B+G: Reports Strong Q2-2020 Net Sales and Earnings Growth

Parsippany / NJ. (bgs) B+G Foods Inc. announced financial results for the second quarter and first two quarters of 2020 and provided an update as to how the Covid-19 pandemic is impacting the Company.

Second Quarter 2020 Financial Summary versus Q2-2019

• Net sales increased 38.1 percent to USD 512.5 million
• Base business net sales increased 33.9 percent to USD 496.9 million
• Diluted earnings per share increased 150.0 percent to USD 0.70
• Adjusted diluted earnings per share increased 86.8 percent to USD 0.71
• Net income increased 146.1 percent to USD 44.9 million
• Adjusted net income increased 87.6 percent to USD 46.0 million
• Adjusted Ebitda increased 44.6 percent to USD 102.6 million
• Net cash provided by operating activities for the first two quarters of 2020 increased to USD 246.4 million

«At B+G Foods we remain committed to the health and safety of our employees and doing our part to keep our nation supplied with food during this difficult time,» stated Kenneth G. Romanzi, President and Chief Executive Officer of B+G Foods. Romanzi continued, «Thanks to the tremendous efforts of our employees, we were able to achieve both of these goals during the second quarter. We had an outstanding second quarter in terms of net sales, net income, adjusted Ebitda and cash flow as our portfolio of brands served consumers very well as they continued to cook and eat more at home.»

«We continue to take a wide range of precautionary measures at our manufacturing facilities and other work locations in response to Covid-19. And, although we are operating in a very challenging environment, our employees have done a fantastic job ensuring that our supply chain has been able to meet an unprecedented increase in demand for our products.»

Romanzi continued, «During the second half of the year, we remain focused on working closely with our supply chain partners and our customers to ensure that we can continue to provide uninterrupted service and meet the increased demand resulting from the pandemic. At the same time, we will continue our new product innovation and other brand building efforts as we look to turn some of this pandemic-related increase in demand into long-term growth opportunities for our brands.»

Financial Results for the Second Quarter of 2020

Net sales for the second quarter of 2020 increased USD 141.3 million, or 38.1 percent, to USD 512.5 million from USD 371.2 million for the second 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. The Company’s net sales also benefited from the Clabber Girl and Farmwise acquisitions, which were completed on May 15, 2019 and February 19, 2020, respectively. An additional one and one-half months of net sales of Clabber Girl and an additional three months of net sales of Farmwise contributed USD 15.0 million and USD 0.6 million, respectively, to the Company’s net sales for the second quarter of 2020.

Base business net sales for the second quarter of 2020 increased USD 125.7 million, or 33.9 percent, to USD 496.9 million from USD 371.2 million for the second quarter of 2019. The increase in base business net sales reflected an increase in unit volume of USD 111.7 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) of USD 15.3 million, or 4.1 percent of base business net sales, partially offset by the negative impact of foreign currency of USD 1.3 million.

Net sales of Green Giant (including Le Sueur) increased USD 51.2 million, or 45.4 percent; net sales of the Company’s spices and seasonings increased USD 17.4 million, or 21.4 percent; net sales of Ortega increased USD 12.8 million, or 37.4 percent; net sales of Cream of Wheat increased USD 6.3 million, or 54.0 percent; and net sales of Maple Grove Farms increased USD 0.2 million, or 1.5 percent, for the second quarter of 2020 as compared to the second quarter of 2019. Net sales of all other brands in the aggregate increased USD 37.8 million, or 33.3 percent, for the second quarter of 2020.

Gross profit was USD 134.1 million for the second quarter of 2020, or 26.2 percent of net sales. Excluding the negative impact of USD 0.5 million of acquisition/divestiture-related and non-recurring expenses during the second quarter of 2020, the Company’s gross profit would have been USD 134.6 million, or 26.3 percent of net sales. 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 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 96.8 million, or 26.0 percent of net sales.

Selling, general and administrative expenses increased USD 4.4 million, or 11.3 percent, to USD 44.3 million for the second quarter of 2020 from USD 39.9 million for the second quarter of 2019. The increase was composed of increases in general and administrative expenses of USD 4.7 million and selling expenses of USD 2.7 million, partially offset by decreases in acquisition/divestiture-related and non-recurring expenses of USD 2.7 million, warehousing expenses of USD 0.2 million and consumer marketing expenses of USD 0.1 million. Expressed as a percentage of net sales, selling, general and administrative expenses improved by 2.0 percentage points to 8.7 percent for the second quarter of 2020, compared to 10.7 percent for the second quarter of 2019.

Net interest expense increased USD 1.6 million, or 7.2 percent, to USD 24.8 million for the second quarter of 2020 from USD 23.2 million in the second quarter of 2019. The increase was primarily attributable to an increase in average long-term debt outstanding during the second quarter of 2020 as compared to the second quarter of 2019, primarily as a result of borrowings made during the last three quarters of fiscal 2019 primarily to fund the Clabber Girl acquisition, to pay cash taxes resulting from the 2018 gain on sale of Pirate Brands and to fund the repurchase of shares of the Company’s common stock as part of the Company’s stock repurchase program, and a USD 100.0 million revolver draw made by the Company in March 2020, which was subsequently repaid in May and June 2020.

The Company’s net income was USD 44.9 million, or USD 0.70 per diluted share, for the second quarter of 2020, compared to net income of USD 18.3 million, or USD 0.28 per diluted share, for the second quarter of 2019. The Company’s adjusted net income for the second quarter of 2020 was USD 46.0 million, or USD 0.71 per adjusted diluted share, compared to USD 24.5 million, or USD 0.38 per adjusted diluted share, for the second quarter of 2019.

For the second quarter of 2020, adjusted Ebitda was USD 102.6 million, an increase of USD 31.6 million, or 44.6 percent, compared to USD 71.0 million for the second 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 increased net sales due to an extra one and one-half months of net sales of Clabber Girl in the second quarter of 2020. Adjusted Ebitda as a percentage of net sales was 20.0 percent for the second quarter of 2020, compared to 19.1 percent in the second quarter of 2019.

Financial Results for the First Two Quarters of 2020

Net sales for the first two quarters of 2020 increased USD 178.0 million, or 22.7 percent, to USD 961.9 million from USD 783.9 million for the first two quarters of 2019. The increase was primarily attributable to materially increased net sales in March through June 2020 (as compared to March through June 2019) resulting from increased demand for the Company’s products due to the Covid-19 pandemic. The Company’s net sales also benefited from the Clabber Girl and Farmwise acquisitions, which were completed on May 15, 2019 and February 19, 2020, respectively. An additional four and one-half months of net sales of Clabber Girl and an additional four and one-half months of net sales of Farmwise contributed USD 33.7 million and USD 0.8 million, respectively, to the Company’s net sales for the first two quarters of 2020.

Base business net sales for the first two quarters of 2020 increased USD 143.5 million, or 18.3 percent, to USD 927.4 million from USD 783.9 million for the first two quarters of 2019. The increase in base business net sales reflected an increase in unit volume of USD 119.9 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) of USD 24.5 million, or 3.1 percent of base business net sales, partially offset by the negative impact of foreign currency of USD 0.9 million.

Net sales of Green Giant (including Le Sueur) increased USD 73.5 million, or 29.5 percent; net sales of Ortega increased USD 14.3 million, or 20.0 percent; net sales of Cream of Wheat increased USD 7.8 million, or 26.9 percent; net sales of the Company’s spices and seasonings increased USD 4.5 million, or 2.7 percent; and net sales of Maple Grove Farms increased USD 0.8 million, or 2.3 percent, in the first two quarters of 2020, as compared to the first two quarters of 2019. Net sales of all other brands in the aggregate increased USD 42.6 million, or 18.4 percent, for the first two quarters of 2020.

Gross profit was USD 239.0 million for the first two quarters of 2020, or 24.8 percent of net sales. Excluding the negative impact of USD 2.8 million of acquisition/divestiture-related and non-recurring expenses during the first two quarters of 2020, the Company’s gross profit would have been USD 241.8 million, or 25.1 percent of net sales. 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 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 197.9 million, or 25.2 percent of net sales.

Selling, general and administrative expenses increased USD 6.1 million, or 7.9 percent, to USD 84.3 million for the first two quarters of 2020 from USD 78.2 million for the first two quarters of 2019. The increase was composed of increases in general and administrative expenses of USD 6.4 million and selling expenses of USD 4.7 million, partially offset by decreases in acquisition/divestiture-related and non-recurring expenses of USD 3.8 million, warehousing expenses of USD 0.6 million and consumer marketing expenses of USD 0.6 million. Expressed as a percentage of net sales, selling, general and administrative expenses improved by 1.2 percentage points to 8.8 percent for the first two quarters of 2020, compared to 10.0 percent for the first two quarters of 2019.

Net interest expense increased USD 4.6 million, or 10.0 percent, to USD 50.9 million for the first two quarters of 2020 from USD 46.3 million in the first two quarters of 2019. The increase was primarily attributable to an increase in average long-term debt outstanding during the first two quarters of 2020 as compared to the first two quarters of 2019, primarily as a result of borrowings made during the last three quarters of fiscal 2019 primarily to fund the Clabber Girl acquisition, to pay cash taxes resulting from the 2018 gain on sale of Pirate Brands and to fund the repurchase of shares of the Company’s common stock as part of the Company’s stock repurchase program, and a USD 100.0 million revolver draw made by the Company in March 2020, which was subsequently repaid in May and June 2020.

The Company’s net income was USD 73.0 million, or USD 1.14 per diluted share, for the first two quarters of 2020, compared to net income of USD 35.0 million, or USD 0.53 per diluted share, for the first two quarters of 2019. The Company’s adjusted net income for the first two quarters of 2020 was USD 75.3 million, or USD 1.17 per adjusted diluted share, compared to USD 53.5 million, or USD 0.82 per adjusted diluted share, for the first two quarters of 2019.

For the first two quarters of 2020, adjusted Ebitda was USD 183.3 million, an increase of USD 36.5 million, or 24.9 percent, compared to USD 146.8 million for the first two 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 two quarters of 2020. Adjusted Ebitda as a percentage of net sales was 19.1 percent for the first two quarters of 2020, compared to 18.7 percent in the first two quarters of 2019.

Full Year Fiscal 2020 Guidance

Although B+G Foods’ management continues to believe that B+G Foods’ net sales and adjusted Ebitda for full year fiscal 2020 will materially exceed the full year fiscal 2020 net sales and adjusted Ebitda guidance provided by management when the Company reported fiscal 2019 results in February 2020, the Company’s management is unable to fully estimate the impact the Covid-19 pandemic will have on the Company’s third quarter and full year fiscal 2020 results and therefore is unable at this time to provide guidance for the remainder of 2020. The ultimate impact of the Covid-19 pandemic on the Company’s business will depend on many factors, including, among others, the duration of social distancing and stay-at-home mandates and whether a second or third wave 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, and the extent to which macroeconomic conditions resulting from the pandemic and the pace of the subsequent recovery may impact consumer eating habits.