B&G Foods Q3 2026 Earnings Call Transcript

B&G Foods (NYSE:BGS) reported third-quarter financial results on Tuesday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

B&G Foods reported a strong third quarter with a 5% increase in base business net sales and a 6.6% increase in adjusted EBITDA year-to-date.

The company increased its full-year guidance for net sales and adjusted EBITDA, driven by strong volume growth and operational improvements.

Strategic priorities include driving profitable net sales, improving EBITDA through operational excellence, reducing leverage, and investing in talent and capabilities.

Operational highlights include leveraging manufacturing capabilities for private brands and food service, expanding production lines, and optimizing the portfolio through acquisitions like College Inn and Kitchen Basics.

Management is focused on reducing leverage to below six times by mid-2027 and improving profitability through cost management and productivity enhancements.

Full Transcript

OPERATOR (Moderator)

Good day and welcome to the B&G Foods third quarter 2026 earnings call. Today’s call, which is being recorded, is scheduled to last about an 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 Schwab, Director, Corporate Strategy and Business Development for B&G Foods. AJ

AJ Schwab (Director, Corporate Strategy and Business Development)

Good afternoon and thank you for joining us. With me today are Rob Mills, 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 following non-GAAP financial measures: Adjusted EBITDA, Segment Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted Earnings Per Share, Adjusted Gross Profit, Adjusted Gross Profit Percentage, Base Business Net Sales and Segment Adjusted Expenses. Reconciliations of these financial measures to the most directly comparable GAAP financial measures are provided in today’s earnings release. Rob 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 2026. Bruce will then discuss our financial results for the third quarter 2026 and our increased guidance for fiscal 2026. I would now like to turn the call over to Rob.

Rob Mills (Chief Executive Officer)

Thank you AJ and good afternoon everyone. I am pleased to join you for B&G’s third quarter 2026 earnings call. We delivered a very strong quarter. We generated base business net sales growth of 5% in the third quarter and 1.8% year to date. The growth in the base business net sales was primarily driven by volumes. Adjusted EBITDA increased 12.4 million or 6.6% year to date. That momentum has carried into the fourth quarter and we are raising our full year guidance for net sales and Adjusted EBITDA.

We remain focused on building upon this progress and Bruce will cover the financial details and guidance shortly. Before I go further, I wanted to thank our teams across B&G Foods. I have spent significant time with our commercial and brand teams, operations leaders and customer partners and in our manufacturing facilities. I have seen firsthand the commitment of our employees throughout the company and I appreciate the way the organization has welcomed me. As many of you know, I have served on B&G Foods’ board since 2018. That experience gave me a solid understanding of our portfolio, business model and financial position.

Working directly with our teams has reinforced my belief that we have a strong foundation: brands consumers know and love, enduring customer relationships, talented employees and valuable manufacturing capabilities. We also have opportunities to be more focused, faster and more consistent in how we operate. The team and I are driving what I think of as the B&G Foods operating way: clear priorities, decisions made closer to the business, stronger collaboration across functions and accountability for results.

Our agenda has four connected priorities. First, drive profitable net sales. Second, improve EBITDA through operational excellence and productivity. Third, improve cash generation, reduce leverage and actively manage our portfolio. And fourth, invest in the talent, capabilities and culture that support consistent performance. Our first priority is profitable net sales. We need to win in our core branded retail business where distribution, sales velocity and market share matter.

We also see meaningful opportunities across private brands, food service, club and digital channels where we can leverage our manufacturing capabilities and customer relationships. As I mentioned earlier, third quarter base business net sales grew approximately 5%, bringing year to date net sales growth to approximately 1.8%. Importantly, we are seeing continued net sales momentum as we enter the fourth quarter. Early in my tenure as CEO, we worked brand by brand to identify what is working, where we can improve and which actions will have the greatest impact.

We are focused on execution, improving distribution and shelf presence, building velocity, sharpening promotional effectiveness and delivering innovation that matters to our customers and to the consumer. For example, we have reallocated resources towards higher impact brands and opportunities including Cream of Wheat and Cream of Rice. We expect to build momentum for the brands as we look to launch a new Cream of Wheat fiber innovation offering early next year.

We have strong platforms across our portfolio. Spices and seasoning is an important part of B&G Foods with well-known brands, private label opportunities, strong relationships in club and food service, the ability to scale and manufacturing capabilities we can build on. We also have opportunities across other categories. Our College Inn and Kitchen Basics brands give us a strong presence in the growing broth and stock category. In baking, Crisco is a leading brand in vegetable oil and shortening, Clabber Girl in baking powder and Grandma’s in molasses.

In hot breakfast, Cream of Wheat is a strong heritage brand and our Cream of Wheat protein and fiber offering and Cream of Rice provide additional growth opportunities. In Mexican food, Ortega is a leader in taco sauce and Las Palmas has a strong position in enchilada sauce. These brands reflect the strength and heritage of our portfolio. Our priority is to translate those advantages into better distribution, stronger sales and improved profitability.

Our retail customers are central to this work. We are spending more time directly with our customers, listening to what matters to them and finding ways to grow together. We are making and will continue to make thoughtful pricing and promotional decisions that improve customer value and competitiveness while maintaining discipline around returns. We also see opportunities beyond traditional branded retail. We are selectively pursuing profitable incremental volume in food service, club, private label and other channels where it strengthens customer relationships, leverages our manufacturing capabilities and improves asset utilization, thus profitability.

Our second priority is improving EBITDA through operational excellence and productivity and we are already making great progress. The team has done meaningful work to reshape our cost structure following the Green Giant U.S. divestitures and I appreciate that progress and I believe we can build upon it. The third quarter showed the benefit of stronger volume mix and improved execution. For example, we have added production lines in our Ankeny spices and seasoning facility, allowing us to scale more efficiently with food service and private branded customers.

At our Brooklyn facility we leveraged our capabilities to launch a new private label salsa for our customer, and in Yadkinville we are expanding capabilities and improving the efficiency of our baking oven operations. We have also focused our investments within our existing capital plans to improve throughput across our manufacturing facilities and we plan to continue to do so. I recently visited our Hurlock, Maryland manufacturing facility and while I was there I saw firsthand the progress that the team has made in improving performance and how effective leadership over the past year has helped turn an underperforming plant into a stronger performing operation. We have an annual incremental productivity target of approximately 3% of cost of goods sold designed to offset inflation and drive profitability. We plan to achieve this goal by focusing on procurement and sourcing, manufacturing productivity, logistics and just simplifying how we work.

In addition to these actions, we will continue to improve forecasting and strengthen coordination among sales, marketing and supply chain to enhance customer service. Portfolio optimization and improved planning are helping us manage inventory more efficiently and improve working capital discipline. Better manufacturing performance has also helped us to win additional private label and food service business. These are practical improvements: better service, less waste, more productive assets and lower cost.

This is what I mean by the B&G Foods operating way: teams working together to solve problems and deliver results. We will keep raising standards for plant performance, safety, quality and service while directing capital towards investments with clear returns. Our third priority is strengthening the balance sheet. We are focused on reducing our consolidated leverage ratio as defined in our credit agreement to below six times by the middle of 2027 and we remain committed to achieving our longer-term target of less than five and a half times over time. We intend to achieve this through profitable sales growth, EBITDA improvement, stronger cash conversion and a disciplined approach to portfolio management.

B&G Foods has a long history of actively managing its portfolio. Following the divestiture of the Green Giant U.S. frozen business, we recently completed the divestiture of the B&M and Joan of Arc brands. These actions demonstrate our disciplined approach to portfolio management while also generating proceeds to help reduce net debt. We have also expanded our presence in the soup aisle and into the growing on-trend broth and stock category through the College Inn and Kitchen Basics acquisition.

Bruce will provide additional detail on the portfolio and the financial implications of these transactions. We will continue to evaluate both acquisition and divestiture opportunities that create value and improve our financial flexibility, but transactions alone will not deliver our objectives. The most durable path to deleveraging is improving the earnings power and cash generation of the business we own and operate today. Our fourth priority is building the organization and capabilities that deliver better results year after year. That means raising the bar on teamwork, speed, follow-through and accountability while investing in our employees and adding capabilities where they can make a difference commercially. It also means making our marketing dollars work harder through better consumer insights, more responsive digital and social content, faster identification of emerging trends and new tools, including AI, that can improve targeting, speed and measurement.

This isn’t about just launching a bigger campaign for their own sake. It’s about being more disciplined, investing more intelligently, learning faster and getting better return on every dollar. The B&G Foods operating way is about ownership and teamwork. When brand, sales, finance and operations teams work from common priorities and act with urgency, we serve customers better and create a stronger business. We will build a culture where talented employees can grow, make decisions and see the positive impact of their work. Flawless execution is our focus. We have already seen wins in sales, service and asset utilization. Now we need to repeat that performance consistently week after week.

I am proud of the third quarter and even more confident in what our team can accomplish moving forward. B&G Foods has strong brands, deep capabilities and committed teams. Our responsibility is to turn those strengths into consistent growth, stronger earnings, better cash flow and lower leverage. That is the work that’s in front of us and we are focused on delivering. With that, I’ll turn the call over to Bruce to review our financial results, our portfolio developments and updated 2026 guidance. Bruce.

Bruce Wacha (Chief Financial Officer)

Thank you, Rob. Good afternoon, everyone. Thank you for joining us today. This afternoon I plan to cover our financial performance, our continued portfolio reshaping, and our updated guidance for fiscal 2026. As we highlighted on our last call, we had a fast start to the third quarter. Our financial performance was very strong in July and that momentum continued throughout our third quarter and into our fourth quarter. For the third quarter of 2026, we generated $459.8 million in net sales, $81.8 million in adjusted EBITDA, adjusted EBITDA as a percentage of net sales of 17.8%, and $0.21 in adjusted diluted earnings per share. Net sales for the third quarter increased by $20.5 million, or 4.7%, and base business net sales increased by $19.4 million, or 5%. The increase in base business net sales was driven by increases in all four of our reporting segments.

The increase in base business net sales consisted of an increase of $23.6 million, or 6.1%, from higher volumes across the portfolio, partially offset by $3.3 million, or 0.9%, decrease in net pricing and the impact of product mix, and a $0.9 million, or 0.1%, negative impact from foreign exchange. Net sales from the College Inn and Kitchen Basics acquisition and the U.S. Frozen contract manufacturing business contributed $29 million and $26.3 million, respectively, during the quarter. These contributions more than offset the $54.1 million in net sales generated in the prior year quarter from the since-divested Green Giant U.S. Frozen and Le Sueur U.S. businesses. For the first three quarters of 2026, our base business net sales are up $19.7 million, or 1.8%, compared to the first three quarters of last year.

The increase was led by volume growth of $15.2 million, or 1.4% of base business net sales. Our core branded retail business is improving and we are continuing to execute and grow our existing businesses while taking on new opportunities to leverage our manufacturing capabilities in alternative channels. Our M&A additions, including College Inn, Kitchen Basics, and the Green Giant contract manufacturing business, are all performing in line with or better than our M&A models.

At the same time, we are managing our fixed cost structure following the divestitures and limiting stranded costs, which is visible through our reduction in unallocated corporate costs both in the quarter and year to date. The divestiture of the B&M and Joan of Arc brands closed after the end of the quarter and therefore did not affect our third quarter operating results other than a non-cash impairment charge recorded in connection with the divestiture that I will discuss shortly.

For the third quarter of 2026, gross profit was $108.9 million, or 23.7% of net sales, and adjusted gross profit was $111.2 million, or 24.2% of net sales. For the third quarter of 2025, gross profit was $99.0 million, or 22.5% of net sales, and adjusted gross profit was $98.8 million, or 22.5% of net sales. The increases in gross profit as a percentage of net sales and adjusted gross profit as a percentage of net sales primarily reflect the acquisition of the higher-margin College Inn and Kitchen Basics brands and the divestiture of the lower-margin Green Giant U.S. Frozen business.

Selling, general and administrative expenses increased by $6.7 million, or 14.9%, to $51.3 million for the third quarter of 2026 from $44.6 million for the third quarter of 2025. The increase was primarily composed of increases in acquisition, divestiture-related and non-recurring expenses of $7.9 million. Additional drivers include increased consumer marketing expenses of $0.6 million and warehouse expenses of $0.3 million, partially offset by decreases in selling expenses of $1.1 million and general and administrative expenses of $1.0 million.

Expressed as a percentage of net sales, selling, general and administrative expenses increased by 1 percentage point to 11.2% for the third quarter of 2026 as compared to 10.2% for the third quarter of 2025. Excluding the acquisition, divestiture-related and non-recurring expenses, SG&A as a percentage of net sales was 8.9%, compared to 9.6% in the year-ago quarter. We generated $81.8 million in adjusted EBITDA, or 17.8% of net sales, in the third quarter of 2026, compared to $70.4 million, or 16.0%, in the third quarter of 2025. The increase in adjusted EBITDA was driven by an increase in net sales, improved operating performance, lower tariff expense, and the continued execution of our M&A strategy, including the addition of the higher-margin College Inn and Kitchen Basics brands and the divestiture of our lower-margin Green Giant U.S. Frozen business.

Net interest increased by $7.5 million to $44.8 million for the third quarter of 2026 from $37.3 million in the third quarter of 2025. The increase was primarily attributable to higher average long-term debt outstanding, largely reflecting debt incurred to fund the College Inn and Kitchen Basics acquisition, as well as the 11% interest rate on our new senior notes due 2031. The increase also reflects a $1.1 million loss on extinguishment of debt during the quarter compared with a net gain of $0.5 million in the prior year quarter.

Depreciation and amortization expense was $14.4 million in the third quarter of 2026 compared to $16.6 million in the third quarter of 2025. We had a net loss of $32.5 million, or $0.40 per diluted share, in the third quarter of 2026 compared to a net loss of $19.1 million, or $0.24 per diluted share, in the third quarter of 2025. The net loss for the third quarter of 2026 was driven by a $40.7 million pre-tax non-cash impairment charge related to the B&M and Joan of Arc trademarks in connection with the divestiture of those brands, as well as other acquisition, divestiture-related and non-recurring costs.

We had adjusted net income of $17.8 million, or $0.21 per adjusted diluted share, in the third quarter of 2026. In the third quarter of 2025, we had adjusted net income of $11.7 million, or $0.15 per adjusted diluted share. Details regarding the impairments and other adjustments reflected in our adjusted EBITDA and adjusted net income are described further in today’s earnings release and 10-Q. I would now like to touch on the results by business unit for the third quarter. Net sales for Spices & Flavor Solutions increased by $0.3 million, or 0.3%, in the third quarter of 2026 to $101.7 million from $101.4 million in the third quarter of 2025. The increase was primarily due to strong continued growth in private label and foodservice channels and a moderate increase in net pricing, partially offset by modest declines in volumes for certain spice brands.

Spices & Flavor Solutions segment adjusted EBITDA increased by $6.4 million in the third quarter of 2026 compared to the third quarter of 2025. The increase in segment adjusted EBITDA was largely driven by increased net pricing and product mix, as well as improved profit margins, favorable lapping of 2025 tariffs, and reduced operating costs. The increase was offset in part by increased transportation and logistics costs due to rising diesel fuel prices.

Net sales for Meals increased by $30.6 million, or 27.9%, in the third quarter of 2026 to $140.6 million from $110.0 million for the third quarter of 2025. The acquisition of the College Inn and Kitchen Basics brands added approximately $29 million of net sales during the third quarter. Excluding the impact of M&A, Meals net sales increased by $1.6 million, or 1.5%. Meals also benefited from improved sales performance across the portfolio and, as Rob mentioned earlier, the launch of a new private label salsa for one of our customers.

Meals segment adjusted EBITDA increased by approximately $5.9 million, primarily driven by the favorable impact of the acquisition of the College Inn and Kitchen Basics brands. The increase was offset in part by increased transportation and logistics costs due to rising diesel fuel prices. Net sales for Specialty increased by $12.5 million, or 8.3%, in the third quarter of 2026 to $163.0 million from $150.5 million in the third quarter of 2025. The increase was primarily due to increased institutional bulk vegetable oil sales, which are an area of focus as we work to better leverage our manufacturing and refining capabilities. We also benefited from increased volumes of Grandma’s Molasses, which is the number one brand in the growing U.S. molasses category, as well as improved net sales performance in the aggregate across the remainder of the Specialty portfolio.

Specialty segment adjusted EBITDA decreased by $3.8 million in the third quarter of 2026 compared to the third quarter of 2025. The decrease was primarily driven by increased soybean and canola oil costs for Crisco, as well as increased transportation and logistics costs due to the rising diesel fuel prices year over year. Comparisons in the Frozen and Vegetables segment are significantly affected by the Le Sueur U.S. and the Green Giant U.S. Frozen divestitures and the impact of our new contract manufacturing business for Green Giant U.S. Frozen. We are pleased with the continued strength of Green Giant Canada, where third quarter net sales increased by $5.0 million, or 21.6%, compared to the third quarter of 2025. Separately, the new contract manufacturing business for Green Giant U.S. Frozen generated $26.3 million in net sales for the quarter.

The contract manufacturing arrangement has a cost-plus structure and provides a modest but stable profit contribution. As Rob mentioned earlier and as disclosed in our press release, we are increasing our guidance for net sales and adjusted EBITDA and reaffirming our guidance for adjusted earnings per share. Our increased guidance reflects the progress that we have made in fiscal 2026 through our continued refinement of our brand and product portfolio and improvements in our operating performance. Our increased guidance reflects that progress. Please also note that our guidance reflects the expected impact only of acquisitions and divestitures that have already closed.

For example, this includes the Don Pepino, Le Sueur U.S., Green Giant U.S. Frozen, B&M and Joan of Arc divestitures, the Green Giant U.S. Frozen contract manufacturing business, and the College Inn and Kitchen Basics acquisition. Our guidance does not include the potential impact of any divestitures of Green Giant Canada. Also, as a reminder, our guidance reflects that fiscal 2026 has one fewer week than fiscal 2025, which had a 53rd week. While we loved the benefit of the 53rd week last year, fiscal 2026 will lap the extra 53rd week in 2025.

As a result, and as noted in our earnings release, we expect fiscal 2026 net sales in the range of $1.76 billion to $1.8 billion, adjusted EBITDA in the range of $280 to $290 million, and adjusted EBITDA as a percentage of net sales in the range of approximately 15.9% to 16.1%. And we are reaffirming our adjusted diluted earnings per share to be in a range of 57.5 to 67.5 cents. Additionally, we expect for fiscal 2026 full-year interest expense of $160 million to $165 million, including cash interest expense of $152.5 to $157.5 million, depreciation expense of $40 to $45 million, amortization expense of $17 to $19 million, cash taxes of approximately $5 million or less, an effective tax rate of 26% to 27%, and CapEx of approximately $25 million or less.

Now I will turn the call back over to Rob for further remarks.

Rob Mills (Chief Executive Officer)

Thank you, Bruce. Our focus for the remainder of 2026 is pretty straightforward. Deliver on our fourth quarter guidance, continue improving net sales performance and customer execution, advance productivity, generate cash and put a strong operating plan in place for 2027 and beyond. We have the brands, capabilities and the team to build a stronger B&G Foods. Our focus is clear and we will execute. Thank you for your interest in B&G Foods and now, operator, we’re ready for questions.

OPERATOR (Moderator)

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. Please limit yourself to one question and one follow-up. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

And our first question will come from Scott Marks with Jefferies.

Scott Marks (Analyst at Jefferies)

Hey, good afternoon all. Thanks very much for taking the questions. First thing I wanted to ask about, just the base business performance sounded like volume growth was pretty strong in the quarter, and it also sounded like a lot of that may have been driven by some of the institutional bulk vegetable oil sales and some of the spices private label and food service business. So just wondering if you can speak to that a little bit and help us understand how you’re thinking about shifting more of that mix to branded as we look out over the next year and pull back at all, if you will, on some of the maybe lower margin private label business.

Rob Mills (Chief Executive Officer)

Sure. Thanks, Scott. Happy to. I think the key things here to remember part one, year to date our net sales are up 1.8%. Most of that’s volume. It’s about 1.4% from a mix standpoint. We continue to be a branded packaged food manufacturer. That’s our core focus is core retail. But we do right now have the opportunity, particularly where we have manufacturing capabilities that we can leverage to extend that performance outside of the core retail channel into other channels.

And that includes private brands. It includes foodservice, club, and also industrial sales. And so there is a combination of those things going on. We’ve been talking about it for a little while. It is helping to drive performance, and we think that we need to have continued strong performance across all of those as well as this is a unique year for us, but not really because we do it fairly regularly of buying things. And as an M&A vehicle, we’re going to continue to look for opportunities like College Inn, Kitchen Basics, et cetera, where we can drive incremental growth on top of the base business.

And that’s kind of what we had for the quarter.

Scott Marks (Analyst at Jefferies)

Okay, appreciate the thoughts there. And then just second one for me, you talked about the M&A engine and kind of getting back to that, given that the Green Giant Canada deal was cancelled. Wondering how you’re thinking about that asset. You still see it as potential to be hived off, or do you plan on running that for a little bit longer? And I ask in the context, so I think that was a component of your business being able to kind of bring down the leverage a little bit.

So just wondering how you’re thinking about it from that perspective.

Rob Mills (Chief Executive Officer)

Sure. And it’s a little bit of both there. Green Giant in Canada is the number one brand for both frozen vegetables and shelf-stable vegetables. The business has tremendous momentum. It’s up real strong double digits this year, and so happy with that part of the performance. To the extent that we own and operate this brand in perpetuity, we need to work a little bit harder to fix the profitability. And that’s our base case. We also think this brand and the dynamics around it is sellable.

There is still the opportunity to transact with other parties, and that’s quite possible something that happens in the coming months as well. So probably more to update as life goes on because it’s hard to say right now with regards to ongoing M&A, but feel really good about the trajectory of that business.

Scott Marks (Analyst at Jefferies)

Okay, appreciate it. Thanks. I’ll pass it on.

OPERATOR (Moderator)

Our next question will come from Robert Moscow with TD Cowen.

Robert Moscow (Analyst at TD Cowen)

Hi, thanks. Kind of a follow-on to Scott’s question. I understand the opportunity to extend your plants into industrial sales and private label. I guess my question is the sustainability of it. You know, in the past some of those kind of opportunities have been episodic and then they, you know, they don’t last. So can we expect especially what you did in vegetable oil to sustain into next year? I guess that’s the first question. Second question is, was it just opportunistic?

Was it an opportunity that just kind of popped up and you took it, or has this been part of the strategy for a while?

Rob Mills (Chief Executive Officer)

If you think about the opportunities that we have, where we’re focused is less on the opportunistic, episodic, those things. If they happen, we’ll take them. But where the real focus has been is where we have manufacturing capabilities that we want to leverage and we’ve got customer relationships. And so it’s a little bit less of the focus on here today, gone tomorrow and more around building sustainable businesses. So, for example, in spices, our private brands relationship is very strong and we think that’s something that’s continued to grow.

The Crisco opportunity there, we’ve got a world-class refinery for vegetable oil and we want to try to take advantage of that and leverage that as much as possible. That’s probably a more recent focus than, say, the spice opportunity.

Robert Moscow (Analyst at TD Cowen)

Okay. In terms of your price-cost relationship with vegetable oil, those costs have been rising a lot. Where are you right now? Has that been pretty stable? Have the profits been pretty stable? It’s kind of hard to see now with this big chunky industrial sale. Have the margins been pretty consistent?

Bruce Wacha (Chief Financial Officer)

So this was a year, and we talked about this on our first quarter and second quarter call. This was a year where we were planning on leaning in a little bit from a price standpoint on Crisco to protect some volumes. We were a little bit lucky and a little bit well planning. We were fairly well covered for a good portion of this year on our purchases of soybean oil. So when costs came up, we escaped a little bit of that volatility. With that said, margins on this business are lower than they were last year, and you should see that in our segment financials.

But they’re lower, but they’re still pretty good margins and still reasonable. And going forward, that’s the plan. We feel pretty good because right now, costs for diesel and for soybean oil, which are the two biggest pain points for us this year, have actually come down over the last couple weeks.

Robert Moscow (Analyst at TD Cowen)

The input costs have. Okay. Okay. Thank you.

Bruce Wacha (Chief Financial Officer)

Thank you. Yep.

OPERATOR (Moderator)

We’ll go next to Karu Martenson with Jefferies.

Karu Martenson (Analyst at Jefferies)

Good afternoon. Sorry to keep harping on the same volume question, but to frame it in other ways. How do we square the strong outperformance against the Nielsen data? And how should we kind of look at you guys when we go forward here?

Rob Mills (Chief Executive Officer)

So there’s probably 60, 70% of our business that’s core branded retail business that tracks fairly closely to the consumption data over time. And then there’s another 30, 40% that represents these other channels or alternative channels, and that is private brands, it’s foodservice, it’s club, and now with Crisco, industrial oil is a focus. We got to hit all of them. And so there’s a desire to improve the consumption data because that’s driving our brands and that’s very important.

But we do have these other areas and channels that today are driving incremental sales. And that’s a real part of the business.

Karu Martenson (Analyst at Jefferies)

Okay, and then just in terms of the tariff refund, what was that in the quarter and is there any kind of additional proceeds that we should expect for the fourth quarter?

Bruce Wacha (Chief Financial Officer)

It was a lot smaller in the third quarter than it was in the second quarter. As a reminder, our total tariff exposure in 2025 from an incremental tariff was less than $10 million. And so a fair amount of the refunds that we got were in the second quarter, a couple million dollars in the third quarter, and probably de minimis in the fourth quarter.

Karu Martenson (Analyst at Jefferies)

Okay, thank you very much, guys. Appreciate it.

OPERATOR (Moderator)

And as a reminder, if you would like to ask a question, please press star one. We’ll go next to Carla Casella with JPMorgan.

Carla Casella (Analyst at JPMorgan)

Hi, thanks for taking the question. On Canada, if that is a business that you end up holding onto, what’s a normalized margin for that? And then, similar question for the co-man. We’re trying to get a sense for what that kind of frozen business could do from an EBITDA margin standpoint with those two businesses being the majority of it.

Bruce Wacha (Chief Financial Officer)

Yeah, so we haven’t disclosed that Canada margin, and I think that’s an area where there’s an opportunity for us to really improve it. It’s fairly low margin today, but it’s something that we think that there’s an opportunity to optimize. So that would be the base case. If we continue to own it, we’ve got to fix and improve those margins. On the manufacturing business, it’s probably a mid to high single digits margin on an EBITDA basis. Not a game changer, but fairly stable annuity that we have off of those volumes.

Carla Casella (Analyst at JPMorgan)

Okay, great. And then on the input cost side, can you give us any further breakout in terms of how much maybe you’re seeing in inflation in transportation costs versus how much you’re seeing increase in the raw material costs?

Bruce Wacha (Chief Financial Officer)

The biggest pieces for us in our P&L today and what we see in the future where we saw inflationary pressure continues to be diesel fuel, logistics, transportation, and soybean oil. Those are the big drivers. What’s different today than, call it, 2021 and 2022 is that inflation took off across the board and we saw it broad-based. We haven’t seen that so far today. We’re somewhat encouraged that these costs are coming down relative to the peak, but they’re still pretty high.

I mean, we definitely saw it. EBITDA would have been higher absent some pain on the diesel fuel and higher cost lapping on Crisco.

Carla Casella (Analyst at JPMorgan)

Okay, great. And then just from a cash flow perspective, you talk about the goal to delever and most of that’s coming through EBITDA growth. Does any of that contemplate debt paydown, and do you have any restrictions in terms of buying back some of your debt trading at a discount?

Bruce Wacha (Chief Financial Officer)

We’ve got a pretty good history of buying back our debt when it’s been at a discount. And I think if you look at the last couple K’s, we certainly did that at least two or three years in the last three or four years. And so we’re always looking for opportunities to come in and support our bonds and buy them back when they’re cheap. They are,

Carla Casella (Analyst at JPMorgan)

Yeah. Okay, great, thanks.

OPERATOR (Moderator)

We’ll hear next from Andrew Lazar with Barclays.

Andrew Lazar (Analyst at Barclays)

Great. Thanks so much. Good afternoon, Rob. I think, you know, I guess my question is, I know the last couple years, I feel like B&G Foods, the sort of the top-line sort of rate of growth or what the company was looking for was sort of in that very low single digit. Maybe it’s flat, maybe it’s up 1% to try to do that sort of consistently and really focus more on cash generation and sort of managing the portfolio. Some of the commentary from tonight, is that still sort of what you’re thinking about or are you trying to approach this to be sort of maybe a faster growth entity?

And if that’s the case, I guess what makes you comfortable that that’s sort of the right goal for a company like this, particularly given the categories you’re operating in and obviously just given an even increasingly difficult sort of consumer backdrop. Thank you.

Rob Mills (Chief Executive Officer)

Yeah, thank you, Andrew, and thank you for the question. So big picture, our strategy has always been organic growth, zero or flat, 2% up with some type of M&A activity. I mean, as I referenced on my call, B&G Foods has a lot of knowledge and a lot of success in driving strong M&A activity through acquisitions that just overall contribute to EBITDA and just the overall growth of the company. With that being the backdrop, you know, as Bruce mentioned and I also referenced on the call, you know, when you look at the tracked as well as non-tracked channels, we are very committed and still have work to do on the tracked channels for our core brands to drive up consumption and overall drive those brands back into, you know, that 0 to 2%. And just as a reference point, when you look at our entire portfolio, you know, the majority of our brands are, you know, having positive growth.

With that also being said, there are non-tracked channels out there that, you know, Bruce and I both referenced that we’re leaning into because they’re true business models for the organization. They leverage our manufacturing capabilities, they drive better asset utilization and they fit nicely into kind of the B&G Foods portfolio, the categories that we own, et cetera. So when you kind of sum it up, big picture, I wouldn’t say our strategy is changing radically.

It’s not 0 to 2% up from an organic perspective. We’re going to continue to double down in our core retail brands and grow them. We’re also going to take and ride what I would say the growth that we’ve seen in the non-tracked brands or non-tracked channels to overall fuel just B&G Foods’ growth. You know, in my short tenure as CEO, but of course I’ve had many years sitting on the board, you know what it really boils down to is this team having just clear priorities, executing well and driving a sense of accountability. You know, I’m really proud of the team and what I’ve seen and how this organization operates. But we could do more in the sense of driving with a sense of urgency and really focusing on our execution and that’s going to position us very well going into 27.

And in my last 90 days I’ve already seen meaningful changes in how we’re operating as a team and will continue to drive that in Q4 and positioning us for 27. So big picture, very confident in the brands. I feel like our targets are reasonable and now let’s take advantage of just not supporting the growth of the core retail brands, but how we attack the other channels that are in front of us as well.

Andrew Lazar (Analyst at Barclays)

Thanks for that. And then quick follow-up. Most, if not all, the larger cap food companies that have reported earnings recently have all intimated that sort of, you know, sell-side estimates for 27 are simply still too high, primarily just because of rising input cost pressure, the potential need to take pricing again—pricing tends to lag costs on the way up—things of that nature and just a difficult consumer backdrop in general. Still, I guess I know you’re not at a point yet either where you’re going to provide 27 guidance, but are there some of these headwinds that you see as well that we ought to be sort of taking into account now as we think out to next year? Or maybe there are a couple of, like, broader puts and takes you can kind of go through a little bit that we should just keep in mind for next year as we think about modeling. Thank you.

Bruce Wacha (Chief Financial Officer)

Yeah, sure. And obviously, Andrew, we typically give our guidance for the forward year after our fourth quarter results. But I think the best that we can answer your question within that context is, yeah, obviously there’s some inflation and we’re seeing it. Like we said, the largest areas where we’re seeing inflation in the portfolio is diesel fuel, transportation, logistics costs and soybean oil. Those have all come down from peak. So if you were talking to me three weeks ago versus today, feel a little bit better today when we think about the outlook for 27 versus where we would have thought three weeks ago.

So feel good that stuff’s coming down. I think there’ll be some pressures. Rob mentioned in his portion of kind of our prepared remarks our strong desire to lean in from a productivity standpoint. And so I think that there’s also going to be some offsets into that inflation from our efforts to drive savings in our factories, automations, improved efficiencies, et cetera. We then, just as a reminder, as you’re thinking about that first quarter of 2027, will be incremental benefit from college and Kitchen Basics and the Green Giant co-pack transactions.

And so those will be a little bit of offset there. So I’m sure there’ll be good guys and bad guys that we’ll be talking about as we get closer to those guidance numbers.

Andrew Lazar (Analyst at Barclays)

Thank you.

OPERATOR (Moderator)

And we’ll take a follow-up question from Carla Casella with JP Morgan.

Carla Casella (Analyst at JPMorgan)

Hi, I’m wondering if you, Bruce, can give us what covenant leverage or covenant EBITDA was for the quarter or the LTM?

Bruce Wacha (Chief Financial Officer)

Yeah, it’s a little bit higher. Just keep in mind, third quarter is our high number. So we’re just over 6.4 times in the third quarter, which is higher than we were first quarter, second quarter. But as a reminder, it’s about a half a turn less than where we were third quarter last year, with the third quarter being our seasonal working capital build.

Carla Casella (Analyst at JPMorgan)

Perfect. Okay, thank you.

OPERATOR (Moderator)

And this concludes our question and answer session and will conclude today’s teleconference. We thank you for your participation. You may disconnect your lines and have a wonderful day.

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