B&G Foods reports Q3 net earnings of US$15.4M, down 9.2% from year-ago period due to loss on extinguishment of debt and acquisition-related transaction costs of US$3.4M; net sales rise 17.6% to US$181.4M

Nevin Barich

PARSIPPANY, New Jersey , October 17, 2013 (press release) – Reaffirms Fiscal 2013 Guidance 

B&G Foods, Inc. (BGS) today announced financial results for the third quarter and first three quarters of 2013.

Highlights (vs. year-ago quarter where applicable):

Net sales increased 17.6% to $181.4 million

Net income decreased 9.2% to $15.4 million due to loss on extinguishment of debt and acquisition related transaction costs of $3.4 million, net of tax

Adjusted net income* increased 10.8% to $18.7 million

Adjusted EBITDA* increased 7.3% to $46.0 million

Adjusted EBITDA guidance remains at $187.0 million to $191.0 million for the full year

David L. Wenner, President and Chief Executive Officer of B&G Foods, stated, “Our business saw continued strong growth in net sales, net income and adjusted EBITDA during the third quarter. Putting acquisition growth aside, our base business net sales followed industry trends and declined for the quarter. Given current trends in the packaged foods industry, we expect growth in our base business to be challenging during the fourth quarter of 2013. We are taking actions to improve sales trends in our base business through new product introductions and selected pricing adjustments and are confident base business net sales will rebound and return to our more typical modest growth during 2014. Meanwhile, our recent acquisitions in snacks appear to be more on trend with changing consumer consumption patterns and we expect significant growth from Pirate’s Booty, Rickland Orchards, New York Style and TrueNorth in fourth quarter 2013 and beyond.”

Financial Results for the Third Quarter of 2013

Net sales for the third quarter of 2013 increased 17.6% to $181.4 million from $154.2 million for the third quarter of 2012. Net sales of Pirate Brands, which B&G Foods acquired at the beginning of July 2013, contributed $16.5 million to the overall increase, net sales of the New York Style and Old London brands, which B&G Foods acquired at the end of October 2012, contributed $11.4 million to the overall increase, and net sales of the TrueNorth brand, which B&G Foods acquired at the beginning of May 2013, contributed $5.4 million to the overall increase. Net sales for B&G Foods’ base business decreased $6.1 million, or 3.9%, attributable to a net price decrease of $3.5 million and a unit volume decrease of $2.6 million.

Gross profit for the third quarter of 2013 increased 10.8% to $61.3 million from $55.3 million in the third quarter of 2012. Gross profit expressed as a percentage of net sales decreased 2.1 percentage points to 33.8% for the third quarter of 2013 from 35.9% in the third quarter of 2012. The decrease in gross profit expressed as a percentage of net sales was primarily attributable to a net price decrease of $3.5 million, and a sales mix shift to lower margin products. Operating income decreased 1.9% to $37.6 million for the third quarter of 2013, from $38.3 million in the third quarter of 2012.

Selling, general and administrative expenses increased $6.3 million, or 42.4%, to $21.3 million for the third quarter of 2013 from $14.9 million for the third quarter of 2012. This increase was primarily due to increases in consumer marketing and selling expenses of $3.5 million (of which $1.6 million was due to timing of planned marketing spending), acquisition-related transaction costs of $2.4 million, and other expenses of $0.4 million.

Net interest expense for the third quarter of 2013 decreased $0.9 million or 7.5% to $11.1 million from $12.0 million for the third quarter of 2012. The decrease in net interest expense in the third quarter of 2013 was primarily attributable to the refinancing of the Company’s long-term debt during the second quarter of 2013, including the issuance of 4.625% senior notes, the repurchase of 7.625% senior notes, and the repayment of tranche B term loans.

The Company’s reported net income under U.S. generally accepted accounting principles (GAAP) was $15.4 million, or $0.29 per diluted share, for the third quarter of 2013, as compared to reported net income of $16.9 million, or $0.35 per diluted share, for the third quarter of 2012. The Company’s adjusted net income for the third quarter of 2013, which excludes the impact of acquisition-related transaction costs and loss on extinguishment of debt, was $18.7 million, or $0.35 per adjusted diluted share. There were no adjustments to net income for the third quarter of 2012.

For the third quarter of 2013, adjusted EBITDA, which excludes the impact of acquisition-related transaction costs, increased 7.3% to $46.0 million from $42.8 million for the third quarter of 2012. There were no adjustments to EBITDA for the third quarter of 2012.

Financial Results for the First Three Quarters of 2013

Net sales for the first three quarters of 2013 increased $53.3 million or 11.6% to $513.4 million from $460.1 million for the first three quarters of 2012. Net sales of the New York Style and Old London brands, which B&G Foods acquired at the end of October 2012, contributed $33.6 million to the overall increase, net sales of Pirate Brands, which B&G Foods acquired at the beginning of July 2013, contributed $16.5 million to the overall increase, and net sales of the TrueNorth brand, which B&G Foods acquired at the beginning of May 2013, contributed $8.5 million to the overall increase. Net sales from the Company’s base business decreased $5.3 million, or 1.2%, attributable to a net price decrease of $3.9 million and a unit volume decrease of $1.4 million.

Gross profit for the first three quarters of 2013 increased 7.3% to $175.8 million from $163.9 million in the first three quarters of 2012. Gross profit expressed as a percentage of net sales decreased 1.4 percentage points to 34.2% for the first three quarters of 2013 from 35.6% in the first three quarters of 2012. The decrease in gross profit expressed as a percentage of net sales was primarily attributable to a net price decrease of $3.9 million and a sales mix shift to lower margin products. Operating income increased 2.2% to $114.1 million for the first three quarters of 2013, from $111.6 million in the first three quarters of 2012.

Selling, general and administrative expenses increased $8.9 million, or 19.2%, to $55.1 million for the first three quarters of 2013 from $46.2 million for the first three quarters of 2012. The increase is due to increases in consumer marketing and selling expenses of $5.1 million (of which $2.2 million was due to timing of planned marketing spending), acquisition-related transaction costs of $2.9 million, warehousing expenses of $0.8 million and other expenses of $0.1 million.

Net interest expense for the first three quarters of 2013 decreased $4.9 million or 13.8% to $30.9 million from $35.8 million in the first three quarters of 2012. The decrease in net interest expense in the first three quarters of 2013 was primarily attributable to the refinancing of the Company’s long-term debt during the second quarter of 2013.

After taking into account $22.1 million of after tax charges relating to the refinancing and acquisition-related transaction costs, the Company’s reported net income under U.S. GAAP was $33.6 million, or $0.63 per diluted share, for the first three quarters of 2013, as compared to reported net income of $49.7 million, or $1.02 per diluted share, for the first three quarters of 2012. The Company’s adjusted net income for the first three quarters of 2013, which excludes the refinancing charges and acquisition-related transaction costs, was $55.7 million, and adjusted diluted earnings per share was $1.05. There were no adjustments to net income for the first three quarters of 2012.

For the first three quarters of 2013, adjusted EBITDA, which excludes acquisition-related transaction costs, increased 7.2% to $134.0 million from $125.0 million for the first three quarters of 2012. There were no adjustments to EBITDA for the first three quarters of 2012.

Guidance

B&G Foods reaffirmed its adjusted EBITDA guidance for fiscal 2013 to a range of approximately $187.0 million to $191.0 million.

Conference Call

B&G Foods will hold a conference call at 4:30 p.m. ET today, October 17, 2013. The call will be webcast live from B&G Foods’ website at www.bgfoods.com under “Investor Relations—Company Overview.” The call can also be accessed live over the phone by dialing (888) 500-6974 for U.S. callers or (719) 325-2383 for international callers.
A replay of the call will be available one hour after the call and can be accessed by dialing (877) 870-5176 or (858) 384-5517 for international callers; the password is 5959800. The replay will be available from October 17, 2013 through October 31, 2013. Investors may also access a web-based replay of the call at the Investor Relations section of B&G Foods’ website, www.bgfoods.com.

About Non-GAAP Financial Measures and Items Affecting Comparability

“Adjusted net income,” “adjusted diluted earnings per share,” “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 acquisition-related transaction costs) 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 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” and “adjusted diluted earnings per share,” which are calculated as reported net income and reported diluted earnings per share adjusted for certain items that affect comparability. These non-GAAP financial measures reflect adjustments to reported net income and diluted earnings per share to eliminate the items identified below. 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 acquisition-related transaction costs and gains or losses on extinguishment of debt, management does not consider these costs 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 third quarter and first three quarters of 2013 and 2012, along with the components of EBITDA and adjusted EBITDA. Also included below are reconciliations of the non-GAAP terms adjusted net income and adjusted diluted earnings per share to reported net income and reported diluted earnings per share.

About B&G Foods, Inc.

B&G Foods and its subsidiaries manufacture, sell and distribute a diversified portfolio of high-quality, branded shelf-stable foods across the United States, Canada and Puerto Rico. Based in Parsippany, New Jersey, B&G Foods’ products are marketed under many recognized brands, including Ac’cent, B&G, B&M, Baker’s Joy, Brer Rabbit, Cream of Rice, Cream of Wheat, Devonsheer, Don Pepino, Emeril’s, Grandma’s Molasses, JJ Flats, Joan of Arc, Las Palmas, Maple Grove Farms, Molly McButter, Mrs Dash, New York Style, Old London, Original Tings, Ortega, Pirate’s Booty, Polaner, Red Devil, Regina, Rickland Orchards, Sa-són, Sclafani, Smart Puffs, Sugar Twin, Trappey’s, TrueNorth, Underwood, Vermont Maid and Wright’s. B&G Foods also sells and distributes two branded household products, Static Guard and Kleen Guard.

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