Trade Resources Company News B&G Foods Reports 49% Increase in Sales for Third Quarter 2016

B&G Foods Reports 49% Increase in Sales for Third Quarter 2016

B&G Foods has announced a 49.2% increase in net sales for the July-September quarter of this year.

Highlights (vs. year-ago quarter where applicable):

Net sales increased 49.2% to $318.2 millionNet income increased 63.6% to $32.4 millionAdjusted net income increased 62.1% to $36.7 millionDiluted earnings per share increased 47.1% to $0.50Adjusted diluted earnings per share increased 43.6% to $0.56Adjusted EBITDA increased 60.2% to $85.1 millionRevised guidance for full year fiscal 2016:Net sales to a range of $1.38 billion to $1.40 billionAdjusted EBITDA to a range of $322.0 million to $328.0 millionAdjusted diluted earnings per share to a range of $2.11 to $2.17

“Our third quarter results reflect very strong profitability, as demonstrated by our adjusted EBITDA and adjusted diluted earnings per share, despite the overall poor sales performance of our base business. Reversing the base business net sales decline is a high-priority for the entire B&G Foods leadership team and we are working extremely hard to flatten out the recent base business sales trend in the first half of 2017,” stated Robert C. Cantwell, President and Chief Executive Officer of B&G Foods.

Mr. Cantwell continued, “The end of the third quarter and start of the fourth quarter also marks the beginning of a new and exciting time for B&G Foods as the transition services agreement for Green Giant is now complete and we have assumed full responsibility for the operation of the business. I anticipate that there may be some growing pains in the early stages of the post transition period but I believe that our very capable team at B&G Foods will provide our customers with the same excellent level of service for Green Giant that we have historically provided our customers for all of our other brands.”

Financial Results for the Third Quarter of 2016

Net sales increased $104.9 million, or 49.2%, to $318.2 million for the third quarter of 2016 from $213.3 million for the third quarter of 2015. Net sales of Green Giant, acquired on November 2, 2015, contributed $113.8 million to the Company’s net sales for the quarter.

Base business net sales for the third quarter of 2016 decreased $7.7 million, or 3.7%, to $204.5 million from $212.2 million for the third quarter of 2015. The $7.7 million decrease was attributable to a decrease in unit volume of $5.9 million, or 2.8%, and a decrease in net pricing of $1.8 million, or 0.9%.

Approximately 25% of the Company’s base business net sales decline during the third quarter was attributable to our TrueNorth brand, whose net sales declined $2.0 million, or 50.5%. The TrueNorth net sales decline was primarily the result of historically high almond prices in 2015. In response to increased almond costs, the Company increased the selling price for TrueNorth products, which had a negative impact on consumer demand.

Although the Company has recently rolled back pricing as almond prices have begun to return to historical norms, consumer demand has not returned to prior levels. The Company has also been experiencing a challenging competitive environment for its syrup brands, which in the aggregate declined $2.4 million for the quarter. The decline was primarily attributable to maple syrup price deflation due to the strength of the U.S. dollar relative to the Canadian dollar, which has resulted in increased competition in the maple syrup category and contractually mandated price reductions with certain of the Company’s foodservice customers.

Gross profit increased $43.8 million, or 61.2%, to $115.4 million for the third quarter of 2016 from $71.6 million for the third quarter of 2015. Gross profit expressed as a percentage of net sales increased to 36.3% in the third quarter of 2016 from 33.6% in the third quarter of 2015, an increase of 2.7 percentage points. The increase in gross profit percentage was primarily driven by the acquisition of Green Giant. Gross profit percentage was also positively impacted by decreased costs for commodities, packaging and distribution for the base business and improved product mix, which was partially offset by the unfavorable impact the decrease in base business sales volume had on cost absorption and a net reduction in base business pricing. Gross profit percentage, excluding the results of Green Giant, increased 0.5 percentage points.

Selling, general and administrative expenses increased $15.2 million, or 55.5%, to $42.5 million for the third quarter of 2016 from $27.3 million for the third quarter of 2015, primarily due to the Green Giant acquisition. Acquisition-related expenses and distribution restructuring expenses increased $2.5 million for the quarter.

The remaining $12.7 million of the increase was attributable to increases in consumer marketing of $7.4 million, selling expenses of $3.5 million (which includes a $2.0 million increase in brokerage expenses and a $1.4 million increase in salesperson compensation), warehousing expenses of $1.0 million, and general and administrative expenses of $0.8 million (primarily related to compensation). Expressed as a percentage of net sales, selling, general and administrative expenses increased 0.5 percentage points to 13.3% for the third quarter of 2016 from 12.8% for the third quarter of 2015.

Net interest expense increased $6.7 million, or 59.5%, to $18.0 million for the third quarter of 2016 from $11.3 million in the third quarter of 2015. The increase was primarily attributable to additional indebtedness outstanding during the third quarter of 2016 as compared to the third quarter of 2015 as a result of the Green Giant acquisition.

The Company’s reported net income under U.S. generally accepted accounting principles (GAAP) was $32.4 million, or $0.50 per diluted share, for the third quarter of 2016, as compared to reported net income of $19.8 million, or $0.34 per diluted share, for the third quarter of 2015. The Company’s adjusted net income for the third quarter of 2016, which excludes the after tax impact of acquisition-related expenses and distribution restructuring expenses, was $36.7 million, or $0.56 per adjusted diluted share. The Company’s adjusted net income for the third quarter of 2015, which excludes the after tax impact of acquisition-related expenses and distribution restructuring expenses, was $22.7 million, or $0.39 per adjusted diluted share.

For the third quarter of 2016, adjusted EBITDA (which excludes the impact of acquisition-related expenses and distribution restructuring expenses), increased 60.2% to $85.1 million from $53.1 million for the third quarter of 2015.

Financial Results for the First Three Quarters of 2016

Net sales increased $353.5 million, or 56.7%, to $977.6 million for the first three quarters of 2016 from $624.1 million for the first three quarters of 2015. Net sales of Green Giant, acquired on November 2, 2015, and net sales of Mama Mary’s, acquired on July 10, 2015, contributed $351.2 million and $19.4 million, respectively, to the overall increase.

Base business net sales for the first three quarters of 2016 decreased $14.4 million, or 2.3%, to $606.5 million from $620.9 million for the first three quarters of 2015. The $14.4 million decrease was attributable to a decrease in unit volume of $11.3 million, or 1.8%, a decrease in net pricing of $2.4 million, or 0.4%, and the negative impact of currency fluctuations on foreign sales of approximately $0.7 million, or 0.1%.

The largest driver of the decline in base business net sales during the first three quarters of 2016 was TrueNorth, which declined $5.7 million, or 40.4%. The TrueNorth net sales decline was primarily the result of historically high almond prices in 2015. In response to increased almond costs, the Company increased the selling price for TrueNorth products, which had a negative impact on consumer demand.

Although the Company has recently rolled back pricing as almond prices have begun to return to historical norms, consumer demand has not returned to prior levels. Base business net sales were also negatively impacted by net sales of the Company’s Ortega products, which decreased $4.8 million, or 4.3%. A portion of the decrease was attributable to the effects of the product recall we announced in November 2014, which caused an increase in net sales of Ortega in the first three quarters of 2015 due to customers restocking inventory of products affected by the recall, partially offset by $1.2 million of customer refunds related to the recall. $0.8 million of the decrease was due to a net pricing decrease in the first three quarters of 2016.

The Company has also been experiencing a challenging competitive environment for its syrup brands, which in the aggregate declined $4.4 million for the first three quarters. The decline was primarily attributable to maple syrup price deflation due to the strength of the U.S. dollar relative to the Canadian dollar, which has resulted in increased competition in the maple syrup category and contractually mandated price reductions with certain of the Company’s foodservice customers.

Gross profit increased $140.1 million, or 69.7%, to $341.1 million for the first three quarters of 2016 from $201.0 million for the first three quarters of 2015. Gross profit expressed as a percentage of net sales increased to 34.9% in the first three quarters of 2016 from 32.2% in the first three quarters of 2015, an increase of 2.7 percentage points. The increase in gross profit percentage was primarily driven by the acquisition of Green Giant.

Gross profit percentage was also positively impacted by decreased costs for commodities, packaging and distribution for the base business and improved product mix, which was partially offset by the unfavorable impact the decrease in base business sales volume had on cost absorption, a net reduction in base business pricing, and the impact of the write-off of Rickland Orchards inventory in connection with the Company’s decision to discontinue the brand. Gross profit percentage, excluding the results of Green Giant, increased 0.1 percentage points.

Selling, general and administrative expenses increased $46.6 million, or 67.2%, to $116.0 million for the first three quarters of 2016 from $69.4 million for the first three quarters of 2015, primarily due to the Green Giant acquisition. Acquisition-related expenses and distribution restructuring expenses increased $7.3 million for the first three quarters. The remaining $39.3 million of the increase was attributable to increases in consumer marketing of $22.0 million, selling expenses of $9.2 million (which includes a $7.0 million increase in brokerage expenses and a $2.2 million increase in salesperson compensation), general and administrative expenses of $4.8 million (primarily related to compensation), and warehousing expenses of $3.3 million. Expressed as a percentage of net sales, selling, general and administrative expenses increased 0.8 percentage points to 11.9% for the first three quarters of 2016 from 11.1% for the first three quarters of 2015.

Net interest expense increased $21.6 million, or 64.0%, to $55.5 million for the first three quarters of 2016 from $33.9 million in the first three quarters of 2015. The increase was primarily attributable to additional indebtedness outstanding during the first three quarters of 2016 as compared to the first three quarters of 2015 as a result of the Green Giant acquisition.

The Company’s reported net income under GAAP was $95.9 million, or $1.54 per diluted share, for the first three quarters of 2016, as compared to reported net income of $58.1 million, or $1.03 per diluted share, for the first three quarters of 2015. The Company’s adjusted net income for the first three quarters of 2016, which excludes an intangible asset impairment-related adjustment to deferred taxes resulting from the Company’s decision to discontinue the Rickland Orchards brand, the after-tax impact of the non-cash impairment charge and the related loss on disposal of inventory, loss on extinguishment of debt, the amortization of acquisition-related inventory step-up, other acquisition-related expenses and distribution restructuring expenses, was $111.4 million, or $1.79 per adjusted diluted share.

The Company’s adjusted net income for the first three quarters of 2015, which excludes the after tax impact of the loss on product recall, acquisition-related expenses and distribution restructuring expenses, was $62.2 million, or $1.11 per adjusted diluted share.

For the first three quarters of 2016, adjusted EBITDA (which excludes the impact of acquisition-related expenses, the amortization of acquisition-related inventory step-up, the non-cash intangible asset impairment charge and related loss on disposal of inventory, loss on product recall and distribution restructuring expenses), increased 72.6% to $259.6 million from $150.4 million for the first three quarters of 2015.

Source: http://bakeryandcereals.food-business-review.com/news/bg-foods-reports-financial-results-for-third-quarter-2016-5650746
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