B&G Foods Inc (BGS) 2005 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the B&G Foods Incorporated Third Quarter 2005 Earnings Conference Call.

(Operator Instructions)

I would like to remind everyone that this conference is being recorded, and I would now like to turn the conference over to David Wenner, President and CEO of B&G Foods. Please go ahead.

Okay, thank you very much. Welcome, everyone, to the B&G Foods Third Quarter 2005 Conference Call. Everyone on the call today can access detailed financial information on the quarter in our earnings press release issued today and available on our website at www.bgfoods.com and on our quarterly report on form 10Q filed today with the SEC.

Before we begin our formal remarks, I need to remind everyone that part of the discussion today may include forward-looking statements. The statements are not guarantees of future performance and therefore, undue reliance should not be placed upon them.

We 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.

We'll also be making reference on today's call to certain non-GAAP terms like EBITDA and adjusted EBITDA. A reconciliation to GAAP terms is provided in today's press release and in our quarterly report on form 10Q.

I'd like to start the call, as we usually do, by asking Bob Cantwell, our CFO, to discuss financial results for the quarter. After Bob's remarks, I'll discuss factors that influence the quarter and certain business highlights as well as some of the dynamics we see going forward. Bob?

Thank you, Dave. For the third quarter, net sales increased 0.4 million or 0.4% to 92.3 million from 91.9 million in the third quarter of 2004. Sales increased 2.9 million relating to price increases, which was offset by a decrease in unit volume of 2.5 million.

Net sales for certain of our brands increased as follows - Ortega increased 1.6 million or 8.6%. Maple Grove Farms increased 0.7 million, or 5.3%. And Los Palmos products increased 0.6 million or 12.7%. These increases were offset by a reduction in net sales per Emeril which decreased 1.2 million or 18.6%, B&G pickles and peppers which decreased by 0.4 million or 4% and Accent products which decreased 0.4 million or 10.3%. Net sales for all our other brands decreased in the aggregate by 0.5 million or 1.3%.

Gross profit during the third quarter increased 0.5 million, or 2%, to 27.5 million from 27 million in the third quarter of last year. Pro forma gross profit, which excludes our restructuring charge, increased 0.8 million or 3.1% to 27.8 million compared to 27 million in the third quarter of last year. Pro forma growth profit expressed as a percentage of net sales increased 80 basis points to 30.2% in the quarter from 29.4% in the third quarter of fiscal 2004.

Price increases accounted for 2.4% of the pro forma gross profit increase, offset by decreases in gross profit relating to higher bean and packaging material costs, higher maple syrup costs, and higher transportation costs which decreased gross profit margin by 1.1%, 0.5%, and 0.3% respectively.

Regarding the restructuring costs effective July 1, 2005. We closed our New Iberia Louisiana manufacturing facility as announced. We recorded as costs of goods sold a restructuring charge associated with the plant close which included the cash charge for employee compensation and other costs of 0.6 million and a non-cash charge for the impairment of property, plant and equipment, and inventory of 2.9 million.

During the third quarter we expensed 0.3 million of these costs. The balance of the 3.5 million charge was expensed during the first and second quarters of 2005. We expect to have additional cash charges relating to the restructuring of approximately 0.2 million during the fourth quarter of fiscal 2005.

Turning to operating expenses for the third quarter - sales, marketing and distribution expenses increased 0.7 million or 7.4% to 10.4 million for the third quarter of fiscal 2005 from 9.6 million in the third quarter of last year. These expenses as a percentage of net sales increased to 11.2% from 10.5% a year ago. This increase is primarily due to an increase in consumer marketing spending of 0.4 million and an increase in brokerage and salesman commissions of 0.3 million.

General administrative expenses increased 0.3 million, or 25.5% to 1.7 million for the third quarter of fiscal 2005, from 1.4 million in the third quarter of fiscal 2004. The increase was primarily due to incremental costs associated with Sarbane's Oxley compliance of 0.3 million and additional public company costs of 0.2 million.

In the third quarter, the company's operating income decreased 0.5 million or 3.4% to 15.5 million from 16 million. Operating income expressed as a percentage of net sales decreased to 16.8% from 17.4% a year ago.

Net interest expense increased 2.3 million, or 27.6%, to 10.5 million for the 13-week period ended October 1, 2005 from 8.2 million in the 13-week period ending October 2, 2004. Our average debt outstanding increased approximately 37.5 million in the third quarter of fiscal 2005 vs. the third quarter of fiscal 2004.

The effective interest rate for all our outstanding debt during the third quarter of 2005 under our post initial public offer and capital structure was higher than the effective interest rate for the outstanding debt during the third quarter of 2004.

Regarding EBITDA and adjusted EBITDA, I would like to note that these are non-GAAP financial measures that we have reconciled to net cash provided by operating activities in today's press release. Our EBITDA decreased to 17.3 million in the third quarter of 2005, compared to 17.8 million in the third quarter of last year. Our adjusted EBITDA which excludes the non-recurring charges relating to the Louisiana plant closing was 17.6 million for the third quarter of this year.

Capital expenditures in the third quarter of fiscal 2005 were 1.6 million. Most of our capital expenditures were for the purchases of manufacturing and computer equipment in the move from our Louisiana facility to our Maryland facilities. We will continue to foresee modest capital expenditure requirements going forward.

Moving on to the balance sheet, we finished the quarter with 22.9 million of cash compared to 28.5 million at the end of fiscal 2004. We also finished the quarter with 405.8 million in long-term debt and 85.9 million in shareholders equity. A few cash flow measures expected cash -- taxes in 2005 are zero. We continue to forecast planned capital spending for fiscal 2005 of approximately 6.5 million. Annual cash interest expense for fiscal 2005 is approximately 39 million, and as a reminder, all of our long-term debt has fixed interest rates.

Today, we made a cash payment of 42.65 per EIS to holders of record as of October 1st, 2005. As previously announced on August 16th, this reflects the cash dividend of 21.2 cents per share of class A common stock and an interest payment of 21.45 cents per senior subordinated note. I will now turn the call back over to Dave for his remarks.

Thanks, Bob. The third quarter results are very encouraging to us after the previous 9 months, a period when our business saw higher and higher costs with few offsets. Our results for the third quarter, a sales increase of 0.4 % and an EBITDA decline of only $200,000 if you set aside the restructuring charge, are stable vs. last year and represent the major dynamics of our business balancing each other out.

The first dynamic has been, and still is, cost. We estimate that our costs throughout the company were $3 million higher in Q3 2005 than they were in Q3 2004, and about $9 million higher year-to-date. The largest component of this increase remains cost to goods sold, where we saw over a million-dollar increase in the third quarter.

Since cost of goods is up over $4 million year-to-date, the cost increases seen this quarter lessened as we rolled against higher prior year costs. Underwood costs, for instance, were flat as compared to third quarter 2004, as were B&G pickle and pepper costs for the seasonal pack. Maple syrup remains higher in costs and our bean brands, Joan of Arc and B&M, are both up in costs due to packaging and commodity costs.

In addition to these specific cost increases, nearly every one of our brands have seen some cost impact from packaging as our packaging suppliers are increasingly adding fuel surcharges to their bills as the price of oil remains high.

Unlike our earlier hopes, we now see prospects on costing unfavorable for the foreseeable future. We have had a price increase on several co-pack brands effective October 1st due to packaging and commodity costs, and the US-Canadian dollar exchange rate continues to go in the wrong direction for future purchases of maple syrup. We had previously announced price increases in anticipation of the cost increases we just saw from our co-packers, so we have hopefully buffered that impact.

On a positive note, we have seen some limited relief on meat prices, which should help Underwood costs going forward. Higher distribution costs are still out there. And in fact, got worse in the third quarter. Fuel surcharges in Q3 of 2004 average 10 cents a mile. In Q3 2005, they averaged 20 cents a mile and ended the quarter at 32 cents a mile. That substantially increased our shipping costs for the quarter, which have, of course, also substantially increased year-to-date. And while oil costs backed down recently, the price of diesel does not appear to be following, so we do not anticipate any relief in distribution costs in the near future.

G&A costs were up $300,000 in the quarter as compared to the third quarter 2004 and are up $1 million year-to-date as compared to the first 3 quarters of 2004. This increase is driven by public company costs and Sarbane's Oxley compliance costs. We expect the fourth quarter to be much the same, although insurance costs have come down slightly.

Finally, our spending on trade promotions, coupon and slotting have all increased this year. Trade spending was much improved in the third quarter as our pay-for-performance initiatives started taking effect and we realized better pricing. We have been investing in new products though, particularly in the Ortega and Polaner lines and this has caused higher slotting expenses for the new distribution and coupon expenses to support that distribution. We feel this is money well spent investing in the future growth of our company.

As you can see from all of this, cost remains an issue for our company and one that is not going away soon. We're working hard to generate cost savings to offset these increases and of course, raising price where we see the opportunity, and I'll talk about that in a moment.

Our efficiency efforts continue to reduce costs in our facilities, as do the savings from the New Iberia shutdown. We've also reduced selling expenses by adjusting certain commissions and incentives, saving $200,000 in the third quarter and $700,000 year-to-date.

Pricing, as I said a moment ago, is the second most important dynamic in our business, and here we have some good news. As we told you on previous calls, we've announced a series of price increases on various brands starting last fall. Those increases took longer than we expected to have an impact on our results, but we began to see meaningful benefits in the third quarter.

As Bob noted, price increases contributed $2.9 million in sales in the quarter. This was offset to some extent by lower unit sales, but it's still a very encouraging number. We saw the benefit in virtually all the brands where we increased price in the last 12 months, and there is reason to believe that this momentum will carry over into the fourth quarter.

Price was key to offsetting costs in the third quarter. To the extent it does the same in the fourth quarter, our results should see the same benefit. I've discussed our pay-for-performance trade initiative on the last few calls. As I noted a moment ago, we saw lower unit sales in the third quarter, caused to some degree by this initiative.

Lower sales of Accent, Underwood, and Brer Rabbit and slight declines of several other brands have been caused by our pay-for-performance initiative. It's clear, however, that we're making progress against the trends in the industry towards higher and higher trade spending, and I am hopeful that we will show positive results out of this in the fourth quarter.

It’s obvious from all of this that there are factors in the business that significantly outweigh the plusses and minuses of individual brand performance. As I said in the beginning, we're very encouraged by the third quarter results because these factors offset each other, allowing us to show relative consistency in the third quarter as compared to the third quarter of last year. This is how we've operated in the past, and it feels good to regain consistency in the business.

Moving on to the brands, during the third quarter there were brands within the portfolio with successful results and brands with disappointing results. Again, we saw the smoothing effect from our ownership of 16 diverse brands.

As mentioned in the 10Q, the Emeril brand saw the largest decline in the third quarter, $1.2 million, or almost 19%. The brand is doing well in supermarket distribution but has lost some of its distribution at Wal-Mart after being there for a year.

Simply put, what is an excellent brand in specialty distribution and a good brand in grocery warehouse distribution is a brand that has some difficulty in the mass merchant channel. We're working hard to succeed with the Emeril brand in other channels. The relaunch dressings are performing well again, and we just began shipping a line of cooking stocks effective this week.

B&G pickle and pepper sales were down 4% in the quarter due to continued competitive pressure in New York and non-performance on promotions by one of our large chains. Here we have a success story with Wal-Mart. We've tested products in 5 super centers with excellent results and B&G products are being included in shelf sets as new supercenters enter our region. So some brands that we have will work in mass merchants and some others are having some difficulties.

On the positive side, Ortega net sales grew 1.6 million for us last quarter on the strength of new products, including our new Ortega cheese bowls and dinner kits and new distribution into the mass channels. We're launching other new products and spending the slotting and marketing money behind this brand to keep that momentum.

Maple Grove Farms pure maple syrup business grew nicely as well - 5% net sales for the quarter and maintained unit volume even though we had increased price. And our Los Palmos line, which has provided consistent growth quarter after quarter, grew 13% in net sales. The line of items aimed at dollar stores that we've launched under the Los Palmos name provided half of that growth for the quarter.

The Polaner brand did not make the list of growing brands this quarter because of soft industrial sales, but the sugar free line continued to grow very rapidly as we launched new items and gained new distribution. Polaner, Ortega, Los Palmos and Emeril will remain points of emphasis for us going into the fourth quarter.

As Bob noted, we took an additional $300,000 of the restructuring charge this quarter that we had previously announced in association with the shut down of the New Iberia, Louisiana facility. This is in line with our projections for the shut down. Charges year-to-date total $3.5 million. The facility is currently being used as a distribution center for hurricane relief efforts, but it is for sale. We're very fortunate to avoid any serious disruption of our business from the 2 hurricanes that hit the gulf coast in the third quarter. We obviously have seen the same effect on energy costs that everyone else has, and a shortage of trucks at the end of the quarter probably delayed some sales we would have otherwise shipped, but in context of everything else, that's a very manageable impact.

M&A activity in the packaged food industries has picked up recently, and we continue to examine brands as they are put up for sale. As a result of this increased activity, we've been reviewing a greater number of potential M&A transactions than in the past, but we still see prices are typically high often bid up by financial sponsors even though interest rates continue to rise. We remain a patient buyer, focused more on day-to-day operations at this point, but we continue to look at M&A opportunities.

As I said last quarter, there are a lot of moving pieces in the business these days, but I think we've managed to bring them together in the third quarter. We have consistently said that increased revenues from price increases combined with more efficient promotional spending would be the key to offsetting cost increases and stabilizing our performance. Our third quarter results reflect the validity of that strategy. We believe we understand the cost challenges in the fourth quarter with oil as the wildcard, of course, and we have plans in place that we think will compensate for all those cost challenges.

At this point, we expect performance to be consistent for the fourth quarter of 2005 as it's compared to the fourth quarter of 2004 and are hoping cost relief somewhere will help us do even better. With that, I'd like to open up the call for questions. Operator?

Thank you.

(Operator Instructions) We'll go to Leonard Teitelbaum Merrill Lynch.

Good morning, or afternoon or evening, whatever it is.

Evening here. Hi.

First of all, I think you did better in the quarter than I thought, and congratulations to you to that. Could you comment a bit on the level of inventory, David? It's a little higher. Is that due to maybe some slower turns because of your method of promotion or cost increases buried in the inventory account, or what is that?

It's basically higher cost in the inventory, Leonard. If we compare our physical count of inventory and everything, it's not much different than last year, but the higher costs throughout our system are reflected in the inventory, yes.

Okay. And you know, Bob has told us in our visits out there that we stop producing and start selling big and getting good inventory turns in Q4. Given what you've just said, would you expect the same pattern this year as you have in the past, 92 million turns over, maybe a little bit better than it was in other quarters?

Well it certainly --.

Inventory turns I'm talking.

Yes, it certainly should turn typical of what it does in fourth quarters for us every fourth quarter, and it's just the nature of the seasonal pack on the B&G products that's ramping up the inventory, the timing of the maple syrup purchases, all those things stop in the fourth quarter and inventory comes down very dramatically and we generate a lot of cash.

Because obviously what I'm trying to do, and I'm sure other analysts will as well, is that how much of the inventory is carried in the brands that are growing and how much is - where you're having some problems. And you've already answered it, I guess, by saying, we're looking for a normal year not a skewed year in our inventory turn in Q4?

That's absolutely right. We don't see any reason it will be dramatically different from any other quarters.

Okay, and just a couple more questions on some of the numbers. I took a look at the other parts of the balance sheet, you're happy with your payables and accrued expenses? There's nothing in there that's out of line?

No, everything is in line. I mean accrued expenses are a little higher year-over-year just because of the timing of when we make interest payments, last year vs. this year. Everything is very much in line, and we'll look very similar at year-end to the year-end numbers of last year.

Are you willing to give us a projection on what you think your cash balance is going to be at the end of the year?

At this point, no. But I mean if you -- I mean, just from running our run rate, when you look at our Magic page in our documents --

Yes.

-- you know, our current EBITDA run rate is 66 million.

Right.

You know, we have uses of funds of a little over 62. You just --

Math...

Plus fuel.

Okay. How do these numbers come in with what you had been budgeting internally, Bob? Were you there or were some a little bit -- were they a little worse or a little better than you had thought when you set up your own internal budgets?

I think from an internal budget it's where we expected. I think it came in, in a few parts. You know, we got more pricing in the third quarter, and we're very happy with it, and we had more costs in the third quarter than we expected especially as it related to fuel costs.

Yes, I think, just to expand on that for a second, we looked at last year's fuel surcharges and said, "Well, we should be no worse off." And then, of course, the hurricanes came through and cranked it up significantly, but we got pricing that offset that.

And are you pretty well set now for prices or are you trying to get at least one more in for energy purposes?

Well, with so many different brands, it's very unique to each brand. We are looking for every and any opportunity to take price that we can, watching competitive action, just trying to understand where there are opportunities. It goes from little things to big things, but it's just a constant effort to look for further price increase opportunities where they're appropriate.

And finally, could you compare - if you gave the number, I apologize, I missed it. Could you give the amount of promotion, the difference between gross and net sales this quarter versus a year ago?

I think it was up -- let's see the number was -- yes, we don't really talk about that, but it was up.

On a go-forward, Dave.

I think the promotional spend quarter to quarter -- I'll give you variance, how about that? The trade --.

I'll take anything, I'm desperate.

The trade promotion spend was actually about 300,000 favorable to where it was last year.

All right. I don't know if Eric has any questions or Ryan, but I'm good. You guys okay? Thank you very much.

You're welcome.

We'll go next to Reza Vahabzadeh, Lehman Brothers.

Good afternoon.

Good afternoon, Reza.

Marketing spend line was up this quarter year-over-year. Last quarter was actually down. Is this a trend that we should expect going forward or is this timing?

Absolute timing, marketing will come in exactly where it was last year.

Okay. Last year's fourth quarter sales performance was not anything to write home about. Do you feel okay about the sales comparisons? Do you find them challenging or easy, any color on that?

I think -- we're not disappointed in the sales performance because when you look at the customers who went down, it was kind of a "I meant to do that."

I see.

"I meant to not sell to that guy. I meant to not incent this guy as much as in the past." And all of those things came true. But I don't see anything in consumer data that says that consumers are using less of our products, so I look at it as a short-term thing.

Packaging costs, you touched on that. What kind of cost increases are you seeing whether it's through co-packers or your own packaging costs?

Well co-packers tend to come in lurches –

Right.

--depending on when the contract allows co-packers to increase costs. So as I said we just saw one October 1st on one of our lines. They had been struggling through the cost increases up to that point.

Certainly, when it's our packaging used in our facilities, it's much more immediate. One of the glass companies just announced a surcharge based on natural gas pricing, and it's on the order of 6% but will fluctuate depending on natural gas pricing. And those are the kind of things that you just don't have an alternative because glass manufacturing takes molds, they take months and months to have made, so you don't have the ability to move that quickly even if you can find a better alternative.

I see. And what about your -- I know you use a lot of glass, but what about cost increases in your non-glass packaging? What kind of increases are you --

Anything that uses a lot of energy or uses oil as a base, such as plastics, is seeing surcharges on the base price of the goods. Anything else, we're seeing fuel surcharges on deliveries and things like that, but not so much on the actual cost of the product.

Right, and then on Emeril, you touched on a re-launch salad dressing business. I mean, is there going to be more re-launches? Is there going to be more new products? I mean, you had a lot of new product news last year and the year before, maybe a little bit less this year. Are we going to see more product news going forward?

Well, we just launched three cooking stocks into that category which we think is a very attractive thing for Emeril. It's certainly appropriate in terms of it being an ingredient for somebody who is semi-serious about cooking. We are going to be launching additional flavors into the categories we're established in.

I think what we're rediscovering, if you will, about specialty is that we have to keep refreshing the flavors in some of these categories, keeping the news out there to keep the attention of our distributors, our retailers, and our customers.

Got it, thank you much.

Sure.

(OPERATOR INSTRUCTIONS) We'll go to Eric Larson, Piper Jaffray.

Hi guys. Congratulations on a good quarter. Your maple syrup costs, I know it's 2 years and running; what has been the negative variance so far this year?

It's certainly over $1 million.

Yes, it's now a little over $1.2 million, and the exchange rate it's cost us this year alone - last year we were paying about $0.76 Canadian dollar, and now it's -- early part of this year we're paying $0.81, and now it's closer to $0.85.

Wow, is there any way to hedge that or is it pretty hard to do that?

Well, you can certainly hedge if you believe it's going to go higher than $0.85, but I don't know what the right answer is.

See, our philosophy all along has been not to hedge because we, you know, we're trying to run a food business here not a currency exchange business. But we look pretty stupid having taken that position, and the Canadian dollar keep getting stronger and stronger.

At $0.76, I would have said it would never get stronger. At $0.79, I said it would never get stronger. I obviously don't belong in the currency hedging business.

Okay. And is there any place in your portfolio where you've taken pricing and the competition has been sticky? You've mentioned some of those issues in the past, but nothing particular today. Are most of them reflected across your lines?

Yes, we're seeing people following or we have followed them pretty much across the board. There's a few customer-specific issues here and there. And now you get into, well, at what level are people promoting as opposed to everyday shelf price and things like that. All those dynamics have to sort out, but we're pretty satisfied with how it's all come out so far.

Okay, good. And then just one final question, I think your total cost for closing down your plant, I think you said $3.5 million. You may have also said what the cash component of that is -- what portion of that is cash?

$600,000 so far.

Okay, thank you gentlemen.

There'll be another $200 --.

Okay, and go ahead.

-- another $200,000 in the fourth quarter.

Okay, good, thank you.

Then we're pretty much done.

Right.

Good.

We'll go next to Al Alaimo, Seneca Capital.

Yes, hi, good quarter.

Thank you.

I was wondering if you could talk more about the ability to raise prices. Is there momentum overall in the food industry to push fair price increases that they haven't really looked for in the past --.

There's no question. I think every manufacturer -- and we certainly have categories that have not seen significant cost increases, but even there the packaging and the distribution costs and all of that affect you to some degree. So there's pressure to small to large degrees on every manufacturer to try and get their margins back to where they were or where they'd like them to be. I think everybody -- there's certainly a general sentiment that everybody wants to increase price, yes.

Okay, thank you.

Andrew Lazar, Lehman Brothers.

Hi. This is actually Amanda Jones from Andrew's team. Just two quick questions. The first one, to follow-up on Reza’s question, are you seeing any more favorable contracts on steel? We had heard that some of the steel producers are taking advantage of the rise in PDP costs and trying to negotiate more favorably on steel, so just wondering what you had seen there.

We saw it a while ago, a little back down, and that's got to be six months ago or so. And I think energy has halted that direction, as far as we can see. I guess we're pretty content it hasn't gotten worse.

Got it. And then also, I was wondering if you could talk a little bit more about the competitive pressure you've been seeing in pickles, and also what the pricing environment has been like. Just curious if the excess capacity in the industry and the branded player who tends to price kind of on private label, if that's been keeping more of a lid on pricing in that category?

Prices have crept up a little in that category, and we've taken a price increase in that category. But pickle sales are all about promotional activity at the right times of the year. The everyday business is a small proportion of the business compared to what you do at promotional times. And that's what important is, where is your promotional pricing?

As far as the competitive pressure, New York has seen an awful lot of competitive pressure in terms of people placing new products into the market and spending very significant amounts of money to do that.

So it's been a battle for shelf space as much as anything. And we've liked the fact that our store door system insulates us from that to some extent, and we've certainly spent our money where we need to to defend our position. But it's not so much a price game as it's been just a sheer battle for shelf space and slotting dollars.

Got it. And is that coming from more national branded players or is that more kind of regional within the New York, northeast area?

It's the only regional brand in the northeast area. It's Mt. Olive and Vlasic that are coming in here and doing that. And I don't think that's atypical. I think that battle is going on all around the country.

Got it. Thanks very much.

Reza Vahabzadeh, Lehman Brothers.

Dave, on the pricing front, did you reach your full run rate pricing in the third quarter based on your initiative in the first half of the year or is there more to go in terms of reaching your full run rate in the fourth quarter?

I don't think we've reached it all, Reza. It's really a matter, though, of when you take the price increase, you're guessing how much of it you're going to give back on promotional activity and things like that and coming out on expectation. But I think there is some more out there still, and we're still increasing price here and there as we see the opportunities, as I said earlier.

We've changed our - a good example, effective tomorrow, our pricing on Maple Grove food service items is changing to where we are now adding freight to the order where before it was a delivered cost, now it's an FOB cost with freight added; that's a price increase. So we continue to pursue new increases, as well as trying to get more out of the ones we've already put out there.

But just based on the pricing actions you took in the first half, it sounds like maybe the run rate would be a little higher in the fourth quarter than the third quarter, or is that accurate?

I'm hoping it is, yes.

Okay, great. And then on the volume front, did the volume trends for your business in the third quarter roughly match your expectations internally or was it different?

I think it's pretty much where we thought we would be. We can lay out - as we do this pay-for-performance, we can lay out some business that we're going to sacrifice, short-term customers that we're not going to incent as much as we have in the past and things like that. We can pretty much call those things. So we expected what we got.

All right. And then within your price component that helped your gross margin that you mentioned, Bob, you mentioned 200 basis points just out of pricing, I think. Does that include mix? I mean Ortega is up in sales and Joan of Arc is down in sales - that by itself would mean mix is positive for you.

There's a little bit of mix, but most of it was truly the priceing. There wasn't enough mix to change it that much. Most of that is pure just pure dollars and pricing year-over-year.

Got it. Thank you.

Mike Lanier (ph), AIG.

Can you guys go back over the dividend policy, where you're at on that and what is the likelihood of that number changing?

Well, the dividends, again, are at the option of the Board to declare. Right now, we have declared dividends every quarter, and each quarter is really a new event. We expect to continue to be a dividend-paying company, but that, again, is at the option of the Board.

Are you comfortable at the current level?

Yes, we are. And I think we've shown that we can fund it and we don't drain our cash in funding it, so we have a sizable cash balance on our balance sheet. Our cash balance on our balance sheet is in excess of a full year's worth of dividends at our current rate that we're paying, and we don't dip into our cash to pay those dividends.

So we can generate that dividend payment from our normal operations during the course of the year. So right now, based on our EBITDA, our run rate of 66 million of EBITDA, we're very comfortable in the dividend structure we are in today.

And aren't the B shares coming up? Are they eligible for a payment next spring here?

Yes.

Well, they're eligible and they're not eligible. They're eligible technically. There would be a payment paid in 2006, but given the EBITDA role and everything, no, they're not eligible. That payment would not be made.

So the next window would be -

That's a once-a-year payment.

Right, once a year. So probably no payment in '06, and then '07 is pretty hard to project at this time.

Right.

All right. Thank you very much.

You're welcome.

Leonard Teitelbaum, Merrill Lynch.

Do you have any mark at all as to how much Wal-Mart is of your total business?

About 8%.

Now, you've got to have a lot of brands that just simply are not going to be eligible for Wal-Mart. Of those brands that are, could you tell us how much Wal-Mart would be of those brands?

Well, first, I don't necessarily agree with your statement they're not eligible. What we find at Wal-Mart is, our business is smaller with Wal-Mart than somebody else's might be. One, because 20% of our business is food service, and that's not appropriate for Wal-Mart. And secondly, Wal-Mart's weakest development is on the east and west coast, which is where our business is the strongest. So, we're not a perfect fit for Wal-Mart yet in terms of where we are and where they are. But having said that, we are certainly growing faster with Wal-Mart than Wal-Mart is growing, and we expect that to continue in the future.

Okay. That answers - because I tried to pull some of the food service brands out, but -

Well, we don't have a brand that's all food service.

No, I guess that's where I kind of messed up. Okay.

Now, the final part of your question was what percent of the business. It ranges from very small to --and Underwood would be over 20% of the business would be with Wal-Mart.

Okay. All right. That's it for now. Thank you very much.

And having no further questions, I'd like to turn the conference back over to David Wenner for any additional or closing comments.

Okay, thank you, operator. As I said at the beginning of my comments, we are very encouraged by this quarter. The cost environment remains very challenging, so it's hard to gauge exactly how we will do quarter to quarter, but the fact that our price increases became as effective as they were in the third quarter is also very encouraging. And we believe that we're positioned to offset the cost challenges we have in the fourth quarter and that we will produce consistent results again in the fourth quarter as we did in the third quarter.

So, nice to see that, and hopefully nothing dramatic happens with the price of oil to change that whole situation. That's probably the thing we're most at the mercy of, as is everyone else. And if that remains consistent, then I would think that B&G Foods would remain consistent as well. Again, thank you very much.

This does conclude today's conference. Thank you for your participation. You may now disconnect.