B&G Foods, Inc. (BGS)

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B&G Foods, Inc.(BGS)

Q4 2007 Earnings Call

March 6, 2008 4:30 pm ET


David Wenner - CEO

Bob Cantwell - EVP and CFO


Jim Essert - ING

Reza Vahabzadeh - Lehman Brothers

Pi Aquino - Credit Suisse

Andrew Lazar - Lehman Brothers



Welcome to the B&G Foods Incorporated fourth quarter 2007 financial results conference call. Today's call is being recorded. At this time all participants are in a listen-only-mode. Following the presentation we'll conduct a question-and-answer session. Instructions will be provided at that time for you to queue for your questions. I like to remind everyone this conference is being recorded.

I would now like to turn the conference over to David Wenner, Chief Executive Officer of B&G Foods. Please go ahead.

David Wenner

Thank you. Good afternoon, everyone, and welcome to the B&G Foods fourth quarter and full year fiscal 2007 conference call. Everyone on the call today can access detailed financial information on the quarter and full year in our earnings press release issued today and available on our website at bgfoods.com and in our annual report on Form 10-K that we have filed with the SEC today.

Before we begin our formal remarks, I need to remind everyone that part of the discussion today includes forward-looking statements. These statements are not guarantees of future performance and therefore, undue reliance should not be placed upon them. We refer all of you to our recent filings with the SEC for a more detailed discussion of the risks that could impact our future operating results and financial conditions. The company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

We also will be making reference on today's call to the non-GAAP financial measure, EBITDA. A reconciliation of EBITDA to the most directly comparable GAAP financial measure is provided in today's press release and is included in our 10-K.

We will start the call by having our CFO, Bob Cantwell, discuss financial results for the quarter and the year. After Bob's remarks, I'll discuss factors that affected our quarterly and annual results, some of our business highlights and our current thoughts concerning the business going forward into 2008. Bob?

Bob Cantwell

Thank you, Dave. First I’ll review the full year briefly, then talk about the fourth quarter.

Net sales increased $60 million, or 14.6%, to $471.3 million for 2007, compared to $411.3 million for 2006. Net sales of Cream of Wheat products for 2007, which includes two months of net sales under the brand's prior owner, increased $3.8 million, or 6.1%, as compared to net sales during 2006 under the brand's prior owner. Our 10-K has additional disclosure on the performance of our brands for the full year.

Operating income increased 33% to $81.2 million during 2007 from $61.0 million in 2006. Operating income expressed as a percentage of net sales increased to 17.2% in 2007, from 14.8% in 2006.

I’d like to take a moment to discuss EBITDA or non-GAAP financial measures that we have reconciled to net cash provided by operating activities in today’s press release. Our EBITDA increased to $94.5 million in 2007, compared to $69 million in 2006. Net income increased 54% to $17.8 million for 2007, compared to $11.6 million for fiscal 2006.

For 2007, earnings per share of Class A common stock was $0.62. Earnings per share of Class A common stock was negatively impacted by $0.04 due to a $1.9 million accrual, $1.2 million net of tax for special bonus awards to be paid in March 2008 to certain executive officers and members of our senior management in recognition of their contributions to the successful completion of the Cream of Wheat acquisition and the Class A common stock offering. Prior to the third quarter of 2007, B&G Foods had posted two classes of common stock outstanding, and computed earnings per share under the two class method. As a result, it is not meaningful to compare earnings per share for 2007 against 2006.

The capital expenditures in 2007 were $14.2 million, which included $4.9 million relating to the expansion of our Stoughton, Wisconsin facility and the transfer of our instant Cream of Wheat production into that facility, and $4.8 million for the recently completed relocation of our Underwood manufacturing line from the third party co-packer to the Portland, Maine facility. We continue to foresee modest capital expenditure requirements in the future expect for an additional $7.6 million of planned capital spending in the first half of 2008 relating to the completion of the Cream of Wheat production transfer.

Turning now to the fourth quarter of 2007, net sales increased $21.2 million or 19% to $132.4 million for the fourth quarter of 2007 compared to $111.2 million for the fourth quarter of 2006. The Cream of Wheat acquisition accounted for $20 million of the net sales increase, offset by a decrease in net sales of $0.6 million relating to the termination of a temporary co-packing arrangement.

Excluding the impact of Cream of Wheat acquisition and the termination of the temporary co-packing agreement, net sales increased $1.8 million in sales price and unit volume. Net sales of Cream of Wheat products for the fourth quarter of 2007 increased $2.4 million, or 13.8%, as compared to net sales during the fourth quarter of 2006 under the brand's prior owner.

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