B&G Foods - Earnings Call - Q1 2020
May 5, 2020
Transcript
Speaker 0
Good day, and welcome to the B and G Foods First Quarter twenty twenty Earnings Call. Today's call is being recorded. You can access detailed financial information on the quarter in the company's earnings release issued today, which is available at Investor Relations section of bgfoods.com. Before the company begins its 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 the company's most recent annual report on Form 10 ks and subsequent SEC filings for a more detailed discussion of the risks that could impact the company's future operating results and financial condition. The company undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events, or otherwise. The company will also be making references on today's call to the non GAAP financial measures, adjusted EBITDA, adjusted net income, adjusted diluted earnings per share, and base business net sales. Reconciliations of these financial measures to the most directly comparable GAAP financial measures are provided in today's earnings release. Ken Romanzi, the company's President and Chief Executive Officer, will begin the call with the opening remarks and discussion various factors that affected the company's results, selected business highlights, and his thoughts concerning the outlook for the remainder of fiscal twenty twenty.
Bruce Wacha, the company's Chief Financial Officer, will then discuss the company's financial results for the first quarter as well as expectations for 2020. I would now like to turn our conference over to Ken.
Speaker 1
Thank you. Good afternoon. Thank you all for joining us today for our first quarter earnings call. I pray this finds you and your loved ones safe, healthy and weathering these most difficult times. We find ourselves in unprecedented and extremely volatile and uncertain times driven by the COVID nineteen pandemic.
But through it all, we at B and G Foods have maintained a steadfast commitment to our core values and strategic imperatives to ensure the long term success of our company and to make B and G Foods a more valuable company. During this crisis, every single decision we make is guided by our following priorities. and foremost, protecting the health and safety of our employees, assuring our usual high level of quality and integrity of our products, meeting unprecedented customer and consumer demand, helping our communities, and lastly making the right decisions and investments to ensure the long term financial health and success of B and G Foods when we emerge from this pandemic. On today's call, I will cover three topics. I'll discuss the actions we're taking during this unprecedented time to service all of our stakeholders.
I will provide a year to date update on our business. And later after Bruce's comments, I will provide perspective on our outlook for the remainder of the year. Consistent with our core values, the health and safety of our employees and the quality and safety of our products are our highest priorities. At B and G Foods, we have implemented a wide range of precautionary measures at our manufacturing facilities and all other work locations in response to the COVID-nineteen pandemic. Precautionary measures that B and G Foods has taken to protect our employees, customers, suppliers, and other business partners, and to maintain our abilities to supply food products include the following among many others.
the establishment of a COVID-nineteen task force consisting of top company executives and senior management in Min Bay, screening of all employees including temperature checks before entering our manufacturing facilities, enhanced sanitation procedures at all of our manufacturing and other work locations social distancing at all manufacturing locations, including the required wearing of masks the installation of plexiglass safety shield barriers at spots where line workers must work in close proximity, the staggering of shift times and breaks, the restructuring of break rooms, including separating lunch tables, marking chairs for socially distant seating, and the installation of plexiglass safety shield barriers at each table to maintain proper employee separation, Quarantine for at least fourteen days with pay of all employees who have either been exposed to COVID-nineteen or who are exhibiting any symptoms of COVID-nineteen. The notification of manufacturing employees of any COVID-nineteen positive tests at their location and the quarantining for at least fourteen days with pay any employee who may have had contact with the employee who tested positive manufacturing plant shutdowns for thorough sanitation upon any COVID-nineteen positive test with continued pay for employees and instituting a work from home policy for office workers beginning March 16 and as of this date until at least 06/01/2020.
We believe the early and aggressive actions we've taken in our facilities has helped keep our employees safe and productive with very few positive test results and no widespread infection. While employee safety is our highest priority, we are also aggressively managing our production to ensure that we can meet the unprecedented increase in demand from our customers. Our teams have been working tirelessly producing and delivering products to help maintain the nation's food supply with minimal disruption. Our manufacturing employees have been brave and agile in responding to rapidly changing market dynamics driven by rapidly changing consumer behaviors. Our frontline employees are true heroes during this pandemic.
And thanks to the tremendous effort of our employees, our ability to serve our customers has not to date been materially impacted. In fact, our customer service rate for March was strong, fulfilling more than 95% of all orders for both the month and for the last two weeks when the demand surge peaked. While that has declined with continued increased demand, our service rates have declined to just below 90% in April, we're pleased we're doing our part to keep the nation's food supply chain strong. This would not be possible without the hard work and perseverance of our amazing team here at B and G and our valued customers who continue to serve local communities during this difficult time. We are incredibly proud of how our team has responded to this unfortunate crisis, and we've rewarded our dedicated manufacturing employees by increasing wages for hourly employees by $2 per hour from March 30 through at least May 22 and provided supervisors and managers with bonuses of up to $500 during that time as well.
We are also very grateful for the recognition our employees are receiving from our customers who greatly appreciate the efforts our employees are doing to keep their shelves stocked. I would like to share an example of the type of feedback we've been receiving from many of our retail partners. The following are just some highlights of a recent note we received from a top customer. Quote, I just wanted to send you a note touching upon the true value your team has provided us over the past month as we work through the availability of products for the customers that shop at our stores. Your employees' over and above commitment to give me the most up to date visibility from the trenches has been awesome.
The work your team has done has been best in class, unquote. At B and G Foods, we have always prided ourselves on the can do attitude of our employees and their willingness to outwork the competition. It has been such an amazing experience to see the tremendous results our team has delivered and see these efforts recognized real time by our customers. All of these efforts generated very positive results for the first quarter. While the onset of the COVID-nineteen pandemic has been traumatic in its human and economic cost, the measures that we have taken as a society to combat it, particularly with regards to social distancing and staying at home, has led to a significant increase in Americans and Canadians preparing and eating their meals at home.
And we expect this trend will continue at some level for an extended period of time. Our B and G Foods portfolio has been constructed to include a stable of over 50 brands with solid positions in the categories in which they compete. And while some have questioned the health of center store and even frozen vegetable brands, these are our foundation at P and G Foods and just the trusted products that consumers have turned to in a time of crisis. As you likely saw from our earnings release earlier today, we reported net sales of $449,400,000 for the quarter, an increase of more than $36,000,000 or 8.9% compared to last year. We delivered adjusted EBITDA of $80,700,000 for the quarter, an increase of nearly $5,000,000 or 6.5% compared to last year despite being negatively impacted by foreign exchange to the tune of $1,900,000 We reported net cash provided by operating activities of $57,600,000 an increase of nearly 15% compared to last year.
As we highlighted on our last earnings call, we initially had modest expectations for the first quarter. In January and February, we continued to work with our retail partners to execute our trade optimization strategy during the non holiday season promotional calendar, which resulted in softer top line performance to start the year, although it was the right thing for the business. By early March, sales were back on track, and we began to build momentum as we headed toward the Easter holiday. During the March, we quickly realized that we were in a very different environment following the outbreak of the coronavirus. At that point, we immediately shifted gears and began to task our supply chain to ensure we keep our employees safe while at the same time ramping up production to ensure that we were doing the best that we could to satisfy what would become unprecedented demand for our products.
In fact, the March was the strongest sales week in B and G company history with more than $65,000,000 in net sales. We experienced strength in almost all of our brands, but especially Green Giant, Ortega, Cream of Wheat, Clabber Girl, E and M, Bear Creek, Victoria, and Underwood. Contrary to some belief that consumers were only pantry loading for the long term, consumers have been consuming a large percentage of the increased volume, driving continued strong performance throughout the month of April, with our net sales increasing more than $70,000,000 or more than 60% ahead of last year for the four weeks ending April 25. Now while we don't expect to see the same level of outperformance in the second quarter and long term, our open orders through the May show similar growth as April. This outsized sales performance was driven by strong retail consumption in the quarter.
Consumption as reported by Nielsen Services for all of B and G Foods increased 12% for the thirteen weeks ending March 28, driven by a strong five week March of plus 44%, and specifically driven by the last two weeks of March by plus 87%. In fact, for the week ending March 21, consumption of all B and G food products more than doubled at 122% versus last year. Several of our brands doubled or nearly doubled their year ago consumption for the entire month of March, including Green Giant and Leisseur canned vegetables, clavagrel baking powder, B and M baked beans, Underwood, Victoria, and McCann's. Total B and G foods consumption trends have continued very strong in April with the four weeks ending April 25 up nearly 41% versus last year. B and G Foods is largely a North American retail oriented business with a portfolio with distinct advantages in this current environment.
These strong consumption trends are a testament to the popularity and consumer trust in our brands and their utility as consumers prepare more meals at home. However, we have experienced softness in our food service business which represents approximately 13% of our net sales in 2019. We expect that our food service sales will remain challenged as people continue to shelter in place and their away from home eating options remain limited. Some of the businesses mostly impacted by the decrease in food service sales include our spices and seasonings business, B and G brand, Dom Pepino, and Maple Grove Farms. While our overall business is trending very strong, we do recognize brand building and innovation remain critical pieces to our long term success.
And while the innovation we plan to introduce this year will be delayed somewhat due to the retailer movement of reset timing and the manufacturing focus on getting existing products to the shelf we plan to step up investment against our new products to ensure their success. Any loss in sales from delayed resets and other innovation delays will be more than made up in the current consumption trends of our stable of core brands like Green Giant canned and frozen vegetables, B and M, Bear Creek Soup Vixes, Folano All Fruit, Victoria Pasta Sauce and Underwood. Our largest innovation is in Green Giant frozen vegetables where we will continue to launch that we began in the fall of twenty nineteen with Green Giant Pizza with Cauliflower Crust, Green Giant Veggie Hash Browns, Green Giant cauliflower gnocchi, and Green Giant cauliflower breadsticks, which are already in distribution in an average of 40% of the ACV and performing very well there. In addition, we are very excited about our recent Farmwise acquisition as we expect it will add fuel to our Green Giant innovation pipeline as well as provide us a brand name more appropriate for the natural channel. This fall we plan to leverage this acquisition of Farmwise by introducing Green Giant Veggie Fries in innovative new varieties including zucchini garlic parmesan, cauliflower ranch and bacon, and broccoli and cheese, along with a totally new product called Green Giant Veggie Rings, our cauliflower based take on onion rings.
These will come in varieties such as cauliflower French onion and cauliflower three cheese and bacon. Regarding the Farmwise brand, we plan to relaunch the brand in the natural channel plus a few current mainstream retail customers later this year as well. On the grocery side of the business, we will continue to launch a shelf stable version of Green Giant Rice Veggies, a nutritious alternative to traditional dry rice made from 100% plant based legumes like lentils, sweet peas, and chickpeas. Retailer acceptance of this innovation has been very good, and we expect to be in 30% of the ACV by year end, less than anticipated due to category resets being canceled or delayed due to COVID-nineteen, but building throughout 2021 with a targeted goal of 65% ACV. Not to be outdone by Green Giant, the Ortega brand is moving ahead with its introduction of cauliflower taco shells and cauliflower tortillas as well as a line of street taco sauces.
These new products have been very well received by our customers with many of them saying it's the real innovation they've seen in the category in quite some time. We expect to achieve an average 30% ACV distribution by year end, also less than anticipated due to delayed category resets. But we expect this will continue to build in 2021 with a goal of 75% ACV. Another area in which we will make additional investments this year is in e commerce. We estimate our e commerce sales at less than 1% of our business.
And although it really has taken off this past quarter, growing more than 100% on Amazon alone, we know we need to catch up to many of our competitors in this space. By the end of twenty twenty, we plan to make significant progress in building our e commerce capability by completing the foundational work needed on our digital imaging, content and product data, improving our product offerings with innovation and e commerce friendly packaging, and improved data compliance. We will combine this with a greater investment in internal resources including marketing, sales and supply chain personnel along with increased investments to build out our e commerce shopper marketing program including branded stores, banner ads, social media links and search engine optimization amongst other activities. Lastly, B and G Foods has long been a supporter of the communities in which we live and work. And that has only accelerated during this time of crisis.
In addition to our partnership with St. Jude's Hospital, we've established relationships with Feeding America and No Kid Hungry, and are using our electronic billboards in Times Square, New York, along with our social media channels to help raise awareness for these very important charitable causes. In summary, Bingy Foods has so far successfully managed through these very trying times by keeping focused on our highest priorities, executing the plan with which we entered the year, and then quickly exercise the adaptability and determination for which our company is known to respond to an unprecedented time in our country and our world. I am extremely proud of our employees and I'm confident they can continue their terrific performance going forward. I will return later to provide perspective on our path forward to our first quarter in more detail and thoughts about the remainder of the year.
Bruce?
Speaker 2
Thank you, Ken. Good afternoon, everyone. I hope that you and your families are staying safe and healthy. Before I begin, I would also like to add my own thanks to our incredible team of dedicated employees across all of B and G Foods for their hard work during this time. As Ken mentioned earlier in the call, while the onset of the coronavirus has been traumatic in its human and economic costs, the measures that we have taken as a society to combat it, particularly with regards to social distancing and staying home, have led to a significant increase in Americans preparing and eating their meals at home.
And this is something that we expect to continue at some level for an extended period of time. We constructed our portfolio of brands over time to include a broad range of shelf stable products and frozen vegetables. These are exactly the types of brands and products that consumers are gravitating to in the current environment, and we are happy to be doing our part to help feed America. Not surprisingly, given this backdrop and our portfolio of brands, we had a very strong finish to the first quarter of twenty twenty, with outsized growth in March in terms of net sales and adjusted EBITDA. This was driven by the final two weeks of the month, which had frenzied demand for our products and coincided with the establishment of the country's social distancing policies, stay at home mandates, and the shutdown of large portions of the economy.
We have seen this heightened demand for our products continue throughout April and into the May. In the first quarter of twenty twenty, we reported net sales of $449,400,000 adjusted EBITDA of $80,700,000 and adjusted diluted earnings per share of $0.46 results that are far greater than we have expected in the beginning of the year. Adjusted EBITDA as a percentage of net sales was 18% for the quarter, which is in line with our expectations for the quarter and for the year. We were negatively impacted by about $1,900,000 in FX for the quarter, as well as some discrete incremental spending associated with coronavirus preparedness that I will walk through a little later on the call. Absent these costs, we would have generated a little bit more than $83,000,000 of adjusted EBITDA and approximately 18.5% in adjusted EBITDA as a percentage of net sales.
Net sales for the quarter represented an increase of $36,700,000 or 8.9% versus the year ago period. The acquisition of Clabber Girl in May of twenty nineteen benefited the company and contributed approximately 18,700,000 to the first quarter of twenty twenty net sales. Base business net sales, which excludes the impact of M and A, increased by $17,800,000 or 4.3%. First quarter twenty twenty net sales benefited by approximately $9,200,000 from net pricing, inclusive of the wraparound benefit of our spring twenty nineteen list price increase and our trade spend optimization program. These pricing benefits were complemented by approximately $8,200,000 from increased volumes in our base business.
As a reminder, while we are seeing a tremendous benefit from increased consumption following the onset of the coronavirus, we really only began to see these benefits in the final two weeks of the quarter. Green Giant led our performance with net sales increasing by $22,200,000 or 16.3% in the quarter. We saw outsized growth in net sales of both our frozen and shelf stable Green Giant products. Frozen growth was driven by our core legacy frozen bag and frozen bag in a box lines, as well as our innovation products. Frozen innovation net sales growth was primarily driven by our power innovation SKUs, as well as Green Giant Rice Veggies and Green Giant Veggie Spirals, while many of our twenty twenty innovation launches have been delayed as a result of the turmoil that is occurring in the grocery aisles, as our retail partners are focused on keeping their largest and fastest turning items on the shelf.
Among our other large brands, Victoria was the leader and increased net sales by $1,900,000 or 17.4%. New York style had another strong quarter, and net sales increased by $1,000,000 or 11.1%. Cream of Wheat increased by $1,500,000 or 8.7%. Ortega increased by $1,500,000 or 4.1%. Maple Grove Farms increased by $05,000,000 or 3%.
Net sales for our spices and seasonings business, inclusive of the business that we acquired in 2016, and our legacy brands such as Dash and Accent were down significantly. Unlike the majority of our business, spices and seasonings has a significant food service weighting, and these sales were negatively impacted by the coronavirus and the resulting shutdown of large portions of the American economy. This is the one significant area of our portfolio where we have seen a negative drag on performance, and not surprisingly, net sales were down $12,900,000 or 15%. Clabber Girl, which we acquired in mid May twenty nineteen, also performed exceptionally well. As I mentioned earlier in the call, clabigrel generated $18,700,000 in net sales during the first quarter.
And while we didn't own the business at this point last year, and that's all of the sales are purely incremental, the business generated approximately $15,000,000 in net sales under the prior ownership's watch during the same time period last year. I would also like to highlight our quarterly net sales performance for some of the other brands in our portfolio. B and M, which increased net sales by $1,700,000 or 49%, had outstanding performance in the first quarter. Net sales of McCann's Irish Oatmeal increased by $700,000 or 20.9%, as that brand continued to build momentum since our acquisition. Others, such as Las Palmas, increased net sales by 1,100,000 or 12.3%.
Mama Mary increased net sales by $900,000 or 12.8%. And Underwood increased net sales by $700,000 or 13.2%. Gross profit was $104,900,000 for the first quarter of twenty twenty, or 23.3% of net sales. Excluding the negative impact of approximately $2,300,000 of acquisition, divestiture related, and non recurring expenses during the first quarter of twenty twenty, gross profit would have been $107,200,000 or 23.9% of net sales. Gross profit was $88,100,000 for the first quarter of twenty nineteen, or 21.3% of net sales.
Excluding the negative impact of $13,100,000 of acquisition divestiture related and non recurring expenses during the first quarter of twenty nineteen, gross profit would have been $101,200,000 or 24.5% of net sales. Selling, general, and administrative expenses were $40,000,000 in the first quarter of twenty twenty, or 8.9% of the quarter's net sales, up slightly in dollar terms, but a decrease as a percentage of net sales. Selling, general and administrative expenses were $38,300,000 in the prior year quarter, which was 9.3% of net sales, or an improvement of almost 50 basis points. The dollar increase was composed of increases in selling expenses of $2,000,000 and general administrative expenses of $1,700,000 partially offset by a decrease in M and A and non recurring expenses of $1,200,000 consumer marketing of $05,000,000 and warehousing expense of $300,000 We generated $80,700,000 in adjusted EBITDA in the first quarter of twenty twenty, compared to $75,800,000 in the prior year period. The increase of $4,900,000 in adjusted EBITDA represents our consecutive quarterly increase in adjusted EBITDA, which follows our finally lapping the one year anniversary of the divestiture of Pirate Brands in the fourth quarter of last year.
Adjusted EBITDA as a percentage of net sales was 18% for the first quarter of twenty twenty, which is consistent with our performance last year and our expectations for full year 2020. While we are seeing unprecedented growth in net sales and representative increases in adjusted EBITDA, we haven't necessarily seen an outsized increase in margins from the incremental sales, driven by some of the incremental costs associated with the coronavirus. For example, we have engaged in precautionary screenings for factory workers, enhanced cleaning of our facilities, and we are paying additional compensation for our factory workers. Additionally, we had an increase of nearly $2,000,000 related to transactional losses related to FX during the quarter, which helped to depress our profits. Absent these charges, we would have delivered a little bit more than $83,000,000 in adjusted EBITDA and approximately 18.5% in adjusted EBITDA as a percentage of net sales.
While we expect elevated costs associated with operating in the age of the coronavirus throughout the rest of the year, we also expect operating leverage of our increased net sales on our corporate structure and enhanced utilization in our factories to largely offset these costs. Net interest expense was $26,000,000 in the first quarter of twenty twenty, an increase of almost $3,000,000 that was largely expected over the prior year period. Net interest was negatively impacted during the quarter, primarily due to incremental borrowing used to fund our acquisition of Clabber Girl, as well as our share repurchases last year and the higher cost of debt associated with last year's refinancing of
Speaker 1
our
Speaker 2
four fiveeight notes. Additionally, we have also drawn on our revolver, and we were sitting on more than $125,000,000 in cash at the end of the quarter as a precautionary measure, which, while the right decision to take for the company, has involved an increase in our interest expense. Separately, we do expect to see some benefits in the back half of the year as a result of lower interest rates, which should help create favorable result for us with regards to our term loan that carries a rate of LIBOR plus two fifty basis points. As a reminder, LIBOR was at approximately 2.2% when we placed our term loan last year, compared to approximately 1% today, or 120 basis points cheaper. We generated $0.46 in adjusted diluted earnings per share in the first quarter of twenty twenty, compared to $0.44 in adjusted diluted earnings per share in the prior year period, benefiting from improved operating performance, a lower effective tax rate, and a reduction in our share count.
Cash generation was strong for the first quarter of twenty twenty, as expected, with $57,600,000 in net cash provided by operating activities versus $50,300,000 in the first quarter of twenty nineteen. The unprecedented demand for our products in the final two weeks of the quarter led to a greater than expected decrease in inventories, with inventories decreasing from 472,200,000 at the end of fiscal twenty nineteen to 399,200,000.0 at the end of the first quarter. This benefit was offset in part with an increase in accounts receivable, particularly for those sales at the very end of the quarter, to 200,600,000.0 from 143,900,000.0 at the end of fiscal twenty nineteen, and compared to 162,800,000.0 at the end of the first quarter twenty nineteen. Finally, it should come as no surprise for longtime followers of D and G Foods that our management team and our board of directors remain committed to our longstanding dividend policy, And during the first quarter, on 02/24/2020, our board of directors declared B and G Foods 60 consecutive quarterly dividend in the amount of 47.5¢ per share. Now, I would like to touch on our expectations for fiscal twenty twenty.
As you know, the guidance that we issued a little more than two months ago, on February 25, called for net sales to be in the range of 1,660,000,000.00 to $1,680,000,000 adjusted EBITDA to be in the range of $302,500,000 to $312,500,000 and adjusted diluted earnings per share to be in the range of 1.6 to $1.8 Based on our results through today, we expect to materially exceed that guidance for 2020. We also believe that improving P and L results will drive increased cash flows and help us to accelerate the deleveraging of our balance sheet. However, the ultimate impact of the coronavirus on our business will depend on many factors, including among others, the duration of social distancing and stay at home mandates, and whether a or wave of coronavirus will affect The United States and the rest of North America, our company's ability to continue to operate our manufacturing facilities and maintain our supply chain without material disruption, and the extent to which macroeconomic conditions resulting from the pandemic and the pace of the subsequent recovery may impact consumer eating habits. At this time, we are unable to fully estimate the impact that the coronavirus will have on our company's second quarter, third quarter, and full year fiscal twenty twenty results, and therefore, we are unable at this time to provide guidance for the remainder of 2020.
We do, however, expect our performance to be strong for the remainder of the year. We had our strongest finish to the quarter ever, and that momentum has continued into the second quarter, with April net sales through the week ending April 25 increasing by more than $70,000,000 or more than 60% as compared to last year, and we expect continued outperformance. Early indications suggest that net sales in May will also be quite robust and materially larger than net sales in May of twenty nineteen. We have continued to generate substantial cash from these incremental net sales as we work our way through the second quarter, and our cash position has increased from approximately $127,000,000 at the end of the first quarter to approximately $200,000,000 today, even after taking into account the $30,000,000 quarterly dividend payment we made last week. That being said, and based on everything that we know right now, we assume that our outperformance may have peaked as stay at home restrictions are starting to lessen and markets are starting to reopen in certain parts of the country.
We don't know the pace as to which consumers will begin to return to eating some of their meals away from home, But we expect the hyper growth in net sales we are seeing today to moderate over time as stay at home restrictions and work from home policies evolve. However, based on our experience with previous economic crises and downturns, we expect to see modest growth continue with a meaningful and lasting shift from away from home consumption to at home consumption that will persist for some time after the economy reopens. Due to the likely economic downturn that is broadly anticipated at this point. We also expect to see this shift benefit B and G Foods, given our heavy portfolio weighting towards U. S.
And Canadian traditional retail grocery. Also, we have a portfolio of great tasting, high quality branded foods. One of the key focuses has been to support our brands and our retail partners, leveraging our supply chain and logistics expertise to keep our products on the shelves and maintain historical fill rates as best we can, demonstrating to our customers our importance as long term partners. While this is of utmost importance, we have also been focused on our end users and improving their consumer experience. We have seen tremendous demand from long term consumers of our products.
We are also seeing new consumers and increased trial during this period of heavy consumption, and we believe this will translate into increased demand over time. We certainly believe that we will come out of the coronavirus period better positioned to grow our business, reduce leverage, and generate value for our shareholders. On the other side of the coin, we do have some factors that could limit our performance. We are currently selling everything we can produce for most of our brands. Our factories are running full steam ahead, as are those of our co packing partners.
We are also working with our suppliers, particularly with regards to our seasonal pack that supports Green Giant, so that we can really lean in from a production standpoint and satisfy all of this demand. And as Ken mentioned earlier, thanks in part to the precautionary measures we have taken and the cooperation of our manufacturing and other employees in adhering to those policies, together we have been able to help flatten the curve and keep each other safe, and we have been blessed with limited disruptions to date to our supply chain, both in terms of manufacturing and distribution, and more importantly, very few coronavirus tests. We do expect to continue to invest in our manufacturing facilities and our dedicated manufacturing employees at this very difficult time. And we also expect to reinvest some of our incremental proceeds in additional consumer marketing and an acceleration of our e commerce readiness efforts. So while we do not know how long this unprecedented increased demand for our products will last, and while there are risks associated with operating in this unprecedented environment that could cap our upside performance, and while we also plan to make incremental investments in brand building and e commerce preparedness that we will look to fund with our anticipated incremental cash flows, we do believe that we will materially exceed the guidance that we provided to you just two months ago.
We look forward to providing in the coming months additional insight as to our plans and expectations for the remainder of the year, as we get a better understanding of the extent to which the coronavirus resulting societal changes will impact our full year results. I would now like to turn the call back over to Ken.
Speaker 1
Thank you, Bruce. While the coronavirus pandemic is still evolving, we believe that the foundation we have built at B and G Foods has positioned us to come out of the crisis stronger than we entered it. As Bruce mentioned, we believe we will have elevated financial performance throughout the crisis and beyond as consumers gravitate toward our products while cooking and eating more at home. We also plan to take this opportunity to make incremental investments behind brand innovation and ecommerce preparedness. We are optimistic because we believe that the increase in consumers eating at home is resulting in trial among a new set of consumers we were not reaching previously.
Our consumer research has uncovered encouraging news regarding bringing new consumers into our franchise. We believe new households are like a fountain of youth to food brands. And our research shows that the percent increase in total brand buyers due to new buyers since the COVID-nineteen outbreak ranged from fifteen percent to forty five percent amongst B and G food brands. As a result, we're seeing a significant increase in volume from new buyers, increasing by an estimate of between 14% to 53% across our brands. Encouragingly, new brand buyers during this time indicate they have a strong appetite to continue buying our brands as the repurchase intent or the percent of new buyers who plan to buy again range from 40% to 82% among our brands.
So going forward, our job's very clear. We must work hard to retain as many of these new households as possible. So we're optimistic about our outlook for 2020, powered by changes in consumer behavior, our stable of time tested and trusted brands ideal for preparing meals at home, and the strength, flexibility, and commitment of our employees to excel even during these most difficult times. We look forward to updating you on our progress over the course of the year. In the meantime, I pray that all of you and your families and friends remain safe and healthy.
This concludes our remarks today. And now we'd like to begin the Q and A portion of our call. Operator?
Speaker 0
Certainly. We will now begin the question and answer session. Our question comes from Andrew Lazar of Barclays. Please go ahead.
Speaker 3
Good afternoon, Ken and Bruce. Glad to hear you're doing well.
Speaker 2
Thanks, Andrew. Thank you.
Speaker 3
I've got two questions, if I could. The one is more of a quick one. I know that you had mentioned that overall consumption in 1Q, I think, was up 12% or so. And that was a little ahead of overall sales growth and obviously well ahead of the organic increase of a little over 4%. I was hoping you could just kinda bridge those those two for us a little bit.
I don't know if there was, you know, any inventory drawdown, you know, ahead. I guess in any couple week period, you could have differentials, obviously, between consumption shipments due to retailer inventory levels. And then I've just got a follow-up.
Speaker 1
Well, we didn't really see any inventory. Sorry. Go ahead, Ken. Go ahead.
Speaker 2
Yeah. Part of it also, Andrew, is we saw massive sales in April, and so there may be a little bit of a timing as you referenced. So we had, as Ken mentioned on the call, our busiest week ever to close out March, and then just continued strong demand through April. I think it just is a matter of shipments catching up. Okay.
Then maybe
Speaker 1
more Also shipments just also, shipments would have lagged a little bit on consumption because although not a big part of our business, our food service business, as as we mentioned, was very soft and and started out the year very strong, and then in March, really, was soft and continues to be soft. So that would would be a driver of the of the shipment number of our total business net sales number growth being less than our consumption growth.
Speaker 3
Got it. And it's interesting, you know, from from what we're hearing, I assume the same is is true for you guys, is that, you know, obviously, retailer inventories are also incredibly low, like, by any historical measure, just given, obviously, you know, they're shelving everything they basically have. So anyway, it'll be interesting as as time goes on if, you know, people are worried about some big, sort of, you know, pantry unwind or something even though there's clearly consumption happening with people at home. One would think retailers are gonna have to restock inventory at some point as well. And I don't know, maybe even have to reappraise what an ongoing level of inventory might look like going forward.
But I assume that's your your levels of of retail inventory at this stage are also very low.
Speaker 1
We you know, you're right. We don't we don't expect there's gonna be a pantry deloading to a great degree because of how frequently we're seeing consumers come back and research that shows that, you know, most people are, a very, very high percentage of people based on research we've heard are coming back within two weeks. So not staying out of the grocery store for long periods of time. And and just our continued strong consumption and order rates through April and May, we don't think people are the data doesn't suggest that all they're doing is stocking their pantry.
Speaker 4
There was probably a little
Speaker 1
bit of that in that spike in March, but there's, in mid March. But since then, it's been pretty consistent.
Speaker 3
Yeah. I mean, more interesting, I think, is is and I appreciate your your commentary towards the end of your prepared remarks around sort of trial and and repeat, because I think that's really gonna be interesting to track for a lot of the packaged food brands that are getting all this trial, as many of yours are, and how successful you and others can be in converting even some portion of those new trialers, if you will, into more permanent consumers. Can you and you went through a couple of numbers pretty quickly, but I was hoping you could just cover that a little bit more. Just, you know, where I guess where does that data sort of come from? I assume it's just sort of panel survey type data of consumers.
And and, you know, how do you how do you parse out how much of that is consumers that are still in a current mindset, if you will, of sort of all things pandemic versus maybe when we're in a more normalized sort of environment, what the repeat could look like? So any comments there would be really helpful.
Speaker 1
Well, some of the data came from party sources, but some of it also came from our own consumer research that we didn't do new this time. It's something that we do ongoing. So it was the interesting and very encouraging news was that during the Easter period, for instance, we usually see a jump in households given the brands that tend to drive higher seasonality during that time frame. But we saw even bigger increases this year than we've ever seen in the past. So the the it's encouraging because anytime you can get new new households that's a very hard thing to do.
And anytime you can get new households, just retaining some of them should have a positive impact. So while while the well, we certainly won't project out the sales growth rates, that we're seeing now. We we, you know, we we wanna closely monitor this so that we can get you know, when things return to, quote, normal or quote unquote normal, we're going to have to include this in our brand forecasting going forward.
Speaker 3
Great. Okay. Well, thanks very much. Stay well.
Speaker 1
It's just like a new product, you know? You take take a new product and you measure trial and you measure repeat, and you project out what the volume can be. You know? So a new household on an old brand, that's like a new product. So we really have to kind of apply those those consumer marketing disciplines to to determine the long term effect on the brands.
Speaker 3
Thank you.
Speaker 0
Our next question comes from David Palmer of Evercore ISI. Please go ahead.
Speaker 5
Thanks and good evening. Your comments about April growth of 60% and similar growth based on the orders for May, that's obviously pretty remarkable stuff. It looks like you've swung from undershipping consumption by eight points or so based on your numbers to outshipping consumption just based upon some of the consumption numbers that we saw for April. Might be twenty, thirty points light of the type of growth that you're seeing in terms of your shipments. Although if we were to spread that over the quarter, that might be more like 10 points, whatever.
But as you said, May continues to be very strong on the demand for shipments. So do you see shipments outpacing consumption at this point? And how do you think why do you think that is? And where do you see this quarter playing out in terms of how you're going to end with retailer inventory? And I have a follow-up.
Speaker 1
I think you have to be careful. The numbers don't always match exactly because not all of the business is measured by the consumption numbers. You have to look at them over time. So you can't you can't pinpoint exact numbers. Keep in mind, if you if you listen to my carefully to the numbers, we we shipped over 60% growth in April, and our order fill rate dropped below 90%.
We could have shipped a lot more if we if we had our historical 98.5984% order fill. So the the the demand is really there, and and you can't look at one month and have the same exact numbers between shipment and consumption. There are shipments that go to unmeasured channels and or unmeasured customers. And and, of course, the the food service the food service element I talked to before has has the opposite effect on that. So so far with the you know, that's why we're so so I mean, we're we we don't believe this will last forever, but we are so attentive to what's happening with our order patterns and our open orders and how we can see them now into the May as of today, and and they remain strong.
So we're we're you know, our our own inventories have been dramatically depleted. So we're, as Bruce said, we're producing everything we can sell. And when things slow down, we'll actually have a chance to rebuild some of our inventory to rebuild our our customer fill rates to the traditional high 90s like we normally want to do. But right now, we're producing everything we can to meet this spike in demand that continues.
Speaker 5
And then thanks for that. And then just two quick ones in terms of how we should think about our modeling going forward. You talked about the $70,000,000 of revenue growth in the month of April. If we were just to say round numbers, so you know it's not going be this number, but you had $100,000,000 of new sales or of incremental sales in this quarter. Should we think of that being EBITDA of 19,000,000 to $20,000,000 or something like that, which would be similar to your EBITDA margin in the past?
Bruce, you made a comment about incremental costs being offset by the leverage. So hard to believe that at that type of sales, wouldn't get even with a co packer model in a larger part of your business, wouldn't get some leverage that would outpace your costs. So any comment on that? And then thinking about free cash flow conversion of EBITDA for this year, how would we think about that for 2020? Anything unusual that you would think would impact that?
And I'll pass it on. Thanks.
Speaker 1
I'll let Bruce in more But I'll let Bruce answer in more detail. But to be clear, we do about half of our business through co packers. We do not see volume leverage with our co packers. Our rates, you know, to a great extent. So about half of our business that is doing well on our own manufacturing, we do expect to see to get leverage off of that volume and the incremental margin off of that volume.
But there as Bruce mentioned, there are higher costs. So, you know, it's we're it's a it's a really unprecedented time right now to pinpoint that. But we will have materially increase in sales, we will have margin that will cover a lot of those increased costs.
Speaker 2
To Ken's point, I I think if we were in that eighteen, eighteen and a half percent margin area, we would be happy because it means things are going well. And from a cash standpoint, the cash should follow the sales. We're always pretty efficient from a cash flow standpoint. As as I said on the call earlier, we finished the first quarter with a little bit more than a $125,000,000 in cash. We were sitting on a little somewhere around $200,000,000 today in cash, and that's after paying our dividend payment.
Speaker 1
K. Thank you.
Speaker 0
Once again, if you have a question, please press then 1. Our next question comes from William Rauter of Bank of America. Please go ahead.
Speaker 6
Hi. This is Mary on for Bill. Thanks for taking my question. just on private label, the environment. Have you seen any shift towards or away from private label?
And do you expect that their share may increase as consumers become more focused on value?
Speaker 2
I think we've been in that mid to high teens private label as a percent of of US grocery for some time, and and, you know, there's increased demand for private label, there's increased demand for branded food, and and people are eating at home. And I think we should expect that to continue.
Speaker 6
Got it. And then lastly, how are you thinking about, timing as far as repaying your revolver balance?
Speaker 2
I think we're watching how the world evolves. We drew down a little bit on the revolver as a precautionary matter as as the whole coronavirus started to sweep through, and we're gonna continue to monitor things just to be on the safe side. Our revolver is fairly cheap. We're l plus $1.75 from a cost standpoint.
Speaker 6
Okay. Thank you very much.
Speaker 1
Our
Speaker 0
next question comes from Brian Hunt of Wells Fargo Securities. Please go ahead.
Speaker 4
Thanks for your time and thank you for the script, very detailed. My question is, have generated a significant amount of excess cash. If I think about discretionary cash, but it's in the month of April, it's over $100,000,000 Is there any way you could put some bands around the incremental spending you plan on doing to develop your e com as well as the heightened marketing you planned on you plan on putting some incremental cash to work in, you know, kinda given the windfall you're seeing today? I
Speaker 2
think from a timing standpoint, we're gonna let the year build and continue to generate that cash. I don't think it's gonna be in a material where it's gonna hurt margins necessarily, but we do see an opportunity as we work through the year to continue to invest in our brands, continue to develop our ecommerce capabilities, and we think it's a good opportunity to do so while we're benefiting from this increased demand.
Speaker 4
Okay. And my and my question is, you know, do you see any opportunities to put money to work on CapEx to improve your throughput in the very short term and or take advantage of high return opportunities that you may have given that, again, you have a cash windfall? And could you remind us what your CapEx guidance is for the year? Yeah. CapEx.
CapEx was
Speaker 2
$45,000,000 with our guidance. That's probably still a fair number, and that probably has some of those investment opportunities in there. If you think about the last couple years, we were implementing our ERP system, and so that's largely done. And so we're already planning on putting some money to work from a growth standpoint anyway. Feel pretty good about that number.
Speaker 1
Yes. Our plan also included our plan also included investments to, to drive efficiency and throughputs in our facilities. But in a specific answer to your question, there are no short term things that we can turn on a dime to do. Normally, things are pretty long lead time projects. So we're staying with our capital plan as indicated with some minor variations to where we can, but nothing major.
Speaker 4
Alright. Ken and Bruce, you stay healthy and thanks for your time. Best of luck. Thanks.
Speaker 1
Thanks so much. You too.
Speaker 0
Our next question comes from Karru Martinson of Jefferies. Please go ahead.
Speaker 7
Good afternoon. Just on the foodservice part, the 13% of sales, where are you on that today? I mean, is that grounded down to zero? Or are we still seeing some throughput on that?
Speaker 2
Not zero. We still are seeing food service sales, but certainly you saw it with our spice business. It was down. And I think that you know, that'll come back as people start to go back to work, go back to restaurants, and get out of the stay at home. And so for us, it's a small part of the business.
So we're getting the large benefit from a retail branded grocery standpoint, and a little bit of a drag from a food service standpoint.
Speaker 7
Okay. And just wondering, in terms of the investments that you're making, today is Cinco de Mayo, Ortega would have had a great opportunity to sell through. Where are you reallocating marketing dollars here on the front end that may not be invested given that the demand is so strong?
Speaker 1
Well, we certainly took part in the Cinco de Mayo promotions with many retailers with Ortega. Participated in that like it normally does. We did hold back some dollars when it was where we could because there was driving demand even higher when we were seeing order fill rates decline was not something. So we'll take those dollars and reapply them mostly in the half of the year as well as some incremental investments. Mostly just getting ready on e commerce and accelerating a timeframe we were already planning for this year, as well as supporting the innovation.
Since we're launching it later, we'll be putting a little bit more of the awareness and trial efforts against the Green Giant and Ortega innovation in particular.
Speaker 4
Thank you very much, Appreciate it. Thanks, Kare.
Speaker 0
Our next question comes from Carla Casella of JPMorgan. Please go ahead.
Speaker 8
Hi. Just a couple of little follow ups on the prior questions. Can you tell us how much of your foodservice customers are you know, have their locations closed versus they're just operating on a limited basis?
Speaker 2
Most of our food service customers are are the large institutional guys.
Speaker 8
Okay. And then it sounds like the cost increases from the bonuses you pay and the extra spacing, etcetera, it sounds like the you you do expect the sales windfall to more than offset those increased costs. Is that the right way to read it?
Speaker 2
From a from an incremental EBITDA dollar standpoint, yes. From a margin standpoint, not necessarily. Maybe a little.
Speaker 8
Right. Okay. And then are there any of your the non foodservice customers or or the foodservice customers where you have a concern or or, you know, bad debt expense concerns? Nothing material.
Speaker 2
Not nothing material. I mean, obviously, the March, we were watching things pretty carefully in early April, but, you know, people seem to have been able to maintain their businesses.
Speaker 8
Okay, great. The rest of my questions were answered, so thank you so much for the time.
Speaker 2
Thank you. Thank you.
Speaker 0
Our next question comes from Rob Dickerson of Jefferies. Please go ahead.
Speaker 9
Hi, good afternoon. It's Matt Fishbein on for Rob. Thanks for the question. A quick one to follow-up. Hey.
Sorry if I missed it, but did you give a dollar amount of the incremental costs related to the COVID-nineteen situation in the quarter? And how much of these would you consider nonrecurring? Some of these costs, like the incentives, they sound like they're onetime in nature. But which of these new costs maybe a little bit stickier as we think about employee screenings and protective equipment? How should we think about those costs in Q2, assuming they would be higher than they were in Q1 and maybe beyond in the rest of the year?
Thanks.
Speaker 2
Yes. Less than a million dollars in q one, and the the cost will probably continue so long as we're in the current environment that we are in. And as that environment begins to recede, think those costs will start to normalize.
Speaker 10
Okay. That's helpful. Thank you.
Speaker 0
Our next question comes from Hale Holden of Barclays. Please go ahead.
Speaker 10
Hi. I just had two quick ones for you guys. I was wondering, with the excess cash that you're generating, sort of given any thought to restarting or becoming more aggressive with share repurchases?
Speaker 2
I think we're looking at the entire capital structure, and so we do have a share repurchase program in place. We ended up not buying any shares last quarter, but we're also looking at at our debt levels as well. You know, we'd like to come out of this with a more levered file than we went into it.
Speaker 10
Alright. Thank you, Bruce. My one is, you guys said that, I think, in the in the script, one of the one of the brands you had was, up with 45% trial and repeat. I think it was the range of 15 to 45%. And I was wondering what brand was at the high end of the 45% range.
Speaker 1
Let me I'll have to look at that.
Speaker 10
Yes. It's new consumers into the in their category, new households, youth in the brown brands, increase in brand buyers due to new buyers between 1545% among brands that you were seeing new consumers come into. I can come back to you guys on it. I'm just wondering what
Speaker 1
the highest number open up the Green Giant was a large one. You're saying the percentage of new buyers?
Speaker 10
Yeah. Yeah. New buyers. Kinda open the the category?
Speaker 1
Yeah. New buyers.
Speaker 2
You're gonna see brands like Green Giant, even McCann's.
Speaker 1
Yeah. Green Giant. Victoria was was very high at 40%. Po Poehlana All Fruit was 40%.
Speaker 10
Okay. I I appreciate it. Thank you, guys. Our
Speaker 0
next question comes from Ken Zaslow of BMO. Please go ahead.
Speaker 11
Hey. Good afternoon, everyone.
Speaker 2
Hey, Ken.
Speaker 11
Just, two for me. One is you said that your new product innovation is still going on as scheduled. Is that how are you getting the placements of that? Is that that seems a little unusual given more and more companies are saying they're just kinda sticking with their core products. Can you discuss that?
And my next and my question would be, I know it's early, but the optimism that you have seems almost a point to the idea that you potentially may actually eventually change your long term growth algorithm. Is that on the table? It just seems the emphatic nature of what you're doing. Those are my two questions. I'll leave it there.
Speaker 1
Well, I'll start with the one first. It is way too early to to try to think about a long term growth algorithm while we're we're still, we're still in the middle, as you can see, but we're still you know, it's not over for us. I mean, in in in our growth rate in in April and May is gonna be higher than our growth rate in March. So so we're trying to figure out just the short term and making sure that we're filling our customer demand in high quality way and keeping our employees safe. I think it's gonna take a while for us to figure out whether or there's any long term algorithm change.
We hope that we can emerge stronger than we came in, And that'll be something that we'll have to look at going forward. In terms of innovation, we didn't say it was business as usual. We are planning to launch the new products that we had planned to launch in 2020, yet just many of them, just about all of them are delayed because of the the retailers changing their timing on when they're gonna reset shelves. So we're we're working with our retail partners based on when they want to reset, and many of them are delaying not canceling resets for twenty twenty twenty.
Speaker 11
Great. Thank you very much.
Speaker 0
This concludes the question and answer session and today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.