B+G Foods: Reports Q3-2019 Financial Results

Parsippany / NJ. (bgs) B+G Foods Inc. announced financial results for the third quarter and first three quarters of 2019. Financial results for the third quarter and first three quarters of 2019 reflect the impact of the divestiture of Pirate Brands during the fourth quarter of 2018 and the acquisitions of McCann’s during the third quarter of 2018 and Clabber Girl during the second quarter of 2019.

Third Quarter 2019 Financial Summary

  • Net sales of USD 406.3 million
  • Diluted earnings per share of USD 0.48
  • Adjusted diluted earnings per share1 of USD 0.54
  • Net income of USD 31.1 million
  • Adjusted net income1 of USD 34.9 million
  • Adjusted Ebitda1 of USD 86.2 million
  • Repurchased 1,330,865 shares of common stock at an average price per share of USD 18.55, or USD 24.7 million in the aggregate
  • Refinanced senior notes due 2021 and revolver borrowings with new senior notes due 2027 issued in September 2019 and a new tranche B term loan facility in October 2019

Updated Guidance for Full Year Fiscal 2019

  • Net sales reaffirmed at a range of USD 1.665 billion to USD 1.700 billion
  • Adjusted Ebitda revised to a range of USD 295.0 million to USD 310.0 million
  • Adjusted diluted earnings per share revised to a range of USD 1.65 to USD 1.80

Kenneth G. Romanzi, President and Chief Executive Officer of B+G Foods, stated «Both our 2019 plan and our long-term strategic plan are based on our goal of a stable base business with pricing and cost of goods savings initiatives to offset inflation, complemented by net sales and earnings growth through new product innovation and accretive acquisitions.»

Romanzi continued, «I am happy to report that through three quarters we are successfully executing on our short-term and long-term plans and a number of other corporate initiatives, including the latest launch of exciting plant-based innovation products by Green Giant, which we are striving to make the leading plant-based brand of the future. We have acquired and are nearing the successful completion of the integration of Clabber Girl, the nation’s #1 manufacturer of retail baking powder. And we also recently completed a USD 1 billion refinancing in the third quarter and early part of the fourth quarter – the largest in our Company’s history. The refinancing extends our near term debt maturities and sets up our capital structure for long-term success. We continue to strengthen our organization, including organizational re-design, personnel enhancements and system improvements such as our Oracle JDE integration and a new trade spending system.»

«Finally, we continue to believe our stock is undervalued and repurchased 1.3 million shares of common stock in the third quarter at an average price of USD 18.55, or USD 24.7 million in the aggregate.»

Financial Results for the Third Quarter of 2019

B+G Foods generated net sales of USD 406.3 million for the third quarter of 2019, compared to USD 422.6 million for the third quarter of 2018. The decrease was due in part to the Pirate Brands divestiture, partially offset by the McCann’s and Clabber Girl acquisitions. Net sales of Pirate Brands, which was sold on October 17, 2018 and therefore not part of the Company’s third quarter of 2019 results, were USD 26.6 million during the third quarter of 2018. An additional two weeks of net sales of McCann’s, which was acquired on July 16, 2018 (two weeks after the start of the third quarter of 2018), contributed USD 0.3 million to the Company’s net sales for the third quarter of 2019. Net sales of Clabber Girl, which was acquired on May 15, 2019 and therefore not part of the Company’s third quarter of 2018 results, contributed USD 20.1 million to the Company’s net sales for the third quarter of 2019.

Base business net sales1 for the third quarter of 2019 decreased USD 9.8 million, or 2.5 percent, to USD 385.9 million from USD 395.7 million for the third quarter of 2018. The decrease in base business net sales was attributable to a decrease in unit volume of USD 14.8 million, partially offset by an increase in net pricing of USD 5.0 million, or 1.3 percent of base business net sales.

Net sales of Maple Grove Farms increased USD 1.3 million, or 8.1 percent, and net sales of New York Style increased USD 0.3 million, or 3.2 percent for the third quarter of 2019 as compared to the third quarter of 2018. Net sales of Green Giant (including Le Sueur) decreased USD 6.1 million, or 4.9 percent, net sales of the Company’s spices + seasonings2 decreased USD 2.5 million, or 3.0 percent, and net sales of Victoria decreased USD 0.5 million, or 4.2 percent, for the quarter. Net sales of all other brands in the aggregate decreased USD 2.3 million, or 1.5 percent, for the third quarter of 2019.

Gross profit was USD 108.8 million for the third quarter of 2019, or 26.8 percent of net sales. Excluding the negative impact of USD 1.5 million of acquisition/divestiture-related and non-recurring expenses during the third quarter of 2019, the Company’s gross profit would have been USD 110.3 million, or 27.2 percent of net sales. Gross profit was USD 115.0 million for the third quarter of 2018, or 27.2 percent of net sales. Excluding the negative impact of USD 3.2 million of acquisition-related and non-recurring charges during the third quarter of 2018, which includes expenses relating to the Company’s inventory reduction plan, the Company’s gross profit would have been USD 118.2 million, or 28.0 percent of net sales.

Selling, general and administrative expenses decreased USD 1.9 million, or 4.7 percent, to USD 38.1 million for the third quarter of 2019 from USD 40.0 million for the third quarter of 2018. The decrease was composed of decreases in selling expenses of USD 1.6 million, warehousing expenses of USD 0.8 million and consumer marketing expenses of USD 0.5 million, partially offset by increases in other general and administrative expenses of USD 0.8 million and acquisition/divestiture-related and non-recurring expenses of USD 0.2 million. Expressed as a percentage of net sales, selling, general and administrative expenses improved by 0.1 percentage points to 9.4 percent for the third quarter of 2019, compared to 9.5 percent for the third quarter of 2018.

Net interest expense decreased USD 3.7 million, or 13.5 percent, to USD 24.2 million for the third quarter of 2019 from USD 27.9 million in the third quarter of 2018. The decrease was primarily attributable to a reduction in average long-term debt outstanding during the third quarter of 2019 as compared to the third quarter of 2018, primarily as a result of the use of the net proceeds from the sale of Pirate Brands to prepay long-term debt during the fourth quarter of 2018, which was partially offset by additional borrowings made in the second quarter of 2019 to fund the Clabber Girl acquisition.

There was no loss on extinguishment of debt for the third quarter of 2019 or the third quarter of 2018.

The Company’s net income was USD 31.1 million, or USD 0.48 per diluted share, for the third quarter of 2019, compared to net income of USD 32.0 million, or USD 0.48 per diluted share, for the third quarter of 2018. The Company’s adjusted net income1 for the third quarter of 2019 was USD 34.9 million, or USD 0.54 per adjusted diluted share, compared to USD 37.5 million, or USD 0.57 per adjusted diluted share, for the third quarter of 2018.

For the third quarter of 2019, adjusted Ebitda was USD 86.2 million, a decrease of USD 5.7 million, or 6.1 percent, compared to USD 91.9 million for the third quarter of 2018. The decrease in adjusted Ebitda was primarily attributable to the divestiture of Pirate Brands in the fourth quarter of 2018, which was offset in part by improved operating performance, as well as the acquisition of Clabber Girl in the second quarter of 2019. Adjusted Ebitda as a percentage of net sales was 21.2 percent for the third quarter of 2019, compared to 21.7 percent in the third quarter of 2018.

Financial Results for the First Three Quarters of 2019

B+G Foods generated net sales of USD 1,190.2 million for the first three quarters of 2019, compared to USD 1,242.7 million for the first three quarters of 2018. The decrease was primarily attributable to the Pirate Brands divestiture, offset in part by the McCann’s and Clabber Girl acquisitions. Net sales of Pirate Brands, which was sold on October 17, 2018 and therefore not part of the Company’s first three quarters of 2019 results, were USD 72.8 million during the first three quarters of 2018. An additional two weeks of net sales of McCann’s, which was acquired on July 16, 2018 (two weeks after the start of the third quarter of 2018), contributed USD 0.3 million to the Company’s net sales for the first three quarters of 2019. Net sales of Clabber Girl, which was acquired on May 15, 2019 and therefore not part of the Company’s first three quarters of 2018 results, contributed USD 28.5 million to the Company’s net sales for the first three quarters of 2019.

Base business net sales for the first three quarters of 2019 decreased USD 11.4 million, or 1.0 percent, to USD 1,156.0 million from USD 1,167.4 million for the first three quarters of 2018. The decrease in base business net sales was attributable to a decrease in unit volume of USD 27.5 million and the negative impact of foreign currency of USD 0.1 million, partially offset by an increase in net pricing of USD 16.2 million, or 1.4 percent of base business net sales.

Net sales of Green Giant (including Le Sueur) increased USD 9.1 million, or 2.5 percent, in the first three quarters of 2019, as compared to the first three quarters of 2018. Net sales of Maple Grove Farms increased USD 3.0 million, or 5.8 percent; net sales of New York Style increased USD 1.9 million, or 7.3 percent; and net sales of Ortega increased USD 0.5 million, or 0.4 percent, for the first three quarters of 2019 as compared to the first three quarters of 2018. Net sales of the Company’s spices + seasonings decreased USD 5.4 million, or 2.1 percent; net sales of Victoria decreased USD 1.7 million, or 5.0 percent; and net sales of Cream of Wheat decreased USD 1.3 million, or 2.8 percent, for the first three quarters of 2019. Net sales of all other brands in the aggregate decreased USD 17.5 million, or 6.0 percent, for the first three quarters of 2019.

Gross profit was USD 288.7 million for the first three quarters of 2019, or 24.3 percent of net sales. Excluding the negative impact of USD 19.5 million of acquisition/divestiture-related and non-recurring expenses during the first three quarters of 2019, which includes expenses related to the Company’s inventory reduction plan, the Company’s gross profit would have been USD 308.2 million, or 25.9 percent of net sales. Gross profit was USD 299.6 million for the first three quarters of 2018, or 24.1 percent of net sales. Excluding the negative impact of USD 39.4 million of acquisition-related and non-recurring charges during the first three quarters of 2018, which includes expenses relating to the Company’s inventory reduction plan, the Company’s gross profit would have been USD 339.0 million, or 27.3 percent of net sales.

Selling, general and administrative expenses decreased USD 3.5 million, or 3.0 percent, to USD 116.3 million for the first three quarters of 2019 from USD 119.8 million for the first three quarters of 2018. The decrease was composed of decreases in consumer marketing expenses of USD 4.1 million, selling expenses of USD 3.2 million and warehousing expenses of USD 1.4 million, partially offset by increases in acquisition/divestiture-related and non-recurring expenses of USD 3.0 million and other general and administrative expenses of USD 2.2 million. Expressed as a percentage of net sales, selling, general and administrative expenses increased by 0.2 percentage points to 9.8 percent for the first three quarters of 2019, compared to 9.6 percent for the first three quarters of 2018.

Net interest expense decreased USD 13.4 million, or 16.0 percent, to USD 70.4 million for the first three quarters of 2019 from USD 83.8 million in the first three quarters of 2018. The decrease was primarily attributable to a reduction in average long-term debt outstanding during the first three quarters of 2019 as compared to the first three quarters of 2018, primarily as a result of the use of the net proceeds from the sale of Pirate Brands to prepay long-term debt during the fourth quarter of 2018 and other prepayments of long-term debt made during the first and second quarters of 2018, which was partially offset by additional borrowings made in the second quarter of 2019 to fund the Clabber Girl acquisition.

There was no loss on extinguishment of debt for the first three quarters of 2019, compared to a loss on extinguishment of debt for the first three quarters of 2018 of USD 3.3 million, which included the write-off of deferred debt financing costs and unamortized discount of USD 2.8 million and USD 0.5 million, respectively, relating to the repayment of USD 150.0 million aggregate principal amount of the Company’s then outstanding tranche B term loans.

The Company’s net income was USD 66.1 million, or USD 1.01 per diluted share, for the first three quarters of 2019, compared to net income of USD 60.5 million, or USD 0.91 per diluted share, for the first three quarters of 2018. The Company’s adjusted net income for the first three quarters of 2019 was USD 88.4 million, or USD 1.35 per adjusted diluted share, compared to USD 98.8 million, or USD 1.49 per adjusted diluted share, for the first three quarters of 2018.

For the first three quarters of 2019, adjusted Ebitda was USD 233.0 million, a decrease of USD 22.7 million, or 8.9 percent, compared to USD 255.7 million for the first three quarters of 2018. The decrease in adjusted Ebitda was primarily attributable to the divestiture of Pirate Brands in the fourth quarter of 2018, which was offset in part by improved operating performance, as well as the acquisitions of McCann’s in the third quarter of 2018 and Clabber Girl in the second quarter of 2019. Adjusted Ebitda as a percentage of net sales was 19.6 percent for the first three quarters of 2019, compared to 20.6 percent in the first three quarters of 2018.

Full Year Fiscal 2019 Guidance

B+G Foods updated its guidance for full year fiscal 2019. Net sales are expected to be approximately USD 1.665 billion to USD 1.700 billion, adjusted Ebitda is now expected to be approximately USD 295.0 million to USD 310.0 million and adjusted diluted earnings per share is now expected to be approximately USD 1.65 to USD 1.80.

For fiscal 2019, net interest expense is now expected to be approximately USD 95.5 million to USD 99.5 million (including cash interest payments which are now expected to be approximately USD 92.0 million to USD 95.0 million), depreciation expense is expected to be approximately USD 41.0 million, amortization expense is expected to be approximately USD 18.5 million, cash taxes, excluding the tax effects resulting from the gain on sale of Pirate Brands, are expected to be approximately USD 5.0 million or less and capital expenditures are expected to be approximately USD 45.0 million to USD 50.0 million.

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/divestiture-related and non-recurring expenses, gains and losses, including severance and other expenses primarily relating to a workforce reduction; the non-cash accounting impact of the Company’s inventory reduction plan; restructuring expenses; gains and losses on the sale of assets and other charges reflected in the Company’s reconciliation of historic non-GAAP financial measures, the amounts of which, based on past experience, could be material. For additional information regarding B+G Foods’ non-GAAP financial measures, see «About Non-GAAP Financial Measures and Items Affecting Comparability» below.

Debt Refinancing

On September 26, 2019, the Company completed a registered public offering of USD 550.0 million aggregate principal amount of 5.25 percent senior notes due 2027. On October 10, 2019, the Company amended its amended and restated credit agreement, which amendment, among other things, provided for an incremental USD 450.0 million tranche B term loan facility, which closed and funded on October 10, 2019. The Company used the proceeds of the tranche B term loans, together with the net proceeds of its senior notes offering, to redeem all USD 700.0 million of the Company’s 4.625 percent senior notes due 2021, repay a portion of its borrowings under its revolving credit facility and pay related fees and expenses.

Stock Repurchase Program

During the third quarter of 2019, the Company repurchased and retired 1,330,865 shares of common stock at an average price per share, excluding fees and commissions, of USD 18.55, or USD 24.7 million in the aggregate. The Company has USD 25.3 million available for future repurchases of common stock under the stock repurchase program and has 64,044,649 shares of common stock outstanding.

Under the stock repurchase program, which expires on March 15, 2020, the Company may purchase shares of the Company’s common stock 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.

The timing and amount of stock repurchases under the program, if any, will be at the discretion of management, and will depend on a variety of factors, including price, available cash, general business and market conditions and other investment opportunities. Therefore, there can be no assurance as to the number or aggregate dollar amount of shares, if any, that will be repurchased under the program. The Company may discontinue the program at any time. Any shares repurchased pursuant to the program will be retired.

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