B&G Foods, Inc. (BGS) Q2 2018 Earnings Report, Transcript and Summary

Good day everyone and welcome to the B&G Foods Second 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 Investor Relations section of bgfoods.com. Before the company begins its formal remarks, I need to remind everybody 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 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 be making references on today's call to the non-GAAP financial 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. Bruce Wacha, the company's CFO, will start the call by discussing the company's financial results for the quarter. After that, Bob Cantwell, the company's Chief Executive Officer, will discuss various factors that affected the company's results, select businesses highlights and his thoughts concerning the outlook for 2018 and beyond, and Ken Romanzi, the company's Chief Operating Officer will make some remarks. I would like to now turn the call over to Bruce. Bruce C. Wacha - B&G Foods, Inc.: Good afternoon. Thank you for joining us for our second quarter 2018 earnings call. Our second quarter results benefited from very strong sales growth of 7.4% [Technical Difficulty] (00:02:21) more than 3% growth from our base business, top line trends that are in excess of the growth rates implied by our full year guidance, despite what is considered to be challenging operating environment. During the quarter, we generated $388.4 million of net sales compared to $361.7 million for the second quarter of last year. Our base business net sales increased by approximately $11 million including approximately $4.3 million from pricing and $6.7 million from increased volumes. Back to Nature acquired on October 2, 2017 contributed approximately $17.6 million to net sales for the quarter. We generated $74.4 million of adjusted EBITDA in the quarter, a short fall of $3.8 million compared to the second quarter of last year, which was largely expected due primarily to industry-wide increases in freight costs and timing of our price increases which were not fully implemented until late in the quarter. [Technical Difficulty] (00:03:30) our updated full year guidance, we expect to see the full benefit from our price increases and cost savings programs in the second half of the year. In addition, the pace of increases in freight costs have already begun to moderate. [Technical Difficulty] (00:03:51) of the year, we generated approximately $106 million in adjusted EBITDA and generated adjusted EBITDA as a percentage of net sales of approximately 20%. This includes $17.5 million of increased freight costs compared to the first six months of 2017 and the timing of increased spend of approximately $5.5 million for slotting in coupons primarily to support the roll-out of Green Giant innovation products. These costs were offset in part by $5.5 million of pricing benefits inclusive of trade spending. And we had very strong conversion of our EBITDA into cash. We generated approximately $105 million of net cash provided by operating activities during the first six months of the year compared to the [Technical Difficulty] (00:04:45) during the first six months of 2017. We expect to generate $181 million to $191 million of adjusted EBITDA during the back half of this year compared to $163 million (00:05:00) a year ago. Driving this growth will be an expected $12 million to $15 million in pricing benefits from the price increases that have now been implemented across the portfolio as well as an expected $10 million to $12 million resulting from increased volume primarily [Technical Difficulty] (00:05:19) Green Giant frozen innovation products and one benefit from Back to Nature which we did not own in the third quarter of 2017. We also expect $5 million of benefit from our SG&A cost savings initiatives including warehouse savings driven by [Technical Difficulty] (00:05:38) reduction program and lower coupon [Technical Difficulty] (00:05:55). Offsetting these benefits will be anticipated increase freight of about $5 million to $7 million in the second half of this year. We expect the majority of our other costs [Technical Difficulty] (00:05:57) total basket of inputs to be between flat and favorable for the remainder of the year. We are fine tuning our full year [Technical Difficulty] (00:06:07) which is largely in line with what we have communicated [Technical Difficulty] (00:06:10). We expect net sales of $1.73 billion to $1.75 billion, adjusted EBITDA $345 million to $355 million and adjusted earnings per share $2.05 to $2.15. Now I'd like to cover some of the key drivers of our net sales performance before we move to the balance sheet. Green Giant frozen driven by strong consumer demand of our newest innovation launch Green Giant Veggie Spirals as well as continued strong performance from our Green Giant Riced Veggies, Green Giant [Technical Difficulty] (00:06:52) and Green Giant Mashed Cauliflower which were launched in 2016 and 2017 saw its fifth consecutive quarter of double-digit growth with net sales of Green Giant frozen products up 19.7% for the quarter or nearly $14 million to $84.2 million. Pirate's Booty also outperformed during the quarter. Net sales of Pirate's Booty increased by approximately $9 million or nearly 55% to $25.2 million for the quarter. Despite a slow start in the first quarter [Technical Difficulty] (00:07:30) sales of Pirate's Booty are now up approximately 10% for the first six months of the year. Looking at the rest of the portfolio, we had a mix of pluses and minuses. New York Style generated net sales of $9 million in the second quarter, up approximately 11% compared to the year ago period. Victoria had another strong quarter under our ownership and generated net sales of $9.9 million in the second quarter, up approximately 3.5% compared to the year ago period. Cream of Wheat generated net sales of $11.8 million and was down 3.5% for the quarter. This comes on the heels of double digit growth during Q1 [Technical Difficulty] (00:08:12) Ortega generated net sales of $34.1 million for the quarter, down 1.7% compared to the year ago quarter, but following a strong first quarter performance of over 4% growth in net sales. Our spices and seasons business inclusive of the business that we acquired in 2016 and our legacy brand businesses such as Mrs. Dash and [Technical Difficulty] (00:08:37) generated $85.1 million in net sales [Technical Difficulty] (00:08:42) 3.7% compared to last year. Back to Nature generated $17.6 million (08:49) in net sales for the quarter and is tracking to our annual. Net sales of the rest of the brands in the portfolio were $91.1 million compared to $94 million in the prior quarter. From a balance sheet perspective, I'm happy to report that our inventory reduction program needs to (00:09:08) track schedule through the second quarter of 2018. During the first two quarters of 2018, we've reduced inventory [Technical Difficulty] (00:09:17) at the end of the second quarter compared to $501.8 million at the end of fiscal 2017. As a reminder, we had increased inventory by nearly $65 million during the same time period last year. We expect to continue to reduce our inventory throughout the remainder of the year and we expect to achieve the high end of our $75 million to $100 million of inventory reduction target, reducing inventory by the end of the fiscal year to approximately $400 million to [Technical Difficulty] (00:09:50) Green Giant has been the primary beneficiary of our inventory reduction program with a decrease of approximately $80 million already year-to-date. We finished the quarter with $62.8 million in cash and net debt of $2 billion. We made voluntary prepayment on our term loan facility of $25 million during the quarter, reducing the balance sheet to approximately [Technical Difficulty] (00:10:21) approximately $650 million at the end of fiscal 2017. As you know, our Board of Directors authorized the share repurchase program of $50 million in March of this year and we have repurchased $18.5 million or approximately 695,000 shares at an average price of $26.65 through the end of the second quarter. In May, our Board of Directors increased our quarterly cash dividend rate by 2.2% from 46 enhancements per share of common stock to 47 enhancements per share of common stock. And now for those of you who are doing your own modeling [Technical Difficulty] (00:11:06) what I mentioned earlier, here are some of the remaining [Technical Difficulty] (00:11:08) to our updated guidance. Net interest expense of $110.5 million to $115.5 million including cash interest expense of $105 million to $110 million, an interest amortization of $6 million. Depreciation expense of approximately $36 million, amortization expense of approximately $18.5 million. We continue to expect an effective tax rate of approximately 25% in 2018 and we now expect our cash taxes to be less than $5 million for the year. We are also lowering our anticipated CapEx to approximately $50 million. Based on our adjusted EBITDA guidance, we expect that our adjusted EBITDA [Technical Difficulty] (00:12:00) CapEx, cash taxes and cash interest will be approximately $185 million to $195 million, an increase of $10 million when compared to our previous [Technical Difficulty] (00:12:11) In addition, we expect our inventory reduction plan to positively impact cash by an additional $75 million to $100 million before dividends. Also based on the midpoint of our adjusted EBITDA guidance and inclusive of our acquisition of McCann's Irish Oatmeal which occurred after the quarter, we expect net debt to pro forma adjusted EBITDA of 5 5% and 5.6% at the end of the year. And now I'd now like to turn the call over to Bob. Bob? Robert C. Cantwell - B&G Foods, Inc.: Thank you, Bruce and thank you to the audience for joining our call today. As a reminder, when we laid out our vision for 2018 earlier this year, we suggested the year would be a typical B&G Foods year with modest topline growth, stable margins and the strong key free cash flow generation the investment community expects from [Technical Difficulty] (00:13:13) we became a public company in 2004 and we are on track to achieve these results. Another typical for B&G Foods has been strategic acquisitions and as you know we recently announced the acquisition of McCann's Irish Oatmeal, a leading authentic premium brand of Irish steel cut oatmeal. It is [Technical Difficulty] (00:13:41) small brand, but we love the brand, what it stands for in the category dynamics. With this transaction, we are adding our fifth straight business in a better-for-you category and I'm very excited to walk you through some of the highlights of this acquisition in [Technical Difficulty] (00:14:00). As Bruce mentioned at the start of the call, we had a very strong top line growth, up nearly 7.5% versus last year's second quarter. Including the benefit of M&A and equally important, our base business net sales were up more than 3%. This growth compares favorably to our full year target of 4% to [Technical Difficulty] (00:14:29) top line growth which [Technical Difficulty] (00:14:32) approximately 4 points of growth from the acquisition [Technical Difficulty] (00:14:36) and up to 2-plus points of growth from base business between price and volume. There are several drivers for this growth including M&A. Back to Nature continues to contribute our sales, adjusted EBITDA and cash flows as expected. Also our key brands like Green Giant, Pirate's Booty, Ortega, Cream of Wheat and Victoria are also performing well as we expected. And we're also beginning [Technical Difficulty] (00:15:13) the benefits of our pricing initiatives. We benefited from approximately $4.3 million in [Technical Difficulty] (00:15:22) during the second quarter inclusive of our list price increases as well as reductions in our promotional trade spending. And the cumulative benefit through the six months is approximately $5.5 million. As we mentioned previously, the benefits of our price increase will [Technical Difficulty] (00:15:44) be a back half event and we [Technical Difficulty] (00:15:47) another $12 million to $15 million plus benefits during the next two [Technical Difficulty] (00:15:52). I will touch on costs later in the call, but as you know, the pricing strategy was designed to head off the impact of the cost increases and margin compression that we were seeing in the first half of this year largely driven by increases in freight cost. Now, back to our brands, I will begin with Green Giant, our largest [Technical Difficulty] (00:16:20). We have just reported our fifth quarter of double-digit growth in net sales of Green Giant frozen, which increased by almost 20% to approximately $85 million in the second quarter. This growth is driven by strong demand for our innovation products including our latest launch Green Giant veggie Spirals. While we're still in the early days of the launch, we are excited by our progress to-date and expect that this latest innovation product will be just as big as our Green Giant Riced Veggies and our Green Giant Veggies. Green Giant Veggie Spirals have already achieved almost 75% distribution in our core food and mass channels and they are helping to drive growth [Technical Difficulty] (00:17:16) continued excitement about the brand. Consumption trends are also strong for Green Giant frozen, up 70% for the latest five-week period and these [Technical Difficulty] (00:17:28) very much support our optimism and [Technical Difficulty] (00:17:32) our targets throughout the remainder of the year. We are spending to [Technical Difficulty] (00:17:39) Green Giant was the primary driver for nearly a $2.5 million increase in slotting and coupons during the second quarter as [Technical Difficulty] (00:17:50) our new Green Giant Veggie Spirals and we also launched our Green Giant electronic billboard raised in the heart of the Times Square. We are continually driving awareness for the brand, and we also feel good about our efforts to get consumers to [Technical Difficulty] (00:18:10) and increase their vegetable consumption. In fact, we are continuing our innovation push and we'll be [Technical Difficulty] (00:18:20) a number of new items in three new frozen categories later this fall, including a new line of organic vegetables. Pirate's Booty also had a stellar quarter. As we mentioned on our last call, we were very confident in the outlook for Pirate's Booty despite the soft 1Q results, which were driven by the timing of our promotional event and a key customer. While Pirate's Booty delivered in the second quarter up 55% in net sales, we are very confident in our forecast for Pirate's Booty for the remainder of the year and the long-term upside for this brand. We think Pirate's Booty is a truly unique brand [Technical Difficulty] (00:19:12) better-for-you snacking category and [Technical Difficulty] (00:19:15) growth profile and strong margin profile. We are convinced that Pirate's Booty is truly one of the most valuable snack brands in North America. I would also like to talk about Ortega for a moment. As a reminder, Ortega is one of the largest Hispanic food brands sold in the United States and is the second [Technical Difficulty] (00:19:42) within our portfolio. Net sales were up 1.7% for the second quarter, but are up 1.3% for the first six months of the year. Also consumption data has been strong, up 3.2% for the 13 weeks ended June 30. And now, we take a moment to discuss the newest addition to our portfolio. We were very excited to announce the acquisition of McCann's Irish Oatmeal late last month. McCann's is an authentic 150-year old brand of premium steel cut Irish oatmeal. McCann's is a perfect complement to Cream of Wheat and to our position in the hot cereal aisle. There is also another example [Technical Difficulty] (00:20:40) acquisitions of Green Giant, Spice Islands and our [Technical Difficulty] (00:20:45) and seasonings brands Victoria and Back to Nature of our [Technical Difficulty] (00:20:52) recent years to acquire better for you brands that taste great and [Technical Difficulty] (00:20:57) with today's consumer. Within the hot cereal breakfast category, premium oatmeal has [Technical Difficulty] (00:21:07) a lot of attention in innovation over the [Technical Difficulty] (00:21:10) couple of years, creating a [Technical Difficulty] (00:21:14) growth opportunity for smaller brands like McCann. And separately, much like Cream of Wheat, McCann's is a great addition to the type of high margin brands in our portfolio that we expect to continue to support our free cash flow model for years to come. Now, we'd like to move from the top line to the cost side of our business. As we have been [Technical Difficulty] (00:21:43) for some time now, and Bruce just mentioned, freight cost which first began to [Technical Difficulty] (00:21:50) last fall remained high. We have [Technical Difficulty] (00:21:54) increases in freight costs of approximately $30 million over the past three quarters, the majority of which came during last year's fourth quarter and in this year's first quarter. Now, 2Q costs were also elevated. As Bruce pointed out earlier, we are now [Technical Difficulty] (00:22:18) the pace of these increases. Outside of freight cost, we still expect to be somewhere between flat and favorable on our [Technical Difficulty] (00:22:30) cost this year. The net of the [Technical Difficulty] (00:22:34) and our pricing initiatives are expected [Technical Difficulty] (00:22:37) very favorable comparison during the back half of 2018. But unfortunately, we have been squeezed through the first two quarters of the year. We generated $74.4 million of adjusted EBITDA in 2Q compared to $78.2 million a year ago. We are encouraged by our progress on the top line and we are also very pleased with the successful implementation of our pricing strategy, which we expect will really begin to [Technical Difficulty] (00:23:15) during the second half of the year. While we also expect to begin to benefit from a moderating of the [Technical Difficulty] (00:23:25) of freight cost setting up a nice finish to the year. And we're also happy to announce the recent McCann's acquisition exciting innovation-led growth in Green Giant frozen and solid performance in other core brands. Now, I'd like to turn the call over to Ken who'll provide additional detail on our cost-cutting initiatives. Ken? Kenneth G. Romanzi - B&G Foods, Inc.: Thank you, Bob. As Bob and Bruce have mentioned, we had a strong quarter of net sales growth led by our key brands and some early benefits from our pricing initiative. We expect our base business net sales growth in the back half of the year to be approximately 3%, which includes $12 million to $15 million of pricing benefit. On the cost side, Bob already walked you through some of the factors that were [Technical Difficulty] (00:24:19). So I'd like to spend some time giving you an update on some of the [Technical Difficulty] (00:24:23) we're doing to offset these costs [Technical Difficulty] (00:24:25) on the freight side. While rates have increased and will continue to do so, we're implementing efforts to be more efficient for the betterment of contract versus spot freight rates and [Technical Difficulty] (00:24:40) of intermodal service. We expect freight costs [Technical Difficulty] (00:24:45) elevated throughout the year, but we expect the impact will be less punitive than the back end of the year as we lapped the late 2017 increases. Beyond this year, we expect to further reduce our [Technical Difficulty] (00:25:00) expense with our new West Coast [Technical Difficulty] (00:25:03). We secured a location in Southern California and expect to be operational by the end of September. We believe this new distribution center will save approximately [Technical Difficulty] (00:25:15) on an annual basis, once fully operational and as we close our Houston [Technical Difficulty] (00:25:21). However, we do believe that we will [Technical Difficulty] (00:25:25) some cost benefits as soon as the fourth quarter of this year. Furthermore, this new distribution center is expected to not only reduce costs, but also improve service levels to our West Coast customers with inventory several days close to those customers than our Houston location. On the warehousing front, we've reduced costs primarily driven by the inventory reduction program, saving approximately $1.5 million of warehousing costs year-to-date versus the same time last year. And we expect to see full year benefits of approximately $3 million. These initiatives are just the beginning of a comprehensive program we're undertaking to transform our supply chain to drive meaningful cost savings to maintain our margins in the [Technical Difficulty] (00:26:15) pressures we cannot control like freight rates. As I mentioned last quarter, we've engaged a consultant help us with our cost savings initiatives and have been working collaboratively for the past few months. Last [Technical Difficulty] (00:26:33) even before our study began, I shared with you that we quickly identified $25 million in anticipated annual cost savings opportunities over the next few years or about 2% of our cost of goods sold. And [Technical Difficulty] (00:26:48) diagnostic base of this project, we now believe there is an opportunity to possibly increase these cost savings to 4% of COGS or approximately $50 million on an annual basis. As part of our guidance to be provided at our year end conference call, we expect to have the total anticipated cost savings identified as well as their time phasing condition over the next few days. Now, I'd like to turn the call back over to Bob. Robert C. Cantwell - B&G Foods, Inc.: Thanks, Ken, and thanks to the audience for joining us. We clearly have more work to do on the cost side, but it is a pleasure to report that our successful [Technical Difficulty] (00:27:30) on the top line, coupled with our inventory reduction program are translating into significant cash generation. And we are using this cash to [Technical Difficulty] (00:27:44) debt, generate returns to our shareholders through our consistent dividend policy and now through our share repurchase program as well and finally, to be supportive of our ability to pursue accretive M&A opportunities. With that, I would like to begin the Q&A portion of the call. Operator?

We will take our first question from Ken Zaslow from Bank of Montreal.

Hey, good afternoon, everyone. Robert C. Cantwell - B&G Foods, Inc.: Good afternoon. Bruce C. Wacha - B&G Foods, Inc.: Hey Ken.

So just two questions. One is, when I think about (00:28:43) going forward into the year, there is a benefit as well as the cost savings to 2019 and do you expect to believe cost of [Technical Difficulty] (00:28:59) 2019? Robert C. Cantwell - B&G Foods, Inc.: Could you just repeat the back half of the question, it was actually very hard hearing.

Yeah, [Technical Difficulty] (00:29:10) I don't know what it is, I apologize. Robert C. Cantwell - B&G Foods, Inc.: No, I apologize too. It is...

So would the benefit of the pricing [Technical Difficulty] (00:29:29) 2018, [ph] does that translate into (29:33) growth in 2019? Robert C. Cantwell - B&G Foods, Inc.: Well, absolutely, so again, (00:29:42) I think what I heard, the pricing t[Technical Difficulty] (00:29:47) into effect here later in the second quarter in a big way, I mean, we certainly have a good six months of that pricing benefit again in the first half of 2019. But in addition, part of the pre-program work that's been led by Ken and his team is in driving [Technical Difficulty] (00:30:10) programs is not just [Technical Difficulty] (00:30:14) to us in the first half of 2019. We see that as a continued benefit as we look at where we can extract pricing through by reducing some inefficient trade. So, we expect to be able to not only talk about another six months of pricing in 2019 just because of the timing of this year [Technical Difficulty] (00:30:38) implementation. We expect [Technical Difficulty] (00:30:41) as the less price [Technical Difficulty] (00:30:43) the trade promotion work will continue to be [indiscernible] (00:30:48) drive pricing throughout 2019.

So, you will (00:30:53) in 2019? Robert C. Cantwell - B&G Foods, Inc.: Absolutely.

And the second thing is what type of [Technical Difficulty] (00:31:00) better than you expected [indiscernible] (00:31:04)? Robert C. Cantwell - B&G Foods, Inc.: Well, I think what you saw and we're very pleased, so it's early in the game, but a lot of that pricing generation in the first half and certainly through most of the second quarter was [Technical Difficulty] (00:31:20) programs. And we've built [Technical Difficulty] (00:31:24) we're actually seeing strong volume on top in a number of brands. So I think it's really important to make sure everybody understood, not only do we get nice [Technical Difficulty] (00:31:38) in the second quarter and $5.5 million for the first half of the year, we've had strong volume growth too on our base business and kind of finishing the second quarter with base business up over 3% for the quarter and close to 2% year-to-date and really strong expectations in the second half, has really changed the trajectory as we think about a number [Technical Difficulty] (00:32:04) business line and certainly is being led by Green Giant and in the first half Pirate's, but we have a number of brands that actually increased during the first half of the year. So we're really expecting that to flow right through the rest of this year and certainly, we believe will continue to flow then into 2019.

Thank you very much.

Our next question comes from Cornell Burnette of Citi Research.

Good evening, guys. Robert C. Cantwell - B&G Foods, Inc.: Hi.

Just a couple of questions. In the quarter, your sales team did a little bit better than [Technical Difficulty] (00:33:00) tracking, but EBITDA came in about $6 million below. A lot of that was really due to gross margins. Look like gross margin pressures accelerated versus 1Q and I was just curious kind of what drove that given that you did get some pricing in 2Q, so was the result kind of what you expected or was there something that surprised you on the cost side during that quarter? Robert C. Cantwell - B&G Foods, Inc.: So actually, less surprises on the cost side, so we expect it to be short of what we did last year $78 million in EBITDA, certainly, like have come in a little bit better here. So certainly, we knew we still had freight cost increases heading through the second quarter and we're going to see, as Bruce said, another. So we've experienced [Technical Difficulty] (00:33:51) close to $20 million of freight cost just here in the first half. We're only looking at about $7 million in the second half so [Technical Difficulty] (00:34:00) year-over-year which really helps drive the EBITDA growth. Part of the second quarter is there's a little bit of a mix change from what you sell in the first quarter you get into a lot of what I call our lower margin Northeast brands for the barbecue summer season like B&G and B&M [Technical Difficulty] (00:34:21) that do mix our margins down. So we didn't [Technical Difficulty] (00:34:25) from a kind of margin compression that [Technical Difficulty] (00:34:29) in the first quarter at all. So we're really [Technical Difficulty] (00:34:33) as we look out at the rest of the year that our margins, I mean certainly improved because of the freight dynamics shrinking and pricing increasing, and then, some small benefits net in all of our other kind of cost structure will actually see a small benefit here. And what we're seeing from Nielsen and we're certainly seeing it from our internal results is we don't see a let up on the sales growth. I mean, the sales growth should be rock solid through the rest of this year. We know the pricing is in place. So we're going to see that pricing of $12 million to [Technical Difficulty] (00:35:13) pretty much be split between the third quarter and the fourth quarter. I mean, we're generating [Technical Difficulty] (00:35:19) in the fourth quarter, because just pure volume is higher, so there's more price on the pure dollar sold. But other than that, it's a pretty equal split between the third quarter and fourth quarter on pricing.

And when thinking about the cash and the full year guidance total, just [Technical Difficulty] (00:35:36) why the upper end of the EBITDA guidance was brought down [Technical Difficulty] (00:35:42)? Robert C. Cantwell - B&G Foods, Inc.: Well, I think we just wanted to – certainly where we are today, we just kind of where, as Bruce walked you through [Technical Difficulty] (00:35:51), the roll gets us very comfortable in our guidance range and we feel we're basically at the low end of our guidance here. It just really felt uncomfortable to kind of have that extra $10 million, which I think was from [indiscernible] (00:36:08) on top. So we achieved that. And the only cost – as we think about cost in our structure here, the only cost worry we have, but we think we know where it will be is freight, because we know what the spot rates are. We know what our contract rates are. We believe we can mix better than we did last year and reduce the pain we saw in the fourth quarter of last year. So I think it was more of a conservative approach on both a little bit on the top line on the high side on sales and the top line on the EBITDA side. But we did also raise the bottom of the sales rates, but (00:36:55) we're really comfortable with how well sales is performing through the year.

And [Technical Difficulty] (00:37:01) do you have on that kind of freight [Technical Difficulty] (00:37:05) back half? [Technical Difficulty] (00:37:07) Robert C. Cantwell - B&G Foods, Inc.: Well, nothing is ever locked in. So our contracts rates are locked in. The spot rates can move, but we kind of have good outside help understanding that kind of nowhere that is. We don't expect unless there's major hurricanes again that's changing dramatically. And we feel real comfortable. We were inefficient in the fourth quarter last year that what we're doing this year and because we're moving around the lot less inventory, as our inventories down, that helps us whole bunch too. So we're really lapping a terrible fourth quarter last year, I mean that's probably the biggest piece. Fourth quarter of last year, one of the reasons we took the hit on EBITDA last year hit [Technical Difficulty] (00:38:01) little over [Technical Difficulty] (00:38:05) on freight year-over-year that punished our EBITDA. So we know we're going against a very high number. We know rates are up, but we know what we did. We're improving on and we've improved on as we've gone through the year. And as we look at what's happened this year with higher rates and rising rates, we saw freight hit us for about almost $14 million – little over (00:38:32) $14 million in the first quarter year-over-year this year, and really around $5 million in the second quarter. We've seen the change happen here. We look at – the rest of the year, we're looking at that next six months to be closer to 5% to 7%, so not even double the 5% we saw in the second quarter. So we have really...

I guess... Robert C. Cantwell - B&G Foods, Inc.: Yeah.

I'm going to say just the last one (00:39:00) how much of this is basically from the contracts that are out there on the spot for the remainder of the year? Robert C. Cantwell - B&G Foods, Inc.: So we're contracting. So it's just a matter of – we are contracting, if trucks are fully available, they go out at contract rates. It's going to be – it's a tough trucking environment. So we're hoping that the larger percentage goes out of the contractor rates in for (39:28) spot. So we shipped in the fourth [Technical Difficulty] (00:39:31) last year can give or take 25-ish percent spot? Bruce C. Wacha - B&G Foods, Inc.: Yeah. Like 20% – almost 27%. Robert C. Cantwell - B&G Foods, Inc.: 27% spot. Bruce C. Wacha - B&G Foods, Inc.: (00:39:39) 20%. Robert C. Cantwell - B&G Foods, Inc.: Yeah. Bruce C. Wacha - B&G Foods, Inc.: So we're going to be in the spot market, but we're going to be down significantly. Robert C. Cantwell - B&G Foods, Inc.: Yeah. Bruce C. Wacha - B&G Foods, Inc.: So less spot and more intermodal and that average freight rate will come down even though each individual rate is higher than it was a year ago.

Okay. Thank you.

Our next question comes from Karru Martinson of Jefferies.

Good afternoon. Robert C. Cantwell - B&G Foods, Inc.: Hey, Karru.

Just in terms of – can you remind us where we are today on business [Technical Difficulty] (00:40:11) how much further [Technical Difficulty] (00:40:14)? Thanks. Robert C. Cantwell - B&G Foods, Inc.: So the good news is the decline on that business has actually been a lot less than expected. I mean, it is down in the first-half, but it's really down [Technical Difficulty] (00:40:32) the loss of major customer which happens to be Wal-Mart which we lost in the – basically, as we began the fourth quarter of last year. We are [Technical Difficulty] (00:40:44) up in the rest of the accounts in [Technical Difficulty] (00:40:47) year-over-year. So the loss factor is [Technical Difficulty] (00:40:50) we really just have the third quarter hit again. So we had a major hit in the fourth quarter and I forgot the number last year, but it was upwards close to $1 million in the fourth quarter of last year roll over against that. We're not going to grow, I mean, most likely in the fourth quarter, but we're not going to shrink any further in the fourth quarter. So it's just the third quarter hit, third quarter is not a big canned vegetable season that hit last year. The big hit was the fourth quarter during Christmas and we don't have that hit to go I guess. So we're very confident in kind of our internal forecasts and expect Green Giant to have a very strong – and had certainly a very strong first half, it's going to have a really strong second half.

Okay. Okay. You guys mentioned three new category launches, (00:41:44) Green Giant and frozen. We're trying to get a sense of when those will roll out, will that all in the second half or will that carry into the first half of next year? Kenneth G. Romanzi - B&G Foods, Inc.: Yeah. This is Ken. The benefit would really be well spread for both the years. So we – this is actually innovation that we had slotted [Technical Difficulty] (00:42:07) first part of 2019, but several major [Technical Difficulty] (00:42:11) and ourselves wanted to pull it forward. So we work with several major customers plans for launching this year with no slot. So when you have [ph] hard innovation (00:42:25) and people want more of it, let's just say, those conversations have gotten easier and easier. And we expect to get roughly about a third of the ACV, we'll take on those items this year and that roll out will [Technical Difficulty] (00:42:42) throughout the first part of next year. All retailers [Technical Difficulty] (00:42:45) timeframes, there's no common set timeframes [Technical Difficulty] (00:42:49) frozen category, so whenever the retailers will reset, we expect again – based on the initial – we expect the same amount of retail distribution on these three new efforts as we have on our existing innovation between now and mid next year.

Okay. And then, lastly, when we look at the tuck-in acquisitions on McCann's, are there additional opportunities on the horizon of that or how [Technical Difficulty] (00:43:19) the M&A environment? Robert C. Cantwell - B&G Foods, Inc.: Well, I think as we always say, we're always out looking certainly opportune – I mean, I think we've proven [Technical Difficulty] (00:43:28) over many years, but over the last three years or four years [Technical Difficulty] (00:43:34) acquisitions become available. So I think the simple answer is [Technical Difficulty] (00:43:40) for B&G in center of the store and/or frozen, and [Technical Difficulty] (00:43:45) is right, we're going to aggressively pursue it.

Thank you very much guys. Appreciate it.

Our next question comes from Bryan Hunt from Wells Fargo Securities.

Thank you. I'd like to [Technical Difficulty] (00:44:03) Green Giant frozen a little bit deeper, could you talk about same-store growth products away from innovation, and whether the innovation creating a halo of growth for the whole brand? Robert C. Cantwell - B&G Foods, Inc.: So – and Ken can jump in [Technical Difficulty] (00:44:28), but so certainly the innovation has been the driving force in the frozen category for us. I think the halo factor on the rest of the frozen is we're gaining tremendous support from all the key [Technical Difficulty] (00:44:42). So Green Giant has now become meaningful [Technical Difficulty] (00:44:47) certainly super meaningful on the innovation [Technical Difficulty] (00:44:52) meaningful on what we [Technical Difficulty] (00:44:54). So I wouldn't say that's really moving the needle in a big way, but it's fundamentally stopped the declines on the rest of it in a big way. And we see opportunities and we see opportunities in some of that core, to say the halo rolls into cans (00:45:12). But the only thing I could say on that is outside of the distribution we lost, which happens to be a large retailer, we're seeing growth in a category that's trouble and the Green Giant can business is growing, not a lot, but a 2% is meaningful outside of that one retailer. So hard to say how much of a halo that is from all the frozen innovation, but Green Giant is still a meaningful can business. It's not where we're focusing our major efforts and all our innovation focus has been driven towards certainly the frozen and as I said in [Technical Difficulty] (00:45:57) kind of the call, we're really excited about the launch we have here that's going to be happening. And as Ken said, we've had a lot of acceptance and just exciting to enter three new categories. Part of our goal here is not only [ph] extension (00:46:15) some of the powerful new innovation we have, but to also to continue to spread vegetables [ph] and (00:46:27) spread it outside of the traditional kind of vegetable category. And we're really excited about these launches and we think we're going to continue to see strong growth [ph] launches (00:46:38) too and have really nice little pick up [Technical Difficulty] (00:46:40) kind of what we do here in the kind of September through December timeframe and it's certainly – and we're gaining share, the other thing is we keep gaining share in the frozen category which is truly and [Technical Difficulty] (00:46:59) so, everybody is winning here.

[Technical Difficulty] (00:47:03) So I was wondering if you could repeat what the decline in [ph] demand sales were (00:47:18) in Q4 last year? Robert C. Cantwell - B&G Foods, Inc.: About $20 million, right around $20 million in the fourth quarter of last year. So...

Next on the McCann's oatmeal, can you talk about what retailers have said about your (00:47:39) of it and then where you see opportunity expand and in terms of (00:47:45) Robert C. Cantwell - B&G Foods, Inc.: Well certainly, this is an oatmeal business. This is still kind of Irish oatmeal, so the product line is cook on stove, instant formats et cetera but it is a steel cut Irish oatmeal business. This has certainly spotty distribution. This is a business that is a branded business in a private label company. We think the power of our sales and distribution network, can move ACV in a big way over time. So again, this is a small brand today. Very profitable as a percentage of sales, which also excited. We see that this is the better-for-you concept the opportunity, a great brand, great name. And certainly in certain parts of this country in the northeast for example, people know this brand. So there's a lot parts of the country that people don't know and Ken and his team are looking at plan to really roll-out (00:48:54) distribution. This isn't about creating a bunch of new product here. This is about rolling out steel cut Irish [Technical Difficulty] (00:49:03) under a great brand and we think we can make a difference on this brand.

And then the last question is given where (00:49:12) gone and maybe your equity performance (00:49:26) Bruce C. Wacha - B&G Foods, Inc.: So our goal is to still bring leverage down to that 4.5 times, 5.5 times net debt-to-EBITDA range that we've lived in for the past few years and [Technical Difficulty] (00:49:40) continue to make progress bringing down to those levels this year.

Fantastic. That's it all (00:49:47)

Our next question comes from Farha Aslam with Stephens.

Hi. Good evening. Robert C. Cantwell - B&G Foods, Inc.: Hi.

Given you're seeing [Technical Difficulty] (00:50:03) do you anticipate a pickup in your packaging expenses [Technical Difficulty] (00:50:10) and are you pricing for that or should [indiscernible] (00:50:15) into next year? Robert C. Cantwell - B&G Foods, Inc.: No, so we know today, based on the best of our ability what tariffs have done to some of our packagings, specifically cans for example. So between Green Giant [Technical Difficulty] (00:50:32) and a number of the brands we have that go in cans, that increases upwards of couple million dollars on our cost of cans. So we know where that is. There's some other smaller pluses and minuses across the board, but we also know we have other just purely procurement cost savings [ph] outs (00:50:56) that has nothing to do with tariffs that more than offset. So we know going into 2019, at least as of today, we're locking in some of those costs and [Technical Difficulty] (00:51:08) some of the costs as we speak, that we expect that procurement overall in 2019 to most likely be positive to our P&L. But certainly tariffs have hurt. They've certainly hurt where it's pertinent. Probably the biggest hurt we have is steel – because of the steel component. Outside of that, everything on the tariffs side is relatively small for us. So not a lot of big increases and then as Ken mentioned, in addition to procurement savings, we will have some nice other cost savings in this organization that I'll talk about much more – in a lot more detail in our year-end conference call. So we don't see margin compression all in 2019. Hopefully, [Technical Difficulty] (00:52:05) assuming nothing goes crazy with freight further. If there's increases that are somewhat normal to deal with, that's okay. But for some reason, it ratchets up 15% we've got to find more savings to cover that and/or price.

Understand. Clearly, just sales in the quarter were very strong, but since [Technical Difficulty] (00:52:31) Robert C. Cantwell - B&G Foods, Inc.: So are you asking about quarter? Well, our consumption trends in general across a number of our product lines have been very strong and we don't – with what we have in place, anything can happen but we don't see that changing.

Yeah. So we have forecasted on our list price increases. Again, [Technical Difficulty] (00:53:05) translate to be a diamond unit [ph] to the (00:53:09) retail level. While we have forecasted elasticity, we're not going to see a lot of elasticity on the base business. So basically what we'll see elasticity in a big way is where we carve out inefficient trade promotions, where we will actually see – we will eliminate volume that are not satisfactory margins perhaps the pricing [Technical Difficulty] (00:53:31) And that's not necessarily elasticity. We're not going to [ph] trade promos (00:53:37) deeply in some areas as have [Technical Difficulty] (00:53:38) right economically. So if there's any volume softness [ph] at least (00:53:44) carving out deep discount trade promotion, but those are all on our forecast for the rest of the year.

Helpful. Thank you.

At this time we're going to go over some e-mail questions. Bruce C. Wacha - B&G Foods, Inc.: So the first question I have is just on the visibility on pricing and the confidence on the top-line and you've mentioned some of the margins [Technical Difficulty] (00:54:23) visibility. [Technical Difficulty] (00:54:30) volatility, is it primarily the availability of the contracted freight [ph] versus having to ship to (00:54:34) spot rates or anything else [ph] we should launch (00:54:38)? So as Ken said before, we've got very good price (00:54:44) visibility on pricing. We put these in place, we're expecting $12 million to $15 million of incremental benefit (00:54:54) from a pricing initiatives. And the primary drag that we saw throughout the first few quarters of the year was freight, which as we said on the call, we expect an incremental $5 million to $7 million over the back half of the year. Robert C. Cantwell - B&G Foods, Inc.: And I think the important – other [Technical Difficulty] (00:55:11) comment on freight is close to $20 million we saw in the first half kind of a little over $14 million in the first quarter and around $5 million in the second quarter within our plan. We knew what that was going to look like and [ph] it's (00:55:28) exactly to our plan. So we haven't been surprised on freight at all so we feel pretty good [Technical Difficulty] (00:55:35) what the second half of the year should look like. That's all we have for email question, so operator I think that means that we're done unless you have some more?

Our next question does come from Eric from Buckingham Research. Robert C. Cantwell - B&G Foods, Inc.: Hey, Eric. How are you?

[Technical Difficulty] (00:56:00) three quarters of the call here, so I'm not even sure if I'm – I'm sure I'm asking questions that you've already answered. But just one quick follow-up on the canned vegetable side, what would be your estimates for total can sales – vegetable sales this year including [Technical Difficulty] (00:56:27) your customer? Robert C. Cantwell - B&G Foods, Inc.: Okay. So we expect because I have that, we expect can sales to be somewhere between $135 million to $140 million this year. We expect can sales to be down between $15 million and $20 million for the year. Bruce C. Wacha - B&G Foods, Inc.: Eric, just as a reminder that is can U.S. and Canada, as well as Green Giant and Le Sueur.

Right. [Technical Difficulty] (00:57:06) follow up with you later. Thanks. Robert C. Cantwell - B&G Foods, Inc.: Okay.

Our last question comes from Brian from Consumer Edge Research.

Yes, thanks. Given the issues I tried to keep it very short. First question, could you just clarity whether Q2 was in line with your plan internally? Robert C. Cantwell - B&G Foods, Inc.: Yes it was. We knew is on (00:57:33) two factors; pricing was getting settled kind of mid to later part of this Q2. But in addition, we knew we were still getting hit by the freight pressures. So we knew kind of where the numbers were and we'd also knew that we (00:57:56) largest spiralized veggies in both the second quarter and the third quarter, there was going to be a lot more upfront slotting on Green Giant. So not more than in total for the year, but just more oriented in both couponing and launching and slotting in the first half of the year. So, we are pretty comfortable that we're tracking exactly where we thought we'd be tracking for the year. We're actually performing a little better on top [Technical Difficulty] (00:58:28) we expected. So we actually thought that some of the programs and pull backs on trade affect the volume as Ken said a little bit more, but we haven't seen that. Volume is very strong and certainly pricing is good. So we're very pleased on the top line. So that's actually been a little bit positive than expected. So certainly [Technical Difficulty] (00:58:52) and heading into the second half of the year, we're really very excited about where our sales can be for the whole year. And it's going to be driven our Power Brands in Green Giant and Pirate's and a few others. But we have a lot of our smaller brands. We have a brand like TrueNorth that has been down and has struggled for the last couple years. It was up over $1 million in the quarter. So there's just some really change in the dynamic and go-to-market that we've just really improved, some of the go-to-market on some of the smaller brands too. So I think everybody in general probably showing better results because consumption trends in most of the categories that [Technical Difficulty] (00:59:39) certainly are better than what we were looking at last year same time.

Okay. And then last one from me. It sounds like in the cadence that you offered on freight, I guess $14 million or so in Q1, $5 million in Q2. I think you said $6 million or something in the back half, which sounds like maybe doubled out (01:00:00) in Q3. Do you think that means flat for freight in Q4 when you lap. I guess, I'm asking because one of your [Technical Difficulty] (01:00:13) morning actually suggested that the inflation would be [ph] half than for the full year (01:00:15) than they anticipate it. So curious if you could maybe clean that up for us. Robert C. Cantwell - B&G Foods, Inc.: Yeah. [Technical Difficulty] (01:00:26) that will happen in the third quarter. So we expect flat to even some little benefit in the fourth quarter. And part of – we're rolling up against the fourth quarter where we just were ratcheting up inventory in a in a big way last year, we're not doing that this year. And what that is a [Technical Difficulty] (01:00:52) than what we needed in contract. So just our demand needs now because we're bringing inventory down is that much less, which really changes our ability to mix spot in contracts and we know rates are going up. So we're seeing kind of rates going up and we're seeing both in spot. And so that's not surprising us. I mean it's been tracking based on what we thought all year long. But we know just what went on last year much higher inventory than we need because we're looking at [Technical Difficulty] (01:01:30) upwards of $100 million this year and a lot of that comes in the fourth quarter which means a lot less [indiscernible] (01:01:36), which means a lot more contract rates for spot rates. And there's a huge difference in spot first contract when we're out in the market and a huge difference in spots first contract on the frozen side of distribution, which every truck costs more to begin with. So when you multiply percentages those numbers get bigger. And much – a vast majority of our inventory decrease is coming out of Green Giant, which is being led by the frozen decrease in inventory. So we know it's going up. We don't expect freight at all to be higher on us in the [Technical Difficulty] (01:02:15) quarter versus last year because of all the issues we had last year. And maybe there's even some positive. But we're kind of conservative here, kind of thinking is more flat than positive. And we've got some positives [ph] get our shelves to bottom (01:02:29) Hello?

At this time there are no additional questions. Robert C. Cantwell - B&G Foods, Inc.: Okay. Great. Thank you. Thank you everyone for joining the call.