B&G Foods, Inc. (BGS)

BGS 
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B&G Foods, Inc. (BGS)

Q2 2008 Earnings Call

July 28, 2008 4:30 pm ET

Executives

David Wenner - Chief Executive Officer

Bob Cantwell - Executive Vice President and Chief Financial Officer

Analysts

Edward Aaron - RBC Capital Markets

Robert Moskow - Credit Suisse

Bryan Hunt - Wachovia

Andrew Lazar - Lehman Brothers

Reza Vahabzadeh – Unknown Company

Presentation

Operator

Welcome to the B&G Foods, Inc. second quarter 2008 financial results conference call. (Operator Instructions) I would now like to turn the conference over to David Wenner, Chief Executive Officer of B&G Foods.

David Wenner

You can access detailed financial information on the quarter in our earnings release issued today and available on our website 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.

As usual we’ll start the call by having our CFO, Bob Cantwell, discuss financial results for the quarter. After Bob's remarks, I'll discuss factors that affected our quarterly results, some of our business highlights and our current thoughts concerning the business going forward. Bob.

Bob Cantwell

Net sales increased $1 million or 0.8% to $119.2 million for the second quarter of 2008, compared to $118.2 million for the second quarter of 2007. Net sales of our lines of Maple Grove Farms, Ortega and B&M increased $2.3 million, $1.5 million and $1.1 million. These increases were partially offset by a reduction in net sales of Cream of Wheat, Sa-són, Polaner and B&G of $1.8 million, $0.6 million, $0.6 million and $0.5 million.

Gross profit decreased $3.7 million for the second quarter of 2008 or 10.1% to $33.6 million from $37.3 million in the second quarter of 2007. Gross profit expressed as a percentage of net sales decreased 3.4% to 28.2% for the second quarter of 2008 from 31.6% in the second quarter of 2007. This decrease in gross profit expressed as a percentage in net sales was primarily due to increased spending on trade promotions and increased cost for wheat, maple syrup, corn, packaging, transportation and sweeteners.

Sales, marketing and distribution expenses decreased $1.1 million or 8.8% to $11.5 million for the second quarter of 2008, compared to $12.6 million for the second quarter of 2007. This decrease was primarily due to a decrease in consumer marketing of $0.7 million and a decrease in selling expenses of $0.6 million, offset by an increase in warehousing expense of $0.2 million. These expenses expressed as a percentage of net sales decreased to 9.6% in the second quarter of 2008 from 10.6% in the second quarter of 2007.

General and administrative expenses increased $0.3 million or 17.8% to $1.9 million for the second quarter of 2008, compared to $1.6 million in the second quarter of 2007. Excluding the impact of $800,000 insurance reimbursement received in the second quarter of 2007, general and administrative expenses decreased $0.5 million in the second quarter of 2008 as compared to the second quarter of 2007. This decrease primarily was the result of a decrease in professional fees of $0.3 million and compensation expense of $0.3 million.

Operating income decreased 13.7% to $18.6 million for the second quarter of 2008 from $21.5 million in the second quarter of 2007. Net interest expense decreased $2.6 million or 16.9% to $12.9 million for the second quarter of 2008, from $15.5 million in the second quarter of 2007.

Interest expense for the second quarter of 2007 included a write-off of deferred financing cost of $1.8 million relating to our prepayment of $100 million of term loan borrowings with a portion of the proceeds of our public offering of Class A common stock in May 2007. Our average debt outstanding was approximately $66.7 million lower for the second quarter of 2008, as compared to the second quarter of 2007.

Our EBITDA decreased 10% to $22.4 million for the second quarter of 2008, compared to $25 million in the second quarter of 2007. Earnings per share of Class A common stock was $0.10 for the second quarter of 2008. Capital expenditures for the second quarter of 2007 were $2.6 million and are $9 million year-to-year.

During the second half of 2008, we expect to incur an additional of $2 million in capital expenditures for a total of $11 million. This compares to capital expenditures spending of $7.8 million in the second half of 2007 for a full year total of $14.2 million in 2007.

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