B&G Foods, Inc. (NYSE: BGS) today announced financial
results for the 13 and 39 weeks ended October 2, 2010 (third
quarter and first three quarters of 2010).
Third Quarter Highlights
- Adjusted diluted earnings per share*
increased 42.9% to $0.20 from $0.14 in prior year quarter
- EBITDA* increased 17.0% year-over-year
to $28.9 million from $24.7 million
- Net sales increased 1.0% to $125.1
million from $123.9 million
- Fiscal 2010 EBITDA guidance increased
to range of $113.0 to $115.0 million
David L. Wenner, President and Chief Executive Officer of
B&G Foods, stated, “We are very pleased with the strong margin
improvement seen this quarter — the result of our efforts to
improve sales mix and reduce cost. The dramatic improvement in
EBITDA and earnings per share is a continuation of the 2010 trends
in our business. We are also encouraged by the firming of sales
despite the negative effects of promotional restructuring and
changes in distribution. Accordingly, we are raising our guidance
for the third straight quarter.”
Financial Results for the Third Quarter of 2010
Net sales for the third quarter of 2010 increased 1.0% to $125.1
million from $123.9 million for the 13 weeks ended October 3,
2009 (third quarter of 2009). This $1.2 million increase was
attributable to sales price and unit volume increases of $0.4
million and $0.3 million, respectively, and a reduction in coupons
and slotting expenses of $0.5 million.
Gross profit for the third quarter of 2010 increased 8.2% to
$39.2 million from $36.2 million in the third quarter of 2009.
Gross profit expressed as a percentage of net sales increased 2.1
percentage points to 31.3% for the third quarter of 2010 from 29.2%
in the third quarter of 2009. The increase in gross profit
expressed as a percentage of net sales was attributable to
increased sales prices and a reduction in coupons and slotting,
which accounted for 0.5 percentage points. The remaining 1.6
percentage points is attributable to decreases in commodity and
ingredient costs and a sales mix shift to higher margin products,
slightly offset by higher packaging and fuel surcharge costs.
Operating income increased 19.6% to $25.1 million for the third
quarter of 2010, from $21.0 million in the third quarter of
2009.
Net interest expense for the third quarter of 2010 decreased
$3.3 million or 23.8% from $13.6 million in the third quarter of
2009 to $10.3 million in the third quarter of 2010. The decrease in
net interest expense in the third quarter was primarily
attributable to the refinancing we completed during the second half
of 2009 and first quarter of 2010 that reduced our long-term debt
and the effective interest rate on our long-term debt from 9.6% in
the third quarter of 2009 to 7.9% in the third quarter of 2010.
The Company’s adjusted net income* for the third quarter of 2010
was $9.8 million, and adjusted diluted earnings per share was
$0.20, as compared to adjusted net income of $5.2 million and
adjusted diluted earnings per share of $0.14, for the third quarter
of 2009. Under U.S. Generally Accepted Accounting Principles
(GAAP), the Company’s reported net income was $9.3 million, or
$0.19 per diluted share, for the third quarter of 2010, as compared
to reported net income of $4.2 million, or $0.11 per diluted share,
for the third quarter of 2009.
For the third quarter of 2010, EBITDA increased 17.0% to $28.9
million from $24.7 million for the third quarter of 2009.
Financial Results for the First Three Quarters of
2010
Net sales for the first three quarters of 2010 increased 1.7% to
$371.5 million from $365.4 million in the comparable period of
2009. This $6.1 million increase was attributable to sales price
and unit volume increases of $3.9 million and $2.9 million,
respectively, partially offset by an increase in coupon expenses of
$0.7 million.
Gross profit for the first three quarters of 2010 increased 7.8%
to $120.6 million from $111.8 million in the comparable period of
last year. Gross profit expressed as a percentage of net sales
increased 1.9 percentage points to 32.5% in the first three
quarters of 2010 from 30.6% in the comparable period of fiscal
2009. The increase in gross profit expressed as a percentage of net
sales was attributable to increased sales prices net of increased
coupon expenses, which accounted for 0.6 percentage points. The
remaining 1.3 percentage points was primarily attributable to
decreases in commodity and ingredient costs and a sales mix shift
to higher margin products, slightly offset by an increase in
packaging and fuel surcharge costs. Operating income increased
13.7% to $75.8 million during the first three quarters of 2010,
compared to $66.7 million in the comparable period of fiscal
2009.
Net interest expense for the first three quarters of 2010
decreased $8.1 million or 20.4% from $40.0 million in the first
three quarters of 2009 to $31.9 million for the first three
quarters of 2010. The decrease in net interest expense in the first
three quarters of 2010 was primarily attributable to the
refinancing we completed during the second half of 2009 and first
quarter of 2010 that reduced our long-term debt and the effective
interest rate on our long-term debt from 9.8% in the first three
quarters of 2009 to 8.1% in the first three quarters of 2010.
The Company’s adjusted net income* for the first three quarters
of 2010 was $29.6 million, and adjusted diluted earnings per share
was $0.61, as compared to adjusted net income of $17.2 million and
adjusted diluted earnings per share of $0.47, for the comparable
period of fiscal 2009. Under GAAP, the Company’s reported net
income was $18.1 million, or $0.37 per diluted share, for the first
three quarters of 2010, as compared to reported net income of $16.1
million, or $0.44 per diluted share, for the comparable period of
fiscal 2009.
For the first three quarters of 2010, EBITDA increased 12.2% to
$86.9 million from $77.5 million for the comparable period of
fiscal 2009.
Guidance
For the third consecutive quarter, B&G Foods increased its
full-year fiscal 2010 performance expectations. The Company now
expects EBITDA for fiscal 2010 to be approximately $113.0 to $115.0
million instead of the previously anticipated $109.0 to $112.0
million. B&G Foods continues to expect to make capital
expenditures of approximately $11.0 million in the aggregate during
fiscal 2010.
Changes to Board Committee Composition
Following the previously announced appointments of Charles F.
Marcy and Cheryl M. Palmer to the Board of Directors on October 12,
2010, the Board subsequently approved changes to the composition of
the Compensation Committee and the Nominating and Governance
Committee on October 19, 2010. No changes were made to the
composition of the Audit Committee. The current composition of the
committees is as follows: Compensation Committee – Alfred Poe
(Chairman), Cynthia T. Jamison and Mr. Marcy; Nominating and
Governance Committee – Dennis M. Mullen (Chairman), Mr. Marcy and
Ms. Palmer; and Audit Committee – Ms. Jamison, Mr. Mullen and Mr.
Poe.
Conference Call
B&G Foods will hold a webcast and conference call at 4:30
p.m. ET today, October 26, 2010. 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 (877) 780-3381 or for international
callers by dialing (719) 325-2180.
A replay of the call will be available one hour after the call
and can be accessed by dialing (877) 870-5176 or (858) 384-5517 for
international callers. The password is 2104633. The replay will be
available from October 26, 2010 through November 2, 2010. 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” and
“EBITDA” (net income before net interest expense, income taxes,
depreciation and amortization and loss on extinguishment of debt)
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 and cash flows. Non-GAAP
financial measures should not be considered in isolation or as a
substitute for the most directly comparable GAAP measures. The
Company’s non-GAAP financial measures may be different from
non-GAAP financial measures used by other companies.
The Company uses “adjusted net income” and “adjusted diluted
earnings per share,” which are calculated as reported net income
and reported diluted earnings per share adjusted for certain items
that affect comparability. These non-GAAP financial measures
reflect adjustments to reported net income and diluted earnings per
share to eliminate the items identified below. This information is
provided in order to allow investors to make meaningful comparisons
of the Company’s operating performance between periods and to view
the Company’s business from the same perspective as the Company’s
management. Because the Company cannot predict the timing and
amount of charges associated with unrealized gains or losses on the
Company’s interest rate swap and gains or losses on extinguishment
of debt, management does not consider these costs when evaluating
the Company’s performance or when making decisions regarding
allocation of resources.
A reconciliation of EBITDA to net income and to net cash
provided by operating activities is included below for the third
and first three quarters of 2010 and 2009, along with the
components of EBITDA. Also included below are reconciliations of
the non-GAAP terms adjusted net income and adjusted diluted
earnings per share to reported net income and reported diluted
earnings per share.
About B&G Foods, Inc.
B&G Foods and its subsidiaries manufacture, sell and
distribute a diversified portfolio of high-quality, shelf-stable
foods across the United States, Canada and Puerto Rico. B&G
Foods’ products include hot cereals, fruit spreads, canned meats
and beans, spices, seasonings, marinades, hot sauces, wine vinegar,
maple syrup, molasses, salad dressings, Mexican-style sauces, taco
shells and kits, salsas, pickles, peppers and other specialty food
products. B&G Foods competes in the retail grocery, food
service, specialty, private label, club and mass merchandiser
channels of distribution. Based in Parsippany, New Jersey, B&G
Foods’ products are marketed under many recognized brands,
including Ac’cent, B&G, B&M, Brer Rabbit, Cream of
Rice, Cream of Wheat, Emeril’s, Grandma’s Molasses, Joan of Arc,
Las Palmas, Maple Grove Farms of Vermont,
Ortega, Polaner, Red Devil, Regina, Sa-són, Trappey’s, Underwood,
Vermont Maid and Wright’s.
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 our expectations
regarding EBITDA and capital expenditures for fiscal 2010. 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 our Annual Report on
Form 10-K for fiscal 2009 filed on March 1, 2010. B&G Foods
undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information,
future events or otherwise.
B&G Foods, Inc. and Subsidiaries
Consolidated Balance Sheets (In thousands, except share
and per share data) (Unaudited) Assets
October 2, 2010 January 2, 2010 Current assets: Cash
and cash equivalents $ 87,525 $ 39,930 Trade accounts receivable,
less allowance for doubtful accounts and discounts of $610 in 2010
and $631 in 2009 31,842 34,488 Inventories 89,355 86,134 Prepaid
expenses 1,881 2,523 Income tax receivable 1,166 864 Deferred
income taxes 1,671 1,981 Total current
assets 213,440 165,920 Property, plant and equipment, net of
accumulated depreciation of $78,543 in 2010 and $72,217 in 2009
54,425 53,598 Goodwill 253,353 253,353 Trademarks 227,220 227,220
Customer relationship intangibles, net 105,030 109,868 Net deferred
debt financing costs and other assets 9,396
6,935 Total assets $ 862,864 $ 816,894
Liabilities and Stockholders’ Equity Current
liabilities: Trade accounts payable $ 26,613 $ 22,574 Accrued
expenses 18,859 18,326 Dividends payable 8,098
8,052 Total current liabilities 53,570 48,952
Long-term debt
477,668
439,541
Other liabilities
19,422
19,265
Deferred income taxes
90,548
83,528
Total liabilities
641,208
591,286
Commitments and contingencies Stockholders’ equity: Preferred
stock, $0.01 par value per share. Authorized 1,000,000 shares; no
shares issued or outstanding — — Common stock, $0.01 par value per
share. Authorized — 125,000,000 and 100,000,000 shares; 47,635,640
and 47,367,292 issued and outstanding as of October 2, 2010 and
January 2, 2010 476 474 Additional paid-in capital 208,539 231,549
Accumulated other comprehensive loss (8,422 ) (9,377 ) Retained
earnings 21,063 2,962 Total
stockholders’ equity 221,656 225,608
Total liabilities and stockholders’ equity $ 862,864 $
816,894
B&G Foods, Inc. and
Subsidiaries Consolidated Statements of Operations
(In thousands, except per share data) (Unaudited)
Thirteen Weeks Ended Thirty-nine Weeks Ended
October 2, 2010 October 3, 2009 October 2, 2010
October 3, 2009 Net sales $ 125,144 $ 123,871 $ 371,471 $
365,408 Cost of goods sold 85,960 87,647
250,861 253,569 Gross profit 39,184 36,224 120,610
111,839 Operating expenses: Sales, marketing and
distribution expenses 9,901 10,659 32,022 32,575 General and
administrative expenses 2,534 2,936 7,928 7,753 Amortization
expense—customer relationships 1,613 1,613
4,838 4,838 Operating income 25,136 21,016 75,822 66,673
Other expenses: Interest expense, net 10,335 13,570 31,855
39,996 Loss on extinguishment of debt — 674
15,224 674 Income before income tax expense 14,801 6,772
28,743 26,003 Income tax expense 5,519 2,611
10,642 9,900 Net income $ 9,282 $ 4,161 18,101
16,103 Weighted average common shares outstanding: Basic
47,636 37,790 47,563 36,644 Diluted 48,601 37,973 48,349 36,644
Earnings per common share: Basic $ 0.19 $ 0.11 $ 0.38 $ 0.44
Diluted $ 0.19 $ 0.11 $ 0.37 $ 0.44 Cash dividends declared
per common share $ 0.17 $ 0.17 $ 0.51 $ 0.51
B&G Foods, Inc. and Subsidiaries Reconciliation of
EBITDA to Net Income and to Net Cash Provided by Operating
Activities (In thousands) (Unaudited)
Thirteen Weeks Ended Thirty-nine Weeks Ended
October 2, 2010 October 3, 2009 October 2,
2010 October 3, 2009 (Dollars in thousands) Net
income $ 9,282 $ 4,161 $ 18,101 $ 16,103 Income tax expense 5,519
2,611 10,642 9,900 Interest expense, net(1) 10,335 13,570 31,855
39,996 Depreciation and amortization 3,761 3,677 11,118 10,847 Loss
on extinguishment of debt(2) — 674
15,224 674 EBITDA(3) 28,897 24,693
86,940 77,520 Income tax expense (5,519 ) (2,611 ) (10,642 ) (9,900
) Interest expense, net (10,335 ) (13,570 ) (31,855 ) (39,996 )
Deferred income taxes 2,825 3,348 5,584 9,295 Amortization of
deferred financing costs and bond discount 500 610 1,515 2,222
Unrealized loss (gain) on interest rate swap 471 631 1,820 (108 )
Reclassification to net interest expense for interest rate swap 423
424 1,270 1,270 Share-based compensation expense 943 1,471 2,413
3,273 Excess tax benefits from share-based compensation — — (330 )
— Changes in assets and liabilities (559 ) 1,973
4,426 (9,275 ) Net cash provided by
operating activities $ 17,646 $ 16,969 $ 61,141
$ 34,301
(1) Net interest expense in the third quarter and first
three quarters of 2010 and 2009 includes costs relating to the
unrealized loss on our interest rate swap subsequent to our
determination that the swap was no longer an effective hedge for
accounting purposes, due to Lehman’s bankruptcy filing in September
2008 and a reclassification of amounts recorded in accumulated
other comprehensive loss related to the swap. See our Quarterly
Report on Form 10-Q filed with the SEC on October 26, 2010 for
additional details. (2) Loss on extinguishment of debt for
the first three quarters of 2010 includes $15.2 million of costs
relating to our repurchase and redemption of $69.5 million
aggregate principal amount of senior subordinated notes and $240.0
million aggregate principal amount of senior notes, including $10.7
million for the payment of a repurchase premium and a non-cash
charge of $4.5 million for the write-off of unamortized deferred
debt financing costs associated with the notes repurchased. Loss on
extinguishment of debt for the first three quarters of 2009
included $0.7 million of costs relating to our repurchase of senior
subordinated notes during the third quarter of 2009, including $0.4
million for the payment of a repurchase premium and a non-cash
charge of $0.3 million for the write-off of unamortized deferred
financing costs associated with the notes repurchased. (3)
EBITDA is a measure used by management to measure operating
performance. We define EBITDA as net income before net interest
expense, income taxes, depreciation and amortization and loss on
extinguishment of debt. Management believes that it is useful to
eliminate net interest expense, income taxes, depreciation and
amortization and loss on extinguishment of debt 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 in our business
operations, among other things, to 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 because we
believe it is a useful indicator of our historical debt capacity
and ability to service debt and because covenants in our credit
facility and our senior notes indenture contain ratios based on
this measure. As a result, internal management reports used during
monthly operating reviews feature the EBITDA metric. However,
management uses this metric 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 this measure as its only measure of
operating performance and liquidity. EBITDA is not a
recognized term under GAAP and does not purport to be an
alternative to operating income or net income as an indicator of
operating performance or any other GAAP measure. EBITDA is not a
complete net cash flow measure because EBITDA is a measure of
liquidity that does not include reductions for cash payments for an
entity’s obligation to service its debt, fund its working capital,
capital expenditures and acquisitions, if any, and pay its income
taxes and dividends. Rather, EBITDA is a potential indicator of an
entity’s ability to fund these cash requirements. EBITDA also is
not a complete measure of an entity’s profitability because it does
not include costs and expenses for depreciation and amortization,
loss on extinguishment of debt, interest and related expenses and
income taxes. Because not all companies use identical calculations,
this presentation of EBITDA may not be comparable to other
similarly titled measures of other companies. However, EBITDA can
still be useful in evaluating our performance against our peer
companies because management believes this measure provides 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) (Unaudited)
Thirteen Weeks Ended Thirty-nine Weeks Ended
October 2, 2010 October 3, 2009 October 2,
2010 October 3, 2009 Reported net income $ 9,282
$ 4,161 $ 18,101 $ 16,103 Loss on extinguishment of debt, net of
tax(1) — 419 9,591 419 Non-cash adjustments on interest rate
swap,net of tax(2) 563 655 1,947 722
Adjusted net income $ 9,845 $ 5,235 $ 29,639 $ 17,244 Adjusted
diluted EPS – Common stock $ 0.20 $ 0.14 $ 0.61 $ 0.47
(1) Loss on extinguishment of debt for the first three
quarters of 2010 includes $15.2 million of costs relating to our
repurchase and redemption of $69.5 million aggregate principal
amount of senior subordinated notes and $240.0 million aggregate
principal amount of senior notes, including $10.7 million for the
payment of a repurchase premium and a non-cash charge of $4.5
million for the write-off of unamortized deferred debt financing
costs associated with the notes repurchased. Loss on extinguishment
of debt for the first three quarters of 2009 included $0.7 million
of costs relating to our repurchase of senior subordinated notes
during the third quarter of 2009, including $0.4 million for the
payment of a repurchase premium and a non-cash charge of $0.3
million for the write-off of unamortized deferred financing costs
associated with the notes repurchased. (2) Includes an
unrealized loss (gain) on interest rate swap and a reclassification
from accumulated other comprehensive loss to interest expense, net
on interest rate swap. The counterparty of the Company’s interest
rate swap is an affiliate of Lehman Brothers. Following the
bankruptcy of Lehman Brothers, we determined that the interest rate
swap was no longer an effective hedge for accounting purposes. *
Please see “About Non-GAAP Financial Measures and Items
Affecting Comparability” below for definitions of the terms EBITDA,
adjusted net income and adjusted diluted earnings per share as well
as information concerning certain items affecting comparability and
reconciliations of the non-GAAP terms EBITDA, adjusted net income
and adjusted diluted earnings per share to the most comparable GAAP
financial measures.
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