B&G Foods, Inc. today announced financial results for the first quarter of 2014.
David L. Wenner, President and Chief Executive Officer of B&G Foods, stated, "Our very strong cash flow performance in the face of base business volume declines was encouraging and was the result of our recent acquisitions and our Continuous Improvement cost reduction efforts. Our base business net sales for the quarter were negatively impacted by general volume weakness in the industry, unusually severe weather in the Northeast and the late Easter holiday. However, we continue to believe that our base business volume will rebound by year end and we remain focused on growing both our base business and the brands we acquired last year. In addition, we believe that our acquisition of Specialty Brands, which is expected to close later this month, will be immediately accretive to our earnings per share and free cash flow and will help position B&G Foods for continued growth in 2014 and beyond."
Financial Results for the First Quarter of 2014
Net sales for the first quarter of 2014 increased 15.7% to $198.1 million from $171.2 million for the first quarter of 2013. Net sales of Pirate Brands, which B&G Foods acquired in July 2013, contributed $20.4 million to the overall increase, net sales of the Rickland Orchards brand, acquired in October 2013, contributed $8.6 million to the overall increase and net sales of the TrueNorth brand, acquired in May 2013, contributed $5.8 million to the overall increase. Net sales for B&G Foods' base business decreased $7.9 million, or 4.6%, attributable to unit volume and net price decreases of $5.2 million and $2.7 million, respectively.
Gross profit for the first quarter of 2014 increased 10.0% to $64.7 million from $58.8 million in the first quarter of 2013. Gross profit expressed as a percentage of net sales decreased 1.8 percentage points to 32.6% for the first quarter of 2014 from 34.4% in the first quarter of 2013, primarily attributable to a net price decrease of $2.7 million and an increase in distribution costs. Operating income decreased 3.5% to $38.8 million for the first quarter of 2014, from $40.2 million in the first quarter of 2013.
Selling, general and administrative expenses increased $6.1 million, or 36.9%, to $22.6 million for the first quarter of 2014 from $16.5 million for the first quarter of 2013. This increase was primarily due to increases in consumer marketing of $3.8 million, selling expenses of $1.3 million (including increases of $0.7 million for brokerage expenses and $0.4 million for salesperson compensation), acquisition-related transaction costs of $0.7 million and warehousing expenses of $0.6 million, partially offset by a decrease in all other expenses of $0.3 million.
Net interest expense for the first quarter of 2014 increased $1.3 million or 14.0% to $11.1 million from $9.8 million for the first quarter of 2013. The increase in net interest expense for the first quarter was primarily attributable to an increase in the Company's average debt outstanding.
The Company's reported net income under U.S. generally accepted accounting principles (GAAP) was $17.8 million, or $0.33 per diluted share, for the first quarter of 2014, as compared to reported net income of $19.6 million, or $0.37 per diluted share, for the first quarter of 2013. The Company's adjusted net income for the first quarter of 2014, which excludes the after tax impact of acquisition-related transaction costs, was $18.3 million, or $0.34 per adjusted diluted share. There were no adjustments to net income for the first quarter of 2013.
For the first quarter of 2014, adjusted EBITDA, which excludes the impact of acquisition-related transaction costs, increased 1.7% to $46.5 million from $45.7 million for the first quarter of 2013.
Specialty Brands of America Acquisition
On April 3, 2014, B&G Foods entered into an agreement to acquire Specialty Brands of America, Inc. for approximately $155 million in cash, subject to certain closing and post-closing adjustments. B&G Foods projects that following the acquisition, Specialty Brands will generate on an annualized basis after being fully integrated into B&G Foods net sales of approximately $85.0 million and adjusted EBITDA of approximately $20.0 million.
Specialty Brands is a leading packaged foods company with a portfolio of strong and differentiated brands. Specialty Brands' largest brand is Bear Creek Country Kitchens. Bear Creek is the leading brand of hearty dry soups in the United States. Bear Creek also offers a line of savory pasta dishes and hearty rice dishes. Specialty Brands also offers Spring Tree, Cary's and MacDonald's pure maple syrups and pancake syrups, New York Flatbreads and Canoleo margarine.
B&G Foods intends to fund the acquisition with borrowings under its existing revolving credit facility. B&G Foods expects the acquisition to close in April 2014, subject to the satisfaction of customary closing conditions.
Guidance
B&G Foods increased its adjusted EBITDA guidance for fiscal 2014 to a range of approximately $209.0 million to $214.0 million. B&G Foods also set its adjusted diluted earnings per share guidance for fiscal 2014 at a range of $1.59 to $1.65. In each case, this guidance assumes, among other things, that the Specialty Brands acquisition closes in April 2014.