B&G Foods Inc (BGS) 2009 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the B&G Foods Incorporated first quarter 2009 financial results conference call. Today's call is being recorded. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a Question and Answer session. Instructions will be provided at that time for you to queue up for questions. I would like to remind everyone that this conference is being recorded once again, and would like to turn the conference over to David Wenner, Chief Executive Officer of B&G Foods. Please go ahead.

Thank you. Good afternoon, everyone, and welcome to the B&G Foods first quarter fiscal 2009 conference call. You can access detailed financial information on the quarter in our earnings release issued today available on our Web site at bgfoods.com and in our Quarterly Report on Form 10-Q that we have filed today with the SEC.

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 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 will also be making reference on today's call to the non-GAAP financial measures, net income as adjusted, earnings per share as adjusted, and EBITDA. Reconciliations of these measures to the most directly comparable GAAP financial measure are provided in today's press release.

As usual, we will begin the call with our CFO, Bob Cantwell, discussing financial results for the quarter. After Bob's remarks, I'll discuss factors that affected our quarterly results, business highlights, and our updated thoughts concerning the remainder of fiscal 2009. Bob?

Thank you, Dave. Net sales increased $2.3 million, or 2%, to $118.6 million for the first quarter of 2009 from $116.3 million for the first quarter of 2008. Excluding net sales of Maple Grove Farms Pure Maple Syrup products, net sales for the first quarter of 2009 increased $4.2 million, or 3.8%. This $4.2 million increase was attributable to sales price increases of $6.4 million, partially offset by a decrease in unit volume of $2.2 million. Net sales of Maple Grove Farms Pure Maple Syrup products decreased by $1.9 million, consisting of a unit volume decline of $3.3 million, partially offset by sales price increases of $1.4 million. Our 10-Q has additional disclosure on our individual brand performance during the first quarter.

Gross profit increased $3.8 million, or 10.9%, to $38.7 million for the first quarter of 2009 from $34.9 million for the first quarter of 2008. Gross profit, expressed as a percentage of net sales, increased 2.7 percentage points to 32.7% in the first quarter of 2009 from 30% in the first quarter of 2008. The increase in gross profit, expressed as a percentage of net sales, was primarily attributable to increased sales prices and decreased costs for trade spending, slotting, wheat, and transportation, partially offset by increased cost of maple syrup, beans, and packaging.

Sales, marketing, and distribution expenses decreased $1.3 million, or 10.6%, to $11 million for the first quarter of 2009, compared to $12.3 million for the first quarter of 2008. This decrease was primarily due to a decrease in consumer and trade marketing of $0.8 million, a reduction in compensation expense and warehouse spending of $0.3 million, and a decrease in other expenses of $0.2 million. Expressed as a percentage of net sales, sales, marketing, and distribution expenses decreased to 9.3% in the first quarter of 2009 from 10.6% in the first quarter of 2008.

General and administrative expenses increased $0.9 million, or 72.2%, to $2.3 million for the first quarter of 2009, compared to $1.4 million in the first quarter of 2008, which resulted primarily from an increased accrual for performance-based equity compensation.

Operating income increased 21.1% to $23.8 million for the first quarter of 2009 from $19.7 million in the first quarter of 2008. Net interest expense increased $1.7 million to $14.3 million for the first quarter of 2009 from $12.6 million in the first quarter of 2008. Of this increase, $1.2 million consists of non-cash adjustments to net interest expense relating to our interest rate swap.

Excluding the impact of items affecting comparability relating to the interest rate swap, the Company's net income for the first quarter of 2009 was $6.6 million and earnings per share were $0.18, or a 50% increase, as compared to net income of $4.4 million, or $0.12 per share for the first quarter of 2008. Including items affecting comparability, the Company experienced net income of $5.9 million, or $0.16 per share for the first quarter of 2009. Our EBITDA increased 17.2% to $27.4 million for the first quarter of 2009, compared to $23.4 million in the first quarter of 2008.

Moving on to the balance sheet, we finished the first quarter of 2009 with $33.5 million of cash, compared to $32.6 million at the end of fiscal 2008. It should be noted, however, that we pay a semi-annual interest payment of $9.6 million on our senior notes each April 1st. During fiscal 2009, April 1st was during our first quarter, and during fiscal 2008, April 1st was part of our second quarter. Had this payment been made in the second quarter, as it was in 2008, we would have finished the first quarter with $43.1 million of cash.

In the first quarter of 2009, we used $1 million of our cash to buy back 213,600 shares of Class A common stock. Our ongoing dividend rate is $0.68 per share per annum, or $24.5 million per annum in the aggregate. We finished the first quarter of 2009 with $535.8 million in long-term debt and $144.5 million of stockholder's equity.

Our inventory at the end of the first quarter of 2009 was $93.9 million, compared to $95.1 million at the end of the first quarter of 2008.

Cash interest expense for 2009 is expected to be, and is still on target to be, approximately $49 million.

We expect to make capital expenditures of approximately $11 million in the aggregate during fiscal 2009, $2.4 million of which has already been made during the first quarter.

I will now turn the call back over to Dave for his remarks.

Thank you, Bob. As you can tell from those numbers, the first quarter of 2009 was a tremendous quarter and represented an acceleration of the positive momentum our business regained in the fourth quarter of 2008. First quarter actually exceeded our own expectations to some degree, mainly due to our success in reducing unproductive trade spending and in generating cost savings in the business.

The 3.8% net sales gain we saw outside of maple syrup included $6.4 million in pricing. This was consistent with fourth quarter price gains and our expectations for the first quarter. That magnitude of pricing gains should continue through the second quarter and into the first half of the third quarter before we begin to lap prior year.

We also saw a decline in trade spending of over 1% of gross sales, namely promotions that were deemed inefficient or unproductive in building consumer sales. These two gains combined more than offset the higher cost that we continued to see on a year-over-year basis in maple syrup, packaging, and other commodities. We estimate our year-over-year cost increases at approximately $5 million for the first quarter. So you can see that we're not out of the woods yet on cost.

The cost picture did improve in some areas. Distribution costs, for instance, were down .04% of gross sales, a $0.5 million benefit. But even though some commodity costs have eased, that does not mean that those costs are lower than prior year. Wheat, for instance, is down more than 50% from its high last year. But our first quarter wheat costs were no better than first quarter last year. We will begin to see favorable comparisons on wheat in the second quarter. The various relatively minor crops that we use, beans, cucumbers, and peppers, for instance, continued to have much higher costs, up to 60% in some cases. These crops costs reset more or less on an annual basis in the fall. So we do not expect any meaningful relief on these costs until then.

We do expect maple syrup cost to drop this year. The crop is in the final stages in Quebec and it appears to be a very strong crop. The final market price will depend on how much is needed to refill empty pipelines and manufacturing and distribution, but a cost decrease is fairly certain. How much benefit that will bring depends, of course, on where retail prices ultimately settle, and we do expect those prices to decline eventually. We have no current plans to reduce price on maple syrup products ourselves and instead hope to regain lost margin in that line. But the overall cost news for our business is generally good, with the large majority of our costs fixed or softening and further cost increase is the exception.

Returning to our sales results, as Bob reported, our net sales increased $4.2 million, or 3.8% after setting aside lower sales of maple syrup. Pricing gains of $6.4 million versus this increase implies a volume decline of $2.2 million, or 1.8%, which is what we experienced. In general, we believe that three factors played a role in this decrease. First, as we noted in the fourth quarter 2008 call, there was a pipeline fill in the fourth quarter on the Polaner and B&G brands, as we changed distribution methods in the New York City region. We saw a surge in sales on those brands in the fourth quarter that unwound in the first quarter of 2009, accounting for over half of the $2.2 million decline. Our exit from private label pickle accounts accounted for another 20% of the decline.

Finally, our reduction in trade promotions, particularly in the four weeks leading into Easter, caused sales to retailers to decline in a number of brands. The main effect was seen in Cream of Wheat, where we did not repeat promotions that we found inefficient last year. Eliminating those promotions caused Cream of Wheat to see an 11% sales decline for the quarter in sales to retailers. We are still very confident that the brand is succeeding with consumers, however. Our share at retail continues to increase, according to IRI. Sales in the latest 12 weeks are up 3.9% and share up to 7.1%. Cream of Wheat consumer sales in mass merchants, the other significant part of retail sales, are up 31% in the last 13 weeks.

We've launched three new Cream of Wheat products in the first quarter - a healthy grain instant cereal in Original and Maple Brown Sugar flavors, and a SpongeBob SquarePants Instant Variety Pack under a license with Nickelodeon. These products have been well received by retailers and are going into distribution as we speak. The SpongeBob product is specifically aimed at gaining our next generation of Cream of Wheat consumers and has an enhanced nutritional profile that should please parents serving it to their children. Our licensing arrangement includes advertising on Nickelodeon in support of the product.

We continue to see a trend of consumers buying food to prepare and eat at home. This has benefited brands such as B&M, where net sales were up 27% year over year in the first quarter; Joan of Arc, up 14%; Regina, up 17%; and Emeril, up 21%. Emeril pasta sauces, seasonings, and cooking sprays all had a very good quarter.

Our two Hispanic brands, Las Palmas and Ortega, both had exceptional quarters. Las Palmas net sales increased 16%, primarily on increased distribution and higher sales in existing distribution. This has been a long-term trend with this brand, which we intend to reinforce in 2009 with new product introductions.

Ortega, our largest brand, grew by almost 14% in the first quarter. This follows a 16% increase in the fourth quarter of 2008 and demonstrates how much momentum has built in this brand. Again, as with fourth quarter, we continue to expand the distribution of Ortega products into new areas, as not all of our best products are in full national distribution. In addition, we have introduced several new products this quarter, including an extended shelf life tortilla in both regular and whole wheat, and whole-grain taco shells, a unique product in the category. These join our black beans, rice mixes, and guacamole seasoning mix launched last year. We are not sure how high up is in this brand, but we do see significant opportunity remaining, as it is on trend with consumers and retailers and we have significant share potential with existing and new products.

Private label sales have been a hot button in recent months with great interest on their effect on branded sales. In our case, we find that most of our brands have little or no direct private label competition, leaving us generally unaffected. Where we do have direct competition, the effect is varied. The pickle category, for instance, is a strong private label category. Private label shows a 33% share nationally, according to IRI. In New York, however, where the B&G brand is the strongest brand, private label has a 14% share, because three brands are competing strongly against each other.

Recipe beans, where our Joan of Arc brand competes, are another category where private label has a significant share. But here the category is up so much, nearly 20% according to IRI, that the brands are growing even as private label gains share, which is what we see with Joan of Arc.

Hot cereal is more typical of the common wisdom regarding private label. IRI says that private label has a 31% share of the category, with Quaker down substantially and private label up. The net result, by the way, is that category sales are down. In this case, however, our activity with new products and new distribution on Cream of Wheat has insulated us, allowing our consumer sales and share to grow, as I indicated earlier. Beyond these examples, however, there is very little of our business exposed to direct private label competition and we do not foresee a meaningful impact on our future business.

On the fourth quarter call, I addressed the decline in gross profit seen in the quarter and why we expected gross profit margin to improve in upcoming quarters. It's always nice to match your predictions, which is why we are very pleased with the first quarter gross profit margins.

Gross profit for the quarter was higher by $3.8 million and up 2.7% of net sales. As I indicated before, price increases offset the higher costs we saw in packaging and commodities and accounted for half of the gain versus first quarter 2008. Lower trade spending and shipping costs accounted for the other half of the gross profit gain.

We expect to see a very similar pattern in the second quarter, with pricing offsetting cost increases that should be less severe on a year-over-year comparison and shipping and trade spending remaining favorable as well. Fuel surcharges have been fairly level so far this year, albeit at a lower level than fourth quarter, but were increasing through the second quarter of last year. So that comparison will be more favorable barring higher oil prices.

Operating expenses in the first quarter were lower than prior year due to a combination of savings from headcount reductions last fall and lower brokerage payments. These savings more than offset higher accruals for management incentive compensation attributable to our improved first quarter performance and expected improved performance going forward. We expect our operating expenses to be well under control in upcoming quarters.

Our balance sheet remains strong with cash at $33.5 million. As Bob noted, we paid interest on our senior notes in the first quarter of 2009 versus second quarter 2008. Otherwise, our year-over-year cash position would have been $10 million higher than last year. Between the higher forecasted EBITDA results and increased inventory reduction, we anticipate increased cash generation from the business this year.

We spent approximately $1 million of cash buying back approximately 214,000 shares of common stock in the first quarter. And since the buyback program was announced in the fourth quarter of 2008, we have spent roughly $3.5 million to buy back over 760,000 shares of common stock. At our current dividend rate, this will reduce annual dividend payments by over $500,000 due to the reduction in outstanding shares.

We believe that the record first quarter EBITDA performance is not a fluke but rather an indication that our efforts to return B&G's performance to a more normal level has succeeded. Looking forward to the second quarter, we expect similar performance in the business. In the second half of the year, we will begin to lap pricing benefits that help first quarter performance, but we should still see year-over-year EBITDA improvement, although at a more modest rate. For that reason, we are increasing our 2009 EBITDA guidance from the previous $95 million to $98 million to a new range of $99 million to $102 million. If we see improvement beyond that level, we would consider reinvesting such dollars by increasing spending in marketing and new product placement.

We believe that the first quarter results have proven yet again the resilience of our brands and the overall stability of our business model. 2008 was a unique challenge. Cost increase came faster than we were able to raise price. But despite that, our EBITDA declined only 4%. By the fourth quarter, we had stabilized the business and we believed at the time positioned ourselves to have an excellent 2009, if the combination of price increases, lower trade spending, and cost reduction followed our plan. As you can see by the results, that's exactly what happened, returning our business to a more normal pattern of reliable results, high operating margins, and strong cash flow. We have every reason to believe that that pattern will continue throughout 2009.

At this point, we would like to open the call up to questions. Allen?

Certainly. Thank you very much, gentlemen. (Operator Instructions.) And first we'll hear from Reza Vahabzadeh from Barclays Capital.

Good afternoon, Dave, Bob.

Good afternoon, Reza.

Afternoon, Reza.

Congrats on the results.

Thank you.

Thank you.

Did the -- just one housekeeping item. Did the calendar change have any impact on your first quarter results or comparisons?

I'm not sure what you mean.

Well, I mean the quarter this year ended I guess three or four days later than last year.

Actually I think that was a fairly neutral event since Easter was later. And that's really the only significant year-to-year event.

Yes.

Okay. So, basically, it was a wash on that one?

Yes.

Okay. And then on the syrup front, when do you get more visibility on your costs? And I recognize that the Canadian dollar is going to be a bit of a tailwind for you. But when do you get more visibility on the cost?

Well, it's firming up right now. We're finalizing what we've committed to and what we think we're going to do as we go down the road. So within the next 30 days we should have a pretty good idea of where our cost is ending up.

As far as the exchange rate, we had already moved a considerable amount of cash up to Canada at a -- what we -- certainly versus last year, are favorable exchange rates. So we think we've done a pretty good job there.

Got it. And then in the last quarter or two your sales and marketing expenses have been curtailed. Some of it has been just deficiencies. But do you think that this can be sustained or do you think you're going to have to opportunistically reinvest in that down the road?

On the sales side, most of it has been selling expenses in the brokerage area. And we really think we just -- we just took out a bunch of expenses that weren't producing anything for us and we don't think we need to ever put that back. We have beefed up headcount a little bit in a couple of areas to be more effective in sales, but, in general, we're going to save money in sales this year, to no ill effect to the Company.

In marketing, we would love to have our EBITDA results be strong enough that we can restore the roughly $1 million we cut out of marketing last year, and we're looking forward to being able to do that.

Got it. And then as far as the pricing front, I know you will have tougher comparisons in the second half of the year, but at what point do you think you might have to, at least, increase promotional frequency, if not reinvesting promotions more vigorously?

Well, that's going to vary across the brands tremendously. Right now we don't see where we're going to need to do that. And I think there are a couple of promotion-sensitive brands, like baked beans that, as costs decline in the fall, that may be necessary, but I think we're going to have to wait and see whether costs come down or not.

Okay. Have you seen any signs of increased promotional intensity? And I know you might get some feel for that for the second quarter already.

We really have not seen it in our direct competitors, no.

Okay. And all this discussion about retailers asking for lower prices, what's your thought process on that?

Again, we're not seeing a lot of pressure from retailers to lower prices. I think -- and I think our pricing is very defensible. We have seen considerable cost increases. And when you take our pricing over the spectrum of products we have, we've basically taken about 4%, at tops 5% price increases on our portfolio in the last 12, 18 months. So we've taken very modest price increases.

Okay. And then my last question is for Bob. Working capital, obviously a bit of a use last year. This year, obviously with the serve crop coming out a little better than last year, what should we think on the working capital front?

Well, we actually expect working capital to be a benefit to us this year. We may, at the end of this year, be carrying more syrup just because it's available to us. But most of our other products, mostly likely scenario, will have a lower cost attributable to them. So we'll see some savings in our inventory. Our net inventory will be down year over year, which will create additional cash to us.

Okay, that's helpful. Thank you.

Thank you. Next we'll hear from Bryan Hunt from Wachovia.

Thank you. Dave, it looks like you're having fantastic growth through the big box retailers. Could you talk about what you're seeing in dollar stores and supermarkets on a relative basis?

Well, dollar stores are a much more limited opportunity for us. They have a very finite number of food products. We are continuing to try and design products for that channel, because if you can get in there, the leverage on it is phenomenal. I mean you're talking tens of thousands of stores that you get into right away if you can get a successful product into the store. And there's a couple of our brands that we sell a few products in, but it's very limited. We actually think that our growth is going to shift away from mass merchants a little bit and shift back to supermarkets some going forward and we're working hard to adapt to that versus what it has been in the past. But we're trying to grow in every venue. And I'd love to grow more in dollar stores. You just have to find the exact right products to do it.

Okay. And on your cost increases, could you give us an idea of what you're seeing? I mean you said $5 million of expense increases this year. Could you give us an idea where that's coming from exactly?

Sure. I mean, as I said, minor commodities, any of these smaller crops have increased very dramatically, because to get the crops planted last year in the face of very high wheat and corn prices, you had to -- the costs went up. So there is a raft of things like beans and cucumbers and peppers and all those kinds of things that jumped very significantly, 50%, 60%. Those costs are rolling over through our production here for the next six months probably, and certainly have been for the last six months.

Packaging is another factor in the whole thing. The can cost went up in January. It has not come down yet. There was an interesting article the other day that said, well, can costs were raised because the steel guys are at full capacity in that particular kind of steel and so they raised price because they could. And there wasn't a whole lot of sympathy expressed in that article. That's -- cans, to us, is a seven-figure event when that increase came. And, as we said, there is no sign of that softening any time in the very near future. And other packaging has not come down, as I would have expected it to at this point. Things like cardboard and things like that. So it's primarily -- it's really divided between packaging and smaller crop type of things and we just don't see those things going away here in the next six months.

On your family-style meals and Ortega and when you look at Polaner, I know you do some significant value packaging there as well, are you seeing your value pack items turn a lot faster than your single items?

Well, we're having very good success with family-type products. We've come out with several grande-formatted products, taco kits and things like that, and those have been an important part of the growth in the Ortega business. So I guess the answer is yes, we're seeing that.

Okay. And then lastly, you said you would like to, if your numbers continue to improve, put some more money behind marketing. Are there any particular brands you'd like to put the marketing behind or is it kind of across the board?

Well, it's not across the board. We tend to invest in the higher margin, higher volume brands. So the obvious ones are Cream of Wheat and Ortega. Polaner is a brand we'd love to put some money behind. Those kinds of brands. There are a number of other brands that -- we're looking for very modest growth, and the EBITDA margins are fine but not nearly the margins that we have in some of these other brands. The growth potential, we don't feel, is as strong. So we're going to put our money where we think we're going to get the best return.

I appreciate your time. Thank you.

Thank you.

And next we'll hear from Ed Aaron from RBC Capital.

Thanks, good afternoon. Really nice quarter, guys.

Thank you.

Thank you.

So I just wanted to get a little more color on your outlook for the second quarter. It sounds like you're expecting roughly flattish EBITDA quarter to quarter. And I keep wondering why margins wouldn't even be a little bit better in Q2 because, presumably, you had the same amount of price but you should be into lower input costs. And then you also had the negative Cream of Wheat mix effect in the first quarter, with sales down 11%. So why wouldn't that get a little bit better sequentially?

It's possible that it will get a little bit better, but the second quarter product mix tends to be towards some of the lower margin products. The B&G products sell much more strongly in the second quarter. B&M sells more strongly in the second quarter. So it's more a function of product mix than anything else.

Okay, that makes sense. And then I was curious about your comments that you made about expecting some channel shift back in favor of supermarkets. What are you seeing out there that leads you to think that that might be imminent?

Oh, for branded businesses, Wal-Mart is on this mission with private label. And we're not sure what that means in terms of them accepting new products and how much growth from new products there will be. So, to the extent that we intend to grow through new products, we may have more of an opportunity with supermarkets than we do with Wal-Mart.

Do you have any concerns that what they're trying to do with private label is going to threaten anything that you have on their shelves today causing you to maybe lose some distribution there?

I think there's a chance we'll lose some of our smaller, slower selling SKUs. I don't think there's a chance that we will lose anything that's consequential. And we've got very good success, to this point at least, replacing products with new products that are actually selling better and at the end of the day we're ahead. A case in point would be the hot cereal where Wal-Mart has made a significant push with private label. We haven't lost shelf space and in fact have more shelf space today because they've taken two of the three new products that we've just launched in the first quarter.

Right. On the maple syrup business, is there anything that actually gives you confidence that you will be able to maintain the pricing? Because it does seem like it obviously hit a little bit of a price elasticity threshold with what happened last year. Is there anything you're seeing that leads you to think that that pricing is going to stick?

Well, as you said, we -- to us, it was remarkable year-end that prices went up significantly and sales, unit sales, went up. We thought that was an amazing thing for maple syrup. So I guess I'm hoping that my, 1) competitors like to make money, as opposed to not making money, and 2) that people perceive that maple syrup is going to sell at any price, and we don't need to lower prices to drive consumer volume in and of itself. But I think the main thing is that I think people really, across the board in the business, need to recover their margins from where they were last year in the syrup business and we don't think that they'll be as quick to reduce price going forward.

Okay, thank you.

Yes.

And next we'll hear from Andrew Lazar from Barclays Capital.

Good afternoon, Dave and Bob.

Good afternoon.

Good afternoon.

Just a couple of things. One, just following up on the trade spending question. It's just interesting. You've got some very healthy efficiencies in the quarter. What you're hearing most package food companies talk about now are shifting a lot of more consumer-oriented spending toward the trade, getting the consumer more value-oriented entry price point at the point of sale. And is it just that you're in categories where you've got higher shares or that are niche-ier and that you kind of don't need to do that or -- because it seems like it is happening sort of around you anyway in some larger categories in a pretty big way.

Well, the quarter is really a continuation of an effort that we've been making for several years. I went back a couple of years and 2005 our trade spending was over 2% of sales higher than it is today. So we've been making progress for a few years. And I think we just continue to get more sophisticated in terms of looking at trade promotions, events, and saying, well, did this do anything or did it pay for itself or why was this a good investment?

And in the case of Cream of Wheat, it's a bit of a learning experience. We did a number of things last year on promotions that we hoped would drive consumer volume and they did not, at least, not to the extent we hoped, anywhere near. So we pulled back those this year and said, well, we're going to try different venues instead to reach consumers. So we've done things with the Internet, we're looking at advertising on Nickelodeon around the SpongeBob product and things like that. So trade promotion in that brand we felt just wasn't the right answer. So that's part of the pullback you saw in the first quarter. But it really is just sitting and dissecting it all the time and trying to make it efficient and then going to the retailers. It's not that we begrudge the money; it's that we really want performance for the money. And that's what we've called it along is pay for performance. So we're finding that by doing that we can still do events but we can do them more efficiently and for less cost.

And I guess last quarter, in the fourth quarter, you had some of the sort of inventory trade de-loading, whether it be at the retailer or in the consumer's pantry that a number of other packaged food companies had talked about. I think at the time you said that seemed like it was pretty much moved behind you at that point. Was there any more of that in the quarter that was meaningful or not really?

We really didn't see anything like we did at the end of last quarter. At the end of the last quarter, we had three of our top ten customers basically say -- two weeks left in the quarter basically say we're done, we're not ordering anything the rest of this year. We didn't see anything like that this year. Not this quarter, I mean.

Okay. Got it. In terms of just one on maple syrup, what is, at least, historically, typically the lag on retail pricing coming down, if and when the input costs comes down dramatically? Or have you not had any moves in the input cost as severely as you saw this past year?

We've never seen this kind of scenario before. We've been doing this for over ten years. We've never seen this kind of price spike out of a shortage that we saw last year and now this recovery. So we're in uncharted waters here.

And I'm trying to think about the way -- the thing about your top line and the components sort of going forward. You had, obviously, the maple syrup piece which impacted it. Does that still impact the top line going forward? And if so, for how much longer?

No, we expect that second quarter we'll get to a more normal scenario. We're already starting to look to refill pipelines on the retail side and recover some items that we had stopped making because of supply and things like that. So I don't expect second quarter to see a large negative effect like we've seen for the last 12 months.

And on the underlying sales, you had volume that was down a bit and you pointed to three different reasons. One was the 4Q you had the pipeline fill in Polaner and B&G, you were getting some private label pickles, and you had the reduced trade spend. How much of that will continue on into impacting volumes as we go into the second quarter?

I think you'll see a little of that, but not nearly what we've seen. We're continuing to look at promotional activity, but I think the effect will diminish as the year goes on. So you might see some more in the second quarter, to a lesser extent in the third quarter, and then by the fourth quarter I think we'll be done with that. So I think it will dwindle down as the year goes on.

Obviously, you still have some of the pricing through the next quarter to quarter and a half.

Right.

Volume perhaps a little less negative. But, as you said, but you still have some cost favorability. The mix starts to work a little bit against you in the second quarter just from a product standpoint.

A little bit, yes. Not -- it's not huge, but it is in effect, there's no question.

Okay. Thanks very much, guys.

You're welcome.

(Operator Instructions.) Next we'll hear a follow-up from Reza Vahabzadeh from Barclays.

Yes, are you, on the cost front, would you expect to hedge part of the -- part of your cost exposure, or do you think you're going to move away from hedging and be more into market so to speak?

We have been taking positions. We don't really hedge per se as much as commit to purchases on some major commodities. And we've been taking positions on those commodities all along. In some cases, we're into the middle of 2010. And we -- given how volatile the market potentially is, I think we're going to continue to do that.

Okay, thank you.

Yes.

And next we'll hear from Robert Kirkpatrick from Cardinal Capital.

Good afternoon and congratulations as well. Could you talk about where you view the financing markets and where you view the M&A markets at this time?

Slowly thawing I guess is a good way to -- M&A is still pretty cold and bleak. We've seen some very small properties, but we've not seen anything of consequence. The financial markets have their ups and downs, but the general trend seems to be interest rates on the kind of deals that we would want to do are slowly bleeding down and I understand that the high-yield market actually saw a fairly good thaw here in the last week or so. All relative of course. But it's slowly improving I think.

Great. And I'd like to add my congratulations on buying in the shares and reducing the dividend payments. I think that that's a fine combination.

Thank you.

Thank you.

And we do have a follow-up from Andrew Lazar from Barclays.

Thanks for taking the follow-up.

Sure.

Dave, just a broader sort of industry question or two. I'm trying to get a sense, in the fourth quarter for the industry, as a whole, volumes really fell off for the group as a whole. I mean no part of that was inventory de-loading and such; it's kind of one-offish in nature. But beyond that, volume was still kind of weak. And I guess part of that is some trade down to private label, depending on the category we're talking about. But I'm trying to get a sense of just your thoughts on that. I mean, I'm just trying to get a sense of what you think some of the key reasons might be that we've seen that and how much longer that sort of lasts. Is it just consumers being a lot more discerning about what they're buying within food? And on top of that, we've seen certain categories, like soup, which one would think would fare pretty well, right, in this kind of environment, really slow down. I'm trying to get a sense of in the categories where you operate that would be considered simple meal solutions like soup, to the extent you've got them, have you seen those accelerate like I would normally expect I guess in this kind of environment?

Well, I guess the answer is yes, we have seen that accelerate. And the two I would use as classic examples that I don't think are that unlike soup are B&M baked beans and Joan of Arc. Our sales trends on both of those have been very good and the categories are doing very well. So why somebody doesn't buy soup but they buy kidney beans to make chili or whatever, I'm afraid I don't have a lot of wisdom there. But we are seeing those categories increase very nicely. And maybe it's as simple as, well, a pot of chili made with kidney beans feeds a lot more people than a can of soup does.

Get more [center on the plate].

Maybe more economically.

Yes.

We're seeing our meal kits, as we said earlier, sell very well. But those are family meal solutions and I'm not sure a can of soup is. How long will that continue? I guess as long as consumers feel like they're having some economic constraints and can't treat themselves more. In a way, I kind of hope they get into the habit of feeding themselves more like that because it's good for our business. And maybe the economizing will become more of a cultural thing. I don't know how much other than that I can bring to the party in terms of insights.

[Hopeful.] And then just the last thing, you talked a little bit about sort of great value and just the whole concept of just squeezing between, let's say, private label and the key brand and maybe some of the tertiary brands perhaps getting hurt at some point, but without naming names or whatever, I mean I think the industry is kind of waiting for, like, a smoking gun. Like someone in a tertiary brand in a category just got de-listed because they were a second-tier brand. I think there is a lot of worry about that, but I don't know that we've necessarily had that sort of proof really happen yet. Is that something that you'd kind of expect to happen over time, broadly speaking, not in your business, but -- or have we heard of and had them and it's just not out there in the investment community yet?

I think it has happened. I think it has happened in a more limited way than might show up in the investment community. But I think there are certain categories, certain retailers, where they've trimmed it down to just a couple of brands and private label. I just think it's below the radar right now. But we are certainly seeing that in some places.

Thanks very much.

Yes.

And it appears, gentlemen, that's all the questions that we have. I'd like to turn it back over to Mr. Wenner and Mr. Cantwell for closing remarks or comments.

Thank you. Thank you everyone for joining us on the conference call. As we said earlier, we're very pleased with the quarter and going into the rest of year very confident that we can continue this kind of performance. I think we have a very good handle on the business, our price increases are in place, our ability to make our trade spending more efficient is in place, and we have a pretty vibrant cost reduction program in the Company. And all of those are coming together to help us have a record EBITDA quarter here in the first quarter and setting us up for meeting our increased EBITDA guidance as we go through the year. So thank you again.

And that does conclude today's call. We do thank you for your participation and ask that you enjoy the remainder of your day.