Parsippany / NJ. (bgs) B+G Foods Inc. announced financial results for the third quarter and first three quarters of 2020, which include the favorable impact of continued strong demand for the Company’s products due to the ongoing Covid-19 pandemic and an extra reporting week in the third quarter and first three quarters of 2020 as compared to the third quarter and first three quarters of 2019.
Third Quarter 2020 Financial Summary versus Q3-2019
- Net sales increased 22.0 percent to USD 495.8 million
- Base business net sales1 increased 21.9 percent to USD 495.4 million
- Diluted earnings per share increased 50.0 percent to USD 0.72
- Adjusted diluted earnings per share1 increased 37.0 percent to USD 0.74
- Net income increased 50.6 percent to USD 46.8 million
- Adjusted net income1 increased 37.4 percent to USD 47.9 million
- Adjusted Ebitda increased 21.3 percent to USD 104.6 million
Commenting on the results, Kenneth G. Romanzi, President and Chief Executive Officer of B+G Foods, stated, «During the quarter, B+G Foods continued to benefit from very strong demand for our products as a result of the ongoing Covid-19 pandemic. Our portfolio of brands and products are very well-suited for the stay at home, work at home, cook and eat at home world. Thanks to the tremendous efforts of our employees, to date we have been able to keep our employees safe, avoid material disruptions to our supply chain and capitalize on the unprecedented increase in demand. We expect to see continued strong demand for our products throughout the fourth quarter and into 2021.» Romanzi continued, «We are also very excited to be adding the Crisco brand of oils and shortening to our family of brands and expect to close the Crisco acquisition during the fourth quarter. Consistent with our acquisition strategy, the acquisition is expected to be immediately accretive to our earnings per share and free cash flow.»
Guidance for Full Year Fiscal 2020 (excluding the impact of the pending Crisco acquisition):
- Net sales range of USD 1.950 billion to USD 1.970 billion
- Adjusted Ebitda range of USD 360.0 million to USD 370.0 million
- Adjusted diluted earnings per share range of USD 2.30 to USD 2.40
Financial Results for the Third Quarter of 2020
Net sales for the third quarter of 2020 increased USD 89.5 million, or 22.0 percent, to USD 495.8 million from USD 406.3 million for the third quarter of 2019. The increase was primarily attributable to materially increased net sales resulting from increased demand for the Company’s products due to the Covid-19 pandemic, as well as one extra week in the third quarter of fiscal 2020 compared to the third quarter of fiscal 2019. The Company estimates that the additional week in the third quarter of 2020 contributed approximately USD 35.0 million to the Company’s net sales for the quarter. The Company’s net sales also benefited from the Farmwise acquisition, which was completed on February 19, 2020. Net sales of Farmwise contributed USD 0.4 million to the Company’s net sales for the third quarter of 2020.
Base business net sales1 for the third quarter of 2020 increased USD 89.1 million, or 21.9 percent, to USD 495.4 million from USD 406.3 million for the third quarter of 2019. The increase in base business net sales reflected an increase in unit volume of USD 89.8 million, partially offset by a slight decrease in net pricing of USD 0.4 million, or 0.1 percent of base business net sales, and the negative impact of foreign currency of USD 0.3 million.
Net sales of Green Giant (including Le Sueur) increased USD 37.9 million, or 31.5 percent; net sales of the Company’s spices + seasonings2 increased USD 24.3 million, or 29.5 percent; net sales of Victoria increased USD 6.3 million, or 55.9 percent; net sales of Maple Grove Farms increased USD 3.2 million, or 18.2 percent; net sales of Cream of Wheat increased USD 2.4 million, or 17.2 percent; and net sales of Ortega increased USD 1.0 million, or 3.0 percent, for the third quarter of 2020 as compared to the third quarter of 2019. Net sales of all other brands in the aggregate increased USD 14.0 million, or 11.1 percent, for the third quarter of 2020.
Gross profit was USD 136.0 million for the third quarter of 2020, or 27.4 percent of net sales. Excluding the negative impact of USD 0.1 million of acquisition/divestiture-related and non-recurring expenses during the third quarter of 2020, the Company’s gross profit would have been USD 136.1 million, or 27.5 percent of net sales. 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, which includes expenses relating to the trailing non-cash accounting impact of the Company’s 2018 inventory reduction plan, the Company’s gross profit would have been USD 110.3 million, or 27.2 percent of net sales.
Selling, general and administrative expenses increased USD 5.3 million, or 13.9 percent, to USD 43.4 million for the third quarter of 2020 from USD 38.1 million for the third quarter of 2019. The increase was composed of increases in consumer marketing expenses of USD 3.8 million, general and administrative expenses of USD 2.7 million, selling expenses of USD 1.8 million and warehousing expenses of USD 0.3 million, partially offset by a decrease in acquisition/divestiture-related and non-recurring expenses of USD 3.3 million. Expressed as a percentage of net sales, selling, general and administrative expenses improved by 0.6 percentage points to 8.8 percent for the third quarter of 2020, compared to 9.4 percent for the third quarter of 2019.
Net interest expense increased USD 2.2 million, or 9.4 percent, to USD 26.4 million for the third quarter of 2020 from USD 24.2 million in the third quarter of 2019. The increase was primarily attributable to (1) additional interest expense of USD 1.5 million resulting from one extra week in the third quarter of 2020 and the accelerated amortization of USD 1.1 million of deferred debt financing costs resulting from the Company’s voluntary partial prepayment of tranche B term loans. These increases were partially offset by a reduction in average long-term debt outstanding during the quarter, primarily due to the voluntary partial prepayment of USD 75.0 million of tranche B term loans in August 2020.
The Company’s net income was USD 46.8 million, or USD 0.72 per diluted share, for the third quarter of 2020, compared to net income of USD 31.1 million, or USD 0.48 per diluted share, for the third quarter of 2019. The Company’s adjusted net income1 for the third quarter of 2020 was USD 47.9 million, or USD 0.74 per adjusted diluted share, compared to USD 34.9 million, or USD 0.54 per adjusted diluted share, for the third quarter of 2019.
For the third quarter of 2020, adjusted Ebitda was USD 104.6 million, an increase of USD 18.4 million, or 21.3 percent, compared to USD 86.2 million for the third quarter of 2019. The increase in adjusted Ebitda was primarily attributable to the positive impact of increased base business unit volume on the Company’s net sales as a result of the Covid-19 pandemic, as well as one extra week in the third quarter of fiscal 2020 compared to the third quarter of fiscal 2019. Adjusted Ebitda as a percentage of net sales was 21.1 percent for the third quarter of 2020, compared to 21.2 percent in the third quarter of 2019.
Financial Results for the First Three Quarters of 2020
Net sales for the first three quarters of 2020 increased USD 267.5 million, or 22.5 percent, to USD 1,457.7 million from USD 1,190.2 million for the first three quarters of 2019. The increase was primarily attributable to materially increased net sales in March through September 2020 (as compared to March through September 2019) resulting from increased demand for the Company’s products due to the Covid-19 pandemic. The Company’s net sales also benefited from one extra week in the first three quarters of 2020 and the Clabber Girl and Farmwise acquisitions, which were completed on May 15, 2019 and February 19, 2020, respectively. The Company estimates that the additional week in the third quarter of 2020 contributed approximately USD 35.0 million to the Company’s net sales for the first three quarters of 2020. An additional four and one-half months of net sales of Clabber Girl and an additional seven and one-half months of net sales of Farmwise contributed USD 33.7 million and USD 1.2 million, respectively, to the Company’s net sales for the first three quarters of 2020.
Base business net sales for the first three quarters of 2020 increased USD 232.6 million, or 19.5 percent, to USD 1,422.8 million from USD 1,190.2 million for the first three quarters of 2019. The increase in base business net sales reflected an increase in unit volume of USD 209.7 million and an increase in net pricing (inclusive of the impact of the Company’s 2019 list price increases, the trade spend optimization program the Company initiated in 2019, and a temporarily lower trade spend environment in the industry during the first half of the year) of USD 24.1 million, or 2.0 percent of base business net sales, partially offset by the negative impact of foreign currency of USD 1.2 million.
Net sales of Green Giant (including Le Sueur) increased USD 111.3 million, or 30.1 percent; net sales of the Company’s spices + seasonings2 increased USD 28.8 million, or 11.6 percent; net sales of Ortega increased USD 15.3 million, or 14.4 percent; net sales of Victoria increased USD 11.9 million, or 37.5 percent; net sales of Cream of Wheat increased USD 10.2 million, or 23.7 percent; and net sales of Maple Grove Farms increased USD 4.0 million, or 7.5 percent, in the first three quarters of 2020, as compared to the first three quarters of 2019. Net sales of all other brands in the aggregate increased USD 51.1 million, or 15.1 percent, for the first three quarters of 2020.
Gross profit was USD 375.0 million for the first three quarters of 2020, or 25.7 percent of net sales. Excluding the negative impact of USD 2.8 million of acquisition/divestiture-related and non-recurring expenses during the first three quarters of 2020, the Company’s gross profit would have been USD 377.8 million, or 25.9 percent of net sales. 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 relating to the trailing non-cash accounting impact of the Company’s 2018 inventory reduction plan, the Company’s gross profit would have been USD 308.2 million, or 25.9 percent of net sales.
Selling, general and administrative expenses increased USD 11.4 million, or 9.8 percent, to USD 127.7 million for the first three quarters of 2020 from USD 116.3 million for the first three quarters of 2019. The increase was composed of increases in general and administrative expenses of USD 9.1 million, selling expenses of USD 6.4 million and consumer marketing expenses of USD 3.2 million, partially offset by decreases in acquisition/divestiture-related and non-recurring expenses of USD 7.0 million and warehousing expenses of USD 0.3 million. Expressed as a percentage of net sales, selling, general and administrative expenses improved by 1.1 percentage points to 8.7 percent for the first three quarters of 2020, compared to 9.8 percent for the first three quarters of 2019.
Net interest expense increased USD 6.9 million, or 9.8 percent, to USD 77.3 million for the first three quarters of 2020 from USD 70.4 million in the first three quarters of 2019. The increase was primarily attributable to the following factors: (1) additional interest expense of USD 1.5 million resulting from one extra week in the third quarter of 2020, (2) the accelerated amortization of USD 1.1 million of deferred debt financing costs resulting from the Company’s voluntary partial prepayment of tranche B term loans, and (3) an increase in average long-term debt outstanding during the first three quarters of 2020 as compared to the first three quarters of 2019.
The Company’s net income was USD 119.8 million, or USD 1.86 per diluted share, for the first three quarters of 2020, compared to net income of USD 66.1 million, or USD 1.01 per diluted share, for the first three quarters of 2019. The Company’s adjusted net income for the first three quarters of 2020 was USD 123.2 million, or USD 1.91 per adjusted diluted share, compared to USD 88.4 million, or USD 1.35 per adjusted diluted share, for the first three quarters of 2019.
For the first three quarters of 2020, adjusted Ebitda was USD 287.9 million, an increase of USD 54.9 million, or 23.5 percent, compared to USD 233.0 million for the first three quarters of 2019. The increase in adjusted Ebitda was primarily attributable to the positive impact of increased base business unit volume on the Company’s net sales as a result of the Covid-19 pandemic, as well as increased net sales due to an extra four and one-half months of Clabber Girl in the first three quarters of 2020, and one extra week in the third quarter of fiscal 2020 compared to the third quarter of fiscal 2019. Adjusted Ebitda as a percentage of net sales was 19.8 percent for the first three quarters of 2020, compared to 19.6 percent in the first three quarters of 2019.
Fiscal Quarter Calendar Clarification
Typically, the Company’s fiscal quarters and fiscal year consist of 13 and 52 weeks, respectively, ending on the Saturday closest to December 31 in the case of the Company’s fiscal year and fourth fiscal quarter, and on the Saturday closest to the end of the corresponding calendar quarter in the case of the Company’s fiscal quarters. As a result, a 53rd week is added to the Company’s fiscal year every five or six years. The Company’s fiscal year ending January 2, 2021 (fiscal 2020) contains 53 weeks. Generally when this occurs, the Company’s fourth fiscal quarter contains 14 weeks. However, based upon a third quarter end date of October 3, 2020 (the Saturday closest to September 30) and a fourth quarter end date of January 2, 2021 (the Saturday closest to December 31), for fiscal 2020, the third quarter contained 14 weeks and the fourth quarter will contain 13 weeks. Fiscal 2019 contained 52 weeks and each quarter of 2019 contained 13 weeks.
Full Year Fiscal 2020 Guidance
For fiscal 2020, net sales are expected to be approximately USD 1.950 billion to USD 1.970 billion, adjusted Ebitda is expected to be approximately USD 360.0 million to USD 370.0 million and adjusted diluted earnings per share is expected to be approximately USD 2.30 to USD 2.40. For fiscal 2020, capital expenditures are expected to be approximately USD 40.0 million to USD 45.0 million.
The Company’s full year fiscal 2020 guidance excludes the impact of the pending acquisition of the Crisco brand, which is expected to close in the fourth quarter of 2020.
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; 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.
Agreement to Acquire the Crisco Brand
On October 26, 2020, B+G Foods announced that it had entered into an agreement to acquire the Crisco brand of oils and shortening from The J. M. Smucker Co. for approximately USD 550.0 million in cash, subject to a post-closing adjustment based upon inventory at closing. As part of the acquisition, B+G Foods is also acquiring a manufacturing facility and warehouse in Cincinnati, Ohio. The asset purchase agreement includes an agreement for Smucker to provide certain transition services associated with the acquired business for up to nine to twelve months following closing. Subject to regulatory approval and the satisfaction of customary closing conditions set forth in the asset purchase agreement, B+G Foods expects the acquisition to close during the fourth quarter of 2020.
B+G Foods projects that in 2021, the acquired business will continue to benefit from increased demand due to the Covid-19 pandemic and generate annual net sales of approximately USD 270.0 million, adjusted Ebitda in the range of USD 65.0 million to USD 70.0 million and adjusted diluted earnings per share in the range of USD 0.45 to USD 0.50. Because the acquisition will be structured as an asset purchase, B+G Foods expects to realize approximately USD 75.0 million in tax benefits on a net present value basis. At the midpoint of B+G Foods’ 2021 projected adjusted Ebitda for the business, the acquisition represents a purchase price multiple of approximately 8.1 times adjusted Ebitda (or 7.0 times adjusted Ebitda net of expected tax benefits).
B+G Foods expects to fund the acquisition and related fees and expenses with cash on hand and revolving loans under its existing credit facility.
