B&G Foods, Inc. (BGS) Earnings Call Transcript & Summary

Good day, and welcome to the B&G Foods, Inc. Second Quarter 2024 Financial Results Conference Call. Today's call, which is being recorded, is scheduled to last about 1 hour, including remarks by B&G Foods' management and the question-and-answer session. I would now like to turn the call over to AJ Schwabe Senior Associate, Corporate Strategy and Business Development for B&G Foods. A.J.?

Good afternoon, and thank you for joining us. With me today are Casey Keller, our Chief Executive Officer; and Bruce Wacha, our Chief Financial Officer. You can access detailed financial information on the quarter in the earnings release we issued today. which is available at the Investor Relations section of bgfoods.com. Before we begin our formal remarks, I need to remind everyone that part of the discussion today includes forward-looking statements. These statements are not guarantees of future performance, and therefore, undue reliance should not be placed upon them. We refer you to B&G Foods' most recent annual report on Form 10-K and subsequent SEC filings for a more detailed discussion of the risks that could impact our company's future operating results and financial condition. B&G Foods undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. We will also be making references on today's call to the non-GAAP financial measures, adjusted EBITDA, segment adjusted EBITDA, adjusted net income, adjusted diluted earnings per share, adjusted gross profit, adjusted gross profit percentage and base business net sales. Reconciliation of these financial measures to the most directly comparable GAAP financial measures are provided in today's earnings release. Casey will begin the call with opening remarks and discuss various factors that affected our results, selected business highlights and his thoughts concerning the outlook for the remainder of fiscal 2024. Bruce will then discuss our financial results for the second quarter of 2024 and our guidance for fiscal 2024. I would now like to turn the call over to Casey.

Good afternoon. Thank you, AJ, and thank you all for joining us today for our second quarter 2024 earnings call. Q2 results. Second quarter net sales of $444.6 million and adjusted EBITDA of $64 million were in line with expectations. Excluding Crisco, whose net sales were impacted by lower net pricing to reflect the decrease in soybean oil costs. Base business net sales decreased by approximately 1.5% compared to the year ago period. Base business trends improved relative to the first quarter, but we continue to experience softer trends in the center of the store, consistent with the rest of the industry. Food service sales also declined 3% but much less than in Q1 and more consistent with overall restaurant traffic patterns. Net sales for the highest margin Spices & Flavor Solutions business unit increased by 4.9% versus last year. Q2 adjusted EBITDA of $64 million decreased by $4.5 million (sic) [ $4.6 million ] compared to the second quarter of 2023. The Green Giant U.S. shelf-stable product line represented approximately $2 million of the year-over-year decline with foreign exchange from Mexico operations on the Green Giant frozen business, representing another $2 million. Adjusted EBITDA as a percentage of net sales for the second quarter was 14.4%, down slightly from the prior year period. In quarter 2, we continue to see moderating inflation and some favorability in transportation and warehousing. [ Corporate Central ] expenses were also down in quarter 2 versus last year, reflecting a moderation in insurance and other fixed costs. Segment reporting. As of the first quarter, B&G Foods is reporting results by operating segments, providing greater visibility into the underlying performance of the company's 4 operating business units. Spices & Flavor Solutions. Second quarter net sales increased 4.9% with segment adjusted EBITDA up 5.9% versus the second quarter of fiscal year '23. This segment remains B&G Foods highest segment adjusted EBITDA as a percentage of net sales. B&G Foods is a leader in spices & seasonings, and we continue to see healthy trends in the overall category. Food service sales declined moderated this quarter to reflect overall restaurant trends. We also launched the new line of licensed seasoning and grilling blends under the Four Sixes brand featured in the Yellowstone TV franchise. Overall, customer service levels have been restored from some isolated issues in fiscal year '23. Meals the key components of this business unit are Mexican meals, Ortega, Las Palmas and Hot Breakfast, Cream of Wheat, McCann's, Maple Grove Farms syrups. The Meals segment increased quarter 2 segment adjusted EBITDA by 3.9%, although net sales were down approximately 5.5%. We have made good progress in controlling costs and driving productivity in this segment. Skinnygirl salad dressings continued high growth behind new items, increased capacity and expanded distribution. Ortega net sales were impacted by competitive activity from Taco Bell and the Taco category, although we have a strong pipeline of channel and product innovation in the back half of this year. Food service sales in syrup were also down behind weak trends in a major syrup customer. Customer service levels have remained strong at over 99%. Specialty. The Specialty segment's key objective is to maintain strong, stable cash flow and profit dollars with a primary focus on baking staples, about 70% of business unit sales with leading #1 brands such as Crisco oil and shortening, Clabber Girl baking powder, Grandma's Molasses, et cetera. Based on our Crisco commodity pricing model, quarter 2 net sales for Specialty were down mostly behind lower soybean oil pricing versus last year reflected through the customers. We believe the soybean oil prices have largely stabilized in the near term and expect that the level of year-over-year decline will decrease in the back half. Specialty segment adjusted EBITDA was down modestly 3% reflecting slight delays in getting some customers to reflect lower oil pricing on all Crisco SKUs, which has now been rectified. The Specialty segment continues to deliver strong customer service at 98.5%. Frozen and vegetables. The Frozen & Vegetables business unit includes the U.S. Green Giant frozen business, the Canadian Green Giant frozen and canned businesses, a major portion of our company's consolidated [ Canada ] sales and the Le Sueur canned vegetable product line. Net sales excluding the impact of the U.S. Green Giant canned divestiture, were down 2.3%, an improvement from the first quarter trend, but still sluggish behind negative overall category trends. The premium price [indiscernible] canned business is showing strong growth in Q2 and year-to-date versus last year. Frozen vegetables segment adjusted EBITDA was down significantly but reflected the loss of the U.S. Green Giant shelf-stable business, $2 million and the impact of foreign exchange, another $2 million from the transfer of finished goods to the U.S. and Mexican pesos. This segment remains our lowest segment adjusted EBITDA margin business. This fall, we plan to launch a strong innovation pipeline of veggie ramen in premium sites. Customer service models have remained strong in this segment. Portfolio shaping. B&G Foods is continuing to reshaping and restructuring of our portfolio to sharpen focus, improve margin and cash flow and maximize future value creation. The divestiture of the Green Giant U.S. canned vegetable business was completed last fall, following the sale of Back to Nature brand in January 2023. As discussed last quarter, we are conducting a strategic review of the frozen and remaining canned vegetable businesses for a possible divestiture and sale of some or all of the assets in the Frozen & Vegetables business unit. Green Giant remains a strong brand with broad awareness and distribution and the Frozen & Vegetables category is on trend with health and dietary trends. It just may not be the right fit with B&G who's focus and capabilities particularly since there are no plans to add more assets in the frozen portfolio, given the opportunities in our core shelf-stable businesses and overall capital constraints. As previously disclosed, we have been evaluating and working on other smaller divestitures that represent around 10% of total company net sales. That process with some lesser brands is moving forward. Thank you, and I will now turn the call over to Bruce for more detail on the quarterly performance and outlook for the remainder of the year.

Thank you, Casey. Good afternoon, everyone. As a reminder and before I get into our results, we sold our Green Giant U.S. shelf-stable product line last fall, and so we are lapping second quarter of 2023 results, which included Green Giant U.S. shelf stable net sales of $13.7 million and approximately $2 million of contribution. In the second quarter of 2024, we generated $444.6 million in net sales, approximately $64 million in adjusted EBITDA, adjusted EBITDA as a percentage of net sales of 14.4% and $0.08 in adjusted diluted earnings per share. Base business net sales, which excludes the Green Giant U.S. shelf-stable product line, decreased by $11.3 million or 2.5% in the second quarter of 2024 compared to the second quarter of 2023. $1.8 million or 0.4 percentage points of the base business net sales decline was driven by lower net pricing. $9.3 million or just under 2 percentage points of the decline was driven by decreased volumes and a little bit less than $200,000 of the decline was driven by unfavorable FX. Net sales of our Crisco brand decreased by $4.6 million for the second quarter of 2024 as compared to the second quarter of 2023, primarily as a result of our commodity pricing model for the brand, which drove a decline in net pricing of approximately $6.5 million to reflect lower soybean oil commodity costs, partially offset by an increase in volume of approximately $2 million. Excluding the Crisco brand, base business net sales decreased by $6.7 million or 1.5% in the second quarter of 2024 compared to the second quarter of 2023. Gross profit was $92 million for the second quarter of 2024 or approximately 20.7% of net sales. Adjusted gross profit, which excludes the negative impact of $1.2 million of acquisition/divestiture-related expenses and nonrecurring expenses, included in cost of goods sold during the second quarter of 2024, and was $93.2 million or 21% of net sales. Gross profit was $102.3 million for the second quarter of 2023 or 21.8% of net sales. Adjusted gross profit, which excludes the negative impact of $0.4 million of acquisition/divestiture-related expenses and nonrecurring expenses included in cost of goods sold during the second quarter of 2023 was $102.7 million or 21.9% of net sales. While we are continuing to see input cost inflation with regards to material costs across our basket of inputs and in our factories, the cost increases have mostly been modest thus far this year. Helping to mitigate those cost increases, our continued favorability in some of the areas that saw the most extreme input cost inflation in 2022 and 2023, such as soybean oil, cans and logistics as well as through our continuous improvement efforts and cost savings initiatives in our factories. Selling, general and administrative expenses decreased by $4.8 million or 9.9% to $43.1 million for the second quarter of 2024 from $47.9 million for the second quarter of 2023. The decrease was composed of decreases in consumer marketing expense of $3.4 million, selling expenses of $1.9 million and warehousing expenses of $0.1 million, partially offset by an increase in general and administrative costs of $0.6 million. Expressed as a percentage of net sales, selling, general and administrative expenses improved by 0.5 percentage points to 9.7% for the second quarter of 2024, as compared to 10.2% for the second quarter of 2023. As I mentioned earlier, we generated approximately $64 million in adjusted EBITDA or 14.4% of net sales in the second quarter of 2024 compared to $68.5 million or 14.6% in the second quarter of 2023. Approximately $2 million of the decrease in adjusted EBITDA for the quarter was the result of the divestiture of the Green Giant U.S. shelf-stable product line, which we sold last fall. An additional $2 million or so of the adjusted EBITDA decline resulted from the negative impact of foreign currency on our cost of goods sold for our Green Giant frozen business that were manufactured in Mexico. The remainder of the decline was largely driven by the decline in our net sales, a modest increase in our raw material costs and some negative mix. Net interest expense was $37.8 million in the second quarter of 2024 compared to $35.8 million in the second quarter of 2023. The increase was primarily due to higher interest rates on our long-term debt during the second quarter of 2024, and compared to the second quarter of 2023, partially offset by a reduction in average long-term debt outstanding during the second quarter of 2024 compared to the second quarter of 2023. The second quarter of 2024 net interest expense also includes $0.5 million of noncash expense due to the accelerated amortization of financing fees that resulted from the early retirement of approximately $22 million principal amount of long-term debt during the quarter, whereas the year ago period includes an $800,000 gain on extinguishment of debt. Depreciation and amortization was $17.3 million in the second quarter of 2024, which is in line with the $17.3 million in the second quarter of last year. We had net income of $3.9 million or $0.05 per diluted share and adjusted net income of $6.6 million or $0.08 per diluted share in the second quarter of 2024, compared to $10.6 million or $0.15 per diluted share and adjusted net income of $10.7 million or $0.15 per diluted share in the second quarter of last year. Adjustments to our EBITDA and net income are described further in our earnings release. Now I'd like to touch on the results by business units. Net sales for Specialty decreased by $7.2 million or 4.7% in the second quarter of 2024 to $146.6 million from $153.8 million in the second quarter of 2023. The decrease was primarily due to lower Crisco pricing, driven by decreased commodity costs, coupled with modest declines in volumes across the rest of the business unit in the aggregate, which were offset in part by higher Crisco volumes. Specialty segment adjusted EBITDA decreased by $1 million or 3.1% in the second quarter of 2024 compared to the second quarter of 2023. Net sales for Meals decreased by $6.3 million or 5.5% in the second quarter of 2024 to $107.9 million from $114.1 million for the second quarter of 2023. The decrease was primarily due to lower volumes across the business unit, partially offset by a modest increase in net pricing. Meals segment adjusted EBITDA increased by $900,000 (sic) [ $887,000 ] or 3.9% compared to the second quarter of 2023. Excluding the impact from the divestiture of the Green Giant U.S. shelf-stable product line, which we sold last fall, net sales for Frozen & Vegetables decreased by $2.4 million or 2.6% compared to the second quarter of 2023. Frozen & Vegetables segment adjusted EBITDA decreased by $7 million compared to the second quarter of 2023. Approximately $2 million of the decline was due to the divestiture of the Green Giant U.S. shelf-stable product line, approximately $2 million from the negative impact of foreign currency and the remainder from the decrease in net sales, increases in material costs and some unfavorable product mix. Net sales for Spices & Flavor Solutions increased by $4.6 million or 4.9% in the second quarter of 2024 to $98.5 million from $93.9 million in the second quarter of 2023. The increase was primarily due to higher volumes across the business unit. Spices & Flavor Solutions segment adjusted EBITDA increased by $1.5 million or 5.9% in the second quarter of 2024 compared to the second quarter of 2023. Now moving on to our balance sheet. As you likely saw, we were busy in the capital markets this summer. In late June, we launched a 3-part financing effort, which included a $475 million revolver, a $450 million term loan and a $250 million add-on to our existing senior secured notes due 2028. The transactions priced in late June but did not close until early July and thus are not reflected on the face of our second quarter financial statements. Instead, they will be reflected in our third quarter financial statements. Further details regarding the refinancing transactions have previously been disclosed by press release and 8-K filings and are described in the footnotes to the financial statements that we filed earlier today as part of our 10-Q. After giving effect to the recently completed refinancing and our planned repurchase or redemption by the end of fiscal 2024 of our remaining $265 million of 5.25% notes due 2025, which we expect to fund with cash from operations and revolver draw. We will have successfully pushed into the future the maturity dates for the majority of our long-term debt with our nearest maturity being our 5.25% senior notes due September 2027. And finally, as we noted in our earnings press release, we are revising our fiscal 2024 guidance to $1.945 billion to $1.970 billion for net sales, $300 million to $315 million for adjusted EBITDA and $0.70 to $0.90 for adjusted diluted earnings per share. We believe that the revised guidance better reflects the continued industry-wide challenges in consumer activity which has dampened volumes in both retail consumption and foodservice channels. We do expect continued volume improvement throughout the year in our sales to retail customers and less of a drag on net pricing as we lap our increased trade promotional spending in Q3 of this year. Our net sales guidance is based on our first half 2024 net sales of approximately $920 million and projected base business net sales growth for the second half of 2024, which excludes approximately $36 million of 2023 net sales from the Green Giant U.S. shelf-stable business in a range of approximately negative 2% to plus 5% -- plus 0.5%, excuse me. Additionally, we expect full year 2024 net interest expense of $150 million to $155 million including cash interest expense of $143 million to $148 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. Over the long term, we continue to expect to use approximately 50% of our excess cash to pay dividends and the remaining 50% to pay down debt. Now I will turn the call back over to Casey for further remarks.

Thank you, Bruce. In closing, B&G Foods is laser focused on the few critical priorities: one, improving the base business net sales trends of the core business to the long-term objective of plus 1% to 2%; two, reshaping the portfolio for future growth, stability, higher margins and cash flows as well as structuring key platforms for future acquisition growth; and three, reducing leverage below 5.5x through divestitures and excess cash flow to facilitate strategic acquisitions. Our second quarter results demonstrated improving trends from the first quarter with base business net sales, excluding Crisco, moderating at minus 1.5%, and food service sales showing more consistent declines with restaurant industry trends. We expect the gradual improvement to continue in the back half. Further, we are prioritizing efforts to reshape and clarify the portfolio and are actively reviewing and working on possible divestitures, including our ongoing strategic review of our Frozen & Vegetables business. This concludes our remarks, and now we would like to begin the Q&A portion of our call. Operator?

[Operator Instructions] And our first question will come from Andrew Lazar with Barclays.

Spices & seasonings have been as a category, one of the sort of better highlights, if you will -- or better growing categories in the sort of the center of the store. You're seeing some of the benefits of that as well. The theory is as more consumers look to do a little more scratch cooking and purchase items around the perimeter of the store, or maybe as they look to sort of stretch the food budget, they need to flavor what they cook? And in your results, I guess you're seeing some of that similar trend, right? Spice & Seasonings have been strong, some of the meals and center store parts of the portfolio for you, like others, have been a bit weaker. Is that what you're seeing sort of drive that dynamic? Or are there other things that play there? And then how would you...

I mean, we see some of the -- no, that is what we're seeing in our business right now. And I think it's tied to what you mentioned. We see growth in the perimeter store or in the fresh -- or the fresh produce or the fresh proteins. And we know that Spices & seasonings is one of the ways that people flavor prepare that. And so we've seen that kind of -- Flavor Solutions kind of part of the market. continue to be strong based on its kind of correlation to the perimeter sales. And we've seen more weakness in the center store kind of prepared food market, which you referenced in our Meals. So I think people have -- in terms of baking, we've seen scratch baking stay relatively stable over time. So people learn to bake in the pandemic, and they've kind of continued that habit. It's not growing, but it's kind of staying stable. And so our shortening, baking powder business, everything has been pretty consistent. The fluctuations in that business are all around the commodity pricing on Crisco behind soybean oil. So yes, I think that is what we're seeing right now in our business. But from our standpoint if people begin to make more fresh food at home, we make it up in terms of the things that flavor it or enable people to bake from scratch that we'll ride just fine in that portfolio.

And then you operate in a lot of different categories, obviously, in the store and some are going to be more promotional than others by nature, others less so. I guess, could you characterize what you're sort of seeing broadly in the promotional environment. It sounds like you're expecting less of a drag from price primarily due to lapping some of the Crisco pricing actions. But maybe outside of that, what are you seeing from sort of a promotional perspective that gives you, I guess, some confidence that pricing can be less of a drag as you go into the back half of the year?

So I mean I think beyond just the Crisco pricing differential year-over-year, which we expect to not be as significant in the back half as it was in the first half. We started to return to sort of not quite but almost pre-pandemic promotional levels last year at the end of Q3. So we begin to lap that in Q3 -- at the end of Q3 and Q4 of this year. And we don't see the need to increase from where we moved to last year in terms of a rate spend or promotional depth. So what we're saying is, we don't expect to have a promotional dip in the third and fourth quarters that would show us spending at a higher promotion rate than we did last year.

And last thing real quick, and there's probably not much more you can say on it, but in terms of the strategic review around Frozen, I guess, how is that progressing? Or have you seen more or less similar amount of interest perhaps than you might have expected? Anything that you can say around it, understanding that there's sensitivity there?

Yes. And Andrew, I think the sensitivity is we try not to comment on M&A. I think as we discussed on our last call because of the size of Green Giant and the kind of the name recognition that it makes sense for us to at least disclose that we were evaluating the process, but our goal is to not get into a quarterly update on where we are in the process. It's just too fluid. It's early in the process, and there's a lot of things going on in the world.

Our next question will come from William Reuter with Bank of America.

My first question, inventory has continued to decline on a year-over-year basis. Is there opportunity to reduce your inventory levels further over the next handful of quarters or into next year?

So certainly, on a year-over-year basis, you see it in the balance sheet, we significantly reduced our inventory from where it was at the beginning of last year. And so we're going to have favorability for a good portion of this year. As we get into the back half of the year, our expectation is to still drive favorability, but a lot of the easy lifting is probably done, but very much, we expect to continue to reduce inventory from that kind of post-pandemic level.

You still see continuous improvement in our inventory levels, we'll show that. But more on a continuous improvement level versus the big year-over-year decline driven by exiting the canned vegetable business.

And then similarly, there was destocking by your foodservice customers earlier this year. Has that process now been completed and you feel like your sales trends will align with the kind of sell-through and what we're kind of seeing more broadly from foodservice?

We think that's the case.

And that's certainly what our Q2 trend shows.

Okay. Just lastly, in terms of nontrack channels, a lot of times the trends there. I guess, over the last 6 or 9 months have been better, I think, than track channels. What percentage of your sales are through nontrack channels? And how have those done versus track channels? And I'm referring more towards kind of Nielsen.

Yes. So Nielsen only is capturing about 70% of our total sales. We have, obviously, foodservice and industrial sales, which aren't captured by Nielsen. There's probably about 5% that is untracked retail channels that Nielsen doesn't cover. And then we have a Canadian business, about 10% of our business that's not covered by the Nielsen data in the U.S. So -- yes, so 70% is -- kind of correlates to Nielsen, 30% is outside. And so we -- Canada had a reasonably strong quarter. Our foodservice industrial business was slightly down as we've talked about, but not down that much, much more moderate kind of declines consistent with the industry. And we've continued to perform in one or two customers that are tracked by Nielsen reasonably well.

Our next question will come from Rob Dickerson with Jefferies.

I guess, a couple of questions. First question is kind of related to the cadence for rest of the year, as we think through kind of the updated guide on Q3 relative to Q4, should we be thinking these are kind of fairly deferred year-over-year or just more of the sequential improvement relative to what we're seeing in Q2?

Maybe a slight bias towards sequential improvement, but we always looked at first half of this year and second half of this year is 2 pieces, first half would be challenged from top line trends. Second half, which show improvement, I think we still expect that to be the case. Our back half guide is to a base business down 2% to plus 0.5% versus earlier in the year, we are thinking plus 1 minus 1. And then just as a reminder, we did sell Green Giant U.S. can business last year. And so there's about a $36 million drag from a non-base business concept.

Yes. Okay. Okay. Cool. And then, I guess, just on the margin piece, gross margin was a little lighter than expected in the quarter. I mean, clearly, you had a great Q2 last year. And at the same time, right, sales come down a little bit for the year, you lowered the high end of your EBITDA range a little bit, but the low end stays the same. So again, just kind of [ cadence of like] still come down a little bit in Q1, but it was up a little bit year-over-year in Q1. Should we still be thinking maybe gross margin could be up a little bit in the back half? And then it also sounds like SG&A instead of maybe being up a little bit for the year, given wages maybe flat to down a little bit. And then -- just one quick add. It does sounds like Spice & Seasonings growing more quickly, right? It's the highest margin business. Like are there other offsets that are just kind of came through Q2 that caused the market to be down more than you expected?

So a couple of things. I'll try to get them all. We give guidance on an EBITDA and implied EBITDA margin basis. Our guidance expects -- suggests somewhere between flat and somewhere up from last year's EBITDA margins in the back half of the year. Nothing Herculean, just sort of like a little bit of increase. If you think about gross margin, and SG&A so far this year and EBITDA margins on a year-to-date were basically flat through the first 6 months of the year or the quarter on EBITDA margin. I think we're within 20 basis points. And we had these slip gross margin, SG&A. Gross margin was down a little bit in the second quarter. But as you remember, it was up a little bit in the first quarter, and I think it's flat on a year-to-date basis versus the prior year period and SG&A went in the opposite direction. So some of this, I think, is timing. The other thing to keep in mind, there is a little bit of noise from the Green Giant business that we sold. And then the other piece of that is we manufacture the majority, not all, but the majority of our U.S. frozen business for Green Giant out of our facility in Mexico. And we've got a drag just the way it works out, currency translation. That was about $2 million, $2.5 million of an impact in the second quarter is probably something similar in the first quarter. And that obviously impacts the gross margin a little bit.

We don't -- and so far the pesos kind of come back up. So we think that impact will be less in the back half of the year.

The next question comes from Karru Martinson with Jefferies.

I just wanted to get a sense on the competitive environment. Certainly, I haven't read about the more promotions. It doesn't sound like we're going to be excessively promotional in the second half. But I was also curious to your comments on the prepared meals saying that Ortega was being challenged by Taco Bell and if there are others. Kind of what's feeding that?

I think in this particular case of Ortega, we've seen Taco Bell come in with a lot of new items and drive new distribution and I feel like we're pretty competitive now. We've got some new kind of sauces and taco items coming in, in the back half of the year. But it's just another competitor or entrant coming back in, they've tried before and kind of retreated, but this time, they're pushing again and pushing new items. So you've seen both us and Old El Paso get impacted a little bit by the entry of a new competitor in that taco shell, taco sauce, taco kit area, taco seasonings. But I think we're going to hold up just fine, and I think you're going to see improved trends on the Ortega business in the back half. In terms of promotions, what I was trying to say before is that we brought promotion spending and promotional levels up last year at the back half of '23, at the end of Q3 and in Q4 because we have a lot of baking promotional seasonality or baking and fall promotional seasonality. So we're going to lap that. So we're already kind of back to where we were in terms of promotion intensity at pre-pandemic levels in the end of '23, and we'll lap that this year, but I don't see us going beyond where we -- promotion intensity pre-pandemic. I think we'll stay right there, and we believe we're competitive with that kind of spend rate.

Okay. And then when we look at spices & seasonings, is kind of that license line extension the model for growth there? Or are there products that you're developing on your own?

I think a combination of both. We like the license model where we think we have the right properties like the Four Sixes, I think, is a great way for us to get into the seasoning blend business that's designed to kind of enhance proteins and kind of a Western barbecue kind of style. So we like licensed brands where they bring relevant equities and properties to our portfolio and put us in spaces that we're not really competing in that well. So you'll continue to see some of that, but we will also look at ways to kind of either extend our current brands, drive our current brands or even maybe launch new items that are necessarily licensed properties. So we like the Spice & Seasonings category. We think it's a good long-term growth. We think it's good margins. We've built up our capabilities there in development in culinary, and it's a place that we want to focus on the long term, both organic and possibly inorganic.

Our next question comes from Michael Lavery with Piper Sandler.

You're a little bit better aligned with foodservice traffic now. But can you give us a sense of maybe how you're exposed there? And just if you've got projects that are particularly better or worse than some of the general trends and just how to think about translating some of the read-through from bigger companies into how it affects [indiscernible]?

Yes. I mean it's obviously, Michael, it's dependent on the portfolio. Our portfolio is about half Spices & seasonings. So mostly sold through distributors. So that we've seen track pretty closely in the second quarter to restaurant traffic trends. We have a foodservice syrup business that with a major customer that's not healthy. So we've seen a little bit of decline there, but not that significant. So I think overall, our portfolio is kind of tracking with restaurant traffic patterns, call it. We read in Technomic and other places, kind of somewhere in the 2% to 4% range depending on the customer profile. And that's kind of what we think our business will continue to reflect for the remainder of the year until we see a turnaround in kind of restaurant trends because we're just going to reflect what traffic is doing in those channels. We're just supplying those channels with back-end ingredients and components.

Yes. No, that's helpful. And then just on the -- I know that's fairly complicated to give any update at all and Andrew touched on some of -- the frozen divestiture. But for some of the smaller brands that you touched on as well, would you kind of need to bundle those to avoid some of the dissynergies? Could you sell one-offs here and there? Is that too much complexity or distraction? Just how do you think about how that process is going? And does it have to take a certain shape?

Yes. It's potentially a little bit of all of the above. So far what we've sold has been one-offs, but there could be other things in other ways that it could happen and it's very situation dependent.

I mean if you look at the business, we've already divested the Green Giant canned vegetables business kind of had its own supply for that business and then the Back to Nature business was a contract-backed business, it was kind of isolated itself. So we'll have a combination, as Bruce says, but a lot of our products we can't carve out pretty easily without having a lot of structure with user absorption or overhead problems.

Our next question comes from Carla Casella with JPMorgan.

On that asset sales of Green Giant shelf, is there any stranded costs left from that would work its way out over the next, I guess, 1 year or 2? Or is that all behind you?

Yes, not really. I mean the business itself from just the business and the product line is pretty straightforward. It's U.S. business, canned vegetables, 100% co-packed, right? So you pretty much airlift that and take it away. Freight is what it is. There's less freight. Maybe there's a little bit structurally around like warehouse costs, but not really. I think that pretty much just gets airlifted out and its nice clean.

Okay. And then did you say your pro forma...

Just depending how many resources that we're working directly in that business segment so.

Do you get pro forma availability on your revolving credit facility post the financing they closed after the quarter end?

Sorry, in what sense?

I guess, so you paid down some of the revolver after quarter end, but you've also downsized it. I'm just wondering how much of it is available today. At the end of the quarter, you announced $600 million, about $605 million available.

Yes. So I would suggest just going to the debt offering docs, and I think we've footnoted appropriately, what was drawn and available based on closing dates.

Perfect. Okay. And then on the ramen, what -- I missed the timing you said of that offering. And I was just wondering if you -- I mean what's the shelf kind of place that you've got on any kind of either numbers or percentage gains you can point to?

It's going in the fall. So we'll start shipping shortly. We've had good acceptance and reception from customers, but I don't think you'll see it on shelf until the fall based on when customers set their growth in cases. It's a ramen vegetable kind of a dish, it will start shipping within the next couple of months.

Okay. Great. Look forward to trying it.

Our next question comes from David Palmer with Evercore ISI.

I wanted to talk about what your vision would be for the business long term in terms of what sorts of businesses fit within B&G? And I know there's going to be reticence to talk about categories of brands, but I'm really talking about the types of things that would work inside B&G. There was a wave of acquisitions long ago where the company was trying to gross up with snacks and frozen. And then now those businesses are gone or soon to be gone. So they were kind of rejected from the shell that is B&G. So I'm wondering what do you think does work from what you've seen and where you might want to get bigger?

Yes, I think it's pretty -- we've talked about this before, but I think front end. It's relatively clear looking at our business where we've been successful over time and where we have good margin structure and cash flows. And so I like, first and foremost, the spices & seasonings and business. If you look at our margin, it's high margin, we actually improved our segment EBITDA margin year-over-year in the quarter 2. We had good growth on that business. I think that's a business that we want to focus on organically. But more importantly, we would want to look over time to add additional acquisitions. We have a great asset in our Iowa facility. We've got good capabilities. We've kind of built up our culinary and R&D capability there. So that's one business that I see as a strong future for B&G Also, the specialty business, which is, I think, I said in my comments, is 70% baking staples, with kind of #1 brands that -- and pretty stable trends in those categories. We've done a good job of managing Clabber Girl, Crisco, even with some of the kind of volatility in the commodity pricing, we've done a great job of managing the profitability and cash flow in those businesses. I think we would be interested in picking up additional baking staples or some shelf-stable baking products where we could easily fit in that portfolio, get synergies and maintain good margins, stable cash flow. And then I think lastly, meals, we've talked about that. I do think longer term meals is a good place for us to be. We kind of are centered in 2 places, Mexican meals. I believe Mexican meals will grow in terms of at-home consumption. We're seeing those trends going, people making different types of Mexican meals. I think our portfolio, Las Palmas, Ortega is well founded there, but I think there's lots of opportunities to look at other Mexican at home sauces and other meal preparation items that we would consider buying over time. So I think those 3 business units remaining after the Frozen business, which we said we have a question around or under review within that really fits with us long term. I think those are the 3 places that we should be able to drive organic growth, but more importantly, be good platforms for acquisitions. If we decided to buy something outside of those 3, we would certainly look at it, but I would want to make sure that it fits our capabilities. It fits our ability to distribute it, less like -- and we said Frozen is not a place that we want to scale up to drive costs down. Refrigerated would probably be a place that would be hard for us to get into. So I would want to stay in the categories that we know how to manage that may be adjacent to some of the categories where we have selling synergies, distribution synergies, other places, but we might create another business unit to manage that if we acquire things over time. So that's kind of a more longer-term view of where we're going. But that's the vision of what I see us shaping up with the divestiture activity.

Yes. And would you say those 3 -- by the way, that's a very helpful answer. I really appreciate that. Would you -- those 3 -- I know that's probably not an unabridged answer, that's probably not everything that you would think is core. But like just those 3 mega platforms that you mentioned, how much of your business do you think is encapsulated with those currently? Over half?

75% from a sales basis, higher on an EBITDA basis, and higher on a cash flow basis.

You said -- I think it was in the release that foodservice is a little bit better than it was in the first quarter for a lot of companies, foodservice is actually getting worse. So I'm just wondering maybe what are you seeing with your particular foodservice accounts? And what are you seeing out there for foodservice looking into the second half?

I mean the one thing to remember, which we highlighted last quarter was we had some challenges, but some of that was timing, right, and some of that was unique to 1 or 2 customers.

I think we see that our business, which should largely track what we expect restaurant and foodservice traffic trends to be overall. And what we see is kind of -- I've seen different numbers, but call it minus 2% to minus 4% and people are sort of projecting that for the rest of the year. I mean who knows in a recessionary environment, if that would get worse, but that's kind of what we expect. And right now, our trends are kind of mirroring that in terms of restaurant traffic are minus 3% -- call it minus 3% in Q2, that's what I think we're going to see for the near future until something changes, but that's kind of what we're seeing and what we read in the industry data.

Yes. Now I think a lot of people were thinking that the second half would be better because of comparisons. And I think those expectations might be fading a bit. So I don't think there's many people. I think it will necessarily get worse.

And our final question will come from Robert Moskow with TD Cowen.

I have a glass half empty and a glass half full question. So I think I'm going to just do the glass half full question.

What's in the glass half?

It's pretty late. So I don't want to -- and I'm covering first the glass full, so may be...

Hiding glass somewhere, exactly.

But honestly, like if you look at Nielsen's tracking data, and just look at overall grocery sales, like forgetting about all the -- who's selling it, it is starting to show some signs of acceleration. I think it's up about 3% in the last 4 weeks. And it's a clear sign, I would argue, of consumers going back to the grocery store trying to save money, and you can see foodservice being down a lot. So are you -- I haven't heard much about that in your outlook for the back half of the year. I know you have easy comps, but do you -- could you be so bold as to say hey, there could be a better environment, a better backdrop overall in grocery retail in the back half because of that as well as the easier comparisons?

Yes. So I think our guidance is somewhat based on that, which is more favorable back half of this year than the first half. We obviously took it down a little bit to suggest some caution. We do have at the high end, a little bit of growth, right? So I don't disagree with what you're saying. I think if you went back to earlier this year, when most of us were talking and giving guidance, I think there is an expectation that, that recovery was going to happen sooner. I think we're seeing signs of it. I would have just loved it to be a little bit sooner. But that's what we're seeing. That's the glass half full.

Okay. All right. You and me both.

And this will conclude the question-and-answer session for today. Ladies and gentlemen, the conference has now ended. Thank you for all joining and you may now disconnect.