B&G Foods Management Discusses Q2 2012 Results - Earnings Call Transcript

B&G Foods (BGS)

Q2 2012 Earnings Call

July 19, 2012 4:30 pm ET

Executives

David L. Wenner - Chief Executive Officer, President and Director

Robert C. Cantwell - Chief Financial Officer, Chief Accounting Officer, Executive Vice President of Finance and Director

Analysts

Sean P. Naughton - Piper Jaffray Companies, Research Division

Reza Vahabzadeh - Barclays Capital Inc.

Robert Moskow - Crédit Suisse AG, Research Division

Katya Voronchuk - Sidoti & Company, LLC

Thomas Scherr

Presentation

Operator

Good afternoon, ladies and gentlemen. Welcome to the B&G Foods, Inc. Second Quarter 2012 Financial Results Conference Call. As a reminder, today's presentation is being recorded. [Operator Instructions] I would now like to turn the conference over to David Wenner, Chief Executive Officer of B&G Foods. Please go ahead, sir.

David L. Wenner

Thank you. Good afternoon, everyone, and welcome to the B&G Foods second 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 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 upon them. We refer all of you to our most recent annual report on Form 10-K 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 publicly update or revise any forward-looking statement, whether 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 measure EBITDA. Reconciliations of this measure 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 second half of the year. Bob?

Robert C. Cantwell

Thank you, Dave. Net sales for the second quarter of 2012 increased $19.2 million or 14.8% to $148.6 million compared to $129.4 million for the second quarter of 2011. The Culver Specialty Brands, which we acquired at the end of November 2011, contributed $19.5 million of our net sales for the quarter. For our base business, a sales price increase of $4.3 million, offset by a $4.6 million unit volume decrease, resulted in a $0.3 million net sales decline. Net sales increased by $1.5 million for Ortega and $0.6 million for Cream of Wheat. These increases were offset by a reduction in net sales for B&G of $1.2 million, Las Palmas of $0.6 million and Underwood of $0.5 million. All other brands decreased $0.1 million in the aggregate.

Gross profit increased $9.6 million for the second quarter of 2012 or 22.7% to $51.8 million from $42.2 million in the second quarter of 2011. Gross profit expressed as a percentage of net sales increased 220 basis points to 34.8% for the second quarter of 2012 from 32.6% for the second quarter of 2011. The increase in gross profit as a percentage of net sales was primarily due to pricing gains of $4.3 million and a sales mix shift to higher-margin products, primarily due to the Culver Specialty Brands acquisition, partially offset by commodity cost increases.

Selling, general and administrative expenses increased $0.4 million or 3.1% to $14.6 million for the second quarter of 2012 compared to $14.2 million for the second quarter of 2011. This increase is primarily due to increases in brokerage expenses of $0.4 million, professional fees of $0.2 million and all other expenses of $0.3 million, offset by a decrease in consumer marketing and trade spending of $0.5 million. However, expressed a percentage of net sales, our selling, general and administrative expenses decreased 120 basis points to 9.8% for the second quarter of 2012, from 11% in the second quarter of 2011.

Operating income increased 33.3% to $35.1 million for the second quarter of 2012 from $26.3 million in the second quarter of 2011. Net interest expense for the second quarter of 2012 increased $3.6 million or 42.2% to $11.9 million from $8.3 million for the second quarter of 2011. The increase was primarily attributed to additional indebtedness to finance the Culver Specialty Brands acquisition and an additional $900,000 of amortization of deferred debt financing costs and bond discount relating to the acquisition financing.

The company reported net income was $16 million for the second quarter of 2012, a 27.2% increase as compared to reported net income for the second quarter of 2011 of $12.6 million. Diluted earnings per share for the second quarter of 2012 was $0.33, a 26.9% increase as compared to diluted earnings per share for the second quarter of 2011 of $0.26. For the 2 first quarters of 2012, reported net income was $32.8 million or $0.68 per diluted share, a 28.3% increase as compared to reported net income of $25.9 million or $0.53 per diluted share for the first 2 quarters of 2011.

Our EBITDA increased 30.6% to $39.6 million for the second quarter of 2012 compared to $30.3 million in the second quarter of 2011. EBITDA as a percentage of net sales increased to 26.6% in the second quarter of 2012 from 23.4% for the second quarter of 2011. Our EBITDA for the first 2 quarters of 2012 was $82.2 million or 29.7% increase compared to $63.3 million for the first 2 quarters of 2011. EBITDA as a percentage of net sales increased to 26.9% in the first 2 quarters of 2012 or 24.3% for the first 2 quarters of 2011.

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