Operator: Good day, and welcome to the B&G Foods Second Quarter 26 Earnings Call. Today's call, which is being recorded, is scheduled to last about 1 hour, including remarks by B&G Foods management and the question and answer session. I would now like to turn the call over to AJ Schwabe, Director, Corporate Strategy and Business Development for B&G Foods. AJ?
AJ Schwabe: Good afternoon, and thank you for joining us. With me today is Bruce C. Wacha, our Chief Financial Officer. You can access detailed financial information on the quarter in the earnings release we issued today which is available at the Investor Relations section of bgfoods.com. Before we begin, our formal remarks, I need to remind everyone that part of the discussion today includes forward looking statements. These statements are not guarantees of future performance and therefore, under reliance should not be placed upon them. We refer you to B and G Foods' most recent annual report on Form 10 k and subsequent SEC filings, for a more detailed discussion of the risks that could impact our company's future operating results and financial condition. B&G Foods undertakes no obligation to publicly update or revise any forward looking statements. Whether as a result of new information, future events, or otherwise. We will also be making references on today's call to the non GAAP financial measures. Adjusted EBITDA, segment adjusted EBITDA, adjusted net income, adjusted diluted earnings per share, adjusted gross profit, adjusted gross profit percentage, base business net sales, and segment adjusted expenses. Reconciliations of these financial measures to the most directly comparable GAAP financial measures are provided in today's earnings release. Bruce will begin the call with opening remarks and discuss various factors that affected our results selected business highlights and its thoughts concerning the outlook for the remainder of fiscal 26 and beyond. Would now like to turn the call over to Bruce.
Bruce C. Wacha: Thank you, AJ. Good afternoon, everyone. Thank you for joining us today. I am going to cover a number of topics on our call this afternoon, which will include our change in CEO, and why we are so excited to have Robert Mills join our executive leadership team at B&G Foods. Our portfolio reshaping efforts which consists of the divestitures of low margin working capital intensive business, including Green Giant US Frozen, Le Sueur US shelf stable, and the Don Pepino brand over the past 12 months. The establishment of our Green Giant US frozen contract manufacturing business which we expect to provide a modest but consistent contribution to adjusted EBITDA and cash flows. As well as the acquisition of the higher margin cash generative College Inn and Kitchen Basics brands. Our second quarter results which demonstrate our ability to grow adjusted EBITDA and net cash provided by operating activities, despite a challenging industry backdrop. And update on our fiscal 26 guidance which are-- which we are reaffirming at previous levels across net sales, adjusted EBITDA, and adjusted diluted earnings per share. While it is taking time to implement this portfolio reshaping, and we are still evolving today, we can see the green shoots as our business results continue to improve and we continue to better position ourselves for a more steady and more balanced financial performance in the future. Now before I move on to our performance in the second quarter, I would like to take a moment to comment on our CEO transition the appointment of Robert Mills as our chief executive officer. Having served on our board of directors, for the past 8 years, Robert brings a unique combination of deep knowledge of our company and extensive operating experience. He understands our brands, our customers, our opportunities, and importantly, the challenges that we need to address. This familiarity significantly reduces the traditional transition period for a new CEO and positions Robert to move quickly establish clear priorities, and accelerate the actions necessary to improve execution, strengthen the business, and create sustainable shareholder value. Robert's experience is particularly well aligned with what B&G Foods needs at this point in our evolution. He joins us from Tractor Supply Company, where he has held senior executive leadership roles spanning strategy, digital commerce, technology, and business operations with direct P&L accountability. During his tenure, Robert helped lead large scale transformation and growth initiatives across a complex multibillion dollar public company. While building deep experience in digital, data, AI, productivity, and operating execution. Robert also brings extensive M&A in corporate development experience including evaluating, acquiring, and integrating businesses. This combination gives Robert a broad perspective on organic and inorganic value creation. Disciplined capital allocation, and active portfolio management. Robert comes into this role with a strong sense of urgency, and a clear understanding of B&G Foods. During his first 90 days, he intends to spend considerable time with our employees, customers, business partners, and shareholders. Listening and developing and even deeper understanding of the challenges and opportunities in front of us. His 8 years on our board provide an important head start allowing him to use this period not simply to learn the business, but to quickly establish priorities and began translating these priorities into action. Robert's immediate focus will be on strengthening execution maximizing the potential of our core brands, improving productivity and cash generation, and accelerating the strategies that can return the business to sustainable growth. Robert is excited about the future of B&G Foods and the opportunity to build upon the strength of our brands while bringing new capabilities and greater speed to the organization and so am I. We believe that his experience in digital transformation data, and AI can help us modernize how we operate better understand and serve our customers consumers, and improve decision making and identify new opportunities for growth and productivity. Robert is also looking forward to engaging directly with the analyst and investor community in the months and years ahead. And sharing more about his priorities and vision for B&G Foods. We believe that Robert has the right combination of institutional knowledge operating experience, strategic leadership, M&A expertise, and transformation capabilities to move quickly, make disciplined decisions, and accelerate value creation for our shareholders. We are very excited to have Robert as part of the B&G Foods family. Robert will be joining our third quarter earnings call in November. And now back to the quarter. For the second quarter of 26, we generated $383 million in net sales a net loss of $4 million or $0.05 per diluted share, adjusted net income of $4.9 million or $0.06 per adjusted diluted share. Adjusted EBITDA of $60.4 million and adjusted EBITDA as a percentage of net sales of 15.8%. As we review our second quarter 26 results, we will highlight the impact of our various M&A transactions, which include the divestitures of the Don Pepino, and Le Sueur US brands in the summer of 2 thousand 25 and the divestiture of the Green Giant US frozen business in February 2026. Simultaneous with the Green Giant US frozen divestiture, we commenced the contract manufacturing business pursuant to which we produce Green Giant US frozen products, at our vegetable manufacturing facility in Mexico on behalf of the new owner of the Green Giant US frozen business. In addition, we acquired the College Inn and Kitchen Basics brands in February 2026. Unless otherwise noted, the 3 divestitures are included in our Q2 25 financials but not our Q2 2026 financials, while the new contract manufacturing business and the acquired brands are included in our Q2 2 thousand 26 financials but not our Q2 2025 financials. Because of the divestiture of the Green Giant Canada has not yet closed, there is no impact to our net sales or adjusted EBITDA. However, because Green Giant Canada is classified as an asset held for sale for accounting purposes the pending divestiture does impact how Green Giant Canada assets are carried on our balance sheet. And within certain line items. of our P&L. We expect Green Giant Canada divestiture to close during the third quarter and look forward to providing an update after the divestiture has been completed. Net sales for the quarter of 2026 decreased by $41.1 million or 9.7% to $383 million from $424 million for the second quarter of 2 thousand 25. The decrease was primarily attributable to the Green Giant US frozen Le Sueur US shelf stable. And Don Pepino brand divestitures. Partially offset by incremental net sales from the Green Giant US frozen contract manufacturing business and the acquisition of the College Inn and Kitchen Basics brands. Net sales of divested brands contributed approximately $68 million to Q2 25 net sales. Net sales of acquired brands plus the contract manufacturing business contributed approximately $37 million in net sales during the second quarter of 2 thousand 26. Base business net sales for the second quarter of 26 decreased by $10.2 million, or 2.9%, to $346.3 million as compared to $357 million for the second quarter of 2025. The decrease in base business net sales was driven by a decrease in volume of $15.5 million or 4.3% of base business net sales. Partially offset by an increase in net pricing and product mix of $5.1 million or 1.4% of base business net sales. And the positive impact of foreign currency of $200 thousand or 0.1% of net sales. The timing of the July 4 holiday cost us about 1.5 shipping days in the quarter or approximately $5 million to $7 million of net sales in the second quarter of 2 thousand 26. For the year to date period, base business net sales are on track with our plan and were essentially flat or up $200 thousand to $711 million for the first 2 quarters of 2 thousand 26. From 711 million for the first 2 quarters of 2 thousand 25. Gross profit was $79.6 million for the second quarter of 26 or 20.8% of net sales. And adjusted gross profit was $83.7 million or 21.8% of net sales. Gross profit was $87 million for the second quarter of 2 thousand 25, or 20.5% of net sales. And adjusted gross profit was $89.1 million or 21% of net sales. Gross profit as a percentage of net sales increased due to the acquisition of higher margin College Inn and Kitchen Basics brands, the divestiture of the lower margin Green Giant US frozen business, and certain tariff refunds received from the US government during our second quarter. Selling, general, and administrative expenses decreased by $6.6 million or 14% to $40.6 million for the second quarter of 2 thousand 26 from $47.2 million for the second quarter of 2 thousand 25. The decrease was comprised of a decrease in warehouse expenses of $3.7 million general and administrative expenses of $2.7 million consumer marketing expenses of $1.7 million and selling expenses of $800 thousand. These were partially offset by an increase in acquisition divestiture related and nonrecurring expenses of $2.3 million expressed as a percentage of net sales, selling, general, and administrative expenses, improved by 50 basis points to 10.6% for the second quarter of 2 thousand 26. As compared to 11.1% for the second quarter of 2 thousand 25. We continue to follow these costs closely and we are taking steps to reduce our ongoing SG&A commitments. To better reflect the size of our business going forward. Minimizing the impact of stranded costs on our overhead structure from recent divestitures. We generated $60.4 million of adjusted EBITDA or 15.8% of net sales in the second quarter of 26 compared to $58 million or 13.7% in the second quarter of 2 thousand 25. The increase in adjusted EBITDA was primarily attributable to the acquisition of the College Inn and Kitchen Basics brands, the divestiture of the Green Giant US frozen business, the commencement of the Green Giant US frozen contract manufacturing business, and tariff refunds received from the US government during the second quarter. Net interest increased $2.7 million or 7.5% to $38.5 million for the second quarter of 2 thousand 26. From $35.8 million for the second quarter of 2 thousand 25. The increase in net interest expense was primarily attributable to an increase in average long term debt outstanding during the second quarter of 26 relative to the average long term debt outstanding during the second quarter of 2 thousand 25 and the 11% interest rate on our new senior unsecured notes due 2031. During the second quarter of 2 thousand 26, net interest expense was also negatively impacted in connection with our debt refinancing because the new 11% senior unsecured notes due 2031 were issued on 06/10/2026 prior to the redemption of our 5.25% senior unsecured notes due 2027, and therefore, during a 24 day period, we incurred interest expense on both sets of notes. Which was only partially offset by the interest earned on the net proceeds of the issuance of the 11% senior unsecured notes due 2031. Depreciation and amortization was $14.5 million in the second quarter of 26, compared to $16.7 million in the second quarter of 2025. We had a net loss of $4 million or $0.05 per diluted share for the second quarter of 26 compared to a net loss of $9.8 million or 12¢ per diluted share for the second quarter of 2 thousand 25. The net loss for the second quarter of 2 thousand 26 was primarily attributable to approximately $9.7 million of acquisition divestiture related expenses and nonrecurring expenses including certain organizational restructuring efforts, to reduce the cost overhang related to the divestitures. We had adjusted net income of $4.9 million or 6¢ per diluted adjusted share in the second quarter of 26. In the second quarter of 2 thousand 25, we had adjusted net income of $2.9 million or $0.04 per adjusted diluted share. Adjustments to our EBITDA and net income are further described in our earnings release that was issued today and our 10-Q, which we expect to release later this week. I would now like to touch on the results by business unit for the second quarter. Net sales for Spices and Flavor Solutions increased by $0.1 million or 0.1% in the second quarter of 2 thousand 26 $96.6 million from $96.5 million in the second quarter of 2 thousand 25. Spices and Flavor Solutions segment adjusted EBITDA increased by $7 million or 29% in the second quarter of 26 compared to the second quarter of 2 thousand 25. The increase in segment adjusted EBITDA primarily due to an increase in net pricing, and the impact of product mix. An improved cost environment for spices relative to the prior year, and tariff refunds received from the US government during the second quarter. Net sales for meals increased $6.4 million or 6.2% in the second quarter of 2 thousand 26. To $111 million from $104 million in the second quarter of 25. The acquisition of College Inn and Kitchen Basics brands added approximately $13.2 million of net sales during the quarter. Meals segment adjusted EBITDA increased by approximately $100 thousand primarily driven by the acquisition. Which offset declines in certain brands. Net sales for specialty decreased by $5.9 million or 4.4% in the second quarter of 2026 to $128.9 million dollars from a 135 million in the second quarter of 2 thousand 25. The decrease was due in part to the divestiture of the Don Pepino business which generated $1.8 million of net sales in the second quarter of 2 thousand 25. Specialty segment adjusted EBITDA decreased by $8.9 million in the second quarter of 2 thousand 26 compared to the second quarter of 2 thousand 25. The decrease was due in part to the divestiture of the Don Pepino business certain unfavorable cost comparisons, in raw materials, increased manufacturing expenses, and our investment in critical oil pricing which on the positive side benefited from increased volumes. In the quarter. Financial performance for the frozen and Vegetables during the second quarter of 2 thousand 26 and the second quarter of 2 thousand 25 are not comparable due to the impact of the Le Sueur US and Green Giant US frozen divestitures and the impact of our new contract manufacturing agreement for Green Giant US Frozen. Net sales of Green Giant Canada remained strong and increased by $500 thousand or 2.4% to $23.4 million for the second quarter of 2 thousand 26 compared to $22.9 million for the second quarter of 2 thousand 25. Separately, the new Green Giant US frozen contract manufacturing business generated $23.9 million in net sales during its first full quarter of operation following our sale of the Green Giant US frozen business. Our team is looking to build this business, add new customers, and increase its volumes. Before I discuss 2026 guidance, I would like to remind the audience that we continue to live in unpredictable times. And depending on the day we are at war in The Middle East, Our 2026 guidance reflects only what we know today, and, for example, does not factor in significant changes in inflation, tariff policies, or the potential impact of escalation and conflicts in Eastern Europe, The Middle East, or Latin America could have on our results. Also, please note that our guidance reflects the expected impacts only of acquisitions and divestitures that have already closed. In other words, our guidance reflects the expected impacts of Don Pepino, Le Sueur US, and Green Giant US frozen divestitures, the commencement of the Green Giant US frozen contract manufacturing business, and the College Inn and Kitchen Basics acquisition. But our guidance does not reflect the expected impact from the pending Green Giant Canada divestiture because that divestiture has not yet closed. Also, as a reminder, our guidance reflects that fiscal 2 thousand 26 has 1 fewer week than fiscal 2 thousand 25, which had a 53rd week. The benefit of the 50 third week was included in our fiscal 2025 results. And we will lap that benefit or approximately $18 million in net sales during the fiscal fourth quarter. Of 2026. That said, we are reaffirming our guidance We are maintaining fiscal 26 net sales guidance in the range of $1.735 billion to $1.775 billion adjusted EBITDA guidance in the range of $275 million to $290 million and adjusted EBITDA as a percentage of net sales in the range of approximately 15.8% to 16.3%. And based on this guidance, we still expect adjusted diluted earnings per share to be in a range of $0.575 to $0.675 per share. Additionally, we expect for full year 2026 interest expense of $157.5 million to $162.5 million including cash interest of $150 million to $155 million depreciation expense of $40 million to $45 million, amortization expense of $17 million to $19 million, cash taxes of approximately $5 million or less an effective tax rate of 26 to 27%, and CapEx will likely be at the lower end of our $30 million to $35 million target. As a reminder, we are making strong progress against our long term goals which include improving the base business net sales trends of the core business to the long term objective of 0% to 2% growth. Reshaping the portfolio for future growth stability higher margins, and strong cash flows. Proactively managing our capital structure by using excess cash flow and the net proceeds of divestitures to facilitate debt reduction and ultimately to fund strategic acquisitions. We believe that we have the ability even in a challenging environment for packaged food companies, to maintain a stable base business and enhance our performance through our growth by acquisition strategy. While simultaneously returning a meaningful portion of our excess cash to investors through our long standing commitment to both debt reduction and a healthy dividend policy. We are very excited about the future of B&G Foods we thank you for tuning into our earnings call this afternoon. This concludes our remarks, and now we would like to begin the Q&A portion of our call. Operator?
Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, press 1. Your first question comes from Andrew Lazar with Barclays. Please go ahead.
Andrew Lazar: Hey, Andrew. How are you? Hey there. Good. Good. To start off, can you maybe quantify how much the tariff refund benefited EBITDA in the quarter and what your expectation would be for that benefit for the full year if there is more to come?
Bruce C. Wacha: Yeah. We have not disclosed the number. it is relatively modest. If you go back to kind of 2025 results and as we articulated then, we had about 8 million to $9 million of total incremental tariff exposure That included tariffs where we were the direct importer of record. And where we were not the importer of record. Where we were the importer of record is about a little bit less than half of that, that is largely what we got back. In the second quarter. We expect to get some more back throughout the remainder of the year and in certain cases, we will invest that in the business on a go forward basis.
Andrew Lazar: Got it. Alright. And then I think on the last call, there is quite a bit of discussion around potential inflation building even outside of just soybean oil as it relates to Crisco, but other items too, and that might necessitate some incremental pricing moves, you know, despite it being a sort of a challenging environment for everyone. Where do you stand on inflation at this stage for this year? What might that mean for pricing? And have you taken any or plan to? And then know, what sort of elasticity should we be thinking about this time around just given the consumer is under sort of more pressure than perhaps in the last couple of rounds of pricing the industry took? Thanks so much.
Bruce C. Wacha: Yeah. I think on our last call, we were right around the time where both diesel fuel oil, kind of West Texas Brent, and soybean oil were all at their peak levels. So they are a little bit inside of where they were before with a couple moves. Up and down. that is still the largest area where we have seen inflation so far this year. there is a little bit coming in spices as well. But that is primarily where we have seen it. We have not seen people taking pricing on fuel costs. But we certainly have seen that within vegetable oil. Got it. Thank you. And our expectation is that is to cover that inflation where we can. Right. and kind of the way that you have done it on Crisco in the past, wherever it is, you know, 1 or 2 years with that new process. Okay. Thank you.
Operator: Next question, David Palmer with Evercore. Please go ahead.
David Palmer: Thanks. I wanted to ask you about non measured channels. I think last quarter that might have been up low double digits or at least some sort of double digits. And now it feels like it might maybe up low single digits. Wondering how you are what reason there is for that and how you are thinking about non measured going into second half?
Bruce C. Wacha: Yes. We are still seeing pretty strong growth across some of our non measured channels. Canada has been strong, continues to be strong. The foodservice where we have it, is continue to be pretty strong. And then with within spices, our, private brands relationship continues to be strong. As well as some of the other ones. We still see that strength. You know, it is it is up. it is offsetting some of the damage in the regular track channels. But quite frankly, we need to improve the performance of our retail branded business. And I think that is a lot of the focus that Robert is gonna bring on a go forward basis. Okay.
David Palmer: And just with regard to what we are seeing when we look at some of the scanner data, looks like spices is under pressure, but you are having some areas of strength elsewhere, cream of wheat, You know, could you maybe make a comment about you know, the wins and losses and where you see the most opportunity near and medium term with the brand business? And I will pass it on.
Bruce C. Wacha: Yeah. We are actually seeing pretty good trends in our hot breakfast overall, which would be cream of wheat, McCann's, and the pure maple syrup. Grandma's molasses. So there is pockets of strength in there. On the spices, where there is a little bit of noise is some shift, in some of the brands particularly around Tones and Weber. That are going from branded to partner brands. So there that creates a little bit of the distortion that you are seeing. Look, we need to improve our performance across the board. We have had really good performance in some of the non tracked channels. We need to see further improvement in the tracked channels as well. Thank you.
Operator: Next question, Robert Moskow with TD Cowen. Please go ahead.
Robert Moskow: Thanks. Maybe I will just go right to that last point. Tones and Weber are going from brands to partner brands. Is that new, Bruce? And can you give a little more context as to what the rationale for that is?
Bruce C. Wacha: Yeah. it is it is a continuation of what we have seen over time. We saw this very much early on when we bought the ACH business in, like, 2016. 2017, and then we are just seeing sort of the follow through there. So in a couple in a couple spots, we are we are losing tones distribution, and it is being replaced with us providing distribution of similar product, similar amount of SKUs on the private band side.
Robert Moskow: Okay. But you are not read recharacterizing those 2 brands as like, private label or work or giving it to a retailer or anything like that.
Bruce C. Wacha: Okay. No. We are we are keeping those brands, and look. We wanna improve the performance in those brands.
Robert Moskow: Okay. Got it. And can you touch on College Inn and Kitchen Basics? The sales were lighter than what we had forecasted. Maybe we got the seasonality wrong. But can you can you talk to your early learnings on those 2?
Bruce C. Wacha: Yeah. Hale for both, I think, are just a little bit ahead of where we had forecasted but maybe we are a little bit more conservative than you were. Think within consumption, there is a little bit of softness in College Inn, which we knew when we bought this. You know, it is a No. 2, Northeast regional brand. We have to price it right. I think under the last 1 or 2 years of prior ownership, particularly leading up to the bankruptcy, and post bankruptcy We think it was mispriced in the market. And so we are fixing that. We are looking forward to a strong holiday season. We kinda knew what we were getting here, which is something we got to really protect. And drive cash flows with. But manage that brand as it is, which is a No. 2 Northeast regional player where it is been around for a long time and makes good money. Where we sell it. Kitchen basics, I think we continue to be surprised by this business. We really like it. We think it is got some growth opportunity. Addition to having some pretty good margins. The category has been pretty good. To be fair, it is off season, but people are still buying a lot of broths. And stocks in the summer. But it is off season, and so it is a little bit smaller. The true test for us really will be as we integrate during the winter months, the more traditional soup season in the third and fourth and first quarter.
Robert Moskow: Okay. Thank you.
Bruce C. Wacha: Yep.
Operator: Next question, Karru Martinson with Jefferies. Please proceed.
Karru Martinson: I could not help but notice that couple of comments here on implementing portfolio reshaping active portfolio management. You have done a lot of the heavy lifting here. Is there more to do? Or are there pockets when you look at your portfolio that you want to accelerate on?
Bruce C. Wacha: I think, Karru, there is always more to do with B and G. We tend to be pretty active in M&A, and we are focused on improving our portfolio. I think a big focus for the last year and a half has been the Green Giant strategic review, and, so we are nearing the end of that. And so that is a that is a big lift there. There are still things that we will look at, opportunistically across the portfolio from the divestiture standpoint, but I would not put a big expectation there. College Inn and Kitchen Basics we want and, you know, we expect to do more things like that in the future where we are adding some nice incremental growth in sales and profitability to our business.
Karru Martinson: And I am sorry. I missed it. Did you give a tariff refund number?
Bruce C. Wacha: We did not. Okay. it is not a huge it is not a huge number.
Karru Martinson: Okay. Thank you very much. Appreciate it.
Bruce C. Wacha: Yep.
Operator: Next question, Hale Holden with Barclays. Please go ahead.
Hale Holden: Hey, Bruce. On the tariff refunds, I think, as you outlined, is all in the spices line, Was that part of your original guidance or is that something that is sort of a put and take as you came across it in the middle of the year?
Bruce C. Wacha: it is we always knew that it was out there. it is probably a put and take as it factors in and, you know, we have got a little bit of both here. As we always do. Yep.
Hale Holden: And when you think about, you know, risk to the next 2 quarters that get you to the low end or the high end of that guidance range? Maybe you could talk through some of the puts and takes that you are seeing on the ground.
Bruce C. Wacha: Yeah. I think if you if you look at the guidance that we laid out, and it is a little bit more moving pieces because of the M&A transactions, To be within the to be within our range it is kind of a, you know, flat to down 2% in net sales kind of base business and then plus or minus the rest of the M&A. And so we are not looking for anything heroic. We feel comfortable where we are. We do know that we lost the 53rd week last year, and you will hear me cry about it when we give our fourth quarter results this year. But we feel like we are on pace given where we are year to date.
Hale Holden: Great. And then just last question is, anything changed in Canada or just waiting on the regulatory process there? For the sale?
Bruce C. Wacha: Just waiting on the regulatory process. We are chomping at the bit to get it completed just like I am sure you guys are ready to hear about it, but it takes time.
Hale Holden: I am sure you are. Thank you, Bruce. I appreciate it.
Bruce C. Wacha: Yep.
Operator: Next question, Carla Casella with JPMorgan.
Carla Casella: Just 1 follow-up for Hale. You mentioned Canada. The 1.74 billion to $1.775 billion revenue, that includes the Canada business because it has not been sold. Right?
Bruce C. Wacha: Yeah. We are gonna include Canada in our numbers until we sell it. Until it is the transaction is done.
Carla Casella: And the proceeds, originally, we were using a placeholder of 6 million but I think that is when the assets held for sale were closer to that amount. With the proceeds being now closer to the 32 million assets held for sale?
Bruce C. Wacha: Yeah. And proceeds are gonna move around as inventory moves. And so the 1 thing to keep in mind is we announced this transaction I think, back in the third quarter, around where we are near peak inventory levels. Second quarter, we are at near-trough inventory levels. We are coming into the pack season. Right now, and so inventory will be higher, and therefore, value that we receive in the transaction will be higher. So it is kind of yes to both of your numbers.
Carla Casella: Ultimately, it will it will probably be closer to the September of last year number.
Bruce C. Wacha: But we will see. Right.
Carla Casella: And it is just gonna match whatever's on the assets held for sale, though there is no incremental amount?
Bruce C. Wacha: there is moving pieces within that, and there is a small true up on top of it. Okay. And then just with the asset sale versus the acquisitions, as you look at the overhead costs, are you sitting on stranded cost, or is there a need to add in additional overhead to with College Inn?
Carla Casella: I am just trying to get a sense for, like, a good run rate for SG and A. It came down nicely this quarter, a lot lower than we expected. And I am just trying to get a sense for whether you need to add cost back in, or is there still more room to cut costs?
Bruce C. Wacha: I think you will continue to see costs reduce into early third quarter. And then we should be at largely at a run rate from there. Okay.
Carla Casella: And then can you just talk to the M&A environment? Like, are you are there assets out there, things that you would look at, or could you consider further assets sales to accelerate balance sheet improvement?
Bruce C. Wacha: We are always looking at both. There are deals that are being announced. There are deals that have been speculated on for some period of time that are kind of sideways and have not been announced. You know, we have seen some large deals get signed and completed in our general kind of space. You know, there is stuff out there I think it is a matter of finding things at the right price whether we are buying or selling and you know, I do not know what the next thing is, but at some point, there will be another 1. We continue to look for ways to improve our portfolio over time.
Carla Casella: Okay. Great. Thanks.
Bruce C. Wacha: Thanks, Carla.
Operator: Once again, please press 1 if you would like to ask a question. Next question comes from William Reuter with Bank of America. Please proceed.
William Reuter: Good afternoon. Just to make sure I understand where we are on the tariffs, I think you said it was $8 million or $9 million. You were the importer of record for less than half of that. Think you got most of that back in the second quarter. Will you be receiving proceeds where you were not the importer of record will those, vendors be, like, I guess, sending those proceeds that they received to you?
Bruce C. Wacha: Where appropriate, we are gonna do our best to recover every dollar. Okay. Alright.
William Reuter: And so I guess that could be a little bit of a tailwind to your results in the second half of the year. Is that right?
Bruce C. Wacha: It could. Okay. But, again, just keep in mind, like, the relative size of this is not massive.
William Reuter: Yep. Understood.
Bruce C. Wacha: And, you know, we are hearing that you know, you have mentioned that you were not pushing through fuel surcharges, and you were not hearing of others doing the same. Freight excluding fuel, domestic freight charges are pretty elevated. Is that putting pressure on your margins in the back half of the year? I mean, it is defined pressure. it is not helping margins in the back half of the year. But it is not, you know, for us, fuel is just 1 part of our logistics cost. We need every penny. So, yeah, it is putting a little bit of pressure. And, you know, as we said, we have got a lot of puts and takes and so, you know, we got to find something to offset it. Got it.
William Reuter: And then just lastly for me Certainly, the fuel impact is not radically different than where it was the last time we spoke. In fact, it is probably better or less scary or less bad.
Bruce C. Wacha: Right. Okay.
William Reuter: And then, I cannot remember the actual number you said. It was something in the twenties the revenue from the contract manufacturing. Where are you at in terms of is that business profitable at this scale, or do you need to add business in order for that to generate, EBITDA?
Bruce C. Wacha: it is about-- it is running at about $25 million give or take, maybe just a hair under that per quarter. And so annualized, that might be just under a $100 million. That will not be the 2026 number. Because we really only started running that in the second quarter. The business is modestly profitable. Not game changer, but modestly profitable, and it is a benefit to EBITDA. We want that to be a sustainable business. Would love to grow it. And we wanna continue to service our largest customers well as possible.
William Reuter: Got it. I guess, this will be the last 1. I promise. How challenging do you think it is going to be to add incremental customers and volume to that facility?
Bruce C. Wacha: I mean, it is it is selling. It takes effort, but we actually think we have got a really good facility. And we have got a couple nice little wins already on it, but you know, not game changer, but nice little business. That we have and we wanna continue to run. Got it. Alright.
William Reuter: Thanks for taking all my questions.
Bruce C. Wacha: Yep. Thanks.
Operator: There are no further questions. This concludes today's teleconference. You may disconnect your lines at this time, and we thank you for your participation. Thank you.