B&G Foods
Annual Report 2018

Plain-text annual report

™™1391_Cover.indd 13/4/19 4:57 PMFinancial Highlights FISCAL YEAR (Dollars in millions) Net Sales* Net Income Adjusted EBITDA** 2018 2017 2016 2015 2014 $ 1,700.8 $ 1,646.4 $ 1,372.3 $ 172.4 $ 314.2 $ 217.5 $ 333.2 $ 109.4 $ 322.0 $ 958.9 $ 69.1 $ 217.8 $ 837.3 $ 41.0 $ 194.1 Net Sales* Net Income Adjusted EBITDA** 5 . 7 1 2 $ 4 . 2 7 1 $ 2 . 3 3 3 $ 0 . 2 2 3 $ 2 . 4 1 3 $ 8 . 7 1 2 1 $ . 4 9 1 $ 8 . 0 0 7 , 1 $ 4 . 6 4 6 , 1 $ 3 . 2 7 3 , 1 $ 9 . 8 5 9 3 $ . 7 3 8 $ 4 . 9 0 1 $ 1 . 9 6 $ 0 . 1 4 $ 14 15 16 17 18 14 15 16 17 18 14 15 16 17 18 Net sales for fiscal 2017, 2016, 2015 and 2014 have been adjusted as a result of our retrospective adoption of new accounting standards relating to revenue recognition. The adjustments had no impact on * net income or adjusted EBITDA. See Note 2(s), “Summary of Significant Accounting Policies — Recently Issued Accounting Standards” to our consolidated financial statements in Part II, Item 8 of the following Annual Report for detailed information. Adjusted EBITDA is a “non-GAAP (Generally Accepted Accounting Principles) financial measure.” Please see the discussion within the footnotes to Item 6, “Selected Financial Data” in the following Annual Report for a more detailed discussion of adjusted EBITDA and a reconciliation of adjusted EBITDA with the most directly comparable GAAP measures for fiscal 2018, 2017, 2016, 2015 and 2014, along with the components of adjusted EBITDA. ** Company Information Board of Directors Stephen C. Sherrill Chairman of the Board Director since 1996 Robert C. Cantwell* President and Chief Executive Officer Director since 2005 DeAnn L. Brunts Director since 2015 Charles F. Marcy Director since 2010 Robert D. Mills Director since 2018 Dennis M. Mullen Director since 2006 Cheryl M. Palmer Director since 2010 Alfred Poe Director since 1997 David L. Wenner Director since 1997 Executive Officers Robert C. Cantwell* President and Chief Executive Officer Erich A. Fritz Executive Vice President and Chief Supply Chain Officer Jordan E. Greenberg Executive Vice President and Chief Commercial Officer Eric H. Hart Executive Vice President of Human Resources and Chief Human Resources Officer William F. Herbes Executive Vice President of Operations Scott E. Lerner Executive Vice President, General Counsel, Secretary and Chief Compliance Officer Vanessa E. Maskal* Executive Vice President of Sales and Marketing Kenneth G. Romanzi* Executive Vice President and Chief Operating Officer Ellen M. Schum Executive Vice President and Chief Customer Officer Bruce C. Wacha Executive Vice President of Finance and Chief Financial Officer Corpor ate headquarters B&G Foods, Inc. Four Gatehall Drive Parsippany, NJ 07054 Telephone: 973.401.6500 Website: www.bgfoods.com Stock Exchange Listlng B&G Foods’ common stock is traded on the New York Stock Exchange under the ticker symbol BGS. corporate news releases and sec filings Corporate news releases and SEC filings, including Forms 10-K, 10-Q and 8-K are available free of charge in the Investor Relations section of our website, www.bgfoods.com. If you do not have internet access, you may contact ICR, Inc. at the address and telephone number listed below to request these materials. Investor Relations Inquiries and requests regarding this annual report and other stockholder questions should be directed to: ICR, Inc. 685 Third Avenue, 2nd Floor, New York, NY 10017 Attn: Dara Dierks Telephone: 866.211.8151 Please also visit the Investor Relations section of our website, www.bgfoods.com. Tr ansfer Agent and Registr ar Computershare Trust Company, N .A. P.O. Box 30170 College Station, TX 77842 Private Couriers/Registered Mail: Computershare Trust Company, N .A. 211 Quality Circle, Suite 210 College Station, TX 77845 Telephone: 800.522.6645 Website: www.computershare.com/investor Hearing Impaired #: TDD: 800.952.9245 Independent Registered Public Accounting Firm KPMG LLP 51 John F. Kennedy Parkway Short Hills, NJ 07078 Annual Meeting The annual meeting of stockholders will be held on Tuesday, May 21, 2019, at 10:00 a.m., local time, at the Hilton Parsippany, 1 Hilton Court, Parsippany, NJ 07054. * As previously announced, Bob Cantwell is retiring as President and Chief Executive Officer and as a director on April 5, 2019 and Ken Romanzi has been appointed as President and Chief Executive Officer and a director effective April 6, 2019. Vanessa Maskal is retiring on April 5, 2019. This Annual Report includes certain forward-looking statements that are based upon current expectations and are subject to a number of risks and uncertain- ties. Please see “Forward-Looking Statements” beginning on page 3 of this Annual Report. © 2019 B&G Foods, Inc. All rights reserved. 1391_Cover.indd 2 4/2/19 6:21 PM TO OUR STOCKHOLDERS: Business Performance 21MAR201707310323 I am pleased to report that fiscal 2018 was another record breaking year for B&G Foods. Once again we set a company record for net sales, which increased 3.3% to $1.7 billion. We also achieved the high end of our inventory reduction plan target for the year, reducing our inventory by approximately $100 million as compared to year end 2017. Another highlight was our Green Giant frozen business, which continued to perform well in 2018, largely on the strength of innovation products we launched over the last three years since acquiring the iconic brand in late 2015. Net sales of Green Giant frozen increased $42.7 million, or 12.9%, to $372.7 million for fiscal 2018 compared to fiscal 2017, primarily driven by strong customer and consumer acceptance of Green Giant Veggie Spirals, launched in 2018, as well as continued demand for Green Giant Riced Veggies, Green Giant Veggie Tots and Green Giant Mashed Cauliflower. Net sales of Green Giant frozen products also benefited from Green Giant Cauliflower Pizza Crusts, Green Giant Protein Bowls and Little Green Sprout’s Organics by Green Giant, which began shipping in September 2018 and will continue their rollout in the first half of 2019. Notwithstanding the growth we achieved in net sales, our margins and our adjusted EBTIDA*, fell short of our expectations, as we continue to face elevated input and freight costs that in 2018 we were unable to fully offset with price increases and cost savings initiatives. While we are disappointed in our 2018 profitability, we are confident that the actions we are now taking will enable us to achieve our full year 2019 guidance. Investment Highlights In our fourteen years as a publicly held company, we have proven our commitment to creating stockholder value by consistently paying a generous and growing cash dividend. We have paid a dividend every quarter since our initial public offering and over the last five years we have increased the dividend at a compound annual growth rate of 7.6%. We have been able to keep that commitment year after year by growing net sales and adjusted EBITDA over the past fourteen years at compound annual growth rates of 11.5% and 11.3%, respectively. Our dividend yield is among the highest in the industry and we remain as committed as ever to our policy of returning a meaningful portion of our excess cash to stockholders. Assuming the reinvestment of dividends, total stockholder return over the past five fiscal years through the end of fiscal 2018 was 12.9%. Over the past year pursuant to a $50 million stock repurchase program authorized in March 2018, we repurchased $36.9 million of our common stock. In addition, last month we announced that our board has authorized an extension of the stock repurchase program for another year through March 15, 2020 and reset the repurchase authorization to up to $50 million, which gives us an additional option to return excess cash to our stockholders. * Adjusted EBITDA is a ‘‘non-GAAP (Generally Accepted Accounting Principles) financial measure.’’ Please see the discussion in the footnotes to Item 6, ‘‘Selected Financial Data’’ and in the Management’s Discussion and Analysis section in the following Annual Report on Form 10-K for a more detailed discussion of adjusted EBITDA and reconciliations of adjusted EBITDA with the most directly comparable GAAP measures along with the components of adjusted EBITDA. Acquisition Strategy Our acquisition strategy, which we have executed successfully over many years, continued to yield positive results in 2018. In July 2018, we successfully completed the acquisition of the McCann’s brand of premium Irish oatmeal from TreeHouse Foods. The McCann’s brand is an excellent complement to our existing portfolio of brands, including our Cream of Wheat hot cereal brand. This acquisition is another example, along with our acquisitions of Green Giant, Spice Islands and other spices & seasoning brands, Victoria and Back to Nature, of our efforts in recent years to acquire better-for-you brands that taste great and resonate with today’s consumer. During 2018, we also successfully monetized a prior acquisition when in October we completed the sale of Pirate Brands to The Hershey Company for $420 million, more than double the $195 million price we paid for Pirate Brands five years ago. In Closing As previously announced, I will be retiring on April 5, 2019 and Ken Romanzi will succeed me as President and Chief Executive Officer and as a director of B&G Foods. It has been an honor and a privilege to serve as President and Chief Executive Officer and Chief Financial Officer of B&G Foods over the last 35 years. I am very proud of the tremendous growth we have achieved over that time— growing from a small, regional pickle company to a leading public food company with a diverse portfolio of iconic brands—and I would like to thank my senior leadership team and each and every employee of B&G Foods. We could not have achieved this growth without their extraordinary efforts. Over the four years that I have served as CEO, we have completed six acquisitions, more than doubled net sales from $837.3 million in fiscal 2014 to $1.7 billion in fiscal 2018, increased headcount from approximately 1,000 employees to approximately 2,700 employees, acquired our two largest manufacturing facilities and established a more sophisticated distribution network that now also includes a frozen distribution network. Although we did not achieve every objective we set for ourselves at the beginning of my tenure as CEO in 2015, I believe we made valuable progress in positioning our company for future success. B&G Foods is in many ways a different company now than the one I took over four years ago, but we have the same values. Passion for what we do, our commitment to food safety and quality, integrity and accountability, our customer and consumer focus, our commitment to the safety and health of our employees and our belief in collaboration and empowerment are the values that have driven the success of this company for many years and will continue to drive our company’s success in the future. Since joining B&G Foods in December 2017 as Executive Vice President and Chief Operating Officer, Ken has demonstrated that he has the experience and leadership skills to successfully lead B&G Foods to its next phase of growth. Ken has been a terrific partner and I am confident that he is the right person to guide B&G Foods into the future. It is because of the values I mentioned above that we have been able to create tremendous stockholder value over the years, and I believe stockholders of B&G Foods should continue to expect a bright future under Ken’s leadership. Sincerely, 30MAR201622420353 Robert C. Cantwell President and Chief Executive Officer April 1, 2019 As filed with the Securities and Exchange Commission on February 26, 2019 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10 - K (Mark one)  Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934  Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 29, 2018 or For the transition period from to . Commission file number 001 - 32316 B&G FOODS, INC. (Exact name of Registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) Four Gatehall Drive, Parsippany, New Jersey (Address of principal executive offices) 13 - 3918742 (I.R.S. Employer Identification No.) 07054 (Zip Code) Registrant’s telephone number, including area code: (973) 401 - 6500 Securities registered pursuant to Section 12(b) of the Act: Title of each class Common Stock, par value $0.01 per share Name of exchange on which registered New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well - known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  No  Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  No  Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes  No  Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S - T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No  Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S - K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10 - K or any amendment to this Form 10 - K.  Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer  Accelerated filer  Non-accelerated filer  Smaller reporting company  Emerging growth company  If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes  No  The aggregate market value of the registrant’s outstanding shares of common stock held by non-affiliates of the registrant (assuming for these purposes, but without conceding, that all executive officers, directors and holders of more than 10% of the registrant’s common stock are affiliates of the registrant) as of June 29, 2018, the last business day of the registrant's most recently completed second fiscal quarter, was $1,468,230,919 (based on the $29.90 per share closing price of the registrant's common stock on that date as reported on the New York Stock Exchange). As of February 22, 2019, the registrant had 65,638,701 shares of common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Selected designated portions of the registrant’s definitive proxy statement to be filed on or before April 29, 2019 in connection with the registrant’s 2019 annual meeting of stockholders are incorporated by reference into Part III of this annual report. B&G FOODS, INC. ANNUAL REPORT ON FORM 10 - K FOR THE FISCAL YEAR ENDED DECEMBER 29, 2018 TABLE OF CONTENTS PART I Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART II Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART III Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 1. Item 1A. Item 1B. Item 2. Item 3. Item 4. Item 5. Item 6. Item 7. Item 7A. Item 8. Item 9. Item 9A. Item 9B. Item 10. Item 11. Item 12. Item 13. Item 14. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART IV Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 15. Item 16. Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 5 13 24 25 25 25 26 29 35 57 59 108 108 109 110 110 110 111 111 112 115 116 Forward-Looking Statements This report includes forward-looking statements, including without limitation the statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The words “believes,” “belief,” “expects,” “projects,” “intends,” “anticipates,” “assumes,” “could,” “should,” “estimates,” “potential,” “seek,” “predict,” “may,” “will” or “plans” and similar references to future periods are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance and achievements, or industry results, to be materially different from any future results, performance, or achievements expressed or implied by any forward-looking statements. We believe important factors that could cause actual results to differ materially from our expectations include the following: • • • • • • • • • • • • • • • • • • our substantial leverage; the effects of rising costs for our raw materials, packaging and ingredients; crude oil prices and their impact on distribution, packaging and energy costs; our ability to successfully implement sales price increases and cost saving measures to offset any cost increases; intense competition, changes in consumer preferences, demand for our products and local economic and market conditions; our continued ability to promote brand equity successfully, to anticipate and respond to new consumer trends, to develop new products and markets, to broaden brand portfolios in order to compete effectively with lower priced products and in markets that are consolidating at the retail and manufacturing levels and to improve productivity; the risks associated with the expansion of our business; our possible inability to identify new acquisitions or to integrate recent or future acquisitions or our failure to realize anticipated revenue enhancements, cost savings or other synergies; tax reform and legislation, including the effects of the U.S. Tax Cuts and Jobs Act; our ability to access the credit markets and our borrowing costs and credit ratings, which may be influenced by credit markets generally and the credit ratings of our competitors; unanticipated expenses, including, without limitation, litigation or legal settlement expenses; the effects of currency movements of the Canadian dollar and the Mexican peso as compared to the U.S. dollar; the effects of international trade disputes, tariffs, quotas, and other import or export restrictions on our international procurement, sales and operations; future impairments of our goodwill and intangible assets; our ability to successfully implement a new enterprise resource planning (ERP) system; our ability to protect information systems against, or effectively respond to, a cybersecurity incident or other disruption; our sustainability initiatives and changes to environmental laws and regulations; other factors that affect the food industry generally, including: • recalls if products become adulterated or misbranded, liability if product consumption causes injury, ingredient disclosure and labeling laws and regulations and the possibility that consumers could lose confidence in the safety and quality of certain food products; • • • competitors’ pricing practices and promotional spending levels; fluctuations in the level of our customers’ inventories and credit and other business risks related to our customers operating in a challenging economic and competitive environment; and the risks associated with third-party suppliers and co-packers, including the risk that any failure by one or more of our third-party suppliers or co-packers to comply with food safety or other laws and regulations may disrupt our supply of raw materials or certain finished goods products or injure our reputation; and - 3 - • other factors discussed elsewhere in this report, including under Part I, Item 1A, “Risk Factors,” and in our other public filings with the SEC. Developments in any of these areas could cause our results to differ materially from results that have been or may be projected by or on our behalf. All forward-looking statements included in this report are based on information available to us on the date of this report. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this report. We caution that the foregoing list of important factors is not exclusive. There may be other factors that may cause our actual results to differ materially from the forward-looking statements in this report, including factors disclosed under the sections of this report titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report. You should evaluate all forward-looking statements made in this report in the context of these risks and uncertainties. We urge investors not to unduly rely on forward-looking statements contained in this report. - 4 - Item 1. Business. Overview PART I The terms “B&G Foods,” “our,” “we” and “us,” as used in this report, refer to B&G Foods, Inc. and its wholly owned subsidiaries, except where it is clear that the term refers only to the parent company. Throughout this report, we refer to our fiscal years ended January 3, 2015, January 2, 2016, December 31, 2016, December 30, 2017, December 29, 2018 and December 28, 2019 as “fiscal 2014,” “fiscal 2015,” “fiscal 2016,” “fiscal 2017,” “fiscal 2018” and “fiscal 2019,” respectively. Our fiscal year is the 52 or 53 week reporting period ending on the Saturday closest to December 31. Fiscal 2014 contained 53 weeks and fiscal 2019, 2018, 2017, 2016, and 2015 each contained or contain 52 weeks. B&G Foods manufactures, sells and distributes a diverse portfolio of branded, high quality, shelf - stable and frozen food and household products across the United States, Canada and Puerto Rico. Many of our branded products have leading regional or national market shares. In general, we position our products to appeal to the consumer desiring a high quality and reasonably priced product. We complement our branded product retail sales with institutional and foodservice sales and private label sales. B&G Foods, including our subsidiaries and predecessors, has been in business for over 125 years. We were incorporated in Delaware on November 25, 1996 under the name B Companies Holdings Corp. On August 11, 1997, we changed our name to B&G Foods Holdings Corp. On October 14, 2004, B&G Foods, Inc., then our wholly owned subsidiary, was merged with and into us and we were renamed B&G Foods, Inc. Our company has been built upon a successful track record of both organic and acquisition - related growth. Our goal is to continue to increase sales, profitability and cash flows through organic growth, disciplined acquisitions of complementary branded businesses and new product development. Since 1996, we have successfully acquired and integrated more than 45 brands into our company. The table below includes some of the acquisitions and the divestiture we have completed in recent years: Date October 2018 . . . . . . . . July 2018 . . . . . . . . . . . October 2017 . . . . . . . . December 2016 . . . . . . November 2016 . . . . . . November 2015 . . . . . . July 2015 . . . . . . . . . . . April 2014 . . . . . . . . . . Significant Event Divestiture of Pirate Brands, including the Pirate’s Booty, Smart Puffs, and Original Tings brands, which was sold to The Hershey Company, referred to as the “Pirate Brands sale” in the remainder of this report. Acquisition of the McCann’s brand of premium Irish oatmeal from TreeHouse Foods, Inc., referred to as the “McCann’s acquisition” in the remainder of this report. Acquisition of Back to Nature Foods Company, LLC and related entities, including the Back to Nature and SnackWell’s brands, from Brynwood Partners VI L.P., Mondelēz International and certain other sellers, referred to as the “Back to Nature acquisition” in the remainder of this report. Acquisition of Victoria Fine Foods, LLC, and a related entity, from Huron Capital Partners and certain other sellers, referred to as the “Victoria acquisition” in the remainder of this report. Acquisition of the spices & seasonings business of ACH Food Companies, Inc., including the Spice Islands, Tone’s, Durkee and Weber brands, referred to as the “spices & seasonings acquisition” in the remainder of this report. Acquisition of the Green Giant and Le Sueur brands from General Mills, Inc., referred to as the “Green Giant acquisition” in the remainder of this report. Acquisition of Spartan Foods of America, Inc., and related entities, including the Mama Mary’s brand, from Linsalata Capital Partners and certain other sellers, referred to as the “Mama Mary’s acquisition” in the remainder of this report. Acquisition of Specialty Brands of America, Inc. and related entities, including the Bear Creek Country Kitchens, Spring Tree, Cary’s, MacDonald’s, New York Flatbreads and Canoleo brands, from affiliates of American Capital, Ltd., referred to as the “Specialty Brands acquisition” in the remainder of this report. - 5 - Products and Markets The following is a brief description of some of our brands and product lines: The Green Giant and Le Sueur brands trace their roots to Le Sueur, Minnesota in 1903, and the Minnesota Valley Canning Company. For more than 100 years, fresh and great - tasting Green Giant and Le Sueur vegetables have been grown and picked at the peak of perfection in the Valley of the Jolly Green Giant. In the remainder of this report, we generally refer to the Green Giant and Le Sueur brands collectively as the “Green Giant brand.” The Ortega brand has been in existence since 1897; its products span the shelf - stable Mexican food segment including taco shells, tortillas, seasonings, dinner kits, taco sauces, peppers, refried beans, salsas and related food products. The Maple Grove Farms of Vermont brand, which originated in 1915, is one of the leading brands of pure maple syrup sold in the United States. Other products under the Maple Grove Farms of Vermont label include a line of gourmet salad dressings, sugar free syrups, marinades, fruit syrups, confections, pancake mixes and organic products. The Cream of Wheat brand was introduced in 1893 and is among the leading brands and one of the most trusted and widely recognized brands of hot cereals sold in the United States. Cream of Wheat is available in Original, Whole Grain and Maple Brown Sugar stove top, and also in instant packets of Original and other flavors. We also offer Cream of Rice, a gluten - free, rice - based hot cereal. The Mrs. Dash brand, which was introduced in 1983 as the original brand in salt - free seasonings, is available in more than a dozen blends. In 2005, the leading brand in salt - free seasonings introduced salt - free marinades. Mrs. Dash’s brand essence, “Salt - Free, Flavor - Full,” resonates with consumers and underscores the brand’s commitment to provide healthy products that fulfill consumers’ expectations for taste. Back to Nature has been a pioneer in the better-for-you snack foods category and it is a leading cookie and cracker brand in the category. The Back to Nature brand’s product offerings include Non-GMO Project Verified, organic and gluten free products. The Bear Creek Country Kitchens brand is the leading brand of hearty dry soups in the United States. Bear Creek Country Kitchens also offers a line of savory pasta dishes and hearty rice dishes. Victoria Fine Foods is a Brooklyn-based business founded in 1929. The Victoria brand offers a variety of premium pasta and specialty sauces, savory condiments and tasty gourmet spreads. Using traditional cooking methods, Victoria sauces are slow kettle-cooked in small batches to ensure rich flavor and a homemade taste. Committed to its values of quality, honesty, authenticity and community, Victoria believes that Ingredients Come First. The Las Palmas brand originated in 1922 and primarily includes authentic Mexican enchilada sauce, chili sauce and various pepper products. The Spice Islands brand, established in San Francisco in 1941, is a leading premium spices and extracts brand offering a diverse line of high quality products including spices, seasonings, dried herbs, extracts, flavorings and sauce blends. The brand recently expanded into organic products. The Polaner brand was introduced in 1880 and is comprised of a broad array of fruit - based spreads as well as jarred wet spices such as chopped garlic and oregano. Polaner All Fruit is a leading national brand of fruit - juice sweetened fruit spread. The spreads are available in more than a dozen flavors. Polaner Sugar Free preserves are the second leading brand of sugar free preserves nationally. The Mama Mary’s brand was introduced in 1986 and is a leading brand of shelf - stable pizza crusts. Mama Mary’s also offers pizza sauces and premium gourmet pepperoni slices. The Weber brand of seasonings and other flavor enhancers was introduced in 2006 under a licensing agreement with Weber-Stephen Products LLC, maker of the popular Weber grills. Under the Weber brand, we offer a wide range of grilling seasoning blends, rubs, marinades, sprays and sauces. The Tone’s brand started as a family business in 1873 and was responsible for many of the early advancements in the spice industry. The Tone’s brand sells predominantly in the club channel while also servicing traditional grocery. - 6 - The Bloch & Guggenheimer (B&G) brand originated in 1889, and its pickle, pepper and relish products are a leading brand in the New York metropolitan area. This line consists of shelf - stable pickles, peppers, relishes, olives and other related specialty items. The Underwood brand’s “Underwood Devil” logo, which was registered in 1870, is believed to be the oldest registered trademark still in use for a prepackaged food product in the United States. Underwood meat spreads, which were introduced in the late 1860s, include deviled ham, white - meat chicken, roast beef, corned beef and liverwurst. The New York Style brand was created in 1985 and includes Original Bagel Crisps, Pita Chips and Panetini Italian Toast. The Ac’cent brand was introduced in 1947 as a flavor enhancer for meat preparation and is generally used on beef, poultry, fish and vegetables. We believe that Ac’cent is positioned as a unique flavor enhancer that provides food with the “umami” flavor sensation. The B&M brand was introduced in 1927 and is the original brand of brick - oven baked beans and remains one of the very few authentic baked beans. The B&M line includes a variety of baked beans and brown bread. The B&M brand currently has a leading market share in the New England region. The SnackWell’s brand of reduced fat snacks originated in 1992. SnackWell’s offerings include a variety of delicious reduced fat products such as its signature Devil’s Food Cookie Cakes and peanut-free treats such as its tasty Vanilla Creme Sandwich Cookies. The Spring Tree brand originated in 1976 in Brattleboro, Vermont, and consists of pure maple syrup and sugar free syrup. The Grandma’s brand of molasses, which was introduced in 1890, is the leading brand of premium - quality molasses sold in the United States. Grandma’s molasses products are offered in two distinct styles: Grandma’s Original Molasses and Grandma’s Robust Molasses. The Durkee brand was established in 1850 and, like our Tone’s brand, started as a family business and was an early leader in the spice industry. The Old London brand was created in 1932 and offers a wide variety of flavors available in melba toasts, melba rounds and other snacks. Old London also markets specialty snacks under the Devonsheer and JJ Flats brand names. The Trappey’s brand, which was introduced in 1898, has a Louisiana heritage. Trappey’s products fall into two major categories—high quality peppers and hot sauces, including Trappey’s Red Devil. The McCann’s brand has been in existence since 1800 and offers classic traditional steel cut Irish oatmeal as well as convenience-oriented oatmeal products. The Don Pepino and Sclafani brands originated in 1955 and 1900, respectively, and primarily include pizza and spaghetti sauces, whole and crushed tomatoes and tomato puree. The Emeril’s brand was introduced in 2000 under a licensing agreement with celebrity chef Emeril Lagasse. We offer a line of pasta sauces, seasonings, cooking stocks, mustards and cooking sprays under the Emeril’s brand name. The TrueNorth brand was introduced in 2008. TrueNorth nut cluster snacks combine freshly roasted nuts, a dash of sea salt and just a hint of sweetness. TrueNorth varieties include almond pecan crunch, chocolate nut crunch and cashew crunch. The Static Guard brand, the number one brand name in static elimination sprays, created the anti - static spray category when it was launched in 1978 to fulfill a previously unmet consumer need. The brand’s ability to consistently deliver on its promise to “instantly eliminate static cling” has resulted in a loyal consumer following. The Cary’s brand originated in 1904 and is the oldest brand of pure maple syrup in the United States. Cary’s also offers sugar free syrup. The Joan of Arc brand, which originated in 1895, includes a full range of canned beans including kidney, chili and other varieties. - 7 - The Baker’s Joy brand was introduced in 1982 and is the original brand of no - stick baking spray with flour. Baker’s Joy’s product proposition has been to “generate a perfect release from the pan every time,” making baking easier, faster and more successful for everyday bakers. The Regina brand, which has been in existence since 1949, includes vinegars and cooking wines. Regina products are most commonly used in the preparation of salad dressings as well as in a variety of recipe applications, including sauces, marinades and soups. The Sugar Twin brand was developed in 1968 and is a calorie free sugar substitute. The Wright’s brand was introduced in 1895 and is a seasoning that reproduces the flavor and aroma of pit smoking in meats, chicken and fish. Wright’s is offered in three flavors: Hickory, Mesquite and Applewood. The Sa - són brand was introduced in 1947 as a flavor enhancer used primarily for Puerto Rican and Hispanic food preparation. The product is generally used on beef, poultry, fish and vegetables. The brand’s flavor enhancer is offered in four flavors: Original, Coriander and Achiote, Garlic and Onion, and Tomato. We also offer reduced sodium versions of Sa - són. The Brer Rabbit brand has been in existence since 1907 and currently offers mild and full - flavored molasses as well as blackstrap molasses. Mild molasses is designed for table use and full - flavored molasses is typically used in baking, barbeque sauces and as a breakfast syrup. The New York Flatbreads brand is a line of thin, crispy, flavorful crispbread that is available in several toppings. The Vermont Maid brand has been in existence since 1919 and offers maple - flavored syrups. Vermont Maid syrup is available in regular, sugar - free and sugar - free butter varieties. The Molly McButter brand created the butter - flavored sprinkles category in 1987. Molly McButter is available in butter and cheese flavors. The Canoleo brand offers an all - purpose margarine used for spreading, cooking and baking. Food Industry The food industry is one of the United States’ largest industries. Historically, it has been characterized by relatively stable sales growth, based largely on price and population increases. In recent years, however, many traditional center of store grocery brands in the industry have often experienced flat to modestly declining sales. Over the past decade or so, the retail side of the food industry has seen a continuing shift of sales to alternate food outlets such as supercenters, warehouse clubs, organic and “natural” food stores, dollar stores, drug stores and e-tailers. Among other things, this shift has caused consolidation of traditional grocery chains into larger entities, often spanning the country under varying banner names. Consolidation has increased the importance of having a number one or two brand within a category, be that position national or regional. At the same time, this shift has also introduced many alternatives to traditional grocery chains. A broad sales and distribution infrastructure has also become critical for food companies, allowing them to reach all outlets selling food to consumers and expanding their growth opportunities. Sales, Marketing and Distribution Overview. We sell, market and distribute our products through a multiple - channel sales, marketing and distribution system to all major U.S. food channels, including sales and shipments to supermarkets, mass merchants, warehouse clubs, wholesalers, foodservice distributors and direct accounts, specialty food distributors, military commissaries and non - food outlets such as drug, dollar store chains and e-tailers. Certain of our brands, including Green Giant, Cream of Wheat, Back to Nature, Ac’cent, Crock Pot® seasoning mixes, Underwood, Polaner, Static Guard, Mrs. Dash, New York Style, Sugar Twin and Victoria are also distributed to similar food channels in Canada. We sell, market and distribute our household brand, Static Guard, through the same sales, marketing and distribution system to many of the same customers who buy our food products as well as to other household product retailers and distributors. We sell our products primarily through broker sales networks to supermarket chains, foodservice outlets, mass merchants, warehouse clubs, non - food outlets and specialty distributors. The broker sales network handles the sale of our products at the retail level. - 8 - Sales. Our sales organization is aligned by distribution channels and consists of regional sales managers, key account managers and sales persons. Regional sales managers sell our products nationwide through national and regional brokers, with separate organizations focusing on foodservice, grocery chain accounts and special markets. Our sales managers coordinate our broker sales efforts, make key account calls with buyers or distributors and supervise broker retail coverage of the products at the store level. Our sales strategy is centered on individual brands. We allocate promotional spending for each of our brands and our regional sales managers coordinate promotions with customers. Additionally, our marketing department works in conjunction with the sales department to coordinate special account activities and marketing support, such as couponing, public relations and media advertising. We have a national sales force that is capable of supporting our current brands and quickly integrating and supporting any newly acquired brands. Marketing. Our marketing organization is aligned by brand and is responsible for the strategic planning for each of our brands. We focus on deploying promotional dollars where we believe the spending will have the greatest impact on sales. Marketing and trade spending support, on a national basis, typically consists of advertising trade promotions, coupons and cross - promotions with supporting products. Radio, internet, social media and limited television advertising supplement this activity. Distribution. We distribute our products through a multiple - channel system that covers every class of customer nationwide. Due to the different demands of distribution for frozen and shelf-stable products, we maintain separate distribution systems. Our shelf-stable distribution network consists of five primary locations, four of which are leased by us and are operated for us by a third party logistics provider, and one that is located at an owned manufacturing facility and is operated by us. In Canada, Mexico and from time to time in the United States we also use public warehouse and distribution facilities for our shelf-stable products. Our frozen distribution network consists of seven primary locations, which are owned and operated by third party logistics providers. We believe that our distribution systems for shelf - stable and frozen products have sufficient capacity to accommodate incremental product volume. See Item 2, “Properties” for a listing of our owned and leased distribution centers and warehouses. During 2018, we were negatively impacted by industry-wide increases in the cost of distribution, primarily driven by freight costs. We expect this to continue in 2019. To date our sales price increases and cost savings initiatives have not been sufficient to fully offset these distribution cost increases. To the extent we are unable to offset present and future cost increases, our operating results will be negatively impacted. Customers Our top ten customers accounted for approximately 54.4% of our net sales and 54.8% of our end of the year receivables for fiscal 2018. Other than Walmart, which accounted for 23.1% of our fiscal 2018 net sales, no single customer accounted for 10.0% or more of our fiscal 2018 net sales. Other than Walmart, which accounted for 24.9% of our receivables as of the end of fiscal 2018, no single customer accounted for more than 10.0% of our receivables as of the end of fiscal 2018. During fiscal 2018, 2017 and 2016, our net sales to foreign countries represented approximately 7.3%, 6.3% and 7.1%, respectively, of our total net sales. Our foreign sales are primarily to customers in Canada. Seasonality Sales of a number of our products tend to be seasonal and may be influenced by holidays, changes in seasons/weather or certain other annual events. In general, our sales are higher in the first and fourth quarters. We purchase most of the produce used to make our frozen and shelf - stable canned vegetables, pickles, relishes, peppers, tomatoes and other related specialty items during the months of June through October, and we generally purchase the majority of our maple syrup requirements during the months of April through August. Consequently, our liquidity needs are greatest during these periods. - 9 - Competition We face competition in each of our product lines. Numerous brands and products compete for shelf space and sales, with competition based primarily on product quality, convenience, price, trade promotion, consumer promotion, brand recognition and loyalty, customer service, advertising and other activities and the ability to identify and satisfy emerging consumer preferences. We compete with numerous companies of varying sizes, including divisions or subsidiaries of larger companies. Many of these competitors have multiple product lines, substantially greater financial and other resources and may have lower fixed costs and/or be substantially less leveraged than we are. Our ability to grow our business could be impacted by the relative effectiveness of, and competitive response to, our product initiatives, product innovation, advertising and promotional activities. In addition, from time to time, we experience margin pressure in certain markets as a result of competitors’ pricing practices. Our products compete not only against other brands in their respective product categories, but also against products in similar or related product categories. For example, our shelf - stable pickles compete not only with other brands of shelf - stable pickles, but also with pickle products found in the refrigerated sections of grocery stores, and all our brands compete against private label products to varying degrees. Raw Materials We purchase raw materials, including agricultural products, meat, poultry, flour, other raw materials, ingredients and packaging materials from growers, commodity processors, other food companies and packaging suppliers located in U.S. and foreign locations. The principal raw materials for our products include corn, peas, broccoli, beans, pepper, garlic and other spices, maple syrup, wheat, corn, nuts, cheese, fruits, beans, tomatoes, peppers, meat, sugar, concentrates, molasses and corn sweeteners. Vegetables for the Green Giant brand are primarily purchased under dedicated acreage supply contracts from a number of growers prior to each growing season with the remaining demand being sourced directly from third parties. We purchase certain other agricultural raw materials in bulk or pursuant to short - term supply contracts. Most of our agricultural products are purchased between April 1 and October 31. We generally source pepper, garlic and other spices and herbs from locations other than the United States. We purchase the majority of our maple syrup from Canada. We also use packaging materials, particularly glass jars, cans, cardboard and plastic containers. The profitability of our business relies in substantial part on the prices we and our co - packers pay for these raw materials and packaging materials, which can fluctuate due to a number of factors, including changes in crop size, national, state and local government sponsored agricultural programs, export demand, currency exchange rates, natural disasters, weather conditions during the growing and harvesting seasons, water supply, general growing conditions, the effect of insects, plant diseases and fungi, and glass, metal and plastic prices. Fluctuations in commodity prices can lead to retail price volatility and intensive price competition, and can influence consumer and trade buying patterns. The cost of labor, manufacturing, energy, fuel, packaging materials and other costs related to the production and distribution of our food products can from time to time increase significantly and unexpectedly. We attempt to manage these risks by entering into short - term supply contracts and advance commodities purchase agreements, implementing cost saving measures and raising sales prices. During the past three years, our cost saving measures and sales price increases have not been sufficient to fully offset increases to our raw material, ingredient and packaging costs. To the extent we are unable to offset present and future cost increases, our operating results will be negatively impacted. Production Manufacturing. We operate ten manufacturing facilities for our products. See Item 2, “Properties” for a listing of our manufacturing facilities. - 10 - Co-Packing Arrangements. In addition to our own manufacturing facilities, we source a significant portion of our products under “co - packing” arrangements, a common industry practice in which manufacturing is outsourced to other companies. We regularly evaluate our co - packing arrangements to ensure the most cost - effective manufacturing of our products and to utilize company - owned manufacturing facilities most effectively. Third parties located in U.S. and foreign locations produce our Back to Nature, Baker’s Joy, Bear Creek Country Kitchens, Canoleo, Cream of Rice, Crock Pot, Green Giant, JJ Flats, Joan of Arc, Le Sueur, MacDonald’s, McCann’s, New York Flatbreads, Regina, SnackWell’s, Spring Tree, Static Guard, Sugar Twin and TrueNorth products and certain B&G, Cary’s, Cream of Wheat, Emeril’s, Las Palmas and Ortega products under co - packing agreements or purchase orders. Each of our co - packers produces products for other companies as well. We believe that there are alternative sources of co - packing production readily available for the majority of our products, although we may experience short - term disturbances in our operations if we are required to change our co - packing arrangements unexpectedly. Trademarks and Licensing Agreements Trademarks. We consider our trademarks, in the aggregate, to be material to our business. We protect our trademarks by registration in the United States, Canada and in other countries where we sell our products. We also oppose any infringement in key markets. Trademark protection continues in some countries for as long as the mark is used and in other countries for as long as it is registered. Registrations generally are for renewable, fixed terms. Examples of our trademarks and registered trademarks include Ac’cent, Back to Nature, B&G, B&G Sandwich Toppers, B&M, Baker’s Joy, Bear Creek Country Kitchens, Brer Rabbit, Canoleo, Cary’s, Cream of Rice, Cream of Wheat, Devonsheer, Don Pepino, Durkee, Emeril’s, Grandma’s, Green Giant, JJ Flats, Joan of Arc, Las Palmas, Le Sueur, MacDonald’s, Mama Mary’s, Maple Grove Farms of Vermont, McCann’s, Molly McButter, Mrs. Dash, New York Flatbreads, New York Style, Old London, Ortega, Polaner, Regina, Sa - són, Sclafani SnackWell’s, Spice Islands, Spring Tree, Static Guard, Sugar Twin, Tone’s, Trappey’s, TrueNorth, Underwood, Vermont Maid, Victoria, Weber and Wright’s. Inbound License Agreements. From time to time we enter into inbound licensing agreements. For example, we sell our Emeril’s brand products pursuant to a license agreement with Sequential Brands Group, Cream of Wheat Cinnabon®, a co - branded product, pursuant to a licensing agreement with Cinnabon, Inc., Crock Pot seasoning mixes pursuant to a licensing agreement with Sunbeam Products, Inc. dba Jarden Consumer Solutions, Weber seasonings and other flavor enhancers pursuant to a licensing agreement with Weber-Stephen Products LLC. French’s® seasoning mixes were sold pursuant to a licensing agreement with French’s Food Company LLC, but that licensing agreement was terminated effective June 30, 2018 and we no longer sell any French’s products. Outbound License Agreements. We also from time to time enter into outbound license agreements for our trademarks and other intellectual property. For example, the Green Giant trademark is licensed to third parties for use in connection with their sale of fresh produce in the United States and Europe. We also license the Green Giant name and related intellectual property to General Mills for use with its sale of frozen and shelf stable products in parts of Europe, Asia and in various other locations outside of the United States and Canada. - 11 - Employees and Labor Relations As of December 29, 2018, our workforce consisted of 2,675 employees. Of that total, 2,322 employees were engaged in manufacturing, 131 were engaged in marketing and sales, 142 were engaged in warehouse and distribution and 80 were engaged in administration. Approximately 61% of our employees, located at five facilities in the United States and one facility in Mexico, are covered by collective bargaining agreements. The agreements covering employees at the five facilities in the United States, which vary in term depending on the location, expire on December 31, 2019 (Brooklyn, NY; United Food and Commercial Workers, Local No. 342), March 31, 2020 (Roseland, New Jersey; International Brotherhood of Teamsters, Chauffeurs, Warehousemen & Helpers of America, Local No. 863), April 5, 2020 (Ankeny, Iowa; International Brotherhood of Teamsters, Local No. 238), March 27, 2021 (Stoughton, Wisconsin; Drivers, Salesmen, Warehousemen, Milk Processors, Cannery, Dairy Employees and Helpers Union, Local No. 695), and April 30, 2022 (Portland, Maine; Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, AFL - CIO, Local No. 334). There are two unions representing employees at our facility in Mexico, (1) the Industrial Union of Stevedore Workers, Cargo Transport Operators and Similar from the Mexican Republic and (2) the Union of Agriculture Workers at the Service of the Region. Our collective bargaining agreements with these two unions do not expire, however, certain terms of the agreements must be reviewed periodically. The collective bargaining agreement covering our Brooklyn facility, which covers approximately 80 employees, is the only collective bargaining agreement expiring in the next twelve months. While we believe that our relations with our union employees are in general good, we cannot assure you that we will be able to negotiate a new collective bargaining agreement for our Brooklyn facility on terms satisfactory to us, or at all, and without production interruptions, including labor stoppages. At this time, however, management does not expect that the outcome of these negotiations will have a material adverse impact on our business, financial condition or results of operations. Government Regulation As a manufacturer and marketer of food and household products, our operations are subject to extensive regulation by the United States Food and Drug Administration (FDA), the United States Department of Agriculture (USDA), the Federal Trade Commission (FTC), the Consumer Product Safety Commission (CPSC), the United States Department of Labor, the Environmental Protection Agency and various other federal, state, local and foreign authorities (including government authorities in Canada and Mexico) regarding the manufacturing, processing, packaging, storage, labeling, sale and distribution of our products and the health and safety of our employees. Our manufacturing facilities and products are subject to periodic inspection by federal, state, local and foreign authorities. In addition, our meat processing operation in Portland, Maine is subject to daily inspection by the USDA. We are subject to the Food, Drug and Cosmetic Act and the Food Safety Modernization Act and the regulations promulgated thereunder by the FDA. This comprehensive regulatory program governs, among other things, the manufacturing, composition and ingredients, labeling, packaging and safety of food. We are also subject to the U.S. Bio - Terrorism Act of 2002 which imposes on us import and export regulations. Under the Bio - Terrorism Act we are required, among other things, to provide specific information about the food products we ship into the United States and to register our manufacturing, warehouse and distribution facilities with the FDA. We believe that we are currently in substantial compliance with all material governmental laws and regulations and maintain all material permits and licenses relating to our operations. Nevertheless, there can be no assurance that we are in full compliance with all such laws and regulations or that we will be able to comply with any future laws and regulations in a cost - effective manner. Failure by us to comply with applicable laws and regulations could subject us to civil remedies, including fines, injunctions, recalls or seizures, as well as potential criminal sanctions, all of which could have a material adverse effect on our business, consolidated financial condition, results of operations or liquidity. Environmental Matters Environmental Sustainability. As part of our commitment to being a good corporate citizen, we consider environmental sustainability to be an important strategic focus area. For instance, our manufacturing operations have a variety of initiatives in place to reduce energy usage, conserve water, improve wastewater management, reduce packaging and where possible use recycled and recyclable packaging. We continue to evaluate and modify our manufacturing and other processes on an ongoing basis to mitigate risk and further reduce our impact on the environment, conserve water and reduce waste. - 12 - Environmental Laws and Regulations. We are also subject to environmental laws and regulations in the normal course of business. We have not made any material expenditures during the last three fiscal years in order to comply with environmental laws or regulations. Based on our experience to date, we believe that the future cost of compliance with existing environmental laws and regulations (and liability for known environmental conditions) will not have a material adverse effect on our business, consolidated financial condition, results of operations or liquidity. However, we cannot predict what environmental laws or regulations will be enacted in the future or how existing or future laws or regulations will be enforced, administered or interpreted, nor can we predict the amount of future expenditures that may be required in order to comply with such environmental laws or regulations or to respond to such environmental claims. Available Information Under the Securities Exchange Act of 1934, as amended, we are required to file with or furnish to the Securities and Exchange Commission (SEC) annual, quarterly and current reports, proxy and information statements and other information. The SEC maintains an internet site at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. We file electronically with the SEC. We make available, free of charge, through the investor relations section of our web site, our reports on Forms 10 - K, 10 - Q and 8 - K, and amendments to those reports, filed with or furnished to the SEC as soon as reasonably practicable after they are filed or furnished to the SEC. The address for the investor relations section of our web site is https://www.bgfoods.com/investor-relations. The full text of the charters for each of the audit, compensation, nominating and governance, and risk committees of our board of directors as well as our Code of Business Conduct and Ethics is available at the investor relations section of our web site, https://www.bgfoods.com/investor-relations/governance/documents. Our Code of Business Conduct and Ethics applies to all of our employees, officers and directors, including our chief executive officer, chief financial officer and chief accounting officer. We intend to disclose any amendment to, or waiver from, a provision of the Code of Business Conduct and Ethics that applies to our chief executive officer, chief financial officer or chief accounting officer in the investor relations section of our web site. The information contained on our web site is not part of, and is not incorporated in, this or any other report we file with or furnish to the SEC. Item 1A. Risk Factors. Any investment in our company will be subject to risks inherent to our business. Before making an investment decision, investors should carefully consider the risks described below together with all of the other information included in this report. The risks and uncertainties described below are not the only ones facing our company. Additional risks and uncertainties that we are not aware of or focused on or that we currently deem immaterial may also impair our business operations. This report is qualified in its entirety by these risk factors. Any of the following risks could materially and adversely affect our business, consolidated financial condition, results of operations or liquidity. In that case, holders of our securities may lose all or part of their investment. Risks Specific to Our Company The packaged food industry is highly competitive. The packaged food industry is highly competitive. Numerous brands and products, including private label products, compete for shelf space and sales, with competition based primarily on product quality, convenience, price, trade promotion, brand recognition and loyalty, customer service, effective consumer advertising and promotional activities and the ability to identify and satisfy emerging consumer preferences. We compete with a significant number of companies of varying sizes, including divisions or subsidiaries of larger companies. Many of these competitors have multiple product lines, substantially greater financial and other resources available to them and may have lower fixed costs and/or are substantially less leveraged than our company. If we are unable to continue to compete successfully with these companies or if competitive pressures or other factors cause our products to lose market share or result in significant price erosion, our business, consolidated financial condition, results of operations or liquidity could be materially and adversely affected. - 13 - We may be unable to maintain our profitability in the face of a consolidating retail environment. Our largest customer, Walmart, accounted for 23.1% of our fiscal 2018 net sales, and our ten largest customers together accounted for approximately 54.4% of our fiscal 2018 net sales. As the retail grocery trade continues to consolidate and our retail customers grow larger and become more sophisticated, our retail customers may demand lower pricing and increased promotional programs. Further, these customers are reducing their inventories and increasing their emphasis on products that hold either the number one or number two market position and private label products. If we fail to use our sales and marketing expertise to maintain our category leadership positions to respond to these trends, or if we lower our prices or increase promotional support of our products and are unable to increase the volume of our products sold, our profitability and financial condition may be adversely affected. We are vulnerable to decreases in the supply and increases in the price of raw materials and labor, manufacturing, distribution and other costs, and we may not be able to offset increasing costs by increasing prices to our customers. We purchase agricultural products, including vegetables and spices and seasonings, meat, poultry, other raw materials, ingredients and packaging materials from growers, commodity processors, other food companies and packaging manufacturers. Raw materials, ingredients and packaging materials are subject to increases in price attributable to a number of factors, including changes in crop size, federal and state agricultural programs, export demand, currency exchange rates, energy and fuel costs, water supply, weather conditions during the growing and harvesting seasons, insects, plant diseases and fungi, and glass, metal and plastic prices. Fluctuations in commodity prices can lead to retail price volatility and intensive price competition, and can influence consumer and trade buying patterns. The cost of labor, manufacturing, energy, fuel, packaging materials and other costs related to the production and distribution of our products can from time to time increase significantly and unexpectedly. We attempt to manage these risks by entering into short - term supply contracts and advance commodities purchase agreements from time to time, by implementing cost saving measures and by raising sales prices. During the past three years, our cost saving measures and sales price increases have not been sufficient to fully offset increases to our raw material, ingredient, packaging and distribution costs. To the extent we are unable to offset present and future cost increases, our operating results will be negatively impacted. We may be unable to offset any reduction in net sales in our mature food product categories through an increase in trade spending for these categories or an increase in net sales in other categories. Most of our food product categories are mature and certain categories have experienced declining consumption rates from time to time. If consumption rates and sales in our mature food product categories decline, our revenue and operating income may be adversely affected, and we may not be able to offset this decrease in business with increased trade spending or an increase in sales or profitability of other products and product categories. We may have difficulties integrating acquisitions or identifying new acquisitions. A major part of our strategy is to grow through acquisition. We completed the McCann’s acquisition in July 2018 and the Back to Nature acquisition in October 2017 and we expect to pursue additional acquisitions of food product lines and businesses. However, we may be unable to identify and consummate additional acquisitions or may be unable to successfully integrate and manage the product lines or businesses that we have recently acquired or may acquire in the future. In addition, we may be unable to achieve a substantial portion of any anticipated cost savings from acquisitions or other anticipated benefits in the timeframe we anticipate, or at all. Moreover, any acquired product lines or businesses may require a greater than anticipated amount of trade, promotional and capital spending. Acquisitions involve numerous risks, including difficulties in the assimilation of the operations, technologies, services and products of the acquired companies, personnel turnover and the diversion of management’s attention from other business concerns. Any inability by us to integrate and manage any product lines or businesses that we have recently acquired or may acquire in the future in a timely and efficient manner, any inability to achieve a substantial portion of any anticipated cost savings or other anticipated benefits from these acquisitions in the time frame we anticipate or any unanticipated required increases in trade, promotional or capital spending could adversely affect our business, consolidated financial condition, results of operations or liquidity. Moreover, future acquisitions by us could result in our incurring substantial additional indebtedness, being exposed to contingent liabilities or incurring the impairment of goodwill and other intangible assets, all of which could adversely affect our financial condition, results of operations and liquidity. - 14 - We have substantial indebtedness, which could restrict our ability to pay dividends and impact our financing options and liquidity position. At December 29, 2018, we had total long - term indebtedness of $1,650.0 million (before debt discount), including $50.0 million principal amount of senior secured indebtedness and $1,600.0 million principal amount of senior unsecured indebtedness. Our ability to pay dividends is subject to contractual restrictions contained in the instruments governing our indebtedness. Although our credit agreement and the indentures governing our senior notes (which we refer to as the senior notes indentures) contain covenants that restrict our ability to incur debt, as long as we meet these covenants we will be able to incur additional indebtedness. The degree to which we are leveraged on a consolidated basis could have important consequences to the holders of our securities, including: • our ability in the future to obtain additional financing for working capital, capital expenditures or acquisitions may be limited; • we may not be able to refinance our indebtedness on terms acceptable to us or at all; • a significant portion of our cash flow is likely to be dedicated to the payment of interest on our indebtedness, thereby reducing funds available for future operations, capital expenditures, acquisitions and/or dividends on our common stock; and • we may be more vulnerable to economic downturns and be limited in our ability to withstand competitive pressures. We are subject to restrictive debt covenants and other requirements related to our debt that limit our business flexibility by imposing operating and financial restrictions on our operations. The agreements governing our indebtedness impose significant operating and financial restrictions on us. These restrictions prohibit or limit, among other things: • • • • • • • • the incurrence of additional indebtedness and the issuance of certain preferred stock or redeemable capital stock; the payment of dividends on, and purchase or redemption of, capital stock; a number of restricted payments, including investments; specified sales of assets; specified transactions with affiliates; the creation of certain types of liens; consolidations, mergers and transfers of all or substantially all of our assets; and entry into certain sale and leaseback transactions. Our credit agreement requires us to maintain specified financial ratios and satisfy financial condition tests, including, without limitation, a maximum leverage ratio and a minimum interest coverage ratio. Our ability to comply with the ratios or tests may be affected by events beyond our control, including prevailing economic, financial and industry conditions. A breach of any of these covenants, or failure to meet or maintain ratios or tests could result in a default under our credit agreement and/or our senior notes indentures. Certain events of default under our credit agreement and our senior notes indentures would prohibit us from paying dividends on our common stock. In addition, upon the occurrence of an event of default under our credit agreement or our senior notes indentures, the lenders could elect to declare all amounts outstanding under the credit agreement and the senior notes, together with accrued interest, to be immediately due and payable. If we were unable to repay those amounts, the credit agreement lenders could proceed against the security granted to them to secure that indebtedness. If the lenders accelerate the payment of the indebtedness, our assets may not be sufficient to repay in full this indebtedness and our other indebtedness. - 15 - To service our indebtedness, we require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control. Our ability to make interest payments on and to refinance our indebtedness, and to fund planned capital expenditures and potential acquisitions depends on our ability to generate cash flow from operations in the future. This ability, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. A significant portion of our cash flow from operations is dedicated to servicing our debt requirements. In addition, in accordance with our current dividend policy we intend to continue distributing a significant portion of any remaining cash flow to our stockholders as dividends. Our ability to continue to expand our business is, to a certain extent, dependent upon our ability to borrow funds under our credit agreement and to obtain other third - party financing, including through the issuance and sale of additional debt or equity securities. Financial market conditions may impede our access to, or increase the cost of, financing for acquisitions. Any future financial market disruptions or tightening of the credit markets, may make it more difficult for us to obtain financing for acquisitions or increase the cost of obtaining financing. In addition, our borrowing costs can be affected by short and long - term debt ratings assigned by independent rating agencies that are based, in significant part, on our performance as measured by credit metrics such as interest coverage and leverage ratios. A decrease in these ratings could increase our cost of borrowing or make it more difficult for us to obtain financing. Future disruptions in the credit markets or other factors, could impair our ability to refinance our debt upon terms acceptable to us or at all. Our $700.0 million revolving credit facility matures on November 21, 2022, our $700.0 million of 4.625% senior notes mature on June 1, 2021 and our $900.0 million of 5.25% senior notes mature on April 1, 2025. Our ability to raise debt or equity capital in the public or private markets in order to effect a refinancing of our debt at or prior to maturity could be impaired by various factors, including factors beyond our control. For example, in recent years U.S. credit markets experienced significant dislocations and liquidity disruptions that caused the spreads on prospective debt financings to widen considerably. These circumstances materially impacted liquidity in the debt markets, making financing terms for borrowers less attractive, and in certain cases resulted in the unavailability of certain types of debt financing. Any future uncertainty in the credit markets could negatively impact our ability to access additional debt financing or to refinance existing indebtedness on favorable terms, or at all. In addition, any future uncertainty in other financial markets in the U.S. could make it more difficult or costly for us to raise capital through the issuance of common stock or other equity securities. Any of these risks could impair our ability to fund our operations or limit our ability to expand our business or increase our interest expense, which could have a material adverse effect on our financial results. If we are unable to refinance our indebtedness at or prior to maturity on commercially reasonable terms or at all, we would be forced to seek other alternatives, including: • • • sales of assets; sales of equity; and negotiations with our lenders or noteholders to restructure the applicable debt. If we are forced to pursue any of the above options, our business and/or the value of an investment in our securities could be adversely affected. We rely on co - packers for a significant portion of our manufacturing needs, and the inability to enter into additional or future co - packing agreements may result in our failure to meet customer demand. We rely upon co - packers for a significant portion of our manufacturing needs. The success of our business depends, in part, on maintaining a strong sourcing and manufacturing platform. We believe that there are a limited number of competent, high - quality co - packers in the industry, and if we were required to obtain additional or alternative co - packing agreements or arrangements in the future, we can provide no assurance that we would be able to do so on satisfactory terms or in a timely manner. Our inability to enter into satisfactory co - packing agreements could limit our ability to implement our business plan or meet customer demand. - 16 - We rely on the performance of major retailers, wholesalers, specialty distributors and mass merchants for the success of our business, and should they perform poorly or give higher priority to other brands or products, our business could be adversely affected. We sell our products principally to retail outlets and wholesale distributors including, traditional supermarkets, mass merchants, warehouse clubs, wholesalers, foodservice distributors and direct accounts, specialty food distributors, military commissaries and non - food outlets such as drug store chains, dollar stores and e-tailers. The replacement by or poor performance of our major wholesalers, retailers or chains or our inability to collect accounts receivable from our customers could materially and adversely affect our results of operations and financial condition. In addition, our customers offer branded and private label products that compete directly with our products for retail shelf space and consumer purchases. Accordingly, there is a risk that our customers may give higher priority to their own products or to the products of our competitors. In the future, our customers may not continue to purchase our products or provide our products with adequate levels of promotional support. It is also possible that our customers may replace our branded products with private label products. We may be unable to anticipate changes in consumer preferences and consumer demographics, which may result in decreased demand for our products. Our success depends in part on our ability to anticipate and offer products that appeal to the changing tastes, dietary habits and product packaging preferences of consumers in the market categories in which we compete. If we are not able to anticipate, identify or develop and market products that respond to these changes in consumer preferences, whether resulting from changing consumer demographics or otherwise, demand for our products may decline and our operating results may be adversely affected. In addition, we may incur significant costs related to developing and marketing new products or expanding our existing product lines in reaction to what we perceive to be increased consumer preference or demand. Such development or marketing may not result in the volume of sales or profitability anticipated. Severe weather conditions and natural disasters can affect crop supplies and reduce our operating results. Severe weather conditions and natural disasters, such as floods, droughts, frosts, earthquakes or pestilence, may affect the supply of the raw materials that we use for our products. Our maple syrup products, for instance, are particularly susceptible to severe freezing conditions in Québec, Canada and Vermont during the season in which maple syrup is produced. Our Green Giant frozen vegetable manufacturing facility in Irapuato, Mexico is located in a region affected by water scarcity and restrictions on usage. Competing manufacturers can be affected differently by weather conditions and natural disasters depending on the location of their supplies. If our supplies of raw materials are reduced, we may not be able to find supplemental supply sources on favorable terms or at all, which could adversely affect our business and operating results. Climate change, water scarcity or legal, regulatory, or market measures to address climate change or water scarcity, could negatively affect our business and operations. In the event that climate change has a negative effect on agricultural productivity, we may be subject to decreased availability or less favorable pricing for certain commodities that are necessary for our products. We may also be subjected to decreased availability or less favorable pricing for water as a result of such change, which could impact our manufacturing and distribution operations. For example, our Green Giant frozen vegetable manufacturing facility in Irapuato, Mexico is already affected by water scarcity in that region of Mexico. Any further restrictions on, or loss of, water rights due to water scarcity, water rights violations or otherwise for our Irapuato manufacturing facility could have a material adverse effect on our business and operating results. The increasing concern over climate change also may result in more regional, federal, foreign and/or global legal and regulatory requirements to reduce or mitigate the effects of greenhouse gases. In the event that such regulation is enacted and is more aggressive than the sustainability measures that we are currently undertaking to monitor our emissions and improve our energy and resource efficiency, we may experience significant increases in our manufacturing and distribution costs. In particular, increasing regulation of fuel emissions could substantially increase the supply chain and distribution costs associated with our products. As a result, climate change or increased concern over climate change could negatively affect our business and operations. - 17 - Most of our products are sourced from single manufacturing sites, which means disruptions in our or our co - packers’ operations for any number of reasons could have a material adverse effect on our business. Our products are manufactured at many different manufacturing facilities, including our ten manufacturing facilities and manufacturing facilities operated by our co - packers. However, in most cases, individual products are produced only at a single location. If any of these manufacturing locations experiences a disruption for any reason, including a work stoppage, power failure, fire, or weather related condition or natural disaster, etc., this could result in a significant reduction or elimination of the availability of some of our products. If we were not able to obtain alternate production capability in a timely manner or on satisfactory terms, this could have a material adverse effect on our business, consolidated financial condition, results of operations or liquidity. Our operations are subject to numerous laws and governmental regulations, exposing us to potential claims and compliance costs that could adversely affect our business. Our operations are subject to extensive regulation by the FDA, the USDA, the FTC, the SEC, the CPSC, the United States Department of Labor, the Environmental Protection Agency and various other federal, state, local and foreign authorities. We are also subject to U.S. laws affecting operations outside of the United States, including anti - bribery laws such as the Foreign Corrupt Practices Act (FCPA). Any changes in these laws and regulations, or any changes in how existing or future laws or regulations will be enforced, administered or interpreted could increase the cost of developing, manufacturing and distributing our products or otherwise increase the cost of conducting our business, or expose us to additional risk of liabilities and claims, which could have a material adverse effect on our business, consolidated financial condition, results of operations or liquidity. In addition, failure by us to comply with applicable laws and regulations, including future laws and regulations, could subject us to civil remedies, including fines, injunctions, recalls or seizures, as well as potential criminal sanctions, which could have a material adverse effect on our business, consolidated financial condition, results of operations or liquidity. See Item 1, “Business—Government Regulation” and “—Environmental Matters.” Failure by third - party co - packers or suppliers of raw materials to comply with food safety, environmental or other regulations may disrupt our supply of certain products and adversely affect our business. We rely on co - packers to produce certain of our products and on other suppliers to supply raw materials. Such co - packers and other suppliers, whether in the United States or outside the United States, are subject to a number of regulations, including food safety and environmental regulations. Failure by any of our co - packers or other suppliers to comply with regulations, or allegations of compliance failure, may disrupt their operations. Disruption of the operations of a co - packer or other suppliers could disrupt our supply of product or raw materials, which could have an adverse effect on our business, consolidated financial condition, results of operations or liquidity. Additionally, actions we may take to mitigate the impact of any such disruption or potential disruption, including increasing inventory in anticipation of a potential production or supply interruption, may adversely affect our business, consolidated financial condition, results of operations or liquidity. A recall of our products could have a material adverse effect on our business. In addition, we may be subject to significant liability should the consumption of any of our products cause injury, illness or death. The sale of food products for human consumption involves the risk of injury to consumers. Such injuries may result from mislabeling, tampering by unauthorized third parties or product contamination or spoilage, including the presence of foreign objects, undeclared allergens, substances, chemicals, other agents or residues introduced during the growing, manufacturing, storage, handling or transportation phases of production. Under certain circumstances, we may be required to recall products, leading to a material adverse effect on our business, consolidated financial condition, results of operations or liquidity. Even if a situation does not necessitate a recall, product liability claims might be asserted against us. We have from time to time been involved in product liability lawsuits, none of which have been material to our business. While we are subject to governmental inspection and regulations and believe our facilities comply in all material respects with all applicable laws and regulations, if the consumption of any of our products causes, or is alleged to have caused, a health - related illness in the future we may become subject to claims or lawsuits relating to such matters. Even if a product liability claim is unsuccessful or is not fully pursued, the negative publicity surrounding any assertion that our products caused injury, illness or death could adversely affect our reputation with existing and potential customers and our corporate and brand image. Moreover, claims or liabilities of this sort might not be covered by our insurance or by any rights of indemnity or contribution that we may have against others. We maintain product liability insurance and product contamination insurance in amounts we believe to be adequate. However, we - 18 - cannot assure you that we will not incur claims or liabilities for which we are not insured or that exceed the amount of our insurance coverage. A product liability judgment against us or a product recall or the damage to our reputation resulting therefrom could have a material adverse effect on our business, consolidated financial condition, results of operations or liquidity. Pending and future litigation may lead us to incur significant costs. We are, or may become, party to various lawsuits and claims arising in the normal course of business, which may include lawsuits or claims relating to contracts, intellectual property, product recalls, product liability, the marketing and labeling of products, employment matters, environmental matters or other aspects of our business. Even when not merited, the defense of these lawsuits may divert our management’s attention, and we may incur significant expenses in defending these lawsuits. In addition, we may be required to pay damage awards or settlements or become subject to injunctions or other equitable remedies, which could have a material adverse effect on our business, consolidated financial condition, results of operations or liquidity. The outcome of litigation is often difficult to predict, and the outcome of pending or future litigation may have a material adverse effect on our business, consolidated financial condition, results of operations or liquidity. Consumer concern regarding the safety and quality of food products or health concerns could adversely affect sales of certain of our products. If consumers in our principal markets lose confidence in the safety and quality of our food products even without a product liability claim or a product recall, our business could be adversely affected. Consumers have been increasingly focused on food safety and health and wellness with respect to the food products they buy. We have been and will continue to be impacted by publicity concerning the health implications of food products generally, which could negatively influence consumer perception and acceptance of our products and marketing programs. Developments in any of these areas could cause our results to differ materially from results that have been or may be projected. A weakening of the U.S. dollar in relation to the Canadian dollar would significantly increase our future costs relating to the production of maple syrup products. We purchase a significant majority of our maple syrup requirements from suppliers in Québec, Canada. A weakening of the U.S. dollar in relation to the Canadian dollar would significantly increase our future costs relating to the production of our maple syrup products to the extent we have not purchased Canadian dollars or otherwise entered into a currency hedging arrangement in advance of any such weakening of the U.S. dollar. These increased costs may not be fully offset by the positive impact the change in the relative strength of the Canadian dollar versus the U.S. dollar would have on our net sales in Canada. Our operations in foreign countries are subject to political, economic and foreign currency risk. Our relationships with foreign suppliers and co - packers as well as our manufacturing location in Irapuato, Mexico also subject us to the risks of doing business outside the United States. The countries from which we source our raw materials and certain of our finished goods may be subject to political and economic instability, and may periodically enact new or revise existing laws, taxes, duties, quotas, tariffs, currency controls or other restrictions to which we are subject, including restrictions on the transfer of funds to and from foreign countries or the nationalization of operations. Our products are subject to import duties and other restrictions, and the U.S. government may periodically impose new or revise existing duties, quotas, tariffs or other restrictions to which we are subject, including restrictions on the transfer of funds to and from foreign countries. In particular, our financial condition and results of operations could be materially and adversely affected by the new United States-Mexico-Canada Agreement, or other regulatory and economic impact of changes in taxation and trade relations among the United States and other countries. In addition, changes in respective wage rates among the countries from which we and our competitors source product could substantially impact our competitive position. Changes in exchange rates, import/export duties or relative international wage rates applicable to us or our competitors could adversely impact our business, financial condition and results of operations. These changes may impact us in a different manner than our competitors. - 19 - Our financial performance on a U.S. dollar denominated basis is subject to fluctuations in currency exchange rates. These fluctuations could cause material variations in our results of operations. Our principal exposures are to the Canadian dollar and the Mexican peso. For example, our foreign sales are primarily to customers in Canada. Net sales in Canada accounted for 5.7% of our total net sales in 2018. Although our sales for export to other countries are generally denominated in U.S. dollars, our sales to Canada are generally denominated in Canadian dollars. As a result, our net sales to Canada are subject to the effect of foreign currency fluctuations, and these fluctuations could have an adverse impact on operating results. From time to time, we may enter into agreements that are intended to reduce the effects of our exposure to currency fluctuations, but these agreements may not be effective in significantly reducing our exposure. Litigation regarding our trademarks and any other proprietary rights and intellectual property infringement claims may have a significant negative impact on our business. We maintain an extensive trademark portfolio that we consider to be of significant importance to our business. If the actions we take to establish and protect our trademarks and other proprietary rights are not adequate to prevent imitation of our products by others or to prevent others from seeking to block sales of our products as an alleged violation of their trademarks and proprietary rights, it may be necessary for us to initiate or enter into litigation in the future to enforce our trademark rights or to defend ourselves against claimed infringement of the rights of others. Any legal proceedings could result in an adverse determination that could have a material adverse effect on our business, consolidated financial condition, results of operations or liquidity. We face risks associated with our defined benefit pension plans and multiemployer pension plan obligations. We maintain four defined benefit pension plans that cover approximately 43% of our employees. A deterioration in the value of plan assets resulting from poor market performance, a general financial downturn or otherwise could cause an increase in the amount of contributions we are required to make to these plans. For example, our defined benefit pension plans may from time to time move from an overfunded to underfunded status driven by decreases in plan asset values that may result from changes in long - term interest rates and disruptions in U.S. or global financial markets. Additionally, historically low interest rates coupled with poor market performance would have the effect of decreasing the funded status of these plans which would result in greater required contributions. For a more detailed description of these plans, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies; Use of Estimates—Pension Expense” and Note 12, “Pension Benefits,” to our consolidated financial statements in Part II, Item 8 of this report. We also participate in a multiemployer pension plan maintained by the labor union representing certain of our employees at our Portland, Maine facility. We make periodic contributions to this plan pursuant to the terms of a collective bargaining agreement. In the event that we withdraw from participation in this plan or substantially reduce our participation in this plan (such as due to a workforce reduction), applicable law could require us to make withdrawal liability payments to the plan, and we would have to reflect that liability on our balance sheet. The amount of our withdrawal liability would depend on the extent of this plan’s funding of vested benefits at the time of our withdrawal. Furthermore, our withdrawal liability could increase as the number of employers participating in this plan decreases. For a more detailed description of this multiemployer plan, see Note 12, “Pension Benefits,” to our consolidated financial statements in Part II, Item 8 of this report. An obligation to make additional, unanticipated contributions to our defined benefit plans or the multiemployer plan described above could reduce the cash available for working capital and other corporate uses, and may have a material adverse effect on our business, consolidated financial position, results of operations and liquidity. - 20 - Our financial well - being could be jeopardized by unforeseen changes in our employees’ collective bargaining agreements, shifts in union policy or labor disruptions in the food industry. As of December 29, 2018, approximately 61% of our 2,675 employees were covered by collective bargaining agreements. A prolonged work stoppage or strike at any of our facilities with union employees or a significant work disruption from other labor disputes in the food or related industries could have a material adverse effect on our business, consolidated financial condition, results of operations or liquidity. Later this year we will begin negotiations for a new collective bargaining agreement to replace the existing collective bargaining agreement for our Brooklyn manufacturing facility, which covers approximately 80 employees, that is scheduled to expire on December 31, 2019. However, we cannot assure you that we will be able to negotiate a new collective bargaining agreement for our Brooklyn facility on terms satisfactory to us, or at all, and without production interruptions, including labor stoppages. If, prior to the expiration of the collective bargaining agreement for the Brooklyn facility or prior to the expiration of any of our other existing collective bargaining agreements, we are unable to reach new agreements without union action or any such new agreements are not on terms satisfactory to us, our business, consolidated financial condition, results of operations or liquidity could be materially and adversely affected. We are increasingly dependent on information technology; Disruptions, failures or security breaches of our information technology infrastructure could have a material adverse effect on our operations. Information technology is critically important to our business operations. We rely on information technology networks and systems, including the Internet, to process, transmit and store electronic and financial information, to manage a variety of business processes and activities, including manufacturing, financial, logistics, sales, marketing and administrative functions. We depend on our information technology infrastructure to communicate internally and externally with employees, customers, suppliers and others. We also use information technology networks and systems to comply with regulatory, legal and tax requirements. These information technology systems, many of which are managed by third parties or used in connection with shared service centers, may be susceptible to damage, disruptions or shutdowns due to failures during the process of upgrading or replacing software, databases or components thereof, issues with or errors in systems’ maintenance or security, migration of applications to the cloud, power outages, hardware or software failures, computer viruses, malware, attacks by computer hackers or other cybersecurity risks, telecommunication failures, denial of service, user errors, natural disasters, terrorist attacks or other catastrophic events. Cyberattacks and other cyber incidents are occurring more frequently in the United States, are constantly evolving in nature, are becoming more sophisticated and are being made by groups and individuals (including criminal hackers, hacktivists, state-sponsored institutions, terrorist organizations and individuals or groups participating in organized crime) with a wide range of expertise and motives (including monetization of corporate, payment or other internal or personal data, theft of trade secrets and intellectual property for competitive advantage and leverage for political, social, economic and environmental reasons). Such cyberattacks and cyber incidents can take many forms including cyber extortion, denial of service, social engineering, such as impersonation attempts to fraudulently induce employees or others to disclose information or unwittingly provide access to systems or data, introduction of viruses or malware, such as ransomware through phishing emails, website defacement or theft of passwords and other credentials. We may incur significant costs in protecting against or remediating cyberattacks or other cyber incidents. If any of our significant information technology systems suffer severe damage, disruption or shutdown, whether due to natural disaster, cyberattacks or otherwise, and our disaster recovery and business continuity plans, or those of our third party providers, do not effectively respond to or resolve the issues in a timely manner, our product sales, financial condition and results of operations may be materially and adversely affected, and we could experience delays in reporting our financial results, loss of intellectual property and damage to our reputation or brands. In addition, if we are unable to prevent physical and electronic break-ins, cyberattacks and other information security breaches, we may suffer financial and reputational damage, be subject to litigation or incur remediation costs or penalties because of the unauthorized disclosure of confidential information belonging to us or to our partners, customers, suppliers or employees. The mishandling or inappropriate disclosure of non-public sensitive or protected information could lead to the loss of intellectual property, negatively impact planned corporate transactions or damage our reputation and brand image. Misuse, leakage or falsification of legally protected information could also result in a violation of data privacy laws and regulations and have a negative impact on our reputation, business, financial condition and results of operations. - 21 - We may experience difficulties fully implementing our new enterprise resource planning system. We are implementing a new enterprise resource planning (ERP) system. The implementation of the new ERP system has required, and will continue to require, the investment of significant financial and human resources. We may not be able to complete successfully the full implementation of the ERP system without experiencing difficulties. Any disruptions, delays or deficiencies in the design and implementation of the new ERP system could adversely affect our ability to produce products, process orders, ship products, provide services and customer support, send invoices and track payments, fulfill contractual obligations, integrate acquisitions, or otherwise operate our business. It is also possible that the migration to a new ERP system could adversely affect our internal controls over financial reporting. If we are unable to retain our key management personnel, our growth and future success may be impaired and our results of operations could suffer as a result. Our success depends to a significant degree upon the continued contributions of senior management, certain of whom would be difficult to replace. As a result, departure by members of our senior management could have a material adverse effect on our business and results of operations. In addition, we do not maintain key - man life insurance on any of our executive officers. We are a holding company and we rely on dividends, interest and other payments, advances and transfers of funds from our subsidiaries to meet our obligations. We are a holding company, with all of our assets held by our direct and indirect subsidiaries, and we rely on dividends and other payments or distributions from our subsidiaries to meet our debt service obligations and to enable us to pay dividends. The ability of our subsidiaries to pay dividends or make other payments or distributions to us depends on their respective operating results and may be restricted by, among other things, the laws of their jurisdiction of organization (which may limit the amount of funds available for the payment of dividends), agreements of those subsidiaries, our credit agreement, our senior notes indentures and the covenants of any future outstanding indebtedness we or our subsidiaries incur. Future changes that increase cash taxes payable by us could significantly decrease our future cash flow available to make interest and dividend payments with respect to our securities. We are able to amortize goodwill and certain intangible assets within the meaning of Section 197 of the Internal Revenue Code of 1986. We expect to be able to amortize for tax purposes approximately $1,048.7 million between 2019 and 2033. The expected annual deductions are approximately $108.0 million for fiscal 2019, approximately $106.4 million for fiscal 2020, approximately $103.8 million for fiscal 2021, approximately $92.2 million for fiscal 2022, approximately $90.3 million per year for fiscal 2023 through fiscal 2024, approximately $90.0 million for fiscal 2025, approximately $86.1 million for fiscal 2026, approximately $66.2 million for fiscal 2027, approximately $63.7 million for fiscal 2028, approximately $63.1 million for fiscal 2029, approximately $57.0 million for fiscal 2030, approximately $24.3 million for fiscal 2031, approximately $6.1 million for fiscal 2032 and approximately $1.2 million for fiscal 2033. If there is a change in U.S. federal tax policy that reduces any of these available deductions, eliminates, limits or reduces the interest deduction we receive on our substantial indebtedness, or otherwise results in an increase in our corporate tax rate, our cash taxes payable would increase, which could significantly reduce our future cash and impact our ability to make interest and dividend payments. Likewise, the ultimate impact of the U.S. Tax Cuts and Jobs Act signed into law on December 22, 2017 on our reported results in fiscal 2019 and beyond may differ from the estimates provided in this report, possibly materially, due to, among other things, changes in interpretations and assumptions we have made, guidance that may be issued, and other actions we may take as a result of the new tax law different from that currently contemplated. See Note 10, “Income Taxes,” to our consolidated financial statements in Part II, Item 8 of this report for information about the U.S. Tax Cuts and Jobs Act. A change in the assumptions used to value our goodwill or our unamortizable intangible assets could negatively affect our consolidated results of operations and net worth. Our total assets include substantial goodwill and unamortizable intangible assets (trademarks). These assets are tested for impairment at least annually and whenever events or circumstances occur indicating that goodwill or unamortizable intangibles might be impaired. The annual goodwill impairment test involves a two - step process. The first step of the impairment test involves comparing our company’s market capitalization with our company’s carrying value, including goodwill. If the carrying value of our company exceeds our market capitalization, we perform the second step of the impairment test to determine the amount of the impairment loss. The second step of the goodwill impairment test - 22 - involves comparing the implied fair value of goodwill with the carrying value and recognizing a loss for the difference. We test our unamortizable intangibles by comparing the fair value with the carrying value and recognize a loss for the difference. We estimate the fair value of our unamortizable intangibles based on discounted cash flows that reflect certain third party market value indicators. Estimating our fair value for these purposes requires significant estimates and assumptions by management. We completed our annual impairment tests for fiscal 2018, 2017 and 2016 with no adjustments to the carrying values of goodwill and unamortizable intangibles. However, an interim impairment analysis relating to one of our brands performed during fiscal 2014 resulted in our company recording non - cash impairment charges to amortizable trademarks and customer relationship intangibles for the brand of $26.9 million and $7.3 million, respectively, during fiscal 2014. During the second quarter of 2016, we discontinued that brand because there was not sufficient demand to warrant continued production. Accordingly, we wrote off the related intangible assets and recorded non-cash impairment charges to amortizable trademarks and customer relationship intangibles of $4.5 million and $0.9 million, respectively, which are recorded in “Impairment of intangible assets” on the accompanying consolidated statement of operations for fiscal 2016. If operating results for any of our other brands, including newly acquired brands, deteriorate, at rates in excess of our current projections, we may be required to record additional non - cash impairment charges to certain intangible assets. In addition, any significant decline in our market capitalization, even if due to macroeconomic factors, could put pressure on the carrying value of our goodwill. A determination that all or a portion of our goodwill or unamortizable intangible assets are impaired, although a non - cash charge to operations, could have a material adverse effect on our business, consolidated financial condition and results of operations. Any future financial market disruptions or tightening of the credit markets could expose us to additional credit risks from customers and supply risks from suppliers and co - packers. Any future financial market disruptions or tightening of the credit markets could result in some of our customers experiencing a significant decline in profits and/or reduced liquidity. A significant adverse change in the financial and/or credit position of a customer could require us to assume greater credit risk relating to that customer and could limit our ability to collect receivables. A significant adverse change in the financial and/or credit position of a supplier or co - packer could result in an interruption of supply. This could have a material adverse effect on our business, consolidated financial condition, results of operations and liquidity. Risks Relating to our Securities Holders of our common stock may not receive the level of dividends provided for in our dividend policy or any dividends at all. Dividend payments are not mandatory or guaranteed and holders of our common stock do not have any legal right to receive, or require us to pay, dividends. Our board of directors may, in its sole discretion, decrease the level of dividends provided for in our dividend policy or entirely discontinue the payment of dividends. Future dividends with respect to shares of our capital stock, if any, depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions (including restrictions in our credit agreement and senior notes indentures), business opportunities, provisions of applicable law (including certain provisions of the Delaware General Corporation Law) and other factors that our board of directors may deem relevant. If our cash flows from operating activities were to fall below our minimum expectations (or if our assumptions as to capital expenditures or interest expense were too low or our assumptions as to the sufficiency of our revolving credit facility to finance our working capital needs were to prove incorrect), we may need either to reduce or eliminate dividends or, to the extent permitted under our credit agreement and senior notes indentures, fund a portion of our dividends with borrowings or from other sources. If we were to use working capital or permanent borrowings to fund dividends, we would have less cash and/or borrowing capacity available for future dividends and other purposes, which could negatively impact our financial condition, results of operations, liquidity and ability to maintain or expand our business. - 23 - Our dividend policy may negatively impact our ability to finance capital expenditures, operations or acquisition opportunities. Under our dividend policy, a substantial portion of our cash generated by our business in excess of operating needs, interest and principal payments on indebtedness, and capital expenditures sufficient to maintain our properties and assets is in general distributed as regular quarterly cash dividends to the holders of our common stock. As a result, we may not retain a sufficient amount of cash to finance growth opportunities or unanticipated capital expenditure needs or to fund our operations in the event of a significant business downturn. We may have to forego growth opportunities or capital expenditures that would otherwise be necessary or desirable if we do not find alternative sources of financing. If we do not have sufficient cash for these purposes, our financial condition and our business will suffer. Our certificate of incorporation authorizes us to issue without stockholder approval preferred stock that may be senior to our common stock in certain respects. Our certificate of incorporation authorizes the issuance of preferred stock without stockholder approval and, in the case of preferred stock, upon such terms as the board of directors may determine. The rights of the holders of shares of our common stock will be subject to, and may be adversely affected by, the rights of holders of any class or series of preferred stock that may be issued in the future, including any preferential rights that we may grant to the holders of preferred stock. The terms of any preferred stock we issue may place restrictions on the payment of dividends to the holders of our common stock. If we issue preferred stock that is senior to our common stock in right of dividend payment, and our cash flows from operating activities or surplus are insufficient to support dividend payments to the holders of preferred stock, on the one hand, and to the holders of common stock, on the other hand, we may be forced to reduce or eliminate dividends to the holders of our common stock. Future sales or the possibility of future sales of a substantial number of shares of our common stock or other securities convertible or exchangeable into common stock may depress the price of our common stock. We may issue shares of our common stock or other securities convertible or exchangeable into common stock from time to time in future financings or as consideration for future acquisitions and investments. In the event any such future financing, acquisition or investment is significant, the number of shares of our common stock or other securities convertible or exchangeable into common stock that we may issue may in turn be significant. In addition, we may grant registration rights covering shares of our common stock or other securities convertible or exchangeable into common stock, as applicable, issued in connection with any such future financing, acquisitions and investments. Future sales or the availability for sale of a substantial number of shares of our common stock or other securities convertible or exchangeable into common stock, whether issued and sold pursuant to our currently effective shelf registration statement or otherwise, would dilute our earnings per share and the voting power of each share of common stock outstanding prior to such sale or distribution, could adversely affect the prevailing market price of our securities and could impair our ability to raise capital through future sales of our securities. Our certificate of incorporation and bylaws and several other factors could limit another party’s ability to acquire us and deprive our investors of the opportunity to obtain a takeover premium for their securities. Our certificate of incorporation and bylaws contain certain provisions that may make it difficult for another company to acquire us and for holders of our securities to receive any related takeover premium for their securities. For example, our certificate of incorporation authorizes the issuance of preferred stock without stockholder approval and upon such terms as the board of directors may determine. The rights of the holders of shares of our common stock will be subject to, and may be adversely affected by, the rights of holders of any class or series of preferred stock that may be issued in the future. Item 1B. Unresolved Staff Comments. None. - 24 - Item 2. Properties. Our corporate headquarters are located at Four Gatehall Drive, Parsippany, NJ 07054. Our manufacturing facilities are generally located near major customer markets and raw materials. Of our ten manufacturing facilities, eight are owned and two are leased. Management believes that our manufacturing facilities have sufficient capacity to accommodate our planned growth. Listed below are our manufacturing facilities and the principal warehouses, distribution centers and offices that we own or lease. Description Owned/Leased Facility Location Leased Parsippany, New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leased Mississauga, Ontario . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ankeny, Iowa. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owned Hurlock, Maryland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owned Irapuato, Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owned Portland, Maine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owned St. Johnsbury, Vermont . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owned Stoughton, Wisconsin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owned Williamstown, New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owned Yadkinville, North Carolina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owned Leased Brooklyn, New York . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leased Roseland, New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leased Easton, Pennsylvania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leased Fontana, California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leased Joliet, Illinois . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leased Lebanon, Tennessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . St. Evariste, Québec . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owned Leased Bentonville, Arkansas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Corporate Headquarters Canadian Headquarters Manufacturing/Warehouse Manufacturing/Warehouse Manufacturing/Warehouse Manufacturing/Warehouse Manufacturing/Warehouse Manufacturing/Warehouse Manufacturing/Warehouse Manufacturing/Warehouse Manufacturing/Warehouse Manufacturing/Warehouse Distribution Center Distribution Center Distribution Center Distribution Center Storage Facility Sales Office Item 3. Legal Proceedings. The information set forth under the heading “Legal Proceedings” in Note 13 of Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10 - K is incorporated herein by reference. Item 4. Mine Safety Disclosures. Not applicable. - 25 - PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Shares of our common stock are traded on the New York Stock Exchange under the symbol “BGS” and have been so traded since May 23, 2007. According to the records of our transfer agent, we had 71 holders of record of our common stock as of February 22, 2019, including Cede & Co. as nominee for The Depository Trust Company (DTC). Cede & Co. as nominee for DTC holds shares of our common stock on behalf of participants in the DTC system, which in turn hold the shares of common stock on behalf of beneficial owners. Performance Graph Set forth below is a line graph comparing the change in the cumulative total shareholder return on our company’s common stock with the cumulative total return of the Russell 2000 Index and the S&P Packaged Foods & Meats Index for the period from December 28, 2013 to December 29, 2018, assuming the investment of $100 on December 28, 2013 and the reinvestment of dividends. The common stock price performance shown on the graph only reflects the change in our company’s common stock price relative to the noted indices and is not necessarily indicative of future price performance. Comparison of 5 Year Cumulative Total Return Among B&G Foods, Inc. Common Stock, the Russell 2000 Index and the S&P Packaged Foods & Meats Index $160 $140 $120 $100 $80 $60 $40 $20 $0 12/28/13 1/3/15 1/2/16 12/31/16 12/30/17 12/29/18 B&G Foods Inc Russell 2000 S&P Packaged Foods & Meats B&G Foods, Inc. (NYSE: BGS) . . . . . . . $ Russell 2000 Index . . . . . . . . . . . . . . . . . . $ S&P Packaged Foods & Meats Index . . . $ 12/28/2013 * 100.00 100.00 100.00 91.52 104.89 111.51 112.65 100.26 130.90 12/31/2016 12/30/2017 12/29/2018 112.94 124.09 117.57 146.67 121.63 142.86 123.97 139.44 144.79 1/3/2015 1/2/2016 * $100 invested on December 28, 2013 in B&G Foods’ common stock or index, including reinvestment of dividends. Indexes calculated on month - end basis. - 26 - Dividend Policy General Our dividend policy reflects a basic judgment that our stockholders are better served when we distribute a substantial portion of our cash available to pay dividends to them instead of retaining it in our business. Under this policy, a substantial portion of the cash generated by our company in excess of operating needs, interest and principal payments on indebtedness, capital expenditures sufficient to maintain our properties and other assets is distributed as regular quarterly cash dividends to the holders of our common stock and not retained by us. We have paid dividends every quarter since our initial public offering in October 2004. For fiscal 2018 and fiscal 2017, we had cash flows from operating activities of $209.5 million and $37.8 million, respectively, and distributed $124.5 million and $123.6 million as dividends, respectively. At our current dividend rate of $1.90 per share per annum, we expect our aggregate dividend payments in 2019 to be approximately $124.7 million. The following table sets forth the dividends per share we have declared in each of the quarterly periods of 2018 and 2017: Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Fiscal 2018 Fiscal 2017 0.465 0.475 $ 0.465 0.475 $ 0.465 0.475 $ 0.465 0.465 $ Under U.S. federal income tax law, distributions to holders of our common stock are taxable to the extent they are paid out of current or accumulated earnings and profits. Generally, the portion of the distribution treated as a return of capital should reduce the tax basis in the shares of common stock up to a holder’s adjusted basis in the common stock, with any excess treated as capital gains. Qualifying dividend income and the return of capital, if any, will be allocated on a pro - forma basis to all distributions for each fiscal year. Based on U.S. federal income tax laws, B&G Foods has determined that for fiscal 2018 and fiscal 2017, 0.0% and 69.5%, respectively, of distributions paid on common stock will be treated as a return of capital and 100.0% and 30.5%, respectively, will be treated as a taxable dividend paid from earnings and profits. Our dividend policy is based upon our current assessment of our business and the environment in which we operate, and that assessment could change based on competitive or other developments (which could, for example, increase our need for capital expenditures or working capital), new acquisition opportunities or other factors. Our board of directors is free to depart from or change our dividend policy at any time and could do so, for example, if it was to determine that we have insufficient cash to take advantage of growth opportunities. Restrictions on Dividend Payments Our ability to pay future dividends, if any, with respect to shares of our capital stock will depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions, provisions of applicable law and other factors that our board of directors may deem relevant. Under Delaware law, our board of directors may declare dividends only to the extent of our “surplus” (which is defined as total assets at fair market value minus total liabilities, minus statutory capital), or if there is no surplus, out of our net profits for the then current and/or immediately preceding fiscal years. Our board of directors will periodically and from time to time assess the appropriateness of the then current dividend policy before actually declaring any dividends. In general, our senior notes indentures restrict our ability to declare and pay dividends on our common stock as follows: • we may use up to 100% of our excess cash (as defined below) for the period (taken as one accounting period) from and including March 31, 2013 to the end of our most recent fiscal quarter for which internal financial statements are available at the time of such payments, plus certain incremental funds described in the indentures for the payment of dividends so long as the fixed charge coverage ratio for the four most recent fiscal quarters for which internal financial statements are available is not less than 1.6 to 1.0; and - 27 - • we may not pay any dividends on any dividend payment date if a default or event of default under our indentures has occurred or is continuing. Excess cash is defined in our senior notes indentures and under the terms of our credit agreement. Excess cash is calculated as “consolidated cash flow,” as defined in the indentures and under the terms of our credit agreement (which, in each case, allows for certain adjustments and which is equivalent to the term adjusted EBITDA), minus the sum of cash tax expense, cash interest expense, certain capital expenditures, excess tax benefit from issuance of performance share long-term incentive award (LTIA) shares, certain repayment of indebtedness and the cash portion of restructuring charges. In addition, the terms of our credit agreement also restrict our ability to declare and pay dividends on our common stock. In accordance with the terms of our credit agreement, we are not permitted to declare or pay dividends unless we are permitted to do so under our senior notes indentures. In addition, our credit agreement does not permit us to pay dividends unless we maintain: • • a “consolidated interest coverage ratio” (defined as the ratio of our adjusted EBITDA for any period of four consecutive fiscal quarters to our consolidated interest expense for such period payable in cash) of not less than 1.75 to 1.00; and a “consolidated leverage ratio” (defined as the ratio of our consolidated net debt, as of the last day of any period of four consecutive fiscal quarters to our adjusted EBITDA for such period) of not more than 7.00 to 1.00. Recent Sales of Unregistered Securities We did not issue any unregistered securities in fiscal 2018. Issuer Purchases of Equity Securities Period September 30, 2018 - October 27, 2018 . . . . . October 28, 2018 - November 24, 2018 . . . . . November 25, 2018 - December 29, 2018 . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Number of Shares Repurchased Average Price Paid per Share — 28.07 29.27 28.39 — $ 217,072 $ 78,305 $ 295,377 2 $ Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs — $ 217,072 $ 78,305 $ 295,377 $ 31,471,005 1 25,373,672 23,080,321 23,080,321 (1) On March 13, 2018, our board of directors authorized a stock repurchase program for the repurchase of up to $50.0 million of our common stock through March 15, 2019. (2) During the fourth quarter of 2018, we repurchased and retired 295,377 shares of common stock pursuant to the stock repurchase program. As of December 29, 2018, we had $23.1 million available for future purchases of our common stock under the stock repurchase program. - 28 - Item 6. Selected Financial Data. The following selected historical consolidated financial data should be read in conjunction with Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited consolidated financial statements and related notes to those statements included in this report. The selected historical consolidated financial data as of and for the fiscal years ended December 29, 2018 (fiscal 2018), December 30, 2017 (fiscal 2017), December 31, 2016 (fiscal 2016), January 2, 2016 (fiscal 2015) and January 3, 2015 (fiscal 2014) have been derived from our audited consolidated financial statements. Fiscal 2018 Fiscal 2017 Fiscal 2016 (In thousands, except per share data and ratios) Fiscal 2015 Fiscal 2014 349,500 167,389 18,343 (176,386) — — 340,154 108,334 13,135 (3,592) 222,277 49,842 676,794 282,085 99,250 11,255 — — — 171,580 51,131 — (790) 121,239 52,149 69,090 $ Consolidated Statement of Operations Data(1): Net sales(2)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,700,764 $ 1,646,387 $ 1,372,307 $ 958,879 $ 837,336 Cost of goods sold(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,351,264 1,205,809 600,246 237,090 440,578 84,267 183,448 12,692 17,611 — 1,608 34,154 — (8,206) — 114,183 237,911 46,573 91,784 5,748 1,163 (1,915) (3,098) 63,777 148,062 22,821 (69,401) 40,956 943,295 Gross profit(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 429,012 Selling, general and administrative expenses(2)(5) . . . . . . . . . . 157,028 Amortization expense(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,803 (Gain) loss on sale of assets(7) . . . . . . . . . . . . . . . . . . . . . . . . . — Impairment of intangible assets(8) . . . . . . . . . . . . . . . . . . . . . . 5,405 Gain on change in fair value of contingent consideration(9) . . . — Operating income(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252,776 Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,456 Loss on extinguishment of debt(10) . . . . . . . . . . . . . . . . . . . . . . 2,836 Other income(2)(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,582) Income before income tax expense . . . . . . . . . . . . . . . . . . . . 177,066 67,641 Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 172,435 $ 217,463 $ 109,425 $ Earnings per share data: Weighted average basic common shares outstanding . . . . . . . Weighted average diluted common shares outstanding . . . . . . Cash dividends declared per common share . . . . . . . . . . . . . . $ Basic earnings per common share . . . . . . . . . . . . . . . . . . . . . . $ Diluted earnings per common share . . . . . . . . . . . . . . . . . . . . $ Other Financial Data(1): 99,126 Net cash provided by operating activities . . . . . . . . . . . . . . . . $ 209,456 $ (41,627) Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (19,025) (30,787) (162,965) (438,787) (873,811) (154,277) Cash payments for acquisition of businesses . . . . . . . . . . . . . . Net cash (used in) provided by financing activities . . . . . . . . . (753,327) 71,619 216,005 EBITDA(12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 397,385 $ 290,181 $ 291,624 $ 201,023 $ 143,532 Senior debt / EBITDA(13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2x 7.1x Total debt / EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EBITDA / cash interest expense(14) . . . . . . . . . . . . . . . . . . . . . 3.4x Consolidated Balance Sheet Data (at end of year)(1): Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,490 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,054,799 3,561,038 3,043,505 2,571,715 1,649,353 Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,653,371 2,251,741 1,746,769 1,759,616 1,025,857 Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 900,049 $ 880,819 $ 785,657 $ 457,685 $ 337,995 37,799 $ 289,661 $ 128,479 $ (18,574) (42,418) (59,802) 56,585 56,656 1.38 $ 1.22 $ 1.22 $ 66,487 66,706 1.86 $ 3.27 $ 3.26 $ 66,145 66,255 1.89 $ 2.61 $ 2.60 $ 63,203 63,420 1.73 $ 1.73 $ 1.73 $ 53,658 53,747 1.36 0.76 0.76 8.8x 8.8x 4.3x 4.2x 4.2x 3.9x 7.8x 7.8x 3.4x 6.0x 6.0x 4.2x 11,648 $ 206,506 $ 359,336 767,444 28,833 $ 5,246 $ (1) We completed the sale of Pirate Brands to The Hershey Company on October 17, 2018. We completed the McCann’s acquisition from TreeHouse Foods, Inc. on July 16, 2018. We completed the Back to Nature acquisition from Brynwood Partners VI L.P., Mondelēz International and certain other sellers on October 2, 2017. We completed the Victoria acquisition from Huron Capital Partners and certain other sellers on December 2, 2016. We completed the spices & seasonings acquisition from ACH Food Companies, Inc. on November 21, 2016. We completed the Green Giant acquisition from General Mills, Inc., on November 2, 2015. We completed the Mama Mary’s acquisition from Linsalata Capital Partners and certain other sellers on July 10, 2015. We completed the Specialty Brands acquisition from affiliates of American Capital, Ltd., and certain individual sellers, on April 23, 2014. Each of the acquisitions listed above has been accounted for using the acquisition method of accounting and, accordingly, the assets acquired, liabilities assumed and results of operations of the acquired business is included in our consolidated financial statements from the date of acquisition. - 29 - (2) Net sales, gross profit, selling, general and administrative expenses, operating income and other income for fiscal 2017, 2016, 2015 and 2014 have been adjusted as a result of our retrospective adoption of new accounting standards relating to revenue recognition and the presentation of net periodic pension cost and net periodic post-retirement benefit cost. We also reclassified a $1.6 million pre-tax loss on sale of assets for fiscal 2017 from selling, general and administrative expenses to loss on sale of assets. The adjustments described above had no impact on net income or earnings per share. See Note 2(s), “Summary of Significant Accounting Policies — Recently Issued Accounting Standards” to our consolidated financial statements in Part II, Item 8 of this report, for detailed information. (3) Fiscal 2018, 2017, 2016 and 2015 each contained 52 weeks and fiscal 2014 contained 53 weeks. Net sales for fiscal 2015 and fiscal 2014 were negatively impacted by $1.2 million and $4.1 million, respectively, of customer refunds, net of insurance recoveries, related to our November 2014 voluntary recall of certain Ortega and Las Palmas products. (4) Cost of goods sold for fiscal 2018 includes $76.3 million of non-recurring expenses, including $66.3 million relating to the non-cash accounting impact of our inventory reduction plan and $10.0 million of warehouse, delivery and other costs associated with our transition from certain of our existing distribution centers to new distribution centers. Cost of goods sold for fiscal 2017 includes $2.4 million of amortization of acquisition -related inventory fair value step-up (for certain spices & seasonings business and Back to Nature inventory acquired and sold during the period) and a $3.3 million loss on disposal of inventory related to the write-off of discontinued and expired inventory from recent acquisitions. Fiscal 2016 includes $5.4 million of amortization of acquisition-related inventory fair value step-up (for certain spices & seasonings business inventory acquired and sold during the period and certain Green Giant inventory sold during the period) and a $0.8 million loss on disposal of inventory related to the impairment of Rickland Orchards. Fiscal 2015 includes $6.1 million of amortization of acquisition - related inventory fair value step - up (for certain Green Giant inventory acquired and sold during the period) and $0.5 million of charges, net of insurance recoveries, related to the Ortega and Las Palmas recall. Fiscal 2014 includes $8.2 million of inventory write - off and other cost of goods sold charges, net of insurance recoveries, related to the Ortega and Las Palmas recall and a $4.5 million loss on disposal of inventory related to the impairment of Rickland Orchards. (5) Selling, general and administrative expenses for fiscal 2018 includes $16.9 million of acquisition/divestiture-related and non-recurring expenses, including divestiture expenses for the Pirate Brands sale and acquisition and integration expenses for the McCann’s, Green Giant, spices & seasonings, Victoria and Back to Nature acquisitions. Selling, general and administrative expenses for fiscal 2017 include $35.6 million of acquisition-related and non-recurring expenses, including acquisition and integration expenses for the Green Giant, spices & seasonings, Victoria and Back to Nature acquisitions, severance and hiring costs and a non-recurring startup surcharge paid to a co-packer. Selling, general and administrative expenses for fiscal 2016 include $17.5 million of acquisition - related expenses for the Victoria, spices & seasonings, Green Giant and Mama Mary’s acquisitions and $1.3 million of distribution restructuring expenses. Selling, general and administrative expenses for fiscal 2015 include $6.1 million of acquisition - related expenses for the Green Giant and Mama Mary’s acquisitions, $2.7 million of distribution restructuring expenses and $0.2 million of administrative expenses, net of insurance recoveries, related to the Ortega and Las Palmas recall. Selling, general and administrative expenses for fiscal 2014 include $7.3 million of acquisition - related expenses for the Specialty Brands, Rickland Orchards and Pirate Brands acquisitions and $0.5 million of administrative expenses, net of insurance recoveries, related to the Ortega and Las Palmas recall. (6) Amortization expense includes the amortization of customer relationships, amortizable trademarks and other intangible assets acquired in the McCann’s, Back to Nature, Victoria, spices & seasonings, Green Giant, Mama Mary’s, Specialty Brands, Rickland Orchards, Pirate Brands, TrueNorth and prior acquisitions. (7) During fiscal 2018, we recognized a pre-tax gain on the Pirate Brands sale of $176.4 million. See Note 3, “Acquisitions and Divestitures” to our consolidated financial statements in Part II, Item 8 of this report, for detailed information. During fiscal 2017, we recorded a $1.6 million pre-tax loss as we sold to a third-party co-packer our Le Sueur, Minnesota research center, including the seed technology assets, property, plant and equipment. (8) Impairment of intangible assets for fiscal 2016 includes a $4.5 million loss for the impairment of amortizable trademarks and a $0.9 million loss for the impairment of customer relationship intangibles, both relating to Rickland Orchards. Impairment of intangible assets for fiscal 2014 includes a $26.8 million loss for the impairment of amortizable trademarks and a $7.4 million loss for the impairment of customer relationship intangibles, both relating to Rickland Orchards. - 30 - (9) In addition to the base purchase price consideration paid at closing, the acquisition agreement for Rickland Orchards required that we pay additional purchase price earn - out consideration contingent upon the achievement of revenue growth targets for fiscal 2014, 2015 and 2016. At the time of acquisition, we established the fair value of the contingent consideration using revenue growth targets meant to achieve operating results in excess of base purchase price acquisition model assumptions. As required, at June 28, 2014 we remeasured the fair value of the contingent consideration using actual operating results through June 28, 2014 and revised forecasted operating results for the remainder of fiscal 2014, 2015 and 2016, and reduced the probability of achievement and the fair value of the contingent consideration to zero. This resulted in a non - cash gain of $8.2 million that is included in gain on change in fair value of contingent consideration in fiscal 2014. (10) Fiscal 2018 loss on extinguishment of debt includes the write-off of deferred debt financing costs and unamortized discount of $11.1 million and $2.0 million, respectively, relating to the repayment of all outstanding borrowings under the tranche B term loans. Fiscal 2017 loss on extinguishment of debt includes the write-off of deferred debt financing costs of $0.9 million and the write-off of unamortized discount of $0.2 million in connection with the repayment of all outstanding borrowings under the tranche A term loans and the write-off of deferred debt financing costs and the write-off of unamortized discount of less than $0.1 million in connection with the refinancing of our tranche B term loans. Fiscal 2016 loss on extinguishment of debt includes the write-off of deferred debt financing costs of $2.2 million and the write-off of unamortized discount of $0.6 million in connection with the repayment of $40.1 million aggregate principal amount of our tranche A term loans and $109.9 million aggregate principal amount of our tranche B term loans. Fiscal 2014 loss on extinguishment of debt includes the write - off of deferred debt financing costs of $5.4 million and the write - off of unamortized discount of $0.3 million in connection with the termination of our prior credit agreement and the repayment of all outstanding obligations thereunder. (11) Other income for fiscal 2018 includes remeasurement of monetary assets denominated in a foreign currency into U.S. dollars of $1.2 million and includes the impact of the newly adopted presentation of net periodic pension cost and net periodic post-retirement benefit costs below operating profit in the amount of $2.4 million. Other income for fiscal 2017 includes remeasurement of monetary assets denominated in a foreign currency into U.S. dollars of $1.6 million and includes the impact of the newly adopted presentation of net periodic pension cost and net periodic post- retirement benefit costs below operating profit in the amount of $1.5 million. Other income for fiscal 2016 includes remeasurement of monetary assets denominated in a foreign currency into U.S. dollars of $0.4 million and includes the impact of the newly adopted presentation of net periodic pension cost and net periodic post-retirement benefit costs below operating profit in the amount of $1.2 million. Other income for fiscal 2015 includes the impact of the newly adopted presentation of net periodic pension cost and net periodic post-retirement benefit costs below operating profit in the amount of $0.8 million. Other income for fiscal 2014 includes the impact of the newly adopted presentation of net periodic pension cost and net periodic post-retirement benefit costs below operating profit in the amount of $1.9 million. - 31 - (12) EBITDA and adjusted EBITDA are non-GAAP financial measures used by management to measure operating performance. A non - GAAP financial measure is defined as a numerical measure of our financial performance that excludes or includes amounts so as to be different from the most directly comparable measure calculated and presented in accordance with GAAP in our consolidated balance sheets and related consolidated statements of operations, comprehensive income, changes in stockholders’ equity and cash flows. We define EBITDA as net income before net interest expense, income taxes, depreciation and amortization and loss on extinguishment of debt (see footnote (10) above). We define adjusted EBITDA as EBITDA adjusted for cash and non-cash acquisition/divestiture-related expenses, gains and losses (which may include third party fees and expenses, integration, restructuring and consolidation expenses, amortization of acquired inventory fair value step-up and gains and losses on the sale of assets); non-recurring expenses, gains and losses; gains and losses related to changes in the fair value of contingent liabilities from earn-outs; the non-cash accounting impact of our inventory reduction plan; intangible asset impairment charges and related asset write-offs; loss on product recalls, including customer refunds, selling, general and administrative expenses and the impact on cost of sales; and distribution restructuring expenses. Management believes that it is useful to eliminate these items because it allows management to focus on what it deems to be a more reliable indicator of ongoing operating performance and our ability to generate cash flow from operations. We use EBITDA and adjusted EBITDA in our business operations to, among other things, evaluate our operating performance, develop budgets and measure our performance against those budgets, determine employee bonuses and evaluate our cash flows in terms of cash needs. We also present EBITDA and adjusted EBITDA because we believe they are useful indicators of our historical debt capacity and ability to service debt and because covenants in our credit agreement and our senior notes indentures contain ratios based on these measures. As a result, reports used by internal management during monthly operating reviews feature the EBITDA and adjusted EBITDA metrics. However, management uses these metrics in conjunction with traditional GAAP operating performance and liquidity measures as part of its overall assessment of company performance and liquidity, and therefore does not place undue reliance on these measures as its only measures of operating performance and liquidity. EBITDA and adjusted EBITDA are not recognized terms under GAAP and do not purport to be alternatives to operating income, net income or any other GAAP measure as an indicator of operating performance. EBITDA and adjusted EBITDA are not complete net cash flow measures because EBITDA and adjusted EBITDA are measures of liquidity that do not include reductions for cash payments for an entity’s obligation to service its debt, fund its working capital, capital expenditures and acquisitions and pay its income taxes and dividends. Rather, EBITDA and adjusted EBITDA are two potential indicators of an entity’s ability to fund these cash requirements. EBITDA and adjusted EBITDA are not complete measures of an entity’s profitability because they do not include certain costs and expenses and gains and losses described above. Because not all companies use identical calculations, this presentation of EBITDA and adjusted EBITDA may not be comparable to other similarly titled measures of other companies. However, EBITDA and adjusted EBITDA can still be useful in evaluating our performance against our peer companies because management believes these measures provide users with valuable insight into key components of GAAP amounts. A reconciliation of EBITDA and adjusted EBITDA to net income and to net cash provided by operating activities for fiscal 2018, 2017, 2016, 2015 and 2014 along with the components of EBITDA and adjusted EBITDA follows: - 32 -  Fiscal 2018 Fiscal 2017 Fiscal 2016 Fiscal 2015 Fiscal 2014 (In thousands) Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 172,435 $ 217,463 $ 109,425 $ 69,090 $ 40,956 Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,821 46,573 Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,434 Loss on extinguishment of debt(A) . . . . . . . . . . . . . . . . . . . . . . . . 5,748 143,532 EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisition/divestiture-related and non-recurring expenses(B) . . 7,315 Inventory reduction plan impact(C) . . . . . . . . . . . . . . . . . . . . . . . — Amortization of acquisition-related inventory step-up(D) . . . . . . . — Impairment of intangible assets(E) . . . . . . . . . . . . . . . . . . . . . . . . 34,154 Loss on disposal of inventory(F) . . . . . . . . . . . . . . . . . . . . . . . . . . 4,535 (Gain) loss on sale of assets(G) . . . . . . . . . . . . . . . . . . . . . . . . . . . — Loss on product recall, net of insurance recoveries(H) . . . . . . . . . 12,798 Distribution restructuring expenses(I) . . . . . . . . . . . . . . . . . . . . . . — Gain on change in fair value of contingent consideration(J) . . . . . (8,206) 194,128 Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (22,821) Income tax (expense) benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . (46,573) Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisition/divestiture-related and non-recurring expenses(B) . . (7,315) Inventory reduction plan impact(C) . . . . . . . . . . . . . . . . . . . . . . . — Amortization of acquisition-related inventory step-up(D) . . . . . . . — Loss on product recall, net of insurance recoveries(H) . . . . . . . . . (12,798) Distribution restructuring expenses(I) . . . . . . . . . . . . . . . . . . . . . . — Write-off of property, plant and equipment(J) . . . . . . . . . . . . . . . — Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,855 3,790 Amortization of deferred financing costs and bond discount . . . . 2,235 Share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . (2,356) Excess tax benefits from share-based compensation . . . . . . . . . . Acquisition-related contingent consideration expense, including 49,842 108,334 53,639 13,135 397,385 26,863 66,320 — — — (176,386) — — — 314,182 (49,842) (108,334) (26,863) (66,320) — — — 931 (1,494) 5,282 3,025 — 52,149 51,131 28,653 — 201,023 6,118 — 6,127 — — — 1,868 2,665 — 217,801 (52,149) (51,131) (6,118) — (6,127) (1,868) (2,665) (107) 29,152 3,900 5,817 (539) 67,641 74,456 37,266 2,836 291,624 17,523 — 5,424 5,405 791 — — 1,273 — 322,040 (67,641) (74,456) (17,523) — (5,424) — (1,273) 337 56,190 5,426 5,798 (343) (69,401) 91,784 49,172 1,163 290,181 35,745 — 2,380 — 3,287 1,608 — — — 333,201 69,401 (91,784) (35,745) — (2,380) — — 208 (80,525) 5,812 4,615 — interest accretion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — — 432 Changes in assets and liabilities, net of effects of business combinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138,889 Net cash provided by operating activities . . . . . . . . . . . . . . . . . . $ 209,456 $ (A) See footnote (10) above. (165,004) (23,451) 37,799 $ 289,661 $ 128,479 $ 99,126 66,530 (7,487) (B) Acquisition/divestiture-related and non-recurring expenses for fiscal 2018 primarily includes divestiture expenses for the Pirate Brands sale and acquisition and integration expenses for the McCann’s, Green Giant, spices & seasonings, Victoria and Back to Nature acquisitions. Fiscal 2017 primarily includes acquisition and integration expenses for the Green Giant, spices & seasonings, Victoria and Back to Nature acquisitions, severance and hiring costs, a non-recurring interest charge relating to the refinancing of our credit agreement and a non-recurring startup surcharge paid to a co-packer. Fiscal 2016 primarily includes acquisition and integration expenses for the Green Giant, spices & seasonings, Victoria and Back to Nature acquisitions, and severance and hiring costs. Fiscal 2015 primarily includes acquisition and integration expenses for the Green Giant and Mama Mary’s acquisition and severance and hiring costs. Fiscal 2014 primarily includes acquisition and integration expenses for the Special Brands acquisition and severance and hiring costs. (C) For fiscal 2018, the inventory reduction plan impact of $66.3 million includes $51.1 million of fixed manufacturing, warehouse and other corporate overhead costs associated with inventory purchased and converted into finished goods in fiscal 2017 and sold in fiscal 2018 and $15.2 million for the underutilization of our manufacturing facilities as we reduced inventory during the implementation of the inventory reduction plan. (D) See footnote (4) above. (E) See footnote (8) above. (F) Fiscal 2017 represents a loss on disposal of inventory related to the write-off of discontinued and expired inventory from recent acquisitions. Fiscal 2016 and 2014 represent a loss on disposal of inventory related to the impairment of Rickland Orchards. See footnote (8) above. - 33 - (G) During fiscal 2018, we completed the Pirate Brands sale. The sale resulted in a pre-tax gain of $176.4 million. During fiscal 2017, we sold to a third-party co-packer our Le Sueur, Minnesota research center, including the seed technology assets, property, plant and equipment. We acquired the research center and related assets on November 2, 2015, as part of the Green Giant acquisition. The sale resulted in a $1.6 million pre-tax loss on sale of assets. (H) On November 14, 2014, we announced a voluntary recall for certain Ortega and Las Palmas products after learning that one or more of the spice ingredients purchased from a third party supplier contained peanuts and almonds, allergens that are not declared on the products’ ingredient statements. The cost impact of this recall during fiscal 2015 was $1.9 million, of which $1.2 million was recorded as a decrease in net sales related to customer refunds; $0.5 million was recorded as an increase in cost of goods sold primarily related to costs associated with product retrieval, destruction charges and customer fees; and $0.2 million was recorded as an increase in selling, general, and administrative expenses related to administrative costs. The charges we recorded are based upon costs incurred to date. During fiscal 2015, we recovered $5.0 million of insurance proceeds. The cost impact of this recall during fiscal 2014 (not including lost sales during the period of time production and distribution of the affected products were suspended), net of insurance recoveries of $5.0 million (received in fiscal 2015), was $12.8 million, of which $4.1 million was recorded as a decrease in net sales related to customer refunds; $8.2 million was recorded as an increase in cost of goods sold primarily related to costs associated with product retrieval, destruction charges and customer fees; and $0.5 million was recorded as an increase in selling, general, and administrative expenses related to administrative costs (I) Distribution restructuring expenses for fiscal 2016 and fiscal 2015 includes expenses relating to our transitioning of the operations of our then three primary shelf-stable distribution centers and a new fourth primary shelf-stable distribution center in the United States to a third party logistics provider. (J) See footnote (9) above. (K) See footnote (H) above. (13) As of the end of each fiscal year presented, senior debt is defined as the face amount of all of our outstanding debt. Current and former senior secured credit agreement: Fiscal 2018 Fiscal 2017 Fiscal 2016 Fiscal 2015 Fiscal 2014 (In thousands, except ratios) Revolving credit facility . . . . . . . . . . . . . . . . . . . . . . . . . $ Tranche A term loan due 2019 . . . . . . . . . . . . . . . . . . . . Tranche B term loan due 2022 . . . . . . . . . . . . . . . . . . . . 4.625% senior notes due 2021 . . . . . . . . . . . . . . . . . . . . . . 5.25% senior notes due 2025 . . . . . . . . . . . . . . . . . . . . . . . 34,000 50,000 $ 292,500 — — — 700,000 700,000 — 900,000 Senior debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,650,000 $ 2,250,110 $ 1,749,750 $ 1,763,750 $ 1,026,500 143,532 7.2x 194,128 5.3x EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Senior debt / EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Senior debt /adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . 176,000 $ 233,640 640,110 700,000 — — $ — 650,110 700,000 900,000 397,385 $ 4.2x 314,182 $ 5.3x 290,181 $ 7.8x 333,201 $ 6.8x 291,624 $ 6.0x 322,040 $ 5.4x 201,023 $ 8.8x 217,801 $ 8.1x 273,750 750,000 700,000 — 40,000 $ See Note 7, “Long-Term Debt,” to our consolidated financial statements in Part II, Item 8 of this report, for more information about our long-term debt. As of December 29, 2018, we were in compliance with all of the covenants, including the financial covenants, in our credit agreement and the indentures governing the 4.625% senior notes and 5.25% senior notes. (14) Cash interest expense, calculated below, is equal to net interest expense less amortization of deferred financing and bond discount. Fiscal 2018 Fiscal 2017 Fiscal 2016 Fiscal 2015 Fiscal 2014 (In thousands, except ratios) Cash interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 103,052 $ Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 108,334 $ Amortization of deferred financing and bond discount . . . . 46,573 (3,790) 42,783 EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 397,385 $ 290,181 $ 291,624 $ 201,023 $ 143,532 EBITDA / cash interest expense . . . . . . . . . . . . . . . . . . . . . 3.4x Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 314,182 $ 333,201 $ 322,040 $ 217,801 $ 194,128 4.5x Adjusted EBITDA / cash interest expense . . . . . . . . . . . . . . 74,456 $ (5,426) 69,030 $ 51,131 $ (3,900) 47,231 $ 91,784 $ (5,812) 85,972 $ (5,282) 4.2x 4.7x 4.6x 4.3x 3.9x 3.0x 3.4x 3.9x - 34 - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under Part I, Item 1A, “Risk Factors,” under the heading “Forward-Looking Statements” before Part I of this report and elsewhere in this report. The following discussion should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this report. General We manufacture, sell and distribute a diverse portfolio of branded, high quality, shelf - stable and frozen foods and household products, many of which have leading regional or national market shares. In general, we position our branded products to appeal to the consumer desiring a high quality and reasonably priced product. We complement our branded product retail sales with institutional and foodservice sales and private label sales. Our company has been built upon a successful track record of acquisition-driven growth. Our goal is to continue to increase sales, profitability and cash flows through strategic acquisitions, new product development and organic growth. We intend to implement our growth strategy through the following initiatives: expanding our brand portfolio with disciplined acquisitions of complementary branded businesses, continuing to develop new products and delivering them to market quickly, leveraging our multiple channel sales and distribution system and continuing to focus on higher growth customers and distribution channels. Since 1996, we have successfully acquired and integrated more than 45 brands into our company. Most recently, on July 16, 2018, we completed the acquisition of McCann’s brand of premium Irish oatmeal from TreeHouse Foods, Inc. On October 2, 2017, we completed the acquisition of Back to Nature Foods Company, LLC and related entities from Brynwood Partners VI L.P., Mondelēz International and certain other sellers. On December 2, 2016, we acquired Victoria Fine Foods, LLC, and a related entity, from Huron Capital Partners and certain other sellers. On November 21, 2016, we completed the acquisition of the spices & seasonings business of ACH Food Companies, Inc. We refer to these acquisitions in this report as the “McCann’s acquisition,” “Back to Nature acquisition,” “Victoria acquisition” and “spices & seasonings acquisition,” respectively. Each of these recent acquisitions has been accounted for using the acquisition method of accounting and, accordingly, the assets acquired, liabilities assumed and results of operations of the acquired businesses are included in our consolidated financial statements from the respective dates of acquisition. These acquisitions and the application of the acquisition method of accounting affect comparability between periods. During the fourth quarter of 2018, we completed the sale of Pirate Brands to The Hershey Company for a purchase price of $420.0 million in cash. We refer to this sale in this report as the “Pirate Brands sale.” We recognized a pre-tax gain on the Pirate Brands sale of $176.4 million. We are subject to a number of challenges that may adversely affect our businesses. These challenges, which are discussed above before Part I of this report under the heading “Forward - Looking Statements” and in Part I, Item 1A, “Risk Factors” include: Fluctuations in Commodity Prices and Production and Distribution Costs. We purchase raw materials, including agricultural products, meat, poultry, ingredients and packaging materials from growers, commodity processors, other food companies and packaging suppliers located in U.S. and foreign locations. Raw materials and other input costs, such as fuel and transportation, are subject to fluctuations in price attributable to a number of factors. Fluctuations in commodity prices can lead to retail price volatility and intensive price competition, and can influence consumer and trade buying patterns. The cost of raw materials, fuel, labor, distribution and other costs related to our operations can increase from time to time significantly and unexpectedly. We attempt to manage cost inflation risks by locking in prices through short - term supply contracts and advance commodities purchase agreements and by implementing cost saving measures. We also attempt to offset rising input costs by raising sales prices to our customers. However, increases in the prices we charge our customers may lag behind rising input costs. Competitive pressures also may limit our ability to quickly raise prices in response to rising costs. - 35 - We experienced moderate net cost increases for raw materials during fiscal 2018 and anticipate higher raw materials cost increases for fiscal 2019. We are currently locked into our supply and prices for a majority of our most significant commodities (excluding, among others, maple syrup) through fiscal 2019. In addition, we expect higher distribution costs industry-wide for fiscal 2019. To the extent we are unable to avoid or offset any present or future cost increases by locking in our costs, implementing cost saving measures or increasing prices to our customers, our operating results could be materially adversely affected. In addition, if input costs begin to decline, customers may look for price reductions in situations where we have locked into purchases at higher costs. Consolidation in the Retail Trade and Consequent Inventory Reductions. As the retail grocery trade continues to consolidate and our retail customers grow larger and become more sophisticated, our retail customers may demand lower pricing and increased promotional programs. These customers are also reducing their inventories and increasing their emphasis on private label products. Changing Consumer Preferences. Consumers in the market categories in which we compete frequently change their taste preferences, dietary habits and product packaging preferences. Consumer Concern Regarding Food Safety, Quality and Health. The food industry is subject to consumer concerns regarding the safety and quality of certain food products. If consumers in our principal markets lose confidence in the safety and quality of our food products, even as a result of a product liability claim or a product recall by a food industry competitor, our business could be adversely affected. Fluctuations in Currency Exchange Rates. Our foreign sales are primarily to customers in Canada. Our sales to Canada are generally denominated in Canadian dollars and our sales for export to other countries are generally denominated in U.S. dollars. During fiscal 2018, 2017 and 2016, our net sales to customers in foreign countries represented approximately 7.3%, 6.3% and 7.1%, respectively, of our total net sales. We also purchase a significant majority of our maple syrup requirements from suppliers located in Québec, Canada. Any weakening of the U.S. dollar against the Canadian dollar could significantly increase our costs relating to the production of our maple syrup products to the extent we have not purchased Canadian dollars in advance of any such weakening of the U.S. dollar or otherwise entered into a currency hedging arrangement in advance of any such weakening of the U.S. dollar. These increased costs would not be fully offset by the positive impact the change in the relative strength of the Canadian dollar versus the U.S. dollar would have on our net sales in Canada. Our purchases of raw materials from other foreign suppliers are generally denominated in U.S. dollars. We also operate a manufacturing facility in Irapuato, Mexico for the manufacture of Green Giant frozen products and are as a result exposed to fluctuations in the Mexican peso. Our results of operations could be adversely impacted by changes in foreign currency exchange rates. Costs and expenses in Mexico are recognized in local foreign currency, and therefore we are exposed to potential gains or losses from the translation of those amounts into U.S. dollars for consolidation into our consolidated financial statements. To confront these challenges, we continue to take steps to build the value of our brands, to improve our existing portfolio of products with new product and marketing initiatives, to reduce costs through improved productivity, to address consumer concerns about food safety, quality and health and to favorably manage currency fluctuations. Critical Accounting Policies; Use of Estimates The preparation of financial statements in accordance with generally accepted accounting principles in the United States (GAAP) requires our management to make a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Some of the more significant estimates and assumptions made by management involve revenue recognition as it relates to trade and consumer promotion expenses; pension benefits; acquisition accounting fair value allocations; the recoverability of goodwill, other intangible assets, property, plant and equipment, and deferred tax assets; the determination of the useful life of customer relationship and amortizable trademark intangibles; and the fair value of contingent consideration liabilities. Actual results could differ significantly from these estimates and assumptions. Our significant accounting policies are described more fully in note 2 to our consolidated financial statements included elsewhere in this report. We believe the following critical accounting policies involve the most significant judgments and estimates used in the preparation of our consolidated financial statements. - 36 - Revenue Recognition and Trade and Consumer Promotion Expenses We offer various sales incentive programs to customers and consumers, such as price discounts, in - store display incentives, slotting fees and coupons. The recognition of expense for these programs involves the use of judgment related to performance and redemption estimates. Estimates are made based on historical experience and other factors. Actual expenses may differ if the level of redemption rates and performance vary from our estimates. In May 2014, the Financial Accounting Standards Board (FASB) issued authoritative guidance related to new accounting requirements for the recognition of revenue from contracts with customers. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for the goods or services. We adopted this guidance and related amendments as of the first quarter of fiscal 2018 applying the full retrospective transition approach to all contracts. Based on our comprehensive assessment of the new guidance, including our evaluation of the five-step approach outlined within the guidance, we concluded that the adoption would not have a significant impact to our core revenue generating activities. However, the adoption did result in a change in presentation of certain trade and consumer promotion expenses, specifically in-store display incentives, also referred to as marketing development funds. We previously recorded in-store display incentives, or marketing development funds, within selling, general and administrative expenses in our consolidated statements of operations. Upon the adoption of the new guidance, many of these cash payments did not meet the specific criteria within the new guidance of providing a “distinct” good or service, and therefore, is required to be presented as a reduction of net sales. The impact of this change resulted in a reduction of net sales, gross profit and selling, general and administrative expenses during fiscal 2018, the first year of adoption, with no impact to net income. See Note 2(s), “Summary of Significant Accounting Policies — Recently Issued Accounting Standards,” to our consolidated financial statements in Part II, Item 8 of this report for the adjustments to net sales, gross profit and selling, general and administrative expenses for fiscal 2017 and 2016 as a result of the newly adopted revenue recognition standard. Long - Lived Assets Long - lived assets, such as property, plant and equipment, and intangibles with estimated useful lives are depreciated or amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted net future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted net future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Recoverability of assets held for sale is measured by a comparison of the carrying amount of an asset or asset group to their fair value less estimated costs to sell. Estimating future cash flows and calculating the fair value of assets requires significant estimates and assumptions by management. Goodwill and Other Intangible Assets Our total assets include substantial goodwill and unamortizable intangible assets (trademarks). These assets are tested for impairment at least annually and whenever events or circumstances occur indicating that goodwill or unamortizable intangibles might be impaired. We perform the annual impairment tests as of the last day of each fiscal year. The annual goodwill impairment test involves a two - step process. The first step of the impairment test involves comparing our company’s market capitalization with our company’s carrying value, including goodwill. If the carrying value of our company exceeds our market capitalization, we perform the second step of the impairment test to determine the amount of the impairment loss. The second step of the goodwill impairment test involves comparing the implied fair value of goodwill with the carrying value and recognizing a loss for the difference. As of December 29, 2018, we had $584.4 million of goodwill recorded in our consolidated balance sheet. Our testing indicates that the implied fair value of goodwill is significantly in excess of the carrying value. Therefore, we believe that only significant changes in the cash flow assumptions would result in an impairment of goodwill. - 37 - We test our unamortizable intangibles by comparing the fair value with the carrying value and recognize a loss for the difference. We estimate the fair value of our unamortizable intangibles based on discounted cash flows that reflect certain third party market value indicators. Calculating our fair value for these purposes requires significant estimates and assumptions by management, including future cash flows consistent with management’s expectations, annual sales growth rates, and certain assumptions underlying a discount rate based on available market data. Significant management judgment is necessary to estimate the impact of competitive operating, macroeconomic and other factors to estimate the future levels of sales and cash flows. As of December 29, 2018, we had $1,355.7 million of unamortizable intangibles recorded in our consolidated balance sheet and none of the balances exceed their calculated fair values, and the percentage excess of calculated fair value over book value was 172.9% or more. The table below sets forth the book value as of December 29, 2018, of the trademarks of each of our brands whose fiscal 2018 net sales were equal to or exceeded 3% of our total fiscal 2018 net sales and for “all other brands” in the aggregate. Brand: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (in thousands) Green Giant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Mrs. Dash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bear Creek Country Kitchens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Spices & Seasonings(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ortega . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cream of Wheat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Maple Grove Farms of Vermont . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . All other brands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 422,000 189,000 113,400 65,200 32,339 27,000 11,627 495,134 1,355,700 Fiscal 2018 (1) The spices & seasonings acquisition was completed on November 21, 2016. Includes trademark values for multiple brands acquired as part of the acquisition. All assumptions used in our impairment evaluations for goodwill and unamortizable intangibles, such as forecasted growth rates and discount rate, are based on the best available market information and are consistent with our internal forecasts and operating plans. We believe these assumptions to be reasonable, but they are inherently uncertain. These assumptions could be adversely impacted by certain of the risks described in Part I, Item 1A, “Risk Factors,” of this report. We completed our annual impairment tests for fiscal 2018, 2017 and 2016 with no adjustments to the carrying values of goodwill and unamortizable intangibles. However, materially different assumptions regarding the future performance of our businesses could result in significant impairment losses. For example, an interim impairment analysis relating to one of our brands performed during fiscal 2014 resulted in our company recording non-cash impairment charges to amortizable trademarks and customer relationship intangibles for the brand of $26.9 million and $7.3 million, respectively, during fiscal 2014. During the second quarter of 2016, we discontinued that brand because there was not sufficient demand to warrant continued production. Accordingly, we wrote off the related intangible assets and recorded non-cash impairment charges to amortizable trademarks and customer relationship intangibles of $4.5 million and $0.9 million, respectively, which are recorded in “Impairment of intangible assets” on the accompanying consolidated statement of operations for fiscal 2016. In addition, any significant decline in our market capitalization, even if due to macroeconomic factors, could put pressure on the carrying value of our goodwill. A determination that all or a portion of our goodwill or unamortizable intangible assets are impaired, although a non - cash charge to operations, could have a material adverse effect on our business, consolidated financial condition and results of operations. - 38 - Income Tax Expense Estimates and Policies As part of the income tax provision process of preparing our consolidated financial statements, we are required to estimate our income taxes. This process involves estimating our current tax expenses together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities. We then assess the likelihood that our deferred tax assets will be recovered from future taxable income and to the extent we believe the recovery is not likely, we establish a valuation allowance. Further, to the extent that we establish a valuation allowance or increase this allowance in a financial accounting period, we include such charge in our tax provision, or reduce our tax benefits in our consolidated statements of operations. We use our judgment to determine our provision or benefit for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against our deferred tax assets. There are various factors that may cause these tax assumptions to change in the near term, and we may have to record a valuation allowance against our deferred tax assets. We cannot predict whether future U.S. federal and state income tax laws and regulations might be passed that could have a material effect on our results of operations. We assess the impact of significant changes to the U.S. federal and state income tax laws and regulations on a regular basis and update the assumptions and estimates used to prepare our consolidated financial statements when new regulations and legislation are enacted. We recognize the benefit of an uncertain tax position that we have taken or expect to take on the income tax returns we file if it is more likely than not that such tax position will be sustained based upon its technical merits. See “U.S. Tax Act” below for a discussion of the U.S. Tax Cuts and Jobs Act that was signed into law on December 22, 2017, and the impact it has had and may have on our business and financial results. Pension Expense We have defined benefit pension plans covering approximately 43% of our employees. Our funding policy is to contribute annually not less than the amount recommended by our actuaries. The funded status of our pension plans is dependent upon many factors, including returns on invested assets and the level of certain market interest rates, employee-related demographic factors, such as turnover, retirement age and mortality, and the rate of salary increases. Certain assumptions reflect our historical experience and management’s best judgment regarding future expectations. Due to the significant management judgment involved, our assumptions could have a material impact on the measurement of our pension expenses and obligations. We review pension assumptions regularly and we may from time to time make voluntary contributions to our pension plans, which exceed the amounts required by statute. During fiscal 2018, we made total contributions to our pension plans of $5.6 million. During fiscal 2017, we made total contributions to our pension plans of $8.7 million. Changes in interest rates and the market value of the securities held by the plans could materially change, positively or negatively, the funded status of the plans and affect the level of pension expense and required contributions in fiscal 2019 and beyond. Our discount rate assumption for our four defined benefit plans changed from 3.45% - 3.56% at December 30, 2017 to 4.08% - 4.18% at December 29, 2018. While we do not currently anticipate a change in our fiscal 2019 assumptions, as a sensitivity measure, a 0.25% decline or increase in our discount rate would increase or decrease our pension expense by approximately $0.5 million to $0.6 million. Similarly, a 0.25% decrease or increase in the expected return on pension plan assets would increase or decrease our pension expense by approximately $0.3 million. We currently do not expect to make any contributions to our defined benefit pension plans during fiscal 2019. Acquisition Accounting Our consolidated financial statements and results of operations include an acquired business’s operations after the completion of the acquisition. We account for acquired businesses using the acquisition method of accounting, which requires that the assets acquired and liabilities assumed be recorded at the date of acquisition at their respective fair values. Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Transaction costs are expensed as incurred. - 39 - The judgments made in determining the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact our results of operations. Accordingly, for significant items, we typically obtain assistance from third party valuation specialists. Determining the useful life of an intangible asset also requires judgment as different types of intangible assets will have different useful lives and certain assets may even be considered to have indefinite useful lives. All of these judgments and estimates can materially impact our results of operations. U.S. Tax Act On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act, which we refer to as the “U.S. Tax Act.” The changes in the U.S. Tax Act are broad and complex and we continue to examine the impact the U.S. Tax Act may have on our business and financial results. The U.S. Tax Act contains provisions with separate effective dates but is generally effective for taxable years beginning after December 31, 2017. Under FASB Accounting Standards Codification (ASC) Topic 740, Income Taxes, we are required to revalue any deferred tax assets or liabilities in the period of enactment of change in tax rates. The U.S. Tax Act lowers the federal corporate income tax rate from 35% to 21%. In the fourth quarter of 2017 we revalued our prior year U.S. deferred tax assets and liabilities at the lower U.S. corporate income tax rate, which resulted in a discrete tax benefit of approximately $133.3 million. This tax benefit was partially offset by an increase in our blended state rate of approximately $5.8 million and a repatriation expense of $0.9 million. The reduction in the corporate income tax rate from 35% to 21% was effective for our fiscal 2018. Our consolidated effective tax rate for fiscal 2018 was 22.4%. We also expect to realize a cash tax benefit for future bonus depreciation on certain business additions, which, together with the reduced income tax rate, we expect to reduce our cash income tax payments. The U.S. Tax Act also limits the deduction for net interest expense incurred by a corporate taxpayer to 30% of the taxpayer’s adjusted taxable income. Although we currently expect that our interest expense may exceed 30% of our adjusted taxable income, at this time we do not believe this limitation will have a material adverse impact on our business or financial results because any interest that is non-deductible may be carried forward indefinitely. The U.S. Treasury's proposed 2018 regulations also seek to clarify the application of the U.S. Tax Act provisions for the limitation of interest expense, including treatment of depreciation and other deductions in arriving at adjusted taxable income and application of the rules to controlled foreign affiliates. These regulations remain open for comment and are not effective until published in the federal register. As a result, we will monitor their impact to our filing positions and will record the impacts as discrete income tax expense adjustments in the period that the guidance is finalized. The SEC issued guidance on December 23, 2017 providing a one-year measurement period from a registrant’s reporting period that includes the U.S. Tax Act’s enactment date to allow the registrant sufficient time to obtain, prepare and analyze information to complete the accounting required under ASC 740. As of December 29, 2018, we have recorded all known and estimable impacts of the U.S. Tax Act that are effective for fiscal 2018. The ultimate impact of the U.S. Tax Act on our reported results in fiscal 2019 and beyond may differ from the estimates provided in this report, possibly materially, due to, among other things, changes in interpretations and assumptions we have made, guidance that may be issued, and other actions we may take as a result of the U.S. Tax Act different from that currently contemplated. - 40 - Results of Operations(1) The following table sets forth the percentages of net sales represented by selected items reflected in our consolidated statements of operations. The comparisons of financial results are not necessarily indicative of future results: Statement of Operations Data: Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fiscal 2018 Fiscal 2017 Fiscal 2016 100.0 % 79.5 % 20.5 % 100.0 % 73.2 % 26.8 % 100.0 % 68.7 % 31.3 % Operating expenses: Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . Amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Gain) loss on sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impairment of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.8 % 1.1 % (10.4) % — % 20.0 % Other income and expenses: Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income before income tax expense (benefit) . . . . . . . . . . . . . . . . . . . Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4 % 0.8 % (0.3) % 13.1 % 3.0 % 10.1 % As used in this section the terms listed below have the following meanings: 11.1 % 1.1 % 0.1 % — % 14.5 % 5.6 % 0.1 % (0.2) % 9.0 % (4.2) % 13.2 % 11.4 % 1.1 % — % 0.4 % 18.4 % 5.4 % 0.2 % (0.1) % 12.9 % 4.9 % 8.0 % Net Sales. Our net sales represents gross sales of products shipped to customers plus amounts charged to customers for shipping and handling, less cash discounts, coupon redemptions, slotting fees and trade promotional spending. Gross Profit. Our gross profit is equal to our net sales less cost of goods sold. The primary components of our cost of goods sold are cost of internally manufactured products, purchases of finished goods from co - packers, a portion of our warehousing expenses plus freight costs to our distribution centers and to our customers. Selling, General and Administrative Expenses. Our selling, general and administrative expenses include costs related to selling our products, as well as all other general and administrative expenses. Some of these costs include administrative, marketing and internal sales force employee compensation and benefits costs, consumer advertising programs, brokerage costs, a portion of our warehousing expenses, information technology and communication costs, office rent, utilities, supplies, professional services, acquisition/divestiture-related and non-recurring expenses and other general corporate expenses. Amortization Expense. Amortization expense includes the amortization expense associated with customer relationships, amortizable trademarks and other intangibles. (Gain) Loss on Sale of Assets. (Gain) loss on sale of assets includes a gain recognized on the Pirate Brands sale in fiscal 2018 and a loss recognized on the sale of our Le Sueur, Minnesota research center in fiscal 2017. Impairment of Intangible Assets. Impairment of intangible assets represents a reduction of the carrying value of amortizable intangible assets to fair value when the carrying value of the assets is no longer recoverable. (1) Net sales, gross profit, selling, general and administrative expenses, operating income and other income for fiscal 2017 and 2016 have been adjusted as a result of our retrospective adoption of new accounting standards relating to revenue recognition and the presentation of net periodic pension cost and net periodic post-retirement benefit cost. We also reclassified a $1.6 million pre-tax loss on sale of assets for fiscal 2017 from selling, general and administrative expenses to loss on sale of assets. The adjustments described above had no impact on net income or earnings per share. See Note 2(s), “Summary of Significant Accounting Policies — Recently Issued Accounting Standards” to our consolidated financial statements in Part II, Item 8 of this report, for detailed information. - 41 - Net Interest Expense. Net interest expense includes interest relating to our outstanding indebtedness, amortization of bond discount and amortization of deferred debt financing costs (net of interest income). Loss on Extinguishment of Debt. Loss on extinguishment of debt includes costs relating to the retirement of indebtedness, including repurchase premium, if any, and write - off of deferred debt financing costs and unamortized discount, if any. Other Income. Other income includes expense and/or income resulting from the remeasurement of monetary assets denominated in a foreign currency into U.S. dollars for financial reporting purposes and the impact of the recently and retrospectively adopted presentation of net periodic pension cost and net periodic post-retirement benefit cost below operating profit, in accordance with the FASB ASU issued in March 2017. See Note 2(s), “Summary of Significant Accounting Policies — Recently Issued Accounting Standards,” to our consolidated financial statements in Part II, Item 8 of this report for further details. Non-GAAP Financial Measures Certain disclosures in this report include non-GAAP financial measures. A non-GAAP financial measure is defined as a numerical measure of our financial performance that excludes or includes amounts so as to be different from the most directly comparable measure calculated and presented in accordance with GAAP in our consolidated balance sheets and related consolidated statements of operations, comprehensive income, changes in stockholders’ equity and cash flows. Base Business Net Sales. Base business net sales is a non-GAAP financial measure used by management to measure operating performance. We define base business net sales as our net sales excluding (1) the net sales of acquisitions until at least one full quarter of net sales from such acquisitions are included in both comparable periods, (2) net sales of discontinued or divested brands and (3) net sales of our IQF bulk rice products, see footnote 3 to the table below. The portion of current period net sales attributable to recent acquisitions for which there is not at least one full quarter of net sales in the comparable period of the prior year is excluded. For each acquisition, the excluded period starts at the beginning of the most recent fiscal period being compared and ends on the last day of the quarter in which the first anniversary of the date of acquisition occurs, and the period from the date of acquisition to the end of the quarter in which the acquisition occurred. For discontinued or divested brands, the entire amount of net sales is excluded from each fiscal period being compared. Management has included this financial measure because it provides useful and comparable trend information regarding the results of our business without the effect of the timing of acquisitions and the effect of discontinued or divested brands. The definition of base business net sales was modified in the first quarter of 2018 to exclude net sales of our IQF bulk rice products, as described in footnote 3 below. A reconciliation of base business net sales to net sales for fiscal 2018 and 2017 follows (in thousands): Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,700,764 Net sales from acquisitions(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (60,193) Net sales of non-branded IQF bulk rice products(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,494) Net sales from divested brands(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (74,853) Base business net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,564,224 Fiscal 2018 Fiscal 2017(1) $ 1,646,387 — (8,518) (87,705) $ 1,550,164 (1) Prior period net sales have been adjusted as a result of our retrospective adoption of the new accounting standard relating to revenue recognition. See Note 2(s), “Summary of Significant Accounting Policies — Recently Issued Accounting Standards,” to our consolidated financial statements in Part II, Item 8 of this report. (2) Reflects net sales for Back to Nature for the first three quarters of 2018 and net sales of McCann’s for fiscal 2018. Back to Nature was acquired on October 2, 2017 and McCann’s was acquired on July 16, 2018. (3) Reflects net sales of our non-branded individually quick frozen (IQF) bulk rice products, which is a product line we acquired as part of the Green Giant acquisition, and which we are excluding from net sales for the purposes of calculating base business net sales because we do not consider the non-branded IQF bulk rice products to be part of our core business or material. (4) Reflects net sales of Pirate Brands. We completed the Pirate Brands sale on October 17, 2018. See Note 3, “Acquisitions and Divestitures,” to our consolidated financial statements in Part II, Item 8 of this report. - 42 - A reconciliation of base business net sales to net sales for fiscal 2017 and 2016 follows (in thousands): Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,646,387 Net sales from acquisitions(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (321,540) Net sales of Rickland Orchards(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — Base business net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,324,847 Fiscal 2017(1) Fiscal 2016(1) $ 1,372,307 (31,416) (515) $ 1,340,376 (1) Prior period net sales have been adjusted as a result of our retrospective adoption of the new accounting standard relating to revenue recognition. See Note 2(s), “Summary of Significant Accounting Policies — Recently Issued Accounting Standards,” to our consolidated financial statements in Part II, Item 8 of this report. (2) Reflects all net sales for Victoria and the spices & seasonings business for each period presented and net sales for Back to Nature for fiscal 2017. Back to Nature was acquired on October 2, 2017, Victoria was acquired on December 2, 2016, and the spices & seasonings business was acquired on November 21, 2016. (3) Reflects all fiscal 2016 net sales of Rickland Orchards. Rickland Orchards was discontinued during the second quarter of 2016. EBITDA and Adjusted EBITDA. EBITDA and adjusted EBITDA are non-GAAP financial measures used by management to measure operating performance. We define EBITDA as net income before net interest expense, income taxes, depreciation and amortization and loss on extinguishment of debt. We define adjusted EBITDA as EBITDA adjusted for cash and non-cash acquisition/divestiture-related expenses, gains and losses (which may include third party fees and expenses, integration, restructuring and consolidation expenses, amortization of acquired inventory fair value step-up and gains and losses on the sale of assets); non-recurring expenses, gains and losses; gains and losses related to changes in the fair value of contingent liabilities from earn-outs; the non-cash accounting impact of our inventory reduction plan; intangible asset impairment charges and related asset write-offs; loss on product recalls, including customer refunds, selling, general and administrative expenses and the impact on cost of sales; and distribution restructuring expenses. Management believes that it is useful to eliminate these items because it allows management to focus on what it deems to be a more reliable indicator of ongoing operating performance and our ability to generate cash flow from operations. We use EBITDA and adjusted EBITDA in our business operations to, among other things, evaluate our operating performance, develop budgets and measure our performance against those budgets, determine employee bonuses and evaluate our cash flows in terms of cash needs. We also present EBITDA and adjusted EBITDA because we believe they are useful indicators of our historical debt capacity and ability to service debt and because covenants in our credit agreement and our senior notes indentures contain ratios based on these measures. As a result, reports used by internal management during monthly operating reviews feature the EBITDA and adjusted EBITDA metrics. However, management uses these metrics in conjunction with traditional GAAP operating performance and liquidity measures as part of its overall assessment of company performance and liquidity, and therefore does not place undue reliance on these measures as its only measures of operating performance and liquidity. EBITDA and adjusted EBITDA are not recognized terms under GAAP and do not purport to be alternatives to operating income, net income or any other GAAP measure as an indicator of operating performance. EBITDA and adjusted EBITDA are not complete net cash flow measures because EBITDA and adjusted EBITDA are measures of liquidity that do not include reductions for cash payments for an entity’s obligation to service its debt, fund its working capital, capital expenditures and acquisitions and pay its income taxes and dividends. Rather, EBITDA and adjusted EBITDA are two potential indicators of an entity’s ability to fund these cash requirements. EBITDA and adjusted EBITDA are not complete measures of an entity’s profitability because they do not include certain costs and expenses and gains and losses described above. Because not all companies use identical calculations, this presentation of EBITDA and adjusted EBITDA may not be comparable to other similarly titled measures of other companies. However, EBITDA and adjusted EBITDA can still be useful in evaluating our performance against our peer companies because management believes these measures provide users with valuable insight into key components of GAAP amounts. - 43 - A reconciliation of EBITDA and adjusted EBITDA to net income and to net cash provided by operating activities for fiscal 2018, 2017 and 2016 along with the components of EBITDA and adjusted EBITDA follows (in thousands): Fiscal 2018 Fiscal 2017 Fiscal 2016 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 172,435 $ 217,463 $ 109,425 67,641 Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,456 Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,266 Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss on extinguishment of debt(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,836 291,624 EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisition/divestiture-related and non-recurring expenses(2) . . . . . . . . . . . . . . . 17,523 Inventory reduction plan impact(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — Amortization of acquisition-related inventory step-up(4) . . . . . . . . . . . . . . . . . . . 5,424 Impairment of intangible assets(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,405 Loss on disposal of inventory(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 791 (Gain) loss on sale of assets(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — Distribution restructuring expenses(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,273 322,040 Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (67,641) Income tax (expense) benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (74,456) Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisition/divestiture-related and non-recurring expenses(2) . . . . . . . . . . . . . . . (17,523) Inventory reduction plan impact(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — Amortization of acquisition-related inventory step-up(4) . . . . . . . . . . . . . . . . . . . (5,424) (1,273) Distribution restructuring expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337 Write-off of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,190 Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,426 Amortization of deferred financing costs and bond discount . . . . . . . . . . . . . . . . 5,798 Share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (343) Excess tax benefits from share-based compensation . . . . . . . . . . . . . . . . . . . . . . 66,530 Changes in assets and liabilities, net of effects of business combinations . . . . . 37,799 $ 289,661 (69,401) 91,784 49,172 1,163 290,181 35,745 — 2,380 — 3,287 1,608 — 333,201 69,401 (91,784) (35,745) — (2,380) — 208 (80,525) 5,812 4,615 — (165,004) 49,842 108,334 53,639 13,135 397,385 26,863 66,320 — — — (176,386) — 314,182 (49,842) (108,334) (26,863) (66,320) — — 931 (1,494) 5,282 3,025 — 138,889 Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 209,456 $ (1) Loss on extinguishment of debt for fiscal 2018 includes the write-off of deferred debt financing costs and unamortized discount of $11.1 million and $2.0 million, respectively, relating to the prepayment of outstanding borrowings under the tranche B term loans. Fiscal 2017 includes the write-off of deferred debt financing costs and unamortized discount of $0.9 million and $0.2 million, respectively, relating to the prepayment of all outstanding borrowings under the tranche A term loans and less than $0.1 million relating to the refinancing of our tranche B term loans. Fiscal 2016 includes the write-off of deferred debt financing costs and unamortized discount of $2.2 million and $0.6 million, respectively, relating to the repayment of $40.1 million aggregate principal amounts of our tranche A term loans and $109.9 million aggregate principal amount of our tranche B term loans. (2) Acquisition/divestiture-related and non-recurring expenses for fiscal 2018 of $26.9 million primarily include divestiture expenses for the Pirate Brands sale and acquisition and integration expenses for the McCann’s, Green Giant, spices & seasonings, Victoria and Back to Nature acquisitions. Acquisition/divestiture-related and non-recurring expenses for fiscal 2017 of $35.7 million primarily include acquisition and integration expenses for the Green Giant, spices & seasonings, Victoria and Back to Nature acquisitions, severance and hiring costs, a non- recurring interest charge relating to the refinancing of our credit agreement and a non-recurring startup surcharge paid to a co-packer. Acquisition/divestiture-related and non-recurring expenses for fiscal 2016 of $17.5 million primarily include acquisition and integration expenses for the Green Giant, spices & seasonings, Victoria and Back to Nature acquisitions, and severance and hiring costs. - 44 - (3) For fiscal 2018, the inventory reduction plan impact of $66.3 million includes $51.1 million of fixed manufacturing, warehouse and other corporate overhead costs associated with inventory purchased and converted into finished goods in fiscal 2017 and sold in fiscal 2018 and $15.2 million for the underutilization of our manufacturing facilities as we reduced inventory during the implementation of the inventory reduction plan. (4) Amortization of acquisition-related inventory step-up for fiscal 2017 of $2.4 million relates to the purchase accounting adjustments made to the finished goods inventory acquired in the Back to Nature acquisition and spices & seasonings acquisition that we completed on October 2, 2017 and November 21, 2016, respectively. Fiscal 2016 includes $5.4 million of purchase accounting adjustments made to the finished goods inventory acquired in the spices & seasonings acquisition. (5) During the second quarter of fiscal 2016, we discontinued the Rickland Orchards brand because there was not sufficient demand to warrant continued production. Accordingly, we wrote off the related intangible assets and recorded non-cash impairment charges to amortizable trademarks and customer relationship intangibles of $4.5 million and $0.9 million, respectively, which are recorded in “Impairment of intangible assets” in our consolidated statement of operations for fiscal 2016. (6) During the fourth quarter of 2017, we recorded a pre-tax loss on disposal of inventory of $3.3 million related to the write-off of discontinued and expired inventory from recent acquisitions. During the second quarter of 2016, we recorded a charge to cost of goods sold of approximately $0.8 million in connection with the write-off of raw materials and finished goods inventory used for the Rickland Orchards brand. (7) During the fourth quarter of 2018, we completed the Pirate Brands sale. The sale resulted in a pre-tax gain of $176.4 million. During fiscal 2017, we sold to a third-party co-packer our Le Sueur, Minnesota research center, including the seed technology assets, property, plant and equipment. We acquired the research center and related assets on November 2, 2015, as part of the Green Giant acquisition. The sale resulted in a $1.6 million pre-tax loss on sale of assets. (8) Distribution restructuring expenses for fiscal 2016 includes expenses relating to our transitioning of the operations of our then three primary shelf-stable distribution centers and a new fourth primary shelf-stable distribution center in the United States to a third party logistics provider. - 45 - We use “adjusted net income” and “adjusted diluted earnings per share,” which are calculated as reported net income and reported diluted earnings per share adjusted for certain items that affect comparability. These non-GAAP financial measures reflect adjustments to reported net income and diluted earnings per share to eliminate the items identified below. This information is provided in order to allow investors to make meaningful comparisons of our operating performance between periods and to view our business from the same perspective as our management. Because we cannot predict the timing and amount of these items, management does not consider these items when evaluating our performance or when making decisions regarding allocation of resources. A reconciliation of adjusted net income and adjusted diluted earnings per share to net income for fiscal 2018, 2017 and 2016 along with the components of adjusted net income and adjusted diluted earnings per share follows (in thousands): Fiscal 2018 Fiscal 2017 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Non-recurring adjustment to deferred income taxes(1) . . . . . . . . . . . . . . . . . . . Loss on extinguishment of debt, net of tax(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisition/divestiture-related and non-recurring expenses, net of tax(3) . . . . Inventory reduction plan impact, net of tax(4) . . . . . . . . . . . . . . . . . . . . . . . . . . Distribution restructuring expenses, net of tax(5) . . . . . . . . . . . . . . . . . . . . . . . . Amortization of acquisition-related inventory step-up, net of tax(6) . . . . . . . . Impairment of intangible assets, net of tax(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss on disposal of inventory, net of tax(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Gain) loss on sale of assets, net of tax(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax true-ups(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjusted net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Adjusted diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 172,435 $ — 10,190 20,754 51,451 — — — — (133,172) 650 122,308 $ 1.85 $ 217,463 $ (109,641) 847 26,497 — — 1,733 — 2,393 1,171 — 140,463 $ 2.12 $ Fiscal 2016 109,425 881 1,770 10,934 — 794 3,385 3,373 494 — — 131,056 2.07 (1) Non-recurring adjustment to deferred income taxes for fiscal 2017 relates to the revaluation of our deferred income taxes as a result of the U.S. Tax Cuts and Jobs Act. Non-recurring adjustment to deferred income taxes for fiscal 2016 relates to a true-up of deferred income taxes resulting from our decision during the second quarter of 2016 to discontinue the Rickland Orchards brand and the related impairment of intangible assets. (2) Loss on extinguishment of debt for fiscal 2018 includes the write-off of deferred debt financing costs and unamortized discount of $8.6 million, net of tax, and $1.6 million, net of tax, respectively, relating to the prepayment of outstanding borrowings under the tranche B term loans. Fiscal 2017 includes the write-off of deferred debt financing costs and unamortized discount of $0.7 million, net of tax, and $0.1 million, net of tax, respectively, relating to the prepayment of all outstanding borrowings under the tranche A term loans and less than $0.1 million, net of tax, relating to the refinancing of our tranche B term loans. Fiscal 2016 includes the write-off of deferred debt financing costs and unamortized discount of $1.4 million, net of tax, and $0.4 million, net of tax, respectively, relating to the repayment of $40.1 million aggregate principal amounts of our tranche A term loans and $109.9 million aggregate principal amount of our tranche B term loans. (3) Acquisition/divestiture-related and non-recurring expenses for fiscal 2018 primarily includes divestiture expenses for the Pirate Brands sale and acquisition and integration expenses for the McCann’s, Green Giant, spices & seasonings, Victoria and Back to Nature acquisitions. Acquisition/divestiture-related and non-recurring expenses for fiscal 2017 primarily includes acquisition and integration expenses for the Green Giant, spices & seasonings, Victoria and Back to Nature acquisitions, severance and hiring costs, a non-recurring interest charge relating to the refinancing of our credit agreement and a non-recurring startup surcharge paid to a co-packer. Acquisition/divestiture-related and non-recurring expenses for fiscal 2016 primarily includes acquisition and integration expenses for the Green Giant, spices & seasonings, Victoria and Back to Nature acquisitions, and severance and hiring costs. - 46 - (4) For fiscal 2018, the inventory reduction plan impact of $66.3 million (or $51.5 million net of taxes) includes $51.1 million of fixed manufacturing, warehouse and other corporate overhead costs associated with inventory purchased and converted into finished goods in fiscal 2017 and sold in fiscal 2018 and $15.2 million for the underutilization of our manufacturing facilities as we reduced inventory during the implementation of the inventory reduction plan. (5) Distribution restructuring expenses for fiscal 2016 includes expenses relating to our transitioning of the operations of our then three primary shelf-stable distribution centers and a new fourth primary shelf-stable distribution center in the United States to a third party logistics provider. (6) Amortization of acquisition-related inventory step-up for fiscal 2017 relates to the purchase accounting adjustments made to the finished goods inventory acquired in the Back to Nature acquisition and spices & seasonings acquisition that we completed on October 2, 2017 and November 21, 2016, respectively. Acquisition-related inventory step-up for fiscal 2016 relates to the purchase accounting adjustments made to the finished goods inventory acquired in the spices & seasonings acquisition. (7) During the second quarter of fiscal 2016, we discontinued the Rickland Orchards brand because there was not sufficient demand to warrant continued production. Accordingly, we wrote off the related intangible assets and recorded non-cash impairment charges to amortizable trademarks and customer relationship intangibles of $2.8 million, net of tax, and $0.6 million, net of tax, respectively, which are recorded in “Impairment of intangible assets” in our consolidated statement of operations for fiscal 2016. (8) During the fourth quarter of 2017, we recorded a loss on disposal of inventory related to the write-off of discontinued and expired inventory from recent acquisitions. During the second quarter of 2016, we recorded a charge to cost of goods sold in connection with the write-off of raw materials and finished goods inventory used for the Rickland Orchards brand. (9) During the fourth quarter of 2018, we completed the Pirate Brands sale. The sale resulted in a gain of $133.2 million, net of tax. During fiscal 2017, we sold to a third-party co-packer our Le Sueur, Minnesota research center, including the seed technology assets, property, plant and equipment. We acquired the research center and related assets on November 2, 2015, as part of the Green Giant acquisition. The sale resulted in a $1.2 million loss on sale of assets, net of tax. (10) Tax true-ups for fiscal 2018 reflects prior year foreign tax expense true-up and impact of enacted state rate changes. Fiscal 2018 Compared to Fiscal 2017 Net Sales. Net sales increased $54.4 million, or 3.3%, to $1,700.8 million for fiscal 2018 from $1,646.4 million for fiscal 2017. The $54.4 million increase in net sales was attributable to an increase in unit volume of $42.2 million and an increase in net pricing of $12.2 million. Net sales of McCann’s, which was acquired on July 16, 2018 and therefore not owned during fiscal 2017, and an additional three quarters of net sales of Back to Nature, which was acquired on October 2, 2017, combined to contribute $60.2 million to our overall net sales for fiscal 2018. Our net sales for 2018 were negatively impacted by the divestiture of Pirate Brands during the fourth quarter of 2018. Net sales of Pirate Brands were $87.7 million in fiscal 2017, compared to $74.9 million in fiscal 2018 through the date of divestiture, which was October 17, 2018. Base business net sales increased $14.0 million, or 0.9%, to $1,564.2 million for fiscal 2018 from $1,550.2 million for fiscal 2017. The increase was attributable to an increase in unit volume for the base business of $4.0 million and an increase in net pricing of $10.0 million, or 0.6% of base business net sales. Net sales of Green Giant frozen increased $42.7 million, or 12.9%, to $372.7 million for fiscal 2018 compared to fiscal 2017, driven by strong customer and consumer acceptance of Green Giant Veggie Spirals, launched earlier this year, as well as continued demand for Green Giant Riced Veggies, Green Giant Veggie Tots and Green Giant Mashed Cauliflower. Net sales of Green Giant frozen products also benefited from Green Giant Cauliflower Pizza Crusts and Little Green Sprout’s Organics, which began shipping in September 2018. Net sales of all Green Giant products in the aggregate (including Le Sueur) increased $29.7 million, or 6.1%, to $518.9 million in fiscal 2018, as net sales growth of frozen products was offset in part by Green Giant shelf stable (including Le Sueur), whose net sales decreased $13.0 million, or 8.2%, to $146.2 million. - 47 - Net sales of Ortega increased $4.0 million, or 2.9%, for fiscal 2018 compared to fiscal 2017. Net sales of Cream of Wheat increased $1.7 million, or 2.8%; New York Style increased $1.7 million, or 4.7%; and Victoria increased $1.2 million, or 2.8%, for fiscal 2018. Net sales of all of our spices & seasonings, including the brands acquired in the fall of 2016, as well as our legacy spices & seasonings brands such as Mrs. Dash and Ac’cent, decreased $3.5 million, or 1.0%, for fiscal 2018. Net sales of all other brands in the aggregate accounted for a decrease of $20.8 million, or 4.6%, for fiscal 2018. See Note 15, “Net Sales by Brand,” to our consolidated financial statements in Part I, Item 1 of this report, for detailed information regarding total net sales by brand for fiscal 2018 and fiscal 2017 for each of our brands that equaled or exceeded approximately 3% of our fiscal 2018 net sales and for all other brands in the aggregate. The following chart sets forth the most significant base business net sales increases and decreases by brand for fiscal 2018: Brand: Base Business Net Sales Increase (Decrease) Dollars (in millions) Percentage Green Giant - frozen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Ortega . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cream of Wheat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Green Giant - shelf stable(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Spices & Seasonings(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bear Creek Country Kitchens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mrs. Dash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . All other brands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Base business net sales increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 42.7 4.0 1.7 (13.0) (3.2) (2.0) (1.1) (15.1) 14.0 12.9 % 2.9 % 2.8 % (8.2)% (1.2)% (4.0)% (1.9)% (3.0)% 0.9 % (1) Includes net sales of the Le Sueur brand. (2) Includes net sales for multiple brands acquired as part of the spices & seasonings acquisition that we completed on November 21, 2016. Does not include net sales for Mrs. Dash and our other legacy spices & seasonings brands. Gross Profit. Gross profit was $349.5 million for fiscal 2018, or 20.5% of net sales. Excluding the negative impact of non-recurring charges relating to our inventory reduction plan of $66.3 million and acquisition/divestiture- related expenses of $10.0 million, our gross profit would have been $425.8 million, or 25.0% of net sales. This compares to gross profit of $440.6 million for fiscal 2017, or 26.8% of net sales. For 2018, gross profit benefited from an increase in net pricing of $12.2 million and was also negatively impacted by input cost inflation, inclusive of freight, warehousing and procurement, as well as mix. Selling, general and administrative expenses. Selling, general and administrative expenses decreased $16.0 million, or 8.8%, to $167.4 million for fiscal 2018 from $183.4 million for fiscal 2017. The decrease was composed of a decrease in acquisition/divestiture-related and non-recurring expenses of $18.7 million and decreased consumer marketing expenses of $7.9 million, partially offset by increased warehousing expenses of $0.9 million, increased general and administrative expenses of $8.5 million (primarily consisting of compensation, professional and consulting fees, technology related expenses and real property leases) and other increases of $1.2 million. Expressed as a percentage of net sales, selling, general and administrative expenses improved by 1.3 percentage points to 9.8% for fiscal 2018 compared to 11.1% for fiscal 2017. Amortization Expense. Amortization expense increased $0.7 million to $18.3 million for fiscal 2018 from $17.6 million for fiscal 2017 due to the McCann’s acquisition completed in fiscal 2018 and the Back to Nature acquisition completed in fiscal 2017. (Gain) Loss on Sale of Assets. On October 17, 2018, we completed the Pirate Brands sale. We recognized a pre- tax gain on the Pirate Brands sale of $176.4 million. During fiscal 2017, we recorded a $1.6 million pre-tax loss on the sale of assets. - 48 - Operating Income. As a result of the foregoing, operating income increased $102.3 million, or 43.0%, to $340.2 million for fiscal 2018 from $237.9 million for fiscal 2017. Operating income expressed as a percentage of net sales increased to 20.0% in fiscal 2018 from 14.5% in fiscal 2017. Net Interest Expense. Net interest expense increased $16.5 million, or 18.0%, to $108.3 million for fiscal 2018 from $91.8 million in fiscal 2017. The increase was primarily attributable to additional borrowings made in the third quarter of 2018 to fund the McCann’s acquisition, in the fourth quarter of 2017 to fund the Back to Nature acquisition, and in the second and fourth quarters of 2017 in connection with our senior notes offerings, partially offset by our prepayment in full of the tranche B term loans in the beginning of the fourth quarter of 2018 in connection with the closing of the Pirate Brands sale. See “—Liquidity and Capital Resources—Debt” below. Loss on Extinguishment of Debt. On October 18, 2018, we made a mandatory prepayment of $352.2 million principal amount of tranche B term loans with the net proceeds of the Pirate Brands sale. On October 19, 2018, we made an optional prepayment of the remaining $147.9 million principal amount of tranche B term loans outstanding under our credit agreement from cash on hand and the proceeds of additional revolving loans under our credit agreement. There are no longer any term loans outstanding under our credit facility. As a result of these prepayments of the tranche B term loans and additional prepayments in the first two quarters of 2018, we recognized a loss on extinguishment of debt of $13.1 million in fiscal 2018, including $2.8 million in the first quarter of 2018, $0.5 million in the second quarter of 2018 and $9.8 million in the fourth quarter of 2018. See “—Liquidity and Capital Resources—Debt” below. Other Income. Other income for fiscal 2018 includes remeasurement of monetary assets denominated in a foreign currency into U.S. dollars of $1.2 million and includes the impact of the newly adopted presentation of net periodic pension cost and net periodic post-retirement benefit costs below operating profit in the amount of $2.4 million. Other income for fiscal 2017 includes remeasurement of monetary assets denominated in a foreign currency into U.S. dollars of $1.6 million and includes the impact of the newly adopted presentation of net periodic pension cost and net periodic post-retirement benefit costs below operating profit in the amount of $1.5 million. Income Tax Expense (Benefit). Income tax expense (benefit) changed $119.2 million to a tax expense of $49.8 million in fiscal 2018 from a tax benefit of $(69.4) million for fiscal 2017. See “U.S. Tax Act” above for a discussion of the impact of the tax legislation on income tax expense (benefit). Fiscal 2017 Compared to Fiscal 2016 Net Sales. Net sales increased $274.1 million, or 20.0%, to $1,646.4 million for fiscal 2017 from $1,372.3 million for fiscal 2016. The net sales increase was due to an increase in unit volume, of $287.5 million, partially offset by a decrease in net pricing of $13.4 million. The unit volume increase was primarily driven by an additional eleven plus months of net sales of the spices & seasonings business, acquired on November 21, 2016, an additional eleven months of net sales of Victoria, acquired on December 2, 2016, and three months of net sales of Back to Nature, acquired on October 2, 2017. Base business net sales decreased $15.6 million, or 1.2%, to $1,324.8 million for fiscal 2017 compared to $1,340.4 million for fiscal 2016. The decrease in base business net sales was primarily driven by a decrease in unit volume of $4.3 million, or 0.3% of base business net sales, and a decrease in net pricing of $10.7 million, or 0.8% of base business net sales. Net sales of Green Giant frozen products, benefitting from the strong performance of new innovation products, increased $35.0 million, or 11.9%, and net sales of Pirate Brands, benefitting from new distribution gains, plus momentum from a strong back-to-school season and successful promotional events, increased $4.8 million, or 5.8%. Net sales of Green Giant shelf-stable products (including Le Sueur decreased $30.0 million, or 15.9%, primarily due to weak consumption trends and distribution losses with a key customer. Net sales of our maple syrup products decreased $7.1 million, or 7.0%, primarily due to our decision during the first quarter of 2017 to discontinue certain private label sales. And net sales of Ortega decreased $2.9 million, or 2.1%, primarily due to heightened competitive activity. The overall decline in base business net sales in fiscal 2017 was concentrated in the first half of the year. Base business net sales in the third and fourth quarters of fiscal 2017 increased compared to the third and fourth quarters of 2016. The spices & seasonings business and Victoria, each acquired in the fourth quarter of 2016, generated fiscal 2017 net sales of $259.2 million and $42.1 million, respectively, compared to our initial forecasts at the time of acquisition of $220.0 million of net sales for the spices & seasonings business and $41.0 million of net sales for Victoria. - 49 - See Note 15, “Net Sales by Brand,” to our consolidated financial statements in Part I, Item 1 of this report, for detailed information regarding total net sales by brand for fiscal 2017 and 2016 for each of our brands that equaled or exceeded approximately 3% of our fiscal 2018 net sales and for all other brands in the aggregate. The following chart sets forth the most significant base business net sales increases and decreases by brand for fiscal 2017: Brand: Base Business Net Sales Increase (Decrease) Dollars (in millions)(1) Percentage Green Giant - frozen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Pirate Brands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . New York Style . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Underwood . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Grandma's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Green Giant - shelf stable(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Maple Grove Farms of Vermont . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mama Mary's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ortega . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bear Creek Country Kitchens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Las Palmas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Spring Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TrueNorth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bloch & Guggenheimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B&M . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Emeril . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . All other brands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Base business net sales decrease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 35.0 4.8 2.6 1.6 0.9 (30.0) (4.5) (3.0) (2.9) (2.7) (2.3) (1.9) (1.7) (1.5) (1.4) (1.2) (7.4) (15.6) 11.9 % 5.8 % 8.0 % 7.9 % 6.9 % (15.9)% (6.3)% (8.6)% (2.1)% (5.2)% (6.1)% (10.4)% (13.9)% (5.8)% (7.5)% (8.8)% (2.5)% (1.2)% (1) Fiscal 2017 and 2016 net sales have been adjusted as a result of our retrospective adoption of the new accounting standard relating to revenue recognition. See Note 2(s), “Summary of Significant Accounting Policies — Recently Issued Accounting Standards,” to our consolidated financial statements in Part II, Item 8 of this report. (2) Includes net sales of the Le Sueur brand. Gross Profit. Gross profit increased $11.6 million, or 2.7%, to $440.6 million for fiscal 2017 from $429.0 million for fiscal 2016. Gross profit expressed as a percentage of net sales was 26.8% for fiscal 2017 compared to 31.3% for fiscal 2016. Excluding the 2.3 percentage point impact due to product mix, gross profit as a percentage of net sales decreased 2.2 percentage points. Approximately 1.5 percentage points of the decrease in gross profit percentage was due to an increase in warehousing and distribution costs and 0.7 percentage points of the decrease was due to a decrease in net pricing. Selling, general and administrative expenses. Selling, general and administrative expenses increased $26.4 million, or 16.8%, to $183.4 million for fiscal 2017 from $157.0 million for fiscal 2016. The increase was attributable to increased warehousing expenses of $12.8 million, acquisition-related and non-recurring expenses of $11.4 million and selling expenses of $7.4 million (which includes increases on brokerage expenses of $5.9 million and $0.9 million of salesperson compensation), slightly offset by decreases of $1.3 million of distribution restructuring expenses, consumer marketing expenses of $2.1 million and all other expenses of $1.8 million. Expressed as a percentage of net sales, selling, general and administrative expenses improved by 0.3 percentage points to 11.1% for fiscal 2017 compared to 11.4% for fiscal 2016. Amortization Expense. Amortization expense increased $3.8 million to $17.6 million for fiscal 2017 from $13.8 million for fiscal 2016 due to the Back to Nature acquisition completed in fiscal 2017 and the spices & seasonings and Victoria acquisitions completed in fiscal 2016. - 50 - Impairment of Intangible Assets. Impairment of intangible assets of $5.4 million for fiscal 2016 includes a $4.5 million loss for the impairment of amortizable trademarks and a $0.9 million loss for the impairment of customer relationship intangibles, both relating to Rickland Orchards, as we discontinued the Rickland Orchards brand during the second quarter of 2016 because there was not sufficient demand to warrant continued production. Operating Income. As a result of the foregoing, operating income decreased $14.9 million, or 5.9%, to $237.9 million for fiscal 2017 from $252.8 million for fiscal 2016. Operating income expressed as a percentage of net sales decreased to 14.5% in fiscal 2017 from 18.4% in fiscal 2016. Net Interest Expense. Net interest expense increased $17.3 million, or 23.3%, to $91.8 million for fiscal 2017 from $74.5 million in fiscal 2016. The increase was primarily attributable to additional borrowings made in the fourth quarter of 2016 to fund the spices & seasonings acquisition and the Victoria acquisition and in the fourth quarter of 2017 to fund the Back to Nature acquisition, and our senior notes offerings in second quarter and fourth quarter of 2017. See “Liquidity and Capital Resources—Debt” below. Loss on Extinguishment of Debt. Loss on extinguishment of debt for fiscal 2017 includes the write-off of deferred debt financing costs and unamortized discount of $0.9 million and $0.2 million, respectively, relating to the repayment of all outstanding borrowings under the tranche A term loans. Loss on extinguishment of debt for fiscal 2016 includes the write-off of deferred debt financing costs and unamortized discount of $2.2 million and $0.6 million, respectively, relating to the repayment of $40.1 million aggregate principal amount of our tranche A term loans and $109.9 million aggregate principal amount of our tranche B term loans. See “Liquidity and Capital Resources—Debt” below. Other Income. Other income for fiscal 2017 includes remeasurement of monetary assets denominated in a foreign currency into U.S. dollars of $1.6 million and includes the impact of the newly adopted presentation of net periodic pension cost and net periodic post-retirement benefit costs below operating profit in the amount of $1.5 million. Other income for fiscal 2016 includes remeasurement of monetary assets denominated in a foreign currency into U.S. dollars of $0.4 million and includes the impact of the newly adopted presentation of net periodic pension cost and net periodic post-retirement benefit costs below operating profit in the amount of $1.2 million. Income Tax Expense (Benefit). Income tax expense (benefit) changed $137.0 million to a tax benefit of $(69.4) million in fiscal 2017 from a tax expense of $67.6 million for fiscal 2016. See “U.S. Tax Act” above for a discussion of the impact of the recently enacted tax legislation on income tax expense (benefit). Without the impact of the U.S. Tax Act, our income tax expense for fiscal 2017 would have been approximately $57.1 million and our effective tax rate would have been 38.6%. Liquidity and Capital Resources Our primary liquidity requirements include debt service, capital expenditures and working capital needs. See also, “Dividend Policy” and “Commitments and Contractual Obligations” below. We fund our liquidity requirements, as well as our dividend payments and financing for acquisitions, primarily through cash generated from operations and external sources of financing, including our revolving credit facility. Cash Flows Net Cash Provided by Operating Activities. Net cash provided by operating activities increased $171.7 million to $209.5 million for fiscal 2018 from $37.8 million for fiscal 2017. The increase in net cash provided by operating activities primarily reflects favorable working capital, primarily driven by reduced inventory levels resulting from our 2018 inventory reduction plan and favorable changes in income tax receivables/payables, accrued expenses, other assets and accounts receivables as compared to fiscal 2017. This increase was partially offset by lower net income and non- cash items and unfavorable working capital changes in prepaid expenses, trade accounts payable and other liabilities. Net cash provided by operating activities decreased $251.9 million to $37.8 million for fiscal 2017 from $289.7 million for fiscal 2016. The decrease in net cash provided by operating activities primarily reflects unfavorable working capital (comprised of changes in inventories, other current assets, accounts payable and accrued expenses) comparisons to the fiscal year 2016. This decrease is primarily due to a significant increase in inventory net of businesses acquired in 2017 compared to a decrease in inventory net of businesses acquired in 2016, and the timing of payments received from post-acquisition transition services agreements. - 51 - Net Cash Provided by (Used in) Investing Activities. Net cash provided by (used in) investing activities increased $568.1 million to cash provided by investing activities of $347.6 million for fiscal 2018 compared to cash used in investing activities of $220.5 million for fiscal 2017. The increase was due primarily to gross pre-tax proceeds received from the Pirate Brands sale in fiscal 2018 of $420.0 million, lower cash paid for business acquired and lower capital expenditures in fiscal 2018. Net cash used in investing activities decreased $260.7 million to $220.5 million for fiscal 2017 from $481.2 million for fiscal 2016. The decrease was primarily attributable to the decrease in payments made for the acquisition of businesses, net of cash acquired, and an increase in proceeds from the sale of assets, partially offset by an increase in capital spending. Capital expenditures in fiscal year 2017 and 2016 included expenditures for building improvements, purchases of manufacturing equipment, expenditures in connection with the implementation of a new enterprise resource planning (ERP) system and capitalized interest. Net Cash Used in (Provided by) Financing Activities. In fiscal 2018, we had net cash used in financing activities of $753.3 million as compared to net cash provided by financing activities of $359.3 million for fiscal 2017. Net cash used in financing activities in fiscal 2018 consist of $650.1 million for the prepayment of tranche B terms loans, $170.0 million for the repayment of revolving credit facility borrowing, $124.5 million of dividend payments, $26.9 million for the repurchase of common stock and $1.8 million of payments of tax withholdings on behalf of employees for net share settlement of share based compensation, partially offset by $220.0 million of revolving credit facility borrowings. Net cash provided by financing activities for fiscal 2017 increased $143.3 million to $359.3 million from $216.0 million for fiscal 2016. Net cash provided by financing activities for the fiscal year 2017 consisted of $914.0 million of proceeds from the issuance of our 5.25% senior notes and $395.0 million of revolving credit facility borrowings, partially offset by $233.6 million repayment of our tranche A term loans, $571.0 million of repayments of revolving credit facility borrowings, $123.6 million of dividend payments, $19.5 million of debt financing costs and $2.0 million of payments of tax withholding on behalf of employees for net share settlement of share based compensation. Cash Income Tax Payments. During fiscal 2018 we made cash tax payments of approximately $4.7 million. During fiscal 2017 we made cash tax payments of approximately $17.2 million even though we recorded a tax benefit for financial reporting purposes. See “U.S. Tax Act” above for a discussion of the impact and expected impact of the U.S. Tax Act on our cash income tax payments. Based on a number of factors, including amortization for tax purposes of our trademarks, goodwill and other intangible assets acquired in prior acquisitions, we realized a significant reduction in cash taxes in fiscal 2016 as compared to our tax expense for financial reporting purposes. During the second quarter of fiscal 2016, we discontinued the Rickland Orchards brand, which resulted in a one-time cash taxes benefit of $17.3 million for fiscal 2016. We believe that we will realize a benefit to our cash taxes payable from amortization of our trademarks, goodwill and other intangible assets for the taxable years 2019 through 2033. If there is a change in U.S. federal tax policy that reduces any of these available deductions or results in an increase in our corporate tax rate, our cash taxes payable may increase further, which could significantly reduce our future liquidity and impact our ability to make interest and dividend payments. Dividend Policy For a discussion of our dividend policy, see the information set forth under the heading “Dividend Policy” in Part II, Item 5 of this report. Acquisitions Our liquidity and capital resources have been significantly impacted by acquisitions and may be impacted in the foreseeable future by additional acquisitions. As discussed elsewhere in this report, as part of our growth strategy we plan to expand our brand portfolio with disciplined acquisitions of complementary brands. We have historically financed acquisitions by incurring additional indebtedness, issuing equity and/or using cash flows from operating activities. Our interest expense has over time increased as a result of additional indebtedness we have incurred in connection with acquisitions and will increase with any additional indebtedness we may incur to finance future acquisitions. Although we may subsequently issue equity and use the proceeds to repay all or a portion of the additional indebtedness incurred to finance an acquisition and reduce our interest expense, the additional shares of common stock would increase the amount of cash flows from operating activities necessary to fund dividend payments. - 52 - We financed the Green Giant acquisition, completed in November 2015, with additional indebtedness, and we repaid a portion of that additional indebtedness with the proceeds of a public offering of common stock we completed in March 2016. We financed the spices & seasonings acquisition, completed in November 2016, with cash on hand, including the net proceeds of our August 2016 public offering of common stock, and additional revolving loans under our existing credit facility. We financed the Victoria acquisition, completed in December 2016, with cash on hand and additional revolving loans under our existing credit facility. We financed the Back to Nature acquisition, completed in October 2017, with cash on hand and additional revolving loans under our existing credit facility. We financed the McCann’s acquisition, completed in October 2018, with cash on hand. The impact of future acquisitions, whether financed with additional indebtedness or otherwise, may have a material impact on our liquidity and capital resources. Divestitures We used the net proceeds from the Pirate Brands sale, completed in October 2018, along with additional borrowings under our revolving credit facility, to prepay the entire $500.1 million principal amount of tranche B term loans outstanding under our credit facility. See “Debt” below. Debt Senior Secured Credit Agreement. In fiscal 2017, we refinanced our senior secured credit facility twice by amending and restating our senior secured credit agreement, first on March 30, 2017, and again on November 20, 2017. The first refinancing, on March 30, 2017, reduced by 0.75% the spread over LIBOR or the applicable base rate on the then outstanding $640.1 million of tranche B term loans. On April 3, 2017, we repaid all of the outstanding borrowings and amounts due under our revolving credit facility and tranche A term loans using a portion of the net proceeds of our registered public offering of $500.0 million aggregate principal amount of 5.25% senior notes due 2025. On November 20, 2017, we again refinanced our senior secured credit facility. This second refinancing increased the principal amount of the tranche B term loans by $10.0 million to $650.1 million, reduced by 25 basis points the spread over LIBOR or the applicable base rate on the tranche B term loans and any revolving loans, increased the aggregate commitments under our revolving credit facility from $500.0 million to $700.0 million, and extended the maturity date applicable to our revolving credit facility from June 2019 to November 2022. We made optional prepayments of our tranche B term loans of $125.0 million principal amount in the first quarter of 2018 and $25.0 million principal amount in the second quarter of 2018. On October 18, 2018, we made a mandatory prepayment of $352.2 million principal amount of tranche B term loans with the net proceeds of the Pirate Brands sale. On October 19, 2018, we made an optional prepayment of the remaining $147.9 million principal amount of tranche B term loans outstanding under our credit agreement from cash on hand and the proceeds of additional revolving loans under our credit agreement. As a result of the optional and mandatory prepayments of the tranche B term loans, we recognized a loss on extinguishment of debt of $9.8 million in the fourth quarter of 2018. At December 29, 2018, the available borrowing capacity under our revolving credit facility, net of outstanding letters of credit of $2.2 million, was $647.8 million. Proceeds of the revolving credit facility may be used for general corporate purposes, including acquisitions of targets in the same or a similar line of business as our company, subject to specified criteria. At December 29, 2018, there was $50.0 million outstanding under our revolving credit facility. The revolving credit facility matures on November 21, 2022. Our credit agreement is secured by substantially all of our and our domestic subsidiaries’ assets except our and our domestic subsidiaries’ real property. Interest under the revolving credit facility, including any outstanding letters of credit is determined based on alternative rates that we may choose in accordance with the credit agreement, including a base rate per annum plus an applicable margin ranging from 0.25% to 0.75%, and LIBOR plus an applicable margin ranging from 1.25% to 1.75%, in each case depending on our consolidated leverage ratio. Interest under the tranche B term loan facility was determined based on alternative rates that we could choose in accordance with the credit agreement, including a base rate per annum plus an applicable margin of 1.00%, and LIBOR plus an applicable margin of 2.00%. As of December 29, 2018, there were no tranche B term loans outstanding under our credit facility. - 53 - For further information regarding our credit agreement, including a description of optional and mandatory prepayment terms, and financial and restrictive covenants, see Note 7, “Long-Term Debt,” to our consolidated financial statements in Part II, Item 8 of this report. 4.625% Senior Notes due 2021. On June 4, 2013, we issued $700.0 million aggregate principal amount of 4.625% senior notes due 2021 at a price to the public of 100% of their face value. We used the net proceeds from the issuance of the 4.625% senior notes to purchase or redeem all $248.5 million principal amount of our then existing 7.625% senior notes due 2018, to repay $222.2 million principal amount of our then existing tranche B term loans and approximately $40.0 million principal amount of revolving loans under our then existing credit agreement, and to pay related premiums, fees and expenses. We used the remaining net proceeds for our acquisition of Pirate Brands, completed in July 2013. Interest on the 4.625% senior notes is payable on June 1 and December 1 of each year. The 4.625% senior notes will mature on June 1, 2021, unless earlier retired or redeemed as permitted or required by the terms of the indenture governing the 4.625% senior notes as described in Note 7, “Long-Term Debt,” to our consolidated financial statements in Part II, Item 8 of this report. We may also, from time to time, seek to retire the 4.625% senior notes through cash repurchases of the 4.625% senior notes or exchanges of the 4.625% senior notes for equity securities or both, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. We may also, from time to time, seek to retire the 4.625% senior notes through cash repurchases of the 4.625% senior notes and/or exchanges of the 4.625% senior notes for equity securities, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. See Note 7, “Long-Term Debt,” to our consolidated financial statements in Part II, Item 8 of this report for a more detailed description of the 4.625% senior notes. 5.25% Senior Notes due 2025. On April 3, 2017, we issued $500.0 million aggregate principal amount of 5.25% senior notes due 2025 at a price to the public of 100% of their face value. On November 20, 2017, we issued an additional $400.0 million aggregate principal amount of 5.25% senior notes due 2025 at a price to the public 101% of their face value plus accrued interest from October 1, 2017, which equates to a yield to worst of 5.03%. The notes issued in November were issued as additional notes under the same indenture as our 5.25% senior notes due 2025 that were issued in April, and, as such, form a single series and trade interchangeably with the previously issued 5.25% senior notes. We used the net proceeds of the April 2017 offering to repay all of the outstanding borrowings and amounts due under our revolving credit facility and tranche A term loans, and to pay related fees and expenses. We used the net proceeds of the November 2017 offering to repay all of the then outstanding borrowings and amounts due under our revolving credit facility and to pay related fees and expenses. We have used a portion of, and intend to use the remaining portion of, the net proceeds of the April 2017 and November 2017 offerings for general corporate purposes, which have included and could include, among other things, repayment of other long term debt or possible acquisitions. Interest on the 5.25% senior notes is payable on April 1 and October 1 of each year, commencing October 1, 2017. The 5.25% senior notes will mature on April 1, 2025, unless earlier retired or redeemed as permitted or required by the terms of the indenture governing the 5.25% senior notes as described in Note 7, “Long-Term Debt,” to our consolidated financial statements in Part II, Item 8 of this report. We may also, from time to time, seek to retire the 5.25% senior notes through cash repurchases of the 5.25% senior notes and/or exchanges of the 5.25% senior notes for equity securities, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. See Note 7, “Long-Term Debt,” to our consolidated financial statements in Part II, Item 8 of this report for a more detailed description of the 5.25% senior notes. - 54 - Loss on Extinguishment of Debt. Loss on extinguishment of debt for fiscal 2018 includes the write-off of deferred debt financing costs and unamortized discount of $11.1 million and $2.0 million, respectively, relating to the repayment of all outstanding borrowings under the tranche B term loans. Loss on extinguishment of debt for fiscal 2017 includes the write-off of deferred debt financing costs and unamortized discount of $0.9 million and $0.3 million, respectively, relating to the repayment of all outstanding borrowings under the tranche A term loans. Loss on extinguishment of debt for fiscal 2016 includes the write-off of deferred debt financing costs and unamortized discount of $2.2 million and $0.6 million, respectively, relating to the repayment of $40.1 million aggregate principal amount of our tranche A term loans and $109.9 million aggregate principal amount of our tranche B term loans. Stock Repurchase Program On March 13, 2018, our board of directors authorized a stock repurchase program for the repurchase of up to $50.0 million of our company’s common stock through March 15, 2019. Under the authorization, we may purchase shares of common stock from time to time in the open market or in privately negotiated transactions in compliance with the applicable rules and regulations of the SEC. The timing and amount of stock repurchases under the program will be at the discretion of management, and will depend on available cash, market conditions and other considerations. Therefore, we cannot assure you as to the number or aggregate dollar amount of shares that will be repurchased under the repurchase program. We may discontinue the program at any time. Any shares repurchased pursuant to the repurchase program will be retired. During the second quarter of 2018, we repurchased and retired 694,749 shares of common stock at an average price per share (excluding fees and commissions) of $26.65, or $18.5 million in the aggregate. During the fourth quarter of 2018, we repurchased and retired 295,377 shares of common stock at an average price per share (excluding fees and commissions) of $28.39, or $8.4 million in the aggregate. As of December 29, 2018, we had $23.1 million available for future repurchases of common stock under the stock repurchase program. We did not repurchase any shares of common stock during fiscal 2017 or fiscal 2016. See Note 12, “Pension Benefits,” to our consolidated financial statements in Part II, Item 8 of this report for disclosure relating to shares of our company’s common stock purchased by our defined benefit pension plans. Future Capital Needs On December 29, 2018, our total long-term debt of $1,635.9 million, net of our cash and cash equivalents of $11.6 million, was $1,624.3 million. Stockholders’ equity as of that date was $900.0 million. Our ability to generate sufficient cash to fund our operations depends generally on our results of operations and the availability of financing. Our management believes that our cash and cash equivalents on hand, cash flow from operating activities and available borrowing capacity under our revolving credit facility will be sufficient for the foreseeable future to fund operations, meet debt service requirements, fund capital expenditures, make future acquisitions, if any, and pay our anticipated quarterly dividends on our common stock. We expect to make capital expenditures of approximately $45.0 million to $50.0 million in the aggregate during fiscal 2019. Our projected capital expenditures for fiscal 2019 include, among other things, approximately $9.1 million in connection with the implementation of a new enterprise resource planning (ERP) system, $5.4 million for new productivity projects, $4.4 million for IT infrastructure including cyber security and $3.8 million to fund infrastructure optimization projects. Seasonality Sales of a number of our products tend to be seasonal and may be influenced by holidays, changes in seasons or certain other annual events. In general our sales are higher during the first and fourth quarters. We purchase most of the produce used to make our frozen and shelf-stable vegetables, shelf-stable pickles, relishes, peppers, tomatoes and other related specialty items during the months of June through October, and we generally purchase the majority of our maple syrup requirements during the months of April through August. Consequently, our liquidity needs are greatest during these periods. - 55 - Inflation We experienced moderate net cost increases for raw materials during fiscal 2018 and anticipate higher raw materials cost increases for fiscal 2019. We are currently locked into our supply and prices for a majority of our most significant commodities (excluding, among others, maple syrup) through fiscal 2019. In addition, we expect higher distribution costs industry-wide for fiscal 2019. During fiscal 2017, we had a minimal cost increase for a majority of our most significant commodities (excluding, among others, maple syrup). During fiscal 2016 we had a minimal cost decrease. We plan to continue managing inflation risk by entering into short term supply contracts and advance commodities purchase agreements from time to time, and, if necessary, by raising prices. To the extent we are unable to avoid or offset any present or future cost increases by locking in our costs, implementing cost saving measures or increasing prices to our customers, our operating results could be materially and adversely affected. In addition, if input costs begin to decline, customers may look for price reductions in situations where we have locked into purchases at higher costs. During the past three years, our cost saving measures and sales price increases have not been sufficient to fully offset increases to our raw material, ingredient and packaging and distribution costs. Contingencies See Note 13, “Commitments and Contingencies,” to our consolidated financial statements in Part II, Item 8 of this report. Recent Accounting Pronouncements See Note 2(s), “Summary of Significant Accounting Policies — Recently Issued Accounting Standards,” to our consolidated financial statements in Part II, Item 8 of this report. Off-balance Sheet Arrangements As of December 29, 2018, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K. - 56 - Commitments and Contractual Obligations Our contractual obligations and commitments principally include obligations associated with our outstanding indebtedness, future minimum operating lease obligations, future purchase obligations and future pension obligations as set forth in the following table as of December 29, 2018. Payments Due by Period Contractual Obligations: Total Fiscal 2019 Fiscal 2020 Fiscal 2022 Fiscal 2024 and 2023 and Thereafter and 2021 (In thousands) Long-term debt—principal . . . . . . . . . . . . . . . . . . . . . $ 1,650,000 $ Long-term debt—interest(1) . . . . . . . . . . . . . . . . . . . . Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchase obligations(2) . . . . . . . . . . . . . . . . . . . . . . . . Pension obligations(3) . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,190,280 $ 159,663 $ 872,505 $ 166,213 $ 140,365 19,944 12,196 — 82,750 12,298 64,615 — 94,500 9,517 12,196 — 376,677 50,204 113,399 — — $ 700,000 $ 50,000 $ 900,000 59,063 8,445 24,392 — 991,900 (1) Expected interest payments on long - term debt are based on principal amounts outstanding, scheduled maturity dates and interest rates at December 29, 2018. See Note 7, “Long - Term Debt,” to our consolidated financial statements in Part II, Item 8 for further information as to our long - term debt interest obligations. (2) For the purposes of this table, purchase obligations means agreements to purchase goods or services (such as raw materials, commodities, packaging, other materials and supplies and co - manufacturing arrangements) that are enforceable and legally binding on B&G Foods and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. The purchase obligations in the above table do not represent our entire expected future purchases for goods and services, which are significantly higher than the amounts set forth above. The table does not include purchase obligations under contracts that may be cancelled by B&G Foods without material penalty. Any amounts reflected on our consolidated balance sheet as accounts payable and accrued liabilities are excluded from the purchase obligations set forth in the table above. Penalties, if any, related to molds and equipment based upon failure to meet minimum volume requirements are also excluded from the table because we are unable to determine whether such penalties will be incurred and, if incurred, over what time period they will be paid. (3) We currently do not expect to make any contributions to our defined benefit pension plans during fiscal 2019. We are unable to reliably estimate the timing of pension contributions and contribution amounts beyond fiscal 2019. Item 7A. Quantitative and Qualitative Disclosures About Market Risk Our principal market risks are exposure to changes in commodity prices, interest rates on borrowings and foreign currency exchange rates and market fluctuation risks related to our defined benefit pension plans. Commodity Prices and Inflation. The information under the heading “Inflation” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” is incorporated herein by reference. Interest Rate Risk. In the normal course of operations, we are exposed to market risks relating to our long-term debt arising from adverse changes in interest rates. Market risk is defined for these purposes as the potential change in the fair value of a financial asset or liability resulting from an adverse movement in interest rates. Changes in interest rates impact our fixed and variable rate debt differently. For fixed rate debt, a change in interest rates will only impact the fair value of the debt, whereas for variable rate debt, a change in the interest rates will impact interest expense and cash flows. At December 29, 2018, we had $1,600.0 million of fixed rate debt and $50.0 million of variable rate debt. Based upon our principal amount of long-term debt outstanding at December 29, 2018, a hypothetical 1.0% increase or decrease in interest rates would have affected our annual interest expense by approximately $0.5 million. - 57 - The carrying values and fair values of our revolving credit loans, term loans and senior notes as of December 29, 2018 and December 30, 2017 are as follows (in thousands): December 29, 2018 December 30, 2017 Revolving credit loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Tranche B term loans due 2022 . . . . . . . . . . . . . . . . . . . . . . 4.625% senior notes due 2021 . . . . . . . . . . . . . . . . . . . . . . . 5.25% senior notes due 2025 . . . . . . . . . . . . . . . . . . . . . . . . $ — (2) 50,000 $ 50,000 (1) $ — (2) 684,250 (3) 700,000 903,371 (4) $ 837,877 (3) $ 647,831 (2) 652,689 (1) 710,500 (3) 700,000 903,910 (4) $ 919,729 (3) Carrying Value Fair Value Carrying Value Fair Value — — $ (1) Fair values are estimated based on Level 2 inputs, which were quoted prices for identical or similar instruments in markets that are not active. (2) The carrying value of the tranche B term loans is net of discount. At December 30, 2017, the face amount of the tranche B term loans was $650.1 million. There are no tranche B term loans outstanding under our credit facility as of December 29, 2018. See Note 7, “Long-Term Debt,” to our consolidated financial statements in Part II, Item 8 of this report. (3) Fair values are estimated based on quoted market prices. (4) The carrying values of the 5.25% senior notes due 2025 include a premium. At December 29, 2018 the face amount of the 5.25% senior notes due 2025 was $900.0 million. Cash and cash equivalents, trade accounts receivable, income tax receivable/payable, trade accounts payable, accrued expenses and dividends payable are reflected on our consolidated balance sheets at carrying value, which approximates fair value due to the short-term nature of these instruments. For more information, see Note 7, “Long-Term Debt,” to our consolidated financial statements in Part II, Item 8 of this report. Foreign Currency Risk. Our foreign sales are primarily to customers in Canada. Our sales to Canada are generally denominated in Canadian dollars and our sales for export to other countries are generally denominated in U.S. dollars. During fiscal 2018, 2017 and 2016, our net sales to customers in foreign countries represented approximately 7.3%, 6.3% and 7.1%, respectively, of our total net sales. We also purchase certain raw materials from foreign suppliers. For example, we purchase a significant majority of our maple syrup requirements from suppliers in Québec, Canada. These purchases are made in Canadian dollars. A weakening of the U.S. dollar in relation to the Canadian dollar would significantly increase our future costs relating to the production of our maple syrup products to the extent we have not purchased Canadian dollars or otherwise entered into a currency hedging arrangement in advance of any such weakening of the U.S. dollar. Our purchases of raw materials from other foreign suppliers are generally denominated in U.S. dollars, but certain purchases of raw materials in Mexico are denominated in Mexican pesos. As a result, certain revenues and expenses have been, and are expected to be, subject to the effect of foreign currency fluctuations, and these fluctuations may have an adverse impact on operating results. Market Fluctuation Risks Relating to our Defined Benefit Pension Plans. See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies; Use of Estimates – Pension Plans” and Note 12, “Pension Benefits,” to our consolidated financial statements in Part II, Item 8 of this report for a discussion of the exposure of our defined benefit pension plan assets to risks related to market fluctuations. - 58 - Item 8. Financial Statements and Supplementary Data. The consolidated balance sheets at December 29, 2018 and December 30, 2017 and the consolidated statements of operations, comprehensive income, changes in stockholders’ equity and cash flows for fiscal 2018, 2017 and 2016 and related notes are set forth below. Reports of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 60 Consolidated Balance Sheets as of December 29, 2018 and December 30, 2017 . . . . . . . . . . . . . . . . . . . 63 Consolidated Statements of Operations for the fiscal years ended December 29, 2018, December 30, 2017 and December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Consolidated Statements of Comprehensive Income for the fiscal years ended December 29, 2018, December 30, 2017 and December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Consolidated Statements of Changes in Stockholders’ Equity for the fiscal years ended December 29, 2018, December 30, 2017 and December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Consolidated Statements of Cash Flows for the fiscal years ended December 29, 2018, December 30, 2017 and December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 68 Schedule II—Schedule of Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 - 59 - REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors B&G Foods, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of B&G Foods, Inc. and subsidiaries (the “Company”) as of December 29, 2018 and December 30, 2017, the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity, and cash flows for the fiscal years ended December 29, 2018, December 30, 2017 and December 31, 2016, and the related notes and the schedule of valuation and qualifying accounts (collectively, the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 29, 2018 and December 30, 2017, and the results of its operations and its cash flows for the fiscal years ended December 29, 2018, December 30, 2017 and December 31, 2016, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 29, 2018, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 26, 2019 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. We have served as the Company’s auditor since 1996. /s/ KPMG LLP Short Hills, New Jersey February 26, 2019 - 60 - REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors B&G Foods, Inc.: Opinion on Internal Control Over Financial Reporting We have audited B&G Foods, Inc.’s and subsidiaries’ (the “Company”) internal control over financial reporting as of December 29, 2018, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 29, 2018, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 29, 2018 and December 30, 2017, the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity, and cash flows for the fiscal years ended December 29, 2018, December 30, 2017 and December 31, 2016, and the related notes and the schedule of valuation and qualifying accounts (collectively, the consolidated financial statements), and our report dated February 26, 2019 expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management’s Report on Internal Control Over Financial Reporting.” Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. - 61 - Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP Short Hills, New Jersey February 26, 2019 - 62 - B&G FOODS, INC. AND SUBSIDIARIES Consolidated Balance Sheets (In thousands, except share and per share data) December 29, December 30, 2018 2017 Current assets: Assets Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Trade accounts receivable, less allowance for doubtful accounts and discounts of $1,851 11,648 $ 206,506 and $1,824 as of December 29, 2018 and December 30, 2017, respectively . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151,707 401,355 19,988 1,398 586,096 141,392 501,849 20,054 16,794 886,595 Property, plant and equipment, net of accumulated depreciation of $230,200 and $200,664 as of December 29, 2018 and December 30, 2017, respectively . . . . . . . . . . . . . . . . . . . . . 282,553 584,435 Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other intangibles, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,595,569 1,206 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,940 Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 272,192 649,292 1,748,220 1,617 3,122 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,054,799 $ 3,561,038 Current liabilities: Liabilities and Stockholders’ Equity Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 140,000 $ 122,358 48,067 Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139 Income tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,922 Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201,486 Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,660 31,624 31,178 258,462 Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,635,881 24,505 Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235,902 Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,154,750 2,217,574 24,881 236,278 2,680,219 Commitments and contingencies (Note 13) Stockholders’ equity: Preferred stock, $0.01 par value per share. Authorized 1,000,000 shares; no shares issued or outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — Common stock, $0.01 par value per share. Authorized 125,000,000 shares; 65,638,701 and 66,499,044 shares issued and outstanding as of December 29, 2018 and December 30, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 665 266,789 (20,756) 634,121 880,819 Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,054,799 $ 3,561,038 656 116,339 (23,502) 806,556 900,049 See accompanying Notes to Consolidated Financial Statements. - 63 - B&G FOODS, INC. AND SUBSIDIARIES Consolidated Statements of Operations (In thousands, except per share data) December 29, Fiscal Year Ended December 30, December 31, Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2018 2017 1,700,764 $ 1,646,387 $ 1,372,307 943,295 1,205,809 1,351,264 429,012 440,578 349,500 2016 Operating expenses: Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . Amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Gain) loss on sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impairment of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167,389 18,343 (176,386) — 340,154 183,448 17,611 1,608 — 237,911 157,028 13,803 — 5,405 252,776 Other income and expenses: Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income before income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 108,334 13,135 (3,592) 222,277 49,842 172,435 $ 91,784 1,163 (3,098) 148,062 (69,401) 217,463 $ 74,456 2,836 (1,582) 177,066 67,641 109,425 Weighted average shares outstanding: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,145 66,255 66,487 66,706 63,203 63,420 Earnings per share: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.61 $ 2.60 $ 3.27 $ 3.26 $ 1.73 1.73 Cash dividends declared per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.89 $ 1.86 $ 1.73 See accompanying Notes to Consolidated Financial Statements. - 64 - B&G FOODS, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income (In thousands) Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2018 172,435 $ 2017 217,463 $ 2016 109,425 Other comprehensive income: Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of unrecognized prior service cost and pension deferrals, net of tax . . . . . Other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (3,507) 761 (2,746) 169,689 $ 4,393 (5,785) (1,392) 216,071 $ (8,180) 1,512 (6,668) 102,757 Fiscal Year Ended December 29, December 30, December 31, See accompanying Notes to Consolidated Financial Statements. - 65 - S E I R A I D I S B U S D N A . C N I , S D O O F G & B y t i u q E ’ s r e d l o h k c o t S n i s e g n a h C f o s t n e m e t a t S d e t a d i l o s n o C ) a t a d e r a h s r e p d n a e r a h s t p e c x e , s d n a s u o h t n I ( l a t o T d e t a l u m u c c A r e h t O l a n o i t i d d A ’ s r e d l o h k c o t S y t i u q E d e n i a t e R s g n i n r a E e v i s n e h e r p m o C s s o L n i - d i a P l a t i p a C 5 8 6 , 7 5 4 $ 3 3 2 , 7 0 3 $ ) 6 9 6 , 2 1 ( $ 8 6 5 , 2 6 1 $ k c o t S n o m m o C t n u o m A 0 8 5 $ s e r a h S 4 4 7 , 6 7 9 , 7 5 ) 0 8 1 , 8 ( 2 1 5 , 1 5 2 4 , 9 0 1 8 9 7 , 5 ) 0 1 4 , 1 ( 9 7 8 , 1 3 3 3 4 3 ) 5 9 3 , 1 1 1 ( — — — — — — — 5 2 4 , 9 0 1 — — — — — — ) 0 8 1 , 8 ( 2 1 5 , 1 — — — 3 4 3 8 9 7 , 5 ) 0 1 4 , 1 ( 5 9 7 , 1 3 3 ) 5 9 3 , 1 1 1 ( — — — — — 4 8 — — — — — — — — 0 7 5 , 9 7 0 0 0 , 0 5 3 , 8 3 9 3 , 4 ) 5 8 7 , 5 ( 3 6 4 , 7 1 2 5 1 6 , 4 ) 0 5 8 , 1 ( ) 4 7 6 , 3 2 1 ( — — — — — 3 6 4 , 7 1 2 — — — — 3 9 3 , 4 ) 5 8 7 , 5 ( — — — 5 1 6 , 4 ) 1 5 8 , 1 ( ) 4 7 6 , 3 2 1 ( — — — — 1 — — — — — — 0 3 7 , 2 9 7 5 6 , 5 8 7 $ 8 5 6 , 6 1 4 $ ) 4 6 3 , 9 1 ( $ 9 9 6 , 7 8 3 $ 4 6 6 $ 4 1 3 , 6 0 4 , 6 6 9 1 8 , 0 8 8 $ 1 2 1 , 4 3 6 $ ) 6 5 7 , 0 2 ( $ 9 8 7 , 6 6 2 $ 5 6 6 $ 4 4 0 , 9 9 4 , 6 6 0 6 1 6 7 ) 7 0 5 , 3 ( 5 3 4 , 2 7 1 5 2 0 , 3 ) 4 4 8 , 1 ( ) 0 2 9 , 6 2 ( ) 0 8 7 , 4 2 1 ( — — — — — — — 5 3 4 , 2 7 1 — — — — — — 1 6 7 ) 7 0 5 , 3 ( — — — 0 6 5 2 0 , 3 ) 5 4 8 , 1 ( ) 0 1 9 , 6 2 ( ) 0 8 7 , 4 2 1 ( 9 4 0 , 0 0 9 $ 6 5 5 , 6 0 8 $ ) 2 0 5 , 3 2 ( $ 9 3 3 , 6 1 1 $ — — — — 1 — ) 0 1 ( — 6 5 6 — — — — — 7 8 7 , 1 6 9 9 , 7 2 1 ) 6 2 1 , 0 9 9 ( $ 1 0 7 , 8 3 6 , 5 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 1 0 2 , 2 y r a u n a J t a e c n a l a B n o i t a l s n a r t y c n e r r u c n g i e r o F ) s e x a t e m o c n i f o 7 1 9 $ f o t e n ( t i f e n e b n o i s n e p n i e g n a h C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e m o c n i t e N . n o i t a s n e p m o c d e s a b - e r a h S n o i t a s n e p m o c d e s a b - e r a h s r o f k c o t s n o m m o c f o e c n a u s s I . . . . . . . . . . . . . . . . . . . . . . . . . . k c o t s n o m m o c f o e c n a u s s I . n o i t a s n e p m o c d e s a b - e r a h s r o f k c o t s n o m m o c f o e c n a u s s i m o r f t i f e n e b x a T . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e r a h s r e p 3 7 . 1 $ , k c o t s n o m m o c n o d e r a l c e d s d n e d i v i D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 1 0 2 , 1 3 r e b m e c e D t a e c n a l a B . . n o i t a l s n a r t y c n e r r u c n g i e r o F ) s e x a t e m o c n i f o 7 7 7 , 3 $ f o t e n ( t i f e n e b n o i s n e p n i e g n a h C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e m o c n i t e N . n o i t a s n e p m o c d e s a b - e r a h S n o i t a s n e p m o c d e s a b - e r a h s r o f k c o t s n o m m o c f o e c n a u s s I . . . . . . . . . . e r a h s r e p 6 8 . 1 $ , k c o t s n o m m o c n o d e r a l c e d s d n e d i v i D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 1 0 2 , 0 3 r e b m e c e D t a e c n a l a B . . n o i t a l s n a r t y c n e r r u c n g i e r o F ) s e x a t e m o c n i f o 4 5 2 $ f o t e n ( t i f e n e b n o i s n e p n i e g n a h C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e m o c n i t e N . n o i t a s n e p m o c d e s a b - e r a h S n o i t a s n e p m o c d e s a b - e r a h s r o f k c o t s n o m m o c f o e c n a u s s I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d e s i c r e x e s n o i t p o k c o t S k c o t s n o m m o c f o e s a h c r u p e R . e r a h s r e p 9 8 . 1 $ , k c o t s n o m m o c n o d e r a l c e d s d n e d i v i D . . . . . . . . . . . . . . . . . . . . 8 1 0 2 , 9 2 r e b m e c e D t a e c n a l a B - 66 - . s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C o t s e t o N g n i y n a p m o c c a e e S B&G FOODS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (In thousands) Cash flows from operating activities: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Adjustments to reconcile net income to net cash provided by operating activities: 172,435 $ 217,463 $ 109,425 Fiscal Year Ended December 29, December 30, December 31, 2018 2017 2016 Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of deferred debt financing costs and bond discount/premium . . . . . . . . . . . . . . Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impairment of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Gain) loss on sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Write-off of property, plant, and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss on disposal of inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Excess tax benefits from share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in assets and liabilities, net of effects of businesses acquired: Trade accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax receivable/payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash flows from investing activities: Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payments for acquisition of businesses, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash provided by (used in) investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash flows from financing activities: Repayments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Repayments of borrowings under revolving credit facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . Borrowings under revolving credit facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from issuance of common stock, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Excess tax benefits from share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payments for repurchase of common stock, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payments of tax withholding on behalf of employees for net share settlement of share- based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Debt financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash (used in) provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,639 5,282 (1,494) — (176,386) 931 — 13,135 3,025 — (12,933) 88,037 (302) 45,973 307 14,773 1,449 1,585 209,456 (41,627) 420,002 (30,787) 347,588 (650,110) — (170,000) 220,000 60 (124,524) — (26,920) (1,833) — (753,327) Effect of exchange rate fluctuations on cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . Net (decrease) increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,425 (194,858) 49,172 5,812 (80,525) — 1,608 208 3,287 1,163 4,615 — (18,034) (139,512) 6,596 (9,829) (6,542) 16,623 (17,344) 3,038 37,799 (59,802) 2,229 (162,965) (220,538) (233,640) 914,000 (571,000) 395,000 112 (123,631) — — (1,962) (19,543) 359,336 1,076 177,673 Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 206,506 28,833 11,648 $ 206,506 $ 37,266 5,426 56,190 5,405 — 337 791 2,836 5,798 (343) (45,763) 2,396 41,929 (3,658) (747) 47,250 23,832 1,291 289,661 (42,418) — (438,787) (481,205) (150,000) — (99,000) 235,000 331,879 (100,807) 343 — (1,410) — 216,005 (874) 23,587 5,246 28,833 Supplemental disclosures of cash flow information: Cash interest payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Cash income tax payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Non-cash investing and financing transactions: 102,114 $ 4,669 $ 75,784 $ 17,231 $ 69,755 15,406 Dividends declared and not yet paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Accruals related to purchases of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . $ 31,178 $ 5,520 $ 30,922 $ 330 $ 30,879 — See accompanying Notes to Consolidated Financial Statements. - 67 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 29, 2018, December 30, 2017 and December 31, 2016 (1) Nature of Operations Organization and Nature of Operations B&G Foods, Inc. is a holding company whose principal assets are the shares of capital stock of its subsidiaries. Unless the context requires otherwise, references in this report to “B&G Foods,” “our company,” “we,” “us” and “our” refer to B&G Foods, Inc. and its subsidiaries. Our financial statements are presented on a consolidated basis. We operate in a single industry segment and manufacture, sell and distribute a diverse portfolio of high-quality shelf-stable and frozen foods across the United States, Canada and Puerto Rico. Our products include frozen and canned vegetables, oatmeal and other hot cereals, fruit spreads, canned meats and beans, bagel chips, spices, seasonings, hot sauces, wine vinegar, maple syrup, molasses, salad dressings, pizza crusts, Mexican-style sauces, dry soups, taco shells and kits, salsas, pickles, peppers, tomato-based products, puffed corn and rice snacks, cookies and crackers, nut clusters and other specialty products. Our products are marketed under many recognized brands, including Ac’cent, B&G, B&M, Back to Nature, Baker’s Joy, Bear Creek Country Kitchens, Brer Rabbit, Canoleo, Cary’s, Cream of Rice, Cream of Wheat, Devonsheer, Don Pepino, Durkee, Emeril’s, Grandma’s Molasses, Green Giant, JJ Flats, Joan of Arc, Las Palmas, Le Sueur, MacDonald’s, Mama Mary’s, Maple Grove Farms of Vermont, McCann’s, Molly McButter, Mrs. Dash, New York Flatbreads, New York Style, Old London, Ortega, Polaner, Red Devil, Regina, Sa-són, Sclafani, SnackWell’s, Spice Islands, Spring Tree, Sugar Twin, Tone’s, Trappey’s, TrueNorth, Underwood, Vermont Maid, Victoria, Weber and Wright’s. We also sell and distribute Static Guard, a household product brand. We compete in the retail grocery, foodservice, specialty, private label, club and mass merchandiser channels of distribution. We sell and distribute our products directly and via a network of independent brokers and distributors to supermarket chains, foodservice outlets, mass merchants, warehouse clubs, non-food outlets and specialty distributors. Sales of a number of our products tend to be seasonal and may be influenced by holidays, changes in seasons/weather or certain other annual events. In general, our sales are higher in the first and fourth quarter. We purchase most of the produce used to make our frozen and shelf-stable canned vegetables, pickles, relishes, peppers, tomatoes and other related specialty items during the months of June through October, and we generally purchase the majority of our maple syrup requirements during the months of April through August. Consequently, our liquidity needs are greatest during these periods. Fiscal Year We utilize a 52-53 week fiscal year ending on the Saturday closest to December 31. The fiscal years ended December 29, 2018 (fiscal 2018) December 30, 2017 (fiscal 2017) and December 31, 2016 (fiscal 2016) contained 52 weeks each. Business and Credit Concentrations Our exposure to credit loss in the event of non-payment of accounts receivable by customers is estimated in the amount of the allowance for doubtful accounts. We perform ongoing credit evaluations of the financial condition of our customers. Our top ten customers accounted for approximately 54.4%, 54.6% and 56.0% of consolidated net sales in fiscal 2018, 2017 and 2016, respectively. Our top ten customers accounted for approximately 54.8%, 49.4% and 53.4% of our consolidated trade accounts receivables as of the end of fiscal 2018, 2017 and 2016, respectively. Other than Walmart, which accounted for 23.1%, 24.1% and 24.1% of our consolidated net sales in fiscal 2018, 2017 and 2016, respectively, no single customer accounted for more than 10.0% of consolidated net sales in fiscal 2018, 2017 or 2016. Other than Walmart, which accounted for 24.9%, 21.5% and 21.2% of our consolidated trade accounts receivables as of the end of fiscal 2018, 2017 and 2016, respectively, no single customer accounted for more than 10.0% of our consolidated trade accounts receivables as of the end of fiscal 2018, 2017 and 2016. As of December 29, 2018, we do not believe we have any significant concentration of credit risk with respect to our consolidated trade accounts receivable with any single customer whose failure or nonperformance would materially affect our results other than as described above with respect to Walmart. During fiscal 2018, 2017 and 2016, our sales to foreign countries represented approximately 7.3%, 6.3% and 7.1%, respectively, of net sales. Our foreign sales are primarily to customers in Canada. - 68 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (2) Summary of Significant Accounting Policies (a) Basis of Presentation The consolidated financial statements include the accounts of B&G Foods, Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated. Certain prior year amounts have been reclassified to conform to the current year’s presentation. See (r) “Newly Adopted Accounting Standards,” below, for further details. (b) Use of Estimates The preparation of financial statements in accordance with generally accepted accounting principles in the United States (GAAP) requires our management to make a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Some of the more significant estimates and assumptions made by management involve revenue recognition as it relates to trade and consumer promotion expenses; allowances for excess, obsolete and unsaleable inventories; pension benefits; acquisition accounting fair value allocations; the recoverability of goodwill, other intangible assets, property, plant and equipment and deferred tax assets; the determination of the useful life of customer relationship and amortizable trademark intangibles; and the fair value of contingent consideration. Actual results could differ significantly from these estimates and assumptions. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors that management believes to be reasonable under the circumstances, including the current economic environment. We adjust such estimates and assumptions when facts and circumstances dictate. Volatility in the credit and equity markets can increase the uncertainty inherent in such estimates and assumptions. (c) Subsequent Events We have evaluated subsequent events for disclosure through the date of issuance of the accompanying consolidated financial statements. (d) Cash and Cash Equivalents For purposes of the consolidated statements of cash flows, all highly liquid instruments with maturities of three months or less when acquired are considered to be cash and cash equivalents. (e) Inventories Inventories are stated at the lower of cost or net realizable value and include direct material, direct labor, overhead, warehousing and product transfer costs. Cost is determined using the first-in, first-out and average cost methods. Inventories have been reduced by an allowance for excess, obsolete and unsaleable inventories. The allowance is an estimate based on our management’s review of inventories on hand compared to estimated future usage and sales. (f) Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation on plant and equipment is calculated using the straight-line method over the estimated useful lives of the assets, 10 to 30 years for buildings and improvements, 5 to 12 years for machinery and equipment, and 2 to 5 years for office furniture and vehicles. Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or estimated useful life of the asset. Expenditures for maintenance, repairs and minor replacements are charged to current operations. Expenditures for major replacements and betterments are capitalized. We capitalize interest on qualifying assets based on our effective interest rate. During fiscal 2018, 2017 and 2016, we capitalized $1.1 million, $1.0 million and $0.5 million, respectively. - 69 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (2) Summary of Significant Accounting Policies (Continued) (g) Goodwill and Other Intangible Assets Goodwill and unamortizable intangible assets (trademarks) are tested for impairment at least annually and whenever events or circumstances occur indicating that goodwill or unamortizable intangibles might be impaired. We perform the annual impairment tests as of the last day of each fiscal year. The annual goodwill impairment test involves a two-step process. The first step of the impairment test involves comparing our company’s market capitalization with our company’s carrying value, including goodwill. If the carrying value of our company exceeds our market capitalization, we perform the second step of the impairment test to determine the amount of the impairment loss. The second step of the goodwill impairment test involves comparing the implied fair value of goodwill with the carrying value and recognizing a loss for the difference. We test our unamortizable intangibles by comparing the fair value with the carrying value and recognize a loss for the difference. We estimate the fair value of our unamortizable intangibles based on discounted cash flows that reflect certain third party market value indicators. Calculating our fair value for these purposes requires significant estimates and assumptions by management. We completed our annual impairment tests for fiscal 2018, 2017 and 2016 with no adjustments to the carrying values of goodwill and unamortizable intangibles. Each annual test confirmed that the market capitalization and fair values of our goodwill and unamortizable intangibles, respectively, exceeded their current carrying values. Customer relationship intangibles and amortizable trademarks are presented at cost, net of accumulated amortization, and are amortized on a straight-line basis over their estimated useful lives of 10 to 20 years. Seed technology assets are presented at cost, net of accumulated amortization, and are amortized utilizing a declining balance approach over their estimated useful lives of 5 years. During fiscal 2017, we sold to a third-party co- packer our Le Sueur, Minnesota research center, including the seed technology assets, property, plant and equipment, which we acquired as part of the Green Giant acquisition, resulting in a $1.6 million pre-tax loss on sale of assets. (h) Deferred Debt Financing Costs Debt financing costs are capitalized and amortized over the term of the related debt agreements and are included as a reduction of long-term debt. Amortization of deferred debt financing costs for fiscal 2018, 2017 and 2016 was $5.3 million, $5.4 million and $4.9 million, respectively. (i) Long-Lived Assets Long-lived assets, such as property, plant and equipment, and intangibles with estimated useful lives, are depreciated or amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future net cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future net cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Recoverability of assets held for sale is measured by a comparison of the carrying amount of an asset or asset group to their fair value less estimated costs to sell. Estimating future cash flows and calculating the fair value of assets requires significant estimates and assumptions by management. Assets to be disposed of are separately presented in the consolidated balance sheets and are no longer depreciated. (j) Accumulated Other Comprehensive Loss Accumulated other comprehensive loss includes foreign currency translation adjustments relating to assets and liabilities located in our foreign subsidiaries and changes in our pension benefits due to the initial adoption and ongoing application of the authoritative accounting literature relating to pensions, net of tax. - 70 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (2) Summary of Significant Accounting Policies (Continued) (k) Revenue Recognition Revenues are recognized when our performance obligation is satisfied. Our primary performance obligation is satisfied when products are shipped. We report all amounts billed to a customer in a sale transaction as revenue, including those amounts related to shipping and handling. Shipping and handling costs are included in cost of goods sold. Consideration from a vendor to a retailer is presumed to be a reduction to the selling prices of the vendor’s products and, therefore, is characterized as a reduction of sales when recognized in the vendor’s income statement. As a result, coupon incentives, slotting and promotional expenses are recorded as a reduction of sales. Additionally, as a result of the newly adopted revenue recognition standard, certain payments to customers related to in-store display incentives, or marketing development funds, are also recorded as a reduction of sales. See (r) “Newly Adopted Accounting Standards,” below, for further details regarding the newly adopted revenue recognition standard. (l) Selling, General and Administrative Expenses We promote our products with advertising, consumer incentives and trade promotions. These programs include, but are not limited to, discounts, slotting fees, coupons, rebates, in-store display incentives and volume-based incentives. Consumer incentive and trade promotion activities are recorded as a reduction to revenues based on amounts estimated as being due to customers and consumers at the end of a period. We base these estimates principally on historical utilization and redemption rates. We expense our advertising costs either in the period the advertising first takes place or as incurred. Advertising expenses were approximately $15.9 million, $22.7 million and $26.0 million, for fiscal 2018, 2017 and 2016, respectively. (m) Pension Plans We have defined benefit pension plans covering approximately 43% of our employees. Our funding policy is to contribute annually the amount recommended by our actuaries. From time to time, however, we voluntarily contribute greater amounts based on pension asset performance, tax considerations and other relevant factors. (n) Share Based Compensation Expense We provide compensation benefits in the form of stock options, performance share long-term incentive awards (LTIAs) and common stock to employees and non-employee directors. The cost of share based compensation is recorded at fair value at the date of grant and expensed in our consolidated statements of operations over the requisite service period, if any. Performance share LTIAs granted to our executive officers and certain other members of senior management entitle each participant to earn shares of common stock upon the attainment of certain performance goals over the applicable performance period. The recognition of compensation expense for the performance share LTIAs is initially based on the probable outcome of the performance condition based on the fair value of the award on the date of grant and the anticipated number of shares to be awarded on a straight-line basis over the applicable performance period. The fair value of the awards on the date of grant is determined based upon the closing price of our common stock on the applicable measurement dates (i.e., the deemed grant dates for accounting purposes) reduced by the present value of expected dividends using the risk-free interest-rate as the award holders are not entitled to dividends or dividend equivalents during the vesting period. Our company’s performance against the defined performance goals are re- evaluated on a quarterly basis throughout the applicable performance period and the recognition of compensation expense is adjusted for subsequent changes in the estimated or actual outcome. The cumulative effect of a change in the estimated number of shares of common stock to be issued in respect of performance share awards is recognized as an adjustment to earnings in the period of the revision. - 71 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (2) Summary of Significant Accounting Policies (Continued) The fair value of stock option awards is estimated on the date of grant using the Black-Scholes option pricing model and is recognized in expense over the vesting period of the options using the straight-line method. The Black- Scholes option pricing model requires various assumptions, including the expected volatility of our stock, the expected term of the option, the risk-free interest rate and the expected dividend yield. Expected volatility is based on both historical and implied volatilities of our common stock over the estimated expected term of the award. The risk-free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. All stock option grants have an exercise price equal to the fair market value of our common stock on the date of grant and have a 10-year term. Employee stock options cliff vest three years after the date of grant and non-employee director stock options vest one year after the date of grant. We recognize compensation expense for only that portion of share based awards that are expected to vest. We utilize historical employee termination behavior to determine our estimated forfeiture rates. If the actual forfeitures differ from those estimated by management, adjustments to compensation expense will be made in future periods. (o) Income Tax Expense Estimates and Policies Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities of our company are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided when it is more likely than not that all or some portion of the deferred tax asset will not be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. As part of the income tax provision process of preparing our consolidated financial statements, we are required to estimate our income taxes. This process involves estimating our current tax expenses together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities. We then assess the likelihood that our deferred tax assets will be recovered from future taxable income and to the extent we believe the recovery is not likely, we establish a valuation allowance. Further, to the extent that we establish a valuation allowance or increase this allowance in a financial accounting period, we include such charge in our tax provision, or reduce our tax benefits in our consolidated statements of operations. We use our judgment to determine our provision or benefit for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against our deferred tax assets. There are various factors that may cause these tax assumptions to change in the near term, and we may have to record a valuation allowance against our deferred tax assets. We cannot predict whether future U.S. federal and state income tax laws and regulations might be passed that could have a material effect on our results of operations. See Note 10, “Income Taxes,” for a discussion of the Tax Cuts and Jobs Act enacted in December 2017, which we refer to in this report as the “U.S. Tax Act.” We assess the impact of significant changes to the U.S. federal and state income tax laws and regulations on a regular basis and update the assumptions and estimates used to prepare our consolidated financial statements when new regulations and legislation are enacted. We recognize the benefit of an uncertain tax position that we have taken or expect to take on our income tax returns we file if it is “more likely than not” that such tax position will be sustained based on its technical merits. (p) Dividends Cash dividends, if any, are accrued as a liability on our consolidated balance sheets and recorded as a decrease to additional paid-in capital when declared. - 72 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (2) Summary of Significant Accounting Policies (Continued) (q) Earnings Per Share Basic earnings per share is calculated by dividing net income by the weighted average number of shares of common stock outstanding. Diluted earnings per share is calculated by dividing net income by the weighted average number of shares of common stock outstanding plus all additional shares of common stock that would have been outstanding if potentially dilutive shares of common stock had been issued upon the exercise of stock options or in connection with performance share LTIAs that may be earned as of the beginning of the period using the treasury stock method. Fiscal 2018 Fiscal 2017 (in thousands, except share and per share data) Fiscal 2016 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 172,435 $ 217,463 $ 109,425 Weighted average common shares outstanding: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net effect of potentially dilutive share-based compensation awards(1) . . Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,144,703 109,851 66,254,554 66,487,403 219,060 66,706,463 63,202,900 216,892 63,419,792 Earnings per share: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.61 $ 2.60 $ 3.27 $ 3.26 $ 1.73 1.73 (1) For fiscal 2018, 2017 and 2016, outstanding stock options of 1,091,478, 348,894 and 22,692, respectively, were excluded from diluted earnings per share as their effect was antidilutive. (r) Newly Adopted Accounting Standards In March 2017, the Financial Accounting Standards Board (FASB) issued a new accounting standards update (ASU) that improves the presentation of net periodic pension cost and net periodic post-retirement benefit cost. The new guidance revises how employers that sponsor defined benefit pension and other post-retirement plans present the net periodic benefit cost in their income statement and requires that the service cost component of net periodic benefit cost be presented in the same income statement line items as other employee compensation costs from services rendered during the period and present the other components of net periodic pension cost below operating profit. The update was effective beginning with the first quarter of fiscal 2018. We adopted this standard retrospectively as of the first quarter of fiscal 2018. The adoption of this ASU did not have any impact on our consolidated financial position, results of operations or liquidity, but did require a reclassification among selling, general and administrative expenses and other income on our consolidated statements of operations. In May 2014, the FASB issued guidance on revenue recognition, with final guidance issued in 2016. The guidance provides for a five-step model to determine the revenue to be recognized from the transfer of goods or services to customers. The guidance also requires improved disclosures to help users of the financial statements better understand the nature, amount, timing and uncertainty of revenue and cash flows relating to customer contracts. It also provides clarification for principal versus agent considerations, identifying performance obligations and the accounting of intellectual property licenses. In addition, the FASB introduced practical expedients related to disclosures of remaining performance obligations, as well as other amendments to guidance on collectability, non-cash consideration and the presentation of sales and other similar taxes. - 73 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (2) Summary of Significant Accounting Policies (Continued) We adopted this guidance and related amendments as of the first quarter of fiscal 2018, applying the full retrospective transition method to all contracts. We concluded that the adoption of this standard primarily affected our policies and estimation methodologies of variable consideration associated with rebates and bill-backs, product returns and cash discounts. The provisions of the new standard did not impact the timing of revenue recognition but did impact the classification of certain payments to customers, moving an immaterial amount of such payments from expense to a deduction from net sales. Our sales predominantly contain a single performance obligation and revenue is recognized at a single point in time when ownership, risks and rewards transfer. Typically, this occurs when the goods are shipped to the customer. Revenues are recognized in an amount that reflects the net consideration we expect to receive in exchange for the goods. We report all amounts billed to a customer in a sale transaction as revenue, including those amounts related to shipping and handling. Shipping and handling costs are included in cost of goods sold. Under the new revenue guidance, we recognize our shipping and handling activities as a fulfillment of our promise to transfer products to our customers. We promote our products with advertising, consumer incentives and trade promotions. These programs include discounts, slotting fees, coupons, rebates, in-store display incentives and volume-based incentives. Customer trade promotion and consumer incentive activities are recorded as a reduction to the sale price based on amounts estimated as being due to customers and consumers at the end of a period. We derive these estimates principally on historical utilization and redemption rates. Payment terms in our invoices are based on the billing schedule established in our contracts or purchase orders with customers. We generally recognize the related trade receivable when the goods are shipped. In certain cases, we require a payment in advance of performance when the customer’s credit has not been established. We record these revenues as a contract liability; however, these amounts have historically been immaterial. The below tables set forth the adjustments to net sales, gross profit, selling, general and administrative expenses, operating income and other income during fiscal 2017 and 2016 as a result of the newly adopted revenue recognition standard and newly adopted presentation of net periodic pension cost and net periodic post-retirement benefit cost (in thousands, except per share data). As Reported Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,668,056 $ Cost of goods sold . . . . . . . . . . . . . . . . . . . Gross profit . . . . . . . . . . . . . . . . . . . . . . . . Selling, general and administrative 1,205,809 462,247 Impact of Revenue Adoption (21,669) $ — (21,669) Fiscal 2017 Impact of Pension Adoption Reclassification of Loss on Sale of Assets — $ — — As Adjusted — $ 1,646,387 1,205,809 — 440,578 — expenses . . . . . . . . . . . . . . . . . . . . . . . . . Loss on sale of assets . . . . . . . . . . . . . . . . Operating income . . . . . . . . . . . . . . . . . . . Other income . . . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . $ 205,234 — 239,402 (1,607) 217,463 $ (21,669) — — — — $ 1,491 — (1,491) (1,491) — $ (1,608) 1,608 — — — $ 183,448 1,608 237,911 (3,098) 217,463 Earnings per share: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3.27 $ 3.26 $ — $ — $ — $ — $ — $ — $ 3.27 3.26 - 74 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (2) Summary of Significant Accounting Policies (Continued) Fiscal 2016 As Reported Impact of Revenue Adoption Impact of Pension Adoption Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,391,257 $ (18,950) $ Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selling, general and administrative expenses . . . . . . . . . . . . . Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 109,425 $ — (18,950) (18,950) — — — 943,295 447,962 174,759 253,995 (363) $ As Adjusted — $ 1,372,307 943,295 — 429,012 — 157,028 1,219 252,776 (1,219) (1,582) (1,219) — $ 109,425 Basic and diluted earnings per share . . . . . . . . . . . . . . . . . . . . $ 1.73 $ — $ — $ 1.73 In January 2017, the FASB issued a new ASU that clarifies the definition of a business with the objective of adding guidance to assist companies with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The definition of a business may affect many areas of accounting, including acquisitions, disposals, goodwill and consolidation. The ASU is applied on a prospective basis and was effective for fiscal years beginning after December 15, 2017. We adopted this standard as of the first quarter of fiscal 2018, and there was no material impact to our consolidated financial statements. We applied this ASU while evaluating whether McCann’s, acquired on July 16, 2018, and Pirate Brands, sold on October 17, 2018, met the definition of a business. See Note 3, “Acquisitions and Divestitures.” In August 2016, the FASB issued a new ASU to provide guidance on eight specific cash flow classification issues and reduce diversity in practice in how some cash receipts and cash payments are presented and classified on the statement of cash flows. The ASU was effective for fiscal years beginning after December 15, 2017. We adopted this standard as of the first quarter of fiscal 2018, and there was no material impact to our consolidated financial statements. In March 2016, the FASB issued a new ASU that changes the accounting for certain aspects of share-based payments to employees. The new guidance requires that excess tax benefits (which represent the excess of actual tax benefits received at the date of vesting or settlement over the benefits recognized over the vesting period or upon issuance of share-based payments) and tax deficiencies (which represent the amount by which actual tax benefits received at the date of vesting or settlement is lower than the benefits recognized over the vesting period or upon issuance of share-based payments) be recorded in the income statement as a reduction of income taxes when the awards vest or are settled. The new guidance also requires excess tax benefits to be classified as an operating activity in the statement of cash flows rather than as a financing activity. As a result of this adoption, we recognized discrete tax benefits of $0.8 million in the income taxes line item of our consolidated statement of operations for fiscal 2017 related to excess tax benefits upon vesting or settlement in that period. We elected to adopt the cash flow presentation of the excess tax benefits prospectively, commencing with our statement of cash flows for the first quarter of 2017, where we began classifying these benefits, along with other income tax cash flows, as an operating activity. We excluded the excess tax benefits from the assumed proceeds available to repurchase shares in the computation of our diluted earnings per share for fiscal 2017. In November 2015, the FASB issued a new ASU that requires deferred tax assets and liabilities to be classified as noncurrent on the balance sheet. The ASU was effective beginning with the first quarter of fiscal 2017. We adopted the provisions of this ASU at the beginning of fiscal 2017 and applied the required changes in accounting principle on a retrospective basis. The update impacted presentation and disclosure only, and therefore, the adoption of this ASU did not have any impact on our results of operations or liquidity. - 75 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (2) Summary of Significant Accounting Policies (Continued) In July 2015, the FASB issued a new ASU that simplifies the subsequent measurement of inventories by replacing the current lower of cost or market test with a lower of cost and net realizable value test. We adopted the provisions of this ASU at the beginning of fiscal 2017. The adoption of this ASU did not have any impact on our consolidated financial position, results of operations or liquidity. (s) Recently Issued Accounting Standards In August 2018, the FASB issued a new ASU which clarifies that implementation costs incurred by customers in cloud computing arrangements are deferred if they would be capitalized by customers in software licensing arrangements under the internal-use software guidance. The update is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in any interim period. We currently do not expect the adoption of this ASU to have a material impact to our consolidated financial statements. In August 2018, the FASB issued a new ASU that aims to improve the overall usefulness of disclosures to financial statement users and reduce unnecessary costs to companies by changing disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. The update is effective for fiscal years beginning after December 15, 2020. We expect to update our defined benefit pension plan disclosures when the new standard becomes effective. We do not expect the adoption of this ASU to have an impact to our consolidated financial statements as this ASU only modifies disclosure requirements. In August 2018, the FASB issued a new ASU that aims to improve the overall usefulness of disclosures to financial statement users and reduce unnecessary costs to companies by changing disclosure requirements for fair value measurement. The update is effective for fiscal years beginning after December 15, 2019. We expect to update our fair value measurement disclosures when the new standard becomes effective. We do not expect the adoption of this ASU to have an impact to our consolidated financial statements as this ASU only modifies disclosure requirements. In January 2017, the FASB issued an amendment to the standards of goodwill impairment testing. The new guidance simplifies the test for goodwill impairment, by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The update is effective for fiscal years beginning after December 15, 2019. We expect to adopt the standards when they become effective. In February 2016, the FASB issued a new ASU that requires lessees to recognize lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under current guidance and to disclose key information about leasing arrangements. The new standard establishes a right-of-use model (ROU) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the statement of operations. The effective date for the new standard is December 30, 2018, with early adoption permitted. We elected a modified retrospective transition approach, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. If an entity chooses the second option, the transition requirements for existing leases also apply to leases entered into between the date of initial application and the effective date. The entity must also recast its comparative period financial statements and provide the disclosures required by the new standard for the comparative periods. We will adopt the new standard prospectively when it becomes effective in the first quarter of 2019. - 76 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (2) Summary of Significant Accounting Policies (Continued) The new standard provides a number of optional practical expedients in transition. We expect to elect the ‘package of practical expedients’, which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. We do not expect to elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter not being applicable to us. We expect to elect all of the new standard’s available transition practical expedients. We do not expect that this standard will have a material effect on our financial statements. Upon adoption, the most significant effects are expected to relate to (1) the recognition of new ROU assets and lease liabilities on our balance sheet for our operating leases, which is expected to be approximately $40.0 million at the beginning of fiscal 2019; and (2) providing significant new disclosures about our leasing activities. The new standard also provides practical expedients for an entity’s initial and ongoing accounting. We currently expect to elect the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, we will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition. We also currently expect to elect the practical expedient to not separate lease and non-lease components for all of our leases. (3) Acquisitions and Divestitures Acquisitions On July 16, 2018, we acquired the McCann’s brand of premium Irish oatmeal from TreeHouse Foods, Inc. for approximately $30.8 million in cash. We refer to this acquisition as the “McCann’s acquisition.” On October 2, 2017, we completed the acquisition of Back to Nature Foods Company, LLC and related entities, including the Back to Nature and SnackWell’s brands, from Brynwood Partners VI L.P., Mondelēz International and certain other sellers for approximately $162.8 million in cash. We refer to this acquisition as the “Back to Nature acquisition.” On December 2, 2016, we acquired Victoria Fine Foods, LLC, and a related entity, from Huron Capital Partners and certain other sellers for a purchase price of $71.9 million in cash. We refer to this acquisition as the “Victoria acquisition.” On November 21, 2016, we completed the acquisition of the spices & seasonings business of ACH Food Companies, Inc. for a purchase price of $366.9 million. We refer to this acquisition as the “spices & seasonings acquisition.” In connection with the acquisition, as of December 31, 2016, we had payables related to a transition services agreement with ACH Food Companies of $12.6 million included in accrued expenses in the accompanying consolidated balance sheets. We have accounted for each of these acquisitions using the acquisition method of accounting and, accordingly, have included the assets acquired, liabilities assumed and results of operations in our consolidated financial statements from the respective date of acquisition. The excess of the purchase price over the fair value of identifiable net assets acquired represents goodwill. Unamortizable trademarks are deemed to have an indefinite useful life and are not amortized. Customer relationship intangibles and amortizable trademarks acquired are amortized over 10 to 20 years. Goodwill and other intangible assets, except in the case of the Victoria and Back to Nature acquisitions, are deductible for income tax purposes. Inventory has been recorded at estimated selling price less costs of disposal and a reasonable selling profit and the property, plant and equipment and other intangible assets (including trademarks, customer relationships and other intangibles) acquired have been recorded at fair value as determined by our management with the assistance of a third-party valuation specialist. See Note 6, “Goodwill and Other Intangible Assets.” - 77 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (3) Acquisitions and Divestitures (Continued) The following table sets forth the preliminary allocation of the McCann’s acquisition purchase price to the estimated fair value of the net assets acquired at the date of acquisition. The preliminary purchase price allocation may be adjusted as a result of the finalization of our purchase price allocation procedures related to the assets acquired and liabilities assumed. During the fourth quarter of 2018, we recorded a purchase price adjustment to increase accrued expenses and goodwill by $0.2 million. We anticipate completing the purchase price allocation during the third quarter of fiscal 2019. McCann’s Acquisition (in thousands): Purchase Price: Cash paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,787 30,787 Preliminary Allocation: Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trademarks—unamortizable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Customer relationship intangibles—amortizable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ 12 973 24,800 2,000 (292) 3,294 30,787 The following table sets forth the allocation of the Back to Nature acquisition purchase price to the estimated fair value of the net assets acquired at the date of acquisition. During fiscal 2018, we recorded a purchase price adjustment to increase unamortizable trademarks by $0.1 million, goodwill by $2.8 million and other working capital by $2.1 million, and decrease inventory by $1.7 million and long-term deferred income tax liabilities, net, by $0.9 million. Back to Nature Acquisition (in thousands): Purchase Price: Cash paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162,848 162,848 Allocation: Trademarks—unamortizable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trademarks—amortizable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Customer relationship intangibles—amortizable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term deferred income tax liabilities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ 109,900 12,800 36,334 14,700 5,088 (9,892) (6,082) 162,848 - 78 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (3) Acquisitions and Divestitures (Continued) The following table sets forth the allocation of the Victoria acquisition purchase price to the estimated fair value of the net assets acquired at the date of acquisition. Victoria Acquisition (in thousands): Purchase Price: Cash paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ 71,972 71,972 Allocation: Trademarks—unamortizable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Customer relationship intangibles—amortizable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term deferred income tax liabilities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 45,500 12,298 9,298 6,400 5,729 (5,206) (2,047) 71,972 The following table sets forth the allocation of the spices & seasonings acquisition purchase price to the estimated fair value of the net assets acquired at the date of acquisition. Spices & Seasonings Acquisition (in thousands): Purchase Price: Cash paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ 366,932 366,932 Allocation: Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Customer relationship intangibles—amortizable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . Trademarks—unamortizable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other liabilities(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 120,545 89,250 65,200 62,193 49,571 (17,939) (1,888) 366,932 (1) In connection with the spices & seasonings acquisition, we agreed to establish a defined benefit plan for certain employees transferred to B&G Foods and certain former employees of the acquired spices & seasonings business. We also agreed to assume certain liabilities relating to the underfunded status of the former plan that such employees participated in prior to the acquisition. At each of December 29, 2018 and December 30, 2017, we recognized $17.9 million in “other liabilities” in the accompanying consolidated balance sheets to reflect our obligations with respect to the underfunded status of the defined benefit plan assets and liabilities transferred to us. - 79 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (3) Acquisitions and Divestitures (Continued) Unaudited Pro Forma Summary of Operations The following pro forma summary of operations presents our operations as if the spices & seasonings acquisition had occurred as of the beginning of fiscal 2016. In addition to including the results of operations of this acquisition, the pro forma information gives effect to the interest on additional borrowings, the amortization of trademark, customer relationship and seed technology intangibles, and the issuance of shares of common stock. On an actual basis, the spices & seasonings business contributed $256.0 million, $259.2 million and $28.2 million of our consolidated net sales for fiscal 2018, 2017 and 2016, respectively. (In thousands, except per share data): Net sales(1) (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Basic earnings per share(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted earnings per share(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ $ $ Fiscal 2016 1,587,212 129,712 2.01 2.00 (1) The pro forma information presented above does not purport to be indicative of the results that actually would have been attained had the spices & seasonings acquisition occurred as of the beginning of fiscal 2016, and is not intended to be a projection of future results. (2) Net sales has been adjusted as a result of our retrospective adoption of the new accounting standard relating to revenue recognition. See Note 2(s), “Summary of Significant Accounting Policies — Recently Issued Accounting Standards” above. The adjustments described above had no impact on net income or earnings per share. None of the McCann’s, Back to Nature and Victoria acquisitions were material to our consolidated results of operations or financial position and, therefore, pro forma financial information is not presented. Divestitures On October 17, 2018, we completed the sale of Pirate Brands to The Hershey Company for a purchase price of $420.0 million in cash. Pirate Brands includes the Pirate’s Booty, Smart Puffs and Original Tings brands. We refer to this divestiture as the “Pirate Brands sale.” Net deferred tax liabilities associated with the Pirate Brands sale were $107.3 million. We recognized a pre-tax gain on the Pirate Brands sale of $176.4 million, as calculated below (in thousands): Cash received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Assets sold: Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Customer relationships—amortizable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trademarks—unamortizable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 420,002 (6,688) (404) (8,408) (152,800) (70,952) (77) (239,328) (4,288) 176,386 In December 2018, the compensation committee of our board of directors approved a special bonus pool of $6.0 million to be paid in fiscal 2019 to our executive officers and certain members of senior management to recognize their significant contributions to the successful operation of Pirate Brands during our company’s five years of ownership of Pirate Brands and to the successful completion of the Pirate Brands sale at a sale price more than double what our company paid for Pirate Brands in 2013. - 80 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (4) Inventories Inventories consist of the following, as of the dates indicated (in thousands): Raw materials and packaging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Work-in-process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ December 29, 2018 December 30, 2017 70,315 140,425 291,109 501,849 61,905 95,282 244,168 401,355 $ $ (5) Property, Plant and Equipment, net Property, plant and equipment, net, consists of the following as of the dates indicated (in thousands): Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Office furniture and vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Construction-in-progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ December 29, 2018 11,718 125,768 311,457 45,230 18,580 512,753 (230,200) 282,553 $ December 30, 2017 11,671 118,534 285,813 40,341 16,497 472,856 (200,664) 272,192 $ Depreciation expense was $35.3 million, $31.6 million and $23.5 million for fiscal 2018, 2017 and 2016, respectively. (6) Goodwill and Other Intangible Assets The carrying amounts of goodwill and other intangible assets, as of the dates indicated, consist of the following (in thousands): December 29, 2018 December 30, 2017 Gross Carrying Accumulated Net Carrying Gross Carrying Accumulated Net Carrying Amount Amortization Amount Amount Amortization Amount Amortizable Intangible Assets Trademarks . . . . . . . . . . . . . . . . . . . $ Customer relationships . . . . . . . . . . Total amortizable intangible assets . . $ 3,369 $ 16,231 $ 19,600 $ 335,590 111,952 223,638 355,190 $ 115,321 $ 239,869 $ 19,600 $ 344,990 364,590 $ 17,324 2,276 $ 97,695 247,295 99,971 $ 264,619 Unamortizable Intangible Assets Goodwill(1) . . . . . . . . . . . . . . . . . . . . . . $ 584,435 Trademarks(1) . . . . . . . . . . . . . . . . . . . . $ 1,355,700 $ 649,292 $ 1,483,601 (1) The decreases in the carrying amounts of unamortizable intangible assets during fiscal 2018 are attributable to the Pirate Brands sale. During fiscal 2018, 2017 and 2016, we amortized $18.3 million, $17.6 million and $13.8 million, respectively, of the amortizable intangible assets. We expect to recognize $18.0 million of amortization expense in each of the fiscal years 2019, 2020, 2021 and 2022, respectively, and $17.8 million in fiscal 2023. See Note 3, “Acquisitions and Divestitures.” - 81 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (6) Goodwill and Other Intangible Assets (Continued) Rickland Orchards. During the second quarter of 2016, we discontinued the Rickland Orchards brand because there was not sufficient demand to warrant continued production. Accordingly, we wrote off the related intangible assets and recorded non-cash impairment charges to amortizable trademarks and customer relationship intangibles of $4.5 million and $0.9 million, respectively, which are recorded in “Impairment of intangible assets” in the accompanying consolidated statement of operations. (7) Long-Term Debt Long-term debt consists of the following, as of the dates indicated (in thousands): Revolving credit loans: Outstanding principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Unamortized deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Revolving credit loans, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 $ (2,996) 47,004 — (3,778) (3,778) December 29, 2018 December 30, 2017 Tranche B term loans due 2022: Outstanding principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unamortized deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unamortized discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tranche B term loans due 2022, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.625% senior notes due 2021: Outstanding principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unamortized deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.625% senior notes due 2021, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.25% senior notes due 2025: Outstanding principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unamortized deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unamortized premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.25% senior notes due 2025, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — — 700,000 (3,687) 696,313 900,000 (10,807) 3,371 892,564 650,110 (12,648) (2,279) 635,183 700,000 (5,206) 694,794 900,000 (12,535) 3,910 891,375 Total long-term debt, net of unamortized financing costs and discount/premium . . . . $ 1,635,881 $ 2,217,574 Senior Secured Credit Agreement. In fiscal 2017, we refinanced our senior secured credit facility twice by amending and restating our senior secured credit agreement, first on March 30, 2017, and again on November 20, 2017. The first refinancing, on March 30, 2017, reduced by 0.75% the spread over LIBOR or the applicable base rate on the then outstanding $640.1 million of tranche B term loans. On April 3, 2017, we repaid all of the outstanding borrowings and amounts due under our revolving credit facility and tranche A term loans using a portion of the net proceeds of our registered public offering of $500.0 million aggregate principal amount of 5.25% senior notes due 2025. On November 20, 2017, we again refinanced our senior secured credit facility. This second refinancing increased the principal amount of the tranche B term loans by $10.0 million to $650.1 million, reduced by 25 basis points the spread over LIBOR or the applicable base rate on the tranche B term loans and any revolving loans, increased the aggregate commitments under our revolving credit facility from $500.0 million to $700.0 million, and extended the maturity date applicable to our revolving credit facility from June 2019 to November 2022. - 82 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (7) Long-Term Debt (Continued) We made optional prepayments of our tranche B term loans of $150.0 million principal amount in fiscal 2018. On October 18, 2018, we made a mandatory prepayment of $352.2 million principal amount of tranche B term loans with the net proceeds of the Pirate Brands sale. On October 19, 2018, we made an optional prepayment of the remaining $147.9 million principal amount of tranche B term loans outstanding under our credit agreement from cash on hand and the proceeds of additional revolving loans under our credit agreement. As a result of the optional and mandatory prepayments of the tranche B term loans, we recognized a loss on extinguishment of debt of $13.1 million in fiscal 2018. At December 29, 2018, the available borrowing capacity under our revolving credit facility, net of outstanding letters of credit of $2.2 million, was $647.8 million. Proceeds of the revolving credit facility may be used for general corporate purposes, including acquisitions of targets in the same or a similar line of business as our company, subject to specified criteria. At December 29, 2018, there was $50.0 million outstanding under our revolving credit facility. We are required to pay a commitment fee of 0.50% per annum on the unused portion of the revolving credit facility. The maximum letter of credit capacity under the revolving credit facility is $50.0 million, with a fronting fee of 0.25% per annum for all outstanding letters of credit and a letter of credit fee equal to the applicable margin for revolving loans that are Eurodollar (LIBOR) loans. The revolving credit facility matures on November 21, 2022. We may prepay the term loans or permanently reduce the revolving credit facility commitment under the credit agreement at any time without premium or penalty (other than customary “breakage” costs with respect to the early termination of LIBOR loans). Subject to certain exceptions, the credit agreement provides for mandatory prepayment upon certain asset dispositions or casualty events and issuances of indebtedness. Interest under the revolving credit facility, including any outstanding letters of credit is determined based on alternative rates that we may choose in accordance with the credit agreement, including a base rate per annum plus an applicable margin ranging from 0.25% to 0.75%, and LIBOR plus an applicable margin ranging from 1.25% to 1.75%, in each case depending on our consolidated leverage ratio. Interest under the tranche B term loan facility was determined based on alternative rates that we could choose in accordance with the credit agreement, including a base rate per annum plus an applicable margin of 1.00%, and LIBOR plus an applicable margin of 2.00%. As of December 29, 2018, there were no tranche B term loans outstanding under our credit facility. Our obligations under the credit agreement are jointly and severally and fully and unconditionally guaranteed on a senior basis by all of our existing and certain future domestic subsidiaries. The credit agreement is secured by substantially all of our and our domestic subsidiaries’ assets except our and our domestic subsidiaries’ real property. The credit agreement contains customary restrictive covenants, subject to certain permitted amounts and exceptions, including covenants limiting our ability to incur additional indebtedness, pay dividends and make other restricted payments, repurchase shares of our outstanding stock and create certain liens. The credit agreement also contains certain financial maintenance covenants, which, among other things, specify a maximum consolidated leverage ratio and a minimum interest coverage ratio, each ratio as defined in the credit agreement. Our consolidated leverage ratio (defined as the ratio of our consolidated net debt, as of the last day of any period of four consecutive fiscal quarters to our adjusted EBITDA for such period) may not exceed 7.00 to 1.00. We are also required to maintain a consolidated interest coverage ratio of at least 1.75 to 1.00 as of the last day of any period of four consecutive fiscal quarters. As of December 29, 2018, we were in compliance with all of the covenants, including the financial covenants, in the credit agreement. The credit agreement also provides for an incremental term loan and revolving loan facility, pursuant to which we may request that the lenders under the credit agreement, and potentially other lenders, provide unlimited additional amounts of term loans or revolving loans or both on terms substantially consistent with those provided under the credit agreement. Among other things, the utilization of the incremental facility is conditioned on our ability to meet a maximum senior secured leverage ratio of 4.00 to 1.00, and a sufficient number of lenders or new lenders agreeing to participate in the facility. - 83 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (7) Long-Term Debt (Continued) 4.625% Senior Notes due 2021. On June 4, 2013, we issued $700.0 million aggregate principal amount of 4.625% senior notes due 2021 at a price to the public of 100% of their face value. Interest on the 4.625% senior notes is payable on June 1 and December 1 of each year. The 4.625% senior notes will mature on June 1, 2021, unless earlier retired or redeemed. We may redeem some or all of the 4.625% senior notes at a redemption price of 103.469% beginning June 1, 2016 and thereafter at prices declining annually to 100% on or after June 1, 2019, in each case plus accrued and unpaid interest to the date of redemption. In addition, if we undergo a change of control or upon certain asset sales, we may be required to offer to repurchase the 4.625% senior notes at the repurchase price set forth in the indenture plus accrued and unpaid interest to the date of repurchase. We may also, from time to time, seek to retire the 4.625% senior notes through cash repurchases of the 4.625% senior notes and/or exchanges of the 4.625% senior notes for equity securities, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. Our obligations under the 4.625% senior notes are jointly and severally and fully and unconditionally guaranteed on a senior basis by all of our existing and certain future domestic subsidiaries. The 4.625% senior notes and the subsidiary guarantees are our and the guarantors’ general unsecured obligations and are effectively junior in right of payment to all of our and the guarantors’ secured indebtedness and to all existing and future indebtedness and other liabilities of our non-guarantor subsidiaries; are pari passu in right of payment to all of our and the guarantors’ existing and future unsecured senior debt; and are senior in right of payment to all of our and the guarantors’ future subordinated debt. Our foreign subsidiaries are not guarantors, and any future foreign or partially owned domestic subsidiaries will not be guarantors, of the 4.625% senior notes. The indenture governing the 4.625% senior notes contains covenants with respect to us and the guarantors and restricts the incurrence of additional indebtedness and the issuance of capital stock; the payment of dividends or distributions on, and redemption of, capital stock; a number of other restricted payments, including certain investments; creation of specified liens, certain sale-leaseback transactions and sales of certain specified assets; fundamental changes, including consolidation, mergers and transfers of all or substantially all of our assets; and specified transactions with affiliates. Each of the covenants is subject to a number of important exceptions and qualifications. As of December 29, 2018, we were in compliance with all of the covenants in the indenture governing the 4.625% senior notes. 5.25% Senior Notes due 2025. On April 3, 2017, we issued $500.0 million aggregate principal amount of 5.25% senior notes due 2025 at a price to the public of 100% of their face value. On November 20, 2017, we issued an additional $400.0 million aggregate principal amount of 5.25% senior notes due 2025 at a price to the public 101% of their face value plus accrued interest from October 1, 2017, which equates to a yield to worst of 5.03%. The notes issued in November were issued as additional notes under the same indenture as our 5.25% senior notes due 2025 that were issued in April, and, as such, form a single series and trade interchangeably with the previously issued 5.25% senior notes. We used the net proceeds of the April 2017 offering to repay all of the outstanding borrowings and amounts due under our revolving credit facility and tranche A term loans, and to pay related fees and expenses. We used the net proceeds of the November 2017 offering to repay all of the then outstanding borrowings and amounts due under our revolving credit facility and to pay related fees and expenses. We have used a portion of, and intend to use the remaining portion of, the net proceeds of the April 2017 and November 2017 offerings for general corporate purposes, which have included and could include, among other things, repayment of other long term debt or possible acquisitions. - 84 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (7) Long-Term Debt (Continued) Interest on the 5.25% senior notes is payable on April 1 and October 1 of each year, commencing October 1, 2017. The 5.25% senior notes will mature on April 1, 2025, unless earlier retired or redeemed. On or after April 1, 2020, we may redeem some or all of the 5.25% senior notes at a redemption price of 103.9375% beginning April 1, 2020 and thereafter at prices declining annually to 100% on or after April 1, 2023, in each case plus accrued and unpaid interest to the date of redemption. In addition, if we undergo a change of control or upon certain asset sales, we may be required to offer to repurchase the 5.25% senior notes at the repurchase price set forth in the indenture plus accrued and unpaid interest to the date of repurchase. We may also, from time to time, seek to retire the 5.25% senior notes through cash repurchases of the 5.25% senior notes and/or exchanges of the 5.25% senior notes for equity securities, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. Our obligations under the 5.25% senior notes are jointly and severally and fully and unconditionally guaranteed on a senior basis by all of our existing and certain future domestic subsidiaries. The 5.25% senior notes and the subsidiary guarantees are our and the guarantors’ general unsecured obligations and are effectively junior in right of payment to all of our and the guarantors’ secured indebtedness and to all existing and future indebtedness and other liabilities of our non-guarantor subsidiaries; are pari passu in right of payment to all of our and the guarantors’ existing and future unsecured senior debt; and are senior in right of payment to all of our and the guarantors’ future subordinated debt. Our foreign subsidiaries are not guarantors, and any future foreign or partially owned domestic subsidiaries will not be guarantors, of the 5.25% senior notes. The indenture governing the 5.25% senior notes contains covenants with respect to us and the guarantors and restricts the incurrence of additional indebtedness and the issuance of capital stock; the payment of dividends or distributions on, and redemption of, capital stock; a number of other restricted payments, including certain investments; creation of specified liens, certain sale-leaseback transactions and sales of certain specified assets; fundamental changes, including consolidation, mergers and transfers of all or substantially all of our assets; and specified transactions with affiliates. Each of the covenants is subject to a number of important exceptions and qualifications. As of December 29, 2018, we were in compliance with all of the covenants in the indenture governing the 5.25% senior notes. Subsidiary Guarantees. We have no assets or operations independent of our direct and indirect subsidiaries. All of our present domestic subsidiaries jointly and severally and fully and unconditionally guarantee our long-term debt. There are no significant restrictions on our ability and the ability of our subsidiaries to obtain funds from our respective subsidiaries by dividend or loan. See Note 18, “Guarantor and Non-Guarantor Financial Information.” Loss on Extinguishment of Debt. Loss on extinguishment of debt for fiscal 2018 includes the write-off of deferred debt financing costs and unamortized discount of $11.1 million and $2.0 million, respectively, relating to the repayment of all outstanding borrowings under the tranche B term loans. Loss on extinguishment of debt for fiscal 2017 includes the write-off of deferred debt financing costs and unamortized discount of $0.9 million and $0.3 million, respectively, relating to the repayment of all outstanding borrowings under the tranche A term loans. Loss on extinguishment of debt for fiscal 2016 includes the write-off of deferred debt financing costs and unamortized discount of $2.2 million and $0.6 million, respectively, relating to the repayment of $40.1 million aggregate principal amount of our tranche A term loans and $109.9 million aggregate principal amount of our tranche B term loans. - 85 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (7) Long-Term Debt (Continued) Contractual Maturities. As of December 29, 2018, the aggregate contractual maturities of long-term debt are as follows (in thousands): Fiscal Year: 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 700,000 50,000 — 900,000 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,650,000 Accrued Interest. At December 29, 2018 and December 30, 2017, accrued interest of $15.6 million and $14.6 million, respectively, is included in accrued expenses in the accompanying consolidated balance sheets. (8) Fair Value Measurements The authoritative accounting literature relating to fair value measurements defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The accounting literature outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and the accounting literature details the disclosures that are required for items measured at fair value. Financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy under the accounting literature. The three levels are as follows: Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities. Level 2—Observable inputs other than Level 1 quoted prices, such as quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value driver is observable for the asset or liability, either directly or indirectly. Level 3—Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability. Cash and cash equivalents, trade accounts receivable, income tax receivable, trade accounts payable, accrued expenses, income tax payable and dividends payable are reflected in the consolidated balance sheets at carrying value, which approximates fair value due to the short-term nature of these instruments. - 86 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (8) Fair Value Measurements (Continued) The carrying values and fair values of our revolving credit loans, term loans, 4.625% senior notes and 5.25% senior notes as of December 29, 2018 and December 30, 2017 are as follows (in thousands): December 29, 2018 December 30, 2017 Revolving credit loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Tranche B term loans due 2022 . . . . . . . . . . . . . . . . . . . . . . 4.625% senior notes due 2021 . . . . . . . . . . . . . . . . . . . . . . . 5.25% senior notes due 2025 . . . . . . . . . . . . . . . . . . . . . . . . $ — (2) 50,000 $ 50,000 (1) $ — (2) 684,250 (3) 700,000 903,371 (4) $ 837,877 (3) $ 647,831 (2) 652,689 (1) 710,500 (3) 700,000 903,910 (4) $ 919,729 (3) Carrying Value Fair Value Carrying Value Fair Value — — $ (1) Fair values are estimated based on Level 2 inputs, which were quoted prices for identical or similar instruments in markets that are not active. (2) The carrying value of the tranche B term loans is net of discount. At December 30, 2017, the face amount of the tranche B term loans was $650.1 million. There are no tranche B term loans outstanding under our credit facility as of December 29, 2018. See Note 7, “Long-Term Debt.” (3) Fair values are estimated based on quoted market prices. (4) The carrying values of the 5.25% senior notes due 2025 include a premium. At December 29, 2018 the face amount of the 5.25% senior note due 2025 was $900.0 million. There was no Level 3 activity during fiscal 2018, 2017 or 2016. (9) Accumulated Other Comprehensive Loss The reclassifications from accumulated other comprehensive loss (AOCL) for fiscal 2018, 2017 and 2016 are as follows (in thousands): Amount Reclassified From AOCL Affected Line Item in the Details about AOCL Components Defined benefit pension plan items Amortization of unrecognized prior service December 29, December 30, December 31, Statement Where Net Income 2016 (loss) is Presented 2018 2017 cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of unrecognized loss . . . . . . . . . . . $ 2 $ 696 35 $ 517 44 See (1) below 454 See (1) below Accumulated other comprehensive loss before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total reclassification . . . . . . . . . . . . . . . . . . . . . . . . $ 698 (174) 524 $ 552 (218) 334 $ 498 Total before tax (188) Income tax expense 310 Net of tax (1) These items are included in the computation of net periodic pension cost. See Note 12, “Pension Benefits,” for additional information. - 87 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (9) Accumulated Other Comprehensive Loss (Continued) Changes in AOCL for fiscal 2018, 2017 and 2016 are as follows (in thousands): Defined Benefit Pension Plan Items Foreign Currency Translation Adjustments Balance at January 2, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Other comprehensive income (loss) before reclassifications . . Amounts reclassified from AOCL . . . . . . . . . . . . . . . . . . . . . . . Net current period other comprehensive income (loss) . . . . . . . . . Balance at December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other comprehensive (loss) income before reclassifications . . Amounts reclassified from AOCL . . . . . . . . . . . . . . . . . . . . . . . Net current period other comprehensive (loss) income . . . . . . . . . Balance at December 30, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other comprehensive income (loss) before reclassifications . . Amounts reclassified from AOCL . . . . . . . . . . . . . . . . . . . . . . . Net current period other comprehensive income (loss) . . . . . . . . . Balance at December 29, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (8,712) $ 1,202 310 1,512 (7,200) (6,119) 334 (5,785) (12,985) 237 524 761 (12,224) $ (3,984) $ (8,180) — (8,180) (12,164) 4,393 — 4,393 (7,771) (3,507) — (3,507) (11,278) $ Total (12,696) (6,978) 310 (6,668) (19,364) (1,726) 334 (1,392) (20,756) (3,270) 524 (2,746) (23,502) (10) Income Taxes The components of income before income tax expense consist of the following (in thousands): U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 217,044 $ 5,233 222,277 $ 136,015 $ 12,047 148,062 $ 150,266 26,800 177,066 Fiscal 2018 Fiscal 2017 Fiscal 2016 Income tax expense (benefit) consists of the following (in thousands): Fiscal 2018 Fiscal 2017 Fiscal 2016 Current: Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred: Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 41,583 $ 7,775 1,978 51,336 3,508 (3,190) (1,812) (1,494) 49,842 $ 3,977 $ 2,584 4,563 11,124 (88,716) 10,401 (2,210) (80,525) (69,401) $ 1,993 1,348 8,110 11,451 50,587 6,229 (626) 56,190 67,641 - 88 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (10) Income Taxes (Continued) Income tax expense differs from the expected income tax expense (computed by applying the U.S. federal income tax rate of 21% for fiscal year 2018 and 35% for fiscal years 2017 and 2016 to income before income tax expense) as a result of the following: Fiscal 2018 Fiscal 2017 35.0 % Fiscal 2016 35.0 % Expected tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase (decrease): State income taxes, net of federal income tax benefit . . . . . . . . . . . . . . . . Impact on deferred taxes from changes in state tax rates . . . . . . . . . . . . . Foreign income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impact on deferred taxes from U.S. Tax Act . . . . . . . . . . . . . . . . . . . . . . . Permanent differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign tax credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.0 % 2.9 (1.6) 0.8 0.3 0.1 (0.1) (1.0) 22.4 % 4.4 3.9 2.3 (90.0) (0.4) (1.6) (0.5) (46.9)% 2.9 1.0 2.8 — (0.1) (3.1) (0.3) 38.2 % In the fourth quarter of 2017, as a result of the U.S. Tax Act, we remeasured our U.S. deferred tax assets and liabilities at the lower U.S. corporate income tax rate, which resulted in a discrete tax benefit of approximately $133.3 million. In fiscal 2018, 2017 and 2016, changes in state apportionments or state tax laws impacted our blended state rate, resulting in a state tax benefit in fiscal 2018 of $3.5 million and state tax expense in fiscal 2017 and 2016 of $5.8 million and $1.8 million, respectively. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below (in thousands): December 29, December 30, 2018 2017 Deferred tax assets: Accounts receivable, principally due to allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Inventories, principally due to additional costs capitalized for tax purposes . . . . . . . . . . Accruals and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net operating loss and tax credit carry forwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 $ 2,090 8,512 4,663 15,289 (961) 14,328 37 2,695 6,806 4,462 14,000 — 14,000 Deferred tax liabilities: Plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goodwill and other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16,224) (222,851) (8,081) (247,156) Net deferred tax liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (230,962) $ (233,156) (18,592) (217,811) (8,887) (245,290) In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income and reversal of deferred tax liabilities over the periods in which the deferred tax assets are deductible, a valuation allowance of $1.0 million was recorded during fiscal 2018 to record only the portion of the deferred tax asset that management believes it is more likely than not that we will realize the benefits of these deductible differences. There was no valuation allowance recorded during fiscal 2017 or 2016. The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during future periods are reduced. - 89 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (10) Income Taxes (Continued) At December 29, 2018 and December 30, 2017, we had $0.6 million and $0.0 million, respectively, of reserves for uncertain tax positions which represents an increase of $0.6 million in fiscal 2018 for tax positions taken during 2018. Our policy is to classify interest and penalties that result from any income tax uncertainties as income tax expense. At December 29, 2018 we had intangibles of $1,048.7 million for tax purposes, which are amortizable through 2033. We operate in multiple taxing jurisdictions within the United States, Canada and Mexico and from time to time face audits from various tax authorities regarding the deductibility of certain expenses, state income tax nexus, intercompany transactions, transfer pricing and other matters. Examinations are ongoing in a number of jurisdictions within the United States. In August 2016, our company received notice that the IRS intended to conduct an audit of our 2014 tax year. During the third and fourth quarter of 2016, we provided documents and information to the IRS in response to its questions. During 2017 we closed this audit with no changes. We remain subject to examination in all of our tax jurisdictions until the applicable statutes of limitations expire. As of December 29, 2018, a summary of the tax years that remain subject to examination in our major tax jurisdictions are: United States—Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 and forward United States—States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2014 and forward Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2014 and forward 2015 and forward Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S. Tax Act. On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act, which we refer to as the “U.S. Tax Act.” The U.S. Tax Act provides for significant changes in the U.S. Internal Revenue Code of 1986, as amended. The U.S. Tax Act contains provisions with separate effective dates but is generally effective for taxable years beginning after December 31, 2017. Beginning on January 1, 2018, the U.S. Tax Act lowered the U.S. federal corporate income tax rate from 35% to 21% on our U.S. earnings from that date and beyond. The revaluation of our U.S. deferred tax assets and liabilities to the 21% corporate tax rate reduced our net U.S. deferred income tax liability by approximately $133.3 million and has been reflected as a reduction in our income tax benefit in our results for the fourth quarter ended December 30, 2017. This tax benefit was partially offset by an increase in our blended state rate of approximately $5.8 million and a repatriation expense of $0.9 million. The U.S. Tax Act also limits the deduction for net interest expense incurred by a corporate taxpayer to 30% of the taxpayer’s adjusted taxable income. We were not impacted by this limitation in fiscal 2018, however, we may be limited in 2019 and future years. The U.S. Treasury issued several proposed regulations supplementing the U.S. Tax Act in 2018, including detailed guidance clarifying the calculation of the mandatory tax on previously unrepatriated earnings, application of the existing foreign tax credit rules to newly created categories and expanding details for application of the base erosion tax on affiliate payments. These proposed regulations are intended to be applied retroactively and would not materially impact our 2018 tax rate if finalized in current form. We currently do not expect these regulations to have a material impact on income tax expense upon final adoption. The U.S. Treasury's proposed 2018 regulations also seek to clarify the application of the U.S. Tax Act provisions for the limitation of interest expense, including treatment of depreciation and other deductions in arriving at adjusted taxable income and application of the rules to controlled foreign affiliates. These regulations remain open for comment and are not effective until published in the federal register. As a result, we will monitor their impact to our filing positions and will record the impacts as discrete income tax expense adjustments in the period that the guidance is finalized. - 90 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (10) Income Taxes (Continued) The SEC issued guidance on December 23, 2017 providing a one-year measurement period from a registrant’s reporting period that includes the U.S. Tax Act’s enactment date to allow the registrant sufficient time to obtain, prepare and analyze information to complete the accounting required under ASC 740. As of December 29, 2018, we have recorded all known and estimable impacts of the U.S. Tax Act that are effective for fiscal 2018. The ultimate impact of the U.S. Tax Act on our reported results in fiscal 2018 may differ from the estimates provided herein, possibly materially, due to, among other things, changes in interpretations and assumptions we have made, guidance that may be issued, and other actions we may take as a result of the U.S. Tax Act different from that currently contemplated. (11) Capital Stock Voting Rights. The holders of our common stock are entitled to one vote per share with respect to each matter on which the holders of our common stock are entitled to vote. The holders of our common stock are not entitled to cumulate their votes in the election of our directors. Dividends. The holders of our common stock are entitled to receive dividends, if any, as they may be lawfully declared from time to time by our board of directors, subject to any preferential rights of holders of any outstanding shares of preferred stock. In the event of any liquidation, dissolution or winding up of our company, common stockholders are entitled to share ratably in our assets available for distribution to the stockholders, subject to the prior rights of holders of any outstanding preferred stock. See Note 17, “Quarterly Financial Data (unaudited),” for dividends declared for each quarter of fiscal 2018 and 2017. Additional Issuance of Our Authorized Common Stock and Preferred Stock. Additional shares of our authorized common stock and preferred stock may be issued, as determined by our board of directors from time to time, without approval of holders of our common stock, except as may be required by applicable law or the rules of any stock exchange or automated quotation system on which our securities may be listed or traded. Our board of directors has the authority by resolution to determine and fix, with respect to each series of preferred stock prior to the issuance of any shares of the series to which such resolution relates, the designations, powers, preferences and rights of the shares of preferred stock of such series and any qualifications, limitations or restrictions thereof. Stock Repurchases. On March 13, 2018, our board of directors authorized a stock repurchase program for the repurchase of up to $50.0 million of our company’s common stock through March 15, 2019. Under the authorization, we may purchase shares of common stock from time to time in the open market or in privately negotiated transactions in compliance with the applicable rules and regulations of the SEC. The timing and amount of stock repurchases under the program will be at the discretion of management, and will depend on available cash, market conditions and other considerations. Therefore, we cannot assure you as to the number or aggregate dollar amount of shares that will be repurchased under the repurchase program. We may discontinue the program at any time. Any shares repurchased pursuant to the repurchase program will be cancelled. During the second quarter of 2018, we repurchased and retired 694,749 shares of common stock at an average price per share (excluding fees and commissions) of $26.65, or $18.5 million in the aggregate. During the fourth quarter of 2018, we repurchased and retired 295,377 shares of common stock at an average price per share (excluding fees and commissions) of $28.39, or $8.4 million in the aggregate. As of December 29, 2018, we had $23.1 million available for future repurchases of common stock under the stock repurchase program. We did not repurchase any shares of common stock during fiscal 2017 or fiscal 2016. See Note 12, “Pension Benefits,” for disclosure relating to shares of our company’s common stock purchased by our defined benefit pension plans. - 91 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (11) Capital Stock (Continued) August 2016 Common Stock Offering. On August 12, 2016, we completed an underwritten public offering of 3,750,000 shares of our common stock at a price to the public of $49.00 per share. The proceeds of the offering were $179.9 million, after deducting underwriting discounts and commissions and other offering expenses. The offering was made by means of a prospectus and related prospectus supplement included as part of a new shelf registration statement filed with the SEC. We used the net proceeds of the offering to fund a portion of the purchase price for the spices & seasonings acquisition. See Note 3, “Acquisitions and Divestitures.” March 2016 Common Stock Offering. On March 15, 2016, we completed an underwritten public offering of 4,600,000 shares of our common stock at a price to the public of $33.55 per share. The proceeds of the offering were $152.0 million, after deducting underwriting discounts and commissions and other offering expenses. The offering was made by means of a prospectus and related prospectus supplement included as part of an effective shelf registration statement previously filed with the SEC. We used the net proceeds of the offering to repay a portion of our long-term debt. See Note 7, “Long-Term Debt.” (12) Pension Benefits As of December 29, 2018, we had four defined benefit pension plans covering approximately 43% of our employees. The benefits are based on years of service and the employee’s compensation, as defined. The following table sets forth our defined benefit pension plans’ benefit obligation, fair value of plan assets and funded status recognized in the consolidated balance sheets. We used December 29, 2018 and December 30, 2017 measurement dates for fiscal 2018 and 2017, respectively, to calculate end of year benefit obligations, fair value of plan assets and annual net periodic benefit cost (in thousands): December 29, December 30, 2018 2017 — (15,126) 7,710 5,064 (3,468) 138,152 Change in projected benefit obligation: Projected benefit obligation at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 143,972 $ Projected benefit obligation acquired (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Projected benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in plan assets: Fair value of plan assets at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fair value of plan assets acquired (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employer contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fair value of plan assets at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net amount recognized: Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Funded status at the end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amount recognized in accumulated other comprehensive loss consists of: Prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) (20,799) 7,816 Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (12,224) $ (12,985) 70,425 50,939 14,219 6,334 4,998 (2,943) 143,972 74,397 33,000 11,148 8,650 (2,943) 124,252 1,135 (20,857) (19,722) 124,252 — (6,678) 5,600 (3,468) 119,706 805 (19,251) (18,446) — (19,786) 7,562 (1) Relates to the spices & seasonings acquisition, discussed below in this Note 12. - 92 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (12) Pension Benefits (Continued) The accumulated benefit obligations of these plans were $129.4 million and $134.4 million at December 29, 2018 and December 30, 2017, respectively. The following information is presented for those plans with an accumulated benefit obligation in excess of plan assets (in thousands): December 29, December 30, Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2018 54,601 $ 40,935 $ 2017 59,010 39,956 The amounts in accumulated other comprehensive loss that are expected to be recognized as components of net periodic benefit cost in fiscal 2018 are as follows (in thousands): Prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — 858 858 Fiscal 2018 December 29, 2018 December 30, 2017 Weighted-average assumptions: Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.08 - 4.18 % 3.00 % Rate of compensation increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.50 % Expected long-term rate of return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.45 - 3.56 % 3.00 % 6.50 % The discount rate used to determine year-end fiscal 2018 and fiscal 2017 pension benefit obligations was derived by matching the plans’ expected future cash flows to the corresponding yields from the Citigroup Pension Discount Curve. This yield curve has been constructed to represent the available yields on high-quality fixed-income investments across a broad range of future maturities. The overall expected long-term rate of return on plan assets assumption is based upon a building-block method, whereby the expected rate of return on each asset class is broken down into the following components: (1) inflation; (2) the real risk-free rate of return (i.e., the long-term estimate of future returns on default-free U.S. government securities); and (3) the risk premium for each asset class (i.e., the expected return in excess of the risk-free rate). All three components are based primarily on historical data, with modest adjustments to take into account additional relevant information that is currently available. For the inflation and risk-free return components, the most significant additional information is that provided by the market for nominal and inflation-indexed U.S. Treasury securities. That market provides implied forecasts of both the inflation rate and risk-free rate for the period over which currently available securities mature. The historical data on risk premiums for each asset class is adjusted to reflect any systemic changes that have occurred in the relevant markets; e.g., the higher current valuations for equities, as a multiple of earnings, relative to the longer-term average for such valuations. Net periodic pension cost includes the following components (in thousands): Service cost—benefits earned during the period . . . . . . . . . . . . . . . . . . . . . . Interest cost on projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of unrecognized prior service cost . . . . . . . . . . . . . . . . . . . . . Amortization of unrecognized loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net periodic pension cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ $ Fiscal 2018 Fiscal 2017 Fiscal 2016 3,325 2,717 (4,434) 44 454 2,106 6,334 4,998 (7,041) 35 517 4,843 7,710 5,064 (8,134) 2 696 5,338 $ $ $ - 93 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (12) Pension Benefits (Continued) As a result of adopting the ASU issued by the FASB in March 2017, that improves the presentation of net periodic pension cost and net periodic post-retirement benefit cost, we have reclassified net periodic pension cost, excluding service cost, out of selling, general and administrative expenses and into other income on our consolidated statements of operations in the amount of $2.4 million, $1.5 million and $1.2 million for fiscal 2018, 2017 and 2016, respectively. The asset allocation for our pension plans at the end of fiscal 2018 and fiscal 2017, and the target allocation for fiscal 2018, by asset category, follows. Our pension plan assets are managed by outside investment managers; assets are rebalanced at the end of each quarter. Our investment strategy with respect to pension assets is to maximize return while protecting principal. The investment manager has the flexibility to adjust the asset allocation and move funds to the asset class that offers the most opportunity for investment returns. Percentage of Plan Assets at Year End Target December 29, December 30, Asset Category Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fixed income securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Allocation 75 % 25 % — % 100 % 2018 65 % 31 % 4 % 100 % 2017 68 % 28 % 4 % 100 % The general investment objective of each of the pension plans is to grow the plan assets in relation to the plan liabilities while prudently managing the risk of a decrease in the plan’s assets relative to those liabilities. To meet this objective, our management has adopted the above target allocations that it reconsiders from time to time as circumstances change. The actual plan asset allocations may be within a range around these targets. The actual asset allocations are reviewed and rebalanced on a periodic basis. The fair values of our pension plan assets at December 29, 2018 and December 30, 2017, utilizing the fair value hierarchy discussed in Note 8, “Fair Value Measurements” follow (in thousands): December 29, 2018 December 30, 2017 Level 1 Levels 2 & 3 Level 1 Levels 2 & 3 Asset Category Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,235 $ Equity securities: — $ 5,655 $ — U.S. mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S. common stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign common stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,645 14,678 19,031 511 — — — — 52,058 9,143 10,465 12,481 Fixed income securities: U.S. mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,606 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 119,706 $ 34,450 — — $ 124,252 $ — — — — — — The investment portfolio contains a diversified blend of common stocks, bonds, cash equivalents and other investments, which may reflect varying rates of return. The investments are further diversified within each asset classification. The portfolio diversification provides protection against a single security or class of securities having a disproportionate impact on aggregate performance. Of the $19.0 million of U.S. common stocks in the investment portfolio at the end of fiscal 2018, $11.5 million was invested in B&G Foods’ common stock. Of the $10.5 million of U.S. common stocks in the investment portfolio at the end of fiscal 2017, $5.8 million was invested in B&G Foods’ common stock. - 94 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (12) Pension Benefits (Continued) Information about the expected cash flows for the pension plan follows (in thousands): Pension Payments Benefit payments: 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2024 to 2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,845 4,187 4,601 5,125 5,514 35,511 We currently do not anticipate making any contributions to our pension plans in fiscal 2019. We also sponsor defined contribution plans covering substantially all of our employees. Employees may contribute to these plans and these contributions are matched by us at varying amounts. Contributions for the matching component of these plans amounted to $1.7 million for fiscal 2018, $1.6 million for fiscal 2017 and $1.1 million for fiscal 2016. During the second quarter of 2018, our defined benefit pension plans purchased 227,667 shares of our company’s common stock at an average price per share (excluding fees and commissions) of $28.27, or $6.4 million in the aggregate. Multi-Employer Defined Benefit Pension Plan. We also contribute to the Bakery and Confectionery Union and Industry International Pension Fund (EIN 52-6118572, Plan No. 001), a multi-employer defined benefit pension plan, sponsored by the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM). The plan provides multiple plan benefits with corresponding contribution rates that are collectively bargained between participating employers and their affiliated BCTGM local unions. We were notified that for the plan year beginning January 1, 2012, the plan was in critical status and classified in the Red Zone. As of the date of the accompanying audited consolidated financial statements, the plan remains in critical status. The law requires that all contributing employers pay to the plan a surcharge to help correct the plan’s financial situation. The amount of the surcharge is equal to a percentage of the amount an employer is otherwise required to contribute to the plan under the applicable collective bargaining agreement. During the second quarter of 2015, we agreed to a collective bargaining agreement that, among other things, implements a rehabilitation plan. As a result, our contributions to the plan are expected to increase by at least 5.0% per year. B&G Foods made contributions to the plan of $0.8 million, $0.9 million and $0.8 million, in fiscal 2018, 2017 and 2016, respectively. In each of fiscal 2018, 2017 and 2016, we paid less than $0.1 million in surcharges and expect to pay surcharges of less than $0.1 million in fiscal 2019 assuming consistent hours are worked. These contributions represented less than five percent of total contributions made to the plan. Spices & Seasonings Acquisition. In connection with the spices & seasonings acquisition, we agreed to and did establish a defined benefit plan for certain employees transferred to us and certain former employees of the acquired spices & seasonings business. We also agreed to and did assume certain liabilities relating to the underfunded status of the former plan that such employees participated in prior to the acquisition. At December 31, 2016, we recognized an initial $17.5 million in “other liabilities” in the accompanying consolidated balance sheet to reflect our obligations with respect to the underfunded status of the defined benefit plan assets and liabilities transferred to us, and during fiscal 2017 we adjusted that amount to $17.9 million, which consists of a projected benefit obligation of $50.9 million and fair value of plan assets of $33.0 million. - 95 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (13) Commitments and Contingencies Operating Leases. We have several noncancelable operating leases, primarily for our corporate headquarters, certain of our manufacturing facilities, warehouses, transportation equipment and machinery. These leases generally require us to pay all executory costs such as maintenance, taxes and insurance. Total rental expense for our operating leases was $13.1 million, $12.4 million and $9.1 million, for fiscal 2018, 2017 and 2016, respectively. As of December 29, 2018, future minimum lease payments under non-cancelable operating leases (with initial or remaining lease terms in excess of one year) for the periods set forth below were as follows (in thousands): Fiscal year ending: 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,298 10,953 8,991 4,733 4,784 8,445 50,204 Legal Proceedings. We are from time to time involved in various claims and legal actions arising in the ordinary course of business, including proceedings involving product liability claims, product labeling claims, worker’s compensation and other employee claims, and tort and other general liability claims, as well as trademark, copyright, patent infringement and related claims and legal actions. While we cannot predict with certainty the results of these claims and legal actions in which we are currently or in the future may be involved, we do not expect that the ultimate disposition of any currently pending claims or actions will have a material adverse effect on our consolidated financial position, results of operations or liquidity. Environmental. We are subject to environmental laws and regulations in the normal course of business. We did not make any material expenditures during fiscal 2018, 2017 or 2016 in order to comply with environmental laws and regulations. Based on our experience to date, management believes that the future cost of compliance with existing environmental laws and regulations (and liability for any known environmental conditions) will not have a material adverse effect on our consolidated financial position, results of operations or liquidity. However, we cannot predict what environmental or health and safety legislation or regulations will be enacted in the future or how existing or future laws or regulations will be enforced, administered or interpreted, nor can we predict the amount of future expenditures that may be required in order to comply with such environmental or health and safety laws or regulations or to respond to such environmental claims. Collective Bargaining Agreements. As of December 29, 2018, approximately 1,626 of our 2,675 employees, or 61%, were covered by collective bargaining agreements. The collective bargaining agreement covering our Brooklyn facility, which covers approximately 80 employees, is the only collective bargaining agreement expiring in the next twelve months. While we believe that our relations with our union employees are in general good, we cannot assure you that we will be able to negotiate a new collective bargaining agreement for our Brooklyn facility on terms satisfactory to us, or at all, and without production interruptions, including labor stoppages. At this time, however, management does not expect that the outcome of these negotiations will have a material adverse impact on our business, financial condition or results of operations. Severance and Change of Control Agreements. We have employment agreements with each of our executive officers. The agreements generally continue until terminated by the executive or by us, and provide for severance payments under certain circumstances, including termination by us without cause (as defined in the agreements) or as a result of the employee’s death or disability, or termination by us or a deemed termination upon a change of control (as defined in the agreements). Severance benefits generally include payments for salary continuation, continuation of health care and insurance benefits, present value of additional pension credits and, in the case of a change of control, accelerated vesting under compensation plans and, in certain cases, potential gross up payments for excise tax liability. - 96 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (14) Incentive Plans Annual Bonus Plan. Annually, our board of directors establishes a bonus plan that provides for cash awards to be made to our executive officers and other senior managers upon our company’s attainment of pre-set annual financial objectives and individual performance. Awards are normally paid in cash in a lump sum following the close of each plan year. Threshold performance objectives were not attained for fiscal 2018 or 2017 and therefore accrued expenses in the accompanying consolidated balance sheets do not include an accrual for the annual bonus plan at December 29, 2018 or December 30, 2017. Omnibus Incentive Compensation Plan. Upon the recommendation of our compensation committee, our board of directors on March 10, 2008 adopted (subject to stockholder approval) the B&G Foods, Inc. 2008 Omnibus Incentive Compensation Plan, which we refer to as the Omnibus Plan. Our stockholders approved the Omnibus Plan at our annual meeting on May 6, 2008. Our stockholders reapproved the material terms of the performance goals in our Omnibus Plan at our annual meeting on May 16, 2013. Upon the recommendation of our compensation committee, our board of directors in March 2017 approved (subject to stockholder approval) the amendment and restatement of the Omnibus Plan, renamed the Omnibus Incentive Compensation Plan. Our stockholders approved the amended and restated Omnibus Plan, including the materials terms of the performance goals, at our annual meeting on May 23, 2017. The Omnibus Plan authorizes the grant of performance share awards, restricted stock, options, stock appreciation rights, deferred stock, stock units and cash-based awards to employees, non-employee directors and consultants. The total number of shares available for issuance under the Omnibus Plan is 4,500,000, of which 2,274,515 were available for future issuance as of December 29, 2018. Some of those shares are subject to outstanding performance share LTIAs and stock options as described in the table below. Performance Share Awards. Beginning in fiscal 2008, our compensation committee has made annual grants of performance share LTIAs to our executive officers and certain other members of senior management under the Omnibus Plan. The performance share LTIAs entitle the participants to earn shares of common stock upon the attainment of certain performance goals over the applicable performance period. The performance period is typically three years. Each performance share LTIA has a threshold, target and maximum payout. The awards are settled based upon our performance over the applicable performance period. For the performance share LTIAs granted to date, the applicable performance metric is and has been “excess cash” (as defined in the award agreements). If our performance fails to meet the performance threshold, then the awards will not vest and no shares will be issued pursuant to the awards. If our performance meets or exceeds the performance threshold, then a varying amount of shares from the threshold amount (50% of the target number of shares) up to the maximum amount (200% of the target number of shares) may be earned. Subject to the performance goal for the applicable performance period being certified in writing by our compensation committee as having been achieved, shares of common stock are issued prior to March 15 following the completion of the performance period. - 97 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (14) Incentive Plans (Continued) The following table details the activity in our performance share LTIAs for fiscal 2018: Beginning of fiscal 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . End of fiscal 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Performance Shares (1) 437,218 242,436 (150,255) (20,082) 509,317 Number of Weighted Average Grant Date Fair Value (per share)(2) $ $ $ $ $ 29.36 21.39 23.84 26.86 27.30 (1) Solely for purposes of this table, the number of performance shares is based on the participants earning the maximum number of performance shares (i.e., 200% of the target number of performance shares). (2) The fair value of the awards was determined based upon the closing price of our common stock on the applicable measurement dates (i.e., the deemed grant dates for accounting purposes) reduced by the present value of expected dividends using the risk- free interest-rate as the award holders are not entitled to dividends or dividend equivalents during the vesting period. Stock Options. The following table details our stock option activity for fiscal 2018: Outstanding at beginning of fiscal 2018 . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Outstanding at end of fiscal 2018 . . . . . . . . . . . Exercisable at end of fiscal 2018 . . . . . . . . . . . Options 832,569 397,864 (1,787) (33,515) (1,026) 1,194,105 531,316 Weighted Average Weighted Average Contractual Life Exercise Price Remaining (Years) $ $ $ $ $ $ $ 33.45 27.00 27.77 30.66 27.77 31.40 31.36 7.46 6.15 Aggregate Intrinsic Value $ $ 986 149 The fair value of the options was estimated on the date of grant using the Black-Scholes option-pricing model utilizing the following assumptions. Expected volatility was based on both historical and implied volatilities of our common stock over the estimated expected term of the award. The expected term of the options granted represents the period of time that options were expected to be outstanding and is based on the “simplified method” in accordance with accounting guidance. We utilized the simplified method to determine the expected term of the options as we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury implied yield at the date of grant. Weighted average grant date fair value . . . . . . . . . . . . . . . . . . . . . . . . . . $ Expected volatility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expected term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2018 3.74 30.6% - 31.7% 5.5 - 6.5 years 2.6% - 2.8% 6.7% - 8.1% $ 2017 7.29 27.5% - 29.2% 5.5 - 6.5 years 1.8% - 2.4% 4.5% - 5.22% - 98 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (14) Incentive Plans (Continued) Non-Employee Director Grants. Each of our non-employee directors receives an annual grant of common stock as part of his or her non-employee director compensation. These shares fully vest when issued. In addition, each of our non-employee directors is given the option to receive all or a portion of his or her annual board service fee in cash or an equivalent amount of stock options. Such stock options are reflected in the information provided above under “Stock Options.” The following table details the number of shares of common stock issued by our company during fiscal 2018, 2017 and 2016 upon the vesting of performance share long-term incentive awards and for non-employee director annual equity grants and other share based compensation: Number of performance shares vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shares withheld to fund statutory minimum tax withholding . . . . . . . . . . . . . . Shares of common stock issued for performance share LTIAs . . . . . . . . . . . Shares of common stock issued upon the exercise of stock options . . . . . . . Shares of common stock issued to non-employee directors for annual 2018 150,255 57,298 92,957 1,787 2017 110,528 42,368 68,160 4,011 December 29, December 30, December 31, 2016 101,094 37,596 63,498 — equity grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total shares of common stock issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Excess tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 35,039 129,783 — 20,559 92,730 — 16,072 79,570 343 $ $ The following table sets forth the compensation expense recognized for share-based payments (performance share LTIAs, stock options, non-employee director stock grants and other share based payments) during the last three fiscal years and where that expense is reflected in our consolidated statements of operations (in thousands): Consolidated Statements of Operations Location Compensation expense included in cost of goods sold . . . . . . . . . . . . . . . . . . . . . . $ Compensation expense included in selling, general and administrative Fiscal 2018 Fiscal 2017 Fiscal 2016 1,060 1,236 $ 1,203 $ expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total compensation expense for share-based payments . . . . . . . . . . . . . . . . . . $ 1,789 3,025 $ 3,412 4,615 $ 4,738 5,798 As of December 29, 2018, we currently do not have any unrecognized compensation expense related to performance share LTIAs, as threshold performance objectives are not expected to be attained for the 2017 to 2019 performance share LTIAs or the 2018 to 2020 performance share LTIAs. As of December 29, 2018, there was $1.2 million of unrecognized compensation expense related to stock options, which is expected to be recognized over the next three fiscal years. - 99 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (15) Net Sales by Brand The following table sets forth net sales by brand (in thousands): Brand(1): Fiscal 2018 Fiscal 2017(2) Fiscal 2016(2) Green Giant - frozen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Spices & Seasonings(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ortega . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Green Giant - shelf stable(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pirate Brands(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Back to Nature(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Maple Grove Farms of Vermont . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cream of Wheat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mrs. Dash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . All other brands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 294,963 28,171 140,248 153,636 82,865 — 72,525 61,661 60,388 477,850 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,700,764 $ 1,646,387 $ 1,372,307 372,696 $ 255,965 141,265 107,476 74,853 69,704 68,048 62,520 58,676 489,561 330,004 $ 259,196 137,276 120,541 87,705 20,283 67,987 60,833 59,816 502,746 (1) Table includes net sales for each of our brands whose fiscal 2018 net sales equaled or exceeded 3% of our total fiscal 2018 net sales and for all other brands in the aggregate. Net sales for each brand includes branded net sales and, if applicable, any private label and foodservice net sales attributable to the brand. (2) Net sales for fiscal 2017 and 2016 have been adjusted to reflect our retrospective adoption of the new revenue recognition standard. See Note 2, “Summary of Significant Accounting Policies — Newly Adopted Accounting Standards.” (3) Includes net sales for multiple brands acquired as part of the spices & seasonings acquisition that we completed on November 21, 2016. Does not include net sales for Mrs. Dash and our other legacy spices & seasonings brands. (4) Does not include net sales of the Le Sueur brand. Net sales of the Le Sueur brand are included below in “All other brands.” (5) We completed the Pirate Brands sale on October 17, 2018. See Note 3, “Acquisitions and Divestitures.” (6) We completed the Back to Nature acquisition on October 2, 2017. See Note 3, “Acquisitions and Divestitures.” (16) Restructuring During fiscal 2016, we closed our Spartanburg, South Carolina manufacturing and warehouse facilities and moved our Mama Mary’s operations to our manufacturing facility in Yadkinville, North Carolina. This decision was consistent with our ongoing efforts to reduce excess production capacity, improve productivity and operating efficiencies and reduce overall costs. In connection with the restructuring, we recorded a charge for employee severance and other employee costs of approximately $0.8 million during the third quarter of 2016 and a non-cash write-off of equipment of approximately $0.3 million during the fourth quarter of 2016. There were no restructuring expenses during fiscal 2017 or 2018. - 100 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (17) Quarterly Financial Data (unaudited) First Quarter Second Quarter Third Quarter Fourth Quarter (in thousands, expect per share data) Net sales 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 431,729 $ 388,378 $ 422,602 $ 458,055 2017(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 412,307 $ 361,676 $ 406,051 $ 466,353 Gross profit 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 103,356 $ 81,173 $ 115,039 $ 49,932 2017(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 121,219 $ 104,557 $ 120,942 $ 93,860 Net income 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,547 $ 7,976 $ 31,988 $ 111,924 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 32,764 $ 22,061 $ 32,730 $ 129,908 Basic earnings per share 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.31 $ 0.49 $ 0.12 $ 0.33 $ 0.49 $ 0.49 $ Diluted earnings per share 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.31 $ 0.49 $ 0.12 $ 0.33 $ 0.48 $ 0.49 $ Cash dividends declared per share 1.70 1.95 1.70 1.95 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.465 $ 0.475 $ 0.475 $ 0.475 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.465 $ 0.465 $ 0.465 $ 0.465 (1) Net sales and gross profit have been adjusted as a result of our retrospective adoption of the new accounting standard relating to revenue recognition for each of the quarters in fiscal 2017. See Note 2, “Summary of Significant Accounting Policies – Newly Adopted Accounting Standards” for detailed information. Earnings per share were computed individually for each of the quarters presented using the weighted average number of shares outstanding during each quarterly period, while earnings per share for the full year were computed using the weighted average number of shares outstanding during the full year; therefore, the sum of the earnings per share amounts for the quarters may not equal the total for the full year. (18) Guarantor and Non-Guarantor Financial Information As further discussed in Note 7, “Long-Term Debt,” our obligations under the 4.625% senior notes and the 5.25% senior notes are jointly and severally and fully and unconditionally guaranteed on a senior basis by all of our existing and certain future domestic subsidiaries, which we refer to in this note as the guarantor subsidiaries. Our foreign subsidiaries, which we refer to in this note as the non-guarantor subsidiaries, do not guarantee the 4.625% senior notes or the 5.25% senior notes. The following condensed consolidating financial information presents the condensed consolidating balance sheet as of December 29, 2018 and December 30, 2017, the related condensed consolidating statement of operations for the fiscal years ended December 29, 2018 and December 30, 2017, and the related condensed consolidating statement of cash flows for the fiscal years ended December 29, 2018 and December 30, 2017, for: 1. 2. 3. 4. B&G Foods, Inc. (the Parent), the guarantor subsidiaries, the non-guarantor subsidiaries, and the Parent and all of its subsidiaries on a consolidated basis. - 101 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (18) Guarantor and Non-Guarantor Financial Information (Continued) The information includes elimination entries necessary to consolidate the Parent with the guarantor subsidiaries and non-guarantor subsidiaries. The guarantor subsidiaries and non-guarantor subsidiaries are presented on a combined basis. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions. Separate financial information for each of the guarantor subsidiaries and non-guarantor subsidiaries are not presented because management believes such financial statements would not be meaningful to investors. Condensed Consolidating Balance Sheet As of December 29, 2018 (In thousands) Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Current Assets: Assets Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . Trade accounts receivable, net . . . . . . . . . . . . . . . . . . . Inventories, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses and other current assets . . . . . . . . . . . Income tax receivable . . . . . . . . . . . . . . . . . . . . . . . . . . Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . $ — — — — — — $ 9,871 140,464 332,774 15,995 — 499,104 Property, plant and equipment, net . . . . . . . . . . . . . . . . Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other intangibles, net . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . Investments in subsidiaries . . . . . . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — — — 2,584,598 $ 2,584,598 238,128 584,435 1,595,569 1,193 — 93,069 $ 3,011,498 Liabilities and Stockholders' Equity Current Liabilities: Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intercompany payables . . . . . . . . . . . . . . . . . . . . . . . . . Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . $ $ — — — 31,178 — 31,178 Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,653,371 — — 1,684,549 115,946 53,386 31,247 — (16,581) 183,998 (17,490) 24,490 235,902 426,900 $ $ $ 1,777 11,243 68,581 3,993 1,398 86,992 44,425 — — 13 4,940 — 136,370 24,054 2,274 377 — 16,581 43,286 — 15 — 43,301 $ — — — — — — $ 11,648 151,707 401,355 19,988 1,398 586,096 — — — — — (2,677,667) $ (2,677,667) 282,553 584,435 1,595,569 1,206 4,940 — $ 3,054,799 $ — — — — — — — — — — $ 140,000 55,660 31,624 31,178 — 258,462 1,635,881 24,505 235,902 2,154,750 Stockholders' Equity: Preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . Accumulated other comprehensive loss . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . Total liabilities and stockholders’ equity . . . . . . . . — 656 116,339 (23,502) 806,556 900,049 $ 2,584,598 — — 1,803,769 (23,502) 804,331 2,584,598 $ 3,011,498 $ — — 68,253 (11,279) 36,095 93,069 136,370 — — (1,872,022) 34,781 (840,426) (2,677,667) $ (2,677,667) — 656 116,339 (23,502) 806,556 900,049 $ 3,054,799 - 102 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (18) Guarantor and Non-Guarantor Financial Information (Continued) Condensed Consolidating Balance Sheet As of December 30, 2017 (In thousands) Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Current Assets: Assets Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . Trade accounts receivable, net . . . . . . . . . . . . . . . . . . . Inventories, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses and other current assets . . . . . . . . . . . Income tax receivable . . . . . . . . . . . . . . . . . . . . . . . . . . Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . $ — — — — — — $ 204,815 129,769 428,613 15,932 16,259 795,388 Property, plant and equipment, net . . . . . . . . . . . . . . . . Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other intangibles, net . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . Investments in subsidiaries . . . . . . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — — — 3,163,482 $ 3,163,482 229,219 649,292 1,748,220 1,603 (1) 91,766 $ 3,515,487 Liabilities and Stockholders' Equity Current Liabilities: Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intercompany payables . . . . . . . . . . . . . . . . . . . . . . . . . Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . $ $ — — — 30,922 — 30,922 Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,251,741 — — 2,282,663 102,594 45,586 — — (23,167) 125,013 (34,167) 24,881 236,278 352,005 $ $ $ 1,691 11,623 73,236 4,122 535 91,207 42,973 — — 14 3,123 — 137,317 19,764 2,481 139 — 23,167 45,551 — — — 45,551 $ — — — — — — $ 206,506 141,392 501,849 20,054 16,794 886,595 — — — — — (3,255,248) $ (3,255,248) 272,192 649,292 1,748,220 1,617 3,122 — $ 3,561,038 $ — — — — — — — — — — $ 122,358 48,067 139 30,922 — 201,486 2,217,574 24,881 236,278 2,680,219 Stockholders' Equity: Preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . Accumulated other comprehensive loss . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total stockholders’ equity . . . . . . . . . . . . . . . . . . Total liabilities and stockholders’ equity . . . . . . — 665 266,789 (20,756) 634,121 880,819 $ 3,163,482 — — 2,552,342 (20,756) 631,896 3,163,482 $ 3,515,487 $ — — 68,253 (7,771) 31,284 91,766 137,317 — — (2,620,595) 28,527 (663,180) (3,255,248) $ (3,255,248) — 665 266,789 (20,756) 634,121 880,819 $ 3,561,038 - 103 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (18) Guarantor and Non-Guarantor Financial Information (Continued) Condensed Consolidating Statements of Operations and Comprehensive Income Fiscal Year Ended December 29, 2018 (In thousands) Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — $ 1,609,650 $ — — 1,272,381 337,269 195,593 $ 183,362 12,231 Consolidated (104,479) $ 1,700,764 1,351,264 (104,479) 349,500 — Parent Guarantor Non-Guarantor Subsidiaries Subsidiaries Eliminations Operating expenses: Selling, general and administrative expenses . . . . . . . . . . . Amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — — 160,392 18,343 (176,386) 334,920 6,997 — — 5,234 — — — — 167,389 18,343 (176,386) 340,154 Other income and expenses: Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income before income tax expense . . . . . . . . . . . . . . . . . Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity in earnings of subsidiaries . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Comprehensive income (loss) . . . . . . . . . . . . . . . . . . . $ — — — — — 172,435 172,435 $ 169,689 $ 108,334 13,135 (3,592) 217,043 49,419 4,811 172,435 $ 171,674 $ — — — 5,234 423 — 4,811 $ 1,304 $ — — — — — (177,246) (177,246) $ (172,978) $ 108,334 13,135 (3,592) 222,277 49,842 — 172,435 169,689 Condensed Consolidating Statements of Operations and Comprehensive Income Fiscal Year Ended December 30, 2017 (In thousands) Net sales(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross profit(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — $ 1,557,328 $ — — 1,141,080 416,248 176,694 $ 152,364 24,330 Consolidated (87,635) $ 1,646,387 1,205,809 (87,635) 440,578 — Parent Guarantor Non-Guarantor Subsidiaries Subsidiaries Eliminations Operating expenses: Selling, general and administrative expenses(1) . . . . . . . . . Amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss on sale of assets(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating income(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — — 171,165 17,611 1,608 225,864 12,283 — — 12,047 — — — — 183,448 17,611 1,608 237,911 Other income and expenses: Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . Other income(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income before income tax expense . . . . . . . . . . . . . . . . . Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity in earnings of subsidiaries . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Comprehensive income (loss) . . . . . . . . . . . . . . . . . . . $ — — — — — 217,463 217,463 $ 216,071 $ 91,784 1,163 (3,098) 136,015 (71,682) 9,766 217,463 $ 223,248 $ — — — 12,047 2,281 — 9,766 $ 14,158 $ — — — — — (227,229) (227,229) $ (237,406) $ 91,784 1,163 (3,098) 148,062 (69,401) — 217,463 216,071 (1) Net sales, gross profit, selling, general and administrative expenses, operating income and other income have been adjusted as a result of our retrospective adoption of new accounting standards relating to revenue recognition and the presentation of net periodic pension cost and net periodic post-retirement benefit cost. We also reclassified a $1.6 million pre-tax loss on sale of assets for fiscal 2017 from selling, general and administrative expenses to loss on sale of assets. The adjustments described above had no impact on net income or earnings per share. See Note 2(s), “Summary of Significant Accounting Policies — Recently Issued Accounting Standards” to our consolidated financial statements for detailed information. - 104 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (18) Guarantor and Non-Guarantor Financial Information (Continued) Condensed Consolidating Statement of Cash Flows Fiscal Year Ended December 29, 2018 (In thousands) Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . $ — $ 197,094 $ 12,362 $ Parent Guarantor Non-Guarantor Subsidiaries Subsidiaries Eliminations Consolidated 209,456 — $ Cash flows from investing activities: Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payments for acquisition of businesses, net of cash acquired . . . . . Net cash provided by (used in) investing activities . . . . . . . . . . . — — — — (34,503) 420,002 (30,787) 354,712 Cash flows from financing activities: Repayments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . Repayments of borrowings under revolving credit facility . . . . . . . Borrowings under revolving credit facility . . . . . . . . . . . . . . . . . . Proceeds from issuance of common stock, net . . . . . . . . . . . . . . . . Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payments for the repurchase of common stock, net . . . . . . . . . . . . Payments of tax withholding on behalf of employees for net share (650,110) (170,000) 220,000 60 (124,524) (26,920) — — — — — — (7,124) — — (7,124) — — — — — — settlement of share-based compensation . . . . . . . . . . . . . . . . . . . Intercompany transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . Effect of exchange rate fluctuations on cash and cash equivalents . Net (decrease) increase in cash and cash equivalents . . . . . . . . . . . Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . $ — 751,494 — — — — — $ (1,833) (744,918) (746,751) — (194,945) 204,815 9,870 $ — (6,576) (6,576) 1,425 87 1,691 1,778 $ — — — — — — — — — — — — — — — — $ (41,627) 420,002 (30,787) 347,588 (650,110) (170,000) 220,000 60 (124,524) (26,920) (1,833) — (753,327) 1,425 (194,858) 206,506 11,648 Condensed Consolidating Statement of Cash Flows Fiscal Year Ended December 30, 2017 (In thousands) Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . $ — $ 44,762 $ (6,963) $ Parent Guarantor Non-Guarantor Subsidiaries Subsidiaries Eliminations Consolidated 37,799 — $ Cash flows from investing activities: Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payments for acquisition of businesses, net of cash acquired . . . . . Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . — — — — (47,503) 2,229 (162,965) (208,239) (12,299) — — (12,299) Cash flows from financing activities: Repayments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . . . . Repayments of borrowings under revolving credit facility . . . . . . . Borrowings under revolving credit facility . . . . . . . . . . . . . . . . . . Proceeds from issuance of common stock, net . . . . . . . . . . . . . . . . Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payments of tax withholding on behalf of employees for net share (233,640) 914,000 (571,000) 395,000 112 (123,631) — — — — — — — (1,962) — — — — — — — settlement of share-based compensation . . . . . . . . . . . . . . . . . . . Debt financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intercompany transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash provided by financing activities . . . . . . . . . . . . . . . . . . Effect of exchange rate fluctuations on cash and cash equivalents . Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . $ — (380,841) — — — — — $ (19,543) 364,678 343,173 — 179,696 25,119 204,815 $ — 16,163 16,163 1,076 (2,023) 3,714 1,691 $ — — — — — — — $ — — — — — — — — — — — (59,802) 2,229 (162,965) (220,538) (233,640) 914,000 (571,000) 395,000 112 (123,631) (1,962) (19,543) — 359,336 1,076 177,673 28,833 206,506 - 105 - B&G FOODS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 29, 2018, December 30, 2017 and December 31, 2016 (19) Subsequent Events Workforce Reduction. In February 2019, we implemented a reduction in workforce. On a pre-tax basis, we expect that the reduction in workforce will save our company an estimated $4.0 million on an annualized basis. We expect to record severance and related charges of approximately $1.9 million. Substantially all of these charges will result in cash payments. These payments will primarily be made during the first quarter of 2019 but a relatively small portion will continue through the first quarter of 2020. Leadership Appointments and Retirement. On February 25, 2019, our board of directors made the following appointments, each effective as of March 11, 2019: Erich A. Fritz to the position of Executive Vice President and Chief Supply Chain Officer, Jordan E. Greenberg to the position of Executive Vice President and Chief Commercial Officer and Ellen M. Schum to the position of Executive Vice President and Chief Customer Officer. Mr. Greenberg currently serves as our Vice President and General Manager – Green Giant and Ms. Schum currently serves as our Vice President of U.S. Retail Sales. Mr. Fritz is new to our company and will join us on the effective date of his appointment. On February 25, 2019, we also entered into a retirement agreement with Vanessa E. Maskal, our Executive Vice President of Sales and Marketing, regarding the terms of her retirement on April 5, 2019. The retirement and other benefits payable to Ms. Maskal pursuant to the retirement agreement are included in the estimated charges set forth above under “Workforce Reduction.” - 106 - B&G FOODS, INC. AND SUBSIDIARIES Schedule of Valuation and Qualifying Accounts (In thousands) Schedule II Column A Column B Column C Additions Column D Column E Description Fiscal year ended December 31, 2016: Allowance for doubtful accounts and discounts . . . . . $ Fiscal year ended December 30, 2017: Allowance for doubtful accounts and discounts . . . . . $ Fiscal year ended December 29, 2018: Allowance for doubtful accounts and discounts . . . . . $ Balance at Charged to Charged to beginning of costs and expenses describe year other accounts— Deductions— Balance at end of year describe 1,167 $ 559 — $ 7 (a) $ 1,719 1,719 $ 378 — $ 273 (a) $ 1,824 1,824 $ 65 — $ 38 (a) $ 1,851 (a) Represents bad-debt write-offs. - 107 - Item 9. Changes in and Disagreement with Accountants on Accounting and Financial Disclosure. None. Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures. As required by Rule 13a - 15(b) under the Securities Exchange Act of 1934, as amended, our management, including our chief executive officer and our chief financial officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. As defined in Rules 13a - 15(e) and 15d - 15(e) under the Exchange Act, disclosure controls and procedures are controls and other procedures that we use that are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and our chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. Based on that evaluation, our chief executive officer and our chief financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report. Management’s Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a - 15(f) and 15d - 15(f) under the Exchange Act. Our management, including our chief executive officer and our chief financial officer, conducted an evaluation of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework of Internal Control—Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective at December 29, 2018. The effectiveness of our internal control over financial reporting as of December 29, 2018 was audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which is included in Part II, Item 8, “Financial Statements and Supplementary Data” of this report. Our internal control system is designed to provide reasonable assurance to our management and board of directors regarding the preparation and fair presentation of published consolidated financial statements in accordance with GAAP. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Changes in Internal Control over Financial Reporting. As required by Rule 13a - 15(d) under the Exchange Act, our management, including our chief executive officer and our chief financial officer, also conducted an evaluation of our internal control over financial reporting to determine whether any change in our internal control over financial reporting occurred during the last quarter of fiscal 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, our chief executive officer and our chief financial officer concluded that there has been no change in our internal control over financial reporting during the last quarter of fiscal 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. - 108 - We transitioned the spices & seasonings business that we acquired in late 2016 to a new enterprise resource planning (ERP) system during the third quarter of 2018. Since then, we have been planning for the transition of the remainder of our business to that new ERP system. Implementation and transition efforts continued during the fourth quarter of 2018 and continue during fiscal 2019. We currently expect the implementation and transition to the new ERP system to be completed during the second or third quarter of 2019. In connection with the implementation and transition, and resulting business process changes, we continue to review and enhance the design and documentation of our internal control over financial reporting processes to maintain effective controls over our financial reporting following the completion of the implementation and transition. To date, the implementation and transition have not materially affected, and upon completion we do not expect the implementation and transition to have any material effect on, our internal control over financial reporting. Inherent Limitations on Effectiveness of Controls. Our company’s management, including the chief executive officer and chief financial officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision - making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Item 9B. Other Information. None. - 109 - Item 10. Directors, Executive Officers and Corporate Governance. PART III With the exception of the information relating to our Code of Business Conduct and Ethics that is presented in Part I, Item 1 of this report under the heading “Available Information,” the information required by this Item will appear in the sections entitled “Corporate Governance,” “Proposal 1—Election of Directors,” “Our Management” and “Section 16(a) Beneficial Ownership Reporting Compliance” included in our definitive proxy statement to be filed on or before April 29, 2019, relating to the 2019 annual meeting of stockholders, which information is incorporated herein by reference. Item 11. Executive Compensation. The information required by this item will appear in the section entitled “Executive Compensation,” “Compensation Discussion and Analysis,” “Compensation Committee Interlocks and Insider Participation” and “Report of the Compensation Committee” included in our definitive proxy statement to be filed on or before April 29, 2019, relating to the 2019 annual meeting of stockholders, which information is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Securities Authorized for Issuance Under Equity Compensation Plans. The following table summarizes information, as of December 29, 2018, relating to the Omnibus Incentive Compensation Plan, which was approved by our stockholders and under which restricted stock, options, stock appreciation rights, deferred stock, stock units and cash - based awards to employees, non - employee directors and consultants may be granted from time to time. Equity Compensation Plan Information Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) Weighted-average exercise price of outstanding options, warrants and rights (b) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) Plan Category Equity compensation plans approved by security holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,703,422 (1) $ 31.40 (2) 571,093 (1) Equity compensation plans not approved by security holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1,703,422 (1) $ — 31.40 (2) — 571,093 (1) (1) Includes 1,194,105 stock options and 509,317 performance share LTIAs (for the 2016 to 2018, 2017 to 2019 and 2018 to 2020 performance periods) outstanding as of December 29, 2018, under the Omnibus Incentive Compensation Plan. The performance share LTIAs include the maximum number of shares (i.e., 200% of the target number of shares) of common stock that, as of December 29, 2018, may be issued under the Omnibus Incentive Compensation Plan in respect of the performance share LTIAs, subject to the achievement of specified performance goals. There is, however, no guarantee that all or any part of these performance - based awards will actually be earned and that shares of common stock will be issued upon completion of the performance cycles. In addition, if performance goals are achieved for the performance share LTIAs, plan participants are required to have shares withheld by our company to satisfy tax withholding requirements. Shares not issued due to withholding and shares not issued due to failure to satisfy performance goals do not count against the maximum number of remaining authorized shares under the plan. (2) Reflects the weighted average exercise price of 1,194,105 stock options outstanding under the Omnibus Incentive Compensation Plan. 509,317 performance share LTIAs do not have an exercise price and are not included in calculation of the weighted average exercise price set forth in column (b). The remaining information required by this item will appear in the section entitled “Security Ownership of Certain Beneficial Owners and Management” included in our definitive proxy statement to be filed on or before April 29, 2019 relating to the 2019 annual meeting of stockholders, which information is incorporated herein by reference. - 110 - Item 13. Certain Relationships and Related Transactions, and Director Independence. The information required by this item will appear in the section entitled “Certain Relationships and Related Transactions” and “Corporate Governance” included in our definitive proxy statement to be filed on or before April 29, 2019, relating to the 2019 annual meeting of stockholders, which information is incorporated herein by reference. Item 14. Principal Accountant Fees and Services. The information required by this item will appear in the section entitled “Independent Registered Public Accounting Firm Fees” included in our definitive proxy statement to be filed on or before April 29, 2019, relating to the 2019 annual meeting of stockholders, which information is incorporated herein by reference. - 111 - Item 15. Exhibits, Financial Statement Schedules. (a) The following documents are filed as part of this report PART IV (1) Consolidated Financial Statements: The following consolidated financial statements are included in Part II, Item 8 of this report Reports of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Balance Sheets as of December 29, 2018 and December 30, 2017 . . . . . . . . . . . . . Consolidated Statements of Operations for the fiscal years ended December 29, 2018, December 30, 2017 and December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Comprehensive Income for the fiscal years ended December 29, 2018, December 30, 2017 and December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Changes in Stockholders’ Equity for the fiscal years ended December 29, 2018, December 30, 2017 and December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Cash Flows for the fiscal years ended December 29, 2018, December 30, 2017 and December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 60 63 64 65 66 67 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 (2) Financial Statement Schedule. The following financial statement schedule is included in Part II, Item 8 of this report Schedule II—Schedule of Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 (3) Exhibits - 112 - EXHIBIT NO. DESCRIPTION 2.1 2.2 2.3 3.1 3.2 4.1 4.2 4.3 4.4 4.5 4.6 10.1 10.2 Asset Purchase Agreement, dated as of September 2, 2015, among General Mills, Inc., B&G Foods North America, Inc., and B&G Foods, Inc. (Filed as Exhibit 2.1 to B&G Foods’ Current Report on Form 8 - K filed September 3, 2015, and incorporated by reference herein) Asset Purchase Agreement, dated as of September 21, 2016, among ACH Food Companies, Inc., B&G Foods North America, Inc., B&G Foods, Inc. and Associated British Foods PLC (Filed as Exhibit 2.1 to B&G Foods’ Current Report on Form 8-K filed September 21, 2016, and incorporated by reference herein) Asset Purchase Agreement, dated as of September 12, 2018, among B&G Foods, Inc., B&G Foods North America, Inc., Pirate Brands, LLC and The Hershey Company (Filed as Exhibit 2.1 to B&G Foods’ Current Report on Form 8‑K filed on September 13, 2018, and incorporated by reference herein). Second Amended and Restated Certificate of Incorporation of B&G Foods, Inc. (Filed as Exhibit 3.1 to B&G Foods’ Current Report on Form 8 - K filed on August 13, 2010, and incorporated by reference herein) Bylaws of B&G Foods, Inc., as amended and restated through February 27, 2013 (Filed as Exhibit 3.1 to B&G Foods’ Current Report on Form 8 - K filed on March 4, 2013, and incorporated by reference herein) Indenture, dated as of June 4, 2013, between B&G Foods, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (Filed as Exhibit 4.1 to B&G Foods’ Current Report on Form 8 - K filed on June 4, 2013, and incorporated by reference herein) First Supplemental Indenture, dated as of June 4, 2013, among B&G Foods, Inc., B&G Foods North America, Inc., B&G Foods Snacks, Inc., William Underwood Company, and The Bank of New York Mellon Trust Company, N.A., as trustee, relating to the 4.625% senior notes due 2021 (Filed as Exhibit 4.2 to B&G Foods’ Current Report on Form 8 - K filed on June 4, 2013, and incorporated by reference herein) Form of 4.625% Senior Note due 2021 (included in Exhibit 4.2) Seventh Supplemental Indenture, dated as of April 3, 2017, among B&G Foods, Inc., the Guarantors (as defined therein), and The Bank of New York Mellon Trust Company, N.A., as trustee, relating to the 5.25% senior notes due 2025 (Filed as Exhibit 4.1 to B&G Foods’ Current Report on Form 8-K filed April 4, 2017, and incorporated by reference herein) Form of 5.25% Senior Note due 2025 (included in Exhibit 4.4) Form of stock certificate for common stock (Filed as Exhibit 4.1 to B&G Foods’ Current Report on Form 8 - K filed on August 13, 2010, and incorporated by reference herein) Second Amendment to Credit Agreement, dated as of November 20, 2017, to the Amended and Restated Credit Agreement, dated as of October 2, 2015, among B&G Foods, Inc., as borrower, the several banks and other financial institutions or entities from time to time party thereto as lenders and Barclays Bank PLC, as administrative agent for the lenders and as collateral agent for the secured parties (Filed as Exhibit 10.1 to B&G Foods’ Current Report on Form 8-K filed on November 21, 2017, and incorporated by reference herein) Guarantee and Collateral Agreement, dated as of June 5, 2014, among B&G Foods, Inc., B&G Foods North America, Inc., B&G Foods Snacks, Inc., BCCK Holdings, Inc., Bear Creek Country Kitchens, LLC, Pirate Brands, LLC, Rickland Orchards LLC, Specialty Brands of America, Inc. and William Underwood Company, and each other subsidiary of B&G Foods, Inc. party thereto from time to time, and Credit Suisse AG, as collateral agent (Filed as Exhibit 10.2 to B&G Foods’ Current Report on Form 8 - K filed on June 9, 2014, and incorporated by reference herein) - 113 - EXHIBIT NO. 10.3 10.4 10.5 10.6 10.7 10.8 10.9 10.10 10.11 10.12 10.13 10.14 DESCRIPTION Second Amended and Restated Employment Agreement, dated as of December 11, 2014, between Robert C. Cantwell and B&G Foods, Inc. (Filed as Exhibit 10.1 to B&G Foods’ Current Report on Form 8 - K filed on December 16, 2014, and incorporated by reference herein) Amended and Restated Employment Agreement by and between Vanessa E. Maskal and B&G Foods, Inc., dated as of December 31, 2008 (Filed as Exhibit 10.3 to B&G Foods’ Current Report on Form 8 - K filed on January 6, 2009, and incorporated by reference herein) Amended and Restated Employment Agreement by and between Scott E. Lerner and B&G Foods, Inc., dated as of December 31, 2008 (Filed as Exhibit 10.5 to B&G Foods’ Current Report on Form 8 - K filed on January 6, 2009, and incorporated by reference herein) Employment Agreement, dated as of August 6, 2009, between William F. Herbes and B&G Foods, Inc. (Filed as Exhibit 10.2 to B&G Foods’ Current Report on Form 8 - K filed on August 10, 2009, and incorporated by reference herein) Employment Agreement, dated as of January 4, 2016, between Eric H. Hart and B&G Foods, Inc. (filed as Exhibit 10.9 to B&G Foods’ Annual Report on Form 10-K filed on March 2, 2016, and incorporated by reference herein) Employment Agreement, dated as of August 1, 2017, between Bruce C. Wacha and B&G Foods, Inc. (Filed as Exhibit 10.1 to B&G Foods Quarterly Report on Form 10-Q filed on November 3, 2017, and incorporated herein by reference) First Amendment to Employment Agreement, dated as of November 6, 2017, between, Bruce C. Wacha and B&G Foods, Inc. (Filed as Exhibit 10.1 to B&G Foods’ Current Report on Form 8-K filed on November 7, 2017, and incorporated by reference herein) Employment Agreement, dated as of November 21, 2017, between Kenneth G. Romanzi and B&G Foods, Inc. (Filed as Exhibit 10.1 to B&G Foods’ Current Report on Form 8-K filed on November 21, 2017, and incorporated by reference herein) Offer Letter, dated as of October 19, 2018, between Michael D. Adasczik and B&G Foods, Inc. (Filed as Exhibit 10.1 to B&G Foods’ Current Report on Form 8‑K filed on November 16, 2018, and incorporated by reference herein). B&G Foods, Inc. Omnibus Incentive Compensation Plan, as amended and restated on May 23, 2017 (filed as Annex A to B&G Foods’ Definitive Proxy Statement on Schedule 14A, filed on April 6, 2017, and incorporated by reference herein) Form of B&G Foods, Inc. Performance Share Long - Term Incentive Award Agreement (Filed as Exhibit 10.11 to B&G Foods’ Annual Report on Form 10 - K filed on February 26, 2014, and incorporated by reference herein) Form of B&G Foods, Inc. Stock Option Agreement (Non - Qualified Stock Option) (Filed as Exhibit 10.2 to B&G Foods’ Current Report on Form 8 - K filed on December 16, 2014, and incorporated by reference herein) 21.1 Subsidiaries of B&G Foods, Inc. 23.1 Consent of KPMG LLP. - 114 - EXHIBIT NO. 31.1 31.2 32.1 101.1 DESCRIPTION Certification pursuant to Rule 13a - 14(a) or Rule 15d - 14(a) of the Securities Exchange Act of 1934 of the Chief Executive Officer. Certification pursuant to Rule 13a - 14(a) or Rule 15d - 14(a) of the Securities Exchange Act of 1934 of the Chief Financial Officer. Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002, of the Chief Executive Officer and Chief Financial Officer. The following financial information from B&G Foods’ Annual Report for the fiscal year ended December 29, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows, (vi) Notes to Consolidated Financial Statements, and (vii) document and entity information. Item 16. Form 10-K Summary. None. - 115 - SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: February 26, 2019 B&G FOODS, INC. By: /s/ Bruce C. Wacha Bruce C. Wacha Executive Vice President of Finance and Chief Financial Officer (Principal Financial Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. NAME TITLE DATE /s/ Stephen C. Sherrill Stephen C. Sherrill Chairman of the Board of Directors February 26, 2019 /s/ Robert C. Cantwell Robert C. Cantwell President, Chief Executive Officer and Director (Principal Executive Officer) February 26, 2019 /s/ Bruce C. Wacha Bruce C. Wacha Executive Vice President of Finance and Chief Financial Officer (Principal Financial Officer) February 26, 2019 /s/ Michael D. Adasczik Michael D. Adasczik Vice President of Finance and Chief Accounting Officer (Principal Accounting Officer) /s/ DeAnn L. Brunts DeAnn L. Brunts /s/ Charles F. Marcy Charles F. Marcy /s/ Robert D. Mills Robert D. Mills Director Director Director /s/ Dennis M. Mullen Dennis M. Mullen Director /s/ Cheryl M. Palmer Cheryl M. Palmer /s/ Alfred Poe Alfred Poe /s/ David L. Wenner David L. Wenner Director Director Director - 116 - February 26, 2019 February 26, 2019 February 26, 2019 February 26, 2019 February 26, 2019 February 26, 2019 February 26, 2019 February 26, 2019 Exhibit 31.1 CERTIFICATION BY CHIEF EXECUTIVE OFFICER I, Robert C. Cantwell, certify that: 1. 2. I have reviewed this annual report on Form 10-K of B&G Foods, Inc.; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Date: February 26, 2019 /s/ ROBERT C. CANTWELL Robert C. Cantwell Chief Executive Officer Exhibit 31.2 CERTIFICATION BY CHIEF FINANCIAL OFFICER I, Bruce C. Wacha, certify that: 1. 2. I have reviewed this annual report on Form 10-K of B&G Foods, Inc.; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Date: February 26, 2019 /s/ BRUCE C. WACHA Bruce C. Wacha Chief Financial Officer CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Exhibit 32.1 In connection with the Annual Report of B&G Foods, Inc. (the “Company”) on Form 10-K for the period ended December 29, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert C. Cantwell, Chief Executive Officer of the Company and I, Bruce C. Wacha, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ ROBERT C. CANTWELL Robert C. Cantwell Chief Executive Officer February 26, 2019 /s/ BRUCE C. WACHA Bruce C. Wacha Chief Financial Officer February 26, 2019 A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. Financial Highlights FISCAL YEAR (Dollars in millions) Net Sales* Net Income Adjusted EBITDA** 2018 2017 2016 2015 2014 $ 1,700.8 $ 1,646.4 $ 1,372.3 $ 172.4 $ 314.2 $ 217.5 $ 333.2 $ 109.4 $ 322.0 $ 958.9 $ 69.1 $ 217.8 $ 837.3 $ 41.0 $ 194.1 Net Sales* Net Income Adjusted EBITDA** 5 . 7 1 2 $ 4 . 2 7 1 $ 2 . 3 3 3 $ 0 . 2 2 3 $ 2 . 4 1 3 $ 8 . 7 1 2 1 $ . 4 9 1 $ 8 . 0 0 7 , 1 $ 4 . 6 4 6 , 1 $ 3 . 2 7 3 , 1 $ 9 . 8 5 9 3 $ . 7 3 8 $ 4 . 9 0 1 $ 1 . 9 6 $ 0 . 1 4 $ 14 15 16 17 18 14 15 16 17 18 14 15 16 17 18 Net sales for fiscal 2017, 2016, 2015 and 2014 have been adjusted as a result of our retrospective adoption of new accounting standards relating to revenue recognition. The adjustments had no impact on * net income or adjusted EBITDA. See Note 2(s), “Summary of Significant Accounting Policies — Recently Issued Accounting Standards” to our consolidated financial statements in Part II, Item 8 of the following Annual Report for detailed information. Adjusted EBITDA is a “non-GAAP (Generally Accepted Accounting Principles) financial measure.” Please see the discussion within the footnotes to Item 6, “Selected Financial Data” in the following Annual Report for a more detailed discussion of adjusted EBITDA and a reconciliation of adjusted EBITDA with the most directly comparable GAAP measures for fiscal 2018, 2017, 2016, 2015 and 2014, along with the components of adjusted EBITDA. ** Company Information Board of Directors Stephen C. Sherrill Chairman of the Board Director since 1996 Robert C. Cantwell* President and Chief Executive Officer Director since 2005 DeAnn L. Brunts Director since 2015 Charles F. Marcy Director since 2010 Robert D. Mills Director since 2018 Dennis M. Mullen Director since 2006 Cheryl M. Palmer Director since 2010 Alfred Poe Director since 1997 David L. Wenner Director since 1997 Executive Officers Robert C. Cantwell* President and Chief Executive Officer Erich A. Fritz Executive Vice President and Chief Supply Chain Officer Jordan E. Greenberg Executive Vice President and Chief Commercial Officer Eric H. Hart Executive Vice President of Human Resources and Chief Human Resources Officer William F. Herbes Executive Vice President of Operations Scott E. Lerner Executive Vice President, General Counsel, Secretary and Chief Compliance Officer Vanessa E. Maskal* Executive Vice President of Sales and Marketing Kenneth G. Romanzi* Executive Vice President and Chief Operating Officer Ellen M. Schum Executive Vice President and Chief Customer Officer Bruce C. Wacha Executive Vice President of Finance and Chief Financial Officer Corpor ate headquarters B&G Foods, Inc. Four Gatehall Drive Parsippany, NJ 07054 Telephone: 973.401.6500 Website: www.bgfoods.com Stock Exchange Listlng B&G Foods’ common stock is traded on the New York Stock Exchange under the ticker symbol BGS. corporate news releases and sec filings Corporate news releases and SEC filings, including Forms 10-K, 10-Q and 8-K are available free of charge in the Investor Relations section of our website, www.bgfoods.com. If you do not have internet access, you may contact ICR, Inc. at the address and telephone number listed below to request these materials. Investor Relations Inquiries and requests regarding this annual report and other stockholder questions should be directed to: ICR, Inc. 685 Third Avenue, 2nd Floor, New York, NY 10017 Attn: Dara Dierks Telephone: 866.211.8151 Please also visit the Investor Relations section of our website, www.bgfoods.com. Tr ansfer Agent and Registr ar Computershare Trust Company, N .A. P.O. Box 30170 College Station, TX 77842 Private Couriers/Registered Mail: Computershare Trust Company, N .A. 211 Quality Circle, Suite 210 College Station, TX 77845 Telephone: 800.522.6645 Website: www.computershare.com/investor Hearing Impaired #: TDD: 800.952.9245 Independent Registered Public Accounting Firm KPMG LLP 51 John F. Kennedy Parkway Short Hills, NJ 07078 Annual Meeting The annual meeting of stockholders will be held on Tuesday, May 21, 2019, at 10:00 a.m., local time, at the Hilton Parsippany, 1 Hilton Court, Parsippany, NJ 07054. * As previously announced, Bob Cantwell is retiring as President and Chief Executive Officer and as a director on April 5, 2019 and Ken Romanzi has been appointed as President and Chief Executive Officer and a director effective April 6, 2019. Vanessa Maskal is retiring on April 5, 2019. This Annual Report includes certain forward-looking statements that are based upon current expectations and are subject to a number of risks and uncertain- ties. Please see “Forward-Looking Statements” beginning on page 3 of this Annual Report. © 2019 B&G Foods, Inc. All rights reserved. 1391_Cover.indd 2 4/2/19 6:21 PM ™™1391_Cover.indd 13/4/19 4:57 PM

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