B+G Foods: Reports Q4 and Full Year Results

Parsippany / NJ. (bgs) B+G Foods Inc. announced financial results for the fourth quarter and full year 2019. Financial results for the fourth quarter and full year 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.

Fourth Quarter 2019 Financial Summary

• Net sales of USD 470.2 million
• Diluted earnings per share of USD 0.16
• Adjusted diluted earnings per shareof USD 0.28
• Net income of USD 10.3 million
• Adjusted net income of USD 17.8 million
• Adjusted Ebitda of USD 69.5 million

Full Year 2019 Financial Summary

• Net sales of USD 1,660.4 million
• Diluted earnings per share of USD 1.17
• Adjusted diluted earnings per share of USD 1.64
• Net income of USD 76.4 million
• Adjusted net income of USD 106.6 million
• Adjusted Ebitda of USD 302.5 million
• Repurchased 1,737,887 shares of common stock at an average price per share of USD 19.95, or USD 34.7 million in the aggregate

Guidance for Full Year Fiscal 2020

• Net sales range of USD 1.660 billion to USD 1.680 billion
• Adjusted Ebitda range of USD 302.5 million to USD 312.5 million
• Adjusted diluted earnings per share range of USD 1.60 to USD 1.80

Kenneth G. Romanzi, President and Chief Executive Officer of B+G Foods, stated «I am happy to report 2019 financial results that are consistent with our short-term and long-term plans, which are based on our goal of a stable base business with pricing and cost savings initiatives to offset inflation, complemented by net sales and earnings growth through new product innovation and accretive acquisitions.»

Romanzi continued, «We have been successful in our efforts to generate growth by investing in plant-based innovation products by «Green Giant». We recently augmented these efforts with our acquisition last week of Farmwise LLC, proud creator of «Veggie Fries», «Veggie Tots» and «Veggie Rings». Additionally, in 2019, we acquired and successfully integrated «Clabber Girl», the nation’s #1 manufacturer of retail baking powder. We also strengthened our organization in 2019, including organizational re-design, personnel enhancements and system improvements such as our new ERP system implementation. We believe that these initiatives, coupled with our investor-friendly capital allocation strategy, position us to create long-term value for our shareholders.»

Financial Results for the Fourth Quarter of 2019

Net sales increased USD 12.1 million, or 2.6 percent, to USD 470.2 million for the fourth quarter of 2019 from USD 458.1 million for the fourth quarter of 2018. The increase was primarily due to the «Clabber Girl» acquisition, partially offset by the Pirate Brands divestiture. Net sales of «Clabber Girl», which was acquired on May 15, 2019 and therefore not part of the Company’s fourth quarter of 2018 results, contributed USD 25.2 million to the Company’s net sales for the fourth quarter of 2019. Net sales of Pirate Brands, which was sold on October 17, 2018 and therefore not part of the Company’s fourth quarter of 2019 results, were USD 2.1 million during the fourth quarter of 2018.

Base business net sales for the fourth quarter of 2019 decreased USD 10.8 million, or 2.4 percent, to USD 445.0 million from USD 455.8 million for the fourth quarter of 2018. The decrease in base business net sales reflected an increase in net pricing of USD 4.1 million, or 0.9 percent of base business net sales, inclusive of list price increases and promotional trade spend optimization, more than offset by a decrease in unit volume of USD 14.9 million.

Net sales of the Company’s spices + seasonings increased USD 0.8 million, or 1.0 percent, and net sales of «New York Style» increased USD 0.2 million, or 1.9 percent, for the fourth quarter of 2019 as compared to the fourth quarter of 2018«.» Net sales of «Cream of Wheat» decreased USD 1.4 million, or 7.5 percent; net sales of Ortega decreased USD 1.3 million, or 3.6 percent; net sales of« Green Giant» (including «Le Sueur») decreased USD 1.3 million, or 0.8 percent; and net sales of« Maple Grove Farms» decreased USD 0.4 million, or 2.4 percent, for the fourth quarter of 2019 as compared to the fourth quarter of 2018. Net sales of all other brands in the aggregate decreased USD 7.4 million, or 5.8 percent, for the fourth quarter of 2019.

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 and non-recurring expenses during the fourth quarter of 2019, the Company’s gross profit would have been USD 97.0 million, or 20.6 percent of net sales. Gross profit was USD 49.9 million for the fourth quarter of 2018, or 10.9 percent of net sales. Excluding the negative impact of USD 36.9 million of acquisition/divestiture-related and non-recurring expenses during the fourth quarter of 2018, which includes expenses relating to the non-cash accounting impact of the Company’s 2018 inventory reduction plan, the Company’s gross profit would have been USD 86.8 million, or 19.0 percent of net sales.

Selling, general and administrative expenses decreased USD 3.1 million, or 6.5 percent, to USD 44.5 million for the fourth quarter of 2019 from USD 47.6 million for the fourth quarter of 2018. The decrease was composed of decreases in acquisition/divestiture-related and non-recurring expenses of USD 3.2 million, consumer marketing expenses of USD 1.6 million and warehousing expenses of USD 1.3 million, partially offset by increases in other general and administrative expenses of USD 2.2 million and selling expenses of USD 0.8 million. Expressed as a percentage of net sales, selling, general and administrative expenses improved by 0.9 percentage points to 9.5 percent for the fourth quarter of 2019, compared to 10.4 percent for the fourth quarter of 2018.

Net interest expense increased USD 3.2 million, or 13.2 percent, to USD 27.7 million for the fourth quarter of 2019 from USD 24.5 million in the fourth quarter of 2018. The increase was primarily attributable to an increase in average long-term debt outstanding during the fourth quarter of 2019 as compared to the fourth quarter of 2018, primarily as a result of borrowings made in fiscal 2019 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. During the fourth quarter of 2019, net interest expense was negatively impacted in connection with the Company’s debt refinancing because the Company’s new 5.25 percent senior notes due 2027 were issued on September 26, 2019, prior to the redemption of the Company’s 4.625 percent senior notes due 2021 on October 10, 2019, and therefore during such fourteen day period (twelve days of which occurred during the fourth quarter) the Company incurred interest expense on both sets of notes.

The Company’s net income was USD 10.3 million, or USD 0.16 per diluted share, for the fourth quarter of 2019, compared to net income of USD 111.9 million, or USD 1.70 per diluted share, for the fourth quarter of 2018, which includes the USD 176.4 million gain on sale from the Pirate Brands divestiture. The Company’s adjusted net income for the fourth quarter of 2019 was USD 17.8 million, or USD 0.28 per adjusted diluted share, compared to USD 22.3 million, or USD 0.34 per adjusted diluted share, for the fourth quarter of 2018.

For the fourth quarter of 2019, adjusted Ebitda was USD 69.5 million, an increase of USD 11.0 million, or 18.8 percent, compared to USD 58.5 million for the fourth quarter of 2018. The increase in adjusted Ebitda was primarily attributable to improved operating performance (which includes the benefits of the Company’s pricing initiatives and the Company’s cost savings program, which were offset in part by input cost inflation and reduced volume), as well as the acquisition of «Clabber Girl »in the second quarter of 2019, partially offset by the divestiture of Pirate Brands in the fourth quarter of 2018. Adjusted Ebitda as a percentage of net sales was 14.8 percent for the fourth quarter of 2019, compared to 12.8 percent in the fourth quarter of 2018.

Financial Results for the Full Year Fiscal 2019

B+G Foods generated net sales of USD 1,660.4 million for fiscal 2019, compared to USD 1,700.8 million for fiscal 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 fiscal 2019 results, were USD 74.9 million during fiscal 2018. An additional six and one-half months of net sales of «McCann’s», which was acquired on July 16, 2018, contributed USD 5.8 million to the Company’s net sales for fiscal 2019. Net sales of «Clabber Girl», which was acquired on May 15, 2019 and therefore not part of the Company’s fiscal 2018 results, contributed USD 53.6 million to the Company’s net sales for fiscal 2019.

Base business net sales for fiscal 2019 decreased USD 22.2 million, or 1.4 percent, to USD 1,601.0 million from USD 1,623.2 million for fiscal 2018. The decrease in base business net sales reflected an increase in net pricing of USD 20.3 million, or 1.3 percent of base business net sales, inclusive of list price increases and promotional trade spend optimization, more than offset by a decrease in unit volume of USD 42.4 million and the negative impact of foreign currency of USD 0.1 million.

Net sales of «Green Giant» (including «Le Sueur») increased USD 7.8 million, or 1.5 percent; net sales of «Maple Grove Farms» increased USD 2.6 million, or 3.7 percent; and net sales of «New York Style» increased USD 2.1 million, or 5.7 percent, in fiscal 2019, as compared to fiscal 2018. Net sales of the Company’s spices + seasonings decreased USD 4.6 million, or 1.3 percent; net sales of «Cream of Wheat» decreased USD 2.6 million, or 4.2 percent; and net sales of «Ortega» decreased USD 0.9 million, or 0.6 percent, for fiscal 2019 as compared to fiscal 2018. Net sales of all other brands in the aggregate decreased USD 26.6 million, or 5.9 percent, for fiscal 2019.

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 and non-recurring expenses during fiscal 2019, which includes expenses related to the trailing non-cash accounting impact of the Company’s 2018 inventory reduction plan and the amortization of acquisition-related inventory fair value step-up of inventory, the Company’s gross profit would have been USD 405.1 million, or 24.4 percent of net sales. Gross profit was USD 349.5 million for fiscal 2018, or 20.5 percent of net sales. Excluding the negative impact of USD 76.3 million of acquisition/divestiture-related and non-recurring expenses during fiscal 2018, which includes expenses relating to the non-cash accounting impact of the Company’s 2018 inventory reduction plan, the Company’s gross profit would have been USD 425.8 million, or 25.0 percent of net sales.

Selling, general and administrative expenses decreased USD 6.7 million, or 4.0 percent, to USD 160.7 million for fiscal 2019 from USD 167.4 million for fiscal 2018. The decrease was composed of decreases in consumer marketing expenses of USD 5.7 million, warehousing expenses of USD 2.7 million, selling expenses of USD 2.5 million and acquisition/divestiture-related and non-recurring expenses of USD 0.2 million, partially offset by an increase in other general and administrative expenses of USD 4.4 million. Expressed as a percentage of net sales, selling, general and administrative expenses improved by 0.1 percentage points to 9.7 percent for fiscal 2019, compared to 9.8 percent for fiscal 2018.

Net interest expense decreased USD 10.2 million, or 9.4 percent, to USD 98.1 million for fiscal 2019 from USD 108.3 million in fiscal 2018. The decrease was primarily attributable to a reduction in average long-term debt outstanding during fiscal 2019 as compared to fiscal 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 earlier prepayments of long-term debt made during the first and second quarters of 2018, which was partially offset by additional borrowings made in fiscal 2019 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. During fiscal 2019, net interest expense was negatively impacted in connection with the Company’s debt refinancing because the Company’s new 5.25 percent senior notes due 2027 were issued on September 26, 2019, prior to the redemption of the Company’s 4.625 percent senior notes due 2021 on October 10, 2019, and therefore during such fourteen day period the Company incurred interest expense on both sets of notes.

The Company’s net income was USD 76.4 million, or USD 1.17 per diluted share, for fiscal 2019, compared to net income of USD 172.4 million, or USD 2.60 per diluted share, for fiscal 2018, which includes the USD 176.4 million gain on the sale from the Pirate Brands divestiture. The Company’s adjusted net income for fiscal 2019 was USD 106.6 million, or USD 1.64 per adjusted diluted share, compared to USD 122.3 million, or USD 1.85 per adjusted diluted share, for fiscal 2018.

For fiscal 2019, adjusted Ebitda was USD 302.5 million, a decrease of USD 11.7 million, or 3.7 percent, compared to USD 314.2 million for fiscal 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 (which includes the benefits of the Company’s pricing initiatives and the Company’s cost savings program, which were offset in part by input cost inflation and reduced volume), 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 18.2 percent for fiscal 2019, compared to 18.5 percent in fiscal 2018.

Full Year Fiscal 2020 Guidance

For fiscal 2020, net sales are expected to be approximately USD 1.660 billion to USD 1.680 billion, adjusted Ebitda is expected to be approximately USD 302.5 million to USD 312.5 million and adjusted diluted earnings per share is expected to be approximately USD 1.60 to USD 1.80.

For fiscal 2020, net interest expense is expected to be approximately USD 98.0 million to USD 103.0 million (including cash interest payments which are expected to be approximately USD 94.0 million to USD 99.0 million), depreciation expense is expected to be approximately USD 45.0 million, amortization expense is expected to be approximately USD 19.0 million, cash taxes are expected to be approximately USD 10.0 million to USD 20.0 million and capital expenditures are expected to be approximately USD 40.0 million to USD 45.0 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.