B&G Foods, Inc. (BGS)

BGS 
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B&G Foods (BGS)

Q2 2013 Earnings Call

July 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

Kevin A. McClure - Wells Fargo Securities, LLC, Research Division

Jared W. Madlin - Piper Jaffray Companies, Research Division

Karru Martinson - Deutsche Bank AG, Research Division

Presentation

Operator

Good afternoon, ladies and gentlemen. Thank you for standing by, and welcome to the B&G Foods Inc. Second Quarter 2013 Financial Results Conference Call. Today's call is being recorded. [Operator Instructions] Now I'd 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 Foods Second 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 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 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 measures, adjusted EBITDA, adjusted net income and adjusted diluted earnings per share. Reconciliations of these financial measures to the most directly comparable GAAP financial measure are provided in today's press release.

We'll 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 second quarter of 2013 increased $12.3 million or 8.3% to $160.9 million from $148.6 million for the second quarter of 2012. Net sales of the New York Style and Old London brands, which we acquired at the end of October 2012, contributed $10.9 million to the overall increase and net sales of the TrueNorth brand, which we acquired at the beginning of May of 2013, contributed $3.2 million to the overall increase.

Net sales for our base business decreased $1.8 million or 1.2%, of which $0.6 million was attributable to a net price decrease and $1.2 million was attributable to a unit volume decrease. Net sales increased by $1.1 million for Mrs. Dash and $0.6 million for Polaner. These increases were offset by a reduction in net sales for Maple Grove Farms of Vermont of $1 million, B&M of $0.9 million, B&G, $0.7 million and Underwood of $0.6 million. All other brands decreased $0.3 million in the aggregate.

Gross profit for the second quarter increased $3.9 million or 7.6% to $55.7 million from $51.8 million in the second quarter of 2012. Gross profit expressed as a percentage of net sales decreased 20 basis points to 34.6% for the second quarter from 34.8% for the second quarter of 2012. The decrease in gross profit as a percentage of net sales was primarily attributable to the effect of the New York Style and Old London acquisition and the TrueNorth acquisition and a net price decrease of $0.6 million, partially offset by a sales mix shift to higher-margin products.

Selling, general and administrative expenses increased $2.7 million or 18.4% to $17.3 million for the second quarter compared to $14.6 million for the second quarter of 2012. This increase is primarily due to increases in consumer marketing of $1.1 million, selling expenses of $0.6 million, acquisition-related transaction costs of $0.5 million and other expenses of $0.1 million. Expressed as a percentage of net sales, our selling, general and administrative expenses increased 100 basis points to 10.8% for the second quarter of 2013 from 9.8% in the second quarter of 2012.

Operating income increased 3.2% to $36.2 million for the second quarter from $35.1 million in the second quarter of 2012.

Net interest expense for the second quarter decreased approximately $1.8 million or 15.4% to $10 million from $11.9 million for the second quarter of 2012. The decrease was primarily attributable to the refinancing of our long-term debt, including our issuance of 4 5/8% senior notes and a repurchase of our 7 5/8% senior notes and our repayment of our tranche B term loans.

As a result of $18.7 million of after-tax charges relating to the refinancing and acquisition-related transaction costs, the company reported a net loss of $1.4 million or $0.03 a share for the second quarter of 2013. This compares to reported net income of $16 million or $0.33 per diluted share for the second quarter of 2012.

The company's adjusted net income for the second quarter of 2013, which excludes refinancing charges and acquisition-related transaction costs, was $17.3 million or $0.33 per adjusted diluted share. There were no adjustments to net income for the second quarter of 2012.

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