— Company Updates Fiscal 2014
Guidance —
B&G Foods, Inc. (NYSE:BGS) today announced financial results
for the third quarter and first three quarters of 2014.
Highlights (vs. year-ago quarter where applicable):
- Net sales increased 15.2% to $209.0
million
- Base business net sales volume
increased $2.4 million, or 1.4%
- Base business net sales increased $1.0
million, or 0.6%
- Net loss was $4.4 million due to
significant non-cash impairment charges to intangible assets, a
related loss on the disposal of inventory, and acquisition-related
transaction costs
- Adjusted net income* increased 9.5% to
$20.5 million
- Adjusted diluted earnings per share*
increased 8.6% to $0.38
- Adjusted EBITDA* increased 7.5% to
$49.5 million
- Due to further reduced net sales
expectations for Rickland Orchards, the Company recognized non-cash
impairment charges to intangible assets of $22.2 million, net of
tax, and a $1.9 million loss, net of tax, on the related disposal
of inventory, which are treated as items affecting
comparability
- The Company updated its guidance for
fiscal year 2014:
- Adjusted EBITDA guidance decreased
approximately 1.0% to a range of $202.0 million to $206.0
million
- Adjusted diluted earnings per share
guidance remains at $1.54 to $1.60 for the full year
Commenting on the results, David L. Wenner, President and Chief
Executive Officer of B&G Foods, stated, “We were very pleased
with the performance of Pirate Brands during the third quarter. One
of our largest and most important businesses, Pirate Brands
experienced a 38.9% net sales gain for the quarter, primarily in
warehouse clubs. We were equally encouraged by volume gains in our
overall base business and a reduction in the rate of price declines
to 26% of that seen in the first half of the year. The impairment
and other charges related to last year’s Rickland Orchards
acquisition reflect obviously disappointing sales results in that
brand, primarily in the warehouse club channel. However, we believe
that B&G Foods’ overall business is headed in the right
direction in both volume and pricing going into the fourth quarter
and fiscal 2015.”
____________________________________________________________
* Please see “About Non-GAAP Financial Measures and Items
Affecting Comparability” below for the definition of the terms
adjusted net income, adjusted diluted earnings per share, EBITDA
and adjusted EBITDA, as well as information concerning certain
items affecting comparability and reconciliations of the non-GAAP
terms adjusted net income, adjusted diluted earnings per share,
EBITDA and adjusted EBITDA to the most comparable GAAP financial
measures.
Financial Results for the Third Quarter of 2014
Net sales for the third quarter of 2014 increased $27.6 million
or 15.2% to $209.0 million from $181.4 million for the third
quarter of 2013. Net sales of Specialty Brands, acquired in April
2014, contributed $22.1 million to the overall increase and net
sales of the Rickland Orchards brand, acquired in October 2013,
contributed $4.5 million to the overall increase. Net sales for
B&G Foods’ base business increased $1.0 million, or 0.6%,
attributable to a unit volume increase of $2.4 million, or 1.4%,
partially offset by a net price decrease of $1.4 million, or
0.8%.
Gross profit for the third quarter of 2014 increased $1.8
million, or 2.9%, to $63.1 million from $61.3 million for the third
quarter of 2013. Gross profit expressed as a percentage of net
sales decreased to 30.2% for the third quarter of 2014 from 33.8%
in the third quarter of 2013. The 3.6 percentage point decrease was
to a large extent attributable to the write-off of certain raw
material and finished goods inventory in connection with the
Rickland Orchards impairment, which reduced gross profit margin by
approximately 1.4 percentage points. The remaining 2.2 percentage
point decrease was attributable to a sales mix shift to lower
margin products, an increase in distribution costs and the base
business net price decrease described above, as well as the effect
of the Canadian exchange rate, which reduced gross profit margin by
approximately 0.9 percentage points, 0.7 percentage points and 0.6
percentage points, respectively.
Selling, general and administrative expenses decreased $0.1
million, or 0.5%, to $21.2 million for the third quarter of 2014
from $21.3 million for the third quarter of 2013. This decrease was
due to decreases in acquisition-related transaction costs of $1.3
million, consumer marketing of $0.2 million and other expenses of
$0.4 million, offset by increases in selling expenses of $1.1
million (including an increase of $0.9 million for brokerage
expenses) and warehousing expenses of $0.7 million. Expressed as a
percentage of net sales, selling, general and administrative
expenses decreased 1.6 percentage points to 10.1% for the third
quarter of 2014 from 11.7% for the third quarter of 2013.
Net interest expense for the third quarter of 2014 increased
$0.5 million or 4.4% to $11.6 million from $11.1 million for the
third quarter of 2013. The increase was primarily attributable to
an increase in the Company’s average debt outstanding due to the
Company’s recent acquisitions.
The Company’s reported net loss under U.S. generally accepted
accounting principles (GAAP) was $4.4 million, or $0.08 per share,
for the third quarter of 2014, as compared to net income of $15.4
million, or $0.29 per diluted share, for the third quarter of 2013.
The Company’s adjusted net income for the third quarter of 2014,
which excludes the after tax impact of acquisition-related
transaction costs, the non-cash impairment charges to Rickland
Orchards intangible assets and the related loss on disposal of
inventory, was $20.5 million, or $0.38 per adjusted diluted share.
The Company’s adjusted net income for the third quarter of 2013,
which excludes the after tax impact of refinancing charges and
acquisition-related transaction costs, was $18.7 million, or $0.35
per adjusted diluted share.
For the third quarter of 2014, adjusted EBITDA, which excludes
the impact of acquisition-related transaction costs, the non-cash
impairment charges and the related loss on disposal of inventory,
increased 7.5% to $49.5 million from $46.0 million for the third
quarter of 2013.
Financial Results for the First Three Quarters of
2014
Net sales for the first three quarters of 2014 increased $96.6
million or 18.8% to $610.0 million from $513.4 million for the
first three quarters of 2013. An additional six months of net sales
of Pirate Brands, which B&G Foods acquired in July 2013,
contributed $40.7 million to the overall increase, net sales of
Specialty Brands, acquired in April 2014, contributed $33.5 million
to the overall increase, net sales of the Rickland Orchards brand,
acquired in October 2013, contributed $20.3 million to the overall
increase and an additional four months of net sales of the
TrueNorth brand, acquired in May 2013, contributed $7.2 million to
the overall increase. Net sales for the Company’s base business
decreased $5.1 million, or 1.0%, attributable to a net price
decrease of $6.8 million, or 1.3%, partially offset by a unit
volume increase of $1.7 million, or 0.3%.
Gross profit for the first three quarters of 2014 increased
$15.0 million, or 8.5%, to $190.8 million from $175.8 million for
the first three quarters of 2013. Gross profit expressed as a
percentage of net sales decreased to 31.3% in the first three
quarters of 2014 from 34.2% in the first three quarters of 2013.
The 2.9 percentage point decrease was primarily attributable to the
base business net price decrease described above as well as the
effect of the Canadian exchange rate, a sales mix shift to lower
margin products, an increase in distribution costs and the
write-off of inventory in connection with the
Rickland Orchards impairment, which reduced gross profit
margin by approximately 0.9 percentage points, 0.8 percentage
points, 0.7 percentage points and 0.5 percentage points,
respectively.
Selling, general and administrative expenses increased $14.0
million, or 25.4%, to $69.1 million for the first three quarters of
2014 from $55.1 million for the first three quarters of 2013. This
increase was primarily due to increases in consumer marketing of
$5.0 million, selling expenses of $4.5 million (including increases
of $2.8 million for brokerage expenses and $0.8 million for
salesperson compensation), acquisition-related transaction costs of
$3.6 million, warehousing expenses of $1.8 million and other
expenses of $0.1 million, offset by a decrease in compensation
expenses of $1.0 million. Expressed as a percentage of net sales,
our selling, general and administrative expenses increased 0.6
percentage points to 11.3% for the first three quarters of 2014
from 10.7% for the first three quarters of 2013.
Net interest expense for the first three quarters of 2014
increased $3.6 million or 11.8% to $34.5 million from $30.9 million
for the first three quarters of 2013. The increase was primarily
attributable to the increase in the Company’s average debt
outstanding attributable to the Company’s recent acquisitions.
The Company’s reported net income under GAAP was $29.5 million,
or $0.55 per diluted share, for the first three quarters of 2014,
as compared to $33.6 million, or $0.63 per diluted share, for the
first three quarters of 2013. The Company’s adjusted net income for
the first three quarters of 2014, which excludes the after tax
impact of refinancing charges, acquisition-related transaction
costs, the non-cash impairment charges to Rickland Orchards
intangible assets and the related loss on disposal of inventory,
and a non-cash gain relating to the Rickland Orchards earn-out, was
$56.3 million, or $1.05 per adjusted diluted share. The Company’s
adjusted net income for the first three quarters of 2013, which
excludes the after tax impact of refinancing charges and
acquisition-related transaction costs, was $55.7 million, and
adjusted diluted earnings per share was $1.05.
For the first three quarters of 2014, adjusted EBITDA, which
excludes the impact of acquisition-related transaction costs, the
non-cash impairment charges and the related loss on disposal of
inventory, and the non-cash gain relating to the earn-out,
increased 6.0% to $142.0 million from $134.0 million for the first
three quarters of 2013.
Guidance
B&G Foods decreased its adjusted EBITDA guidance for fiscal
2014 by approximately 1.0% to a range of $202.0 million to $206.0
million. However, B&G Foods reaffirmed its adjusted diluted
earnings per share guidance for fiscal 2014 at a range of $1.54 to
$1.60.
Conference Call
B&G Foods will hold a conference call at 4:30 p.m. ET today,
October 21, 2014. The call will be webcast live from B&G Foods’
website at www.bgfoods.com under “Investor Relations—Company
Overview.” The call can also be accessed live over the phone by
dialing (800) 263-8506 for U.S. callers or (719) 325-2133 for
international callers.
A replay of the call will be available one hour after the call
and can be accessed by dialing (877) 870-5176 or
(858) 384-5517 for international callers; the password is
5000512. The replay will be available from October 21, 2014
through November 4, 2014. Investors may also access a web-based
replay of the call at the Investor Relations section of B&G
Foods’ website, www.bgfoods.com.
About Non-GAAP Financial Measures and Items Affecting
Comparability
“Adjusted net income,” “adjusted diluted earnings per share,”
“EBITDA” (net income (loss) before net interest expense, income
taxes, depreciation and amortization and loss on extinguishment of
debt) and “adjusted EBITDA” (EBITDA as adjusted for cash and
non-cash acquisition-related expenses, gains and losses (which may
include third party fees and expenses, integration, restructuring
and consolidation expenses), intangible asset impairment charges
and related asset write-offs, and gains or losses related to
changes in the fair value of contingent liabilities from earn-outs)
are “non-GAAP financial measures.” A non-GAAP financial measure is
a numerical measure of financial performance that excludes or
includes amounts so as to be different than the most directly
comparable measure calculated and presented in accordance with GAAP
in B&G Foods’ consolidated balance sheets and related
consolidated statements of operations, comprehensive income,
changes in stockholders’ equity and cash flows. Non-GAAP financial
measures should not be considered in isolation or as a substitute
for the most directly comparable GAAP measures. The Company’s
non-GAAP financial measures may be different from non-GAAP
financial measures used by other companies.
The Company uses “adjusted net income” and “adjusted diluted
earnings per share,” which are calculated as reported net income
(loss) and reported diluted earnings (loss) per share adjusted for
certain items that affect comparability. These non-GAAP financial
measures reflect adjustments to reported net income (loss) and
diluted earnings (loss) per share to eliminate the items identified
below. This information is provided in order to allow investors to
make meaningful comparisons of the Company’s operating performance
between periods and to view the Company’s business from the same
perspective as the Company’s management. Because the Company cannot
predict the timing and amount of acquisition-related transaction
costs, intangible asset impairment charges and related asset
write-offs, non-cash gains or losses on contingent earn-out
consideration and gains or losses on extinguishment of debt,
management does not consider these costs when evaluating the
Company’s performance or when making decisions regarding allocation
of resources.
Additional information regarding EBITDA and adjusted EBITDA, and
a reconciliation of EBITDA and adjusted EBITDA to net income (loss)
and to net cash provided by operating activities is included below
for the third quarter and first three quarters of 2014 and 2013,
along with the components of EBITDA and adjusted EBITDA. Also
included below are reconciliations of the non-GAAP terms adjusted
net income and adjusted diluted earnings per share to reported net
income (loss) and reported diluted earnings (loss) per share.
About B&G Foods, Inc.
B&G Foods and its subsidiaries manufacture, sell and
distribute a diversified portfolio of high-quality, branded
shelf-stable foods across the United States, Canada and Puerto
Rico. Based in Parsippany, New Jersey, B&G Foods’
products are marketed under many recognized brands, including
Ac’cent, B&G, B&M, Baker’s Joy, Bear Creek Country
Kitchens, Brer Rabbit, Canoleo, Cary’s, Cream of Rice,
Cream of Wheat, Devonsheer, Don Pepino, Emeril’s,
Grandma’s Molasses, JJ Flats, Joan of Arc,
Las Palmas, MacDonald’s, Maple Grove Farms, Molly McButter,
Mrs. Dash, New York Flatbreads, New York Style,
Old London, Original Tings, Ortega, Pirate’s Booty, Polaner,
Red Devil, Regina, Rickland Orchards, Sa-són, Sclafani,
Smart Puffs, Spring Tree, Sugar Twin, Trappey’s, TrueNorth,
Underwood, Vermont Maid and Wright’s. B&G Foods also sells
and distributes two branded household products, Static Guard
and Kleen Guard.
Forward-Looking Statements
Statements in this press release that are not statements of
historical or current fact constitute “forward-looking statements.”
The forward-looking statements contained in this press release
include, without limitation, statements related to B&G Foods’
adjusted EBITDA and adjusted diluted earnings per share
expectations for fiscal 2014 and B&G Foods’ expectations
regarding volume and pricing during the fourth quarter and fiscal
2015. Such forward-looking statements involve known and unknown
risks, uncertainties and other unknown factors that could cause the
actual results of B&G Foods to be materially different from the
historical results or from any future results expressed or implied
by such forward-looking statements. In addition to statements that
explicitly describe such risks and uncertainties readers are urged
to consider statements labeled with the terms “believes,” “belief,”
“expects,” “projects,” “intends,” “anticipates” or “plans” to be
uncertain and forward-looking. The forward-looking statements
contained herein are also subject generally to other risks and
uncertainties that are described from time to time in B&G
Foods’ filings with the Securities and Exchange Commission,
including under Item 1A, “Risk Factors” in the Company’s most
recent Annual Report on Form 10-K and in its subsequent reports on
Forms 10-Q and 8-K. Investors are cautioned not to place undue
reliance on any such forward-looking statements, which speak only
as of the date they are made. B&G Foods undertakes no
obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or
otherwise.
B&G Foods, Inc. and
Subsidiaries
Consolidated Balance Sheets
(In thousands, except share and per
share data)
(Unaudited)
Assets September 27, 2014 December 28,
2013 Current assets: Cash and cash equivalents $ 5,981 $
4,107 Trade accounts receivable, net 68,444 62,763 Inventories
132,856 101,251 Prepaid expenses and other current assets 7,996
8,079 Income tax receivable 12,540 3,422 Deferred income taxes
4,293 2,115 Total current assets
232,110 181,737 Property, plant and equipment, net of
accumulated depreciation of $125,397 and $114,685
114,621
110,374
Goodwill 370,096 319,292 Other intangibles, net 951,101 844,141
Other assets 30,064 28,799 Total assets
$ 1,697,992 $ 1,484,343
Liabilities and
Stockholders’ Equity Current liabilities: Trade accounts
payable $ 49,706 $ 42,638 Accrued expenses 27,665 19,189 Current
portion of long-term debt 20,625 26,250 Dividends payable
18,246 17,637 Total current liabilities
116,242 105,714 Long-term debt 1,024,686 844,635 Other
liabilities 2,356 8,692 Deferred income taxes 201,490
146,939 Total liabilities 1,344,774 1,105,980
Commitments and contingencies 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; 53,663,697 and 53,445,910
shares issued and outstanding as of September 27, 2014 and December
28, 2013 537 534 Additional paid-in capital 128,487 183,113
Accumulated other comprehensive loss (2,495 ) (2,471 ) Retained
earnings 226,689 197,187 Total
stockholders’ equity 353,218 378,363
Total liabilities and stockholders’ equity $ 1,697,992 $
1,484,343
B&G Foods, Inc. and
Subsidiaries
Consolidated Statements of
Operations
(In thousands, except per share
data)
(Unaudited)
Third Quarter Ended First Three Quarters Ended
September 27, 2014 September 28, 2013
September 27, 2014 September 28, 2013
Net sales $ 208,998 $ 181,350 $ 610,027 $ 513,426 Cost of
goods sold 145,936 120,084 419,269
337,651 Gross profit 63,062 61,266 190,758 175,775
Operating expenses: Selling, general and administrative
expenses 21,173 21,271 69,065 55,097 Amortization expense 3,391
2,385 9,986 6,608 Impairment of intangible assets 34,154 — 34,154 —
Gain on change in fair value of contingent consideration —
— (8,206 ) — Operating income 4,344
37,610 85,759 114,070 Other expenses: Interest expense, net
11,587 11,097 34,532 30,900 Loss on extinguishment of debt —
2,813 5,748 31,291 (Loss) income
before income tax (benefit) expense (7,243 ) 23,700 45,479 51,879
Income tax (benefit) expense (2,830 ) 8,350
15,977 18,328 Net (loss) income $ (4,413 ) $ 15,350 $
29,502 $ 33,551 Weighted average shares outstanding:
Basic 53,664 52,873 53,656 52,817 Diluted 53,664 53,120 53,730
52,975 (Loss) earnings per share: Basic $ (0.08 ) $ 0.29 $
0.55 $ 0.64 Diluted $ (0.08 ) $ 0.29 $ 0.55 $ 0.63 Cash
dividends declared per share $ 0.34 $ 0.32 $ 1.02 $ 0.90
B&G Foods, Inc. and
Subsidiaries
Reconciliation of EBITDA and Adjusted
EBITDA to Net Income (Loss) and to Net Cash Provided by Operating
Activities
(In thousands)
(Unaudited)
Third Quarter Ended First Three Quarters Ended
September 27, 2014 September 28, 2013
September 27, 2014 September 28, 2013
Net (loss) income $ (4,413 ) $ 15,350 $ 29,502 $ 33,551
Income tax (benefit) expense (2,830 ) 8,350 15,977 18,328 Interest
expense, net 11,587 11,097 34,532 30,900 Depreciation and
amortization 6,838 5,983 20,783 17,002 Loss on extinguishment of
debt — 2,813 5,748
31,291 EBITDA(1) 11,182 43,593 106,542 131,072
Acquisition-related transaction costs 1,141 2,399 6,524 2,933
Impairment of intangible assets 34,154 — 34,154 — Loss on disposal
of inventory 2,978 — 2,978 — Gain on change in fair value of
contingent consideration — —
(8,206 ) — Adjusted EBITDA(1) 49,455 45,992 141,992
134,005 Income tax benefit (expense) 2,830 (8,350 ) (15,977 )
(18,328 ) Interest expense, net (11,587 ) (11,097 ) (34,532 )
(30,900 ) Deferred income taxes (3,511 ) 5,869 5,083 12,063
Amortization of deferred financing costs and bond discount 879
1,025 2,907 3,318 Acquisition-related transaction costs (1,141 )
(2,399 ) (6,524 ) (2,933 ) Acquisition-related contingent
consideration expense, including interest accretion — — 432 —
Share-based compensation expense 386 1,109 2,128 3,269 Excess tax
benefits from share-based compensation 27 6 (2,356 ) (4,192 )
Changes in assets and liabilities (12,790 ) (4,938 )
(32,464 ) (27,409 ) Net cash provided by operating
activities $ 24,548 $ 27,217 $ 60,689 $ 68,893
(1)
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 (loss), changes in stockholders’
equity and cash flows. We define EBITDA as net income (loss) 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-related expenses,
gains and losses (which may include third party fees and expenses,
integration, restructuring and consolidation expenses), intangible
asset impairment charges and related asset write-offs, and gains or
losses related to changes in the fair value of contingent
liabilities from earn-outs. Management believes that it is useful
to eliminate net interest expense, income taxes, depreciation and
amortization, loss on extinguishment of debt, acquisition-related
expenses, gains and losses, non-cash intangible asset impairment
charges and related asset write-offs, and gains or losses related
to changes in the fair value of contingent liabilities from
earn-outs 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 indenture contain ratios based on these measures. As a
result, internal management reports used 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 an alternative to operating income or
net income (loss) 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 costs and
expenses for depreciation and amortization, interest and related
expenses, loss on extinguishment of debt, acquisition-related
expenses, gains and losses and income taxes, intangible asset
impairment charges and related asset write-offs, and gains or
losses related to changes in the fair value of contingent
liabilities from earn-outs. 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.
B&G Foods, Inc. and
Subsidiaries
Items Affecting Comparability —
Reconciliation of Adjusted Information to GAAP Information
(In thousands, except per share
data)
(Unaudited)
Third Quarter Ended First Three Quarters Ended
September 27, 2014 September 28, 2013
September 27, 2014 September 28, 2013
Reported net (loss) income $ (4,413 ) $ 15,350 $ 29,502 $ 33,551
Loss on extinguishment of debt, net of tax(1) — 1,817 3,742 20,214
Acquisition-related transaction costs, net of tax 743 1,550 4,247
1,895 Impairment of intangible assets, net of tax(2) 22,234 —
22,234 — Loss on disposal of inventory, net of tax(2) 1,939 — 1,939
— Gain on contingent consideration, net of tax(2) —
— (5,342 ) — Adjusted net income $ 20,503
$ 18,717 $ 56,322 $ 55,660 Adjusted diluted earnings
per share (3) $ 0.38 $ 0.35 $ 1.05 $ 1.05
___________________
(1)
During the third quarter of 2014, we did
not have any loss on extinguishment of debt. Loss on extinguishment
of debt for the third quarter of 2013 includes costs relating to
our repurchase of $30.2 million aggregate principal amount of
7.625% senior notes, including the repurchase premium and other
expenses of $2.3 million, the write-off of deferred debt financing
costs of $0.4 million and the write-off of unamortized discount of
$0.1 million.
Loss on extinguishment of debt for the first three quarters
of 2014 includes costs relating to the termination of our prior
credit agreement, which included the repayment of $121.9 million
aggregate principal amount of tranche A term loans and $215.0
million aggregate principal amount of revolving loans, and the
write-off of deferred debt financing costs and unamortized discount
of $5.4 million and $0.3 million, respectively. Loss on
extinguishment of debt for the first three quarters of 2013
includes costs relating to our repurchase of $248.5 million
aggregate principal amount of 7.625% senior notes and our repayment
of $222.2 million aggregate principal amount of tranche B term
loans, including the repurchase premium and other expenses of $20.2
million, the write-off of deferred debt financing costs of $8.3
million and the write-off of unamortized discount of $2.8 million.
(2)
On October 7, 2013, we completed the
Rickland Orchards acquisition for a base purchase price of $57.5
million, of which $37.4 million was paid in cash and approximately
$20.1 million was paid in shares of B&G Foods common stock. The
purchase agreement also provided that the purchase price could be
increased by contingent earn-out consideration of up to $15.0
million in the aggregate based upon the achievement of revenue
growth targets during fiscal 2014, 2015 and 2016 meant to achieve
operating results in excess of base purchase price acquisition
model assumptions.
As of the date of acquisition we estimated the original fair
value of the contingent consideration to be approximately $7.6
million. During the remainder of fiscal 2013 and the first two
quarters of 2014, we recorded interest accretion expense on the
contingent consideration liability of $0.2 million and $0.4
million, respectively. 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. As a
result of lower than expected net sales results for Rickland
Orchards and the unlikelihood of Rickland Orchards achieving the
revenue growth targets, the fair value of the contingent
consideration was reduced to zero, resulting in a non-cash gain of
$8.2 million that is included in gain on change in fair value of
contingent consideration in the accompanying unaudited consolidated
statements of operations for the first three quarters of 2014. We
also concluded that these factors were potential indicators of the
impairment of certain long-lived assets (trademark and customer
relationship intangibles), requiring us to perform an interim
impairment analysis of the trademark and customer relationship
intangibles acquired in the Rickland Orchards acquisition. Based on
the results of the interim impairment analysis, we determined that
no impairment was required as of June 28, 2014. We did not have any
contingent earn-out obligations during 2013. During the
third quarter of 2014, net sales to the club channel of the core
products of Rickland Orchards continued to deteriorate beyond our
June 28, 2014 projections. As a result, we have as of September 27,
2014 reduced our net sales projections to the club channel and
performed an interim impairment analysis of the trademark and
customer relationship intangibles acquired in the Rickland Orchards
acquisition. We used a discounted cash flow model to determine the
fair value of the intangibles. Based on the results of the interim
impairment analysis performed at September 27, 2014, we recorded
non-cash impairment charges to amortizable trademarks and customer
relationship intangibles of $26.9 million and $7.3 million,
respectively, which are recorded in Impairment of Intangible Assets
on the accompanying unaudited consolidated statement of operations.
If, during the remainder of 2014 or thereafter, operating results
for the Rickland Orchards brand continue to deteriorate at rates in
excess of our revised projections, we may be required to record an
additional non-cash charge for the impairment of long-lived
intangibles relating to Rickland Orchards, and these non-cash
charges would be material. In connection with the interim
impairment analysis of the Rickland Orchards intangibles, we also
recorded a charge to cost of goods sold of approximately $3.0
million relating to the write-off of certain raw material and
finished goods inventory used in the production of Rickland
Orchards products.
(3)
For the third quarter of 2014, 101,428
shares of common stock issuable upon the achievement of performance
goals in connection with share-based compensation awards have not
been included in the calculation of diluted weighted average shares
because the effect would be antidilutive on diluted loss per
share.
ICR, Inc.Investor Relations:Don Duffy, 866-211-8151orMedia
Relations:Matt Lindberg, 203-682-8214
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