AGM 2020

May 12, 2020

Hello and welcome to the Annual Meeting of Stockholders of B and G Foods. Please note that today's meeting is being recorded. During the meeting we'll have a question and answer session. You can submit questions or comments at any time by clicking on the message icon. It is now my pleasure to turn today's meeting over to Ken Romanzi, President, Chief Executive Officer and a Director of B and G Foods. Mr. Romanzi, the floor is yours. Thank you. Good morning. On behalf of the directors and officers of B and G Foods, I'd like to welcome you to our Annual Meeting of Stockholders. We appreciate your attendance, your interest, and most importantly, your support of B and G Foods. Due to the public health and safety concerns related to the COVID-nineteen pandemic, and recommendations and orders from federal and New Jersey authorities, we're holding this annual meeting of stockholders in an audio only virtual format. I will act as chairman of this meeting. And at this time, I would like to call this annual meeting of stockholders to order. I would like to introduce each of the other current directors of the company who are in attendance on the call today. Steve Scherrill, the Chairman of the Board, Deanne Bruns, Chuck Marcy, Rob Mills, Dennis Mullen, Cheryl Palmer, Al Poe, and Dave Wenner. Each of us is also standing for reelection. I would now like to introduce the following members of B and G Foods' executive leadership team. Eric Fritz, executive vice president and chief supply chain officer Jordan Greenberg, executive vice president and chief commercial officer Eric Hart, executive vice president of human resources and chief human resources officer. Scott Lerner, executive vice president, general counsel, secretary, and chief compliance officer. Ellen Shum, Executive Vice President and Chief Customer Officer Bruce Wacha, Executive Vice President of Finance and Chief Financial Officer. Scott Lerner will act as the secretary of this meeting. Also in attendance are Assad Chaudhry, Alan Kalako, Corey Temple, and Ellen Shengina of KPMG, the company's independent registered public accounting firm. The stated items of business for this meeting are number one, the election of nine directors to serve until the twenty twenty one annual meeting of stockholders. Two, an advisory vote on executive compensation, commonly referred to as say on pay vote. And three, the ratification of the appointment of KPMG as our independent registered public accounting firm. In order to have an orderly meeting, after the proposals are presented, I will ask if there are any questions or comments. I ask that you restrict your remarks to the proposals that are before us. Stockholders may submit questions by clicking on the message icon at the top of the screen on the meeting center site. Time has been allotted later in the meeting for any appropriate questions you may have concerning the company. Please review and adhere to the rules of conduct that are posted on the meeting center site. We will now proceed with the voting on the proposals. If you have voted your shares in advance of the meeting by one of the methods described in the proxy materials for the meeting, there's no need to vote those shares during the meeting. If you have not already voted your shares in advance of the meeting, you will be able to vote your shares electronically during the meeting by clicking on the Cast Your Vote link on the meeting center site. Your vote must be cast before the polls are closed. If your shares are held in the name of a broker, bank, or other nominee, you will not be able to vote your shares electronically during the meeting today unless you have obtained a proxy executed in your favor from the institution that holds your shares and have previously submitted the proxy to Computershare in accordance with the procedures described in the Notice of Change of Annual Meeting Location press release we issued on April 24 and posted on our Investor Relations site. The polls will be closed at the end of the general discussion and my CEO report to stockholders. Again, please be assured that there will be an opportunity later in the meeting for stockholders to ask general questions regarding the company. We will now begin the formal business of this meeting. Mr. Lerner, will you please present the notice of meeting? I present to this meeting an affidavit of Computershare, the transfer agent for the company's common stock, which states that the notice of annual meeting was mailed on 04/02/2020 to all holders of record of the company's common stock as of the close of business on 03/20/2020. The notice of meeting and the affidavit will be filed with the records of the company. The report of the Inspector of Election certifies that there are in attendance at the annual meeting or by proxy stockholders entitled to cast at least the majority of the votes which all stockholders are entitled to cast. Thank you, Mr. Secretary. In view of that report, I declare that our quorum is present and the meeting is duly constituted. We are now ready to proceed with the transaction of business. The board of directors has appointed Carrie Schenkin of Computershare to act as inspector of election for this meeting. The inspector is in attendance and has taken her oath of office, which I direct to be filed with the minutes of this meeting. The inspector has a list of stockholders of the company indicating the name, address, and number of shares held by each holder of the company's common stock as of the record date certified by the company's transfer agent. This list is available for inspection during this meeting by any stockholder on the meeting center site. The secretary will file a copy of the list of stockholders with the records of the company. We will now have the presentation of the three proposals before the meeting. Each of the proposals is described in the proxy statement previously made available to you. Stockholders who have questions specifically relating to the three proposals may submit them now. And after I finish summarizing the proposals, we will answer those questions. Proposal number one is the election of nine directors to serve until the two thousand twenty one annual meeting of stockholders. The company has an advanced notice by law provision. Accordingly, all nominations are closed. As set in the proxy statement, the board of directors has previously nominated for reelection each of the current members of the board. Proposal number two concerns an advisory vote on executive compensation, commonly referred to as a say on pay vote. And proposal number three concerns the ratification of the selection of KPMG as the company's independent registered public accounting firm for the year ending 01/02/2021. As we have received no questions, we will proceed to the opening of the polls. Mr. Romanzi? I declare the polls now open for voting on all proposals. If you have voted your shares advance of the meeting by one of the methods described in the proxy materials for the meeting, there is no need to vote those shares during the meeting. If you have not already voted your shares or wish to change your vote, you may do so now by clicking on the Cast Your Vote link on the Meeting Center site. While the stockholders are voting, I will now present the Chief Executive Officer Report to the stockholders. Before I begin my remarks, I would like to remind everyone that part of the discussion today includes forward looking statements. I'm not guarantees of future performance, and therefore undue reliance should not be placed upon them. I refer all of you to our recent filings with the SEC for a more detailed discussion of the risks that could impact our future operating results and financial condition. The company undertakes no obligation to publicly update or revise any forward looking statement, whether as a result of new information, future events, or otherwise. I will also refer to the non GAAP financial measure adjusted EBITDA. Reconciliations of this financial measure to the most directly comparable GAAP financial measures are provided in the earnings press release that we issued for fiscal twenty nineteen and the first quarter of twenty twenty, both of which may be found in the Investor Relations section of our website, bgfoods.com. Having dispensed with that, thank you all for joining us this morning. We very much appreciate your interest and continued investment in B and G Foods. I pray this finds you and your loved ones safe, healthy, and weathering these very difficult times. I will focus today's report on the impact COVID-nineteen has had on our business during the first quarter of twenty twenty and their expectations for the remainder of the year. But would like to briefly discuss and recap 2019. I'm pleased to report that our 2019 financial results were solid and consistent with our short term and long term plans, which are based upon our goal of a stable base business with pricing and cost savings initiatives to offset inflation, complemented by net sales and earnings growth through new product innovation and accretive acquisitions. We saw 2019 as the start of a new era for B and Z Foods. Some of our notable 2019 highlights include the realignment of our executive leadership team, including new executive vice presidents and chief customer officer, chief commercial officer, and chief supply chain officer, the successful implementation of our new enterprise resource planning system, the continued rollout of our Green Giant brand vision to be the plant based veggie brand of the future by delivering on its mission to get people to eat more vegetables with continued growth of category reinventing innovation the successful acquisition of Clabber Girl Corporation, and fully integrating the Clabber Girl business into our sales, distribution, and manufacturing network. The completion of a $1,000,000,000 debt refinancing, the largest in our company's history, and at attractive interest rates. And we returned 123,700,000 of cash to our stockholders in the form of dividends, and an additional $34,700,000 in the form of share repurchases. Our 2019 results demonstrate that we can get back to growth through accretive acquisitions and deliver what we say we're going to deliver. While we understand investor concern over our stock price and debt leverage, we are committed to continuing to make progress in 2020 towards improved sustainable performance and generating excess cash flow to help us reduce leverage. Heading into 2020, our long term strategies remain the same. We'll drive modest organic growth through key brands, including Green Giant, Ortega, Mrs. Dash and McCann's, amongst others, while maintaining a large portfolio of stable brands and then managing our remaining brands for cash flow improving margins through cost savings initiatives and trade spending optimization continuing to make accretive acquisitions of complementary businesses, and building a winning workplace by investing in our people, processes, systems. Suddenly, however, we find ourselves in unprecedented and extremely volatile and uncertain times driven by the COVID-nineteen pandemic. But through it all, we at P and G Foods have maintained a steadfast commitment to our core values and strategic imperatives to ensure the long term success of our company and to make B and G Foods a more valuable company. During this crisis, every decision we make is guided by our following priorities. and foremost, protecting the health and safety of our employees. Two, assuring our usual high level of quality and integrity of all of our products. Three, meeting unprecedented customer and consumer demand four, helping our communities and five, making the right decisions and investments to ensure the long term financial health and success of B and G Foods when we emerge from this pandemic. Consistent with our core values, the health and safety of our employees and the quality and safety of our products are our highest priorities. At B and G Foods, we have implemented a wide range of precautionary measures at our manufacturing facilities and other work locations in response to the pandemic. Precautionary measures that B and G has taken to protect our employees, customers, suppliers, and other business partners, and to maintain our ability to supply food products include the following among many others. The establishment of a COVID-nineteen task force consisting of executive officers and members of senior management. Screening of all employees, including temperature checks before entering manufacturing facilities enhanced sanitation procedures at all manufacturing and other work locations social distancing at all manufacturing locations, including the required wearing of masks the installation of plexiglass safety shield barriers at spots where line workers must work in close proximity The staggering of shift times and breaks. The restructuring of break rooms, including separating lunch tables, marking chairs for socially distant seating, and the installation of plexiglass safety shield barriers at each table to maintain employee separation, quarantine for at least fourteen days with pay of all employees who may have been exposed to COVID-nineteen or who are exhibiting any symptoms of COVID-nineteen, the notification of manufacturing employees of any COVID-nineteen positive test at their manufacturing location, and the quarantining for at least fourteen days with pay, any employee who may have had contact with the employee who tested positive manufacturing plant shutdowns for thorough sanitation upon any COVID-nineteen positive test with continued pay for employees and instituting a work from home policy for office workers from March 16 until at least June 5. We believe the early and aggressive actions we have taken in our facilities has helped keep our employees safe and productive with very few positive test results and no widespread infection. While employee safety is our highest priority, we are also aggressively managing our production to ensure that we can meet the unprecedented increase in demand from our customers. Our teams have been working tirelessly producing and delivering products to help maintain the nation's food supply with minimal disruption. Our manufacturing employees have been brave and agile in responding to rapidly changing market dynamics and changing consumer behaviors. Our frontline employees are true heroes during this pandemic. Thanks to the tremendous efforts of all of our employees, our ability to serve our customers has not to date been materially affected. This would not be possible without the hard work and perseverance of our amazing team here at P and G Foods and our valued customers who continue to serve local communities during this difficult time. We are incredibly proud of how our team has responded to this unfortunate crisis. And we have rewarded our dedicated manufacturing employees by increasing wages for hourly employees by $2 per hour from March 30 to at least May 22 and provided supervisors and managers with bonuses of up to $500 during that time. At B and T Foods, we have always prided ourselves on the can do attitude of our employees and their willingness to outwork the competition. All of these terrific efforts generated very positive results for the first quarter. While the onset of the COVID nineteen pandemic has been traumatic in its human and economic cost, the measures that we have taken as a society to combat it, particularly with regards to social distancing and staying home, has led to a significant increase in Americans and Canadians preparing and eating their meals at home. And we expect this trend will continue at some level for an extended period of time. Our B and G portfolio has been constructed to include a stable of over 50 brands with solid positions in the categories in which they compete. And while some have questioned the health of center store and even frozen vegetable brands, these are the foundation at P and G Foods and the trusted products that consumers have now turned to in a time of crisis. As you likely saw in our earnings release last week, we reported net sales of $449,400,000 for the first quarter of twenty twenty, an increase of more than $36,000,000 or 8.9% compared to last year. We delivered adjusted EBITDA of $80,700,000 for the quarter, an increase of nearly $5,000,000 or 6.5% ahead of last year, despite being negatively impacted by foreign exchange to the tune of $1,900,000 We reported net cash provided by operating activities of $57,600,000 an increase of nearly 15 compared to last year. After a bit of a slow start in January and February, we quickly realized during the March that we were in a very different environment following the outbreak of COVID nineteen. At that point, we immediately shifted gears and began to task our supply chain to ensure we keep our employees safe while at the same time ramping up production to ensure that we were doing the best that we could to satisfy what would become unprecedented demand for our products. In fact, the March was the strongest sales week. We experienced strength in almost all of our brands, but especially Green Giant, Ortega, Cream of Wheat, Clabber Girl, B and M, Bear Creek, Victoria, and Underwood. Contrary to some belief that consumers were only pantry loading for the long term, consumers have been consuming a large percentage of the increased volume, driving continued strong performance throughout the month of April, with our net sales increasing more than $70,000,000 or roughly 64% ahead of last year for the four weeks ending 04/25/2020. While we do not expect to see the same level of outperformance in the entire second quarter and longer term, our open orders through the May show similar growth as April. This outsized sales performance was driven by strong retail consumption throughout the quarter. Consumption as reported by Nielsen Services for all B and G food brands increased 12% for the thirteen weeks ending March 28, driven by a strong five week March of plus 44%, and specifically the last two weeks of March of plus 87%. In fact, for the week ending March 21, consumption of all B and G food products more than doubled at 122% versus last year. Several of our brands doubled or nearly doubled their year ago consumption levels for the entire month of March, including Green Giant and Leisseur canned vegetables, Clabber Girl baking powder, B and M baked beans, Underwood, Victoria, and McCann's. And total B and G Foods consumption trends have continued very strong in April, with the four weeks ending April 25 up nearly 41% versus last year. B and G Foods is largely a North American retail oriented business with a portfolio with distinct advantages in this current environment. These strong consumption trends are a testament to the popularity and consumer trust in our brands and their utility as consumers prepare more meals at home. However, we have experienced softness in our food service business, which represents approximately 13% of our net sales in 2019. We expect that our food service sales will remain challenged as people continue to shelter in place and their away from home eating options remain limited. Some of the businesses most impacted by the decrease in food service sales include spices and seasonings, B and G, Don Pappino, and Maple Grove Farms. While our overall business is trending very strong, we recognize brand building and innovation remain critical pieces to our long term success. And while the innovation we plan to launch this year will be delayed somewhat due to retailer movement of reset timing and the manufacturing focus on getting existing products to the shelf, we plan to set up investment against our new products to ensure their success. Any loss in sales from delayed resets and other innovation delays will be more than made up in the current consumption trends of our stable of core brands like Green Giant canned and frozen vegetables, B and M, Bear Creek dry soup mixes, Pollanner All Fruit, Victoria pasta sauces, and Underwood. Our largest innovation is in Green Giant frozen vegetables where we will continue to launch what we began in the fall of twenty nineteen with Green Giant Pizza with Cauliflower Crust, Green Giant Veggie Hash Browns, Green Giant Cauliflower Gnocchi, and Green Giant cauliflower breadsticks, which are already in an average of 40% ACV and performing very well. In addition, we're very excited about the Farmwise acquisition as it is expected to add fuel to our Green Giant innovation pipeline as well as provide us a brand name more appropriate for the natural channel. This fall we plan to leverage our acquisition of Farmwise by introducing Green Giant Veggie Fries in innovative new varieties including zucchini garlic parmesan, cauliflower ranch and bacon, and broccoli and cheese, along with Green Giant Veggie Rings, our cauliflower based take on onion rings. These will come in varieties such as cauliflower French onion and cauliflower free cheese and bacon. Regarding the Farmwise brand, we plan to relaunch this brand in the natural channel, plus a few current mainstream retail customers later this year as well. On the dry grocery side of the business, we plan to continue the launch of a shelf stable version of Green Giant riced veggies, a nutritious alternative to traditional dry rice. Made from 100% plant based legumes like lentils, sweet peas, and chickpeas. Retailer acceptance of this innovation has been very promising. Not to be outdone, Ortega is moving ahead with its introduction of cauliflower taco shells and cauliflower tortillas, as well as a line of street taco sauces. These new products have been very well received by our customers, with many of them saying it's the real innovation they've seen in this category in quite some time. Another area in which we will make additional investment this year is in e commerce. We estimate our e commerce sales are less than 1% of our business. And though it has really taken off this past quarter, growing more than 100% on Amazon alone, we know we need to catch up to many of our competitors in this space. By the end of twenty twenty, we plan to make significant progress in building our e commerce capability by completing the foundational work needed on our digital imaging, content and product data, improving our product offerings with innovation and e commerce friendly packaging, and improved data compliance. We will combine this with a greater investment in internal resources, including marketing, sales and supply chain personnel, along with increased investments to build out our e commerce shopper marketing program, including branded stores, banner ads, social media links, and search engine optimization, amongst other activities. Lastly, B and G Foods has long been a supporter of the communities in which we live and work, and that has only accelerated during this time of crisis. In addition to our strong partnership with the St. Jude's Children's Hospital, we have established relationships with Feeding America and No Kid Hungry. And we're using our electronic billboards in Times Square, New York, along with our other social media channels, to help raise awareness for these very important charitable causes. In summary, B and G Foods has so far successfully managed through these very trying times by keeping focused on our highest priorities, executing the plan with which we entered the year, and then quickly exercising the adaptability and determination for which our company is known to respond to an unprecedented time in our country and our world. I'm extremely proud of our employees, and I'm confident they can continue their terrific performance going forward. Thank you all very much for coming today and for your time and attention. And thank you for your continued support of B and G Foods. I pray for you and your families to stay safe and healthy. This now concludes my prepared remarks. Now we'll return to the business of the meeting. Since everyone has now had the opportunity to vote, the polls are now closed. While the votes cast and proxies are being counted, I now invite stockholders to ask any questions you may have about the company. As we have received no questions, the next item on the agenda is the report of the inspector. The inspector of election has tabulated the votes with respect to the election of directors and has reported that director nominees have each received greater than 92% of the votes cast at this meeting, electronically or by proxy and entitled to vote for the election of directors. And accordingly, they are elected as directors of the company. In addition, the stay on paid proposal received approximately 89% of the votes cast. And the proposal to ratify the appointment of KPMG has received approximately 96% of the votes cast. Accordingly, all of these proposals are approved. The full details of the votes cast are contained in the written report of the inspector, which may be examined by any stockholder and will be filed with the records of the company. In addition, as required by SEC rules, the company will file a current report on Form K later this week to report the details of the votes cast. Mr. Romanzi? Thank you, mister Lerner. I wanna thank all of you for attending today's meeting, specifically, during these very difficult times, and for all of your interest you've shown in B and G Foods. We really appreciate it. There being nothing further to come before the meeting, I declare this meeting adjourned. I hope that all of you and your families remain safe and healthy. Thank you. This concludes the meeting. You may now disconnect. Everyone, have a great day.