B&G Foods, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 30, 2023 (52 weeks); filed February 28, 2024. The filing is an annual report, not a standalone fourth-quarter results report.
Business context
B&G Foods manufactures and distributes branded shelf-stable and frozen foods and household products in the U.S., Canada and Puerto Rico. It operates in one segment and sells through retail, foodservice, private-label and other channels. In 2023 it sold the Back to Nature business (January) and Green Giant U.S. shelf-stable product line (November); Green Giant frozen, Canadian shelf-stable and Le Sueur businesses were retained.
Financial performance and liquidity
| Metric | FY2023 | FY2022 |
|---|---|---|
| Net sales | $2,062.3 million | $2,163.0 million |
| Gross profit / margin | $455.5 million / 22.1% | $409.6 million / 18.9% |
| Operating income / margin | $80.4 million / 3.9% | $98.6 million / 4.6% |
| Net income (loss) | $(66.2) million; $(0.89) per diluted share | $(11.4) million; $(0.16) per diluted share |
| Operating cash flow | $247.8 million | $6.0 million |
| Capital expenditures | $25.7 million | $22.3 million |
Adjusted EBITDA, a non-GAAP measure, was $318.0 million versus $301.0 million; adjusted net income was $73.9 million ($0.99 per diluted share) versus $76.2 million ($1.08). These measures exclude specified items and should be considered alongside GAAP results.
- Sales fell 4.7%; base-business sales declined 1.5%, with lower unit volume and foreign currency effects partly offset by pricing and mix. Divestitures also reduced reported sales.
- Gross margin improved as pricing caught up with input-cost inflation, inflation moderated, and transportation, warehousing and depreciation costs declined. SG&A rose 3.0% to $196.0 million.
- Interest expense increased 21.1% to $151.3 million, reflecting higher rates and debt-financing cost amortization, contributing to the larger net loss.
- At year-end, cash was $41.1 million; current assets were $802.8 million and current liabilities $262.4 million. Long-term debt principal was $2,064.0 million, or $2,022.9 million net of cash. Available revolving-credit capacity, net of letters of credit, was $625.1 million.
Material changes and unusual items
- Green Giant U.S. shelf-stable sale generated $55.3 million cash proceeds but resulted in a total $137.7 million loss, including $132.9 million of non-cash charges to assets held for sale. The sale included a perpetual, royalty-free license of the Green Giant trademarks for that product line.
- Fourth-quarter non-cash trademark impairments totaled $20.5 million for Baker’s Joy, Molly McButter, Sugar Twin and New York Flatbreads. Molly McButter and New York Flatbreads were fully impaired; Baker’s Joy and Sugar Twin were partially impaired.
- The company repurchased or redeemed substantial 5.25% notes due 2025 and issued $550 million of 8.00% secured notes due 2028 to help fund the refinancing. Year-end debt maturities include $435.4 million in 2025 and $528.6 million in 2028, subject to the disclosed asset-sale-related offer and debt-prepayment terms.
- Shares outstanding rose to 78.6 million from 71.7 million, including 6.3 million shares sold through the ATM program in 2023 for $75.3 million gross proceeds.
Outlook, risks and contingencies
- Management expects $35–$40 million of capital expenditures in fiscal 2024 and believes cash, operating cash flow and available revolver capacity should fund operations, debt service, capital spending, potential acquisitions and anticipated dividends. No specific 2024 sales or earnings guidance is provided in the supplied filing text.
- Management expects input costs to remain elevated in 2024 and freight rates to remain elevated despite their 2023 decline. Most significant commodity costs were locked in through the first half of 2024; oil coverage extended through the first quarter and into the second quarter. Pricing and savings may not fully offset future cost increases.
- The $0.76 annual dividend rate was the current intended rate; approximately $60 million of 2024 dividends was anticipated. Dividends are discretionary and constrained by debt covenants. The company paid $56.0 million in 2023 versus $133.4 million in 2022.
- Key risks include substantial leverage and refinancing needs, covenant limits, variable interest rates, customer concentration (Walmart was 28.8% of sales), volume and competitive pressure, commodities and labor, reliance on co-packers and single production sites, foreign exchange and water scarcity at the Mexico facility.
- A February 2023 ransomware incident encrypted servers and led to unauthorized release of sensitive information for certain current and former employees. Systems were restored within days without ransom and with minimal operational disruption; remediation costs were incurred. The company said the incident was not expected to have a material financial impact, while warning future incidents could be more damaging.
- Management does not expect currently pending ordinary-course litigation or known environmental obligations to materially affect results. A $12.9 million present-value liability remains for withdrawal from a multi-employer pension plan. The Terre Haute labor agreement was scheduled to expire March 30, 2024; management did not expect negotiations to have a material adverse impact, but disruption cannot be ruled out.
Investor verification priorities
- Assess the durability of the 2023 margin recovery and whether pricing can offset input, labor and distribution costs as contracts reset.
- Review volume trends by major brand, particularly Crisco and Green Giant frozen, and separate divestiture effects from ongoing performance.
- Examine debt maturities, interest costs, covenant headroom and refinancing plans for 2025, alongside the terms and outcome of the required 2028-note asset-sale offer.
- Reconcile the strong 2023 operating cash flow with working-capital movements and confirm that expected cash generation supports capital spending and dividends.
- Evaluate the assumptions behind the Green Giant disposal loss and trademark impairments, plus the risk of further impairment given the substantial goodwill and intangible-asset balances.
- Monitor Walmart and other customer concentration, ATM-related dilution, the Terre Haute labor negotiations and remediation or privacy exposure from the cyber incident.