B+G Foods: Reports Q4 and Full Year 2016 Results

Parsippany / NJ. (bgs) B+G Foods Inc. announced financial results for the fourth quarter and full year 2016. Highlights versus prior year quarter and prior full year where applicable:

  • Completed the acquisitions of the spices and seasonings business of ACH Foods Companies, Inc. on November 21, 2016, and Victoria Fine Foods on December 2, 2016 – transitions and integrations on track
  • Net sales increased 20.8 percent to 413.7 million USD for the quarter and 44.0 percent to 1.39 billion USD for the year
  • Net income increased 23.8 percent to 13.6 million USD for the quarter and 58.4 percent to 109.4 million USD for the year
  • Adjusted net income* decreased 22.2 percent to 19.4 million USD for the quarter (primarily due to the timing of the increase in consumer marketing described below) and increased 51.0 percent to 131.1 million USD for the year
  • Diluted earnings per share increased 5.3 percent to 0.20 USD for the quarter and 41.8 percent to 1.73 USD for the year
  • Adjusted diluted earnings per share* decreased 32.6 percent to 0.29 USD for the quarter (primarily due to the timing of the increase in consumer marketing described below) and increased 35.3 percent to 2.07 USD for the year
  • Adjusted Ebitda* decreased 7.4 percent to 62.4 million USD for the quarter (primarily due to the timing of the increase in consumer marketing described below) and increased 47.9 percent to 322.0 million USD for the year
  • Consumer marketing spending increased 208.5 percent to 28.8 million USD for the quarter and 148.2 percent to 69.6 million USD for the year, primarily a result of the relaunch of the iconic Green Giant brand
  • Returned 100.8 million USD to stockholders in the form of dividends during the year
  • Guidance for full year fiscal 2017:
    • Net sales of 1.64 billion USD to 1.68 billion USD
    • Adjusted Ebitda of 360.0 million USD to 375.0 million USD
    • Adjusted diluted earnings per share of 2.13 USD to 2.27 USD

«In 2016, much of our year was focused on the Green Giant integration, including the relaunch of the iconic Green Giant brand with a new and exciting marketing campaign and the introduction of several new and innovative products that have been a hit with consumers. We also continued to execute a key tenet of our growth strategy by completing two acquisitions in the fourth quarter; the spices and seasonings business of ACH Food Companies and the Victoria brand. Our base business, however, was not immune to the top-line challenges affecting our industry», stated Robert C. Cantwell, President and Chief Executive Officer of B+G Foods.

«In just over two years we have nearly doubled the size of the B+G Foods, and with rapid growth comes significant challenges but also significant opportunities. For 2017 our top priorities are to deliver superior customer service, stabilize our core portfolio of brands through strategic and tactical marketing support, continue to harness the power and positive momentum of the Green Giant brand to drive top-line growth, and successfully integrate our two most recent acquisitions. We have a significant amount of work ahead of us in 2017, but my confidence in our team and our ability to deliver results and achieve our goals is as strong as ever. I look forward to another successful year for B+G Foods and our stockholders».

Financial Results for the Fourth Quarter of 2016

Net sales increased 71.4 million USD, or 20.8 percent, to 413.7 million USD for the fourth quarter of 2016 from 342.3 million USD for the fourth quarter of 2015. An additional month of net sales of Green Giant, acquired on November 2, 2015, contributed 46.5 million USD to net sales for the quarter. In addition, net sales of the spices and seasonings business, acquired on November 21, 2016, and net sales of Victoria, acquired on December 2, 2016, contributed 28.2 million USD and 3.2 million USD, respectively, to the Company’s net sales for the quarter.

Base business net sales for the fourth quarter of 2016 decreased 5.6 million USD, or 1.6 percent, to 335.7 million USD from 341.3 million USD for the fourth quarter of 2015. The 5.6 million USD decrease was attributable to a decrease in unit volume of 2.2 million USD, or 0.6 percent, and a decrease in net pricing of 3.6 million USD, or 1.1 percent, partially offset by the favorable impact of currency fluctuations on foreign sales of approximately 0.2 million USD, or 0.1 percent.

A little more than half of the Company’s base business net sales decline during the fourth quarter was attributable to a challenging competitive environment for its syrup brands, which in the aggregate declined 3.1 million USD for the quarter. The decline was primarily attributable to pure maple syrup price deflation due to the strength of the U.S. Dollar relative to the Canadian Dollar, which has resulted in increased competition in the maple syrup category and contractually mandated price reductions with certain of the Company’s foodservice customers.

Gross profit increased 18.3 million USD, or 20.7 percent, to 106.9 million USD for the fourth quarter of 2016 from 88.6 million USD for the fourth quarter of 2015. Gross profit expressed as a percentage of net sales decreased to 25.8 percent in the fourth quarter of 2016 from 25.9 percent in the fourth quarter of 2015, a decrease of 0.1 percentage points.

Selling, general and administrative expenses increased 22.2 million USD, or 60.6 percent, to 58.8 million USD for the fourth quarter of 2016 from 36.6 million USD for the fourth quarter of 2015, primarily due to the Green Giant acquisition. The increase was attributable to increases in consumer marketing of 19.5 million USD, warehousing expenses of 4.1 million USD, acquisition-related expenses of 2.7 million USD, partially offset by decreases in general and administrative expenses of 3.6 million USD (primarily related to the timing of accruals for performance based compensation), and selling expenses of 0.5 million USD (which includes a 1.0 million USD decrease in salesperson compensation partially offset by a 0.5 million USD increase in brokerage expenses). Expressed as a percentage of net sales, selling, general and administrative expenses increased 3.5 percentage points to 14.2 percent for the fourth quarter of 2016 from 10.7 percent for the fourth quarter of 2015.

Net interest expense increased 1.6 million USD, or 9.6 percent, to 18.9 million USD for the fourth quarter of 2016 from 17.3 million USD in the fourth quarter of 2015. The increase was primarily attributable to additional indebtedness outstanding during the fourth quarter of 2016 as compared to the fourth quarter of 2015 as a result of the Green Giant acquisition, the spices and seasonings acquisition and the Victoria acquisition.

The Company’s reported net income under U.S. generally accepted accounting principles (GAAP) was 13.6 million USD, or 0.20 USD per diluted share, for the fourth quarter of 2016, as compared to reported net income of 11.0 million USD, or 0.19 USD per diluted share, for the fourth quarter of 2015. The Company’s adjusted net income for the fourth quarter of 2016, which excludes the after-tax impact of the amortization of acquisition-related inventory step-up and other acquisition-related expenses was 19.4 million USD, or 0.29 USD per adjusted diluted share. The Company’s adjusted net income for the fourth quarter of 2015, which excludes an acquisition-related adjustment to deferred taxes, the after-tax impact of the amortization of acquisition-related inventory step-up, other acquisition-related expenses and distribution restructuring expenses, was 25.0 million USD, or 0.43 USD per adjusted diluted share.

For the fourth quarter of 2016, adjusted Ebitda (which excludes the impact of the amortization of acquisition-related inventory step-up and other acquisition-related expenses), decreased 7.4 percent to 62.4 million USD from 67.4 million USD for the fourth quarter of 2015.

Financial Results for Full Year 2016

Net sales increased 424.9 million USD, or 44.0 percent, to 1’391.3 million USD for fiscal 2016 from 966.4 million USD for fiscal 2015. An additional ten months of net sales of Green Giant, acquired on November 2, 2015, and an additional almost six months of net sales of Mama Mary’s, acquired on July 10, 2015, contributed 397.6 million USD and 19.4 million USD, respectively, to net sales for fiscal 2016. In addition, net sales of the spices and seasonings business, acquired on November 21, 2016, and net sales of Victoria, acquired on December 2, 2016, contributed 28.2 million USD and 3.2 million USD, respectively, to the overall net sales increase.

Base business net sales for fiscal 2016 decreased 20.0 million USD, or 2.1 percent, to 942.3 million USD from 962.3 million USD for fiscal 2015. The 20.0 million USD decrease was attributable to a decrease in unit volume of 13.5 million USD, or 1.4 percent, a decrease in net pricing of 6.0 million USD, or 0.6 percent, and the negative impact of currency fluctuations on foreign sales of approximately 0.5 million USD, or 0.1 percent.

A primary driver of the decline in base business net sales for fiscal 2016 was the Company’s syrup business. The Company’s syrup brands have been experiencing a challenging competitive environment and the net sales of those brands declined in the aggregate 7.7 million USD for the year. The decline was primarily attributable to maple syrup price deflation due to the strength of the U.S. Dollar relative to the Canadian Dollar, which has resulted in increased competition in the maple syrup category and contractually mandated price reductions with certain of the Company’s foodservice customers. Another significant factor in the decline in base business net sales for fiscal 2016 was the TrueNorth brand, which declined 6.4 million USD, or 33.9 percent. The TrueNorth net sales decline was primarily the result of historically high almond prices in 2015. In response to increased almond costs, the Company increased the selling price for TrueNorth products, which had a negative impact on consumer demand. Although the Company has rolled back pricing as almond prices have begun to return to historical norms, consumer demand has not returned to prior levels. Base business net sales were also negatively impacted by net sales of the Company’s Ortega products, which decreased 3.7 million USD, or 2.6 percent. A portion of the decrease was attributable to the effects of the product recall we announced in November 2014, which caused an increase in net sales of Ortega in fiscal 2015 due to customers restocking inventory of products affected by the recall, partially offset by 1.2 million USD of customer refunds related to the recall. 1.5 million USD of the decrease in net sales of Ortega was due to a net pricing decrease in fiscal 2016.

Gross profit increased 158.4 million USD, or 54.7 percent, to 448.0 million USD for fiscal 2016 from 289.6 million USD for fiscal 2015. Gross profit expressed as a percentage of net sales increased to 32.2 percent in fiscal 2016 from 30.0 percent in fiscal 2015, an increase of 2.2 percentage points. The increase in gross profit percentage was primarily driven by the acquisition of Green Giant. Gross profit percentage was also positively impacted by decreased costs for commodities, packaging and distribution for the base business and improved product mix, which was partially offset by the unfavorable impact the decrease in base business sales volume had on cost absorption, a net reduction in base business pricing, and the impact of the write-off of Rickland Orchards inventory in connection with the Company’s decision to discontinue the brand.

Selling, general and administrative expenses increased 68.9 million USD, or 65.0 percent, to 174.8 million USD for fiscal 2016 from 105.9 million USD for fiscal 2015, primarily due to the Green Giant acquisition. Acquisition-related expenses and distribution restructuring expenses increased 10.0 million USD for the year. The remaining 58.9 million USD of the increase was attributable to increases in consumer marketing of 41.6 million USD, selling expenses of 8.7 million USD (which includes a 7.5 million USD increase in brokerage expenses and a 1.2 million USD increase in salesperson compensation), warehousing expenses of 7.4 million USD and general and administrative expenses of 1.2 million USD (primarily related to compensation). Expressed as a percentage of net sales, selling, general and administrative expenses increased 1.5 percentage points to 12.5 percent for fiscal 2016 from 11.0 percent for fiscal 2015.

Net interest expense increased 23.4 million USD, or 45.6 percent, to 74.5 million USD for fiscal 2016 from 51.1 million USD in fiscal 2015. The increase was primarily attributable to additional indebtedness outstanding during fiscal 2016 as compared to fiscal 2015 as a result of the Green Giant acquisition, the spices and seasonings acquisition and the Victoriaacquisition.

The Company’s reported net income under GAAP was 109.4 million USD, or 1.73 USD per diluted share, for fiscal 2016, as compared to reported net income of 69.1 million USD, or 1.22 USD per diluted share, for fiscal 2015. The Company’s adjusted net income for fiscal 2016, which excludes an intangible asset impairment-related adjustment to deferred taxes resulting from the Company’s decision to discontinue the Rickland Orchards brand, the after-tax impact of the non-cash impairment charge and the related loss on disposal of inventory, loss on extinguishment of debt, the amortization of acquisition-related inventory step-up, other acquisition-related expenses and distribution restructuring expenses, was 131.1 million USD, or 2.07 USD per adjusted diluted share. The Company’s adjusted net income for fiscal 2015, which excludes the acquisition-related adjustment to deferred taxes and the after-tax impact of the amortization of acquisition-related inventory step-up, other acquisition-related expenses and distribution restructuring expenses and the loss on product recall, was 86.8 million USD, or 1.53 USD per adjusted diluted share.

For fiscal 2016, adjusted Ebitda (which excludes the impact of the amortization of acquisition-related inventory step-up, the non-cash intangible asset impairment charge and related loss on disposal of inventory, loss on product recall and other acquisition-related and distribution restructuring expenses), increased 47.9 percent to 322.0 million USD from 217.8 million USD for full year 2015.

2017 Guidance

For full year 2017, net sales is expected to be approximately 1.64 billion USD to 1.68 billion USD, consumer marketing spending is expected to be approximately 75.0 million USD to 80.0 million USD, with approximately 35 percent of the total spending occurring in the first quarter of 2017, adjusted Ebitda is expected to be approximately 360.0 million USD to 375.0 million USD and adjusted diluted earnings per share is expected to be 2.13 USD to 2.27 USD.

B+G Foods provides earnings guidance only on a non-GAAP basis and does not provide a reconciliation of the Company’s forward-looking adjusted Ebitda and adjusted diluted earnings per share guidance to the most directly comparable GAAP financial measures because of the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations, including adjustments that could be made for deferred taxes; loss on extinguishment of debt; acquisition-related expenses, gains and losses; intangible asset impairment charges and related asset write-offs; loss on product recalls; restructuring expenses; and other charges reflected in our reconciliation of historic non-GAAP financial measures, the amounts of which, based on past experience, could be material.

bakenet:eu