Carla Casella

Carla Casella inquired about the company's plan to address the 2026 debt maturities and its longer-term capital structure strategy. She also requested a 'goalpost' for fiscal 2025 EBITDA excluding Hawthorne, to aid in financial modeling, after the business was classified as a discontinued operation.

Answer

CFO Mark Scheiwer explained that the 2026 maturities would be paid off later in the summer using free cash flow generated ($275 million plan) and access to the company's revolving credit facility. He also stated that fiscal 2025 adjusted EBITDA with Hawthorne was $581 million, and it is expected to decrease by approximately $11 million when Hawthorne is backed out, resulting in a recast fiscal 2025 EBITDA of around $570 million.

Carla Casella from JPMorgan inquired about the longer-term capital structure, the company's leverage target, and how the 2026 maturity will be addressed. She also asked for a goalpost for last year's EBITDA with Hawthorne, confirming a figure around $530 million.

Answer

Mark Scheurer, EVP, CFO and Chief Accounting Officer, stated that the 2026 maturities will be paid off later in the summer using free cash flow generation (part of the $275 million plan) and access to the revolving credit facility. He corrected the Hawthorne EBITDA figure, stating adjusted EBITDA with Hawthorne was $581 million last year, and after backing out Hawthorne, the recast number for fiscal 2025 would be approximately $570 million.

Carla Casella asked for more color on the overall industry capacity for frozen potatoes, specifically if it varies dramatically by country or region.

Answer

President and CEO Michael Smith reiterated his belief that the market will be rational over time, noting that the pace of newly announced capacity has slowed, and there have been delays and postponements. He acknowledged that some capacity built in developing markets over the last year is impacting European exports due to low raw material costs and soft demand. He also mentioned recent market consolidation and its potential future impact.

Carla Casella asked for more color on the overall industry capacity for frozen potatoes, specifically if it varies dramatically by country or region.

Answer

CEO Michael Smith reiterated his belief in market rationality over time, noting that while the pace of newly announced capacity has slowed, some capacity has been built in developing markets over the last year, impacting European exports due to low raw costs. He also mentioned some market consolidation and the company's ongoing management of its supply chain footprint.

Carla Casella of JPMorgan Chase & Co. inquired about the company's leverage target, asking if the 3.5x to 4.0x range is a firm target or a ceiling for potential M&A. She also followed up by asking about the current M&A landscape and the types of opportunities being considered, particularly internationally.

Answer

CFO Bernadette Madarieta confirmed the leverage target is approximately 3.5x and that they will manage debt to maintain this level. President & CEO Mike Smith added that the company remains open to M&A and joint ventures, focusing on the global potato industry. He specified they are looking for opportunities in strategic markets with capabilities that align with the 'Focus to Win' strategy.

Carla Casella from JPMorgan Chase & Co. asked about the company's maintenance capital expenditure level and any changes in QSR customer behavior regarding contracts and outsourcing.

Answer

Executive Bernadette Madarieta outlined maintenance CapEx at approximately 3% of sales, plus 2% for modernization and other environmental spending. CEO Mike Smith noted that the company has returned to a normal contract renewal cycle and that customers are currently receptive to innovation to help drive traffic.

Carla Casella asked if Lamb Weston has changed its leverage target in light of declining CapEx but increasing shareholder returns through buybacks and dividends.

Answer

CFO Bernadette Madarieta confirmed that there has been no change to the company's leverage target, which remains at 3.5x.

Carla Casella asked for a breakdown of the $200-$250 million restructuring charge, the impact of unused potato contracts on future supplier negotiations, and whether the company's leverage target has changed.

Answer

CFO Bernadette Madarieta detailed that the 20% noncash portion of the charge is accelerated depreciation, while about 60% of the cash portion is for contracted raw potatoes that won't be used. CEO Tom Werner stated the potato negotiation process won't change, though needs might. Madarieta confirmed the 3.5x leverage target is unchanged and she is comfortable at the current 3.0x level.

Carla Casella asked if the company could quantify the shipments expected to shift from Q1 to Q2 and inquired about observed strengths or weaknesses across different channels, particularly regarding income dispersion.

Answer

CEO Niko Lahanas and J.D. Walker, President of Garden Consumer Products, explained that quantifying the Q1 to Q2 shipment shift is not possible due to evolving factors like competing for trucking, the fiscal quarter ending on December 27th, and unreceived orders. Regarding channels, Niko Lahanas highlighted a significant migration to online across both segments, with robust omnichannel strategies winning. John Hanson, President of Pet Consumer Products, noted continued challenges in the pet specialty channel due to foot traffic but did not identify specific income bifurcation trends.

Carla Casella asked if the company could quantify the shipments expected to shift from Q1 to Q2. She also inquired about observed strengths or weaknesses across different sales channels (home centers, specialty pet, mass, etc.) in the context of income dispersion.

Answer

Niko Lahanas, Chief Executive Officer, stated that the Q1 to Q2 shipment shift could not be quantified due to evolving factors, including competition for trucking around year-end and the timing of retailer orders. J.D. Walker, President of Garden Consumer Products, further explained that many garden orders for the upcoming season ship between Christmas and New Year's, making precise Q1/Q2 allocation difficult. Niko Lahanas noted the primary trend is migration to online channels across both segments, with garden e-commerce growing significantly (60% growth). He and John Hanson, President of Pet Consumer Products, did not observe specific income bifurcation trends across traditional channels, though the pet specialty channel remains challenged by foot traffic.

Carla Casella of JPMorgan Chase & Co. inquired about the stability of the pet specialty retail channel and whether the channel mix shift towards mass and other retailers is continuing.

Answer

John Hanson, President of Pet Consumer Products, described the pet specialty channel as "challenged" in the near term. He attributed the softness primarily to a slowdown in new pet acquisitions, which drives significant traffic and advice-seeking behavior to these specialized stores.

Carla Casella asked about the company's comfort level with leverage for a potential M&A transaction. She also inquired about tariff mitigation strategies compared to 2018-19 and the current stage of the cost simplification program.

Answer

CEO Nicholas Lahanas stated that the company would be willing to take leverage over 4x for the right acquisition, provided there is a clear path to return to their 3.0-3.5x target range. On tariffs, he said the playbook of insourcing, resourcing, and cost negotiation remains the same, though the company's exposure is now lower. He characterized the cost simplification program as being in the 'fourth or fifth inning,' with significant progress made and more to come.

Carla Casella asked about the current M&A environment, including the availability of opportunities and whether Post Holdings is focused on expanding within existing segments or adding new ones. She also inquired about plans to refinance the revolver draw used for the Eighth Avenue acquisition.

Answer

President and CEO Rob Vitale stated that the company is opportunistic regarding M&A, comparing it to other capital allocation choices like share buybacks or debt repayment, and noted some reluctance to transact given current multiples. CFO and Treasurer Matt Mainer confirmed that the company continues to monitor the bond market for the right opportunity to refinance the revolver draw.

Carla Casella asked about the current M&A environment, including the availability of opportunities and whether Post Holdings is focused on expanding within existing segments or adding new ones. She also inquired about plans to refinance the revolver draw used for the Eighth Avenue acquisition.

Answer

President and CEO Rob Vitale stated that the company is opportunistic regarding M&A, comparing it to other capital allocation choices like share buybacks or debt repayment, and noted some reluctance to transact given current multiples. CFO and Treasurer Matt Mainer confirmed that the company continues to monitor the bond market for the right opportunity to refinance the revolver draw.

Carla Casella asked about the financing strategy for the Eighth Avenue acquisition, specifically whether the company intended to issue long-term bonds or a term loan to replace the revolver and cash used.

Answer

CFO Matt Mainer confirmed that they are closely monitoring the capital markets for a potential long-term financing solution. However, he emphasized that the company is in no rush due to its strong cash flow and liquidity position, and will remain opportunistic about the timing.

Carla Casella followed up on the 8th Avenue topic, asking for more detail on the potential options and whether a scenario exists where Post would buy and reconsolidate the business.

Answer

COO Jeff Zadoks reiterated that Post views 8th Avenue as a new investment opportunity where the company has significant prior experience. However, he declined to comment on the various potential outcomes or specific scenarios for the business.

Carla Casella asked about the recent Brazilian debt financing, specifically if it was sold to public markets, any concentration of holders, and the interest rate paid. She also inquired about JBS's strategy for balancing Brazilian versus U.S. debt given Brazilian cash flow, and which EBITDA metric (IFRS or U.S. Comp) is used for the 2.5x year-end leverage target.

Answer

Guilherme Cavalcanti (Global CFO, JBS) stated that the longest tranche of the Brazilian agribusiness receivables certificate was inflation plus 8% (dollar plus 6.2% swapped), issued inside their investment grade bond curve, with demand from individual investors and bank treasuries. He noted that 10% of debt is in Brazilian reais, aligning with 12% of revenues, leaving some room for more real debt to balance currency exposure. He confirmed the 2.5x year-end leverage target uses IFRS EBITDA.

Carla Casella asked for details on the recent Brazilian debt financing, including whether it was sold to public markets or had concentrated holders, and the interest rate. She also inquired about JBS's strategy for balancing Brazilian versus U.S. debt and the specific EBITDA metric (IFRS or U.S. GAAP) used for the 2.5x leverage target for year-end.

Answer

Guilherme Cavalcanti, Global CFO of JBS, stated that the Brazilian agribusiness receivables certificate was placed with both individual investors and bank treasuries, with the longest 40-year tranche at inflation +8% (dollar +6.2% swapped), within their investment grade bond curve. He noted that 10% of debt is in Brazilian reais, aligning with 12% of revenues, indicating limited room for more real-denominated debt. He confirmed the 2.5x leverage target uses IFRS EBITDA.

Carla Casella of JPMorgan Chase & Co. requested more detail on the Pet category, including shifts in channel mix, specifics on where market share was gained, the nature of retailer supply constraints, and any volatility in shipping rates.

Answer

CFO Jeremy Smeltzer acknowledged that the chews and treats category has seen declines due to consumer trade-downs but expressed optimism as pricing actions are now complete and the company is performing better against private label. He clarified that stop shipments materially impacted Pet sales and a key global retailer had its own warehouse constraints. He confirmed that shipping rates are now stable and on contract, with no major volatility expected.

Carla Casella of JPMorgan Chase & Co. inquired about the recent trends distinguishing new, reactivated, and core customer groups for QVC Group.

Answer

David Rollinson, QVC Group President and CEO, clarified that while the traditional customer count declined 12% year-over-year, this figure excludes over 100,000 new customers acquired through TikTok Shop. Including these customers would reverse the new customer metric from a 21% decline to a 7% gain. Rollinson also highlighted positive trends, including a 1% increase in spending by their best customers and a 100 basis point improvement in existing customer retention.

Carla Casella from JPMorgan Chase & Co. asked about second-half trade spend trends, the impact of asset sales on the foodservice mix, and the use of divestiture proceeds.

Answer

CEO Casey Keller anticipates a smaller increase in trade spend in the second half as the company laps prior-year promotional investments. CFO Bruce Wacha noted the asset sales have a minimal impact on the foodservice versus retail mix and confirmed that all proceeds from the divestitures will be used for debt reduction.

Carla Casella of JPMorgan Chase & Co. asked for the pro forma revolver balance after the recent debt redemption, whether working capital would be an outsized cash source in Q4, and if competitor pricing was forcing changes to B&G's Crisco pricing model.

Answer

CFO Bruce Wacha provided the components to calculate the pro forma revolver balance and confirmed Q4 is a strong cash flow quarter, though inventory reduction won't be as outsized as in 2023. He clarified that while competitor Wesson has been promotionally aggressive, it has not changed B&G's fundamental cost-plus pricing model for Crisco with customers.

Carla Casella from JPMorgan Chase & Co. inquired about the company's long-term leverage target, if the raw material mix changes significantly with the plastic-free packaging initiative, and whether efforts to de-risk from China involve moving production to their own facilities or to other third-party partners.

Answer

Executive Mark LaVigne stated the top priority is debt paydown with a goal of reaching a leverage ratio of 4x and below. He confirmed the raw material basket does not change dramatically with plastic-free packaging, as the bulk of the cost is in the battery components. He also explained that their sourcing strategy is a mix of bringing production in-house and using external partners globally to optimize costs and fulfillment.

Carla Casella asked for more detail on sourcing, specifically which key products are made in China or Mexico for Energizer or the industry. She also inquired about the M&A environment and whether acquisitions could be a pillar for growth.

Answer

John Drabik, EVP and CFO, specified that for Energizer, key products sourced from China include lights and some auto components like hoses and gauges, along with certain raw materials. Mark LaVigne, President and CEO, addressed M&A by stating that while the company keeps a pulse on the market, the near-term emphasis remains on debt paydown. He indicated that any potential deals would likely be small, bolt-on acquisitions rather than large-scale transactions.

Carla Casella asked for clarification on the previously mentioned holiday timing shift and questioned if there has been any change in retailer demands for marketing or trade spend as Energizer gains more shelf space.

Answer

CFO John Drabik explained that the holiday shift was a prior-year event that impacted the fiscal 2024 comparison by about 50 basis points and is not a factor for fiscal 2025. CEO Mark LaVigne added that there has been no meaningful industry-wide shift in retailer demands, stating that promotional programs are tailored to individual retail partners.

Carla Casella asked about the trend in early buyout activity during Q1, inquired about broader consumer behavior and traffic, and asked about the pipeline for new merchant wins at Acima.

Answer

CFO Fahmi Karam reported that early buyout activity increased year-over-year in both segments, particularly at Rent-A-Center, driven by tax refunds. He characterized the consumer as 'pretty stable,' with delinquencies flat to down and losses improving. Both Mr. Karam and CEO Mitchell E. Fadel confirmed that Acima's merchant pipeline remains strong, with continued regional wins contributing to its strong GMV growth and market share gains.

Carla Casella inquired about customer retention and any account losses related to the frozen griddle facility shutdown. She also asked about conversations with rating agencies regarding a potential upgrade from the company's CCC rating.

Answer

Chairman, CEO and President Steven Oakland stated that customers have been highly supportive and he expects the distribution base to remain neutral post-recall due to the company's transparency. EVP and CFO Patrick O'Donnell and CEO Steven Oakland both addressed the credit rating, emphasizing that consistent execution and low leverage are key, and that they believe the company's earnings power is viewed more favorably by lenders than the current rating reflects.

Carla Casella of JPMorgan Chase & Co. asked if channel mix, specifically the away-from-home channel, was driving margin improvement and requested the expected dollar impact from supply chain savings in Q4.

Answer

CFO Patrick O'Donnell clarified that margin improvement is a result of supply chain productivity, mainly procurement savings, not channel mix. CEO Steve Oakland added that the food service channel is a relatively small part of the business. O'Donnell did not provide a specific Q4 savings figure but confirmed the company is on track with its goals, pointing to the $20 million net benefit in Q3.

Carla Casella from JPMorgan Chase & Co. asked for insights on any observed shifts in consumer behavior between different retail channels and other notable consumer trends.

Answer

CEO Stephen Bratspies acknowledged that Hanesbrands' performance across different retail channels is relatively consistent with the broader macro trends, where some channels are outperforming others. He noted the company is well-positioned with winning retailers but did not provide specific performance details by channel.

Carla Casella of JPMorgan Chase & Co. asked about plans to address bonds maturing in 2026 and requested an update on the performance and potential sale of the Wella stake.

Answer

CFO Laurent Mercier confirmed that the company constantly works on its debt maturity profile and is looking at the 2026 bonds. Regarding Wella, he stated the business is performing well and the book value decline is due to accounting methodology. He reiterated that since the standstill period ended, Coty remains opportunistic and pragmatic about monetizing the asset.

Carla Casella asked about the company's plans for its 2026 bond maturities and requested an update on the performance and potential sale of its Wella stake.

Answer

Executive Laurent Mercier confirmed that the company is actively managing its debt maturity profile and is looking at the 2026 bonds. Regarding the Wella stake, he stated that the recent decline in its book value is an accounting result of interest rate changes, not a reflection of the business's performance. He reiterated that with the standstill period over, the company remains opportunistic about monetizing this asset.

Carla Casella asked about the company's debt paydown priorities, specifically whether they would focus on the revolver or consider refinancing the 2027 bonds. She also requested the current penetration rate of Performance Brands products.

Answer

CFO Patrick Hatcher confirmed that the immediate focus for debt reduction is the ABL facility (revolver), though they will also evaluate the 2027 bonds. CEO George Holm clarified that Performance Brands represent approximately 53% of sales in the independent restaurant channel and that while this figure will temporarily dip due to recent acquisitions, he sees long-term room for growth.

Carla Casella inquired about the impact of warm fall weather on inventory and potential clearance needs, and also asked about the company's import exposure to China regarding potential tariffs.

Answer

CFO Richard Westenberger acknowledged that warm weather slowed sales late in Q3 but noted the company made excellent progress clearing prior-season inventory. CEO Michael Casey stated that import exposure to China is now minimal, with less than 5% of finished goods sourced from the country, significantly mitigating potential tariff risks.

Inquired about the full-year credit card income expectations, the impact of the CFPB ruling delay, the magnitude of the inventory reserve charge on gross margin, and trends in underlying merchandise margins.

Answer

The company's credit outlook is unchanged, with the potential CFPB impact already factored into guidance. The Q1 gross margin pressure was about 200 basis points vs expectations, with half from timing (split between loyalty deferrals and inventory reserves). The inventory reserve impact will reverse with an inventory turn. Underlying merchandise margins were strong, driven by an increase in regular price sales.

Carla Casella questioned the drivers behind the higher-than-expected revolver draw, specifically related to inventory and receivables. She also asked for the company's current annual script count and details on the recent 25 store closures, including any market concentration and future closure plans.

Answer

Matt Schroeder, Executive VP and CFO, explained the revolver draw was influenced by a build in pharmacy inventory due to AWP inflation and timing-related increases in receivables from CMS and PBMs. He did not provide an annual script count. Regarding store closures, he described them as part of an ongoing performance evaluation process rather than a new large-scale program, and noted this evaluation will continue.