— Delivers Strong Growth in Sales and
Earnings —
— Revises Full Year Guidance —
B&G Foods, Inc. (NYSE:BGS) today announced financial results
for the third quarter and first three quarters of 2016.
Highlights (vs. year-ago quarter where applicable):
- Net sales increased 49.2% to $318.2
million
- Net income increased 63.6% to $32.4
million
- Adjusted net income* increased 62.1% to
$36.7 million
- Diluted earnings per share increased
47.1% to $0.50
- Adjusted diluted earnings per share*
increased 43.6% to $0.56
- Adjusted EBITDA* increased 60.2% to
$85.1 million
- Revised guidance for full year fiscal
2016:
- Net sales to a range of $1.38 billion
to $1.40 billion
- Adjusted EBITDA to a range of $322.0
million to $328.0 million
- Adjusted diluted earnings per share to
a range of $2.11 to $2.17
“Our third quarter results reflect very strong profitability, as
demonstrated by our adjusted EBITDA and adjusted diluted earnings
per share, despite the overall poor sales performance of our base
business. Reversing the base business net sales decline is a
high-priority for the entire B&G Foods leadership team and we
are working extremely hard to flatten out the recent base business
sales trend in the first half of 2017,” stated Robert C. Cantwell,
President and Chief Executive Officer of B&G Foods.
Mr. Cantwell continued, “The end of the third quarter and start
of the fourth quarter also marks the beginning of a new and
exciting time for B&G Foods as the transition services
agreement for Green Giant is now complete and we have assumed
full responsibility for the operation of the business.
I anticipate that there may be some growing pains in the early
stages of the post transition period but I believe that our very
capable team at B&G Foods will provide our customers with the
same excellent level of service for Green Giant that we have
historically provided our customers for all of our other
brands.”
_____________________________
* Please see “About Non-GAAP Financial Measures and Items
Affecting Comparability” below for the definition of the non-GAAP
financial measures “adjusted net income,” “adjusted diluted
earnings per share,” “base business net sales,” “EBITDA” and
“adjusted EBITDA,” as well as information concerning certain items
affecting comparability and reconciliations of the non-GAAP terms
to the most comparable GAAP financial measures.
Financial Results for the Third Quarter of 2016
Net sales increased $104.9 million, or 49.2%, to $318.2 million
for the third quarter of 2016 from $213.3 million for the third
quarter of 2015. Net sales of Green Giant, acquired on November 2,
2015, contributed $113.8 million to the Company’s net sales for the
quarter.
Base business net sales for the third quarter of 2016 decreased
$7.7 million, or 3.7%, to $204.5 million from $212.2 million for
the third quarter of 2015. The $7.7 million decrease was
attributable to a decrease in unit volume of $5.9 million, or 2.8%,
and a decrease in net pricing of $1.8 million, or 0.9%.
Approximately 25% of the Company’s base business net sales
decline during the third quarter was attributable to our TrueNorth
brand, whose net sales declined $2.0 million, or 50.5%. The
TrueNorth net sales decline was primarily the result of
historically high almond prices in 2015. In response to increased
almond costs, the Company increased the selling price for TrueNorth
products, which had a negative impact on consumer demand. Although
the Company has recently rolled back pricing as almond prices have
begun to return to historical norms, consumer demand has not
returned to prior levels. The Company has also been experiencing a
challenging competitive environment for its syrup brands, which in
the aggregate declined $2.4 million for the quarter. The decline
was primarily attributable to maple syrup price deflation due to
the strength of the U.S. dollar relative to the Canadian dollar,
which has resulted in increased competition in the maple syrup
category and contractually mandated price reductions with certain
of the Company’s foodservice customers.
Gross profit increased $43.8 million, or 61.2%, to $115.4
million for the third quarter of 2016 from $71.6 million for the
third quarter of 2015. Gross profit expressed as a percentage of
net sales increased to 36.3% in the third quarter of 2016 from
33.6% in the third quarter of 2015, an increase of 2.7 percentage
points. The increase in gross profit percentage was primarily
driven by the acquisition of Green Giant. Gross profit percentage
was also positively impacted by decreased costs for commodities,
packaging and distribution for the base business and improved
product mix, which was partially offset by the unfavorable impact
the decrease in base business sales volume had on cost absorption
and a net reduction in base business pricing. Gross profit
percentage, excluding the results of Green Giant, increased 0.5
percentage points.
Selling, general and administrative expenses increased $15.2
million, or 55.5%, to $42.5 million for the third quarter of 2016
from $27.3 million for the third quarter of 2015, primarily due to
the Green Giant acquisition. Acquisition-related expenses and
distribution restructuring expenses increased $2.5 million for the
quarter. The remaining $12.7 million of the increase was
attributable to increases in consumer marketing of $7.4 million,
selling expenses of $3.5 million (which includes a $2.0 million
increase in brokerage expenses and a $1.4 million increase in
salesperson compensation), warehousing expenses of $1.0 million,
and general and administrative expenses of $0.8 million (primarily
related to compensation). Expressed as a percentage of net sales,
selling, general and administrative expenses increased 0.5
percentage points to 13.3% for the third quarter of 2016 from 12.8%
for the third quarter of 2015.
Net interest expense increased $6.7 million, or 59.5%, to $18.0
million for the third quarter of 2016 from $11.3 million in the
third quarter of 2015. The increase was primarily attributable to
additional indebtedness outstanding during the third quarter of
2016 as compared to the third quarter of 2015 as a result of the
Green Giant acquisition.
The Company’s reported net income under U.S. generally accepted
accounting principles (GAAP) was $32.4 million, or $0.50 per
diluted share, for the third quarter of 2016, as compared to
reported net income of $19.8 million, or $0.34 per diluted share,
for the third quarter of 2015. The Company’s adjusted net income
for the third quarter of 2016, which excludes the after tax impact
of acquisition-related expenses and distribution restructuring
expenses, was $36.7 million, or $0.56 per adjusted diluted share.
The Company’s adjusted net income for the third quarter of 2015,
which excludes the after tax impact of acquisition-related expenses
and distribution restructuring expenses, was $22.7 million, or
$0.39 per adjusted diluted share.
For the third quarter of 2016, adjusted EBITDA (which excludes
the impact of acquisition-related expenses and distribution
restructuring expenses), increased 60.2% to $85.1 million from
$53.1 million for the third quarter of 2015.
Financial Results for the First Three Quarters of
2016
Net sales increased $353.5 million, or 56.7%, to $977.6 million
for the first three quarters of 2016 from $624.1 million for the
first three quarters of 2015. Net sales of Green Giant, acquired on
November 2, 2015, and net sales of Mama Mary’s, acquired on July
10, 2015, contributed $351.2 million and $19.4 million,
respectively, to the overall increase.
Base business net sales for the first three quarters of 2016
decreased $14.4 million, or 2.3%, to $606.5 million from $620.9
million for the first three quarters of 2015. The $14.4 million
decrease was attributable to a decrease in unit volume of $11.3
million, or 1.8%, a decrease in net pricing of $2.4 million, or
0.4%, and the negative impact of currency fluctuations on foreign
sales of approximately $0.7 million, or 0.1%.
The largest driver of the decline in base business net sales
during the first three quarters of 2016 was TrueNorth, which
declined $5.7 million, or 40.4%. The TrueNorth net sales decline
was primarily the result of historically high almond prices in
2015. In response to increased almond costs, the Company increased
the selling price for TrueNorth products, which had a negative
impact on consumer demand. Although the Company has recently rolled
back pricing as almond prices have begun to return to historical
norms, consumer demand has not returned to prior levels. Base
business net sales were also negatively impacted by net sales of
the Company’s Ortega products, which decreased $4.8 million, or
4.3%. A portion of the decrease was attributable to the effects of
the product recall we announced in November 2014, which caused an
increase in net sales of Ortega in the first three quarters of 2015
due to customers restocking inventory of products affected by the
recall, partially offset by $1.2 million of customer refunds
related to the recall. $0.8 million of the decrease was due to a
net pricing decrease in the first three quarters of 2016. The
Company has also been experiencing a challenging competitive
environment for its syrup brands, which in the aggregate declined
$4.4 million for the first three quarters. The decline was
primarily attributable to maple syrup price deflation due to the
strength of the U.S. dollar relative to the Canadian dollar, which
has resulted in increased competition in the maple syrup category
and contractually mandated price reductions with certain of the
Company’s foodservice customers.
Gross profit increased $140.1 million, or 69.7%, to $341.1
million for the first three quarters of 2016 from $201.0 million
for the first three quarters of 2015. Gross profit expressed as a
percentage of net sales increased to 34.9% in the first three
quarters of 2016 from 32.2% in the first three quarters of 2015, an
increase of 2.7 percentage points. The increase in gross profit
percentage was primarily driven by the acquisition of Green Giant.
Gross profit percentage was also positively impacted by decreased
costs for commodities, packaging and distribution for the base
business and improved product mix, which was partially offset by
the unfavorable impact the decrease in base business sales volume
had on cost absorption, a net reduction in base business pricing,
and the impact of the write-off of Rickland Orchards inventory
in connection with the Company’s decision to discontinue the brand.
Gross profit percentage, excluding the results of Green Giant,
increased 0.1 percentage points.
Selling, general and administrative expenses increased $46.6
million, or 67.2%, to $116.0 million for the first three quarters
of 2016 from $69.4 million for the first three quarters of 2015,
primarily due to the Green Giant acquisition. Acquisition-related
expenses and distribution restructuring expenses increased $7.3
million for the first three quarters. The remaining $39.3 million
of the increase was attributable to increases in consumer marketing
of $22.0 million, selling expenses of $9.2 million (which includes
a $7.0 million increase in brokerage expenses and a $2.2 million
increase in salesperson compensation), general and administrative
expenses of $4.8 million (primarily related to compensation), and
warehousing expenses of $3.3 million. Expressed as a percentage of
net sales, selling, general and administrative expenses increased
0.8 percentage points to 11.9% for the first three quarters of 2016
from 11.1% for the first three quarters of 2015.
Net interest expense increased $21.6 million, or 64.0%, to $55.5
million for the first three quarters of 2016 from $33.9 million in
the first three quarters of 2015. The increase was primarily
attributable to additional indebtedness outstanding during the
first three quarters of 2016 as compared to the first three
quarters of 2015 as a result of the Green Giant acquisition.
The Company’s reported net income under GAAP was $95.9 million,
or $1.54 per diluted share, for the first three quarters of 2016,
as compared to reported net income of $58.1 million, or $1.03 per
diluted share, for the first three quarters of 2015. The Company’s
adjusted net income for the first three quarters of 2016, which
excludes an intangible asset impairment-related adjustment to
deferred taxes resulting from the Company’s decision to discontinue
the Rickland Orchards brand, the after-tax impact of the non-cash
impairment charge and the related loss on disposal of inventory,
loss on extinguishment of debt, the amortization of
acquisition-related inventory step-up, other acquisition-related
expenses and distribution restructuring expenses, was $111.4
million, or $1.79 per adjusted diluted share. The Company’s
adjusted net income for the first three quarters of 2015, which
excludes the after tax impact of the loss on product recall,
acquisition-related expenses and distribution restructuring
expenses, was $62.2 million, or $1.11 per adjusted diluted
share.
For the first three quarters of 2016, adjusted EBITDA (which
excludes the impact of acquisition-related expenses, the
amortization of acquisition-related inventory step-up, the non-cash
intangible asset impairment charge and related loss on disposal of
inventory, loss on product recall and distribution restructuring
expenses), increased 72.6% to $259.6 million from $150.4 million
for the first three quarters of 2015.
Guidance
B&G Foods revised full year 2016 guidance as follows:
- net sales guidance to a range of
$1.38 billion to $1.40 billion;
- adjusted EBITDA guidance to a range of
$322.0 million to $328.0 million; and
- adjusted diluted earnings per share
guidance to a range of $2.11 to $2.17.
The Company’s revised guidance excludes the impact of the
pending acquisition of the spices and seasonings business of ACH
Food Companies, expected to close in the fourth quarter.
B&G Foods provides earnings guidance only on a non-GAAP
basis and does not provide a reconciliation of the Company’s
forward-looking adjusted EBITDA and adjusted diluted earnings per
share guidance to the most directly comparable GAAP financial
measures because of the inherent difficulty in forecasting and
quantifying certain amounts that are necessary for such
reconciliations, including adjustments that could be made for
deferred taxes; loss on extinguishment of debt; acquisition-related
expenses, gains and losses; intangible asset impairment charges and
related asset write-offs; loss on product recalls; restructuring
expenses; and other charges reflected in our reconciliation of
historic non-GAAP financial measures, the amounts of which, based
on past experience, could be material. For additional information
regarding B&G Foods’ non-GAAP financial measures, see “About
Non-GAAP Financial Measures and Items Affecting Comparability”
below.
Agreement to Acquire Spices and Seasonings Business from ACH
Food Companies
On September 21, 2016, B&G Foods announced that it has
entered into an agreement to acquire the spices and seasonings
business of ACH Food Companies for a purchase price of $365.0
million in cash, subject to a post-closing adjustment based upon
inventory at closing. The spices and seasonings business includes
the Spice Islands, Tone’s and Durkee brands. The business also
includes Weber brand sauces and seasonings, which are sold under
license. As part of the acquisition, B&G Foods is also
acquiring a manufacturing facility in Ankeny, Iowa. B&G Foods
expects the acquisition to close during the fourth quarter of 2016,
subject to customary closing conditions, including the receipt of
regulatory approvals.
B&G Foods projects that after the acquisition is fully
integrated, the acquired business will generate on an annualized
basis net sales in the range of $220.0 million to $225.0 million,
adjusted EBITDA in the range of $38.0 million to $40.0 million and
adjusted diluted earnings per share in the range of $0.26 to $0.28.
Because the acquisition will be structured as an asset purchase,
B&G Foods expects to realize approximately $83.0 million in tax
benefits on a net present value basis. At the midpoint of B&G
Foods’ 2017 projected adjusted EBITDA for the business, the
acquisition represents a purchase price multiple of approximately
9.4 times adjusted EBITDA (or 7.2 times adjusted EBITDA net of
expected tax benefits).
B&G Foods expects to fund the acquisition and related fees
and expenses with cash on hand, including the net proceeds of its
August 2016 public offering of common stock, and additional
revolving loans under its existing credit facility.
Conference Call
B&G Foods will hold a conference call at 4:30 p.m. ET today,
October 27, 2016. The call will be webcast live from B&G Foods’
website at www.bgfoods.com under “Investor Relations—Company
Overview.” The call can also be accessed live over the phone by
dialing (888) 240-9267 for U.S. callers or (913) 312-0724 for
international callers.
A replay of the call will be available two hours after the call
and can be accessed by dialing (877) 870-5176 or (858) 384-5517 for
international callers; the password is 6202376. The replay will be
available from October 27, 2016 through November 10, 2016.
Investors may also access a web-based replay of the call at the
Investor Relations section of B&G Foods’ website,
www.bgfoods.com.
About Non-GAAP Financial Measures and Items Affecting
Comparability
“Adjusted net income,” “adjusted diluted earnings per share,”
“base business net sales” (net sales without the impact of
acquisitions until the acquisitions are included in both comparable
periods and without the impact of discontinued brands), “EBITDA”
(net income before net interest expense, income taxes, depreciation
and amortization and loss on extinguishment of debt), and “adjusted
EBITDA” (EBITDA as adjusted for cash and non-cash
acquisition-related expenses, gains and losses (which may include
third party fees and expenses, integration, restructuring and
consolidation expenses and amortization of acquired inventory fair
value step-up); intangible asset impairment charges and related
asset write-offs; loss on product recalls, including customer
refunds, selling, general and administrative expenses and the
impact on cost of sales; and distribution restructuring expenses)
are “non-GAAP financial measures.” A non-GAAP financial measure is
a numerical measure of financial performance that excludes or
includes amounts so as to be different than the most directly
comparable measure calculated and presented in accordance with GAAP
in B&G Foods’ consolidated balance sheets and related
consolidated statements of operations, comprehensive income,
changes in stockholders’ equity and cash flows. Non-GAAP financial
measures should not be considered in isolation or as a substitute
for the most directly comparable GAAP measures. The Company’s
non-GAAP financial measures may be different from non-GAAP
financial measures used by other companies.
The Company uses “adjusted net income,” “adjusted diluted
earnings per share,” and “base business net sales,” which are
calculated as reported net income, reported diluted earnings per
share and reported net sales adjusted for certain items that affect
comparability. These non-GAAP financial measures reflect
adjustments to reported net income, diluted earnings per share and
net sales to eliminate the items identified above. This information
is provided in order to allow investors to make meaningful
comparisons of the Company’s operating performance between periods
and to view the Company’s business from the same perspective as the
Company’s management. Because the Company cannot predict the timing
and amount of these items, management does not consider these items
when evaluating the Company’s performance or when making decisions
regarding allocation of resources.
Additional information regarding EBITDA and adjusted EBITDA, and
a reconciliation of EBITDA and adjusted EBITDA to net income and to
net cash provided by operating activities is included below for the
third quarter and first three quarters of 2016 and 2015, along with
the components of EBITDA and adjusted EBITDA. Also included below
are reconciliations of the non-GAAP terms adjusted net income,
adjusted diluted earnings per share and base business net sales to
the most directly comparable measure calculated and presented in
accordance with GAAP in the Company’s consolidated balance sheets
and related consolidated statements of operations, comprehensive
income and cash flows.
About B&G Foods, Inc.
B&G Foods and its subsidiaries manufacture, sell and
distribute a diversified portfolio of high-quality, branded
shelf-stable and frozen foods across the United States, Canada and
Puerto Rico. Based in Parsippany, New Jersey, B&G Foods’
products are marketed under many recognized brands, including
Ac’cent, B&G, B&M, Baker’s Joy,
Bear Creek Country Kitchens, Brer Rabbit, Canoleo,
Cary’s, Cream of Rice, Cream of Wheat, Devonsheer,
Don Pepino, Emeril’s, Grandma’s Molasses, Green Giant, JJ
Flats, Joan of Arc, Las Palmas, Le Sueur, MacDonald’s,
Mama Mary’s, Maple Grove Farms, Molly McButter,
Mrs. Dash, New York Flatbreads, New York Style, Old
London, Original Tings, Ortega, Pirate’s Booty, Polaner,
Red Devil, Regina, Sa-són, Sclafani, Smart Puffs, Spring Tree,
Sugar Twin, Trappey’s, TrueNorth, Underwood, Vermont Maid and
Wright’s. B&G Foods also sells and distributes
Static Guard, a household product brand.
Forward-Looking Statements
Statements in this press release that are not statements of
historical or current fact constitute “forward-looking statements.”
The forward-looking statements contained in this press release
include, without limitation, statements related to B&G Foods’
net sales, adjusted EBITDA and adjusted diluted earnings per share;
B&G Foods’ overall expectations for fiscal 2016; B&G Foods’
expectations regarding Green Giant, including, without
limitation, B&G Foods’ expectations as to customer service;
efforts to flatten out base business net sales in 2017; the planned
acquisition of the spices and seasonings business of ACH Food
Companies and the timing and financing thereof; the expected impact
of the planned acquisition, including without limitation, the
expected impact on B&G Foods’ earnings per share, net sales,
adjusted EBITDA and free cash flow, and the expected tax benefits
of the acquisition. Such forward-looking statements involve known
and unknown risks, uncertainties and other unknown factors that
could cause the actual results of B&G Foods to be
materially different from the historical results or from any future
results expressed or implied by such forward-looking statements. In
addition to statements that explicitly describe such risks and
uncertainties readers are urged to consider statements labeled with
the terms “believes,” “belief,” “expects,” “projects,” “intends,”
“anticipates” or “plans” to be uncertain and forward-looking. The
forward-looking statements contained herein are also subject
generally to other risks and uncertainties that are described from
time to time in B&G Foods’ filings with the Securities and
Exchange Commission, including under Item 1A, “Risk Factors” in the
Company’s most recent Annual Report on Form 10-K and in its
subsequent reports on Forms 10-Q and 8-K. Investors are cautioned
not to place undue reliance on any such forward-looking statements,
which speak only as of the date they are made. B&G Foods
undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information,
future events or otherwise.
B&G Foods, Inc. and
Subsidiaries
Consolidated Balance Sheets
(In thousands, except share and per
share data)
(Unaudited)
October 1, 2016 January 2, 2016
Assets Current assets: Cash and cash equivalents $ 240,580 $
5,246 Trade accounts receivable, net 90,609 69,712 Inventories
341,254 312,880 Prepaid expenses and other current assets 69,884
67,517 Income tax receivable 7,355 2,514 Deferred income taxes
5,243 5,292 Total current assets 754,925 463,161
Property, plant and equipment, net of accumulated
depreciation of $163,026 and $146,337 168,008 163,642 Goodwill
473,956 473,145 Other intangibles, net 1,426,895 1,442,340 Other
assets 2,904 1,332 Total assets $ 2,826,688 $
2,543,620
Liabilities and Stockholders’ Equity
Current liabilities: Trade accounts payable $ 97,285 $ 49,593
Accrued expenses 48,206 31,233 Current portion of long-term debt
10,515 33,750 Income tax payable 526 — Dividends payable
27,891 20,292 Total current liabilities 184,423 134,868
Long-term debt 1,537,943 1,697,771 Other liabilities 3,119
3,212 Deferred income taxes 296,355 250,084 Total
liabilities 2,021,840 2,085,935 Stockholders’ equity:
Preferred stock, $0.01 par value per share. Authorized 1,000,000
shares; no shares issued or outstanding — — Common stock, $0.01 par
value per share. Authorized 125,000,000 shares; 66,406,314 and
57,976,744 shares issued and outstanding as of October 1, 2016 and
January 2, 2016 664 580 Additional paid-in capital 417,237 162,568
Accumulated other comprehensive loss (16,143) (12,696) Retained
earnings 403,090 307,233 Total stockholders’ equity
804,848 457,685 Total liabilities and stockholders’
equity $ 2,826,688 $ 2,543,620
B&G Foods, Inc. and
Subsidiaries
Consolidated Statements of
Operations
(In thousands, except per share
data)
(Unaudited)
Third Quarter Ended First Three Quarters Ended
October 1, October 3, October 1, October
3, 2016 2015 2016 2015 Net sales $
318,247 $ 213,300 $ 977,601 $ 624,067 Cost of goods sold
202,821 141,704 636,545 423,066 Gross profit
115,426 71,596 341,056 201,001 Operating expenses: Selling,
general and administrative expenses 42,465 27,307 115,989 69,352
Amortization expense 3,269 2,726 10,039 8,072 Impairment of
intangible assets — — 5,405
— Operating income 69,692 41,563 209,623 123,577
Other income and expenses: Interest expense, net 17,974 11,272
55,535 33,873 Loss on extinguishment of debt — — 2,836 — Other
expense (income) 127 — (2,173) — Income
before income tax expense 51,591 30,291 153,425 89,704 Income tax
expense 19,181 10,476 57,568 31,574 Net
income $ 32,410 $ 19,815 $ 95,857 $ 58,130 Weighted average
shares outstanding: Basic 64,758 57,977 62,135 56,121 Diluted
65,038 58,057 62,338 56,180 Basic earnings per share $ 0.50
$ 0.34 $ 1.54 $ 1.04 Diluted earnings per share $ 0.50 $ 0.34 $
1.54 $ 1.03 Cash dividends declared per share $ 0.42 $ 0.35
$ 1.26 $ 1.03
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)
Third Quarter Ended First Three Quarters Ended
October 1, October 3, October 1, October
3, 2016 2015 2016
2015 Net income $ 32,410 $ 19,815 $ 95,857 $
58,130 Income tax expense 19,181 10,476 57,568 31,574 Interest
expense, net 17,974 11,272 55,535 33,873 Depreciation and
amortization 8,655 7,136 26,813 20,512 Loss on extinguishment of
debt — — 2,836 —
EBITDA(1) 78,220 48,699 238,609 144,089 Acquisition-related
expenses 6,544 3,239 10,475 3,301 Amortization of
acquisition-related inventory step-up — — 3,074 — Impairment of
intangible assets — — 5,405 — Loss on disposal of inventory — — 791
— Loss on product recall — — — 1,868 Distribution restructuring
expenses 325 1,172 1,273
1,172 Adjusted EBITDA(1) 85,089 53,110 259,627
150,430 Income tax expense (19,181 ) (10,476 ) (57,568 ) (31,574 )
Interest expense, net (17,974 ) (11,272 ) (55,535 ) (33,873 )
Acquisition-related expenses (6,544 ) (3,239 ) (10,475 ) (3,301 )
Loss on product recall — — — (1,868 ) Distribution restructuring
expenses (325 ) (1,172 ) (1,273 ) (1,172 ) Deferred income taxes
9,888 4,405 45,555 13,638 Amortization of deferred financing costs
and bond discount 1,319 875 4,101 2,631 Amortization of
acquisition-related inventory step-up — — (3,074 ) — Share-based
compensation expense 1,341 1,187 4,457 3,704 Excess tax benefits
from share-based compensation — — (343 ) (518 ) Changes in assets
and liabilities, net of effects of business combinations
(61,508 ) (4,283 ) 7,306 (11,400 ) Net
cash provided by operating activities $ (7,895 ) $ 29,135 $
192,778 $ 86,697
_________________________
(1) EBITDA and adjusted EBITDA are non-GAAP financial measures
used by management to measure operating performance. A non-GAAP
financial measure is defined as a numerical measure of our
financial performance that excludes or includes amounts so as to be
different from the most directly comparable measure calculated and
presented in accordance with GAAP in our consolidated balance
sheets and related consolidated statements of operations,
comprehensive income, changes in stockholders’ equity and cash
flows. We define EBITDA as net income before net interest expense,
income taxes, depreciation and amortization and loss on
extinguishment of debt. We define adjusted EBITDA as EBITDA
adjusted for cash and non-cash acquisition-related expenses, gains
and losses (which may include third party fees and expenses,
integration, restructuring and consolidation expenses and
amortization of acquired inventory fair value step-up); intangible
asset impairment charges and related asset write-offs; loss on
product recalls, including customer refunds, selling, general and
administrative expenses and the impact on cost of sales; and
distribution restructuring expenses. Management believes that it is
useful to eliminate net interest expense, income taxes,
depreciation and amortization, loss on extinguishment of debt,
acquisition-related expenses, gains and losses, non-cash intangible
asset impairment charges and related asset write-offs; loss on
product recalls and distribution restructuring expenses because it
allows management to focus on what it deems to be a more reliable
indicator of ongoing operating performance and our ability to
generate cash flow from operations. We use EBITDA and adjusted
EBITDA in our business operations to, among other things, evaluate
our operating performance, develop budgets and measure our
performance against those budgets, determine employee bonuses and
evaluate our cash flows in terms of cash needs. We also present
EBITDA and adjusted EBITDA because we believe they are useful
indicators of our historical debt capacity and ability to service
debt and because covenants in our credit agreement and our senior
notes indenture contain ratios based on these measures. As a
result, internal management reports used during monthly operating
reviews feature the EBITDA and adjusted EBITDA metrics. However,
management uses these metrics in conjunction with traditional GAAP
operating performance and liquidity measures as part of its overall
assessment of company performance and liquidity and therefore does
not place undue reliance on these measures as its only measures of
operating performance and liquidity.
EBITDA and adjusted EBITDA are not recognized terms under GAAP
and do not purport to be alternatives to operating income, net
income or any other GAAP measure as an indicator of operating
performance. EBITDA and adjusted EBITDA are not complete net cash
flow measures because EBITDA and adjusted EBITDA are measures of
liquidity that do not include reductions for cash payments for an
entity’s obligation to service its debt, fund its working capital,
capital expenditures and acquisitions and pay its income taxes and
dividends. Rather, EBITDA and adjusted EBITDA are two potential
indicators of an entity’s ability to fund these cash requirements.
EBITDA and adjusted EBITDA are not complete measures of an entity’s
profitability because they do not include costs and expenses for
depreciation and amortization, interest and related expenses, loss
on extinguishment of debt, acquisition-related expenses, gains and
losses, income taxes, intangible asset impairment charges and
related asset write-offs, loss on product recalls and distribution
restructuring expenses. Because not all companies use identical
calculations, this presentation of EBITDA and adjusted EBITDA may
not be comparable to other similarly titled measures of other
companies. However, EBITDA and adjusted EBITDA can still be useful
in evaluating our performance against our peer companies because
management believes these measures provide users with valuable
insight into key components of GAAP amounts.
B&G Foods, Inc. and
Subsidiaries
Items Affecting Comparability —
Reconciliation of Adjusted Information to GAAP Information
(In thousands, except per share
data)
(Unaudited)
Third Quarter Ended First Three Quarters Ended
October 1, October 3, October 1, October
3, 2016 2015 2016 2015 Reported net
income $ 32,410 $ 19,815 $ 95,857 $ 58,130 Non-recurring adjustment
to deferred taxes(1) — — 564 — Loss on extinguishment of debt, net
of tax(2) — — 1,784 — Acquisition-related expenses, net of tax
4,115 2,089 6,588 2,129 Distribution restructuring expenses, net of
tax(3) 205 756 801 756 Acquisition-related inventory step-up, net
of tax(4) — — 1,934 — Impairment of intangible assets, net of
tax(5) — — 3,400 — Loss on disposal of inventory, net of tax(5) — —
498 — Loss on product recall, net of tax(6) — —
— 1,205 Adjusted net income $ 36,730 $ 22,660 $
111,426 $ 62,220 Adjusted diluted earnings per share $ 0.56 $ 0.39
$ 1.79 $ 1.11
_________________________
(1)
Non-recurring adjustment to deferred taxes
for the first three quarters of 2016 relates to a true-up of
deferred taxes resulting from our decision during the second
quarter of 2016 to discontinue the Rickland Orchards brand and the
related impairment of intangible assets.
(2)
Loss on extinguishment of debt for the
first three quarters 2016 includes the write-off of deferred debt
financing costs and unamortized discount of $2.2 million and $0.6
million, respectively, relating to the repayment of $40.1 million
aggregate principal amounts of our tranche A term loans and $109.9
million aggregate principal amount of our tranche B term loans.
(3)
Distribution restructuring expenses for
the third quarter and first three 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 three 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 first
three 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 material and finished goods inventory used for the Rickland
Orchards brand.
(6)
On November 14, 2014, we announced a
voluntary recall for certain Ortega and Las Palmas products after
learning that one or more of the spice ingredients purchased from a
third party supplier contained peanuts and almonds, allergens that
are not declared on the products’ ingredient statements. A
significant majority of the costs of this recall were incurred in
the fourth quarter of 2014. The cost impact of this recall during
the first three quarters of 2015 was $1.9 million, of which $1.2
million was recorded as a decrease in net sales related to customer
refunds; $0.5 million was recorded as an increase in cost of goods
sold primarily related to costs associated with product retrieval,
destruction charges and customer fees; and $0.2 million was
recorded as an increase in selling, general, and administrative
expenses related to administrative costs.
B&G Foods, Inc. and
Subsidiaries
Items Affecting Comparability —
Reconciliation of Base Business Net Sales to Reported Net
Sales
(In thousands)
(Unaudited)
Third Quarter Ended First Three Quarters Ended
October 1, October 3, October 1, October
3, 2016 2015 2016 2015 Reported net
sales $ 318,247 $ 213,300 $ 977,601 $ 624,067 Net sales from
acquisitions(1) (113,780 ) — (370,535 ) — Net sales of Rickland
Orchards(2) — (1,057 ) (528 )
(3,172 ) Base business net sales (3) $ 204,467 $ 212,243
$ 606,538 $ 620,895
_____________
(1)
Reflects net sales for Green Giant and
Mama Mary’s for the third quarter and first three quarters of 2016
for which there is no comparable period of net sales in 2015. Green
Giant was acquired on November 2, 2015, and Mama Mary’s was
acquired on July 10, 2015.
(2)
Reflects all net sales for Rickland
Orchards for each period presented. Rickland Orchards was
discontinued during the second quarter of 2016.
(3)
Base business net sales is a non-GAAP
financial measure used by management to measure operating
performance. We define base business net sales as our net sales
excluding (1) the impact of acquisitions until the net sales from
such acquisitions are included in both comparable periods and (2)
net sales of discontinued brands. The portion of current period net
sales attributable to recent acquisitions for which there is no
corresponding period in the comparable period of the prior year is
excluded. For each acquisition, the excluded period starts at the
beginning of the most recent fiscal period being compared and ends
on the first anniversary of the acquisition date. For discontinued
brands, the entire amount of net sales is excluded from each fiscal
period being compared. Management has included this financial
measure because it provides useful and comparable trend information
regarding the results of our business without the effect of the
timing of acquisitions and the effect of discontinued brands.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161027006756/en/
ICR, Inc.Investor Relations:Dara Dierks, 866-211-8151orMedia
Relations:Matt Lindberg, 203-682-8214
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