B&G Foods, Inc. — FY2021 Form 10-K
Business context and reporting period. B&G Foods manufactures and distributes branded shelf-stable and frozen foods and household products, primarily in the U.S., Canada and Puerto Rico. This is the annual report for the 52 weeks ended January 1, 2022, filed March 1, 2022—not a standalone fourth-quarter report. The comparison year, ended January 2, 2021, had 53 weeks.
Financial performance and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Net sales | $2,056.3 million | $1,967.9 million |
| Gross profit / margin | $437.0 million / 21.3% | $481.7 million / 24.5% |
| Operating income / margin | $196.1 million / 9.5% | $276.4 million / 14.0% |
| Net income | $67.4 million | $132.0 million |
| Diluted EPS | $1.02 | $2.04 |
| Net cash from operating activities | $93.9 million | $281.5 million |
| Capital expenditures | $43.6 million | $26.7 million |
- Adjusted EBITDA, a non-GAAP measure, was $358.0 million versus $361.2 million; adjusted EBITDA before COVID-19 expenses was $362.6 million versus $374.8 million.
- At year-end, cash was $33.7 million and long-term debt was $2,267.8 million net of discounts, premiums and financing costs; debt principal was $2,286.6 million. Net debt was $2,234.1 million. The company reported $630.1 million available under its $800 million revolving facility, net of letters of credit.
- Debt includes $900 million of 5.25% notes due 2025, $671.6 million of term loans due 2026 and $550 million of 5.25% notes due 2027. The company reported compliance with debt covenants at year-end.
- Operating cash flow was below the $122.9 million of dividends paid. The annual declared dividend was $1.90 per share; management estimated 2022 aggregate dividends of approximately $130.6 million at the then-current rate.
- Year-end current assets were $834.5 million and current liabilities $244.3 million. Inventories rose to $609.8 million from $492.8 million.
Material changes versus the prior year
- Reported net sales rose 4.5%, mainly reflecting $255.7 million of incremental Crisco sales, acquired December 1, 2020. Base business sales fell 8.3% to $1,798.1 million, as unit-volume declines outweighed improved pricing and mix.
- FY2021 net sales were 23.8% above FY2019, while base business sales were 5.2% higher. Comparisons with FY2020 were affected by its extra reporting week, unusually strong pandemic-related demand, and FY2021 supply disruptions.
- Gross margin contracted 3.2 percentage points amid higher raw-material and transportation costs. Operating income fell 29.1%; net income fell 49.0%. Interest expense increased 5.2% to $106.9 million.
- Operating cash flow declined by $187.6 million, reflecting lower earnings and less favorable working-capital movements, particularly inventory. FY2020 investing cash outflow included the Crisco purchase; FY2021 had no business acquisition payments.
- The company sold 3.70 million shares through its ATM program for $112.5 million gross proceeds, using net proceeds in part to repay revolving borrowings. Shares outstanding increased to 68.5 million from 64.3 million.
Outlook, commentary and risks
- The filing provides no specific full-year FY2022 revenue or earnings guidance. Management expected FY2022 sales to remain elevated relative to pre-pandemic FY2019, while noting uncertainty around pandemic-related demand and supply conditions.
- Management expected significant input-cost inflation and elevated freight rates to continue in FY2022. Price increases and cost-saving measures were underway, but had not fully offset inflation; pricing may lag cost increases. List-price increases were announced in 2021 and again in the first quarter of 2022.
- Management expected approximately $50 million of FY2022 capital expenditures and approximately $2.5 million of pension contributions. It believed cash, operating cash flow and revolver capacity would be sufficient for foreseeable needs, including debt service, capital spending and dividends.
- COVID-related supply constraints and labor shortages affected product availability and shipments, particularly late in FY2021. Green Giant sales fell 14.9% year over year, partly due to prior-year pantry loading and supply constraints.
- A $23.1 million non-cash impairment charge was recorded for the Static Guard, SnackWell’s, Molly McButter and Farmwise trademarks. SnackWell’s and Farmwise were fully impaired and are being discontinued; some Farmwise products transitioned to Green Giant.
- The Portland, Maine manufacturing facility ceased operations in FY2021, with sale expected to close in the first quarter of 2022. Closure-related charges included a $13.9 million multi-employer pension withdrawal liability, payable at approximately $0.9 million annually for 20 years beginning March 2022.
- Other significant risks include substantial leverage and debt refinancing, dependence on major retailers (Walmart represented 27.7% of FY2021 sales), commodity, packaging, labor and freight costs, co-packer and supplier disruptions, customer concentration, product safety and recall exposure, currency movements, and potential further brand or goodwill impairment.
- The company’s audited financial statements received an unqualified opinion; management and the auditor reported effective internal control over financial reporting. The auditor identified valuation of certain indefinite-lived trademarks as a critical audit matter.
Important facts for investors to verify
- Whether pricing, cost savings and supply-chain improvements can restore margins, and how FY2022 unit volumes compare with both pandemic-affected FY2020 and pre-pandemic FY2019.
- Whether operating cash flow can support dividends, capital expenditures and debt service without increased borrowing or further equity issuance.
- Debt covenant headroom, interest-rate exposure and refinancing plans for the $1.065 billion of principal due in 2025.
- Progress and final proceeds from the Portland facility sale, transition of production, and required pension withdrawal-liability payments.
- Performance of major brands and the assumptions supporting trademark valuations, particularly Static Guard and Molly McButter; assess any further impairment risk.
- Customer concentration and Walmart exposure, including the effect of retailer inventory levels, pricing demands and promotional requirements.