B&G Foods, Inc. — 2012 Form 10-K
Business context and reporting period. B&G Foods manufactures and distributes branded shelf-stable foods and household products. This 10-K covers the 52-week fiscal year ended December 29, 2012; the requested 2012 Q4 figures are also summarized below. Fiscal 2012 included the October acquisition of the New York Style, Old London, JJ Flats and Devonsheer brands for $62.5 million. Fiscal 2011 included the late-year Culver Specialty Brands acquisition, affecting year-over-year comparability.
Key financial metrics
| Metric | Fiscal 2012 | Fiscal 2011 |
|---|---|---|
| Net sales | $633.8 million | $543.9 million |
| Gross profit / margin | $223.3 million / 35.2% | $177.8 million / 32.7% |
| Operating income / margin | $149.0 million / 23.5% | $113.5 million / 20.9% |
| Net income | $59.3 million | $50.2 million |
| Diluted EPS | $1.20 | $1.04 |
| Operating cash flow | $100.5 million | $72.0 million |
| Capital expenditures | $10.6 million | $10.6 million |
| Cash and cash equivalents at year-end | $19.2 million | $16.7 million |
| Total debt at year-end | $637.7 million | $720.1 million |
Fiscal 2012 gross margin and operating margin improved, while net interest expense rose to $47.7 million from $36.7 million. The company reported a $10.4 million loss on extinguishment of debt, including costs associated with redeeming $101.5 million principal amount of senior notes and amending the credit agreement. Net debt, as presented by management, was $618.5 million.
Fourth-quarter results
Fiscal 2012 Q4 net sales were $173.7 million, gross profit $59.5 million and net income $9.6 million; diluted EPS was $0.18. Q4 2011 figures were $150.0 million, $49.3 million, $12.3 million and $0.25, respectively. Sales and gross profit rose, but quarterly net income and EPS declined.
Material changes and liquidity
- Annual net sales rose 16.5%. Acquired brands contributed $81.0 million of the increase from Culver Specialty Brands and $8.4 million from New York Style and Old London. Base-business sales increased $0.5 million: $13.1 million of pricing gains were largely offset by a $12.6 million unit-volume decline.
- Management attributed the higher annual gross margin mainly to product mix, particularly Culver Specialty Brands, and pricing gains, partly offset by commodity and packaging costs.
- Operating cash flow increased $28.5 million year over year. Investing activities used $73.3 million, including $62.5 million for the New York Style and Old London acquisition. Financing activities used $24.7 million, including debt repayments and $50.2 million of dividends; a $120.4 million net common-stock offering helped fund the senior-note redemption.
- Year-end debt comprised $392.7 million of senior secured debt and $248.5 million of senior unsecured notes. Revolver availability, net of letters of credit, was $174.5 million. The company reported compliance with debt covenants at year-end.
- Current assets were $164.1 million and current liabilities $104.3 million. Management said cash on hand, operating cash flow and revolving-credit availability should be sufficient for foreseeable needs, including debt service, capital expenditures, acquisitions and anticipated dividends.
Outlook, risks and unusual items
- Management expected minimal market-wide raw-material cost decreases in 2013; major commodities other than maple syrup were largely contracted through 2013 at an expected cost decrease of about $1.0 million. Planned 2013 capital expenditures were approximately $13 million.
- At the then-current annual dividend rate of $1.16 per share, management expected 2013 aggregate dividends of approximately $61.2 million. Dividends are discretionary and constrained by debt covenants and cash needs.
- Key risks include substantial leverage and covenant constraints; retailer concentration and pricing pressure (Wal-Mart generated 19.7% of fiscal 2012 sales); raw-material, packaging, labor and distribution cost volatility; customer inventory reductions; acquisition integration; co-packer and single-site supply disruptions; food safety and product liability; Canadian-dollar exposure for maple syrup; and pension obligations.
- The Portland, Maine multiemployer pension plan entered critical status for 2012; a 10% surcharge on required contributions was applicable from 2013 while the plan remained in critical status. The company expected fiscal 2013 defined-benefit contributions of $4.8 million.
- No goodwill or indefinite-lived intangible impairment was recorded in 2012. The New York Style and Old London purchase-price allocation was preliminary and expected to be finalized in fiscal 2013. The auditor issued an unqualified opinion on the financial statements and internal controls; management and the auditor reported effective internal control over financial reporting.
Investor facts to verify
- How much of sales and margin growth is sustainable from the acquired brands versus pricing, and whether base-business volume declines continue.
- Debt repayment capacity, interest-rate exposure, covenant headroom, and the planned reduction of revolving borrowings.
- Whether the dividend remains supportable after debt service, capital spending and working-capital needs.
- Final purchase accounting for the 2012 acquisition, and the performance and integration costs of acquired brands.
- Commodity and packaging costs, maple-syrup currency exposure, customer concentration, and pension-plan funding and surcharge developments.