B&G Foods, Inc. (BGS)

BGS 
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B&G Foods, Inc. (BGS)

Q3 2012 Earnings Call

October 18, 2012 4:30 pm ET

Executives

David L. Wenner – President, Chief Executive Officer & Director

Robert C. Cantwell – Chief Financial Officer, Executive Vice President Finance & Director

Analyst

Andrew Lazar – Barclays Capital

Analyst for Bryan Hunt – Wells Fargo Securities

Reza Vahabzadeh – Barclays Capital

Karru Martinson – Deutsche Bank

Edward Aaron – RBC Capital Markets

Robert Moscow – Credit Suisse

Phil Terpolilli – Longbow Research

[Katia Vernochuck] – Sidoti & Company

Sean Naughton – Piper Jaffray

Presentation

Operator

Welcome to the B&G Foods, Inc. third quarter 2012 financial results conference call. Today’s call is being recorded. At this time all participants are in a listen only mode. Following the presentation we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions. I would now like to turn the conference over to David Wenner, Chief Executive Officer of B&G Foods.

David L. Wenner

Welcome to the B&G Foods third quarter 2012 conference call. You can access detailed financial information on the quarter 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 on them. We refer all of you to our most recent annual report on Form 10K 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 publically update or revise any forward-looking statements whether it is 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 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. After Bob’s remarks I’ll discuss the various factors that affected our results for the quarter, selected business highlights and our thoughts concerning the final quarter of the year.

Robert C. Cantwell

Net sales for the third quarter of 2012 increased $21.1 million or 15.9% to $154.2 million compared to $133 million for the third quarter of 2011. Net sales of the Culver Specialty Brands which we acquired at the end of November 2011 contributed $20.2 million to the overall increase for the quarter. For our base business a sales price increase of $3.5 million partially offset by a $2.6 million unit volume decrease resulted in a net sales decrease of $0.9 million.

Net sales increased by $1.2 million for Las Palmas, $0.9 million for Maple Grove Farms of Vermont, $0.4 million for Ortega, $0.4 million for Ac’cent and $0.4 million B&M Products. These increase were offset by a reduction in net sales for B&G of $1.3 million and Cream of Wheat of $0.9 million. All other brands decreased $0.2 million in the aggregate.

Gross profit increased $13.8 million for the third quarter 2012 or 33.4% to $55.3 million from $41.5 million in the third quarter 2011. Gross profit expressed as a percentage of net sales increased 470 basis points to 35.9% for the third quarter of 2012 from 31.2% for the third quarter 2011. The increase of gross profit as a percentage of net sales was primarily due to pricing gains of $3.5 million and a sales mix shift to higher margin products primarily due to the Culver Specialty Brands acquisition partially offset by commodity costs increases.

Selling, general and administrative expenses increased $2.2 million or 17.4% to $14.9 million for the third quarter of 2012 compared to $12.7 million for the third quarter 2011. This increase is primarily due to increases in marketing and selling expenses of $1.6 million, warehousing expenses of $0.3 million, professional fees of $0.2 million and all other expenses of $0.1 million. Expressed as a percentage of net sales our selling, general and administrative expenses increased 10 basis points to 9.7% for the third quarter of 2012 from 9.6% in the third quarter 2011.

Operating income increased 41.5% to $38.3 million for the third quarter 2012 from $27.1 million in the third quarter 2011. Operating income expressed as a percentage of net sales increased to 24.9% in the third quarter 2012 from 20.4% in the third quarter 2011. Net interest expense for the third quarter 2012 increase $3.7 million or 44.1% to $12 million from $8.3 million for the third quarter 2011. The increase was primarily attributable to the additional indebtedness incurred during the fourth quarter 2011 to finance the Culver Specialty Brands acquisitions and an additional $0.8 million of amortization of deferred debt financing costs and bond discount related to the acquisition financing.

The company’s reported net income was $16.9 million for the third quarter 2012, a 39.8% increase as reported net income for the third quarter 2011 of $12.1 million. Diluted earnings per share for the third quarter 2012 was $0.35, a 40% increase as compared to diluted earnings per share for the third quarter 2011 of $0.25. Adjusted net income for the third quarter 2011 was $12.4 million. For the first three quarters of 2012 reported net income was $49.7 million or $1.02 per diluted share a 308% increase as compared to reported net income of $38 million or $0.78 per diluted share for the first three quarters of 2011. Adjusted net income for the first three quarters of 2011 was $38.4 million and adjusted diluted earnings per share was $0.79.

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