— Generates Net Cash Provided by Operating Activities of
— Reaffirms Full Year 2018 Guidance —
Executive Summary (vs. year-ago quarter where applicable):
Overall, our net sales increased 4.7% for the quarter and we had a
balanced performance across our portfolio, led by the strength of our
largest brand - Green Giant. Net sales of Green Giant
frozen products increased by
Mr. Cantwell continued, “We generated
Financial Results for the First Quarter of 2018
Net sales increased
Base business net sales for the first quarter of 2018 increased
Net sales of Green Giant frozen products for the first quarter of
2018 increased
Gross profit was
Selling, general and administrative expenses decreased
Net interest expense increased
The Company’s reported net income under U.S. generally accepted
accounting principles (GAAP) was
For the first quarter of 2018, adjusted EBITDA, which excludes
acquisition-related and non-recurring expenses and the non-cash
accounting impact of the Company’s inventory reduction plan, was
Guidance
Conference Call
A replay of the call will be available two hours after the call and can
be accessed by dialing (844) 512-2921 for U.S. callers or (412) 317-6671
for international callers; the password is 9493777. The replay will be
available from
About Non-GAAP Financial Measures and Items Affecting Comparability
“Adjusted net income,” “adjusted diluted earnings per share,” “base business net sales” (net sales without the impact of acquisitions until the acquisitions are included in both comparable periods and without the impact of discontinued brands), “EBITDA” (net income before net interest expense, income taxes, depreciation and amortization and loss on extinguishment of debt) and “adjusted EBITDA” (EBITDA as adjusted for cash and non-cash acquisition-related expenses, gains and losses (which may include third party fees and expenses, integration, restructuring and consolidation expenses, and amortization of acquired inventory fair value step-up, and gains and losses on sale of assets), non-recurring expenses, gains and losses and the non-cash accounting impact of the Company’s inventory reduction plan) are “non-GAAP financial measures.” A non-GAAP financial measure is a numerical measure of financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with GAAP in B&G Foods’ consolidated balance sheets and related consolidated statements of operations, comprehensive income and cash flows. Non-GAAP financial measures should not be considered in isolation or as a substitute for the most directly comparable GAAP measures. The Company’s non-GAAP financial measures may be different from non-GAAP financial measures used by other companies.
The Company uses “adjusted net income,” “adjusted diluted earnings per share,” and “base business net sales,” which are calculated as reported net income, reported diluted earnings per share and reported net sales adjusted for certain items that affect comparability. These non-GAAP financial measures reflect adjustments to reported net income, diluted earnings per share and net sales to eliminate the items identified above. This information is provided in order to allow investors to make meaningful comparisons of the Company’s operating performance between periods and to view the Company’s business from the same perspective as the Company’s management. Because the Company cannot predict the timing and amount of these items, management does not consider these items when evaluating the Company’s performance or when making decisions regarding allocation of resources.
Additional information regarding EBITDA and adjusted EBITDA, and a reconciliation of EBITDA and adjusted EBITDA to net income and to net cash provided by operating activities is included below for the first quarter of 2018 and 2017, along with the components of EBITDA and adjusted EBITDA. Also included below are reconciliations of the non-GAAP terms adjusted net income, adjusted diluted earnings per share and base business net sales to the most directly comparable measure calculated and presented in accordance with GAAP in the Company’s consolidated balance sheets and related consolidated statements of operations, comprehensive income and cash flows.
About
Based in
Forward-Looking Statements
Statements in this press release that are not statements of
historical or current fact constitute “forward-looking statements.” The
forward-looking statements contained in this press release include,
without limitation, statements related to B&G Foods’ net sales, adjusted
EBITDA, adjusted diluted earnings per share, inventory and overall
expectations for fiscal 2018. Such forward-looking statements
involve known and unknown risks, uncertainties and other unknown factors
that could cause the actual results of B&G Foods to be materially
different from the historical results or from any future results
expressed or implied by such forward-looking statements. In
addition to statements that explicitly describe such risks and
uncertainties readers are urged to consider statements labeled with the
terms “believes,” “belief,” “expects,” “projects,” “intends,”
“anticipates” or “plans” to be uncertain and forward-looking. Factors
that may affect actual results include, without limitation: the
Company’s substantial leverage; the effects of rising costs for the
Company’s raw materials, packaging and ingredients; crude oil prices and
their impact on distribution, packaging and energy costs; the Company’s
ability to successfully implement sales price increases and cost saving
measures to offset any cost increases; intense competition, changes in
consumer preferences, demand for the Company’s products and local
economic and market conditions; the Company’s continued ability to
promote brand equity successfully, to anticipate and respond to new
consumer trends, to develop new products and markets, to broaden brand
portfolios in order to compete effectively with lower priced products
and in markets that are consolidating at the retail and manufacturing
levels and to improve productivity; the risks associated with the
expansion of the Company’s business; the Company’s possible inability to
identify new acquisitions or to integrate recent or future acquisitions
or the Company’s failure to realize anticipated revenue enhancements,
cost savings or other synergies; tax reform and legislation, including
the effects of the U.S. Tax Cuts and Jobs Act; the Company’s ability to
access the credit markets and the Company’s borrowing costs and credit
ratings, which may be influenced by credit markets generally and the
credit ratings of the Company’s competitors; unanticipated expenses,
including, without limitation, litigation or legal settlement expenses;
the effects of currency movements of the Canadian dollar and the Mexican
peso as compared to the U.S. dollar; future impairments of the Company’s
goodwill and intangible assets; the Company’s ability to successfully
implement a new enterprise resource planning (ERP) system; the Company’s
ability to protect information systems against, or effectively respond
to, a cybersecurity incident or other disruption; the Company’s
sustainability initiatives and changes to environmental laws and
regulations; and other factors that affect the food industry generally.
The forward-looking statements contained herein are also subject
generally to other risks and uncertainties that are described from time
to time in B&G Foods’ filings with the
1 | Please see “About Non-GAAP Financial Measures and Items Affecting Comparability” below for the definition of the non-GAAP financial measures “adjusted net income,” “adjusted diluted earnings per share,” “base business net sales,” “EBITDA,” and “adjusted EBITDA” as well as information concerning certain items affecting comparability and reconciliations of the non-GAAP terms to the most comparable GAAP financial measures. | |
2 | In May 2014, the Financial Accounting Standards Board (FASB) issued authoritative guidance related to new accounting requirements for the recognition of revenue from contracts with customers. The Company adopted this guidance and the related amendments as of the beginning of our fiscal 2018, applying the full retrospective transition approach to all contracts. Based on the Company’s comprehensive assessment of the new guidance, the Company has concluded that the adoption does not have a significant impact to the Company’s core revenue generating activities. However, the adoption resulted in a change in presentation of certain trade and consumer promotion expenses, specifically in-store display incentives also referred to as marketing development funds. In-store display incentives or marketing development funds were previously recorded within selling, general and administrative expenses in the Company’s consolidated statements of operations. Upon the adoption of the new guidance, this expense will not meet the specific criteria within the new guidance of providing a “distinct” good or service, and therefore, is required to be presented as a reduction of the Company’s net sales. The Company currently anticipates that the impact of this change will result in a reduction of net sales and selling, general and administrative expenses by approximately $21.5 million during 2018, the first year of adoption, with no impact to net income. | |
B&G Foods, Inc. and Subsidiaries Consolidated Balance Sheets (In thousands, except share and per share data) (Unaudited) |
||||||||
March 31, | December 30, | |||||||
2018 | 2017 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 118,144 | $ | 206,506 | ||||
Trade accounts receivable, net | 160,758 | 141,392 | ||||||
Inventories | 455,364 | 501,849 | ||||||
Prepaid expenses and other current assets | 17,776 | 20,054 | ||||||
Income tax receivable | 15,788 | 16,794 | ||||||
Total current assets | 767,830 | 886,595 | ||||||
Property, plant and equipment, net of accumulated depreciation of $209,609 and $200,664 | 271,750 | 272,192 | ||||||
Goodwill | 650,568 | 649,292 | ||||||
Other intangibles, net | 1,743,711 | 1,748,220 | ||||||
Other assets | 1,520 | 1,617 | ||||||
Deferred income taxes | 3,384 | 3,122 | ||||||
Total assets | $ | 3,438,763 | $ | 3,561,038 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Trade accounts payable | $ | 111,313 | $ | 122,358 | ||||
Accrued expenses | 60,880 | 48,067 | ||||||
Income tax payable | 68 | 139 | ||||||
Dividends payable | 30,966 | 30,922 | ||||||
Total current liabilities | 203,227 | 201,486 | ||||||
Long-term debt | 2,096,897 | 2,217,574 | ||||||
Other liabilities | 24,854 | 24,881 | ||||||
Deferred income taxes | 241,137 | 236,278 | ||||||
Total liabilities | 2,566,115 | 2,680,219 | ||||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.01 par value per share. Authorized 1,000,000 shares; no shares issued or outstanding | — | — | ||||||
Common stock, $0.01 par value per share. Authorized 125,000,000 shares; 66,593,120 and 66,499,044 shares issued and outstanding as of March 31, 2018 and December 30, 2017 | 666 | 665 | ||||||
Additional paid-in capital | 234,827 | 266,789 | ||||||
Accumulated other comprehensive loss | (17,513) | (20,756) | ||||||
Retained earnings | 654,668 | 634,121 | ||||||
Total stockholders’ equity | 872,648 | 880,819 | ||||||
Total liabilities and stockholders’ equity | $ | 3,438,763 | $ | 3,561,038 | ||||
B&G Foods, Inc. and Subsidiaries Consolidated Statements of Operations (In thousands, except per share data) (Unaudited) |
||||||||
First Quarter Ended | ||||||||
March 31, | April 1, | |||||||
2018 | 2017(1) | |||||||
Net sales | $ | 431,729 | $ | 412,307 | ||||
Cost of goods sold | 328,373 | 291,088 | ||||||
Gross profit | 103,356 | 121,219 | ||||||
Operating expenses: | ||||||||
Selling, general and administrative expenses | 42,568 | 48,520 | ||||||
Amortization expense | 4,609 | 4,472 | ||||||
Operating income | 56,179 | 68,227 | ||||||
Other income and expenses: | ||||||||
Interest expense, net | 28,306 | 19,647 | ||||||
Loss on extinguishment of debt | 2,778 | 118 | ||||||
Other income | (2,054) | (2,597) | ||||||
Income before income tax expense | 27,149 | 51,059 | ||||||
Income tax expense | 6,602 | 18,295 | ||||||
Net income | $ | 20,547 | $ | 32,764 | ||||
Weighted average shares outstanding: | ||||||||
Basic | 66,518 | 66,474 | ||||||
Diluted | 66,715 | 66,784 | ||||||
Basic and diluted earnings per share | $ | 0.31 | $ | 0.49 | ||||
Cash dividends declared per share | $ | 0.465 | $ | 0.465 | ||||
(1) | Net sales, gross profit, selling, general and administrative expenses, operating income and other income have been adjusted as a result of our retrospective adoption of new accounting standards relating to revenue recognition and the presentation of net periodic pension cost and net periodic postretirement benefit cost. The adjustments described above had no impact on net income or earnings per share. | |
B&G Foods, Inc. and Subsidiaries Reconciliation of EBITDA and Adjusted EBITDA to Net Income and to Net Cash Provided by Operating Activities (In thousands) (Unaudited) |
||||||||
First Quarter Ended | ||||||||
March 31, | April 1, | |||||||
2018 | 2017 | |||||||
Net income | $ | 20,547 | $ | 32,764 | ||||
Income tax expense | 6,602 | 18,295 | ||||||
Interest expense, net | 28,306 | 19,647 | ||||||
Depreciation and amortization | 13,064 | 12,218 | ||||||
Loss on extinguishment of debt | 2,778 | 118 | ||||||
EBITDA(1) | 71,297 | 83,042 | ||||||
Acquisition-related and non-recurring expenses | 3,269 | 5,842 | ||||||
Inventory reduction plan impact | 14,850 | — | ||||||
Amortization of acquisition-related inventory step-up | — | 1,550 | ||||||
Loss on sale of assets | — | 1,608 | ||||||
Adjusted EBITDA(1) | 89,416 | 92,042 | ||||||
Income tax expense | (6,602) | (18,295) | ||||||
Interest expense, net | (28,306) | (19,647) | ||||||
Acquisition-related and non-recurring expenses | (3,269) | (5,842) | ||||||
Inventory reduction plan impact | (14,850) | — | ||||||
Write-off of property, plant and equipment | 21 | — | ||||||
Deferred income taxes | 4,821 | 10,280 | ||||||
Amortization of deferred financing costs and bond discount | 1,545 | 1,331 | ||||||
Amortization of acquisition-related inventory step-up | — | (1,550) | ||||||
Share-based compensation expense | 838 | 1,143 | ||||||
Changes in assets and liabilities, net of effects of business combinations | 30,130 | (56,969) | ||||||
Net cash provided by operating activities | $ | 73,744 | $ | 2,493 | ||||
(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 and cash flows. We define EBITDA as net income before net interest expense, income taxes, depreciation and amortization and loss on extinguishment of debt. We define adjusted EBITDA as EBITDA adjusted for cash and non-cash acquisition-related expenses, gains and losses (which may include third party fees and expenses, integration, restructuring and consolidation expenses, amortization of acquired inventory fair value step-up, and gains and losses on the sale of assets), non-recurring expenses, gains and losses and the non-cash accounting impact of our inventory reduction plan. Management believes that it is useful to eliminate net interest expense, income taxes, depreciation and amortization, loss on extinguishment of debt, acquisition-related and non-recurring expenses, gains and losses, and the non-cash accounting impact of our inventory reduction plan because it allows management to focus on what it deems to be a more reliable indicator of ongoing operating performance and our ability to generate cash flow from operations. We use EBITDA and adjusted EBITDA in our business operations to, among other things, evaluate our operating performance, develop budgets and measure our performance against those budgets, determine employee bonuses and evaluate our cash flows in terms of cash needs. We also present EBITDA and adjusted EBITDA because we believe they are useful indicators of our historical debt capacity and ability to service debt and because covenants in our credit agreement and our senior notes indentures contain ratios based on these measures. As a result, internal management reports used during monthly operating reviews feature the EBITDA and adjusted EBITDA metrics. However, management uses these metrics in conjunction with traditional GAAP operating performance and liquidity measures as part of its overall assessment of company performance and liquidity and therefore does not place undue reliance on these measures as its only measures of operating performance and liquidity. | |
EBITDA and adjusted EBITDA are not recognized terms under GAAP and do not purport to be alternatives to operating income, net income or any other GAAP measure as an indicator of operating performance. EBITDA and adjusted EBITDA are not complete net cash flow measures because EBITDA and adjusted EBITDA are measures of liquidity that do not include reductions for cash payments for an entity’s obligation to service its debt, fund its working capital, capital expenditures and acquisitions and pay its income taxes and dividends. Rather, EBITDA and adjusted EBITDA are two potential indicators of an entity’s ability to fund these cash requirements. EBITDA and adjusted EBITDA are not complete measures of an entity’s profitability because they do not include costs and expenses for depreciation and amortization, interest and related expenses, loss on extinguishment of debt, acquisition-related and non-recurring expenses, gains and losses, the non-cash accounting impact of our inventory reduction plan and income taxes. Because not all companies use identical calculations, this presentation of EBITDA and adjusted EBITDA may not be comparable to other similarly titled measures of other companies. However, EBITDA and adjusted EBITDA can still be useful in evaluating our performance against our peer companies because management believes these measures provide users with valuable insight into key components of GAAP amounts. | ||
B&G Foods, Inc. and Subsidiaries Items Affecting Comparability — Reconciliation of Adjusted Information to GAAP Information (In thousands, except per share data) (Unaudited) |
||||||||
First Quarter Ended | ||||||||
March 31, | April 1, | |||||||
2018 | 2017 | |||||||
Reported net income | $ | 20,547 | $ | 32,764 | ||||
Loss on extinguishment of debt, net of tax(1) | 2,102 | 74 | ||||||
Acquisition-related and non-recurring expenses, net of tax | 2,474 | 3,661 | ||||||
Inventory reduction plan impact, net of tax(2) | 11,238 | — | ||||||
Acquisition-related inventory step-up, net of tax(3) | — | 971 | ||||||
Loss on sale of assets, net of tax(4) | — | 1,008 | ||||||
Adjusted net income | $ | 36,361 | $ | 38,478 | ||||
Adjusted diluted earnings per share | $ | 0.55 | $ | 0.58 | ||||
(1) | Loss on extinguishment of debt for the first quarter of 2018 includes the write-off of deferred debt financing costs and unamortized discount of $2.4 million and $0.4 million, respectively, relating to the repayment of outstanding borrowings under the tranche B term loans. Loss on extinguishment of debt for the first quarter of 2017 includes the write-off of deferred debt financing costs and unamortized discount of $0.1 million and less than $0.1 million, respectively, relating to the refinancing of our tranche B term loans. | |
(2) | Inventory reduction plan impact for the first quarter of 2018 relates to the allocation of certain fixed manufacturing, warehouse and other corporate overhead costs associated with inventory purchased and converted into finished goods in fiscal 2017 and sold in the first quarter of 2018. | |
(3) | Acquisition-related inventory step-up for the first quarter of 2017 relates to the purchase accounting adjustments made to the finished goods inventory acquired in the spices & seasonings acquisition. | |
(4) | During the first quarter of 2017, we sold to a third-party co-packer our Le Sueur, Minnesota research center, including the seed technology assets, property, plant and equipment. We acquired the research center and related assets on November 2, 2015, as part of the Green Giant acquisition. The sale resulted in a $1.6 million loss on sale of assets. | |
B&G Foods, Inc. and Subsidiaries Items Affecting Comparability — Reconciliation of Base Business Net Sales to Reported Net Sales (In thousands) (Unaudited) |
||||||||
First Quarter Ended | ||||||||
March 31, | April 1, | |||||||
2018 | 2017 | |||||||
Reported net sales | $ | 431,729 | $ | 412,307 | ||||
Net sales from acquisitions(1) | (20,040) | — | ||||||
Net sales of non-branded IQF bulk rice products(2) | (578) | (2,327) | ||||||
Base business net sales(3) | $ | 411,111 | $ | 409,980 | ||||
(1) | Reflects net sales for Back to Nature for the first quarter of 2018, for which there is no comparable period of net sales in 2017. Back to Nature was acquired on October 2, 2017. | |
(2) | Reflects net sales of non-branded individually quick frozen (IQF) bulk rice products, which is a business we acquired with Green Giant, and which we are excluding from reported net sales for the purposes of calculating base business net sales because we do not consider the non-branded IQF rice products to be part of our core business or material. | |
(3) | Base business net sales is a non-GAAP financial measure used by management to measure operating performance. We define base business net sales as our net sales excluding (1) the impact of acquisitions until at least one full quarter of net sales from acquisitions are included in both comparable periods, (2) net sales of discontinued brands and (3) net sales of our IQF bulk rice business, see footnote 2 above. The portion of current period net sales attributable to recent acquisitions for which there is not at least one full quarter of net sales in the comparable period of the prior year is excluded. For each acquisition, the excluded period starts at the beginning of the most recent fiscal period being compared and ends on the last day of the quarter in which the first anniversary of the date of acquisition occurs, and the period from the date of acquisition to the end of the quarter in which the acquisition occurred. For discontinued brands, the entire amount of net sales is excluded from each fiscal period being compared. Management has included this financial measure because it provides useful and comparable trend information regarding the results of our business without the effect of the timing of acquisitions and the effect of discontinued brands. | |
The definition of base business net sales set forth above, as it relates to acquisitions, was modified in the fourth quarter of 2017. Under the Company’s previous definition of base business net sales, for each acquisition, the excluded period started at the beginning of the most recent fiscal period being compared and ended on the first anniversary of the acquisition date. The Company believes that it is more useful to measure base business net sales on a full quarter basis. The definition of base business net sales set forth above was modified in the first quarter of 2018 to exclude net sales of our IQF bulk rice business. | ||
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Source:
Investor Relations:
ICR, Inc.
Dara Dierks, 866-211-8151
or
Media
Relations:
ICR, Inc.
Matt Lindberg, 203-682-8214