B&G Foods reports Q1 net earnings of US$17.8M, compared to year-ago earnings of US$19.6M; net sales rise 15.7% to US$198.1M

Nevin Barich

PARSIPPANY, New Jersey , April 16, 2014 (press release) – Increases Fiscal 2014 Guidance

B&G Foods, Inc. (BGS) today announced financial results for the first quarter of 2014.

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

Net sales increased 15.7% to $198.1 million

Net cash provided by operating activities increased 34.2% to $31.0 million

Adjusted EBITDA* increased 1.7% to $46.5 million

Increased quarterly dividend rate 3.0% to $0.34 per share beginning with the April 30, 2014 quarterly payment

Following quarter end, announced an agreement to acquire Specialty Brands of America, which is expected to generate on an annualized basis after being fully integrated into B&G
Foods net sales of approximately $85.0 million and adjusted EBITDA of approximately $20.0 million

Increased adjusted EBITDA guidance for fiscal year 2014 to a range of approximately $209.0 million to $214.0 million, assuming that the Specialty Brands acquisition closes in April 2014

Established an adjusted diluted earnings per share guidance range of approximately $1.59 to $1.65 for fiscal year 2014

David L. Wenner, President and Chief Executive Officer of B&G Foods, stated, “Our very strong cash flow performance in the face of base business volume declines was encouraging and was the result of our recent acquisitions and our Continuous Improvement cost reduction efforts. Our base business net sales for the quarter were negatively impacted by general volume weakness in the industry, unusually severe weather in the Northeast and the late Easter holiday. However, we continue to believe that our base business volume will rebound by year end and we remain focused on growing both our base business and the brands we acquired last year. In addition, we believe that our acquisition of Specialty Brands, which is expected to close later this month, will be immediately accretive to our earnings per share and free cash flow and will help position B&G Foods for continued growth in 2014 and beyond.”

Financial Results for the First Quarter of 2014

Net sales for the first quarter of 2014 increased 15.7% to $198.1 million from $171.2 million for the first quarter of 2013. Net sales of Pirate Brands, which B&G Foods acquired in July 2013, contributed $20.4 million to the overall increase, net sales of the Rickland Orchards brand, acquired in October 2013, contributed $8.6 million to the overall increase and net sales of the TrueNorth brand, acquired in May 2013, contributed $5.8 million to the overall increase. Net sales for B&G Foods’ base business decreased $7.9 million, or 4.6%, attributable to unit volume and net price decreases of $5.2 million and $2.7 million, respectively.

Gross profit for the first quarter of 2014 increased 10.0% to $64.7 million from $58.8 million in the first quarter of 2013. Gross profit expressed as a percentage of net sales decreased 1.8 percentage points to 32.6% for the first quarter of 2014 from 34.4% in the first quarter of 2013, primarily attributable to a net price decrease of $2.7 million and an increase in distribution costs. Operating income decreased 3.5% to $38.8 million for the first quarter of 2014, from $40.2 million in the first quarter of 2013.

Selling, general and administrative expenses increased $6.1 million, or 36.9%, to $22.6 million for the first quarter of 2014 from $16.5 million for the first quarter of 2013. This increase was primarily due to increases in consumer marketing of $3.8 million, selling expenses of $1.3 million (including increases of $0.7 million for brokerage expenses and $0.4 million for salesperson compensation), acquisition-related transaction costs of $0.7 million and warehousing expenses of $0.6 million, partially offset by a decrease in all other expenses of $0.3 million.

Net interest expense for the first quarter of 2014 increased $1.3 million or 14.0% to $11.1 million from $9.8 million for the first quarter of 2013. The increase in net interest expense for the first quarter was primarily attributable to an increase in the Company’s average debt outstanding.

The Company’s reported net income under U.S. generally accepted accounting principles (GAAP) was $17.8 million, or $0.33 per diluted share, for the first quarter of 2014, as compared to reported net income of $19.6 million, or $0.37 per diluted share, for the first quarter of 2013. The Company’s adjusted net income for the first quarter of 2014, which excludes the after tax impact of acquisition-related transaction costs, was $18.3 million, or $0.34 per adjusted diluted share. There were no adjustments to net income for the first quarter of 2013.

For the first quarter of 2014, adjusted EBITDA, which excludes the impact of acquisition-related transaction costs, increased 1.7% to $46.5 million from $45.7 million for the first quarter of 2013.

Specialty Brands of America Acquisition

On April 3, 2014, B&G Foods entered into an agreement to acquire Specialty Brands of America, Inc. for approximately $155 million in cash, subject to certain closing and post-closing adjustments. B&G Foods projects that following the acquisition, Specialty Brands will generate on an annualized basis after being fully integrated into B&G Foods net sales of approximately $85.0 million and adjusted EBITDA of approximately $20.0 million.

Specialty Brands is a leading packaged foods company with a portfolio of strong and differentiated brands. Specialty Brands’ largest brand is Bear Creek Country Kitchens. Bear Creek is the leading brand of hearty dry soups in the United States. Bear Creek also offers a line of savory pasta dishes and hearty rice dishes. Specialty Brands also offers Spring Tree, Cary’s and MacDonald’s pure maple syrups and pancake syrups, New York Flatbreads and Canoleo margarine.

B&G Foods intends to fund the acquisition with borrowings under its existing revolving credit facility. B&G Foods expects the acquisition to close in April 2014, subject to the satisfaction of customary closing conditions.

Guidance

B&G Foods increased its adjusted EBITDA guidance for fiscal 2014 to a range of approximately $209.0 million to $214.0 million. B&G Foods also set its adjusted diluted earnings per share guidance for fiscal 2014 at a range of $1.59 to $1.65. In each case, this guidance assumes, among other things, that the Specialty Brands acquisition closes in April 2014.

Conference Call

B&G Foods will hold a conference call at 4:30 p.m. ET today, April 16, 2014. 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) 468-2440 for U.S. callers or (719) 325-2448 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 9819268. The replay will be available from April 16, 2014 through April 30, 2014. 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, which include outside fees and expenses, contingent consideration expense and restructuring and consolidation costs of acquisitions) 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” 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 first quarters of 2014 and 2013, 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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