B&G Foods, Inc. (BGS) Q4 2016 Earnings Report, Transcript and Summary

Good day, and welcome to the B&G Foods Fourth Quarter 2016 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 ir.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. We refer all of you to the company's most recent Annual Report on Form 10-K and subsequent SEC filings for a more detailed discussion of the risks that could impact the company's future operating results and financial condition. The company undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events, or otherwise. The company will also be making references on today's call to the non-GAAP financial measures, adjusted EBITDA, adjusted net income, adjusted diluted earnings per share and base business net sales. Reconciliations of these financial measures to the most directly comparable GAAP financial measures are provided in today's earnings release. Tom Crimmins, the company's CFO, will start the call by discussing the company's financial results for the quarter. Next, Bob Cantwell, the company's CEO, will discuss various factors that affected the company's results, selected business highlights and his thoughts concerning 2017. I'd now like to turn the conference over to Mr. Tom Crimmins. Tom? Thomas P. Crimmins - B&G Foods, Inc.: Thank you, operator. Good afternoon, everyone, and thank you for joining us today. Net sales for the fourth quarter of 2016 increased 20.8% to $413.7 million, compared to $342.3 million in the fourth quarter of 2015. And additional month of net sales of Green Giant, acquired on November 2, 2015, contributed $46.5 million to net sales for the quarter. In addition, net sales of the spices and seasonings business, acquired on November 21, 2016, and net sales of Victoria, acquired on December 2, 2016, contributed $28.2 million and $3.2 million respectively to our total net sales for the quarter. Base business net sales decreased 1.6%, or $5.6 million. The decrease was attributable to a $2.2 million decrease in unit volumes and a net reduction in pricing of $3.6 million, partially offset by the slightly favorable impact of foreign exchange on our sales. A little more than half of the company's base business net sales declined during the fourth quarter was attributable to a challenging competitive environment for our syrup brands, which in the aggregate declined $3.1 million for the quarter. The decline was primarily a result of pure maple syrup price deflation due to the strength of the U.S. dollar relative to the Canadian dollar, which has resulted in increased competition in the maple syrup category and contractually mandated price reductions with certain of our foodservice customers. Gross profit increased 20.7% to $106.9 million in the fourth quarter as compared to $88.6 million for the fourth quarter of 2015. Gross profit expressed as a percentage of net sales decreased 10 basis points to 25.8% for the fourth quarter of 2016 from 25.9% for the fourth quarter of 2015. Selling, general, and administrative expenses increased 60.6% to $58.8 million for the fourth quarter, as compared to $36.6 million for the fourth quarter of 2015, primarily related to the Green Giant acquisition. The overall increase consisted of increases in consumer marketing of $19.5 million, warehousing expenses of $4.1 million, acquisition-related expenses of $2.7 million, partially offset by decreases in general and administrative expenses of $3.6 million, primarily related to the timing of accruals for performance based compensation, and selling expenses of $0.5 million, which includes $1 million decrease in salesperson compensation, partially offset by $0.5 million increase in brokerage expenses. Expressed as a percentage of net sales, our selling, general and administrative expenses increased 350 basis points to 14.2% for the fourth quarter of 2016, from 10.7% for the fourth quarter of 2015. Net interest expense for the fourth quarter increased 9.6% to $18.9 million from $17.3 million for the fourth quarter of 2015, which was primarily attributable to additional indebtedness outstanding during the fourth quarter of 2016 as compared to the fourth quarter of 2015 as a result of the Green Giant acquisition, the spices and seasonings acquisition and the Victoria acquisition. The company reported net income under U.S. generally accepted accounting principles was $13.6 million, or $0.20 per diluted share, for the fourth quarter of 2016, as compared to reported net income of $11 million, or $0.19 per diluted share, for the fourth quarter of 2015. The company's adjusted net income for the fourth quarter of 2016, which excludes the after-tax impact of the amortization of acquisition-related inventory step-up and other acquisition-related expenses, was $19.4 million, or $0.29 per adjusted diluted share. The company's adjusted net income for the fourth quarter of 2015, which excludes an acquisition-related adjustment to deferred taxes, the after-tax impacts of the amortization of acquisition-related inventory step-up, other acquisition-related expenses, and distribution restructuring expenses were $25 million, or $0.43 per adjusted diluted share. For the fourth quarter of 2016, our adjusted EBITDA, which excludes the impact of the amortization of acquisition-related inventory step-up and other acquisition-related expenses, decreased 7.4% to $62.4 million from $67.4 million for the fourth quarter of 2015. The primary driver of the decrease in the fourth quarter of 2016, adjusted EBITDA as compared to the same period in the prior year was $13.5 million incremental Green Giant advertising expense, partially offset by incremental adjusted EBITDA contributed by the 2016 fourth quarter acquisitions and the extra month of the Green Giant results. 2016 fourth quarter adjusted EBITDA was also impacted by $1.8 million of foreign currency translation losses on Mexican pesos held in the U.S. We anticipate that our current Mexican peso positions will benefit our 2017 operating results. Moving on to the balance sheet, we finished the fourth quarter with approximately $1.7 billion in net debt. Our net leverage was approximately 4.6 times pro forma adjusted EBITDA. And our current dividend rate is $1.86 per share per annum or approximately $123.5 million in the aggregate based on our current share count. Now on to our guidance for fiscal 2017: We expect net sales to be in the range of $1.64 billion to $1.68 billion, adjusted EBITDA to be in a range of $360 million to $375 million, and adjusted diluted earnings per share to be in a range of $2.13 to $2.27. In addition, we project 2017 interest expense of approximately $83 million, including cash interest expense of $77.5 million, and interest amortization of $5.5 million. We project 2017 depreciation expense of approximately $32 million, and amortization expense of approximately $18 million. And finally, we expect our 2017 effective tax rate to be approximately 38.2%. Before I turn the call over to Bob, I also want to mention that we expect our media spend on Green Giant will be approximately $35 million in 2017, and we expect to spend approximately 40% of that amount in the first quarter, and another 40% in the fourth quarter of 2017. Now, I'd like to turn the call over to Bob for more details on the quarter and his thoughts on 2017. Bob? Robert C. Cantwell - B&G Foods, Inc.: Thank you, Tom, and good afternoon, everyone. 2016 was a very busy year for the company. Much of our year was focused on the Green Giant integration. Pursuant to our transition services agreement with General Mills, we assumed increasing responsibility for the day-to-day management of the brand over the course of the year. At the start of the fourth quarter, the transition services agreement expired and we assumed full responsibility for the management of the brand, although General Mills will continue to co-pack certain items for us into the second half of 2017. In 2016, we also re-launched the iconic Green Giant brand with a new and exciting marketing campaign and the introduction of several new and innovative products that have been a hit with consumers. During the year, we also continued to execute a key tenant of our growth strategy by completing two acquisitions in the fourth quarter. The spices and seasonings business of ACH Food Companies and the Victoria brand. Our base business, however, was not immune to the top-line challenges affecting our industry. During the year, we continue to work to stabilize the base business and experience the base business net sales decline of 2.1% for the year and 1.6% for the fourth quarter. And finally, during the fourth quarter, we increased our dividend by 10.7%, that was the 49th consecutive quarterly dividend declared by the company and board of directors since our IPO in October 2004. Moving onto our Green Giant sales for the quarter: We continue to get very positive customer feedback from the launch of our new innovation products. The acceptance and sell-through of these products has surpassed our initial expectations. We are in the process of increasing production capacity to support the increase demand of the new products. Our transition services agreement with the prior owner of Green Giant brand expired at the start of the fourth quarter. We did experience some transition issues as we took over complete responsibility for servicing the business at the beginning of October. We did not have enough inventory to support the sales demand leading up to Thanksgiving, that created a sales shortfall during the month of October of approximately $13 million. We have overcome this transition issue and during November-December, Green Giant net sales grew $2.9 million versus last year. Also during the four weeks ended January 28, 2017, Green Giant continued the positive momentum, gaining a 0.4% market share in the frozen category. We expect to launch additional new Green Giant products in the second half of 2017, and are committed to supporting the brand with full marketing support. For 2017, we expect Green Giant to generate approximately $530 million to $540 million in net sales versus $506.7 million in net sales in 2016. Now, moving on to our base business: During last quarter's call, we said that we expected our base business would be flat in the fourth quarter, excluding Maple Grove and TrueNorth, and we're hoping to get into positive territory sometime in 2017. For the fourth quarter, our base business excluding Maple Grove and TrueNorth, was down approximately 1%. We are working on a number of new product initiatives across multiple brands, in an attempt to stabilize and eventually grow our base business. For example, we have launched new instant Cream of Wheat products in the first quarter of 2017. In the second quarter, we planned to launch new on-trend innovative Ortega products, with cleaner labels and high-quality ingredients that we expect will bring new users to the category and the brand. We also plan to launch new Pirate's Booty line extensions in the second quarter. Finally, Bear Creek is expected to launch a number of new items during the third quarter, including a new line of products and a new category. The number of our key brands increased their category dollar share during 2016, including Pirate's Brands, Mrs. Dash, Cream of Wheat, Bear Creek, Mama Mary's and Las Palmas. We expect this trend to continue into 2017. Moving on to some specific brands highlights during the fourth quarter and high-level thoughts about 2017: Net sales of Pirate's Brands increased 9.4% in the quarter and 3.9% for the year. We continue to grow Pirate's Brands by expanding distribution. During 2016, we increased points of distribution by approximately 10%. We have a plan to further expand distribution during 2017 and beyond. Net sales of Las Palmas increased 7.5% in the quarter and 6.6% for the year. This growth was fueled by continued distribution gains and strong category growth. Ortega also had a strong quarter with net sales increasing 3.1%. This is a recovery from a tough start to 2016 caused by strong competition in shells and kits. In 2017, we expect to continue to hold our own in those categories assisted by new product launches. Net sales of Cream of Wheat were roughly flat for the quarter and the year. We expect to improve that trend with the innovation we launched in January 2017. We're also advertising on television for the first time in over 20 years. Mama Mary's had a tough fourth quarter, but that was mostly due to consolidation of our Mama Mary's manufacturing operations into one of our other manufacturing facilities, which created temporary planned production downtime of approximately three weeks. We believe Mama Mary's is very solid going forward and a consolidation of manufacturing operations is expected to save our company approximately $5 million per year. In 2017, we expect to put additional media dollars into our Mrs. Dash brand to ensure we continue to maintain and grow our 80+% market share of salt-free seasonings. Some of our other smaller brands had impressive fourth quarters and full-years, including Underwood, whose sales increased 11.3% for the quarter and 5.7% for the year, and Polaner, whose net sales increased 4.1% for the quarter and 1.4% for the year. Most of this growth was due to expanded distribution. Net sales of our TrueNorth brand decreased 34% for the year, or $6.4 million. However, we started to see improvement in the fourth quarter and for the first two months of 2017, net sales for the brand have increased by approximately $1 million year-over-year. Maple Grove continue to see net sales declines in the fourth quarter, the brand was down 6.3% for the year. We expect that trend to continue through 2017, although we expect much of the decrease will come from lower margin private label sales. Bottom-line is that, it's been a challenging center-of-the-store environment for our industry and this has affected our base business. Although, there are no easy answers, we do plan to stabilize our base business in 2017. Among other things, we restructured internally and attempts to put proper focus on all brands and groups of brands in our portfolio. We also intend to be much more aggressive with new products that truly satisfy changing consumer preferences. The new and innovative Green Giant products we launched in the second half of 2016 are an excellent example of our new product initiative. The Green Giant products we launched including Veggie Tots, Riced Veggies, Mashed Cauliflower and Roasted Veggies have been a hit with consumers and are beginning to generate increased distribution and positive momentum for Green Giant. Led by these new products, we expect Green Giant brand to generate a net sales increase of 5% to 6.5% in 2017. During the fourth quarter, we also closed on our acquisition of the spices and seasonings business of the ACH Food Companies. The spices and seasonings business includes the Spice Island, Tone's and Durkee Brands. The business also includes Weber brand sauces and seasonings, and French's seasoning mixes, which are both sold under a license. As part of the acquisition, we also acquired a state-of-the-art spices and seasonings manufacturing facility in Ankeny, Iowa. We continue to operate under a transition services agreement with the prior owner of the business, and expect to takeover full responsibility for servicing the business in early September. During the fourth quarter, we also reached an agreement to acquire and closed on the acquisition of Victoria Fine Foods. Victoria Fine Foods is the Brooklyn-based business founded in 1929. The Victoria brand complements very well our existing portfolio of brands, including our Don Pepino pizza sauces, Sclafani crushed tomatoes, and Emeril's pasta sauces. We completed the integration of this business into the B&G Foods infrastructure earlier this month. In closing, we are pleased with our overall performance during 2016, although there remains work to be done to restore our base business from flat to stable growth. We are also pleased with the organizational changes we have made and the outstanding efforts of our very talented and capable workforce, in response to our rapid growth over the past two years. One of my biggest goals, as a CEO, has been to ensure the company remains capable and ready to continue our acquisition growth strategy, which we have accomplished over the last two years, completing four acquisitions, with over $800 million in net sales. In addition, I wanted to build an organization that would effectively support and stabilize our base business. The organizational plans are in place to deliver our strategic objectives, including our 2017 guidance. We are feeling very comfortable with where we are today and can now be more excited about the future of B&G Foods. With that, I would like to open up the call for questions. Operator?

Thank you. And we'll take our first question from Farha Aslam with Stephens Incorporated. Please go ahead, ma'am.

Hi, Good morning. Robert C. Cantwell - B&G Foods, Inc.: Good afternoon. Thomas P. Crimmins - B&G Foods, Inc.: Good afternoon

Or actually, good afternoon. Robert C. Cantwell - B&G Foods, Inc.: Right.

The day has just passed by. Robert C. Cantwell - B&G Foods, Inc.: Okay.

Green Giant, total sales for the year and kind of the – what the key aspect should we expect to deliver that 5% to 6% growth? Robert C. Cantwell - B&G Foods, Inc.: Well, part of it is we finished 2016 at $506.7 million and part of that was we were short product to ship product in kind of October into early November for Thanksgiving and that equated to about $13 million. So, part of the growth in 2017 is, certainly, not having that issue in October and November in 2017. The other pieces, we are seeing just a very high demand on the innovation we launched here kind of September, October of 2016. Specifically in Riced Veggies and Veggie Tots, but Mashed Cauliflower has been very strong too. And the roasted line is a little bit more of a distant to the other three. Those businesses are growing very rapidly. This was also the first year where we've launched kind of a real marketing campaign against Green Giant and we're starting to see those results. We're seeing results from innovation, we're seeing the results from that and we're going to spend just as much if not more on marketing in 2017. And also as we head through the – we're going to see very strong sales results on those new innovation that we talked about. And we got more innovation coming in the later part of 2017 and we're going to figure out whether we're going to launch that at the end of 2017 or at the beginning 2018, but some of the plans are now to launch in late 2017.

And as a follow-up, you launched your innovation for Green Giant very late in the year...? Robert C. Cantwell - B&G Foods, Inc.: Yeah.

...of 2016? Do you anticipate getting broader distribution in the core reset that occurs in the freezer category kind of early like in the February, March timeframe? Any early read with discussions with retailers and kind of going into that new launch. If you launch it at the end of 2017 how do you anticipate getting incremental shelf space again with that late in the year launch? Robert C. Cantwell - B&G Foods, Inc.: I'll kind of take the first part of your question. Certainly, we're in a little over – on Veggie Tots and Riced Veggies and kind of Cauliflower Mashed those three, we're in a little right around 65% of the ACV in the country today. So we have more distribution to gain from some customers who didn't take it in, in the fourth quarter. And then we have some very big outlets, that we're going after. That we didn't do in the initial launch like clubs and places like Target and those kind of customers. We're also launching all of these products as we speak in Canada, from the Tots to the Riced Veggies to the Cauliflower Mash. So we expect some really positive – and the Canadian customers have seen what we've done in the U.S. and really wanted. So we're going to get some positives there. So part of your second question is, we have some very really interesting innovation kind of subcategories, again just like we launch and we're going to decide as we go through the year, whether it truly makes sense to launch it late 2017 or just launch it January 1 of 2018. So we haven't really decided, we see a lot of growth in the innovation that we launch and we're going to expand that – we are definitely expanding that innovation with more flavor put ups and some packaging sizes et cetera. So we're going to decide on the second part of innovation, what the right timing is and really just not get caught up in potentially craziness of the holiday periods where frozen categories are very difficult to get space in.

That's helpful. Thank you.

And we'll take our next question from Bryan Hunt with Wells Fargo. Sir, your line is open.

Hi, it's actually Dave Cook on for Bryan, two from us. I saw you listed your priorities for 2017 in your press release. One of those priorities did not specifically address M&A. I know it's a core part of your strategy but could we expect you to take a break from M&A in 2017? Robert C. Cantwell - B&G Foods, Inc.: I think the easy answer to that is, we're ready enable to do the next one and if something comes along that makes sense to be part of B&G's portfolio. We're going to be aggressive to go after. So I don't think we look at ourselves and think about taking a break at all. But it has to be the right acquisition and we're ready. From a balance sheet to an organization, we're ready to do the next one when and if it comes.

Okay. Thanks. And did you want to say what your total CapEx was in 2016? And could you please provide an indication for 2017? Thomas P. Crimmins - B&G Foods, Inc.: Approximately $40 million in 2016. Next year, we will see – it will pick-up somewhere closer to $60 million.

Thank you very much. Thomas P. Crimmins - B&G Foods, Inc.: Sure.

Moving along, we'll take our next question from Cornell Burnette with Citi Research. Please go ahead.

Good evening, everyone. Robert C. Cantwell - B&G Foods, Inc.: Good evening. Thomas P. Crimmins - B&G Foods, Inc.: How are you?

Okay. Just wanted to get in a little bit about the quarter and relative to maybe the way things came out relative to what you guys are looking for initially, the EPS below the implied fourth quarter range. But I think sales was somewhat to the middle of the range. It looks like the big delta here was 125 basis points year-over-year decline in gross margins. I just wanted to get into kind of what was the driver of that and what implications does that possibly have going forward? Thomas P. Crimmins - B&G Foods, Inc.: Well, that's a true look of what B&G will look like as you look at 2017 or so. Part of it is just having another full month of Green Giant in those numbers. And it's the time of year where not just frozen, Green Giant has a very large can business, almost $200 million a year in sales, can vegetables and that tends to be lower margin. And you sell a lot of can vegetables in October and November, as you ahead into Thanksgiving. So part of that is just the math of having Green Giant in the mix for another month, more than anything else. So that is a look. As you look at the quarters as we achieved them in 2016, those are the kind of margins we'd be looking at in 2017 also by quarter.

Okay. And when I think about 2017, just kind of in the way earnings are skewed, is it fair to say that maybe the way the marketing spending is getting phased-in for Green Giant next year that you probably have a stronger second half than first half, just given the way the marketing dollars will be spread throughout the year? Thomas P. Crimmins - B&G Foods, Inc.: Well, that is correct because in the first quarter alone, we're going to be spending kind of on a year-over-year basis on Green Giant, $11 million, $12 million more on marketing because we didn't really spend much in marketing in the first quarter of last year. So we're going to hit our results for $11 million, $12 million of marketing spend in the first quarter versus last year and then kind of it all, it evens out because we get it back as the year goes on, because we're going to spend about the same amount in total. So we definitely are skewing the – especially the first quarter lower, and better in the second half of 2017.

Great. And then just one last question here if I may is on the seasonings category, just looking at the high level data from Nielsen, looks like you're down about 15% in sales in terms of the latest 12 weeks of data, and I just was wondering, is there any kind of disruptions possibly that you have in the early stages of the ACH acquisition, or if not perhaps, kind of what's driving that data and then what plans do you have for the business in 2017? Robert C. Cantwell - B&G Foods, Inc.: I'd actually have to look further, we are not seeing that at all. So, across the board on the brands we bought, actually the business is up year-over-year from where it was last year, kind of pure sales. So we're not seeing, it's not lost distribution, it's not – the customers are the same. I don't know what you're looking at is picking up all the club stores, which probably is, but the business is right on relatively flat. Some of the business that was identified as Tone's is now a private label brand...

Okay. Robert C. Cantwell - B&G Foods, Inc.: ...at clubs. That maybe skewing it, but the pure dollars sold and what Tom showed you what was sold really in kind of a six-week period is tracking actually a little bit above our projected $220 million on annual sales basis for the spice business.

Okay. Thanks a lot. I'll pass it on. Robert C. Cantwell - B&G Foods, Inc.: Okay.

Our next question comes from Sean Naughton with Piper Jaffray. Please go ahead. Sean P. Naughton - Piper Jaffray & Co.: Hi. Good afternoon. Robert C. Cantwell - B&G Foods, Inc.: Hi. How are you? Sean P. Naughton - Piper Jaffray & Co.: Hey. Could you guys maybe give us, you've kind of been doing the marketing now here for a little bit, Green Giant has been on TV now for a while, and I know you've been doing stuff in social media, but may be can you give us anything either anecdotally, or some key kind of performance indicators that you're looking for on the campaign to kind of see if you're getting the ROI on that spend? Robert C. Cantwell - B&G Foods, Inc.: So, we're still learning through the process. Part of – we spend some money here in the fourth quarter, actually a decent amount of money. We weren't fully – we didn't fully have all the products we needed to cover stores. So, we have a number of out of stocks at store levels, that kind of really affected consumer data. So it's hard to totally see that. I can tell you from what we are learning on from the advertisements and driving the advertisements against Riced Veggies and Tots, is we are seeing that 50% of the Tot purchases are coming from users that did not buy Green Giant products before. So, we are getting new users into the Green Giant franchise, which is really important. And also the advertisement just from a kind of a store level because we are out there, pushing this brand, we are getting a lot more, I guess, meetings and play from the major customers, who are willing to support us going forward, and hope to drive this brand further. We'll have much better vision as we get through the first quarter on the consumer trends and what we think the advertising is doing. We're only seeing really positive responses, it's a little difficult in the fourth quarter because of our out of stock situation that affected Green Giant sales by $13 million. So, it's hard to get a real comparison. But we think it's working for us. That's why we're committed to continue to spend this in a big way. And really – and January was the first four-week period that Green Giant has gained share, small as it may be, in four-plus years. So, part of that is the innovation, part of that is advertising the innovation and part of that is pushing the brand. We expect much bigger things as we go through the year and we're expecting a big sales increase and part of that is driven by that advertising term. Sean P. Naughton - Piper Jaffray & Co.: Good. That's probably a good segue into that 40 basis points of market share gain you had in the trailing four weeks. I think you said it was the first time they had any gain in the last four years. Can you maybe give us an idea maybe where that was kind of four years ago, how far down are you in terms of market share and I guess as a follow-up to that is this 5% to 6% growth rates that you're forecasting for Green Giant in 2017 is that potentially the right way to think about growth in this brand over the next couple of years? Thomas P. Crimmins - B&G Foods, Inc.: Yeah. I think that's a good way to look at it at least for two years to three years if not more. I don't know the share four years ago, but I can tell you this is a brand that if you go back four years ago, four and a half years ago, this is a brand that's $650-ish million in sales, heading between $650 and $700 million. So, it's a much bigger brand, the brand has lost a lot of distribution from key items. Part of our goal here is the innovation is driving most of this growth, but it's also to get some of these key items back to key customers. So, I think we went through a year of transition. There were ups and downs and excitement and negatives through the process. But we're really poised to move the needle on this brand and we're truly excited about the two innovation platforms of Riced Veggies and Veggie Tots. We think, certainly our products are better than anybody else for reasons that we can make it differently than other people. And we are outselling when we look at Riced Veggies for example, our number one competitor over two to one on that product. It's a same-store sale. So we're seeing some real potential upside and the demand is growing dramatically. And we are honestly struggling, we're making building production capacity at co-packers to cover all this increased demand, but the demand is very strong and it flies – especially in Riced Veggies, it flies out of the freezer case as fast as it goes into a store. Sean P. Naughton - Piper Jaffray & Co.: Yeah. That's good to hear. And then last question for me, I know you did have a hick-up on the transition between yourself and the prior owner. But how should we think about the potential for disruption on the next transition on kind of the co-packing arrangement, is this a much lower risk proposition or did you learn anything about how the transition went in Q4? Robert C. Cantwell - B&G Foods, Inc.: Oh, we learned a lot. But this one is very different. This is – we've already bought, we are putting new equipment, new lines into our facilities and to some other co-packer as we speak. So really when we turned the keys off at what the seller is doing for us, we're already up and running at the other places over the next few months. So, we'll be fine, we'll be carrying a lot of inventory into that and we're really just turning the keys off at that point and shutting it down. We have the production up and running everywhere else. So we're really comfortable with that. It's a very disappointing start for us, when we just didn't have enough inventory of key items to sell at the biggest holiday time of the year, and we really suffered through October and really into November and little nits and nats as you got through December here. But that selling time of kind of mid-October to early November for Thanksgiving, we were hurting. But we've come out of that. Customers are working with us. We're seeing huge, we're seeing huge volume pick-up every single month on this new innovation. The new innovation is going to be a big dollar number for us in 2017. Sean P. Naughton - Piper Jaffray & Co.: Okay. Best of luck. Robert C. Cantwell - B&G Foods, Inc.: Sure. Sean P. Naughton - Piper Jaffray & Co.: Thank you for taking the questions.

Our next question comes from Eric Gottlieb with D.A. Davidson. Sir, go ahead. Eric Mitchell Gottlieb - D.A. Davidson & Co.: Yeah. Hi. Thanks for taking the question. So the period that you're short, in October-November, did you lose any customers in the process or? And was that for new products or just the general product line? Robert C. Cantwell - B&G Foods, Inc.: No. It was mostly for the general product line. So, we didn't lose customers. Certainly, customers weren't thrilled with us, but they've actually worked with us through this process. Certainly, they don't want to be short, and have an open space during a busy time when consumers are actually in that freezer case buying everything up. So, we've gotten through that. The innovation is strictly that demand keeps growing. So, we look at this innovation from the beginning. Riced Veggies is selling kind of four times what we thought it was going to sell, when we first kind of launched it. And Tots are selling kind of double, what we thought it was going to sell. So, all that's good news. So, we are able to service customers on those products, but as we want to look at going into additional customers such as club stores and really launched this fully in Canada or in places like Target and things like that, we need more production capacity. And we will have that in place here over the next couple of months and every day it gets better. But, we see this as a much bigger opportunity for us and we just – and we are all excited about how high the demand is and how the repeat purchases are. One of things we are seeing, on these products is the repeat purchases are very high from consumers, which is all great. So, we just need to have enough product to sell everybody we want to sell. Eric Mitchell Gottlieb - D.A. Davidson & Co.: Okay... Robert C. Cantwell - B&G Foods, Inc.: And we haven't been able to put it everywhere we wanted yet so far. Eric Mitchell Gottlieb - D.A. Davidson & Co.: One follow-up on that and then I'll switch topics, were you short to a certain customer or a certain channel, or certain region or across the board? Robert C. Cantwell - B&G Foods, Inc.: Across the board. So, we will basically – we had x amount of products, so was – we weren't out of – and we – fundamentally we'll have to allocate to customers. So, it was across the board. Eric Mitchell Gottlieb - D.A. Davidson & Co.: Okay. And then the marketing spend for both this year and 2017, can we expect similar levels in 2018 as well? Robert C. Cantwell - B&G Foods, Inc.: That's the plan. Today the plan is to continue to push this brand, and continue to spend that money. Eric Mitchell Gottlieb - D.A. Davidson & Co.: Okay. And then for the transition on ACH coming in September, how do we think about changes in SG&A and margin there for the switch? Robert C. Cantwell - B&G Foods, Inc.: Nothing. So nothing really will change at all, there is a little bit of cost to go away from ACH kind of managing for us. It's not a big number that's a different. So our sales team is already running the sales for these products from trade marketing to sales through our broker network. What ACH – and we're running the plan, those are our people with our plans. What they're doing is, invoice all the back-office, they're invoicing customers, collecting receivables, making sure shipments to other customers on a timely fashion. And we'll takeover that responsibility here at the end of August. Eric Mitchell Gottlieb - D.A. Davidson & Co.: Got it. Okay. And then one minor question, other expense seems to be up $2 million, is there anything interesting in there? Robert C. Cantwell - B&G Foods, Inc.: Tom. Thomas P. Crimmins - B&G Foods, Inc.: Yeah. We did have an adjustment related to our investment in pesos. I actually hold pesos here in the U.S. So you sort of see that coming through that the impact of the change in the exchange rate in the fourth quarter particular. So that's flowing through in the EBITDA number in our results of operations. So and I do expect that that, we were I think somewhat prudent in our process to invest into pesos, when they were somewhat depressed and bring those in-house to make sure that we had coverage for 2017. So although I took a little bit on the chain in the fourth quarter, I expect to see that come through in the first quarter and beyond for next year as well. So it's mainly just that. Eric Mitchell Gottlieb - D.A. Davidson & Co.: How much have you locked in for 2017? Thomas P. Crimmins - B&G Foods, Inc.: Yeah. We've done the majority of the pesos exposure that we have down there right now. I mean there is a, out of the total expenses, sort of half of their business is in U.S. dollars and other half is in pesos, related to payroll and buying local product and things like that. So I have got half of that peso covered. We're the ones that really supply them with their funding and where we sit right now, at the end of this year and now into the first quarter, we were fairly opportunistic in our approach and I have got, I mean you want to call it 80% to 90%, probably somewhere north of there, maybe even of my peso exposure covered for 2017. Eric Mitchell Gottlieb - D.A. Davidson & Co.: Fair enough. All right, thank you very much. And I'll pass it on. Robert C. Cantwell - B&G Foods, Inc.: Thank you.

Eric Larson with Buckingham Research Group. Please go ahead.

Hi, yeah. Thanks for taking my question. A couple of things, your base business, Bob and Tom, can you – obviously you've got specific issues with certain brands, but is it a spending issue, are the products, do the products need reformulation. Is it natural ingredients and colors and flavorings issues that you, what are the steps that you have to take to actually stabilize kind of the base for 2017? Robert C. Cantwell - B&G Foods, Inc.: Well, part of it is, a lot of the categories that some of those product lines are in have been declining. So the whole category has been declining. Our goal for 2017 is to gain more share in the categories and most of that's going to come through launching – we have a lot of new products in a lot of our brands, where we didn't really have that in 2016 and most of 2015. We are – we re-emphasized innovation here and the innovation is oriented more to better-for-you, cleaner labels et cetera. But again, we are not going to be the ones who absolutely change the whole category dynamics. So the way we can kind of stabilize the flats to hopefully up, is between the innovation and paying attention is through just kind of garnish some more share in that category. So even if the category declines here for another year or two whatever goes on, our share gains could actually outpace that category decline. So that's our goal and that's the direction internally. We're in a lot of categories and a lot of our food peers are all reporting a lot of results in similar categories that are just challenged. We're being much more aggressive with new products, it's really not about the spending on our part, we're doing our fair share of trade spending et cetera. It's making noise, and making new news in the category. We really didn't do that in 2016 and for most of 2015. But we're launching a bunch of new items and a bunch of subsets in a number of categories that we hope will move the needle.

Okay. I mean that make sense. And then in syrup, obviously you've got the U.S., the U.S.-Canadian dollar relationship that's hurt you. Would a shorter or smaller maple syrup crop be a benefit to you at this point, I would think that would be one of the things that could help you a lot, obviously we don't know what that is going to be yet, but would a smaller crop or a smaller output be a value to you at this point? Robert C. Cantwell - B&G Foods, Inc.: Actually a smaller crop would be a value. You never know what weather does, but I think if I was a betting person, I wouldn't expect that. Since we've owned maple growth in, we bought in 1998, there was only one real short crop that was meaningful. That made a reference. So chances of that happening in last year and the year before were pretty much record crops because what happened is the sophistication in Canada has gotten better and better and the production capacity has got larger and larger. So even though the demand for maple syrup worldwide is growing, and certainly growing in the United States too. This plenty of syrup to go around. So you can never bet on weather – warm weather really messes up the crop, so if it's too warm too soon that's what hurts the crop. But again it's almost 20 years now and is only really happened once in those 20 years in any magnitude. So you never know Mother Nature could strike.

Yeah, now exactly. And then the final question and then I'll pass it on here. Your original guidance for accretion – EPS accretion for ACH, I believe was – correct me if I'm wrong, I think it was a range of $0.24 to $0.26 within that? Robert C. Cantwell - B&G Foods, Inc.: Yeah. That's correct.

Is that low to kind of mid $0.20 range and I'm not sure if you gave any specific number for Victoria, I do believe you said, you expected to be accretive, is that still – are those still part of your guidance that still achievable? Robert C. Cantwell - B&G Foods, Inc.: While the EBITDA – and Victoria was in that $0.08 to $0.10 range. So on the seasoning business from ACH, the EBITDA is there, everything else is there. One of the challenges we have a little bit here is there – the way the valuation of ACH was done is there's more amortizable assets, it's not a cash thing, but it is affecting our EPS there and our effective tax rate is also up. So when we were looking at this, our tax rate was 37.2%.

Correct. Robert C. Cantwell - B&G Foods, Inc.: We're now looking at kind of 38.2%, right. So it's up 1 percentage point which is affecting our EPS across the board. And that's why it was very important for Tom to put out kind of our full year look at all of those non-cash numbers from amortization to deprecation et cetera. So everybody can kind of adjust their numbers in their models. But from EBITDA, we don't see any issues, ACH is tracking great, but there is just some more accounting, what I call counting amortization that is affecting our EPS.

Got it. Okay. Thanks guys. Robert C. Cantwell - B&G Foods, Inc.: Sure.

And we'll take our final question from Robert Moskow with Credit Suisse. Please go ahead. Robert Moskow - Credit Suisse Securities (USA) LLC: Hi, Bob, and hi, Tom. Robert C. Cantwell - B&G Foods, Inc.: Hi. Robert Moskow - Credit Suisse Securities (USA) LLC: I wanted to make sure that I bridge the EBITDA correctly, so I guess I have a bunch of questions here. When you finish the year at $322 million, did you say that ACH was in that number, that there was maybe a couple of million there from ACH? Robert C. Cantwell - B&G Foods, Inc.: So with ACH and Victoria... Robert Moskow - Credit Suisse Securities (USA) LLC: Yeah. Robert C. Cantwell - B&G Foods, Inc.: in total, the two of them not quite $2 million. So this is just a lot of initial cost. We actually had the – we terminated the G&A structure and selling structure of Victoria all that really happened here in February. ACH has some cost that will go away. So we didn't make a whole bunch of money, it's actually a little less that $2 million on that EBITDA for those two business combined. Robert Moskow - Credit Suisse Securities (USA) LLC: And Green Giant, would the EBITDA maybe you said on the call, what it was for 2016? Robert C. Cantwell - B&G Foods, Inc.: Well for 2016, Green Giant came in right around $110 million in EBITDA. Well above our initial expectations, when we bought the business of about $95 million Robert Moskow - Credit Suisse Securities (USA) LLC: Right. Robert C. Cantwell - B&G Foods, Inc.: But yeah, a $110 million. Robert Moskow - Credit Suisse Securities (USA) LLC: Okay. So just getting from your $322 million base to $370 million, what I think you're saying here is that ACH maybe gets you about $40 million, but then you have another $6 million or so, I think, from the peso hedging that you did. It's just my math. So if I add those two together, I get to pretty much the midpoint if not a little higher in your range. So that indicates that there is just not a lot of, there's not a lot of growth for the rest of the business including Green Giant. So can you help us tease out what's going on in that big middle there? Is Green Giant expected to grow on EBITDA and then maybe that's offsetting some weakness in other brands? Robert C. Cantwell - B&G Foods, Inc.: Well, part of it is the $322 million, ACH and Victoria on a full-year basis, we were talking in total $47 million kind of $38 million and $9 million made about $2 million. So, it's going to add about $45 million next year. Robert Moskow - Credit Suisse Securities (USA) LLC: Okay. Robert C. Cantwell - B&G Foods, Inc.: The other piece of the business is $6 million for the peso is too high. I mean, there is a few million dollars there. I mean, there is some cost increases. We have some commodities, not a lot, that have moved on us a little bit, that offset it a little bit. We're not expecting much growth of EBITDA on the base itself. So kind of a flat sales year, kind of keep – we get a little bit of benefit just by being good stewards of cost here, but relatively flat. And Green Giant grew up a little bit, but the plan on Green Giant is if we're moving 5% or 6%, our initial plan is to really continue to put some of that money back into the brand to keep driving it. So the Green Giant pieces, if we don't do that, we can make a little bit more money and we'll decide that as we go through the year. But Green Giant is moving the way we expect, especially from slotting. So, part of this is – slotting cost is very expensive, so as we go from kind of 60% ACV to 80% to 90% and in addition into Canada, we have some plans on spending a decent amount on slotting on Green Giant, that affects the EBITDA, kind of in one year. And we don't get all of that back in year one. Robert Moskow - Credit Suisse Securities (USA) LLC: Okay. How much of that 5% to 6% sales growth is just the catch-up on the $13 million that you missed out on in December? Is that expected to come back in that... Robert C. Cantwell - B&G Foods, Inc.: Yes. So, the first part of that is we should get $13 million back, and hopefully more in the fourth quarter, just year-over-year, just by having the product. Robert Moskow - Credit Suisse Securities (USA) LLC: Okay. All right. Well, thank you very much. Robert C. Cantwell - B&G Foods, Inc.: Okay.

There are no further questions at this time. I'd turn the conference back over to Mr. Bob Cantwell, sir? Robert C. Cantwell - B&G Foods, Inc.: Okay. Thank you, everyone for joining the call tonight, and certainly, thank you for the continued following of B&G, and look forward to 2017 and a very strong 2017 year. Thank you.

That does conclude today's presentation. Thank you for your participation. You may now disconnect.