B&G Foods, Inc. (BGS)

BGS 
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B&G Foods (BGS)

Q1 2013 Earnings Call

April 18, 2013 4:30 pm ET

Executives

David L. Wenner - Chief Executive Officer, President and Director

Robert C. Cantwell - Chief Financial Officer, Chief Accounting Officer, Executive Vice President of Finance and Director

Analysts

Bryan C. Hunt - Wells Fargo Securities, LLC, Research Division

Andrew Lazar - Barclays Capital, Research Division

Jared W. Madlin - Piper Jaffray Companies, Research Division

Katya Voronchuk - Sidoti & Company, LLC

Presentation

Operator

Good afternoon, ladies and gentlemen. Thank you for standing by, and welcome to the B&G Foods, Inc. First Quarter 2013 Financial Results Conference Call. Today's call is being recorded. [Operator Instructions] I would 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. Good afternoon, everyone, and welcome to the B&G Food's First Quarter 2013 Conference Call. You can access detailed financial information on the quarter in our earnings release issued today, which is available on our website at 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 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 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.

We will start the call with our CFO, Bob Cantwell, discussing our financial results for the quarter. After Bob's remarks, I'll discuss the various factors that affected our results, selected business highlights and our thoughts concerning the remainder of 2013. Bob?

Robert C. Cantwell

Thank you, Dave. Net sales for the first quarter of 2013 increased $13.9 million or 8.8% to $171.2 million from $157.3 million for the first quarter of 2012. Net sales of the New York Style and Old London brands, which we acquired at the end of October 2012, contributed $11.3 million to the overall increase.

Net sales from our base business increased $2.6 million or 1.6%, of which $2.5 million was attributable to a unit volume increase and $0.1 million was attributable to a net price increase. Net sales increased by $1.4 million for Maple Grove Farms of Vermont, $1.4 million for Ortega, and $1.3 million for Cream of Wheat. These increases were offset by a reduction in net sales for Mrs. Dash of $0.9 million, Polaner of $0.8 million and B&G of $0.8 million. All other brands increased $0.9 million in the aggregate.

Gross profit increased $2 million or 3.5% for the first quarter to $58.8 million, from $56.8 million in the first quarter of 2012. Gross profit expressed as a percentage of net sales decreased 170 basis points to 34.4% for the first quarter from 36.1% for the first quarter of 2012. The decrease in gross profit as a percentage of net sales was primarily attributed to the full quarter effect of the New York Style and Old London brands, accounting for 80 basis points of the decrease.

Increased trade spending accounted for 30 basis points of the decline and the remaining 60 basis points related to a sales mix shift to lower margin products. Selling, general and administrative expenses decreased $0.1 million or 0.8% to $16.5 million for the first quarter, compared to $16.6 million for the first quarter of 2012. This decrease is primarily due to a decrease in consumer marketing of $1.3 million, offset by increases in selling expenses of $1.1 million and warehouse expenses of $0.1 million.

Expressed as a percentage of net sales, our selling, general and administrative expenses decreased 100 basis points to 9.6% for the first quarter of 2013 from 10.6% in the first quarter of 2012. Operating income increased 5.4% to $40.2 million for the first quarter, from $38.2 million in the first quarter of 2012.

Net interest expense for the first quarter decreased $2.2 million or 18.5% to $9.8 million, from $12 million for the first quarter of 2012. The decrease was primarily due to our redemption of our $101.5 million principal amount of our outstanding senior notes in December 2012, a negotiated reduction in the interest rate on our tranche B term loans and scheduled principal payments of our tranche A and tranche B term loans. The company's reported net income was $19.6 million for the first quarter, a 17% increase as compared to reported net income for the first quarter of 2012 of $16.8 million.

Diluted earnings per share for the first quarter of 2013 was $0.37, a 5.7% increase as compared to diluted earnings per share for the first quarter of 2012 of $0.35. Our EBITDA increased 7.2% to $45.7 million for the first quarter, compared to $42.6 million in the first quarter of 2012. EBITDA, as a percentage of net sales, decreased to 26.7% in the first quarter of 2013, from 27.1% for the first quarter of 2012.

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