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B&G Foods Reports Financial Results for First Quarter 2018B&G Foods, Inc. (NYSE:BGS) today announced financial results for the first quarter of 2018. Executive Summary (vs. year-ago quarter where applicable):
Robert C. Cantwell, President and Chief Executive Officer of B&G Foods stated, "When we laid out our vision for 2018 earlier this year, we expressed our belief that during 2018 we would return to modest growth, stable margins and strong free cash flow generation, benefiting in part from our inventory reduction plan, and we delivered on those expectations in the first quarter. Overall, our net sales increased 4.7% for the quarter and we had a balanced performance across our portfolio, led by the strength of our largest brand - Green Giant. Net sales of Green Giant frozen products increased by $10.8 million or 12.8% during the quarter. This marks the fourth consecutive quarter of double digit growth in net sales of Green Giant frozen products. The key driver of the growth for Green Giant frozen has been the successful launch and adoption of our innovation products, which now include Green Giant Veggie SpiralsTM, Green Giant Riced Veggies, Green Giant Veggie Tots and Green Giant Mashed Cauliflower. We are offering consumers new ways to consume vegetables at home and they are responding positively to our Green Giant products." Mr. Cantwell continued, "We generated $89.4 million of adjusted EBITDA, which as a percentage of net sales is 20.7%, $36.4 million in adjusted net income1 and $0.55 in adjusted diluted earnings per share, all supportive of our full year fiscal 2018 guidance. Importantly, we generated net cash provided by operating activities of $73.7 million compared to $2.5 million in the first quarter of last year. We also reduced debt by $125.0 million during the first quarter and an additional $25.0 million in April. We also reduced our inventory by $46.5 million during the quarter and we now expect to achieve the high end of our $75.0 million to $100.0 million inventory reduction program by the end of the year." Financial Results for the First Quarter of 2018 Net sales increased $19.4 million, or 4.7%, to $431.7 million for the first quarter of 2018 from $412.3 million for the first quarter of 2017. Net sales of Back to Nature, acquired on October 2, 2017, contributed $20.0 million to the Company's net sales for the first quarter of 2018. Base business net sales for the first quarter of 2018 increased $1.1 million, or 0.3%, to $411.1 million from $410.0 million for the first quarter of 2017. The $1.1 million increase was attributable to an increase in net pricing of $1.2 million, or 0.3%, partially offset by a decrease in unit volume of $0.1 million. Net sales of Green Giant frozen products for the first quarter of 2018 increased $10.8 million, or 12.8%, compared to the first quarter of 2017. This growth was driven by Green Giant frozen innovation products. Other brands that performed well during the quarter include Cream of Wheat, whose net sales increased 11.2%, Ortega, whose net sales increased 4.1%, and Victoria, whose net sales increased 11.0%. This performance was offset, in part, by Pirate Brands, whose net sales decreased 17.9%, largely due to the timing of promotional activities, Maple Grove Farms of Vermont, whose net sales decreased 9.1%, Mama Mary's, whose net sales decreased 9.8% and Green Giant shelf stable, whose net sales decreased by 6.9%. Gross profit was $103.4 million for the first quarter of 2018 compared to $121.2 million for the first quarter of 2017. Gross profit expressed as a percentage of net sales decreased to 23.9% in the first quarter of 2018 from 29.4% in the first quarter of 2017. Excluding the negative impact of $16.1 million of non-recurring expenses, including the non-cash accounting impact of the Company's inventory reduction plan, and acquisition-related expenses, including Back to Nature integration expenses, gross profit as a percentage of net sales was 27.7% for the quarter. The remaining 1.7 percentage point decrease in gross profit percentage was attributable to industry-wide and anticipated increases in freight expenses, partially offset by procurement savings, a decrease in warehousing expenses and an increase in net pricing. Selling, general and administrative expenses decreased $5.9 million, or 12.3%, to $42.6 million for the first quarter of 2018 from $48.5 million for the first quarter of 2017. The decrease was composed of a decrease in acquisition-related and non-recurring expenses of $5.4 million, reduced consumer marketing expenses of $1.8 million and reduced warehousing expenses of $0.7 million, partially offset by other increases of $2.0 million. Expressed as a percentage of net sales, selling, general and administrative expenses improved by 1.9 percentage points to 9.9% for the first quarter of 2018 compared to 11.8% for the first quarter of 2017. Net interest expense increased $8.7 million, or 44.1%, to $28.3 million for the first quarter of 2018 from $19.6 million in the first quarter of 2017. The increase was primarily attributable to additional borrowings made in the fourth quarter of 2017 to fund the Back to Nature acquisition and in the second and fourth quarters of 2017 in connection with our senior notes offerings. The Company's reported net income under U.S. generally accepted accounting principles (GAAP) was $20.5 million, or $0.31 per diluted share for the first quarter of 2018, as compared to reported net income of $32.8 million, or $0.49 per diluted share, for the first quarter 2017. The Company's adjusted net income for the first quarter of 2018, which excludes the after-tax impact of loss on extinguishment of debt, acquisition-related and non-recurring expenses and the non-cash accounting impact of the Company's inventory reduction plan, was $36.4 million, or $0.55 per adjusted diluted share. The Company's adjusted net income for the first quarter of 2017, which excludes the after-tax impact of loss on extinguishment of debt, acquisition-related and non-recurring expenses, acquisition-related inventory step-up and loss on sale of assets was $38.5 million, or $0.58 per adjusted diluted share. For the first quarter of 2018, adjusted EBITDA, which excludes acquisition-related and non-recurring expenses and the non-cash accounting impact of the Company's inventory reduction plan, was $89.4 million, a decrease of 2.9%, or $2.6 million, compared to $92.0 million for the first quarter of 2017. Adjusted EBITDA as a percentage of net sales was 20.7% for the first quarter of 2018. Guidance B&G Foods reaffirmed its guidance for full year 2018. Net sales are expected to be approximately $1.720 billion to $1.755 billion, adjusted EBITDA is expected to be approximately $347.5 million to $365.0 million and adjusted diluted earnings per share is expected to be approximately $2.05 to $2.25. The full year 2018 net sales guidance includes the impact of the new FASB revenue recognition standard, which the Company estimates will reduce net sales in 2018 by approximately $21.5 million.2 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-related and non-recurring expenses, gains and losses; the non-cash accounting impact of the Company's inventory reduction plan; restructuring expenses; gains and losses on the sale of assets and other charges reflected in the Company's reconciliation of historic non-GAAP financial measures, the amounts of which, based on past experience, could be material. For additional information regarding B&G Foods' non-GAAP financial measures, see "About Non-GAAP Financial Measures and Items Affecting Comparability" below. Conference Call B&G Foods will hold a conference call at 4:30 p.m. ET today, May 3, 2018. The call will be webcast live and can be accessed at ir.bgfoods.com. The call can also be accessed live over the phone by dialing (866) 548-4713 for U.S. callers or (323) 794-2093 for international callers. A replay of the call will be available two hours after the call and can be accessed by dialing (844) 512-2921 for U.S. callers or (412) 317-6671 for international callers; the password is 9493777. The replay will be available from May 3, 2018 through May 17, 2018. Investors may also access a web-based replay of the call at ir.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 and without the impact of discontinued brands), "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 acquired inventory fair value step-up, and gains and losses on sale of assets), non-recurring expenses, gains and losses and the non-cash accounting impact of the Company's inventory reduction plan) 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 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," and "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 first quarter of 2018 and 2017, 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 and 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 and cash flows. About B&G Foods, Inc. Based in Parsippany, New Jersey, B&G Foods and its subsidiaries manufacture, sell and distribute high-quality, branded shelf-stable and frozen foods across the United States, Canada and Puerto Rico. With B&G Foods' diverse portfolio of more than 50 brands you know and love, including Back to Nature, B&G, B&M, Cream of Wheat, Green Giant, Las Palmas, Le Sueur, Mama Mary's, Maple Grove Farms, Mrs. Dash, New York Style, Ortega, Pirate's Booty, Polaner, SnackWell's, Spice Islands and Victoria, there's a little something for everyone. For more information about B&G Foods and its brands, please visit www.bgfoods.com. 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, adjusted diluted earnings per share, inventory and overall expectations for fiscal 2018. 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. Factors that may affect actual results include, without limitation: the Company's substantial leverage; the effects of rising costs for the Company's raw materials, packaging and ingredients; crude oil prices and their impact on distribution, packaging and energy costs; the Company's ability to successfully implement sales price increases and cost saving measures to offset any cost increases; intense competition, changes in consumer preferences, demand for the Company's products and local economic and market conditions; the Company's continued ability to promote brand equity successfully, to anticipate and respond to new consumer trends, to develop new products and markets, to broaden brand portfolios in order to compete effectively with lower priced products and in markets that are consolidating at the retail and manufacturing levels and to improve productivity; the risks associated with the expansion of the Company's business; the Company's possible inability to identify new acquisitions or to integrate recent or future acquisitions or the Company's failure to realize anticipated revenue enhancements, cost savings or other synergies; tax reform and legislation, including the effects of the U.S. Tax Cuts and Jobs Act; the Company's ability to access the credit markets and the Company's borrowing costs and credit ratings, which may be influenced by credit markets generally and the credit ratings of the Company's competitors; unanticipated expenses, including, without limitation, litigation or legal settlement expenses; the effects of currency movements of the Canadian dollar and the Mexican peso as compared to the U.S. dollar; future impairments of the Company's goodwill and intangible assets; the Company's ability to successfully implement a new enterprise resource planning (ERP) system; the Company's ability to protect information systems against, or effectively respond to, a cybersecurity incident or other disruption; the Company's sustainability initiatives and changes to environmental laws and regulations; and other factors that affect the food industry generally. 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.
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