B&G Foods, Inc.

Good day, and welcome to the B&G Foods fourth quarter and fiscal 2020 earnings call. Today's call is being recorded. You can access detailed financial information on the quarter and full year in the company's earnings release issued today, which is available at the investor relations section of bgfoods.com. Before the company begins its formal remarks, I need to remind everyone that part of this discussion today includes forward-looking statements. These statements are not guarantees of future performance, and therefore, a new reliance should not be placed upon them. We refer you to the company's 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 forwarding 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 EBITDA before COVID-19 expenses, adjusted net income, adjusted diluted earnings per share, and base business net sales. Reconciliation of these financial measures to the most directly comparable GAAP financial measures are provided in today's earnings release. David Winter, the company's interim president and chief executive officer, will begin the call with opening remarks and discuss various factors that affected the company's results, selected business highlights, and his thoughts concerning the outlook for fiscal 2020 and beyond. Bruce Walker, The company's chief financial officer will then discuss the company's financial results for the fourth quarter and fiscal 2020, as well as the company's perspectives on the outlook for 2021. I would now like to turn our conference over to Dave.

Thank you. Good afternoon, everyone. Thank you all for joining us today for our fourth quarter earnings call. It would be a gross understatement to say that 2020 was a year like no other year. COVID-19 brought an incredible amount of suffering, inconvenience, and unfortunately, death with it. It's humbling that our company benefited from such a tragedy. And at the same time, it's a tribute to our employees working in the midst of the pandemic and dealing with their own issues caused by it that we were able to respond as well as we did to the increased needs of consumers as they cope with COVID and the resultant quarantine. Bruce will go through the financial details in a moment, but the headlines for the year are that net sales increased 18.5% to $1.968 billion, and adjusted EBIT increased 19.4% to $361.2 million. This remarkable increase slowed temporarily in the fourth quarter, and I will discuss the factors that lead me to use the word temporarily. But first, I'll turn the call over to Bruce to review the fourth quarter and full year financial results. Bruce?

Thank you, Dave. Good afternoon, everyone. As Dave just discussed, we generated unprecedented financial results during fiscal 2020, delivering company record net sales, adjusted EBITDA, and adjusted diluted earnings per share for the year. We reported net sales of $1.968 billion in fiscal 2020, an increase of $307.5 million or 18.5% compared to the prior year. Fiscal 2020 net sales included approximately $27.8 million in net sales from our acquisition of Crisco. Crisco closed on December 1st, 2020, providing us with a full month of net sales. We generated adjusted EBITDA before COVID-19 expenses of $374.8 million in fiscal 2020, an increase of $72.3 million, or 23.9%. During 2020, we incurred approximately $13.5 million in incremental COVID-19 costs at our manufacturing facilities, which primarily included temporary enhanced compensation for our manufacturing employees, compensation we continue to pay manufacturing employees while in quarantine, and expenses related to other precautionary health and safety measures. Inclusive of these costs, we reported adjusted EBITDA of $361.2 million, which is an increase of $58.7 million, or 19.4% compared to last year. Adjusted EBITDA before COVID-19 expenses as a percentage of net sales was 19% in fiscal 2020. Adjusted EBITDA as a percentage of net sales after including approximately $13.5 million in COVID-19 costs incurred during the year was 18.4%. Adjusted EBITDA as a percentage of net sales was 18.2% fiscal 2019. We reported net sales of $510.2 million in the fourth quarter, an increase of $40 million, or 8.5%. Fourth quarter 2020 net sales included approximately $27.8 million in net sales from our acquisition of Crisco. We generated adjusted EBITDA before COVID-19 expenses of $77.6 million in the fourth quarter, an increase of $8.1 million, or 11.7%. During fourth quarter fiscal 2020, we incurred approximately $4.3 million in incremental COVID-19 expenses at our manufacturing facilities. As a result, we reported adjusted EBITDA of $73.3 million in the fourth quarter, an increase of $3.8 million, or 5.6%, from $69.5 million in the prior year period. We reported $2.26 in adjusted diluted earnings per share in fiscal 2020, an increase of $0.62 per share, or 37.8%, compared to the prior year. We reported $0.35 in adjusted diluted earnings per share in the fourth quarter of fiscal 2020, an increase of $0.07 per share, or 25%, compared to the prior year. Fiscal 2020 net sales increased by $307.5 million, which included an increase in base business net sales of $244.5 million and an increase in net sales from acquisitions of $63 million. Of the $244.5 million increase in base business net sales, $209.8 million was attributable to increased base business volume. Of the $63 million of net sales from acquisitions, $33.7 million was attributable to an additional seven and one-half months of Clobber Girl net sales in fiscal 2020, and $27.8 million was attributable to one month of Crisco net sales. Fiscal 2020 base business net sales also benefited from $35.8 million in net pricing, inclusive of our spring 2019 list price increase, our 2019 trade spend optimization program, as well as the impact of COVID-19, which resulted in lower than average daily trade promotions during the height of the pandemic. Keep in mind that our pricing calculation also includes an element of favorable mix as we sold less spices in the food service channel, which tend to be priced at a lower margin. FX was a drag on net sales of a little bit more than $1 million for the year. We estimate that the extra reporting week in fiscal 2020, which occurred in the third quarter, contributed approximately $35 million to our net sales. Leading our brand performance was Green Giant, which reached approximately $639 million in net sales during fiscal 2020, marking an increase of $112.2 million, or 21.3% for the year. Green Giant's outperformance was largely led by shelf-stable, with Green Giant Lasur shelf-stable net sales up by approximately $64.8 million, or 39.7% for the year. Green Giant Shelf Stable had COVID-19 enhanced sales that led to extraordinary performance that began in the second half of March and carried through to the end of the third quarter. As we hit the fourth quarter, we began to manage sales closely through the implementation of certain customer allocations to ensure that we had sufficient product to last us until this summer's pack season. As a result, Green Giant Shelf Stable net sales were flat in the fourth quarter and despite elevated demand and double-digit consumption trends that persist today. Net sales of Green Giant frozen products were up double digits for the year, plus $47.4 million, or 13.1%. Among our other larger brands, Cream of Wheat had one of the best performances in fiscal 2020, with net sales up by approximately $12.9 million, or 21.6% for the year. Premium wheat continued to outperform in the fourth quarter with net sales up by $2.7 million, or 16.1%, compared to the prior year period. Claver Girl also had very strong performance as part of what we believe will be a lasting resurgence in baking. Net sales of Claver Girl products were up by approximately $10.2 million, or 18.9%, during the comparable period of time that we owned it. following the mid-May 2019 acquisition. We have been very pleased with the performance of Collaborgirl Business, which generated approximately $97.5 million in net sales during our first full year of ownership, compared to our expectations at the time of acquisition of approximately $70 to $75 million in net sales. Net sales of Collaborgirl were up by approximately $2.5 million, or almost 10% in the fourth quarter, compared to the year-ago period. Net sales of Ortega were also up double digits during fiscal 2020 with an increase of $17.9 million or 12.7% compared to the prior year. Supply chain constraints driven by industry-wide taco shell capacity constraints limited the upside for the fourth quarter. And as a result, while our net sales growth was impressive with a $2.5 million increase or 7.3% compared to the prior year period, We could have done much more had we had incremental product supply. Victoria was also one of the larger gainers in the portfolio, increasing net sales in fiscal 2020 by $11.3 million or 26.4% compared to the prior year. Net sales of Victoria reached nearly $55 million in 2020. While consumption remained strong throughout the year, net sales dropped approximately $0.6 million or 4.7% in the fourth quarter, primarily due to the timing shift of a large promotional event with one of our key club customers that moved from fourth quarter 2019 to third quarter 2020. Net sales of Maple Grove Farms were up by approximately $6.1 million, or 8.7%. Impressive performance, given that a substantial portion of Maple Grove Farms' business is sold through the food service channel which went dark for a significant portion of the year. Fourth quarter performance showed nice improvement as well, with net sales up $2.1 million, or 12.2%, driven by continued strong consumption trends and an improvement in the food service side of the business. Our spices and seasonings, including our legacy brands, such as Accent and Dash, and the brands we acquired in 2016, such as Tones and Weber, were up by $30.9 million or 9.2% for the year. Net sales of spices and seasonings reached $367.7 million in fiscal 2020. The retail side of this business began to show strong momentum by June as more and more Americans began to fully embrace cooking and seasoning their meals at home, a trend which continues in 2021. The food service side of the business continues to be down but it's slowly improving. In the fourth quarter, net sales of our spices and seasonings increased by $2.1 million, or 2.4%. Despite the outsized performance for the year, our spices and seasonings could have increased even more, even with the drag from food service, had we had incremental supply. Among our other larger brands, New York Style had challenges both in food service and, to a lesser degree, in the retail deli aisle. Net sales of New York Style were down 1.8 million, 4.5% for fiscal 2020 compared to the prior year. Gross profit was $481.7 million for fiscal 2020, or 24.5% of net sales. Excluding the negative impact of approximately $5 million of acquisition divestiture-related expenses, the amortization of acquisition-related inventory fair value step-up and non-recurring event expenses included in the cost of goods sold, our gross profit would have been $486.7 million or 24.7% of net sales. Gross profit was $383.1 million for fiscal 2019 or 23.1% of net sales. Excluding the negative impact of approximately $22 million of acquisition divestiture related expenses amortization of acquisition-related inventory, fair value step-up, and non-recurring expenses, including costs of goods sold, our gross profit would have been $405.1 million, or 24.4% of net sales. Outside of COVID-19-related expenses, including those described previously at our factories and those from our co-packers, inflation remained somewhat benign throughout a significant portion of 2020. However, we did begin to see inflation starting late in the third quarter and accelerating into the fourth quarter, particularly for freight costs, certain agricultural products, and other ingredient costs and packaging. I will discuss inflation a little bit more in our 2021 outlook, but we expect to see inflationary pressures continue in the coming months, and we are working to alleviate these pressures in our 2021 budget. Selling general and administrative expenses for the year were $186.2 million or 9.5% of net sales. This compares favorably to the prior year as a percentage of net sales, which included $160.7 million in selling general and administrative expenses or 9.7% of fiscal 2019 net sales. The dollar increase in SG&A was composed of increases in selling expenses of $8.2 million, increases in consumer marketing, investments of $7.7 million, increases of warehousing expenses of $2 million, and increases in G&A of $10.7 million. Increases in SG&A, including increases in selling, brokerage, and incentive compensation that are tied to increased sales and profitability. These increases were offset in part by a reduction in acquisition to investor-related and non-recurring expenses of $3.1 million. As I mentioned earlier, we generated $374.8 million in adjusted EBITDA before COVID-19 expenses, and after the inclusion of $13.5 million in COVID-19 expenses, adjusted EBITDA of $361.2 million. This compares to adjusted EBITDA of $302.5 million in 2019. We generated $2.26 in adjusted diluted earnings per share in fiscal 2020, compared to $1.64 per share in 2019. The increase was primarily driven by volumes, including COVID-19-driven demand for our products, as well as the acquisitions of Clabergirl in mid-May 2019 and Crisco in December 2020. Adjusted diluted earnings per share were also positively driven by increased adjusted EBITDA margins, despite the impact of COVID-19 costs, due to the benefits of our increased sales, as well as lower effective costs of borrowing. We had another strong year for cash, with net cash provided by operating activities of $281.5 million, which more than supported our longstanding dividend policy and helped us reduce our net debt before taking into account debt incurred to finance the Crisco acquisition and our pro forma net leverage. As a reminder, We began the year with net debt to pro forma adjusted EBITDA of approximately 6.12 times. We reached nearly 4.75 times at the end of the third quarter and finished the year with pro forma net debt to adjusted EBITDA before COVID-19 expenses of approximately 5.21 times, which is how our consolidated leverage ratio is calculated for purposes of our credit agreement. Our increase in net cash provided by operating activities allowed us to reduce net debt by approximately $135 million over the course of the year, excluding our acquisition of Crisco. Our 2021 outlook includes an expectation for elevated net sales of our products in the early month, driven by consumption that has remained over 10% higher than pre-pandemic levels on a blended basis across the B&G Foods portfolio for nearly every week of the last 11 months. We don't expect to exceed our net sales for March, April, or May 2020 when there is a surge in sales driven more by pantry loading than by consumption. Our current year is off to a tremendous start as we have strong expectations for fiscal 2021, especially when compared to 2019. As a result of the challenges faced while trying to forecast COVID-19, we are not able to provide a detailed financial forecast this time. However, what I can say is that we expect to generate company record net sales of $2.05 to $2.1 billion in 2021, inclusive of the full benefit of a full year of the Crisco acquisition. We do expect 2021 to bring us a different set of challenges than we faced in 2020, and these challenges will include a return of inflation across a number of key input costs. including certain agricultural products, packaging, and freight, as mentioned earlier. As in prior years, our expectation is that we will manage these costs through a combination of pricing, initiatives, and cost savings activities to preserve our margin profile and our cash flows. And now I'll turn the call back over to Dave for further remarks.