B&G Foods, Inc. (BGS)

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B&G Foods Inc. (BGS)

Barclays Back-to-School Consumer Conference Transcript

September 4, 2013 3:00 PM ET


Bob Cantwell - Executive Vice President, Finance and CFO


Andrew Lazar - Barclays Capital


Andrew Lazar - Barclays Capital

Our final presentation of the day. You can do it. You can do it. Okay. Our final presenter today will be B&G Foods. The phrase limitation is the sincerest form of flattery comes to mind when thinking about B&G. One of the first North American food company to position its investment case less around topline growth for growth sake and more around margins and use of free cash for M&A and returns to shareholders. This model has of course since become a successful framework for others as well.

Well recent deals have established B&G has a presence when in stacking, which could with it bring a growth to the element such deals are also very consistent with the company’s ongoing consolidation strategy. We delighted to have Executive Vice President, Finance, CFO, Bob Cantwell with us today to discuss B&G in more detail.

So with that I turn it over to Bob. Thanks for being here.

Bob Cantwell

Thank you, Andrew, and good afternoon, everyone. I’ll pass through the forward-looking statements and non-GAAP financial matter disclosure and get right into it. B&G has had a consistent track record of growth and profitability.

First in class in this industry going back to 2004, but this charts kind of showing from 2006 forward, B&G has grown a sales from $411 million to we finished last year to $634 million and our LTM number is about $660. We are up 7.5%.

We’ve done that through focusing on profitable sales growth of our Tier 1 and our top of our Tier 2 brands, a lot of implementing cost savings that has approved EBITDA and improving productivity and accretive acquisitions along the way.

Adjusted EBITDA has grown very quickly also from $69 million back in 2006 to an LTM number of almost $175 million. EBITDA as a percentage of sales have grown into the 26% range. Small mistake on the last bar, we are actually on the LTM basis 26.5% EBITDA margin to sales. So, continued growth in EBITDA up over 15% on a compounded annual growth rate.

As Andrew mentioned, we have been about returning cash to shareholders along the way. We have paid quarterly dividends since us going public in October of 2004. 2009 our dividend as of -- was $0.68 a share. Today with our increase in dividend that we did again in July were $1.28 a share, current total dividends that we payout on an annual basis is $67.7 million and we’ve grown that dividend at the rate of 14% over the last five years.

And we do that with accretive acquisitions. Our goal on accretive -- on acquisition is fundamental, we return about 50% to 60% of our free cash flow to shareholders and acquisitions are always accretive to us out of the box they generated over 50% of free cash flow as percentage of EBITDA. Most of our acquisitions since 2007 have been closer to 70% and we are returning 50% to 60% of that 70% back to shareholders and immediately increasing the dividend in the following quarter.

Since 2004 as a small company we still have returned $332 million back to shareholders in the form of dividends of $323 million and some minus share repurchases back in the kind of 2008, 2009 period when the market was a little below valuation and we bought some shares back at very reasonable prices. But our goal again is to continue to take a substantial piece of our cash flow and return it to shareholders.

When you look at us compared to what we consider our mid-cap peers, our EBITDA margin on LTM basis is 26.5%. You can read who our peers across the chart but their average is 14.4%, but the closest one being over 5 percentage below us of 21.1% and it continues to drop off.

And our EBITDA turns into free cash flow. And I’ll show you on a chart later how much that turns into free cash flow. But our EBITDA 26.5% of sales equates to 25% free cash flow after CapEx as a percentage of sales. So again substantially higher than the peer average, peer average are little lower 11% with the next closest being post at little over 18% compared to our 25%.

Also, again, we are committed to returning cash to shareholders in the form of dividends. Our dividend now, we just increased it in July to $0.32 a quarter per share or $1.28 annualized, which is again about $67.7 million in total dividend payout on our annual basis.

Dividend rate has been ranging returning 3.5% and 4% depending where our share price is. Again, the peer group is much lower, little over 1% and our closest peers in the mid tiers, so we are percentage point above most of the players in the mid-cap space. And we will continue to look at increasing that dividend as we had accretive acquisitions and accretive acquisitions are all about accretive cash flow to us.

And we have really returned a substantial amount of shareholder return back to shareholders over the last number of years. In the last five years, our total shareholder return has been 465%. You can see on the chart substantially had everybody else on that chart.

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