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B+G Foods: Reports Q2-2019 Financial Results

Parsippany / NJ. (bgs) B+G Foods Inc. announced financial results for the second quarter and first two quarters of 2019. Financial results for the second quarter and first two 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.

Second Quarter 2019 Financial Summary

  • Net sales of USD 371.2 million
  • Diluted earnings per share of USD 0.28
  • Adjusted diluted earnings per share1 of USD 0.38
  • Net income of USD 18.3 million
  • Adjusted net income1 of USD 24.5 million
  • Adjusted Ebitda1 of USD 71.0 million
  • Completed the acquisition of Clabber Girl Corporation, a leader in baking products, including baking powder, baking soda and corn starch

Guidance Updated for Full Year Fiscal 2019

  • Net sales revised upward to a range of USD 1.665 billion to USD 1.700 billion
  • Adjusted Ebitda reaffirmed at a range of USD 305.0 million to USD 320.0 million
  • Adjusted diluted earnings per share reaffirmed at a range of USD 1.85 to USD 2.00

«I am pleased to report that we had a solid second quarter with results ahead of our internal operating plan, putting us on track through the first six months of the year and in line with our full year plan to achieve our 2019 financial targets. Importantly, these results are more reflective of the performance that I expect from B+G Foods,» stated Kenneth G. Romanzi, President and Chief Executive Officer of B+G Foods.

Romanzi continued, «Our 2019 plan and our longer term strategic plan are based on a stable base business complemented by new product innovation and accretive acquisitions with pricing and cost of goods savings initiatives to offset inflation. All of these initiatives gained traction throughout the second quarter and we expect to continue to gain momentum throughout the remainder of the year.»

Financial Results for the Second Quarter of 2019

B+G Foods generated net sales of USD 371.2 million for the second quarter of 2019, compared to USD 388.4 million for the second quarter 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 second quarter of 2019 results, were USD 25.2 million during the second quarter of 2018. Net sales of McCann’s, which was acquired on July 16, 2018 and therefore not part of the Company’s second quarter of 2018 results, contributed USD 2.2 million to the Company’s net sales for the second quarter of 2019. Net sales of Clabber Girl, which was acquired on May 15, 2019 and therefore not part of the Company’s second quarter of 2018 results, contributed USD 8.4 million to the Company’s net sales for the second quarter of 2019.

Base business net sales1 for the second quarter of 2019 decreased USD 1.7 million, or 0.5 percent, to USD 360.6 million from USD 362.3 million for the second quarter of 2018. Base business net sales benefited from an increase in net pricing of USD 4.0 million, or 1.1 percent of base business net sales, offset by a decrease in unit volume for the base business of USD 5.5 million and the negative impact of foreign currency of USD 0.2 million.

Net sales of all Green Giant products in the aggregate (including Le Sueur) increased USD 8.3 million, or 7.9 percent, in the second quarter of 2019, as compared to the second quarter of 2018, as net sales in both frozen and shelf stable products increased. Net sales of Green Giant frozen increased USD 3.5 million, or 4.1 percent, for the quarter. Net sales of Green Giant shelf stable (including Le Sueur) increased USD 4.8 million, or 23.5 percent, for the second quarter of 2019.

Net sales of Maple Grove Farms increased USD 0.7 million, or 4.1 percent, net sales of New York Style increased USD 0.4 million, or 3.8 percent, and net sales of Victoria increased USD 0.1 million, or 1.4 percent, for the second quarter of 2019 as compared to the second quarter of 2018. Net sales of the Company’s spices + seasonings2 decreased USD 3.6 million, or 4.2 percent, for the quarter. Net sales of all other brands in the aggregate decreased USD 7.6 million, or 5.6 percent, for the second quarter of 2019.

Gross profit was USD 91.9 million for the second quarter of 2019, or 24.7 percent of net sales. Excluding the negative impact of USD 4.9 million of acquisition/divestiture-related and non-recurring expenses during the second quarter of 2019, which includes expenses related to the Company’s inventory reduction plan, the Company’s gross profit would have been USD 96.8 million, or 26.0 percent of net sales. Gross profit was USD 81.2 million for the second quarter of 2018, or 20.9 percent of net sales. Excluding the negative impact of USD 20.1 million of acquisition-related and non-recurring charges during the second quarter of 2018, which includes expenses relating to the Company’s inventory reduction plan, the Company’s gross profit would have been USD 101.3 million, or 26.1 percent of net sales.

Selling, general and administrative expenses increased USD 2.6 million, or 6.9 percent, to USD 39.9 million for the second quarter of 2019 from USD 37.3 million for the second quarter of 2018. The increase was composed of increases in general and administrative expenses of USD 1.9 million and acquisition/divestiture-related and non-recurring expenses of USD 1.5 million, partially offset by decreases in warehousing expenses of USD 0.4 million, consumer marketing expenses of USD 0.3 million and selling expenses of USD 0.1 million. Expressed as a percentage of net sales, selling, general and administrative expenses increased by 1.1 percentage points to 10.7 percent for the second quarter of 2019, compared to 9.6 percent for the second quarter of 2018.

Includes the spices + seasoning brands acquired in the fourth quarter of 2016, as well as the Company’s legacy spices + seasonings brands, such as Mrs. Dash and Ac’cent. Excludes net sales of French’s® seasoning mixes, which the Company discontinued during the third quarter of 2018.

Net interest expense decreased USD 4.4 million, or 16.0 percent, to USD 23.2 million for the second quarter of 2019 from USD 27.6 million in the second quarter of 2018. The decrease was primarily attributable to a reduction in long-term debt outstanding during the second quarter of 2019 as compared to the second 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. At the end of the second quarter of 2019, the Company had long-term debt outstanding of USD 1.803 billion, compared to USD 2.074 billion at the end of the second quarter of 2018, a decrease of USD 271.2 million, or 13.1 percent.

There was no loss on extinguishment of debt for the second quarter of 2019, compared to a loss on extinguishment of debt for the second quarter of 2018 of USD 0.5 million, which included the write-off of deferred debt financing costs and unamortized discount of USD 0.4 million and USD 0.1 million, respectively, relating to the repayment of USD 25.0 million aggregate principal amount of the Company’s then outstanding tranche B term loans.

The Company’s net income was USD 18.3 million, or USD 0.28 per diluted share, for the second quarter of 2019, compared to net income of USD 8.0 million, or USD 0.12 per diluted share, for the second quarter of 2018. The Company’s adjusted net income1 for the second quarter of 2019 was USD 24.5 million, or USD 0.38 per adjusted diluted share, compared to USD 25.1 million, or USD 0.38 per adjusted diluted share, for the second quarter of 2018.

For the second quarter of 2019, adjusted Ebitda was USD 71.0 million, a decrease of USD 3.4 million, or 4.7 percent, compared to USD 74.4 million for the second 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 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 19.1 percent for the second quarter of 2019, compared to 19.2 percent in the second quarter of 2018.

Primarily as a result of the Company’s inventory reduction plan and the divestiture of Pirate Brands, and partially offset by the acquisitions of McCann’s and Clabber Girl, the Company reduced inventory from USD 446.3 million at the end of the second quarter of 2018 to USD 404.8 million at the end of the second quarter of 2019.

Financial Results for the First Two Quarters of 2019

B+G Foods generated net sales of USD 783.9 million for the first two quarters of 2019, compared to USD 820.1 million for the first two 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 two quarters of 2019 results, were USD 46.2 million during the first two quarters of 2018. Net sales of McCann’s, which was acquired on July 16, 2018 and therefore not part of the Company’s first two quarters of 2018 results, contributed USD 5.5 million to the Company’s net sales for the first two quarters of 2019. Net sales of Clabber Girl, which was acquired on May 15, 2019 and therefore not part of the Company’s first two quarters of 2018 results, contributed USD 8.4 million to the Company’s net sales for the first two quarters of 2019.

Base business net sales for the first two quarters of 2019 decreased USD 1.6 million, or 0.2 percent, to USD 770.1 million from USD 771.7 million for the first two quarters of 2018. Base business net sales benefited from an increase in net pricing of USD 11.3 million, or 1.5 percent of base business net sales, offset by a decrease in unit volume for the base business of USD 12.7 million and the negative impact of foreign currency of USD 0.2 million.

Net sales of all Green Giant products in the aggregate (including Le Sueur) increased USD 15.2 million, or 6.5 percent, in the first two quarters of 2019, as compared to the first two quarters of 2018, as net sales in both frozen and shelf stable products increased. Net sales of Green Giant frozen increased USD 9.4 million, or 5.3 percent, for the first two quarters of 2019. Net sales of Green Giant shelf stable (including Le Sueur) increased USD 5.8 million, or 10.5 percent, for the first two quarters of 2019.

Net sales of Maple Grove Farms increased USD 1.7 million, or 4.8 percent, and net sales of New York Style increased USD 1.6 million, or 9.6 percent, for the first two quarters of 2019 as compared to the first two quarters of 2018. Net sales of the Company’s spices + seasonings2 decreased USD 2.8 million, or 1.7 percent; net sales of Victoria decreased USD 1.1 million, or 5.4 percent; net sales of Cream of Wheat decreased USD 1.1 million, or 3.7 percent; and net sales of Ortega decreased USD 0.6 million, or 0.9 percent, for the first two quarters of 2019. Net sales of all other brands in the aggregate decreased USD 14.5 million, or 7.4 percent, for the first two quarters of 2019.

Gross profit was USD 179.9 million for the first two quarters of 2019, or 23.0 percent of net sales. Excluding the negative impact of USD 18.0 million of acquisition/divestiture-related and non-recurring expenses during the first two quarters of 2019, which includes expenses related to the Company’s inventory reduction plan, the Company’s gross profit would have been USD 197.9 million, or 25.2 percent of net sales. Gross profit was USD 184.5 million for the first two quarters of 2018, or 22.5 percent of net sales. Excluding the negative impact of USD 36.2 million of acquisition-related and non-recurring charges during the first two quarters of 2018, which includes expenses relating to the Company’s inventory reduction plan, the Company’s gross profit would have been USD 220.7 million, or 26.9 percent of net sales.

Selling, general and administrative expenses decreased USD 1.6 million, or 2.1 percent, to USD 78.2 million for the first two quarters of 2019 from USD 79.8 million for the first two quarters of 2018. The decrease was composed of decreases in consumer marketing expenses of USD 3.6 million, selling expenses of USD 1.7 million and warehousing expenses of USD 0.6 million, partially offset by increases in acquisition/divestiture-related and non-recurring expenses of USD 2.9 million and general and administrative expenses of USD 1.4 million. Expressed as a percentage of net sales, selling, general and administrative expenses increased by 0.3 percentage points to 10.0 percent for the first two quarters of 2019, compared to 9.7 percent for the first two quarters of 2018.

Net interest expense decreased USD 9.6 million, or 17.3 percent, to USD 46.3 million for the first two quarters of 2019 from USD 55.9 million in the first two quarters of 2018. The decrease was primarily attributable to a reduction in long-term debt outstanding during the first two quarters of 2019 as compared to the first two 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 two quarters of 2019, compared to a loss on extinguishment of debt for the first two 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 35.0 million, or USD 0.53 per diluted share, for the first two quarters of 2019, compared to net income of USD 28.5 million, or USD 0.43 per diluted share, for the first two quarters of 2018. The Company’s adjusted net income for the first two quarters of 2019 was USD 53.5 million, or USD 0.82 per adjusted diluted share, compared to USD 61.5 million, or USD 0.92 per adjusted diluted share, for the first two quarters of 2018.

For the first two quarters of 2019, adjusted Ebitda was USD 146.8 million, a decrease of USD 17.1 million, or 10.4 percent, compared to USD 163.9 million for the first two 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 18.7 percent for the first two quarters of 2019, compared to 20.0 percent in the first two quarters of 2018.

Full Year Fiscal 2019 Guidance

B+G Foods updated its guidance for full year fiscal 2019. Net sales are now expected to be approximately USD 1.665 billion to USD 1.700 billion, adjusted Ebitda is expected to be approximately USD 305.0 million to USD 320.0 million and adjusted diluted earnings per share is expected to be approximately USD 1.85 to USD 2.00.

For fiscal 2019, net interest expense is expected to be approximately USD 87.5 million to USD 91.5 million (including cash interest payments which are expected to be approximately USD 84.0 million to USD 88.0 million), depreciation expense is now expected to be approximately USD 41.0 million, amortization expense is now 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.