B&G Foods, Inc.

Good day, and welcome to the B&G Foods first quarter 2025 earnings call. Today's call, which is being recorded, is scheduled to last about one hour, including remarks by B&G Foods management and the question and answer session. I would now like to turn the call over to A.J. Schwab, Senior Associate, Corporate Strategy and Business Development for B&G Foods. A.J.? ?

Good afternoon, and thank you for joining us. With me today are Casey Keller, our Chief Executive Officer, and Bruce Wacca, our Chief Financial Officer. You can access detailed financial information on the quarter 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 a more detailed discussion of the risks that could impact our company's future operating results and financial condition. B&G Foods undertakes no obligation to publicly update or revise any forward-looking statements. whether as a result of new information, future events, or otherwise. We will also be making references on today's call to the non-GAAP financial measures adjusted EBITDA, segment adjusted EBITDA, adjusted net income, adjusted diluted earnings per share, adjusted gross profit, adjusted gross profit percentage, base business net sales, and segment adjusted expenses. Reconciliations of these financial measures to the most directly comparable GAAP financial measures are provided in today's earnings release. Casey will begin the call with opening remarks and discuss various factors that affected our results, selected business highlights, and his thoughts concerning the outlook for the remainder of fiscal 2025. Bruce will then discuss our financial results for the first quarter 2025 and our revised guidance for fiscal 2025. I would now like to turn the call over to Casey.

Good afternoon. Thank you, AJ, and thank you all for joining us today for our first quarter 2025 earnings call. Today, I will cover an overview of first quarter results and the key drivers. Bruce will cover more specific financial results. An outlook for the remainder of fiscal year 2025. Actions to improve performance in EBITDA delivery. and an update on our portfolio reshaping efforts. Q1 results. The first quarter results reflect the challenging environment in the packaged foods industry at the start of 2025, after relatively solid performance in the fourth quarter of 2024. Net sales in quarter one 2025 were down minus 10.5%, driven by a major decline in January of almost 20% versus last year. Net sales trends improved throughout the quarter and continued to improve in April and early May. Adjusted EBITDA was down $15.9 million to a large extent reflecting the lower net sales in the quarter and increased costs and investment in the green giant U.S. business. Some of the key drivers of first quarter performance were consumption trends. Like other packaged food center store peers, B&G Foods' consumption trends have not yet stabilized following the high inflation and consumer reaction over the past couple years. Across measured and unmeasured channels, our consumption was approximately minus 6% in the quarter one period. We expect the trends will improve in the back half as we lap negative comps from the middle of last year. The trends are also starting to improve with April consumption minus 2% to 3% across the portfolio. Retailer inventories. During January and February, B&G Foods significantly undershipped consumption across major retailers. Many retailers reduced weeks of supply by almost two weeks and cleared remaining fall merchandising stock more rapidly than in previous years. We estimate the net sales impact was roughly $15 million in quarter one. Easter timing shift. In 2025, Easter fell in late April versus March in 2024. Easter merchandising, principally on the Green Giant and Christopher brands, was shipped and executed in April this year against Easter performance in March last year. We estimate the net sales impact to be approximately $8 million in quarter one, shifting into Q2. Green Giants. The U.S. frozen green giant business drove approximately two-thirds of the total BNG-adjusted EBITDA decline versus last year. The frozen and vegetable business unit segment EBITDA declined $9.3 million in the first quarter. During Q1, we increased short-term promotion investment to support the brand and meet key retailer needs. In addition, seasonal pack costs were high, reflecting crop issues on core vegetable lines predominantly corn and peas. Fiscal year 25 outlook. We are seeing improving trends in April and early May net sales and volumes, but because of the slow start in quarter one and a more gradual recovery in consumption trends, we are revising both net sales and adjusted EBITDA guidance down for fiscal year 25. The net sales range is now $1.86 to $1.91 billion, with adjusted EBITDA at $280 to $290 million. Our expectation is that underlying net sales and consumption trends improve to minus 2% to flat in the second half, with the benefit of a partial 53rd week in the fourth quarter. We continue to see uncertainty in the near term on center store trends, but fully expect to lap the impact of changing consumer behaviors in food purchases following high inflation. For adjusted EBITDA, we have lowered the range by $10 million for fiscal year 25, based largely upon the decline in the first quarter. However, we have also implemented efforts to reduce operating and overhead costs in the third and fourth quarters, which we expect to deliver $10 million in projected savings for this year, with an annual run rate of $15 to $20 million. These include additional productivity in cost of goods sold, trade and market spending efficiencies, accelerated SG&A savings, and discretionary spending cuts. We also forecast some favorability from the Mexican peso foreign exchange on the portion of the green giant business manufactured in Mexico. Portfolio shaping. B&G Foods remains committed to reshaping and restructuring our portfolio to sharpen focus, simplify our portfolio, improve margins and cash flow, and maximize future value creation. This is a very high priority for the company and critical to our future strategic direction and risk profile. The end game is to create a more highly focused B&G Foods with adjusted EBITDA as a percentage of net sales approaching 20%. increased cash flow generation, lower leverage closer to five times, a more efficient cost structure, and clear synergies within the portfolio. And ultimately, to build a stable platform that can be the foundation for future-focused M&A growth in our core business lines, principally spices and seasonings, Mexican meal preparation, and baking staples. As previously discussed, we have been evaluating the frozen and remaining canned vegetable businesses for for 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 vegetable category is on trend with health and dietary trends. It just may not be the right fit with B&G Foods' focus and capabilities, particularly since there are no plans to add more assets in the frozen portfolio, given the opportunities in our core shelf-stable businesses and overall capital constraints. We are also evaluating divesters of other non-core business in the portfolio with any proceeds from divesters used to pay down debt. Thank you, and I will now turn the call over to Bruce for more detail on the quarterly performance and outlook for the remainder of fiscal year 2025. Thank you, Casey.

Good afternoon, everyone. Thank you for joining us today. As you can see, despite a reasonably strong finish to 2024, we had a very challenging start to 2025. For the first quarter of 2025, we generated $425.4 million in net sales, $59.1 million in adjusted EBITDA, 13.9% adjusted EBITDA as a percentage of net sales, and 4 cents in adjusted diluted earnings per share. The cadence of our year start deserves more context than usual, regarding our monthly net sales performance as compared to the prior year periods. January and February were especially challenging, with February showing improvement versus January. We experienced a similar retailer-to-stocking phenomenon that many in the industry peers have reported at the start of the year. During this period, we undershipped versus our consumption in retail track channels. March demonstrated progress despite the Easter holiday shift to April, with net sales down approximately 5%. As an encouraging preview of what may lie ahead, April has begun to show signs of the stabilization we've anticipated, with net sales down only 2%. This improvement was driven in part by strong performance from Green Giant in both the frozen and shelf stable categories. Overall, Net sales for the first quarter of 2025 decreased by $49.8 million, or 10.5%, to $425.4 million, from $475.2 million for the first quarter of 2024. Base business net sales, which for this quarter largely match our net sales, decreased by $49.9 million, or 10.5%, in the first quarter of 2025 compared to the first quarter of 2024. $42.4 million or 8.9 percentage points of the decline in base business net sales was driven by lower volumes. $5.5 million or 1.2 percentage points of the decline was driven by a decrease in net pricing and the impact of product mix. And approximately $2 million or 0.4 percentage points was driven by the negative impact of foreign currency. Net sales for frozen and vegetables and Crisco accounted for approximately 44% of the decline in our net sales for the quarter. Net sales of frozen and vegetables decreased by $11.8 million, or 11.2%. Reduced volumes, particularly in January and February, drove approximately one half of the decline. Additionally, we significantly increased our promotional trade spending to support Green Giant to start the year. Given the soft category trends, we implemented a targeted promotional pricing investment with key retail partners, which we subsequently expanded following the supply chain challenges experienced by a competitor. While this promotional pricing decision temporarily impacted our net sales and P&L in the short term, It allowed us to strengthen our relationships with valued customers while also delivering meaningful price relief to consumers during the challenging period. With similar pacing trends to overall B&G foods, our frozen and vegetables business showed sequential monthly improvement during the quarter. Net sales of frozen and vegetables decreased only slightly or approximately 1% for the month of March. Frozen and vegetables then had a strong Easter holiday with April net sales up mid-single digits for both our frozen and shelf-stable products. And despite the challenging consumer environment in the US, our frozen and vegetables business has performed exceptionally well in Canada, driving mid-single digit net sales growth for the first quarter, despite a nearly $2 million negative impact from currency translation into our consolidated results. Net sales for our Crisco brand decreased by $10 million, or 15.4%, for the first quarter of 2025, as compared to the first quarter of 2024, as the category continues to reset prices and input costs stabilize. Approximately half of the decline for Crisco was driven by lower net pricing and product mix, and approximately half of the decline was driven by lower volumes. Gross profit for our overall business was $90.1 million for the first quarter of 2025, or 21.2% of net sales. Adjusted gross profit, which excludes the negative impact of a half a million dollars of acquisition divestiture-related expenses and non-recurring expenses included in our cost of goods sold for the first quarter, was $90.6 million, or 21.3% of net sales. Gross profit was $108.9 million in the first quarter of 2024, or 22.9% of net sales. Adjusted gross profit, which excludes the negative impact of $1 million of acquisition divestiture-related expenses and non-recurring expenses included in cost of goods sold during the first quarter of 2024, was $109.9 million, or 23.1% of net sales. Promotional trade spend, which is captured in our net sales line, increased by approximately 175 basis points in the first quarter of 2025 as compared to the first quarter of 2024, as we continue to invest in our brands and attempt to reflect lower prices on shelf to consumers. The increased promotional trade spend drove the majority of the decrease in net pricing in our sales line, as well as the majority of the decrease in our gross profit and adjusted gross profit as a percentage of net sales. Our material labor and overhead costs when measured against gross sales were essentially flat during the first quarter as compared to the first quarter of last year. Input cost inflation as measured by raw material costs across our basket of inputs and in our factories has remained mostly modest thus far in 2025. outside of some categories such as black pepper, garlic, olive oil, tomatoes, core vegetables, and cans, which have remained elevated. We are obviously watching closely for any increased signs of inflation throughout the trade and tariff negotiations. While we haven't yet seen the benefit of more normal or favorable U.S. dollar to Mexican peso exchange rate flows into our P&L this year, we still expect to see some benefit in the back half of the year. However, currency remains a potential wild card given the current macroeconomic environment and the political uncertainty regarding tariffs. Selling general and administrative expenses increased by a half a million dollars or 1.1% to $49.1 million for the first quarter of 2025 from $48.6 million for the first quarter of 2024. The increase was composed of increases in acquisition divestiture-related and non-recurring expenses of $4.2 million and general and administrative expenses of $0.5 million, partially offset by decreases in consumer marketing expenses of $3.3 million and selling expenses of $0.9 million. Expressed as a percentage of net sales, selling general and administrative expenses increased by 1.4 percentage points to 11.6% for the first quarter of 2025 as compared to 10.2% for the first quarter of 2024. As I mentioned earlier, we generated $59.1 million in adjusted EBITDA, or 13.9% of net sales in the first quarter of 2025 compared to $75 million, or 15.8% of net sales in the first quarter of 2024. The decrease in adjusted EBITDA as a percentage of net sales was primarily due to our increased investment in promotional trade spent. After removing the impact of trade, adjusted EBITDA margins were more comparable year over year. Net interest expense remained flat at $37.8 million for the first quarter of 2025 as compared to the first quarter of 2024. Depreciation and amortization was $16.8 million in the first quarter of 2025, which is largely in line with $17.2 million for the first quarter of last year. We had adjusted net income of $3.4 million, or 4 cents, per adjusted diluted share in the first quarter of 2025. In the first quarter of 2024, we had adjusted net income of $14.4 million, or 18 cents, per adjusted diluted share. Adjustments to our EBITDA net income are described further in our earnings release. I would now like to touch on our results by business unit for the first quarter. Net sales for specialty decreased by $20.3 million or 13.1% in the first quarter of 2025 to $134.4 million from $154.7 million in the first quarter of 2024. The decrease in specialty segment sales was primarily driven by a combination of lower net pricing and decreased volumes across the specialty business unit in the aggregate. Specialty segment adjusted EBITDA decreased by $3.7 million, or 9.9% in the first quarter of 2025. The decrease was primarily due to a decrease in net sales, which was offset in part by an increase in segment adjusted EBITDA as a percentage of net sales. Net sales for meals decreased by $13.9 million, or 11.6%, in the first quarter of 2025 to $106.1 million, from $120 million for the first quarter of 2024. The decrease was primarily due to a decrease in volumes across the meals business unit in the aggregate, coupled with a decrease in net pricing and product mix. Meals segment-adjusted EBITDA decreased by approximately as lower net sales were largely offset by an increase in segment-adjusted EBITDA as a percentage of net sales. Net sales for frozen and vegetables were down by $11.8 million, or 11.2%, in the first quarter of 2025 compared to the first quarter of 2024. As I mentioned earlier, a significant portion of the decline was driven by the impact of our investments in pricing, increased promotional trade spend, and the timing shift of Easter. Meanwhile, frozen and vegetables in Canada performed quite well with net sales up mid-single digits for the quarter. Frozen and vegetable segment adjusted EBITDA was a negative $1.5 million for the first quarter of 2025 compared to $7.8 million for the year-ago quarter. Approximately $6 million of the decline was driven by increased trade spend that was targeted and temporary. and nearly $2 million from increased seasonal pack costs on core vegetable products, including corn on the cob and peas. The remainder of the decrease was driven by lower net sales. Looking ahead for frozen vegetables, we anticipate significant cost improvements in the upcoming production cycle compared to the previous pack season. We expect these production costs to benefit positively and impact our financial performance beginning in the fourth quarter of this year. Net sales for spices and flavor solutions decreased by $3.8 million, or 4% in the first quarter of 2025, to $91.7 million from $95.6 million in the first quarter of 2024. The decrease was primarily due to a decline in volumes across the spices and flavor solutions business unit in the aggregate. Performance was softer than we typically expect for the portfolio, although our food service and private label brands performed reasonably well for the quarter. Spices and flavor solutions segment-adjusted EBITDA decreased by $2.4 million, or 8.4%, in the first quarter of 2025 compared to the first quarter of 2024. The decrease in segment-adjusted EBITDA was largely driven by decreases in net sales, increases in raw material costs such as black pepper and garlic, and the negative impact of product mix. Now moving to our consolidated cash flow and balance sheet. Cash flow was quite strong for the quarter. We generated $52.7 million in net cash from operations during Q1 of 2025 versus $35.1 million in Q1 2024. We reduced our debt to $1.967 billion at the end of the first quarter 2025, compared to $1.994 billion at the fourth quarter 2024, and $2.012 billion at the end of the first quarter 2024. While we have no updates on the capital markets front, as a reminder, approximately 35% of our long-term debt is tied to floating interest rates or, for us, SOFR. 100 basis point rate reduction would be expected to reduce our interest expense by approximately $7 million. Given the soft start of the year and the heightened economic uncertainty due to, among other things, the ongoing trade and tariff negotiations, we are reducing our fiscal 2025 guidance range. We now expect net sales of $1.86 billion to $1.91 billion, adjusted EBITDA of $280 to $290 million, and adjusted earnings per share of 55 cents to 65 cents. Our updated guidance accounts for a modestly softer economic environment that may impact consumer spending patterns. It also reflects our expectation that our top line will continue to stabilize and that our input costs will remain relatively consistent. In addition, our guidance also assumes a cost reduction plan we have implemented will produce approximately $10 million of cost savings during the remainder of the year. Given the uncertainty in the political economic environment and rapidly evolving negotiations regarding tariffs and retaliatory tariffs, our guidance does not reflect the potential impacts of the recently imposed and threatened tariffs by the U.S. and retaliatory actions taken or threatened by other countries in response. or the potential for additional tariffs, trade barriers, or retaliatory actions by the U.S. or other countries. For perspective, more than 90 percent of our net sales are to customers in the United States, and the remainder are primarily to customers in Canada. Approximately 80 to 85 percent of our products, ingredients, and raw materials are sourced in the United States, Canada, and Mexico. The majority of our non-North American sourced products are sourced from Asian countries, particularly within our spices and flavor solutions business unit, such as black pepper, which is primarily sourced in Vietnam, and garlic, which is primarily sourced in China. Many of these imported spices are classified as unavailable natural resources, which we believe may ultimately qualify for reduced or zero tariff rates. Additionally, we expect for full year 2025 Interest expense of $147.5 to $152.5 million, including cash interest of $142.5 to $147.5 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 $30 to $35 million. Now I will turn the call back over to Casey for further remarks.

Thank you, Bruce. To close, B&G Foods continues to remain laser-focused on the critical priorities, improving the base business net sales trends of our core business to the long-term objective of plus 1%, reshaping the portfolio for future growth, stability, higher margins, and cash flows, as well as structuring key platforms for future acquisition growth. and reducing leverage below 5.5 times through divestitures and excess cash flow to facilitate strategic acquisitions. This concludes our remarks, and now we would like to begin the Q&A portion of our call. Operator?

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Michael Lavery with Piper Sandler. Please go ahead.

Thank you. Good afternoon. Hey, Michael. Just back on some of the questions tariff considerations. Can you give us a sense just for maybe how that impacts your potential sale of frozen? Is it essentially put it on hold till there's better clarity there? What are some of the maybe ripple effects and if the reciprocal tariffs kick in that are on pause or if the pause tariffs of any kind come through, Is there any concerns with things like what that could mean for debt covenants? I mean, some of the ways we can do the math, the magnitude can get a little big. Help us just understand maybe how you're contingency planning and thinking about that.

Yeah, so part one, we don't typically comment on any ongoing M&A discussions. Obviously, we've made it clear the business unit's under strategic review. From a tariff perspective, at least with regards to to that business. Everything Green Giant World is compliant under USMCA from a manufacturing in Mexico and moving to the US. Our Canadian business, for Green Giant at least, is almost entirely made in Canada, and so there's no real impacts there. Obviously, like everybody else, we're watching the news and trying to do as best as we can to understand what the implications are and when these negotiations are finished.

And so just to follow up, if they were reinstated or instated and you end up facing the tariffs that are paused but that you could identify, can you give a sense of what magnitude that is? Have you been able to put a number on it or help us understand what that could look like?

Yeah, I don't think most people could put a number on it because they change every day. We're watching like everybody else. Certainly, we would look at different parts of our business and have an understanding of what the competitive set looks like, but it's hard to predict where tariffs are going to go right now.

As we talked in the script in our comments, the largest potential risk is in our spices business. coming from China, Southeast Asia, Vietnam, etc., that's the biggest risk. Some of those are on pause. China is obviously in negotiation. Those are the ones we just can't predict. What is the final rate in China? We don't know. It was as high as 150% at one point. Now it's come down. The risk is significant, but we're confident that negotiations will continue and that the things on pause will be negotiated as well. We know there's a lot of progress with Vietnam, et cetera. So, I mean, honestly, from a Mexico standpoint, we're not that worried because it appears that as long as you're NAFTA or USMCA compliant, that we should be fine going forward. And so I don't think that will have any major impact on our green giant business.

And the other thing to keep in mind with our spice business is virtually everybody that buys the products that we manufacture and spice, whether it's garlic or black pepper, they're buying from the same regions, and so that would be kind of an industry phenomenon rather than a unique B&G sourcing phenomenon.

Okay. That's helpful, Culler. I'll pass it on. Thanks.

Thank you. Our next question comes from Robert Mosco with TD Cabin. Please go ahead.

Hi. Good afternoon. So, you know, the stock reaction today was more dramatic than I expected. And I'm just wondering if it has led to any kind of discussions internally about accelerating your portfolio changes or accelerating cost reduction programs. I know it's only, you know, 12 hours of reaction, but wanted to get your reaction, please.

Honestly, we were already accelerating. I mean, this isn't news to us today. I mean, we were already looking at how do we accelerate our portfolio shaping efforts, and we've been working pretty diligently on that. You know, I obviously can't comment on it, but that's been a major focus for us to make the changes in the portfolio that we think are necessary for the long term. And what I talked today about the cost reduction efforts, you know, $10 million this year, run rate of $15 to $20 million. we've been working on that for, you know, a few months now to get those implemented this year. And, you know, we've got, we were already trying to drive those pretty fast and hard. So, you know, today gives me more conviction that we've got to move those things as fast as possible, but we were already doing that. We were already pushing the accelerator on both those efforts pretty hard.

Okay.

And I guess the other, the only other thing I would say, Rob, is that The other piece of this is as we reshape the portfolio, we will take some pretty significant actions to right-size our cost structure as we divest businesses. So that's another effort that's being planned that's probably part of a larger restructuring.

Got it. And I wanted to try to drill down to the negative 2% you called out in April as a consumption trend. Is that a clean number, or are there any Easter elements that make it maybe stronger because of the later Easter?

Yeah, I think there's maybe a little bit of Easter help in that number, but I think even the underlying number before Easter benefits is improving versus what we're seeing in the you know, early part of the first quarter and then, you know, towards the end of last year in the fourth quarter. So we are seeing some improvement in that trend. You know, it's gradual, and I don't – we really didn't expect a significant change because we don't lap the, you know, sort of the negative comps until the middle of the year. We weren't expecting a lot of change, but, you know, it's encouraging us. We're seeing a little bit of light in the consumption trends, but we need to see more. We need to see it continue.

Okay, can I ask one more? The 50 million of inventory deload, did the vast majority of that happen in January, or was it kind of spread out?

I think I said 15, 1-5, just to make it clear. 1-5, 1-5, yeah. I would say most of that occurred in January at the end of the month, and some of it in February. Okay. But, you know, we saw our volumes, kind of our shipments, pretty low in the very end of the month in January.

Got it.

Okay.

Thanks so much. Yep. Thanks Rob.

The next question comes from Scott Marks with Jefferies. Please go ahead.

Hey, good afternoon guys. Thanks so much for taking our questions. Um, first thing I wanted to ask about is this retailer inventory reduction. Is there any expectation of recouping some of that loss volume, whether it's during the Easter period or later in the year?

I don't think so. I think this was a permanent reduction. We typically see some of this reduction from the fall period happen more gradually than it did this year. We could see maybe some smoothing out of that effect this year, but our assumption right now is that they've taken the weeks down. and 80% of that will stick as they try and operate more efficiently and operate with lower inventories just like we're doing. So, I mean, it was a little bit of a surprise to us in terms of what happened and how much they took out. But I think our operating assumption right now is that they're trying to be more efficient, and we need to kind of plan that those inventory reductions are largely permanent. or they will operate with more weeks of supply and maybe some of it will come back, but just as a small portion.

Got it. And then I think there was also a comment that you made in the prepared remarks about, you know, about kind of fully laughing this changing consumer behavior at some point. You know, I think we kind of heard thoughts from others around the industry that this would have happened a bit sooner after the initial kind of inflationary shock from, from a couple of years ago. So, you know, I'm just curious if you can kind of speak to maybe, you know, what kind of gives you that, you know, confidence that that can happen? Because I think more recently we've heard about some declining consumer sentiment from some of your peers. So just trying to gauge how you're thinking about, you know, the consumer right now and when maybe some of those behaviors will shift back.

Thanks. I don't think there's a point in time where We laugh everything, all consumer behavior. I think it will be a gradual process. But what we see in our own brands and categories, and obviously our categories operate differently, particularly Crisco with prices moving up and down quite a bit. We believe that we're lapping the larger negative comps in our business and categories in the middle of this year. So call it the start of the third quarter. And that we're looking at that and saying, is that kind of a demarcation when we begin to see less negative comps because we're already lapping the first round of consumer behavior changes and everything else. So we're going to watch this pretty closely. It's encouraging to me. We're seeing a little bit of signs in our recent weeks that maybe some of the declines will begin to lessen. But it's that simple. It's like looking at kind of the year-over-year trends and when do we hit those points where we saw some significant declines. But I don't think it's a point in time. I think it's, you know, it's faith in terms of different categories and when people reacted to different price points and when prices actually changed in different categories.

Got it. Thanks for the thoughts.

I'll pass it on.

Our next question comes from William Reuter with Bank of America. Please go ahead.

Hey, Bill.

Hi. Hi. Good afternoon. I've got just a couple of questions. The first, on your ABL, are there any constraints on your ability to borrow the full amount based upon the credit agreement covenants, or do you have access to the entirety of it?

So it's actually not an ABL. It's a cash flow revolver.

Sorry, yes, I said that wrong.

So if you think about sort of the way those two work, the ABL, we're going to be limited by what's our inventory, et cetera. Here, we've got some covenants, but we also are less reliant on our revolvers today than we were in the past around working capital following the sale of the Green Giant canned business. So we'll still have some swings around the holidays, but not nearly as big. And then separately, really, that revolver was sized for acquisition. So I wouldn't anticipate fully drawing on that revolver unless we were buying something.

Okay. Can you share what's available today?

I mean, it's a couple hundred million dollars drawn at the $475 million revolver.

Right. Okay. Okay. And then with regard to the timing of the late January reductions of inventory, I think a lot of retailers reset their shelves around that period of time. Were there any shelf-based losses as part of those resets?

Actually, retailers reset shelves kind of on a phased approach by category across the year. There's not a lot of We don't really see, you know, a specific point in time that they do multiple categories. So, no, it was really around how are they managing their weeks of supply. There are some resets, one or two in our categories in March, but I don't think that was really the impact. It was, you know, making some decisions to pull down inventories on, you know, on categories and run with lower level supply and maybe even take out, you know, seasonal merchandising from the fall period. seasonal inventory faster than you typically see.

Yeah, as Casey said, our commentary is more around destocking rather than reset, which impacted us. Yeah, yeah.

Got it. And then just lastly, the decision to promote a little bit more, I mean, was that decision based upon either retailers that were going to reduce your shelf space or maybe that, you know, given these elevated promotions that you've gained more? Can you talk a little bit about the decision to make the promotions that clearly hit EBIT in the quarter?

I mean, it's largely in the green giant frozen business. And, you know, number one, I think we determined that we needed to get, you know, sharper price points and promotions to be competitive in the category because we saw, you know, other people promoting and being more aggressive. And so we decided to respond. to be able to do that. And we also felt that we needed to make sure that our volumes were moving more quickly and our velocities were increasing, and we saw that happen. So this was really a decision to make sure that we're competitive, make sure that our business was healthy. And as I said, it was a short-term decision in that period of time that now we've kind of pulled back on some of those trade investments, but I'm encouraged that our actual business on the U.S. frozen net sales was up. positive in April after we pulled back on the trade investment. So some of that was either merchandising, but we've continued to see good trends on that business. But we made a short-term decision to get competitive against, you know, some pretty aggressive promotion activity. And, you know, we suffered a little bit in the fourth quarter, probably by not responding aggressively enough. And we did that in the first quarter. And as I said, you know, I'm encouraged by the trends as we pulled back that trade investment that our business is healthy.

Got it. All right, that's all very helpful. Thank you. Thanks, Bill.

Thank you. Again, if you have a question, please press star, then one. Our next question comes from Caru Martinson with Jefferies. Please go ahead.

Hi, thanks for taking my question. This is Bestiana on for Caru. On the frozen and vegetable segment, what will be the run rate for promo moving forward? And with the pressures that you've seen in Green Giant, has that brand's performance influenced how you and your potential suitors are looking at valuation?

So, again, from an M&A standpoint, we wouldn't comment on that. As far as promotional run rate, as Casey said, we leaned in a little bit harder in the first quarter, just given the challenging backdrop. from a category standpoint. We think that we had really good performance from the top line in response to that, particularly in March and April. But we don't necessarily disclose our promotional rates or cadence on a go-forward basis.

I think we will resume more normal kind of trade promotion spending rates for the remainder of the year. This was investment we put in to be competitive, but we're feeling like right now our plans are competitive.

Thank you.

This concludes our question and answer session and our conference. Thank you for attending today's presentation. You may now disconnect.