July 22, 2015
B&G Foods Reports Financial Results for Second Quarter 2015
— Net Income Increased 16.2% —
— Updates Full Year 2015 Guidance —
Highlights (vs. year-ago quarter where applicable):
-
Net income increased 16.2% to
$18.7 million -
Adjusted net income* increased 8.4% to
$19.0 million -
Diluted earnings per share increased 10.0% to
$0.33 -
Adjusted diluted earnings per share* increased 3.0% to
$0.34 -
Adjusted EBITDA* increased 2.8% to
$47.4 million -
Following the Mama Mary’s acquisition, the Company has issued
updated guidance:
-
Adjusted EBITDA guidance increased to a range of
$199.0 million to$204 .0 million -
Adjusted diluted earnings per share guidance decreased to a range
of
$1.44 to $1.50 , primarily due to an additional 4.2 million shares outstanding following the Company’s second quarter 2015 public offering -
Net sales guidance increased to a range of
$875.0 million to$885.0 million
-
Adjusted EBITDA guidance increased to a range of
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| * | 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,” “comparable base business net sales,” “EBITDA,” “adjusted EBITDA” and “adjusted EBITDA margin,” as well as information concerning certain items affecting comparability and reconciliations of the non-GAAP terms to the most comparable GAAP financial measures. | |
Commenting on the results,
“We are also pleased that during the second quarter we were able to
enter into a strategic partnership with DSC Logistics to provide
warehousing and distribution management services at our three primary
distribution centers,” Mr. Cantwell continued. “We expect that the first
of the three distribution centers will transition during the third
quarter of 2015 and that after all three have transitioned by the end of
the second quarter of 2016, we will achieve cost savings of
approximately
Financial Results for the Second Quarter of 2015
Net sales for the second quarter of 2015 decreased 4.6% to
Comparable base business net sales, which excludes the impact of
acquisitions, the Rickland Orchards shortfall and the Ortega
and Las Palmas recall announced in
Gross profit for the second quarter of 2015 decreased
Selling, general and administrative expenses decreased
Net interest expense for the second quarter of 2015 decreased
The Company’s reported net income under U.S. generally accepted
accounting principles (GAAP) was
For the second quarter of 2015, adjusted EBITDA, which excludes the
impact of acquisition-related expenses and the loss on product recall,
increased 2.8% to
Financial Results for the First Two Quarters of 2015
Net sales for the first two quarters of 2015 increased
Net sales of Ortega products increased
Comparable base business net sales, which excludes the impact of
acquisitions, the Rickland Orchards shortfall and the Ortega and
Las Palmas recall, increased
Gross profit for the first two quarters of 2015 increased
Selling, general and administrative expenses decreased
Net interest expense for the first two quarters of 2015 decreased
The Company’s reported net income under GAAP was
For the first two quarters of 2015, adjusted EBITDA, which excludes the
impact of acquisition-related expenses and the loss on product recall,
increased 5.2% to
Guidance
Primarily to take into account the expected impact of the recently
completed Mama Mary’s acquisition,
Conference Call
A replay of the call will be available two hours after the call and can
be accessed by dialing (877) 870-5176 or (858) 384-5517 for
international callers; the password is 1025071. The replay will be
available from July 22, 2015 through
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), “comparable base business net sales” (base business net sales, excluding the Rickland Orchards shortfall and the impact of the Ortega and Las Palmas recall), “EBITDA” (net income before net interest expense, income taxes, depreciation and amortization and loss on extinguishment of debt); “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); intangible asset impairment charges and related asset write-offs; gains or losses related to changes in the fair value of contingent liabilities from earn-outs; and loss on product recalls, including customer refunds, selling, general and administrative expenses and the impact on cost of sales); and “adjusted EBITDA margin” (adjusted EBITDA divided by net sales); are “non-GAAP financial measures.” A non-GAAP financial measure is a numerical measure of financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with GAAP in B&G Foods’ consolidated balance sheets and related consolidated statements of operations, comprehensive income, changes in stockholders’ equity and cash flows. Non-GAAP financial measures should not be considered in isolation or as a substitute for the most directly comparable GAAP measures. The Company’s non-GAAP financial measures may be different from non-GAAP financial measures used by other companies.
The Company uses “adjusted net income,” “adjusted diluted earnings per share,” “base business net sales” and “comparable 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 fiscal 2015 and 2014, 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, base business net sales and comparable 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
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’ adjusted EBITDA,
adjusted diluted earnings per share, net sales, and overall expectations
for fiscal 2015, and the timing of and expected cost savings relating to
the DSC Logistics transition. Such forward-looking statements involve
known and unknown risks, uncertainties and other unknown factors that
could cause the actual results of
| B&G Foods, Inc. and Subsidiaries | ||||||||
| Consolidated Balance Sheets | ||||||||
| (In thousands, except share and per share data) | ||||||||
| (Unaudited) | ||||||||
| Assets | July 4, 2015 | January 3, 2015 | ||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 98,540 | $ | 1,490 | ||||
| Trade accounts receivable, net | 50,361 | 55,925 | ||||||
| Inventories | 119,112 | 106,557 | ||||||
| Prepaid expenses and other current assets | 14,267 | 14,830 | ||||||
| Income tax receivable | 4,201 | 14,442 | ||||||
| Deferred income taxes | 3,078 | 3,275 | ||||||
| Total current assets | 289,559 | 196,519 | ||||||
|
Property, plant and equipment, net of accumulated depreciation of $137,145 and $129,253 |
115,542 |
116,197 |
||||||
| Goodwill | 370,589 | 370,424 | ||||||
| Other intangibles, net | 942,549 | 947,895 | ||||||
| Other assets | 16,664 | 18,318 | ||||||
| Total assets | $ | 1,734,903 | $ | 1,649,353 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Trade accounts payable | $ | 30,811 | $ | 38,052 | ||||
| Accrued expenses | 15,746 | 17,644 | ||||||
| Current portion of long-term debt | 22,500 | 18,750 | ||||||
| Dividends payable | 19,712 | 18,246 | ||||||
| Total current liabilities | 88,769 | 92,692 | ||||||
| Long-term debt | 961,947 | 1,007,107 | ||||||
| Other liabilities | 4,846 | 7,352 | ||||||
| Deferred income taxes | 213,380 | 204,207 | ||||||
| Total liabilities | 1,268,942 | 1,311,358 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity: | ||||||||
|
Preferred stock, $0.01 par value per share. |
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|
Authorized 1,000,000 shares; no shares issued or outstanding |
— | — | ||||||
|
Common stock, $0.01 par value per share. |
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|
Authorized 125,000,000 shares; 57,976,744 and 53,663,697 shares |
580 | 537 | ||||||
| Additional paid-in capital | 199,832 | 110,349 | ||||||
| Accumulated other comprehensive loss | (10,909 | ) | (11,034 | ) | ||||
| Retained earnings | 276,458 | 238,143 | ||||||
| Total stockholders’ equity | 465,961 | 337,995 | ||||||
| Total liabilities and stockholders’ equity | $ | 1,734,903 | $ | 1,649,353 | ||||
| B&G Foods, Inc. and Subsidiaries | ||||||||||||||
| Consolidated Statements of Operations | ||||||||||||||
| (In thousands, except per share data) | ||||||||||||||
| (Unaudited) | ||||||||||||||
| Second Quarter Ended | First Two Quarters Ended | |||||||||||||
| July 4, 2015 | June 28, 2014 | July 4, 2015 | June 28, 2014 | |||||||||||
| Net sales | $ | 193,645 | $ | 202,889 | $ | 410,767 | $ | 401,029 | ||||||
| Cost of goods sold | 131,637 | 139,862 | 281,362 | 273,333 | ||||||||||
| Gross profit | 62,008 | 63,027 | 129,405 | 127,696 | ||||||||||
| Operating expenses: | ||||||||||||||
| Selling, general and administrative expenses | 19,197 | 25,289 | 42,045 | 47,892 | ||||||||||
| Amortization expense | 2,673 | 3,348 | 5,346 | 6,595 | ||||||||||
| Gain on change in fair value of contingent consideration | — | (8,206 | ) | — | (8,206 | ) | ||||||||
| Operating income | 40,138 | 42,596 | 82,014 | 81,415 | ||||||||||
| Other expenses: | ||||||||||||||
| Interest expense, net | 11,062 | 11,803 | 22,601 | 22,945 | ||||||||||
| Loss on extinguishment of debt | — | 5,748 | — | 5,748 | ||||||||||
| Income before income tax expense | 29,076 | 25,045 | 59,413 | 52,722 | ||||||||||
| Income tax expense | 10,328 | 8,907 | 21,098 | 18,807 | ||||||||||
| Net income | $ | 18,748 | $ | 16,138 | $ | 38,315 | $ | 33,915 | ||||||
| Weighted average shares outstanding: | ||||||||||||||
| Basic | 56,627 | 53,654 | 55,193 | 53,652 | ||||||||||
| Diluted | 56,683 | 53,719 | 55,241 | 53,713 | ||||||||||
| Basic and diluted earnings per share | $ | 0.33 | $ | 0.30 | $ | 0.69 | $ | 0.63 | ||||||
| Cash dividends declared per share | $ | 0.34 | $ | 0.34 | $ | 0.68 | $ | 0.68 | ||||||
| B&G Foods, Inc. and Subsidiaries | ||||||||||||||||
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Reconciliation of EBITDA and Adjusted EBITDA to Net Income and to Net Cash Provided by Operating Activities |
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| (In thousands) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Second Quarter Ended | First Two Quarters Ended | |||||||||||||||
| July 4, 2015 | June 28, 2014 | July 4, 2015 | June 28, 2014 | |||||||||||||
| Net income | $ | 18,748 | $ | 16,138 | $ | 38,315 | $ | 33,915 | ||||||||
| Income tax expense | 10,328 | 8,907 | 21,098 | 18,807 | ||||||||||||
| Interest expense, net | 11,062 | 11,803 | 22,601 | 22,945 | ||||||||||||
| Depreciation and amortization | 6,832 | 7,050 | 13,376 | 13,945 | ||||||||||||
| Loss on extinguishment of debt | — | 5,748 | — | 5,748 | ||||||||||||
| EBITDA(1) | 46,970 | 49,646 | 95,390 | 95,360 | ||||||||||||
| Acquisition-related expenses | 23 | 4,642 | 62 | 5,383 | ||||||||||||
| Loss on product recall | 401 | — | 1,868 | — | ||||||||||||
| Gain on change in fair value of contingent consideration | — | (8,206 | ) | — | (8,206 | ) | ||||||||||
| Adjusted EBITDA(1) | 47,394 | 46,082 | 97,320 | 92,537 | ||||||||||||
| Income tax expense | (10,328 | ) | (8,907 | ) | (21,098 | ) | (18,807 | ) | ||||||||
| Interest expense, net | (11,062 | ) | (11,803 | ) | (22,601 | ) | (22,945 | ) | ||||||||
| Acquisition-related expenses | (23 | ) | (4,642 | ) | (62 | ) | (5,383 | ) | ||||||||
| Loss on product recall | (401 | ) | — | (1,868 | ) | — | ||||||||||
| Deferred income taxes | 4,614 | 4,500 | 9,233 | 8,594 | ||||||||||||
| Amortization of deferred financing costs and bond discount | 877 | 984 | 1,756 | 2,028 | ||||||||||||
| Share-based compensation expense | 1,334 | 1,177 | 2,517 | 1,742 | ||||||||||||
| Excess tax benefits from share-based compensation | — | — | (518 | ) | (2,383 | ) | ||||||||||
| Acquisition-related contingent consideration expense, including interest accretion | — | 200 | — | 432 | ||||||||||||
| Changes in assets and liabilities | (13,524 | ) | (22,453 | ) | (7,117 | ) | (19,674 | ) | ||||||||
| Net cash provided by operating activities | $ | 18,881 | $ | 5,138 | $ | 57,562 | $ | 36,141 | ||||||||
| (1) | EBITDA and adjusted EBITDA are non-GAAP financial measures used by management to measure operating performance. A non-GAAP financial measure is defined as a numerical measure of our financial performance that excludes or includes amounts so as to be different from the most directly comparable measure calculated and presented in accordance with GAAP in our consolidated balance sheets and related consolidated statements of operations, comprehensive income, changes in stockholders’ equity and cash flows. We define EBITDA as net income before net interest expense, income taxes, depreciation and amortization and loss on extinguishment of debt. We define adjusted EBITDA as EBITDA adjusted for cash and non-cash acquisition-related expenses, gains or losses (which may include third party fees and expenses, integration, restructuring and consolidation expenses); intangible asset impairment charges and related asset write-offs; gains or losses related to changes in the fair value of contingent liabilities from earn-outs; and loss on product recalls, including customer refunds, selling, general and administrative expenses and the impact on cost of sales. Management believes that it is useful to eliminate net interest expense, income taxes, depreciation and amortization, loss on extinguishment of debt, acquisition-related expenses, gains and losses, non-cash intangible asset impairment charges and related asset write-offs, gains or losses related to changes in the fair value of contingent liabilities from earn-outs and loss on product recalls because it allows management to focus on what it deems to be a more reliable indicator of ongoing operating performance and our ability to generate cash flow from operations. We use EBITDA and adjusted EBITDA in our business operations to, among other things, evaluate our operating performance, develop budgets and measure our performance against those budgets, determine employee bonuses and evaluate our cash flows in terms of cash needs. We also present EBITDA and adjusted EBITDA because we believe they are useful indicators of our historical debt capacity and ability to service debt and because covenants in our credit agreement and our senior notes indenture contain ratios based on these measures. As a result, internal management reports used during monthly operating reviews feature the EBITDA and adjusted EBITDA metrics. However, management uses these metrics in conjunction with traditional GAAP operating performance and liquidity measures as part of its overall assessment of company performance and liquidity and therefore does not place undue reliance on these measures as its only measures of operating performance and liquidity. | ||
| EBITDA and adjusted EBITDA are not recognized terms under GAAP and do not purport to be an alternative to operating income or net income or any other GAAP measure as an indicator of operating performance. EBITDA and adjusted EBITDA are not complete net cash flow measures because EBITDA and adjusted EBITDA are measures of liquidity that do not include reductions for cash payments for an entity’s obligation to service its debt, fund its working capital, capital expenditures and acquisitions and pay its income taxes and dividends. Rather, EBITDA and adjusted EBITDA are two potential indicators of an entity’s ability to fund these cash requirements. EBITDA and adjusted EBITDA are not complete measures of an entity’s profitability because they do not include costs and expenses for depreciation and amortization, interest and related expenses, loss on extinguishment of debt, acquisition-related expenses, gains and losses and income taxes, intangible asset impairment charges and related asset write-offs, gains or losses related to changes in the fair value of contingent liabilities from earn-outs and loss on product recalls. Because not all companies use identical calculations, this presentation of EBITDA and adjusted EBITDA may not be comparable to other similarly titled measures of other companies. However, EBITDA and adjusted EBITDA can still be useful in evaluating our performance against our peer companies because management believes these measures provide users with valuable insight into key components of GAAP amounts. | |||
| B&G Foods, Inc. and Subsidiaries | ||||||||||||||
| Items Affecting Comparability — Reconciliation of Adjusted Information to GAAP Information | ||||||||||||||
| (In thousands) | ||||||||||||||
| (Unaudited) | ||||||||||||||
| Second Quarter Ended | First Two Quarters Ended | |||||||||||||
| July 4, 2015 | June 28, 2014 | July 4, 2015 | June 28, 2014 | |||||||||||
| Reported net income | $ | 18,748 | $ | 16,138 | $ | 38,315 | $ | 33,915 | ||||||
| Loss on extinguishment of debt, net of tax(1) | — | 3,702 | — | 3,702 | ||||||||||
| Acquisition-related expenses, net of tax | 15 | 2,989 | 40 | 3,467 | ||||||||||
| Loss on product recall, net of tax(2) | 259 | — | 1,205 | — | ||||||||||
| Gain on contingent consideration, net of tax(3) | — | (5,285 | ) | — | (5,285 | ) | ||||||||
| Adjusted net income | $ | 19,022 | $ | 17,544 | $ | 39,560 | $ | 35,799 | ||||||
| Adjusted diluted earnings per share (4) | $ | 0.34 | $ | 0.33 | $ | 0.72 | $ | 0.67 | ||||||
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| (1) | Loss on extinguishment of debt for the second quarter and first two quarters of 2014 includes costs relating to the termination of our prior credit agreement, which included the repayment of $121.9 million aggregate principal amount of tranche A term loans and $215.0 million aggregate principal amount of revolving loans, and the write-off of deferred debt financing costs and unamortized discount of $5.4 million and $0.3 million, respectively. | |
| (2) |
On November 14, 2014, we announced a voluntary recall for certain Ortega and Las Palmas products after learning that one or more of the spice ingredients purchased from a third party supplier contained peanuts and almonds, allergens that are not declared on the products’ ingredient statements. The cost impact of this recall during the second quarter of 2015 was $0.4 million, which was recorded as a decrease in net sales related to customer refunds. The cost impact of this recall during the first two quarters of 2015, was $1.9 million, of which $1.2 million was recorded as a decrease in net sales related to customer refunds; $0.5 million was recorded as an increase in cost of goods sold primarily related to costs associated with product retrieval, destruction charges and customer fees; and $0.2 million was recorded as an increase in selling, general, and administrative expenses related to administrative costs. The charges we recorded are based upon costs incurred to date and management’s estimates of costs that have yet to be incurred. As of July 4, 2015, accounts receivables in our unaudited consolidated balance sheet includes a $0.3 million reserve relating to the recall and prepaid expenses include a $5.0 million receivable for expected insurance recoveries relating to the recall. |
|
| (3) |
On October 7, 2013, we completed the Rickland Orchards acquisition for a base purchase price of $57.5 million, of which $37.4 million was paid in cash and approximately $20.1 million was paid in shares of B&G Foods common stock. The purchase agreement also provided that the purchase price could be increased by contingent earn-out consideration of up to $15.0 million in the aggregate based upon the achievement of revenue growth targets during fiscal 2014, 2015 and 2016 meant to achieve operating results in excess of base purchase price acquisition model assumptions. |
|
|
As of the date of acquisition we estimated the original fair value of the contingent consideration to be approximately $7.6 million. During the remainder of fiscal 2013 and the first two quarters of 2014, we recorded interest accretion expense on the contingent consideration liability of $0.2 million and $0.4 million, respectively. At June 28, 2014, we remeasured the fair value of the contingent consideration using actual operating results through June 28, 2014 and revised forecasted operating results for the remainder of fiscal 2014, 2015 and 2016. As a result of lower than expected net sales results for Rickland Orchards and the unlikelihood of Rickland Orchards achieving the revenue growth targets, the fair value of the contingent consideration was reduced to zero, resulting in a non-cash gain of $8.2 million that is included in gain on change in fair value of contingent consideration in the accompanying unaudited consolidated statements of operations for the second quarter and first two quarters of 2014. |
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| (4) | For the second quarter and first two quarters of 2015, 551,330 shares of common stock issuable upon the exercise of stock options have not been included in the calculation of diluted weighted average shares outstanding because the effect would be antidilutive. | |
| B&G Foods, Inc. and Subsidiaries | ||||||||||||||||
| Items Affecting Comparability — Reconciliation of Base Business Net Sales and | ||||||||||||||||
| Comparable Base Business Net Sales to Reported Net Sales | ||||||||||||||||
| (In thousands) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Second Quarter Ended | First Two Quarters Ended | |||||||||||||||
| July 4, 2015 | June 28, 2014 | July 4, 2015 | June 28, 2014 | |||||||||||||
| Reported net sales | $ | 193,645 | $ | 202,889 | $ | 410,767 | $ | 401,029 | ||||||||
| Net sales from acquisitions(1) | (1,009 | ) | — | (23,053 | ) | — | ||||||||||
| Base business net sales | 192,636 | 202,889 | 387,714 | 401,029 | ||||||||||||
| Net sales of Rickland Orchards(2) | (1,047 | ) | (7,142 | ) | (2,115 | ) | (15,789 | ) | ||||||||
| Customer refunds related to recall(3) | 401 | — | 1,225 | — | ||||||||||||
| Comparable base business net sales | 191,990 | 195,747 | 386,824 | 385,240 | ||||||||||||
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| (1) | Reflects net sales for Specialty Brands for the portion of the second quarter and first two quarters of 2015 for which there is no comparable period of net sales during the same period in 2014. Specialty Brands was acquired in April 2014. | |
| (2) |
Net sales were negatively impacted by the Rickland Orchards shortfall in the second quarter and first two quarters of 2015, a continuation of the weakness that caused the Company to impair the brand’s trademark and customer relationship intangible assets in 2014. |
|
| (3) |
Reflects customer refunds relating to the Ortega and Las Palmas recall announced in November 2014. |
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Source:
Investor Relations:
ICR, Inc.
Don Duffy, 866-211-8151
or
Media
Relations:
ICR, Inc.
Matt Lindberg, 203-682-8214