Quarterly Report (10-q)

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As filed with the Securities and Exchange Commission on July 31, 2020

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)


☒	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 27, 2020


☐	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to .

Commission file number 001-32316

B&G FOODS, INC.

(Exact name of Registrant as specified in its charter)


Delaware		13-3918742
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

Four Gatehall Drive, Parsippany, New Jersey		07054
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (973) 401-6500

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.01 per share	BGS	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☒	Accelerated filer ☐	Non-accelerated filer ☐	Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 24, 2020, the registrant had 64,164,721 shares of common stock, par value $0.01 per share, issued and outstanding.

Table of Contents

B&G Foods, Inc. and Subsidiaries

Index

r
		Page No.

PART I FINANCIAL INFORMATION		1

	Item 1. Financial Statements (Unaudited)	1
	Consolidated Balance Sheets	1
	Consolidated Statements of Operations	2
	Consolidated Statements of Comprehensive Income	3
	Consolidated Statements of Changes in Stockholders’ Equity	4
	Consolidated Statements of Cash Flows	6
	Notes to Consolidated Financial Statements	7
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
	Item 3. Quantitative and Qualitative Disclosures About Market Risk	44
	Item 4. Controls and Procedures	45

PART II OTHER INFORMATION		46

	Item 1. Legal Proceedings	46
	Item 1A. Risk Factors	46
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	47
	Item 3. Defaults Upon Senior Securities	47
	Item 4. Mine Safety Disclosures	47
	Item 5. Other Information	47
	Item 6. Exhibits	48

SIGNATURE		49

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Forward-Looking Statements

This report includes forward-looking statements, including, without limitation, the statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The words “believes,” “belief,” “expects,” “projects,” “intends,” “anticipates,” “assumes,” “could,” “should,” “estimates,” “potential,” “seek,” “predict,” “may,” “will” or “plans” and similar references to future periods are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance and achievements, or industry results, to be materially different from any future results, performance, or achievements expressed or implied by any forward-looking statements. We believe important factors that could cause actual results to differ materially from our expectations include the following:

●

the ultimate impact the COVID-19 pandemic will have on our business, which will depend on many factors, including, without limitation,

o

the ability of our company and our supply chain partners to continue to operate manufacturing facilities, distribution centers and other work locations without material disruption, and to procure ingredients, packaging and other raw materials when needed despite unprecedented demand in the food industry;

o

the duration of social distancing and stay-at-home mandates and whether a second or third wave of COVID-19 will affect the United States and the rest of North America; and

o

the extent to which macroeconomic conditions resulting from the pandemic and the pace of the subsequent recovery may impact consumer eating habits;

●

our substantial leverage;

●

the effects of rising costs for our raw materials, packaging and ingredients;

●

crude oil prices and their impact on distribution, packaging and energy costs;

●

our ability to successfully implement sales price increases and cost saving measures to offset any cost increases;

●

intense competition, changes in consumer preferences, demand for our products and local economic and market conditions;

●

our 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 our business;

●

our possible inability to identify new acquisitions or to integrate recent or future acquisitions or our 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 and the U.S. CARES Act;

●

our ability to access the credit markets and our borrowing costs and credit ratings, which may be influenced by credit markets generally and the credit ratings of our 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;

●

the effects of international trade disputes, tariffs, quotas, and other import or export restrictions on our international procurement, sales and operations;

●

future impairments of our goodwill and intangible assets;

●

our ability to successfully complete the implementation of additional modules and the integration and operation of a new enterprise resource planning (ERP) system;

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●

our ability to protect information systems against, or effectively respond to, a cybersecurity incident or other disruption;

●

our sustainability initiatives and changes to environmental laws and regulations;

●

other factors that affect the food industry generally, including:

orecalls if products become adulterated or misbranded, liability if product consumption causes injury, ingredient disclosure and labeling laws and regulations and the possibility that consumers could lose confidence in the safety and quality of certain food products;

ocompetitors’ pricing practices and promotional spending levels;

ofluctuations in the level of our customers’ inventories and credit and other business risks related to our customers operating in a challenging economic and competitive environment; and

othe risks associated with third-party suppliers and co-packers, including the risk that any failure by one or more of our third-party suppliers or co-packers to comply with food safety or other laws and regulations may disrupt our supply of raw materials or certain finished goods products or injure our reputation; and

●

other factors discussed elsewhere in this report and in our other public filings with the Securities and Exchange Commission (SEC), including under Part I, Item 1A, “Risk Factors,” in our Annual Report on Form 10-K filed with the SEC on February 26, 2020, and Part, II, Item 1A, “Risk Factors,” in this report.

Developments in any of these areas could cause our results to differ materially from results that have been or may be projected by us or on our behalf.

All forward-looking statements included in this report are based on information available to us on the date of this report. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this report.

We caution that the foregoing list of important factors is not exclusive. There may be other factors that may cause our actual results to differ materially from the forward-looking statements in this report, including factors disclosed under the section of this report titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” You should evaluate all forward-looking statements made in this report in the context of these risks and uncertainties. We urge investors not to unduly rely on forward-looking statements contained in this report.

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PART I

FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

B&G Foods, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share data)

(Unaudited)


	June 27,		December 28,
	2020		2019
Assets
Current assets:
Cash and cash equivalents	$	181,200	$	11,315
Trade accounts receivable, net		141,216		143,908
Inventories		356,803		472,187
Prepaid expenses and other current assets		34,434		25,449
Income tax receivable		4,196		8,934
Total current assets		717,849		661,793

Property, plant and equipment, net of accumulated depreciation of $288,282 and $270,454 as of June 27, 2020 and December 28, 2019, respectively		283,827		304,934
Operating lease right-of-use assets, net		35,925		38,698
Goodwill		598,860		596,391
Other intangible assets, net		1,606,164		1,615,126
Other assets		3,017		3,277
Deferred income taxes		6,180		7,371
Total assets	$	3,251,822	$	3,227,590

Liabilities and Stockholders’ Equity
Current liabilities:
Trade accounts payable	$	122,887	$	114,936
Accrued expenses		58,780		55,659
Current portion of operating lease liabilities		10,946		9,813
Current portion of long-term debt		4,500		5,625
Income tax payable		2,297		454
Dividends payable		30,476		30,421
Total current liabilities		229,886		216,908

Long-term debt		1,874,442		1,874,158
Deferred income taxes		268,962		254,339
Long-term operating lease liabilities, net of current portion		28,003		31,997
Other liabilities		33,380		37,646
Total liabilities		2,434,673		2,415,048
Commitments and contingencies (Note 12)

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; 64,160,453 and 64,044,649 shares issued and outstanding as of June 27, 2020 and December 28, 2019, respectively		642		640
Additional paid-in capital		—		—
Accumulated other comprehensive loss		(44,057)		(31,894)
Retained earnings		860,564		843,796
Total stockholders’ equity		817,149		812,542
Total liabilities and stockholders’ equity	$	3,251,822	$	3,227,590

See Notes to Consolidated Financial Statements.

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B&G Foods, Inc. and Subsidiaries

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)


	Thirteen Weeks Ended				Twenty-six Weeks Ended
	June 27,		June 29,		June 27,		June 29,
	2020		2019		2020		2019
Net sales	$	512,539	$	371,197	$	961,909	$	783,931
Cost of goods sold		378,438		279,330		722,892		603,985
Gross profit		134,101		91,867		239,017		179,946

Operating expenses:
Selling, general and administrative expenses		44,347		39,856		84,320		78,153
Amortization expense		4,739		4,601		9,462		9,092
Operating income		85,015		47,410		145,235		92,701

Other income and expenses:
Interest expense, net		24,849		23,179		50,888		46,253
Other income		(701)		(525)		(1,154)		(783)
Income before income tax expense		60,867		24,756		95,501		47,231
Income tax expense		15,956		6,505		22,498		12,189
Net income	$	44,911	$	18,251	$	73,003	$	35,042

Weighted average shares outstanding:
Basic		64,130		65,341		64,088		65,464
Diluted		64,410		65,391		64,247		65,504

Earnings per share:
Basic	$	0.70	$	0.28	$	1.14	$	0.54
Diluted	$	0.70	$	0.28	$	1.14	$	0.53

Cash dividends declared per share	$	0.475	$	0.475	$	0.950	$	0.950

See Notes to Consolidated Financial Statements.

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B&G Foods, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)


	Thirteen Weeks Ended				Twenty-six Weeks Ended
	June 27,		June 29,		June 27,		June 29,
	2020		2019		2020		2019
Net income	$	44,911	$	18,251	$	73,003	$	35,042

Other comprehensive (loss) income:
Foreign currency translation adjustments		1,671		1,543		(12,678)		3,001
Amortization of unrecognized prior service cost and pension deferrals, net of tax		219		163		515		325
Other comprehensive (loss) income		1,890		1,706		(12,163)		3,326
Comprehensive income	$	46,801	$	19,957	$	60,840	$	38,368

See Notes to Consolidated Financial Statements.

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B&G Foods, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

As of June 27, 2020

(In thousands, except share and per share data)

(Unaudited)


						Accumulated
				Additional		Other				Total
	Common Stock			Paid-in		Comprehensive		Retained		Stockholders’
	Shares	Amount		Capital		Loss		Earnings		Equity
Balance at December 28, 2019	64,044,649	$	640	$	—	$	(31,894)	$	843,796	$	812,542
Foreign currency translation	—		—		—		(14,349)		—		(14,349)
Change in pension benefit (net of $104 of income taxes)	—		—		—		296		—		296
Net income	—		—		—		—		28,092		28,092
Share-based compensation	—		—		—		—		163		163
Net issuance of common stock for share-based compensation	75,848		1		—		—		(1)		—
Dividends declared on common stock, $0.475 per share	—		—		—		—		(30,457)		(30,457)
Balance at March 28, 2020	64,120,497	$	641	$	—	$	(45,947)	$	841,593	$	796,287
Foreign currency translation	—		—		—		1,671		—		1,671
Change in pension benefit (net of $77 of income taxes)	—		—		—		219		—		219
Net income	—		—		—		—		44,911		44,911
Share-based compensation	—		—		—		—		4,601		4,601
Net issuance of common stock for share-based compensation	39,956		1		—		—		(65)		(64)
Dividends declared on common stock, $0.475 per share	—		—		—		—		(30,476)		(30,476)
Balance at June 27, 2020	64,160,453	$	642	$	—	$	(44,057)	$	860,564	$	817,149

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B&G Foods, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

As of June 29, 2019

(In thousands, except share and per share data)

(Unaudited)


						Accumulated
				Additional		Other				Total
	Common Stock			Paid-in		Comprehensive		Retained		Stockholders’
	Shares	Amount		Capital		Loss		Earnings		Equity
Balance at December 29, 2018	65,638,701	$	656	$	116,339	$	(23,502)	$	806,556	$	900,049
Foreign currency translation	—		—		—		1,458		—		1,458
Change in pension benefit (net of $53 of income taxes)	—		—		—		162		—		162
Net income	—		—		—		—		16,791		16,791
Share-based compensation	—		—		580		—		—		580
Net issuance of common stock for share-based compensation	65,928		1		(906)		—		—		(905)
Repurchase of common stock	(407,022)		(4)		(9,996)		—		—		(10,000)
Dividends declared on common stock, $0.475 per share	—		—		(31,016)		—		—		(31,016)
Balance at March 30, 2019	65,297,607	$	653	$	75,001	$	(21,882)	$	823,347	$	877,119
Foreign currency translation	—		—		—		1,543		—		1,543
Change in pension benefit (net of $52 of income taxes)	—		—		—		163		—		163
Net income	—		—		—		—		18,251		18,251
Share-based compensation	—		—		2,336		—		—		2,336
Net issuance of common stock for share-based compensation	77,907		1		—		—		—		1
Dividends declared on common stock, $0.475 per share	—		—		(31,053)		—		—		(31,053)
Balance at June 29, 2019	65,375,514	$	654	$	46,284	$	(20,176)	$	841,598	$	868,360

See Notes to Consolidated Financial Statements.

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B&G Foods, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Twenty-six Weeks Ended
	June 27,		June 29,
	2020		2019
Cash flows from operating activities:
Net income	$	73,003	$	35,042
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		30,919		28,420
Amortization of operating lease right-of-use assets		5,968		5,377
Amortization of deferred debt financing costs and bond discount/premium		1,799		1,745
Deferred income taxes		14,281		7,240
Net (gain)/loss on sales and disposals of property, plant, and equipment		(61)		13
Share-based compensation expense		4,244		1,964
Changes in assets and liabilities, net of effects of businesses acquired:
Trade accounts receivable		1,751		21,246
Inventories		110,038		10,251
Prepaid expenses and other current assets		(9,667)		(5,035)
Income tax receivable/payable		6,930		(39,759)
Other assets		(150)		122
Trade accounts payable		10,903		(32,335)
Accrued expenses		(25)		(16,749)
Other liabilities		(3,567)		(696)
Net cash provided by operating activities		246,366		16,846

Cash flows from investing activities:
Capital expenditures		(10,016)		(18,148)
Proceeds from sale of property, plant and equipment		303		—
Payments for acquisition of businesses, net of cash acquired		(3,227)		(82,430)
Net cash used in investing activities		(12,940)		(100,578)

Cash flows from financing activities:
Repayments of long-term debt		(2,250)		—
Repayments of borrowings under revolving credit facility		(160,000)		(95,000)
Borrowings under revolving credit facility		160,000		260,000
Dividends paid		(60,878)		(62,194)
Payments for repurchase of common stock, net		—		(10,000)
Payments of tax withholding on behalf of employees for net share settlement of share-based compensation		(64)		(905)
Net cash (used in) provided by financing activities		(63,192)		91,901

Effect of exchange rate fluctuations on cash and cash equivalents		(349)		94
Net increase in cash and cash equivalents		169,885		8,263

Cash and cash equivalents at beginning of period		11,315		11,648
Cash and cash equivalents at end of period	$	181,200	$	19,911

Supplemental disclosures of cash flow information:
Cash interest payments	$	49,008	$	45,302
Cash income tax payments	$	1,256	$	44,710
Non-cash investing and financing transactions:
Dividends declared and not yet paid	$	30,476	$	31,053
Accruals related to purchases of property, plant and equipment	$	1,074	$	2,142
Right-of-use assets obtained in exchange for new operating lease liabilities	$	1,457	$	533

See Notes to Consolidated Financial Statements.

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B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

(1)

Nature of Operations

B&G Foods, Inc. is a holding company whose principal assets are the shares of capital stock of its subsidiaries. Unless the context requires otherwise, references in this report to “B&G Foods,” “our company,” “we,” “us” and “our” refer to B&G Foods, Inc. and its subsidiaries. Our financial statements are presented on a consolidated basis.

We operate in a single industry segment and manufacture, sell and distribute a diverse portfolio of high-quality shelf-stable and frozen foods across the United States, Canada and Puerto Rico. Our products include frozen and canned vegetables, oatmeal and other hot cereals, fruit spreads, canned meats and beans, bagel chips, spices, seasonings, hot sauces, wine vinegar, maple syrup, molasses, salad dressings, pizza crusts, Mexican-style sauces, dry soups, taco shells and kits, salsas, pickles, peppers, tomato-based products, cookies and crackers, baking powder, baking soda, corn starch, nut clusters and other specialty products. Our products are marketed under many recognized brands, including Ac’cent, B&G, B&M, Back to Nature, Baker’s Joy, Bear Creek Country Kitchens, Brer Rabbit, Canoleo, Cary’s, Clabber Girl, Cream of Rice, Cream of Wheat, Dash, Davis, Devonsheer, Don Pepino, Durkee, Emeril’s, Farmwise, Grandma’s Molasses, Green Giant, JJ Flats, Joan of Arc, Las Palmas, Le Sueur, MacDonald’s, Mama Mary’s, Maple Grove Farms of Vermont, McCann’s, Molly McButter, New York Flatbreads, New York Style, Old London, Ortega, Polaner, Red Devil, Regina, Rumford, Sa-són, Sclafani, SnackWell’s, Spice Islands, Spring Tree, Sugar Twin, Tone’s, Trappey’s, TrueNorth, Underwood, Vermont Maid, Victoria, Weber and Wright’s. We also sell and distribute Static Guard, a household product brand. We compete in the retail grocery, foodservice, specialty, private label, club and mass merchandiser channels of distribution. We sell and distribute our products directly and via a network of independent brokers and distributors to supermarket chains, foodservice outlets, mass merchants, warehouse clubs, non-food outlets and specialty distributors.

(2)

Summary of Significant Accounting Policies

Fiscal Year

Typically, our fiscal quarters and fiscal year consist of 13 and 52 weeks, respectively, ending on the Saturday closest to December 31 in the case of our fiscal year and fourth fiscal quarter, and on the Saturday closest to the end of the corresponding calendar quarter in the case of our fiscal quarters. As a result, a 53^rd week is added to our fiscal year every five or six years. In a 53-week fiscal year our fourth fiscal quarter contains 14 weeks. Our fiscal year ending January 2, 2021 (fiscal 2020) contains 53 weeks and our fiscal year ended December 28, 2019 (fiscal 2019) contains 52 weeks. The first three quarters of fiscal 2020 and all quarters of fiscal 2019 contain 13 weeks, and the fourth quarter of fiscal 2020 contains 14 weeks.

Basis of Presentation

The accompanying unaudited consolidated interim financial statements for the thirteen and twenty-six week periods ended June 27, 2020 (second quarter and first two quarters of 2020) and June 29, 2019 (second quarter and first two quarters of 2019) have been prepared by our company in accordance with generally accepted accounting principles in the United States (GAAP) pursuant to the rules and regulations of the Securities and Exchange Commission (SEC), and include the accounts of B&G Foods, Inc. and its subsidiaries. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations. However, our management believes, to the best of their knowledge, that the disclosures herein are adequate to make the information presented not misleading. All intercompany balances and transactions have been eliminated. The accompanying unaudited consolidated interim financial statements contain all adjustments that are, in the opinion of management, necessary to present fairly our consolidated financial position as of June 27, 2020, and the results of our operations, comprehensive income, changes in stockholders equity and cash flows for the second quarter and first two quarters of 2020 and 2019. Our results of operations for the second quarter and first two quarters of 2020 are not necessarily indicative of the results to be expected for the full year. We have evaluated subsequent events for disclosure through the date of issuance of the accompanying unaudited consolidated interim financial statements. The accompanying unaudited consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for fiscal 2019 filed with the SEC on February 26, 2020.

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B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Use of Estimates

The preparation of financial statements in accordance with GAAP requires our management to make a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Some of the more significant estimates and assumptions made by management involve revenue recognition as it relates to trade and consumer promotion expenses; pension benefits; acquisition accounting fair value allocations; the recoverability of goodwill, other intangible assets, property, plant and equipment and deferred tax assets; and the determination of the useful life of customer relationship and finite-lived trademark intangible assets. Actual results could differ significantly from these estimates and assumptions.

Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors that management believes to be reasonable under the circumstances, including the current economic environment. We adjust such estimates and assumptions when facts and circumstances dictate. Volatility in the credit and equity markets can increase the uncertainty inherent in such estimates and assumptions.

Newly Adopted Accounting Standards

In June 2016, the Financial Accounting Standards Board (FASB) issued a new accounting standards update (ASU) which modifies the measurement of expected credit losses of certain financial instruments. This ASU replaces the incurred loss methodology for recognizing credit losses with a current expected credit losses model and applies to all financial assets, including trade accounts receivables. The amendments in this ASU should be applied on a modified retrospective basis to all periods presented. This guidance became effective during the first quarter of 2020. The adoption of the new standard did not have a material impact to our consolidated financial statements and related disclosures.

In January 2017, the FASB issued an amendment to the standards of goodwill impairment testing. The new guidance simplifies the test for goodwill impairment, by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. This guidance became effective during the first quarter of 2020. The adoption of this ASU did not have an impact to our consolidated financial statements.

Recently Issued Accounting Standards

In March 2020, the SEC adopted amendments to the financial disclosure requirements for guarantors and issuers of guaranteed securities registered or being registered in Rule 3-10 of Regulation S-X, and affiliates whose securities collateralize securities registered or being registered in Rule 3-16 of Regulation S-X (SEC Release No. 33-10762). The amendments are effective January 4, 2021, with early adoption permitted. We currently expect to adopt the amendments to the disclosure requirements during the first quarter of 2021. We do not expect this amendment to have an impact on our consolidated financial statements as this amendment simplifies the financial disclosures required in our guarantor and non-guarantor financial information. The amendment replaces the requirement to present condensed consolidating financial statements, comprised of balance sheets and statements of operations, comprehensive income and cash flows for all periods presented, with summarized financial information of the guarantor only for the most recently completed fiscal year and any subsequent interim period.

In March 2020, the FASB issued a new ASU which provides optional guidance for a limited time to ease the potential accounting burden associated with transitioning away from reference rates such as LIBOR. The update may be applied as of the beginning of the interim period that includes March 12, 2020 through December 31, 2022. We currently expect to adopt the standard during fiscal 2022. We are in the process of evaluating the impact of the adoption of this ASU. We use LIBOR to determine interest under our revolving credit facility and our tranche B term loans due 2026. However, we currently do not expect the adoption of this ASU to have a material impact to our consolidated financial statements.

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B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

In December 2019, the FASB issued a new ASU which removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for goodwill and allocating taxes to members of a consolidated group. The update is effective for fiscal years beginning after December 15, 2020. Early adoption is permitted, including adoption in any interim period. We currently expect to adopt the standard when it becomes effective. We are in the process of evaluating the impact of the adoption of this ASU. Currently, we do not expect the adoption of this ASU to have a material impact to our consolidated financial statements.

In August 2018, the FASB issued a new ASU that aims to improve the overall usefulness of disclosures to financial statement users and reduce unnecessary costs to companies by changing disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. The update is effective for fiscal years beginning after December 15, 2020. We expect to update our defined benefit pension plan disclosures when the new standard becomes effective. We do not expect the adoption of this ASU to have an impact to our consolidated financial statements as this ASU only modifies disclosure requirements.

(3)

Acquisitions

Farmwise Acquisition

On February 19, 2020, we acquired Farmwise LLC, maker of Farmwise Veggie Fries, Farmwise Veggie Tots and Farmwise Veggie Rings. We refer to this acquisition as the “Farmwise acquisition.”

Clabber Girl Acquisition

On May 15, 2019, we acquired Clabber Girl Corporation, a leader in baking products, including baking powder, baking soda and corn starch, from Hulman & Company for approximately $84.6 million in cash. In addition to Clabber Girl, the number one retail baking powder brand, Clabber Girl Corporation’s product offerings include the Rumford, Davis, Hearth Club and Royal brands of retail baking powder, baking soda and corn starch, and the Royal brand of foodservice dessert mixes. We refer to this acquisition as the “Clabber Girl acquisition.”

The following table sets forth the allocation of the Clabber Girl acquisition purchase price to the estimated fair value of the net assets acquired at the date of acquisition.

Clabber Girl Acquisition (in thousands):


Purchase Price Allocation:	May 15, 2019
Cash and cash equivalents	$	2,202
Trade accounts receivable, net		5,627
Inventories		10,641
Prepaid expenses and other current assets		154
Income tax receivable		7
Property, plant and equipment, net		20,697
Operating lease right-of-use assets		7,841
Trademarks — indefinite-lived intangible assets		19,600
Customer relationships — finite-lived intangible assets		18,500
Trade accounts payable		(3,007)
Accrued expenses		(1,315)
Operating lease liabilities, current portion		(952)
Long-term operating lease liabilities, net of current portion		(7,319)
Goodwill		11,956
Total purchase price (paid in cash)	$	84,632

Unaudited Pro Forma Summary of Operations

Neither the Farmwise acquisition nor the Clabber Girl acquisition was material to our consolidated results of operations or financial position and, therefore, pro forma financial information is not presented.

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B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

(4)

Inventories

Inventories are stated at the lower of cost or net realizable value and include direct material, direct labor, overhead, warehousing and product transfer costs. Cost is determined using the first-in, first-out and average cost methods. Inventories have been reduced by an allowance for excess, obsolete and unsaleable inventories. The allowance is an estimate based on management’s review of inventories on hand compared to estimated future usage and sales.

Inventories consist of the following, as of the dates indicated (in thousands):


	June 27, 2020		December 28, 2019
Raw materials and packaging	$	80,873	$	65,673
Work-in-process		39,332		111,866
Finished goods		236,598		294,648
Inventories	$	356,803	$	472,187

(5)

Goodwill and Other Intangible Assets

The carrying amounts of goodwill and other intangible assets, as of the dates indicated, consist of the following (in thousands):


	June 27, 2020						December 28, 2019
	Gross Carrying		Accumulated		Net Carrying		Gross Carrying		Accumulated		Net Carrying
	Amount		Amortization		Amount		Amount		Amortization		Amount
Finite-Lived Intangible Assets
Trademarks	$	20,100	$	5,026	$	15,074	$	19,600	$	4,462	$	15,138
Customer relationships		354,090		138,300		215,790		354,090		129,402		224,688
Total finite-lived intangible assets	$	374,190	$	143,326	$	230,864	$	373,690	$	133,864	$	239,826

Indefinite-Lived Intangible Assets
Goodwill	$	598,860					$	596,391
Trademarks	$	1,375,300					$	1,375,300

The increases in the carrying amounts of finite-lived trademarks and goodwill are attributable to the Farmwise acquisition.

Amortization expense associated with finite-lived intangible assets was $4.7 million and $9.5 million for the second quarter and first two quarters of 2020, respectively, and was $4.6 million and $9.1 million for the second quarter and first two quarters of 2019, respectively, and is recorded in operating expenses. We expect to recognize an additional $9.4 million of amortization expense associated with our finite-lived intangible assets during the remainder of fiscal 2020, and thereafter $18.9 million of amortization expense in each of fiscal 2021 and 2022, and $18.8 million in each of fiscal 2023, fiscal 2024 and fiscal 2025.

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B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

(6)

Long-Term Debt

Long-term debt consists of the following, as of the dates indicated (in thousands):


	June 27, 2020		December 28, 2019
Revolving credit loans	$	—	$	—
Tranche B term loans due 2026		447,750		450,000
5.25% senior notes due 2025		900,000		900,000
5.25% senior notes due 2027		550,000		550,000
Unamortized deferred debt financing costs		(19,333)		(20,869)
Unamortized discount/premium		525		652
Total long-term debt, net of unamortized deferred debt financing costs and discount/premium		1,878,942		1,879,783
Current portion of long-term debt		(4,500)		(5,625)
Long-term debt, net of unamortized deferred debt financing costs and discount/premium, and excluding current portion	$	1,874,442	$	1,874,158

As of June 27, 2020, the aggregate contractual maturities of long-term debt were as follows (in thousands):


	Aggregate Contractual Maturities
Fiscal year:
2020 remaining	$	3,375
2021		4,500
2022		4,500
2023		4,500
2024		4,500
Thereafter		1,876,375
Total	$	1,897,750

Senior Secured Credit Agreement. Our senior secured credit agreement includes a term loan facility and a revolving credit facility. On October 10, 2019, we amended our senior secured credit agreement to, among other things, provide for an incremental $450.0 million tranche B term loan facility, which closed and funded on October 10, 2019. We used the proceeds of the tranche B term loans, together with the net proceeds of our recently completed offering of $550.0 million aggregate principal amount of 5.25% senior notes due 2027, to redeem all $700.0 million aggregate principal amount of our 4.625% senior notes due 2021, repay a portion of our borrowings under our revolving credit facility, pay related fees and expenses and for general corporate purposes.

The tranche B term loans mature on October 10, 2026 and are subject to amortization at the rate of 1% per year with the balance due and payable on the maturity date. If we prepay all or any portion of the tranche B term loans within six months of the funding of the tranche B term loans in connection with a financing that has a lower interest rate or weighted average yield than the tranche B term loans, we will owe a repayment fee equal to 1% of the amount prepaid. Otherwise, we may prepay the term loans at any time without premium or penalty (other than customary “breakage” costs with respect to the early termination of LIBOR loans). Subject to certain exceptions, the tranche B term loans are subject to mandatory prepayment upon certain asset dispositions or casualty events and issuances of indebtedness.

Interest under the tranche B term loan facility is determined based on alternative rates that we may choose in accordance with our credit agreement, including a base rate per annum plus an applicable margin of 1.00%, and LIBOR plus an applicable margin of 2.50%.

As of June 27, 2020, our revolving credit facility was undrawn and the available borrowing capacity under the revolving credit facility, net of outstanding letters of credit of $1.6 million, was $698.4 million. Proceeds of the revolving credit facility may be used for general corporate purposes, including acquisitions of targets in the same or a similar line of business as our company, subject to specified criteria. The revolving credit facility matures on November 21, 2022.

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B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Interest under the revolving credit facility, including any outstanding letters of credit, is determined based on alternative rates that we may choose in accordance with the credit agreement, including a base rate per annum plus an applicable margin ranging from 0.25% to 0.75%, and LIBOR plus an applicable margin ranging from 1.25% to 1.75%, in each case depending on our consolidated leverage ratio.

We are required to pay a commitment fee of 0.50% per annum on the unused portion of the revolving credit facility. The maximum letter of credit capacity under the revolving credit facility is $50.0 million, with a fronting fee of 0.25% per annum for all outstanding letters of credit and a letter of credit fee equal to the applicable margin for revolving loans that are Eurodollar (LIBOR) loans.

We may prepay term loans or permanently reduce the revolving credit facility commitment under the credit agreement at any time without premium or penalty (other than customary “breakage” costs with respect to the early termination of LIBOR loans). Subject to certain exceptions, the credit agreement provides for mandatory prepayment upon certain asset dispositions or casualty events and issuances of indebtedness.

Our obligations under the credit agreement are jointly and severally and fully and unconditionally guaranteed on a senior basis by all of our existing and certain future domestic subsidiaries. The credit agreement is secured by substantially all of our and our domestic subsidiaries’ assets except our and our domestic subsidiaries’ real property. The credit agreement contains customary restrictive covenants, subject to certain permitted amounts and exceptions, including covenants limiting our ability to incur additional indebtedness, pay dividends and make other restricted payments, repurchase shares of our outstanding stock and create certain liens.

The credit agreement also contains certain financial maintenance covenants, which, among other things, specify a maximum consolidated leverage ratio and a minimum interest coverage ratio, each ratio as defined in the credit agreement. Our consolidated leverage ratio (defined as the ratio of our consolidated net debt, as of the last day of any period of four consecutive fiscal quarters to our adjusted EBITDA for such period on a pro forma basis) may not exceed 7.00 to 1.00. We are also required to maintain a consolidated interest coverage ratio of at least 1.75 to 1.00 as of the last day of any period of four consecutive fiscal quarters. As of June 27, 2020, we were in compliance with all of the covenants, including the financial covenants, in the credit agreement.

The credit agreement also provides for an incremental term loan and revolving loan facility, pursuant to which we may request that the lenders under the credit agreement, and potentially other lenders, provide unlimited additional amounts of term loans or revolving loans or both on terms substantially consistent with those provided under the credit agreement. Among other things, the utilization of the incremental facility is conditioned on our ability to meet a maximum senior secured leverage ratio of 4.00 to 1.00, and a sufficient number of lenders or new lenders agreeing to participate in the facility.

5.25% Senior Notes due 2025. On April 3, 2017, we issued $500.0 million aggregate principal amount of 5.25% senior notes due 2025 at a price to the public of 100% of their face value. On November 20, 2017, we issued an additional $400.0 million aggregate principal amount of 5.25% senior notes due 2025 at a price to the public 101% of their face value plus accrued interest from October 1, 2017. The notes issued in November 2017 were issued as additional notes under the same indenture as our 5.25% senior notes due 2025 that were issued in April 2017, and, as such, form a single series and trade interchangeably with the previously issued 5.25% senior notes due 2025.

We used the net proceeds of the April 2017 offering to repay all of the outstanding borrowings and amounts due under our revolving credit facility and tranche A term loans, to pay related fees and expenses and for general corporate purposes. We used the net proceeds of the November 2017 offering to repay all of the then outstanding borrowings and amounts due under our revolving credit facility, to pay related fees and expenses and for general corporate purposes.

Interest on the 5.25% senior notes due 2025 is payable on April 1 and October 1 of each year, commencing October 1, 2017. The 5.25% senior notes due 2025 will mature on April 1, 2025, unless earlier retired or redeemed as described below.

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B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

We may redeem some or all of the 5.25% senior notes due 2025 at a redemption price of 103.9375% beginning April 1, 2020 and thereafter at prices declining annually to 100% on or after April 1, 2023, in each case plus accrued and unpaid interest to the date of redemption. In addition, if we undergo a change of control or upon certain asset sales, we may be required to offer to repurchase the 5.25% senior notes due 2025 at the repurchase price set forth in the indenture plus accrued and unpaid interest to the date of repurchase.

We may also, from time to time, seek to retire the 5.25% senior notes due 2025 through cash repurchases of the 5.25% senior notes due 2025 and/or exchanges of the 5.25% senior notes due 2025 for equity securities, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Our obligations under the 5.25% senior notes due 2025 are jointly and severally and fully and unconditionally guaranteed on a senior basis by all of our existing and certain future domestic subsidiaries. The 5.25% senior notes due 2025 and the subsidiary guarantees are our and the guarantors’ general unsecured obligations and are effectively junior in right of payment to all of our and the guarantors’ secured indebtedness and to all existing and future indebtedness and other liabilities of our non-guarantor subsidiaries; are pari passu in right of payment to all of our and the guarantors’ existing and future unsecured senior debt; and are senior in right of payment to all of our and the guarantors’ future subordinated debt. Our foreign subsidiaries are not guarantors, and any future foreign or partially owned domestic subsidiaries will not be guarantors, of the 5.25% senior notes due 2025.

The indenture governing the 5.25% senior notes due 2025 contains covenants with respect to us and the guarantors and restricts the incurrence of additional indebtedness and the issuance of capital stock; the payment of dividends or distributions on, and redemption of, capital stock; a number of other restricted payments, including certain investments; creation of specified liens, certain sale-leaseback transactions and sales of certain specified assets; fundamental changes, including consolidation, mergers and transfers of all or substantially all of our assets; and specified transactions with affiliates. Each of the covenants is subject to a number of important exceptions and qualifications. As of June 27, 2020, we were in compliance with all of the covenants in the indenture governing the 5.25% senior notes due 2025.

5.25% Senior Notes due 2027. On September 26, 2019, we issued $550.0 million aggregate principal amount of 5.25% senior notes due 2027 at a price to the public of 100% of their face value.

We used the proceeds of the offering, together with the proceeds of incremental term loans made during the fourth quarter of 2019, to redeem all of our outstanding 4.625% senior notes due 2021, repay a portion of our borrowings under our revolving credit facility, pay related fees and expenses and for general corporate purposes.

Interest on the 5.25% senior notes due 2027 is payable on March 15 and September 15 of each year, commencing March 15, 2020. The 5.25% senior notes due 2027 will mature on September 15, 2027, unless earlier retired or redeemed as described below.

We may redeem some or all of the 5.25% senior notes due 2027 at a redemption price of 103.938% beginning March 1, 2022 and thereafter at prices declining annually to 100% on or after March 1, 2025, in each case plus accrued and unpaid interest to the date of redemption. We may redeem up to 40% of the aggregate principal amount of the 5.25% senior notes due 2027 prior to March 1, 2022 with the net proceeds from certain equity offerings. We may also redeem some or all of the 5.25% senior notes due 2027 at any time prior to March 1, 2022 at a redemption price equal to the make-whole amount set forth in the tenth supplemental indenture. In addition, if we undergo a change of control or upon certain asset sales, we may be required to offer to repurchase the 5.25% senior notes due 2027 at the repurchase price set forth in the indenture plus accrued and unpaid interest to the date of repurchase.

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B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

We may also, from time to time, seek to retire the 5.25% senior notes due 2027 through cash repurchases of the 5.25% senior notes due 2027 and/or exchanges of the 5.25% senior notes due 2027 for equity securities, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Our obligations under the 5.25% senior notes due 2027 are jointly and severally and fully and unconditionally guaranteed on a senior basis by all of our existing and certain future domestic subsidiaries. The 5.25% senior notes due 2027 and the subsidiary guarantees are our and the guarantors’ general unsecured obligations and are effectively junior in right of payment to all of our and the guarantors’ secured indebtedness and to all existing and future indebtedness and other liabilities of our non-guarantor subsidiaries; are pari passu in right of payment to all of our and the guarantors’ existing and future unsecured senior debt; and are senior in right of payment to all of our and the guarantors’ future subordinated debt. Our foreign subsidiaries are not guarantors, and any future foreign or partially owned domestic subsidiaries will not be guarantors, of the 5.25% senior notes due 2027.

The indenture governing the 5.25% senior notes due 2027 contains covenants with respect to us and the guarantors and restricts the incurrence of additional indebtedness and the issuance of capital stock; the payment of dividends or distributions on, and redemption of, capital stock; a number of other restricted payments, including certain investments; creation of specified liens, certain sale-leaseback transactions and sales of certain specified assets; fundamental changes, including consolidation, mergers and transfers of all or substantially all of our assets; and specified transactions with affiliates. Each of the covenants is subject to a number of important exceptions and qualifications. As of June 27, 2020, we were in compliance with all of the covenants in the indenture governing the 5.25% senior notes due 2027.

Subsidiary Guarantees. We have no assets or operations independent of our direct and indirect subsidiaries. All of our present domestic subsidiaries jointly and severally and fully and unconditionally guarantee our long-term debt. There are no significant restrictions on our ability and the ability of our subsidiaries to obtain funds from our respective subsidiaries by dividend or loan. See Note 18, “Guarantor and Non-Guarantor Financial Information.”

Accrued Interest. At June 27, 2020 and December 28, 2019, accrued interest of $21.5 million and $21.4 million, respectively, is included in accrued expenses in the accompanying unaudited consolidated balance sheets.

(7)

Fair Value Measurements

The authoritative accounting literature relating to fair value measurements defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The accounting literature outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and the accounting literature details the disclosures that are required for items measured at fair value. Financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy under the accounting literature. The three levels are as follows:

Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs other than Level 1 quoted prices, such as quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value driver is observable for the asset or liability, either directly or indirectly.

Level 3—Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.

Cash and cash equivalents, trade accounts receivable, income tax receivable, trade accounts payable, accrued expenses, income tax payable and dividends payable are reflected in the consolidated balance sheets at carrying value, which approximates fair value due to the short-term nature of these instruments.

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B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

The carrying values and fair values of our revolving credit loans, term loans and senior notes as of June 27, 2020 and December 28, 2019 were as follows (in thousands):


		June 27, 2020						December 28, 2019
	Carrying Value			Fair Value			Carrying Value			Fair Value
Revolving credit loans	$	—		$	—		$	—		$	—
Tranche B term loans due 2026		445,713	⁽¹⁾		439,027	⁽²⁾		447,820	⁽¹⁾		451,179	⁽²⁾
5.25% senior notes due 2025		902,562	⁽³⁾		909,331	⁽²⁾		902,832	⁽³⁾		929,917	⁽²⁾
5.25% senior notes due 2027	$	550,000		$	550,000	⁽²⁾	$	550,000		$	550,000	⁽²⁾

(1)	The carrying value of the tranche B term loans includes a discount. At June 27, 2020 and December 28, 2019, the face amount of the tranche B term loans was $447.8 million and $450.0 million, respectively.

(2)	Fair values are estimated based on quoted market prices.

(3)	The carrying values of the 5.25% senior notes due 2025 include a premium. At June 27, 2020 and December 28, 2019, the face amount of the 5.25% senior notes due 2025 was $900.0 million.

There was no Level 3 activity during the second quarter or first two quarters of 2020 or 2019.

(8)

Accumulated Other Comprehensive Loss

The reclassifications from accumulated other comprehensive loss (AOCL) for the second quarter and first two quarters of 2020 and 2019 were as follows (in thousands):


	Amounts Reclassified from AOCL
	Thirteen Weeks Ended				Twenty-six Weeks Ended				Affected Line Item in
	June 27,		June 29,		June 27,		June 29,		the Statement Where
Details about AOCL Components	2020		2019		2020		2019		Net Income is Presented
Defined benefit pension plan items
Amortization of unrecognized loss	$	296	$	215	$	696	$	430	See (1) below
Accumulated other comprehensive loss before tax		296		215		696		430	Total before tax
Tax expense		(77)		(52)		(181)		(105)	Income tax expense
Total reclassification	$	219	$	163	$	515	$	325	Net of tax

(1)	These items are included in the computation of net periodic pension cost. See Note 10, “Pension Benefits,” for additional information.

Changes in AOCL for the first two quarters of 2020 were as follows (in thousands):


			Foreign Currency
	Defined Benefit		Translation
	Pension Plan Items		Adjustments		Total
Balance at December 28, 2019	$	(24,761)	$	(7,133)	$	(31,894)
Other comprehensive income before reclassifications		—		(12,678)		(12,678)
Amounts reclassified from AOCL		515		—		515
Net current period other comprehensive income		515		(12,678)		(12,163)
Balance at June 27, 2020	$	(24,246)	$	(19,811)	$	(44,057)

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B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

(9)Stock Repurchase Program

On March 11, 2020, our board of directors authorized an extension of our stock repurchase program from March 15, 2020 to March 15, 2021. In extending the repurchase program, our board of directors also reset the repurchase authority to up to $50.0 million.

Under the authorization, we may purchase shares of common stock from time to time in the open market or in privately negotiated transactions in compliance with the applicable rules and regulations of the SEC. The timing and amount of future stock repurchases, if any, under the program will be at the discretion of management, and will depend on a variety of factors, including price, available cash, general business and market conditions and other investment opportunities. Therefore, we cannot assure you as to the number or aggregate dollar amount of additional shares, if any, that will be repurchased under the program. We may discontinue the program at any time. Any shares repurchased pursuant to the program will be retired.

During the first quarter of 2019, we repurchased and retired 407,022 shares of common stock at an average price per share, excluding fees and commissions, of $24.55, or $10.0 million in the aggregate. We did not repurchase any shares of our common stock during the first two quarters of 2020 or the second quarter of 2019. As of June 27, 2020, we had $50.0 million available for future repurchases of common stock under the stock repurchase program.

(10)

Pension Benefits

Company-Sponsored Defined Benefit Pension Plans. As of June 27, 2020, we had four company-sponsored defined benefit pension plans. The benefits are based on years of service and the employee’s compensation, as defined in the plans. Effective January 1, 2020, newly hired non-union employees are no longer eligible to participate in our defined benefit pension plans. Net periodic pension cost for our four company-sponsored defined benefit pension plans for the second quarter and first two quarters of 2020 and 2019 includes the following components (in thousands):


	Thirteen Weeks Ended				Twenty-six Weeks Ended
	June 27,		June 29,		June 27,		June 29,
	2020		2019		2020		2019
Service cost—benefits earned during the period	$	2,052	$	1,734	$	4,519	$	3,671
Interest cost on projected benefit obligation		1,322		1,431		2,699		2,873
Expected return on plan assets		(2,319)		(1,913)		(4,548)		(3,827)
Amortization of unrecognized loss		296		215		696		430
Net periodic pension cost	$	1,351	$	1,467	$	3,366	$	3,147

During the second quarter of 2020, we made an $8.0 million contribution to our company-sponsored defined benefit pension plans. During the first quarter of 2020 and the first two quarters of 2019, we did not make any contributions to our company-sponsored defined benefit pension plans.

Multi-Employer Defined Benefit Pension Plan. We also contribute to the Bakery and Confectionery Union and Industry International Pension Fund (EIN 52-6118572, Plan No. 001), a multi-employer defined benefit pension plan, sponsored by the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM) on behalf of certain employees at our Portland, Maine manufacturing facility. The plan provides multiple plan benefits with corresponding contribution rates that are collectively bargained between participating employers and their affiliated BCTGM local unions.

We were notified that for the plan year beginning January 1, 2012, the plan was in critical status and classified in the Red Zone, and for the plan year beginning January 1, 2018, the plan was in critical and declining status. As of the date of the accompanying unaudited consolidated interim financial statements, the plan remains in critical and declining status. The law requires that all contributing employers pay to the plan a surcharge to help correct the plan’s financial situation. The amount of the surcharge is equal to a percentage of the amount an employer is otherwise required to contribute to the plan under the applicable collective bargaining agreement. During the second quarter of 2015, we agreed to a collective bargaining agreement that, among other things, implements a rehabilitation plan. As a result, our contributions to the plan are expected to increase by at least 5.0% per year, assuming consistent hours are worked.

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B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

B&G Foods made contributions to the multi-employer defined benefit pension plan of $0.4 million during the first two quarters of 2020 and $0.5 million during the first two quarters of 2019, respectively. These contributions represented less than five percent of total contributions made to the plan.

(11)

Leases

Operating Leases. Operating leases are included in the accompanying unaudited consolidated balance sheets in the following line items:


	June 27,		December 28,
	2020		2019
Right-of-use assets:
Operating lease right-of-use assets, net	$	35,925	$	38,698

Operating lease liabilities:
Current portion of operating lease liabilities	$	10,946	$	9,813
Long-term operating lease liabilities, net of current portion		28,003		31,997
Total operating lease liabilities	$	38,949	$	41,810

We determine whether an arrangement is a lease at inception. We have operating leases for certain of our manufacturing facilities, distribution centers, warehouse and storage facilities, machinery and equipment, and office equipment. Our leases have remaining lease terms of one year to seven years, some of which include options to extend the lease term for up to five years, and some of which include options to terminate the lease within one year. We consider these options in determining the lease term used to establish our right-of use assets and lease liabilities.

The following table shows supplemental information related to leases:


	Thirteen Weeks Ended				Twenty-six Weeks Ended
	June 27,		June 29,		June 27,		June 29,
	2020		2019		2020		2019
Operating cash flow information:
Cash paid for amounts included in the measurement of operating lease liabilities	$	3,095	$	2,795	$	6,182	$	5,497

The components of lease costs were as follows:
Cost of goods sold	$	1,012	$	769	$	2,016	$	1,437
Selling, general and administrative expenses		1,975		1,970		3,952		3,940
Total lease costs	$	2,987	$	2,739	$	5,968	$	5,377

Total rent expense was $3.8 million, including the operating lease costs of $3.0 million stated above, for the second quarter of 2020, and $7.3 million, including the operating lease costs of $6.0 million stated above, for the first two quarters of 2020. Total rent expense was $4.0 million, including the operating lease costs of $2.7 million stated above, for the second quarter of 2019, and $7.2 million, including the operating lease costs of $5.4 million stated above, for the first two quarters of 2019.

Because our operating leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We have lease agreements that contain both lease and non-lease components. With the exception of our real estate leases, we account for our leases as a single lease component.

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B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

The following table shows the lease term and discount rate for our ROU assets:


	June 27,		December 28,
	2020		2019
Weighted average remaining lease term (years)		5.0		5.4
Weighted average discount rate		4.03%		4.07%

As of June 27, 2020, the maturities of operating lease liabilities were as follows (in thousands):


	Maturities of Operating Lease Liabilities
Fiscal year:
2020 remaining	$	6,175
2021		11,613
2022		5,974
2023		5

BGS

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