Good day, and welcome to the B&G Foods Third Quarter 2024 Earnings Call. Today's call, which is being recorded, is scheduled to last about 1 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 Schwabe, Senior Associate, Corporate Strategy and Business Development for B&G Foods. AJ?

Good afternoon, and thank you for joining us. With me today are Casey Keller, our Chief Executive Officer, and Bruce Wacha, our Chief Financial Officer. You can access detailed financial information on the quarter in the earnings release we issued today, which is available at the Investor Relations section of bgfoods.com. Before we begin our formal remarks, I need to remind everyone that part of the discussion today includes forward-looking statements. These statements are not guarantees of future performance and therefore, undue reliance should not be placed upon them. We refer you to B&G Foods' most recent Annual Report on Form 10-K and subsequent SEC filings for 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, and base business net sales. Reconciliations of these financial measures to the most directly comparable GAAP financial measures are provided in today's earnings release. Casey will begin the call with opening remarks and discuss various factors that affected our results, selected business highlights, and his thoughts concerning the outlook for the remainder of fiscal 2024. Bruce will then discuss our financial results for the third quarter of 2024 and our guidance for the remainder of fiscal 2024. I would now like to turn the call over to Casey.

Good afternoon. Thank you, AJ, and thank you all for joining us today, Election Day for our third quarter 2024 earnings call. Third quarter net sales of $461.1 million and adjusted EBITDA of $70.4 million were somewhat below expectations. Excluding Crisco, whose net sales were negatively impacted by lower net pricing to reflect a decrease in soybean oil costs, base business net sales decreased by approximately 3% compared to the year-ago period. Some of the key factors impacting third quarter sales trends. First, base business trends on most of the B&G Foods portfolio have been slower to recover than expected. Consistent with the center store packaged foods industry, we have not seen much improvement relative to the first half with consumers adjusting their purchasing patterns in the wake of high food inflation. The exception has been our Spices and Flavor Solutions business that has shown positive trends, plus 2.6% in Q3 with the growth of fresh produce and proteins in the perimeter of the store, driven by a narrowing of the relative pricing of fresh to frozen and packaged foods in the last year. During Q3 and particularly in the July period, major retail customers lowered their warehouse and shelf inventories across our categories by several days to a week. We estimate that impact was 1% lower net sales in the quarter. Foodservice sales, roughly 15% of total B&G Foods, have continued to be down 2% to 3%, but generally reflect overall restaurant industry traffic patterns. We have experienced some increased competitive activity in a few categories. In vegetable oil, Wesson has priced aggressively over the last several months to protect and in some cases, rebuild distribution. In the Mexican category, Ortega, as well as the Old El Paso brand, have been impacted by increased activity from the Taco Bell brand. For the third quarter, adjusted EBITDA of $70.4 million decreased by $10 million compared to the third quarter of 2023. The Green Giant U.S. shelf stable divestiture represented approximately $2 million of the year-over-year decline with foreign exchange from Mexico operations on the Green Giant frozen business representing roughly another $1.5 million. Foreign exchange from the peso has been a drag on costs and profits, depressing Green Giant's segment adjusted EBITDA by $5 million to $6 million year-to-date. Total B&G Foods adjusted EBITDA as a percentage of net sales for the third quarter was 15.3%, down from the prior year period. During Q3, we continued to see only isolated inflation in some categories, e.g. pepper, garlic, etc., and some modest favorability in transportation and warehousing costs versus last year. In terms of outlook, we are revising guidance to reflect the reality of a slower recovery in center store trends and the consumer environment. Bruce will cover more detailed guidance for the fiscal year 2024. Moving forward, we expect to see gradual recovery and stabilization in fiscal year 2025 with sequential improvement between the first and second halves of the year. Segment reporting. B&G Foods continues to report results by operating segments, providing greater visibility into the performance of the company's four operating business units. Bruce will provide more detail, and I will touch on a few top lines across the segments. Spices and Flavor Solutions. Third quarter net sales increased 2.6% versus the third quarter of fiscal year '23, aided by the growth of the fresh fruit perimeter in grocery. This segment represents B&G Foods' highest segment adjusted EBITDA as a percentage of net sales. Segment adjusted EBITDA was down modestly behind the timing of some foodservice trade spend, increases in certain raw material costs, and product mix. We also launched a new line of licensed seasoning and grilling blends under the 46s brand, the ranch featured in the Yellowstone Television franchise. Meals, the Meals segment Q3 net sales decreased by 3.9% versus last year. The largest driver was the Ortega brand, impacted by competitive pressure from increased activity by the Taco Bell brand, although we have a strong pipeline of channel and product innovation coming. Skinnygirl salad dressings continued high growth behind new items, increased capacity, and expanded distribution. Specialty, the Specialty segment Q3 net sales declined by 9.9% versus last year. The Crisco brand was down behind lower soybean oil pricing last year, reflected through the customers and our pricing model. We also experienced some delays in getting lower pricing reflected in customers which has been rectified. Wesson also fielded more aggressive pricing and promotion during the quarter. Frozen and Vegetables, the Frozen and Vegetables business unit net sales, excluding the impact of the U.S. Green Giant canned divestiture, were down 1.7% versus last year, an improvement from prior quarter trends and reflecting some overall category softness in frozen vegetables. Excluding the divested Green Giant U.S. shelf stable business and the impact of foreign exchange from the peso, segment adjusted EBITDA for Frozen and Vegetables was positive for the quarter. This fall, we have launched a strong innovation pipeline including a number of premium sides. Portfolio shaping, B&G Foods remains committed to reshaping and restructuring our portfolio to sharpen focus, improve margins and cash flow, and maximize future value creation. This is a high priority for the company and critical to our future strategic direction and risk profile. The divestiture of the Green Giant U.S. canned vegetable business was completed last fall following the state of Back to Nature brand in January 2023. We continue to review our remaining portfolio for possible divestiture of non-core assets, including the possible divestiture and sale of some or all of the assets in the Frozen and Vegetables business unit. Green Giant remains a strong brand with broad awareness in distribution, and the frozen vegetable category is on-trend with health and dietary trends. However, it may not be the right fit with B&G Foods' focus and capabilities, particularly since there are no plans to add more assets in the frozen portfolio given the opportunities in our core shelf-stable businesses and overall capital constraints. In anticipation of questions we often receive during the Q&A portion of these earnings calls, I remind you that our company policy is to not comment on any specific acquisition or divestiture opportunities unless and until we reach an agreement with a counterparty. As such, other than the general statements we have made regarding the review of possible divestitures and our commitment to reshape and restructure our portfolio, we will not have further comment at this time regarding specific divestiture opportunities or possible timing. 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 the year.

Thank you, Casey. Good afternoon, everyone. Thank you for being here today. We will keep this brief to allow everyone time to vote if they haven't already. I'll begin with an important note. Last year's third-quarter results included the Green Giant U.S. shelf stable product line, which we sold to Seneca last November. This line contributed about $20.3 million in net sales and roughly $2 million to last year's third-quarter results. In the third quarter of 2024, we reported $461.1 million in net sales, $70.4 million in adjusted EBITDA, with adjusted EBITDA as a percentage of net sales and $0.13 in adjusted diluted earnings per share. Excluding the Green Giant U.S. shelf stable product line, base business net sales fell by $21.3 million or 4.4% in the third quarter of 2024 compared to the same quarter in 2023. This decline aligns with our consumption data from Nielsen, which indicated about a 5% decrease for the 13 weeks ending September 28th, 2024. Of the $22.6 million decline in base business net sales, $22.6 million or 4.7 percentage points stemmed from lower volumes, and $0.4 million or 0.1 percentage points were impacted by foreign currency. Part of this was offset by a positive net price and product mix, contributing $1.7 million or 0.4 percentage points. Net sales for our Crisco brand dropped by $9.4 million in the third quarter of 2024 compared to the same quarter of 2023, largely due to our commodity pricing model, which resulted in a net pricing decline of about $3.5 million reflecting lower soybean oil costs along with a volume decrease of approximately $5.9 million. Excluding Crisco, base business net sales fell by $11.9 million or 3% in the third quarter of 2024 compared to the previous year. Gross profit was $102.3 million for the third quarter of 2024, representing 22.2% of net sales. Adjusted gross profit, excluding $0.1 million in acquisition-related expenses and non-recurring costs, was $102.4 million or 22.2% of net sales. Gross profit for the third quarter of 2023 was $113.8 million or 22.6% of net sales. Adjusted gross profit for that quarter, excluding $0.3 million in acquisition-related expenses and non-recurring items, was $114.1 million or 22.7% of net sales. We are continuing to experience some inflation in raw material costs, but the overall cost increases have been mostly modest this year. However, we are still facing high costs in specific categories like black pepper, garlic, olive oil, and tomatoes, and foreign currency is affecting our costs at the Green Giant manufacturing facility in Mexico. To help offset these increases, we've continued to see favorable conditions in areas that faced significant input cost inflation in 2022 and 2023, such as soybean oil, cans, and logistics, along with our ongoing improvement, productivity efforts, and cost-saving initiatives in our factories. Selling, general, and administrative expenses decreased by $2.2 million or 4.6% to $46 million for the third quarter of 2024 from $48.2 million for the third quarter of 2023. The decrease was composed of decreases in consumer marketing expenses of $1.2 million, warehouse expenses of $0.9 million, selling expenses of $0.8 million, and acquisition, divestiture-related and non-recurring expenses of $0.6 million, partially offset by an increase in general and administrative costs of $1.3 million. Expressed as a percentage of net sales, selling, general, and administrative expenses increased by approximately 40 basis points to 10% for the third quarter of 2024, as compared to 9.6% for the third quarter of 2023. As I mentioned earlier, we generated approximately $70.4 million of adjusted EBITDA, or 15.3% of net sales in the third quarter of 2024 compared to $80.4 million, or 16% in the third quarter of 2023. Approximately $2 million of the decrease in adjusted EBITDA for the quarter was the result of the divestiture of the Green Giant U.S. shelf stable product line, which we sold last fall. An additional $1.5 million or so of the adjusted EBITDA decline resulted from the negative impact of foreign currency relative to the impact in the year-ago period on our cost of goods sold for the portion of our Green Giant frozen vegetables that are produced in our manufacturing facility in Mexico. The remainder of the decline was largely driven by the decline in our net sales and a modest increase in our raw material costs. Net interest expense was $42.2 million in the third quarter of 2024 compared to $35.9 million in the third quarter of 2023. The increase was primarily driven by approximately $3.1 million of charges related to our recent financing as well as the impact of higher interest rates on our long-term debt during the third quarter of 2024 compared to the third quarter of 2023. These increases were offset in part due to lower average debt outstanding in the quarter relative to the prior year quarter. Depreciation and amortization was $17.2 million in the third quarter of 2024, which is in line with the $17.3 million in the third quarter of last year. We had net income of $7.5 million or $0.09 per diluted share and adjusted net income of $10.1 million or $0.13 per diluted share in the third quarter of 2024. In the third quarter of 2023, we had a net loss of $82.7 million, or $1.11 per diluted share and adjusted net income of $20.5 million, or $0.27 per adjusted diluted share. Adjustments to our EBITDA and our net income are described further in our earnings release. I would now like to touch on the results by business unit. Net sales for Specialty decreased by $17.7 million, or 9.9%, in the third quarter of 2024 to $161 million from $178.7 million in the third quarter of 2023. The decrease was primarily due to lower Crisco pricing driven by decreased commodity costs coupled with modest declines in volumes across the business unit and the aggregate. Specialty segment adjusted EBITDA decreased by $2.7 million, or 6.2%, in the third quarter of 2024 compared to the third quarter of 2023. Net sales for meals decreased by $4.5 million or 3.9% in the third quarter of 2024 to $111.6 million from $116.1 million for the third quarter of 2023. The decrease was primarily due to lower volumes across the business unit, partially offset by a modest increase in net pricing and product mix. Meals segment adjusted EBITDA decreased by $2.4 million or 9.5% compared to the third quarter of 2023. Frozen and vegetable net sales, excluding the impact of the Green Giant U.S. shelf stable product line divestiture, were down by $1.6 million or 1.7% versus the prior year. Segment adjusted EBITDA decreased by $3.2 million compared to the third quarter of 2023. Approximately $2 million of the decline was due to the divestiture of the Green Giant U.S. shelf stable product line and an additional $1.5 million or so from the negative impact of foreign currency relative to the prior year period on our cost of goods sold for the portion of our Green Giant frozen vegetable products produced at our manufacturing facility in Mexico. Excluding these amounts, segment adjusted EBITDA increased marginally in the third quarter as compared to the prior year. Net sales for Spices and Flavor Solutions increased by $2.5 million, or 2.6% in the third quarter of 2024 to $99.3 million from $96.8 million in the third quarter of 2023. The increase was primarily due to higher volumes across the business unit. Spices and Flavor Solutions segment adjusted EBITDA decreased by $1.6 million or 5.2% in the third quarter of 2024 compared to the third quarter of 2023. The decrease in segment adjusted EBITDA was largely driven by a combination of an increase in trade spending and product mix and increases in raw material costs such as black pepper and garlic. Now moving on to our balance sheet. As you likely saw, we continue to update our balance sheet. Following the refinancing of our revolver, our term loan B, and an add-on senior secured note offering this summer. In October 2024, shortly after the end of the quarter, we then redeemed the remaining $265 million of senior notes due April 2025. Following these moves, we no longer have any near-term maturities with our closest maturity being our senior notes due 2027. Additionally, we now have just over 35% of our long-term debt tied to floating rates or SOFR. A 50 basis point decrease in rates would reduce our interest expense by approximately $3.5 million to $4 million on an annualized rate. Similarly, a 100 basis point reduction would be expected to reduce our interest expense by $7 million to $8 million. Further details regarding the refinancing transactions have previously been disclosed by press release and 8-K filings and are described in the footnotes to the financial statements that we filed earlier today as part of our 10-Q. And finally, as noted in our earnings press release, we are revising our fiscal 2024 guidance to $1.92 billion to $1.95 billion for net sales, $295 million to $305 million for adjusted EBITDA and $0.67 to $0.77 for adjusted diluted earnings per share. At the midpoint, our net sales guidance is based on our first three-quarters of 2024 net sales of approximately $1.381 billion and projected base business net sales decline of approximately 2% to 3% for the final quarter of 2024, which is a similar trend to what we saw in the third quarter. We believe that the revised guidance better reflects the continued industry-wide challenges in consumer activity which has dampened volumes in both retail consumption and food service channels. As a reminder, the Green Giant U.S. shelf stable business line that we sold last year contributed approximately $15.9 million in net sales to last year's fourth quarter. Additionally, we expect, for full year 2024, interest expense of $152.5 million to $157.5 million including cash interest expense of $145.5 million to $150.5 million. Depreciation expense of $47.5 million to $52.5 million, amortization expense of $20 million to $22 million, an effective tax rate of 26% to 27% and CapEx of $30 million to $35 million. And while we are not providing guidance for fiscal 2025 at this point, we do expect trends to gradually improve and stabilize in the first half of 2025 as we lap the consumer reaction to higher prices. Now I will turn the call back over to Casey for further remarks.

Thank you, Bruce. In closing, B&G Foods is laser-focused on a few critical priorities. First, improving the base business net sales trends of the core business to the long-term objective of plus 1% to 2%. Second, reshaping the portfolio for future growth, stability, higher margins and cash flow, as well as structuring key platforms for future acquisition growth. Third, reducing leverage below 5.5 times through divestitures and excess cash flow to facilitate strategic acquisitions in the future. This concludes our remarks, and now we would like to begin the Q&A portion of our call.

Thank you. We will now be conducting a question-and-answer session. Our first question comes from Andrew Lazar with Barclays. Please proceed with your question.

Great. Thanks. Good afternoon, Bruce and Casey. Maybe to start off, I recall that in the second quarter, I think sales results came in better than the consumption data would have implied. And I think you chalked it up to sort of better results at the time in untracked channels and Canada. And now obviously you talked a bit about destocking. That was a one-point headwind to base business sales. I guess, in looking back, do you think there was some sort of inventory stocking that might have occurred in the second quarter by shipping ahead of sort of consumption, or was that not really a factor, do you think?

As a reminder, we're approximately 75% U.S. traditional grocery, possibly slightly lower. Additionally, we have sales from Canada, our food service, and our industrial business. In the first quarter, we noted some timing in our food service, which positively influenced the second quarter. Therefore, the performance in the first and second quarters aligned well. In the third quarter, as Casey mentioned, we've received information that some of our key customers reduced their inventory. We believe this was evident in July and definitely affected the quarter.

We can analyze warehouse inventories and trends, so we have an understanding of the situation. We observed a significant impact, particularly in July, with a slight effect in August. As Bruce mentioned, our consumption levels are below 70%. While we can track our consumption, there are many variables in Canada, including food service and industrial sectors, as well as untracked channels, making it challenging to determine an exact figure for our total. Therefore, consider this a directional indicator but be aware that you can't really combine the different components to arrive at an overall total.

Yeah. I appreciate it. And then your comments on looking for the business to sequentially improve and stabilize in the first half, certainly not inconsistent, right, with others that have made comments on next year being a below algorithm sort of growth year. But I was wondering if there were any other actions maybe on the cost side perhaps that you could take to sort of or are taking to blunt the weaker sales for a while, just given where leverage stands and things of that nature?

We are addressing costs through several initiatives. Firstly, we have active productivity efforts aimed at improving margins, covering inflation, and compensating for any weakness in our portfolio. These productivity initiatives are increasing and are expected to be around 3% of net sales and 3% of cost of goods sold next year. Additionally, we are effectively lowering selling, general, and administrative expenses this quarter. We are focused on reducing our overhead and fixed costs in response to lower sales. A key area we are examining is concurrent with our divestitures, where we will implement restructuring activities in our cost profile. As we divest businesses, we will not only eliminate proportional costs but also seek to enhance efficiency with a more streamlined portfolio. This is a significant focus that we have already begun to assess.

Got it. Last quick thing would be, I think you mentioned that fourth quarter probably a similar base business trend to what we saw in the third quarter. And I guess, certainly, I think a lot of food companies are hoping anyway, we'll have to see how it plays out to at least continue to see some sequential improvement as we move through the sort of final quarter of the calendar year. I'm just curious why maybe you're just trying to be thoughtful and prudent about your expectations, but why we wouldn't expect to at least see some continued sequential improvement in the environment? Thanks so much.

We're expecting some, but not that much, and it's mostly prudence because every time we believe that maybe we're lapping some of these things, it's probably taking longer in the recovery process. So I think we said the base business net sales were down ex-Crisco pricing impact ex the Green Giant divestiture are down 3% in Q3. We're projecting between minus 2% and minus 3% in Q4. So a little bit of improvement. But I think we're just being cautious in terms of how fast we believe the consumer will come back or really more likely, when do we lap some of the behavior changes that we saw in the wake of the high inflation in the center store food categories, when do those get lapped in terms of their year-over-year impact in consumer buying patterns. And so we're just being cautious, and I think that's prudent at this point. When we start seeing some indications that things are starting to improve, then I think we'll start calling it out. But, to date, we haven't really seen a lot of evidence of that through the third quarter.

Thanks so much.

Thank you. Our next question comes from the line of Michael Lavery with Piper Sandler. Please proceed with your question.

Thank you. Good evening.

Hey, Michael.

You called out some of the currency pressure in Frozen and Vegetables and just want to make sure I understand that right. Is that just transactional? Is there a translational piece to it? And do you have any idea, I mean, I guess nobody knows, but is there any preparation you can do for potential tariff risk? Have you thought about that and have any thoughts there?

Yeah. So part one on the foreign currency, this is really exchange rate between U.S. dollar and Mexican peso. It's actually normalized relative to the five-year average over the last number of weeks or a couple of months. But we lapped a period where the Mexican peso was pretty strong relative to where it's been in the past and certainly stronger this year relative to where it was last year, that impacts really our core frozen business for Green Giant. It's those products that are manufactured down there, and that's transaction, that's not translation. And so that compressed margins, and that impacted EBITDA. As far as tariffs, it's election day. We're really not going to get into the election.

Okay. That's helpful. And just on the guidance. You've narrowed it, of course, but below the line, still it's a pretty decent window at a $0.10 range. Is there anything in particular to keep an eye on there that you would say is more volatile or it sounds like the tax rate's coming still around where you thought and you should have a line of sight on the interest expense, I guess just what's the range of outcomes there that makes it feel a little bit wide.

Yeah. If you just simply took our EBITDA range high-to-low and then used the interest expense, the depreciation, and the amortization and our tax rate, you get those EPS numbers.

Okay.

Thank you. Our next question comes from the line of William Reuter with Bank of America. Please proceed with your question.

Hey, Bill.

Hi. Good evening. This is Rob Rigby on for Bill. So I was just wondering if you could discuss how your performance was versus private label during the quarter or I guess maybe private label trends in general?

We evaluate private label on a category basis. In some areas, private label is well established, while in others, it plays a minimal role. The primary categories where we see significant private label strength are frozen vegetables, where private label, especially in core vegetables, has gained some market share from branded competitors, including Birds Eye. In premium priced segments with sauced or side dishes, there is limited private label competition, and that business is performing well. However, in core basic vegetables, private label has shown stronger performance compared to the pandemic period. In the case of Crisco and vegetable oil, we haven't observed much impact from private label; the main concern has been Wesson trying to maintain its market position against private label, and their aggressive pricing has affected us slightly, but it's had a more pronounced impact on private label. So, while there is some competitive activity from a competitor, private label is not a significant concern for us. We also work with private label in Clabber Girl Baking Powder, so it doesn’t greatly affect our market position. These two categories are the main ones we closely monitor.

Understood. Thank you very much. I wanted to ask about commodity prices and their effect on your gross margins. How do you expect commodity prices to influence your margins moving forward, and do you have any expectations for 2025? Thank you.

We typically do not provide guidance for the upcoming year during this earnings call, and we will offer that information after the fourth quarter results. In terms of input costs, we are experiencing about 1% to 2% inflation this year, and it seems likely that next year will be similar. We'll provide updates as we gather more information and approach our fourth quarter results.

We mentioned in our earnings comments that we are currently experiencing isolated inflation in a few categories, which is offsetting some deflation in others. Right now, we're facing the most pressure on pepper and garlic, which are critical to our spices and seasonings portfolio. We're also experiencing some pressure on olive oil and a bit on tomatoes. These are the main areas of concern, although there are other areas where we are noticing some deflationary impacts. Overall, as Bruce noted, we are seeing about 1% to 1.5% net impact currently, and that is likely what we anticipate moving forward.

Understood. Thank you very much.

Yeah.

Thank you. Our next question comes from the line of Robert Moskow with TD Cowen. Please proceed with your question.

Hi. Thanks. Could you provide some insights on the level of competition you're experiencing? I don’t recall you mentioning Wesson in the last quarter, so it appears to be a new factor. Additionally, it seems there is growing competition in the Mexican category. If this trend continues into next year, do you foresee a continued decline in your business, or do you believe increased spending will be necessary to maintain your market share? You've discussed sequential improvement, but does that also apply to these two categories? Moreover, I wanted to ask about hot cereal since I anticipate Quaker may become more competitive in the oatmeal segment once they restore their capacity. Do you see that as a potential risk as well?

And, sorry. So, Rob, are you talking about in the context of like a permanent shift or are you talking about ebbs and flows?

As you look ahead to 2025, I assume it will continue to be challenging in the Mexican market and in vegetable oil. Do you expect these two categories to stabilize and start growing again? Can you achieve that with the current resources you have allocated, or will you need additional resources? I'll begin with that question.

We have begun allocating additional resources to the two areas you mentioned, where we have noticed increased competition. These are significant businesses for us. Crisco appears to be facing a short-term pricing challenge due to Wesson's aggressive stance this season, which is why we didn't highlight it in August; we weren't aware of their strategy at that time. I believe this situation is likely seasonal, and we intend to remain price-competitive moving forward. As we approach next year, we are committed to ensuring we stay competitive in the market. Regarding Ortega, this marks the third time Taco Bell has ventured into the Mexican category, and we have solid innovation plans for next year, which will involve greater investment and resources for that business. The overall trends in this category are promising, although we are now competing with Old El Paso and a third player who has made inroads in distribution. I do not anticipate increased pressure next year; instead, I believe we will be stronger in countering it and enhancing our innovation and distribution efforts. In summary, we expect to improve the performance of these businesses next year in response to the recent competitive activity, and we are dedicated to investing more resources and efforts into them.

Okay. And then on hot cereal, do you think you need to do prepare for something if Quaker puts more effort against it?

We don't see a ton of correlation with Cream of Wheat and Quaker. We just don't. So that business, I think we'll examine over time where that price point is and everything. But we don't see a lot of substitution between Cream of Wheat and Quaker. So we don't really look at that. I mean, we have a very small business in McCann's that might be impacted by that, but we're feeling okay about our plans on that business. We launched the Standup Pouch and some other things. So I don't think we're necessarily focused on that.

Got it. Makes sense. Thank you.

Thank you. I just had two. On the specialty margin decline in the quarter, is that all the Wesson pressure in Crisco or are there other brands in that portfolio that are seeing some margin declines or pressure?

Yeah. So actually in Wesson, sales were down more than profits.

Bruce.

Sorry, in specialty, sales were down more than margins. So when you think about that in the context of Crisco, sales were down. Some of this is input costs coming down and us reflecting lower input costs as lower pricing is sort of how we pledged in the model, and you kind of see that in the numbers this quarter.

Okay. And then the second question I had was, Bruce, on your kind of like longer-term thoughts for '25 with volumes normalizing through the first half, does that also include food service? I know you guys are in some pretty specific categories on food service, and I was wondering if that was in that or if that was just the grocery brands.

That was an overall company view. We're not indicating that the first half will be positive. Instead, we're expecting an improvement throughout 2025, especially between the first and second halves. I anticipate some normalization by the second half of 2025. However, based on food industry traffic projections I've reviewed from Technomic and other sources, we expect it to remain somewhat negative in the first half of next year.

Okay. Thank you. I appreciate it.

Thank you. Our next question comes from the line of David Palmer with Evercore ISI. Please proceed with your question.

Thank you. Good evening. I wanted to ask a question about your trends going into the fourth quarter, which you mentioned would be down a few percent. This seems consistent with the multi-year trend we've seen this quarter. I understand why you're guiding that way based on the consumption data. If we maintain that multi-year trend into the first quarter, it might actually improve, possibly by around 2%. Do you perceive the internal comparisons as being easier going into the first quarter, making it reasonable to expect an increase in consumption and organic sales in the first quarter of 2025?

I think we will start to compare against some tougher consumption trends from last year in the first quarter. Therefore, we anticipate improved performance in the first and second quarters of 2025, particularly when looking at the combined results for the first half. We expect to perform better than we are currently in Q3 and what we are estimating for Q4. However, we do not foresee reaching flat or positive growth until the second half of the year. It largely depends on how we compare against consumer trends and the consumer environment, along with the behaviors related to trading down that we observed significantly in the first quarter last year.

I think there's been progress, and you mentioned some of the initiatives and areas for improvement earlier. Ortega was one example. Could you please rank your top three or four focus areas where you anticipate making the most progress that we should keep an eye on?

Certainly. Our primary focus is on spices and flavor solutions, which have shown growth in both the last quarter and this quarter, with a positive outlook for next year. This growth aligns with the increasing demand for fresh proteins, as the price gap with packaged and frozen foods has narrowed. We believe this segment has significant growth potential. Additionally, we have a robust innovation pipeline for our Ortega brand, where we lead in taco sauces, and we are launching new products while enhancing our marketing efforts. For Crisco, it's crucial that we appropriately adjust pricing in relation to oil costs and support our shortening products through recipes and outreach efforts. Furthermore, in our Green Giant frozen portfolio, we need to maintain competitive pricing on key vegetables and sauces while introducing successful innovations. We're set to launch new premium sides and Ramen-based products this fall and next spring. These areas are vital to our growth strategy, driven by innovation and strong brand positioning. Overall, we are also observing positive shifts in consumer buying behaviors in the center store, despite some reactionary actions due to inflation. As we move forward, we will concentrate on our major brands and ensure we have effective plans in place.

No. That's great color. Thank you.

Thanks, Dave.

Thank you. Our next question comes from the line of Karru Martinson with Jefferies. Please proceed with your question.

Good afternoon. We certainly saw the slowdown in July for a number of companies, but kind of post-Labor Day, we saw the snapback. Is that one-week reduction something that you're still seeing carrying through the fourth quarter, or are you seeing your retailer starting to adjust that?

I believe we've observed a reduction, depending on the retailer, ranging from a couple of days to perhaps up to a week. However, we did not experience any further inventory reduction during the August to September period, as they seemed to hold steady. The only change we are noticing this year is that retailers are likely holding back on pushing inventory out early in the season and allowing it to flow more naturally. This is reflected in our figures. For Crisco oil, retailers may not be ordering as many pallets to stock their stores, but we are seeing stronger sales later in the season as they start selling through the merchandise at the promotional price points. This marks a slight shift from last year, and I believe it's primarily an inventory management strategy for most of our retailers. Ultimately, it seems to balance out, resulting in less inventory flow upfront and a more consistent merchandising volume throughout the quarter if that provides clarity.

And then when we look at the kind of the slower environment. What is the impact in terms of valuations when you guys look at your potential divestiture program?

Yeah, no comment.

All righty. Had to try. Thank you very much.

Thank you.

Thank you. And our next question comes from the line of Carla Casella with J.P. Morgan. Please proceed with your question.

Hi. Thank you. You mentioned you redeemed the '25 notes after quarter end, which is great. Love to see that. Can you say where the revolver stood pro forma for that?

So what I would do is note that we have $40 million drawn at the end of the third quarter on the revolver. You'll find that reflected in our balance sheet and the press release, along with $265 million of notes. To simplify, just subtract $265 million from the notes and add $265 million to the revolver, and that'll give you the number.

Perfect. It seems that customers are rebalancing their inventory. This indicates that working capital should generate cash as we move through the final quarter, which is typical. However, will it be a significant source of cash this quarter as you adjust inventory levels in trade?

Thinking about retailer inventories compared to B&G's inventories, it's evident that they are behaving similarly. Last year, we experienced significant inventory reduction, but this year we are aiming for more modest levels. For instance, if you look at our third-quarter inventory, it was adjusted for a like-for-like comparison. We have seen a small reduction, but it's nothing close to the significant decreases we experienced in 2023. Typically, the third quarter is when we report the highest inventory levels, and we usually see inventory reductions in the fourth quarter due to the natural flow of the business. While these reductions may not be as drastic as in the past due to changes in the canned business, there will still be a noticeable decrease in inventory during the fourth quarter. This period is traditionally our strongest quarter for cash from operations.

Okay. And then one just on the Wesson. I know you've gotten a lot of questions on this already, but does Wesson have similar pricing contracts with customers or because of their pressure, is it causing customers to come back to you to renegotiate how you price oils, meaning cost-plus versus how much gets passed through in timing?

Yeah. It's really less about that. I think it's just in the context of during 2022 and a portion of 2023 prices going haywire and everybody taking price up, right? We both raised price and we both lowered price this year. They've been a little bit more aggressive. We saw lower input costs. So, therefore, we've all reflected that on-shelf. They've been a little bit more aggressive in their promotional strategy than us. But directionally, we've both taken price down as we should because costs came down.

Okay. Great. That's all I have. Thank you.

Okay.

Thank you. And ladies and gentlemen, we have reached the end of the question-and-answer session. And this also concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.