B&G Foods, Inc. — FY 2022 Form 10-K
Business context and reporting period
B&G Foods manufactures and distributes branded shelf-stable and frozen foods and household products in the U.S., Canada and Puerto Rico. This filing covers the 52 weeks ended December 31, 2022; it is an annual report, not a standalone fourth-quarter report. The company acquired Growers Express’s frozen-vegetable operations in May 2022 and completed the sale of its Back to Nature business on January 3, 2023.
Financial performance and liquidity
| Metric | FY 2022 | FY 2021 |
|---|---|---|
| Net sales | $2,163.0 million | $2,056.3 million |
| Gross profit / margin | $409.6 million / 18.9% | $437.0 million / 21.3% |
| Operating income / margin | $98.6 million / 4.6% | $196.1 million / 9.5% |
| Net income (loss) | $(11.4) million | $67.4 million |
| Adjusted EBITDA (non-GAAP) | $301.0 million | $358.0 million |
| Cash from operations | $6.0 million | $93.9 million |
Net sales increased 5.2%, driven by $231.4 million of higher pricing and favorable mix, partly offset by a $119.9 million decline in unit volume and $4.5 million of unfavorable currency effects. Higher raw-material and transportation costs pressured gross margin; management said the benefits of earlier price increases began to come through more fully in Q4, but the filing gives no clear standalone Q4 financial results.
Net interest expense rose 16.9% to $124.9 million, primarily due to higher rates on variable-rate debt and increased revolving borrowings. At year-end, cash was $45.4 million; long-term debt principal was $2.404 billion, or approximately $2.359 billion net of cash. Available revolver capacity was $512.6 million. Operating cash flow was well below the $133.4 million of cash dividends paid. Net cash taxes paid were $25.6 million.
Material changes and unusual items
- A $106.4 million non-cash impairment related to the Back to Nature assets held for sale materially reduced reported operating income and contributed to the net loss. The business was sold after year-end for $51.4 million, subject to adjustment; the proceeds helped fund $61.0 million of term-loan prepayments in January 2023.
- Net sales growth did not translate into higher profit: operating income fell 49.7%, reflecting inflationary cost pressure, impairment and other items. Adjusted net income, a non-GAAP measure, was $76.2 million versus $123.7 million.
- The company sold its Portland, Maine facility and certain equipment, recognizing a $7.1 million gain; closure and transfer costs partly offset the gain.
- The company issued 2.85 million shares through its at-the-market program in 2022, raising $66.6 million gross and increasing shares outstanding.
- The intended annual dividend rate was reduced from $1.90 to $0.76 per share, beginning with the dividend declared in November 2022 and paid in January 2023.
Outlook, risks and contingencies
Management expects elevated input-cost inflation and freight rates to continue into 2023 and says price increases and savings actions may not fully offset cost increases. It forecasts 2023 capital expenditures of approximately $35–$40 million and believes cash, operating cash flow and available borrowing capacity will fund foreseeable needs, debt service, capital spending and anticipated dividends. The filing provides no specific 2023 revenue or earnings guidance.
Key risks include substantial leverage and refinancing needs (including $1.183 billion of debt maturities in 2025), variable-rate interest exposure, commodity and labor inflation, supply and co-packer disruption, customer concentration and competition. Walmart represented 27.3% of 2022 sales. Collective bargaining negotiations at the Mexico, Cincinnati and Brooklyn facilities presented potential labor-disruption risks. The company reported a February 2023 ransomware incident after year-end: most affected servers were restored within days, but sensitive personal information of some current and former employees was released, requiring remediation and potentially affecting reputation and costs.
Management reported no expectation that currently pending litigation or environmental matters would materially affect financial condition, results or liquidity. KPMG issued unqualified opinions on the financial statements and internal control over financial reporting. The audit identified valuation of certain indefinite-lived trademarks as a critical audit matter, citing sensitivity to revenue-growth and discount-rate assumptions.
Most important facts for investors to verify
- Whether pricing and mix can offset inflation without further material volume declines, and whether margin improvement continues.
- Cash generation, working-capital needs, dividend affordability and compliance with debt covenants; compare operating cash flow with distributions.
- Debt refinancing plans and borrowing costs ahead of the 2025 maturities, including effects of variable interest rates.
- Final Back to Nature sale adjustments, use of proceeds and the impact of the divestiture on future comparable results.
- Any financial, operational or disclosure consequences of the February 2023 cyber incident, and progress on remediation.
- Goodwill and trademark valuation assumptions, potential additional impairments, and outcomes of labor negotiations at key facilities.