Good afternoon, ladies and gentlemen. Thank you for standing by, and welcome to the B&G Foods Inc. Second Quarter 2013 Financial Results Conference Call. Today's call is being recorded. [Operator Instructions] Now I'd like to turn the conference over to Mr. David Wenner, Chief Executive Officer of B&G Foods. Please go ahead, sir.

Thank you. Good afternoon, everyone, and welcome to the B&G Foods Second Quarter 2013 Conference Call. You can access detailed financial information on the quarter in our earnings release issued today, which is available on our website at bgfoods.com. Before we begin our 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. We refer all of you to our most recent annual report on Form 10-K and subsequent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. The company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. We also will be making reference on today's call to the non-GAAP financial measures, adjusted EBITDA, adjusted net income and adjusted diluted earnings per share. Reconciliations of these financial measures to the most directly comparable GAAP financial measure are provided in today's press release. We'll start the call with our CFO, Bob Cantwell, discussing our financial results for the quarter. After Bob's remarks, I'll discuss the various factors that affected our results, selected business highlights and our thoughts concerning the remainder of 2013. Bob?

Thank you, Dave. Net sales for the second quarter of 2013 increased $12.3 million or 8.3% to $160.9 million from $148.6 million for the second quarter of 2012. Net sales of the New York Style and Old London brands, which we acquired at the end of October 2012, contributed $10.9 million to the overall increase and net sales of the TrueNorth brand, which we acquired at the beginning of May of 2013, contributed $3.2 million to the overall increase. Net sales for our base business decreased $1.8 million or 1.2%, of which $0.6 million was attributable to a net price decrease and $1.2 million was attributable to a unit volume decrease. Net sales increased by $1.1 million for Mrs. Dash and $0.6 million for Polaner. These increases were offset by a reduction in net sales for Maple Grove Farms of Vermont of $1 million, B&M of $0.9 million, B&G, $0.7 million and Underwood of $0.6 million. All other brands decreased $0.3 million in the aggregate. Gross profit for the second quarter increased $3.9 million or 7.6% to $55.7 million from $51.8 million in the second quarter of 2012. Gross profit expressed as a percentage of net sales decreased 20 basis points to 34.6% for the second quarter from 34.8% for the second quarter of 2012. The decrease in gross profit as a percentage of net sales was primarily attributable to the effect of the New York Style and Old London acquisition and the TrueNorth acquisition and a net price decrease of $0.6 million, partially offset by a sales mix shift to higher-margin products. Selling, general and administrative expenses increased $2.7 million or 18.4% to $17.3 million for the second quarter compared to $14.6 million for the second quarter of 2012. This increase is primarily due to increases in consumer marketing…

Thank you, Bob. Good afternoon again, everyone. Second quarter was a very active quarter for our company. We reached agreements to purchase 2 snack businesses and closed on one in the second quarter and the other early in the third quarter. Together with the acquisition completed last October, these 2 new acquisitions, TrueNorth in early May and Pirate Brands in early July, have built our snacking brands to an estimated annualized total net sales of $140 million to $150 million, an estimated annualized EBITDA of roughly $28 million to $30 million. That's an important critical mass that allows us to support a dedicated retail sales force and a marketing team aimed at innovation and growth in these brands. I'll go into the color behind each brand in more detail in a few moments, but I wanted to highlight what we consider a very important progress in our business in the quarter. Second quarter was also a good quarter in terms of the overall performance of our business. As Bob said, net sales grew by 8.3% for the quarter, adjusted EBITDA by 7% to $42.4 million and adjusted net income by 8%. We have also raised our guidance on 2013 adjusted EBITDA for the second time this year, this time by 3.8% at the mid-point of guidance to $187 million to $191 million for the full year. Turning to the sales results. While all of the increase in net sales was accounted for by acquisitions, there were very encouraging signs in the base business results. In the glass half-empty, glass half-full scenario, I would describe the second quarter as the glass 3/4 full. I say that because even though base business sales were down 1.2%, 2/3 of which was volume, the declines were very isolated. Looking at sales by channel, our…

[Operator Instructions] We'll go first to Bryan Hunt with Wells Fargo Securities.

This is Kevin McClure standing in for Bryan. Can you just -- you said that the Pirate Brands -- that the integration will be completed by year end, is that correct?

Yes.

And when would the New York Style and Old London brands be fully integrated?

Those are integrated. Those were co-packed, and we were buying brands, not businesses. In the case of Pirate Brands, we -- there's a full-fledged business behind that, and we need to make a lot of decisions on staffing and a lot of things. So it's a much more complicated process than the other 2 brands.

Got it, okay. And last question for us. Robert, I believe you mentioned something about inventories. I didn't get it in my notes, but could you tell us maybe where the seasonal peak in inventories is likely to head given all the acquisitions lately?

The seasonal peak is the third quarter. You have 2 types of inventories here that really peak. Maple Syrup is all done and all purchased, pretty much all in the second quarter numbers. And then you have our fresh packed, seasonal Pickle & Pepper business and tomato business that happens in the third quarter, which adds another kind of $10-ish million to inventory on top of where we were at the end of the second quarter. And then that inventory declines basically through the second quarter of 2014.

Okay. So it's fair to say that we could see inventories in the $115 million to $120 million range in Q3?

Not quite $115 million, a little less than that.

And next from Piper Jaffrey, we'll hear from Sean Naughton.

This is actually Jared Madlin on for Sean. I guess quickly, could you help us how we should think about the puts and takes on the gross margin and SG&A margin in the back half with Pirates in there?

Pirates, as we've modeled it, Pirates is going to be a -- eventually a 20% EBITDA margin business. It'll be a little bit less than that, and it's just a matter of how fast we ramp up the integration and shed whatever costs we're going to shed. I really -- perhaps Bob can tell you little bit more on that, but we still are in the process of making a lot of personnel decisions and things. And so we really can't give you a perfect answer on that.

But I think from the gross profit percentage, the Pirates Brands that are about $80 million to $90 million in sales. What that does is from where we were at the end of the second quarter, kind of gross profit of 34.6%, it reduces the gross profit kind of 10, 20 basis points when you merge it all in. From an operating expense standpoint, except for what Dave talked about -- kind of this onetime over the next 3 to 6 months as we kind of merge their staffing into ours -- on an ongoing basis, operating expense is relatively consistent with what B&G currently spends as a percentage of sales.

Great, very helpful. And I guess on the volume front, what changed since Q1? Was it all in the Northeast and they had a better Q1 and worse in Q2? Or kind of how did that change the volumes in Q2 from Q1?

Well, the Northeast is firming up. It wasn't -- the Northeast decline wasn't as bad as it was in the first quarter. We've gained a lot of momentum in where we're -- where we have businesses struggling or customers struggling, we're gaining momentum with their competitors, and we're doing a good job in the Eastern part of the country. That's not just the Northeast. So I'd say we're seeing firming trends everywhere. But there's still a significant drag from a few customers here in the Northeast.

Got it. And it sounded like last quarter, you guys were doing some experimenting with more couponing at the store level and on the Internet. Any change in that strategy or any learnings there that you can help us better understand at this point?

No, I really don't have anything that -- we think it's more efficient to coupon the new way we're doing it. But there's nothing dramatic coming out of that, that I can -- that I could comment on.

Okay. And just lastly here, it looks like a slight increase in the CapEx for the full year. Is that related to Pirate Brands? Or is there something else going on there?

Well, we certainly -- I misspoke earlier. New York Style is manufactured, and then we have capital associated with that. And we're going to have some capital expense associated with increased warehousing as we do that to accommodate the volume.

[Operator Instructions] We'll go next to Deutsche Bank's Karru Martinson.

With the 3 M&A transactions in the past 9 months, I certainly understand that you have the balance sheet here. But when you look at the portfolio that you have now, you -- are you still kind of looking to add new vehicles kind of like the snack category? Or are you looking more to kind of bolster some of the portfolio that you have?

Well, I would say there's certainly opportunities in snacks, and now that we've acquired 3 brands in 9 months, I think everybody who owns the snack business wants to sell us their snack business. Unfortunately, they're not very compelling propositions in the vast majority of cases. But I guess we're known as a buyer. But it would have to be an extremely compelling proposition for us to be interested in the snack business. Right now, we have a very full docket here, bringing 2 product lines back into a respectable growth mode and continuing what has been a very, very good trend in the Pirate Brands. So we have a lot to work on in the snacks right now as it is. And as I say, that doesn't mean we wouldn't move on a very compelling proposition, but it -- we're going to be extremely selective. Not so much on the grocery side. We're still very interested in buying things in grocery. But again, we're very selective in general, and it would have to be the right profile of business and fit the acquisition model that we've been executing for the last 15 years.

And in terms of that acquisition model, I mean, certainly in the food category, we've seen or heard the prices being asked by people have risen rather dramatically. What are you seeing out there when new guys are showing you these properties, whether they're compelling or not?

Well, I think a very -- a good, very good solid business with very good margins and very good cash flow is going to approach a double-digit multiple for a purchase price. And you're seeing those 9, 10x purchase prices and sometimes even beyond that for the right strategic buyer. That's fine as long as financing costs are low, and low financing allows you to expand the multiple and still get the same cash outcome. You have to be a little more cautious here as interest rates start inching up.

Gentlemen, no further questions at this time. I'll turn the conference back over to you for any additional or closing comments.

Thank you. And thank you for joining us, everyone. We think we've made great progress here in the quarter. Obviously, we've been very active on the M&A front, and we have a lot of work to do here. But we have some exciting properties, and we're really looking forward to making them perform. Thank you once again.

And that does conclude today's conference. Thank you for joining.