B&G Foods (NYSE:BGF)
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B&G Foods, Inc. (NYSE: BGS, BGF), a manufacturer and distributor of
high-quality, shelf-stable foods, today announced financial results for
the thirteen weeks ended September 27, 2008 (third quarter of 2008) and
the thirty-nine weeks ended September 27, 2008 (first three quarters of
2008).
Financial Results for the Third Quarter of 2008
Net sales for the third quarter of 2008 decreased 0.4% to $116.5 million
from $117.0 million for the thirteen weeks ended September 29, 2007
(third quarter of 2007). Price increases that we recently implemented
improved net sales by $4.7 million during the third quarter of 2008.
These pricing gains, however, were offset by a decrease in net sales of
$5.2 million attributable to a unit volume decline. A substantial
portion of the unit volume decline was attributable to (1) the poor
maple syrup crop in Canada in 2008 that resulted in an industry-wide
shortfall of maple syrup and (2) a management decision to eliminate
unprofitable sales to certain customers of private label pickles and
peppers. Net sales of our Maple Grove Farms pure maple syrup and
our private label pickles and peppers declined in the third quarter of
2008 by $1.4 million and $0.2 million, respectively. In the case of pure
maple syrup, this decline was attributable to the unit volume decline
partially offset by pricing gains.
Gross profit for the third quarter of 2008 decreased 19.7% to $30.7
million from $38.3 million in the third quarter of 2007. Gross profit
expressed as a percentage of net sales decreased 6.3% to 26.4% for the
third quarter of 2008 from 32.7% in the third quarter of 2007. The
decrease in gross profit expressed as a percentage of net sales was
primarily attributable to increased costs for wheat, maple syrup, corn,
packaging, transportation and sweeteners, partially offset by $4.7
million in sales price increases. Operating income decreased 19.5% to
$16.2 million for the third quarter of 2008 from $20.2 million in the
third quarter of 2007.
Net income was $2.9 million for the third quarter of 2008 compared to
$4.8 million for the third quarter of 2007. Earnings per share of Class
A common stock decreased to $0.08 for the third quarter of 2008 from
$0.13 for the third quarter of 2007. For the third quarter of 2008,
EBITDA (see “About Non-GAAP Financial Measures”
below) decreased 16.2% to $20.1 million from $24.0 million for the third
quarter of 2007.
Financial Results for the First Three Quarters of 2008
Net sales for the first three quarters of 2008 increased 3.9% to $352.0
million from $339.0 million in the comparable period of fiscal 2007. We
completed the Cream of Wheat acquisition in late February 2007.
Excluding the impact of the Cream of Wheat acquisition (which
positively impacted net sales by $10.0 million), and the termination of
a temporary co-packing arrangement (which negatively impacted net sales
by $0.8 million), net sales increased $3.8 million or 1.2% during the
first three quarters of 2008.
Price increases that we recently implemented improved net sales by $5.3
million during the first three quarters of 2008. These pricing gains,
however, were offset by a decrease in net sales of $1.5 million
attributable to a unit volume decline. A substantial portion of the unit
volume decline was attributable to (1) the poor maple syrup crop in
Canada in 2008 that resulted in an industry-wide shortfall of maple
syrup and (2) a management decision to eliminate unprofitable sales to
certain customers of private label pickles and peppers. For the first
three quarters of 2008, net sales of our Maple Grove Farms pure
maple syrup increased by $0.3 million as pricing gains offset the unit
volume decline. Net sales of our private label pickles and peppers
declined in the first three quarters of 2008 by $0.4 million.
Gross profit for the first three quarters of 2008 decreased 8.4% to
$99.2 million from $108.3 million in the comparable period of last year.
Gross profit expressed as a percentage of net sales decreased 3.7% to
28.2% in the first three quarters of 2008 from 31.9% in the comparable
period of fiscal 2007. The decrease in gross profit expressed as a
percentage of net sales was primarily attributable to increased costs
for wheat, maple syrup, corn, packaging, transportation and sweeteners,
partially offset by $5.3 million in sales price increases. Operating
income decreased 9.8% to $54.5 million during the first three quarters
of 2008, compared to $60.4 million in the comparable period of fiscal
2007.
Net income was $10.8 million for the first three quarters of 2008
compared to $12.7 million for the comparable period of fiscal 2007. For
the first three quarters of 2008, earnings per share of Class A common
stock was $0.29. During the first three quarters of 2007, B&G Foods had
two classes of common stock and computed earnings per share under the
two class method. As a result, it is not meaningful to compare earnings
per share for the first three quarters of 2008 to the first three
quarters of 2007. For the first three quarters of 2008, EBITDA decreased
6.0% to $65.9 million from $70.1 million for the first three quarters of
2007.
Guidance
Excluding the impact of $0.8 million in severance and termination
charges the Company expects to incur in the fourth quarter of 2008
related to its previously announced workforce reduction, B&G Foods
projects that its fourth quarter EBITDA will be relatively flat as
compared to its fourth quarter of 2007 EBITDA of $24.3 million and that
its full year 2008 EBITDA will be within the range of $90 to $91
million. B&G Foods projects that its full year 2009 EBITDA will be
within the range of $95 to $98 million.
David L. Wenner, President and Chief Executive Officer of B&G Foods,
stated, “The third quarter was clearly a
difficult quarter for our Company, but as our fourth quarter 2008 and
full year 2009 guidance implies, we believe an anomaly in our
performance. Unique events such as an unprecedented surge in the cost of
wheat and the failure of the 2008 maple syrup crop in Canada adversely
affected third quarter results. As we entered the fourth quarter, those
issues have for the most part been resolved and our business has been
returning to an operating level more consistent with our expectations.
Our outlook for price and cost in 2009 is very positive as compared to
2008 and is reflected in our guidance.”
Stock and Debt Repurchase Plan
The Company also announced that its Board of Directors has authorized a
stock and debt repurchase program for the repurchase of up to $10.0
million of the Company’s Class A common stock
and/or 8% senior notes over the next twelve months. Under the
authorization, the Company may purchase shares of Class A common stock
and/or senior notes from time to time in the open market or in privately
negotiated transactions in compliance with the applicable rules and
regulations of the Securities and Exchange Commission.
Mr. Wenner remarked, “Even in this challenging
cost environment, we feel very confident about our business, our
continued ability to generate strong cash flows from operations and our
growth opportunities. We are pleased to be able to deliver value to our
stockholders through our regular quarterly dividend at the new rate of
$0.68 per share of Class A common stock per annum. As I stated last
week, we hope that our stockholders will view the new dividend rate as
sustainable in the long term, and consistent with the Company’s
desire to provide stockholders with an attractive and reliable return on
their investment.”
Mr. Wenner continued, “We also remain
committed to our acquisition strategy and continue to pursue accretive
acquisitions subject to the availability of financing. However, given
the deflated price of our Class A common stock and that our senior notes
are currently trading at a substantial discount to face value, we
believe that at this time the use of our cash on hand to repurchase
shares of Class A common stock and/or senior notes represents another
attractive investment opportunity for us and is consistent with our
commitment to enhance stockholder value. Any senior notes we are able to
buy at a discount represent a de-leveraging opportunity, improving the
capital structure of our company.”
The timing and amount of such repurchases, if any, will be at the
discretion of management, and will depend on available cash, market
conditions and other considerations. Therefore, there can be no
assurance as to the number of shares, if any, that will be repurchased
under the stock and debt repurchase program, or the aggregate dollar
amount of the shares or principal amount of senior notes, if any,
repurchased. The Company may discontinue the program at any time. Any
shares repurchased pursuant to the stock repurchase program will be
cancelled. Likewise, any senior notes repurchased will be cancelled. The
Company currently has 36,796,988 shares of Class A common stock
outstanding, 19,719,657 of which trade separately and 17,077,331 of
which trade as part of EISs. The Company currently has $240.0 million
principal amount of senior notes outstanding. In general, the Company’s
credit agreement prohibits the Company from repurchasing its 12% senior
subordinated notes.
Conference Call and Webcast with Slides
B&G Foods will hold a live conference call and webcast at 4:30 p.m. ET
today, October 30, 2008. The call can be accessed live over the phone by
dialing (888) 715-1402 or for international callers by dialing (913)
312-1481. The call will also be webcast live over the Internet from the
Investor Relations section of B&G Foods’
website at www.bgfoods.com
under “Investor Relations—Company
Overview.” B&G Foods will post a slide
presentation on the Company’s Investor
Relations site to accompany the prepared remarks.
A replay of the call will be available one hour after the call and can
be accessed by dialing (888) 203-1112 or (719) 457-0820 for
international callers. The password is 4452942. The replay will be
available from October 30, 2008 through November 6, 2008. The webcast
replay and slide presentation can also be accessed from the Investor
Relations section of B&G Foods’ website
at www.bgfoods.com
under “Investor Relations—Event
Calendar.”
About Non-GAAP Financial Measures
EBITDA (net income before net interest expense, income taxes,
depreciation and amortization) is a “non-GAAP
(Generally Accepted Accounting Principles) financial measure.”
A non-GAAP financial measure is defined as 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 and cash flows.
Non-GAAP financial measures should not be considered in isolation or as
a substitute for the most directly comparable GAAP measures. A
reconciliation of EBITDA with net income and net cash provided by
operating activities is included below for the third quarter and first
three quarters of 2008 and the third quarter and first three quarters of
2007, along with the components of EBITDA.
About B&G Foods, Inc.
B&G Foods and its subsidiaries manufacture, sell and distribute a
diverse portfolio of high-quality, shelf-stable foods across the United
States, Canada and Puerto Rico. B&G Foods’
products include hot cereals, fruit spreads, canned meats and beans,
spices, seasonings, marinades, hot sauces, wine vinegar, maple syrup,
molasses, salad dressings, Mexican-style sauces, taco shells and kits,
salsas, pickles, peppers and other specialty food products. B&G Foods
competes in the retail grocery, food service, specialty, private label,
club and mass merchandiser channels of distribution. Based in
Parsippany, New Jersey, B&G Foods’
products are marketed under many recognized brands, including Ac’cent,
B&G, B&M, Brer Rabbit, Cream of Rice, Cream of Wheat, Emeril’s,
Grandma’s Molasses, Joan of Arc, Las Palmas,
Maple Grove Farms of Vermont, Ortega, Polaner, Red Devil, Regina, Sa-són,
Trappey’s, Underwood, Vermont Maid and
Wright’s.
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 our expectations regarding costs and pricing for
the fourth quarter of 2008 and full year 2009; our expectations
regarding the cost of wheat and maple syrup; and our expectations
regarding EBITDA for the fourth quarter of 2008 and full year 2008 and
2009. 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. The forward-looking statements
contained herein are also subject generally to other risks and
uncertainties that are described from time to time in B&G Foods’
filings with the Securities and Exchange Commission, including under
Item 1A, “Risk Factors”
in our Annual Report on Form 10-K for fiscal 2007 filed on March 6, 2008.
We undertake no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information,
future events or otherwise.
B&G Foods, Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
(Unaudited)
Assets
September 27, 2008
December 29, 2007
Current assets:
Cash and cash equivalents
$
31,899
$
36,606
Trade accounts receivable, net
38,414
42,362
Inventories
95,688
93,181
Prepaid expenses
3,174
3,556
Income tax receivable
597
569
Deferred income taxes
648
648
Total current assets
170,420
176,922
Property, plant and equipment, net of accumulated depreciation of
$62,201 and $55,679
52,878
49,658
Goodwill
253,353
253,353
Trademarks
227,220
227,220
Customer relationship intangibles, net
117,930
122,768
Net deferred debt issuance costs and other assets
15,102
17,669
Total assets
$
836,903
$
847,590
Liabilities and Stockholders’ Equity
Current liabilities:
Trade accounts payable
$
30,045
$
32,126
Accrued expenses
20,314
21,894
Dividends payable
7,801
7,797
Total current liabilities
58,160
61,817
Long-term debt
535,800
535,800
Other liabilities
6,872
6,376
Deferred income taxes
74,463
68,962
Total liabilities
675,295
672,955
Stockholders’ equity:
Preferred stock, $0.01 par value per share. Authorized 1,000,000
shares; no shares issued or outstanding
—
—
Class A common stock, $0.01 par value per share. Authorized
100,000,000 shares; 36,796,988 and 36,778,988 shares issued and
outstanding as of September 27, 2008 and December 29, 2007
368
368
Class B common stock, $0.01 par value per share. Authorized
25,000,000 shares; no shares issued or outstanding
—
—
Additional paid-in capital
179,308
202,197
Accumulated other comprehensive loss
(4,685
)
(3,718
)
Accumulated deficit
(13,383
)
(24,212
)
Total stockholders’ equity
161,608
174,635
Total liabilities and stockholders’ equity
$
836,903
$
847,590
B&G Foods, Inc. and Subsidiaries
Consolidated Statements of Operations
(Dollars in thousands, except per share data)
(Unaudited)
Thirteen Weeks Ended
Thirty-nine Weeks Ended
September 27,2008
September 29,2007
September 27,2008
September 29,2007
Net sales
$
116,515
$
117,003
$
352,041
$
338,952
Cost of goods sold
85,778
78,725
252,816
230,668
Gross profit
30,737
38,278
99,225
108,284
Operating expenses:
Sales, marketing and distribution expenses
10,813
13,114
34,563
37,184
General and administrative expenses
2,067
3,374
5,307
6,802
Amortization expense—customer
relationships
1,613
1,612
4,838
3,888
Operating income
16,244
20,178
54,517
60,410
Other expenses:
Interest expense, net
11,562
12,374
37,041
40,028
Income before income tax expense
4,682
7,804
17,476
20,382
Income tax expense
1,792
2,958
6,647
7,725
Net income
$
2,890
$
4,846
$
10,829
$
12,657
Earnings per share calculations:
Basic and diluted distributed earnings per share:
Class A common stock
$
0.21
$
0.21
$
0.64
$
0.72
Basic and diluted earnings (loss) per share:
Class A common stock
$
0.08
$
0.13
$
0.29
$
0.49
Class B common stock
$
—
$
—
$
—
$
(0.23
)
B&G Foods, Inc. and Subsidiaries
Reconciliation of EBITDA to Net Income and to Net Cash Provided
by Operating Activities
(Dollars in thousands)
(Unaudited)
Thirteen Weeks Ended
Thirty-nine Weeks Ended
September 27,2008
September 29,2007
September 27,2008
September 29,2007
(Dollars in thousands)
Net income
$
2,890
$
4,846
$
10,829
$
12,657
Income tax expense
1,792
2,958
6,647
7,725
Interest expense, net
11,562
12,374
37,041
40,028
Depreciation and amortization
3,887
3,843
11,420
9,706
EBITDA
20,131
24,021
65,937
70,116
Income tax expense
(1,792
)
(2,958
)
(6,647
)
(7,725
)
Interest expense, net
(11,562
)
(12,374
)
(37,041
)
(40,028
)
Deferred income taxes
2,042
3,102
6,087
6,944
Amortization of deferred financing costs
792
792
2,376
2,397
Write off of deferred debt issuance costs
—
—
—
1,769
Unrecognized gain on interest rate swap
(1,514
)
—
(1,514
)
—
Other
76
—
76
—
Stock-based compensation expense
152
—
510
—
Changes in assets and liabilities, net of effects of business
combination
8,108
(3,213
)
(1,258
)
(12,273
)
Net cash provided by operating activities
$
16,433
$
9,370
$
28,526
$
21,200
(1)
EBITDA is a measure used by management to measure operating
performance. EBITDA is defined as net income before net interest
expense, income taxes, depreciation, and amortization. Management
believes that it is useful to eliminate net interest expense, income
taxes, depreciation and amortization 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 in our business operations, among other
things, to 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 because we believe it is a useful indicator of our
historical debt capacity and ability to service debt and because
covenants in our credit facility and the indentures governing the
senior notes and the senior subordinated notes contain ratios based
on these measures. As a result, internal management reports used
during monthly operating reviews feature the EBITDA metric. However,
management uses this metric 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 this measure as its only measure of
operating performance and liquidity.
EBITDA is not a recognized term under GAAP and does not purport to
be an alternative to operating income or net income as an indicator
of operating performance or any other GAAP measure. EBITDA is not a
complete net cash flow measure because EBITDA is a measure of
liquidity that does not include reductions for cash payments for an
entity's obligation to service its debt, fund its working capital,
capital expenditures and acquisitions, if any, and pay its income
taxes and dividends, if any. Rather, EBITDA is a potential indicator
of an entity's ability to fund these cash requirements. EBITDA also
is not a complete measure of an entity's profitability because it
does not include costs and expenses for depreciation and
amortization, interest and related expenses and income taxes.
Because not all companies use identical calculations, this
presentation of EBITDA may not be comparable to other similarly
titled measures of other companies. However, EBITDA can still be
useful in evaluating our performance against our peer companies
because management believes this measure provides users with
valuable insight into key components of GAAP amounts.