— Delivers Strong Growth in Sales and
Earnings —
— Increases Full Year Guidance —
B&G Foods, Inc. (NYSE:BGS) today announced financial results
for the second quarter and first two quarters of 2016.
Highlights (vs. year-ago quarter where applicable):
- Net sales increased 58.2% to $306.4
million
- Net income increased 61.4% to $30.3
million
- Adjusted net income* increased 89.7% to
$36.1 million
- Diluted earnings per share increased
45.5% to $0.48
- Adjusted diluted earnings per share*
increased 67.6% to $0.57
- Adjusted EBITDA* increased 79.3% to
$85.0 million
- Guidance for full year fiscal 2016:-
Net sales guidance reaffirmed at a range of $1.39 billion to $1.42
billion- Adjusted EBITDA guidance increased to a range of $317.0
million to $327.0 million- Adjusted diluted earnings per share
guidance increased to a range of $2.11 to $2.21
“The Green Giant business continues to exceed our profitability
expectations, and as a result we have increased our full year
guidance for adjusted EBITDA and adjusted diluted earnings per
share. We expect to successfully complete the transition of the
Green Giant business into our sales and distribution infrastructure
by the end of the third quarter. During the transition services
period we have reinforced our already very strong and dedicated
workforce with a large collection of very talented and motivated
individuals who we believe will not only help us “awaken the Green
Giant” and bring the brand back to prominence through innovation,
operational excellence and consumer awareness, but will also
restore our base business to a growth trajectory in 2017,” said
Robert C. Cantwell, President and Chief Executive Officer of
B&G Foods.
____________________
*
Please see “About Non-GAAP Financial
Measures and Items Affecting Comparability” below for the
definition of the non-GAAP financial measures “adjusted net
income,” “adjusted diluted earnings per share,” “base business net
sales,” “EBITDA” and “adjusted EBITDA,” as well as information
concerning certain items affecting comparability and
reconciliations of the non-GAAP terms to the most comparable GAAP
financial measures.
Financial Results for the Second Quarter of 2016
Net sales increased $112.8 million, or 58.2%, to $306.4 million
for the second quarter of 2016 from $193.6 million for the second
quarter of 2015. Net sales of Green Giant, acquired on November 2,
2015, and net sales of Mama Mary’s, acquired on July 10, 2015,
contributed $107.2 million and $8.9 million, respectively, to the
Company’s net sales for the quarter.
Base business net sales for the second quarter of 2016 decreased
$2.5 million, or 1.3%, to $190.1 million from $192.6 million for
the second quarter of 2015. The $2.5 million decrease was
attributable to a decrease in unit volume of $1.6 million, or 0.8%,
a decrease in net pricing of $0.7 million, or 0.3%, and the
negative impact of currency fluctuations on foreign sales of
approximately $0.2 million, or 0.1%.
Gross profit increased $47.7 million, or 76.9%, to $109.7
million for the second quarter of 2016 from $62.0 million for the
second quarter of 2015. Gross profit expressed as a percentage of
net sales increased to 35.8% in the second quarter of 2016 from
32.0% in the second quarter of 2015, an increase of 3.8 percentage
points. The increase in gross profit percentage was primarily
driven by the acquisition of Green Giant, which benefited from
lower than anticipated trade expense and input costs, particularly
from the Green Giant manufacturing facility in Irapuato, Mexico, as
well as greater than anticipated synergies with the Company’s base
business. Gross profit percentage was positively impacted by
decreased costs for commodities, packaging and distribution for the
base business and improved product mix, which was partially offset
by the unfavorable impact the decrease in base business sales
volume had on cost absorption, a net reduction in base business
pricing, and the impact of the write-off of Rickland Orchards
inventory in connection with the Company’s decision to discontinue
the brand. Gross profit percentage, excluding the results of Green
Giant, decreased 0.7 percentage points.
Selling, general and administrative expenses increased $14.7
million, or 76.5%, to $33.9 million for the second quarter of 2016
from $19.2 million for the second quarter of 2015. The increase was
primarily due to the Green Giant acquisition, which resulted in
$13.9 million of incremental expenses for the second quarter. The
overall $14.7 million increase was attributable to increases in
consumer marketing of $5.5 million, selling expenses of $3.2
million (which includes a $2.4 million increase in brokerage
expenses and a $0.8 million increase in salesperson compensation),
general and administrative expenses of $2.6 million (primarily
related to compensation), acquisition-related expenses of $1.7
million, and warehousing expenses of $1.7 million (which includes
$0.5 million of distribution restructuring expenses). Expressed as
a percentage of net sales, selling, general and administrative
expenses increased 1.1 percentage points to 11.0% for the second
quarter of 2016 from 9.9% for the second quarter of 2015.
Net interest expense increased $7.3 million, or 66.6%, to $18.4
million for the second quarter of 2016 from $11.1 million in the
second quarter of 2015. The increase was primarily attributable to
additional borrowings used to fund the Green Giant acquisition.
The Company’s reported net income under U.S. generally accepted
accounting principles (GAAP) was $30.3 million, or $0.48 per
diluted share, for the second quarter of 2016, as compared to
reported net income of $18.7 million, or $0.33 per diluted share,
for the second quarter of 2015. The Company’s adjusted net income
for the second quarter of 2016, which excludes an intangible asset
impairment-related adjustment to deferred taxes resulting from the
Company’s decision to discontinue the Rickland Orchards brand, the
after-tax impact of the non-cash impairment charge and related loss
on disposal of inventory, acquisition-related expenses and
distribution restructuring expenses, was $36.1 million, or $0.57
per adjusted diluted share. The Company’s adjusted net income for
the second quarter of 2015, which excludes the after tax impact of
the loss on product recall and acquisition-related expenses, was
$19.0 million, or $0.34 per adjusted diluted share.
For the second quarter of 2016, adjusted EBITDA (which excludes
the impact of acquisition-related expenses, the non-cash intangible
asset impairment charge and related loss on disposal of inventory,
loss on product recall and distribution restructuring expenses),
increased 79.3% to $85.0 million from $47.4 million for the second
quarter of 2015.
Financial Results for the First Two Quarters of 2016
Net sales increased $248.6 million, or 60.5%, to $659.4 million
for the first two quarters of 2016 from $410.8 million for the
first two quarters of 2015. Net sales of Green Giant, acquired on
November 2, 2015, and net sales of Mama Mary’s, acquired on July
10, 2015, contributed $237.4 million and $19.4 million,
respectively, to the overall increase.
Base business net sales for the first two quarters of 2016
decreased $6.6 million, or 1.6%, to $402.1 million from $408.7
million for the first two quarters of 2015. The $6.6 million
decrease was attributable to a decrease in unit volume of $5.4
million, or 1.3%, the negative impact of currency fluctuations on
foreign sales of approximately $0.7 million, or 0.2%, and a
decrease in net pricing of $0.5 million, or 0.1%.
Gross profit increased $96.2 million, or 74.4%, to $225.6
million for the first two quarters of 2016 from $129.4 million for
the first two quarters of 2015. Gross profit expressed as a
percentage of net sales increased to 34.2% in the first two
quarters of 2016 from 31.5% in the first two quarters of 2015, an
increase of 2.7 percentage points. The increase in gross profit
percentage was primarily driven by the acquisition of Green Giant,
which benefited from lower than anticipated trade expense and input
costs, particularly from the Green Giant manufacturing facility in
Irapuato, Mexico, as well as greater than anticipated synergies
with the Company’s base business. Gross profit percentage was
positively impacted by decreased costs for commodities, packaging
and distribution for the base business and improved product mix,
which was partially offset by the unfavorable impact the decrease
in base business sales volume had on cost absorption, a net
reduction in base business pricing, and the impact of the write-off
of Rickland Orchards inventory in connection with the
Company’s decision to discontinue the brand. Gross profit
percentage, excluding the results of Green Giant, decreased 0.1
percentage points.
Selling, general and administrative expenses increased $31.5
million, or 74.9%, to $73.5 million for the first two quarters of
2016 from $42.0 million for the first two quarters of 2015. The
increase was primarily due to the Green Giant acquisition, which
resulted in $29.6 million of incremental expenses for the first two
quarters of 2016. The overall $31.5 million increase was
attributable to increases in consumer marketing of $14.7 million,
selling expenses of $5.7 million (which includes a $5.0 million
increase in brokerage expenses and a $0.7 million increase in
salesperson compensation), general and administrative expenses of
$4.0 million (primarily related to compensation),
acquisition-related expenses of $3.9 million, and warehousing
expenses of $3.2 million (which includes $0.9 million of
distribution restructuring expenses). Expressed as a percentage of
net sales, selling, general and administrative expenses increased
1.0 percentage point to 11.2% for the first two quarters of 2016
from 10.2% for the first two quarters of 2015.
Net interest expense increased $15.0 million, or 66.2%, to $37.6
million for the first two quarters of 2016 from $22.6 million in
the first two quarters of 2015. The increase was primarily
attributable to additional borrowings used to fund the Green Giant
acquisition.
The Company’s reported net income under GAAP was $63.4 million,
or $1.04 per diluted share, for the first two quarters of 2016, as
compared to reported net income of $38.3 million, or $0.69 per
diluted share, for the first two quarters of 2015. The Company’s
adjusted net income for the first two quarters of 2016, which
excludes an intangible asset impairment-related adjustment to
deferred taxes resulting from the Company’s decision to discontinue
the Rickland Orchards brand, the after-tax impact of the non-cash
impairment charge and the related loss on disposal of inventory,
loss on extinguishment of debt, the amortization of
acquisition-related inventory step-up, other acquisition-related
expenses and distribution restructuring expenses, was $74.7
million, or $1.22 per adjusted diluted share. The Company’s
adjusted net income for the first two quarters of 2015, which
excludes the after tax impact of the loss on product recall and
acquisition-related expenses, was $39.6 million, or $0.72 per
adjusted diluted share.
For the first two quarters of 2016, adjusted EBITDA (which
excludes the impact of acquisition-related expenses, the
amortization of acquisition-related inventory step-up, the non-cash
intangible asset impairment charge and related loss on disposal of
inventory, loss on product recall and distribution restructuring
expenses), increased 79.3% to $174.5 million from $97.3 million for
the first two quarters of 2015.
Guidance
B&G Foods reaffirmed full year 2016 guidance for net sales
to a range of $1.39 billion to $1.42 billion and increased full
year 2016 guidance for adjusted EBITDA to a range of $317.0 million
to $327.0 million and adjusted diluted earnings per share to a
range of $2.11 to $2.21.
B&G Foods provides earnings guidance only on a non-GAAP
basis and does not provide a reconciliation of the Company’s
forward-looking adjusted EBITDA and adjusted diluted earnings per
share guidance to the most directly comparable GAAP financial
measures because of the inherent difficulty in forecasting and
quantifying certain amounts that are necessary for such
reconciliations, including adjustments that could be made for
deferred taxes; loss on extinguishment of debt; acquisition-related
expenses, gains and losses; intangible asset impairment charges and
related asset write-offs; loss on product recalls; restructuring
expenses; and other charges reflected in our reconciliation of
historic non-GAAP financial measures, the amounts of which, based
on past experience, could be material. For additional information
regarding B&G Foods’ non-GAAP financial measures, see “About
Non-GAAP Financial Measures and Items Affecting Comparability”
below.
Conference Call
B&G Foods will hold a conference call at 4:30 p.m. ET today,
July 28, 2016. 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 (888) 219-1420 for U.S. callers or (913) 312-1446 for
international callers.
A replay of the call will be available two hours after the call
and can be accessed by dialing (877) 870-5176 or (858) 384-5517 for
international callers; the password is 3150649. The replay will be
available from July 28, 2016 through August 11, 2016. 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,”
“base business net sales” (net sales without the impact of
acquisitions until the acquisitions are included in both comparable
periods and without the impact of discontinued brands), “EBITDA”
(net income 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 and amortization of acquired inventory fair
value step-up); 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)
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,” “adjusted diluted
earnings per share,” and “base business net sales,” which are
calculated as reported net income, reported diluted earnings per
share and reported net sales adjusted for certain items that affect
comparability. These non-GAAP financial measures reflect
adjustments to reported net income, diluted earnings per share and
net sales to eliminate the items identified above. 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 these items, management does not consider these items
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 and to
net cash provided by operating activities is included below for the
second quarter and first two quarters of 2016 and 2015, along with
the components of EBITDA and adjusted EBITDA. Also included below
are reconciliations of the non-GAAP terms adjusted net income,
adjusted diluted earnings per share and base business net sales to
the most directly comparable measure calculated and presented in
accordance with GAAP in the Company’s consolidated balance sheets
and related consolidated statements of operations, comprehensive
income and cash flows.
About B&G Foods, Inc.
B&G Foods and its subsidiaries manufacture, sell and
distribute a diversified portfolio of high-quality, branded
shelf-stable and frozen 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, Green Giant, JJ
Flats, Joan of Arc, Las Palmas, Le Sueur, MacDonald’s,
Mama Mary’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, 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
Static Guard, a household product brand.
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’
net sales, adjusted EBITDA and adjusted diluted earnings per share;
B&G Foods’ overall expectations for fiscal 2016; and B&G
Foods’ expectations regarding Green Giant, including, without
limitation, B&G Foods’ expectations as to transition timing,
profitability, innovation, and Green Giant and base business
growth. 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)
July 2, 2016
January 2, 2016 Assets
Current assets: Cash and cash equivalents $ 107,568 $ 5,246 Trade
accounts receivable, net 71,243 69,712 Inventories 262,742 312,880
Prepaid expenses and other current assets 25,633 67,517 Income tax
receivable 14,370 2,514 Deferred income taxes 5,209
5,292 Total current assets 486,765 463,161
Property, plant and equipment, net of accumulated depreciation of
$157,790 and $146,337 163,743 163,642 Goodwill 472,545 473,145
Other intangibles, net 1,430,165 1,442,340 Other assets
3,240 1,332 Total assets $ 2,556,458 $
2,543,620
Liabilities and Stockholders’ Equity
Current liabilities: Trade accounts payable $ 38,562 $
49,593 Accrued expenses 30,179 31,233 Current portion of long-term
debt 1,140 33,750 Income tax payable 2,933 — Dividends payable
26,316 20,292
Total current liabilities
99,130 134,868 Long-term debt 1,545,999 1,697,771 Other
liabilities 3,077 3,212 Deferred income taxes 285,795
250,084 Total liabilities 1,934,001 2,085,935
Stockholders’ equity:
Preferred stock, $0.01 par value per
share. Authorized 1,000,000 shares; noshares issued or
outstanding
— —
Common stock, $0.01 par value per share.
Authorized 125,000,000 shares;62,656,314 and 57,976,744 shares
issued and outstanding as of July 2, 2016 andJanuary 2, 2016
627 580 Additional paid-in capital 263,978 162,568 Accumulated
other comprehensive loss (12,828 ) (12,696 ) Retained earnings
370,680 307,233 Total stockholders’
equity 622,457 457,685 Total
liabilities and stockholders’ equity $ 2,556,458 $ 2,543,620
B&G Foods, Inc. and Subsidiaries
Consolidated Statements of Operations (In thousands,
except per share data) (Unaudited)
Second Quarter Ended
First Two Quarters Ended July 2,
July 4, July 2, July 4,
2016 2015 2016 2015 Net
sales $ 306,376 $ 193,645 $ 659,354 $
410,767 Cost of goods sold 196,661
131,637 433,724 281,362
Gross profit 109,715 62,008 225,630 129,405 Operating
expenses: Selling, general and administrative expenses 33,886
19,197 73,524 42,045 Amortization expense 3,362 2,673 6,770 5,346
Impairment of intangible assets 5,405
— 5,405 —
Operating income 67,062 40,138 139,931 82,014 Other income
and expenses: Interest expense, net 18,426 11,062 37,561 22,601
Loss on extinguishment of debt — — 2,836 — Other income
(371 ) — (2,300 )
— Income before income tax expense 49,007 29,076 101,834 59,413
Income tax expense 18,756 10,328
38,387 21,098 Net income $
30,251 $ 18,748 $ 63,447 $
38,315 Weighted average shares outstanding: Basic
62,646 56,627 60,823 55,193 Diluted 62,872 56,683 60,988 55,241
Basic and diluted earnings per share $ 0.48 $ 0.33 $ 1.04 $
0.69 Cash dividends declared per share $ 0.42 $ 0.34 $ 0.84
$ 0.68
B&G Foods, Inc. and Subsidiaries
Reconciliation of EBITDA and Adjusted EBITDA to Net Income and
to Net Cash Provided by Operating Activities (In
thousands) (Unaudited)
Second Quarter Ended First
Two Quarters Ended July 2, July
4, July 2, July 4, 2016
2015 2016 2015
Net income $ 30,251 $ 18,748 $ 63,447 $ 38,315 Income tax
expense 18,756 10,328 38,387 21,098 Interest expense, net 18,426
11,062 37,561 22,601 Depreciation and amortization 9,154 6,832
18,158 13,376 Loss on extinguishment of debt —
— 2,836 — EBITDA(1) 76,587
46,970 160,389 95,390 Acquisition-related expenses 1,699 23 3,931
62 Amortization of acquisition-related inventory step-up — — 3,074
— Impairment of intangible assets 5,405 — 5,405 — Loss on disposal
of inventory 791 — 791 — Loss on product recall — 401 — 1,868
Distribution restructuring expenses 474 —
948 — Adjusted EBITDA(1) 84,956
47,394 174,538 97,320 Income tax expense (18,756 ) (10,328 )
(38,387 ) (21,098 ) Interest expense, net (18,426 ) (11,062 )
(37,561 ) (22,601 ) Acquisition-related expenses (1,699 ) (23 )
(3,931 ) (62 ) Loss on product recall — (401 ) — (1,868 )
Distribution restructuring expenses (474 ) — (948 ) — Deferred
income taxes 25,813 4,614 35,667 9,233 Amortization of deferred
financing costs and bond discount 1,314 877 2,782 1,756
Amortization of acquisition-related inventory step-up — — (3,074 )
— Share-based compensation expense 2,018 1,334 3,116 2,517 Excess
tax benefits from share-based compensation — — (343 ) (518 )
Changes in assets and liabilities, net of effects of business
combinations 2,078 (13,524 ) 68,814
(7,117 ) Net cash provided by operating activities $
76,824 $ 18,881 $ 200,673 $ 57,562
____________________
(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, 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. 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 and
amortization of acquired inventory fair value step-up); 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 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; loss on
product recalls and distribution restructuring expenses 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 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
costs and expenses for depreciation and amortization, interest and
related expenses, loss on extinguishment of debt,
acquisition-related expenses, gains and losses, income taxes,
intangible asset impairment charges and related asset write-offs,
loss on product recalls and distribution restructuring expenses.
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) Second
Quarter Ended First Two Quarters
Ended July 2, July 4, July
2, July 4, 2016 2015
2016 2015 Reported net income $ 30,251 $ 18,748 $
63,447 $ 38,315 Non-recurring adjustment to deferred taxes(1) 564 —
564 — Loss on extinguishment of debt, net of tax(2) — — 1,784 —
Acquisition-related expenses, net of tax 1,069 15 2,473 40
Distribution restructuring expenses, net of tax(3) 298 — 596 —
Acquisition-related inventory step-up, net of tax(4) — — 1,934 —
Impairment of intangible assets, net of tax(5) 3,400 — 3,400 — Loss
on disposal of inventory, net of tax(5) 498 — 498 — Loss on product
recall, net of tax(6) — 259 — 1,205
Adjusted net income $ 36,080 $ 19,022 $ 74,696 $ 39,560 Adjusted
diluted earnings per share $ 0.57 $ 0.34 $ 1.22 $ 0.72
____________________
(1)
Non-recurring adjustment to deferred taxes
for the second quarter and first two quarters of 2016 relates to a
true-up of deferred 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 the first two
quarters 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. (3)
Distribution restructuring expenses for the second quarter and
first two quarters of 2016 includes expenses relating to our
transitioning of the operations of our 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. We expect this transition and the incurrence of related
distribution restructuring expenses to be completed during the
third quarter of 2016. (4)
Acquisition-related inventory step-up for
the first two quarters of 2016 relates to the purchase accounting
adjustments made to the finished goods inventory acquired in the
Green Giant acquisition.
(5)
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 our consolidated statement of operations for the second
quarter of 2016. We also recorded a charge to cost of goods sold of
approximately $0.8 million in connection with the write-off of raw
material and finished goods inventory used for the Rickland
Orchards brand.
(6)
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. A
significant majority of the costs of this recall were incurred in
the fourth quarter of 2014. The cost impact of this recall during
the second quarter of 2015 was $0.4 million, which was recorded as
a decrease in net sales related to customer refunds. The cost
impact of this recall during the first two quarters of 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.
B&G Foods, Inc. and Subsidiaries Items
Affecting Comparability — Reconciliation of Base Business Net Sales
to Reported Net Sales (In thousands)
(Unaudited) Second
Quarter Ended First Two Quarters
Ended July 2, July 4, July
2, July 4, 2016 2015
2016 2015 Reported net sales $
306,376 $ 193,645 $ 659,354 $ 410,767 Net sales from
acquisitions(1) (116,115 ) — (256,755 ) — Net sales of Rickland
Orchards(2) (158 ) (1,047 ) (528 )
(2,115 ) Base business net sales (3) $ 190,103 $ 192,598
$ 402,071 $ 408,652
___________________
(1)
Reflects net sales for Green Giant and
Mama Mary’s for the second quarter and first two quarters of 2016
for which there is no comparable period of net sales during the
same period in 2015. Green Giant was acquired on November 2, 2015,
and Mama Mary’s was acquired on July 10, 2015.
(2)
Reflects all net sales for Rickland
Orchards for each period presented. Rickland Orchards was
discontinued during the second quarter of 2016.
(3) 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 impact of
acquisitions until the net sales from such acquisitions are
included in both comparable periods and (2) net sales of
discontinued brands. The portion of current period net sales
attributable to recent acquisitions for which there is no
corresponding period 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 first anniversary of the acquisition date. For discontinued
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 brands.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160728006552/en/
Investor Relations:ICR, Inc.Dara Dierks, 866-211-8151orMedia
Relations:ICR, Inc.Matt Lindberg, 203-682-8214
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