U.S. Markets open in 6 hrs 45 mins

Edited Transcript of BGS earnings conference call or presentation 23-Feb-17 9:30pm GMT

Thomson Reuters StreetEvents

Q4 2016 B&G Foods Inc Earnings Call

PARSIPPANY Feb 23, 2017 (Thomson StreetEvents) -- Edited Transcript of B&G Foods Inc earnings conference call or presentation Thursday, February 23, 2017 at 9:30:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Tom Crimmins

B&G Foods, Inc. - EVP, Finance & CFO

* Bob Cantwell

B&G Foods, Inc. - President & CEO

================================================================================

Conference Call Participants

================================================================================

* Farha Aslam

Stephens Inc. - Analyst

* Dave Cook

Wells Fargo Securities - Analyst

* Cornell Burnette

Citi Research - Analyst

* Sean Naughton

Piper Jaffray & Co. - Analyst

* Eric Gottlieb

D.A. Davidson & Co. - Analyst

* Eric Larson

Buckingham Research Group - Analyst

* Robert Moskow

Credit Suisse - Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good day and welcome to the B&G Foods fourth-quarter 2016 earnings call. Today's call is being recorded. You can access detailed financial information on the quarter and the full year in the Company's earnings release issued today, which is available at ir.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 all of 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.

Tom Crimmins, the Company's CFO will start the call by discussing the Company's financial results for the quarter. Next, Bob Cantwell, the Company's CEO, will discuss various factors that affected the Company's results, selected business highlights, and his thoughts concerning 2017.

I would now like to turn the conference over to Mr. Tom Crimmins. Tom?

--------------------------------------------------------------------------------

Tom Crimmins, B&G Foods, Inc. - EVP, Finance & CFO [2]

--------------------------------------------------------------------------------

Thank you, operator. Good afternoon, everyone, and thank you for joining us today.

Net sales in the fourth quarter of 2016 increased 20.8% to $413.7 million, compared to $342.3 million in the fourth quarter of 2015. An additional month of net sales of Green Giant acquired on November 2, 2015, contributed $26.5 million to net sales for the quarter.

In addition, net sales in the spices and seasonings business acquired on November 21, 2016, and net sales of Victoria acquired on December 2, 2016, contributed $28.2 million and $3.2 million, respectively, to our total net sales for the quarter.

Base business net sales decreased 1.6% or $5.6 million. The decrease was attributable to a $2.2 million decrease in unit volume and a net reduction in pricing of $3.6 million, partially offset by the slightly favorable impact of foreign exchange on our sales.

A little more than half of the Company's base business net sales decline during the fourth quarter was attributable to a challenging competitive environment for our syrup brands, which in the aggregate declined $3.1 million for the quarter. The decline was primarily a result of pure maple syrup price deflation due to the strength of the US dollar relative to the Canadian dollar, which has resulted in increased competition in the maple syrup category and contractually mandated price reductions with certain of our foodservice customers.

Gross profit increased 20.7% to $106.9 million in the fourth quarter, as compared to $88.6 million for the fourth quarter of 2015. Gross profit expressed as a percentage of net sales decreased 10 basis points to 25.8% for the fourth quarter of 2016 from 25.9% for the fourth quarter of 2015.

Selling, general, and administrative expenses increased 60.6% to $58.8 million for the fourth quarter, as compared to $36.6 million for the fourth quarter of 2015, primarily relating to the Green Giant acquisition. The overall increase consisted of increases in consumer marketing of $19.5 million, warehousing expenses of $4.1 million, acquisition-related expenses of $2.7 million, partially offset by decreases in general and administrative expenses of $3.6 million, primarily related to the timing of accruals for performance-based compensation, and selling expenses of $0.5 million, which includes a $1 million decrease in sales persons' compensation, partially offset by $0.5 million increase in brokerage expenses.

Expressed as a percentage of net sales our selling, general, and administrative expenses increased 350 basis points to 14.2% for the fourth quarter of 2016 from 10.7% for the fourth quarter of 2015. Net interest expense for the fourth quarter increased 9.6% to $18.9 million from $17.3 million for the fourth quarter of 2015, which was primarily attributable to additional indebtedness outstanding during the fourth quarter of 2016 as compared to the fourth quarter of 2015 as a result of the Green Giant acquisition, the spices and seasonings acquisition, and the Victoria acquisition.

The Company reported net income under US generally accepted accounting principles was 13.6 million, or $0.20 per diluted share, for the fourth quarter of 2016, as compared to reported net income of $11 million, or $0.19 per diluted share, for the fourth quarter of 2015. The Company's adjusted net income for the fourth quarter 2016, which excludes the after-tax impact of the amortization of acquisition-related inventory step up and other acquisition-related expenses, was $19.4 million, or $0.29 per adjusted diluted share.

The Company's adjusted net income for the fourth quarter of 2015, which excludes an acquisition-related adjustment to deferred taxes, the after-tax impact of amortization of acquisition-related inventory step up, other acquisition-related expenses, and distribution restructuring expenses was $25 million, or $0.43 per adjusted diluted share.

For the fourth quarter of 2016 our adjusted EBITDA, which excludes the impact of the amortization of acquisition-related inventory step up and other acquisition-related expenses, decreased 7.4%, or $62.4 million, from $67.4 million for the fourth quarter of 2015. The primary driver of the decrease in the fourth quarter of 2016 adjusted EBITDA as compared to the same period in the prior year was $13.5 million of incremental Green Giant advertising expense, partially offset by incremental adjusted EBITDA contributed by the 2016 fourth-quarter acquisitions and the extra month of Green Giant results.

2016 fourth-quarter adjusted EBITDA was also impacted by $1.8 million of foreign currency translation losses on Mexican pesos held in the US. We anticipate that our current Mexican peso positions will benefit our 2017 operating results.

Moving on to the balance sheet. We finished the fourth quarter with approximately $1.7 billion in net debt, our net leverage was approximately 4.6 times pro forma adjusted EBITDA, and our current dividend rate is $1.86 per share per annum, or approximately $123.5 million in the aggregate based on our current share count.

Now on to our guidance for fiscal 2017. We expect net sales to be in the range of $1.64 billion to $1.68 billion; adjusted EBITDA to be in a range of $360 million to $375 million, and adjusted diluted earnings per share to be in a range of $2.13 to $2.27.

In addition, we project 2017 interest expense of approximately $83 million including cash interest expense of $77.5 million and interest amortization of $5.5 million. We project 2017 depreciation expense of approximately $32 million and amortization expense of approximately $18 million. And, finally, we expect our 2017 effective tax rate to be approximately 38.2%.

Before I turn the call over to Bob I also want to mention that we expect our media spend on Green Giant will be approximately $35 million in 2017 and we expect to spend approximately 40% of that amount in the first quarter and another 40% in the fourth quarter of 2017.

Now I would like to turn the call over to Bob for more details on the quarter and his thoughts on 2017. Bob?

--------------------------------------------------------------------------------

Bob Cantwell, B&G Foods, Inc. - President & CEO [3]

--------------------------------------------------------------------------------

Thank you, Tom, and good afternoon everyone. 2016 was a very busy year for the Company. Much of our year was focused on the Green Giant integration.

Pursuant to our transition services agreement with General Mills, we assumed increasing responsibility for the day-to-day management of the brand over the course of the year. At the start of the fourth quarter the transition services agreement expired and we assumed full responsibility for the management of the brand, although General Mills will continue to co-pack certain items for us until the second half of 2017. In 2016 we also relaunched the iconic Green Giant brand with a new and exciting marketing campaign and the introduction of several new and innovative products that have been a hit with consumers.

During the year we also continued to execute a key tenet of our growth strategy by completing two acquisitions in the fourth quarter, the spices and seasonings business of ACH Food Companies and the Victoria brand. Our base business, however, was not immune to the top-line challenges affecting our industry. During the year we continued to work to stabilize the base business and experienced a base business net sales decline of 2.1% for the year and 1.6% for the fourth quarter.

And, finally, during the fourth quarter we increased our dividend by 10.7%. That was the 49th consecutive quarterly dividend declared by the Company and Board of Directors since our IPO in October 2004.

Moving on to our Green Giant sales for the quarter. We continue to get very positive customer feedback from the launch of our new innovation products. The acceptance and sellthrough of these products has surpassed our initial expectations. We are in the process of increasing production capacity to support the increase demand of the new products.

Our transition services agreement with the prior owner of Green Giant brand expired at the start of the fourth quarter. We did experience some transition issues as we took over complete responsibility for servicing the business at the beginning of October.

We did not have enough inventory to support the sales demand leading up to Thanksgiving. That created a sales shortfall during the month of October of approximately $13 million. We have overcome this transition issue and during November and December Green Giant net sales grew $2.9 million versus last year.

Also, during the four weeks ended January 28, 2017, Green Giant continued the positive momentum, gaining a 0.4% market share in the frozen category. We expect to launch additional new Green Giant products in the second half of 2017 and are committed to supporting the brand with full marketing support. For 2017 we expect Green Giant to generate approximately $530 million to $540 million in net sales versus $506.7 million in net sales in 2016.

Moving on to our base business. During last quarter's call we said that we expected that our base business would be flat in the fourth quarter, excluding Maple Grove and TrueNorth, and we are hoping to get into positive territory sometime in 2017. For the fourth quarter our base business, excluding Maple Grove and TrueNorth, was down approximately 1%.

We are working on a number of new product initiatives across multiple brands in an attempt to stabilize and eventually grow our base business. For example, we have launched new instant Cream of Wheat products in the first quarter of 2017. In the second quarter we plan to launch new entree and innovative Ortega products with clear labels and high-quality ingredients that we expect will bring new users to the category and the brand.

We also plan to launch new Pirate's Booty line extensions in the second quarter. Finally, Bear Creek is expected to launch a number of new items during the third quarter, including a new line of products in a new category. A number of our key brands increased their category dollar share during 2016 including Pirate's Brands, Mrs. Dash, Cream of Wheat, Bear Creek, Mama Mary's, and Las Palmas. We expect this trend to continue in 2017.

Moving on to some specific brand highlights during the fourth quarter and high-level thoughts about 2017. Net sales of Pirate's Brands increased 9.4% in the quarter and 3.9% for the year. We continue to grow Pirate's Brands by expanding distribution.

During 2016 we increased points of distribution by approximately 10%. We have a plan to further expand distribution during 2017 and beyond.

Net sales of Las Palmas increased 7.5% in the quarter and 6.6% for the year. This growth was fueled by continued distribution gains and strong category growth. Ortega also had a strong quarter, with net sales increasing 3.1%. This is a recovery from a tough start to 2016 caused by strong competition in shells and kits. In 2017 we expect to continue to hold our own in those categories assisted by new product launches.

Net sales of Cream of Wheat were roughly flat for the quarter and the year. We expect to improve that trend with the innovation we launched in January 2017. We are also advertising on television for the first time in over 20 years.

Mama Mary's had a tough fourth quarter, but that was mostly due to consolidation of our Mama Mary's manufacturing operations into one of our other manufacturing facilities, which created temporary planned production downtime of approximately three weeks. We believe Mama Mary's is very solid going forward and the consolidation of manufacturing operations is expected to save our company approximately $5 million per year.

In 2017 we expect to put additional media dollars into our Mrs. Dash brand to ensure we continue to maintain and grow our 80%-plus market share of salt-free seasonings.

Some of our other smaller brands had impressive fourth quarters and full years including Underwood, whose sales increased 11.3% for the quarter and 5.7% for the year, and Polaner, whose net sales increased 4.1% for the quarter and 1.4% for the year. Most of this growth was due to expanded distribution.

Net sales of our TrueNorth brand decreased 34% for the year, or $6.4 million. However we started to see improvement in the fourth quarter and for the first two months of 2017 net sales for the brand have increased by approximately $1 million year over year.

Maple Grove continued to see net sales declines in the fourth quarter. The brand was down 6.3% for the year. We expect that trend to continue through 2017, although we expect much of the decrease will come from lower margin private-label sales.

Bottom line is that it's been a challenging center-of-the-store environment for our industry and this has affected our base business. Although there are no easy answers, we do plan to stabilize our base business in 2017.

Among other things, we've restructured internally in an attempt to put proper focus on all brands and groups of brands in our portfolio. We also intend to be much more aggressive with new products that truly satisfy changing consumer preferences.

The new and innovative Green Giant products we launched in the second half of 2016 are an excellent example of our new product initiatives. The Green Giant products we launched including veggie tops, rice veggies, mashed cauliflower, and roasted veggies, have been a hit with consumers and are beginning to generate increased distribution and positive momentum for Green Giant. Led by these new products, we expect Green Giant brand to generate a net sales increase of 5% to 6.5% in 2017.

During the fourth quarter we also closed on our acquisition of the spices and seasonings business of ACH Food Companies. The spices and seasonings business includes Spice Islands, Tone's, and Durkee brands. The business also includes Weber brand sauces and seasonings and French's seasoning mixes, which are both sold under a license.

As part of the acquisition, we also acquired a state-of-the-art spices and seasonings any factoring facility in Ankeny, Iowa. We continue to operate under a transition services agreement with the prior owner of the business and expect to take over full responsibility for servicing the business in early September.

During the fourth quarter, we also reached an agreement to acquire and closed on the acquisition of Victoria Fine Foods. Victoria Fine Foods is a Brooklyn-based business founded in 1929. The Victoria brand complements very well our existing portfolio of brands including our Don Pepino pizza sauces, Sclafani crushed tomatoes, and Emeril's pasta sauces. We completed the integration of this business into the B&G Foods infrastructure earlier this month.

In closing, we are pleased with our overall performance during 2016, although there remains work to be done to restore our base business to flat to stable growth. We are also pleased with the organizational changes we have made and the outstanding efforts of our very talented and capable workforce in response to our rapid growth over the past two years.

One of my biggest goals as CEO has been to ensure the Company remains capable and ready to continue our acquisition growth strategy, which we have accomplished over the last two years, completing four acquisitions with over $800 million in net sales. In addition, I wanted to build an organization that would effectively support and stabilize our base business. The organization and plans are in place to deliver our strategic objectives, including our 2017 guidance.

We are feeling very comfortable with where we are today and cannot be more excited about the future of B&G Foods. With that I would like to open up the call for questions. Operator?

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Farha Aslam, Stephens.

--------------------------------------------------------------------------------

Farha Aslam, Stephens Inc. - Analyst [2]

--------------------------------------------------------------------------------

Green Giant; total sales for the year and what key aspects should we expect to deliver that 5% to 6% growth?

--------------------------------------------------------------------------------

Tom Crimmins, B&G Foods, Inc. - EVP, Finance & CFO [3]

--------------------------------------------------------------------------------

Well, part of it is we finished 2016 at $506.7 million and part of that was we were short product to ship product in October into early November for Thanksgiving, and that equated to about $13 million. So part of the growth in 2017 is certainly not having that issue in October and November in 2017.

The other piece is we are seeing just a very high demand on the innovation we launched here September/October 2016. Specifically in rice veggies and veggie tops, but mashed cauliflower has been very strong, too. And the roasted line is a little bit more of a distant to the other three. Those businesses are growing very rapidly.

This was also the first year where we've launched a real marketing campaign against Green Giant and we are starting to see those results. We are seeing the results from innovation; we are seeing the results from that and we are going to spend just as much, if not more, on marketing in 2017.

And also as we head through the -- we are going to see very strong sales results on those new innovations that we talked about and we've got more innovation coming in the latter part of 2017. We are going to figure out whether we are going to launch that at the end of 2017 or the beginning of 2018, but some of the plans are now to launch it in late 2017.

--------------------------------------------------------------------------------

Farha Aslam, Stephens Inc. - Analyst [4]

--------------------------------------------------------------------------------

And as a follow-up, you launched your innovation for Green Giant very late in the year of 2016. Do you anticipate getting broader distribution in the core reset that occurs in the freezer category early in the February/March time frame? Any early read with discussions with retailers?

And going into that new launch, if you launch it at the end of 2017, how do you anticipate getting incremental shelf space again with that late-in-the-year launch?

--------------------------------------------------------------------------------

Bob Cantwell, B&G Foods, Inc. - President & CEO [5]

--------------------------------------------------------------------------------

I will take the first part of your question. Certainly we are in a little over -- on veggie tots and rice veggies and cauliflower mash, those three, we are in right around 65% of the ACV in the country today, so we have more distribution to gain from some customers who didn't take it in in the fourth quarter. And then we have some very big outlets that we are going after that we didn't do in the initial launch, like clubs and places like Target and those kind of customers.

We are also launching all of these products as we speak in Canada, from the tots to the rice veggies to the cauliflower mash. So we expect some really positive -- and the Canadian customers have seen what we've done in the US and really want it, so we are going to get some positives there.

Part of your second question is we have some very really interesting innovation, subcategories again just like we launched, and we are going to decide as we go through the year whether it truly makes sense to launch it late 2017 or just launch it January 1, 2018. We haven't really decided. We see a lot of growth in the innovation that we launched and we are going to expand that. We are definitely expanding that innovation with more flavor put ups and some packaging sizes, etc.

So we are going to decide on the second part of innovation and what the right timing is and really just not get caught up in potentially the craziness of the holiday periods where frozen categories are very difficult to get space in.

--------------------------------------------------------------------------------

Farha Aslam, Stephens Inc. - Analyst [6]

--------------------------------------------------------------------------------

That's helpful. Thank you.

--------------------------------------------------------------------------------

Operator [7]

--------------------------------------------------------------------------------

Bryan Hunt, Wells Fargo.

--------------------------------------------------------------------------------

Dave Cook, Wells Fargo Securities - Analyst [8]

--------------------------------------------------------------------------------

It's actually Dave Cook on for Bryan. Two from us. I saw you listed your priorities for 2017 in your press release. One of those priorities did not specifically address M&A. I know that's a core part of your strategy, but could we expect you to take a break from M&A in 2017?

--------------------------------------------------------------------------------

Bob Cantwell, B&G Foods, Inc. - President & CEO [9]

--------------------------------------------------------------------------------

I think the easy answer to that is we are ready and able to do the next one, and if something comes along that makes sense to be part of B&G's portfolio, we are going to be aggressive to go after it. I don't think we look at ourselves and think about taking a break at all, but it has to be the right acquisition. And we are ready; from a balance sheet to an organization we are ready to do the next one when and if it comes.

--------------------------------------------------------------------------------

Dave Cook, Wells Fargo Securities - Analyst [10]

--------------------------------------------------------------------------------

Okay, thanks. And did you all say what your total CapEx was in 2016 and could you please provide an indication for 2017?

--------------------------------------------------------------------------------

Tom Crimmins, B&G Foods, Inc. - EVP, Finance & CFO [11]

--------------------------------------------------------------------------------

Approximately $40 million in 2016. Next year will see -- it will tick up somewhere closer to $60 million.

--------------------------------------------------------------------------------

Dave Cook, Wells Fargo Securities - Analyst [12]

--------------------------------------------------------------------------------

Thank you very much.

--------------------------------------------------------------------------------

Operator [13]

--------------------------------------------------------------------------------

Cornell Burnette, Citi Research.

--------------------------------------------------------------------------------

Cornell Burnette, Citi Research - Analyst [14]

--------------------------------------------------------------------------------

Just wanted to get in a little bit about the quarter and relative to maybe the way things came out relative to what you guys were looking for initially. The EPS below the implied fourth-quarter range, but I think sales was somewhat to the middle of the range. Looks like the big delta here was 125 basis points year-over-year decline in gross margins.

Just wanted to get into what was the driver of that and what implications does that possibly have going forward.

--------------------------------------------------------------------------------

Bob Cantwell, B&G Foods, Inc. - President & CEO [15]

--------------------------------------------------------------------------------

Well, that's a true look of what B&G will look like as you look at 2017 also. Part of it is just having another full month of Green Giant in those numbers.

It's the time of year where not just frozen -- Green Giant has a very large can business, almost $200 million a year in sales of canned vegetables and that tends to be lower margin. And you sell a lot of canned vegetables in October and November as you head into Thanksgiving. So part of that is just the math of having Green Giant in the mix for another month, more than anything else.

So that is a look. As you look at the quarters, as we achieved them in 2016, those are the kind of margins we'd be looking at in 2017 also, by quarter.

--------------------------------------------------------------------------------

Cornell Burnette, Citi Research - Analyst [16]

--------------------------------------------------------------------------------

Okay. And when I think about 2017 just in the way earnings are skewed, is it fair to say that maybe the way the marketing spending is getting phased in for Green Giant next year that you probably have a stronger second half than first half, just given the way the marketing dollars will be spread throughout the year?

--------------------------------------------------------------------------------

Bob Cantwell, B&G Foods, Inc. - President & CEO [17]

--------------------------------------------------------------------------------

That is correct because in the first quarter alone we are going to be spending on a year-over-year basis on Green Giant $11 million, $12 million more in marketing because we didn't really spend much in marketing in the first quarter of last year. So we are going to hit our results for $11 million, $12 million of marketing spend in the first quarter versus last year.

Then it all evens out because we get it back as the year goes on, because we are going to spend about the same amount in total. So we definitely are skewing, especially the first quarter, lower and better in the second half of 2017.

--------------------------------------------------------------------------------

Cornell Burnette, Citi Research - Analyst [18]

--------------------------------------------------------------------------------

Great. Then just one last question here, if I may. On the seasonings category, just looking at the high-level data from Nielsen, it looks like you are down about 15% in sales in terms of the latest 12 weeks of data. I just was wondering is there any kind of disruptions possibly that you have in the early stages of the ACH acquisition, or if not, what is driving that data and what plans do you have for the business in 2017.

--------------------------------------------------------------------------------

Bob Cantwell, B&G Foods, Inc. - President & CEO [19]

--------------------------------------------------------------------------------

I'd actually have to look further. We are not seeing that at all. Across the board on the brands we bought actually the business is up year over year from where it was last year, kind of pure sales, so we're not seeing --. It's not lost distribution; it's not -- the customers are the same.

I don't know if what you are looking at is picking up all the club stores, which it probably is, but the business is right on relatively flat. Some of the business that was identified as Tone's is now a private-label brand at clubs; that may be skewing it. But the pure dollars sold and what Tom showed you what was sold really in a six-week period is tracking actually a little bit above our projected $220 million on annual sales basis for the spice business.

--------------------------------------------------------------------------------

Cornell Burnette, Citi Research - Analyst [20]

--------------------------------------------------------------------------------

Okay, thanks a lot. I will pass it on.

--------------------------------------------------------------------------------

Operator [21]

--------------------------------------------------------------------------------

Sean Naughton, Piper Jaffray.

--------------------------------------------------------------------------------

Sean Naughton, Piper Jaffray & Co. - Analyst [22]

--------------------------------------------------------------------------------

Can you guys maybe give us -- you've been doing the marketing now here for a little bit; Green Giant has been on TV now for a while and I know you've been doing stuff in social media. But maybe can you give us anything, either anecdotally or some key performance indicators, that you are looking for on the campaign to see if you are getting the ROI on that spend?

--------------------------------------------------------------------------------

Bob Cantwell, B&G Foods, Inc. - President & CEO [23]

--------------------------------------------------------------------------------

We are still learning through the process. We spent some money here in the fourth quarter, actually a decent amount of money. We weren't fully -- we didn't fully have all the product we needed to cover stores, so we had a number of out-of-stocks at store levels that really affected consumer data. So it's hard to totally see that.

I can tell you from what we are learning from the advertisements and driving the advertisements against rice veggies and tots is we are seeing that 50% of the tot purchases are coming from users that did not buy Green Giant products before. So we getting new users into the Green Giant franchise, which is really important. Also the advertisement just from a store level, because we are out there pushing this brand, we are getting a lot more I guess meetings and play from the major customers who are willing to support us going forward and hope to drive this brand further.

We will have much better vision as we get through the first quarter on the consumer trends and what we think the advertising is doing. We are only seeing really positive responses. It was a little difficult in the fourth quarter because of our out-of-stock situation that affected Green Giant sales by $13 million, so it's hard to get a real comparison.

But we think it's working for us; that's why we are committed to continue to spend this in a big way. And really -- January was the first four-week period that Green Giant has gained share, small as it may be, in four-plus years. Part of that is the innovation, part of that is advertising the innovation, and part of that is pushing the brand.

We expect much bigger things as we go through the year. We are expecting a big sales increase and part of that is driven by that advertising, too.

--------------------------------------------------------------------------------

Sean Naughton, Piper Jaffray & Co. - Analyst [24]

--------------------------------------------------------------------------------

That's probably a good segue into that 40 basis points of market share gain you had in the trailing four weeks. I think you said it was the first time that you had any gain in the last four years.

Can you maybe give us an idea maybe where that was four years ago? How far down are you in terms of market share? And I guess as a follow-up to that, is this 5% to 6% growth rate that you are forecasting for Green Giant in 2017, is that potentially the right way to think about growth in this brand over the next couple of years?

--------------------------------------------------------------------------------

Bob Cantwell, B&G Foods, Inc. - President & CEO [25]

--------------------------------------------------------------------------------

Yes, I think that's a good way to look at it at least for two to three, if not more. I don't know the share four years ago, but I can tell you this is a brand that if you go back four years ago, four-and-a-half years ago, this is a brand that's $650 million-ish in sales heading -- between $650 million and $700 million. It was a much bigger brand.

The brand has lost a lot of distribution from key items. Part of our goal here is the innovation is driving most of this growth, but it's also to get some of these key items back at key customers.

I think we went through a year of transition. There were ups and downs and excitement and negatives through the process, but we are really poised to move the needle on this brand. We are truly excited about the two innovation platforms of rice veggies and veggie tots.

We think certainly our products are better than anybody else, for reasons that we can make it differently than other people. And we are outselling -- when we look at rice veggies for example, our number one competitor over 2 to 1 on that product, it's a same-store sale. So we are seeing some really potential upside and the demand is growing dramatically.

We are honestly struggling with building production capacity at co-packers to cover all this increased demand, but the demand is very strong. Especially the rice veggies, it flies out of the freezer case as fast as it goes into a store.

--------------------------------------------------------------------------------

Sean Naughton, Piper Jaffray & Co. - Analyst [26]

--------------------------------------------------------------------------------

That's good to hear. Then last question for me. I know you did have a hiccup on the transition between yourself and the prior owner, but how should we think about the potential for disruption on the next transition, on the co-packing arrangement? Is this a much lower-risk proposition or did you learn anything about how the transition went in Q4?

--------------------------------------------------------------------------------

Bob Cantwell, B&G Foods, Inc. - President & CEO [27]

--------------------------------------------------------------------------------

We learned a lot, but this one is very different. This is -- we've already bought -- we are putting new equipment, new lines into our facilities and to some other co-packer as we speak. So really when we turn the keys off at what the seller is doing for us, we are already up and running at the other places over the next few months.

We will be fine. We will be carrying a lot of inventory into that and we're really just turning the keys off at that point and shutting it down. We have the production up and running everywhere else. So we are really comfortable with that.

It was a very disappointing start for us when we just didn't have enough inventory of key items to sell at the biggest holiday time of the year. We really suffered through October and really into November, little nits and nats as you got through December here, but that sell-in time of mid-October to early November for Thanksgiving we were hurting.

We've come out of that; customers are working with us. We are seeing huge volume pick up every single month on this new innovation. The new innovation is going to be a big dollar number for us in 2017.

--------------------------------------------------------------------------------

Sean Naughton, Piper Jaffray & Co. - Analyst [28]

--------------------------------------------------------------------------------

Okay. Best of luck, thank you for taking the questions.

--------------------------------------------------------------------------------

Operator [29]

--------------------------------------------------------------------------------

Eric Gottlieb, D.A. Davidson.

--------------------------------------------------------------------------------

Eric Gottlieb, D.A. Davidson & Co. - Analyst [30]

--------------------------------------------------------------------------------

The period that you were short in October/November did you lose any customers in the process? And was that for new products or just the general product line?

--------------------------------------------------------------------------------

Bob Cantwell, B&G Foods, Inc. - President & CEO [31]

--------------------------------------------------------------------------------

No, it was mostly for the general product line. We didn't lose customers; certainly customers weren't thrilled with us, but they've actually worked with us through this process. Certainly they don't want to be short and have an open space during a busy time when consumers are actually in that freezer case buying everything up.

So we've gotten through that. The innovation is strictly that demand keeps going. When we looked at this innovation from the beginning, rice veggies is selling four times what we thought it was going to sell when we first launched it. And tots are selling double what we thought it was going to sell. All that is good news.

We are able to service customers on those products, but as we want to look at going into additional customers such as the club stores and really launch this fully in Canada and places like Target and things like that, we need more production capacity. We will have that in place here over the next couple of months and every day it gets better, but we see this as a much bigger opportunity for us.

And we are all excited about how high the demand is and how the repeat purchases are. One of the things we are seeing on these products is the repeat purchases are very high from consumers, which is all great. We just need to have enough product to sell to everybody we want to sell and we haven't been able to put it everywhere we want it yet so far.

--------------------------------------------------------------------------------

Eric Gottlieb, D.A. Davidson & Co. - Analyst [32]

--------------------------------------------------------------------------------

One follow-up on that and then I will switch topics. Were you short to a certain customer or certain channel, certain region, or across the board?

--------------------------------------------------------------------------------

Bob Cantwell, B&G Foods, Inc. - President & CEO [33]

--------------------------------------------------------------------------------

Across the board. It was basically we had X amount of product, so we weren't out of -- and we fundamentally had to allocate to customers. So it was across the board.

--------------------------------------------------------------------------------

Eric Gottlieb, D.A. Davidson & Co. - Analyst [34]

--------------------------------------------------------------------------------

Okay. And then the marketing spend for both this year and 2017, can we expect similar levels in 2018 as well?

--------------------------------------------------------------------------------

Bob Cantwell, B&G Foods, Inc. - President & CEO [35]

--------------------------------------------------------------------------------

That's the plan. Today the plan is to continue to push this brand and continue to spend that money.

--------------------------------------------------------------------------------

Eric Gottlieb, D.A. Davidson & Co. - Analyst [36]

--------------------------------------------------------------------------------

Okay. And then for the transition on ACH coming in September, how do we think about changes in SG&A and margins after the switch?

--------------------------------------------------------------------------------

Bob Cantwell, B&G Foods, Inc. - President & CEO [37]

--------------------------------------------------------------------------------

Nothing, nothing really will change at all. There's a little bit of costs that go away from ACH managing for us. It's not a big number that's a difference.

Our sales team is already running the sales for these products from trade marketing to sales through our broker network. What ACH -- and we are running the plant. Those are our people with our plans. What they are doing is invoice all the back office -- they are invoicing customers, collecting receivables, making sure shipments go to customers on a timely fashion, and we will take over that responsibility here at the end of August.

--------------------------------------------------------------------------------

Eric Gottlieb, D.A. Davidson & Co. - Analyst [38]

--------------------------------------------------------------------------------

Got it, okay. And then one minor question. Other expenses seem to be up $2 million dollars. Is there anything interesting in there?

--------------------------------------------------------------------------------

Tom Crimmins, B&G Foods, Inc. - EVP, Finance & CFO [39]

--------------------------------------------------------------------------------

We did have an adjustment related to our investment in pesos. I actually hold pesos here in the US, so you see that coming through, the impact of the change in the exchange rate in the fourth quarter in particular. So that's flowing through in the EBITDA number in our results of operations.

I do expect that that -- we were somewhat prudent in our process to invest in some pesos when they were somewhat depressed and bring those in-house to make sure that we had coverage for 2017. So although I took a little bit on the chin in the fourth quarter, I expect to see that come through in the first quarter and beyond for next year as well. It's mainly just that.

--------------------------------------------------------------------------------

Eric Gottlieb, D.A. Davidson & Co. - Analyst [40]

--------------------------------------------------------------------------------

How much have you locked in for 2017?

--------------------------------------------------------------------------------

Tom Crimmins, B&G Foods, Inc. - EVP, Finance & CFO [41]

--------------------------------------------------------------------------------

We have done the majority of the peso exposure that we have down there right now. There is -- out of the total expenses half of their business is in US dollars and the other half is in pesos related to payroll and buying local products and things like that.

I've got half of that peso covered. We are the ones that really supply them with their funding. Where we sit right now at the end of this year, now into the first quarter, we were fairly opportunistic in our approach. I've got, you want to call it, 80% to 90%, probably somewhere north of there maybe even, of my peso exposure covered for 2017.

--------------------------------------------------------------------------------

Eric Gottlieb, D.A. Davidson & Co. - Analyst [42]

--------------------------------------------------------------------------------

Fair enough. Thank you very much and I will pass it on.

--------------------------------------------------------------------------------

Operator [43]

--------------------------------------------------------------------------------

Eric Larson, Buckingham Research Group.

--------------------------------------------------------------------------------

Eric Larson, Buckingham Research Group - Analyst [44]

--------------------------------------------------------------------------------

A couple things. Your base business, Bob and Tom, can you -- obviously you've got specific issues with certain brands, but is it a spending issue? Are the products -- do the products need reformulation? Is it natural ingredients and colors and flavorings issues that you --?

What are the steps that you have to take to actually stabilize the base for 2017?

--------------------------------------------------------------------------------

Bob Cantwell, B&G Foods, Inc. - President & CEO [45]

--------------------------------------------------------------------------------

Well, part of it is a lot of the categories that some of those product lines are in have been declining, so the whole category has been declining. Our goal for 2017 is to gain more share in the category and most of that is going to come through launching -- we have a lot of new products in a lot of our brands, where we didn't really have that in 2016 and most of 2015.

We reemphasized innovation here and the innovation is oriented more to better for you, cleaner labels, etc. But, again, we are not going to be the ones who absolutely change the whole category dynamic. The way we can stabilize the flat to hopefully up, between the innovation and paying attention, is to just garnish some more share in that category. So even if the category declines here for another year or two or whatever goes on, our share gains could actually help pace that category decline.

That's our goal and that's the direction internally. We are in a lot of categories and a lot of our food peers are all reporting a lot of results in similar categories that are just challenged.

We are being much more aggressive with new products. It's really not about the spending on our part. We are doing our fair share of trade spending, etc. It's making noise and making new news in the category. We really didn't do that in 2016 and for most of 2015, but we are launching a bunch of new items and a bunch of subsets in a number of categories that we hope will move the needle.

--------------------------------------------------------------------------------

Eric Larson, Buckingham Research Group - Analyst [46]

--------------------------------------------------------------------------------

Okay, that makes sense. Then in syrup, obviously you've got the US-Canadian dollar relationship that's hurt you. Would a shorter or a smaller maple syrup crop be of benefit to you at this point? I would think that that would be one of the things that could help you a lot and obviously we don't know what that is going to be yet. But would a smaller crop or a smaller output be of value to you at this point?

--------------------------------------------------------------------------------

Bob Cantwell, B&G Foods, Inc. - President & CEO [47]

--------------------------------------------------------------------------------

Actually a smaller crop would be of value. You never know what weather does, but I think, if I was a betting person, I would expect that. Since we have owned Maple Grove, and we bought it in 1998, there was only one real short crop that was meaningful that made a difference. So the chances of that happening --.

Last year and the year before were pretty much record crops, because what has happened is the sophistication in Canada has gotten better and better and the production capacity has gotten larger and larger. So even though the demand for maple syrup worldwide is growing -- it is certainly growing in the United States, too -- there's plenty of syrup to go around.

You can never bet on weather. Warm weather really messes up the crop, so if it's too warm to soon that's what hurts the crop. But, again, it's almost 20 years now and it's only really happened once in those 20 years in any magnitude. You never know; Mother Nature could strike.

--------------------------------------------------------------------------------

Eric Larson, Buckingham Research Group - Analyst [48]

--------------------------------------------------------------------------------

Exactly. Then the final question and then I will pass it on here. Your original guidance for EPS accretion for ACH I believe was, correct me if I'm wrong, I think it was a range of $0.24 to $0.26. It was in that low to mid $0.20 range.

And I'm not sure if you gave any specific number for Victoria; I do believe you said you expect it to be accretive. Is that still -- are those still part of your guidance that's still achievable?

--------------------------------------------------------------------------------

Bob Cantwell, B&G Foods, Inc. - President & CEO [49]

--------------------------------------------------------------------------------

Well, the EBITDA -- Victoria was in that $0.08 to $0.10 range. So on the seasoning business from ACH, the EBITDA is there; everything else is there. One of the challenges we have a little bit here is there is -- the way the valuation of ACH was done is there's more amortizable assets; it's not a cash thing. That is affecting our EPS there.

And our effective tax rate is also up. When we were looking at this our tax rate was 37.2%. We are now looking at 38.2%. So it's up a percentage point which is affecting our EPS across the board. That's why it was very important for Tom to put out our full-year look at all of those non-cash numbers from amortization to depreciation, etc., so everybody can adjust their numbers and their models.

But from EBITDA we don't see any issues. ACH is tracking great, but there is just some more accounting -- what I call accounting amortization that is affecting our EPS.

--------------------------------------------------------------------------------

Eric Larson, Buckingham Research Group - Analyst [50]

--------------------------------------------------------------------------------

Got it. Okay. Thanks, guys.

--------------------------------------------------------------------------------

Operator [51]

--------------------------------------------------------------------------------

Robert Moskow, Credit Suisse.

--------------------------------------------------------------------------------

Robert Moskow, Credit Suisse - Analyst [52]

--------------------------------------------------------------------------------

I wanted to make sure that I bridged the EBITDA correctly, so I guess I have a bunch of questions here. When you finished the year at $322 million, did you say that ACH was in that number; that there was maybe a couple million there from ACH?

--------------------------------------------------------------------------------

Bob Cantwell, B&G Foods, Inc. - President & CEO [53]

--------------------------------------------------------------------------------

With ACH and Victoria, in total, the two of them not quite $2 million because there's just a lot of initial costs. We actually had to -- we terminated the G&A structure and selling structure of Victoria. All that really happened here in February. ACH has some costs that will go away.

We didn't make a whole bunch of money. It's actually a little less than $2 million on that EBITDA for those two businesses combined.

--------------------------------------------------------------------------------

Robert Moskow, Credit Suisse - Analyst [54]

--------------------------------------------------------------------------------

And Green Giant? Would the EBITDA -- maybe you said on the call what it was for 2016?

--------------------------------------------------------------------------------

Bob Cantwell, B&G Foods, Inc. - President & CEO [55]

--------------------------------------------------------------------------------

Well, for 2016 Green Giant came in right around $110 million on EBITDA, well above our initial expectations when we bought the business of about $95 million. But, you know, it's about $110 million.

--------------------------------------------------------------------------------

Robert Moskow, Credit Suisse - Analyst [56]

--------------------------------------------------------------------------------

So just getting from your $322 million base to $370 million, what I think you are saying here is that ACH maybe gets you about $40 million, but then you have another $6 million or so I think from the peso hedging that you did is just my math. So if I add those two together I get to pretty much the midpoint, if not a little higher, in your range. That indicates that there's just not a lot of growth for the rest of the business, including Green Giant.

Can you help us tease out what's going on in that big middle there? Is Green Giant expected to grow in EBITDA and then maybe that's offsetting some weakness in other brands?

--------------------------------------------------------------------------------

Bob Cantwell, B&G Foods, Inc. - President & CEO [57]

--------------------------------------------------------------------------------

Well, part of it is the $322 million -- ACH and Victoria, on a full-year basis, we were talking in total $47 million, $38 million and $9 million. Made about $2 million, so that's going to add about $45 million next year.

The other piece of the business is $6 million for the peso is too high. I mean there is a few million dollars there; there is some cost increases. We have some commodities, not a lot, that have moved on us a little bit that offset it a little bit.

We are not expecting much growth of EBITDA on the base itself, so kind of a flat sales year. We get a little bit of benefit just by being good stewards of cost here, but relatively flat.

And Green Giant will go up a little bit, but the plan on Green Giant is, if we are moving 5% or 6%, our initial plan is to really continue to put some of that money back into the brand to keep driving it. So the Green Giant pieces, if we don't do that we can make a little bit more money, and we will decide that as we go through the year.

But if Green Giant is moving the way we expect, especially from slotting -- part of this is -- slotting cost is very expensive. So as we go from 60% ACV to 80% to 90% and in addition into Canada, we have some plans on spending a decent amount of slotting on Green Giant that affects the EBITDA in one year. And we don't get all of that back in year one.

--------------------------------------------------------------------------------

Robert Moskow, Credit Suisse - Analyst [58]

--------------------------------------------------------------------------------

Okay. How much of that 5% to 6% sales growth is just the catch-up on the $13 million that you missed out on in December? Is that expected to come back?

--------------------------------------------------------------------------------

Bob Cantwell, B&G Foods, Inc. - President & CEO [59]

--------------------------------------------------------------------------------

Oh, yes. Part of that is we should get $13 million back and, hopefully, more in the fourth quarter, just year over year, just by having the products.

--------------------------------------------------------------------------------

Robert Moskow, Credit Suisse - Analyst [60]

--------------------------------------------------------------------------------

Okay. All right, well, thank you very much.

--------------------------------------------------------------------------------

Operator [61]

--------------------------------------------------------------------------------

There are no further questions at this time. I turn the conference back over to Mr. Bob Cantwell. Sir?

--------------------------------------------------------------------------------

Bob Cantwell, B&G Foods, Inc. - President & CEO [62]

--------------------------------------------------------------------------------

Thank you, everyone, for joining the call tonight and certainly thank you for the continued following of B&G. Look forward to 2017 and a very strong 2017 year. Thank you.

--------------------------------------------------------------------------------

Operator [63]

--------------------------------------------------------------------------------

That does conclude today's presentation. Thank you for your participation. You may now disconnect.