— Generates Net Cash Provided by Operating Activities of
Executive Summary (vs. year-ago quarter where applicable):
“We had very strong top line growth in the second quarter, with our net
sales up 7.4% and our base business net sales up 3.1%, which is
outpacing our initial expectations for the full year,” stated Robert C.
Cantwell, President and Chief Executive Officer of
Mr. Cantwell continued, “Net sales of Green Giant frozen products
grew by 19.7%, the fifth consecutive quarter of double digit growth.
Pirate Brands also had a strong quarter, with net sales up 54.6%. Other
key brands in our portfolio, including Cream of Wheat, Ortega
and
We generated
Financial Results for the Second Quarter of 2018
Net sales increased
Base business net sales increased
Net sales of Green Giant frozen 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 second quarter of 2018, adjusted EBITDA, which excludes
acquisition-related and non-recurring expenses and the non-cash
accounting impact of the Company’s inventory reduction plan, was
Financial Results for the First Two Quarters of 2018
Net sales increased
Base business net sales increased
Net sales of Green Giant frozen for the first two quarters 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 two quarters of 2018, adjusted EBITDA, which excludes
acquisition-related and non-recurring expenses and the non-cash
accounting impact of the Company’s inventory reduction plan, was
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 532010. 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 second quarter and first two quarters of 2018 and 2017, along with the components of EBITDA and adjusted EBITDA. Also included below are reconciliations of the non-GAAP terms adjusted net income, adjusted diluted earnings per share and base business net sales to the most directly comparable measure calculated and presented in accordance with GAAP in the Company’s consolidated balance sheets and related consolidated statements of operations, comprehensive income and cash flows.
About
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 and overall expectations for
fiscal 2018, including the timing and extent to which the Company may
see the benefit of price increases and cost savings measures and the
Company’s expectations as to freight expenses. Such
forward-looking statements involve known and unknown risks,
uncertainties and other unknown factors that could cause the actual
results of B&G Foods to be materially different from the historical
results or from any future results expressed or implied by such
forward-looking statements. In addition to statements that
explicitly describe such risks and uncertainties, readers are urged to
consider statements labeled with the terms “believes,” “belief,”
“expects,” “projects,” “intends,” “anticipates” or “plans” to be
uncertain and forward-looking. Factors that may affect actual
results include, without limitation: the Company’s substantial leverage;
the effects of rising costs for the Company’s raw materials, packaging
and ingredients; crude oil prices and their impact on distribution,
packaging and energy costs; the Company’s ability to successfully
implement sales price increases and cost saving measures to offset any
cost increases; intense competition, changes in consumer preferences,
demand for the Company’s products and local economic and market
conditions; the Company’s continued ability to promote brand equity
successfully, to anticipate and respond to new consumer trends, to
develop new products and markets, to broaden brand portfolios in order
to compete effectively with lower priced products and in markets that
are consolidating at the retail and manufacturing levels and to improve
productivity; the risks associated with the expansion of the Company’s
business; the Company’s possible inability to identify new acquisitions
or to integrate recent or future acquisitions or the Company’s failure
to realize anticipated revenue enhancements, cost savings or other
synergies; tax reform and legislation, including the effects of the U.S.
Tax Cuts and Jobs Act; the Company’s ability to access the credit
markets and the Company’s borrowing costs and credit ratings, which may
be influenced by credit markets generally and the credit ratings of the
Company’s competitors; unanticipated expenses, including, without
limitation, litigation or legal settlement expenses; the effects of
currency movements of the Canadian dollar and the Mexican peso as
compared to the U.S. dollar; the effects of international trade
disputes, tariffs, quotas, and other import or export restrictions on
our international procurement, sales and operations; future impairments
of the Company’s goodwill and intangible assets; the Company’s ability
to successfully implement a new enterprise resource planning (ERP)
system; the Company’s ability to protect information systems against, or
effectively respond to, a cybersecurity incident or other disruption;
the Company’s sustainability initiatives and changes to environmental
laws and regulations; and other factors that affect the food industry
generally. The forward-looking statements contained herein are also
subject generally to other risks and uncertainties that are described
from time to time in B&G Foods’ filings with the
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
B&G Foods, Inc. and Subsidiaries Consolidated Balance Sheets (In thousands, except share and per share data) (Unaudited) |
||||||
June 30, | December 30, | |||||
2018 | 2017 | |||||
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 62,840 | $ | 206,506 | ||
Trade accounts receivable, net | 137,147 | 141,392 | ||||
Inventories | 446,273 | 501,849 | ||||
Prepaid expenses and other current assets | 24,371 | 20,054 | ||||
Income tax receivable | 16,712 | 16,794 | ||||
Total current assets | 687,343 | 886,595 | ||||
Property, plant and equipment, net of accumulated depreciation of $217,518 and $200,664 | 271,955 | 272,192 | ||||
Goodwill | 652,143 | 649,292 | ||||
Other intangibles, net | 1,739,102 | 1,748,220 | ||||
Other assets | 1,479 | 1,617 | ||||
Deferred income taxes | 3,091 | 3,122 | ||||
Total assets | $ | 3,355,113 | $ | 3,561,038 | ||
Liabilities and Stockholders’ Equity | ||||||
Current liabilities: | ||||||
Trade accounts payable | $ | 115,595 | $ | 122,358 | ||
Accrued expenses | 37,301 | 48,067 | ||||
Income tax payable | 140 | 139 | ||||
Dividends payable | 31,318 | 30,922 | ||||
Total current liabilities | 184,354 | 201,486 | ||||
Long-term debt | 2,073,874 | 2,217,574 | ||||
Other liabilities | 25,998 | 24,881 | ||||
Deferred income taxes | 243,873 | 236,278 | ||||
Total liabilities | 2,528,099 | 2,680,219 | ||||
Stockholders’ equity: | ||||||
Preferred stock, $0.01 par value per share. Authorized 1,000,000 shares; no shares issued or outstanding | — | — | ||||
Common stock, $0.01 par value per share. Authorized 125,000,000 shares; 65,932,291 and 66,499,044 shares issued and outstanding as of June 30, 2018 and December 30, 2017 | 659 | 665 | ||||
Additional paid-in capital | 186,745 | 266,789 | ||||
Accumulated other comprehensive loss | (23,034) | (20,756) | ||||
Retained earnings | 662,644 | 634,121 | ||||
Total stockholders’ equity | 827,014 | 880,819 | ||||
Total liabilities and stockholders’ equity | $ | 3,355,113 | $ | 3,561,038 |
B&G Foods, Inc. and Subsidiaries Consolidated Statements of Operations (In thousands, except per share data) (Unaudited) |
|||||||||||||
Second Quarter Ended | First Two Quarters Ended | ||||||||||||
June 30, | July 1, | June 30, | July 1, | ||||||||||
2018 | 2017((1)) | 2018 | 2017((1)) | ||||||||||
Net sales | $ | 388,378 | $ | 361,676 | $ | 820,107 | $ | 773,983 | |||||
Cost of goods sold | 307,205 | 257,119 | 635,578 | 548,207 | |||||||||
Gross profit | 81,173 | 104,557 | 184,529 | 225,776 | |||||||||
Operating expenses: | |||||||||||||
Selling, general and administrative expenses | 37,272 | 43,586 | 79,840 | 92,106 | |||||||||
Amortization expense | 4,609 | 4,265 | 9,218 | 8,737 | |||||||||
Operating income | 39,292 | 56,706 | 95,471 | 124,933 | |||||||||
Other income and expenses: | |||||||||||||
Interest expense, net | 27,607 | 21,998 | 55,913 | 41,645 | |||||||||
Loss on extinguishment of debt | 546 | 1,045 | 3,324 | 1,163 | |||||||||
Other expense (income) | 388 | (1,269) | (1,666 | ) | (3,866) | ||||||||
Income before income tax expense | 10,751 | 34,932 | 37,900 | 85,991 | |||||||||
Income tax expense | 2,775 | 12,871 | 9,377 | 31,166 | |||||||||
Net income | $ | 7,976 | $ | 22,061 | $ | 28,523 | $ | 54,825 | |||||
Weighted average shares outstanding: | |||||||||||||
Basic | 66,307 | 66,482 | 66,412 | 66,478 | |||||||||
Diluted | 66,354 | 66,711 | 66,535 | 66,748 | |||||||||
Basic and diluted earnings per share | $ | 0.12 | $ | 0.33 | $ | 0.43 | $ | 0.82 | |||||
Cash dividends declared per share | $ | 0.475 | $ | 0.465 | $ | 0.940 | $ | 0.930 |
(1) Net sales, gross profit, selling, general and administrative expenses, operating income and other expense (income) have been adjusted as a result of our retrospective adoption of new accounting standards relating to revenue recognition and the presentation of net periodic pension cost and net periodic postretirement benefit cost. The adjustments described above had no impact on net income or earnings per share.
B&G Foods, Inc. and Subsidiaries Reconciliation of EBITDA and Adjusted EBITDA to Net Income and to Net Cash Provided by Operating Activities (In thousands) (Unaudited) |
||||||||||||||||
Second Quarter Ended | First Two Quarters Ended | |||||||||||||||
June 30, | July 1, | June 30, | July 1, | |||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net income | $ | 7,976 | $ | 22,061 | $ | 28,523 | $ | 54,825 | ||||||||
Income tax expense | 2,775 | 12,871 | 9,377 | 31,166 | ||||||||||||
Interest expense, net | 27,607 | 21,998 | 55,913 | 41,645 | ||||||||||||
Depreciation and amortization | 13,343 | 12,329 | 26,407 | 24,547 | ||||||||||||
Loss on extinguishment of debt(1) | 546 | 1,045 | 3,324 | 1,163 | ||||||||||||
EBITDA(2) | 52,247 | 70,304 | 123,544 | 153,346 | ||||||||||||
Acquisition-related and non-recurring expenses | 1,623 | 7,851 | 4,892 | 13,693 | ||||||||||||
Inventory reduction plan impact(3) | 20,576 | — | 35,426 | — | ||||||||||||
Amortization of acquisition-related inventory step-up(4) | — | — | — | 1,550 | ||||||||||||
Loss on sale of assets(5) | — | — | — | 1,608 | ||||||||||||
Adjusted EBITDA(2) | 74,446 | 78,155 | 163,862 | 170,197 | ||||||||||||
Income tax expense | (2,775 | ) | (12,871 | ) | (9,377 | ) | (31,166 | ) | ||||||||
Interest expense, net | (27,607 | ) | (21,998 | ) | (55,913 | ) | (41,645 | ) | ||||||||
Acquisition-related and non-recurring expenses | (1,623 | ) | (7,851 | ) | (4,892 | ) | (13,693 | ) | ||||||||
Inventory reduction plan impact(3) | (20,576 | ) | — | (35,426 | ) | — | ||||||||||
Write-off of property, plant and equipment | 8 | 105 | 29 | 105 | ||||||||||||
Deferred income taxes | 2,690 | 9,712 | 7,511 | 19,992 | ||||||||||||
Amortization of deferred financing costs and bond discount | 1,431 | 1,464 | 2,976 | 2,795 | ||||||||||||
Amortization of acquisition-related inventory step-up | — | — | — | (1,550 | ) | |||||||||||
Share-based compensation expense | 1,759 | 2,059 | 2,597 | 3,202 | ||||||||||||
Changes in assets and liabilities, net of effects of business combinations | 3,307 | (31,444 | ) | 33,437 | (88,413 | ) | ||||||||||
Net cash provided by operating activities | $ | 31,060 | $ | 17,331 | $ | 104,804 | $ | 19,824 |
(1) For the second quarter of 2018 includes the write-off of deferred
debt financing costs and unamortized discount of
(2) EBITDA and adjusted EBITDA are non-GAAP financial measures used by management to measure operating performance. A non-GAAP financial measure is defined as a numerical measure of our financial performance that excludes or includes amounts so as to be different from the most directly comparable measure calculated and presented in accordance with GAAP in our consolidated balance sheets and related consolidated statements of operations, comprehensive income and cash flows. We define EBITDA as net income before net interest expense, income taxes, depreciation and amortization and loss on extinguishment of debt. We define adjusted EBITDA as EBITDA adjusted for cash and non-cash acquisition-related expenses, gains and losses (which may include third party fees and expenses, integration, restructuring and consolidation expenses, amortization of acquired inventory fair value step-up, and gains and losses on the sale of assets), non-recurring expenses and the non-cash accounting impact of our inventory reduction plan. Management believes that it is useful to eliminate net interest expense, income taxes, depreciation and amortization, loss on extinguishment of debt, acquisition-related and non-recurring expenses, gains and losses, and the non-cash accounting impact of our inventory reduction plan because it allows management to focus on what it deems to be a more reliable indicator of ongoing operating performance and our ability to generate cash flow from operations. We use EBITDA and adjusted EBITDA in our business operations to, among other things, evaluate our operating performance, develop budgets and measure our performance against those budgets, determine employee bonuses and evaluate our cash flows in terms of cash needs. We also present EBITDA and adjusted EBITDA because we believe they are useful indicators of our historical debt capacity and ability to service debt and because covenants in our credit agreement and our senior notes indentures contain ratios based on these measures. As a result, internal management reports used during monthly operating reviews feature the EBITDA and adjusted EBITDA metrics. However, management uses these metrics in conjunction with traditional GAAP operating performance and liquidity measures as part of its overall assessment of company performance and liquidity, and therefore does not place undue reliance on these measures as its only measures of operating performance and liquidity.
EBITDA and adjusted EBITDA are not recognized terms under GAAP and do not purport to be alternatives to operating income, net income (loss) or any other GAAP measure as an indicator of operating performance. EBITDA and adjusted EBITDA are not complete net cash flow measures because EBITDA and adjusted EBITDA are measures of liquidity that do not include reductions for cash payments for an entity’s obligation to service its debt, fund its working capital, capital expenditures and acquisitions and pay its income taxes and dividends. Rather, EBITDA and adjusted EBITDA are two potential indicators of an entity’s ability to fund these cash requirements. EBITDA and adjusted EBITDA are not complete measures of an entity’s profitability because they do not include costs and expenses for depreciation and amortization, interest and related expenses, loss on extinguishment of debt, acquisition-related and non-recurring expenses, gains and losses, the non-cash accounting impact of our inventory reduction plan and income taxes. Because not all companies use identical calculations, this presentation of EBITDA and adjusted EBITDA may not be comparable to other similarly titled measures of other companies. However, EBITDA and adjusted EBITDA can still be useful in evaluating our performance against our peer companies because management believes these measures provide users with valuable insight into key components of GAAP amounts.
(3) Relates to the allocation of certain fixed manufacturing, warehouse and other corporate overhead costs associated with inventory purchased and converted into finished goods in fiscal 2017 and sold in the second quarter and first two quarters of 2018 as part of our inventory reduction plan.
(4) Relates to the purchase accounting adjustments made to the finished
goods inventory acquired in the spices & seasonings acquisition that we
completed on
(5) During the first two quarters of 2017, we sold to a third-party
co-packer our
B&G Foods, Inc. and Subsidiaries Items Affecting Comparability — Reconciliation of Adjusted Information to GAAP Information (In thousands, except per share data) (Unaudited) |
||||||||||||
Second Quarter Ended | First Two Quarters Ended | |||||||||||
June 30, | July 1, | June 30, | July 1, | |||||||||
2018 | 2017 | 2018 | 2017 | |||||||||
Net income | $ | 7,976 | $ | 22,061 | $ | 28,523 | $ | 54,825 | ||||
Loss on extinguishment of debt, net of tax(1) | 412 | 654 | 2,514 | 727 | ||||||||
Acquisition-related and non-recurring expenses, net of tax | 1,223 | 4,911 | 3,697 | 8,565 | ||||||||
Inventory reduction plan impact, net of tax(2) | 15,508 | — | 26,746 | — | ||||||||
Acquisition-related inventory step-up, net of tax(3) | — | — | — | 970 | ||||||||
Loss on sale of assets, net of tax(4) | — | — | — | 1,006 | ||||||||
Adjusted net income | $ | 25,119 | $ | 27,626 | $ | 61,480 | $ | 66,093 | ||||
Adjusted diluted earnings per share | $ | 0.38 | $ | 0.41 | $ | 0.92 | $ | 0.99 |
(1) For the second quarter of 2018 includes the write-off of deferred
debt financing costs and unamortized discount of
(2) Relates to the allocation of certain fixed manufacturing, warehouse and other corporate overhead costs associated with inventory purchased and converted into finished goods in fiscal 2017 and sold in the second quarter and first two quarters of 2018 as part of our inventory reduction plan.
(3) Relates to the purchase accounting adjustments made to the finished
goods inventory acquired in the spices & seasonings acquisition that we
completed on
(4) During the first two quarters of 2017, we sold to a third-party
co-packer our
B&G Foods, Inc. and Subsidiaries Items Affecting Comparability — Reconciliation of Base Business Net Sales to Reported Net Sales (In thousands) (Unaudited) |
||||||||||||||||
Second Quarter Ended | First Two Quarters Ended | |||||||||||||||
June 30, | July 1, | June 30, | July 1, | |||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net sales | $ | 388,378 | $ | 361,676 | $ | 820,107 | $ | 773,983 | ||||||||
Net sales from acquisitions(1) | (17,622 | ) | — | (37,662 | ) | — | ||||||||||
Net sales of non-branded IQF bulk rice products(2) | (559 | ) | (2,498 | ) | (1,137 | ) | (4,825 | ) | ||||||||
Base business net sales(3) | $ | 370,197 | $ | 359,178 | $ | 781,308 | $ | 769,158 |
- -
(1) Reflects net sales for Back to Nature for the second quarter
and first two quarters of 2018. Back to Nature was acquired on
(2) Reflects net sales of our non-branded individually quick frozen (IQF) bulk rice products, which is a product line we acquired as part of the Green Giant acquisition, and which we are excluding from reported net sales for the purposes of calculating base business net sales because we do not consider the non-branded IQF bulk rice products to be part of our core business or material.
(3) Base business net sales is a non-GAAP financial measure used by management to measure operating performance. We define base business net sales as our net sales excluding (1) the impact of acquisitions until at least one full quarter of net sales from acquisitions are included in both comparable periods, (2) net sales of discontinued brands, and (3) net sales of our IQF bulk rice business, see footnote 2 above. The portion of current period net sales attributable to recent acquisitions for which there is not at least one full quarter of net sales in the comparable period of the prior year is excluded. For each acquisition, the excluded period starts at the beginning of the most recent fiscal period being compared and ends on the last day of the quarter in which the first anniversary of the date of acquisition occurs, and the period from the date of acquisition to the end of the quarter in which the acquisition occurred. For discontinued brands, the entire amount of net sales is excluded from each fiscal period being compared. Management has included this financial measure because it provides useful and comparable trend information regarding the results of our business without the effect of the timing of acquisitions and the effect of discontinued brands.
The definition of base business net sales set forth above, as it relates to acquisitions, was modified in the fourth quarter of 2017. Under the Company’s previous definition of base business net sales, for each acquisition, the excluded period started at the beginning of the most recent fiscal period being compared and ended on the first anniversary of the acquisition date. The Company believes that it is more useful to measure base business net sales on a full quarter basis. The definition of base business net sales set forth above was modified in the first quarter of 2018 to exclude net sales of our IQF bulk rice business.
View source version on businesswire.com: https://www.businesswire.com/news/home/20180802005821/en/
Source:
Investor Relations:
ICR, Inc.
Dara Dierks, 866-211-8151
Media Relations:
ICR, Inc.
Matt Lindberg, 203-682-8214