— Generates Net Cash Provided by Operating
Activities of $104.8 Million
for the First Two Quarters of 2018
—
B&G Foods, Inc. (NYSE:BGS) today announced financial results
for the second quarter and first two quarters of 2018.
Executive Summary (vs. year-ago quarter where
applicable):
- Net sales increased 7.4% to $388.4
million
- Base business net sales1 increased 3.1%
to $370.2 million
- Diluted earnings per share decreased
63.6% to $0.12
- Adjusted diluted earnings per share1
decreased 7.3% to $0.38
- Adjusted EBITDA1 decreased 4.7% to
$74.4 million
- Net cash provided by operating
activities increased to $104.8 million for the first two quarters
of 2018 from $19.8 million in the first two quarters of 2017
- Updated guidance for full year fiscal
2018:
- Net sales range of $1.73 billion to
$1.75 billion
- Adjusted EBITDA range of $345.0 million
to $355.0 million
- Adjusted diluted earnings per share
range of $2.05 to $2.15
- Repurchased $18.5 million of common
stock at an average price of $26.65 per share
- Prepaid $25.0 million of term
loans
- Completed the acquisition of the
McCann’s brand of premium Irish oatmeal early in the third
quarter
“We had very strong top line growth in the second quarter, with
our net sales up 7.4% and our base business net sales up 3.1%,
which is outpacing our initial expectations for the full year,”
stated Robert C. Cantwell, President and Chief Executive Officer of
B&G Foods.
Mr. Cantwell continued, “Net sales of Green Giant frozen
products grew by 19.7%, the fifth consecutive quarter of double
digit growth. Pirate Brands also had a strong quarter, with net
sales up 54.6%. Other key brands in our portfolio, including Cream
of Wheat, Ortega and Victoria, also performed well during the first
half of the year.
We generated $74.4 million of adjusted EBITDA in the second
quarter, a decrease of $3.8 million compared to the second quarter
of last year, which was expected due primarily to industry wide
increases in freight costs, and the timing of our price increases,
which were not fully implemented until late in the quarter.
Supportive of our full year guidance, we expect to see the full
benefit of our price increases and additional benefit from our cost
savings initiatives in the second half of the year. In addition, we
believe the rate of increase in freight costs has begun to
moderate.”
Financial Results for the Second Quarter of 2018
Net sales increased $26.7 million, or 7.4%, to $388.4 million
for the second quarter of 2018 from $361.7 million for the second
quarter of 2017. Net sales of Back to Nature, acquired on October
2, 2017, contributed $17.6 million to the Company’s overall net
sales for the second quarter of 2018.
Base business net sales increased $11.0 million, or 3.1%, to
$370.2 million from $359.2 million for the second quarter of 2017.
The $11.0 million increase was attributable to an increase in net
pricing of $4.3 million, or 1.2%, and unit volume of $6.7
million.
Net sales of Green Giant frozen increased $13.9 million, or
19.7%, compared to the second quarter of 2017. This growth was
driven by Green Giant frozen innovation products. Net sales of
Pirate Brands increased by 54.6%, largely due to the timing of
promotional activities and increased distribution. This performance
was offset, in part, by Green Giant shelf stable, whose net sales
decreased 36.5%.
Gross profit was $81.2 million for the second quarter of 2018
compared to $104.6 million for the second quarter of 2017. Gross
profit expressed as a percentage of net sales decreased to 20.9% in
the second quarter of 2018 from 28.9% in the second quarter of
2017. Gross profit as a percentage of net sales was 26.1% for the
quarter, excluding the negative impact of $20.1 million of
non-recurring expenses, including the non-cash accounting impact of
the Company’s inventory reduction plan, and acquisition-related
expenses, including Back to Nature integration expenses. Gross
profit percentage was also negatively impacted by industry-wide and
anticipated increases in freight expenses, partially offset by
procurement savings, a decrease in warehousing expenses and an
increase in net pricing.
Selling, general and administrative expenses decreased $6.3
million, or 14.5%, to $37.3 million for the second quarter of 2018
from $43.6 million for the second quarter of 2017. The decrease was
composed of a decrease in acquisition-related and non-recurring
expenses of $5.8 million and reduced consumer marketing expenses of
$2.3 million, partially offset by other increases of $1.8 million.
Expressed as a percentage of net sales, selling, general and
administrative expenses improved by 2.4 percentage points to 9.6%
for the second quarter of 2018 compared to 12.0% for the second
quarter of 2017.
Net interest expense increased $5.6 million, or 25.5%, to $27.6
million for the second quarter of 2018 from $22.0 million in the
second quarter of 2017. The increase was primarily attributable to
additional borrowings made in the fourth quarter of 2017 to fund
the Back to Nature acquisition and in the second and fourth
quarters of 2017 in connection with the Company’s senior notes
offerings.
The Company’s reported net income under U.S. generally accepted
accounting principles (GAAP) was $8.0 million, or $0.12 per diluted
share for the second quarter of 2018, as compared to reported net
income of $22.1 million, or $0.33 per diluted share, for the second
quarter of 2017. The Company’s adjusted net income for the second
quarter of 2018, which excludes the after-tax impact of loss on
extinguishment of debt, acquisition-related and non-recurring
expenses and the non-cash accounting impact of the Company’s
inventory reduction plan, was $25.1 million, or $0.38 per adjusted
diluted share. The Company’s adjusted net income for the second
quarter of 2017, which excludes the after-tax impact of loss on
extinguishment of debt and acquisition-related and non-recurring
expenses, was $27.6 million, or $0.41 per adjusted diluted
share.
For the second quarter of 2018, adjusted EBITDA, which excludes
acquisition-related and non-recurring expenses and the non-cash
accounting impact of the Company’s inventory reduction plan, was
$74.4 million, a decrease of 4.7%, or $3.8 million, compared to
$78.2 million for the second quarter of 2017. Adjusted EBITDA as a
percentage of net sales was 19.2% for the second quarter of
2018.
Financial Results for the First Two Quarters of 2018
Net sales increased $46.1 million, or 6.0%, to $820.1 million
for the first two quarters of 2018 from $774.0 million for the
first two quarters of 2017. Net sales of Back to Nature, acquired
on October 2, 2017, contributed $37.7 million to the Company’s
overall net sales for the first two quarters of 2018.
Base business net sales increased $12.1 million, or 1.6%, to
$781.3 million from $769.2 million for the first two quarters of
2017. The $12.1 million increase was attributable to an increase in
net pricing of $5.5 million, or 0.7%, and unit volume of $6.7
million.
Net sales of Green Giant frozen for the first two quarters of
2018 increased $24.6 million, or 15.9%, compared to the first two
quarters of 2017. This growth was driven by Green Giant frozen
innovation products. Other brands that performed well during the
first two quarters include Pirate Brands, whose net sales increased
10.3%, Victoria, whose net sales increased 7.5%, Cream of Wheat,
whose net sales increased 4.9%, Static Guard, whose net sales
increased 28.7%, and Ortega, whose net sales increased by 1.3%.
This performance was offset, in part, by Green Giant shelf stable,
whose net sales decreased 19.8%, Las Palmas, whose net sales
decreased 10.2%, Bear Creek Country Kitchens, whose net sales
decreased 8.1%, and Mama Mary’s, whose net sales decreased
7.3%.
Gross profit was $184.5 million for the first two quarters of
2018 compared to $225.8 million for the first two quarters of 2017.
Gross profit expressed as a percentage of net sales decreased to
22.5% in the first two quarters of 2018 from 29.2% in the first two
quarters of 2017. Gross profit as a percentage of net sales was
26.9% for the first two quarters, excluding the negative impact of
$36.2 million of non-recurring expenses, including the non-cash
accounting impact of the Company’s inventory reduction plan, and
acquisition-related expenses, including Back to Nature
integration expenses. Gross profit percentage was also negatively
impacted by industry-wide and anticipated increases in freight
expenses, partially offset by procurement savings, a decrease in
warehousing expenses and an increase in net pricing.
Selling, general and administrative expenses decreased $12.3
million, or 13.3%, to $79.8 million for the first two quarters of
2018 from $92.1 million for the first two quarters of 2017. The
decrease was composed of a decrease in acquisition-related and
non-recurring expenses of $11.2 million, reduced consumer marketing
expenses of $4.1 million and reduced warehousing expenses of $0.7
million, partially offset by other increases of $3.7 million.
Expressed as a percentage of net sales, selling, general and
administrative expenses improved by 2.3 percentage points to 9.7%
for the first two quarters of 2018 compared to 12.0% for the first
two quarters of 2017.
Net interest expense increased $14.3 million, or 34.3%, to $55.9
million for the first two quarters of 2018 from $41.6 million in
the first two quarters of 2017. The increase was primarily
attributable to additional borrowings made in the fourth quarter of
2017 to fund the Back to Nature acquisition and in the second and
fourth quarters of 2017 in connection with the Company’s senior
notes offerings.
The Company’s reported net income under U.S. generally accepted
accounting principles (GAAP) was $28.5 million, or $0.43 per
diluted share for the first two quarters of 2018, as compared to
reported net income of $54.8 million, or $0.82 per diluted share,
for the first two quarters of 2017. The Company’s adjusted net
income for the first two quarters of 2018, which excludes the
after-tax impact of loss on extinguishment of debt,
acquisition-related and non-recurring expenses and the non-cash
accounting impact of the Company’s inventory reduction plan, was
$61.5 million, or $0.92 per adjusted diluted share. The Company’s
adjusted net income for the first two quarters of 2017, which
excludes the after-tax impact of loss on extinguishment of debt,
acquisition-related and non-recurring expenses, acquisition-related
inventory step-up, and loss on sale of assets, was $66.1 million,
or $0.99 per adjusted diluted share.
For the first two quarters of 2018, adjusted EBITDA, which
excludes acquisition-related and non-recurring expenses and the
non-cash accounting impact of the Company’s inventory reduction
plan, was $163.9 million, a decrease of 3.7%, or $6.3 million,
compared to $170.2 million for the first two quarters of 2017.
Adjusted EBITDA as a percentage of net sales was 20.0% for the
first two quarters of 2018.
Guidance
B&G Foods revised its guidance for full year 2018. Net sales
are expected to be approximately $1.73 billion to $1.75 billion,
adjusted EBITDA is expected to be approximately $345.0 million to
$355.0 million and adjusted diluted earnings per share is expected
to be approximately $2.05 to $2.15. The full year 2018 net sales
guidance includes the impact of the new FASB revenue recognition
standard, which the Company estimates will reduce net sales in 2018
by approximately $21.5 million.2
B&G Foods provides earnings guidance only on a non-GAAP
basis and does not provide a reconciliation of the Company’s
forward-looking adjusted EBITDA and adjusted diluted earnings per
share guidance to the most directly comparable GAAP financial
measures because of the inherent difficulty in forecasting and
quantifying certain amounts that are necessary for such
reconciliations, including adjustments that could be made for
deferred taxes; loss on extinguishment of debt; acquisition-related
and non-recurring expenses, gains and losses; the non-cash
accounting impact of the Company’s inventory reduction plan;
restructuring expenses; gains and losses on the sale of assets and
other charges reflected in the Company’s reconciliation of historic
non-GAAP financial measures, the amounts of which, based on past
experience, could be material. For additional information regarding
B&G Foods’ non-GAAP financial measures, see “About Non-GAAP
Financial Measures and Items Affecting Comparability” below.
Conference Call
B&G Foods will hold a conference call at 4:30 p.m. ET today,
August 2, 2018. The call will be webcast live and can be accessed
at www.bgfoods.com/investor-relations. The call can also be
accessed live over the phone by dialing (888) 394-8218 for U.S.
callers or (323) 701-0225 for international callers.
A replay of the call will be available two hours after the call
and can be accessed by dialing (844) 512-2921 for U.S. callers or
(412) 317-6671 for international callers; the password is 532010.
The replay will be available from August 2, 2018 through August 16,
2018. Investors may also access a web-based replay of the call at
www.bgfoods.com/investor-relations.
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, and gains and losses on sale of assets),
non-recurring expenses, gains and losses and the non-cash
accounting impact of the Company’s inventory reduction plan) 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 and
cash flows. Non-GAAP financial measures should not be considered in
isolation or as a substitute for the most directly comparable GAAP
measures. The Company’s non-GAAP financial measures may be
different from non-GAAP financial measures used by other
companies.
The Company uses “adjusted net income,” “adjusted diluted
earnings per share,” and “base business net sales,” which are
calculated as reported net income, reported diluted earnings per
share and reported net sales adjusted for certain items that affect
comparability. These non-GAAP financial measures reflect
adjustments to reported net income, diluted earnings per share and
net sales to eliminate the items identified above. This information
is provided in order to allow investors to make meaningful
comparisons of the Company’s operating performance between periods
and to view the Company’s business from the same perspective as the
Company’s management. Because the Company cannot predict the timing
and amount of these items, management does not consider these items
when evaluating the Company’s performance or when making decisions
regarding allocation of resources.
Additional information regarding EBITDA and adjusted EBITDA, and
a reconciliation of EBITDA and adjusted EBITDA to net income and to
net cash provided by operating activities, is included below for
the second quarter and first two quarters of 2018 and 2017, 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.
Based in Parsippany, New Jersey, B&G Foods and its
subsidiaries manufacture, sell and distribute high-quality, branded
shelf-stable and frozen foods across the United States, Canada and
Puerto Rico. With B&G Foods’ diverse portfolio of more
than 50 brands you know and love, including Back to Nature,
B&G, B&M, Cream of Wheat, Green Giant,
Las Palmas, Le Sueur, Mama Mary’s,
Maple Grove Farms, Mrs. Dash,
New York Style, Ortega, Pirate’s Booty, Polaner,
SnackWell’s, Spice Islands and Victoria, there’s a little
something for everyone. For more information about
B&G Foods and its brands, please visit
www.bgfoods.com.
Forward-Looking Statements
Statements in this press release that are not statements of
historical or current fact constitute “forward-looking statements.”
The forward-looking statements contained in this press release
include, without limitation, statements related to B&G Foods’
net sales, adjusted EBITDA, adjusted diluted earnings per share and
overall expectations for fiscal 2018, including the timing and
extent to which the Company may see the benefit of price increases
and cost savings measures and the Company’s expectations as to
freight expenses. Such forward-looking statements involve known and
unknown risks, uncertainties and other unknown factors that could
cause the actual results of B&G Foods to be materially
different from the historical results or from any future results
expressed or implied by such forward-looking statements. In
addition to statements that explicitly describe such risks and
uncertainties, readers are urged to consider statements labeled
with the terms “believes,” “belief,” “expects,” “projects,”
“intends,” “anticipates” or “plans” to be uncertain and
forward-looking. Factors that may affect actual results include,
without limitation: the Company’s substantial leverage; the effects
of rising costs for the Company’s raw materials, packaging and
ingredients; crude oil prices and their impact on distribution,
packaging and energy costs; the Company’s ability to successfully
implement sales price increases and cost saving measures to offset
any cost increases; intense competition, changes in consumer
preferences, demand for the Company’s products and local economic
and market conditions; the Company’s continued ability to promote
brand equity successfully, to anticipate and respond to new
consumer trends, to develop new products and markets, to broaden
brand portfolios in order to compete effectively with lower priced
products and in markets that are consolidating at the retail and
manufacturing levels and to improve productivity; the risks
associated with the expansion of the Company’s business; the
Company’s possible inability to identify new acquisitions or to
integrate recent or future acquisitions or the Company’s failure to
realize anticipated revenue enhancements, cost savings or other
synergies; tax reform and legislation, including the effects of the
U.S. Tax Cuts and Jobs Act; the Company’s ability to access the
credit markets and the Company’s borrowing costs and credit
ratings, which may be influenced by credit markets generally and
the credit ratings of the Company’s competitors; unanticipated
expenses, including, without limitation, litigation or legal
settlement expenses; the effects of currency movements of the
Canadian dollar and the Mexican peso as compared to the U.S.
dollar; the effects of international trade disputes, tariffs,
quotas, and other import or export restrictions on our
international procurement, sales and operations; future impairments
of the Company’s goodwill and intangible assets; the Company’s
ability to successfully implement a new enterprise resource
planning (ERP) system; the Company’s ability to protect information
systems against, or effectively respond to, a cybersecurity
incident or other disruption; the Company’s sustainability
initiatives and changes to environmental laws and regulations; and
other factors that affect the food industry generally. The
forward-looking statements contained herein are also subject
generally to other risks and uncertainties that are described from
time to time in B&G Foods’ filings with the Securities and
Exchange Commission, including under Item 1A, “Risk Factors” in the
Company’s most recent Annual Report on Form 10-K and in its
subsequent reports on Forms 10-Q and 8-K. Investors are cautioned
not to place undue reliance on any such forward-looking statements,
which speak only as of the date they are made. B&G Foods
undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information,
future events or otherwise.
1 Please see “About Non-GAAP Financial Measures and Items
Affecting Comparability” below for the definition of the non-GAAP
financial measures “adjusted net income,” “adjusted diluted
earnings per share,” “base business net sales,” “EBITDA,” 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.
2 In May 2014, the Financial Accounting Standards Board (FASB)
issued authoritative guidance related to new accounting
requirements for the recognition of revenue from contracts with
customers. The Company adopted this guidance and the related
amendments as of the beginning of the Company’s fiscal 2018,
applying the full retrospective transition approach to all
contracts. Based on the Company’s comprehensive assessment of the
new guidance, the Company has concluded that the adoption does not
have a significant impact to the Company’s core revenue generating
activities. However, the adoption resulted in a change in
presentation of certain trade and consumer promotion expenses,
specifically in-store display incentives also referred to as
marketing development funds. In-store display incentives or
marketing development funds were previously recorded within
selling, general and administrative expenses in the Company’s
consolidated statements of operations. Upon the adoption of the new
guidance, this expense will not meet the specific criteria within
the new guidance of providing a “distinct” good or service, and
therefore, is required to be presented as a reduction of the
Company’s net sales. The Company currently anticipates that the
impact of this change will result in a reduction of net sales and
selling, general and administrative expenses by approximately $21.5
million during 2018, the first year of adoption, with no impact to
net income.
B&G Foods, Inc. and
Subsidiaries
Consolidated Balance Sheets
(In thousands, except share and per
share data)
(Unaudited)
June 30, December 30, 2018
2017 Assets Current assets: Cash and cash equivalents
$ 62,840 $ 206,506 Trade accounts receivable, net 137,147 141,392
Inventories 446,273 501,849 Prepaid expenses and other current
assets 24,371 20,054 Income tax receivable 16,712
16,794 Total current assets 687,343 886,595 Property, plant
and equipment, net of accumulated depreciation of $217,518 and
$200,664 271,955 272,192 Goodwill 652,143 649,292 Other
intangibles, net 1,739,102 1,748,220 Other assets 1,479 1,617
Deferred income taxes 3,091 3,122 Total assets $
3,355,113 $ 3,561,038
Liabilities and Stockholders’
Equity Current liabilities: Trade accounts payable $ 115,595 $
122,358 Accrued expenses 37,301 48,067 Income tax payable 140 139
Dividends payable 31,318 30,922 Total current
liabilities 184,354 201,486 Long-term debt 2,073,874
2,217,574 Other liabilities 25,998 24,881 Deferred income taxes
243,873 236,278 Total liabilities 2,528,099 2,680,219
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; 65,932,291 and 66,499,044 shares issued and outstanding as
of June 30, 2018 and December 30, 2017 659 665 Additional paid-in
capital 186,745 266,789 Accumulated other comprehensive loss
(23,034) (20,756) Retained earnings 662,644 634,121
Total stockholders’ equity 827,014 880,819 Total
liabilities and stockholders’ equity $ 3,355,113 $ 3,561,038
B&G Foods, Inc. and
Subsidiaries
Consolidated Statements of
Operations
(In thousands, except per share
data)
(Unaudited)
Second Quarter Ended First Two
Quarters Ended June 30, July 1, June
30, July 1, 2018 2017((1))
2018
2017((1)) Net sales $ 388,378 $ 361,676 $ 820,107 $ 773,983
Cost of goods sold 307,205 257,119 635,578
548,207 Gross profit 81,173 104,557 184,529 225,776
Operating expenses: Selling, general and administrative
expenses 37,272 43,586 79,840 92,106 Amortization expense
4,609 4,265 9,218 8,737 Operating income
39,292 56,706 95,471 124,933 Other income and expenses:
Interest expense, net 27,607 21,998 55,913 41,645 Loss on
extinguishment of debt 546 1,045 3,324 1,163 Other expense (income)
388 (1,269) (1,666 ) (3,866) Income
before income tax expense 10,751 34,932 37,900 85,991 Income tax
expense 2,775 12,871 9,377
31,166 Net income $ 7,976 $ 22,061 $ 28,523 $ 54,825
Weighted average shares outstanding: Basic 66,307 66,482 66,412
66,478 Diluted 66,354 66,711 66,535 66,748 Basic and diluted
earnings per share $ 0.12 $ 0.33 $ 0.43 $ 0.82 Cash
dividends declared per share $ 0.475 $ 0.465 $ 0.940 $ 0.930
(1) Net sales, gross profit, selling, general and administrative
expenses, operating income and other expense (income) have been
adjusted as a result of our retrospective adoption of new
accounting standards relating to revenue recognition and the
presentation of net periodic pension cost and net periodic
postretirement benefit cost. The adjustments described above had no
impact on net income or earnings per share.
B&G Foods, Inc. and
Subsidiaries
Reconciliation of EBITDA and Adjusted
EBITDA to Net Income and to Net Cash Provided by Operating
Activities
(In thousands)
(Unaudited)
Second Quarter Ended First Two
Quarters Ended June 30, July 1, June
30, July 1, 2018 2017
2018 2017 Net income $ 7,976 $ 22,061 $
28,523 $ 54,825 Income tax expense 2,775 12,871 9,377 31,166
Interest expense, net 27,607 21,998 55,913 41,645 Depreciation and
amortization 13,343 12,329 26,407 24,547 Loss on extinguishment of
debt(1) 546 1,045 3,324
1,163 EBITDA(2) 52,247 70,304 123,544 153,346
Acquisition-related and non-recurring expenses 1,623 7,851 4,892
13,693 Inventory reduction plan impact(3) 20,576 — 35,426 —
Amortization of acquisition-related inventory step-up(4) — — —
1,550 Loss on sale of assets(5) — —
— 1,608 Adjusted EBITDA(2) 74,446
78,155 163,862 170,197 Income tax expense (2,775 ) (12,871 ) (9,377
) (31,166 ) Interest expense, net (27,607 ) (21,998 ) (55,913 )
(41,645 ) Acquisition-related and non-recurring expenses (1,623 )
(7,851 ) (4,892 ) (13,693 ) Inventory reduction plan impact(3)
(20,576 ) — (35,426 ) — Write-off of property, plant and equipment
8 105 29 105 Deferred income taxes 2,690 9,712 7,511 19,992
Amortization of deferred financing costs and bond discount 1,431
1,464 2,976 2,795 Amortization of acquisition-related inventory
step-up — — — (1,550 ) Share-based compensation expense 1,759 2,059
2,597 3,202 Changes in assets and liabilities, net of effects of
business combinations 3,307 (31,444 )
33,437 (88,413 ) Net cash provided by operating
activities $ 31,060 $ 17,331 $ 104,804 $
19,824
(1) For the second quarter of 2018 includes the write-off of
deferred debt financing costs and unamortized discount of $0.4
million and $0.1 million, respectively, relating to the prepayment
of outstanding borrowings under the tranche B term loans. For the
first two quarters of 2018 includes the write-off of deferred debt
financing costs and unamortized discount of $2.8 million and $0.5
million, respectively, relating to the prepayment of outstanding
borrowings under the tranche B term loans. For the second quarter
and first two quarters of 2017 includes the write-off of deferred
debt financing costs and unamortized discount of $0.9 million and
$0.2 million, respectively, relating to the repayment of all
outstanding borrowings under the tranche A term loans and less than
$0.1 million relating to the refinancing of our tranche B term
loans.
(2) 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 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,
amortization of acquired inventory fair value step-up, and gains
and losses on the sale of assets), non-recurring expenses and the
non-cash accounting impact of our inventory reduction plan.
Management believes that it is useful to eliminate net interest
expense, income taxes, depreciation and amortization, loss on
extinguishment of debt, acquisition-related and non-recurring
expenses, gains and losses, and the non-cash accounting impact of
our inventory reduction plan because it allows management to focus
on what it deems to be a more reliable indicator of ongoing
operating performance and our ability to generate cash flow from
operations. We use EBITDA and adjusted EBITDA in our business
operations to, among other things, evaluate our operating
performance, develop budgets and measure our performance against
those budgets, determine employee bonuses and evaluate our cash
flows in terms of cash needs. We also present EBITDA and adjusted
EBITDA because we believe they are useful indicators of our
historical debt capacity and ability to service debt and because
covenants in our credit agreement and our senior notes indentures
contain ratios based on these measures. As a result, internal
management reports used during monthly operating reviews feature
the EBITDA and adjusted EBITDA metrics. However, management uses
these metrics in conjunction with traditional GAAP operating
performance and liquidity measures as part of its overall
assessment of company performance and liquidity, and therefore does
not place undue reliance on these measures as its only measures of
operating performance and liquidity.
EBITDA and adjusted EBITDA are not recognized terms under GAAP
and do not purport to be alternatives to operating income, net
income (loss) or any other GAAP measure as an indicator of
operating performance. EBITDA and adjusted EBITDA are not complete
net cash flow measures because EBITDA and adjusted EBITDA are
measures of liquidity that do not include reductions for cash
payments for an entity’s obligation to service its debt, fund its
working capital, capital expenditures and acquisitions and pay its
income taxes and dividends. Rather, EBITDA and adjusted EBITDA are
two potential indicators of an entity’s ability to fund these cash
requirements. EBITDA and adjusted EBITDA are not complete measures
of an entity’s profitability because they do not include costs and
expenses for depreciation and amortization, interest and related
expenses, loss on extinguishment of debt, acquisition-related and
non-recurring expenses, gains and losses, the non-cash accounting
impact of our inventory reduction plan and income taxes. 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.
(3) Relates to the allocation of certain fixed manufacturing,
warehouse and other corporate overhead costs associated with
inventory purchased and converted into finished goods in fiscal
2017 and sold in the second quarter and first two quarters of 2018
as part of our inventory reduction plan.
(4) Relates to the purchase accounting adjustments made to the
finished goods inventory acquired in the spices & seasonings
acquisition that we completed on November 21, 2016.
(5) During the first two quarters of 2017, we sold to a
third-party co-packer our Le Sueur, Minnesota research center,
including the seed technology assets, property, plant and
equipment. We acquired the research center and related assets on
November 2, 2015, as part of the Green Giant acquisition. The sale
resulted in a $1.6 million loss on sale of assets.
B&G Foods, Inc. and
Subsidiaries
Items Affecting Comparability —
Reconciliation of Adjusted Information to GAAP Information
(In thousands, except per share
data)
(Unaudited)
Second Quarter Ended First Two
Quarters Ended June 30, July 1, June
30, July 1, 2018 2017 2018
2017 Net income $ 7,976 $ 22,061 $ 28,523 $ 54,825 Loss on
extinguishment of debt, net of tax(1) 412 654 2,514 727
Acquisition-related and non-recurring expenses, net of tax 1,223
4,911 3,697 8,565 Inventory reduction plan impact, net of tax(2)
15,508 — 26,746 — Acquisition-related inventory step-up, net of
tax(3) — — — 970 Loss on sale of assets, net of tax(4) —
— — 1,006 Adjusted net income $ 25,119 $
27,626 $ 61,480 $ 66,093 Adjusted diluted earnings per share $ 0.38
$ 0.41 $ 0.92 $ 0.99
(1) For the second quarter of 2018 includes the write-off of
deferred debt financing costs and unamortized discount of $0.4
million and $0.1 million, respectively, relating to the prepayment
of outstanding borrowings under the tranche B term loans. For the
first two quarters of 2018 includes the write-off of deferred debt
financing costs and unamortized discount of $2.8 million and $0.5
million, respectively, relating to the prepayment of outstanding
borrowings under the tranche B term loans. For the second quarter
and first two quarters of 2017 includes the write-off of deferred
debt financing costs and unamortized discount of $0.9 million and
$0.2 million, respectively, relating to the repayment of all
outstanding borrowings under the tranche A term loans and less than
$0.1 million relating to the refinancing of our tranche B term
loans.
(2) Relates to the allocation of certain fixed manufacturing,
warehouse and other corporate overhead costs associated with
inventory purchased and converted into finished goods in fiscal
2017 and sold in the second quarter and first two quarters of 2018
as part of our inventory reduction plan.
(3) Relates to the purchase accounting adjustments made to the
finished goods inventory acquired in the spices & seasonings
acquisition that we completed on November 21, 2016.
(4) During the first two quarters of 2017, we sold to a
third-party co-packer our Le Sueur, Minnesota research center,
including the seed technology assets, property, plant and
equipment. We acquired the research center and related assets on
November 2, 2015, as part of the Green Giant acquisition. The sale
resulted in a $1.6 million loss on sale of assets.
B&G Foods, Inc. and
Subsidiaries
Items Affecting Comparability —
Reconciliation of Base Business Net Sales to Reported Net
Sales
(In thousands)
(Unaudited)
Second Quarter Ended First Two
Quarters Ended June 30, July 1, June
30, July 1, 2018 2017
2018 2017 Net sales $ 388,378 $ 361,676
$ 820,107 $ 773,983 Net sales from acquisitions(1) (17,622 ) —
(37,662 ) — Net sales of non-branded IQF bulk rice products(2)
(559 ) (2,498 ) (1,137 ) (4,825 ) Base
business net sales(3) $ 370,197 $ 359,178 $ 781,308
$ 769,158
- -
(1) Reflects net sales for Back to Nature for the second quarter
and first two quarters of 2018. Back to Nature was acquired on
October 2, 2017.
(2) Reflects net sales of our non-branded individually quick
frozen (IQF) bulk rice products, which is a product line we
acquired as part of the Green Giant acquisition, and which we are
excluding from reported net sales for the purposes of calculating
base business net sales because we do not consider the non-branded
IQF bulk rice products to be part of our core business or
material.
(3) Base business net sales is a non-GAAP financial measure used
by management to measure operating performance. We define base
business net sales as our net sales excluding (1) the impact of
acquisitions until at least one full quarter of net sales from
acquisitions are included in both comparable periods, (2) net sales
of discontinued brands, and (3) net sales of our IQF bulk rice
business, see footnote 2 above. The portion of current period net
sales attributable to recent acquisitions for which there is not at
least one full quarter of net sales in the comparable period of the
prior year is excluded. For each acquisition, the excluded period
starts at the beginning of the most recent fiscal period being
compared and ends on the last day of the quarter in which the first
anniversary of the date of acquisition occurs, and the period from
the date of acquisition to the end of the quarter in which the
acquisition occurred. For discontinued brands, the entire amount of
net sales is excluded from each fiscal period being compared.
Management has included this financial measure because it provides
useful and comparable trend information regarding the results of
our business without the effect of the timing of acquisitions and
the effect of discontinued brands.
The definition of base business net sales set forth above, as it
relates to acquisitions, was modified in the fourth quarter of
2017. Under the Company’s previous definition of base business net
sales, for each acquisition, the excluded period started at the
beginning of the most recent fiscal period being compared and ended
on the first anniversary of the acquisition date. The Company
believes that it is more useful to measure base business net sales
on a full quarter basis. The definition of base business net sales
set forth above was modified in the first quarter of 2018 to
exclude net sales of our IQF bulk rice business.
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version on businesswire.com: https://www.businesswire.com/news/home/20180802005821/en/
Investor Relations:ICR, Inc.Dara Dierks, 866-211-8151
Media Relations:ICR, Inc.Matt Lindberg, 203-682-8214
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