# To Our Stockholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/consumer-defensive-packaged-foods/NYSE_BGS_2017/NYSE_BGS_2017.mmd` · pages 2-8_

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To Our Stockholders:

## Financial Performance

I am pleased to report that fiscal 2017 was another record breaking year for B&G Foods. Once again we set company records for net sales, which increased 20.0% to \(1.67 billion, and adjusted EBITDA, \( ^{*} \)  which increased 3.5% to \)333.2 million. From our initial public offering in 2004 through the end of fiscal 2017, net sales and adjusted EBITDA have increased at compound annual growth rates of 12.2% and 12.7%, respectively. And in 2017 our adjusted EBITDA as a percentage of net sales was 20%, placing us in the top tier of our industry for adjusted EBITDA margin.

## Investment Highlights

In our thirteen years as a publicly held company, we have proven our commitment to creating stockholder value by paying a generous and growing cash dividend. We have been able to keep that commitment year after year by achieving consistent and ever improving operating results. Over the last five years we have increased the dividend at a compound annual growth rate of 10%. 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 2017 was 58.1%. And last month, we announced that our board has authorized a stock repurchase program for the repurchase of up to \(50 million of our common stock through March 15, 2019, which gives us an additional option to return excess cash to our stockholders.

## Business Performance

Our acquisition strategy, which we have executed successfully over many years, continued in 2017 to yield positive results. Our three most recent acquisitions, the spices & seasonings business and Victoria, both completed in the fourth quarter of 2016, and Back to Nature, completed in the fourth quarter of 2017, are each outpacing our initial expectations. In fiscal 2017, the spices & seasonings business generated net sales of \(260 million, compared to our initial forecast of \)220 million, and Victoria generated net sales of \(43 million, compared to our initial forecast of \)41 million. And for the fourth quarter of fiscal 2017, Back to Nature generated more than $20 million of net sales, compared to our initial forecast of $17.5 million. We successfully completed the integration of each of those acquisitions during 2017.

Another highlight was our Green Giant frozen business, which performed exceptionally well in 2017. Largely on the strength of new innovation products like Green Giant Veggie Tots, Green Giant Riced Veggies and Green Giant Mashed Cauliflower, in 2017 Green Giant frozen became the fastest growing frozen vegetable brand and the second fastest growing brand in the entire frozen foods category. These growth trends would be impressive for any brand, let alone a brand that is over 100 years old.

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Notwithstanding the growth we achieved in net sales and adjusted EBITDA in fiscal 2017, we fell short of the adjusted EBITDA goal we set at the beginning of the year. A number of factors contributed to the shortfall, including increased freight and warehousing costs, declining net sales for our shelf-stable vegetable business and higher than expected marketing spending in connection with the launch of new Green Giant frozen products. While we were very happy to see our net sales increase by 20% for fiscal 2017, we were disappointed to see our base business net sales \( ^{*} \)  decrease by 1.1%.

I am encouraged, however, that the overall decline in base business net sales for 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 1.2% compared to the third and fourth quarters of fiscal 2016. I am also encouraged when I look at our portfolio of brands, which we have been methodically rebalancing over the past few years. Although our portfolio comprises more than 50 brands, several of our largest brands—Green Giant, Ortega, Pirate Brands, Back to Nature, Maple Grove Farms of Vermont, Cream of Wheat, Victoria and Mrs. Dash, together with our recently acquired spices & seasonings business and our legacy spices & seasonings products—contribute approximately three quarters of our total net sales and adjusted EBITDA. And those brands compete in categories such as frozen vegetables, ethnic foods, "better for you" snacks, spices & seasonings and premium pasta sauces, which we believe to be attractive and promising categories.

## Fiscal 2018

Notwithstanding the challenges we faced in 2017 and that we continue to face, we are excited about the prospects ahead of us in 2018. We expect the success of our new Green Giant innovation products to gain momentum and our base business to stabilize. We will continue to look for acquisition opportunities that make sense for our company and our stockholders, and when we find those opportunities we will be ready to act. We will also remain persistent in our efforts to return even more cash to our stockholders. In 2017 we made some valuable additions to what was already an experienced and talented management team and we all look forward to delivering another year of exceptional results.

## In Closing

In the three years that I have been CEO of B&G Foods, we have undergone significant change and achieved significant growth. In that time, we have completed five acquisitions, more than doubled net sales from \(848 million in fiscal 2014 to a projected \)1.72 to \(1.755 billion in fiscal 2018, increased headcount from approximately 1,000 employees to approximately 2,500 employees, acquired our two largest manufacturing facilities and established a much more complex and sophisticated distribution network. Although we did not achieve every objective we set for ourselves at the beginning of 2017, 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 three 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. It is because of these values that we have been able to create tremendous stockholder value over the years, and I believe stockholders of B&G Foods should expect a bright future.

Sincerely,

![](images/3_0.jpg)

Robert C. Cantwell

President and Chief Executive Officer

April 3, 2018