B&G Foods, Inc. (BGS)
Q3 2008 Earnings Call Transcript
October 30, 2008 4:30 pm ET
David Wenner – President and CEO
Bob Cantwell – CFO and EVP of Finance
Reza Vahabzadeh – Barclays Capital
Ed Aaron – RBC Capital Markets
Alton Stump – Longbow Research
Andrew Lazar – Barclays Capital
Thomas Share [ph] – Federated Investors
Nick Edney – Adar Investment Management
William Robertson – TM Capital Corp.
Previous Statements by BGS
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Thank you. Good afternoon everyone and welcome to the B&G Foods third quarter fiscal 2008 conference call. You can access detailed financial information on the quarter in our earnings release issued today available on our Web site at bgfoods.com and in our quarterly report on Form 10-Q that we have filed today with the SEC.
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 condition. 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 for 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-Q.
On today’s call, we will be referring to slides that are available on our Web site by going to www.bgfoods.com under the Investor Relations Company Overview section. We will refer to individual slides by number to help you follow our remarks.
As usual, we will start the call by having our CFO Bob Cantwell to discuss financial results for the quarter. After Bob’s remarks, I will discuss factors that affected our quarterly results, business highlights, and our current thoughts concerning the upcoming quarter and fiscal 2009. Bob?
Thank you, Dave. If you go to slide 3 in the presentation, you will see that net sales decreased $0.5 million or 0.4% to $116.5 million for the third quarter of 2008 compared to $117 million for the third quarter of 2007. Price increases that were recently implemented improved net sales by $4.7 million during the third quarter of 2008. These pricing gains however were offset by a decrease in net sales of $5.2 million attributable to unit volume decline. A substantial portion of the unit volume decline was attributable to the poor maple syrup crop in Canada in 2008 that resulted in an industry wide shortfall of maple syrup and a management decision to eliminate unprofitable sales to certain customers of private label pickles and peppers. Net sales of our Maple Grove Farms pure maple syrup and our private label pickles and peppers declined in the third quarter of 2008 by $1.4 million and $0.2 million respectively. In the case of pure maple syrup, this decline was attributable to the unit volume decline partially offset by pricing gains. David Wenner will review the remaining increases and decreases in our brand sales in more detail in his business commentary.
Gross profit decreased $7.6 million for the third quarter of 2008 or 19.7% to $30.7 million from $38.3 million in the third quarter of 2007. Gross profit expressed as a percentage of net sales decreased 6.3% of net sales to 26.4% for the third quarter of 2008 from 32.7% in the third quarter of 2007. This decrease in gross profit expressed as a percentage of net sales was primarily due to increased costs of wheat, maple syrup, corn, packaging, transportation and sweeteners, partially offset by
$4.7 million in sales price increases.
Sales, marketing and distribution expenses decreased $2.3 million or 17.6% to $10.8 million for the third quarter of 2008 compared to $13.1 million for the third quarter of 2007. This decrease was primarily due to a decrease in consumer marketing of $1.3 million and a decrease in brokerage and employee compensation of $0.9 million. These expenses expressed as a percentage of net sales decreased to 9.3% in the third quarter of 2008 from 11.2% in the third quarter of 2007. General and administrative expenses decreased $1.3 million or 38.7% to $2.1 million for the third quarter of 2008 compared to $3.4 million in the third quarter of 2007. This decrease was primarily due to the result of a decrease in compensation expense and bonus accruals of $1.6 million partially offset by increase in professional fees of $0.2 million.
Operating income decreased 19.5% to $16.2 million for the third quarter of 2008 from $20.2 million in the third quarter of 2007. Net interest expense decreased $0.8 million or 6.6% to $11.6 million for the third quarter of 2008 from $12.4 million in the third quarter of 2007. Interest expense for the third quarter of 2008 includes a reduction of $1.5 million relating to the unrealized gain on our interest rate swap offset by a reclassification of $0.1 million of the amount recorded in cumulative other comprehensive loss relating to the swap and reduction in interest income and capitalized interest on qualifying assets based on our effective interest rate.