B&G Foods, Inc. (NYSE:BGS) today announced financial results
for the second quarter and first two quarters of 2017.
Executive Summary (vs. year-ago quarter where
applicable):
- Net sales of $368.1 million, an
increase of 20.2%
- Net income of $22.1 million, a decrease
of 27.1%
- Adjusted net income* of $27.6 million,
a decrease of 23.4%
- Diluted earnings per share of $0.33, a
decrease of 31.3%
- Adjusted diluted earnings per share* of
$0.41, a decrease of 28.1%
- Adjusted EBITDA* of $78.2 million, a
decrease of 8.0%
- Revised guidance for full year fiscal
2017:
- Net sales range narrowed to $1.64
billion to $1.67 billion
- Adjusted EBITDA range decreased to
$352.5 million to $367.5 million
- Adjusted diluted earnings per share
range decreased to $2.03 to $2.17
“The second quarter of 2017 was a difficult one, as we continued
to struggle with the many challenges facing our industry. As a
result, we are lowering our adjusted EBITDA and adjusted diluted
earnings per share guidance while reaffirming our net sales
guidance at the lower end of our range. We doubled the size of our
company with our last three acquisitions, and all are performing
above expectations. The quarter saw continued strong growth in our
Green Giant frozen products driven by the innovation we launched in
the fourth quarter of 2016. In addition, our latest two
acquisitions exceeded our net sales expectations by over 20% for
the quarter. We expect these sales trends to continue for the
second half of 2017,” stated Robert C. Cantwell, President and
Chief Executive Officer of B&G Foods.
Financial Results for the Second Quarter of 2017
Net sales increased $61.7 million, or 20.2%, to $368.1 million
for the second quarter of 2017 from $306.4 million for the second
quarter of 2016. Net sales of the spices & seasonings business,
acquired on November 21, 2016, and net sales of Victoria, acquired
on December 2, 2016, contributed $67.4 million and $9.7 million,
respectively, to the Company’s net sales for the quarter.
_____________________
* 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.
Base business net sales* for the second quarter of 2017
decreased $15.1 million, or 4.9%, to $291.1 million from $306.2
million for the second quarter of 2016. The $15.1 million decrease
was attributable to decreases in unit volume of $11.8 million, or
3.8%, and net pricing of $3.3 million, or 1.1%.
Approximately 65% of the base business net sales decline for the
second quarter of 2017 was attributable to Pirate Brands, maple
syrup products, Green Giant and Mama Mary’s. Net sales of Pirate
Brands decreased $3.4 million, primarily due to a shift in timing
of certain promotional spending from the second quarter of last
year to the third quarter of this year. Net sales of maple syrup
products decreased $3.0 million, primarily due to the Company’s
decision during the first quarter of 2017 to discontinue certain
private label sales. Net sales of Green Giant frozen products
increased by $9.4 million, driven by the brand’s new innovation
products. This increase was more than offset by decreases in net
sales of Green Giant shelf-stable products of $7.6 million,
primarily attributable to forecasted distribution losses with
certain customers, and increases in coupon and slotting expenses of
$2.9 million and a decrease in net sales of non-branded bulk IQF
products of $0.9 million. Net sales of Mama Mary’s, which faced a
category decline of approximately 10.0% during the second quarter
of 2017, decreased $1.5 million, or 16.9%.
Gross profit increased $1.3 million, or 1.2%, to $111.0 million
for the second quarter of 2017 from $109.7 million for the second
quarter of 2016. Gross profit expressed as a percentage of net
sales decreased to 30.2% in the second quarter of 2017 from 35.8%
in the second quarter of 2016, a decrease of 5.6 percentage points.
Excluding spices & seasonings and Victoria, approximately 3.2
percentage points of the decrease in gross profit percentage was
due to an increase in warehousing and distribution costs, 1.1
percentage points of the decrease was due to a decrease in pricing
and 0.9 percentage points of the decrease was due to an increase in
coupon and slotting expenses. The remaining 0.4 percentage points
of the decrease was due to an increase in all other costs,
including the impact of product mix.
Selling, general and administrative expenses increased $15.7
million, or 46.3%, to $49.6 million for the second quarter of 2017
from $33.9 million for the second quarter of 2016. The increase was
composed of increases in marketing expenses of $8.0 million,
acquisition-related expenses of $6.2 million and warehousing
expenses of $3.7 million, partially offset by a decrease in
distribution restructuring expenses of $0.5 million and all other
expenses of $1.7 million. Expressed as a percentage of net sales,
selling, general and administrative expenses increased 2.5
percentage points to 13.5% for the second quarter of 2017 from
11.0% for the second quarter of 2016.
Net interest expense increased $3.6 million, or 19.4%, to $22.0
million for the second quarter of 2017 from $18.4 million in the
second quarter of 2016. The increase was primarily attributable to
additional borrowings made in the fourth quarter of 2016 to fund
the spices & seasonings acquisition and the Victoria
acquisition and in the second quarter of 2017 in connection with
the Company’s credit agreement refinancing and senior notes
offering.
The Company’s reported net income under U.S. generally accepted
accounting principles (GAAP) was $22.1 million, or $0.33 per
diluted share, for the second quarter of 2017, as compared to
reported net income of $30.3 million, or $0.48 per diluted share,
for the second quarter of 2016. The Company’s adjusted net income
for the second quarter of 2017, which excludes the after-tax impact
of loss on extinguishment of debt and acquisition-related expenses,
was $27.6 million, or $0.41 per adjusted diluted share. The
Company’s adjusted net income for the second quarter of 2016, which
excludes an intangible asset impairment-related adjustment to
deferred taxes, 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.
For the second quarter of 2017, adjusted EBITDA (which excludes
the impact of acquisition-related expenses), decreased 8.0% to
$78.2 million from $85.0 million for the second quarter of
2016.
Financial Results for the First Two Quarters of 2017
Net sales increased $126.6 million, or 19.2%, to $786.0 million
for the first two quarters of 2017 from $659.4 million for the
first two quarters of 2016. Net sales of the spices &
seasonings business, acquired on November 21, 2016, and net sales
of Victoria, acquired on December 2, 2016, contributed $130.6
million and $20.4 million, respectively, to the Company’s overall
net sales increase.
Base business net sales for the first two quarters of 2017
decreased $23.7 million, or 3.6%, to $635.1 million from $658.8
million for the first two quarters of 2016. The $23.7 million
decrease was attributable to decreases in unit volume of $21.5
million, or 3.3%, and net pricing of $2.2 million, or 0.3%.
Over 60% of the base business net sales decline for the first
two quarters of 2017 was attributable to Green Giant, maple
syrup products, Bear Creek Country Kitchens and Mama Mary’s. Net
sales of Green Giant frozen products increased by $7.8
million, driven by the brand’s new innovation products. This
increase was more than offset by decreases in unit volume of
Green Giant shelf-stable products of $8.7 million, primarily
attributable to forecasted distribution losses with certain
customers, and an increase in coupon and slotting expenses of $4.5
million and a decrease in net sales of non-branded bulk IQF
products of $1.3 million. Net sales of maple syrup products
decreased $3.9 million, primarily due to the Company’s decision
during the first quarter of 2017 to discontinue certain private
label sales. Net sales of Bear Creek Country Kitchens, which faced
aggressive competition and a category decline of approximately 5.0%
during the first two quarters of 2017, decreased $2.3 million, or
12.1%. Net sales of Mama Mary’s decreased $2.2 million, or 11.4%,
generally in line with a category decline of approximately
9.0%.
Gross profit increased $12.2 million, or 5.4%, to $237.8 million
for the first two quarters of 2017 from $225.6 million for the
first two quarters of 2016. Gross profit expressed as a percentage
of net sales decreased to 30.3% in the first two quarters of 2017
from 34.2% in the first two quarters of 2016, a decrease of 3.9
percentage points. Excluding spices & seasonings and Victoria,
approximately 2.7 percentage points of the decrease in gross profit
percentage was due to an increase in warehousing and distribution
costs, 0.6 percentage points of the decrease was due to an increase
in coupon and slotting expenses and 0.3 percentage points of the
decrease was due to a decrease in pricing. The remaining 0.3
percentage points of the decrease was due to an increase of all
other costs, including the impact of product mix.
Selling, general and administrative expenses increased $29.7
million, or 40.4%, to $103.2 million for the first two quarters of
2017 from $73.5 million for the first two quarters of 2016. The
increase was composed of increases in marketing expenses of $11.3
million, acquisition-related expenses of $9.8 million, warehousing
expenses of $7.9 million, selling expenses of $2.0 million (which
includes a $1.6 million increase in brokerage expenses) and a loss
on sale of assets of $1.6 million, partially offset by a decrease
in distribution restructuring expenses of $0.9 million and all
other expenses of $2.0 million. Expressed as a percentage of net
sales, selling, general and administrative expenses increased 1.9
percentage points to 13.1% for the first two quarters of 2017 from
11.2% for the first two quarters of 2016.
Net interest expense increased $4.0 million, or 10.9%, to $41.6
million for the first two quarters of 2017 from $37.6 million in
the first two quarters of 2016. The increase was primarily
attributable to additional borrowings made in the fourth quarter of
2016 to fund the spices & seasonings acquisition and the
Victoria acquisition and in the second quarter of 2017 in
connection with the Company’s credit agreement refinancing and
senior notes offering.
The Company’s reported net income under U.S. GAAP was $54.8
million, or $0.82 per diluted share, for the first two quarters of
2017, as compared to reported net income of $63.4 million, or $1.04
per diluted share, for the first two quarters of 2016. The
Company’s adjusted net income for the first two quarters of 2017,
which excludes the after-tax impact of loss on extinguishment of
debt, amortization of acquisition-related inventory step-up, other
acquisition-related expenses and loss on sale of assets, was $66.1
million, or $0.99 per adjusted diluted share. The Company’s
adjusted net income for the first two quarters of 2016, which
excludes an intangible asset impairment-related adjustment to
deferred taxes, the after-tax impact of the non-cash impairment
charge and related loss on disposal of inventory, loss on
extinguishment of debt, 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.
For the first two quarters of 2017, adjusted EBITDA (which
excludes the impact of acquisition-related inventory step-up, other
acquisition-related expenses and loss on sale of assets), decreased
2.5% to $170.2 million from $174.5 million for the first two
quarters of 2016.
Guidance
B&G Foods revised its guidance for full year 2017. Net sales
is expected to be approximately $1.64 billion to $1.67
billion, adjusted EBITDA is expected to be approximately $352.5
million to $367.5 million and adjusted diluted earnings per share
is expected to be $2.03 to $2.17.
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; restructuring expenses; gains and losses
on the sale of assets and other charges reflected in the Company’s
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,
August 3, 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 (800) 263-8506 for U.S. callers or (719) 457-2603 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 6377291.
The replay will be available from August 3, 2017 through August 17,
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; gains and losses on sale of assets; 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 2017 and 2016, 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, 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, adjusted EBITDA, adjusted diluted earnings per share and
overall expectations for fiscal 2017, and the Company’s
expectations regarding sales trends for Green Giant frozen products
and our two most recent acquisitions. 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. Factors that may affect actual
results include, without limitation: the Company’s substantial
leverage; the effects of rising costs for the Company’s raw
materials, packaging and ingredients; crude oil prices and their
impact on distribution, packaging and energy costs; the Company’s
ability to successfully implement sales price increases and cost
saving measures to offset any cost increases; intense competition,
changes in consumer preferences, demand for the Company’s products
and local economic and market conditions; the Company’s continued
ability to promote brand equity successfully, to anticipate and
respond to new consumer trends, to develop new products and
markets, to broaden brand portfolios in order to compete
effectively with lower priced products and in markets that are
consolidating at the retail and manufacturing levels and to improve
productivity; the risks associated with the expansion of the
Company’s business; the Company’s possible inability to identify
new acquisitions or to integrate recent or future acquisitions or
the Company’s failure to realize anticipated revenue enhancements,
cost savings or other synergies; the Company’s ability to access
the credit markets and the Company’s borrowing costs and credit
ratings, which may be influenced by credit markets generally and
the credit ratings of the Company’s competitors; unanticipated
expenses, including, without limitation, litigation or legal
settlement expenses; the effects of currency movements of the
Canadian dollar and the Mexican peso as compared to the U.S.
dollar; future impairments of the Company’s goodwill and intangible
assets; the Company’s ability to successfully implement a new
enterprise resource planning (ERP) system for the recently acquired
spices & seasonings business and then for the rest of the
Company’s business; the Company’s sustainability initiatives and
changes to environmental laws and regulations; and other factors
that affect the food industry generally. 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 1, 2017 December 31, 2016
Assets Current assets: Cash and cash equivalents $ 51,670 $
28,833 Trade accounts receivable, net 125,169 119,265 Inventories
420,356 356,590 Prepaid expenses and other current assets 25,071
26,399 Income tax receivable 9,069 10,787 Total
current assets 631,335 541,874 Property, plant and
equipment, net of accumulated depreciation of $185,430 and $169,474
258,333 245,344 Goodwill 615,770 614,278 Other intangibles, net
1,619,793 1,629,482 Other assets 3,715 4,625 Deferred income taxes
992 7,902 Total assets $ 3,129,938 $ 3,043,505
Liabilities and Stockholders’ Equity Current
liabilities: Trade accounts payable $ 93,683 $ 98,033 Accrued
expenses 45,015 62,393 Current portion of long-term debt — 10,515
Income tax payable — 3,875 Dividends payable 30,920
30,879 Total current liabilities 169,618 205,695 Long-term
debt 1,821,464 1,715,268 Other liabilities 22,692 21,405 Deferred
income taxes 328,498 315,480 Total liabilities
2,342,272 2,257,848 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; 66,496,333 and 66,406,314 shares
issued and outstanding as of July 1, 2017 and December 31, 2016 665
664 Additional paid-in capital 327,143 387,699 Accumulated other
comprehensive loss (11,625) (19,364) Retained earnings
471,483 416,658 Total stockholders’ equity 787,666
785,657 Total liabilities and stockholders’ equity $
3,129,938 $ 3,043,505
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 1, July 2, July 1, July 2,
2017 2016 2017 2016 Net sales $ 368,134
$ 306,376 $ 786,008 $ 659,354 Cost of goods sold 257,119
196,661 548,207 433,724 Gross profit 111,015
109,715 237,801 225,630 Operating expenses: Selling, general
and administrative expenses 49,591 33,886 103,225 73,524
Amortization expense 4,265 3,362 8,737 6,770 Impairment of
intangible assets — 5,405 —
5,405 Operating income 57,159 67,062 125,839 139,931 Other
income and expenses: Interest expense, net 21,998 18,426 41,645
37,561 Loss on extinguishment of debt 1,045 — 1,163 2,836 Other
income (816) (371) (2,960) (2,300)
Income before income tax expense 34,932 49,007 85,991 101,834
Income tax expense 12,871 18,756 31,166
38,387 Net income $ 22,061 $ 30,251 $ 54,825 $ 63,447
Weighted average shares outstanding: Basic 66,482 62,646 66,478
60,823 Diluted 66,711 62,872 66,748 60,988 Basic and diluted
earnings per share $ 0.33 $ 0.48 $ 0.82 $ 1.04 Cash
dividends declared per share $ 0.465 $ 0.420 $ 0.930 $ 0.840
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 1, July 2, July 1, July 2,
2017 2016 2017 2016 Net income $
22,061 $ 30,251 $ 54,825 $ 63,447 Income tax expense 12,871 18,756
31,166 38,387 Interest expense, net 21,998 18,426 41,645 37,561
Depreciation and amortization 12,329 9,154 24,547 18,158 Loss on
extinguishment of debt 1,045 — 1,163
2,836 EBITDA(1) 70,304 76,587 153,346 160,389 Acquisition-related
expenses 7,851 1,699 13,693 3,931 Amortization of
acquisition-related inventory step-up — — 1,550 3,074 Impairment of
intangible assets — 5,405 — 5,405 Loss on disposal of inventory —
791 — 791 Loss on sale of assets — — 1,608 — Distribution
restructuring expenses — 474 — 948
Adjusted EBITDA(1) 78,155 84,956 170,197 174,538 Income tax expense
(12,871) (18,756) (31,166) (38,387) Interest expense, net (21,998)
(18,426) (41,645) (37,561) Acquisition-related expenses (7,851)
(1,699) (13,693) (3,931) Distribution restructuring expenses —
(474) — (948) Write-off of property, plant and equipment 105 — 105
— Deferred income taxes 9,712 25,813 19,992 35,667 Amortization of
deferred financing costs and bond discount 1,464 1,314 2,795 2,782
Amortization of acquisition-related inventory step-up — — (1,550)
(3,074) Share-based compensation expense 2,059 2,018 3,202 3,116
Excess tax benefits from share-based compensation — — — (343)
Changes in assets and liabilities, net of effects of business
combinations (31,444) 2,078 (88,413) 68,814 Net cash
provided by operating activities $ 17,331 $ 76,824 $ 19,824 $
200,673
_____________________________
(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, and gains
and losses on the sale of assets); intangible asset impairment
charges and related asset write offs; 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, 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 indentures 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, 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 1, July 2, July 1, July 2,
2017 2016 2017 2016 Reported net income
$ 22,061 $ 30,251 $ 54,825 $ 63,447 Non-recurring adjustment to
deferred taxes(1) — 564 — 564 Loss on extinguishment of debt, net
of tax(2) 654 — 727 1,784 Acquisition-related expenses, net of tax
4,911 1,069 8,565 2,473 Distribution restructuring expenses, net of
tax(3) — 298 — 596 Acquisition-related inventory step-up, net of
tax(4) — — 970 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 sale of assets, net of tax(6) — —
1,006 — Adjusted net income $ 27,626 $ 36,080 $
66,093 $ 74,696 Adjusted diluted earnings per share $ 0.41 $ 0.57 $
0.99 $ 1.22
________________________
(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
second quarter and first two quarters of 2017 includes the
write-off of deferred debt financing costs and unamortized discount
of $0.9 million and $0.2 million, respectively, relating to the
repayment of all outstanding borrowings under the tranche A term
loans and less than $0.1 million relating to the refinancing of our
tranche B term loans. Loss on extinguishment of debt for the first
two quarters of 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.
(4)
Acquisition-related inventory step-up for
the first two quarters of 2017 relates to the purchase accounting
adjustments made to the finished goods inventory acquired in the
spices & seasonings acquisition. 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 and first two quarters 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 materials and finished goods inventory
used for the Rickland Orchards brand.
(6)
During the first two quarters of 2017, we
sold to a third-party co-packer our Le Sueur, Minnesota research
center, including the seed technology assets, property, plant and
equipment. We acquired the research center and related assets on
November 2, 2015, as part of the Green Giant acquisition. The sale
resulted in a $1.6 million loss on sale of assets.
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 1, July 2, July 1, July 2,
2017 2016 2017 2016 Reported net sales
$ 368,134 $ 306,376 $ 786,008 $ 659,354 Net sales from
acquisitions(1) (77,062) — (150,918) — Net sales of Rickland
Orchards(2) — (158) — (528) Base
business net sales (3) $ 291,072 $ 306,218 $ 635,090 $ 658,826
________________________
(1)
Reflects net sales for the spices &
seasonings business and Victoria for the second quarter and first
two quarters of 2017 for which there is no comparable period of net
sales in 2016. The spices & seasonings business was acquired on
November 21, 2016, and Victoria was acquired on December 2,
2016.
(2)
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/20170803006371/en/
ICR, Inc.Investor Relations:Dara Dierks, 866-211-8151orMedia
Relations:Matt Lindberg, 203-682-8214
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