B&G Foods, Inc.

Good day and welcome to the B&G Foods Inc. 3rd Quarter 2025 Financial Results Conference Call. Today's call, which is being recorded, is scheduled to last about one hour, including remarks by B&G Foods Management and the question and answer session. I would now like to turn the call over to AJ Squab, Senior Associate, Corporate Strategy and Business Development for B&G Foods. Thank you and over to you.

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 third quarter of 2025 and our updated 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 third quarter 2025 earnings call. Today I will cover an overview of third quarter performance. Bruce will cover more detailed financial results, an update on recent divesters and future portfolio, and the outlook for Q4 and beyond. Q3 results. The third quarter demonstrated significant improvement in adjusted EBITDA delivery with sequential improvement in base business net sales trends. Q3 net sales of $439.3 million finished minus 4.7% versus last year, although base business net sales, which excludes the impact of divestitures, were down minus 2.7%. Third quarter adjusted EBITDA was $70.4 million, flat versus last year on a reported basis, but up year over year, excluding the impact of divestitures. Some of the key drivers. Q3 benefited from the implementation of our back half $10 million cost savings initiative. SG&A overhead was down $2 million from last year as a result of specific restructuring actions. Cost of goods sold, or COGS, as a percentage of net sales improved 40 basis points versus last year behind incremental productivity efforts. The frozen and vegetables business unit delivered strong segment-adjusted EBITDA recovery in Q3, plus $3 million, as new crop pack costs came in favorable to last year's wheat crop, and our Mexico facility achieved strong productivity gains. The spices and seasonings business unit grew net sales plus 2.1% in Q3, benefiting from the growth in fresh food and proteins, as well as strength in our club and food service channels. Segment adjusted EBITDA was impacted by tariffs, with targeted pricing implemented to recover those costs in Q4. The divestiture of the Don Pepino and Sclafani business in May, and the LeSueur U.S. canned peas brand in August, Removed approximately $10.3 million of net sales and $3.2 million in adjusted EBITDA from Q3. Portfolio divestitures. B&G Foods continued strong progress in reshaping and restructuring our portfolio in the third quarter. Last week, we announced the divestiture of our Canadian Green Giant business in canned and frozen vegetables. That divestiture is subject to Canadian regulatory approval and is expected to close late in the fourth quarter or during Q1 fiscal year 26. Further, we continue to evaluate and pursue the divestiture of our Green Giant U.S. frozen business, the last part of the frozen and vegetables business unit. Green Giant is a strong brand in a good category, but is not the right fit for the B&G Foods portfolio with seasonal production, a different temperature state, geographic complexity, and higher working capital intensity. These green giant divesters, along with the recently completed Don Papino's Sclafani and LeSueur divesters, will create a more highly focused B&G Foods, which we believe will lead to adjusted EBITDA as a percentage of net sales approaching 20%, increased cash flow generation, a lower leverage ratio closer to five times, a more efficient cost structure, and clear synergies within our portfolio. Fiscal year 25 outlook. We expect the fourth quarter to show continued improvement versus the first half fiscal year 25 trend. Flat net sales excluding the divestors with year-over-year growth in adjusted EBITDA. The key assumptions behind our latest guidance. The 53rd week is expected to add 2% to 3% sales growth in Q4, a partial week benefit. Excluding the impact of the 53rd week, base business net sales are projected to be down approximately 2% to 3% in Q4, consistent with the trend in Q3. We expect to realize additional savings in Q4 as part of the incremental $10 million cost efficiency initiative launched earlier this year, with an annual run rate of approximately 15 to 20 million in savings. These include additional productivity in COGS, trade and market spending efficiencies, accelerated SG&A savings, and discretionary spending cuts. The U.S. frozen vegetables business is expected to continue to show improved adjusted EBITDA performance behind more favorable crop pack costs and strong productivity in our Mexico manufacturing facility. We have executed targeted pricing to recover incremental tariffs at existing levels. which become effective for most customers starting in November. As a result, we have revised and narrowed guidance for fiscal year 25 to $1.82 to $1.84 billion in net sales and $273 to $280 million in adjusted EBITDA, which reflects the impact of recently completed investors and the base business trends. Finally, we are committed to reducing leverage and balance sheet risk. In the third quarter, typically the high point of our seasonal inventory pack, our consolidated leverage ratio was 6.88 times. We expect to reduce our consolidated leverage ratio to six times within the next nine months by using divestor proceeds and excess cash generated through improved EBITDA performance and lower working capital needs to reduce long-term debt. Looking forward, fiscal year 26 is poised to be a transformational year with a more focused, higher margin, and stable portfolio once investors and post-closing transition services have been completed. We expect continued improvement in base business trends towards the long-term algorithm of 1%. Further, we will also become a less complex, more efficient, and leaner company behind a simplified portfolio restructuring operations to right-size overheads, and focus resources and investments behind the core categories and brands in spices and seasonings, meals, and baking staples. 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 2025.

Thank you, Casey. Good afternoon, everyone. Thank you for joining us today. I am pleased to report that despite a challenging consumer backdrop, we had a reasonably strong third quarter driven by a mix of continued strength in some channels such as club and food service, as well as a validation of our cost savings initiatives. As a reminder, we divested the Don Pepino and Squifani brands at the end of May, and then the LeSore brand in the United States on August 1st of this year. As a result, our third quarter Financial results this year exclude Don Pepino and Sclafani for the full quarter and LeSore U.S. for approximately two of the three months of the quarter. Last week, we announced the agreement to sell our Green Giant and LeSore frozen and shelf-stable product lines in Canada to Norterra Foods, subject to regulatory approval in Canada and the satisfaction of customary closing conditions. We expect the transaction to close on in the fourth quarter of 2025 or the first quarter of 2026. Because the Canadian transaction has not yet closed, it did not impact our financial results for the third quarter. Although when reviewing our 10Q, you will notice that the business has been designated as an asset held for sale on our balance sheet as of the end of the third quarter of 2025. For the third quarter of 2025, We generated $439.3 million in net sales, $70.4 million in adjusted EBITDA, 16% adjusted EBITDA as a percentage of net sales, and 15 cents in adjusted diluted earnings per share. Overall, net sales for the third quarter of 2025 decreased by $21.8 million, or 4.7%, to $439.3 million, from $461.1 million for the third quarter of 2024. Base business net sales, which exclude the net sales for the Don Pepino, Sclafani, and LeSour U.S. brands for both periods, decreased by $11.9 million, or 2.7% in the third quarter of 2025 compared to the third quarter of 2024. 12.9 million or 290 basis points of the decline in base business net sales was driven by lower volumes and 0.3 million or less than 10 basis points of the decline was driven by foreign exchange. The decline was offset in part by $1.3 million or 30 basis points of benefit from an increase in net pricing and the impact of product mix. Our spices and flavor solutions business unit led our top line performance for the third quarter with net sales up by $2.1 million or 2.1%. Driving the performance was continued growth for our partner brand and club and our food service business. Spices and flavor solutions segment adjusted EBITDA was down by approximately $2.1 million for the third quarter as a result of higher raw material costs and tariffs primarily on Chinese garlic and black pepper that is sourced from Vietnam as well as cinnamon and onions. Much like our peers in the industry, we have executed pricing actions to help offset these cost increases. Our spices and flavor solutions business unit began to see the benefit of pricing to offset certain commodity increases in July, and we expect to begin to see additional benefit to offset tariffs beginning this month. Our meals business unit had reasonable top line performance for the quarter, despite its concentration in a still-challenged retail grocery environment. Net sales for meals decreased by $1.6 million, or 1.4% for the third quarter. However, meal segment-adjusted EBITDA increased by approximately $0.6 million for the quarter. We continue to see softness for our specialty business unit. Base business net sales for specialty, which excludes net sales for the Don Pepino and Sclafani brands for both periods, decreased by approximately $7 million or 4.5% for the third quarter of 2025 as compared to the third quarter of 2024. Nearly 60% of that decline was driven by Crisco. Crisco net sales were down by $4.1 million for the third quarter with approximately half of the decrease as a result of lower net pricing that was reduced in part to reflect lower input costs for soybean oil and half driven by lower volume. Despite the decline in net sales, Crisco's segment-adjusted EBITDA was flat for the third quarter as compared to the third quarter of 2024. Overall, specialty segment-adjusted EBITDA was down $3.6 million, or 8.7% for the quarter, including the negative drag from lapping third quarter 2024 profits from the Don Pepino and Sclafani brands. Base business net sales for our frozen and vegetables business unit, which excludes net sales for the SOAR U.S. brand for both periods, declined by $5.4 million, or 6.7%, for the third quarter as compared to the third quarter of last year. However, frozen and vegetables segment adjusted EBITDA increased by $3 million as we cycled past the expensive 2024 crop season and unfavorable peso exchange rates. Green Giant is also benefiting from productivity improvements and cost savings initiatives in our Mexican manufacturing facility. Overall, for B&G Foods, gross profit for the third quarter of 2025 was $99 million, or 22.5% of net sales. Adjusted gross profit was $98.8 million, or 22.5% of net sales. Gross profit for the third quarter of 2024 was $102.3 million or 22.2% of net sales. Adjusted gross profit was $102.4 million or 22.2% of net sales. Promotional trade spend, which is captured on our net sales line, increased by approximately 110 basis points in the third quarter of 2025 versus the third quarter of 2024. sequentially favorable to year-over-year increases of 178 basis points in the first quarter of 2025 and 120 basis points in the second quarter of 2025. While we continue to invest in our brands and reduce prices on shelf for consumers, we must also balance this with managing our profitability. Our material labor and overhead costs improved by nearly 100 basis points as a percentage of gross sales during the third quarter of 2025 as compared to the third quarter of last year. Material labor and overhead costs were favorable by 40 basis points as a percentage of net sales. Input cost inflation as measured by raw material costs across the basket of inputs in our factories has remained modest thus far in 2025 except for elevated costs in black pepper, garlic, olive oil, tomatoes, core vegetables, and cans. We continue to closely monitor inflation amid ongoing trade and tariff negotiations. Tariffs again pressured our portfolio, reducing adjusted EBITDA on the third quarter by nearly $3.5 million. Approximately 60% or 2.2 million of this impacted our spices and flavor solutions business unit. Year-to-date tariff impact totals negative $5.1 million. Selling, general, and administrative costs decreased by $1.4 million, or 3%, to $44.6 million for the third quarter of 2025 from $46 million from the third quarter of 2024. The decrease was composed of a decrease in consumer marketing expenses of $1.8 million, general and administrative expenses of $0.6 million, warehousing expenses of $0.5 million, and selling expenses of $0.3 million, partially offset by an increase in acquisition, divestiture, and non-recurring expenses of $1.8 million. Selling general and administrative expenses as a percentage of net sales was 10.2%, approximately flat when compared to 10% for the prior year period. We generated $70.4 million in adjusted EBITDA, or 16% of net sales, in the third quarter of 2025, compared to $70.4 million, or 15.3% of net sales, in the second quarter of 2024. The divestiture of the Don Pepino, Squathani, and LeSour US brands during the second and third quarters of 2025 negatively impacted third quarter adjusted EBITDA by approximately $3.2 million. Net interest expense decreased by $4.9 million to $37.3 million for the third quarter of 2025 compared to $42.2 million for the third quarter of 2024. The decrease in interest expense was primarily driven by a decrease in net debt and the benefits of lower interest rates on our variable rate debt, as well as a net gain on the extinguishment of debt of $0.7 million during the third quarter of 2025, compared to a whilesome extinguishment of debt of $1.9 million during the third quarter of 2024. We repurchased an additional $20 million aggregate principal amount of 5.25% senior notes due 2027 in open market purchases during the third quarter of 2025, taking us to a year-to-date total of $40.7 million aggregate principal amount of repurchases and an average discounted purchase price of 92.94%, or a discount to principal amount of approximately $2.9 million. Depreciation and amortization was $16.6 million in the third quarter of 2025, which is largely in line with $17.2 million in the third quarter of last year. Adjusted net income increased to $11.7 million or 15 cents per adjusted diluted share in the third quarter of 2025. In the third quarter of 2024, we had adjusted net income of 10.1 million or 13 cents per adjusted diluted share. Adjustments to our EBITDA net income are detailed further in our earnings release. Now moving to our consolidated cash flows and balance sheet. We continue to expect cash flows to be strong this year, but there are some discrete items that negatively impacted net cash from operations in the third quarter of 2025. These included an unfavorable working capital comparison due in large part to the Lasur U.S. divestiture and the timing of our inventory purchases during pack season prior to the closing date of the divestiture, which had negative impact on our net cash from operations during the third quarter of 2025, but increased the purchase price we received for the LeSore U.S. divestiture, which then had a positive impact to our net cash provided by investing activities during the quarter. Pursuant to our transition services agreement for Don Pepino and Sclafani Investor, we purchased inventory during the third quarter for those brands for which we were reimbursed by the new owner in the fourth quarter. Net cash from operations was also negatively impacted by the timing of cash interest payments made during the third quarter of 2025 compared to the third quarter of 2024 as a result of the June 2024 refinancing of our five and a quarter notes due 2025. We have reduced our net debt to $1.984 billion and our consolidated leverage ratio as calculated pursuant to our credit agreement to 6.88 times in the third quarter of 2025, despite being at our seasonal peak for net debt and inventory. As we roll off the typically heavy third quarter inventory pack build, we expect leverage to improve going into the fourth quarter of this year, and we remain on track to reduce our consolidated leverage ratio to approximately six times by mid-2026. And as a reminder, approximately 35 to 40 percent of our long-term debt is tied to floating interest rates, or SOFR. A 100 basis point reduction to SOFR would be expected to reduce our interest expense by approximately $7 to $7.5 million. As Casey mentioned earlier, we continue to make progress on our portfolio reshaping efforts, as evidenced by last week's announcement regarding Green Giant Canada and the Don Pepino, Sclafani, and Lasur U.S. divestitures that we completed earlier this year during the second and third quarters. These divestitures are continuous examples of the strategy that we believe will make us a more focused and ultimately stronger company, while also helping us to reduce debt and eliminate heavy seasonal pack businesses from our portfolio. While these are great brands that will do well for their new owners, they don't align with the focus that we have laid out for the B&G foods of the future. Green Giant Canada generates approximately $100 million in annual net sales in U.S. dollars, but minimal adjusted EBITDA to our P&L. The divestitures of Don Pepino, Sclafani, and LeSore Brands in the U.S. were factored into our fiscal 2025 guidance that we provided during the second quarter earnings call. We are not yet adjusting our guidance to reflect the pending divestiture of the Green Giant and LeSore brands in Canada, given that the transaction has not yet closed. We are largely holding our fiscal 2025 guidance to the levels previously provided. However, given the still challenging consumer environment, we are revising and narrowing our top line guidance to $1.82 to $1.84 billion, adjusted EBITDA of $273 to $280 million, and adjusted earnings per share, guidance of $0.50 to $0.58. Our guidance continues to account for a modestly soft economic environment that has persistently impacted consumer spending patterns. It reflects our expectation that our top line will continue to stabilize, combined with the benefit of the 53rd week that modest pricing around tariffs will offset the majority of these costs, and that material input costs will remain relatively consistent. In addition, our guidance incorporates our cost reduction plans, which remain on track to produce the anticipated $10 million of cost savings that we have targeted for the second half of this year. We live in an uncertain world, however, and so the risks to our guidance include increased challenges in an already difficult consumer environment, a greater than expected negative volume impact as the result of our pricing initiatives to offset tariffs, trade negotiations and the potential impact of any increased or retaliatory tariffs, a softer than expected holiday season or any destocking or other inventory management by our retail customers. Additionally, we expect for full year 2025 Interest expense of $147.5 to $152.5 million, including cash interest expense 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 will likely be at the lower end of our $30 to $35 million target. And as we mentioned on our last call, we are committed to reducing our consolidated leverage ratio, which we expect to reduce to approximately six times or less by the second quarter of 2026. Through the successful execution of our investor strategy, continued stabilization of our adjusted EBITDA, our excess cash generation, and continued improvements in working capital. Now I'll return the call back to Casey for further remarks.

Thank you, Bruce. In closing, B&G Foods remains focused on a few critical priorities. Improving the base business net sales trends of our core business to the long-term objective of 1%. Reshaping the portfolio for future growth, stability, higher margins, and cash flows, as well as structuring key platforms for future acquisition growth. reducing leverage closer to five times through divestitures and exit 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?

Thank you. We will now begin the question and answer session. To ask a question, you may press star and then one on your touchtone phone. If you're 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 and then two. At this time, we will pause momentarily to assemble our roster. We have the first question from the line of Andrew Lazar from Barclays. Please go ahead.

Hey, Bruce. Hey, Andrew. Hey, Andrew. Maybe first off, Casey, third quarter sales came in a bit better than at least consensus was looking for. As you mentioned, you sort of lowered the midpoint of your full-year sales guidance, and the low end is a bit below the previous low end that you had. So maybe what are you seeing in the fourth quarter and maybe the broader environment that has sort of caused this shift?

Yeah, I think on sales guidance, mostly what we did was narrow the range down to $20 million from the previous $50 million range. We brought the bottom end down a little bit, not much. I think all we're doing is reflecting the impact of the divestitures fully and also we've kind of kept the base business net sales trends consistent with what we were seeing in Q3. So that, you know, the improvement that we saw in Q3 versus Q1, Q2, we're kind of projecting that into Q3. Into Q4, sorry, into Q4.

Yep, got it. And then I know it's a little early still because more of the pricing in the spices and flavorings business is still going to flow through. But so far, what have you seen in that segment around volume elasticity with respect to some of the pricing that you've taken?

I mean, we've just taken it literally. So, you know, it's only been out and we don't have really consumption data yet for it because most of that pricing hit kind of the end of October. We're expecting, you know, some elasticity, but not a huge amount. I mean, I think we're projecting more like, you know, 0.5, 0.6, and we'll be able to measure that within a couple weeks now. But, you know, we've seen other manufacturers take spice increases, price increases behind tariffs and commodity costs without a significant effect.

Yeah, and the pricing that we took for spices on the commodity costs earlier this this year kind of went through and, you know, we had a pretty good third quarter performance for spices. So as Casey said, we think that we should be fine.

Yeah. And on average, Andrew, these price increases to reflect tariffs are kind of in the low to single mid digits. Got it.

Thank you. We have the next question from the line of Scott Marks from Jefferies.

Please go ahead.

Hey, good afternoon. Thanks for taking our questions. First thing I wanted to ask about, you noted that you're expecting the base business performance in Q4 to be kind of in line with Q3. If we strip out the impact from the green giant U.S. business and the frozen vegetable business, how should we be thinking about that for the remaining three segments? And then further, how should we be thinking about the building blocks? for getting back to that 1% number in 2026. Thanks.

Yes, I think, well, first off, you know, what we said about Q4, we will still have the green giant Canada business and the U.S. frozen green giant business in those trend lines that we talked about. So when I said Q3 was, you know, minus 2.7%, and what we're projecting in the Q4 is minus 2% to 3%, we will still have the Green Giant pieces in there. Because remember, even though we announced Canada, we can't close it until we get regulatory approval from Canada, and we're assuming that that business remains in the portfolio for the fourth quarter. I think as we go forward, once we are able to complete the investors around Green Giant, if we're looking at the other three business units, my expectation would be that the those top line trends would be better because green giant has been probably a little bit more of our, our difficult comparisons over the last couple of years. Um, so I don't want to give you a specific number now cause it's all dependent on things happening, but you know, I would expect more stable performance from the, you know, the spice and seasonings business we're seeing growing. That category has actually been growing. Um, and we were up 2% in Q3. Um, Meals is down just a little bit, but we are starting to see some improvements in our Ortega and other trends. Our baking staples business has probably been a little bit weaker. Some of that is due to lower oil pricing on Crisco that we've reflected in market, and that's part of the sales degradation. But if I take those three businesses, I think you're going to see more stable trends on the top line. I would hope that's going to be part of our track towards getting to a flat to up 1% over time.

Got it. Appreciate the answer there. Second question for me is just as we think about that spices business, I know you mentioned kind of the strength in the food service and club business there. Just wondering if you can remind us how big Is that business for you? And maybe what are the trends that you're seeing there as it relates to consumer or customer demand relative to more traditional retail channels? Thanks.

Yeah, and I'll give you an answer overall in our portfolio. I mean, we could talk more specifically about spices. But, you know, in total, our food service business is about 13 to 14 percent of our portfolio. And we've seen pretty stable trends in that business. So we haven't really seen declines. We've seen sort of flat to modest growth in our food service business, which is a lot of spices business, going to different restaurant outlets through distributors. And we also have a syrup business going to breakfast establishments. So that business has been relatively stable. You know, our private label business, you know, we do have one, you know, we have one large business in the club channel and private label that, you know, that is a good business, profitable business and has had very strong growth trends. So we've seen, you know, our private label business actually doing pretty well in addition to our food service channels. That that's about foods. I mean, private label in total is about eight percent of our of our total sales. And that's been, you know, kind of a little bit of a growth. It's been driving some, you know, mid single digit growth for us. So, I mean, I hope that answers the question. But that's you know, we've seen some relative stability or strength in those two areas of our business, probably relative to the center store package goods branded side.

It's helpful. Appreciate the answer, so I'll pass it on.

Thank you. We have the next question on the line of Robert Moscow from TD Govern. Please go ahead.

Hi. Thank you. Two questions. You know, the six times leverage target by mid next year, Casey and Bruce. So can I assume that that assumes that you will exit the rest of Green Giant and then Now that you've exited the Canadian side and then LeSueur, does it make it easier to market the remaining U.S. business to potential buyers? And then a follow-up.

Yeah, so on the leverage piece, and we walked through this on our second call call, we were talking about a full turn of deleveraging. About half of that was coming from the divestiture of the various green giant pieces. Le Soir, Canada, and then U.S. And so I think that's the answer to your first question. The rest was stabilization of EBITDA, excess cash, and working capital management. On a go-forward basis, after all the strategic review of Green Giant is completed, assuming we no longer own the business, there will be significantly less working capital swings between quarters. So we'll still have things like Crisco and Claver that have a seasonal bake season, you know, where we build inventory in the third quarter and sell it. But it won't be as extreme as the PAC plan for Green Giant, which is why you see inventory high now, but it always comes down in the fourth quarter and then kind of continues. So that's part one. Your second question around does the divestiture of LeSore and the signed agreement, you know, still the closed, for Canada, does that impact the sale of the remaining business or does it make it easier? Not really. There are distinct conversations with logical strategic partners on all pieces, but this is two out of the three or three out of the four if you go back and include the canned business that we sold to Seneca about a year and a half ago.

Okay, got it. And then the follow-up, There's a lot of noise in the press about the SNAP cutbacks and also just like this immediate disruption related to the government shutdown. It's not just the press. I guess it's really happening in many states. So have you seen any early signs of that impacting grocery sales in your categories, or is it just too soon to know whether it'll matter?

I think it's too soon to know whether it will matter. My expectation is that if, let's say, the shutdown continues and SNAP benefits get cut in half for any extended period of time, that there could be some impact from that. I mean, I've heard Walmart and others talk about that. But I think that's going to be a temporary effect until the government gets back up in operation and SNAP benefits are restored. So, yes, I do expect there might be a temporary effect. It might be a temporary impact. It's too hard to figure out exactly how much, given the way consumers were spending and how much of their SNAP benefits they're actually receiving. But I think this is just a temporary phenomenon until this gets resolved.

And, Rob, just to reiterate on that, we typically try not to talk too much on inter-quarter performance, but certainly with regards to SNAP and any impact, we haven't seen any impact so far to date in our shipment. Got it.

All right. Very good. Thank you.

Thank you. We have the next question from the line of William Reuter from Bank of America. Please go ahead.

Good afternoon. I just have a couple. The first, in terms of your outlook to get to the six times leverage target, is there any expectation there that you will either be gaining or losing any shelf space over that period?

Other than what we've sold? Other than the divested businesses, you mean? Yeah.

Yeah, whether it could be any business wins that you kind of see on the horizon or alternatively if there are businesses that you're having to respond to RFPs to maintain your shelf space.

So the six times assumes that we hit our model for 2025 and kind of preliminary 2006 thoughts. I guess that would include any, you know, performance for those businesses that we anticipate. But we haven't done a further probability weighting by, like, you know, inches of shelf space, if that's what you're asking.

Got it.

Okay. But our forecast would factor in how we see, you know, distribution wins and losses across our innovation launches and, you know, any cut of, you know, slower moving items. Our forecast always includes those kind of projections. Okay.

Got it. And then given you have been successful with the three divestitures so far, are you fairly certain that you're going to be able to come to an agreement with the buyer on the Green Giant U.S. sale within the time frame that you've laid out?

Not really fair to comment on that other than, you know, we're making progress on getting these transactions done. And, you know, we've certainly laid out what we thought made sense from a timeline. And, you know, that's where we are.

Got it. Okay, and then lastly for me, you laid out the timing of the six times net leverage mid-next year. A couple times you touched upon the five times. Is that kind of a longer-term goal, or is there a timeline associated with that we should be thinking about?

We haven't put out a timeline, but it is very much a longer-term goal, and Casey will remind me of that every quarter.

I mean, our long-term leverage goal is between 4.5 and 5.5. So, I mean, that's the midpoint, and I think it would actually reflect the right kind of risk.

Got it. Okay. All very helpful. Thank you.

Thank you. We have the next question from the line of David Palmer from Evercore ISI. Please go ahead.

Thanks. I just wanted to – Hey, Bruce. Casey, I wanted to ask you guys about the organic sales numbers. You mentioned food service roughly flat, and the private label business sounds like it's up mid-single digits. That might get us close to where we are when we adjust our consumption numbers, get close to the numbers that you had, but it still feels like I might be down a 4% to 5% versus the under 3% decline that you showed and you're guiding to as well for the fourth quarter. So I'm just trying to think about other reasons why that would be different. Is there any shipment dynamics, other non-measured channels that are happening?

No, I mean, I think it's really simple. There's about 35% to 40% of our portfolio that's unmeasured by Nielsen U.S. data. So, I mean, if I just give you the numbers, Canada is about 7% to 8%. Food service is about 13% to 14%. Private label is around 7% to 8%. We have an industrial business also that's about 5%. And there's unmeasured customers in the U.S., you know, Costco, et cetera, is about 3%. So, yeah, it's more than just the food service and private label business I talked about. So, yeah. You do all that math and it kind of gets you to that base business trend roughly, that 2% to 3% kind of base business trend.

So your assumption on basically this back part of the year is that your consumption all channel, obviously not that it wouldn't be even captured by Circona either, would be also down 2% to 3%. Fair to say? Yeah.

Yeah, but that would move across food service and channels, and then it would include our private label business. You know, we have a very strong club private label spice business that's been growing very rapidly. So it assumes that we're kind of static in terms of our performance in the fourth quarter that we were in the third quarter across, you know, measured and unmeasured, you know, kind of channels and businesses.

And, Dave, the other part where you might be missing if you're thinking about fourth quarter, just a reminder, this is the 53rd week. And it's in our fourth quarter this year. And so we've talked a number of times, referenced either 15 to 20 or 16 to 18 million dollars. But there'll be some benefit, which is also impacting, is factored into our guide.

Which kind of offsets the base business trend. The two of those kind of offset each other to get to roughly flattish net sales in the fourth quarter.

Great. Thank you for all that. That was great. And with regard to the tariffs language you had in the release, it seems like it's dated language that you're not including all the tariffs in there. We can only elude what we know.

It's going in front of the Supreme Court. We've priced for all known existing tariffs.

And certainly guided for it, too, I would assume.

Yes.

Have you talked about the inflation inclusive of tariffs that you're expecting, call it, into the first half of 26? Have you talked about that?

I mean, we're seeing outlooks, Dave. I wouldn't want to tell you that we've actually finalized our projections, but we're kind of seeing 1.5% to 2% input cost inflation before tariffs. but that's a very early number, probably mostly driven by pacting.

I think our key thing is similar to 2025, we haven't seen anything that suggests a big uptick in inflation based on our basket of inputs.

And our strategy for that would be that we expect a price to recover tariffs, which we've already done, and that's been implemented. we will look at, you know, final inflation assumptions and projections when we, you know, get pretty close to the new year. But, you know, it's a combination of some targeted pricing where we have significant increases in certain commodities as well as productivity efforts that would offset that, more than offset that, you know, that rate of inflation in very low single digits.

Great. Thank you.

Thank you. We have the next question from the line of Hale Holden from Barclays. Please go ahead.

Thank you. Good afternoon, fellas. I just had three very quick clarifications. Bruce, I really appreciate the working capital talk through that you did on the inventory swings. Can you give me a sense of what the baking business would be 3Q to 4Q in terms of percentage of inventory? Because I just don't really have a baseline on what that flow back for you would be.

For our adjusting business?

Yeah.

Like the Crisco and Clapper, we haven't disclosed that. Okay. Probably directionally, you can think about what our sales breakdown is by quarter for those businesses. Do you think we disclosed that for both businesses to have a rough impact of the swings?

Not perfect, but... There's a little bit of a... There's a small pre-build in advance of baking season.

Okay. The spices pricing that you're talking about on tariffs, is this the second one from the summer, or was there one at the end of the summer, or is this the first one?

Yeah, so what we did just in a couple pieces of the spice portfolio is we put pricing in effect to offset increases in commodity costs, so non-tariff-related stuff that we knew was coming this year, particularly black pepper and garlic. And then separately, and that was pretty small, modest, I think we talked about it a little bit. Yeah, in July. We talked a little bit about it on our second quarter earnings call. We've since followed up across the board where we needed to for tariffs to take price. And that's really, you know, an end of October, early November phenomenon.

When it's effective, yeah.

Got it. And then my last question is, the $55 to $60 million in charges that you outlined for Canada, is that a good proxy for the sale price or a bad proxy?

Yes, that $55 to $65 is a good proxy for the sales price, assuming, and it's somewhat dictated by inventory, and so assuming that we closed with inventory levels where we are in September is kind of where that lays out.

Thank you so much. I appreciate it.

Yep. Thank you. We have the next question from the line of Carla Casella from JP Morgan. Please go ahead.

Hi. Great. Thank you. You talked about working capital anomaly in third quarter related to, I think it was , did you say how much was moved into third quarter that you will be reimbursed, that you were reimbursed for in fourth quarter?

Yeah. And so the two pieces for working capital around inventory were , the U.S. business that we sold. It's pack season. It's a little bit nuanced, the ins and outs, but we bought about $20 million of inventory for a business that we no longer own. About half of that ended up finding its way into higher pricing on the transaction and floating as a benefit in cash from investing. Then there's another $2-3 million of inventory that we bought for the Don Pepino and Sclafani brands on behalf of the new owners that they reimbursed us for in the fourth quarter. That was a temporary hurt in the third quarter numbers.

Okay. So it's like a two to three million that you were paid in fourth quarter that hurt third quarter?

Yeah, for Don Pepino and then another 20 million that we spent on the business that we no longer own for LeSueur. Okay. And the interest delta, because we did... refinancing last year and so that ended up moving an interest payment from what was October into September and that's about I think a seven to ten million dollars swing there.

Okay, great. Any early thoughts in terms of the broader refinancing for the capital structure as we start to get closer to the first maturity?

No, I mean, we continue to think that at some point when it makes sense and it's appropriate, you know, we'll look to refinance those 2027 notes. You know, obviously watching the market and, you know, we'll pick an opportune time.

And do you have additional secured capacity?

I think that the notes will be refinanced as unsecured, not secured.

Okay. Okay, great. And then just one follow-up. You mentioned that pricing went into effect for customers in November. I mean, you passed on to retailers, so it's going into the consumer, like on shelves in November. And I'm wondering if you've seen any change in elasticity since then.

No, I mean, most of the pricing has taken place in the last couple of weeks, and we don't really have, you know, kind of market-based scanner data yet. But we'll watch it pretty closely.

Okay. Okay. Great, that's all I have. Thank you.

Thanks, Karla.

Thank you. Ladies and gentlemen, this concludes our question and answer session. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.