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spk03: Good afternoon and
spk15: thank you for joining us. With me today are Casey Keller, our Chief Executive Officer, and Bruce Wacha, our Chief Financial Officer. You can access detailed financial information on the quarter 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 B&G Foods most recent annual report on Form 10-K and subsequent SEC filings for more detailed discussion of the risks that could impact our company's future operating results and financial conditions. 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, segment adjusted EBITDA, adjusted net income, adjusted diluted earnings per share, adjusted gross profit, adjusted gross profit percentage, 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 the various factors that affected our results, selected business highlights, and his thoughts concerning the outlook for the remainder of fiscal 2024. Bruce will then discuss our financial results for the first quarter 2024 and our guidance for fiscal 2024. I would now like to turn the call over to
spk08: Casey. Good afternoon. Thank you, AJ, and thank you all for joining us today for our first quarter 2024 earnings call. In my remarks, I will address three topics on the call today. First, an overview of first quarter results. Bruce will provide more detail and color later in the presentation. Second, the reporting of segment results for the first time by our four business units. And third, an update on our portfolio reshaping plans and activity. Quarter one results. First quarter net sales of $475.2 million and adjusted EBITDA of $75 million were slightly below expectations. Based business net sales adjusted to exclude the -over-year impact of lower critical oil pricing, decreased by approximately $17 million or .4% compared to the year ago period. Much of the decline within our food service and industrial businesses across spices and seasonings, maple-grilled farm syrups, baking powders and oils, and Ortega cheese and other sauces. The declines reflect an overall slowdown and out of home traffic in volumes compared to fiscal year 23 trends. Net sales to retail customers across the business units were slightly down, approximately 1.5%, with relatively flat volumes offset by a modest increase 90 basis points in trade and promotional spending. Adjusted EBITDA for the first quarter decreased by $7.4 million compared to the first quarter of 2023. The divestiture of the green giant US shelf stable product line was responsible for approximately $1.5 million of the -over-year decline. Adjusted EBITDA as the percentage of net sales for the first quarter was 15.8%, largely in line with the .1% achieved in the prior year period. On a consolidated basis, gross profit as the percentage of net sales for the quarter was up 60 basis points versus last year. We continue to see moderating inflation and some favorability in transportation and warehousing, although these were offset by increased GNA costs for insurance and salary wages, as well as higher advertising and marketing investments in the quarter versus last year. Segment reporting. This is the first quarter B&G Foods is reporting results by operating segments, providing greater visibility into the underlying performance of the company's business units. The segments represent the four operating business units that we recently reorganized the company structure into. Business units are now fully established, running their businesses, and actively managing the business unit P&Ls. Across the four business units, we maintain a lean corporate structure, approximately 4% to 5% of net sales, to maintain oversight and efficiency and trend and share transactions and operations, i.e. sales, distribution, order processing, etc. The four business units are Spices and Flavor Solutions. This segment represents approximately 20% of our consolidated net sales and has our highest segment adjusted EVITA as the percentage of net sales at 30%. B&G Foods is a leader in the spices and seasoning category, with key brands Dash, Weber Grilling, Spice Islands, Accent, etc. During the first quarter, Spices and Flavor Solutions net sales were depressed by a significant decline in food service business with key distributors and customers. Sales to retail customers were up slightly in the quarter. We are also launching a new line of licensed seasoning and grilling blends under the Four Sixes brand, which is the new show and ranch featured in the Yellowstone television franchise. Meals. The Meals segment represents approximately 25% of our consolidated net sales, with segment adjusted EVITA as the percentage of net sales of 21.4%. The key components of this business unit are Mexican meals, Ortega Las Palmas, and hot breakfast, cream of wheat, McCans, Maybrow Farms, Syrups. We see growth opportunities in Mexican meal preparation as consumers expand their Mexican cuisine options in the home. The first quarter meal segment net sales decline was driven by lower food service sales, while net sales to retail customers were roughly flat. Specialty. The specialty segment represents approximately 33% of our consolidated net sales, with segment adjusted EVITA as the percentage of net sales of approximately 24%. The primary focus of this business unit is baking staples, about 70% of business unit sales, with leading number one brands such as Crisco Oil and Shortening, Clabber Girl Baking Powder, Grandma's Molasses, etc. Baking, both from scratch and mixed, has remained relatively stable over time, with more consumers learning to bake from scratch during COVID lockdowns. The specialty segment's key objective is to maintain strong, stable cash flow and margins. Specialty segment adjusted EVITA was up slightly in the first quarter. Frozen and vegetables. The frozen and vegetable segment represents approximately 22% of our consolidated net sales, with the lowest segment adjusted EVITA margin as a percentage of net sales of 7.5%. The frozen and vegetables business unit includes the US Green Giant frozen business, the Canada Green Giant frozen and canned businesses, a major portion of our company's consolidated Canada sales, and the Lasur canned vegetable product line. The primary focus of our frozen and vegetable business unit is to improve gross profit margins, strengthen the innovation pipeline, streamline the frozen distribution network, and grow volumes in our Irraquatum, Mexico and Yuma, Arizona manufacturing facilities. First quarter frozen and vegetable segment net sales reflect overall softness in the frozen and vegetables category, with much of the segment adjusted EVITA decline year over year attributed to the divestiture of the US Green Giant canned business last November. Portfolio shaping. The food has continued and will accelerate the reshaping and restructuring of our portfolio to sharpen focus, improve margins and cash flow, and maximize future value creation. The divestiture of the Green Giant US canned vegetable business was completed last fall, following the sale of the Back to Nature brand in January 2023. As previously disclosed, we have been evaluating and working on divestitures that represent between 10 to 15% of total company net sales. That process on smaller brands is proceeding, and we expect to possibly sell some assets before the end of fiscal year 24. Beyond those efforts, the larger decision on whether to remain in frozen long term has been an open question. After careful analysis, we are placing the frozen and remaining canned vegetable businesses under strategic review and are evaluating a possible divestiture and sale of some or all of the assets in the frozen and vegetable business unit. Green Giant remains a strong brand with broad awareness and distribution, and the frozen vegetables category is on trend with long term health and dietary trends. However, I believe the frozen vegetable business may not be the right fit with B&G's foods focus and capabilities, particularly since we have no plans to add more assets in the frozen portfolio, given the opportunities in our core shelf stable businesses and overall capital constraints. More to come as we further evaluate our options and plans. Thank you, and I will now turn the call over to Bruce for more detail on the quarterly performance and outlook for the year. Thank you,
spk16: Casey. Good afternoon, everyone. As a reminder, and before I get into our results, we sold our Green Giant US shelf stable product line last fall, and so we are lapping the first quarter 2023 results that had that business. The Green Giant US shelf stable line had $14.6 million of net sales and approximately $1 to $2 million of contribution in last year's first quarter. In the first quarter of 2024, we generated $475.2 million in net sales, $75 million in adjusted EBITDA, adjusted EBITDA as a percentage of net sales of 15.8%, and $0.18 in adjusted diluted earnings per share. Base business net sales, which excludes the Green Giant US shelf stable product line, decreased by $22 million, or .4% in the first quarter of 2024 compared to the year ago period. The decrease in base business net sales was driven by approximately $5 million from the execution of our Crisco pricing model that reflected a decrease in soybean oil costs and allowed us to pass this benefit back to consumers in the form of lower pricing. Approximately $10 million was from lower food service and industrial net sales across multiple business segments and brands. And the remaining $6-plus million of the decrease was partially driven by lower net sales to our retail customers that were largely the result of modest increases in promotional trade spend and relatively flat volumes. Gross profit was $108.9 million for the first quarter of 2024, or approximately .9% of net sales. Adjusted gross profit, which excludes the negative impact of the $1 million of acquisition divestiture-related expenses and nonrecurring expenses included in the cost of goods sold during the first quarter of 2024, was $109.9 million, or .1% of net sales. Gross profit was $114.2 million for the first quarter of 2023, or .3% of net sales. Adjusted gross profit, which excludes the negative impact of $0.7 million of acquisition divestiture-related expenses and nonrecurring expenses included in the cost of goods sold during the first quarter of 2023, was $114.9 million, or .4% of net sales. While we are continuing to see input cost inflation with regards to material goods and our factory production, the cost increases have been modestly flat thus far this year, and offset in part by continued moderation in certain costs like soybean oil and tomatoes that saw the greatest increases in 2022 and 2023. Separately, we are also continuing to see favorability in our logistics costs, although these benefits are much more modest on a rate basis than they were a year ago. Selling general and administrative expenses increased by $1.9 million, or 4%, to $48.6 million for the first quarter of 2024 from $46.7 million for the first quarter of 2023. The increase was composed of increases in general and administrative expenses of $2 million, consumer marketing expenses of $1.6 million, and acquisition divestiture and nonrecurring expenses of $0.1 million, partially offset by decreases in selling expenses of $1 million, and warehouse expenses of $0.8 million. Expressed as a percentage of net sales, SG&A expenses increased by approximately 110 basis points, or .2% for the first quarter of 2024 as compared to .1% for the first quarter of 2023. The increase in general and administrative costs was largely driven by modest inflation in wages, insurance, and other professional services. As I mentioned earlier, we generated $75 million in adjusted EBITDA, or .8% of net sales in the first quarter of 2024, compared to $82.4 million, or .1% in the first quarter of 2023. Approximately $1-2 million of the decrease in adjusted EBITDA was the result of the divestiture of the Green Giant US Shelf Stable Product Line, which we sold last fall. The remainder was largely driven in proportion by a decline in our net sales. Net interest expense was $37.8 million in the first quarter of 2024, compared to $39.4 million in the first quarter of 2023. The decrease was primarily attributable to a reduction in average long-term debt outstanding and the accelerated amortization of deferred financing costs related to long-term debt prepayments during the first quarter of 2023, partially offset by slightly higher interest rates on our long-term debt compared to the first quarter of 2023. Depreciation and amortization was $17.2 million in the first quarter of 2024, compared to $18 million in the first quarter of last year. We had a net loss of $40.2 million, or $0.51 per diluted share, and adjusted net income of $14.4 million, or $0.18 per diluted share, in the first quarter of 2024. The net loss and diluted loss per share in our GAAP results were driven by a write-down of goodwill that was allocated to our frozen and vegetable business unit as part of our reorganization into four operating segments, and as described further, a reduction in our net loss per diluted share. We have a net loss of $4.9 million, or $4.9 per diluted share, in our press release and 10Q. Casey already described the units, and I recommend investors review our press release and 10Q for additional information. I would like to now touch on the results. Net sales for the specialty segment decreased $7.9 million, or .9% for the first quarter of 2024, to $154.7 million, from $162.6 million in the year-ago quarter. The decrease was primarily due to lower Crisco pricing, driven by softening commodity costs, coupled with declines in food service and industrial sales. Specialty segment adjusted EBITDA increased by $0.7 million, or .9% for the first quarter of 2024, compared to the first quarter of 2023. Net sales for the meal segment decreased $1.9 million, or .6% for the first quarter of 2024, to $120 million, from $121.9 million for the first quarter of 2023. The decrease was primarily due to lower net sales in food service. The meal segment adjusted EBITDA decreased by $0.6 million, or .3% compared to the first quarter of 2023, which was in line with the decrease in net sales. Excluding the impact of the divestiture of the Green Giant U.S. Shell Stable product line, which we sold last fall, net sales of the frozen and vegetable segment decreased by $6.7 million, or 6%. Although increased promotional trade support helped grow our Bag in a Box or BIV product line during the quarter, some of the other parts of the frozen business fared less well. Frozen and vegetable segment adjusted EBITDA decreased by $2.7 million, compared to the prior year period. Approximately $1 million to $2 million of that decline was due to the divestiture of the Green Giant U.S. Shell Stable product line, with the remainder driven by the decline in net sales. Net sales for the spices and flavor solutions segment decreased by $5.4 million, or .4% in the first quarter of 2024, to $95.6 million, from $101 million in the first quarter of 2023. The decrease was primarily due to lower net sales and food service. The spices and flavor solutions segment adjusted EBITDA decreased $2 million, or .6% in the first quarter of 2024, compared to the first quarter of 2023. Now I'd like to spend some time on our cash flows and balance sheet. We generated $35.1 million in net cash from operations in the first quarter of 2024, compared to $69.5 million in net cash from operations generated in the first quarter of last year. Our net cash from operations was actually quite strong, despite the -over-year decrease when compared to the first quarter of 2023. While we are continuing to bring inventory down, our net cash from operations benefited from a more modest decrease in inventory of $8.2 million during this year's first quarter, while net cash benefited from a decrease in inventory of $28.2 million in the year-ago period. As a reminder, last year's first quarter benefited from a sell-down of the seasonal pack for the Green Giant U.S. Shell Stable business that we divested last fall. We finished the first quarter of 2024 with approximately $560.6 million of inventory, compared to $569 million in inventory at the end of 2023 and $700.9 million at the end of the first quarter of 2023. The timing of interest payments also affected our cash flows for the quarter. The new senior secured notes that we issued last fall had an interest payment in Q1 of this year, while the 2025 unsecured notes, which were then partially refinanced, have an interest payment in Q2. We reduced debt by a little bit more than $10 million during the first quarter of 2024, and we have now reduced net debt by approximately $250 million since the end of the first quarter of 2023. Our pro forma adjusted net leverage ratio, as defined in our credit agreement, was approximately 6.35 times at the end of the first quarter of 2024. In line with our year-end results, and significantly better than the 7.2 times at the end of last year's quarter. We expect to continue to reduce our net debt and pro forma adjusted net leverage ratio throughout fiscal 2024 and beyond, as we diligently work toward achieving our long-term target of 4.5 to 5.5 times. As noted in our earnings press release, we are revising our fiscal 2024 guidance to $1.955 billion to $1.985 billion for net sales, $300 to $320 million for adjusted EBITDA, and $0.75 to $0.95 for adjusted diluted earnings per share. We believe that the revised guidance better reflects the emerging challenges in food service and a more gradual recovery in net sales to retail customers, with improvement expected in the second half of this year. We do expect continued volume improvement throughout the year in our sales to retail customers and less of a drag on net pricing, as we will lap our increased trade promotional spending efforts beginning in Q3 of this year. Additionally, we expect for full year 2024, interest expense of $145 to $150 million, including cash interest expense of $138 to $143 million, depreciation expense of $47.5 to $52.5 million, amortization expense of $20 to $22 million, an effective tax rate of 26 to 27 percent, and capex of $35 to $40 million. We expect to use approximately 50 percent of our excess cash to pay our dividend and the remaining 50 percent to pay down debt. Now I'll turn the call back over to Casey for further remarks.
spk08: Thank you, Bruce. In closing, our first quarter results demonstrated consistent margins and moderating inflation, with declines in net sales driven by food service trends and increased promotional spend. We expect food service trends to be soft through the first half of the year, with a corresponding pickup in at-home consumption trends in the back half. We are also accelerating efforts to reshape and clarify the portfolio through the reporting of business unit segments and the strategic evaluation of the remaining green giant frozen and canned vegetable business in the U.S. and Canada. This concludes our remarks, and now we would like to begin the Q&A portion of our call. Operator?
spk03: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a three-tone prompt acknowledging your request. Questions will be taken in the order received. Should you wish to cancel your request, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. Once again, that is star one. Should you wish to ask a question? And your first question is from William Reuter from Bank of America. Please ask your question.
spk24: Good afternoon. My first question, it sounds like really the majority of the weaknesses in the food service components of the business. What percentage of that does, what percentage does food service represent of total sales?
spk08: About 14% on average. An average quarter would be about 14% of our sales, food service.
spk24: Okay. And I guess you made some commentary about expectations that we'll kind of see improving trends in retail as the year goes on. Is that on a unit base or on a dollar basis? And I guess, is that from conversations with retailers or just expectations about economic recovery? So
spk16: there's a couple things going on on the retail side of the business. The first one is volumes is stabilized, right? So we're seeing in consumption kind of flatish volumes. We believe there will be a pickup over time, particularly if you see continued softness in food service. And so that's part one. And that's probably not as strong as we initially expected it to be at this point, but it's hanging in there fine. And then the other part, pricing, which in this case is promotional trade spending. People are, you know, relayering that spend back into the business. It's still below pre-pandemic levels, but it's inching higher. And we really started to dial that up last year, beginning in the third quarter. And so we're lapping a first quarter and second quarter this year where we had very big pricing benefits last year and now a higher level of trade spend. But we'll be lapping a lot of that activity that we layered in last year as we work towards the back end of this year.
spk24: Got it. And then just lastly for me, I don't think you've disclosed this thus far, but the frozen and canned veggie businesses that remain in the U.S. and Canada that you're now evaluating, can you share what the sales or EBITDA of those are?
spk08: It's essentially, it's in the segment reporting. It's essentially the, almost the entire frozen and vegetables business unit.
spk16: So a little bit less than $400 million in annual net sales. We haven't disclosed profits for the full year yet. We're just rolling on the segment profits as we execute quarter by quarter.
spk08: So we reported basically $105 million of net sales for the frozen and vegetables business unit in the first quarter.
spk24: Got it. I guess we're the first quarter margins representative of what they are for the year or is there seasonality?
spk16: We disclosed the first quarter margins. We haven't disclosed for the major year yet. And part of this is we haven't operated the business on a full year on these business units. And so this is an evolution for us and we're, we share the quarterly information as the year rolls through.
spk08: Yeah, it's not too far up being reasonably represented within a certain range.
spk22: Got it. Okay, that's all for me. Thank you.
spk03: Thank you. Your next question is from Michael Lavery from Piper Sandler. Please ask your question.
spk11: Thank you. Good afternoon. Just was curious how to think about Canada. If hypothetically you were to divest frozen and vegetables, is there enough scale excluding that piece of business?
spk34: Is there
spk11: some way that how you think about one gets tied to the other? Where does sort of Canada get left after a potential sale?
spk16: We've had a Canadian business that predated Green Giant. We continue to have one after this transaction. Obviously, Green Giant is a significant portion of the sales in Canada,
spk08: but we still expect to have a Canadian business.
spk05: We
spk08: would probably not maintain the same infrastructure. Okay, makes sense. That's helpful.
spk11: And just at a high level on the portfolio,
spk10: you've historically had
spk11: a good track record of buying cash generative businesses that seemed at least a little bit category agnostic. You've identified now how frozen may not fit. You've got a segment view that's a little bit different.
spk12: Maybe just
spk11: at the total portfolio high level, is there sort of an end game of how you want to evolve? Is it taking on a little bit more of a growth focus or still sort of value cash generative focus or somewhere in between? Maybe just the latest on just the strategy of the portfolio in its entirety.
spk08: Yeah, so of the three remaining business units, if we were to sell off the frozen and vegetables business unit, I think there's three different profiles here. So spices and seasonings, we said we wanted that to be a high margin, low single digit growth business, and we believe that we can get there. The issues this quarter were really more around the food service business, but we think for the year we're going to be on track to driving growth in that business and maintaining strong margins. The meals business, we also want to see some low single digit growth on the top line. We're getting there. Again, it was a little bit hampered by the food service trends this quarter, but our goal is to get that into low single digit growth as well. The specialty business, which is largely focused around baking staples, that business is largely in a maintain mode and making sure that we maintain cash flows, stable margins, et cetera, not expecting a lot of growth out of that portfolio, but stability over time. And if you think about those three business units, they fit our capabilities. We've got some scale, whether it's in spices seasonings, meals with a Mexican focus, or bakings. We've got some scale. I think we could add acquisitions to those platforms and do good things with them and maintain strong cash flow. And in the cases of the spices business unit and the meals business unit, I think we can drive growth even with acquisitions over time. So it's a little bit of a mixed bag, but that's how we think about those three business units. Frozen vegetables, you know, in the long term, I think frozen vegetables is a decent category to be in. The frozen category has historically been a good category. It has not recently. The trends recently have been a little tougher, but it is on trend. It is vegetables. I just don't believe that frozen is the right fit for our capabilities and focus going forward.
spk28: Okay,
spk27: really helpful caller. Thanks. Thank you. Your next question is
spk03: from Andrew Mortenson from Jeff Hurns. Please ask your question.
spk09: Good afternoon. We look at the flat volume with a modest step up in promotion. Is that the consumer just kind of coming to expect the promotional cadence to increase looking for value and kind of what's the private label response been for you guys?
spk08: I think the step up in promotion and as Bruce said, it's really going to be probably more of a first half phenomenon because we did begin to step up promotion activity or promotion spend in the back half of last year. I think it's two things. One is a little bit more competitive promotion environment out there. I think you're probably hearing that from other players too. It's not higher than it was pre-pandemic, but it's getting back to kind of a normal cadence of where it was there. Some categories there and some categories still a little bit lower than it was pre-pandemic,
spk28: but
spk08: we're seeing the resumption of normal promotion activity that's been kind of gradually building over the last 18 to 24 months. The second thing is that in that extreme pricing environment, we're also trying to manage in a couple of our categories the gap to private label. For instance, in Green Giant, frozen vegetables, in our core bags and Vagabox, we want to maintain a certain kind of gap or price gap to private label. We've been kind of refining and honing that and largely that we've been doing that with a little bit of trade spend to get to the right price points, either in promotion or in everyday price. I think it's really those two things, kind of a resumption of normal promotion activity in the environment. Second, just managing our price gaps in a couple of categories, principally Green Giant, frozen vegetables and Crisco, although Crisco we're kind of just passing through the change in oil price up and down. But we watch that gap pretty closely in Crisco as well, particularly on the shortening side.
spk09: Okay. And then when we look at the other potential divestitures, that 10 to 15% of sales, what's the kind of the time horizon you mentioned, you know, hopefully get some of those done. Just wanted to get a sense of the scale or magnitude that you're looking at here.
spk16: I think probably less is more here. We're working on a couple of things, but M&A is just always tricky to predict from a timing or exactly what. So, you know,
spk25: it's a little bit stay tuned and it's
spk16: probably things that would make sense after announced, assuming that there were anything just like the back to nature and the canned
spk08: Green Giant
spk16: business in the U.S.
spk08: But we are working on it, you know, one or two smaller divestitures that we would like to move along at some point. But that's that's a much smaller scale, not even the 10 to 15% probably even less than that. Beyond the larger Green Giant discussion we had today about putting it under review.
spk28: Thank you very much guys. Appreciate it.
spk27: Thank
spk03: you.
spk27: Your
spk03: next question is from Moscow from Judy Cohen. Please ask your question.
spk17: Hey, thanks for the question. I just want to clarify that the back half of the year, you're assuming just easier comparisons on your pricing. You're not expecting any kind of change in consumer behavior like a stronger consumer that will boost volumes. I just want to make sure that the primary. Yeah, Rob on the margins, maybe. Yes,
spk07: but not in a big way.
spk08: Okay, I think for the most part, we expect easier comps. You know, we are, you know, historically what's happened when food service traffic has gone down, you see a little bit of in home consumption pickup, but we're not counting on very much. Right.
spk17: Okay. And then the other question was, I thought I heard you say that frozen is 400 million in sales. Maybe I misheard, but then the divestiture that you're evaluating is 10 to 15% of sales, which is less than 400. No,
spk08: I'm two different things. I think before we were talking about smaller divestitures that represented about 10 to 15%, which would have been things like, you know, back to nature, etc. And we're still working on a small list of those, you know, within that 10 to 15%. The news today is that we're considering a larger divestiture beyond that 10 to 15% pruning that would be the green giant or the frozen vegetables business.
spk17: Okay, so, I mean, when you're when you're said and done, like, it could be as much as 30% of the bit of the portfolio that you exit.
spk06: Yeah, okay. Oh, and one last question. Probably a little less than that, Rob, but yes. Okay,
spk17: and the last question is within foods are there any specific channels to kind of call out restaurants versus institutions or schools that are are causing the decline or is it just kind of a broad food service decline?
spk08: We're just seeing a broad decline in traffic and in orders coming from, you know, we largely go through distributors. We do have one or two direct customers that we, I don't want to specifically talk about some of our customers that that we know that bad traffic declines and other things. But we're, we're kind of following the general industry trend that you've probably seen about, you know, foot traffic being down a lot of out of home establishments.
spk31: Yeah, I
spk08: agree. Okay,
spk31: thank you. Yep.
spk03: Thank you. Your next question is from our legislative from JP Morgan. Please ask your question.
spk32: Hi, a couple of follow ups on that food service are is one of your segments more concentrated in food service and then another or are there any that don't really participate in food service?
spk08: I think spices and seasonings is probably our largest concentration, but we also have some concentration in the meal segment with the Ortega cells, you know, cheese sauces, enchilada sauces, salsas, etc. in that peppers. And then in our specialty segment, you know, we do sell oils, baking powders and other things into the food service. But the largest concentration would be in spices, followed by these those other two business units.
spk32: Okay, and so not much the frozen isn't so much.
spk07: Not so much. No, not very much.
spk32: Okay, are you going to recast your say it put a recast sales on the website or we can kind of, I guess, sum them up given the brands that you broke out and your old reporting, but have you or will you recast it?
spk16: So this would be going forward. We would be disclosing the segment results, sales and actually profitability, but not the brand sales.
spk32: Okay, but it looks to me like if I just add up the different brands that are included in frozen, you said just under 400 million of net sales for the year. I'm only getting like 365. I'm wondering if you're going to recast like the historical into the new segment reporting.
spk16: Sorry, so Green Giant is just really the Green Giant brand plus the
spk08: Soar.
spk33: Okay, yeah, the 365.
spk08: The US frozen plus Canada. So Canada frozen and canned vegetable business and the Soar business.
spk32: Okay. Okay, great. And then on the trade spend, you mentioned that it's kind of getting back to more normal levels. So that retailers pressing more for it or is it being more driven by competition from the brands trying to get better space, new products, etc.
spk08: I think it's a little bit of both. I think everybody's kind of going back to normal competitive levels from where they were in a pandemic. You know, so,
spk23: you know, the
spk08: price is higher, so there's a little bit more pressure to have some promotional discounts to help consumers get back in stores and drive volume. So it's a little bit of both.
spk30: Okay. Okay. And we kind of expected that
spk08: that was work. We also expected that was going to happen at some point, because we've been seeing it gradually increase over time. I think we're saying that over the last couple of orders.
spk32: Yeah. Yeah, yeah, I think that's pretty consistent. We were just trying to get more of a sense, whether it's coming from the retailers pulling it or the manufacturers pushing it. And it sounds like from others we've talked to as well that it's both. Just on the if you were to sell frozen, how is that business? You know, it's a different supply chain kind of it. I mean, is that integrated at all with your existing network for distribution or facilities?
spk16: So from a from a manufacturing standpoint, no, we've got too many manufacturing facilities for Green Giant, which is one in Mexico and one in Arizona. A fair amount of that is still copacked. So there might be overlap in some relationships, but it's completely different from the manufacturing. No, actually
spk08: distribution distribution logistics and manufacturing is completely distinct from the rest of the business from the rest of the company.
spk32: Okay. Okay, great. And then working capital. Just you did give some color on it and I noticed that your payable days are a little bit higher. Is that a timing issue or is there any other working capital timing issues we should consider for the remainder of the year?
spk16: I think it'll all balance out. The couple pieces that will be a little bit different, right, is we exited the Green Giant canned business. And by the way, I think I think maybe your confusion in rolling up the numbers, if you're looking at our case for the sales, we sold part of the shelf stable business, but not all of it. Right. We sold the US part of the of the shelf stable business called Green Giant, but not the Canada piece. That's probably just the small gap.
spk31: Gotcha. Okay, great. That's all I had. Thank you.
spk27: Thank you.
spk03: Thank you. Your next question is from Hale Holden from workplace. Please ask your question.
spk02: Thank you. I had to on the food service decline. I missed it if you gave sort of an aggregate percentage of what that was down across the portfolio, but it sounded like mid single digits. Is that the way to think about it?
spk08: No, it's actually it's actually more like somewhere like 12 13 percent.
spk02: Where I know 12 13, the decline is 12 to 13 percent.
spk08: Yes, and it's about 14 percent of our sales.
spk02: And then for the guide as you as you took the reduction for the year is you just sort of running that forward or do you assume that it stabilizes towards the back half of the year?
spk16: It's probably going to be a little bit challenged throughout the year. Hopefully not that bad. The real way to look at our top line guidance is we have a first quarter rate. So we know what that is. And then if you were to take the remainder of our business for the last three quarters of the year as a reminder, the Green Giant can business that we sold was about. Sixty five million dollars of sales and strip that out. There's another 10 million dollars pricing around Crisco normalization, we think. And so you take that core based business for the remaining three quarters of the year and we're assuming up or down percent, give or take.
spk02: OK, my second question was. You know, when companies put divisions up for review, lots of different things can happen over a long or short time horizon. But this is an asset that you've been thinking about for some time, I think. And I was wondering, you know, in a sale process, you know, what what inning are you in or or I don't want to pin you down on a timeline, but it is a short, medium, long term kind of process to get to the other side of it.
spk16: I'm going to politely talk that question and just say it is unpredictable. You know, the commentary in the press releases were evaluating strategic review of the business and
spk08: we'll move forward and update. That's perfect. We have we have been working on the review business before now.
spk02: OK, I mean, I gave you so many buckets first, but I understand. Thank you.
spk27: Thank you. Your next question is from Rob Dickinson
spk03: from Jeffries. Please ask your question.
spk19: Great. Thanks so much.
spk20: Bruce is curious.
spk21: You know, we were talking about the potential green giant frozen, probably not complete shock here. You know, we've talked for a million in revenue, the margin profile, you know, and then let's say, like, maybe sort of unpredictable. There could be another 10 percent or smaller brands, et cetera. But, you know, like, at some point, you know, the even does kind of add up a little bit kind of relative to just what you're paying on the dividend. And I feel like it's always comes up with BNG and it also leverage. So I'm just curious, like, you know, as we all think about kind of the portfolio reshaping and divesting potential. How do you kind of want us then to be thinking about this overall capital structure? If you were to sell these specific brands of businesses, clearly you get the cash in that's multiple contingent. But at the same time, you know, you would, I guess, the theory still have like, you know, less free cash flow generation absent, you know, future acquisition. So kind of be comprehensive in the question. Just kind of give you an opportunity to kind of talk about capital pressure a little bit. That's all I have. Thanks.
spk16: Yeah. And I'm going to talk a little bit of that other than say we are committed to a dividend. We are talking about, you know, potentially a couple of small, smallest divesters and a potential larger one. Certainly that would accelerate from a capital structure or deleveraging and bring us down, you know, closer to that four and a half to five
spk13: and a half times that we want to get to.
spk16: And as part of that, thinking through proceeds and what the right capital structure looks like, I think it's a little bit early to say exactly what that'll be and when. But, you know, we are committed to a dividend and we're very much contributed to bringing our leverage down. All right.
spk21: Good enough. I'll pass it on. Thank you,
spk01: sir.
spk03: Thank you. Once again, please press star one should have reached to ask a question. Your next question is from David Palmer from Evercore. Please ask your question.
spk18: Hi. Yeah, I'm curious just on the on the announced strategic review and potential sale. You know, it does feel like to Rob's point before, it does feel like this a long time coming. And for you to put it on under review now, I'm just wondering, you know, why, why this communication now? And is there is there something about the timing that seems right for you to do this method of selling it now and this announcement? And then separately, I just wonder if you've done the performer math, how much better a company would be in GB, not just with this, the canned and the rest of the canned and the frozen. Business, but also the sale of the 10 to 15 percent that you're also contemplating selling. How much better of a company would this be? What does that do to perform a maybe historic revenue growth rates and margin structure?
spk29: Sure. So
spk18: so a couple of things in
spk16: there. Right. And part one, this is our first quarter with with our new business unit or segment results. You know, we've been talking about getting to this stage for some time and sort of, you know, Casey has made a point that he came on board talking about the strategy and how he wants to run the business and grow the business going forward and what areas we want to invest in and what areas are maintained and drive cash. And so this is a natural culmination of that reorg of the business into segments and our first time reporting segment results. And I think the whole concept here is improving the business. And so you're asking the right questions. Obviously, we're not in a position to disclose the outcome, but certainly you can see by the margins, we will improve our margin profile from from an inventory standpoint. This is a more inventory and working capital
spk04: intensive
spk16: business, a little bit more seasonality. Less so since we already got rid of the canned business, but more seasonality in the working capital. And we certainly would anticipate accelerating our leveraging of the business. And at the end of the day, we want to get back to strong commitment to the dividend using those free cash flows for a combination of paying a dividend and reducing leverage and going back
spk05: to
spk16: acquiring businesses that make sense for us and fit in our portfolio with the different strategy for each business unit that Casey's outlined.
spk08: I think in simple terms, we want to get to a company that's capable of growing at one, maybe 2% on the top line. We want to get to a company that has closer to a 20% EBITDA margin. We want to get to a company that has stronger cash conversion. And we want a company with clear platforms that we can acquire on and drive value. And that's what we're trying to do. And that's what this announcement and discussion is today. How do we get to that? We're pretty clear in those three other business units that we have platforms. We're pretty clear that we can get to that kind of performance that we're talking about in terms of growth and margins. And this, I think, is just the culmination of a lot of work to say, what's the right structure long term for us to go back and acquire and build?
spk16: Green Giant is obviously a great brand. It's iconic. At a point in time, it was one of the fastest growing brands in the grocery store. It's just very different from a lot of the other things that we own from a profile standpoint. And we want
spk13: to be a focused business.
spk18: I want to just ask a follow up. Thank you. That's all great color, by the way. Thank you. I wanted to follow up on the food service side. I mean, the industry was obviously pretty lousy in restaurants in the first quarter. Volume or traffic was down 2% as an industry in the first quarter. Your number, I think you said down 12, 13 or so percent. That's obviously not equivalent. But how much worse in a volumetric basis in the industry were you? And why would it be worse? I'm not really sure.
spk08: I think it's just, you know, we see traffic numbers, at least from our customer base, a little bit lower than what you just quoted. So I think this is all really timing about people adjusting inventories. I mean, think about spices, right? So how much people are maintaining inventory and our distributors, et cetera. So I just think it's a timing issue. It's reflecting the general slowdown. I'm going to we're going to keep watching it to see what we think the longer term trend is. But I think we're going to have and we have a tough cop, I think, in the first quarter versus last year. So we think we'll be down in the second quarter, probably a little bit better in the third and the fourth based on the trend analysis we're seeing.
spk18: Yeah, I mean, I guess you probably over index some some players that had a really rough. I mean, there were some there were some chains out there that had rough going and I'll maybe
spk08: offline. We have one or two chains that we deal with directly that had much that had much worse numbers. So it's but you know, it is what it is. The other the other part of it is some of this some of our food services
spk16: markets through large distributors. Sometimes that can be a little bit lumpy as opposed to following.
spk18: Yeah, I think but I think that's going to be the story. That's that that's stuff you're talking about. There's much more math there than there will be for the industry trend is my comment back on that. Yeah, thank you.
spk27: Thank you. Your next question is from
spk03: Carla from JP Morgan. Please ask your question.
spk32: I had a couple of follow ups. I think I'm not sure if you said it in your prepared remarks, but I think you paid down twenty million of the term loan be with the green giant proceeds in fourth quarter. And there was another payment coming in first quarter. Was that is that do I have that correct? I was assuming another thirty something million in first quarter. What's their payment?
spk16: So there are two the way the way work through our covenants and now that we've got the senior secured notes, there's got to be a payment to the term loan and then an offer to the new senior secured note holders. And then those new senior secured note holders don't have to take that payment. If they don't, it goes to the term loan. We kind of detail that in our queue in the subsequent events. So, okay, essentially fair point to say, take what we paid down on the term loan and assume that essentially doubles.
spk32: Okay, and in the queue, we'll get the exact numbers on how big the term loan is.
spk16: Yeah, it's about forty four million dollars until this is what we needed to pay down. So, again, half of that went to term loan investors right away on the senior secured notes. Very little came back to us. So it'll be more towards the term loan. The notes are trading well above par. So, as expected, someone's not going to take that money back and par when it's trading at whatever one or three one or four.
spk32: Right. So when do you make that second term loan payment with the whatever's left in
spk16: the second quarter?
spk32: Okay, okay. So it wasn't made in first. That's what I was checking. It was
spk16: not made in the first. Now, early days of the second quarter.
spk31: Okay, great. Thank you.
spk27: That's all I had. Thank you. There are no further
spk03: questions at this time. That concludes the question and answer session for today. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may all disconnect.
spk00: Okay. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you.
spk01: Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank
spk00: you. Thank you. Thank
spk03: you. Thank you. Thank you. Thank you. Thank you. Thank you. Good day and welcome to the PNG Foods first quarter 2024 earnings call. Today's call, which is being recorded, is scheduled to last about one hour including remarks by B&G Foods management for the question and answer session. I would now like to turn the call over to AJ Schwab, Senior Associate, Corporate Strategy and Business Development for B&G Foods. AJ?
spk15: Good afternoon, and thank you for joining us. With me today are Casey Keller, our Chief Executive Officer, and Bruce Wacha, our Chief Financial Officer. You can access detailed financial information on the quarter 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 under-reliance should not be placed upon them. We refer you to B&G Foods' most recent annual report on Form 10-K and subsequent SEC filings for more detailed discussion of the risks that could impact our company's future operating results and financial conditions. 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, Segment Adjusted EBITDA, Adjusted Net Income, Adjusted Deluted Earnings Per Share, Adjusted Gross Profit, Adjusted Gross Profit Percentage, 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 the various factors that affected our results, selected business highlights, and his thoughts concerning the outlook for the remainder of Fiscal 2024. Bruce will then discuss our financial results for the first quarter of 2024 and our guidance for Fiscal 2024. I would now like to turn the call over
spk08: to Casey. Good afternoon. Thank you, AJ, and thank you all for joining us today for our first quarter 2024 earnings call. In my remarks, I will address three topics on the call today. First, an overview of first quarter results. Bruce will provide more detail and color later in the presentation. Second, the reporting of segment results for the first time by our four business units. And third, an update on our portfolio reshaping plans and activity. Quarter one results. First quarter net sales of $475.2 million and adjusted EBITDA of $75 million were slightly below expectations. Base business net sales adjusted to exclude the -over-year impact of lower fiscal oil pricing, decreased by approximately $17 million or .4% compared to the year ago period. Much of the decline within our food service and industrial businesses across spices and seasonings, maple-grilled farm syrups, baking powders and oils, and Ortega cheese and other sauces. The declines reflect an overall slowdown in -of-home traffic and volumes compared to Fiscal Year 23 trends. Net sales to retail customers across the business units were slightly down, approximately 1.5%, with relatively flat volumes offset by a modest increase, 90 basis points in trade and promotional spending. Adjusted EBITDA for the first quarter decreased by $7.4 million compared to the first quarter of 2023. The divestiture of the green giant U.S. shelf stable product line was responsible for approximately $1.5 million of the -over-year decline. Adjusted EBITDA as the percentage of net sales for the first quarter was 15.8%, largely in line with the .1% achieved in the prior year period. On a consolidated basis, gross profit as the percentage of net sales for the quarter was up 60 basis points versus last year. We continue to see moderating inflation and some favorability in transportation and warehousing, although these were offset by increased G&A costs for insurance and salary wages, as well as higher advertising and marketing investment in the quarter versus last year. Segment reporting. This is the first quarter B&G Foods is reporting results by operating segments, providing greater visibility into the underlying performance of the company's business units. The segments represent the four operating business units that we recently reorganized the company structure into. Business units are now fully established, running their businesses, and actively managing the business unit P&Ls. Across the four business units, we maintain a lean corporate structure, approximately 4% to 5% of net sales, to maintain oversight and efficiency in shared transactions and operations, i.e. sales, distribution, order processing, etc. The four business units are Spices and Flavor Solutions. This segment represents approximately 20% of our consolidated net sales and has our highest segment adjusted EBITDA as the percentage of net sales at 30%. B&G Foods is a leader in the spices and seasoning category, with key brands Dash, Weber Grilling, Spice Islands, Accent, etc. During the first quarter, Spices and Flavor Solutions net sales were depressed by a significant decline in food service business with key distributors and customers. Sales to retail customers were up slightly in the quarter. We are also launching a new line of licensed seasoning and grilling blends under the four sixes brand, which is the new show and ranch featured in the Yellowstone television franchise. Meals. The Meals segment represents approximately 25% of our consolidated net sales, with segment adjusted EBITDA as the percentage of net sales of 21.4%. The key components of this business unit are Mexican meals, Ortega Las Palmas, and hot breakfasts, cream of wheat, McCans, maple-grilled farms, syrups. We see growth opportunities in Mexican meal preparation as consumers expand their Mexican cuisine options in the home. The first quarter meal segment net sales decline was driven by lower food service sales, while net sales to retail customers were roughly flat. Specialty. The specialty segment represents approximately 33% of our consolidated net sales, with segment adjusted EBITDA as the percentage of net sales of approximately 24%. The primary focus of this business unit is baking staples, about 70% of business unit sales. With leading number one brands such as Crisco Oil and Shortening, Clabber Girl Baking Powder, Grandma's Molasses, etc. Baking, both from scratch and mixed, has remained relatively stable over time, with more consumers learning to bake from scratch during COVID lockdowns. The specialty segment's key objective is to maintain strong, stable cash flow and margins. Specialty segment adjusted EBITDA was up slightly in the first quarter. Frozen and Vegetables. The frozen and vegetable segment represents approximately 22% of our consolidated net sales, with the lowest segment adjusted EBITDA margin as a percentage of net sales of 7.5%. The frozen and vegetables business unit includes the US Green Giant frozen business, the Canada Green Giant frozen and canned businesses, a major portion of our company's consolidated sales, and the Lasur canned vegetable product line. The primary focus of our frozen and vegetable business unit is to improve gross profit margins, strengthen the innovation pipeline, streamline the frozen distribution network, and grow volumes in our Irrapuerto, Mexico and Yuma, Arizona manufacturing facilities. First quarter frozen and vegetable segment net sales reflect overall softness in the year over year attributed to the divestiture of the US Green Giant canned business last November. Portfolio shaping. BNC Foods has continued and will accelerate the reshaping and restructuring of our portfolio to sharpen focus, improve margins and cash flow, and maximize future value creation. The divestiture of the Green Giant US canned vegetable business was completed last fall, following the sale of the Back to Nature brand in January 2023. As previously disclosed, we have been evaluating and working on divestitures that represent between 10 to 15% of total company net sales. That process on smaller brands is proceeding, and we expect to possibly sell some assets before the end of fiscal year 2024. Beyond those efforts, the larger decision on whether to remain in frozen long term has been an open question. After careful analysis, we are placing the frozen and remaining canned vegetable businesses under strategic review and are evaluating a possible divestiture and sale of some or all of the assets in the frozen and vegetable business unit. Green Giant remains a strong brand with broad awareness and distribution, and the frozen vegetables category is on trend with long term health and dietary trends. However, I believe the frozen vegetable business may not be the right fit with B&G Foods' focus and capabilities, particularly since we have no plans to add more assets in the frozen portfolio given the opportunities in our core shelf stable businesses and overall capital constraints. More to come as we further evaluate our options and plans. Thank you, and I will now turn the call over to Bruce for more detail on the quarterly performance and outlook for the year.
spk16: Thank you, Casey. Good afternoon, everyone. As a reminder, and before I get into our results, we sold our Green Giant U.S. shelf stable product line last fall, and so we are lapping the first quarter 2023 results that had that business. The Green Giant U.S. shelf stable line had $14.6 million of net sales and approximately $1 to $2 million of contribution in last year's first quarter. In the first quarter of 2024, we generated $475.2 million in net sales, $75 million in adjusted EBITDA, adjusted EBITDA as a percentage of net sales of 15.8%, and $0.18 in adjusted diluted earnings per share. Base business net sales, which excludes the Green Giant U.S. shelf stable product line, decreased by $22 million, or .4% in the first quarter of 2024 compared to the year ago period. The decrease in base business net sales was driven by approximately $5 million from the execution of our Crisco pricing model that reflected a decrease in soybean oil costs and allowed us to pass this benefit back to consumers in the form of lower pricing. Approximately $10 million was from lower food service and industrial net sales across multiple business segments and brands. And the remaining $6-plus million of the decrease was partially driven by lower net sales to our retail customers that were largely the result of modest increases in promotional trade spend and relatively flat volumes. Gross profit was $108.9 million for the first quarter of 2024, or approximately .9% of net sales. Adjusted gross profit, which excludes the negative impact of a million dollars of acquisition divestiture-related expenses and nonrecurring expenses included in the cost of goods sold during the first quarter of 2024, was $109.9 million, or .1% of net sales. Gross profit was $114.2 million for the first quarter of 2023, or .3% of net sales. Adjusted gross profit, which excludes the negative impact of a million dollars of acquisition divestiture-related expenses and nonrecurring expenses included in the cost of goods sold during the first quarter of 2023, was $114.9 million, or .4% of net sales. While we are continuing to see input cost inflation with regards to material goods and our factory production, the cost increases have been modestly flat thus far this year, and offset in part by continued moderation in certain costs like soybean oil and tomatoes that saw the greatest increases in 2022 and 2023. Separately, we are also continuing to see favorability in our logistics costs, although these benefits are much more modest on a rate basis than they were a year ago. Selling general and administrative expenses increased by $1.9 million, or 4%, to $48.6 million for the first quarter of 2024, from $46.7 million for the first quarter of 2023. The increase was composed of increases in general and administrative expenses of $2 million, consumer marketing expenses of $1.6 million, and acquisition divestiture and nonrecurring expenses of $0.1 million, partially offset by decreases in selling expenses of a million dollars, and warehouse expenses of $0.8 million. Expressed as a percentage of net sales, SG&A expenses increased by approximately 110 basis points, or .2% for the first quarter of 2024, as compared to .1% for the first quarter of 2023. The increase in general and administrative costs was largely driven by modest inflation in wages, insurance, and other professional services. As I mentioned earlier, we generated $75 million in adjusted EBITDA, or .8% of net sales in the first quarter of 2024, compared to $82.4 million, or .1% in the first quarter of 2023. Approximately $1 to $2 million of the decrease in adjusted EBITDA was the result of the divestiture of the green giant US shelf stable product line, which we sold last fall. The remainder was largely driven in proportion by a decline in our net sales. Net interest expense was $37.8 million in the first quarter of 2024, compared to $39.4 million in the first quarter of 2023. The decrease was primarily attributable to a reduction in average long-term debt outstanding, and the accelerated amortization of deferred financing costs related to long-term debt prepayments during the first quarter of 2023, partially offset by slightly higher interest rates on our long-term debt compared to the first quarter of 2023. Depreciation and amortization was $17.2 million in the first quarter of 2024, compared to $18 million in the first quarter of last year. We had a net loss of $40.2 million, or 51 cents per diluted share, and adjusted net income of $14.4 million, or 18 cents per diluted share, in the first quarter of 2024, compared to net income of $3.4 million, or 5 cents per diluted share, and adjusted net income of $19.1 million, or 27 cents per diluted share, in the first quarter of last year. The net loss and diluted loss per share in our GAAP results were driven by a write-down of goodwill that was allocated to our frozen and vegetable business unit as part of our reorganization into four operating segments, and as described further in our press release in 10Q. Casey already described the units, and I recommend investors review our press release and 10Q for additional information. I would like to now touch on the results. Net sales for the specialty segment decreased $7.9 million, or .9% for the first quarter of 2024, to $154.7 million, from $162.6 million in the year-ago quarter. The decrease was primarily due to lower Crisco pricing, driven by softening commodity costs, coupled with declines in food service and industrial sales. Specialty segment adjusted EBITDA increased by $0.7 million, or .9% for the first quarter of 2024, compared to the first quarter of 2023. Net sales for the meal segment decreased $1.9 million, or .6% for the first quarter of 2024, to $120 million, from $121.9 million for the first quarter of 2023. The decrease was primarily due to lower net sales in food service. The meal segment adjusted EBITDA decreased by $0.6 million, or .3% compared to the first quarter of 2023, which was in line with the decrease in net sales. Excluding the impact of the divestiture of the Green Giant US Shell Stable product line, which we sold last fall, net sales of the frozen and vegetable segment decreased by $6.7 million, or 6%. Although increased promotional trade support helped grow our Bag in a Box, or BIV, product line during the quarter, some of the other parts of the frozen business fared less well. Frozen and vegetable segment adjusted EBITDA decreased by $2.7 million, compared to the prior year period. Approximately $1 to $2 million of that decline was due to the divestiture of the Green Giant US Shell Stable product line, with the remainder driven by the decline in net sales. Net sales for the spices and flavor solution segment decreased by $5.4 million, or .4% in the first quarter of 2024, to $95.6 million, from $101 million in the first quarter of 2023. The decrease was primarily due to lower net sales in food service. The spices and flavor solution segment adjusted EBITDA decreased $2 million, or .6% in the first quarter of 2024, compared to the first quarter of 2023. Now I'd like to spend some time on our cash flows and balance sheet. We generated $35.1 million in net cash from operations in the first quarter of 2024, compared to the $69.5 million in net cash from operations generated in the first quarter of last year. Our net cash from operations was actually quite strong, despite the -over-year decrease when compared to the first quarter of 2023. While we were continuing to bring inventory down, our net cash from operations benefited from a more modest decrease in inventory of $8.2 million during this year's first quarter, while net cash benefited from a decrease in inventory of $28.2 million in the year-ago period. As a reminder, last year's first quarter benefited from a sell-down of the seasonal pack for the green giant U.S. Shell Stable business that we divested last fall. We finished the first quarter of 2024 with approximately $560.6 million of inventory, compared to $569 million in inventory at the end of 2023 and $700.9 million at the end of the first quarter of 2023. The timing of interest payments also affected our cash flows for the quarter. The new senior secured notes that we issued last fall had an interest payment in Q1 of this year, while the 2025 unsecured notes, which were then partially refinanced, have an interest payment in Q2. We reduced debt by a little bit more than $10 million during the first quarter of 2024, and we have now reduced net debt by approximately $250 million since the end of the first quarter of 2023. Our pro forma adjusted net leverage ratio, as defined in our credit agreement, was approximately times at the end of the first quarter of 2024, in line with our year-end results, and significantly better than the 7.2 times at the end of last year's quarter. We expect to continue to reduce our net debt pro forma adjusted net leverage ratio throughout fiscal 2024 and beyond, as we diligently work toward achieving our long-term target of 4.5 to 5.5 times. As noted in our earnings press release, we are revising our fiscal 2024 guidance to $1.955 billion to $1.985 billion for net sales, $300 to $320 million for adjusted EBITDA, and $0.75 to $0.95 for adjusted diluted earnings per share. We believe that the revised guidance better reflects the emerging challenges in food service and a more gradual recovery in net sales to retail customers, with improvement expected in the second half of this year. We do expect continued volume improvement throughout the year in our sales to retail customers and less of a drag on net pricing, as we will lap our increased trade promotional spending efforts beginning in Q3 of this year. Additionally, we expect for full year 2024 interest expense of $145 to $150 million, including cash interest expense of $138 to $143 million, depreciation expense of $47.5 to $52.5 million, amortization expense of $20 to $22 million, an effective tax rate of 26 to 27%, and capex of $35 to $40 million. We expect to use approximately 50% of our excess cash to pay our dividend and the remaining 50% to pay down debt. Now I'll turn the call back over to Casey for further
spk08: remarks. Thank you, Bruce. In closing, our first quarter results demonstrated consistent margins and moderating inflation, with declines in net sales driven by food service trends and increased promotional spend. We expect food service trends to be soft through the first half of the year, with a corresponding pickup in at-home consumption trends in the back half. We are also accelerating efforts to reshape and clarify the portfolio through the reporting of business unit segments and the strategic evaluation of the remaining green giant frozen and canned vegetable business in the US and Canada. This concludes our remarks. And now we would like to begin the Q&A portion of our call. Operator?
spk03: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a three-tone prompt acknowledging your request. Questions will be taken in the order received. Should you wish to cancel your request, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. Once again, that is star one should you wish to ask a question. And your first question is from William Reuter from Bank of America. Please ask your question.
spk24: Good afternoon. My first question, it sounds like really the majority of the weaknesses in the food service components of the business. What percentage of that does food service represent of total sales?
spk08: About 14% on average. An average quarter would be about 14% of our sales food service.
spk24: And I guess you made some commentary about expectations that we will kind of see improving trends in retail as the year goes on. Is that on a unit base or on a dollar basis? And I guess is that from conversations with retailers or just expectations about economic recovery?
spk16: So, there's a couple things going on on the retail side of the business. The first one is volumes are stabilized. So, we're seeing in consumption kind of flatish volumes. We believe there will be a pickup over time, particularly if you see continued softness in food service. And so, that's part one. And that's probably not as strong as we initially expected it to be at this point, but it's hanging in there fine. And then the other part, pricing, which in this case is promotional trade spending. People are relayering that spend back into the business. It's still below pre-pandemic levels, but it's inching higher. And we really started to dial that up last year beginning in the third quarter. And so, we're lapping a first quarter and second quarter this year where we had very big pricing benefits last year and now a higher level of trade spend. But we'll be lapping a lot of that activity that we layered in last year as we work towards the back end of this year.
spk24: Got it. And then just lastly for me, I don't think you've disclosed this thus far, but the frozen and canned veggie businesses that remain in the US and Canada that you're now evaluating, can you share what the sales or EBITDA of those are?
spk08: It's essentially, it's in the segment reporting. It's essentially almost the entire frozen and vegetables business unit.
spk16: So, a little bit less than $400 million in annual net sales. We haven't disclosed profits for the full year yet. We're just rolling on the segment profits as we execute quarter by quarter.
spk08: So, we reported basically 105 million of net sales for the frozen and vegetables business unit in the first quarter.
spk24: Got it. I guess we're the first quarter margins representative of what they are for the year or is there seasonality?
spk16: We disclosed the first quarter margins. We haven't disclosed for the remainder of the year yet. And part of this is we haven't operated the business on a full year on these business units. And so, this is an evolution for us and we're going to share the quarterly information as the year rolls through.
spk08: Yeah, it's not too far up being reasonably represented within a certain range.
spk22: Got it. Okay, that's all for me. Thank you.
spk03: Thank you. Your next question is from Michael Lavery from Piper Sandler. Please ask your question.
spk11: Thank you. Good afternoon. Just was curious how to think about Canada if hypothetically you were to divest frozen and vegetables. Is there enough scale excluding that piece of the business?
spk34: Is there
spk11: some way that how you think about one gets tied to the other? Where does sort of Canada get left after a potential sale? Yeah,
spk16: we've had a Canadian business that predated Green Giant. We continue to have one after this transaction. Obviously, Green Giant is a significant
spk08: portion
spk16: of the sales
spk08: in Canada, but we still expect to have a Canadian business. We would probably not maintain the same infrastructure. Okay, makes sense. That's helpful. And
spk11: just at a high level on the portfolio,
spk10: you've historically
spk11: had a good track record of buying cash generative businesses that seemed at least a little bit category agnostic. You've identified now how frozen may not fit, and you've got a segment view that's a little bit different. Maybe
spk12: just
spk11: at the total portfolio high level, is there sort of an endgame of how you want to evolve? Is it taking on a little bit more of a growth focus or still sort of value cash generative focus or somewhere in between? Maybe just the latest on just the strategy of the portfolio in its entirety.
spk08: Yeah, so of the three remaining business units, if we were to sell off the frozen vegetables business unit, I think there's three different profiles here. Spices and Seasings, we said we wanted that to be a high margin, low single digit growth business, and we believe that we can get there. The issues this quarter were really more around the food service business, but we think for the year we're going to be on track to driving growth in that business and maintaining strong margins. The Meals business, we also want to see low single digit growth on the top line, and we're getting there. Again, it was a little bit hampered by the food service trends this quarter, but our goal is to get that into low single digit growth as well. The Specialty business, which is largely focused around baking staples, that business is largely in a maintain mode and making sure that we maintain cash flows, stable margins, etc. Not expecting a lot of growth out of that portfolio, but stability over time. If you think about those three business units, they fit our capabilities. We've got some scale, whether it's in Spices and Seasonings, Meals with a Mexican focus, or Baking. We've got some scale. I think we could add acquisitions to those platforms and do good things with them and maintain strong cash flow. In the cases of the Spices business unit and the Meals business unit, I think we can drive growth even with acquisitions over time. It's a little bit of a mixed bag, but that's how we think about those three business units. Frozen vegetables, in the long term, I think frozen vegetables is a decent category to be in. The frozen category has historically been a good category. Not recently, the trends recently have been a little tougher, but it is on trend. It is vegetables. I just don't believe that frozen is the right fit for our capabilities and focus going forward.
spk27: Okay, really helpful caller. Thanks. Thank you. Your next question is from
spk03: Andrew Mortenson from Jeff Hurns. Please ask your question.
spk09: Good afternoon. We look at the flat volume with a modest step up in promotion. Is that the consumer just kind of coming to expect the promotional cadence to increase, looking for value, and kind of what's the private label response been for you guys?
spk08: I think the step up in promotion, and as Bruce said, it's really going to be probably more of a first half phenomenon because we did begin to step up promotion activity or promotion spend in the back half of last year. I think it's two things. One is a little bit more competitive promotion environment out there. I think you're probably hearing that from other players too. It's not higher than it was pre-pandemic, but it's getting back to kind of a normal cadence of where it was there. Some categories there and some categories still a little bit lower than it was pre-pandemic, but we're seeing the resumption of normal promotion activity that's been kind of gradually building over the last 18 to 24 months. The second thing is that in that extreme pricing environment, we're also trying to manage in a couple of our categories the gap to private labels. For instance, in Green Giant frozen vegetables, in our core bags and Vagabox, we want to maintain a certain kind of price gap to private labels. We've been kind of refining and honing that and largely we've been doing that with a little bit of trade spend to get to the right price points, either in promotion or in everyday price. I think it's really those two things, kind of a resumption of normal promotion activity in the environment. And second, just managing our price gaps in a couple of categories, principally Green Giant frozen vegetables and Crisco, although Crisco we're kind of just passing through the change in oil price up and down, but we watch that gap pretty closely in Crisco as well, particularly on the shortening side.
spk09: Okay. And then when we look at the other potential divestitures, that 10 to 15% of sales, what's the kind of the time horizon you mentioned? Hopefully get some of those done. Just wanted to get a sense of the scale or magnitude that you're looking at here.
spk16: I think probably less is more here. We're working on a couple of things, but M&A is just always tricky to predict from a finding or exactly what. So, you know,
spk25: it's a little bit stay tuned and it's
spk16: probably things that would make sense after announced, assuming that there were anything just like the back to nature and the canned
spk08: Green Giant
spk16: business in the U.S.
spk08: We are working on it. You know, one or two smaller divestitures that we would like to move along at some point, but that's that's a much smaller scale, not even the 10 to 15%, probably even less than that. Beyond the larger Green Giant discussion we had today about putting it under review.
spk28: Thank you very much, guys. Appreciate it.
spk03: Thank you. Your next question is from Moscow from Judy Cohen. Please ask your question.
spk17: Hey, thanks for the question. I just want to clarify that the back half of the year, you're assuming just easier comparisons on your pricing. You're not expecting any kind of change in consumer behavior like a stronger consumer that will boost volumes? I just want to make sure that the primary. Yeah, Rob, on the margins, maybe.
spk07: Yes, but not in a big way.
spk08: Okay. I think for the most part, we expect easier comps. You know, we are, you know, you know, historically what's happened when food service traffic has gone down, you see a little bit of in home consumption pickup, but we're not counting on very much. Right. Okay.
spk17: And then the other question was, I thought I heard you say that frozen is 400 million in sales. Maybe I misheard. But then the divestiture that you're evaluating is 10 to 15% of sales, which is less than 400. I think
spk08: two different things. I think before we were talking about smaller divestitures that represented about 10 to 15%, which would have been things like, you know, back to nature, et cetera. And we're still working on a small list of those, you know, within that 10 to 15%. The news today is that we're considering a larger divestiture beyond that 10 to 15% pruning that would be the green, giant or the frozen vegetables business.
spk17: Okay. So, I mean, when you're said and done, like, it could be as much as 30% of the bit of the portfolio that you exit.
spk26: Could be.
spk06: Yeah. Okay. Oh, and one last question. Probably a little less than that, Rob, but yes. Okay.
spk17: And the last question. Within food service, are there any specific channels to kind of call out, you know, restaurants versus institutions or schools that are causing the decline or is it just kind of a broad food service decline?
spk08: We're just seeing a broad decline in traffic and orders coming from, you know, we largely go through distributors. We do have one or two direct customers that we, I don't want to specifically talk about some of our customers that we know they've had traffic declines and other things, but we're kind of following the general industry trend that you've probably seen about, you know, foot traffic being down a lot of out of home establishments. Yeah,
spk31: I
spk08: agree. Okay.
spk31: Thank you. Yep.
spk03: Thank you. Your next question is from our legislative follow-up from JP Morgan. Please ask your question.
spk32: Hi, a couple of follow-ups. On the food service, is one of your segments more concentrated in food service than another or are there any that don't really participate in food service?
spk08: I think spices and seasonings is probably our largest concentration, but we also have some concentration in the meal segment with the Ortega cells, you know, cheese sauces, enchilada sauces, salsas, et cetera, and peppers. And then in our specialty segment, you know, we do sell oils, baking powders, and other things into the food service. But the largest concentration would be in spices, followed by those other two business units.
spk32: Okay. And so not much, the frozen isn't so much?
spk07: Not so much. No, not very much.
spk32: Okay. Are you going to recast your sales on the website or, I mean, we can kind of, I guess, sum them up given the brands that you broke out in your old reporting, but have you or will you recast it?
spk16: So this would be going forward, we would be disclosing the segmented results, sales and actually profitability, but not the brand sales.
spk32: Okay. But it looks to me like if I just add up the different brands that are included in frozen, you said just under 400 million of net sales for the year, I'm only getting like 365. I'm wondering if you're going to recast like the historical into the new segment reporting.
spk16: Sorry, so Green Giant is just really the Green Giant brand
spk08: plus the SOAR. Okay. Green Giant brand is the US frozen plus Canada, so Canada frozen and canned vegetable business and the SOAR business.
spk32: Okay, great. And then on the trade spend, you mentioned that it's kind of getting back to more normal levels. So is that retailers pressing more for it or is it being more driven by competition from the brands trying to get better space, new products, et cetera?
spk08: I think it's a little bit of both. I think everybody's kind of going back to normal competitive levels from where they were in a pandemic. So
spk23: the
spk08: price is higher, so there's a little bit more pressure to have some promotional discounts to help consumers get back in stores and drive volume. So it's a little bit of both.
spk30: Okay. And we kind of expected that
spk08: that was going to happen at some point because we've been seeing it gradually increase over time. I think we've been saying that over the last couple of orders.
spk32: Yeah. Yeah, I think that's pretty consistent. We were just trying to get more of a sense whether it's coming from the retailers pulling it or the manufacturers pushing it. And it sounds like from others we've talked to as well that it's both. Just on the, if you were to sell frozen, is that business, you know, it's a different supply chain kind of? Is that integrated at all with your existing network for distribution or facilities?
spk16: So from a manufacturing standpoint, no. We've got two main manufacturing facilities for Green Giant, which is one in Mexico and one in Arizona. A fair amount of that is still co-packed. So there might be overlap in some relationships, but it's completely different from the manufacturing standpoint. No,
spk08: actually distribution logistics and manufacturing is completely distinct from the rest of the business, from the rest of the company.
spk32: Okay. Okay, great. And then working capital, you did give some color on it and I noticed that your payable days are a little bit higher. Is that a timing issue or is there any other working capital timing issues we should consider for the remainder of the year?
spk16: I think it'll all balance out. A couple pieces that will be a little bit different, right, is we exited the Green Giant
spk04: canned
spk16: business. And by the way, I think maybe your confusion in rolling up the numbers, if you're looking at our K for the sales, we sold part of the shelf stable business, but not all of it. Right. We sold the US part of the shelf stable business called Green Giant, but not the Canada piece. So that's probably just the small gap.
spk31: Gotcha. Okay, great. That's all I have. Thank you.
spk01: Thank you.
spk03: Thank you. Your next question is from Hale Holden from Barclays. Please ask your question.
spk02: Thank you. I had two. On the food service decline, I missed it if you gave sort of an aggregate percentage of what that was down across the portfolio, but it sounded like mid single digits. Is that the way to think about it?
spk08: No, it's actually more like 12-13%.
spk02: Right, right. Sorry, the decline is 12-13%.
spk08: Yes, and it's about 14% of our sales.
spk02: And then for the guide as you took the reduction for the year, are you just sort of running that forward, or do you assume that it stabilizes towards the back half of the year?
spk16: It's probably going to be a little bit challenged throughout the year, hopefully not that bad. The real way to look at our top line guidance is we have a first quarter rate, so we know what that is. And then if you were to take the remainder of our business for the last three quarters of the year, as a reminder, the Green Giant canned business that we sold was about, $65 million of sales, and you strip that out, there's another $10 million of pricing around Crisco normalization, we think. And so you take that core based business for the remaining three quarters of the year, and we're assuming up or down percent, give or take.
spk02: Okay. My second question was, when companies put divisions up for review, lots of different things can happen over a long or short time horizon, but this is an asset that you've been thinking about for some time, I think. And I was wondering, in a sale process, what inning are you in, or I don't want to pin you down on a timeline, but is it a short, medium, long term kind of process to get to the other side of it?
spk16: I'm going to politely duck that question and just say M&A is unpredictable. The commentary in the press release says we're evaluating
spk14: strategic
spk16: review of the business, and we'll move
spk08: forward and update that. We have been working on the review of the business before now.
spk02: Okay. I gave you so many buckets first, but I understand. Thank you.
spk27: Thank you. Your next question is from Rob Dickinson from
spk03: Jeff Reins. Please ask your question.
spk19: Great. Thanks so much.
spk20: Bruce is curious.
spk21: We were talking about the divestment potential of Green Giant, Frozen, probably not complete shock here. We've talked $400 million in revenue, look at the margin profile, and then let's say maybe it's unpredictable, there could be another 10% or smaller brands, etc. But at some point, the EBITDA does kind of add up a little bit relative to what you're paying with the dividend. I feel like it always comes up with B&G and also leverage. So I'm just curious, as we all think about the portfolio reshaping and divestment potential, how do you want us then to be thinking about this overall capital structure? If you were to sell these specific brands and businesses, clearly you get the cash in, that's multiple contingent. But at the same time, you would, I guess, in theory, still have less free cash flow generation absent future acquisition. So trying to be comprehensive in the question, just to give you an opportunity to talk about capital structure a little bit. That's all I have. Thanks.
spk16: Yeah. I'm going to talk a little bit of that, other than say we are committed to a dividend. We are talking about potentially a couple of small, smallest divesters and a potential larger one. Certainly that would accelerate from a capital structure or deleveraging and bring us down closer to that four and a half to five and a half times
spk13: that we want to
spk16: get to. And as part of that, thinking through proceeds and what the right capital structure looks like, I think it's a little bit early to say exactly what that'll be and when. But we are committed to a dividend and we're very much contributed to bringing our leverage down.
spk21: All right. Good enough. I'll pass it on. Thank you, sir.
spk03: Thank you. Once again, please press star one should be able to ask a question. Your next question is from David Palmer from Evercore. Please ask your question.
spk18: Hi. Yeah, I'm curious just on the announced strategic review and potential sale. You know, it does feel like to Rob's point before, it does feel like this is a long time coming and for you to put it under review now. I'm just wondering, you know, why this communication now and is there something about the timing that seems right for you to do this method of selling it now? And this announcement and then separately, I just wonder if you've done the performer math, how much better of a company would be in GB? Not just with this, the canned and the rest of the canned in the frozen business, but also the sale of the 10 to 15 percent that you're also contemplating selling. How much better of a company would this be? What does that do to pro forma, maybe historic revenue growth rates and margin structure?
spk29: Sure.
spk18: So a couple things in there, right?
spk16: And part one, this is our first quarter with our new business unit or segment results. You know, we've been talking about getting to this stage for some time and sort of, you know, Casey has made a point as he came on board talking about the strategy and how he wants to run the business and grow the business going forward and what areas we want to invest in and what areas are maintained and drive cash. And so this is a natural culmination of that reorg of the business into segments and our first time reporting segment results. And I think the whole concept here is improving the business. And so you're asking the right questions. Obviously, we're not in a position to disclose, you know, the outcome, but certainly you can see by the margins, we will improve our margin profile from an inventory standpoint. This is a more inventory and working capital,
spk04: intensive
spk16: business, a little bit more seasonality, less so since we already got rid of the canned business, but more seasonality in the working capital. And we certainly would anticipate accelerating our deep leveraging of the business. And at the end of the day, we want to get back to strong commitment to the dividend using those free cash flows for a combination of paying a dividend and reducing leverage and going back
spk05: to
spk16: acquiring businesses. Does that make sense for us and fit in our portfolio with a different strategy for each business unit that Casey's outlined?
spk08: I think in simple terms, we want to get to a company that's capable of growing at, you know, one, maybe 2% on the top line. We want to get to a company that has closer to a 20% EBITDA margin. We want to get to a company that has stronger cash conversion. And we want a company with clear platforms that we can acquire on and drive value. And that's what we're trying to do. And that's what this announcement and discussion is today. How do we get to that? We're pretty clear in those three other business units that we have platforms. We're pretty clear that we can get to that kind of performance that we're talking about in terms of growth and margins. And this, I think, is just the culmination of a lot of work to say, what's the right structure long term for us to go back and acquire and build?
spk16: Green Giant is obviously a great brand. It's iconic. At a point in time, it was one of the fastest growing brands in the grocery store. It's just very different from a lot of the other things that we own from the profiles at that point. And we want to be a focused business,
spk13: as
spk16: Casey said.
spk18: I want to just ask a follow-up. Thank you. That's all great color, by the way. Thank you. I wanted to follow up on the food service side. I mean, the industry was obviously pretty lousy in restaurants in the first quarter. Volume or traffic was down 2% as an industry in the first quarter. Your number, I think you said down 12, 13 or so percent. That's obviously not equivalent. But how much worse in a volumetric basis than the industry were you? And why would it be worse? I'm not really sure.
spk08: I think it's just, you know, we see traffic numbers, at least from our customer base, a little bit lower than what you just quoted. So I think this is all really timing about people adjusting inventories. I mean, think about spices, right? So how much people are maintaining inventory in our distributors, et cetera. So I just think it's a timing issue. It's reflecting the general slowdown. You know, we're going to keep watching it to see what we think the longer-term trend is. But I think we're going to have, and we have a tough cop, I think, in the first quarter versus last year. So we think we'll be down in the second quarter, probably a little bit better in the third and the fourth, based on the trend analysis we're seeing.
spk18: Yeah. I mean, I guess you probably overindex some players that had a really rough, I mean, there were some chains out there that had rough going. And I'll maybe
spk08: offline. We have one or two chains that we deal with directly that had much worse numbers. But, you know, it is what it is. The
spk16: other
spk08: part
spk16: of it is some of our food services work is through large distributors, and sometimes that can be a little bit lumpy. As opposed to the following trend.
spk18: Yeah, I think that's going to be the story. That's stuff you're talking about. There's much more math there than there will be for the industry trend, is my comment back on that. Thank you.
spk03: Thank
spk27: you. Your next question
spk03: is from Carla Casanoa from JP Morgan. Please ask your question.
spk32: I just had a couple of follow-ups. I think, I'm not sure if you said this in your preparatory remarks, but I think you paid down $22 million of the term loan B with the Green Giant proceeds in fourth quarter, and there was another payment coming in first quarter. Was that, do I have that correct? I was assuming another $30-something million in first quarter. Was there a payment?
spk16: So there were two, the way it works for our covenants, and now that we've got the senior secured notes, there's got to be a payment to the term loan and then an offer to the new senior secured note holders. And then those new senior secured note holders don't have to take that payment. If they don't, it goes to the term loan. We kind of detail that in our queue in the subsequent events. So essentially, fair point to say, take what we paid down on the term loan and assume it essentially doubles.
spk32: Okay. And in the queue, we'll get the exact numbers on how big the term loan is.
spk16: Yeah, it's about $44 million in total, which is what we needed to pay down. So again, half of that went to term loan investors right away. So essentially, on the senior secured notes, very little came back to us, so it'll be more towards the term loan. The notes are trading well above par, so as expected, someone's not going to take that money back at par when it's trading at whatever 103, 104.
spk32: Right, so when do you make that second term loan payment with whatever's left?
spk16: In the second quarter.
spk32: Okay, okay, so it wasn't made in first. That's what I was checking. It was
spk16: not made in the first, no, early days of the second quarter.
spk32: Okay, great. Thank you.
spk27: That's all I had. Thank you.
spk03: There are no further questions at this time. That concludes the question and answer session for today. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may all disconnect.
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