— Delivers Strong Net Sales, Earnings Per
Share and Adjusted EBITDA1 Growth —
B&G Foods, Inc. (NYSE:BGS) today announced financial results
for the fourth quarter and full year 2017.
Fourth Quarter 2017 Financial Highlights (vs. Fourth Quarter
2016):
- Completed the acquisition of and fully
integrated Back to Nature2
- Net sales increased by 14.5%
to $473.7 million
- Net income increased by 857.5%
to $129.9 million (primarily due to a benefit on the
re-measurement of deferred tax liabilities as a result of the U.S.
Tax Cuts and Jobs Act)
- Adjusted net income1 increased by 93.6%
to $37.6 million
- Diluted earnings per share increased
875.0% to $1.95 (primarily due to a benefit on the
re-measurement of deferred tax liabilities as a result of the U.S.
Tax Cuts and Jobs Act)
- Adjusted diluted earnings per share1
increased 96.6% to $0.57
- Adjusted EBITDA1 increased 10.5%
to $68.9 million
Full Year 2017 Financial Highlights (vs. Full Year
2016):
- Completed the integrations of the
recently acquired spices & seasonings, Victoria and Back to
Nature businesses
- Net sales increased by 20.0%
to $1.67 billion
- Net income increased by 98.7% to $217.5
million (primarily due to a benefit on the re-measurement of
deferred tax liabilities as a result of the U.S. Tax Cuts and Jobs
Act)
- Adjusted net income increased by 7.2%
to $140.5 million
- Diluted earnings per share increased by
88.4% to $3.26 for the year (primarily due to a benefit on the
re-measurement of deferred tax liabilities as a result of the U.S.
Tax Cuts and Jobs Act)
- Adjusted diluted earnings per share
increased by 2.4% to $2.12
- Adjusted EBITDA increased by 3.5% to
$333.2 million
Guidance for Full Year Fiscal 2018
- Net sales of $1.720 billion to
$1.755 billion, including the impact of the new FASB revenue
recognition standard, which the Company estimates will reduce net
sales in 2018 by $20 million.3
- Adjusted EBITDA of $347.5 million
to $365.0 million
- Adjusted diluted earnings per share
of $2.05 to $2.25
- Expect to generate cash flows
sufficient to reduce net debt1 by $125 million to $150 million by
year end, after making expected dividend payments of approximately
$124 million
Robert C. Cantwell, President and Chief Executive Officer of
B&G Foods stated, “2017 was an impressive year of growth for
B&G Foods as we added more than $275 million in net sales to
deliver net sales of $1.67 billion. We have more than doubled the
size of our business in just three short years, adding the
requisite staff and infrastructure while never losing sight of the
things that we do right that have made B&G Foods such a special
place over the past 20 plus years.”
Mr. Cantwell continued, “In addition to generating company
record net sales, we also generated company record adjusted EBITDA
of $333.2 million, an increase of more than $10 million versus the
prior year, and company record adjusted diluted EPS of $2.12, an
increase of $0.05 per share versus the prior year. While we are
disappointed that we did not achieve all of our objectives, we are
proud of the work that we did growing our Green Giant frozen
business and integrating the recently acquired spices &
seasonings, Victoria and Back to Nature businesses.”
“Our net sales of Green Giant frozen products increased by more
than 11% for the year, making Green Giant one of the fastest
growing brands in the frozen foods aisle, while our spices &
seasonings acquisition generated more than $260 million in net
sales for the year compared to our initial forecast at the time of
acquisition of $220 million, Victoria generated nearly $43 million
in net sales for the year compared to our initial forecast at the
time of acquisition of $41 million and Back to Nature generated
more than $20 million in net sales for the fourth quarter 2017
compared to our initial forecast at the time of acquisition of
$17.5 million.”
“We believe we are well positioned to continue to grow in 2018
and beyond. Our largest brands contribute more than 75% of our net
sales and are in categories that we believe have growth prospects
in excess of the broader packaged foods industry. We are addressing
the modest cost headwinds that we are facing, including increased
freight and transportation costs, with price increases that we are
implementing across our portfolio, and with cost cutting
initiatives. We expect to deliver strong net cash from operations
and free cash flow in 2018 and remain committed to our longstanding
dividend policy, which resulted in nearly $124 million in cash
dividends being paid to our stockholders in 2017.”
Financial Results for the Fourth Quarter of 2017
Net sales increased by $60.0 million, or 14.5%, to $473.7
million in the fourth quarter of 2017 from $413.7 million in the
fourth quarter of 2016. The net sales increase was due to an
increase in unit volume of $65.6 million, partially offset by a
decrease in net pricing of $5.6 million. The unit volume increase
was primarily driven by an additional six weeks of net sales of the
spices & seasonings business, acquired on November 21, 2016, an
additional four weeks of net sales of Victoria, acquired on
December 2, 2016, and three months of net sales of Back to Nature,
acquired on October 2, 2017.
Base business net sales1 for the fourth quarter of 2017 were
essentially flat at $380.9 million compared to $382.2 million in
the fourth quarter of 2016. Net sales of Green Giant frozen
products increased $18.7 million, or 23.4%, benefitting from the
strong performance of new innovation products, and net sales of
Pirate Brands increased $2.1 million, or 11.4%, benefitting from
new distribution gains, plus momentum from a strong back-to-school
season and successful promotional events. The net sales growth of
Green Giant frozen products and Pirate Brands was offset by net
sales declines for Green Giant shelf-stable products, whose
net sales decreased $18.9 million, or 30.9%, primarily due to weak
consumption trends and distribution losses with a key customer, the
Company’s maple syrup products, whose net sales decreased $1.8
million, or 6.8%, primarily due to the Company’s decision during
the first quarter of 2017 to discontinue certain private label
sales, and Ortega, whose net sales decreased $1.8 million, or 5.0%,
primarily due to heightened competitive activity.
Gross profit was $101.2 million for the fourth quarter of 2017
compared to $106.9 million for the fourth quarter of 2016. Gross
profit expressed as a percentage of net sales was 21.4% in the
fourth quarter of 2017 compared to 25.8% in the fourth quarter of
2016. Excluding the 0.9 percentage point impact of product mix and
the 0.6 percentage point impact of acquisition-related and other
non-recurring expenses, gross profit as a percentage of net sales
decreased 2.9 percentage points. Approximately 1.7 percentage
points of the decrease in gross profit percentage was due to an
increase in warehousing and distribution costs and 1.2 percentage
points of the decrease was due to a decrease in net pricing.
Selling, general and administrative expenses were $59.0 million
in the fourth quarter of 2017, compared to $58.8 million in the
fourth quarter of 2016, an increase of $0.2 million, or 0.4%. The
quarter benefitted from reduced consumer marketing of $9.8 million
offset by increases in acquisition-related and other non-recurring
expenses of $6.8 million and selling expenses of $3.6 million
(which includes increases of $2.2 million in brokerage expenses and
$1.3 million in salesperson compensation). All other expenses
decreased $0.4 million. Expressed as a percentage of net sales,
selling, general and administrative expenses improved by 1.7
percentage points to 12.5% for the fourth quarter of 2017 compared
to 14.2% for the fourth quarter of 2016.
Net interest expense was $26.8 million in the fourth quarter of
2017, compared to $18.9 million in the fourth 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 fourth quarter
of 2017 to fund the Back to Nature acquisition, and the Company’s
senior notes offerings in second quarter and fourth quarter of
2017.
The Company’s reported net income under U.S. generally accepted
accounting principles (GAAP) was $129.9 million, or $1.95 per
diluted share, for the fourth quarter of 2017, as compared to
reported net income of $13.6 million, or $0.20 per diluted share,
for the fourth quarter of 2016. The increase in reported net income
was primarily due to a benefit on the re-measurement of deferred
tax liabilities, including acquisition-related deferred tax
liabilities, as a result of the recently enacted U.S. Tax Cuts and
Jobs Act.
The Company’s adjusted net income for the fourth quarter of
2017, which excludes acquisition-related and other non-recurring
expenses, as well as a benefit on the re-measurement of deferred
tax liabilities, including acquisition-related deferred tax
liabilities, was $37.6 million, or $0.57 per adjusted diluted
share. The Company’s adjusted net income for the fourth quarter of
2016, which excludes acquisition-related and other non-recurring
expenses, was $19.4 million, or $0.29 per adjusted diluted
share.
The Company’s adjusted EBITDA, which excludes
acquisition-related and other non-recurring expenses, was $68.9
million in the fourth quarter of 2017, an increase of 10.5%, or
$6.5 million, compared to $62.4 million in the fourth quarter of
2016.
Financial Results for the Full Year Fiscal 2017
Net sales increased by $276.8 million, or approximately 20.0%,
to $1.67 billion for fiscal 2017 from $1.39 billion in 2016. The
net sales increase was due to an increase in unit volume of $287.5
million, partially offset by a decrease in net pricing of $10.7
million. The unit volume increase was primarily driven by an
additional eleven plus months of net sales of the spices &
seasonings business, acquired on November 21, 2016, an additional
eleven months of net sales of Victoria, acquired on December 2,
2016, and three months of net sales of Back to Nature, acquired on
October 2, 2017.
Base business net sales for fiscal 2017 decreased by
approximately $15.0 million, or 1.1%. The decrease in base business
net sales was driven by a decrease in unit volume of $4.3 million,
or 0.3%, and a decrease in net pricing of $10.7 million, or 0.8%.
Net sales of Green Giant frozen products, benefitting from the
strong performance of new innovation products, increased $33.6
million, or 11.1%, and net sales of Pirate Brands, benefitting from
new distribution gains, plus momentum from a strong back-to-school
season and successful promotional events, increased $5.2 million,
or 6.1%. Net sales of Green Giant shelf-stable products decreased
$30.6 million, or 19.6%, primarily due to weak consumption trends
and distribution losses with a key customer. Net sales of the
Company’s maple syrup products decreased $7.0 million, or 7.0%,
primarily due to the Company’s decision during the first quarter of
2017 to discontinue certain private label sales. And net sales of
Ortega decreased $3.0 million, or 2.1%, primarily due to heightened
competitive activity. The overall decline in base business net
sales in fiscal 2017 was concentrated in the first half of the
year. Base business net sales in the third and fourth quarters of
fiscal 2017 increased 1.2% compared to the third and fourth
quarters of 2016.
The spices & seasonings business and Victoria, each acquired
in the fourth quarter of 2016, generated fiscal 2017 net sales of
$260.7 million and $42.8 million, respectively, compared to the
Company’s initial forecasts at the time of acquisition of $220.0
million of net sales for the spices & seasonings business and
$41.0 million of net sales for Victoria.
Gross profit increased $14.3 million, or 3.2%, to $462.2 million
for fiscal 2017 from $448.0 million for fiscal 2016. Gross profit
expressed as a percentage of net sales was 27.7% for fiscal 2017
compared to 32.2% for fiscal 2016. Excluding the 2.5 percentage
point impact due to product mix, gross profit as a percentage of
net sales decreased 2.0 percentage points. Approximately 1.4
percentage points of the decrease in gross profit percentage was
due to an increase in warehousing and distribution costs and 0.6
percentage points of the decrease was due to a decrease in net
pricing.
Selling, general and administrative expenses were $205.2 million
in fiscal 2017, compared to $174.8 million in fiscal 2016, an
increase of $30.5 million, or 17.4%. The increase was attributable
to increased warehousing expenses of $12.8 million,
acquisition-related and other non-recurring expenses of $11.4
million, selling expenses of $7.2 million (which includes increases
on brokerage expenses of $5.9 million and $0.6 million of
salesperson compensation) and consumer marketing expenses of $0.6
million, slightly offset by decreases of $1.3 million of
distribution restructuring expenses and all other expenses of $0.2
million. Expressed as a percentage of net sales, selling, general
and administrative expenses improved by 0.3 percentage points to
12.3% for fiscal 2017 compared to 12.6% for 2016.
Net interest expense was $91.8 million in fiscal 2017, compared
to $74.5 million in fiscal 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 fourth quarter of 2017 to fund the
Back to Nature acquisition, and the Company’s senior notes
offerings in second quarter and fourth quarter of 2017.
The Company’s reported net income under GAAP was $217.5 million,
or $3.26 per diluted share, for fiscal 2017, as compared to
reported net income of $109.4 million, or $1.73 per diluted share
for fiscal 2016. The increase in reported net income was primarily
due to a benefit on the re-measurement of deferred tax liabilities,
including acquisition-related deferred tax liabilities, as a result
of the U.S. Tax Cuts and Jobs Act.
The Company’s adjusted net income for fiscal 2017, which
excludes acquisition-related and other non-recurring expenses, as
well as a benefit on the re-measurement of deferred tax
liabilities, including acquisition-related deferred tax
liabilities, was $140.5 million, or $2.12 per adjusted diluted
share. The Company’s adjusted net income for fiscal 2016, which
excludes acquisition-related and other non-recurring expenses, was
$131.1 million, or $2.07 per adjusted diluted share.
The Company’s adjusted EBITDA, which excludes
acquisition-related and other non-recurring expenses, was $333.2
million in fiscal 2017, an increase of 3.5% or $11.2 million
compared to $322.0 million in fiscal 2016. Adjusted EBITDA as a
percentage of net sales was 20.0% for fiscal 2017.
Full Year Fiscal 2018 Guidance
For fiscal 2018, net sales is expected to be approximately
$1.720 billion to $1.755 billion, including the impact of the new
FASB revenue recognition standard,2 which the Company estimates
will have the effect of reducing the Company’s annual net sales in
2018 by approximately $20 million. Adjusted EBITDA is expected to
be approximately $347.5 million to $365.0 million and adjusted
diluted earnings per share is expected to be approximately $2.05 to
$2.25.
Based upon the Company’s expected adjusted EBITDA of
approximately $347.5 million to $365.0 million, expected cash
interest payments of approximately $105 million to $110 million,
expected cash taxes of approximately $15 million to $20 million,
expected capital expenditures of $50 million to $55 million, and
expected working capital improvement of approximately $75 million
to $100 million resulting from the Company’s inventory reduction
initiative, the Company expects to generate sufficient cash flows
to reduce the Company’s net debt by $125 million to $150 million,
after making expected dividend payments of approximately $124
million.
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
and other non-recurring 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,
February 27, 2018. The call will be webcast live and can be
accessed at ir.bgfoods.com. The call can also be accessed live over
the phone by dialing (866) 548-4713 for U.S. callers or (323)
794-2093 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 6165586.
The replay will be available from February 27, 2018 through March
13, 2018. Investors may also access a web-based replay of the call
at ir.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), “adjusted
EBITDA” (EBITDA as adjusted for cash and non-cash
acquisition-related, 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 other non-recurring expenses, gains and losses;
intangible asset impairment charges and related asset write-offs;
gains and losses on sale of assets; and distribution restructuring
expenses) and “net debt” (total long-term debt less cash and cash
equivalents) 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. The Company uses “net debt”
because the Company believes net debt provides useful information
to the Company’s management and investors about the Company’s
financial position, capital structure and leverage.
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 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,
changes in stockholders’ equity, and cash flows.
About B&G Foods, Inc.
Based in Parsippany, New Jersey, B&G Foods and its
subsidiaries manufacture, sell and distribute high-quality, branded
shelf-stable and frozen foods across the United States, Canada and
Puerto Rico. With B&G Foods’ diverse portfolio of more
than 50 brands you know and love, including Back to Nature,
B&G, B&M, Cream of Wheat, Green Giant, Las Palmas,
Le Sueur, Mama Mary’s, Maple Grove Farms,
Mrs. Dash, New York Style, Ortega,
Pirate’s Booty, Polaner, SnackWell’s, Spice Islands and
Victoria, there’s a little something for everyone. For more
information about B&G Foods and its brands, please visit
www.bgfoods.com.
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,
cash interest payment, cash taxes, working capital, capital
expenditure, inventory, dividend payment, net debt and overall
expectations for fiscal 2018. 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; tax reform and legislation, including the effects of the
U.S. Tax Cuts and Jobs Act; 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; the Company’s ability to
protect information systems against, or effectively respond to, a
cybersecurity incident or other disruption; 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.
___________________________
1 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,” “adjusted
EBITDA” and “net debt,” as well as information concerning certain
items affecting comparability and historical reconciliations of the
non-GAAP terms to the most comparable GAAP financial measures.
2
The Company acquired Back to Nature, which
includes the Back to Nature and SnackWell’s brands, on October 2,
2017. In this earnings release, this acquisition is referred to as
the Back to Nature acquisition and references to Back to Nature
include both Back to Nature and SnackWell’s.
3 In May 2014, the Financial Accounting Standards Board
(FASB) issued authoritative guidance related to new accounting
requirements for the recognition of revenue from contracts with
customers. The Company adopted this guidance and the related
amendments as of the beginning of our fiscal 2018, applying the
full retrospective transition approach to all contracts. Based on
the Company’s comprehensive assessment of the new guidance, the
Company has concluded that the adoption will not have a significant
impact to the Company’s core revenue generating activities.
However, the adoption will result in a change in presentation of
certain trade and consumer promotion expenses, specifically
in-store display incentives also referred to as marketing
development funds. In-store display incentives or marketing
development funds were previously recorded within selling, general
and administrative expenses in the Company’s consolidated
statements of operations. Upon the adoption of the new guidance,
this expense will not meet the specific criteria within the new
guidance of providing a “distinct” good or service, and therefore,
will be required to be presented as a reduction of the Company’s
net sales. The Company currently anticipates that the impact of
this change will result in a reduction of net sales and selling,
general and administrative expenses by approximately $20 million
during 2018, the first year of adoption, with no impact to net
income.
B&G Foods, Inc. and Subsidiaries
Consolidated Balance Sheets (In thousands, except share
and per share data) (Unaudited)
December 30, December 31, 2017 2016
Assets Current assets: Cash and cash equivalents $ 206,506 $
28,833 Trade accounts receivable, net 141,392 119,265 Inventories
501,849 356,590 Prepaid expenses and other current assets 20,054
26,399 Income tax receivable 16,794 10,787
Total current assets 886,595 541,874 Property, plant
and equipment, net of accumulated depreciation of $200,664 and
$169,474 272,192 245,344 Goodwill 649,292 614,278 Other
intangibles, net 1,748,220 1,629,482 Other assets 1,617 4,625
Deferred income taxes 3,122 7,902 Total
assets $ 3,561,038 $ 3,043,505
Liabilities
and Stockholders’ Equity Current liabilities: Trade
accounts payable $ 122,358 $ 98,033 Accrued expenses 48,067 62,393
Current portion of long-term debt — 10,515 Income tax payable 139
3,875 Dividends payable 30,922 30,879
Total current liabilities 201,486 205,695 Long-term debt
2,217,574 1,715,268 Other liabilities 24,881 21,405 Deferred income
taxes 236,278 315,480 Total liabilities
2,680,219 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; 66,499,044 and 66,406,314 shares
issued and outstanding as of December 30, 2017 and December 31,
2016 665 664 Additional paid-in capital 266,789 387,699 Accumulated
other comprehensive loss (20,756 ) (19,364 ) Retained earnings
634,121 416,658 Total stockholders’
equity 880,819 785,657 Total
liabilities and stockholders’ equity $ 3,561,038 $ 3,043,505
B&G Foods, Inc. and Subsidiaries
Consolidated Statements of Operations (In thousands,
except per share data) (Unaudited)
Fourth Quarter Ended Fiscal Year Ended
December 30, December 31, December 30,
December 31, 2017 2016 2017
2016 Net sales $ 473,684 $ 413,656 $ 1,668,056 $ 1,391,257
Cost of goods sold 372,493 306,750
1,205,809 943,295 Gross profit 101,191 106,906
462,247 447,962 Operating expenses: Selling, general and
administrative expenses 58,990 58,770 205,234 174,759 Amortization
expense 4,609 3,764 17,611 13,803 Impairment of intangible assets
— — — 5,405
Operating income 37,592 44,372 239,402 253,995 Other income
and expenses: Interest expense, net 26,765 18,921 91,784 74,456
Loss on extinguishment of debt — — 1,163 2,836 Other expense
(income) 1,258 1,810 (1,607 )
(363 ) Income before income tax (benefit) expense 9,569 23,641
148,062 177,066 Income tax (benefit) expense (120,339 )
10,073 (69,401 ) 67,641 Net income $
129,908 $ 13,568 $ 217,463 $ 109,425
Weighted average shares outstanding: Basic 66,497 66,407 66,487
63,203 Diluted 66,687 66,666 66,706 63,420 Earnings per
share: Basic $ 1.95 $ 0.20 $ 3.27 $ 1.73 Diluted $ 1.95 $ 0.20 $
3.26 $ 1.73 Cash dividends declared per share $ 0.465 $
0.465 $ 1.86 $ 1.73
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 Fiscal Year Ended
December 30, December 31, December 30,
December 31, 2017 2016 2017
2016 Net income $ 129,908 $ 13,568 $ 217,463 $
109,425 Income tax (benefit) expense (120,339 ) 10,073 (69,401 )
67,641 Interest expense, net 26,765 18,921 91,784 74,456
Depreciation and amortization 12,888 10,453 49,172 37,266 Loss on
extinguishment of debt — — 1,163
2,836 EBITDA(1) 49,222 53,015 290,181 291,624
Acquisition-related and other non-recurring expenses 15,604 7,048
35,745 17,523 Amortization of acquisition-related inventory step-up
830 2,350 2,380 5,424 Impairment of intangible assets — — — 5,405
Loss on disposal of inventory 3,287 — 3,287 791 Loss on sale of
assets — — 1,608 — Distribution restructuring expenses —
— — 1,273 Adjusted
EBITDA(1) 68,943 62,413 333,201 322,040 Income tax benefit
(expense) 120,339 (10,073 ) 69,401 (67,641 ) Interest expense, net
(26,765 ) (18,921 ) (91,784 ) (74,456 ) Acquisition-related and
other non-recurring expenses (15,604 ) (7,048 ) (35,745 ) (17,523 )
Distribution restructuring expenses — — — (1,273 ) Write-off of
property, plant and equipment 101 337 208 337 Deferred income taxes
(115,604 ) 10,635 (80,525 ) 56,190 Amortization of deferred
financing costs and bond discount 1,549 1,325 5,812 5,426
Amortization of acquisition-related inventory step-up (830 ) (2,350
) (2,380 ) (5,424 ) Share-based compensation expense 331 1,341
4,615 5,798 Excess tax benefits from share-based compensation — — —
(343 ) Changes in assets and liabilities, net of effects of
business combinations (2,198 ) 59,224 (165,004 )
66,530 Net cash provided by operating activities $ 30,262
$ 96,883 $ 37,799 $ 289,661
______________________________________
(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) and other non-recurring expenses,
gains and losses; 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 and other non-recurring
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 and other
non-recurring 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) Fourth Quarter Ended
Fiscal Year Ended December 30, December
31, December 30, December 31, 2017
2016 2017 2016 Reported net income $ 129,908 $
13,568 $ 217,463 $ 109,425 Non-recurring adjustment to deferred
income taxes(1) (109,641 ) — (109,641 ) 881 Loss on extinguishment
of debt, net of tax(2) 120 — 847 1,770 Acquisition-related and
other non-recurring expenses, net of tax(3) 13,915 4,399 26,497
10,934 Distribution restructuring expenses, net of tax(4) — — — 794
Acquisition-related inventory step-up, net of tax(5) 765 1,466
1,733 3,385 Impairment of intangible assets, net of tax(6) — — —
3,373 Loss on disposal of inventory, net of tax(6) 2,393 — 2,393
494 Loss on sale of assets, net of tax(7) 166
— 1,171 — Adjusted net income $ 37,626
$ 19,433 $ 140,463 $ 131,056 Adjusted diluted earnings per
share $ 0.57 $ 0.29 $ 2.12 $ 2.07
_________________________________
(1)
Non-recurring adjustment to deferred
income taxes for the fourth quarter and fiscal 2017 relate to the
revaluation of our opening deferred income taxes as a result of the
recently enacted U.S. Tax Cuts and Jobs Act as if it had been
enacted on January 1, 2017. Non-recurring adjustment to deferred
income taxes for fiscal 2016 relates to a true-up of deferred
income 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 fourth quarter
2017 includes the tax impact recorded as a result of our effective
tax rate change. Loss on extinguishment of debt for fiscal 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 fiscal 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)
Acquisition-related and other
non-recurring expenses for the fourth quarter and fiscal 2017
primarily include acquisition and integration expenses for the
Green Giant, spices & seasonings, Victoria and Back to Nature
acquisitions, severance and hiring costs, a non-recurring interest
charge relating to the refinancing of our credit agreement and a
non-recurring startup surcharge paid to a co-packer.
(4) Distribution restructuring expenses for fiscal 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. (5)
Acquisition-related inventory step-up for
the fourth quarter and fiscal 2017 relates to the purchase
accounting adjustments made to the finished goods inventory
acquired in the Back to Nature and spices & seasonings
acquisitions. Acquisition-related inventory step-up for the fourth
quarter and fiscal 2016 relates to the purchase accounting
adjustments made to the finished goods inventory acquired in the
spices & seasonings acquisition.
(6)
During the fourth quarter of 2017, we
recorded a loss on disposal of inventory of $3.3 million. 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
fiscal 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.
(7)
During 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)
Fourth Quarter Ended Fiscal
Year Ended December 30, December 31, December
30, December 31, 2017 2016 2017
2016 Reported net sales $ 473,684 $ 413,656 $ 1,668,056 $
1,391,257 Net sales from acquisitions(1) (92,794 ) (31,437 )
(323,794 ) (31,437 ) Net sales of Rickland Orchards(2) —
— — (528 ) Base business
net sales (3) $ 380,890 $ 382,219 $ 1,344,262
$ 1,359,292
______________________________
(1)
Reflects all net sales for Victoria and
the spices & seasonings business for each period presented and
net sales for Back to Nature for the fourth quarter and fiscal
2017. Back to Nature were acquired on October 2, 2017, Victoria was
acquired on December 2, 2016, and the spices & seasonings
business was acquired on November 21, 2016.
(2)
Reflects all net sales of 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 at least one full quarter of 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 not at
least one full quarter of net sales 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 last day of the quarter in which the first
anniversary of the date of acquisition occurs, and the period from
the date of acquisition to the end of the quarter in which the
acquisition occurred. 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. The definition of base
business net sales set forth above, as it relates to acquisitions,
has been modified from the definition the Company had used
previously. Under the Company’s previous definition of base
business net sales, for each acquisition, the excluded period
started at the beginning of the most recent fiscal period being
compared and ended on the first anniversary of the acquisition
date. The Company believes that it is more useful to measure base
business net sales on a full quarter basis.
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Investor Relations:ICR, Inc.Dara Dierks, 866.211.8151orMedia
Relations:ICR, Inc.Matt Lindberg, 203.682.8214
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