B&G Foods, Inc.

Good day and welcome to the B&G Foods fourth quarter 2021 earnings conference call. Today's call, which is being recorded, is scheduled to last about one hour, including remarks by B&G Foods management and the question and answer session. I would now like to turn the call over to your host, Sarah Jerold, Senior Director of Corporate Strategy and Business Development for B&G Foods. Sarah?

Good afternoon and thank you for joining us. With me today are Casey Keller, our Chief Executive Officer, and Bruce Wacca, our Chief Financial Officer. You can access detailed financial information on the quarter and full year in the earnings release we issued today, which is available at the Investor Relations section of bgfoods.com. Before we begin our formal remarks, I need to remind everyone that part of the discussion today includes forward-looking statements. These statements are not guarantees of future performance, and therefore, undue reliance should not be placed upon them. We refer you to the B&G Foods annual report on Form 10-K and subsequent SEC filings for a more detailed discussion of the risks that could impact our company's future operating results and financial condition. B&G Foods undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events, or otherwise. We 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. Casey will begin the call with opening remarks and discuss various factors that affected our results, selected business highlights, and his thoughts concerning the outlook for fiscal 2022 and beyond. Bruce will then discuss our financial results for the fourth quarter and fiscal 2021 and our guidance for fiscal 2022. I would now like to turn the call over to Casey.

Good afternoon. Thank you, Sarah. and thank you all for joining us today for our fourth quarter earnings call. The company's performance in the fourth quarter was solid. Net sales increased plus 12.1% versus last year, driven by an additional two months of Crisco in the quarter. Base business net sales were down modestly minus 1.1% versus last year and were roughly flat versus the same period two years ago. Adjusted EBITDA was up 16% versus last year, with adjusted EBITDA as a percentage of net sales increasing plus 50 basis points to 14.9%. And recall Q4 is typically our lowest margin quarter because of seasonal mix and promotions. However, sales performance was mixed during the quarter. Net sales started strong during October and November, but were significantly impacted by the spread of the Omicron variant in December. Supply chains were disrupted with labor shortages, call-outs across our facilities, distribution networks, and customer store and warehouse operations. Our December net sales fell short of our initial estimates by $20 to $25 million as a result of these supply chain disruptions and customers' inability to receive shipments. The good news is that the impact of Omicron has improved dramatically in late January and February, with shipments exceeding last year and above our forecasts. Supply challenges and shortages remain, but at levels consistent with service prior to Omicron. As a result of a softer December, B&G Foods finished the fiscal year at the low end of our net sales and adjusted EBITDA guidance. Net sales were $2.056 billion. Within the $2.05 to $2.1 billion guidance, and adjusted EBITDA finished at $358 million on the low end of our $358 to $365 million range provided at the Q3 call. 2021 net sales performance reflected both the addition of the Crisco brand and base business sales up plus 5.2% versus 2019. Bruce will talk more specifics on the full year, including financial and portfolio highlights. But let me spend some time on the key themes driving 2021 performance and results. Number one, Crisco integration. In 2021, we successfully integrated Crisco, one of the largest B&G Foods acquisitions. The brand performed above our expectations despite major increases and volatility in the primary soybean and canola oil inputs. Since September, Crisco is running on B&G systems and is fully integrated into our business processes. It is now the second largest brand in the B&G Foods portfolio. Two, inflation. Inflation in full year 2021 was in the mid-single digits, with the second half increasing to a double-digit increase across the portfolio. Crisco input cost inflation is significantly higher than the base portfolio, given the major increases in soybean and canola oil. We anticipate that substantial inflation will continue well into 2022 and at a minimum through the first half, particularly with the impact of the war in Ukraine. Number three, pricing. We have executed pricing actions in 2021 across the portfolio to recover inflation and gross margin dollars. Most increases were effective in the second half of 2021, with some lag for implementation with customers. By the start of Q4, much of our recent pricing was in effect. We are seeing continued pressure moving into 2022 and are implementing further price increases to recover new and continued inflation impacts. So far, pricing elasticity has been lower than our preliminary expectations. Number four, supply chain. We made several key additions to capacity in 2021 to meet higher demand, principally on Ortega taco sauce and taco shells, as well as spices and seasonings. Canned green giant vegetables are also recovering volumes behind a stronger crop pack last fall. However, we continue to face supply challenges behind shortages in some critical packaging, commodities, and materials. In addition, several of our factories have been unable to achieve full staffing due to COVID-19 and the highly competitive labor market. Our service levels were improving in Q4 towards the low to mid-90s, but dropped back below 90% during the Omicron surge. Overall, the B&G Foods team responded well to the significant challenges facing the industry in 2021. We moved quickly on pricing to confront significant inflation on key inputs and costs. We worked through numerous supply constraints to maintain production and deliveries to our customers. We successfully integrated the Crisco brand despite record high soybean commodity prices and added new capacity to meet elevated demand for core product lines. Finally, moving forward, we remain focused on the key priorities and choices we discussed on the last call. First and foremost, managing B&G Foods effectively through the current inflationary pricing and supply environment. Improving organic growth performance beyond COVID recovery. Focusing on brands and categories where we have the capability, scale, and right to win in terms of both resources and structure. making discipline acquisitions that are creative to our portfolio and cash flows and fit with our core expertise in center store dry distribution, and accelerating cost savings and productivity efforts to eliminate non-value-added costs and strengthen margins. As discussed in prior sessions, the team and I expect to share a comprehensive view of our portfolio strategies and structure later this year, defining the categories and brands that we will resource and grow, the brands that will run for efficiency and cash flow, and the businesses we may exit over time. Our goal is to make the portfolio choices and organization changes that will drive stronger performance and valuation behind sustainable top and bottom line growth. We believe that post-pandemic trends, including flexible remote work and renewed interest in cooking, are generating opportunities for our existing and future portfolios. More to come on specific plans, timing, and presentation. I will now turn the call over to Bruce for a more detailed discussion of the quarter and the year. Bruce.