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Date

Monday, Aug. 4, 2025, at 4:30 p.m. ET

Call participants

  • President and Chief Executive Officer — Casey Keller
  • Executive Vice President, Chief Financial Officer — Bruce C. Wacha

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Risks

  • Bruce C. Wacha stated, "we are not satisfied with today's results," highlighting net sales declined by 4.5% and Adjusted EBITDA decreased by 9.3% compared to the prior year.
  • Management cited tariff costs increased by $1.6 million in adjusted EBITDA, primarily in the spices and flavor solutions business, with pricing actions only expected to partially recover these impacts in the near term.
  • Casey Keller said the largest exposure remains "China sourcing of garlic and onion," with limited alternatives and risks to margin from further tariff or supply disruption.
  • Guidance for 2025 does not fully reflect "all of the potential impacts of the recently imposed and threatened tariffs in the US and retaliatory actions taken or threatened by other countries," introducing significant external cost uncertainty.

Takeaways

  • Net Sales: $424.4 million in net sales, a decrease of 4.5% in net sales with base business net sales down 4.2%, driven notably by volume and pricing declines.
  • Adjusted EBITDA: $58 million in adjusted EBITDA, representing a 9.3% year-over-year decrease in adjusted EBITDA; frozen and vegetables segment adjusted EBITDA declined by $6.5 million.
  • Specialty Segment Performance: Base business net sales for specialty decreased by 7.1%, while adjusted EBITDA in this segment improved by 3% due to input cost declines.
  • Trade Promotion Spend: Increased by 120 basis points compared to fiscal Q2 2024, primarily due to timing shifts related to Easter.
  • Cash Flow from Operations: $17.8 million in net cash from operations was generated, up from $11.3 million in net cash from operations for fiscal Q2 2024. Year-to-date net cash from operations (GAAP) was $70.6 million versus $46.4 million in the prior year.
  • Net Debt: Net debt was reduced to $1.957 billion, with further decrease to just above $1.9 billion pro forma for the LeSueur US sale.
  • Portfolio Restructuring: Completed Don Pepino and Scalfani brands divestiture (May) and LeSueur US canned peas divestiture (August), removing $14 million and $36 million in annual net sales, based on trailing twelve months through May 2025 for Don Pepino and Scalfani, and through June 2025 for LeSueur and reducing working capital intensity.
  • Guidance Update: Fiscal 2025 guidance revised to net sales of $1.83 billion to $1.88 billion, adjusted EBITDA of $273 million to $283 million, and adjusted EPS of $0.50 to $0.60, with lower contribution from divested assets and expected $10 million in second-half adjusted EBITDA cost savings for Q3 and Q4.
  • Expected Margin Focus: Management’s long-term target for adjusted EBITDA (non-GAAP) as a percentage of net sales is "approaching 20%", supported by continued cost reduction and portfolio simplification.
  • Tariff Recovery Strategy: Targeted pricing actions to recover incremental tariff costs, but several months lag expected before full mitigation due to retailer negotiation cycles and contract windows.
  • Frozen Vegetables Outlook: Anticipates an $8 million to $10 million year-over-year adjusted EBITDA improvement in the back half of the year, with favorable crop costs and productivity gains.
  • Interest Expense: Projected interest expense is $147.5 million to $152.5 million; a 100 basis point rate reduction could save nearly $7 million annually due to 35% floating-rate debt exposure.
  • Selling, General, and Administrative Expenses: Increased by $4.1 million (9.4%) to $47.2 million, primarily due to higher marketing and transaction costs, partly offset by reduced warehousing and selling expenses.
  • Divestiture Proceeds Usage: All proceeds from recent asset sales will be applied to debt reduction.
  • Additional Divestitures: Ongoing exploration of Green Giant-branded business sales in U.S. frozen and Canadian portfolios, indicating additional near-term portfolio changes.

Summary

B&G Foods(BGS 0.12%) reported a sequential improvement in performance in fiscal Q2 2025, yet continued to face year-over-year declines in net sales and adjusted EBITDA due to segment-specific pressures and inflationary factors. Management completed two significant divestitures during the quarter, with proceeds targeted toward deleveraging and strategic portfolio simplification. Updated financial guidance primarily reflects the removal of these discontinued operations, incremental cost savings plans, and uncertainties posed by tariffs and foreign exchange. The frozen and vegetables segment is expected to turn profitable in the second half (Q3 and Q4), supported by improved pricing, crop cost trends, and operational productivity.

  • Management repeatedly emphasized that the recent declines in net sales are showing signs of stabilization, with early Q3 trends tracking at a negative 2% level, consistent with the lower end of updated guidance.
  • The company’s exposure to tariff volatility remains concentrated in spices and flavor solutions, with management planning staged price increases to mitigate the adverse cost impact but recognizing only partial near-term relief.
  • Cost control initiatives, including $10 million in expected second-half (Q3 and Q4) adjusted EBITDA savings and an annualized $15 million to $20 million run rate, are seen as central pillars to the company’s profitability and leverage reduction strategy.
  • Pro forma net leverage stands just under seven times as of Q2; management set an objective to reduce the pro forma net leverage ratio to less than six times within twelve months using divestiture proceeds and excess cash flow.
  • Potential further asset sales -- including portions of the Green Giant brand -- are actively under discussion, and timing of additional transactions is contingent on ongoing M&A processes.

Industry glossary

  • Trade Spend: Funds allocated by manufacturers to retailers and distributors to promote products and drive sales through temporary shelf price reductions or marketing initiatives.
  • Pack Costs: Total costs incurred to source, process, and package a full annual inventory of seasonal produce such as vegetables.
  • Promotional Trade Spend: Expenses recognized as reductions to net sales reflecting retail promotion and in-store merchandising support.
  • Adjusted EBITDA: Earnings before interest, taxes, depreciation, amortization, and other specified adjustments such as divestitures and non-recurring items, used to measure core operating profitability.
  • Base Business Net Sales: Net sales results from ongoing operations excluding recently divested businesses.

Full Conference Call Transcript

Casey will begin the call with opening remarks and discuss various factors that affected our results, selected business highlights, and his thoughts concerning the outlook for the remainder of fiscal 2025. Bruce will then discuss our financial results for 2025 and our revised guidance for fiscal 2025. I would now like to turn the call over to Casey.

Casey Keller: Good afternoon. Thank you, AJ. And thank you all for joining us today for our second quarter 2025 earnings call. Today, I will cover an overview of second quarter performance, Bruce will cover more detailed financial results, recent divestitures and portfolio shaping efforts, and the outlook for the remainder of fiscal year 2025. Q2 results. The second quarter demonstrated sequential improvement in trend and performance after a challenging quarter one. Q2 net sales of $424.4 million finished 4.5% down versus last year with base business down 4.2%. Q2 adjusted EBITDA was $58 million, down $5 million or 9.3% versus last year. Some of the key drivers.

Almost all of the adjusted EBITDA decline was driven by the frozen and vegetables business unit, with segment adjusted EBITDA down $6.5 million versus last year behind higher true-up costs on last year's wheat crop, specifically corn and peas, higher trade spend from Easter April timing, and the end of the Walmart rollback to improve core velocities. These costs will lap and are expected to reverse in the second half. The specialty business unit experienced significant net sales declines of 8% primarily behind lower Crisco oil pricing year over year. Consistent with our pricing model, segment adjusted EBITDA improved by 3%.

The divestiture of the Don Pepino and Scalfani brands during the latter part of the quarter removed approximately $1.4 million of net sales and some modest profit. Portfolio divestitures. B&G Foods is making good progress in reshaping and restructuring our portfolio to sharpen focus, simplify the business, improve margins and cash flow, and maximize future value creation. The end game is to create a more highly focused B&G Foods, with adjusted EBITDA as a percentage of net sales approaching 20%. Increased cash flow generation, lower leverage closer to five times, a more efficient cost structure, and clear synergies within the portfolio. During the second quarter, we completed two key divestitures.

First, the Don Pepino and Scalfani divestiture signed and closed in May. This is a tomato processing business with about $14 million in annual net sales, with a dedicated factory. Second, the LeSueur US canned peas divestiture signed and closed last Friday. LeSueur has approximately $36 million in annual net sales in the US with a premium position in canned vegetables. Both businesses have relatively high working capital needs, highly seasonal production, and were isolated in terms of the rest of the B&G Foods portfolio, particularly after the divestiture of the Green Giant US canned vegetable business in late 2023. We expect additional divestitures in the future to further focus the portfolio and reduce leverage.

Beyond LeSueur, we continue to evaluate and pursue the potential divestiture of the Green Giant branded business in US frozen, and Canadian frozen and shelf-stable. The remaining business is in the frozen and vegetables business unit. Fiscal year 2025 outlook. We expect the back half of fiscal year 2025, Q3, Q4, to show solid improvement versus the first half trend, flat to slightly positive in net sales with year-over-year growth in adjusted EBITDA. The key assumptions behind the latest estimate. The fifty-third week is expected to add plus 2% to 3% net sales growth in Q4. A partial week benefit.

Excluding the impact of the fifty-third week, base business net sales are projected to be down approximately 1% to 2% in the second half. July and early August net sales are consistent with that expectation, improving from the Q2 trend. As discussed last quarter, additional savings and productivity efforts are on track to deliver an incremental $10 million in adjusted EBITDA growth in Q3 and Q4, with an annual run rate of approximately $15 million to $20 million. These include additional productivity and COGS, trade and market spending efficiencies, accelerated SG&A savings, and discretionary spending cuts.

The US frozen vegetable business is expected to turn profitable, roughly a plus $8 million to $10 million increase in segment adjusted EBITDA versus last year, behind more favorable crop costs, foreign exchange benefit on the portion of the Green Giant business manufactured in Mexico, and strong productivity in the Iroquois manufacturing facility. We have assumed tariffs at current levels with some possible mitigation through US trade negotiation deals, alternative sourcing, or classification of spices as unavailable natural resources. We are planning to execute targeted pricing to recover incremental tariffs with some lag until fully negotiated and implemented. The largest exposure remains China sourcing of garlic and onion.

We are also adjusting guidance primarily to reflect the impact of our two recently completed divestitures. Bruce will provide more detail. Finally, we are committed to reducing leverage and balance sheet risk. We expect to reduce leverage to six times within the next twelve months by using divestiture proceeds and excess cash that we generate through improved adjusted EBITDA performance and lower working capital needs to repay or repurchase long-term debt. Thank you, and I will now turn the call over to Bruce for more detail on the quarterly performance and outlook for the remainder of fiscal 2025.

Bruce Wacha: Thank you, Casey. Good afternoon, everyone. Thank you for joining us today. While we are not satisfied with today's results, we are pleased with the continued progress relative to our challenging start to Q2 2025. For 2025, we generated $424.4 million in net sales, $58 million in adjusted EBITDA, 13.7% adjusted EBITDA as a percentage of net sales, and 4¢ in adjusted diluted earnings per share. Overall, net sales for 2025 decreased by $20.2 million or 4.5% to $424.4 million from $444.6 million for 2024.

Base business net sales, excluding the Don Pepino and Scalfani brands that were sold in May, decreased by $18.7 million or 4.2% in 2025 compared to 2024. $14.3 million or 3.2 percentage points of the decline in base business net sales was driven by lower volumes. $4 million or 0.9 percentage points of the decline was driven by a decrease in net pricing, and the impact of product mix and $400,000 or 0.1 percentage points driven by the negative impact of foreign currency.

Approximately $5 million of the decline in net sales in the quarter was driven by Crisco, and nearly half of that was driven by net pricing, which was reduced in large part to reflect lower input costs for soybean oil. As we have highlighted since acquiring this business, our goal for Crisco is to maintain cash flows regardless of movements in commodity oil prices, and that continues to be what we have done here. Outside of Crisco, the sequential improvement in net sales performance was generally broad-based against the portfolio and the business units.

Base business net sales for specialty, which does not include net sales for the Don Pepino and Scalfani brands, decreased by $10.2 million or 7.1% during 2025. If we remove the impact of Crisco, base business net sales for specialty decreased by $5.3 million or approximately 6.6%. Despite the lower sales during 2025, specialty segment adjusted EBITDA was up modestly for the quarter, at plus nearly $1 million or 3%. And despite a modest inflationary environment, specialty benefited from lower raw material costs for certain brands including soybean oil for Crisco, and phosphates and cornstarch for Clabber Girl. Similarly, Meals has reasonably solid performance despite soft net sales performance. Net sales of meals declined by $3.8 million or 3.5%.

Disappointing for this business unit, but still an improvement from its first quarter performance. Nonetheless, segment adjusted EBITDA was up by $1.8 million or 7.7% for 2025 compared to the prior year period. Premium wheat returned to growth in the quarter after supply issues earlier this year. And we had strong performance from some of our other unsung heroes in the portfolio such as Las Palmas Enchilada Sauce, Skinnygirl dressings, as well as Spring Tree, and Vermont Maid syrups. Net sales of frozen and vegetables also improved this quarter. After being down double digits in the first quarter, net sales were down just $2.6 million or 2.8% in 2025 compared to the prior year.

Net sales for the LeSueur brand in the US and our entire portfolio of products in Canada increased for the quarter as compared to the prior year quarter. Additionally, the US frozen business continues to stabilize after a tough start to the year. We are proud to highlight that volumes increased for frozen and vegetables in the aggregate during Q2 2025 despite tough but improving category dynamics. After a year of challenge around raw material pack costs, and an unfavorable foreign exchange dynamic for frozen vegetable products made in our Mexican manufacturing facility, we are pleased to report that this year's pack appears to be significantly favorable when compared to last year's pack.

Negative foreign exchange impacts have moderated and we are expecting a better cost environment for the business unit and a return to profitability in the back half of the year. Spices and flavor solutions also had a comparably strong 2025. Net sales for the business unit declined by a little bit less than $2 million or two percentage points in the second quarter compared to the prior year period. About half of the decline was driven by timing, net pricing, and mix within our foodservice business, and the remainder was driven by modestly softer volumes. Unlike our other center store businesses, spices and flavor solutions saw material increases in commodity costs, particularly for black pepper and garlic.

Separately, our spices business also bore the brunt of our exposure to tariffs. About $1 million of the $1.6 million of total tariff exposure for B&G Foods in the quarter. As we prepare for the back half of the year, we expect to manage these cost challenges through continued productivity initiatives in our spices and flavor solutions factory, along with targeted pricing where appropriate. Gross profit for our overall B&G Foods business was $87 million for 2025 or 20.5% of net sales. Adjusted gross profit, which excludes the negative impact of $2.1 million of acquisition divestiture-related expenses and non-recurring expenses including cost of goods sold during 2025, was $89.1 million or 21% of net sales.

Gross profit was $92 million for 2024 or 20.7% of net sales. Adjusted gross profit, which excludes the negative impact of $1.2 million of acquisition divestiture-related expenses and non-recurring expenses included in the cost of goods sold during 2024, was $93.2 million or 21% of net sales. Our material, labor, and overhead costs when measured against gross sales were favorable by approximately 100 basis points during 2025 as compared to the second quarter of last year. Promotional trade spend, which is captured in our net sales line, increased by approximately 120 basis points in 2025 as compared to 2024. As we continue to invest in our brands, and attempt to reflect lower prices on shelf for consumers.

The increase in promotional trade spend was also driven in part by the timing of Easter, which was in April 2025 compared to March 2024. Input cost inflation as measured by raw material costs across our basket of inputs and in our factories has remained mostly modest this year thus far in Q2 2025, outside of some categories such as black pepper, garlic, olive oil, tomatoes, core vegetables, and cans, which have been elevated. We continue to closely monitor inflation throughout the trade and tariff negotiations.

And as I mentioned earlier, increased tariffs cost us approximately $1.6 million in adjusted EBITDA during the quarter and a little bit more than $1 million of that in the spices and flavor solutions business unit. While we have not seen the full benefit of a more normal or favorable US dollar to Mexican peso exchange rate flow into our P&L this year, we still expect to see some benefit in the back half of the year. However, currency remains a potential wildcard for our Green Giant business given the current macroeconomic environment and the political uncertainty regarding tariffs. Selling, general, and administrative expenses increased by $4.1 million or 9.4% to $47.2 million for 2025 from $43.1 million for 2024.

The increase was composed of increases in consumer marketing expenses of $2.2 million and acquisition divestiture-related and non-recurring expenses of $2.8 million, partially offset by decreases in warehousing expenses of $800,000 and selling expenses of $100,000. Expressed as a percentage of net sales, selling, general, and administrative expenses increased by 1.4 percentage points to 11.1% for 2025 as compared to 9.7% for 2024. As I mentioned earlier, we generated $58 million in adjusted EBITDA or 13.7% of net sales in 2025 compared to $63.9 million or 14.4% of net sales in 2024. Net interest expense decreased by $2 million to $35.8 million for 2025 as compared to $37.8 million for 2024.

The decrease in interest expense was primarily driven by a book gain on the extinguishment of debt during 2025 as a result of our repurchase of $20.7 million aggregate principal amount of our 5.25% senior notes due 2027 in open market purchases and an average discount repurchase price of 89.98% of principal amount, plus accrued and unpaid interest net of the accelerated amortization of deferred debt financing costs. Depreciation and amortization was $16.7 million in 2025, which is largely in line with the $17.3 million in the second quarter of last year. We had adjusted net income of $2.9 million or $0.04 per adjusted diluted share in 2025.

In 2024, we had adjusted net income of $6.6 million or $0.08 per adjusted diluted share. Adjustments to our EBITDA net income are described further in our earnings release. Now moving on to our consolidated cash flow and balance sheet. Cash flow continues to be strong this year. We generated $17.8 million in net cash from operations during Q2 2025 versus $11.3 million in Q2 2024. On a year-to-date basis, we generated $70.6 million of net cash from operations during 2025 versus $46.4 million during 2024. We have also reduced our net debt to $1.957 billion at the end of 2025.

Pro forma for the sale of LeSueur US, net debt was reduced to a little bit more than $1.9 billion at the end of Q2 2025. As a reminder, net debt was $1.994 billion at the end of fourth quarter 2024 and $2.022 billion at the end of second quarter 2024. As a reminder, approximately 35% of our long-term debt is tied to floating interest rates or SOFR. A 100 basis point reduction would be expected to reduce our interest expense by nearly $7 million annually. As Casey mentioned earlier, we continue to make progress on our portfolio reshaping efforts.

Our recent divestitures of the Don Pepino and Scalfani brands in May and now the LeSueur brand in the US last week are continued examples of the strategy that we believe will make us a more focused and ultimately a stronger business while also helping us to reduce debt and eliminate heavy seasonal pack businesses from our portfolio. We think that the new owners for both of these divested businesses will do well. They are great brands, but they are not in line with the focus that we have laid out for the B&G Foods of the future.

Don Pepino and Scalfani brands contributed approximately $14 million in net sales over the trailing twelve months through May 2025 and approximately $9 million in net sales in June through December 2024. Although small, the brand is profitable, particularly in the back half of the year. The LeSueur brand in the US contributed approximately $36 million in net sales over the trailing twelve months through June 2025 and approximately $19 million in net sales in August through December 2024. Like the Don Pepino and Scalfani brands, LeSueur US is also a profitable little brand that we believe will do well for its new owner.

As a result of these divestitures, we have revised our fiscal year 2025 guidance to remove their previously expected contribution for the remainder of the year. We now expect net sales of $1.83 billion to $1.88 billion, adjusted EBITDA of $273 million to $283 million, and adjusted earnings per share of $0.50 to $0.60 for fiscal 2025. Our updated guidance continues to account for a modestly softer economic environment that has impacted consumer spending patterns. It also reflects our expectation that our top line will continue to stabilize and that our input costs will remain relatively consistent outside of any surprises resulting from the ongoing tariff negotiations.

In addition, our guidance incorporates our cost reduction plans, which we expect will produce approximately $10 million of cost savings in the second half of the year. Given the uncertainty in the political environment and the rapidly evolving negotiations regarding tariffs and retaliatory tariffs, our guidance does not reflect all of the potential impacts of the recently imposed and threatened tariffs in the US and retaliatory actions taken or threatened by other countries in response, or the potential for additional tariffs, trade barriers, or retaliatory actions by the US or other countries. As a reminder, more than 90% of our net sales are to customers in the US, and the remainder are primarily to customers in Canada.

Approximately 80% to 85% of our products, ingredients, and raw materials are sourced in the United States, Canada, and Mexico. The majority of our non-North American sourced products, ingredients, and raw materials, particularly within our spices and flavor solutions business unit, originate in Asian countries, including black pepper, which is primarily sourced in Vietnam, and garlic, which is primarily sourced in China. Additionally, we expect for full year 2025 interest expense of $147.5 million to $152.5 million, including cash interest of $142.5 million to $147.5 million, depreciation expense of $47.5 million to $52.5 million, amortization expense of $20 million to $22 million, an effective tax rate of 26% to 27%, and CapEx of $30 million to $35 million.

We are also committed to reducing our net debt and our net leverage ratio. Over the next twelve months, we expect to reduce our pro forma net leverage ratio by at least a full turn from just under seven times today to less than six times by the end or by this time next year through the successful execution of our divestiture strategy, stabilization of our adjusted EBITDA, our excess cash generation, and continued improvements in working capital. Now I will return the call back over to Casey for further remarks.

Casey Keller: Thank you, Bruce. In closing, B&G Foods continues to remain laser-focused on a few critical priorities. Number one, improving the base business net sales trends of our core business to the long-term objective of plus 1%. Two, reshaping the portfolio for future growth, stability, higher margins, and cash flows, as well as structuring key platforms for future acquisition growth. And third, reducing leverage closer to five times through divestitures and excess cash flow to facilitate strategic acquisitions. This concludes our remarks. Now we would like to begin the Q&A portion of our call. Operator?

Operator: Ladies and gentlemen, at this time, we will begin the question and answer session. To ask a question, you may press star and then one using a touch-tone telephone. To withdraw your questions, you may press star and two. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. Once again, in order to ask a question, please press star and one. We will pause momentarily to assemble the roster. Our first question today comes from David Palmer from Evercore ISI. Please go ahead with your question.

David Palmer: Thanks. Bruce, I think you mentioned that the core business was expected to be down 1% to 2%. I think is that your organic sales interpretation of what you put forward as the revenue for the second half? So down 1% to 2% versus

Bruce Wacha: Yeah. So base business excluding the divestitures. To be kind of midpoint of our guidance is down about 1% after then adding, we call it $15 million to $20 million or pick $16 million as the benefit for the fifty-third week, which will be in our fourth quarter.

David Palmer: You know, what would be I mean, we look at current trends, the multiyear versus you know, it does look like the comparisons get that much easier versus what we have seen lately. In other words, it looks like we are down five-ish in the MULO plus data

Bruce Wacha: and

David Palmer: I know you have some improvement that you are hoping to get in frozen, maybe spices. I do not know. But, you know, help us get comfortable with that sort of guidance versus the type of trend you see now going forward?

Bruce Wacha: Yeah. So the low end of our guidance is, like, a down two, 3%. And if you think about where our performance has been this year, you know, we were down 10.5% first quarter, which is terrible. On a base business, we are down 4.2% in the second quarter. We had pretty good stabilization towards the tail end of the second quarter in July. You know, starting right for the third quarter. So you know, that is about where we expect to come out. I mean, July early August are more in the minus 2% range. Got it. And I mean, just so we are seeing the improvement already happening in the early part of the third quarter.

But Dave, I do agree that generally there is a correlation between the consumption data that we use Nielsen. Know, in our shipments. We expect to see that you know, continue to get less unfavorably or better, however you want to view

David Palmer: I mean Yeah. We believe that at some point we are going to lap the negatives and the consumer behavior changes in our business. Plus, we know we can see on some of our business. We have pretty strong plans. So we have just got to see it stabilize and we are, you know, kind of projecting some improvement in the back half trend.

Bruce Wacha: Yeah. And I mean, I am just for what it is worth, in the know, the IRI, the 5% in the last four weeks and the last twelve weeks ending you know, that we see, but maybe that you are seeing more up-to-date data than we are

David Palmer: Which we also have a custom database. We would be a little better than it.

Bruce Wacha: Yeah. Got it. Alright. I will pass it on. Thank you very much.

Operator: Our next question comes from Scott Marks from Jefferies. Please go ahead with your question.

Scott Marks: Hey. Good evening, guys. Thanks for taking the questions. First thing I want to ask about, you had mentioned some targeted pricing actions and other kind of tariff mitigation efforts. Just wondering if you can kind of give us a sense of how much of those tariff impacts you think you will be able to mitigate through some of those actions and how retailers have been responding to some of these price increases.

Bruce Wacha: Yeah. So we have not disclosed the dollar amounts. The vast majority of our area of exposure on tariffs is our spices and flavor solutions. So you think particularly garlic and black pepper. Anybody who is buying black pepper and garlic in the world are buying them from China and Vietnam. So B&G and all of our competitors, people will take price against those. There may be some risk on an interim you know, how much tariffs slip through your P&L before you got the benefit of that. But you have also seen other people in the space talk about taking price. The other primary area of concern for us is steel cans.

And like everybody else, you know, our expectation is we are going to have to take price.

Casey Keller: I think in this fiscal year, we are implementing and negotiating pricing actions to recover the tariffs. There will be some lag between when we start paying the, you know, the tariff cost and our input cost and when the pricing becomes effective just because of retailer lead times on price changes. But, you know, we expect to price for most of the tariff impact and in some cases will offset a little bit of it with productivity and cost savings efforts.

Scott Marks: Okay. Understood. And then maybe, I guess, as we think about I guess, the guide down for the year and then, obviously, implied H2, maybe how much of the guide down was driven by some of those divestitures versus to meet the expectations.

Bruce Wacha: Yeah. It is primarily the divestitures. Almost all the divestitures.

Scott Marks: Okay. So then the outlook for H2, it is still kind of in line with how you were thinking about it. I guess. After the Q1 results?

Bruce Wacha: Yes.

Scott Marks: Okay. Got it. Very good. Thanks. I will pass it on.

Operator: Our next question comes from William Reuter from Bank of America. Please go ahead with your question.

William Reuter: Good afternoon. I have got a couple. So the first I do not think I explicitly heard any EBITDA given I heard the $36 million of sales for LeSueur. Did you provide an EBITDA number that I did not hear?

Bruce Wacha: We did not.

William Reuter: Okay. And is that I guess, that is something you are not going to be providing.

Bruce Wacha: No. It is a sale to a private company. You know, typically, do not end up giving that out.

William Reuter: Okay. And did I hear correctly that your net debt went from $1.936 billion to a little over $1.9 billion? So I guess the proceeds there are somewhere in the $35 million range. Is that right?

Bruce Wacha: No. No. I think you maybe misheard that. Actually, if you go into our queue, there is a subsequent event where it walks through the net proceeds. It is about $59 million with the benefit of a small, small working capital adjustment in our favor.

William Reuter: Okay. I guess I had not seen the queue yet.

Bruce Wacha: Yeah. It just came out. Last

William Reuter: Okay. Cool. And then just lastly for me, in terms of your availability today, or at the end of the quarter on your ABL, including any sort of financial covenants that may exist for maintenance. Can you share with us what that number would be?

Bruce Wacha: So we do not have an ABL. We have got a cash flow revolver. And the primary covenant on that is a maintenance leverage test, which is now seven and a half times.

William Reuter: Yeah. Sorry. That is the second quarter in a row. I have used the wrong term. But yeah. No. I guess I was wondering if you include that interest coverage as well as the leverage covenant, what the availability would be?

Bruce Wacha: Yeah. It is just math. I do not have it in front of me, but you should just be able to run where we finished the quarter, which is probably just under seven times, probably closer to six eight, six eight and change. Pro forma for LeSueur. So you got basically point seven turns of leverage of cushion.

William Reuter: Perfect. Alright. That is all. Yep. Thank you.

Operator: Our next question comes from Robert Moskow from TD Cowen. Please go ahead with your question.

Robert Moskow: Hi. Thanks. I might have missed it, but, do you have any comments about the flavor solutions part of your business, spice and seasonings? Like, is it in line with your expectations? Or a little light? Like, I would have thought that cooking at home would be a real tailwind for these brands. And, you know, are you seeing that in the business? Or are you seeing some elasticity there as well?

Bruce Wacha: In our spices and seasonings business, we are and flavor solutions is what we call it, I would say that the results are not quite in line with our expectations. We would expect to be seeing that business stable to up slightly. So we are not quite seeing the you know, the tailwind that we would like to see. You know, there are a lot of pieces to that business. There is, you know, some private label members mark. There is some food service business. So there are different performances, and then the branded retail business. But, you know, I think we should be seeing that business, you know, slightly positive.

In the back half again, and that would be more in line with what we would expect because we are seeing the category getting some benefit from it is tied to the perimeter and the growth of proteins, fresh proteins in the store. You know, we do that is where we predominantly have tariff impact. So you know, then that is where we will be, you know, doing some pricing, some kind of targeted pricing to recover. So I would expect to see some pricing benefit as well.

Robert Moskow: Okay. Are there any changes you can make to your sourcing to try to like, either find less expensive raw materials to mitigate the spice and seasonings tariffs? Or different suppliers? Or is that not possible?

Bruce Wacha: I mean, yes, we are doing that. So we are looking at alternative sourcing on some of the spices, but honestly, most of the spices come from countries that have tariffs on them already. It does not really matter where you move them. So there is some work that we have done to mitigate that. You know, we have tried to source, you know, China is probably our most vulnerable position with, you know, garlic and onions. China supplies 80% of the world's garlic. There are not a lot of other options. California does not even come close to meeting the needs. And there is really no other available sourcing in the United States.

But, you know, we have found, like, some other small sources of onion and garlic that we have been able to move outside of China. 30% tariffs is kind of our highest right now. But I am not sure that we can really get out of most of these tariffs. We will need to price for them. There will be some mitigating actions that we can do, but there will also and there are also probably be some offsetting productivity. But at the end of the day, you know, spices are grown in the climates where they can be grown. They cannot be grown in the United States. They are really unavailable natural resources in the United States.

And so I am hoping over time that you know, that realization will help, you know, some of the trade negotiations and that, you know, just like coffee and cocoa cannot be sourced in the United States, spices have the same footprint. So we will see over time. But right now, we are just counting on what the prevailing tariffs are and building that into our models.

Robert Moskow: Alright. Thank you.

Operator: Our next question comes from Hale Holden from Barclays. Please go ahead with your question.

Hale Holden: Hi. I got two or three really quick ones. Can you remind us the L'Oreal Canada brand? Is that smaller or larger than the US brand?

Bruce Wacha: It is smaller.

Hale Holden: Smaller. And following on the Spices comment, would the expectation be you can catch up to pricing in the fourth quarter to get back to sort of historical margins? Or do you think it will take you into '26?

Bruce Wacha: I think it will take us to '26 to get back to fully recover the impact of tariffs, but I think we will partially cover them in the Q4 timeframe. It is just a lead time of, you know, retailer pricing actions. That we will have to manage. And some of our and by the way, some of our food service and private label contracts also have only specific windows where we can price. So we will have to kind of work through those timelines.

Hale Holden: And then last question I had was in the disclosure in the queue around the sore and the expectation for a potential write down in the third quarter seems to imply that we could get more asset sale announcements by the end of the third quarter. Is that the right interpretation?

Bruce Wacha: Yeah. At some point this year. And look. We made a point of talking to a strategic review last year and that in our mind was always expectation probably happened Q2 2025. LeSueur is the first piece. Right? And we are in conversations with some logical strategic buyers for each of the pieces, and we are moving along. But M&A takes time, and it is not always easy to predict the timing, but sort of moving forward in these. If that is your question.

Hale Holden: I was. Thank you very much, Bruce. I appreciate it.

Bruce Wacha: You too.

Operator: Our next question comes from Karru Martinson from Jefferies. Go ahead with your question.

Karru Martinson: Good afternoon. Just for a mathematical housekeeping, so if Green Giant was or frozen vegetables was $396 million of sales last year, we take out the LeSueur. Is what we are looking at for potential divestitures about $360 million kind of remaining of sales?

Bruce Wacha: Give or take.

Karru Martinson: Give or take. And how much of that is just in Canada? You said LeSueur is smaller. The Green Giant in Canada, would assume is smaller as well.

Bruce Wacha: No. No. Green Giant. Yeah. Green Giant is the number one brand in Canada. So it is kind of disproportionately larger than US business. Oh, yeah. On the so it is about a 100 plus million dollars of sales in Canada. And in Canada, by the way, includes both frozen and shelf-stable. Yeah. So canned vegetable cans are still up there as it is frozen. The frozen bit is in it is the number one brand in both those categories. You know, in the US, we are just US frozen and under Green Giant and know, we are the number two brand.

Karru Martinson: Okay. And then when you are looking at divestitures, you mentioned in conversation, is the objective to try to do this all at once, or will it kind of continue to be these smaller sales as we move assets off the balance or off the balance sheet.

Bruce Wacha: Yeah. It is unlikely that it is all going to be at once. You know, the LeSueur transaction signed and closed. That was done on Friday. Cash in the bank.

Karru Martinson: Thank you very much, guys. Appreciate it.

Bruce Wacha: Yep.

Operator: Once again, if you would like to ask a question, please press star and then 1. To withdraw your questions, you may press star and 2. Our next question comes from Carla Casella from JPMorgan. Please go ahead with your question.

Carla Casella: Hi. Thanks for taking my question. On you mentioned trade spend and timing with Easter. In general, are you seeing a dramatic change in trade spend as you look to planning for third quarter and back half and are any categories particularly either promotional or asking for more trade spend?

Bruce Wacha: I think we will probably see an increase in trade spend in the back half of the year, but nowhere near the levels of the first half increase. We have seen, you know, promotional spend become a little bit more competitive and merchandising become a little bit more competitive out there. And we have, you know, we have done what we need to stay competitive. Some of that trade spend is also reflecting lower prices like on Crisco and some other things where we have year-over-year declines in the commodity and we price to that.

But I would expect that, you know, we have a much smaller increase in trade spend year-over-year in the back half because we had started to kind of kick up our promotion efforts back to kind of pre-COVID levels last fall. And so we will be lapping that this year. So I do not think you will see it. You know, if we were up, I do not remember, like, a 130, 140 basis points in the first half, we will not be up anywhere near that level in the second half.

Carla Casella: Okay. Great. And then the inventory related to the LeSueur that comes out in third quarter, is that the $59 million?

Bruce Wacha: No. So $59 million was effectively the purchase price, which included we have not disclosed it, but it included a favorable work capital adjustment. So part of, you know, we have talked about this over time. Like, these are two nice little businesses. Well, Don Pepino and LeSueur. They are both profitable. They are both packed plan businesses where you are buying a year's worth of inventory, and then you are selling it through. And typically in an M&A transaction, you are doing things on, like, an average inventory basis. That has movement this year. Don Pepino, we sold before the pack. LeSueur, we sold after the pack.

And so we got a little bit of a benefit, but we got a real price for both transactions. You know, reasonable multiples when they are both delevering on a ratio basis.

Carla Casella: Okay. That is great. And then just given the changes in the business from the asset sales, has your mix of foodservice overall changed dramatically? Food service versus retail?

Bruce Wacha: Only in the sense that LeSueur was an all branded retail business. And then relatively small portfolio. Yeah. And then Don Pepino was probably a split, but it is like $15 million of sales. So it probably does not really move the needle, but, yeah, we would be lower in service today than slightly lower end. But not. Yeah. Certainly not anything that we change our competitiveness in that category. Very, very little change overall.

Carla Casella: Okay. And then your commentary about the asset sale when it was announced and the proceeds, can you just talk about the flexibility you have in terms of reinvesting the proceeds? If it is a working capital adjustment, is it still considered proceeds under the definition?

Bruce Wacha: Yeah. This is all going to go to debt reduction.

Carla Casella: Okay. Great. Thank you.

Bruce Wacha: And ladies and gentlemen, reduction.

Operator: Sorry. Go ahead.

Bruce Wacha: I was just going to say, ladies and gentlemen, that does conclude today's question and answer session. As well as our conference call. We thank you for attending today's presentation. You may now disconnect your lines.