Earnings Call
B&G Foods, Inc. (BGS)
Earnings Call Transcript - BGS Q4 2023
Operator, Operator
Good day and welcome to the B&G Foods Fourth Quarter and Fiscal 2023 Earnings Call. Today's call, which is being recorded, is scheduled to last about 1 hour included remarks by B&G Foods management and the question-and-answer session. I would now like to turn the call over to AJ Schwabe, Associate, Corporate Strategy and Business Development for B&G Foods. AJ?
AJ Schwabe, Associate, Corporate Strategy and Business Development
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 and full year 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, 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 fiscal 2024 and beyond. Bruce will then discuss our financial results for the fourth and fiscal 2023 and our guidance for fiscal 2024. I would now like to turn the call over to Casey.
Casey Keller, CEO
Good afternoon. Thank you, AJ, and thank you all for joining us today for our fourth quarter and fiscal 2023 earnings call. B&G Foods' fourth quarter results were solid, slightly exceeding expectations. Base business net sales, which exclude net sales of the divested Green Giant U.S. canned vegetable and Back to Nature businesses, were essentially flat, but for the impact of lower Crisco oil commodity pricing year-over-year. In addition, base business volume in the aggregate across the portfolio was slightly up for the quarter, stabilizing for the first period since significant pricing actions in fiscal year '22. Profit margins also demonstrated steady progress. Adjusted gross profit percentage increased 130 basis points versus last year to 21.9%, reflecting pricing recovery of higher costs and productivity savings. Adjusted EBITDA as a percentage of net sales was flat to last year at 15%, with adjusted gross profit improvement offset by the reinstatement of the short-term management incentive accrual in G&A expenses versus zero in fiscal year '22. With fourth quarter results, B&G Foods delivered fiscal year '23 net sales of $2.062 billion and adjusted EBITDA of $318 million, well within our revised guidance reflecting the divestiture of Green Giant U.S. canned vegetables in November. Bruce will provide more details on quarter four and fiscal year '23 results. Stepping back, we achieved several critical milestones in fiscal year '23 on a journey to reshape and strengthen B&G Foods. First, margin recovery. After historic inflation pressure in fiscal year '22, margins recovered strongly in fiscal year '23 behind pricing actions and productivity efforts. Adjusted gross profit percentage increased 280 basis points year-over-year from 19.4% to 22.2% in fiscal year '23. Adjusted EBITDA as a percentage of net sales increased 150 basis points to 15.4% in fiscal year '23. Going forward, input cost inflation has moderated to low single digits, and in some cases, such as soybean oil, has come down from historic highs. Number two, portfolio shaping. We divested the low-margin, working capital-intensive businesses of Back to Nature cookie crackers and Green Giant U.S. canned vegetables. Both did not fit with our future portfolio focus and were strained to deliver adequate cash flow against the leverage model. As previously disclosed, we expect to divest additional businesses and brands over the next year to focus the portfolio for future success and intend to use the proceeds to pay down debt. Third, cash flow and working capital. Net cash from operations improved dramatically, increasing from $6 million last year to $248 million in fiscal year '23. These results were driven by better operating performance and margin recovery and critically by significant improvement in working capital. Inventories in fiscal year '23 declined by $157 million, down from $726 million last year to $569 million at year-end, reflecting the divestiture of the seasonal Green Giant U.S. canned business, lower Crisco soybean oil costs and efficiencies in base business inventory levels while delivering higher service. Fourth, debt and leverage. During fiscal year '23, B&G Foods reduced net debt by $335 million, primarily using improved cash flow and the proceeds from divestitures to pay down debt. As a result, B&G Foods pro forma adjusted net leverage ratio, as calculated per our credit agreement, decreased from 7.62 times at fiscal year '22 end to 6.32 times by the end of fiscal year '23. We are making excellent progress towards returning to our long-term range of 4.5 to 5.5 times. The expectation is to further close that gap in fiscal year '23 through additional divestitures and paying down debt with excess cash flow. Five, Crisco pricing model. During the first quarter fiscal year '23, we implemented a new commodity-based pricing model on Crisco with our customers. Prices for Crisco products moved quarterly to reflect the volatility in soybean and vegetable oil inputs and match market pricing with actual oil costs. The result has been stable gross profit dollars and cash flow for Crisco in a volatile market, particularly over the past two years. As discussed, we do expect to see some up and down movement on Crisco net sales results based on changes in oil pricing without any impact on the bottom line. Lastly, spices and seasonings, representing approximately 18% of our portfolio, the core high-margin spices and seasonings business increased net sales by 2.2%. Trends were particularly strong in the food service and Members Mark Sam's label business, which largely serves out-of-home and small business customers. The core retail branded trends, DASH, Webber, Spice Islands, etc., are improving and have recovered from temporary service and production issues in our Ankeny factory. We have also strengthened our innovation and new product pipeline, launching new license seasoning and grilling blends under the Buffalo Trace, Fireball and Southern Comfort brands, which are preparing very well in initial distribution. Overall, we are pleased with the performance in the fourth quarter and the recovery of the B&G Foods business in fiscal year '23. There is clearly more work to do, but our team has made significant progress towards creating a stronger, more valuable B&G Foods. Bruce will discuss specific guidance, but our focus in fiscal year '24 is to generate slight top-line and low single-digit bottom-line growth on the base business, which excludes the divested Green Giant U.S. canned vegetable business. Further reshape the business through strategic divestitures to focus the long-term portfolio for higher margins and valuation growth. We continue to evaluate existing businesses that have lower margin and cash flow, higher working capital complexity or do not fit with our core capabilities and business unit structure, reduce net debt and leverage through divestiture proceeds and strong excess cash flows. Thank you, and I will now turn the call over to Bruce for more details on the quarterly performance and results for the year.
Bruce Wacha, CFO
Thank you, Casey. Good afternoon, everyone. Thank you for joining us on our fourth quarter and fiscal year 2023 earnings call. As you can see, we had another strong quarter, and we finished the year largely in line with our guidance. As we explained at the outset of the year, we expected to see a large year-over-year increase in adjusted EBITDA and adjusted EBITDA as a percentage of net sales in the first two quarters of the year, followed by a more modest increase in adjusted EBITDA and adjusted EBITDA as a percentage of net sales in the third quarter. And for the fourth quarter, we expected similar performance to the prior year before accounting for the divestiture of Green Giant U.S. shelf-stable product line. This is essentially how the year played out for us. In fiscal 2023, we generated $2.062 billion in net sales, $318 million in adjusted EBITDA, adjusted EBITDA as a percentage of net sales of 15.4% and adjusted diluted earnings per share of $0.99. Base business net sales, which excludes net sales from the Back to Nature brand and the Green Giant U.S. shelf-stable product line, decreased by approximately $30 million or 1.5% in fiscal 2023 compared to the year-ago period. Base business net sales include a benefit of $93.3 million from pricing and the impact of product mix. This was offset by negative impacts of $5.1 million from FX and $118.2 million from volumes. The pricing helped particularly in our results in the early part of the year. For fiscal 2023, adjusted EBITDA increased by $17 million or 5.7% compared to $301 million for fiscal 2022. Adjusted EBITDA as a percentage of net sales was 15.4% for fiscal 2023 compared to 13.9% for fiscal 2022. For the fourth quarter of 2023, we generated $578.1 million in net sales, $86.8 million in adjusted EBITDA, adjusted EBITDA as a percentage of net sales of 15% and adjusted diluted earnings per share of $0.30. Base business net sales decreased by $13.3 million or 2.3% in the fourth quarter of 2023 compared to the prior year. The decrease in base business net sales in the fourth quarter was largely driven by a decrease in net pricing and the impact of product mix of $15.9 million or 2.8% of base business net sales. The decrease in pricing was in part a product of our Crisco commodity pricing model that we have instituted, coupled with modest increases in promotional trade spending in other areas of the portfolio where it made sense. The impact of foreign currency was also a slight drag on net sales, contributing to another $0.3 million of the decline. These were partially offset by an increase in unit volume of $2.9 million for the quarter. We are obviously encouraged by the improving volume story that we are now seeing, although we are closely monitoring the trade-offs between pricing, promotional strategy and volumes as well as the current consumption trends. I will now highlight the performance of some of our larger brands. Clabber Girl had incredibly strong momentum coming into the holiday bake season and similar to its performance all year long, Clabber didn't disappoint. Net sales of Clabber increased by $8.2 million or 26.3% in the fourth quarter of 2023 compared to the fourth quarter of 2022. Net sales of Clabber Girl benefited from both pricing and increased volumes during the quarter. Net sales of Maple Grove Farms increased by about $0.7 million or 3.4%. Our spices and seasonings continue to benefit from improved supply chain performance and new product launches, finishing the year with a solid quarter. Net sales of the company's spices and seasonings increased by $0.7 million or 0.8% in the fourth quarter of 2023 compared to the fourth quarter of 2022. As Casey mentioned earlier on the call, we are very excited about the prospects for these new partnership brand launches coming out of our spices and seasonings business, which include the license seasoning products, Einstein's Everything Bagel, Einstein's Avocado Toast and Sazerac Weber Flavors, Buffalo Trace, Fireball and Southern Comfort. We have a robust pipeline and expect to be able to announce additional new and exciting products. While net sales of Crisco decreased by $10.6 million or 8.7% in the fourth quarter of 2023 when compared to the prior year period. This was largely expected due to favorable input cost relief and the execution of our commodity pricing model, which allowed us to reduce pricing to our customers and still maintain profit dollars. As a result of the lower pricing, we are starting to see a nice recovery in Crisco volumes. Increased volumes for Crisco contributed to $1.8 million to net sales or 1.5% in the fourth quarter of 2023 compared to the fourth quarter of 2022. We expect this trend to continue throughout 2024 with lower pricing leading to an improved volume recovery for Crisco throughout the year. Our Green Giant business was not immune to the category-wide industry challenges seen throughout 2023 in the shelf-stable and frozen vegetable sets. Net sales of Green Giant, including Le Sueur, but excluding the divested Green Giant U.S. shelf-stable product line, decreased by $5.2 million or 4.4%. We expect more favorable industry trends in the category during 2024. Quite frankly, we expect much more favorable trends for our business. The goal is to get this brand back to being the industry leader from an innovation perspective and to generate category-leading growth rates like we did before the pandemic. The hot breakfast category is another category that is still seeing some normalization in its post-pandemic trends. Net sales of Cream of Wheat were approximately $78.5 million in 2023, which was well ahead of the pre-pandemic levels that had been consistently in the $60 million to $70 million range annually. Although 2023 net sales were somewhat lower than fiscal 2022 annual net sales of $81.4 million. In the fourth quarter of 2023, net sales of Cream of Wheat decreased by $2.2 million or 9% compared to the prior year. Net sales of Ortega decreased by $0.3 million or 1% in the fourth quarter of 2023 compared to the fourth quarter of 2022. Ortega finished the quarter with some momentum despite a challenging year. While Q4 net sales were down 1%, they were up approximately 0.9% in the month of November and another 0.6% in December compared to the prior year periods. Taco sauces, green chiles and seasoning mixes led the way for the brand, driving positive performance in the back half of the fourth quarter. Taco Shells and Taco kits continue to be somewhat challenged. Ortega began the year with a tough comp relative to the prior year and some softness in shelves and kits, as well as pricing elasticity-driven volume declines in some SKUs where we took pricing. These factors, combined with the general post-COVID category normalization helped cause much of the declines. Total net sales for Ortega were $147.9 million in fiscal 2023, down from $154.3 million in fiscal 2022, but also up substantially from pre-pandemic 2019 net sales of $140.4 million. Base business net sales of all other brands in the aggregate decreased by $4.6 million or 3.5% for the fourth quarter of 2023 compared to the fourth quarter of 2022. Gross profit was $125.2 million for the fourth quarter of 2023 or 21.7% of net sales. Adjusted gross profit was $126.8 million or 21.9% of net sales. Gross profit was $126.1 million in the fourth quarter of 2022 or 20.2% of net sales. Adjusted gross profit was $128.6 million or 20.6% of net sales. Adjusted gross profit increased by approximately 130 basis points in the fourth quarter of 2023 compared to last year's fourth quarter. The improvement in gross profit percentage was largely driven by a moderation in input costs and logistics inflation. This represents a continued turnaround compared to the first half of fiscal 2022, where we suffered from severe industry-wide input cost inflation, which led to large declines in our gross profit and margins. Selling, general and administrative expenses increased by $1.3 million or 2.7% to $53.2 million for the fourth quarter of 2023 from $51.9 million for the fourth quarter of 2022. The increase was composed of increases in general and administrative expenses of $5.8 million and consumer marketing expenses of $0.9 million, partially offset by decreases in warehousing expenses of $2.6 million, selling expenses of $2.3 million and acquisition divestiture-related and nonrecurring expenses of $0.5 million. Expressed as a percentage of net sales, selling, general and administrative expenses increased by 90 basis points to 9.2% for the fourth quarter of 2023 compared to 8.3% for the fourth quarter of 2022. The increase in general and administrative costs was largely driven by modest inflation in wages, insurance and other professional services, as well as an increase in short-term management incentive accruals as no annual bonuses were rewarded for fiscal 2022 due to the shortfall in performance in fiscal 2022. As I mentioned earlier, we generated $86.8 million in adjusted EBITDA for the fourth quarter of 2023 compared to $93.6 million in the fourth quarter of 2022. Fourth quarter 2023 adjusted EBITDA benefited from the moderation in industry-wide input cost inflation and logistics inflation that have plagued the industry since the fourth quarter of 2021, which were offset in part by the modestly higher G&A costs as well as the impact of divestitures. Fourth quarter of 2022 included a full quarter of profits from the Back to Nature brand and the Green Giant U.S. shelf-stable product line, while the fourth quarter of 2023 had no benefit from Back to Nature and approximately 5.5 weeks of benefit from the Green Giant U.S. shelf-stable business. Adjusted EBITDA as a percentage of net sales was 15% in the fourth quarter of 2023, in line with the 15% in the fourth quarter of 2022. Net interest expense was $40.2 million in the fourth quarter of 2023 compared to $36.3 million in the fourth quarter of 2022. The increase was primarily attributable to higher interest rates on our borrowings and a $0.5 million loss on extinguishment of debt, partially offset by a reduction in our average debt outstanding. Depreciation and amortization was $17 million in the fourth quarter of 2023 compared to $19.5 million in the fourth quarter of last year. We generated $0.30 in adjusted diluted earnings per share in the fourth quarter of 2023 compared to $0.40 last year. We remain very encouraged by the progress we have made over the past year in terms of restoring our P&L and perhaps even more impressive than our P&L improvements was the progress that we made in the improvement of our cash flows and our balance sheet. We generated $92.1 million in net cash from operations in the fourth quarter of 2023 and $247.8 million in the full 12 months of fiscal 2023. This compares to $54.4 million in net cash from operations generated in the fourth quarter of 2022 and just $6 million during the full 12 months of 2022. Increased operating profits, improved margins and a more favorable working capital were the primary drivers of improved cash flows from operations, which was offset in part by increased interest expense. We finished the year with approximately $569 million in inventory in fiscal 2023 compared to $726.5 million in inventory at the end of last year. Approximately $90 million of the reduction was due to our focus on supply chain efficiencies and a moderation in input costs. The remainder came from the sale of the Green Giant U.S. shelf-stable product line, which, as we mentioned previously, was highly capital-intensive and came with large seasonal swings in working capital. We reduced net debt by more than $335 million during the course of fiscal 2023 to $2.02 billion at the end of the year, down from $2.36 billion at the end of fiscal 2022. We also reduced the pro forma adjusted net leverage ratio, as defined in our credit agreement, to approximately 6.3 times at the end of fiscal 2023 compared to 7.6 times at the end of fiscal 2022. We expect to continue to reduce our net debt and pro forma adjusted net leverage ratio throughout fiscal 2024 and beyond as we diligently work toward achieving our long-term target of 4.5 to 5.5 times. Now as a reminder, before we get to our fiscal 2024 guidance, we are still living in highly unpredictable times. We have two major military conflicts going on in the world that have far-reaching global implications. We also have separate but ongoing disruptions in both important canal zones that impacted the global supply chain. Although we are not immune from the challenges that these issues present, we are happy to have a much simpler operational footprint than many of our larger packaged food peers. For B&G Foods, however, M&A will have an impact on our numbers. We have now fully lapped the sale of Back to Nature, but we still have to lap the sale of the Green Giant U.S. shelf-stable product line. As we mentioned on our prior call, the Green Giant U.S. shelf-stable product line had approximately $75 million to $85 million in annual net sales and low double-digit contribution margins. The business had approximately $65 million in net sales under our watch in fiscal 2023 that we need to lap this year. It is also worth noting that while the majority of the heavy lifting in our adjusted EBITDA margin and dollar recovery has already occurred, we still do expect to see some modest improvements going forward in 2024. So based on what we know today, we expect 2024 net sales of $1.975 billion to $2.020 billion. Our net sales guidance is generally in line with our long-term guidance of 0% to 2% base business top-line growth after adjusting for the removal of the Green Giant U.S. shelf-stable product line, which we sold in November, other nonrecurring sales and an estimated $15 million reduction in net sales of Crisco due to anticipated lower oil input costs and a corresponding reduction in our Crisco net selling prices. We expect adjusted EBITDA to be in a range of $305 million to $325 million. This range largely reflects the elimination of approximately $8 million to $10 million of adjusted EBITDA due to the recent sale of our Green Giant U.S. shelf-stable product line. Based on this adjusted EBITDA guidance range, we expect adjusted EBITDA as a percentage of net sales to remain at approximately 15%. And based on this guidance, we expect adjusted diluted earnings per share to be in a range of $0.80 to $1. Additionally, we expect for full year 2024, interest expense of $145 million to $150 million, including cash interest of $138 million to $143 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 $35 million to $40 million. We expect to use a little bit less than 50% of our excess cash to pay our dividend and the remaining 50% to 60% to pay down debt. And now I will turn the call back over to Casey for further remarks.
Casey Keller, CEO
Thank you, Bruce. In closing, our fourth quarter and fiscal 2023 results demonstrated strong progress with improved margins, stabilizing volumes, stronger cash flows, and a reduction in leverage. We remain on track to further improve the business in fiscal 2024 and beyond. We have also made significant progress against reshaping the portfolio through our focused M&A strategy, including the divestiture of two businesses, the Back to Nature brand and the Green Giant U.S. shelf-stable business that are not core to the B&G Foods of the future. This concludes our remarks, and now we would like to begin the Q&A portion of our call.
Operator, Operator
Thank you. The first question we have is from Andrew Lazar of Barclays. Please go ahead.
Andrew Lazar, Analyst
Good afternoon, Casey and Bruce.
Casey Keller, CEO
Hey. How are you?
Andrew Lazar, Analyst
Good. First off, I guess, your base business growth expectation, as you mentioned for '24, I think is roughly flattish. And I'm trying to get a sense of how you see that playing out for the year, both from a volume and a price standpoint. I think you mentioned another $15 million impact from negative pricing for the year for just the Crisco pass-through pricing model, if I got that right. So that's about maybe down 1%. So does that assume that volume is probably up 1% or so for the year? I just want to make sure I have that right.
Casey Keller, CEO
Specific to Crisco.
Andrew Lazar, Analyst
Could there be additional negative pricing activity? I'm trying to understand your outlook on pricing and how optimistic you are about volume expectations.
Casey Keller, CEO
Yes. So let's address these separately. So for Crisco, as we've said over the past year or so, we put in place a pricing model where we interact with our customers quarterly. And based on where input costs are, we adjust price. If we think about how last year played out, input costs were still high from the 2022 levels at the beginning of the year and over time came down. And so quarterly, we were reducing price for Crisco. We will be lapping those higher prices for Crisco for the first half, three quarters of this year, which will then mean assuming everything was perfect, margins would be the same from a dollar standpoint. Sales would be down, margins would be up from a percent standpoint. Pricing would come down for Crisco, and we actually think we get a little volume elasticity benefit. And that's kind of what we're seeing for Crisco today.
Andrew Lazar, Analyst
And then...
Casey Keller, CEO
Yes. But if you look at the base business, excluding the divestitures and excluding the impact of Crisco, we're basically saying we're going to be flat to slightly up. And that will be probably on both volume and pricing. So those two will be kind of running more closely together. And if I think about the flow of that, we still are kind of coming out of that trends improving, but I would expect that the first half of the year is a little bit below that, and the second half is a little bit better than that. And that's how we kind of see it playing out right now. And we are seeing kind of volumes and pricing stabilize. And we don't have a lot of growth planned from pricing other than the movement of Crisco, which is kind of irrelevant to the bottom line.
Andrew Lazar, Analyst
Got it. That's helpful. Your guidance at the midpoint on EBITDA margin indicates some additional modest improvement. There was a significant increase in margins in 2023 compared to 2022, but EBITDA margins are still well below where they were a couple of years ago. I'm trying to understand what might hinder more significant improvement in EBITDA margins moving forward. Has something in the portfolio changed compared to a couple of years ago? What would it take to return to those levels, if that's a reasonable expectation at some point?
Casey Keller, CEO
Our goal is to return to EBITDA margins of 18% to 20%. To achieve this, we need to focus on a few key areas. First, we are looking at mergers and acquisitions while divesting low-margin businesses. We also need to maintain productivity, and we have begun a journey towards productivity savings, which we expect to see improvements from in our second year of focus. Lastly, as Crisco oil prices decrease, we anticipate a benefit to our margins. Interestingly, even though sales may decline, maintaining the same gross profit will allow us to enhance our margins in the Crisco business due to the reduction in oil pricing. These three factors combined will help us work towards that target of 18% to 20%.
Bruce Wacha, CFO
And if you think about some of that drag, what Casey is describing on Crisco, bigger example for that brand, but to the same degree across a lot of the rest of our portfolio, when costs were rapidly rising, we took price to protect profit dollars which just the algebra suggests lower margins as a percent. Just that's how the math works.
Casey Keller, CEO
Crisco will be the most extreme example of that, yes.
Andrew Lazar, Analyst
All right, okay. Thanks so much. I'll pass it on.
Operator, Operator
The next question we have is from William Reuter of Bank of America. Please go ahead.
William Reuter, Analyst
Good afternoon. My first question is regarding future additional asset sales. I wasn't aware that you were still actively pursuing these. Is this new, or have you been working on this over the past few months and quarters? Also, do you have any sense of the magnitude or the types of assets you're considering?
Casey Keller, CEO
Sure. So our M&A process, and we tend and we will tend to be a long-term net acquirer, but we are reshaping the portfolio. And as part of that, there are some things that are going to come out. So we've sold two businesses that we felt were not a fit to the portfolio that we want to run in the future and over the long term. There's probably a couple of other things. There's nothing that we're active in the market in terms of running a process for right now. So there's a little bit of stay tuned. And when it's appropriate to talk about it, we'll talk about it. Likely what you will see is other things that maybe are not a good fit for us or that could be a better fit for other people.
William Reuter, Analyst
Got it. That's helpful. And then in the answer to a previous question, you mentioned that you weren't expecting to take much pricing this year. I don't know if I heard explicitly what your outlook is for input costs and let's exclude Crisco since that's the pass-through model. But for the remainder of the products, what's your outlook on where they should be this year versus last year or any other sources of either inflation or deflation?
Casey Keller, CEO
I believe we're currently observing our input costs, and it's still early in the year, so we're working on projecting them fully. I'm estimating input cost inflation in the range of 1% to 2%, leaning towards the lower end of that range for now, though there might be some increase in freight and transportation. Overall, I think it aligns more with that range. At this moment, our priority is to stabilize our business volumes rather than increase prices as much as we did last year. We're focusing on driving productivity to counteract inflation and potentially improve our margins.
William Reuter, Analyst
Got it. Perfect...
Casey Keller, CEO
There may be some selected places where we're going to take price where we might have a big jump in one particular small commodity input, but that's going to be very, very selective.
William Reuter, Analyst
Got it. Very helpful. That's all from me. Thank you.
Operator, Operator
The next question we have is from Karru Martinson of Jefferies Company. Please go ahead.
Karru Martinson, Analyst
Good afternoon. What has been the kind of the competitive response in terms of your peers? We constantly keep hearing about the consumer trading down to private label and the give back and pricing elasticity that you referenced. Are you seeing that sustained shift in terms of competing products for your categories?
Casey Keller, CEO
I mean, it really depends on the category honestly, because we have the pass-through model on Crisco, we're actually seeing volumes increasing on that business. So we're seeing a pickup in our unit sales as a result of bringing the price back down to reflect the lower oil commodity cost pricing. So even though the percentage gap to private label might be the same, the absolute gap has come down and the absolute price point has come down. So on that one, we're kind of moving where we'd expect to in terms of our share performance. I would say there's a couple of other places where we've seen inflation drive up pricing. And even though we try to maintain our percentage gap to private label at the higher absolute price points and just maybe a couple of categories like well, canned vegetables, we're out of now. But that was one where we were seeing a little bit of that dynamic. But for the most part, we watch the gap to private label pretty closely, and we try and manage to that so that we don't have a lot of pressure from trade down or we maintain the same relative position in the marketplace.
Karru Martinson, Analyst
Okay. And when we look at the kind of the implied cash flow guidance here for the year with the $70 million or so for the dividend when it was $300 million maturity in 2025, would it leave kind of $230 million that you would need to refinance? Is that to be paid off through the asset sales? Or how would you look at addressing that?
Casey Keller, CEO
So for the remaining stub on the 2025, the base case assumption is it's a combination of cash from operations and revolver draw. And keep in mind, we've got a big revolver, so we've got plenty of capacity there. I think there's always options around potential refinancing as part of a broader refinancing if the market is hospitable and it makes sense to us to the extent that we have any more asset divestitures, there's money coming in the door from that as well. So I think there's a couple of things, but I would use as the base case, what we laid out to investors, ample cash from operations, coupled with liquidity from the revolver.
Karru Martinson, Analyst
Thank you very much. Appreciate it.
Operator, Operator
The next question we have is from Connor Rattigan of Consumer Edge Research. Please go ahead.
Connor Rattigan, Analyst
Hey, guys. Good afternoon.
Casey Keller, CEO
Good afternoon.
Connor Rattigan, Analyst
So correct me if I'm wrong, but it sounds like you registered positive base business volume growth in the quarter. So that was quite a bit ahead of what we saw in the track data. I guess could you maybe help us understand what drove that differential? And looking ahead to 2024, how we should sort of think about volume trends over the course of the year and if maybe there are any items we should keep in mind in terms of divergences versus track data?
Casey Keller, CEO
In the fourth quarter, we experienced modest growth in volume, and I want to emphasize that we shouldn’t overstate this. We were actually pleased to see stable volume trends after the previous year's inflationary pressures. Our goal for 2024 is to maintain this small growth trend. However, there are several factors that explain the discrepancies between the measured data, track data, and our actual performance. Our channel coverage isn’t fully captured in the data. For instance, we have businesses selling to various foodservice outlets, especially in the spices, seasonings, and syrups sectors. Additionally, we engage in private label sales, particularly in baking powder, which aren't reflected in your data. Much of our activity in these areas won’t show up in track data. Therefore, correlating track data directly to our sales figures can be challenging due to our involvement in foodservice, private label manufacturing, and other customer relationships. We thoroughly monitor all aspects of our business trends.
Connor Rattigan, Analyst
So I guess just following up on that, would it be fair to say that the non-track businesses are outperforming what you're seeing at retail?
Casey Keller, CEO
We're definitely noticing that foodservice businesses have been performing better than retail trends over the past year. This isn't just isolated to us; you can observe similar patterns in other businesses too. This situation is a reversal from what we experienced during the pandemic. Currently, foodservice growth is outpacing retail growth. I anticipate that this will normalize at some point this year, with both sectors stabilizing and settling into more consistent year-over-year trends. However, this is contingent on various economic factors, such as the possibility of a recession, which could alter that dynamic. As it stands, we're seeing a return to balance in consumer behavior and trends between these two areas.
Connor Rattigan, Analyst
Okay. Makes total sense. And then just as a quick follow-up, Bruce, in your prepared remarks, you noted some increases in promotional and trade spending in certain parts of the business. I guess, could you maybe be a little more specific as far as maybe what brands those impacted? And I guess, what type of lift you might have seen from that spend? And just overall, if you were happy with what you saw.
Bruce Wacha, CFO
I don't think we're necessarily going to talk about the specifics on the brand promotional strategy, but this is, again, in a way to improve volumes. I think we're seeing this across many of our competing or just peer group where people are increasing promotional spend. I think it's been somewhat rational, but spend is still lower than it was pre-pandemic. So it's going to be higher than it was last year or the year before, it's still sort of normal. And we expect to get some volume benefits and I think you do see that.
Casey Keller, CEO
Yes. I mean, for the most part, we put trade spend into businesses because we're going back to more normal promotion patterns, we do see volume look behind that, and we watch that pretty carefully. And if we don't see volume from it, we change. But for the most part, that's been a successful play. And as Bruce said, we're not all the way back to where we were pre-pandemic. So we're kind of moving back there over time as I think most players in the food industry are as normal promotion patterns and merchandising patterns resume.
Connor Rattigan, Analyst
All right. Sounds good. Thank you.
Operator, Operator
The next question we have is from Hale Holden of Barclays. Please go ahead.
Hale Holden, Analyst
Hi, afternoon. Thank you. Super excited to try the Fireball seasoning, by the way. But...
Casey Keller, CEO
Don't drink too much of it with the seasoning.
Hale Holden, Analyst
Trying to age myself out of life here. So Bruce, the $0.5 million debt extinguishment costs in the quarter, did you buy some bonds back? Or was that a term loan pay down?
Bruce Wacha, CFO
Yes. It's just all the refinancing stuff that we did kind of back half of last year.
Hale Holden, Analyst
Okay. My second question is about divestitures in the market. You've been discussing this for the past 6 to 12 months, and I'm curious if you've noticed any improvement in the market from a seller's perspective, such as higher multiples or increased interest in the pipeline.
Bruce Wacha, CFO
I think there's certainly chatter that sounds like there should be more activity. I would have told you the same thing 6 months ago or a year ago. But I think as the financing environment starts to stabilize, we're going to see more activity. We probably have seen some nice little brand deals get done. We saw two of our deals get done. I think it's fine. I don't think it's shut down. It's just not gangbusters like it was a few years ago, but it should be fine.
Hale Holden, Analyst
Okay. Great. Thank you very much.
Operator, Operator
Next question we have is from David Palmer of Evercore ISI. Please go ahead.
David Palmer, Analyst
Thanks. Inventory decreased during the quarter due to the divestiture. I'm curious about how much the inventory change will impact 2024 and where you anticipate free cash flow conversion settling in relation to EBITDA moving forward.
Bruce Wacha, CFO
I believe the inventory reduction in 2023 is due to both the sale of Green Giant U.S. canned vegetables and improvements in our base business following the inflationary cycle and supply shortages. We made significant reductions this year, and I don't anticipate similar changes in the future. A divestiture could influence this, but when it comes to our base business and organic trends, I expect a continuous improvement trend of around 2% to 3% as we enhance our operations and integration of demand and supply. While we will benefit from reducing working capital, it won't reach the same levels as this year. Our long-term goal is to maintain enough excess cash such that half is allocated for dividends and the other half for debt repayment. This is our direction, allowing us to systematically reduce debt through our excess cash flow.
David Palmer, Analyst
I think in the past, you might have had a 60% of EBITDA type target? Is that...
Bruce Wacha, CFO
Give or take that. So I mean if you think about the midpoint of our guidance range, call it, $315 million of adjusted EBITDA, throwing $5 million, $10 million in noncash or share-based comp is sort of your baseline. And then again, we gave guidance on the call, but cash interest at the midpoint is about $140 million. Cash taxes have been bouncing around $30-plus million a year. CapEx of $35 million, $40 million. Casey talked to modest, certainly not what we had last year but modest levels of inventory reductions/working capital improvement, you could see a number that's $110 million, $125 million or so in excess cash before dividends, if you get the benefit of working capital in there. And dividends are about $60 million.
David Palmer, Analyst
That's all helpful. I have a question about Crisco. You mentioned that you expect profit dollars from Crisco to stay fairly consistent this year, which is encouraging. Looking ahead, what do you see as the main concern for that business's profitability? Is the volatility of soybean oil a factor in maintaining steady profits? Are there certain price levels that could lead to increased trade downs? What factors could potentially disrupt your ability to keep profits steady for Crisco?
Casey Keller, CEO
Yes. I believe we have effectively managed to pass through the oil costs to our customers. If you had asked me this in 2022, I would have noted a greater risk. However, since the beginning of last year, we introduced this pass-through model with our customers, and they have responded positively. Each quarter, we inform them of the oil costs and how we will adjust pricing accordingly, and they have been accommodating. This approach has been successful in maintaining our gross profit dollars. My main concern is if soybean oil prices rise again to around $0.80; we will have to increase prices, and at that level, the dollar gap to private label products will widen, even though the percentage remains unchanged. This poses a risk to our volume trends given the current commodity situation. Fortunately, at this moment, soybean oil prices are approximately $0.45 per pound, which is significantly lower than last year and from the previous high of $0.80 seen around 18 to 24 months ago. That's the major risk. Additionally, we monitor our shortening business closely, which is an important component of the Crisco brand, to ensure that household penetration remains strong and that consumers continue to bake, cook, and fry at consistent levels.
David Palmer, Analyst
That's great. Thank you.
Operator, Operator
There are no further questions at this time. I would like to turn the floor back over to Casey Keller for closing comments.
Casey Keller, CEO
Thank you all for joining us today for the fourth quarter earnings call. Obviously, reach out if we want to talk anything. Appreciate your attention. Look, we're pleased with the results in the fourth quarter, but obviously, we have more work to do in '24 to get this business in the shape we want it. So thank you very much.
Operator, Operator
Ladies and gentlemen, this concludes today's conference. Thank you for joining us. You may now disconnect your lines.