Q4 2021 B&G Foods Inc Earnings Call

Okay.

Good day and welcome to the BMG Foods fourth quarter 2021 earnings Conference call.

Today's calls which is being recorded it is scheduled to last about one hour, including remarks by P&G Foods' management and the question and answer session.

Now I'd like to turn the call over to your host Sara Jerome Senior director of corporate strategy and business development for PNG Foods Sara.

Good afternoon, and thank you for joining us.

With me today are Keith T Keller, our Chief Executive Officer, and Bruce Walker, Our Chief Financial Officer.

You can access detailed financial information on the quarter and full year and the earnings release, we issued today, which is available at the Investor Relations section of Beachy food Dot 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 the PNG Foods annual report on Form 10-K , and subsequent SEC filings for a more detailed discussion of the risks that could impact our future.

Future operating results and financial condition.

C N 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 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.

Casey 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 fiscal 2022 and beyond.

Bruce will then discuss our financial results for the fourth quarter and fiscal 2021 and our guidance for fiscal 2022 .

I would now like to turn the call over to Casey.

Good afternoon. Thank you Sarah and thank you all for joining us today for our fourth quarter earnings call.

The company's performance in the fourth quarter was solid net sales increased plus 12, 1% versus last year.

Driven by an additional two months of Chris go in the quarter.

Base business net sales were down modestly minus one 1% versus last year and were roughly flat versus the same period two years ago.

Adjusted EBITDA was up 16% versus last year with adjusted EBITDA as a percentage of net sales, increasing plus 50 basis points to 14, 9%.

Q4 is typically our lowest margin quarter because of seasonal mix and promotions.

However, our sales performance was mixed during the quarter.

Net sales started strong during October and November but were significantly impacted by the spread of the omicron variant in December .

Supply chains were disrupted disrupted with labor shortages callouts across our facilities distribution networks and customer store and warehouse operations.

Our December net sales fell short of our initial estimates by $20 to $25 million as a result of the supply chain disruptions and customers' inability to receive shipments.

Yeah.

The good news is that the impact of a micron has improved dramatically in late January and February with.

With shipments exceeding last year and above our forecast.

Supply challenges and shortages remain but at levels consistent with service prior to old crop.

As a result of a softer December P&G foods finished the fiscal year at the low end of our net sales and adjusted EBITDA guidance.

Net sales were $205 6 billion.

Within the two five to $2 1 billion guidance.

And adjusted EBITDA finished at $358 million on the low end of our $358 million to $365 million range provided at the Q3 call.

2021, net sales performance reflected both the addition of the Chriscoe brand and base business sales up plus five 2% versus 2019.

Bruce will talk more specifics on the full year, including financial and portfolio highlights.

Let me spend some time on the key themes driving 2021 performance and results.

Number one Chris go integration.

In 2021, we successfully integrated Chris go one of the largest P&G foods acquisitions.

The brand performed above our expectations, despite major increases and volatility in the primary soybean and canola oil inputs.

Since September Chriscoe is running at P&G systems and is fully integrated into our business processes.

It is now the second largest brand in the BMG foods portfolio.

Two inflation inflation in full year 2021 was in the mid single digits with the second half increasing to a double digit increase across the portfolio.

Chris kind of input cost inflation is significantly higher than the base portfolio given the major increases in soybean and canola oil.

We anticipate the substantial inflation will continue well into 2022, and then a minimum through the first half, particularly with the impact of the war in Ukraine.

Number three pricing, we have executed pricing actions in 2021 across the portfolio to recover inflation and gross margin dollars.

Most increases were effective in the second half of 2021 with some lag for implementation with customers by.

By the start of Q4 much of our recent pricing was in effect. We are seeing continued pressure moving into 2022 and are implementing further price increases to recover new and continued inflation impacts.

So far pricing elasticity has been lower than our preliminary expectations.

Number four supply chain, we made several key additions to capacity in 2021 to meet higher demand principally on Ortega, Taco sauce, and taco shells as well as spices and seasonings.

Ken Green giant vegetables are also recovering volumes behind a stronger crop pack last fall.

However, we continue to face supply challenges behind shortages in some critical packaging commodities and materials and.

In addition, several of our factories have been unable to achieve full staffing due to COVID-19, and the highly competitive labor market.

Our service levels were improving in Q4 towards the low to mid Ninety's, but dropped back below 90% during the omicron Serge.

Overall, the <unk> foods team responded well to the significant challenges facing the industry in 2021.

We moved quickly on pricing to confront significant inflation on key inputs in cost.

We worked through numerous supply constraints to maintain production and deliveries to our customers.

We successfully integrated the critical brand despite record high soybean commodity prices and added new capacity to meet elevated demand for core product lines.

Finally, moving forward, we remain focused on the key priorities and choices, we discussed on the last call.

First and foremost managing P&G foods effectively through the current inflationary pricing and supply environment.

Improving organic growth performance beyond Covid recovery.

Focusing on brands and categories, where we have the capabilities scale and right to win in terms of both resources and structure.

Making disciplined acquisitions that are accretive to our portfolio and cash flows and fit with our core expertise in center store dry distributions.

And accelerating cost savings and productivity efforts to eliminate non value added cost and strengthen margins.

As discussed in prior sessions, the team and I expect to share a comprehensive view of our portfolio strategies and structure later this year.

Defining the categories and brands that we will resource and grow.

The brands that will run for efficiency and cash flow and.

And the businesses, we may exit over time.

Our goal is to make the portfolio choices and organization changes that will drive stronger performance and valuation behind sustainable top and bottom line growth.

We believe that post pandemic trends, including flexible remote work and renewed interest in cooking are generating opportunities for our existing and future portfolio.

More to come on specific plans timing and presentation.

I will now turn the call over to Bruce for a more detailed discussion of the quarter and the year Bruce.

Thank you Casey and good afternoon, everyone.

As Casey just discussed 2021 was not a year without challenges.

But that said it was also a year in which we generated record net sales at <unk> foods as consumers continue to flock to our brands during a time of prolonged uncertainty and we were able to successfully integrate the chriscoe brand, which we acquired in December 2020, another acquisition that is consistent with our growth by acquisition.

<unk> strategy.

During 2021, we generated net sales of $205 6 billion.

Adjusted EBITDA of $358 million and adjusted.

Diluted earnings per share of $1 88.

Our net sales finished just above the bottom of our guidance range that we set early last year, but was negatively impacted by the industry wide supply chain disruption, which increased significantly during the last month of the year due to the spread of the omicron cobot variant.

We believe that the supply chain disruptions caused.

In large part by the Omicron variant negatively impacted our fourth quarter net sales by approximately $20 million to $25 million.

This is in addition to lost sales, resulting from industry wide supply chain disruptions throughout the year that prevented us from fully meeting the demand for our products but.

But it is difficult to quantify how much net sales were negatively impacted during the first three quarters of the year.

Despite these challenges 2021 marked the first time that we exceeded $2 billion in annual net sales in our company's history.

Yes.

Net sales for fiscal 2021 increased by $88 4 million or four 5% to $205 6 billion from $1 96 8 billion for fiscal 2020.

The increase was primarily due to an extra 11 months of net sales of the Chriscoe brand largely offset by comparisons against extraordinary demand, resulting from the COVID-19 pandemic during fiscal 2020 as well as one fewer reporting week in fiscal 2021 compared to fiscal 2020.

And supply chain disruptions, resulting from the rise of the omicron variant in the closing weeks of the year.

Net sales of Frisco under our first full year of ownership were $293 4 million in fiscal 2021.

For comparative purposes, Chriscoe had $27 8 million and net sales under our only multiple ownership in December 2020.

Despite a material increase in input costs, Chris go as more than exceeded our expectations for fiscal 2021.

Fiscal 2021 had one fewer week in fiscal 2020.

We estimate that the additional week in the third quarter of fiscal 2020 contributed approximately $35 million to our net sales in fiscal 2020.

Additionally, we believe that supply chain disruptions from the rise of the omicron variant negatively impacted our net sales by approximately $20 million to $25 million in the closing weeks of fiscal 2021.

On a two year stack basis net sales for fiscal 2021 were 23, 8% higher than pre pandemic net sales for fiscal 2019.

On a two year compound annual growth rate basis net sales for fiscal 2021 increased by 11, 3%.

Base business net sales for fiscal 2021 decreased by $162 1 million or eight 3% to $1 8 billion.

From 196 billion in fiscal 2020.

The decrease in base business net sales for fiscal 2021.

Flex a decrease in unit volume of $222 6 million, partially offset by an increase in net pricing inclusive of product mix of $54 $3 million.

Foreign currency drove a positive benefit of $6 2 million.

Base business net sales for fiscal 2021 were five 2% higher than pre pandemic base business net sales for fiscal 2019.

On a two year compound annual growth rate basis relative to pre pandemic levels base business net sales for fiscal 2021 increased by two 6%.

Yes.

Our best performing large brand in 2021 was chriscoe.

Chris go generated approximately $293 4 million in net sales for fiscal 2021.

Our outpacing our expectations for the business of $270 million in net sales when we acquired it in late 2020.

As a reminder, we built our forecast for Chriscoe prior to the rapid input cost inflation that we experienced for soybean oil, which had a peak reached.

<unk> pricing levels of more than 100% greater than we had announced the acquisition of the business in late 2020.

However, the power of the Chriscoe brand and its strong positioning in the category allowed us to take the price increases that were required to help offset these costs.

Based on our understanding of the business trends for the periods prior to ownership net sales of Chris go in fiscal 2021, we're not surprisingly below 2020 levels due to the impact of the COVID-19 phenomenon at its peak in 2020.

Net sales of Chriscoe are also significantly higher than the pre pandemic 2019 levels.

As stated a few minutes ago above our expectations when we acquired the business.

With a little bit more than a year of ownership of the brand. We are extremely happy with the Chriscoe acquisition.

Among our other large brands Green giant also had pretty good results for fiscal 2021 that were generally in line with our expectations for the year.

Green giant generated net sales of approximately $543 8 million in 2021, which is obviously down from the pantry loading induced net sales of $638 9 million that we experienced in 2020.

However, net sales of green giant products increased by $17 1 million or three 3% ahead of fiscal 2019 net sales.

While we have seen product supply challenges on the frozen and shelf stable businesses at various times over the past two years, we have generally seen improved demand for both frozen and shelf stable products.

Net sales for our shelf stable products increased by $27 3 million or 16, 7% as compared to 2019.

Net sales for our frozen products were down $10 2 million or two 8% as compared to 2019.

And we are hampered here by disruption to our innovation schedule and with manufacturing challenges for certain co pack items, largely as a result of COVID-19 related supply chain disruptions.

Okay.

Our spices and seasonings business, which includes brands like dash and accident that we've owned for a long time as well as the spices and seasonings business that we acquired in 2016, which includes brands like Spice Islands tones and Weber.

Our club store partnership business in our foodservice business had a good year and exceeded 2020 levels. Despite a very challenging supply chain environment.

Net sales of our spices and seasonings with $372 3 million in fiscal 2021 up $4 6 million or one 2% when compared to fiscal 2020 levels.

Importantly, our spices and seasonings net sales are much larger today than they were pre pandemic and increased by $35 5 million or 10, 5% from 2019 net sales of $336 $8 million.

The broader spices and seasonings category has continued to see the increased demand that we began to experience during the early months of the pandemic not only stick, but also building momentum over time.

The challenge, however is not demand, but instead supply similar.

Similar to our larger and many smaller competitors.

We are seeing shortages of ingredients and packaging that have hampered our ability to fulfill strong customer and consumer demand.

We have also seen this outsized demand exceed our production capacity at times.

Which has been strained by running for nearly two years now at maximum capacity.

Our Q4, 2021, spices and seasonings net sales were down from year ago levels. For example, due primarily to these supply chain constraints.

Okay.

However, we remain optimistic about our spices and seasonings business in 2022.

And it remains a huge priority for us at <unk> foods.

When Keith talks about strategic priorities. He is talking about increased financial and human capital spend against the very important spices and seasonings business.

We are making continued investments to build line capacity and efficiencies at our Ankeny, Iowa facility and we are also prioritizing spices and seasonings from an M&A strategy perspective.

Although we can obviously only bid on what is for sale.

Ortega with net sales of $151 2 million in fiscal 2021 was down not surprisingly by $7 1 million or four 5%.

When compared to the peak pandemic fiscal 2020 net sales.

But arteaga had very strong performance when compared to its pre pandemic fiscal 2019, net sales of $144 million and was up by $10 8 million or seven 6% on a two year stack basis.

Ortega with its powerful positioning as an exciting and growing category and is also a strategic priority for <unk> foods and represents a brand where we are investing resources.

We are very happy to report that we have successfully increased our capacity produce both taco sauce with an additional line in our Hurlock, Maryland facility and Taco shells with an additional line in our Yadkin build North Carolina facility.

These investments should help us continue to grow this important brand along with the category.

Yes.

Las Palmas, which like Ortega is another great brand in the exciting and on trend. Hispanic category at $39 7 million in fiscal 2021, net sales and was down approximately $1 6 million or 4% compared to fiscal 2020.

But up approximately $4 million or 11, 2% compared to 2019.

We have been able to grow Las Palmas, and would've expected to see even more growth with industry wide supply chain challenges have continued to limit our ability to maximize the potential of Las Palmas.

<unk> also continues to be a star for us as more and more Americans are eating breakfast at home and helping to grow the category.

Cream of wheat is down slightly from a pandemic peak with net sales of $67 $3 million in fiscal 2021 off by $5 5 million or seven 6% when compared to fiscal 2020.

Up by $7 4 million or 12, 4% compared to $59 9 million of net sales and pre pandemic fiscal 2019.

Meanwhile, Maple Grove farms had what may have been one of its best years ever in fiscal 2021 with net sales of $81 2 million for the year up $4 5 million or five 9% compared to $76 7 million in fiscal 2020 net sales.

Up $10 6 million or 15, 1% compared to $70 6 million in net sales in fiscal 2019.

Maple Grove farms has benefited from increased pure maple syrup sales, including a recovery and an important foodservice accounts.

As well as continued progress with our line of Skinny girl branded salad dressings, which are captured as part of the Maple Grove Farms' salad dressings business.

Gross profit was $437 million for fiscal 2021, or 21, 3% of net sales.

Including the negative impact of a $13 $9 million accrual for the estimated present value of a multi employer pension plan withdrawal liability in connection with the closure and pending sale of our Portland, Maine manufacturing facility.

$14 6 million of acquisition divestiture related and nonrecurring expenses.

And $5 1 million of amortization of acquisition related inventory fair value step up including the cost of goods sold.

Fiscal 2021 gross profit would have been $476 million.

Or 22, 9% of net sales.

Gross profit was $481 million.

2020, or 24, 5% of net sales.

Excluding the negative impact of $5 million of acquisition divestiture related expenses and nonrecurring expenses, including cost of goods sold during fiscal 2020 gross profit would have been $486 7 million or 24, 7% of net sales.

During fiscal 2021 gross profit was negatively impacted by higher than expected input cost inflation.

Which were in many cases higher than the fourth quarter of 2021 than they were in the fourth quarter of 2020.

Our expectation is that input cost inflation will continue to have a significant industry wide impact during fiscal 2022.

We have been able to mitigate a portion of the impact of inflation by locking in prices through short term supply contracts and advanced commodity purchases agreements and by implementing cost saving measures.

We have also announced list price increases and optimized trade for certain products, where it makes sense.

However increases in the prices that we charge our customers generally lag behind the rising input costs as.

As such we were unable to fully offset all of the incremental costs that we faced in fiscal 2021.

And we were not able to fully offset all of the costs that we will face in fiscal 2022.

Selling general and administrative expenses increased by $10 million or five 4% to $196 2 million.

For fiscal 2021 from $186 2 million in fiscal 2020.

The increase was comprised of increases in warehousing expense of $12 million Act.

Acquisition divestiture related and nonrecurring expenses of $4 $3 million.

And customer marketing expenses of $2 7 million.

Partially offset by decreases in selling expenses of $6 million in general and administrative expenses of $3 million.

The increase in warehouse expenses was primarily driven by the Chriscoe acquisition and customer fines related to COVID-19 shortages and delays, partially offset by one fewer week in fiscal 2021 compared to fiscal 2020.

Expressed as a percentage of net sales selling general and administrative expenses remained about flat at nine 5% from fiscal 2020.

Okay.

As I mentioned earlier, we generated $358 million and adjusted EBITDA for fiscal 2021 compared to a pandemic enhanced $361 2 million in fiscal 2020.

Fiscal 2021, adjusted EBITDA benefited from an extra 11 months of ownership of the Frisco brand, which was offset by lower volume throughout our base business in the aggregate due to comparisons against the extraordinary demand during fiscal 2020, resulting from the COVID-19 pandemic one fewer report.

Week in fiscal 2021, and significant supply chain disruption at the end of fiscal 2021.

Adjusted EBITDA as a percentage of net sales was 17, 4% for fiscal 2020 compared to 18, 4% in fiscal 2020.

Margins were negatively impacted by the input cost inflation and the negative impact of absorption on reduced volumes.

That was only partially offset in fiscal 'twenty, one by our cost savings initiatives and.

And pricing initiatives.

Interest expense was $106 9 million for fiscal.

2020, compared to $101 $6 million in fiscal 2020.

The increase in interest expense.

It was primarily driven by an increase in average debt outstanding as a result of the Chriscoe acquisition, which was offset in part by a lower cost of debt as well as one fewer reporting week.

Depreciation and amortization were also up year over year, driven primarily by the Chriscoe acquisition.

Depreciation expense was $61 3 million in fiscal 2021 compared to $44 6 million in the prior year.

Amortization expense was $21 6 million in fiscal 2021 compared to $19 1 million in the prior year.

We had an effective tax rate of 28, 1% for the year compared to 25, 6% in the prior year.

Our effective tax rate in 2020 benefited from certain provisions of the cares Act that were effective at the beginning of Covid and are no longer applicable.

We generated $1 88, and adjusted diluted earnings per share in fiscal 2021 compared to $2 26 in the prior year.

Our fourth quarter is typically our strongest cash flow.

Quarter of the year and this was true again in fiscal 2021.

This coupled with the net proceeds we received from shares that we sold under our ATM equity offering in the fourth quarter allowed us to reduce our net leverage as defined in our credit agreement to approximately six one times.

And while forecasting in the current environment remains challenging.

I'll now walk you through our outlook for 2022.

Although perhaps with wider ranges and more caveats than we were accustomed to in pre pandemic years due to the uncertainty around COVID-19 and other potential new variants continued inflation, which may be offset perhaps by potential relief in the second half of the year.

And by continued supply chain disruptions.

Yeah.

Based on what we know today, we expect net sales of $2 <unk> to $2 <unk> 5 billion in.

In fiscal 2022, representing a growth rate of nearly 1% to a little bit more than 3%.

Which is just ahead of our historical zero to 2% growth plan.

We expect net sales growth in fiscal 2022 to be primarily driven by our pricing initiatives inclusive.

Inclusive of full year benefits of various pricing initiatives that we launched in fiscal 2021, and coupled with additional pricing initiatives in 2022, including price increases that have already been announced.

And price increases that we expect to announce later this year.

We see modest topline risk from an elasticity perspective, although we appear to have been conservative in our elasticity assumptions so far.

We are also operating in an environment with high levels of uncertainty.

Can't accurately forecast few.

<unk> future Covid risks, which could result in continued or even enhanced supply chain disruption.

Based on our current net sales forecast, we believe that we can achieve adjusted EBITDA of approximately $358 million to $368 million.

While we do expect to grow adjusted EBITDA. This year, we recognize that we are operating in an environment with unprecedented risks and continued high levels of input cost inflation.

We believe that our cost savings initiatives, coupled with our pricing strategies will help to offset some of these challenges, but we do see risk to our margins and could see adjusted EBITDA as a percentage of net sales range from approximately 17% to 17, 5% in fiscal 2022 before recovering in future years.

As to the plus 18% to 20% area that we think is right for the business over the long term.

Additionally, we expect interest expense of $110 million to $115 million.

Including cash interest of $105 million to $110 million.

Depreciation expense of $60 million to $65 million.

Amortization expense of $20 million to $22 million.

An effective tax rate of 26, 5% to 27, 5%.

Adjusted diluted earnings per share of $1 70 to $1 seven to $1 85.

And capex of $50 million.

Now I will turn the call back over to Casey for future remarks.

Thank you Bruce as I said at the beginning of the call. We had a strong fiscal 2021, despite the challenges faced during the year from inflation.

Covid variance and supply disruptions.

Our fiscal year 2022 is off to a good start and we remain cautiously optimistic that COVID-19 could be almost behind us.

This concludes our remarks and now we would like to begin the Q&A portion of the call operator.

Thank you at this time, we'll be conducting a question and answer session.

Like to ask a question. Please press star one on your telephone keypad.

We ask that you please limit to one question and one follow up.

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For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.

Okay.

Our first question comes from Andrew Lazar with Barclays. Please proceed with your question.

Hey, Casey and Bruce.

And as you know are in.

Okay. Thank you.

I guess to start off.

I think maybe in the past you've communicated.

You are sort of level of confidence in keeping leverage at a level that would allow you to sort of cover the dividend and that stock sales in the past have been used more to create flexibility for potential acquisitions and obviously this time it seems like the stock sale was a little bit more geared towards maybe operational needs and such.

I have that right and if so maybe what changed such that the equity sales were kind of deemed necessary.

Yes, so Andrew actually I kind of disagree a little bit with that when we bought Chriscoe, we paid all cash.

Over half of $1 billion.

And our intention was always at a point in time too.

<unk> as you suggested which is used equity to delever the balance sheet. Following an acquisition and so the equity offering was was intended for those purposes.

We knew that we had a short term benefit.

From our Covid enhanced sales and EBITDA, which kept leverage manageable at the height of Covid, even after the Chriscoe acquisition, but but there is always on our mind. Some view of an acquisition and then Delevering afterwards with equity and that's exactly what we did here got it okay. Thank you for the clarity there and then.

I know its awfully tough honestly too to forecast too finely.

This kind of environment, but.

I would imagine that you like others are going to see a lot more volatility in the way sort of the margin profile lays out in terms of the cadence as you go through the year I.

I guess to the extent that you can you could provide a little bit more clarity on maybe how you see margins playing out sort of earlier in the year.

Versus later in the year because.

<unk>.

You don't want to try and and just get sort of expectations in a more reasonable place and it's tougher on the outside to maybe model.

The kind of extreme volatility.

We are staples analysts aren't used to modeling quarter to quarter.

Yes, there's probably two parts to that answer and so part one since we've owned green giant our third quarter has been our highest margin quarter and our fourth quarter has been our lowest margin quarter, that's probably going to continue this year.

However, I think as you are highlighting.

And this is part of the unknown, but expectation would be that margins will be a little bit more challenged in the front half of the year.

From the input cost increases and then the lag effect on the pricing that we're taking to offset that so we would expect some some natural improvement in margins over time, but not so great that we are going to disrupt that fourth quarter being our lowest margin quarter as.

As we get to the end of this year and then there is obviously a big unknown in terms of.

If you talk to US three months ago, we would have been talking about our expectation for.

Possible input cost relief in the back half of this year with all the events going on in the world and in Europe today.

That may be different and so like you said theres a lot of unknown that that makes.

Those predictions are hard to do.

Okay. Thanks, I'll pass it on.

Our next question comes from Nik Modi with RBC capital markets. Please proceed with your question.

Yes.

Good evening everyone.

Two quick questions from my side.

John those are Cagny indicated that they were seeing some new properties as they call them. They said, they're going to keep a watchful eye on that so I just wanted to get your reaction to that and you've seen any of that type of consumer behavior in any of your research and the second question is really just.

Kind of on the cost side, Indonesia has restricted palm oil export I just wanted to see kind of how you guys are thinking about the downstream impact of that on your on your coffee business as the year progresses.

So let me just make sure I this is Casey.

You said comment on meal prep fatigue.

Yes.

Yes, that's a general mills was commenting on okay got it.

Yes.

We actually have not seen that I said, what the two trends that we're seeing in our research are.

Number one people continue to work somewhat remotely even if theyre coming back to the office.

To some extent there still are working more remotely and from home than they were before the pandemic driving more meal consumption at home, particularly in the <unk> the lunch occasion.

Second.

I guess when our meal prep of businesses that were at least where it would be related to that like Ortega, we've seen consumption hold up fairly strongly on those businesses. So we haven't necessarily seen that.

In our in our businesses, yet I mean, the real impact we talked about was sort of a disruption of omicron or our supply chain in December but our consumption numbers held up pretty nicely. So I'm not seeing that yet I am seeing the two that the trend of more breakfast and lunch occasions at home as people work remotely.

And to some extent, even some casual dinner occasions and then the second thing is we continue to hear from people that.

During COVID-19 they learned how to cook.

They are continuing to show interest in cooking and preparing meals at home probably slightly higher than they were in the pre pandemic phase. So that's what we see in our research and Thats, what I would comment on in our portfolio.

Okay and on the Palm oil palm oil exports any thoughts on the cost impact.

Paul.

Cost the cost for this year I mean is this really the guidance is built on on spot rates or is there more forward kind of forecast that youre using.

Yes.

Palm oil is one of the things that we're looking at and tracking pretty closely honestly.

The war in Ukraine is obviously things that are sensitive to oil or even wheat has gone up so we forecast for the year. We in typical fashion, we will have significant coverage through the year, except on things that we're managing coverage up and down based on volatility in the commodities markets. So we were constantly adjusting.

Forecast, but for the most part we are passing on increases in our own pricing to recover gross margin dollars impact.

Higher input costs.

Okay.

Thanks, guys.

Thanks, Nick.

Our next question comes from Michael <unk> with Piper Sandler. Please proceed with your question.

Thank you just.

Curious if you could.

Pat guidance Ted further the EBITDA.

High end of the range is just above consensus, but if I have the numbers right the EPS.

Pretty well below the street, you've touched on some of the pieces there but can you.

So where that gap might be and just what's in your assumptions might be about buybacks as well for.

For fiscal 'twenty two.

Right, yes, yeah. So so the one thing Thats worth looking through the press release and the 10-K, when it's filed as details around the stock sale.

And so we sold about $110 million of stock.

Late last year.

Which probably isn't captured in your forecast around EPS and on that I'm, not really sure what youre using for tax rate. So that could also be.

Throw things off.

Well and I was just using the consensus number so it could be a little bit of a blend but as far as <unk>.

Turning back around to buying back shares is that on the table at all or are you assuming none for 2022.

We do have an authorization in place.

It depends in large part on what happens with <unk>.

With the share price.

Fair enough and just following up on elasticity.

Thank you. Your language was that you have you assumed some modest elasticity or just that doesn't hold quite at the levels that you've seen do you assume it.

Am I hearing it right that that's not you don't model in your guidance is assuming to normal levels and can you just maybe give a little bit of sense of magnitude of what you do expect.

So we have been expecting and modeling out elasticity in all of our price increase analysis that we've done what we've experienced so far and so this is a so far comment is that.

The elasticity that we've actually experienced has been less than what we modeled out.

And part of that I think is if.

We go through the grocery store.

This is not a P&G going out and raising prices.

Manufacturers of most products that most things sold in the grocery store are seeing input cost inflation turnaround and appropriately raising price.

So we're seeing that phenomenon across the grocery store and probably also impacting that as you see that in restaurants and other services.

So the.

The alternative to an expensive night out on the town and dinner is.

Eating at home.

Which while that may cost a little bit more of a is still going to be less than eating out.

And just to elaborate on that so.

As we started taking price increases in the second half of this year, we were modeling elasticity based on historical data.

And what I said was so far we have not seen we've seen alaska coming in lower than that.

So we.

We have been assuming elasticity effects going forward into 2022, not as high as our initial modeling would've suggested but we are still assuming that there will be elasticity.

Certainly going forward.

Okay. Thanks, so much.

Okay.

Our next question is from Ken Zaslow with Bank of Montreal. Please proceed with your question.

Hey, guys good evening.

Yes, it's something about.

That the acquisition.

Actually exceeded your expectations.

On the sales line exceed your expectations on the EBITDA line or not.

<unk> casualty for was it just didn't understand when you said.

Debt.

It exceeded your expectations, yes, probably a little bit of bulk, but we didn't disclose the EBITDA for chriscoe, but overall really.

Between the lines it had a great year it did very well.

I mean, I think if you.

If you look at the topline it was obviously enhanced by the pricing. So we said low high point I agree. Yes, we said we had lower elasticities than we expected so the pricing actually flowed through in the top line very nicely EBITDA was more closely in line with our expectations. Because obviously, we had to cover higher soybean oil costs and.

And we Werent, where we took the business from.

Smokers, we werent covered that far out so.

Okay.

The biggest thing to keep in mind and our reaction to sitting back after years.

We made an acquisition very large one we saw input costs increase.

At a certain point in time more than a 100% for soybean oil.

And through through pretty good management of the business, we're able to.

To perform yeah.

Somewhere between in line and better than expected.

Very very happy with that acquisition.

Okay.

Second question is and we've heard this a line at Cagny as well.

More aggressive and people maybe aligning their strategy a little bit more with you guys, where you know a lot more portfolio management active portfolio management.

One of the opening comments you said is that we are looking to the timing to exit certain businesses.

What is your criteria to exit.

What you guys are usually acquired I know there's been some.

Divestitures at good pricing, but not actively divesting.

Yes.

They're a little bit of a change there.

Thought process and can you elaborate on what are the key criteria for which that you would seek to divest certain businesses.

Yes, sure I think look net I think you should expect us to be a net acquirer versus exit, but we will selectively look at businesses that we don't fit that we don't believe fit within our portfolio long term.

When probably later this year when we come back to you and talk to you more specifically about our strategies and our plans and how we want to manage the portfolio will be a lot more explicit about this but the criteria for me would be looking at businesses that don't really fit our operating model don't have a lot of synergies with how we run our businesses.

And where I don't believe we have the capabilities and the right to grow those businesses sustainably.

Over time.

So I don't want to go further than that but it's basically about shaping the portfolio of the places where I think we managed it well we manage it well to get to get some growth, we manage a well to bring in acquisitions and similar business lines and categories and.

And find synergies and build those and add to our capabilities. So we'll look at selectively exiting some businesses that don't fit that criteria, but and then we'll make some conscious choices about EBIT business lines that might not look like they fit within kind of our focus portfolio structure, where we can manage those businesses efficiently I'm real.

<unk> going to look at only exiting businesses, where I don't think we commanded manage them efficiently or effectively within our within our structure.

Okay. So theres, just a little bit more of a sense of streamlining than maybe previous management have had does that Lisa fairpoint and I'm not trying to put words in your mouth.

I said, we are going to be a net acquirer, which means I think.

But we will look at some yes, yes.

But we will look at some places that we can prune the portfolio, where I think it's not the best fit with where we want to go but look I think we're going to be acquiring more than we're going to be divesting.

Okay. And then last question is you said that you're going to take pricing later this year.

You recaptured.

All of the recent inflation.

Is that anticipatory or is that.

Hey, we think we're a little bit lagging in we need another price increase we just have to tell the retailers how is that positioning and I'll leave it there and I appreciate your time.

Yeah honestly.

This is kind of a fluid dynamic.

If you would've asked me two months ago, and we price for everything that we're seeing I Might've said, yes to.

Today with the war in rig Ukraine, and some new commodity kind of increases coming on on it look at soybean oil soybean oil I thought it would be kind of in the $50 now is really up.

68, the last spot market eyesore so.

It sort of adjusting to that and when I said, we may have to do new price increases, it's the reflective new things new commodity cost inputs that we're seeing in the marketplace.

We in particular have you seen recently soybean oil is up because I think it's sensitive to the cost of oil over I mean to the price of oil overall, so we will be taking further actions, where we see it as necessary to recover cost input increases that are relatively new that we have that we werent experiencing kind of in Q4.

Great I appreciate it thank you.

Thanks, Ken.

Our next question comes from Eric Larson with Seaport Research Partners. Please proceed with your question.

Yes, thanks, guys. Thanks for taking my questions. So my.

My question comes.

Really on your revenue guidance. So when you look at your revenue guidance Youre looking for an increase the hero <unk>.

1% to 3%.

So when you look at your pricing actions from last year, and then what's potentially going to happen again this year.

You shouldn't you shouldn't be able to pencil in probably a high single digit.

Revenue increased just from pricing.

Take away a little bit of promotion expense et cetera.

So.

You may have a $10 million to $15 million leakage from $35 million of the extra week last year, and then a 20% to 25 million shortfall on Covid, but were.

Whereas the rest of the leakage coming from on that can you help us get from point a to point beyond that.

Okay.

Yes, remember that I've said, we are modeling some elasticity right. So.

We're not getting all of the pricing free.

It's going to come at some volume consequence, and we've seen some elasticity in our pricing was already and we've been I think we've appropriately modeled Alaska see going into next year, but look the way to think about our top line guidance for next year is three things. One is we are definitely going to get pricing realization benefit on our portfolio.

Second we are looking at where there has been elevated demand for COVID-19 that may taper off a little bit in some categories still stay high relative to 2019, and pre COVID-19 levels, but down from the 2021. So we do model a little bit of that effect as well which is.

Obviously to the pricing realization and then third we do have new capacity coming on some of our product lines like Ortega, where we will we will expect to get some growth out of that from a volume standpoint. So.

I think look it.

You can't just take the net pricing impact that we're taking in the marketplace and assume that that's all going to flow through because we will have some elasticity impact and we will have some drop off in the elevated demand.

And some of the categories.

Going into 2020, as we get fully through the COVID-19 pandemic.

<unk> and it moves towards more of an endemic in peoples.

The consumer behavior normalizes again.

Does that help.

Yes that does help so.

Where youre seeing the most elasticity.

One would assume that those are in the categories, where you've taken your biggest pricing adjustments and that would be like a critical work.

Just the cost of oil is such a high percentage of the underlying.

Cost of goods sold for that product line. So.

Where are you seeing your elasticity and and as.

Is my assumption right that it's in those product lines.

Have a high percentage of commodity component to them.

It's probably right for some of those and not for others.

I mean, you got to think about so can vegetables would have steel.

Steel, Kansas is going up has gone up dramatically. So youll have some elasticity impact there.

Well okay.

Okay.

We detailed all the pricing that we're actually taking with our customers on a percentage basis than you would see that we're getting a net net help from that but but it's going to be offset by obviously, some volume elasticity, but not certainly less than one to one.

Okay. Thank you I'll pass it on.

Our next question is from Robert Moskow with Credit Suisse. Please proceed with your question.

Thank you and actually a couple of questions.

First time, Chris Koh it seems like that's a.

Ager swing factor for 2022, because of the pricing commodity relationship.

And maybe even it was in 2021 as well.

Is there any way to like Dimensionalize like.

Whats, what's baked into your assumptions for 2022 on margin recapture.

And did you expect profit growth in 2022 or not.

And then secondly, a broader question.

A lot of companies that presented last week at Tagme talked about.

We used a lot of jargon on.

Artificial intelligence new technologies.

Standardizing processes to improve operational efficiency.

Have you seen anything new out there or are you implementing anything new.

And then all these other bigger companies are doing too.

Improve operational effectiveness as well.

I'll take the Chris Good question, and let <unk> take the jargon question.

Thanks.

For Chris Jeff.

Yes margins held up pretty well for Frisco, probably a little bit lighter than we initially modeled out for fiscal 'twenty one.

But held up pretty well despite the input cost inflation.

Due to the due to the pricing.

I think Chris go we'll continue to follow the market as input costs.

Stay elevated and rise more we will take more pricing.

I wouldn't be surprised if you saw that across the category.

So ultimately we believe the margins of the business that we bought will remain intact.

Kind of hard for me to say well I forecast increased margins for critical this year or increased profits for Christmas this year versus last year, Chris Good delivered in 2021, we expect it to again in 2022.

Okay.

On the Jarden question.

Here's the I guess the way I would talk about it in <unk>.

Simple terms is.

I think there are some places where we are trying to streamline and simplify our operations I would say number one we're investing in automation in our plants.

Because labor is so tight and it's been so difficult to manage in that COVID-19. So we have spent quite a bit of money on automation in our plants, which to me is.

<unk>.

Restructuring our costs and streamlining our cost structure in our labor.

And that's just that's facing the realities in the current labor environment that we're in today.

Second we have invested in some systems to drive greater efficiency and control.

Their trade promotion system that we've implemented in the last year and a half, but I think it's now really just coming into its stride in terms of our ability to optimize our trade or trade spending and make sure that we're making the right decisions from a return.

Standpoint.

If you ask me what are the things that we really have to focus on to improve our operations. It is clarifying how we're going to manage different parts of our portfolio because right now we have kind of a big basket of 50, plus brands and multi <unk> 30 categories.

We're trying to manage all of that centrally within the company and from a functional standpoint and.

I think we need to get more efficient and breaking that down and saying where are we going to focus how are we going to resource it and pushing some accountability for managing the growth in the P&L of these businesses to improve our performance and to improve our visibility and clarity and speed up our decision, making and how we are running these businesses. So if you asked me that.

Probably the biggest thing I am focused on its Scott.

Scott a lot of jargon, it's about it's about how do we simplify and clarify the accountability on our business and drive it harder for future success.

That's helpful.

Can you tell me, whether Chriscoe achieved your original acquisition targets for EBITDA.

Yes.

Okay. Thank you.

Yeah.

We have reached the end of our question and answer session I would now like to turn the call back over to Casey Keller for closing comments.

Thank you all for your attention.

Obviously this was.

This is an interesting quarter from that standpoint of dealing with the omicron variant.

But as I said the good news is that we feel like we're past that now and we're seeing big improvements in our in our workforce and callouts and everything else. So I think we're on track two.

<unk> 2022 will be another year of.

Continued challenges with inflation and pricing, but I think the team is up for the task and we are ready ready to go with it. So thank you for your attention.

We'll speak to you next time.

This concludes today's conference you may disconnect your lines at this time and we thank you for your participation.

Okay.

[music].

[music].

Good day and welcome to the PNG Foods fourth quarter 2021 earnings conference call.

Today's calls which is being recorded it is scheduled to last about one hour, including remarks by P&G fluids management and the question and answer session I would now like turn the call over to your host Sara Jerome Senior director of corporate strategy and business development for PNG Foods Sara.

Good afternoon, and thank you for joining us.

With me today are Keith T Keller, our Chief Executive Officer, and Bruce Walker, Our Chief Financial Officer.

You can access detailed financial information on our quarter and full year and the earnings release, we issued today, which is available at the Investor Relations section of Beachy food Dot 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 the BMG Foods annual report on Form 10-K , and subsequent SEC filings for a more detailed discussion of the risks that could impact our.

Future operating results and financial condition.

PNG 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 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.

Casey 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 fiscal 2022 and beyond.

Bruce will then discuss our financial results for the fourth quarter and fiscal 2021, and our guidance for fiscal 2022.

I would now like to turn the call over to Casey.

Good afternoon. Thank you Sarah and thank you all for joining us today for our fourth quarter earnings call.

The company's performance in the fourth quarter with solid.

Net sales increased plus 12, 1% versus last year.

Driven by an additional two months of Chris go in the quarter base.

Base business net sales were down modestly minus one 1% versus last year and were roughly flat versus the same period two years ago.

Adjusted EBITDA was up 16% versus last year with adjusted EBITDA as a percentage of net sales, increasing plus 50 basis points to 14, 9%.

Q4 is typically our lowest margin quarter because of seasonal mix and promotions.

However, our sales performance was mixed during the quarter.

Net sales started strong during October and November but were significantly impacted by the spread of the omicron variant in December .

Supply chains were distressed disrupted with labor shortages callouts across our facilities distribution networks and customer store and warehouse operations.

Our December net sales fell short of our initial estimates by 20% to $25 million as a result of the supply chain disruptions and customers inability to receive shipments.

Yes.

The good news is that the impact of a micron has improved dramatically in late January and February .

With shipments exceeding last year and above our forecast.

Supply challenges and shortages remain but at levels consistent with service prior to old crop.

As a result of a softer December P&G foods finished the fiscal year at the low end of our net sales and adjusted EBITDA guidance.

Net sales were $205 6 billion.

Within the two five to $2 1 billion guidance.

Adjusted EBITDA finished at $358 million on the low end of our $358 million to $365 million range provided at the Q3 call.

2021, net sales performance reflected both the addition of the Chriscoe brand and base business sales up plus five 2% versus 2019.

Bruce will talk more specifics on our full year, including financial and portfolio highlights.

But let me spend some time on the key themes driving 2021 performance and results.

Yes.

Number one critical integration.

In 2021, we successfully integrated Chris go one of the largest P&G foods acquisitions.

The brand performed above our expectations, despite major increases and volatility in the primary soybean and canola oil inputs.

Since September Chriscoe was running at P&G systems and is fully integrated into our business processes.

Now the second largest brand in the <unk> portfolio.

Two inflation inflation in full year 2021 was in the mid single digits with a second half increasing to a double digit increase across the portfolio.

Chris kind of input cost inflation is significantly higher than the base portfolio given the major increases in soybean and canola oil.

We anticipate the substantial inflation will continue well into 2022, and then through the first half, particularly with the impact of the war in Ukraine.

Number three pricing, we have executed pricing actions in 2021 across the portfolio to recover inflation and gross margin dollars.

Most of the increases were effective in the second half of 2021 with some lag for implementation with customers by.

By the start of Q4 much of our recent pricing was in effect. We are seeing continued pressure moving into 2022 and are implementing further price increases to recover new and continued inflation impacts.

So far pricing elasticity has been lower than our preliminary expectations.

Remember for supply chain, we made several key additions to capacity in 2021 to meet higher demand principally on Ortega, Taco sauce, and taco shells as well as spices and seasonings.

<unk> Green giant vegetables are also recovering volumes behind a stronger crop pack last fall.

However, we continue to face supply challenges behind shortages in some critical packaging commodities and materials and.

In addition, several of our factories have been unable to achieve full staffing due to COVID-19, and the highly competitive labor market.

Our service levels were improving in Q4 towards the low to mid Ninety's, but dropped back below 90% during the omicron Serge.

Overall, the <unk> foods team responded well to the significant challenges facing the industry in 2021.

We moved quickly on pricing to confront significant inflation on key inputs in cost.

We worked through numerous supply constraints to maintain production and deliveries to our customers.

We successfully integrated the critical brand despite record high soybean commodity prices and added new capacity to meet elevated demand for core product lines.

Finally, moving forward, we remain focused on the key priorities and choices, we discussed on our last call.

First and foremost managing P&G foods effectively through the current inflationary pricing and supply environment.

Improving organic growth performance beyond Covid recovery.

Focusing on brands and categories, where we have the capabilities scale and right to win in terms of both resources and structure.

Making disciplined acquisitions that are accretive to our portfolio and cash flows and fit with our core expertise in center store dry distributions.

And accelerating cost savings and productivity efforts to eliminate non value added cost and strengthen margins.

As discussed in prior sessions, the team and I expect to share a comprehensive view of our portfolio strategies and structure later this year.

Defining the categories and brands that we will resource and grow.

The brands that will run for efficiency and cash flow.

And the businesses, we may exit over time.

Our goal is to make the portfolio choices and organization changes that will drive stronger performance and valuation behind sustainable top and bottom line growth.

We believe that post pandemic trends, including flexible remote work and renewed interest in cooking are generating opportunities for our existing and future portfolio.

More to come on specific plans timing and presentation.

I will now turn the call over to Bruce for a more detailed discussion of the quarter and the year Bruce.

Thank you Casey and good afternoon, everyone.

Casey just discussed 2021 was not a year without challenges.

That said it was also a year in which we generated record net sales at <unk> foods as consumers continue to flock to our brands during a time of prolonged uncertainty and we were able to successfully integrate the chriscoe brand, which we acquired in December 2020, another acquisition that is consistent with our growth by acquisition.

Strategy.

During 2021, we generated net sales of $2 $5 6 billion adjusted.

Adjusted EBITDA of $358 million and adjusted diluted earnings per share of $1 88.

Our net sales finished just above the bottom of our guidance range that we set early last year, but was negatively impacted by the industry wide supply chain disruption, which increased significantly during the last month of the year due to the spread of the omicron Goober Darien.

We believe that the supply chain disruptions caused in.

In large part by the Omicron variant negatively impacted our fourth quarter net sales by approximately $20 million to $25 million.

This is in addition to lost sales, resulting from industry wide supply chain disruptions throughout the year that prevented us from fully meeting the demand for our products.

But it is difficult to quantify how much net sales were negatively impacted during the first three quarters of the year.

Despite these challenges 2021, mark the first time that we exceeded $2 billion.

And annual net sales in our company's history.

Okay.

Net sales for fiscal 2021 increased by $88 4 million or four 5% to $205 6 billion from $1 96 8 billion for fiscal 2020.

The increase was primarily due to an extra 11 months of net sales of the critical brand largely offset by comparisons against extraordinary demand, resulting from the COVID-19 pandemic during fiscal 2020 as well as one fewer reporting week in fiscal 2021 compared to fiscal 2020.

And supply chain disruptions, resulting from the rise of the omicron variant in the closing weeks of the year.

Net sales of Frisco under our first full year of ownership were $293 4 million in fiscal.

2021.

For comparative purposes, Chriscoe at $27 8 million and net sales under our only multiple ownership in December 2020.

Despite a material increase in input costs, Chris go as more than exceeded our expectations for fiscal 2021.

Fiscal 2021 had one fewer week in fiscal 2020.

We estimate that the additional week in the third quarter of fiscal 2020 contributed approximately $35 million to our net sales in fiscal 2020.

Additionally, we believe that supply chain disruptions from the rise of the omicron variant negatively impacted our net sales by approximately $20 million to $25 million in the closing weeks of fiscal 2021.

On a two year stack basis net sales for fiscal 2021 were 23, 8% higher than pre pandemic net sales for fiscal 2019.

On a two year compound annual growth rate basis net sales for fiscal 2021 increased by 11, 3%.

Base business net sales for fiscal 2021 decreased by $162 1 million or eight 3% to $1 8 billion.

From $1 96 billion in fiscal 2020 the.

The decrease in base business net sales for fiscal 2021.

Flex a decrease in unit volume of $222 6 million, partially offset by an increase in net pricing inclusive of product mix of $54 $3 million.

Foreign currency drove a positive benefit of $6 2 million.

Base business net sales for fiscal 2021 were five 2% higher than pre pandemic base business net sales for fiscal 2019.

On a two year compound annual growth rate basis relative to pre pandemic levels base business net sales for fiscal 2021 increased by two 6%.

Okay.

Our best performing large brand in 2021 was Chris go.

Chris go generated approximately $293 4 million and net sales.

For fiscal 2021 far outpacing our expectations for the business of $270 million in net sales when we acquired it in late 2020.

As a reminder, we built our forecast for Chriscoe prior to the rapid input cost inflation that we experienced for soybean oil, which had a peak reached pricing levels of more than 100% greater than when we had announced the acquisition of the business in late 2020.

However, the power of the Chriscoe brand and its strong positioning in the category allowed us to take the price increases that were required to help offset these costs.

Based on our understanding of the business trends for the periods prior to ownership net sales of Chris go in fiscal 2021.

Not surprisingly below 2020 levels due to the impact of the COVID-19 phenomenon at its peak in 2020.

But net sales of Chriscoe are also significantly higher than the pre pandemic 2019 levels and as stated a few minutes ago above our expectations when we acquired the business.

With a little bit more than a year of ownership of the brand. We are extremely happy with the Chriscoe acquisition.

Among our other large brands Green giant also had pretty good results for fiscal 2021 that were generally in line with our expectations for the year.

Green giant generated net sales of approximately $543 8 million in 2021, which is obviously down from the pantry loading induced net sales of $638 9 million that we experienced in 2020.

However, net sales of green giant products increased by $17 1 million or three 3% ahead of fiscal 2019 net sales.

While we have seen product supply challenges on the frozen and shelf stable businesses at various times over the past two years.

We have generally seen improved demand for both frozen and shelf stable products.

Net sales for our shelf stable products increased by $27 3 million or 16, 7% as compared to 2019.

Net sales for our frozen products were down $10 2 million or two 8% as compared to 2019.

And we were hampered here by disruption to our innovation schedule and with manufacturing challenges for certain <unk> items, largely as a result of COVID-19 related supply chain disruptions.

Yes.

Our spices and seasonings business, which includes brands like dash and accident that we have owned for a long time as well as the spices and seasonings business that we acquired in 2016, which includes brands like Spice Islands tones and Weber Our club store partnership business in our foodservice business had a good year and exceeded 2020.

Levels, despite a very challenging supply chain environment.

Net sales of our spices and seasonings were $372 3 million in fiscal 2021 up $4 $6 million or one 2% when compared to fiscal 2020 levels importantly.

Importantly, our spices and seasonings net sales are much larger today than they were pre pandemic and increased by $35 5 million or 10, 5% from 2019 net sales of $336 8 million.

The broader spices and seasonings category has continued to see the increased demand that we began to experience during the early months of the pandemic not only stick, but also building momentum over time.

The challenge, however is not demand, but instead supply Sim.

To our larger and many smaller competitors.

We are seeing shortages of ingredients and packaging that have hampered our ability to fulfill strong customer and consumer demand. We have also seen this outsized demand exceed our production capacity at times.

Which has been strained by running for nearly two years now at maximum capacity.

Our Q4, 2021, spices and seasonings net sales were down from year ago levels. For example, due primarily to the supply chain constraints.

However, we remain optimistic about our spices and seasonings business in 2022.

And it remains a huge priority for us at <unk> foods.

When Keith talks about strategic priorities. He is talking about increased financial and human capital spend against the very important spices and seasonings business.

We are making continued investments to build line capacity and efficiencies at our Ankeny, Iowa facility and we are also prioritizing spices and seasonings from an M&A strategy perspective.

Although we can obviously only bid on what is for sale.

Okay.

Ortega with net sales of $151 2 million in fiscal 2021 was down not surprisingly by $7 1 million or four 5% when compared to the peak pandemic fiscal 2020 net sales.

What arteaga had very strong performance when compared to its pre pandemic fiscal 2019, net sales of $144 million and was up by $10 8 million or seven 6% on a two year stack basis.

Ortega with its powerful positioning as an exciting and growing category and is also a strategic priority for <unk> foods and represents a brand where we are investing resources.

We are very happy to report that we have successfully increased our capacity produce both taco sauce with an additional line in our Hurlock, Maryland facility and Taco shells with an additional line in our Yadkin build North Carolina facility.

These investments should help us continue to grow this important brand along with the category.

Las Palmas, which like Ortega is another great brand in the exciting and entre and Hispanic category at $39 7 million in fiscal 2021, net sales and was down approximately $1 6 million or 4% compared to fiscal 2020.

But up approximately $4 million or 11, 2% compared to 2019.

We have been able to grow Las Palmas, and would've expected to see even more growth with industry wide supply chain challenges have continued to limit our ability to maximize the potential of Las Palmas.

<unk> also continues to be a star for us as more and more Americans are eating breakfast at home and helping to grow the category.

Cream of wheat is down slightly from a pandemic peak with net sales of $67 $3 million in fiscal 2021 off by $5 5 million or seven 6% when compared to fiscal 2020.

Up by seven 4 million or 12, 4% compared to $59 9 million of net sales and pre pandemic fiscal 2019.

Meanwhile, Maple Grove farms had what may have been one of its best years ever in fiscal 2021, with net sales of $81 $2 million for the year up $4 5 million or five 9% compared to $76 7 million.

In fiscal 2020, net sales and up $10 6 million or 15, 1% compared to $70 6 million in net sales in fiscal 2019.

Maple Grove farms has benefited from increased pure maple syrup sales, including a recovery and an important foodservice account as.

As well as continued progress with our line of Skinny girl branded salad dressings, which are captured as part of the Maple Grove Farms' salad dressings business.

Yes.

Gross profit was $437 million for fiscal 2021, or 21, 3% of net sales.

Including the negative impact of a $13 $9 million accrual for the estimated present value of a multi employer pension plan withdrawal liability in connection with the closure and pending sale of our Portland, Maine manufacturing facility for <unk>.

$14 6 million of acquisition divestiture related and nonrecurring expenses and $5 1 million of amortization of acquisition related inventory fair value step up included in the cost of goods sold.

Fiscal 2021 gross profit would have been $476 million or 22, 9% of net sales.

Gross profit was $481 million.

For 2020, or 24, 5% of net sales <unk>.

Excluding the negative impact of $5 million of acquisition divestiture related expenses and nonrecurring expenses, including cost of goods sold.

During fiscal 2020 gross profit would have been $486 7 million or 24, 7% of net sales.

During fiscal 2021 gross profit was negatively impacted by higher than expected input cost inflation, which were in many cases higher than the fourth quarter of 2021 than they were in the fourth quarter of 2020.

Our expectation is that input cost inflation will continue to have a significant industry wide impact during fiscal 2022.

We have been able to mitigate a portion of the impact of inflation by locking in prices through short term supply contracts and advanced commodity purchases agreements and by implementing cost saving measures.

We have also announced list price increases and optimized trade for certain products, where it makes sense.

However increases in the prices that we charge our customers generally lag behind the rising input costs.

As such we were unable to fully offset all of the incremental costs that we faced in fiscal 2021 and.

And we were not able to fully offset all of the costs that we will face in fiscal 2022.

Selling general and administrative expenses increased by $10 million or five 4% to $196 2 million for fiscal 2021 from $186 2 million in fiscal 2020.

The increase was comprised of increases in warehousing expense of $12 million.

Acquisition divestiture related and nonrecurring expenses of $4 $3 million.

And customer marketing expenses of $2 7 million.

Partially offset by decreases in selling expenses of $6 million in general and administrative expenses of $3 million.

The increase in warehouse expenses was primarily driven by the Chriscoe acquisition and customer fines related to COVID-19 shortages and delays, partially offset by one fewer week in fiscal 2021 compared to fiscal 2020.

Expressed as a percentage of net sales selling general and administrative expenses remained about flat at nine 5% from fiscal 2020.

Okay.

As I mentioned earlier, we generated $358 million and adjusted EBITDA for fiscal 2021 compared to a pandemic enhanced $361 2 million in fiscal 2020.

Fiscal 2021, adjusted EBITDA benefited from an extra 11 months of ownership of the Chriscoe brand, which was offset by lower volume throughout our base business in the aggregate due to comparisons against the extraordinary demand during fiscal 2020, resulting from the COVID-19 pandemic one fewer report.

<unk> week in fiscal 2021, and significant supply chain disruption at the end of fiscal 2021.

Adjusted EBITDA as a percentage of net sales was 17, 4% for fiscal 2020 compared to 18, 4% in fiscal 2020.

Margins were negatively impacted by the input cost inflation and the negative impact of absorption on reduced volumes.

That was only partially offset in fiscal 'twenty, one by our cost savings initiatives and.

And pricing initiatives.

Interest expense was $106 9 million for fiscal.

2020, compared to $101 $6 million in fiscal 2020.

The increase in interest expense.

It was primarily driven by an increase in average debt outstanding as a result of the Chriscoe acquisition, which was offset in part by a lower cost of debt as well as one fewer reporting week.

Depreciation and amortization were also up year over year, driven primarily by the Chriscoe acquisition.

Depreciation expense was $61 3 million in fiscal 2021 compared to $44 6 million in the prior year.

Amortization expense was $21 6 million in fiscal 2021 compared to $19 1 million in the prior year.

We had an effective tax rate of 28, 1% for the year compared to 25, 6% in the prior year.

Our effective tax rate in 2020 benefited from certain provisions of the cares Act that were effective at the beginning of Covid and are no longer applicable.

We generated $1 88, and adjusted diluted earnings per share in fiscal 2021 compared to $2 26 in the prior year.

Our fourth quarter is typically our strongest cash flow.

Quarter of the year and this was true again in the fiscal 2021.

This coupled with the net proceeds we received from shares that we sold under our ATM equity offering in the fourth quarter allowed us to reduce our net leverage as defined in our credit agreement to approximately six one times.

And while forecasting in the current environment remains challenging.

I'll now walk you through our outlook for 2022.

Although perhaps with wider ranges and more caveats than we were accustomed to in pre pandemic years due to the uncertainty around COVID-19 and other potential new variants continued inflation, which may be offset perhaps by potential relief in the second half of the year.

And by continued supply chain disruptions.

Based on what we know today, we expect net sales of $2 <unk> to $2 <unk> 5 billion in.

In fiscal 2022, representing a growth rate of nearly 1% to a little bit more than 3%.

Which is just ahead of our historical <unk> to 2% growth plan.

We expect net sales growth in fiscal 2022 to be primarily driven by our pricing initiatives inclusive.

Inclusive of full year benefits of various pricing initiatives that we launched in fiscal 2021, and coupled with additional pricing initiatives in 2022, including price increases that have already been announced.

And price increases that we expect to announce later this year.

We see modest topline risk from an elasticity perspective, although we appear to have been conservative in our elasticity assumptions so far.

We are also operating in an environment with high levels of uncertainty and.

Can't accurately forecast few.

Future Covid risks, which could result in continued or even enhanced supply chain disruption.

Based on our current net sales forecast, we believe that we can achieve adjusted EBITDA of approximately $358 million to $368 million.

While we do expect to grow adjusted EBITDA. This year, we recognize that we are operating in an environment with unprecedented risk and continued high levels of input cost inflation.

We believe that our cost savings initiatives, coupled with our pricing strategies will help to offset some of these challenges, but we do see risk to our margins and could see adjusted EBITDA as a percentage of net sales range from approximately 17% to 17, 5% in fiscal 2022 before recovering in future years.

As to the plus 18% to 20% area that we think is right for the business over the long term.

Additionally, we expect interest expense of $110 million to $115 million.

Including cash interest of $105 million to $110 million.

Depreciation expense of $60 million to $65 million.

Amortization expense of $20 million to $22 million.

An effective tax rate of 26, 5% to 27, 5%.

Adjusted diluted earnings per share of $1 70 to $1 seven to $1 85.

And capex of $50 million.

Now I will turn the call back over to Casey for future remarks.

Thank you Bruce as I said at the beginning of the call. We had a strong fiscal 2021, despite the challenges faced during the year from inflation.

Covid variance and supply disruptions.

Our fiscal year 2022 is off to a good start and we remain cautiously optimistic that COVID-19 could be almost behind us.

This concludes our remarks and now we would like to begin the Q&A portion of the call operator.

Thank you at this time, we'll be conducting a question and answer session.

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Our first question comes from Andrew Lazar with Barclays. Please proceed with your question.

Hey, Casey and Bruce.

And as you know are you Andrew.

Thank you.

I guess to start off.

I think maybe in the past you've communicated.

You are sort of level of confidence in keeping leverage at a level that would allow you to sort of cover the dividend and that stock sales in the past have been used more to create flexibility for potential acquisitions and obviously this time it seems like the stock sale was a little bit more geared towards maybe operational needs and such.

I have that right and if so maybe what changed such that the equity sales were kind of deemed necessary.

Yes, so Andrew actually I kind of disagree a little bit with that when we bought Chriscoe, we paid all cash.

Over half of $1 billion.

And our intention was always at a point in time too.

<unk> as you suggested which is used equity to delever the balance sheet. Following an acquisition and so the equity offering was was intended for those purposes.

We knew that we had a short term benefit.

<unk> from our Covid enhance sales and EBITDA, which kept leverage manageable at the height of Covid, even after the Chriscoe acquisition, but there is always on our mind some view of an acquisition and Delevering afterwards with equity and that's exactly what we did here got it okay. Thank you for the clarity there and then.

I know its awfully tough honestly too to forecast too finely.

And this kind of environment, but.

I would imagine that you like others youre going to see a lot more volatility in the way sort of the margin profile lays out in terms of the cadence as you go through the year I.

I guess to the extent that you can provide a little bit more clarity on maybe how you see margins playing out sort of earlier in the year.

Versus later in the year because.

<unk>.

You don't want to try and just get sort of expectations in a more reasonable place and it's tougher on the outside to maybe model.

The kind of extreme volatility.

We are staples analysts aren't used to modeling quarter to quarter.

Yes, there's probably two parts to that answer and so part one since we've owned green giant our third quarter has been our highest margin quarter and our fourth quarter has been our lowest margin quarter, that's probably going to continue this year.

However, I think as you are highlighting.

And this is part of the unknown, but expectation would be that margins will be a little bit more challenged in the front half of the year.

From the input cost increases and then the lag effect on the pricing that we're taking to offset that so we would expect some some natural improvement in margins over time, but not so great that we're going to disrupt that fourth quarter being our lowest margin quarter as we can.

Get to the end of this year and then there is obviously a big unknown in terms of if you would.

Talk to US three months ago, we would have been talking about our expectation for.

Possible input cost relief in the back half of this year with all the events going on in the world and in Europe today.

That may be different and so like you said theres a lot of unknown that that mix.

Those predictions hard to do.

Okay. Thanks, I'll pass it on.

Our next question comes from Nik Modi with RBC capital markets. Please proceed with your question.

Yes.

Good evening everyone.

Two quick questions from my side.

General Mills at Cagny indicated that they were seeing some <unk> as they call them. They said theyre going to keep a watchful eye on that so I just wanted to get your reaction to that.

You've seen any of that type of consumer behavior in any of your research and the second question is really just.

Kind of on the cost side, Indonesia has restricted palm oil export I just wanted to see kind of how you guys are thinking about the downstream impact of that on your on your coffee business as the year progresses.

So let me just make sure I this is Casey.

You said comment on meal prep fatigue.

Yes.

Yes, that's a general mills was commenting yes, okay got it.

Yes.

We actually have not seen that I said, what the two trends that we're seeing in our research are.

Number one people will continue to work somewhat remotely even if they are coming back to the office.

To some extent there still are working more remotely and from home than they were before the pandemic driving more meal consumption at home, particularly in the <unk> the lunch occasion.

Second.

I guess, when our meal prep or businesses that are at least where it would be related to that like Ortega. We've seen consumption hold up fairly strongly on those businesses. So we haven't necessarily seen that.

In our in our businesses, yet I mean, the real impact we talked about was sort of a disruption of <unk> on our supply chain in December but our consumption numbers held up pretty nicely. So I'm not seeing that yet I'm seeing that the trend of more breakfast and lunch occasions at home as people work remotely.

And to some extent, even some casual dinner occasions and then the second thing is we continue to hear from people that.

During COVID-19 they learned how to cook.

They are continuing to show interest in cooking and preparing meals at home probably slightly higher than they were in the pre pandemic phase. So that's what we see in our research and Thats, what I would comment on in our portfolio.

Okay and on the Palm oil palm oil exports and your thoughts on the cost impact.

Paul.

The cost for this year I mean is this really the guidance is built on on spot rates or is there more forward kind of forecast that youre using.

Yes.

Palm oil is one of the things that we're looking at and tracking pretty closely honestly.

The war in Ukraine is obviously things that are sensitive to oil or even wheat has gone up so we forecast for the year. We in typical fashion, we will have significant coverage through the year, except on things that we're managing coverage up and down based on volatility in the commodities markets. So we were constantly adjusting.

Forecast, but for the most part we are passing on increases in our own pricing to recover gross margin dollars impact.

Higher input costs.

Okay I'll pass it on.

Thanks, guys.

Thanks, Nick.

Our next question comes from Michael <unk> with Piper Sandler. Please proceed with your question.

Thank you.

Just curious if you could.

Unpack guidance Ted further.

EBITDA.

High end of the range is just above consensus, but if I have the numbers right.

EPS.

Pretty well below the street.

Just on some of the pieces there, but can you point to where that gap might be and just what some of your assumptions might be about buybacks as well.

For fiscal 'twenty two.

Right, yes, yeah. So so the one thing Thats worth looking through the press release and the 10-K, when it's filed as details around the stock sale.

And so we sold about $110 million of stock.

Late last year.

Which probably isn't captured in your forecast around EPS and none that I am not really sure what youre using for tax rate. So that could also be.

Be throw things off.

Well and I was just using the consensus number so it could be able to give a blend but as far as.

Turning back around to buying back shares is that on the table at all or are you assuming none for 2022.

We do have an authorization in place.

It depends in large part on what happens with <unk>.

With the share price.

Fair enough and just following up on elasticity.

Thank you. Your language was that you have you assumed some modest elasticity or just that doesn't hold quite at the levels that you've seen do you assume it.

Am I hearing it right. That's not you don't model in your guidance is assuming to normal levels and can you just maybe give a little bit of sense of magnitude of what you do expect.

So we have been expecting and modeling out elasticity in all of our price increase analysis that we've done what we've experienced so far and so this is a so far comment is that.

Any elasticity that we've actually experienced has been less than what we modeled out.

And part of that I think is if you go through the grocery store.

This is not a P&G going out and raising prices.

Manufacturers of most products that most things sold in the grocery store are seeing input cost inflation turnaround and appropriately raising price and.

So we're seeing that phenomenon across the grocery store and probably also impacting that as you see that in restaurants and other services.

So.

The alternative to an expensive night out on the town and dinner is eating at home.

Which while that may cost a little bit more of is still going to be less than eating out.

And I'd just to elaborate on that so.

As we started taking price increases in the second half of this year, we were modeling elasticity based on historical data.

What I said was so far we have not seen we've seen the last week coming in lower than that.

So we.

We have been assuming elasticity effects going forward into 2022.

Not as high as our initial modeling would've suggested but we are still assuming that there will be elasticity.

Conservatively going forward.

Yes.

Okay. Thanks, so much.

Our next question is from Ken Zaslow with.

Bank of Montreal. Please proceed with your question.

Hey, guys. Good afternoon, good evening.

Yes, it's something about.

That the acquisition.

Actually exceeded your expectations.

On the sales line did it exceed your expectations on the EBITDA line or not and I didn't catch it if it was I just didnt understand when you said.

Debt.

Exceed your expectations.

Yes, probably a little bit of bulk, but we didn't disclose the EBITDA for Chris go but overall.

Read between the lines it had a great year it did very well.

I think if you look at the top line. It was obviously enhanced by the pricing. So we said low point I agree yes.

So we had lower elasticities than we expected so the pricing actually flowed through in the top line very nicely.

EBITDA was more closely in line with our expectations, because obviously, we had to cover higher soybean oil costs, and we Werent, where we took the business from <unk>.

<unk>, we werent covered that far out.

<unk>.

Okay.

The biggest thing to keep in mind in our reaction to sitting back after years.

Look we made an acquisition very large one we saw input costs increase.

At a certain point in time more than 100% for soybean oil.

Through through pretty good management of the business, we're able to.

To perform.

Somewhere between in line and better than expected.

So very very happy with that acquisition.

Okay.

My question is.

Or is this a line at Cagny as well.

More aggressive and people maybe aligning their strategy a little bit more with you guys, where you know a lot more portfolio management active portfolio management.

The opening comments you said is that we are looking to the timing to exit certain businesses.

What's your criteria to exit.

Typically what you guys are usually acquires I know there's been some.

Divestitures at good pricing, but not <unk>.

Digesting.

Assets is there a little bit of a change is there a thought process and can you elaborate on what are the key criteria for which that you would seek to divest certain businesses.

Yes, sure I think look net I think you should expect us to be a net acquirer versus exit, but we will selectively look at businesses that we don't fit that we don't believe fit within our portfolio long term.

Probably later this year when we come back to you and talk to you more specifically about our strategies and our plans and how we want to manage the portfolio will be a lot more explicit about this.

But the criteria for me would be looking at businesses that don't really fit our operating model don't have a lot of synergies with how we run our businesses.

And where I don't believe we have the capabilities and the right to grow those businesses sustainably over time.

So I don't want to go further than that but it's basically about shaping the portfolio of the places where I think we managed it well we manage it well to get to get some growth, we manage a well to bring in acquisitions and similar business lines and categories.

And find synergies and build those and add to our capabilities. So we'll look at selectively exiting some businesses that don't fit that criteria, but.

And then we'll make some conscious choices about EBIT business lines that might not look like they fit within kind of our focus portfolio structure, where we can manage those businesses efficiently I'm really going to look at only exiting businesses, where I don't think we commanded manage them efficiently or effectively within our within our structure.

Okay. So there's a little bit more of a sense of streamlining than maybe previous management have had does that Lisa fairpoint and im not trying to put words email them.

Said, we are going to be a net acquirer, which means I think.

But we will look at it yes, yes.

Yes, but we will look at some places that we can prune the portfolio, where I think it is not the best fit with where we want to go but look the net I think we're going to be acquiring more than we're going to be divesting.

Okay. And then last question is you said that you're going to take pricing later this year.

Have you recaptured.

All of the recent inflation.

Is that anticipatory or is that.

Hey, we think that we're a little bit lagging in we need another price increase we just have to tell the retailers how is that positioning and I'll leave it there and I appreciate your time.

Yeah honestly.

This is kind of a fluid dynamic.

If you would've asked me two months ago, and we priced for everything that we're seeing I might have said, yes to.

Today with the war in review Crane, and some new commodity increases coming on on it.

Soybean oil soybean oil I thought it would be kind of in the $50 now is really up.

68, the last spot market eyesore, so were sort of adjusting to that and when I said, we may have to do new price increases, it's the reflect new things new commodity cost inputs that we're seeing in the marketplace.

We in particular have you seen recently soybean oil is up because I think it's sensitive to the cost of oil over I mean to the price of oil overall, so we will be taking further actions, where we see it as necessary to recover cost input increases that are relatively new that we have that we werent experiencing kind of in Q4.

Yes.

Great I appreciate it thank you.

Thanks, Ken.

Our next question comes from Eric Larson with Seaport Research Partners. Please proceed with your question.

Yes, thanks, guys. Thanks for taking my question so.

My question comes.

Really on your revenue guidance. So when you look at your revenue guidance Youre looking for an increase this year of 1% to 3%.

So when you look at your pricing actions from last year, and then what's potentially going to happen again this year.

You Shouldnt.

You should be able to pencil in probably a high single digit.

Revenue increased just from pricing.

It takes away a little bit of promotion expense et cetera.

You may have a $10 million to $15 million leakage from $35 million of your extra week last year, and then a 20% to 25 million shortfall on COVID-19 , but where.

Whereas the rest of the leakage coming from.

On that can you help us get from point a to point beyond that.

Okay.

Yes, remember that I've said, we are modeling some elasticity right. So.

We're not getting all of the pricing free.

It's going to come at some volume consequence, and we've seen some elasticity in our pricing was already and we've been I think we've appropriately modeled Alaska is he going into next year, but look the way to think about our top line guidance for next year is three things. One is we are definitely going to get pricing realization benefit on the portfolio.

Second we are looking at where there has been elevated demand for COVID-19 that may taper off a little bit in some categories still stay high relative to 2019, and pre COVID-19 levels, but down from the 2021. So we do model a little bit of that effect as well, which is an offset.

Obviously to the pricing realization and then third we do have new capacity coming on some of our product lines like Ortega, where we will we will expect to get some growth out of that from a volume standpoint. So.

I think look it.

You can't just take the net pricing impact that we're taking in the marketplace and assume that that's all going to flow through because we will have some elasticity impact and we will have some drop off in the elevated demand.

And some of the categories going into 2020, and as we get fully through.

COVID-19 kind of.

<unk> and it moves towards more of an endemic in peoples.

The consumer behavior normalizes again.

Does that help.

Yes that does help so.

Where youre seeing the most elasticity.

One would assume that those are in the categories, where you've taken your biggest pricing adjustments and that would be like a critical where.

Just the cost of oil is such a high percentage of the underlying.

Cost of goods sold for that product line. So.

Where are you seeing your elasticity and and as.

Is my assumption right that it's in those product lines.

Have a high percentage of commodity component to them.

It's probably right for some of those and not for others.

I mean, you got to think about so can vegetables would have steel.

Steel, Kansas is going up has gone up dramatically. So youll have some elasticity impact there.

Well okay.

Okay.

We detailed all the pricing that we're actually taking with our customers on a percentage basis than you would see that we're getting a net net help from that but but it's going to be offset by obviously, some volume elasticity, but not certainly less than one to one.

Okay. Thank you I'll pass it on.

Our next question is from Robert Moskow with Credit Suisse. Please proceed with your question.

Thank you actually a couple of questions.

First time, Chris Koh it seems like that.

<unk> swing factor for 2022, because of the pricing commodity relationship.

And maybe even it was in 2021 as well.

Is there any way to like Dimensionalize like.

Whats, what's baked into your assumptions for 2022 on margin recapture.

And did you expect profit growth in 2022 or not.

And then secondly, a broader question.

A lot of companies that presented last week at <unk> talked about.

We used a lot of jargon on.

Artificial intelligence new technologies.

Standardizing processes to improve operational efficiency.

Have you seen anything new out there or are you implementing anything new.

All of these other bigger companies are doing too.

Improve operational effectiveness as well.

I'll take the Chris Good question and let Casey take the jargon question.

Thanks.

Sure Chris.

Yes margins held up pretty well for Frisco, probably a little bit lighter than we initially modeled out for fiscal 'twenty one.

But held up pretty well despite the input cost inflation.

Due to the due to the pricing.

I think Chris will continue to follow the market as input costs.

Stay elevated and rise more we will take more pricing.

I wouldn't be surprised if you saw that across the category.

So ultimately we believe the margins of the business that we bought will remain intact.

Kind of hard for me to say well I forecast increased margins for Christmas this year or increased profits for Christmas this year versus last year, Chris Good delivered in 2021, we expect it to again in 2022.

Okay.

On the Jarden question.

Here's the I guess the way I would talk about it in <unk>.

Simple terms is.

I think there are some places where we are trying to streamline and simplify our operations I would say number one we're investing in automation in our plants.

Because labor is so tight and it's been so difficult to manage in that COVID-19. So we have spent quite a bit of money on automation in our plants, which to me is.

<unk>.

Restructuring our costs and streamlining our cost structure in our labor.

And that's just that's facing the realities in the current labor environment that we're in today.

Second we have invested in some systems to drive greater efficiency and control.

Do trade promotional system that we've implemented in the last year and a half, but I think it's now really just coming into its stride in terms of our ability to optimize our trade or trade spending and make sure that we're making the right decisions from a return.

Standpoint.

If you ask me what are the things that we really have to focus on to improve our operations. It is clarifying how we're going to manage different parts of our portfolio because right now we have kind of a big basket of 50, plus brands and multi <unk> 30 categories.

We're trying to manage all of that centrally within the company and from a functional standpoint.

I think we need to get more efficient and breaking that down and saying where are we going to focus how are we going to resource it and pushing some accountability for managing the growth in the P&L of these businesses to improve our performance and to improve our visibility and clarity and speed up our decision, making and how we are running these businesses. So if you ask me that.

Probably the biggest thing I'm focused on it.

It's got a lot of jargon its about how do we simplify and clarify the accountability on our business and drive it harder for future success.

That's helpful.

Can you tell me, whether Chriscoe achieved your original acquisition targets for EBITDA.

Yes.

Okay. Thank you.

We have reached the end of our question and answer session I would now like to turn the call back over to Casey Keller for closing comments.

Yeah.

Thank you all for your attention.

Obviously this was.

This is an interesting quarter from the standpoint of dealing with the omicron variant.

But as I said the good news is that we feel like we're past that now and we're seeing big improvements in our in our workforce and callouts and everything else. So I think we're on track.

2022 will be another year of.

Continued challenges with inflation and pricing, but I think the team is up for the task and we are ready ready to go with it. So thank you for your attention and we'll speak to you next time.

This concludes today's conference you may disconnect your lines at this time and we thank you for your participation.