Good day. And welcome to the B&G Foods Incorporate Second Quarter 2019 Financial Results Conference Call. Today's call is being recorded. You can access detailed financial information on the quarter in the Company's earnings release issued today, which is available at the Investor Relations section of bgfoods.com. Before the company begins its formal remarks, I need to remind everyone that part of the discussion today includes forward-looking statements. These statements are not guarantees of future performance, and therefore, undue reliance should not be placed upon them. 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 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. Ken Romanzi, the company's President and Chief Executive Officer, will begin the call with opening remarks and discuss various factors that affected the company's results, selected businesses highlights and his thoughts concerning the outlook of the remainder of 2019 and beyond. Bruce Wacha, the Company's Chief Financial Officer, will then company's financial results for the quarter, as well as its guidance for 2019. I would now like to turn our conference over to Ken.

Thank you. Good afternoon. Thank you all for joining us today for our second quarter earnings call. And with a special thanks to the dedicated team at B&G Foods for working so hard in a challenging operating environment to generate our results. This afternoon, I'd like to provide you a perspective on our second quarter results before I turn the call over to Bruce to provide the details of our financial performance. I'm pleased to report that we had a solid second quarter with results that were ahead of our internal plans, which got us backward our internal operating plan through the first six months of the year, and we believe put us on track to deliver our full year plan to achieve our 2019 financial targets. And most importantly, they are more reflective of the performance that I expect from B&G Foods. Net sales for the quarter were $371.2 million, a 4.4% decline versus last year but a 2.2% increase, excluding the divestiture of Pirate's Booty. Adjusted EBITDA was $71 million, down 4.7% versus year ago but up 5.3% excluding Pirate's Booty. Adjusted EBITDA as a percentage of net sales was 19.1%, more in line with what we're used to at B&G Foods and ahead of our full year target. As we shared with you at the beginning of the year, our 2019 plan, and in fact our longer-term strategic plan, is based on a stable base business, pricing to help offset inflation in all forms, such as the list pricing, weight outs, trade spending optimization and innovation. Cost savings initiatives targeting to take $50 million of costs out of our cost of goods sold over a two to three year timeframe, and of course always on the lookout for accretive acquisitions. I'm pleased to report that all of…

Thank you, Ken. Good afternoon, everyone. As Ken just outlined, we had solid results in the second quarter as we reported net sales of $371.2 million, adjusted EBITDA of $71 million and adjusted diluted earnings per share of $0.38. Adjusted EBITDA, as a percentage of net sales, was 19.1% for the quarter. Through six months, we have net sales of $783.9 million and adjusted EBITDA of $146.8 million, both of which are ahead of our internal plan and support of over a full year guidance. After adjusting for approximately $25.2 million in net sales for Pirate Brands in the second quarter of 2018, second quarter 2019 net sales of $371.2 million represents an increase of $8 million or 2.2% more than last year. Net sales benefited in the quarter by $10.6 million, resulting from the acquisitions of Clabber Girl in May 2019 and McCann in July 2018. Second quarter net sales benefited from approximately $4 million in benefits from price increases, which were largely driven by our list price increase, as well as improvements in trade spending efficiencies, volume, exclusive of the sales of Pirate Brand and including our acquisitions of McCann and Clabber Girl, increased by $5.1 million. Green Giant continues to be a primary driver of growth within the portfolio with net sales of all Green Giant products, up $8.3 million or 7.9%. Net sales of Green Giant frozen products were up $3.5 million or 4.1% for the quarter. Net sales of Green Giant frozen products benefited from the successful adoption of innovation products. Frozen growth was slower than we have been used to due to the overlap of innovation pipeline fill last year and from reducing trade promotion activity, which hampered volume growth. But frozen consumption is strong and we remain very bullish about Green Giant's growth…

Thank you, Bruce. Our second quarter financial performance reflects the momentum that's beginning to take hold at B&G Foods. Base business is stable and is performing as expected. Our pricing and cost initiatives are beginning to deliver. Our two most recent acquisitions, McCann and Clabber Girl, are performing in line with our expectations. And our new linear leadership structure is fully operational and working extremely well together. In summary, we believe that B&G Foods' business plan remains intact and very attractive. As we continue to rental lean but nimble organization that can react quickly to various industry challenges, such as wide spread inflationary pressure; while we also create value through accretive M&A; while simultaneously returning excess cash to our investors through a healthier dividend; and share repurchases from time-to-time. This concludes our remarks. And now we'd like to begin the Q&A portion of our call. Operator?

Yes, thank you. [Operator Instructions] We'll have our first question from Bryan Hunt of Wells Fargo. Please go ahead.

Good afternoon, Ken and Bruce. My first question is, you talked about your pricing benefits and then you're on track to get those, as well as cost savings. Can you discuss where freight inflation and input cost inflation? I think you mapped those out at about $18 million and $10 million respectively at the midpoint. Where are those tracking relative to your original budget?

So we continue to expect inflation this year in cost inputs and in freight and our plans to combat that inflation are tracking within our guidance.

And then next, Bruce, you talked about 5.4 times leverage by the end of the year. I think in the last call, you mentioned 5.2. Can you discuss what that relative change is? I imagine it's the acquisition of Clabber Girl.

Yes, it's acquisition of Clabber Girl.

And then lastly, you all sound pretty positive about the pricing environment. Is there anywhere within your categories, or within your channels that you're seeing heightened competitive activity? I mean I know you have bigger exposure to club.

I'm sorry, you asked about -- well, do you mention club in the last piece?

Yes, I was just wondering, are you seeing any incremental competitive activity from your peers, whether it's in traditional channels or in club, particularly with regards to private label?

Not anything particular, I mean the business is always competitive. And so we're not seeing any -- we haven't seen in the recent quarters any more competitor -- more or less than what we're used to.

Thank you. Our next question comes from Karru Martinson of Jefferies. Please go ahead.

Just on the Clabber Girl acquisition. How much work that has to be done to integrate the business to see some of that sale start to drop down to the bottom line?

Sure, I think the key thing to remember with Clabber Girl is we bought a full standalone business that had all sorts of corporate and family owned cost embedded into it. We're very excited about the transaction, it's performing as expected. But our view was to largely run as it was being run before, which include some of the burden of those costs for a period of time as we work through the key banking season. And so that's the game plan and things are proceeding as planned.

We're also taking the time with that acquisition, because we just implemented our own ERP system. So we want to make sure that is absolutely free and clear, so before we now integrate another busy into it. And so everything is a green light for pretty much the first of next year to be just about fully integrated.

And now with the three quarters under your belt of [indiscernible] distribution gains, I mean are we going to call this a trend now and where are you taking that distribution from?

The biggest distribution gains we received was through the dollar channel. But it is important to note that when we were overlapping our sales -- negative sales, because of the overlap of the loss distribution, outside of the major customer that we lost distribution, consumption was up like 1%, which is pretty promising in that category. So this recent growth is certainly not going to be the future trend, we'll overlap that distribution. But before this occurred, our business was actually up very low single-digits, absent of distribution gains.

And then just last, when we look at your target for year-end leverage, how should we think about M&A working itself into that 5.4 target?

So, we're always active and looking for M&A opportunities and nothing really changed in that perspective. For us, the math always has to work, whether big or small from a pricing and valuation in a business that we want, and so we'll continue to evaluate. We're certainly aware of where our leverage is. We're certainly aware of where our stock price is. And all things included, the math has to work.

Thank you. Our next question comes from Robert Moskow of Credit Suisse. Please go ahead.

Ken, one of the concerns that I have articulated, and I think others have too, is that reinvestment needs might have to go up at B&G. Customers are more aggressive and they've invested more in data analytics in their supply chains and e-commerce. And B&G has been operating with a game plan of running a stable business, and I guess brands that have been around for a long time. Have you been able to -- obviously, the business stabilized this quarter, that's all good news. Are you seeing that you're able to run the business with the current level of investment pretty well? Or do you think that there is more capabilities that you might have to build in future years that might require more resources, given the environment? Thanks.

When you say investments, I mean there's two types of investments in my line. One is the P&L investment in terms of marketing spend and shopper marketing spend and then getting ready for ecommerce and things of that nature. And the other is the capital spending. So I believe we do have enough capital spending to do what we need to do. At $45 million to $50 million a year, we are going to be -- and we're coming off a major IT infrastructure investment with our ERP system. We're going to be journeying a lot of those capital investments into further investment to drive cost savings, not just maintenance spend but investments to drive cost savings on the cost to goods line. And then in terms -- and one of those investments is a trade management system that's going to allow us to get at our largest expenditure on the P&L besides cost of goods is trade spending, and trade spending gets used in a lot of different ways. And we're hoping to take that and do more with that, those dollars like shopper marketing, like take -- participating in those, all those retail programs. So I believe we have enough in our P&L to be able to take part in that. It's just how we allocate that spending is going to be the most important thing, going forward.

And then a follow up, I think you mentioned that your sales growth in frozen started to slow in second quarter. Are you saying that in the back half, the pipeline starts building up again with more new products? Or do you think the competitive intensity is going to become a challenge to the back half? Thanks.

No, we did less -- we had two innovation pipelines last year, spring and fall. And this year, we're only doing one. So we overlap the pipeline fill, so that doesn't concern us. That's just we didn't have a second shot at it in spring of this year. In addition to on the non-innovation, we had less trade promotion activity, which reduced volumes but that was planned and intended. So that's why Bruce mentioned, while it appears to be a slowdown, it was planned and not indicative of our expectations, going forward.

Thank you. Our next question comes from Carla Casella of JP Morgan. Please go ahead.

Did you ever get the cash payment you made for the Clabber Girl acquisition?

So we had tax payment obligation of approximately $71 million…

No, Clabber Girl, it wasn't payment…

Oh, the purchase price. Sorry, did you mean the purchase price in Clabber, $80 million.

And that was all this quarter?

Correct.

And what was the tax payment?

Gain on sale of Pirates, so when we saw the business, there was a tax payment. We effectively were able to delay that payment for about six months. So that flows through our cash from operation as well.

It's important to note that that tax payment this quarter was as a result of sale of Pirates Booty, which allowed us to pay a large amount of debt back last year.

Exactly. That goes to my next question. Did you gave the ABL and how much has drawn, and what's the availability on that at the end of the quarter?

So our revolver, all of that information is in press release.

I'm sorry, I missed it. Okay, great. And then just one last one, you mentioned on the last quarter, one of the last question on investment and talked a bit about how you want to redirect some of the spending out of trade. Are you seeing others do the same? Are you getting push back from retailers that you're trying to redirect trade spending?

Well, there's a lot of -- we see a lot of dollars going into things like shopper market and things like that. So it's not like we're trying to take anything away, we're really trying to just redirect into all the new programs and initiatives that retailers have. So it's really about how we spend same amount of money with the retailers.

Thank you. And our next question comes from William Reuter of Bank of America Merrill Lynch. Please go ahead.

It sounds like you pretty successfully pushed through your price increases with your customers. Have you got some date or can you talk to me about how the POS was with those items after the price increases were pushed through to the final customer?

Well, it's all there in Nielsen. Our consumption was up actually a little bit more in the first -- in the second quarter than it was for total B&G, up a smidge and more than it even was in the first quarter. So 1.5% growth of consumer consumption and that's very vibrant. So we haven't seen any elasticities beyond what we expected so far. It is early in terms of when that actually. We only have the s Nielsen results through the end of June. So retail prices were only affected by our price increase, it only take place in May. So you're not seeing a lot yet in terms of any changes in consumption pattern.

You guys have given the commentary about Nielsen, I was just -- that was obviously for across all of your products. And obviously, I'm sure there was a range of price increases. So I was just trying to get an early indication of what you might have seen, if there's anything different for those products that you had higher price increases?

We haven't seen anything unexpected.

And then one thing you mentioned to an earlier question that you continue to see freight costs up. We've heard some indications recently that freight costs are coming down. You haven't seen anything and there's couple of journal articles that we've seen or you haven’t seen anything around that recently?

We certainly hope those articles are correct. But we're not experiencing down versus last year. We're in terms of rate. Yes, where we are getting savings is our activities in terms of realigning both our dry and frozen.

And then last time we heard from you your leverage target was 4.5 to 5.5 times. Is that still the number that you guys would stick with?

It is. That's very much our long-term leverage target.

Thank you. And our next question comes from David Palmer of Evercore ISI. Please go ahead.

A question on Green Giant frozen, and just a follow up to Rob's question. You mentioned that there was slowing consumption, but that you have back weighted your marketing and promotions in that part of your business. Do you believe and that we will see that consumer takeaway growth bring Giant frozen perhaps reaccelerating in the next -- in the coming months in the back half of this year?

Yes, mainly because of the launch of innovation in the fourth quarter.

And just on the distributions, we can see in the scanner data, frozen vegetables you have ACV up there this quarter, but we're seeing some ACV losses across many other brands, like Ortega and Maple Grove and Spices. Could you talk about what's going on with regard to distribution? And perhaps SKU rationalization and how much of that is your own relation versus retailers?

Sure, I mean there is always ebbs and flows on distribution. So some of it is self-inflected, some of it we're cleaning up our product line on lower margin products, some of its retailers being more red lining of skews that may not turn as fast. And our whole approach is that, particularly when we're launching new products, we're always looking at our own portfolio to make sure that we're justified to have incremental skews on shelf versus just keep adding, because we understand the pressures that our customers are under in terms of limited real estate on the shelf. So there's always puts and takes on the distribution line.

And then just one last one on can, vegetables. Obviously, you're getting that good growth out of the dollar channel as you mentioned. Is that -- are you going to lap that? And should we just expect a more moderate growth or more stable performance from cans in a quarter or so when we lap that?

Yes, absolutely, we would not model 25% growth. That's distribution growth. So we wouldn't be -- that's been a category declining in years. But we've actually done, other than one big distribution loss for a big customer, our business has actually been pretty good. For instance, we're growing it in Canada. Green Giant is a very, very strong brand in Canada. So they're actually up growing very, very nicely. But we wouldn't expect a lot of growth from cans post the overlap in new distribution.

Thank you. Our next question comes from Eric Larson of Buckingham Research Group. Please go ahead.

Just a quick, and maybe I don't have all the numbers correct here. But it goes to your sales guidance. You brought it up obviously -- the increase is about $30 million to $45 million. So if you just break down the components of that. I'm just trying to make sure I understand what's in that increasing guide. You have $40 million to $50 million of probably incremental revenue from Clabber Girl. You have some offset obviously from Pirates. You’re going to have the benefit of a price increase, now it'll take a little while for most of that to kick in. My calculation shows that that puts a base sales assumption on your base brands of about 2%. Is that anywhere closer to ballpark? And I might have some of the divestiture revenues incorrect as well. I'm just trying to see if that is in the ballpark?

Yes, so to make it real simple. Prior guidance was $1.635 billion, $1.665 billion and we increased that by between $30 million and $35 million for the addition of Clabber Girl for the year.

And then everything else was net of all that. So that it's just Clabber Girl as your -- as the reason for your guide up?

Correct. Tracking the plan was the nice addition of Clabber Girl.

And then now you're half way through the year and now your cost save are starting to kick in, you have better cost saves and you actually beat the bid on your EBITDA -- your adjusted EBITDA guide in the quarter. So is there potential upside to your guide in adjusted EBITDA for the next several quarters?

I think we would keep it right exactly where it was, and that's what we're comfortable with.

And that guide also includes Clabber Girl?

Correct. Although, not a lot of incremental benefit from Clabber Girl in 2019, just given like we said earlier on the call, it came with a full corporate…

The full, got it. Okay.

For relatively small business and so we’re running it mostly as it is today. And like I said, don't expect major impact there.

So that could be potential EBITDA upside, maybe in 2020 as you get through your ERP systems up. You can see that as maybe upside in the next calendar year?

Correct, and that's why we…

Okay, thank you.

Thank you. Our next question comes from Andrew Lazar of Barclays. Please go ahead.

Just a couple of quick things. One would be, if we think about just volume and price as we go through the back half of the year. Can you talk a little bit about would you expect the impact of pricing to accelerate from here? Or -- because it doesn't sound like you were like at full run rate yet. And then would you anticipate volume to be likely down in the back half around what it had been, let's say, in the first half? Or couldn't there be some adjustment, consumers adjusted to higher prices and maybe volume kicks in a little bit? Or it isn't down quite as much in response to the pricing?

So from a pricing standpoint, we laid out a plan and talked about $15 million to $20 million of increased price and through two quarters, we're tracking to the plan and we're happy with that.

Does that -- do the $15 million to $20 million include the benefit that you had in the first quarter from some of the trade optimization, or is it something…

We're not staging our guidance on the pricing, we're keeping at $15 million to $20 million, we feel comfortable with that.

EBITDA cadence in the back half of the year. Maybe you could just remind us of couple of -- if there are a couple of discrete items between 3Q and 4Q that you'd want to call out just as we think through that?

Yes, the primary things that I'd call out and mentioned a little bit earlier on the call and we're talking through the guidance is, last year benefited from about $7 million to $8 million from Pirates in the third quarter. And we obviously don't have the Pirates today. And so I would say that's your base plan in terms of are you up or down or flat for that. And then fourth quarter, it's a smaller -- we had it for shorter period of time, so maybe a couple of million dollar drag there before you get into performance for this year.

And then lastly, I guess a broader question. I'm just trying to get a sense of how you would characterize your full year EBITDA guidance at this point. And I asked that because -- and what I mean by that is conservative, giving yourself some room, somewhat flexible, because there has been -- I think it's safe to say a little bit more volatility in forecasting versus what's been reported, both up and down between first quarter and second quarter, and even going back to a little bit last year. So I'm trying to get a sense whether do you -- when you think about a range, do you generally think about, hey, midpoint gives us some room on both ends? Or are you just trying to get ultimately -- you'd be happy to get to the low end? Is there some flexibility there? You get the sense of what I'm going after.

We gave a guidance number we're tracking to our plan, and I don't see anything that would suggest folks should be altering their forecast or estimates for the company. I think we're tracking where people were and where we were, very pleased to report that.

Thank you. Our next question comes from Ken Zaslow of Bank of Montreal. Please go ahead.

If I didn't ask this question, I think you guys would be insulted, so I'll start there. Can you walk us through the capital -- the dividend opportunity? I'm assuming it's still in safe regards. But could you just take us a little bit through the cash flow and making sure that through the end of the year, we're in good shape there and there won't be any need for any capital raise or anything like that. That'd be where I start.

Sure. So familiar question, and thank you for asking it. Dividend -- we're still committed to the dividend. Ken referenced on the call the longstanding commitment to the dividend. As people saw yesterday, our board reauthorized the dividend at the same level, and so pretty comfortable with that. And as far as the dividend coverage, based on the range of $305 million to $320 million for adjusted EBITDA, you're getting to $175 million, $180 million of EBITDA less cash interest, cash taxes and CapEx, to cover dividend of about $125 million.

And I mean there's no reason that you would even need -- outside of an acquisition, there'd be no need for you to raise equity of any sort, right? Is that fair?

Outside of an acquisition, I don't see the compelling need to it. And we're certainly aware of what our stock price is today. I think people could see board authorization for additional share buyback of $50 million and the buybacks that we did over the last 18 months in terms of what our view is on the stock price.

And then just on the business. Can you give us an update on the spices and what the outlook for that is? I might have missed it, so just would greatly appreciate that. And I'll leave it there.

We don't have obviously guide to specific brand performance, but lot of the spice business is performing in line with expectations. We outperformed in first quarter of this year. And so there's a little bit of an timing. And then we also have an issue there, so it's somewhat of a pass through business. And so we had some lower raw material cost and that impacted pricing. And so sales down a little bit for the quarter, profit is very healthy and on a year-to-date basis, tracking in line with plan, so little bit of timing.

Is there still opportunity for margin expansion within this business, given the infrastructure set up? Or is that passed this by now? And I will actually leave it there. Thank you.

Margin expansion in spices, or in total business…

Yes, in the spices business. I recall there was some opportunity in terms of distribution opportunities, and just consolidating certain plants or something like that. And I just didn't know where you are in that and if there's any opportunity there?

Right now in total margin expansion, as we said, we're looking at the balanced pricing and cost saving to offset inflation. Longer term, we'd like to return to margin expansion but in the near term, margin maintenance is what we're planning.

Thank you. Ladies and gentlemen, that's all the time we have for questions for today. I would like to turn the conference back over to Mr. Ken Romanzi for any additional or closing remarks. Thank you.

We just appreciate everybody being on the call. Good questions. And look forward to our next third quarter call. Thank you very much.

Ladies and gentlemen, this concludes today's call. Thank you for your participation. You may now disconnect.