XXXX in of But directionally think of fourth four quarter increases those and next we give you're when XXXX. guidance year they're the to XXXX, first seen we haven't But the

increases we XXXX. So we're and anything level haven't prepared us suggests XQ XQ to hitting in same be just for seen We that increased freight XXXX saw that going XXXX. the it's again costs

Cornell R. Burnette

first same biggest Okay. that fourth, in not XXXX? But second (XX:XX:XX) and time, quarter of would why at increase positive in pricing be and your the the you pricing in

Kenneth G. Romanzi

There that is a pricing. deferring level promotions drove of that trade

pricing you're overlap? if offset positive work. think in math all I the asking, well, So overlap don't XXXX help of We think will freight that

put to we still we what on plan. finishing have, touches So still the have

Cornell R. Burnette

be you grow able XXXX? EBITDA in to Will

Bruce C. Wacha

our give we fourth you So our guidance quarter when give we'll results. XXXX

Robert C. Cantwell

come. this But that put and you are to the Ken savings last cost cost on there's has year lot effect few of as latter Ken savings is calls. heard implemented – that and a There and a of the the projects more year, the part – of were some into lot also and a

I those about good cover freights really mean, happy increases. But we feel really able feel – being not where we're going to we further. good freight about So up

Bruce C. Wacha

our yes, to And intention grow. is

Robert C. Cantwell

Yeah.

Cornell R. Burnette

there? But that you category, the the the then the in – said don't count. question, line and go And was I Okay. back do it's know, catalyst underperformed back I fourth spices business know, you you I lost in the when kind expect to don't get to what's of

Robert C. Cantwell

in So have of are you of to very some when ability is volumes you But not little there retail the come business being good. part reducing large go costs end category. and a down comes are spices at outlets. volume certain a bit and there's is I A have Volumes customer, strong. down closed little increase in cost up. Sam's, ingredient the and slowing retail, XX-plus cost, some underperformed it they mean, as – up this has

closing there's Sam's example, So then XXXX. as our given savings we're like us, that really of we just lock strong through, that look stores others. – negativity really we'll in given and had back we've spice our hit here early here things. to pricing that an we've procurement dealing a on spices, at And biggest some is few and part we've pepper specifically of two

just the does. it's what So market

volumes very our affecting top-line. But are that's strong. So

Bruce C. Wacha

across our consumption And are all brands just very of strong.

Robert C. Cantwell

Yeah.

Cornell R. Burnette

it to out? there of isn't, across Okay. a sort there for there one business? would that would times take your then not step of give you not was two assets just understand, I anything is any And bidder, mean, maybe sales, you you if that would

Robert C. Cantwell

out to was a team anything. – I not to me we This a discuss we're don't sits we parties Pirate's that me. wants to really Pirate's. help that as two every shareholders. certainly – management a own We well, they – they one-off own had then create a somebody looking sense multiples sell much to on typically the If multiple that. and sale outlet next and because of brand to sales board made can't value pretty EBITDA, just need Again, in would as that can sell pay really ridiculous

So it made sense.

going somebody come want and outrageous, unusual, just with just down multiple a was to EBITDA we're this think but talk. to that's I of sit

Cornell R. Burnette

guys. appreciate I Great. Okay. it,

Bruce C. Wacha

Ken. Thanks,

Operator

Markets. we'll David Palmer from Capital take And RBC

David Palmer

Hey, guys.

Robert C. Cantwell

Hi.

David Palmer

growth. Just a organic question revenue your on

is lower. Pirate's there long-term revenue feeling growth I think a your the that is of after sale Booty

here. You're of having a transition bit a

these some can declines. going get You're of passed to

categories. that innovation. talking of You're I to But some also there's think risks a legacy feeling about ongoing there's center-of-store your some

So growth a top-line And on should just you we what have strokes to or want organic about think generally reasonable rate? this, about if how I talk it but is follow-up. bucket a speaking, rough

Robert C. Cantwell

in that's that of great. dive to with we're top-line Ken we that talked Hopefully, do that let to X%. and too. continues, X% I'll we've can But very comfortable if better,

little rate I in Pirate's ago. around perspective, is business ownership a September years that run a think over The was our under million million. five $XX bought Pirate's we basically through sales on putting $XX in

over So with it brand, five million great steady a good years. brand, was a and increase, nice $XX

ship. this is rocket a So not

So that we needle weren't moving great. the

rate. who didn't great a up I wonders do – gave higher up much we're we and think – seller it's it. a not giving would like with was growing that brand, mean, So I who a a we buyer at But something certainly

this versus So growth small, steady was something bigger.

So the growth of making there and X% X% we we the this that of think hope the part you've to that brand think grow that our at up And we growth. growth the And flow really And sure six-tenths works. is that our some we everything portfolio better don't than the through achieve decline nothing – it's – to of And of growing look that, – are percent. seen X% else – up that of profitable to X% year. can the I brands year continually all others we're our is a smaller brands. key that extremely manage and brands and without faster that's Pirate's, this cash can if we're

good X% here base to And X%. and in grown our we're the we months. above. number So business first that for hopefully, nine – that is a finish, X% But we've have or

David Palmer

few there's may center-of-store the be side like And And the diverging M&A world, there categories at they history frozen, maybe are if feels a we this as are that snacks, legacy on to to like some we of it at may that challenged. much sort there, other categories of out maybe where project valuations right think as be would be, point. enhancers, more there's spices

some seen assets. their seeing no you the X-plus% talking shedding about companies and them big doubt bottom have You're of

have cover tax them of try you to be would But down. see were do sales the that. they that do that those Street gross to Some if to up, to would grossing the

target price right do range, at you going valuation categories to that So grows rigor you going? X% your but and are and there brands I within to there out is, keep that question the think Are guess X% you down? valuation not your the also be can

Robert C. Cantwell

at things how yes. is all here. believe, think kind And that looked We assumption. think through Well, of it's we've I an of all years the I

that's here steep we're decline. a by category to We not itself that deal not the a tough is buy just going Green canned I jump to that wouldn't categories with, think So jumping Giant point on in. into today. vegetables are we're The

flat B&G So in flat – flat the it to needs category of have down, dynamics look to like total to to – it's kind to where be it's up.

But a small assets. to it's lot those they are sell X% kind if more down, might different, brands we makes that and X% than companies very of it of truly in X%. there's saying something fit. of market make window those certainly something believe of it's not It we fit. us. sense. if lot shared So probably doesn't be those seen down it's kind hopefully categories sense a And If are actually that with to of those very that's thing, then that's for There come they that any assets when in and good believe remains to a

David Palmer

think that? this the re-sculpting are And of Are higher big that in ratios. it's then after the at in Pirate's down you come debt coming to on point? markets now you And averse Are Booty. light appropriate debt debt. levels, of squeeze the fact leverage, rates of how up? Clearly interest you higher last an ranges more amount one the where sale you one target contemplate seems like I'll are of right are feeling acquisition your It would

Robert C. Cantwell

Bruce But the now when we except we've interest Well, fixed borrowing, B, our today. mean, for in. out rates, basically let a look I it's all small I'll that taken term revolver at jump

interest low very So we're rates. fixed at

have LIBOR rates with So, low. interest relatively on even as they're still here, moved up variable

X do We strategically, there – de-levering in weren't use looked So – I undervalued of the out to cash is to stock equity a debt But just too. has works just an de-lever many in it that that times from works still our that I markets X.X to has works. flow. sheet of the really Pirate's allowed playing to to times feel all to upwards From structure capital a think trying But fixed. our basically is doesn't works. think at today, to X.X ways us where opened we that. It view, of completely also came It sale but balance asset level us we since today And going concern opposed point as the together. again. range our

year, you're you leverage acquisitions the when far acquisition, X.X really X of not get north the So end plus pretty of at at times. and do past of at could this basically times $XXX million sizable EBITDA

all right comes can once on many what to too. and and things assumptions of equity again, happen issuing and including market, come that's different when market to So, things

those to we at know assets to companies we're of those always call until around, of and these that hope us So know some too. a they out we know assets hopefully But what make larger looking – float where come strategics, things they the are, – that and

So...

Bruce C. Wacha

a to to And and turn sheet... half of take certainly a we're balance somebody happy leverage turn our off a

Robert C. Cantwell

Yeah.

Bruce C. Wacha

when is ... transaction, flow did deleveraging cash this year, this the the with the remainder in the about year think throughout there. significant which you of what we

David Palmer

you. Thank

Bruce C. Wacha

Thanks, Dave.

Operator

closing call Bob back like remarks. the to turn over I'd for And to Cantwell

Robert C. Cantwell

thank call. conference Thanks. reviewing year-end look to today. the year expectations Again, call. very for you the results for you on delivering Okay. our rest for much those Thank certainly forward our of the joining I and

B&G Foods (BGS) 31 Oct 182018 Q3 Earnings call transcript