B+G: Reports Strong Q4-2020 Net Sales and Earnings Growth

Parsippany / NJ. (bgs) B+G Foods Inc. announced financial results for the fourth quarter and full year 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 fiscal 2020 as compared to fiscal 2019, as well as the impact of the «Crisco» acquisition, which was completed on December 01, 2020.

Fourth Quarter 2020 Financial Summary versus Q4-2019

  • Net sales increased 8.5 percent to USD 510.2 million
  • Base business net sales increased 2.5 percent to USD 482.2 million
  • Diluted earnings per share increased 18.8 percent to USD 0.19
  • Adjusted diluted earnings per share increased 25.0 percent to USD 0.35
  • Net income increased 18.6 percent to USD 12.2 million
  • Adjusted net income increased 28.1 percent to USD 22.8 million
  • Adjusted Ebitda increased 5.6 percent to USD 73.3 million
  • Adjusted Ebitda before Covid-19 expenses increased 11.7 percent to USD 77.6 million
  • Net cash provided by operating activities increased to USD 49.2 million from USD 45.2 million
  • Completed the acquisition of the iconic «Crisco» brand on December 1, 2020 – transition and integration is on track

Full Year 2020 Financial Summary versus FY-2019

  • Net sales increased 18.5 percent to USD 1,967.9 million
  • Base business net sales increased 14.7 percent to USD 1,904.9 million
  • Diluted earnings per share increased 74.4 percent to USD 2.04
  • Adjusted diluted earnings per share increased 37.8 percent to USD 2.26
  • Net income increased 72.8 percent to USD 132.0 million
  • Adjusted net income increased 37.0 percent to USD 146.0 million
  • Adjusted Ebitda increased 19.4 percent to USD 361.2 million
  • Adjusted Ebitda before Covid-19 expenses increased 23.9 percent to USD 374.8 million
  • Net cash provided by operating activities increased to USD 281.5 million from USD 46.5 million

Guidance for Full Year Fiscal 2021

  • Net sales range of USD 2.05 billion to USD 2.10 billion

Commenting on the results, David L. Wenner, Interim President and Chief Executive Officer of B+G Foods, stated, «It would be a gross understatement to say that 2020 was a year like no other year; Covid-19 brought an incredible amount of suffering, inconvenience and, unfortunately, death with it. It’s humbling that our company benefitted from such tragedy, and at the same time a tribute to our employees, working in the midst of a pandemic, that we were able to respond as well as we did to the increased needs of consumers as they coped with Covid-19 and the resultant quarantines.»

«For the year, our net sales increased 18.5 percent to USD 1.968 billion and adjusted Ebitda increased 19.4 percent to USD 361.2 million. The remarkable increase slowed in the fourth quarter but demand for our products remains elevated and through the first two months of fiscal 2021, we have had a strong start to the year.»

«In late fiscal 2020, we completed the acquisition of the iconic «Crisco» brand of oils and shortening and the transition and integration are on track. Consistent with our acquisition strategy, the acquisition has been immediately accretive to our earnings per share and free cash flow.»

Wenner concluded, «I’d like to thank our employees, all of whom have made this company successful in an extremely challenging year, and in particular to the workers who have been on the front lines in our manufacturing facilities, distribution centers and offices on a daily basis and also to those employees working remotely, making sure we can supply the food that consumers need. Without their dedicated efforts we could not have reached the company records that we set in fiscal 2020.»

Financial Results for the Fourth Quarter of 2020

Net sales for the fourth quarter of 2020 increased USD 40.0 million, or 8.5 percent, to USD 510.2 million from USD 470.2 million for the fourth quarter of 2019. The increase was primarily attributable to the «Crisco» acquisition, net pricing and increased demand for the Company’s products due to the Covid-19 pandemic. This was partially offset by supply chain constraints for certain of the Company’s products as a result of increased demand as well as inventory building by retailers and other customers in the third quarter of 2020 in anticipation of increased Covid-19 restrictions in the fourth quarter. The Company’s net sales benefited USD 28.1 million from acquisitions, including USD 27.8 million from the «Crisco» acquisition, which was completed on December 1, 2020.

Base business net sales for the fourth quarter of 2020 increased USD 12.0 million, or 2.5 percent, to USD 482.2 million from USD 470.2 million for the fourth quarter of 2019. The increase in base business net sales reflected an increase in net pricing and the impact of product mix of USD 11.7 million, or 2.5 percent of base business net sales, an increase in unit volume of USD 0.2 million, and the positive impact of foreign currency of USD 0.1 million.

Net sales of «Cream of Wheat» increased USD 2.7 million, or 16.1 percent; net sales of «Ortega» increased USD 2.5 million, or 7.3 percent; net sales of« Maple Grove Farms» increased USD 2.1 million, or 12.2 percent; net sales of the Company’s spices + seasonings increased USD 2.1 million, or 2.4 percent; and net sales of «Green Giant» (including «Le Sueur») increased USD 0.9 million, or 0.6 percent, for the fourth quarter of 2020 as compared to the fourth quarter of 2019. Net sales of «Green Giant» in the fourth quarter of 2020 were negatively impacted by industry-wide supply-chain constraints for shelf-stable vegetable products, which caused the Company to place products on allocation with customers to ensure continued supply throughout the year. Net sales of «Victoria» decreased USD 0.6 million, or 4.7 percent for the fourth quarter of 2020 as compared to the fourth quarter of 2019, primarily as a result of the shift of a key promotional event from the fourth quarter of 2019 to the third quarter of 2020. Net sales of all other brands in the aggregate increased USD 2.3 million, or 1.5 percent, for the fourth quarter of 2020.

Gross profit was USD 106.7 million for the fourth quarter of 2020, or 20.9 percent of net sales. Excluding the negative impact of USD 2.1 million of acquisition/divestiture-related expenses, the amortization of acquisition-related inventory fair value step-up and non-recurring expenses included in cost of goods sold during the fourth quarter of 2020, the Company’s gross profit would have been USD 108.8 million, or 21.3 percent of net sales. Gross profit was USD 94.4 million for the fourth quarter of 2019, or 20.1 percent of net sales. Excluding the negative impact of USD 2.6 million of acquisition/divestiture-related expenses, the amortization of acquisition-related inventory fair value step-up and non-recurring expenses included in cost of goods sold during the fourth quarter of 2019, which includes the Company’s gross profit would have been USD 97.0 million, or 20.6 percent of net sales.

Selling, general and administrative expenses increased USD 14.0 million, or 31.5 percent, to USD 58.5 million for the fourth quarter of 2020 from USD 44.5 million for the fourth quarter of 2019. The increase was composed of increases in consumer marketing expenses of USD 4.5 million, acquisition/divestiture-related and non-recurring expenses of USD 3.8 million, warehousing expenses of USD 2.3 million, selling expenses of USD 1.8 million and general and administrative expenses of USD 1.6 million. Expressed as a percentage of net sales, selling, general and administrative expenses increased by 2.0 percentage points to 11.5 percent for the fourth quarter of 2020, compared to 9.5 percent for the fourth quarter of 2019.

Net interest expense decreased USD 3.4 million, or 12.3 percent, to USD 24.3 million for the fourth quarter of 2020 from USD 27.7 million in the fourth quarter of 2019. The decrease was primarily attributable to a lower effective interest rate on our long-term debt. Net interest expense is expected to increase in fiscal 2021, primarily as a result of incremental borrowings the Company made in the fourth quarter of 2020 to fund the «Crisco» acquisition and related fees and expenses.

The Company’s net income was USD 12.2 million, or USD 0.19 per diluted share, for the fourth quarter of 2020, compared to net income of USD 10.3 million, or USD 0.16 per diluted share, for the fourth quarter of 2019. The Company’s adjusted net income for the fourth quarter of 2020 was USD 22.8 million, or USD 0.35 per adjusted diluted share, compared to USD 17.8 million, or USD 0.28 per adjusted diluted share, for the fourth quarter of 2019.

For the fourth quarter of 2020, adjusted Ebitda was USD 73.3 million, an increase of USD 3.8 million, or 5.6 percent, compared to USD 69.5 million for the fourth quarter of 2019. The increase in adjusted Ebitda was primarily attributable to increased net sales for the reasons described above. Adjusted Ebitda as a percentage of net sales was 14.4 percent for the fourth quarter of 2020, compared to 14.8 percent in the fourth quarter of 2019.

For the fourth quarter of 2020, adjusted Ebitda before Covid-19 expenses was USD 77.6 million, an increase of USD 8.1 million, or 11.7 percent, compared to USD 69.5 million for the fourth quarter of 2019. Covid-19 expenses of USD 4.3 million for the fourth quarter of 2020 primarily include temporary enhanced compensation for the Company’s manufacturing employees, compensation the Company continues to pay manufacturing employees while in quarantine (which is incremental to the compensation the Company pays to the manufacturing employees who produce the Company’s products while others are in quarantine), and expenses relating to other precautionary health and safety measures. Adjusted Ebitda before Covid-19 expenses as a percentage of net sales was 15.2 percent for the fourth quarter of 2020, compared to 14.8 percent in the fourth quarter of 2019.

Financial Results for the Full Year Fiscal 2020

Net sales for fiscal 2020 increased USD 307.5 million, or 18.5 percent, to USD 1,967.9 million from USD 1,660.4 million for fiscal 2019. The increase was primarily attributable to materially increased net sales beginning in March (as compared to prior year) resulting from increased demand for the Company’s products due to the Covid-19 pandemic, partially offset by supply chain constraints for certain of the Company’s products as a result of increased demand. The Company’s net sales also benefited from acquisitions and from one extra reporting week in fiscal 2020 (which occurred in the third quarter) compared to fiscal 2019. Acquisitions benefited the Company’s net sales in fiscal 2020 by USD 63.0 million, which primarily includes USD 33.7 million of net sales from an additional seven and one-half months of «Clabber Girl» net sales and USD 27.8 million of net sales from one month of «Crisco» net sales. The «Clabber Girl» acquisition closed on May 15, 2019 and the «Crisco» acquisition closed on December 1, 2020. The Company estimates that the additional week in fiscal 2020 contributed approximately USD 35.0 million to the Company’s net sales.

Base business net sales for fiscal 2020 increased USD 244.5 million, or 14.7 percent, to USD 1,904.9 million from USD 1,660.4 million for fiscal 2019. The increase in base business net sales reflected an increase in unit volume of USD 209.8 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) and the impact of product mix of USD 35.8 million, or 2.2 percent of base business net sales, partially offset by the negative impact of foreign currency of USD 1.1 million.

Net sales of «Green Giant» (including «Le Sueur») increased USD 112.2 million, or 21.3 percent; net sales of the Company’s spices + seasonings increased USD 30.9 million, or 9.2 percent; net sales of «Ortega» increased USD 17.9 million, or 12.7 percent; net sales of «Cream of Wheat» increased USD 12.9 million, or 21.6 percent; net sales of «Victoria» increased USD 11.3 million, or 26.4 percent; and net sales of «Maple Grove Farms» increased USD 6.1 million, or 8.7 percent, in fiscal 2020, as compared to fiscal 2019. Net sales of all other brands in the aggregate increased USD 53.2 million, or 11.0 percent, for fiscal 2020.

Gross profit was USD 481.7 million for fiscal 2020, or 24.5 percent of net sales. Excluding the negative impact of USD 5.0 million of acquisition/divestiture-related expenses, the amortization of acquisition-related inventory fair value step-up and non-recurring expenses included in cost of goods sold during fiscal 2020, the Company’s gross profit would have been USD 486.7 million, or 24.7 percent of net sales. Gross profit was USD 383.1 million for fiscal 2019, or 23.1 percent of net sales. Excluding the negative impact of USD 22.0 million of acquisition/divestiture-related expenses, the amortization of acquisition-related inventory fair value step-up and non-recurring expenses included in cost of goods sold during fiscal 2019, which includes expenses related to the trailing non-cash accounting impact of the Company’s 2018 inventory reduction plan, the Company’s gross profit would have been USD 405.1 million, or 24.4 percent of net sales.

Selling, general and administrative expenses increased USD 25.5 million, or 15.8 percent, to USD 186.2 million for fiscal 2020 from USD 160.7 million for fiscal 2019. The increase was composed of increases in general and administrative expenses of USD 10.7 million, selling expenses of USD 8.2 million, consumer marketing expenses of USD 7.7 million and warehousing expenses of USD 2.0 million, partially offset by a decrease in acquisition/divestiture-related and non-recurring expenses of USD 3.1 million. Expressed as a percentage of net sales, selling, general and administrative expenses improved by 0.2 percentage points to 9.5 percent for fiscal 2020, compared to 9.7 percent for fiscal 2019.

Net interest expense increased USD 3.5 million, or 3.6 percent, to USD 101.6 million for fiscal 2020 from USD 98.1 million in fiscal 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 in the third quarter of 2020, and (3) an increase in average long-term debt outstanding during fiscal 2020 as compared to fiscal 2019. Net interest expense is expected to increase in fiscal 2021 primarily as a result of incremental borrowings the Company made in the fourth quarter of 2020 to fund the «Crisco» acquisition and related fees and expenses.

The Company’s net income was USD 132.0 million, or USD 2.04 per diluted share, for fiscal 2020, compared to net income of USD 76.4 million, or USD 1.17 per diluted share, for fiscal 2019. The Company’s adjusted net income for fiscal 2020 was USD 146.0 million, or USD 2.26 per adjusted diluted share, compared to USD 106.6 million, or USD 1.64 per adjusted diluted share, for fiscal 2019.

For fiscal 2020, adjusted Ebitda was USD 361.2 million, an increase of USD 58.7 million, or 19.4 percent, compared to USD 302.5 million for fiscal 2019. The increase in adjusted Ebitda was primarily attributable to increased net sales for the reasons described above. Adjusted Ebitda as a percentage of net sales was 18.4 percent for fiscal 2020, compared to 18.2 percent in fiscal 2019.

For fiscal 2020, adjusted Ebitda before Covid-19 expenses was USD 374.8 million, an increase of USD 72.3 million, or 23.9 percent, compared to USD 302.5 million for fiscal 2019. Covid-19 expenses of USD 13.5 million for fiscal 2020 include temporary enhanced compensation for the Company’s manufacturing employees, compensation the Company continues to pay manufacturing employees while in quarantine (which is incremental to the compensation the Company pays to the manufacturing employees who produce the Company’s products while others are in quarantine), and expenses relating to other precautionary health and safety measures. Adjusted Ebitda before Covid-19 expenses as a percentage of net sales was 19.0 percent for fiscal 2020, compared to 18.2 percent in fiscal 2019.

Full Year Fiscal 2021 Guidance

For fiscal 2021, net sales will be positively impacted by an additional eleven months of ownership of the «Crisco» brand, and are expected to be approximately USD 2.05 billion to USD 2.10 billion.

B+G Foods continues to see strong consumer demand for its products and expects to see commensurate elevated levels of net sales throughout fiscal 2021. However, the Company’s management is not able to fully estimate the impact Covid-19 will have on the Company’s fiscal 2021 results and therefore is unable at this time to provide more detailed guidance for fiscal 2021. The ultimate impact of the Covid-19 pandemic on the Company’s business will depend on many factors, including, among others: how long social distancing and stay-at-home and work-from home mandates and recommendations remain in effect; whether additional waves of Covid-19 will affect the United States and the rest of North America; the Company’s ability to continue to operate its manufacturing facilities, maintain its supply chain without material disruption, procure ingredients, packaging and other raw materials when needed despite unprecedented demand in the food industry; the extent to which macroeconomic conditions resulting from the pandemic and the pace of the subsequent recovery may impact consumer eating and shopping habits; and the extent to which consumers continue to work remotely even after the pandemic subsides and how that may impact consumer habits.