— Delivers strong growth in net sales,
diluted EPS and adjusted EBITDA* for the full year —
B&G Foods, Inc. (NYSE:BGS) today announced financial results
for the fourth quarter and full year 2016.
Highlights (vs. prior year quarter and prior full year where
applicable):
- Completed the acquisitions of the
spices & seasonings business of ACH Foods Companies, Inc. on
November 21, 2016, and Victoria Fine Foods on December 2, 2016 –
transitions and integrations on track
- Net sales increased 20.8% to $413.7
million for the quarter and 44.0% to $1.39 billion for the
year
- Net income increased 23.8% to $13.6
million for the quarter and 58.4% to $109.4 million for the
year
- Adjusted net income* decreased 22.2% to
$19.4 million for the quarter (primarily due to the timing of the
increase in consumer marketing described below) and increased 51.0%
to $131.1 million for the year
- Diluted earnings per share increased
5.3% to $0.20 for the quarter and 41.8% to $1.73 for the year
- Adjusted diluted earnings per share*
decreased 32.6% to $0.29 for the quarter (primarily due to the
timing of the increase in consumer marketing described below) and
increased 35.3% to $2.07 for the year
- Adjusted EBITDA* decreased 7.4% to
$62.4 million for the quarter (primarily due to the timing of the
increase in consumer marketing described below) and increased 47.9%
to $322.0 million for the year
- Consumer marketing spending increased
208.5% to $28.8 million for the quarter and 148.2% to $69.6 million
for the year, primarily a result of the relaunch of the iconic
Green Giant brand
- Returned $100.8 million to stockholders
in the form of dividends during the year
- Guidance for full year fiscal 2017:
- Net sales of $1.64 billion to $1.68
billion
- Adjusted EBITDA of $360.0 million to
$375.0 million
- Adjusted diluted earnings per share of
$2.13 to $2.27
“In 2016, much of our year was focused on the Green Giant
integration, including the relaunch of the iconic Green Giant brand
with a new and exciting marketing campaign and the introduction of
several new and innovative products that have been a hit with
consumers. We also continued to execute a key tenet of our growth
strategy by completing two acquisitions in the fourth quarter; the
spices & seasonings business of ACH Food Companies and the
Victoria brand. Our base business, however, was not immune to the
top-line challenges affecting our industry,” stated 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.
“In just over two years we have nearly doubled the size of the
B&G Foods, and with rapid growth comes significant challenges
but also significant opportunities. For 2017 our top priorities are
to deliver superior customer service, stabilize our core portfolio
of brands through strategic and tactical marketing support,
continue to harness the power and positive momentum of the Green
Giant brand to drive top-line growth, and successfully integrate
our two most recent acquisitions. We have a significant amount of
work ahead of us in 2017, but my confidence in our team and our
ability to deliver results and achieve our goals is as strong as
ever. I look forward to another successful year for B&G Foods
and our stockholders.”
Financial Results for the Fourth Quarter of 2016
Net sales increased $71.4 million, or 20.8%, to $413.7 million
for the fourth quarter of 2016 from $342.3 million for the fourth
quarter of 2015. An additional month of net sales of Green Giant,
acquired on November 2, 2015, contributed $46.5 million to net
sales for the quarter. In addition, net sales of the spices &
seasonings business, acquired on November 21, 2016, and net sales
of Victoria, acquired on December 2, 2016, contributed $28.2
million and $3.2 million, respectively, to the Company’s net sales
for the quarter.
Base business net sales for the fourth quarter of 2016 decreased
$5.6 million, or 1.6%, to $335.7 million from $341.3 million for
the fourth quarter of 2015. The $5.6 million decrease was
attributable to a decrease in unit volume of $2.2 million, or 0.6%,
and a decrease in net pricing of $3.6 million, or 1.1%, partially
offset by the favorable impact of currency fluctuations on foreign
sales of approximately $0.2 million, or 0.1%.
A little more than half of the Company’s base business net sales
decline during the fourth quarter was attributable to a challenging
competitive environment for its syrup brands, which in the
aggregate declined $3.1 million for the quarter. The decline was
primarily attributable to pure maple syrup price deflation due to
the strength of the U.S. dollar relative to the Canadian dollar,
which has resulted in increased competition in the maple syrup
category and contractually mandated price reductions with certain
of the Company’s foodservice customers.
Gross profit increased $18.3 million, or 20.7%, to $106.9
million for the fourth quarter of 2016 from $88.6 million for the
fourth quarter of 2015. Gross profit expressed as a percentage of
net sales decreased to 25.8% in the fourth quarter of 2016 from
25.9% in the fourth quarter of 2015, a decrease of 0.1 percentage
points.
Selling, general and administrative expenses increased $22.2
million, or 60.6%, to $58.8 million for the fourth quarter of 2016
from $36.6 million for the fourth quarter of 2015, primarily due to
the Green Giant acquisition. The increase was attributable to
increases in consumer marketing of $19.5 million, warehousing
expenses of $4.1 million, acquisition-related expenses of $2.7
million, partially offset by decreases in general and
administrative expenses of $3.6 million (primarily related to the
timing of accruals for performance based compensation), and selling
expenses of $0.5 million (which includes a $1.0 million decrease in
salesperson compensation partially offset by a $0.5 million
increase in brokerage expenses). Expressed as a percentage of net
sales, selling, general and administrative expenses increased 3.5
percentage points to 14.2% for the fourth quarter of 2016 from
10.7% for the fourth quarter of 2015.
Net interest expense increased $1.6 million, or 9.6%, to $18.9
million for the fourth quarter of 2016 from $17.3 million in the
fourth quarter of 2015. The increase was primarily attributable to
additional indebtedness outstanding during the fourth quarter of
2016 as compared to the fourth quarter of 2015 as a result of the
Green Giant acquisition, the spices & seasonings acquisition
and the Victoria acquisition.
The Company’s reported net income under U.S. generally accepted
accounting principles (GAAP) was $13.6 million, or $0.20 per
diluted share, for the fourth quarter of 2016, as compared to
reported net income of $11.0 million, or $0.19 per diluted share,
for the fourth quarter of 2015. The Company’s adjusted net income
for the fourth quarter of 2016, which excludes the after-tax impact
of the amortization of acquisition-related inventory step-up and
other acquisition-related expenses was $19.4 million, or $0.29 per
adjusted diluted share. The Company’s adjusted net income for the
fourth quarter of 2015, which excludes an acquisition-related
adjustment to deferred taxes, the after-tax impact of the
amortization of acquisition-related inventory step-up, other
acquisition-related expenses and distribution restructuring
expenses, was $25.0 million, or $0.43 per adjusted diluted
share.
For the fourth quarter of 2016, adjusted EBITDA (which excludes
the impact of the amortization of acquisition-related inventory
step-up and other acquisition-related expenses), decreased 7.4% to
$62.4 million from $67.4 million for the fourth quarter of
2015.
Financial Results for Full Year 2016
Net sales increased $424.9 million, or 44.0%, to $1,391.3
million for fiscal 2016 from $966.4 million for fiscal 2015. An
additional ten months of net sales of Green Giant, acquired on
November 2, 2015, and an additional almost six months of net sales
of Mama Mary’s, acquired on July 10, 2015, contributed $397.6
million and $19.4 million, respectively, to net sales for fiscal
2016. In addition, net sales of the spices & seasonings
business, acquired on November 21, 2016, and net sales of Victoria,
acquired on December 2, 2016, contributed $28.2 million and $3.2
million, respectively, to the overall net sales increase.
Base business net sales for fiscal 2016 decreased $20.0 million,
or 2.1%, to $942.3 million from $962.3 million for fiscal 2015. The
$20.0 million decrease was attributable to a decrease in unit
volume of $13.5 million, or 1.4%, a decrease in net pricing of $6.0
million, or 0.6%, and the negative impact of currency fluctuations
on foreign sales of approximately $0.5 million, or 0.1%.
A primary driver of the decline in base business net sales for
fiscal 2016 was the Company’s syrup business. The Company’s syrup
brands have been experiencing a challenging competitive environment
and the net sales of those brands declined in the aggregate $7.7
million for the year. The decline was primarily attributable to
maple syrup price deflation due to the strength of the U.S. dollar
relative to the Canadian dollar, which has resulted in increased
competition in the maple syrup category and contractually mandated
price reductions with certain of the Company’s foodservice
customers. Another significant factor in the decline in base
business net sales for fiscal 2016 was the TrueNorth brand, which
declined $6.4 million, or 33.9%. The TrueNorth net sales decline
was primarily the result of historically high almond prices in
2015. In response to increased almond costs, the Company increased
the selling price for TrueNorth products, which had a negative
impact on consumer demand. Although the Company has rolled back
pricing as almond prices have begun to return to historical norms,
consumer demand has not returned to prior levels. Base business net
sales were also negatively impacted by net sales of the Company’s
Ortega products, which decreased $3.7 million, or 2.6%. A portion
of the decrease was attributable to the effects of the product
recall we announced in November 2014, which caused an increase in
net sales of Ortega in fiscal 2015 due to customers restocking
inventory of products affected by the recall, partially offset by
$1.2 million of customer refunds related to the recall. $1.5
million of the decrease in net sales of Ortega was due to a net
pricing decrease in fiscal 2016.
Gross profit increased $158.4 million, or 54.7%, to $448.0
million for fiscal 2016 from $289.6 million for fiscal 2015. Gross
profit expressed as a percentage of net sales increased to 32.2% in
fiscal 2016 from 30.0% in fiscal 2015, an increase of 2.2
percentage points. The increase in gross profit percentage was
primarily driven by the acquisition of Green Giant. Gross profit
percentage was also 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.
Selling, general and administrative expenses increased $68.9
million, or 65.0%, to $174.8 million for fiscal 2016 from $105.9
million for fiscal 2015, primarily due to the Green Giant
acquisition. Acquisition-related expenses and distribution
restructuring expenses increased $10.0 million for the year. The
remaining $58.9 million of the increase was attributable to
increases in consumer marketing of $41.6 million, selling expenses
of $8.7 million (which includes a $7.5 million increase in
brokerage expenses and a $1.2 million increase in salesperson
compensation), warehousing expenses of $7.4 million and general and
administrative expenses of $1.2 million (primarily related to
compensation). Expressed as a percentage of net sales, selling,
general and administrative expenses increased 1.5 percentage points
to 12.5% for fiscal 2016 from 11.0% for fiscal 2015.
Net interest expense increased $23.4 million, or 45.6%, to $74.5
million for fiscal 2016 from $51.1 million in fiscal 2015. The
increase was primarily attributable to additional indebtedness
outstanding during fiscal 2016 as compared to fiscal 2015 as a
result of the Green Giant acquisition, the spices & seasonings
acquisition and the Victoria acquisition.
The Company’s reported net income under GAAP was $109.4 million,
or $1.73 per diluted share, for fiscal 2016, as compared to
reported net income of $69.1 million, or $1.22 per diluted share,
for fiscal 2015. The Company’s adjusted net income for fiscal 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 $131.1
million, or $2.07 per adjusted diluted share. The Company’s
adjusted net income for fiscal 2015, which excludes the
acquisition-related adjustment to deferred taxes and the after-tax
impact of the amortization of acquisition-related inventory
step-up, other acquisition-related expenses and distribution
restructuring expenses and the loss on product recall, was $86.8
million, or $1.53 per adjusted diluted share.
For fiscal 2016, adjusted EBITDA (which excludes the impact of
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 other
acquisition-related and distribution restructuring expenses),
increased 47.9% to $322.0 million from $217.8 million for full year
2015.
2017 Guidance
For full year 2017, net sales is expected to be approximately
$1.64 billion to $1.68 billion, consumer marketing spending is
expected to be approximately $75.0 million to $80.0 million, with
approximately 35% of the total spending occurring in the first
quarter of 2017, adjusted EBITDA is expected to be approximately
$360.0 million to $375.0 million and adjusted diluted earnings per
share is expected to be $2.13 to $2.27.
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,
February 23, 2017. 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) 282-4056 for U.S. callers or (913) 312-0850 for
international callers.
A replay of the call will be available two hours after the call
and can be accessed by dialing (844) 512-2921 for U.S. callers or
(412) 317-6671 for international callers; the password is 6779173.
The replay will be available from February 23, 2017 through March
9, 2017. 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
fourth quarter and full year 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,
changes in stockholders’ equity 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, 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, 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, Spice
Islands, Spring Tree, Sugar Twin, Tone’s, Trappey’s,
TrueNorth, Underwood, Vermont Maid, Victoria, Weber 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, consumer marketing spending, adjusted EBITDA, adjusted
diluted earnings per share and overall expectations for fiscal
2017. 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) December 31, 2016
January 2, 2016 Assets Current assets: Cash
and cash equivalents $ 28,833 $ 5,246 Trade accounts receivable,
net
119,265
69,712 Inventories
356,590
312,880 Prepaid expenses and other current assets
26,399
67,517 Income tax receivable 10,787 2,514 Deferred income taxes
7,902 5,292 Total current assets
549,776
463,161 Property, plant and equipment, net of accumulated
depreciation of $169,474 and $146,337 245,344 163,642 Goodwill
614,278 473,145 Other intangibles, net 1,629,482 1,442,340 Other
assets 4,625 1,332 Total assets $
3,043,505
$ 2,543,620
Liabilities and Stockholders’
Equity Current liabilities: Trade accounts payable $
98,033
$ 49,593 Accrued expenses
62,393
31,233 Current portion of long-term debt 10,515 33,750 Income tax
payable 3,875 — Dividends payable 30,879
20,292 Total current liabilities
205,695
134,868 Long-term debt 1,715,268 1,697,771 Other liabilities
21,405 3,212 Deferred income taxes 315,480
250,084 Total liabilities
2,257,848
2,085,935 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; 66,406,314 and 57,976,744 shares issued and
outstanding as of December 31, 2016 and January 2, 2016 664 580
Additional paid-in capital 387,699 162,568 Accumulated other
comprehensive loss (19,364 ) (12,696 ) Retained earnings
416,658 307,233 Total stockholders’ equity
785,657 457,685 Total liabilities and
stockholders’ equity $
3,043,505
$ 2,543,620
B&G Foods, Inc. and
Subsidiaries Consolidated Statements of Operations
(In thousands, except per share data) (Unaudited)
Fourth Quarter Ended Fiscal Year
Ended December 31, January 2, December
31, January 2, 2016 2016
2016 2016 Net sales $ 413,656 $ 342,291 $
1,391,257 $ 966,358 Cost of goods sold 306,750
253,728 943,295 676,794 Gross profit 106,906
88,563 447,962 289,564 Operating expenses: Selling, general
and administrative expenses 58,770 36,587 174,759 105,939
Amortization expense 3,764 3,183 13,803 11,255 Impairment of
intangible assets — — 5,405
— Operating income 44,372 48,793 253,995 172,370
Other income and expenses: Interest expense, net 18,921
17,258 74,456 51,131 Loss on extinguishment of debt — — 2,836 —
Other expense (income) 1,810 — (363 ) —
Income before income tax expense 23,641 31,535 177,066 121,239
Income tax expense 10,073 20,575 67,641
52,149 Net income $ 13,568 $ 10,960 $ 109,425 $
69,090 Weighted average shares outstanding: Basic 66,407
57,977 63,203 56,585 Diluted 66,666 58,084 63,420 56,656
Basic and diluted earnings per share $ 0.20 $ 0.19 $ 1.73 $ 1.22
Cash dividends declared per share $ 0.47 $ 0.35 $ 1.73 $
1.38
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) Fourth Quarter
Ended Year Ended December 31,
January 2, December 31, January 2,
2016 2016 2016 2016 Net income $
13,568 $ 10,960 $ 109,425 $ 69,090 Income tax expense 10,073 20,575
67,641 52,149 Interest expense, net 18,921 17,258 74,456 51,131
Depreciation and amortization 10,453 8,141 37,266 28,653 Loss on
extinguishment of debt — — 2,836
— EBITDA(1) 53,015 56,934 291,624 201,023
Acquisition-related expenses 7,048 2,817 17,523 6,118 Amortization
of acquisition-related inventory step-up 2,350 6,127 5,424 6,127
Impairment of intangible assets — — 5,405 — Loss on disposal of
inventory — — 791 — Loss on product recall, net of insurance
recoveries — — — 1,868 Distribution restructuring expenses —
1,493 1,273 2,665
Adjusted EBITDA(1) 62,413 67,371 322,040 217,801 Income tax expense
(10,073 ) (20,575 ) (67,641 ) (52,149 ) Interest expense, net
(18,921 ) (17,258 ) (74,456 ) (51,131 ) Acquisition-related
expenses (7,048 ) (2,817 ) (17,523 ) (6,118 ) Loss on product
recall, net of insurance recoveries — — — (1,868 ) Distribution
restructuring expenses — (1,493 ) (1,273 ) (2,665 ) Write-off of
property, plant and equipment 337 107 337 107 Deferred income taxes
10,635 15,514 56,190 29,152 Amortization of deferred financing
costs and bond discount 1,325 1,269 5,426 3,900 Amortization of
acquisition-related inventory step-up (2,350 ) (6,127 ) (5,424 )
(6,127 ) Share-based compensation expense 1,341 2,113 5,798 5,817
Excess tax benefits from share-based compensation — (21 ) (343 )
(539 ) Changes in assets and liabilities, net of effects of
business combinations 59,224 3,699
66,530 (7,701 ) Net cash provided by operating
activities $ 96,883 $ 41,782 $ 289,661 $
128,479
___________________________
(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) Fourth Quarter Ended
Fiscal Year Ended December 31, January
2, December 31, January 2, 2016
2016 2016 2016 Reported net income $ 13,568 $
10,960 $ 109,425 $ 69,090 Non-recurring adjustment to deferred
taxes(1) — 7,451 881 7,166 Loss on extinguishment of debt, net of
tax(2) — — 1,770 — Acquisition-related expenses, net of tax 4,399
1,769 10,934 3,842 Distribution restructuring expenses, net of
tax(3) — 938 794 1,674 Acquisition-related inventory step-up, net
of tax(4) 1,466 3,848 3,385 3,848 Impairment of intangible assets,
net of tax(5) — — 3,373 — Loss on disposal of inventory, net of
tax(5) — — 494 — Loss on product recall, net of tax(6) —
— — 1,173 Adjusted net income $ 19,433 $
24,966 $ 131,056 $ 86,793 Adjusted diluted earnings per share $
0.29 $ 0.43 $ 2.07 $ 1.53
________________________
(1) Non-recurring adjustment to deferred taxes for full year
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. Non-recurring adjustment to deferred taxes for the fourth
quarter and full year 2015 relate to a true-up of deferred taxes
for state apportionment as a result of the Green Giant and Mama
Mary’s acquisitions. (2) Loss on extinguishment of debt for
full year 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 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. (4) Acquisition-related inventory
step-up for the fourth quarter 2016 relates to the purchase
accounting adjustments made to the finished goods inventory
acquired in the spices & seasonings acquisition.
Acquisition-related inventory step-up for full year 2016 and 2015
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 full year 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 full year 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) Fourth
Quarter Ended Year Ended December 31,
January 2, December 31, January
2, 2016 2016 2016 2016 Reported net
sales $ 413,656 $ 342,291 $ 1,391,257 $ 966,358 Net sales from
acquisitions(1) (77,910 ) — (448,445 ) — Net sales of Rickland
Orchards(2) — (934 ) (528 )
(4,106 ) Base business net sales (3) $ 335,746 $ 341,357
$ 942,284 $ 962,252
________________________
(1) Reflects net sales for Green Giant, Mama Mary’s, the
spices & seasonings business and Victoria for the fourth
quarter and full year 2016 for which there is no comparable period
of net sales in 2015. Green Giant was acquired on November 2, 2015,
Mama Mary’s was acquired on July 10, 2015, the spices &
seasonings business was acquired on November 21, 2016, and Victoria
was acquired on December 2, 2016. (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.
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version on businesswire.com: http://www.businesswire.com/news/home/20170223006608/en/
Investor Relations:ICR, Inc.Dara Dierks, 866.211.8151orMedia
Relations:ICR, Inc.Matt Lindberg, 203.682.8214
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