— Delivers strong growth in net sales,
adjusted EBITDA* and adjusted diluted EPS*
for the quarter and full year —
B&G Foods, Inc. (NYSE:BGS) today announced financial results
for the fourth quarter and full year 2015.
Highlights (vs. prior year quarter and prior full year where
applicable):
- Completed the acquisition of the iconic
Green Giant® brand on November 2, 2015 – transition and integration
is on track
- Net sales increased 43.8% to $342.3
million for the quarter and 14.0% to $966.4 million for the
year
- Comparable base business net sales*
were relatively flat for the quarter and for the year
- Net income decreased 4.3% to $11.0
million for the quarter and increased 68.7% to $69.1 million for
the year
- Adjusted net income* increased 17.9% to
$25.0 million for the quarter and 12.5% to $86.8 million for the
year
- Diluted earnings per share decreased
9.5% to $0.19 for the quarter and increased 60.5% to $1.22 for the
year
- Adjusted diluted earnings per share*
increased 10.3% to $0.43 for the quarter and 6.3% to $1.53 for the
year
- Adjusted EBITDA* increased 29.2% to
$67.4 million for the quarter and 12.2% to $217.8 million for the
year
- Guidance for full year fiscal 2016:
- Net sales of $1.38 billion to $1.42
billion
- Adjusted EBITDA of $294.0 million to
$304.0 million
- Adjusted diluted earnings per share of
$1.98 to $2.09
_____________________
* Please see “About Non-GAAP Financial
Measures and Items Affecting Comparability” below for the
definition of the non-GAAP financial measures “adjusted net
income,” “adjusted diluted earnings per share,” “base business net
sales,” “comparable base business net sales,” “EBITDA,” and
“adjusted EBITDA,” as well as information concerning certain items
affecting comparability and reconciliations of the non-GAAP terms
to the most comparable GAAP financial measures.
“2015 was a year characterized by a return to our long history
of solid, disciplined financial performance, the continuation of
our long-standing acquisition preference for center of the store
shelf-stable brands with our acquisition of Mama Mary’s, and of
course our transformational acquisition of the Green Giant brand.
We are excited to enter the frozen food category and by the other
possibilities that an iconic brand like Green Giant provides us,
and we are truly inspired to reinvigorate Green Giant for
today’s consumer through innovation and enhanced marketing.
Overall, I am extremely proud of what we accomplished in 2015 and
look forward to another rewarding year in 2016 for our customers,
our consumers and our shareholders,” said Robert C. Cantwell,
President and Chief Executive Officer of B&G Foods.
Financial Results for the Fourth Quarter of 2015
Net sales for the fourth quarter of 2015 increased $104.3
million, or 43.8%, to $342.3 million from $238.0 million for the
fourth quarter of 2014. Net sales of Green Giant (which
includes the Le Sueur brand), acquired on November 2, 2015,
and net sales of Mama Mary’s, acquired on July 10, 2015,
contributed $106.2 million and $9.9 million, respectively, to the
Company’s net sales for the quarter.
The fourth quarter of 2015 contained 13 weeks and the fourth
quarter of 2014 contained 14 weeks, which negatively impacted the
fourth quarter of 2015 on a comparative basis. The Company
estimates that the additional week in the fourth quarter of 2014
contributed approximately $15.0 million of incremental net sales in
the fourth quarter of 2014. Customer refunds related to the Ortega
and Las Palmas recall negatively impacted fourth quarter of 2014
net sales by $4.1 million.
Comparable base business net sales for the fourth quarter of
2015 decreased $0.6 million, or 0.3%, to $225.3 from $225.9 for the
fourth quarter of 2014. The $0.6 million decrease was attributable
to a decrease in unit volume of $1.7 million, or 0.7%, offset by an
increase in net pricing of $1.1 million, or 0.5%.
Gross profit for the fourth quarter of 2015 increased $31.6
million, or 55.3%, to $88.6 million from $57.0 million for the
fourth quarter of 2014. Gross profit expressed as a percentage of
net sales increased to 25.9% in the fourth quarter of 2015 from
24.0% in the fourth quarter of 2014. The 1.9 percentage point
increase resulted primarily from the negative impact that the
fourth quarter of 2014 product recall and write-off of certain raw
material and finished goods inventory used in the production of
Rickland Orchards products had on gross profit percentage in the
fourth quarter of 2014. The increase in fiscal 2015 gross profit
percentage was also attributable to price increases and lower
delivery costs as a percentage of net sales, partially offset by
$6.1 million of non-cash amortization of the step-up of inventory
acquired in the Green Giant acquisition.
Selling, general and administrative expenses increased $12.6
million, or 52.6%, to $36.6 million for the fourth quarter of 2015
(which includes $5.7 million of incremental operating expenses
related to Green Giant) from $24.0 million for the fourth quarter
of 2014. This increase was primarily due to increases in general
and administrative expenses of $4.8 million (primarily consisting
of increases in accruals for performance-based compensation),
selling expenses of $3.3 million (including an increase of $1.6
million for salesperson compensation and a $1.5 million increase in
brokerage expenses), acquisition-related expenses of $2.0 million,
warehousing expenses of $1.3 million (primarily consisting of $1.5
million of distribution restructuring expenses) and consumer
marketing of $1.2 million. Expressed as a percentage of net sales,
selling, general and administrative expenses increased 0.6
percentage points to 10.7% for the fourth quarter of 2015 from
10.1% for the fourth quarter of 2014.
Net interest expense for the fourth quarter of 2015 increased
$5.2 million, or 43.3%, to $17.3 million from $12.1 million in the
fourth quarter of 2014. The increase was primarily attributable to
additional borrowings used to fund the Green Giant acquisition.
The Company’s reported net income under U.S. generally accepted
accounting principles (GAAP) was $11.0 million, or $0.19 per
diluted share, for the fourth quarter of 2015, as compared to
reported net income of $11.5 million, or $0.21 per diluted share,
for the fourth quarter of 2014. The Company’s adjusted net income
for the fourth quarter of 2015, which excludes an
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 was $25.0 million, or $0.43 per adjusted
diluted share. The Company’s adjusted net income for the fourth
quarter of 2014, which excludes the after tax impact of the
Rickland Orchards loss on disposal of inventory, the loss on
product recall, and acquisition-related expenses, was $21.2
million, or $0.39 per adjusted diluted share.
For the fourth quarter of 2015, adjusted EBITDA (which excludes
the impact of the amortization of acquisition-related inventory
step-up, the impact of the loss on product recall, other
acquisition-related expenses and the related loss on disposal of
inventory, and distribution restructuring expenses), increased
29.2% to $67.4 million from $52.1 million for the fourth quarter of
2014.
Financial Results for the Full Year 2015
Net sales for fiscal 2015 increased $118.4 million, or 14.0%, to
$966.4 million from $848.0 million for fiscal 2014. Net sales of
Green Giant, acquired on November 2, 2015, contributed $106.2
million to the overall increase, and net sales of Mama Mary’s,
acquired on July 10, 2015, contributed $18.4 million. Additional
months of ownership of Specialty Brands, which was acquired on
April 23, 2014, contributed $23.1 million to fiscal 2015 net
sales.
Fiscal 2015 contained 52 weeks and fiscal 2014 contained 53
weeks, which negatively impacted fiscal 2015 on a comparative
basis. The Company estimates that the additional week in the fourth
quarter of 2014 contributed approximately $15.0 million of
incremental net sales in 2014. Net sales for fiscal 2015 were also
negatively impacted by the Rickland Orchards brand, whose net sales
decreased by $17.2 million compared to fiscal 2014, a continuation
of the weakness that caused the Company to impair the brand’s
trademark and customer relationship assets in 2014. Customer
refunds related to the Ortega and Las Palmas recall negatively
impacted fiscal 2015 net sales by $1.2 million and fiscal 2014 net
sales by $4.1 million.
Comparable base business net sales for fiscal 2015 increased
$0.2 million, or less than 0.1%, to $815.9 million from $815.7
million for fiscal 2014. The $0.2 million increase was attributable
to an increase in net pricing of $12.3 million, or 1.5%, offset by
a decrease in unit volume of $12.1 million, or 1.5%.
Gross profit for fiscal 2015 increased $41.8 million, or 16.9%,
to $289.6 million from $247.8 million for fiscal 2014. Gross profit
expressed as a percentage of net sales increased to 30.0% in fiscal
2015 from 29.2% in fiscal 2014. The 0.8 percentage point increase
resulted primarily from price increases, partially offset by $6.1
million of non-cash amortization of the step-up of inventory
acquired in the Green Giant acquisition. The increase in fiscal
2015 gross profit percentage was also attributable to the negative
impact that the fourth quarter of 2014 product recall and write-off
of certain raw material and finished goods inventory used in the
production of Rickland Orchards products had on gross profit
percentage in fiscal 2014.
Selling, general and administrative expenses increased $12.9
million, or 13.9%, to $105.9 million for fiscal 2015 (which
includes $5.7 million of incremental operating expenses related to
Green Giant) from $93.0 million for fiscal 2014. The increase was
primarily due to increases in general and administrative expenses
of $7.7 million (primarily consisting of increases in accruals for
performance-based compensation), warehousing expenses of $4.5
million (primarily consisting of $2.7 million of distribution
restructuring expenses), selling expenses of $4.2 million
(including an increase of $3.4 million for salesperson
compensation, partially offset by a decrease in brokerage expenses
of $0.3 million), partially offset by decreases in consumer
marketing of $2.3 million (primarily related to a reduction in demo
spending) and acquisition-related expenses of $1.2 million.
Expressed as a percentage of net sales, selling, general and
administrative expenses remained flat at 11.0% for fiscal 2015.
Net interest expense for fiscal 2015 increased $4.5 million, or
9.8%, to $51.1 million from $46.6 million in fiscal 2014. The
increase was primarily attributable to additional borrowings used
to fund the Green Giant acquisition.
The Company’s reported net income under GAAP was $69.1 million,
or $1.22 per diluted share, for fiscal 2015, as compared to $41.0
million, or $0.76 per diluted share, for fiscal 2014. 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, distribution
restructuring expenses and the loss on product recall was $86.8
million, or $1.53 per adjusted diluted share. The Company’s
adjusted net income for fiscal 2014, which excludes the after-tax
impact of the loss on product recall, loss on extinguishment of
debt, acquisition-related expenses, the non-cash impairment charges
to Rickland Orchards intangible assets and the related loss on
disposal of inventory, and a non-cash gain relating to the Rickland
Orchards earn-out, was $77.1 million, or $1.44 per adjusted diluted
share.
For fiscal 2015, adjusted EBITDA, which excludes the impact of
the amortization of acquisition-related inventory step-up, the
impact of the loss on product recall, other acquisition-related
expenses, the non-cash impairment charges to Rickland Orchards
intangible assets and the related loss on disposal of inventory,
the non-cash gain relating to an earn-out and distribution
restructuring expenses, increased 12.2% to $217.8 million from
$194.1 million for fiscal 2014.
2016 Guidance
For full year 2016, net sales is expected to be approximately
$1.38 billion to $1.42 billion, adjusted EBITDA is expected to be
approximately $294.0 million to $304.0 million and adjusted diluted
earnings per share is expected to be $1.98 to $2.09.
Conference Call
B&G Foods will hold a conference call at 4:30 p.m. ET today,
February 25, 2016. The call will be webcast live from B&G
Foods’ website at www.bgfoods.com under “Investor Relations—Company
Overview.” The call can also be accessed live over the phone by
dialing (888) 599-4883 for U.S. callers or (913) 312-0978 for
international callers.
A replay of the call will be available two hours after the call
and can be accessed by dialing (877) 870-5176 or
(858) 384-5517 for international callers; the password is
891363. The replay will be available from February 25, 2016
through March 10, 2016. Investors may also access a web-based
replay of the call at the Investor Relations section of B&G
Foods’ website, www.bgfoods.com.
About Non-GAAP Financial Measures and Items Affecting
Comparability
“Adjusted net income,” “adjusted diluted earnings per share,”
“base business net sales” (net sales without the impact of
acquisitions until the acquisitions are included in both comparable
periods), “comparable base business net sales” (base business net
sales, excluding the impact of the extra reporting week in fiscal
2014 and the fourth quarter of 2014, the negative impact of the
product recall and the Rickland Orchards shortfall), “EBITDA”
(net income before net interest expense, income taxes, depreciation
and amortization and loss on extinguishment of debt); and “adjusted
EBITDA” (EBITDA as adjusted for cash and non-cash
acquisition-related expenses, gains and losses (which may include
third party fees and expenses, integration, restructuring and
consolidation expenses and amortization of acquisition-related
inventory step-up); intangible asset impairment charges and related
asset write-offs; gains or losses related to changes in the fair
value of contingent liabilities from earn-outs; loss on product
recalls, including customer refunds, selling, general and
administrative expenses and the impact on cost of sales; and
distribution restructuring expenses) are “non-GAAP financial
measures.” A non-GAAP financial measure is a numerical measure of
financial performance that excludes or includes amounts so as to be
different than the most directly comparable measure calculated and
presented in accordance with GAAP in B&G Foods’ consolidated
balance sheets and related consolidated statements of operations,
comprehensive income, changes in stockholders’ equity and cash
flows. Non-GAAP financial measures should not be considered in
isolation or as a substitute for the most directly comparable GAAP
measures. The Company’s non-GAAP financial measures may be
different from non-GAAP financial measures used by other
companies.
The Company uses “adjusted net income,” “adjusted diluted
earnings per share,” “base business net sales” and “comparable base
business net sales,” which are calculated as reported net income,
reported diluted earnings per share and reported net sales adjusted
for certain items that affect comparability. These non-GAAP
financial measures reflect adjustments to reported net income,
diluted earnings per share and net sales to eliminate the items
identified above. This information is provided in order to allow
investors to make meaningful comparisons of the Company’s operating
performance between periods and to view the Company’s business from
the same perspective as the Company’s management. Because the
Company cannot predict the timing and amount of these items,
management does not consider these items when evaluating the
Company’s performance or when making decisions regarding allocation
of resources.
Additional information regarding EBITDA and adjusted EBITDA, and
a reconciliation of EBITDA and adjusted EBITDA to net income and to
net cash provided by operating activities is included below for the
fourth quarter and full year of fiscal 2015 and 2014, along with
the components of EBITDA and adjusted EBITDA. Also included below
are reconciliations of the non-GAAP terms adjusted net income,
adjusted diluted earnings per share, base business net sales and
comparable base business net sales to the most directly comparable
measure calculated and presented in accordance with GAAP in the
Company’s consolidated balance sheets and related consolidated
statements of operations, comprehensive income, changes in
stockholders’ equity and cash flows.
About B&G Foods, Inc.
B&G Foods and its subsidiaries manufacture, sell and
distribute a diversified portfolio of high-quality, branded
shelf-stable and frozen foods across the United States, Canada and
Puerto Rico. Based in Parsippany, New Jersey, B&G Foods’
products are marketed under many recognized brands, including
Ac’cent, B&G, B&M, Baker’s Joy,
Bear Creek Country Kitchens, Brer Rabbit, Canoleo,
Cary’s, Cream of Rice, Cream of Wheat, Devonsheer,
Don Pepino, Emeril’s, Grandma’s Molasses, Green Giant, JJ
Flats, Joan of Arc, Las Palmas, Le Sueur, MacDonald’s,
Mama Mary’s, Maple Grove Farms, Molly McButter,
Mrs. Dash, New York Flatbreads, New York Style, Old
London, Original Tings, Ortega, Pirate’s Booty, Polaner,
Red Devil, Regina, Rickland Orchards, Sa-són, Sclafani, Smart
Puffs, Spring Tree, Sugar Twin, Trappey’s, TrueNorth,
Underwood, Vermont Maid and Wright’s. B&G Foods also sells
and distributes Static Guard, a household product brand.
Forward-Looking Statements
Statements in this press release that are not statements of
historical or current fact constitute “forward-looking statements.”
The forward-looking statements contained in this press release
include, without limitation, statements related to B&G Foods’
net sales, adjusted EBITDA and adjusted diluted earnings per share,
and overall expectations for fiscal 2016. Such forward-looking
statements involve known and unknown risks, uncertainties and other
unknown factors that could cause the actual results of
B&G Foods to be materially different from the historical
results or from any future results expressed or implied by such
forward-looking statements. In addition to statements that
explicitly describe such risks and uncertainties readers are urged
to consider statements labeled with the terms “believes,” “belief,”
“expects,” “projects,” “intends,” “anticipates” or “plans” to be
uncertain and forward-looking. The forward-looking statements
contained herein are also subject generally to other risks and
uncertainties that are described from time to time in B&G
Foods’ filings with the Securities and Exchange Commission,
including under Item 1A, “Risk Factors” in the Company’s most
recent Annual Report on Form 10-K and in its subsequent reports on
Forms 10-Q and 8-K. Investors are cautioned not to place undue
reliance on any such forward-looking statements, which speak only
as of the date they are made. B&G Foods undertakes no
obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or
otherwise.
B&G Foods, Inc. and
Subsidiaries
Consolidated Balance Sheets
(In thousands, except share and per
share data)
(Unaudited)
Assets January 2, 2016 January 3, 2015
Current assets: Cash and cash equivalents $ 5,246 $ 1,490
Trade accounts receivable, net 69,712 55,925 Inventories 312,880
106,557 Prepaid expenses and other current assets 67,517 14,830
Income tax receivable 2,514 14,442 Deferred income taxes
5,292 3,275 Total current assets 463,161
196,519 Property, plant and equipment, net 163,642 116,197
Goodwill 473,145 370,424 Other intangibles, net 1,442,340 947,895
Other assets 29,427 18,318 Total assets
$ 2,571,715 $ 1,649,353
Liabilities and
Stockholders’ Equity Current liabilities: Trade accounts
payable $ 49,593 $ 38,052 Accrued expenses 31,233 17,644 Current
portion of long-term debt 33,750 18,750 Dividends payable
20,292 18,246 Total current liabilities
134,868 92,692 Long-term debt 1,725,866 1,007,107 Other
liabilities 3,212 7,352 Deferred income taxes 250,084
204,207 Total liabilities 2,114,030 1,311,358
Commitments and contingencies Stockholders’ equity: Preferred
stock, $0.01 par value per share. Authorized 1,000,000 shares; no
shares issued or outstanding — — Common stock, $0.01 par value per
share. Authorized 125,000,000 shares; 57,976,744 and 53,663,697
shares issued and outstanding as of January 2, 2016 and January 3,
2015, respectively 580 537 Additional paid-in capital 162,568
110,349 Accumulated other comprehensive loss (12,696 ) (11,034 )
Retained earnings 307,233 238,143 Total
stockholders’ equity 457,685 337,995
Total liabilities and stockholders’ equity $ 2,571,715 $
1,649,353
B&G Foods, Inc. and
Subsidiaries
Consolidated Statements of
Operations
(In thousands, except per share
data)
(Unaudited)
Fourth Quarter Ended Fiscal Year Ended
January 2, 2016 January 3, 2015
January 2, 2016 January 3, 2015
Net sales $ 342,291 $ 237,990 $ 966,358 $ 848,017 Cost of goods
sold 253,728 180,977 676,794 600,246
Gross profit 88,563 57,013 289,564 247,771 Operating
expenses: Selling, general and administrative expenses 36,587
23,968 105,939 93,033 Amortization expense 3,183 2,706 11,255
12,692 Impairment of intangible assets — — — 34,154 Gain on change
in fair value of contingent consideration — —
— (8,206 ) Operating income 48,793 30,339 172,370 116,098
Other expenses: Interest expense, net 17,258 12,041 51,131
46,573 Loss on extinguishment of debt — — —
5,748 Income before income tax expense 31,535 18,298
121,239 63,777 Income tax expense 20,575 6,844
52,149 22,821 Net income $ 10,960 $ 11,454 $ 69,090 $
40,956 Weighted average shares outstanding: Basic
57,977 53,665 56,585 53,658 Diluted 58,084 53,797 56,656 53,747
Basic and diluted earnings per share $ 0.19 $ 0.21 $ 1.22 $
0.76 Cash dividends declared per share $ 0.35 $ 0.34 $ 1.38
$ 1.36
B&G Foods, Inc. and
Subsidiaries
Reconciliation of EBITDA and Adjusted
EBITDA to Net Income and to Net Cash Provided by Operating
Activities
(In thousands)
(Unaudited)
Fourth Quarter Ended Fiscal Year Ended
January 2, 2016 January 3, 2015
January 2, 2016 January 3, 2015
Net income $ 10,960 $ 11,454 $ 69,090 $ 40,956 Income tax expense
20,575 6,844 52,149 22,821 Interest expense, net 17,258 12,041
51,131 46,573 Depreciation and amortization 8,141 6,651 28,653
27,434 Loss on extinguishment of debt — —
— 5,748 EBITDA(1) 56,934 36,990
201,023 143,532 Acquisition-related expenses 2,817 791 6,118 7,315
Amortization of acquisition-related inventory step-up 6,127 — 6,127
— Impairment of intangible assets — — — 34,154 Loss on disposal of
inventory — 1,557 — 4,535 Loss on product recall, net of insurance
recoveries — 12,798 1,868 12,798 Distribution restructuring
expenses 1,493 — 2,665 — Gain on change in fair value of contingent
consideration — — —
(8,206 ) Adjusted EBITDA(1) 67,371 52,136 217,801 194,128
Income tax expense (20,575 ) (6,844 ) (52,149 ) (22,821 ) Interest
expense, net (17,258 ) (12,041 ) (51,131 ) (46,573 )
Acquisition-related expenses (2,817 ) (791 ) (6,118 ) (7,315 )
Amortization of acquisition-related inventory step-up (6,127 ) —
(6,127 ) — Loss on product recall, net of insurance recoveries —
(12,798 ) (1,868 ) (12,798 ) Distribution restructuring expenses
(1,493 ) — (2,665 ) — Distribution restructuring fixed asset
write-off (107 ) — (107 ) — Deferred income taxes 15,514 8,772
29,152 13,855 Amortization of deferred financing costs and bond
discount 1,269 883 3,900 3,790 Share-based compensation expense
2,113 107 5,817 2,235 Excess tax benefits from share-based
compensation (21 ) — (539 ) (2,356 ) Acquisition-related contingent
consideration expense, including interest accretion — — — 432
Changes in assets and liabilities, net of effects of business
combinations 3,913 9,013 (7,487
) (23,451 ) Net cash provided by operating activities $
41,782 $ 38,437 $ 128,479 $ 99,126
(1)
EBITDA and adjusted EBITDA are non-GAAP
financial measures used by management to measure operating
performance. A non-GAAP financial measure is defined as a numerical
measure of our financial performance that excludes or includes
amounts so as to be different from the most directly comparable
measure calculated and presented in accordance with GAAP in our
consolidated balance sheets and related consolidated statements of
operations, comprehensive income, changes in stockholders’ equity
and cash flows. We define EBITDA as net income before net interest
expense, income taxes, depreciation and amortization and loss on
extinguishment of debt. We define adjusted EBITDA as EBITDA
adjusted for cash and non-cash acquisition-related expenses, gains
and losses (which may include third party fees and expenses,
integration, restructuring and consolidation expenses and
amortization of acquired inventory fair value step-up); intangible
asset impairment charges and related asset write-offs; gains or
losses related to changes in the fair value of contingent
liabilities from earn-outs; loss on product recalls, including
customer refunds, selling, general and administrative expenses and
the impact on cost of sales; and distribution restructuring
expenses. Management believes that it is useful to eliminate net
interest expense, income taxes, depreciation and amortization, loss
on extinguishment of debt, acquisition-related expenses, gains and
losses, non-cash intangible asset impairment charges and related
asset write-offs, gains or losses related to changes in the fair
value of contingent liabilities from earn-outs, loss on product
recalls and distribution restructuring expenses because it allows
management to focus on what it deems to be a more reliable
indicator of ongoing operating performance and our ability to
generate cash flow from operations. We use EBITDA and adjusted
EBITDA in our business operations to, among other things, evaluate
our operating performance, develop budgets and measure our
performance against those budgets, determine employee bonuses and
evaluate our cash flows in terms of cash needs. We also present
EBITDA and adjusted EBITDA because we believe they are useful
indicators of our historical debt capacity and ability to service
debt and because covenants in our credit agreement and our senior
notes indenture contain ratios based on these measures. As a
result, internal management reports used during monthly operating
reviews feature the EBITDA and adjusted EBITDA metrics. However,
management uses these metrics in conjunction with traditional GAAP
operating performance and liquidity measures as part of its overall
assessment of company performance and liquidity and therefore does
not place undue reliance on these measures as its only measures of
operating performance and liquidity.
EBITDA and adjusted EBITDA are not recognized terms under
GAAP and do not purport to be an alternative to operating income or
net income or any other GAAP measure as an indicator of operating
performance. EBITDA and adjusted EBITDA are not complete net cash
flow measures because EBITDA and adjusted EBITDA are measures of
liquidity that do not include reductions for cash payments for an
entity’s obligation to service its debt, fund its working capital,
capital expenditures and acquisitions and pay its income taxes and
dividends. Rather, EBITDA and adjusted EBITDA are two potential
indicators of an entity’s ability to fund these cash requirements.
EBITDA and adjusted EBITDA are not complete measures of an entity’s
profitability because they do not include costs and expenses for
depreciation and amortization, interest and related expenses, loss
on extinguishment of debt, acquisition-related expenses, gains and
losses and income taxes, intangible asset impairment charges and
related asset write-offs, gains or losses related to changes in the
fair value of contingent liabilities from earn-outs, loss on
product recalls and distribution restructuring expenses. Because
not all companies use identical calculations, this presentation of
EBITDA and adjusted EBITDA may not be comparable to other similarly
titled measures of other companies. However, EBITDA and adjusted
EBITDA can still be useful in evaluating our performance against
our peer companies because management believes these measures
provide users with valuable insight into key components of GAAP
amounts.
B&G Foods, Inc. and
Subsidiaries
Items Affecting Comparability —
Reconciliation of Adjusted Information to GAAP Information
(In thousands, except per share
data)
(Unaudited)
Fourth Quarter Ended Fiscal Year Ended
January 2, 2016 January 3, 2015
January 2, 2016 January 3, 2015
Reported net income $ 10,960 $ 11,454 $ 69,090 $ 40,956
Acquisition-related adjustment to deferred taxes(1) 7,451 — 7,166 —
Loss on extinguishment of debt, net of tax(2) — — — 3,690
Acquisition-related expenses, net of tax 1,769 508 3,842 4,696
Distribution restructuring expenses, net of tax(3) 938 — 1,674 —
Acquisition-related inventory step-up, net of tax(4) 3,848 — 3,848
— Impairment of intangible assets, net of tax(5) — — — 21,927 Loss
on disposal of inventory, net of tax(5) — 1,000 — 2,911 Loss on
product recall, net of insurance recoveries and tax(6)
—
8,216
1,173
8,216
Gain on contingent consideration, net of tax(5)
—
— — (5,268 ) Adjusted net income $ 24,966 $
21,178 $ 86,793 $ 77,128 Adjusted diluted earnings per share
(7) $ 0.43 $ 0.39 $ 1.53 $ 1.44
______________________________
(1)
Acquisition-related adjustment to deferred
taxes for the fourth quarter and full year 2015 relate to a true-up
of deferred taxes for state apportionment as a result of the Green
Giant and Mama Mary’s acquisitions.
(2)
Loss on extinguishment of debt for full
year 2014 includes costs relating to the termination of our prior
credit agreement, which included the repayment of $121.9 million
aggregate principal amount of tranche A term loans and $215.0
million aggregate principal amount of revolving loans, and the
write-off of deferred debt financing costs and unamortized discount
of $5.4 million and $0.3 million, respectively.
(3)
Distribution restructuring expenses for
the fourth quarter and full year of 2015 includes expenses relating
to our transitioning of the operations of our three primary
distribution centers to a third party logistics provider. We expect
this transition and the incurrence of related distribution
restructuring expenses to be completed during the first half of
2016.
(4)
Acquisition-related inventory step-up for
the fourth quarter and full year 2015 relates to the purchase
accounting adjustments made to the finished goods inventory
acquired in the Green Giant acquisition.
(5)
On October 7, 2013, we completed the
Rickland Orchards acquisition for a base purchase price of $57.5
million, of which $37.4 million was paid in cash and approximately
$20.1 million was paid in shares of B&G Foods’ common stock.
The purchase agreement also provided that the purchase price could
be increased by contingent earn-out consideration of up to $15.0
million in the aggregate based upon the achievement of revenue
growth targets during fiscal 2014, 2015 and 2016 meant to achieve
operating results in excess of base purchase price acquisition
model assumptions.
As of the date of acquisition we estimated the original fair
value of the contingent consideration to be approximately $7.6
million. During the remainder of fiscal 2013 and the first two
quarters of 2014, we recorded interest accretion expense on the
contingent consideration liability of $0.2 million and $0.4
million, respectively. At June 28, 2014, we remeasured the fair
value of the contingent consideration using actual operating
results through June 28, 2014 and revised forecasted operating
results for Rickland Orchards for the remainder of fiscal 2014,
2015 and 2016. As a result of lower than expected net sales results
for Rickland Orchards, and the unlikelihood of Rickland Orchards
achieving the revenue growth targets, the fair value of the
contingent consideration was reduced to zero, resulting in a
non-cash gain of $8.2 million that is included in gain on change in
fair value of contingent consideration in the consolidated
statements of operations for fiscal 2014. Based on the
results of an interim impairment analysis performed at September
27, 2014, we recorded non-cash impairment charges to amortizable
trademarks and customer relationship intangibles of Rickland
Orchards of $26.9 million and $7.3 million, respectively, which are
recorded in Impairment of Intangible Assets in the consolidated
statement of operations for fiscal 2014. As of January 2, 2016, the
remaining balances of the Rickland Orchards amortizable trademark
and customer relationship intangibles were $4.7 million and $1.0
million, respectively. If operating results for the Rickland
Orchards brand continue to deteriorate at rates in excess of our
current projections, we may be required to record an additional
non-cash charge for the impairment of long-lived intangibles
relating to Rickland Orchards, and these non-cash charges would be
material. In connection with the impairment of the Rickland
Orchards intangibles, we also recorded a charge to cost of goods
sold of approximately $1.5 million and $4.5 million during the
fourth quarter and full year 2014, respectively, relating to the
write-off of certain raw material and finished goods inventory used
in the production of Rickland Orchards products.
(6)
On November 14, 2014, we announced a
voluntary recall for certain Ortega and Las Palmas products after
learning that one or more of the spice ingredients purchased from a
third party supplier contained peanuts and almonds, allergens that
are not declared on the products’ ingredient statements. A
significant majority of the costs of this recall were incurred in
the fourth quarter of 2014. The cost impact of this recall during
fiscal 2015, was $1.9 million, of which $1.2 million was recorded
as a decrease in net sales related to customer refunds; $0.5
million was recorded as an increase in cost of goods sold primarily
related to costs associated with product retrieval, destruction
charges and customer fees; and $0.2 million was recorded as an
increase in selling, general, and administrative expenses related
to administrative costs. The cost impact of this recall during
fiscal 2014 (not including lost sales during the period of time
production and distribution of the affected products were
suspended, net of expected insurance recoveries of $5.0 million
(which were subsequently recovered in fiscal 2015)) was $12.8
million, of which $4.1 million was recorded as a decrease in net
sales related to customer refunds; $8.2 million was recorded as an
increase in cost of goods sold primarily related to costs
associated with product retrieval, destruction charges, customer
fees and inventory write-offs; and $0.5 million was recorded as an
increase in selling, general, and administrative expenses related
to administrative costs.
(7)
For the fourth quarter and full year 2014,
418,158 shares of common stock issuable upon the exercise of stock
options have not been included in the calculation of diluted
weighted average shares outstanding because the effect would be
antidilutive.
B&G Foods, Inc. and
Subsidiaries
Items Affecting Comparability —
Reconciliation of Base Business Net Sales and
Comparable Base Business Net Sales to
Reported Net Sales
(In thousands)
(Unaudited)
Fourth Quarter Ended Fiscal Year Ended
January 2, 2016 January 3, 2015
January 2, 2016 January 3, 2015
Reported net sales $ 342,291 $ 237,990 $ 966,358 $ 848,017 Net
sales from acquisitions(1) (116,039 ) —
(147,584 ) — Base business net sales(2) 226,252
237,990 818,774 848,017 Extra reporting week — (15,000 ) — (15,000
) Net sales of Rickland Orchards (934 ) (1,093 ) (4,106 ) (21,343 )
Customer refunds related to recall, net of insurance recoveries
—
4,063
1,225
4,063
Comparable base business net sales(3) $ 225,318 $
225,960 $ 815,893 $ 815,737
_________________
(1)
Reflects net sales for Green Giant, Mama
Mary’s and Specialty Brands for the portion of the fourth quarter
and full year 2015 for which there is no comparable period of net
sales during the same period in 2014. Green Giant was acquired on
November 2, 2015, Mama Mary’s was acquired on July 10, 2015 and
Specialty Brands was acquired on April 23, 2014.
(2)
Base business net sales is a non-GAAP
financial measure used by management to measure operating
performance. We define base business net sales as our net sales
excluding the impact of acquisitions until the net sales from such
acquisitions are included in both comparable periods. The portion
of current period net sales attributable to recent acquisitions for
which there is no corresponding period in the comparable period of
the prior year is excluded. For each acquisition, the excluded
period starts at the beginning of the most recent fiscal period
being compared and ends on the first anniversary of the acquisition
date. Management has included this financial measure because it
provides useful and comparable trend information regarding the
results of our business without the effect of the timing of
acquisitions.
(3)
Comparable base business net sales is a
non-GAAP financial measure used by management to measure operating
performance. We define comparable base business net sales as our
base business net sales, excluding the impact of the extra
reporting week in the fourth quarter of 2014, the Rickland Orchards
shortfall and customer refunds relating to the Ortega and Las
Palmas recall, described in more detail below:
- The Company’s fourth quarter of 2015
contained 13 weeks and the fourth quarter of 2014 contained 14
weeks. Fiscal 2015 contained 52 weeks and fiscal 2014 contained 53
weeks.
- Net sales were negatively impacted by
the Rickland Orchards shortfall in fiscal 2015 (primarily during
the first three quarters) and in fiscal 2014, a continuation of the
weakness that caused our company to impair the brand’s trademark
and customer relationship intangible assets in fiscal 2014. Net
sales of Rickland Orchards are excluded from comparable base
business net sales.
- On November 14, 2014, we announced a
voluntary recall for certain Ortega and Las Palmas products after
learning that one or more of the spice ingredients purchased from a
third party supplier contained peanuts and almonds, allergens that
are not declared on the products’ ingredient statements. Fiscal
2015 and fiscal 2014 net sales were negatively impacted by customer
refunds related to the recall. Ortega and Las Palmas combined net
sales in fiscal 2015 and fiscal 2014 were $182.6 million and $169.5
million. Ortega and Las Palmas combined net sales the fourth
quarter of 2015 and 2014 were $45.6 million and $39.5 million,
respectively.
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ICR, Inc.Investor Relations:Dara Dierks, 866-211-8151orMedia
Relations:Matt Lindberg, 203-682-8214
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