Good day, and welcome to the B&G Foods Second Quarter 2020 Earnings Call. Today's call is being recorded. You can access detailed financial information on the quarter in the company's earnings release issued today, which is available at the Investor Relations section of bgfoods.com. Before the company begins its formal remarks, I need to remind everyone that part of the discussion today includes forward-looking statements. These statements are not guarantees of future performance, and therefore, undue reliance should not be placed upon them. We refer you to the Company's most recent annual report on Form 10-K and subsequent SEC filings for a more detailed discussion of the risks that could impact the Company's future operating results and financial condition. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The company will also be making references on today's call to the non-GAAP financial measures, adjusted EBITDA, adjusted net income, adjusted diluted earnings per share and base business net sales. Reconciliations of these financial measures to the most directly comparable GAAP financial measures are provided in today's earnings release. Ken Romanzi, the company’s Vice President and Chief Executive Officer, will begin the call with the opening remarks and discuss various factors that affected the company’s results, selected business highlights and his thoughts concerning the outlook for the remainder of fiscal 2020. Bruce Wacha, the company’s Chief Financial Officer, will then discuss the company’s financial results for the second quarter, as well as expectations for the remainder of 2020. I would now like to turn our conference over to Ken. Sir, please go ahead.

Thank you, operator. Good afternoon, everyone. Thank you for joining us today for our second quarter earnings call. I hope that everyone's staying safe and healthy during these very difficult times. While the last few months have been unprecedented and highly unpredictable, our amazing team at B&G Foods maintained a steadfast commitment to our core values and strategic imperatives to ensure the short-term and long-term success of our company. Before, I highlight our second quarter results, I want to acknowledge and thank the entire B&G Foods team of almost 3,000 people for their tireless efforts to produce the results we will share today, all while taking care of one another to stay safe and healthy, yet remaining extremely productive to do our part to keep our nation's food supply afloat. Our frontline employees have truly shown they're the true heroes throughout this pandemic, and I cannot thank them enough for their heroic efforts. Some of you may have noticed the small gesture we made to recognize our heroes back in June, when two of our Terre Haute, Indiana manufacturing team members rang the closing bell of the New York Stock Exchange virtually. What a proud moment to have our team members represent the entire B&G Foods organization on the world's financial stage. Throughout the pandemic, we remained steadfast and increasingly focused on our major priorities to deliver the results I will highlight today. They are to one, protect the health and safety of our employees. Two, meet unprecedented customer and consumer demand. And three, make the investments necessary to ensure the long-term financial health and success of B&G Foods. Thanks to the tremendous efforts of our employees, we had an outstanding second quarter with net sales increasing 38.1%, and adjusted EBITDA, growing 44.6% ahead of the second quarter of last year. We reported adjusted diluted earnings per share of $0.71 for the quarter, an increase of nearly 87% compared to last year. Our sales performance was driven by very strong base business volume growth, pricing and some M&A benefits. Our adjusted EBITDA as a percentage of net sales was 20%, 90 basis points above the year-ago level, as we began to see some nice operating leverage from increased volumes. As Bruce will share, we actually saw more operating leverage, but some of the benefit was offset by increased COVID costs. These operating results, coupled with excellent working capital management, allowed us to generate very strong net cash flow from operating activities of $188.8 million for the quarter, bringing our cumulative year-to-date net cash from operations to an astounding $246.4 million. We have always maintained that B&G Foods is a cash flow generating machine, and this quarter certainly proved that. We used a portion of this strong cash flow to repay revolver borrowings. And our net debt to pro forma adjusted EBITDA has been reduced by more than one turn since the start of the year to 4.99. Furthermore, on Tuesday of this week, our Board of Directors declared our 64th consecutive quarterly dividend since going public in 2004. The B&G Foods team accomplished this while remaining committed to the health and safety of all of our employees and doing our part to keep our nation supplied with food during this difficult time. We continued to take a wide range of precautionary measures at our manufacturing facilities, and other work locations in response to COVID-19. Although we're operating in a very challenging environment, our operations team has done a fantastic job ensuring that our supply chain has been able to meet an unprecedented increase in demand for our products, by keeping our manufacturing facilities operating while at the same time ensuring the health and safety of our employees. The other heroes in this pandemic are the brands of the B&G Foods portfolio, which consumers turn to as they found themselves having to provide great tasting, comforting and highly trusted brands, products and meal solutions for their families when required to cook and eat at home more than ever before. We have a portfolio of products perfect for these troubling times, with brands and very attractive categories across frozen and shelf-stable vegetables, spices and seasonings, breakfast foods, snacks, meal solutions and baking. With at least one of our brands in approximately 80% of U.S. households and found in nearly every aisle of the grocery store, we have brands and products for each meal of the day and for all age groups. During the second quarter, we experienced tremendous strength in almost all of our brands, with 85% of our brands growing in net sales versus a year ago, including Green Giant, Ortega, Clabber Girl, Cream of Wheat, McCann's, Grandma's Molasses and Victoria, to name a few. As Bruce will share a bit later, the list goes on and on. Incredibly, a number of our brands have doubled in net sales versus the year-ago quarter, including Bear Creek, Joan of Arc, and Mama Mary's. For the most part, our brands with more food service exposure did not grow at high rates, but those same brands did have very strong retail consumption. The oppressive growth in net sales across our portfolio was driven by strong sustained consumption throughout the quarter. For the 13 weeks ending June 27, as reported by Nielsen, the total B&G Foods portfolio grew 34.5% versus a year ago in consumption through retailer checkout lanes. This growth is about two times the total food and beverage growth rate, and is among the fastest growing publicly traded food companies in the U.S. since the beginning of the pandemic. Importantly, we gained or held share in nearly three-quarters of our brands and categories. Our largest brand Green Giant grew 45% in net sales, driven by strong consumption growth of nearly 58% in shelf-stable vegetables, where we gained 1.5 share points in the frozen vegetable category, and more than 22% consumption growth in frozen vegetables, where we maintained share versus last year for the quarter but grew share in May and June, exiting the quarter with strong momentum. Frozen vegetables as a category are growing nicely, although they didn't quite keep up with center store shelf stable categories due to less space for consumers to stock up. The category did increase a healthy 22% in consumption versus last year. While we don't expect these outsized growth numbers to continue forever, we believe our sales trends will remain elevated, as long as people are going to be sheltering or working a bit more from home, eating out less, and eating at home more. Quite candidly, we believe these trends will remain elevated for quite some time, even after the pandemic eventually moves on. Consumers are learning about and enjoying cooking at home, and our brands and categories are a perfect fit for them. We believe this because we're seeing a significant increase in volume from new buyers of our brands. As measured by Nielsen, 2.6 million new households purchased our brands since COVID struck, a 3% increase across our portfolio, with some brands like Underwood, increasing new households by as much as 18%. Encouragingly, these new buyers appear to have a strong appetite to continue buying our brands as the repurchase intent, or the percentage of new buyers who plan to buy again remains high, with Canoleo reporting a 26% repeat rate for new buyers of our brands led by Green Giant at 34.4%. Retaining these new households will be a key driver of elevated sales levels beyond the pandemic. Our existing households are also driving significant growth, as they have increased consumption of their favorite, trusted brands. We also saw a large increase in people shopping online, and our business certainly benefited from that. We estimate that e-commerce sales represent approximately 3% to 5% of our total net sales and are growing rapidly, inclusive of click and deliver and click and collect across our retail customer base. Our Amazon business alone grew 340% versus the year-ago quarter, and more than 330%, year-to-date versus last year. In summary, our brands, products, and most importantly, our people stepped up to deliver outstanding results during an unprecedented period of time. I couldn't be more proud of our people or more excited about our future, based on our performance over the past quarter. I'll share some thoughts on how we plan to capture future opportunities after Bruce provides you with more details on our second quarter performance.

Thank you, Ken. Good afternoon, everyone. I hope you and your families are staying safe and healthy. As Ken mentioned, we had a really incredible performance in the second quarter, despite the many challenges that we faced, as consumers flocked to our products and those of other packaged food manufacturers during this time of crisis. This has driven a slowdown in away-from-home or restaurant-oriented consumption while contributing to a dramatic increase in food-at-home consumption that we expect will continue at elevated levels for some time. We certainly would not be able to achieve this performance without the efforts of our team of dedicated employees across all of B&G Foods, who continue to work very hard in the face of this pandemic. Separately, we are very thankful for the loyalty of our consumers who are gravitating towards our brands in this time of uncertainty. We believe that our portfolio of products and our channel mix is well suited for the current situation that we find ourselves in today, and we believe that this environment will benefit our net sales well after the pandemic recedes. In the second quarter of 2020, we generated net sales of $512.5 million, adjusted EBITDA of $102.6 million, and adjusted diluted earnings per share of $0.71. Results that were far and excess of the prior year, and in fact, represented record second quarter performance for the company. Our net sales increased by an astounding $141.3 million or 38.1%, increased volumes contributed to the majority of the growth in net sales that we have seen in the quarter, including approximately $111.7 million in increased benefit from base business net sales, $15.6 million of increased benefit from volumes due to M&A, and $15.3 million from net pricing. The impact of foreign exchange resulted in an approximately $1.3 million drag on net sales for the quarter. The net pricing benefit of $15.3 million was primarily driven by the impact of our 2019 list price increases, the trade spend optimization program that we initiated in 2019, and a temporarily lower trade spend environment. The trade spend environment has already begun to normalize, and we expect less pricing benefits in the third and fourth quarters of this year. Increases in our net sales to supermarkets, mass merchants, warehouse clubs, wholesalers, and e-commerce customers have more than offset declines from food service customers, which for fiscal 2019, represented only approximately 13% of our overall net sales. As we disclosed on the first quarter call, our net sales in April increased by more than $70 million or more than 60% ahead of last year. Net sales for May increased by more than $50 million, an increase of approximately 50%. For June, net sales increased more than $15 million or 10% year-over-year. While our second quarter was very strong, we saw an emerging theme in this pandemic. Typically, we see a strong build ahead of the holidays that encourage large gatherings like the 4th of July. We did not see that build this year and actually saw a decrease in sales in the final week leading up to the holiday when compared to the prior year period, which did benefit from that traditional holiday build. Interestingly, this would be one of the few times since the beginning of the pandemic that we did not see a weekly year-over-year increase in net sales versus the previous year. July, however, started off with a bang and looks to have had growth rates and net sales versus July of last year of some 30% to 35%, based on preliminary results. When looking at June and July combined, our net sales growth was approximately 20%, which is more similar to what we are currently seeing in the consumption scanner data. Green Giant continues to lead our portfolio, with net sales, including net sales of the Le Sueur brand of approximately $164.1 million, an increase of approximately $51.2 million, or 45.4% in the quarter. Over the last 12 months, Green Giant, including Le Sueur has generated just over $600 million in net sales. We saw outsized growth in net sales for both our shelf-stable and frozen Green Giant products in the second quarter, with shelf-stable adding $33.6 million in net sales, or an increase of over 130%, and frozen adding $17.6 million in net sales or an increase of 20.1%. Frozen growth was driven by core legacy frozen bag and frozen bag-in-box lines, as well as innovative products, such as Green Giant Rice Veggies, Green Giant Veggie Spirals, and Green Giant Veggie Tots. Shelf-stable Green Giant continues to benefit from Amazon's demand for canned vegetables. Clabber Girl, which we acquired on May 15, 2019, and also was not in our April and first-half of May 2019 results, was also a major contributor to the second quarter growth. Net sales of Clabber Girl were approximately $26.5 million for the second quarter of this year, and what is ordinarily a slow period for the category, compared to approximately $8.4 million during the portion of the second quarter last year that we owned Clabber Girl, plus an additional $8 million or so under prior ownership. Among our other large brands, we had exponential growth from Cream of Wheat, which increased net sales by approximately $6.3 million or 54%, Victoria, which was approximately $3.8 million or 37.7%, and Ortega, which was up approximately $12.8 million or 37.4%. Our spices and seasonings in the aggregate increased net sales by $17.4 million or 21.4%, with an acceleration in the second-half of the quarter despite continued softness in food service. We have seen a strong build developing in traditional grocery throughout the course of the quarter, as well as more recently increased demand in food service. Net sales of Maple Grove Farms were up $0.2 million or 1.5% in the second quarter, with strong retail performance offset by softness at some key food service customers. Similarly, New York Style was down $0.7 million or 6.9%, due to a combination of food service exposure, as well as more muted performance that we are seeing in the aisle, relative to the center of store and frozen aisles. We also saw strong performance across the rest of our portfolio. In fact, outside of our seven large brands and our spices and seasonings, net sales of the rest of our portfolio increased by $35.3 million, or 38.2%. As Ken mentioned earlier, approximately 85% of our brands increased net sales during the quarter, with approximately 80%, including B&M, B&G, Grandma's, Las Palmas, Mama Mary's, McCann's, Polaner and Underwood, increasing net sales by double digits in the quarter. Gross profit was $134.1 million for the second quarter of 2020, or 26.2% of net sales. Excluding the negative impact of approximately $0.5 million of acquisition, divestiture related and non-recurring expenses during the second quarter of 2020, gross profit would have been approximately $134.6 million or 26.3% of sales. Gross profit was $91.9 million for the second quarter of 2019 or 24.7% of net sales. Excluding the negative impact of $4.9 million of acquisition, divestiture related and other non-recurring expenses during the second quarter of 2019, gross profit would have been $96.8 million, or 26.0% of net sales. Selling, general and administrative expenses were $44.3 million in the second quarter of 2020, or 8.7% of the quarter's net sales, up slightly in dollar terms but a decrease of approximately 200 basis points as a percentage of net sales. Selling, general administrative expenses were $39.9 million in the prior year quarter, which was 10.7% of net sales. The dollar increase was composed of increases in selling expenses of $2.7 million and general and administrative expenses of $4.7 million, partially offset by a decrease in M&A and non-recurring expenses of $2.7 million, warehousing expenses of $0.2 million and consumer marketing $0.1 million. We generated $102.6 million in adjusted EBITDA in the second quarter of 2020, compared to $71 million in the prior year period. The increase of $31.6 million in adjusted EBITDA represents our third consecutive quarterly increase in adjusted EBITDA, compared to the comparable prior year quarter, following our lapping of the one-year anniversary of the divestiture of Pirate Brands in the fourth quarter of last year. Strong base business performance that has been enhanced by the increased sales resulting from the onset of the COVID-19 pandemic, and the resulting shelter at home and work from home policies. Adjusted EBITDA as a percentage of net sales was 20% for the second quarter of 2020, an increase of approximately 90 basis points over the 19.1% generated during last year's second quarter. Adjusted EBITDA as a percentage of net sales was negatively impacted by approximately 90 basis points, or approximately $4.7 million in COVID-19 expenses related to health and safety precautions, including enhanced sanitation and employee screenings, and increased compensation paid to our manufacturing employees in the form of temporary wage increases, special bonuses and continued pay during quarantines. Adjusted EBITDA was also negatively impacted by an additional $3 million or 60 basis points, due to the impact of foreign exchange. Net interest expense was $24.8 million in the second quarter of 2020, an increase of about $1.6 million compared to the prior year period. We generated $0.71 in adjusted diluted earnings per share in the second quarter of 2020, compared to $0.38 in adjusted diluted earnings per share in the prior year period, driven by our strong operating performance, and a reduction in our share count. B&G Foods has historically been a strong cash flow generator, but our second quarter results were unprecedented for us. We generated $188.8 million in net cash provided by operating activities in the second quarter of 2020, and we have now generated $246.4 million in net cash provided by operating activities through the first six months of the year. As you may recall, we highlighted our intention to reduce working capital this year and generate outsized net cash provided by operating activities. Our planned reduction in working capital has been accelerated by the impact of COVID-19. This combined with a substantial increase in our net sales for the first six months of the year, have dramatically improved our net cash from operating activities. The other aspect to think about with regards to our strong cash flows is our balance sheet, and how our performance this year has impacted our net leverage and accelerated our deleveraging goals. During the first six months of the year, we have reduced our net debt by approximately $170 million to $1.7 billion at the end of the second quarter. We have reduced our net debt to pro forma adjusted EBITDA from 6.1 at the start of the year to just under 5 times today. We are now well within our stated target range of 4.5 to 5.5 times net debt to pro forma adjusted EBITDA, and we expect continued strong financial performance throughout the back half of the year to further reduce our net leverage in 2020. While we have suspended giving guidance for fiscal 2020 due to the unpredictable macro environment, every day we’re learning a lot more about the world that we are currently living in. Based on the current environment, with still elevated incidences of confirmed coronavirus cases, we expect continued shelter at home and work from home activity. Unfortunately, we also expect a soft economy and higher than normal levels of unemployment. As a result, we believe that we will remain in an environment where people are eating more meals at home than in the prior year, boosting our traditional grocery sales, while putting pressure on our food service sales. Based on what we know today, we expect to see continued elevated levels of net sales, adjusted EBITDA and growth in net sales and adjusted EBITDA throughout the remainder of the year. Ultimately, we expect our retail shipments to eventually tie fairly closely over time to our retail consumption trends. This is effectively where we have found ourselves when we look back at our June and July periods. Our factories are running full steam to keep up with this demand, which is helping to generate positive operating leverage. But we also expect that these benefits will continue to be offset in part by the incremental costs of the precautions that we feel are necessary to operate safely in this environment. As a result, we believe that our margins will generally remain in line with, perhaps with a small upside to the prior year's levels. However, it is very hard to predict timing or the full impact of the COVID-19 pandemic on our business, or to provide financial guidance in this environment. As a result, we are continuing to suspend giving guidance. The ultimate impact of the COVID-19 pandemic on our business will depend on many factors, including, among others, the duration of social distancing and stay at home mandates, whether a second or third wave of COVID-19 will affect the United States and the rest of North America, our ability to continue to operate our manufacturing facilities and maintain our supply chain without material disruption, and the extent to which macroeconomic conditions resulting from the pandemic and the pace of the subsequent recovery may impact consumer eating habits. I would now like to turn the call back over to Ken to highlight our plans for the rest of the year.

Thank you, Bruce. As Bruce mentioned, these unprecedented times make it extremely difficult to predict the future. So, we will remain focused on the things we can control and nimbly react to the things we can't control. During the second half of the year, we will continue to work closely with our supply chain partners and customers, to ensure we continue to provide uninterrupted service to meet the increased demand resulting from the pandemic while, of course, keeping our employees safe and healthy. At the same time, we will continue our new product innovation and other brand building efforts, as we look to turn some of this pandemic-related increase in demand into long-term growth opportunities for our brands. We are taking this opportunity to make incremental investments behind brand innovation, marketing, and building out our e-commerce capabilities. While the introduction of new products has been somewhat delayed due to COVID-driven retailer shelf reset delays, we remain very excited about our innovation pipeline and have received terrific responses from our customers. This fall, we will continue to launch several new products, including Green Giant frozen vegetable carb replacement products, including Green Giant Pizza with Cauliflower Crust, Green Giant Veggie Hash Browns, Green Giant Cauliflower Gnocchi, and Cauliflower Breadsticks. We will also leverage our acquisition of Farmwise by introducing Green Giant Veggie Fries and Green Gaint Veggie Rings, our Cauliflower based take on Onion Rings. Regarding the Farmwise brand, we’ll also relaunch that brand in a natural channel, plus a few of the current mainstream retail customers later this year as well. On the dry grocery side of the business, we plan to continue to launch a shelf stable version of Green Giant Riced Veggies, a nutritious alternative to traditional dry rice, made from 100% plant-based legumes like lentils, sweet peas, and chickpeas. We are also going to do one of our first cross-promotions where we plan to launch Green Giant Frozen Vegetables, seasoned already with Dash salt-free seasonings to introduce Green Giant consumers to the Dash brand. While many customers delayed their new product resets, we certainly have not needed the volume this year, given the large increases in our base business. Introducing these items later this year than planned and even some pulling into next year should provide greater growth in 2021 than we originally planned. We plan to support these new product launches with increased marketing investment to ensure their success. In addition, we will shift more investment to e-commerce to make sure we continue to engage with consumers during this rapid increase in the adoption of this new shopping behavior. Our e-commerce business is growing rapidly and we see strong trends building throughout the pandemic, which we expect to continue. Our goal this year was to be fully e-commerce capable by year-end but we're ahead of our internal timeline and we expect to be fully capable by the beginning of the fourth quarter. We've experienced tremendous growth in e-commerce sales year-to-date, without even being fully e-commerce capable. So, we expect even stronger trends going forward. Lastly, we'll take the tremendous opportunity that the unfortunate pandemic has given us to generate significant cash flow and further deleverage our balance sheet, so we can continue to execute the tried-and-true B&G food strategy of maintaining a stable base business while growing through accretive acquisitions. This concludes our remarks, and now we'd like to begin the Q&A portion of our call. Operator?

Thank you. At this time, we'll be conducting a question-and-answer session. The first question is from Brian Holland with D.A. Davidson. Please go ahead, sir.

Thanks. Good evening, gentlemen. And congrats on the strong quarter. I wanted to ask about, pre-COVID one of the concerns on the business was kind of the relative performance of your composite categories. As I think, you noted today there's been an inflection there within the past couple of months. So, I'm curious what's specifically you would point to because obviously, you're in categories that are effectively positioned, but so are your competitors. So, what do you point to specifically as driving the inflection and share for maybe being moderately or worse, negative to positive today? That'd be the first part of the question. And the second part is, what plans you have in place? Or what kind of urgency do you feel you need to preserve that improvement in your relative performance?

Did you ask us why we thought we were gaining share in these categories?

Yes, sure. I think there's, if you look at the data, in the past couple of months, there's been an inflection where I think on the whole, you've been a little bit negative, sometimes maybe a little bit worse. Now that's going positive. So, curious within those categories, if there's one or two things that you would highlight where you feel like you've benefited more than your competitors in those categories?

I'm not sure I'm following you in terms of the fact that we were negative than positive. Our strong consumption started in the third week of March, and we haven't looked back. Our consumption growth has been tops in terms of food companies across the board ever since the start of the pandemic. There were some areas like in Green Giant frozen vegetables where we're still cleaning up promotions, which was a negative impact versus a year ago. As we planned, we're fully past all that, so now we're kind of on even keel from a promotional standpoint, and then of course, our innovations adding a lot. The only other delay was spices and seasonings as a category, fascinating well, while categories like pasta sauce and rice and canned beans and baking products and things of that nature, started taking off. Spices and seasonings were almost like a delay by about a month, because I think people were using up the spices and seasonings they had in their cupboard, and due to their increased activity in cooking and baking, you saw them come back. Our category as well as our brands really started to take off in April, where most of the other categories that have benefited from COVID took off in March.

That's perfect. That's helpful color. I appreciate it. And then just one more. I guess, thinking about your capital allocation priorities, obviously with the big bump in EBITDA this year, you've got a lot more cushion here, and you can look at debt paydown as you've done so notably so far through the first half of this year. There's also maybe reinvestment you talked about the traction that these brands have had as consumers are migrating towards at home. Is there any shift in the capital allocation priorities here in the near-term, given the bump in EBITDA and maybe the opportunity to seize on this big bump in household penetration? Or no real change there and so kind of following the same beats?

I think from a capital allocation standpoint, we've always strived to do what we thought was best for shareholders, which is, one, returning excess cash in the form of a dividend, still a high priority. Keeping a healthy balance sheet and making sure that balance sheet is primed for M&A and other investments. So those first two things, always felt confident about, but clearly demonstrating with a much lower leverage, our balance sheet is very healthy today. As far as reinvestment, absolutely, I think, Ken has highlighted over and over again, the importance of making investments in marketing, e-commerce, and positioning our brands to be as strong coming out of the pandemic as they are today. Obviously, we're always on the prowl for M&A, but it's a matter of finding the right ones and being selective and disciplined, but also very much a priority for us.

Thanks, Bruce. I appreciate it. That's all I have, gentlemen.

Yes. And just to be clear, so from capital allocation, we'll make investments in marketing and e-commerce. But we still plan to have above-plan and significantly above-year-ago EBITDA growth and cash to give to Bruce, so that we can continue our dividends as well as reduce our leverage. We've heard loud and clear from the investment community that our leverage got a little too high for folks for their stomach, and we want the flexibility to get back to our strategy of creative acquisition. So, having a nice strong base business, the best thing we can do for that, and we're excited about being able to get back on the acquisition drill.

The next question is from Andrew Lazar, Barclays. Please go ahead, sir.

Hey, Ken and Bruce, how are you?

Good, Andrew. How are you?

Fine.

Thank you. In considering future guidance, there are many factors at play. Your remarks regarding EBITDA margins for the second half potentially aligning with or slightly exceeding last year's figures are noted. The volume leverage achieved from increased business has been exceptional in the first half, benefiting many food companies. Are there specific factors or details I might not be aware of that could limit some of this volume leverage in the second half? Elevated consumption levels seem likely to continue for some time. You mentioned that recent trends were stabilizing around a 20% growth level. Even with any sequential slowdown, there remains significant operating leverage. I'm curious if there's any incremental investment or COVID-related costs contributing to this, and whether you could provide some quantification to help us understand. Ultimately, you see the gist of my query.

Yes. There are a couple of key points to address. Firstly, we have experienced elevated sales which has led to an increase in EBITDA. The main concern now is how margins will perform. As you may have noticed, we gained considerable leverage in our operations, particularly with SG&A costs. In terms of cost of goods sold, it's important to note that we produce about half of our products in-house and the other half through co-packers, where we don't see the same level of incremental leverage. Internally, we are definitely realizing operational efficiencies, but some of this advantage is being counterbalanced by additional COVID-19 related expenses. We are taking a long-term approach, as it is both the right choice and a smart policy. We are ensuring that we take every necessary precaution in our factories to keep our employees safe and maintain operations over the long haul, instead of compromising on safety, and this does come with associated costs. While we believe there are advantages to this approach, as demonstrated in this quarter, there is likely a limit to the extent of these benefits given the current global situation.

All right, thanks for that. And then Ken, it's interesting, there, there's obviously a pretty big debate raging in the food space right now over how sticky right some of this incremental consumption and from new consumers and lapsed consumers will be. You seem pretty confident that even sort of post-pandemic there could be some positive halo, right from all this on some of your key brands. I too think it's maybe unrealistic that 100% of these new buyers will all of a sudden sort of leave these brands once they've sort of tried them. But again, I know there's a big debate about that. But your level of confidence in that, I'm just trying to get a better idea of what drives that for you? And not in this sort of the current environment, but the post-pandemic world, what gives you that level of confidence that your brands can see some of this continued benefit? Thank you.

Good question. We're confident because of our growth, especially with new households, which I compared to a fountain of youth for brand marketers. We've worked hard to achieve even small increases in household penetration, and Underwood has seen an 18% increase alone. However, much of the increased volume comes from the same households buying and consuming more. My confidence stems not just from our brands, which are well-positioned. I'm optimistic because, as part of the Consumer Brands Association, I've not heard any company, be it in food or banking, say that the post-pandemic world will mirror the pre-pandemic one. With more people working from home, breakfast habits are changing, allowing for home-cooked meals like banana bread or quick lunches. This shift in behavior is evident, including in my own routine. The reality is that the post-pandemic world will differ significantly, even if a vaccine becomes available. If people continue to spend more time at home, it’s beneficial for categories like vegetables, baking, spices, and breakfast. For instance, our breakfast portfolio is thriving, with hot cereal consumption still growing by 30% or 40% in warm summer months compared to last year. The essence is that our world is going to change even with a vaccine on the horizon.

Thank you.

We have a question from William Reuter, Bank of America. Please go ahead.

Hi, thanks for taking the question. You talked about the terrific response you've received from new products, although, it sounds like very few of your supermarket customers did shop resets in July. Are you expecting that these are being delayed until the fall? Or do you think those resets are being just skipped and they'll do one in January of '21?

It's a mixed situation. We have an update on all our customers. Some are planning to proceed in the fourth quarter, while others are postponing until next year. We have incorporated this into our forecast. We're really enthusiastic about launching new products, but we want to ensure we align with our customers' preferences. We're pleased with the growth of our core business and will follow our customers' timing for when they want to showcase products. They are experiencing their own labor issues, and in many instances, shelf resets are being pushed to next year. However, this is not the majority. I don't have the exact figures, but there is a fairly even distribution between delays this year and those pushed off to next year.

Is there any way to quantify what that shelf space you may be gaining from this new product introductions? Would be in either between fall and January of next year?

I don't have the exact numbers right now, but we consider it as a net increase in SKUs. If we launch five new SKUs, we don't necessarily lose out on all five, as long as we are net positive. Whenever new products are introduced, we have to make some sacrifices in terms of SKUs because there's limited space available. We always aim to ensure that we have a net positive SKU count. This is part of our planning and forecasting, as there are two types of cannibalization we recognize. The first is systematic cannibalization, which means if we launch five new SKUs, we might lose two in the process, resulting in a loss of volume. The second type is consumer cannibalization, where some of the consumption of new products comes from our existing products. We're particularly excited about Green Giant because we're not just launching new vegetable products; we've been focusing on successfully introducing products in other categories made from vegetables, targeting different market segments. This includes innovations in pizza, tots, hash browns, and now dry riced veggies in the dried rice aisle.

Great. I’ll pass it on to others. Thank you.

Thanks, Bill.

We have a question from Nik Modi, RBC Capital Markets. Please go ahead, sir.

Good evening, everyone. Hey, how are you? I have just two quick questions. The first one is online. Obviously, every company is seeing a surge online. I'm just curious, from your vantage point, what kind of consumer is buying a product online? I mean, is this just a replacement of what someone would buy in a brick-and-mortar environment or incrementality here? So that's the first question. And then the second question is, to the degree we've seen a surge in cases. We're hearing from retailers around the country that they're starting to stock up to prepare for a second wave. So, I'm just curious if that's something that you've seen and maybe you referenced that in your July commentary that things are off to a very good start. I'm wondering if that has anything to do with it. Thank you for your help.

So your first question was about e-commerce. We believe is a cost adventure, you got to be there because people are changing their buying patterns. We see a mixture; there's younger millennial shopping, but also there's older people. Online is now, as older people don't want to be exposed as much in going shopping in store, older people are shopping online and have it delivered at home as well, or the click and collect version. To me, we're doing a better job online now than we were before, and we'll continue to do the better job. Perhaps it's a little bit more incremental than what we've seen before, but at the end of the day, online is not necessarily driving increased consumption, it's just a mix of shopping. You've got to be there. You've got to be present. Our retailers demand it. Our large retailers want to make sure their electronic storefront is well represented, just like they want it well represented in their physical storefront. They don't want any difference; they want it to all be the same. It should be simple for the customer whether they shop in-store, click and deliver, or click and collect. They want it to be seamless for the customer. We're working hard to get e-commerce ready and capable. In terms of your second question on retailers preparing for a second wave, as soon as we saw news reports that states were too aggressive and people got lackadaisical, and California shut down and now Florida is having an issue, we absolutely saw an increase in average daily orders in our open order book. It's fascinating. As soon as you saw big states, we started to see a little bit of a jump. Not necessarily, and well, you could say in building inventory. I don't know about retailer inventories in total. But as soon as they hear that states are shutting down and restaurants are going backwards again, they're going to be ready for the increased activity at store level. If that happens, we'll see that in the consumption numbers as reported by Nielsen and IRI services.

Excellent. Thank you for your help.

Thanks, Nick.

We have a question from Carla Casella with JPMorgan. Please go ahead, ma'am.

Hi. I guess this goes along with the questions about new products and the trends there. But also, any trends you're seeing in terms of trade spender? How the retailers are viewing trade spending? Is that opening back up? Or do you see a returning trade spend coming out of COVID?

We saw a little bit of relief on trade spend in the first half of the year, but we're planning on making sure that we're going to be promoting equal levels from a year ago for the rest of the year. Unless of course, there's a huge jump in pandemic fears again, then as they did in the first part of the year, customers may not want to be as aggressive on promotion as they might pre-COVID. We'll take the lead from our customers. We're ready to match our promotional activity from a year ago. We'll take it from our customers as to whether or not they want to continue to do that.

We have a question from Bryan Hunt, Wells Fargo. Please go ahead, sir.

Thank you. I just have two questions. One, if I look at inventories granted, you have seasonal fluctuations, because the pack, but you're at the lowest level in three and a half years. Were you all missing sales throughout this period or recently, because you're out of stock? Can you talk about the quality of the inventories you have? I imagine they're probably the best you've ever had. You've been able to clean out any old inventories. Again, just talk about that. Your inventories and whether you missed any sales?

We are in an excellent inventory position. We entered the quarter with high inventories, which benefited us during the early stages of the pandemic. In March and April, we were able to utilize those high inventories as we adjusted our manufacturing system for future demand. This, combined with our focus on safety and operational continuity, along with the right brands and categories, is why we believe we rank second in consumption growth among major food companies, as indicated by Nielsen and IRI. We did experience some product lines where our customer service levels fell below 90%, which is not acceptable to us; we strive for 95% or higher. One example is canned vegetables, which are only packed once a year during the harvest season. We encountered some challenges there, particularly with Underwood, despite its substantial growth. However, these issues were not significant enough to impact our EBITDA or cash flow considerably. While sales could have been a bit higher, only a few product lines faced difficulties, which we consider a strong performance given our extensive brand portfolio. We have already addressed some of those issues, and in the past month, we have improved our service levels. Clabber Girl is a notable example; after acquiring the brand and facility, we’ve been producing more baking powder than we ever anticipated during this period. We will be expanding production in our other facilities to meet high demand. Research indicates that while consumers have used a lot of baking powder, they are not oversupplied; many buy just one can a year and are going through it quickly. Our customers are preparing for a robust fourth quarter, ensuring they are ready for traditional baking. We are swiftly resolving any previous shortages to achieve customer service levels above 90% for the remainder of the year.

Are there any issues within your supply chain, whether internal or external with your co-packing partners?

Our co-packing partners have been quite effective overall, although there have been some challenges with one or two product lines where they haven't been able to scale up as needed. We're addressing this by handling some additional packing ourselves for a product line or two that we haven't previously packed. Generally, our co-pack partners have been supportive during times when we've reached capacity. We've also engaged a few additional co-packers for some product lines that we hadn’t traditionally co-packed to help us prepare for ongoing high consumption rates.

All right. Then my last question, Ken, is you talked about pack just a minute ago. Can you talk about how the crops look and maybe what your plan is for pack this year relative to a year ago? That's it for me. Best of luck. Thank you.

Thank you. The pack, from what we understand, is good. The spring was good, so there wasn't delayed planting. We hear that the crop is going to be decent. Peas are basically in. We didn't get all the peas we wanted, but we got a lot, very close to what we wanted. The pea crop has been short for a few years running, so it continues to be short from what we would ultimately like to have. We haven't heard any issues on the horizon, but there's still a long way to go. We still got a lot of summer and the harvest goes in the fall and mother nature is physical. So far, we've heard it will be a better crop than it's been in the last couple of years.

Thanks for your time and stay safe.

Thank you.

The next question is from Michael Lavery, Piper Jaffray. Please go ahead, sir.

Thanks. Good evening.

Hey, Michael.

Two questions related to inventories. One on the trade inventories, your organic sales growth and your IRI, the numbers we see sales growth aren't very far apart. But with such a surge, do you know what the retailer inventories look like? And how much of a restocking lift we should be looking for in the second half or third quarter, maybe specifically? And then on your own inventories with the working capital benefit that you've gotten. Can you give us any sense, just your year-to-date and quarter cash flow, of course, are very strong? Just any sense of how much of that may reverse as you restock some of your own inventories as well?

I'll turn it over to Bruce on our inventories. The big headline there is going to be obviously our inventories will now build given we're going to bring the Green Giant vegetable pack in. But our retailer inventories, we're not sensing that there's any big huge stock load, meaning retailer-built inventories, then depleted, and now they're going to rebuild. Most of our inventories are most of our customers around really efficient supply chain replenishment program. It's really all about if they're seeing more shoppers in the store, and the takeaway increases they're going to order more. It's not as much of a lag effect with our retailers. We saw that I think it was the first or second week of August already open orders looking out in the future pop up because places like California and Florida are running into difficulty. It's pretty immediate versus some long-term stock up and drawdown effect.

With regard to our inventory, I mean, we had talked after our fourth quarter call or during our fourth quarter call about desiring to bring working capital down a little bit this year. Some of this is planned, some of its accelerated, but still within plan. I think you're right, the back half of the year, particularly around pack season, we usually ramp up inventory during the third quarter, fourth quarters is usually a drawdown. There is a fair amount that's in flux because it really is about what happens with COVID-19 and what happens with back to school. We're seeing strong demand and assuming that continues. We're producing everything that we can, so we've got enough product to sell the people. That's kind of how it's been chugging along for the last few months. We've got to be prepared going forward.

We have a question from Rob Dickerson, Jeffries. Please go ahead, sir.

Great, thank you. So just this one general question on the investment rate potential, I guess both in the back half of the year, but then maybe for the foreseeable future. Look, obviously, you have a very nice top line bump, category positioning seems good, doing well in certain categories on the share side. But kind of like average for your company say now for the most part if you kind of get this nice, increasing household penetration, kind of once in a lifetime, so to speak. But then as you kind of come out of that, there will be some decelerating sales maybe not that quickly, but it would decelerate to some extent. And then what the feel is so like everybody that's been able to increase that household penetration, which sake of argument, let's say is kind of everybody. Then everybody rushes in and then reinvest to try to hold it right and the competitive environment gets more competitive by trade spend, kind of getting a little bit tougher in the back half of this year, marketing budgets or what have you get, kind of are going off. That's what we’re hearing, compared to general food in general, excuse me. So, the top line remains elevated. And I guess this goes back to maybe Andrew’s question about, like kind of what gives you the confidence not only that food at home could remain off a bit, which I tend to agree with too. But that competitive dynamic doesn't really skyrocket to an extent that you kind of leave yourself enough room at this point to really be able to spend up, right because we're all talking about Q3, June, July. I'm thinking about 2021. I'm thinking about how do you budget for next year? What could the top line be? How much do you need to reinvest? Kind of any color on that reinvestment side how you kind of hold on or you keep that household penetrations sticky in the next 12 to 18 months?

We haven't finalized our plan for 2021 yet as we continue to navigate the current situation. The competitive landscape remains intense, and it's unclear if it will become more competitive after the pandemic as we work to acquire new households and retain our existing ones while competing for market share. We are optimistic because the pandemic has led to delays in product launches, which has actually made our pipeline more robust. Although we faced delays of six to nine months, we were already planning beyond that. Our innovation pipeline is now quite full due to these delays, which will enable us to drive growth further into the future rather than just this year. We are excited about the upcoming innovations and hope to maintain our investment this year for next year, rather than scaling back. As I mentioned, we have yet to solidify our plan, but we anticipate benefiting from a weaker first quarter this year. We are aiming for a strong start next year, and we need to observe how consumer behavior evolves as we finalize our plans for the remainder of the year.

Okay. So just to kind of summarize, it seems like because of that delay, because of that innovation line out that possibly kind of hopefully, it's maybe the return on that investment could even be higher, just given you are investing, kind of had to pull back a little bit per quarter, but then you reinvest later with better innovation that hopefully the probability of share gain sticks. Is that the right way to think?

Absolutely. Absolutely.

We have a question from Robert Moskow, Credit Suisse. Please go ahead, sir.

Thank you for the question.

Hey Rob.

Hi. How are you all doing?

Good.

I had a follow-up question about the vegetable crop pack. How do you determine the amount to purchase? Are you forecasting demand growth for vegetables over the next 12 months? Are you planning to buy more aggressively this year compared to last year because of this? Or do you take a more conservative approach and assume that if demand is strong, you will source raw materials from other suppliers? I'm curious about the process.

No, we have to forecast the business. We need to ensure that if you have one pack a year, you have to make sure that you can be secure enough for you believe demand is going to be. This hurt B&G a few years ago, and we lost a major customer, so the inventories popped up because the customer, the pack was determined and vegetables were in the can before they knew about the last customer. We did increase our sales forecast. We get a chance from the start of the year through May. We get a chance to adjust our forecast. We did take it up and even down alternative supplemental suppliers when our major suppliers couldn't give us all we wanted based on the increased demand for canned vegetables in particular. We got a lot of what we asked for. We didn't get everything for what we asked for. The crops not in yet. So the commitments though are up versus a year ago because of the, we drew down so much inventory. We have to not only project demand, but we have to get back to the inventory levels that'll ensure good customer service, not only today, but a year from now.

Okay. But the net of this is you bought aggressively, more so than you did a year ago, because you expect the demand to continue to be strong. Does that make sense?

Correct.

Okay. All right. Thank you.

Yes. To make sure we have enough stock inventory.

We have a question from David Palmer, Evercore ISI. Please go ahead, sir.

Thanks and congrats on the results. Hey, that free cash flow number through the first half of the year was about 120% of EBITDA. How should we think about the free cash flow conversion for the full year? Do you think it might stay at that sort of ratio or any reasons we should think higher or lower?

It's going to be big. Obviously, the one thing that to keep in mind, third quarter, we do buy a lot within the vegetable pack. So, that's always usually our softest quarter from a free cash flow standpoint. But as we've been saying, for some time, large demand causes large sales, large sales causes large EBITDA and large EBITDA is going to create a lot of cash flow.

Yes. So, but like north of like free cash flow being higher than EBITDA this year wouldn't surprise you?

I don't know that I'd expect it to be higher than EBITDA this year because ultimately, we were reinvesting and buying some more inventory in the third quarter. But we'll have a real good year.

Got it. We're making good progress now, where you may have access to consumer insights data that shows who is trying your product and how much household expansion you've seen. You might also have information on how many of those consumers are returning, which would indicate their level of satisfaction. Do you have any data to share about which brands and categories have attracted the most new buyers and the most satisfied buyers?

It's across the board. As I mentioned, we saw a 3% overall increase in household penetration, and for our largest brand, Green Giant, we observed an increase in household penetration with a 34% indicated repeat rate. Those are pretty nice numbers.

And then the last thing is, when we see some of these scan data, it doesn't, it's not a perfect audit in terms of the promotional activity because of the core, the fact that there's not always people to check out what's going on in the stores. So, in sometimes, there is more promotional activity than it looks like. Are you really seeing what looks like, 5, 6, 7 points of drop in promotional activity, in terms of sold on promotion? Is your spending going down that much and then heading into the second half of the year there's, there seems to be a little bit more money out there to spend, or do you anticipate it being a more promotional environment in your key categories?

When Bruce talks about pricing so most of our pricing is due to trade promotion efficiencies and some of this less promotion. When you look at Nielsen or IRI, incremental versus base volume, base volumes are up across the board. In many cases, promotional volumes are down. We don't necessarily think that the rest of the year is going to be more aggressive promotion than prior year. But we do we are planning to make promoting equal levels from a year ago for the rest of the year.

Got it. Thank you.

But that could change. If there is another lockdown in more than just a couple of states, it could result in less promotion again, similar to what we saw in the March-April timeframe.

Makes sense. Thank you.

Ladies and gentlemen, this concludes today's question-and-answer session. And we conclude the conference. You may now disconnect your lines and thank you for your participation.

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