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As filed with the Securities and Exchange Commission on May 11, 2021

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 April 3, 2021

or

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 May 7, 2021, the registrant had 64,752,107 shares of common stock, par value $0.01 per share, issued and outstanding.

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

5

Notes to Consolidated Financial Statements

6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

23

Item 3. Quantitative and Qualitative Disclosures About Market Risk

37

Item 4. Controls and Procedures

38

PART II OTHER INFORMATION

39

Item 1. Legal Proceedings

39

Item 1A. Risk Factors

39

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

39

Item 3. Defaults Upon Senior Securities

40

Item 4. Mine Safety Disclosures

40

Item 5. Other Information

40

Item 6. Exhibits

40

SIGNATURE

41

- i -

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 and work-from-home policies and recommendations, and whether additional waves 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 and shopping habits;
our substantial leverage;
the effects of rising costs for our raw materials, packaging, ingredients and distribution;
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, including the Crisco acquisition, or our failure to realize anticipated revenue enhancements, cost savings or other synergies from recent or future acquisitions;
our ability to successfully complete the integration of recent or future acquisitions into our enterprise resource planning (ERP) system;
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;

- ii -

future impairments of our goodwill and intangible assets;
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 March 2, 2021, 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.

- iii -

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)

April 3,

    

January 2,

2021

    

2021

Assets

Current assets:

Cash and cash equivalents

$

43,128

$

52,182

Trade accounts receivable, net

 

136,265

 

132,935

Inventories

 

497,481

 

492,804

Prepaid expenses and other current assets

 

38,083

 

43,619

Income tax receivable

 

14,439

 

15,761

Total current assets

 

729,396

 

737,301

Property, plant and equipment, net of accumulated depreciation of $328,737 and $314,359 as of April 3, 2021 and January 2, 2021, respectively

 

360,214

 

371,854

Operating lease right-of-use assets

30,909

32,216

Goodwill

 

644,801

 

644,747

Other intangible assets, net

 

1,965,897

 

1,971,326

Other assets

 

5,859

 

5,948

Deferred income taxes

 

4,128

 

4,178

Total assets

$

3,741,204

$

3,767,570

Liabilities and Stockholders’ Equity

Current liabilities:

Trade accounts payable

$

125,165

$

126,537

Accrued expenses

 

40,565

 

77,460

Current portion of operating lease liabilities

9,952

11,034

Income tax payable

1,134

101

Dividends payable

 

30,757

 

30,520

Total current liabilities

 

207,573

 

245,652

Long-term debt

 

2,329,994

 

2,334,086

Deferred income taxes

 

299,456

 

293,121

Long-term operating lease liabilities, net of current portion

23,541

23,959

Other liabilities

 

40,026

 

38,875

Total liabilities

 

2,900,590

 

2,935,693

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; 64,752,511 and 64,252,859 shares issued and outstanding as of April 3, 2021 and January 2, 2021, respectively

 

648

 

643

Additional paid-in capital

 

 

Accumulated other comprehensive loss

 

(35,756)

 

(35,594)

Retained earnings

 

875,722

 

866,828

Total stockholders’ equity

 

840,614

 

831,877

Total liabilities and stockholders’ equity

$

3,741,204

$

3,767,570

See Notes to Consolidated Financial Statements.

- 1 -

B&G Foods, Inc. and Subsidiaries

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

Thirteen Weeks Ended

April 3,

    

March 28,

2021

    

2020

Net sales

$

505,134

$

449,370

Cost of goods sold

 

387,340

 

344,454

Gross profit

 

117,794

 

104,916

Operating expenses:

Selling, general and administrative expenses

 

50,379

 

39,973

Amortization expense

 

5,436

 

4,723

Operating income

 

61,979

 

60,220

Other income and expenses:

Interest expense, net

 

26,969

 

26,039

Other income

(1,091)

(453)

Income before income tax expense

 

36,101

 

34,634

Income tax expense

 

9,223

 

6,542

Net income

$

26,878

$

28,092

Weighted average shares outstanding:

Basic

64,583

64,047

Diluted

65,210

64,084

Earnings per share:

Basic

$

0.42

$

0.44

Diluted

$

0.41

$

0.44

Cash dividends declared per share

$

0.475

$

0.475

See Notes to Consolidated Financial Statements.

- 2 -

B&G Foods, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)

Thirteen Weeks Ended

    

April 3,

    

March 28,

    

2021

    

2020

Net income

$

26,878

$

28,092

Other comprehensive (loss) income:

Foreign currency translation adjustments

 

(496)

 

(14,349)

Amortization of unrecognized prior service cost and pension deferrals, net of tax

 

334

 

296

Other comprehensive loss

 

(162)

 

(14,053)

Comprehensive income

$

26,716

$

14,039

See Notes to Consolidated Financial Statements.

- 3 -

B&G Foods, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

As of April 3, 2021

(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 January 2, 2021

 

64,252,859

$

643

$

$

(35,594)

$

866,828

$

831,877

Foreign currency translation

 

(496)

 

(496)

Change in pension benefit (net of $108 of income taxes)

 

334

 

334

Net income

 

26,878

 

26,878

Share-based compensation

 

432

 

432

Issuance of common stock for share-based compensation

 

82,214

1

(1,087)

 

(1,086)

Cancellation of restricted stock for tax withholding upon vesting

(21,462)

(620)

(620)

Stock options exercised

438,900

4

14,048

14,052

Dividends declared on common stock, $0.475 per share

 

(12,773)

(17,984)

 

(30,757)

Balance at April 3, 2021

 

64,752,511

$

648

$

$

(35,756)

$

875,722

$

840,614

B&G Foods, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

As of March 28, 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

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

See Notes to Consolidated Financial Statements.

- 4 -

B&G Foods, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Thirteen Weeks Ended

    

April 3,

    

March 28,

    

2021

    

2020

Cash flows from operating activities:

Net income

$

26,878

$

28,092

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

 

20,291

 

15,534

Amortization of operating lease right-of-use assets

3,158

2,981

Amortization of deferred debt financing costs and bond discount/premium

 

1,141

 

898

Deferred income taxes

 

6,188

 

14,397

Net (gain)/loss on sales and disposals of property, plant and equipment

(26)

2

Share-based compensation expense

 

723

 

423

Changes in assets and liabilities, net of effects of businesses acquired:

Trade accounts receivable

 

(3,222)

 

(57,759)

Inventories

 

(4,295)

 

66,812

Prepaid expenses and other current assets

 

5,041

 

(1,953)

Income tax receivable/payable

 

2,334

 

(8,523)

Other assets

 

(145)

 

(131)

Trade accounts payable

 

6,462

 

(8,405)

Accrued expenses

 

(40,100)

 

3,484

Other liabilities

 

1,592

 

1,726

Net cash provided by operating activities

 

26,020

 

57,578

Cash flows from investing activities:

Capital expenditures

 

(11,785)

 

(6,141)

Proceeds from sale of assets

38

Payments for acquisition of businesses, net of cash acquired

 

 

(3,419)

Net cash used in investing activities

 

(11,747)

 

(9,560)

Cash flows from financing activities:

Repayments of long-term debt

 

 

(1,125)

Repayments of borrowings under revolving credit facility

 

(50,000)

 

(60,000)

Borrowings under revolving credit facility

 

45,000

 

160,000

Dividends paid

 

(30,520)

 

(30,421)

Proceeds from exercise of stock options

14,052

Payments of tax withholding on behalf of employees for net share settlement of share-based compensation

 

(1,706)

 

Payments of debt financing costs

(275)

Net cash (used in) provided by financing activities

 

(23,449)

 

68,454

Effect of exchange rate fluctuations on cash and cash equivalents

 

122

 

(719)

Net (decrease) increase in cash and cash equivalents

 

(9,054)

 

115,753

Cash and cash equivalents at beginning of period

 

52,182

 

11,315

Cash and cash equivalents at end of period

$

43,128

$

127,068

Supplemental disclosures of cash flow information:

Cash interest payments

$

44,577

$

19,760

Cash income tax payments

$

682

$

659

Non-cash investing and financing transactions:

Dividends declared and not yet paid

$

30,757

$

30,457

Accruals related to purchases of property, plant and equipment

$

1,059

$

374

Right-of-use assets obtained in exchange for new operating lease liabilities

$

1,586

$

1,132

See Notes to Consolidated Financial Statements.

- 5 -

Table of Contents

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, vegetable, canola and other cooking oils, vegetable shortening, cooking sprays, 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, Crisco, 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 53rd week is added to our fiscal year every five or six years. Our fiscal year ending January 1, 2022 (fiscal 2021) contains 52 weeks and each quarter of fiscal 2021 contains 13 weeks. Our fiscal year ended January 2, 2021 (fiscal 2020) contained 53 weeks and each quarter of fiscal 2020 contained 13 weeks, except the third quarter, which contained 14 weeks.

Basis of Presentation

The accompanying unaudited consolidated interim financial statements for the thirteen week periods ended April 3, 2021 (first quarter of 2021) and March 28, 2020 (first quarter of 2020) 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 April 3, 2021, and the results of our operations, comprehensive income, changes in stockholders equity and cash flows for the first quarter of 2021 and 2020. Our results of operations for the first quarter of 2021 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 2020 filed with the SEC on March 2, 2021.

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Table of Contents

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.

Accounting Standards Adopted in Fiscal 2020 or Fiscal 2021

In December 2019, the Financial Accounting Standards Board (FASB) issued a new accounting standards update (ASU) that removes certain exceptions for recognizing deferred taxes for certain 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. This guidance became effective during the first quarter of 2021. The adoption of this ASU did not have a material impact to our consolidated financial statements and related disclosures.

In May 2020, the SEC issued a final rule that amends the financial statement requirements for acquisitions and dispositions of businesses. The amendments primarily relate to disclosures required by Rule 3-05 and Article 11 of Regulation S-X. Among other things, the final rule modifies the tests provided in Rule 1-02(w) of Regulation S-X used to determine whether a subsidiary or an acquired or disposed business is significant and modifies the number of years of audited financial statements required for acquisitions with significance levels greater than specified percentages. We early adopted the rule in the fourth quarter of fiscal 2020 and we applied the rule to our financial statement disclosure requirements for the Crisco acquisition. See Note 3, “Acquisitions.”

In June 2016, the FASB issued a new 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 and was applied during our annual goodwill impairment testing for fiscal 2020. The adoption of this ASU did not have an impact to our consolidated financial statements.

- 7 -

Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

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). We adopted the amendments to the disclosure requirements during the third quarter of 2020. This amendment did not 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. See Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Supplemental Financial Information about B&G Foods and Guarantor Subsidiaries.”

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. This guidance became effective during the fourth quarter of fiscal 2020 and we updated our defined benefit pension plan disclosures accordingly. The adoption of this ASU did not have an impact to our consolidated financial statements as this ASU only modified disclosure requirements. See Note 10, “Pension Benefits.”

Recently Issued Accounting Standards – Pending Adoption

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. LIBOR is used to determine interest under our revolving credit facility and our tranche B term loans due 2026. Currently, however, we do not expect the adoption of this ASU to have a material impact to our consolidated financial statements.

(3)

Acquisitions

Crisco Acquisition

On December 1, 2020, we completed the acquisition of the Crisco oils and shortening business from The J.M. Smucker Company and certain of its affiliates, for approximately $539.3 million in cash. We refer to this acquisition as the “Crisco acquisition” and the Crisco oils and shortening business as the “Crisco business.”

The following table sets forth the preliminary allocation of the Crisco acquisition purchase price to the estimated fair value of the net assets acquired at the date of acquisition. The preliminary purchase price allocation may be adjusted as a result of the finalization of our purchase price allocation procedures related to the assets acquired and liabilities assumed. We anticipate completing the purchase price allocation during fiscal 2021.

Preliminary Purchase Price Allocation (in thousands):

December 1, 2020

Inventories

$

37,137

Prepaid expenses and other current assets

113

Property, plant and equipment, net

81,405

Operating lease right-of-use assets

1,477

Trademarks — indefinite-lived intangible assets

322,000

Customer relationships — finite-lived intangible assets

52,800

Current portion of operating lease liabilities

(565)

Long-term operating lease liabilities, net of current portion

(912)

Goodwill

45,806

Total purchase price (paid in cash)

$

539,261

- 8 -

Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

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.”

Unaudited Pro Forma Summary of Operations

The following pro forma summary of operations presents our operations as if the Crisco acquisition had occurred as of the beginning of fiscal 2020. In addition to including the results of operations of this acquisition, the pro forma information gives effect to the interest on additional borrowings and the amortization of trademark and customer relationship intangibles. On an actual basis, Crisco contributed $58.1 million of our aggregate $505.1 million of consolidated net sales for the first quarter of 2021 (in thousands, except per share data):

Thirteen Weeks Ended

March 28,

    

2020

Net sales(1)

$

521,182

Net income(1)

$

37,744

Basic earnings per share(1)

$

0.59

Diluted earnings per share(1)

$

0.59

(1) The pro forma financial information presented above does not purport to be indicative of the results that actually would have been attained had the Crisco acquisition occurred as of the beginning of fiscal 2020, and is not intended to be a projection of future results.

The Farmwise acquisition was not material to our consolidated results of operations or financial position and, therefore, pro forma financial information is not presented.

(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):

    

April 3, 2021

    

January 2, 2021

Raw materials and packaging

$

88,166

$

87,843

Work-in-process

60,295

95,207

Finished goods

 

349,020

 

309,754

Inventories

$

497,481

$

492,804

- 9 -

Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

(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):

April 3, 2021

January 2, 2021

    

Gross Carrying

    

Accumulated

    

Net Carrying

    

Gross Carrying

    

Accumulated

    

Net Carrying

    

Amount

    

Amortization

    

Amount

    

Amount

    

Amortization

    

Amount

Finite-Lived Intangible Assets

Trademarks

$

20,100

$

5,883

$

14,217

$

20,100

$

5,597

$

14,503

Customer relationships

 

406,908

 

152,528

 

254,380

 

406,901

 

147,378

 

259,523

Total finite-lived intangible assets

$

427,008

$

158,411

$

268,597

$

427,001

$

152,975

$

274,026

Indefinite-Lived Intangible Assets

Goodwill

$

644,801

$

644,747

Trademarks

$

1,697,300

$

1,697,300

Amortization expense associated with finite-lived intangible assets was $5.4 million and $4.7 million for the first quarter of 2021 and 2020, respectively, and is recorded in operating expenses. We expect to recognize an additional $16.2 million of amortization expense associated with our finite-lived intangible assets during the remainder of fiscal 2021, and thereafter $21.6 million of amortization expense in fiscal 2022, $21.5 million in fiscal 2023, $21.4 million in each of fiscal 2024 and 2025, and $20.7 million in fiscal 2026.

(6)

Long-Term Debt

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

    

April 3, 2021

    

January 2, 2021

Revolving credit loans

 

$

230,000

 

$

235,000

Tranche B term loans due 2026

671,625

671,625

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

(19,452)

 

(20,324)

Unamortized discount/premium

 

(2,179)

 

(2,215)

Total long-term debt, net of unamortized deferred debt financing costs and discount/premium

2,329,994

2,334,086

As of April 3, 2021, the aggregate contractual maturities of long-term debt were as follows (in thousands):

Aggregate Contractual Maturities

Fiscal year:

2021 remaining

$

2022

 

2023

 

2024

 

2025

 

1,130,000

Thereafter

 

1,221,625

Total

$

2,351,625

Senior Secured Credit Agreement. Our senior secured credit agreement includes a term loan facility and a revolving credit facility.

- 10 -

Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

On December 16, 2020, we amended our amended and restated credit agreement, dated as of October 2, 2015, and previously amended on March 30, 2017, November 20, 2017 and October 10, 2019. Among other things, the amendment provides for a $300.0 million add-on tranche B term loan facility, which closed and funded on December 16, 2020. The add-on tranche B term loans were issued at a price equal to 99.00% of their face value. The add-on term loans have the same terms as, and are fungible with, $371.6 million of tranche B term loans. We used the net proceeds of the add-on term loans to repay a portion of the revolving credit facility borrowings used to finance the Crisco acquisition. As of April 3, 2021, $671.6 million of tranche B term loans remained outstanding. The tranche B term loans mature on October 10, 2026.

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%.

The December 2020 amendment also increased the revolver capacity from $700.0 million to $800.0 million and extended the maturity date of our revolving credit facility from November 21, 2022 to December 16, 2025. As of April 3, 2021, the available borrowing capacity under the revolving credit facility, net of outstanding letters of credit of $4.4 million, was $565.6 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 December 16, 2025.

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.

If we prepay all or any portion of the tranche B term loans prior to June 16, 2021 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 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 (other than a domestic subsidiary that is a holding company for one or more foreign 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, determined on a pro forma basis, 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) may not exceed 7.00 to 1.00. We are also required to maintain a consolidated interest coverage ratio (defined as the ratio, determined on a pro forma basis, of our adjusted EBITDA for any period of four consecutive fiscal quarters to our consolidated interest expense for such period payable in cash) of at least 1.75 to 1.00. As of April 3, 2021, we were in compliance with all of the covenants, including the financial covenants, in the credit agreement.

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Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

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 then 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.

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 April 3, 2021, we were in compliance with all of the covenants in the indenture governing the 5.25% senior notes due 2025.

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Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

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.

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 April 3, 2021, 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 Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Supplemental Financial Information about B&G Foods and Guarantor Subsidiaries.”

Accrued Interest. At April 3, 2021 and January 2, 2021, accrued interest of $2.1 million and $20.9 million, respectively, is included in accrued expenses in the accompanying unaudited consolidated balance sheets.

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Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

(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.

The carrying values and fair values of our revolving credit loans, term loans and senior notes as of April 3, 2021 and January 2, 2021 were as follows (in thousands):

April 3, 2021

January 2, 2021

 

    

Carrying Value

      

Fair Value

      

Carrying Value

      

Fair Value

 

Revolving credit loans

$

230,000

$

230,000

(1)  

$

235,000

$

235,000

(1)  

Tranche B term loans due 2026

667,288

(2)  

665,620

(3)  

667,118

(2)  

665,450

(3)  

5.25% senior notes due 2025

902,157

(4)  

926,966

(3)  

902,292

(4)  

931,616

(3)  

5.25% senior notes due 2027

$

550,000

$

573,375

(3)  

$

550,000

$

580,250

(3)  

(1) Fair values are estimated based on Level 2 inputs, which were quoted prices for identical or similar instruments in markets that are not active.
(2) The carrying value of the tranche B term loans includes a discount. At April 3, 2021 and January 2, 2021, the face amount of the tranche B term loans was $671.6 million.
(3) Fair values are estimated based on quoted market prices.
(4) The carrying value of the 5.25% senior notes due 2025 includes a premium. At April 3, 2021 and January 2, 2021, the face amount of the 5.25% senior notes due 2025 was $900.0 million.

There was no Level 3 activity during the first quarter of 2021 or 2020.

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Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

(8)

Accumulated Other Comprehensive Loss

The reclassifications from accumulated other comprehensive loss (AOCL) for the first quarter of 2021 and 2020 were as follows (in thousands):

Amounts Reclassified from AOCL

Thirteen Weeks Ended

Affected Line Item in

April 3,

    

March 28,

the Statement Where

Details about AOCL Components

2021

    

2020

    

Net Income is Presented

Defined benefit pension plan items

Amortization of unrecognized loss

$

442

$

400

See (1) below

Accumulated other comprehensive loss before tax

 

442

 

400

Total before tax

Tax expense

 

(108)

 

(104)

Income tax expense

Total reclassification

$

334

$

296

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 quarter of 2021 were as follows (in thousands):

Foreign Currency

Defined Benefit

Translation

    

Pension Plan Items

    

Adjustments

    

Total

Balance at January 2, 2021

 

$

(27,631)

 

$

(7,963)

 

$

(35,594)

Other comprehensive loss before reclassifications

 

 

(496)

 

(496)

Amounts reclassified from AOCL

 

334

 

 

334

Net current period other comprehensive income (loss)

 

334

 

(496)

 

(162)

Balance at April 3, 2021

 

$

(27,297)

 

$

(8,459)

 

$

(35,756)

(9)Stock Repurchase Program

On March 9, 2021, our board of directors authorized an extension of our stock repurchase program from March 15, 2021 to March 15, 2022. 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.

We did not repurchase any shares of our common stock during the first quarter of 2021 or the first quarter of 2020. As of April 3, 2021, we had $50.0 million available for future repurchases of common stock under the stock repurchase program.

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Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

(10)

Pension Benefits

Company-Sponsored Defined Benefit Pension Plans. As of April 3, 2021, we had four company-sponsored defined benefit pension plans covering approximately 33% of our employees. Three of these defined benefit pension plans are for the benefit of certain of our union employees and one is for the benefit of salaried and certain hourly employees. The benefits in the salaried and hourly plan are based on each employee’s years of service and compensation, as defined. Effective January 1, 2020, newly hired salaried and hourly employees are no longer eligible to participate in that defined benefit pension plan. Net periodic pension cost for our four company-sponsored defined benefit pension plans for the first quarter of 2021 and 2020 includes the following components (in thousands):

Thirteen Weeks Ended

April 3,

March 28,

2021

    

2020

Service cost—benefits earned during the period

$

2,626

$

2,467

Interest cost on projected benefit obligation

 

1,225

 

1,377

Expected return on plan assets

 

(2,757)

 

(2,229)

Amortization of unrecognized loss

 

442

 

400

Net periodic pension cost

$

1,536

$

2,015

During the first quarter of 2021 and 2020, we did not make any contributions to our company-sponsored defined benefit pension plans. During the remainder of fiscal 2021, we expect to make approximately $5.5 million of contributions.

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, implemented a rehabilitation plan. As a result, our contributions to the plan had been increasing by at least 5% per year, assuming consistent hours were worked. Effective December 31, 2020, the annual 5% contribution rate increases have been suspended.

B&G Foods made contributions to the plan of approximately $0.2 million in each of the first quarter of 2021 and 2020. During the remainder of fiscal 2021, we expect to make approximately $0.5 million of additional contributions and we expect to pay surcharges of approximately $0.3 million assuming consistent hours are worked. These contributions represent less than 5% of total contributions made to the plan.

In the event that we withdraw from participation in the plan or substantially reduce our participation in this plan (such as due to a workforce reduction), or if a mass withdrawal were to occur, applicable law could require us to make withdrawal liability payments to the plan, and we would have to reflect that liability on our balance sheet. The amount of our withdrawal liability, which would be material, would depend on the extent of this plan’s funding of vested benefits at the time of our withdrawal. As discussed above, the plan is severely underfunded. Furthermore, our withdrawal liability could increase as the number of employers participating in this plan decreases.

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Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

(11)

Leases

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

April 3,

    

January 2,

2021

    

2021

Right-of-use assets:

Operating lease right-of-use assets

$

30,909

$

32,216

Operating lease liabilities:

Current portion of operating lease liabilities

$

9,952

$

11,034

Long-term operating lease liabilities, net of current portion

23,541

23,959

Total operating lease liabilities

$

33,493

$

34,993

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

April 3,

March 28,

2021

    

2020

Operating cash flow information:

Cash paid for amounts included in the measurement of operating lease liabilities

$

3,350

$

3,087

The components of lease costs were as follows:

Cost of goods sold

$

1,184

$

1,004

Selling, general and administrative expenses

1,974

1,977

Total lease costs

$

3,158

$

2,981

Total rent expense was $4.0 million, including the operating lease costs of $3.2 million stated above, for the first quarter of 2021. Total rent expense was $3.5 million, including the operating lease costs of $3.0 million stated above, for the first quarter of 2020.

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.

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

April 3,

January 2,

2021

2021

Weighted average remaining lease term (years)

4.7

4.8

Weighted average discount rate

3.83%

3.94%

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Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

As of April 3, 2021, the maturities of operating lease liabilities were as follows (in thousands):

    

Maturities of Operating Lease Liabilities

Fiscal year:

2021 remaining

$

9,196

2022

6,782

2023

 

6,419

2024

 

5,466

2025

 

4,905

Thereafter

3,950

Total undiscounted future minimum lease payments

36,718

Less: Imputed interest

 

(3,225)

Total present value of future operating lease liabilities

$

33,493

(12)

Commitments and Contingencies

Legal Proceedings. We are from time to time involved in various claims and legal actions arising in the ordinary course of business, including proceedings involving product liability claims, product labeling claims, worker’s compensation and other employee claims, and tort and other general liability claims, as well as trademark, copyright, patent infringement and related claims and legal actions. While we cannot predict with certainty the results of these claims and legal actions in which we are currently, or in the future may be, involved, we do not expect that the ultimate disposition of any currently pending claims or actions will have a material adverse effect on our consolidated financial position, results of operations or liquidity.

Environmental. We are subject to environmental laws and regulations in the normal course of business. We did not make any material expenditures during the first quarter of 2021 or 2020 in order to comply with environmental laws and regulations. Based on our experience to date, management believes that the future cost of compliance with existing environmental laws and regulations (and liability for any known environmental conditions) will not have a material adverse effect on our consolidated financial position, results of operations or liquidity. However, we cannot predict what environmental or health and safety legislation or regulations will be enacted in the future or how existing or future laws or regulations will be enforced, administered or interpreted, nor can we predict the amount of future expenditures that may be required in order to comply with such environmental or health and safety laws or regulations or to respond to such environmental claims.

Collective Bargaining Agreements. As of April 3, 2021, 2,202 of our 3,312 employees, or approximately 66.5%, were covered by collective bargaining agreements.

The collective bargaining agreements covering approximately 110 employees at our Terre Haute, Indiana facility and approximately 170 employees at our Stoughton, Wisconsin facility had each been scheduled to expire on March 27, 2021. During March 2021, we reached an agreement in principle with the Chauffeurs, Teamsters, Warehousemen and Helpers Union, Local No. 135 to extend the Terre Haute agreement for an additional three-year period ending March 30, 2024, and with the Drivers, Salesmen, Warehousemen, Milk Processors, Cannery, Dairy Employees and Helpers Union, Local 695 to extend the Stoughton agreement for an additional five-year period ending March 26, 2026. The new agreements have been ratified by the union employees at our Terre Haute and Stoughton facilities.

As of the date of this report, we have only one collective bargaining agreement that is scheduled to expire in the next twelve months. The collective bargaining agreement covering employees at our Portland, Maine facility, which covers approximately 85 employees, is scheduled to expire on April 30, 2022.

While we believe that our relations with our union employees are in general good, we cannot assure you that we will be able to negotiate a new collective bargaining agreements for our Portland facility on terms satisfactory to us, or at all, and without production interruptions, including labor stoppages. At this time, however, management does not expect that the outcome of the negotiations will have a material adverse impact on our business, financial condition or results of operations.

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Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Severance and Change of Control Agreements. We have employment agreements with each of our executive officers, except for our interim president and chief executive officer. The agreements generally continue until terminated by the executive or by us, and provide for severance payments under certain circumstances, including termination by us without cause (as defined in the agreements) or as a result of the employee’s death or disability, or termination by us or a deemed termination upon a change of control (as defined in the agreements). Severance benefits generally include payments for salary continuation, continuation of health care and insurance benefits, present value of additional pension credits and, in certain cases, accelerated vesting under compensation plans. See Note 16, “Separation Expenses.”

(13)

Earnings per Share

Basic earnings per share is calculated by dividing net income by the weighted average number of shares of common stock outstanding. Diluted earnings per share is calculated by dividing net income by the weighted average number of shares of common stock outstanding plus all additional shares of common stock that would have been outstanding if potentially dilutive shares of common stock had been issued upon the exercise of stock options or in connection with performance shares that may be earned under long-term incentive awards as of the grant date, in the case of the stock options, and as of the beginning of the period, in the case of the performance shares, using the treasury stock method. For the first quarter of 2021 and 2020, there were 430,011 and 1,102,223, respectively, shares of common stock issuable upon the exercise of stock options excluded from the calculation of diluted weighted average shares outstanding because the effect would have been anti-dilutive on diluted earnings per share.

Thirteen Weeks Ended

    

April 3,

    

March 28,

    

2021

    

2020

Weighted average shares outstanding:

Basic

64,582,989

64,047,149

Net effect of potentially dilutive share-based compensation awards

626,725

37,075

Diluted

65,209,714

64,084,224

(14)

Business and Credit Concentrations and Geographic Information

Our exposure to credit loss in the event of non-payment of accounts receivable by customers is estimated in the amount of the allowance for doubtful accounts. We perform ongoing credit evaluations of the financial condition of our customers. Our top ten customers accounted for approximately 61.3% and 59.5% of consolidated net sales for the first quarter of 2021 and 2020, respectively. Other than Walmart, which accounted for approximately 29.0% and 25.6% of our consolidated net sales for the first quarter of 2021 and 2020, respectively, no single customer accounted for more than 10.0% of our consolidated net sales for the first quarter of 2021 or 2020.

Our top ten customers accounted for approximately 64.4% and 62.6% of our consolidated trade accounts receivables as of April 3, 2021 and January 2, 2021, respectively. Other than Walmart, which accounted for approximately 32.1% and 32.6% of our consolidated trade accounts receivables as of April 3, 2021 and January 2, 2021, no single customer accounted for more than 10.0% of our consolidated trade accounts receivables. As of April 3, 2021, we do not believe we have any significant concentration of credit risk with respect to our consolidated trade accounts receivables with any single customer whose failure or nonperformance would materially affect our results other than as described above with respect to Walmart.

During the first quarter of 2021 and 2020, our sales to customers in foreign countries represented approximately 7.6% and 9.1%, respectively, of net sales. Our foreign sales are primarily to customers in Canada.

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Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

(15)

Share-Based Payments

The following table details our stock option activity for the first quarter of fiscal 2021 (dollars in thousands, except per share data):

Weighted

Weighted Average

Average

Contractual Life

Aggregate

    

Options

    

Exercise Price

    

Remaining (Years)

    

Intrinsic Value

Outstanding at January 2, 2021

 

1,030,667

$

31.41

5.50

$

591

Granted

 

$

 

Exercised

 

(438,900)

$

32.02

Forfeited

 

(37,627)

$

26.80

Expired

(2,171)

$

32.59

Outstanding at April 3, 2021

 

551,969

$

31.24

 

5.98

$

1,087

Exercisable at April 3, 2021

 

529,776

$

31.54

 

5.84

$

952

The following table details the activity in our performance share long-term incentive awards (LTIAs) for the first quarter of 2021:

    

    

Weighted Average

Number of

Grant Date Fair Value

    

Performance Shares(1)

      

(per share)(2)

Outstanding at January 2, 2021

 

986,223

$

15.56

Granted

 

188,594

$

26.90

Vested

 

(86,523)

$

21.36

Forfeited

 

(198,454)

$

16.79

Outstanding at April 3, 2021

 

889,840

$

17.13

(1) Solely for purposes of this table, the number of performance shares is based on the participants earning the maximum number of performance shares (i.e., 200% of the target number of performance shares).
(2) The fair value of the awards was determined based upon the closing price of our common stock on the applicable measurement dates (i.e., the deemed grant dates for accounting purposes), reduced by the present value of expected dividends using the risk-free interest-rate, as the award holders are not entitled to dividends or dividend equivalents during the vesting period.

The following table details the activity in our restricted stock for the first quarter of 2021:

    

    

Weighted Average

Number of Shares

Grant Date Fair Value

    

of Restricted Stock

      

(per share)(1)

Outstanding at January 2, 2021

 

97,359

$

18.22

Granted

 

30,972

$

32.58

Vested

 

(59,670)

$

19.30

Forfeited

 

$

Outstanding at April 3, 2021

 

68,661

$

32.44

(1) The fair value of the awards was determined based upon the closing price of our common stock on the applicable measurement dates (i.e., the deemed grant dates for accounting purposes).

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Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

The following table details the net number of shares of common stock issued by our company during the first quarter of 2021 and 2020 upon the vesting of performance share LTIAs, the exercise of stock options, the issuance of restricted stock and other share-based compensation:

Thirteen Weeks Ended

April 3,

    

March 28,

2021

    

2020

Number of performance shares vested

86,523

 

Shares withheld for tax withholding

(35,281)

 

Shares of common stock issued for performance share LTIAs

51,242

 

Shares of common stock issued upon the exercise of stock options

438,900

Shares of restricted common stock issued to employees

30,972

75,848

Shares of restricted stock withheld and cancelled for tax withholding upon vesting

(21,462)

Net shares of common stock issued

499,652

 

75,848

The following table sets forth the compensation expense recognized for share-based payments (performance share LTIAs, restricted stock, stock options, non-employee director stock grants and other share-based payments) during the first quarter of 2021 and 2020 and where that expense is reflected in our consolidated statements of operations (in thousands):

Thirteen Weeks Ended

April 3,

March 28,

Consolidated Statements of Operations Location

2021

    

2020

Compensation expense included in cost of goods sold

$

136

$

17

Compensation expense included in selling, general and administrative expenses

 

587

 

406

Total compensation expense for share-based payments

$

723

$

423

During the first quarter of 2020, we recognized an additional pre-tax share-based compensation expense of less than $0.1 million, which is reflected in the table above, relating to the extension of the post-retirement exercise period for 83,759 vested options held by an executive officer who retired in March 2020. As previously disclosed, the post-retirement exercise period was extended in accordance with the executive officer’s retirement agreement from 180 days after the retirement date to the earlier of three years after the retirement date and the then current expiration date of the options.

As of April 3, 2021, there was $5.3 million of unrecognized compensation expense related to performance share LTIAs, which is expected to be recognized over the next 2.8 years, $1.5 million of unrecognized compensation expense related to restricted stock, which is expected to be recognized over the next 2.7 years, and less than $0.1 million of unrecognized compensation expense related to stock options, which is expected to be recognized during the second quarter of 2021.

(16)

Separation Expenses

During the fourth quarter of 2020, we recorded separation costs of $4.2 million for severance and other benefits payable pursuant to the terms of a separation agreement entered into in November 2020 with our former president and chief executive officer. Of this amount, approximately $1.7 million has resulted or will result in cash payments, of which $0.3 million were made during the first quarter of 2021 and most of the remainder of which will be paid during the remainder of fiscal 2021. The remaining $2.5 million of non-cash separation costs relate to share-based compensation expense for shares that have vested in fiscal 2021 or may vest at the end of fiscal 2021 and fiscal 2022 if certain company performance goals are achieved.

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Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

(17)

Net Sales by Brand

The following table sets forth net sales by brand (in thousands):

Thirteen Weeks Ended

April 3,

March 28,

2021

2020

Brand:(1)

Green Giant - frozen

$

98,615

 

$

108,139

Spices & Seasonings(2)

76,413

51,795

Crisco(3)

58,056

Ortega

 

38,951

 

38,781

Green Giant - shelf-stable(4)

25,465

 

37,930

Maple Grove Farms of Vermont

 

20,677

 

18,441

Dash

 

18,183

 

14,499

Cream of Wheat

 

18,160