B&G Foods, Inc. (BGS)
Q4 2012 Earnings Conference Call
February 14, 2013, 04:30 PM ET
David L. Wenner - President, CEO and Director
Robert C. Cantwell - EVP, Finance, CFO and Director
Bryan Hunt - Wells Fargo Securities
Robert Moscow - Credit Suisse
Sean Naughton - Piper Jaffray
Andrew Lazar - Barclays Capital
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I’d now like to turn the conference over to Mr. David Wenner, Chief Executive Officer of B&G Foods. Please go ahead, sir.
David L. Wenner
Thank you, operator. Good afternoon, everyone and welcome to the B&G Foods fourth quarter and full-year 2012 conference call. You can access detailed financial information on the quarter and the full-year in our earnings release issued today, which is available on our website at www.bgfoods.com.
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 most recent annual report on Form 10-K and subsequent SEC filings 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 statements 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 measures, adjusted EBITDA, adjusted net income and adjusted diluted earnings per share. Reconciliations of these measures to the most directly comparable GAAP financial measures are provided in today’s press release.
We will start the call with our CFO Bob Cantwell discussing our financial results for the quarter and for the full-year. After Bob’s remarks, I’ll discuss the various factors that affected our results for the periods, selected business highlights and our thoughts concerning 2013. Bob?
Robert C. Cantwell
Thank you, Dave. First, I will review the full-year briefly, then talk about the fourth quarter. Net sales for 2012 increased $89.9 million or 16.5% to $633.8 million compared to $543.9 million for 2011. Net sales of the Culver Specialty Brands, which B&G Foods acquired at the end of November 2011, contributed $81 million and net sales of the New York Style and Old London brands, which we acquired at the end of October 2012 contributed $8.4 million to our overall increase.
Net sales for our base business increased $0.5 million, with a sales price increase of $13.1 million offset by a unit volume decline of $12.6 million. Net sales increased by $3.8 million for Ortega, $1.8 million for Las Palmas, $1.2 million for Maple Grove Farms of Vermont, $1 million for B&M and $0.9 million for Ac’cent. These increases were offset by a reduction in net sales of B&G of $4.2 million, Cream of Wheat of $2.5 million, Don Pepino of $0.8 million and Underwood of $0.7 million. In the aggregate, net sales of all our other brands remain consistent.
Gross profit for 2012 increased $45.6 million or 25.6% to $223.3 million from $177.8 million in 2011. Gross profit expressed as a percentage of net sales increased 250 basis points to 35.2% in 2012 from 32.7% in 2011, attributable to a sales mix shift to higher margin products primarily due to the Culver Specialty Brands acquisition and pricing gains of $13.1 million, partially offset by commodity and packaging cost increases. Operating income increased 31.3% to $149 million for 2012 from $113.5 million in 2011.
Net interest expense increased $11 million to $47.7 million in 2012, from $36.7 million in 2011 attributable to the increase in indebtedness to finance the Culver Specialty Brands acquisition, and an additional $2.8 million of amortization of deferred debt financing costs and bond discount relating to the acquisition financing.
The Company’s adjusted net income which excludes the acquisition related transaction costs and loss on extinguishment of debt was $66.7 million, a 25.6% increase as compared to adjusted net income of $53.1 million for 2011. Adjusted diluted earnings per share increased 23.9% from a $1.09 per share in 2011 to a $1.35 per share in 2012.
Adjusted EBITDA, which for 2012 excludes the impact of $1.2 million of transaction costs relating to the New York Style and Old London acquisition and for 2011 excludes the impact of $1.4 million of transaction costs relating to the Culver Specialty Brands acquisition, increased 28.9% to $169 million from $131.1 million in 2011. Adjusted EBITDA as a percentage of net sales increased to 26.7% for 2012, from 24.1% for 2011.
Turning now to the fourth quarter of 2012, net sales increased 15.8% to $173.7 million compared to $150 million for the fourth quarter of 2011. Net sales of the Culver Specialty Brands contributed $15.7 million and net sales of the New York Style and Old London brands contributed $8.4 million to the Company’s overall increase in the fourth quarter. For our business, a sales price increase of $2.8 million offset by a $3.2 million unit volume decline resulted in the net sales decrease of $0.4 million.