SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(Mark One)
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended April 4, 1998
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OR
/ / TRANSITIONAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from _____________________ to _____________________
Commission file number 333-39813
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B&G FOODS, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 13-3916496
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
426 Eagle Rock Avenue, Roseland, NJ 07068
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (973) 228-2500
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Former Name, Former Address and Former Fiscal Year,
if Changes Since Last Report.
Indicate by check whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days Yes |X| No ____________
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
As of May 18, 1998, there was one (1) share of common stock, par value
$.01, issued and outstanding, which was owned by an affiliate of the registrant.
The registrant meets the conditions set forth in General Instruction
H(1)(a) and (b) of Form 10-Q and is therefore filing this form in reduced
disclosure format.
<PAGE>
INDEX
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Part I. Financial Information Page No.
Item 1. Financial Statements...................................... 2
Consolidated Balance Sheets as of April 4, 1998 and
January 3, 1998........................................... 2
Consolidated Statements of Operations for the Thirteen
Weeks Ended April 4, 1998 and March 29, 1997.............. 3
Consolidated Statements of Cash Flows for the Thirteen
Weeks Ended April 4, 1998 and March 29, 1997.............. 4
Notes to Consolidated Financial Statements................ 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 9
Item 3. Quantitative and Qualitative Disclosure About Market
Risk...................................................... 11
Part II Other Information
Item 1. Legal Proceedings......................................... 11
Item 2. Change in Securities...................................... 11
Item 3. Defaults Upon Senior Securities........................... 11
Item 4. Submission of Matters to a Vote of Security Holders....... 11
Item 5. Other Information......................................... 11
Item 6. Exhibits and Reports on Form 8-K.......................... 12
(a) Exhibits............................................. 12
(b) Reports on Form 8-K.................................. 12
Signature ..................................................... 13
Exhibit Index ..................................................... 14
<PAGE>
Item 1. Financial Statements
B&G Foods, Inc. and Subsidiaries
Consolidated Balance Sheets
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Assets April 4, 1998 January 3, 1998
------------- ---------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 340 $ 691
Trade accounts receivable, net 10,797 13,074
Inventories 28,505 31,467
Prepaid expenses and other current assets 1,804 1,792
Deferred income taxes 2,819 2,819
----------- -----------
Total current assets 44,265 49,843
Property, plant and equipment, net 23,175 23,619
Intangible assets, net 100,086 100,831
Other assets 5,731 5,742
----------- -----------
$ 173,257 $ 180,035
=========== ===========
Liabilities and Stockholder's Equity Current liabilities:
Current Liabilities:
Current installments of long-term debt $ 293 $ 293
Trade accounts payable 12,444 15,752
Accrued expenses 8,661 11,990
Due to related parties 147 197
----------- -----------
Total current liabilities 21,545 28,232
Long-term debt 121,276 121,083
Deferred income taxes 11,813 12,033
Other liabilities -- 59
----------- -----------
Total liabilities 154,634 161,407
Stockholder's equity:
Common stock, $.01 par value per share. Authorized
1,000 shares; issued and outstanding 1 share in 1998
and 1997 -- --
Additional paid-in-capital 20,231 20,000
Accumulated deficit (1,608) (1,372)
----------- -----------
Total stockholder's equity 18,623 18,628
----------- -----------
$ 173,257 $ 180,035
=========== ===========
</TABLE>
2
<PAGE>
B&G Foods, Inc. and Subsidiaries
Consolidated Statements of Operations
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
April 4, 1998 March 29, 1997
------------- --------------
<S> <C> <C>
Net sales $ 38,398 $ 30,363
Cost of goods sold 23,473 21,702
------ ------
Gross profit 14,925 8,661
Sales, marketing and distribution expenses 10,740 6,584
General and administrative expenses 1,357 859
Management fees - related parties 62 62
------ ------
Operating income 2,766 1,156
Other expense:
Interest expense - related parties 15 18
Interest expense 3,220 1,516
------ ------
Loss before income tax benefit (469) (378)
Income tax benefit (233) (74)
------ ------
Net loss $ (236) $ (304)
========== ===========
</TABLE>
3
<PAGE>
B&G Foods, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
April 4, 1998 March 29, 1997
------------- --------------
<S> <C> <C>
Cash flows from operating activities
Net loss $ (236) $ (304)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization 1,651 1,200
Deferred income taxes (220) --
Amortization of deferred debt issuance costs 147 239
Changes in assets and liabilities, net of
effects of businesses acquired:
Trade accounts receivable 2,277 (342)
Inventories 2,962 3,198
Prepaid expenses and other current assets (12) (198)
Other assets (9) (27)
Trade accounts payable (3,308) (2,605)
Accrued expenses (3,338) 763
Due to related parties (50) --
Other liabilities - (494)
---- -----
Net cash (used in) provided by operating (136) 1,430
activities ---- -----
Cash flows from investing activities:
Paid for Acquired Companies -- (4,009)
Capital expenditures (570) (1,170)
Proceeds from sales of property, plant and
equipment 346 -
---- -----
Net cash used in investing activities (224) (5,179)
---- -----
Cash flows from financing activities:
Payments of long-term debt (95) (70)
Proceeds from issuance of long-term debt - 3624
Proceeds from issuance of equity 231 500
Deferred debt issuance costs (127) --
---- -----
Net cash provided by financing activities 9 4,054
---- -----
Net (decrease) increase in cash and cash
equivalents (351) 305
Cash and cash equivalents at beginning of period 691 291
---- -----
Cash and cash equivalents at end of period $ 340 $ 596
========= =========
</TABLE>
4
<PAGE>
B&G Foods, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars in Thousands)
(Unaudited)
(1) Basis of Presentation
The accompanying consolidated financial statements of B&G Foods, Inc.
and subsidiaries (the "Company") contain all adjustments (consisting
only of normal recurring adjustments) necessary to present fairly the
Company's financial position as of April 4, 1998 and the results of its
operations and its cash flows for the thirteen weeks ended April 4,
1998 and March 29, 1997.
The results of operations for the thirteen week periods are not
necessarily indicative of the results to be expected for the full year.
The accompanying consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes
thereto for 1997 included in the Company's Form 8-K filed with the
Securities and Exchange Commission on May 19, 1998, which is
incorporated herein by inference.
(2) Business Acquisitions and Nature of Operations
Organization, Acquisition and Financing
B&G Foods, Inc. was incorporated on November 13, 1996 to acquire (the
Acquisition) BGH Holdings, Inc., the holding company of Bloch &
Guggenheimer, Inc and related companies, and BRH Holdings, Inc., the
holding company of Burns & Ricker, Inc., subsidiaries of Specialty
Foods Corporation (SFC). The Acquisition was structured as a stock
purchase with an aggregate purchase price of approximately $70,000,
including transaction costs, and was consummated on December 27, 1996.
As part of the Acquisition, SFC guaranteed the Company's trade
receivables at December 27, 1996. On December 27, 1996, the Company
issued one share of common stock to, and became a wholly-owned
subsidiary of, B&G Foods Holdings Corp., which in turn is majority
owned by Bruckmann, Rosser, Sherrill and Co., L.P. (BRS), a private
equity investment firm, and minority owned by management and certain
other investors.
In addition to initial equity of $12,500, the financing of the
Acquisition was provided through a $50,000 Senior Secured Credit
Facility which consisted of a Revolving Credit Facility of $23,500 and
Term Loan Facilities A and B of $14,500 and $12,000, respectively.
Additionally, the Company issued $13,000 of 12% Senior Subordinated
Notes due 2004 to BRS and other certain investors (the BRS Note).
On June 17, 1997, the Company acquired certain assets from Nabisco,
Inc. (Nabisco) for a purchase price of approximately $50,557, including
transaction costs. Financing for this acquisition and certain related
transaction fees and expenses was provided by $35,000 of new borrowings
on an amended and restated Senior Secured Credit Facility,
5
<PAGE>
and $17,000 of the proceeds from the issuance of $23,000 of 12% Senior
Subordinated Notes due December 16, 1997 (the Interim Notes), with
$6,000 used to repay a portion of the BRS Note.
On August 15, 1997, the Company acquired all of the outstanding capital
stock of JEM Brands, Inc. (JEM), a manufacturer of peppers and branded
hot sauces, for approximately $12,462, including transaction costs.
Financing for this acquisition and certain related transaction fees and
expenses was provided by the proceeds from the issuance of $120,000,
9.625% Senior Subordinated Notes on August 11, 1997.
The above acquisitions have been accounted for using the purchase
method and, accordingly, the excess of the purchase price over the fair
value of identifiable net assets acquired, representing goodwill, is
included in intangible assets.
Nature of Operations
The Company is a manufacturer, marketer and distributor of branded
pickles, peppers, bagel chips, hot sauces and other specialty food
products to retailers and food service establishments. The Company
distributes these products to retailers in the greater New York
metropolitan area through a direct-store-door sales and distribution
system and elsewhere in the United States through a nationwide network
of independent brokers and distributors.
Pro Forma Summary of Operations
The following unaudited pro forma summary of operations for the
thirteen weeks ended March 29, 1997 presents the results of operations
of the Company as if the aforementioned acquisition of certain assets
from Nabisco and aforementioned acquisition of JEM (collectively the
"Acquired Brands") had occurred on December 29, 1996. In addition to
including the results of operations of the Acquired Brands, the pro
forma information gives effect primarily to interest on additional
borrowings and changes in depreciation and amortization of intangible
assets.
Thirteen Weeks Ended
March 29, 1997
--------------
Net sales $38,946
Loss before extraordinary item (667)
The pro forma information presented above does not purport to be
indicative of the results that actually would have been attained if the
Acquired Brands, and related financing transactions had occurred on
December 29, 1996 and is not intended to be a projection of future
results.
6
<PAGE>
(3) Inventories
Inventories are stated at the lower of cost (determined by the
first-in, first-out and average cost methods) or market.
Inventories consist of the following:
April 4, 1998 January 3, 1998
------------- ---------------
Raw materials and packaging $ 3,914 $ 6,146
Work in progress 2,329 1,924
Finished goods 22,262 23,397
$ 28,505 $ 31,467
========== ==========
(4) Senior Subordinated Notes
On August 11, 1997, the Company issued $120,000 of 9.625% Senior
Subordinated Notes (the Notes) due August 1, 2007 with interest payable
semiannually on February 1 and August 1 of each year, commencing
February 1, 1998. The proceeds of the Notes were used to repay the
outstanding balances together with accrued and unpaid interest with
respect to the Credit Facility and the Interim Notes, to finance the
acquisition of JEM and to pay certain related fees and expenses and for
general corporate purposes.
As part of the registration rights agreement dated August 11, 1997
entered into with the initial purchasers of the Notes, the Company
agreed to offer to exchange an aggregate principal amount of up to
$120,000 of its 9.625% Senior Subordinated Notes due 2007 (the New
Notes) for a like principal amount of its Notes outstanding (the
Exchange Offer).
The terms of the New Notes are identical in all material respects to
those of the Notes (including principal amount, interest rate, maturity
and guarantees), except for certain transfer restrictions and
registration rights relating to the Notes. The Exchange Offer was
completed on February 6, 1998.
(5) Commitment and Contingencies
The Company produces fruit spreads under an Amended and Restated Jams
Manufacturing Agreement dated March 3, 1997 and wet spices under a
Sales and Distribution Agreement dated March 19, 1993 with
International Home Foods, Inc. (IHF) which expires in March 1999 and
March 1998, respectively. Additionally, the Company distributes certain
IHF products under a Spice Supply Agreement dated March 19, 1993, which
expired on March 31, 1998. Sales under these contracts during the
thirteen weeks ended April 4, 1998 and March 29, 1997 were $9,708 and
$12,273, respectively.
7
<PAGE>
Receivables due from IHF included in trade accounts receivable at
April 4, 1998 and January 3, 1998 were $1,388 and $1,820,
respectively.
By letter dated February 18, 1998, the Company received notice from IHF
that (a) IHF would not renew the Amended and Restated Jams
Manufacturing Agreement dated March 3, 1997 after its expiration on
March 31, 1999, and (b) IHF was terminating, effective March 31, 1999,
the Sales and Distribution Agreement dated March 19, 1993. With respect
to the Spice Supply Agreement, which expired on March 31, 1998, the
Company continues to distribute certain IHF products in accordance with
the terms of the expired agreement.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
13-Weeks ended April 4, 1998 compared to 13-Weeks ended March 29,
1997.
Net Sales. Net sales increased by $8.0 million or 26.5%, to $38.4
million for the 13-weeks ended April 4, 1998 (the "1998 Period") from
$30.4 million for the 13-weeks ended March 29, 1997 (the "1997
Period"). The net sales increase included $10.3 million from the
Acquired Brands, a 9% increase over sales from the predecessors' 1997
Period. Sales of B&G pickle and pepper products increased $0.3 million
or 2.5% from the 1997 Period largely reflecting increased sales of food
service products. These sales increases were offset by a decrease of
$2.6 million or 20.9%, in sales of co-packed Polaner products to IHF
and sales of Polaner products distributed by the Company in the
northeastern U.S.
Gross Profit. Gross profit increased by $6.3 million, or 72.3%, to
$14.9 million for the 1998 Period from $8.7 million in the 1997 Period.
Gross profit expressed as a percentage of net sales increased to 38.9%
in the 1998 Period from 28.5% in the 1997 Period due to a favorable
shift in the sales mix to higher gross profit margin B&G Pickle and
Pepper product sales and Acquired Brands sales from lower gross profit
margin Polaner co-packing sales.
Sales, Marketing and Distribution Expenses. Sales, marketing and
distribution expenses increased $4.2 million, or 63.1%, to $10.7
million for the 1998 Period from $6.6 million of the 1997 Period. Such
expenses as a percentage of net sales increased to 28.0% in the 1998
Period from 21.7% in the 1997 Period due primarily to the addition of
the Acquired Brands. The Acquired Brands accounted for $3.9 million of
the increase.
General and Administrative Expenses. General and administrative
expenses (including amortization of intangibles and management fees)
increased by $0.5 million, or 58.0%, primarily due to increased
amortization of goodwill of $0.3 million associated with acquisitions
in 1997. The remaining $0.2 million increase represent incremental
expenses needed in managing the Acquired Brands.
Operating Income. As a result of the foregoing, operating income
increased by $1.6 million, or 139.3%, to $2.8 million for the 1998
Period from $1.2 million for the 1997 Period. Operating income
expressed as a percentage of net sales increased to 7.2% in the 1998
Period from 3.8% in the 1997 Period.
Interest Expense. Interest expense increased $1.7 million to $3.2
million for the 1998 Period from $1.5 million in the 1997 Period as a
result of the additional debt incurred by the Company to fund the
acquisitions of the Acquired Brands.
9
<PAGE>
Liquidity and Capital Resources
Cash provided (used) by operations decreased by $1.6 million or 109.5%,
to ($0.1) million for the 1998 Period from $1.4 million in the 1997
Period. The net change in working capital increased $2.5 million or
64.2%, to ($1.4) million for the 1998 Period from ($3.9) million in the
1997 Period. Working capital at April 4, 1998 was $22.7 million, an
increase of $1.1 million over working capital at January 3, 1998 of
$21.6 million. This increase is primarily a result of decreases in
accounts payable and accrued expenses which were partially offset by
decreases in accounts receivable and inventories.
Net cash used in investing activities for the 1998 Period was $0.2
million as compared to $5.2 million for the 1997 Period. The change
primarily related to a final $4.0 million payment to SFC for the
Acquisition. Capital expenditures during the 1998 Period included
purchases of manufacturing and computer equipment.
Net cash provided by financing activities for the 1998 Period decreased
$4.0 million primarily as a result of additional borrowings on the
revolving credit facility in the 1997 Period.
The Company's primary source of capital are cash flows from operations
and borrowings under a $50 million revolving debt facility. The
Company's primary capital requirements include debt service, capital
expenditures, working capital needs and financing acquisitions.
Management believes that available borrowing capacity under the
revolving credit facility of $49.4 million at April 4, 1998, combined
with cash provided by operations, will provide the Company with
sufficient cash to fund current operations as well as to meet its
obligations.
Seasonality
Sales of a number of the Company's products tend to be seasonal, but
the effect of seasonality on the Company's liquidity is tempered by the
Company's relatively varied product mix. The Company purchases most of
the produce used to make the B&G Pickle and Pepper Products during the
period from May to October and, consequently, its liquidity needs are
greatest during this period.
Recent Accounting Pronouncements
In June 1997, Statement of Financial Accounting Standards (SFAS) No.
130 (SFAS 130), "Reporting Comprehensive Income," was issued to
establish standards of reporting and displaying of comprehensive income
and its components in a full set of general-purpose financial
statements. This statement requires disclosure of the components of
comprehensive income including, among other things, foreign currency
translation adjustments, minimum pension liability items and unrealized
gains and losses on certain investments in debt and equity securities.
The Company would be required to show components of comprehensive
income in a financial statement displayed as prominently as the other
required financial statements. The statement is effective for fiscal
years
10
<PAGE>
beginning after December 15, 1997. The Company anticipates compliance
with this Statement in 1998.
In June 1997, SFAS 131 "Disclosures About Segments of an Enterprise and
Related Information", was issued to establish standards for public
business enterprises reporting information regarding operating segments
in annual and interim financial statements issued to shareholders. It
also establishes standards for related disclosures about products and
services, geographic areas and major customers. This statement is
effective for financial statements for periods beginning after December
15, 1997. In the initial year of application, comparative information
for earlier years is to be restated. The Company operates in one
business segment in which it manufactures and markets a diversified
portfolio of food products, and accordingly, does not believe that
segment reporting will impact disclosures in the financial statements.
The Company anticipates compliance with this Statement in 1998.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Not applicable.
Part II OTHER INFORMATION
Item 1. Legal Proceedings
The Company is from time to time involved in legal proceedings arising in the
normal course of business. The Company believes there is no outstanding
litigation which could have a material impact on its financial position or
results of operations.
Item 2. Change in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
11
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
6(a) Exhibits
Exhibit Number Description
-------------- -----------
Exhibit 27 Financial Data Schedule (filed
electronically with SEC only)
6(b) Reports on Form 8-K
Form 8-K filed May 19, 1998
12
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 19, 1998 B&G FOODS, INC.
By:/s/ Robert C. Cantwell
--------------------------------------
Robert C. Cantwell
Executive Vice President and Chief Financial
Officer (Principal Financial and Accounting
Officer and Authorized Officer)
13
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-START> JAN-04-1998
<PERIOD-END> APR-04-1998
<CASH> 340
<SECURITIES> 0
<RECEIVABLES> 10,797
<ALLOWANCES> 0
<INVENTORY> 28,505
<CURRENT-ASSETS> 44,265
<PP&E> 23,175
<DEPRECIATION> 3,927
<TOTAL-ASSETS> 173,257
<CURRENT-LIABILITIES> 21,545
<BONDS> 121,569
0
0
<COMMON> 0
<OTHER-SE> 18,623
<TOTAL-LIABILITY-AND-EQUITY> 173,257
<SALES> 38,398
<TOTAL-REVENUES> 38,398
<CGS> 23,473
<TOTAL-COSTS> 35,632
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,235
<INCOME-PRETAX> (469)
<INCOME-TAX> (233)
<INCOME-CONTINUING> (236)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (236)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
