As filed with the Securities and Exchange Commission on November 8, 1999
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one) Quarterly Report Pursuant to Section 13 or 15(d)
[X] of the Securities Exchange Act of 1934
For the quarterly period ended October 2, 1999
or
Transition 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
B&G FOODS, INC.
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction of 13-3916496
incorporation or organization) (I.R.S. Employer Identification No.)
4 Gatehall Drive, Suite 110, Parsippany, New Jersey 07054
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (973) 401-6500
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 [ ]
As of October 2, 1999, there was 1 share of the registrant's common
stock, $.01 par value, outstanding, which was owned by an affiliate of the
registrant.
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<PAGE>
B&G Foods, Inc. and Subsidiaries
Index
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1.
Consolidated Balance Sheets....................................1
Consolidated Statements of Operations..........................2
Consolidated Statements of Cash Flows..........................3
Notes to Consolidated Financial Statements.....................4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..............7
Item 3. Quantitative and Qualitative Disclosure about
Market Risk...............................................12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.........................................12
Item 2. Changes in Securities and Use of Proceeds.................12
Item 3. Defaults Upon Senior Securities...........................12
Item 4. Submission of Matters to a Vote of Security Holders.......12
Item 5. Other Information.........................................12
Item 6. Exhibits and Reports on Form 8-K..........................12
(a) Exhibits
(b) Reports on Form 8-K
SIGNATURES
Index to Exhibits....................................................16
(i)
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
B&G Foods, Inc. and Subsidiaries
Consolidated Balance Sheets
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Assets October 2, 1999 January 2, 1999
------ --------------- ---------------
(Unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 1,280 $ 599
Trade accounts receivable, net 27,021 15,656
Inventories 75,001 39,764
Prepaid expenses 2,310 1,646
Deferred income taxes 2,938 2,938
---------------------------------
Total current assets 108,550 60,603
Property, plant and equipment, net 42,305 26,486
Intangible assets, net 312,579 119,542
Other assets 10,720 5,242
---------------------------------
$ 474,154 $ 211,873
=================================
Liabilities and Stockholder's Equity
Current liabilities:
Current installments of long-term debt $ 7,848 $ 1,431
Trade accounts payable 25,895 17,508
Accrued expenses 11,254 10,335
Due to related parties 83 705
---------------------------------
Total current liabilities 45,080 29,979
Long-term debt 336,745 143,265
Deferred income taxes 34,451 17,809
Other liabilities 27 0
---------------------------------
Total liabilities 416,303 191,053
Stockholder's equity:
Common stock, $.01 par value per share. Authorized
1,000 shares; issued and outstanding 1 share - -
Additional paid-in capital 56,342 21,342
Retained earnings (accumulated deficit) 1,509 (522)
----------------------------------
Total stockholder's equity 57,851 20,820
----------------------------------
$ 474,154 $ 211,873
=================================
See notes to consolidated financial statements.
</TABLE>
1
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B&G Foods, Inc. and Subsidiaries
Consolidated Statements of Operations
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-nine Weeks Ended
October 2, 1999 October 3, 1998 October 2, 1999 October 3, 1998
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net sales $ 87,552 $ 46,477 $ 241,652 $ 127,508
Cost of goods sold 45,396 28,355 129,072 77,826
---------------------------- -----------------------------
Gross profit 42,156 18,122 112,580 49,682
Sales, marketing, and distribution expenses 29,282 12,430 76,598 34,398
General and administrative expenses 3,722 1,499 10,503 4,166
Management fees-related party 127 62 325 187
---------------------------- -----------------------------
Operating income 9,025 4,131 25,154 10,931
Other expense:
Interest expense-related parties 0 18 15 49
Interest expense 8,107 3,661 21,172 10,044
---------------------------- -----------------------------
Income before income tax expense 918 452 3,967 838
Income tax expense 442 228 1,936 417
----------------------------- -----------------------------
Net income $ 476 $ 224 $ 2,031 $ 421
============================= =============================
See notes to consolidated financial statements.
</TABLE>
2
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B&G Foods, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Thirty-nine Weeks Ended
October 2, 1999 October 3, 1998
-------------- ---------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 2,031 $ 421
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 11,452 5,118
Deferred income tax benefit 1,936 430
Amortization of deferred debt issuance costs 1,011 466
Changes in assets and liabilities, net of effects of
businesses acquired:
Trade accounts receivable (11,365) 1,639
Inventories (8,114) 83
Prepaid expenses (664) (264)
Other assets (43) 13
Trade accounts payable 8,387 1,632
Accrued expenses (1,953) (6,130)
Due to related parties (622) 562
Other liabilities 27 -
---------------------------------
Net cash provided by operating activities 2,083 3,970
---------------------------------
Cash flows from investing activities:
Paid for acquisitions (224,532) (32,622)
Capital expenditures (4,678) (2,581)
Proceeds from sales of property, plant and equipment - 396
----------------------------------
Net cash used in investing activities (229,210) (34,807)
----------------------------------
Cash flows from financing activities:
Payments of long-term debt (20,746) (320)
Proceeds from issuance of long-term debt 220,000 30,344
Proceeds from capital contribution 35,000 1,231
Payments of deferred debt issuance costs (6,446) (127)
----------------------------------
Net cash provided by financing
activities 227,808 31,128
---------------------------------
Increase in cash and cash equivalents 681 291
Cash and cash equivalents at beginning of period 599 691
---------------------------------
Cash and cash equivalents at end of period $ 1,280 $ 982
=================================
See notes to consolidated financial statements.
</TABLE>
3
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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 consolidated financial position as of October 2, 1999 and the
results of their operations and their cash flow for the thirteen and
thirty-nine week periods ended October 2, 1999 and October 3, 1998.
The results of operations for the thirteen and thirty-nine 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 included in the Company's 1998 Annual report on Form 10-K filed
with the Securities and Exchange Commission.
(2) Nature of Operations and Business Acquisitions
Nature of Operations
The Company operates in one industry segment; the manufacturing,
marketing and distribution of branded, shelf-stable food products. The
Company's products include pickles, peppers, jams and jellies, canned
meats and beans, spices, syrups, bagel chips and other specialty food
products which are sold 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.
Acquisitions and Financing
On February 5, 1999, the Company acquired certain assets of the Polaner
Brand and related brands (collectively, "Polaner") from International
Home Foods, Inc. ("IHF"), for approximately $30,574, including
transaction costs ("Polaner Brands Acquisition"). Financing for the
Polaner Brands Acquisition and certain related transaction fees and
expenses was provided by borrowings from the Company's $50,000 Credit
Facility (the "Credit Facility").
On March 15, 1999, the Company acquired the assets and stock of the
Heritage Portfolio of Brands ("Heritage") from Pillsbury, Inc. for
approximately $193,958, including transaction costs ("Heritage Brands
Acquisition"). In connection with this transaction, the Company entered
into a $280,000 senior secured credit facility (the "Senior Secured
Credit Facility"). The Senior Secured Credit Facility comprised of a
$60,000 five-year revolving credit facility, a $70,000 five-year term
loan facility ("Term Loan A") and a $150,000 seven-year term loan
facility ("Term Loan B" and collectively with Term Loan A, the "Term
Loan Facilities"). The proceeds of the Term Loan Facilities, together
with an additional $35,000 of equity from Bruckmann, Rosser, Sherrill &
Co., L.P. ("BRS"), were used to fund the Heritage Brands Acquisition
and
4
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B&G Foods, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands)
(Unaudited)
(Continued)
refinance borrowings under the Company's Credit Facility which had been
used for the Polaner Brands Acquisition and the prior year acquisition
of Maple Grove Farms of Vermont, Inc. and affiliated companies ("Maple
Grove Acquisition").
The above acquisitions have been accounted for using the purchase
method and, accordingly, the assets acquired, liabilities assumed, and
results of operations are included in the consolidated financial
statements from the respective date of the acquisitions. The excess of
the purchase price over the fair value of identifiable net assets
acquired, representing goodwill, is included in intangible assets.
Goodwill and trademarks resulting from the above acquisitions are being
amortized over 40, and 31-32 years, respectively.
Pro Forma Summary of Operations
The following unaudited pro forma summary of operations for the
thirteen and thirty-nine weeks ended October 2, 1999 and October 3,
1998 presents the operations of the Company as if the Polaner Brands
Acquisition, the Heritage Brands Acquisition, and the Maple Grove
Acquisition had occurred at the beginning of the periods presented. In
addition to including the results of operations of the aforementioned
entities, the pro forma information gives effect primarily to interest
on additional borrowings and changes in depreciation and amortization
of intangible assets. The thirteen-weeks ended October 2, 1999 results
are not presented since such actual results are included in the
accompanying financial statements for the entire period.
Thirteen Weeks Ended Thirty-nine Weeks Ended
October 3, 1998 October 2, 1999 October 3, 1998
-------------------- --------------- ---------------
Net sales $ 87,245 $ 267,641 $ 261,059
Net income 2,195 4,442 6,568
The pro forma information presented above does not purport to be
indicative of the results that actually would have been attained if the
aforementioned acquisitions, and related financing transactions had
occurred at the beginning of the periods presented and is not intended
to be a projection of future results.
(3) Inventories
Inventories consist of the following:
October 2, 1999 January 2, 1999
--------------- ---------------
Raw materials and packaging $ 19,462 $ 10,337
Work in process 2,618 2,862
Finished goods 52,921 26,565
------------- -------------
$ 75,001 $ 39,764
============= =============
5
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B&G Foods, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in thousands)
(Unaudited)
(continued)
(4) Debt
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 (i) to
repay the outstanding balances, together with accrued and unpaid
interest, on the Company's $50,000 Credit Facility and the Company's
$23,000 of 12% Senior Subordinated Notes issued as bridge financing for
the Company's June 17, 1997 acquisition of certain brands from Nabisco,
Inc., (ii) to finance the Company's August 15, 1997 acquisition of JEM
Brands, Inc., the holding company of Trappey's Fine Foods, Inc., (iii)
to pay certain related fees and expenses and (iv) 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 the 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.
On March 15, 1999, the Company entered into a $280,000 Senior Secured
Credit Facility comprised of a $60,000 five-year revolving credit
facility, a $70,000 five-year Term Loan A and a $150,000 seven-year
Term Loan B. The proceeds of the Term Loan Facilities, together with an
additional $35,000 of equity from BRS, were used to fund the Heritage
Brands Acquisition and refinance borrowings under the Company's Credit
Facility which had been used for the Polaner Brands Acquisition and the
Maple Grove Acquisition. Interest is determined based on several
alternative rates as stipulated in the Senior Secured Credit Facility,
including the base lending rate plus an applicable margin, as defined,
or the eurodollar rate plus an applicable margin, as defined. The
Senior Secured Credit Facility is secured by substantially all of the
Company's assets and stock. The Senior Secured Credit Facility also
contains covenants that will restrict, among other things, the ability
of the Company to incur additional indebtedness, pay dividends, and
create certain liens. The Senior Secured Credit Facility also contains
certain financial covenants, which, among other things, specify maximum
capital expenditures, a minimum interest and fixed charge ratio, and a
maximum senior leverage ratio, each ratio as defined.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
13 week period ended October 2, 1999 compared to 13 week period ended
October 3, 1998.
Net Sales. Net sales increased $41.1 million or 88.4% to $87.6 million
for the thirteen week period ended October 2, 1999 (the "1999 Quarterly Period")
from $46.5 million for the thirteen week period ended October 3, 1998 (the "1998
Quarterly Period"). The net sales increase included $40.3 million of sales from
Maple Grove, Polaner and Heritage. Regina sales increased $1.1 million or 34.8%.
All other brands decreased $0.3 million or 0.5%.
Gross Profit. Gross profit increased by $24.0 million or 132.6% to
$42.2 million for the 1999 Quarterly Period from $18.1 million for the 1998
Quarterly Period. Gross profit as a percentage of net sales increased to 48.1%
in the 1999 Quarterly Period from 39.0% in the 1998 Quarterly Period. This was
due to a favorable shift in the sales mix to higher gross profit margins from
sales of Polaner and Heritage products, coupled with reduced labor and overhead
costs at the Burns & Ricker Snack Food manufacturing facility.
Sales, Marketing and Distribution Expenses. Sales, marketing and
distribution expenses increased $16.9 million or 135.6% to $29.3 million in the
1999 Quarterly Period from $12.4 million in the 1998 Quarterly Period. Such
expenses as a percentage of net sales increased to 33.4% in the 1999 Quarterly
Period from 26.7% in the 1998 Quarterly Period due primarily to the Maple Grove,
Polaner and Heritage acquisitions. These acquisitions accounted for $16.5
million of the increase. In addition, promotional spending increased $0.6
million on Regina products and $0.4 million on B&G Pickle and Pepper products.
All other brands accounted for the remaining $0.6 million decrease.
General and Administrative Expenses. General and administrative
expenses (including amortization of intangibles and management fees) increased
by $2.3 million or 146.6% to $3.8 million for the 1999 Quarterly Period from
$1.6 million for the 1998 Quarterly Period, primarily due to increased operating
expenses of $0.4 million and amortization of intangibles of $1.9 million
associated with the Maple Grove, Polaner and Heritage acquisitions.
Operating Income. As a result of the foregoing, operating income
increased by $4.9 million or 118.5% to $9.0 million in the 1999 Quarterly Period
from $4.1 million in the 1998 Quarterly Period. Operating income expressed as a
percentage of net sales increased to 10.3% in the 1999 Quarterly Period from
8.9% in the 1998 Quarterly Period.
Interest Expense. Interest expense increased $4.4 million to $8.1
million for the 1999 Quarterly Period from $3.7 million in the 1998 Quarterly
Period as a result of the additional debt incurred by the Company to fund the
Maple Grove, Polaner and Heritage acquisitions.
Income Tax Expense. Income tax expense for the 1999 Quarterly Period
was $0.4 million as compared with $0.2 million in the 1998 Quarterly Period. The
Company's effective tax rate for the 1999 Quarterly Period was 48.1% as compared
with 50.4% in the 1998 Quarterly Period.
Because of the highly leveraged status of the Company, earnings before
interest, taxes, depreciation, and amortization ("EBITDA") is an important
performance measure used by the Company and its stockholders. The Company
believes that EBITDA provides additional information for determining
7
<PAGE>
its ability to meet future debt service requirements. However, EBITDA is not
indicative of operating income or cash flow from operations as determined under
generally accepted accounting principles. The Company's EBITDA from continuing
operations for the thirteen weeks ended October 2, 1999 and October 3, 1998 is
calculated as follows (dollars in thousands):
Thirteen weeks ended
October 2, 1999 October 3, 1998
---------------- ---------------
Net income $ 476 $ 224
Depreciation and amortization 4,412 1,793
Income tax expense 442 228
Interest expense 8,107 3,679
--------- ---------
EBITDA $ 13,437 $ 5,924
========= =========
39 week period ended October 2, 1999 compared to 39 week period ended October 3,
1998.
Net Sales. Net sales increased $114.1 million or 89.5% to $241.7
million for the thirty-nine week period ended October 2, 1999 (the "1999
Year-to-Date Period") from $127.5 million for the thirty-nine week period ended
October 3, 1998 (the "1998 Year-to-Date Period"). The net sales increase
included $111.2 million of sales from Maple Grove, Polaner and Heritage. Sales
of Regina products increased $2.0 million or 20.9%, B&G Pickle and Pepper
products increased $0.4 million or 1.0% and Trappey's products increased $0.4
million or 3.3%. All other brands increased $0.1 million or 0.2%.
Gross Profit. Gross profit increased by $62.9 million or 126.6% to
$112.6 million for the 1999 Year-to-Date Period from $49.7 million for the 1998
Year-to-Date Period. Gross profit as a percentage of net sales increased to
46.6% in the 1999 Year-to-Date Period from 39.0% in the 1998 Year-to-Date
Period. This was due to a favorable shift in the sales mix to higher gross
profit margins from sales of Polaner and Heritage products, along with reduced
labor and overhead costs at the Burns & Ricker Snack Food manufacturing
facility.
Sales, Marketing and Distribution Expenses. Sales, marketing and
distribution expenses increased $42.2 million or 122.7% to $76.6 million in the
1999 Year-to-Date Period from $34.4 million in the 1998 Year-to-Date Period.
Such expenses as a percentage of net sales increased to 31.7% in the 1999
Year-to-Date Period from 27.0% in the 1998 Year-to-Date Period due primarily to
the Maple Grove, Polaner and Heritage acquisitions. These acquisitions accounted
for $39.9 million of the increase. In addition, promotional spending increased
by $2.3 million on B&G Pickle and Pepper products and $1.8 million on all other
brands. They were offset by savings of $1.4 million in overall distribution
costs and $0.4 million in other selling and marketing costs.
General and Administrative Expenses. General and administrative
expenses (including amortization of intangibles and management fees) increased
by $6.5 million or 148.7% to $10.8 million for the 1999 Year-to-Date Period from
$4.4 million for the 1998 Year-to-Date Period, primarily due to increased
operating expenses of $1.9 million and amortization of intangibles of $4.6
million associated with the Maple Grove, Polaner and Heritage acquisitions.
Operating Income. As a result of the foregoing, operating income
increased by $14.2 million or 130.1% to $25.2 million in the 1999 Year-to-Date
Period from $10.9 million in the 1998 Year-to-Date Period. Operating income
expressed as a percentage of net sales increased to 10.4% in the 1999
Year-to-Date Period from 8.6% in the 1998 Year-to-Date Period.
8
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Interest Expense. Interest expense increased $11.1 million to $21.2
million for the 1999 Year-to-Date Period from $10.1 million in the 1998
Year-to-Date Period as a result of the additional debt incurred by the Company
to fund the Maple Grove, Polaner and Heritage acquisitions.
Income Tax Expense. Income tax expense for the 1999 Year-to-Date Period
was $1.9 million as compared with $0.4 million in the 1998 Year-to-Date Period.
The Company's effective tax rate for the 1999 Year-to-Date Period was 48.8% as
compared with 49.8% in the 1998 Year-to-Date Period.
Because of the highly leveraged status of the Company, EBITDA is an
important performance measure used by the Company and its stockholders. The
Company believes that EBITDA provides additional information for determining its
ability to meet future debt service requirements. However, EBITDA is not
indicative of operating income or cash flow from operations as determined under
generally accepted accounting principles. The Company's EBITDA from continuing
operations for the thirty-nine weeks ended October 2, 1999 and October 3, 1998
is calculated as follows (dollars in thoudands):
Thirty-nine weeks ended
October 2, 1999 October 3, 1998
--------------- ---------------
Net income $ 2,031 $ 421
Depreciation and amortization 11,452 5,118
Income tax expense 1,936 417
Interest expense 21,187 10,093
--------- ---------
EBITDA $ 36,606 $ 16,049
========= =========
Liquidity and Capital Resources
Cash Flows
Cash provided by operating activities decreased $1.9 million to $2.1
million for the 1999 Year-to-Date Period from $4.0 million in the 1998
Year-to-Date Period. The change relates primarily to the Heritage and Polaner
acquisitions coupled with some increases in receivables in relation to sales.
Working capital at October 2, 1999 was $63.5 million, an increase of $32.8
million over working capital at January 2, 1999 of $30.6 million.
Net cash used in investing activities for the 1999 Year-to-Date Period
was $229.2 million as compared to $34.8 million for the 1998 Year-to-Date
Period. The change primarily relates to the Polaner and Heritage acquisitions
for $30.6 million and $194.0 million, respectively, in the 1999 Year-to-Date
Period. Capital expenditures during the 1999 Year-to-Date Period of $4.7 million
included purchases of manufacturing and computer equipment and were $2.1 million
above the $2.6 million for the 1998 Year-to-Date Period.
Net cash provided by financing activities for the 1999 Year-to-Date
Period was $227.8 million as compared to $31.1 million for the 1998 Year-to-Date
Period. The change relates primarily to the proceeds from the issuance of
long-term debt and equity in the 1999 Year-to-Date Period to finance the Polaner
and Heritage acquisitions.
9
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Acquisitions
The Company's liquidity and capital resources have been significantly
impacted by acquisitions and may be impacted in the foreseeable future by
additional acquisitions. The Company has historically financed acquisitions with
borrowings and cash flows from operations. The Company's future interest expense
will increase significantly as a result of additional indebtedness the Company
has incurred as a result of its recent acquisitions, and any additional
indebtedness the Company may incur to finance potential future acquisitions, if
any. To the extent future acquisitions, if any, are financed by additional
indebtedness, the resulting increase in debt and interest expense could have a
negative impact on liquidity.
Future Capital Needs
The Company is highly leveraged. On October 2, 1999, the Company's
total long-term debt (including current installments) and stockholder's equity
was $344.6 million and $57.9 million, respectively.
The Company's primary sources of capital are cash flow from operations
and borrowings under a $60.0 million revolving credit facility. The Company's
primary capital requirements include debt service, capital expenditures, working
capital needs and financing acquisitions. The Company's ability to generate
sufficient cash to fund its operations depends generally on the results of its
operations and the availability of financing. Management believes that cash flow
from operations in conjunction with the available borrowing capacity under the
revolving credit facility of approximately $56.5 million at October 2, 1999, and
possible future debt financing will be sufficient for the foreseeable future to
meet debt service requirements, make future acquisitions, if any, and fund
capital expenditures. However, there can be no assurance in this regard or that
the terms available for any future financing, if required, would be favorable to
the Company.
Seasonality
Sales of a number of the Company's products tend to be seasonal. The Company
purchases most of the produce used to make B&G Pickle and Pepper Products during
the period from May to October and it purchases all of its maple syrup
requirements during the months of April through July. Consequently, its
liquidity needs are greatest during these periods.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement on
Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 standardizes the accounting for
derivative instruments by requiring that an entity recognize derivatives as
assets or liabilities in the statement of financial position and measure them at
fair value. In June 1999, the Financial Accounting Standards Board issued SFAS
137, "Accounting for Derivative Instruments and Hedging Activities-Deferral of
the Effective Dates of FASB Statement No. 133 and Amendment of FASB Statement
No. 133." SFAS 137 defers the effective date of SFAS 133 requiring
implementation for all quarters of all fiscal years beginning after June 15,
2000. These Statements should have no material impact on the Company's
consolidated financial statements.
Year 2000
The Year 2000 ("Y2K") issue is the result of computer programs being written
using two digits, rather than four, to define the applicable year. Mistaking
"00" for the year 1900 could result in miscalculations
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and errors and cause significant business interruptions for the Company, as well
as for the government and most other companies. The Company is executing its
plan to assess its state of readiness for Y2K, to remediate those systems that
are non-compliant and to assure that material third parties will be Y2K
compliant.
The Company has assessed its mainframe, operating and application systems for
Y2K readiness, giving the highest priority to those information technology
applications (IT) systems that are considered critical to its business
operations. At present, management believes that approximately 90% of the
critical IT systems and non-IT systems have been remediated. Those critical
systems not yet remediated are expected to be remediated by November 30, 1999.
With respect to the Company's non-critical IT and non-IT systems, management
believes that approximately 85% of such systems have been remediated and expects
the remaining systems to be remediated by November 30, 1999.
In 1998, the Company installed throughout its business units a Wide Area Network
encompassing merchandising, logistics, finance and human resources. The Wide
Area Network project was undertaken for business reasons unrelated to Y2K.
The Company has distributed a comprehensive Y2K compliance questionnaire to key
vendors, service providers and co-packers. Management has addressed the
responses as part of the Company's Y2K plan.
The Company is utilizing both internal and external resources to address the Y2K
issue. Internal resources reflect the reallocation of IT personnel to the Y2K
project from other IT projects. In the opinion of management, the deferral of
such other projects will not have a significant adverse effect on continuing
operations. The total estimated direct cost to remediate the Y2K issue is not
expected to be material to the Company's results of operations or financial
condition. All Y2K costs are expensed as incurred.
The Company is finalizing a contingency plan for areas that might be affected by
Y2K. Although the full consequences are unknown, the failure of either the
Company's critical systems or those of its material third parties to be Y2K
compliant could result in the interruption of its business. This could have a
material adverse effect on the consolidated results of operations or financial
condition of the Company.
Forward-Looking Statements
This report includes "forward-looking statements" within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended. Statements in this
report regarding future events or conditions, including statements regarding
industry prospects and the Company's expected financial position, business and
financing plans, are forward-looking statements. Although the Company believes
that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct. Important factors that could cause actual results to differ
materially from the Company's expectations are disclosed in this report as well
as the Company's most recent annual report on Form 10-K, and include the
Company's substantial leverage, the risks associated with the expansion of the
Company's business, the possible inability of the Company to integrate the
businesses it has acquired, lower sales volumes for the Company's products and
higher costs of food product raw materials, as well as factors that affect the
food industry generally. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of their dates. The
Company undertakes no obligations to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
11
<PAGE>
Item 3. Quantitative and Qualitative Disclosure About Market Risk
In the normal course of operations, the Company is exposed to market
risks arising from adverse changes in interest rates. Market risk is defined for
these purposes as the potential change in the fair value resulting from an
adverse movement in interest rates. As of October 2, 1999, the Company's only
variable rate borrowings were under the Term Loan Facilities that bear interest
at several alternative variable rates as stipulated in the Senior Secured Credit
Facility. A 100 basis point increase in interest rates, applied to the Company's
borrowings at October 2, 1999, would result in an annual increase in interest
expense and a corresponding reduction in cash-flow of approximately $2.2
million.
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 that could have a material impact on its consolidated financial
position, results of operations or liquidity.
Item 2. Changes in Securities and Use of Proceeds
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.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Number Description
-------------- -----------
Exhibit 2.1 Asset and Stock Purchase Agreement, dated as of
January 28, 1999, by and among The Pillsbury
Company, Indivined B.V., IC Acquisition Company,
Heritage Acquisition Corp. and, as guarantor, B&G
Foods, Inc. (filed as Exhibit 2.1 to the
Company's Report on Form 8-K filed April 1, 1999
and incorporated by reference).
12
<PAGE>
Exhibit 2.2 Asset Purchase Agreement, dated as of January 12,
1999, by and among Roseland Distribution Company,
International Home Foods, Inc. and M. Polaner,
Inc. (filed as an exhibit to the Company's Report
on Form 8-K filed February 19, 1999 and
incorporated by reference).
Exhibit 10.1 Revolving Credit Agreement, dated as of March 15,
1999 among B&G Foods Holdings Corp., B&G Foods,
Inc., as borrower, the several lenders from time
to time party thereto, Lehman Brothers Inc., as
Arranger, The Bank of New York, as Documentation
Agent, Heller Financial, Inc., as
Co-Documentation Agent, and Lehman Commercial
Paper Inc. as Syndication Agent and
Administrative Agent (filed as Exhibit 10.1 to
the Company's Report on Form 10-Q filed May 17,
1999 and incorporated by reference).
Exhibit 10.2 Term Loan Agreement, dated as of March 15, 1999,
among B&G Foods Holdings Corp., B&G Foods, Inc.,
as borrower, the several lenders from time to
time party thereto, Lehman Brothers Inc., as
Arranger, The Bank of New York, as Documentation
Agent, Heller Financial, Inc., as
Co-Documentation Agent, and Lehman Commercial
Paper, Inc., as Syndication Agent and
Administrative Agent (filed as Exhibit 10.2 to
the Company's Report on Form 10-Q filed May 17,
1999 and incorporated by reference).
Exhibit 10.3 Guarantee and Collateral Agreement, dated as of
March 15, 1999, by B&G Foods Holdings Corp., B&G
Foods, Inc., and certain of its subsidiaries in
favor of Lehman Commercial Paper, Inc., as
Administrative Agent (filed as Exhibit 10.3 to
the Company's Report on Form 10-Q filed May 17,
1999 and incorporated by reference)
Exhibit 10.4 Transition Services Agreement, dated as of
February 5, 1999, among International Home Foods,
Inc., M. Polaner, Inc. and Roseland Distribution
Company (filed as an exhibit to the Company's
Report on Form 8-K filed February 19, 1999 and
incorporated by reference).
Exhibit 10.5 Consent, Waiver and Second Amendment, dated as of
January 12, 1999 to the Second Amended and
Restated Credit Agreement, dated as of August 11,
1997, among B&G Foods, Inc., the subsidiaries
party thereto, Heller Financial, Inc., as agent
and lender, and the other lenders party thereto
(filed as an exhibit to the Company's Report on
Form 8-K filed February 19, 1999 and incorporated
by reference).
Exhibit 10.6 Guaranty, dated January 12, 1999, of B&G Foods,
Inc. in favor of International Home Foods, Inc.
and M. Polaner, Inc. (filed as
13
<PAGE>
an exhibit to the Company's Report on Form 8-K
filed February 19, 1999 and incorporated by
reference).
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
None.
14
<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.
Dated: November 8, 1999 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)
15
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
Exhibit 2.1 Asset and Stock Purchase Agreement, dated as of January 28,
1999, by and among The Pillsbury Company, Indivined B.V.,
IC Acquisition Company, Heritage Acquisition Corp. and, as
guarantor, B&G Foods, Inc. (filed as Exhibit 2.1 to the
Company's Report on Form 8-K filed April 1, 1999 and
incorporated by reference).
Exhibit 2.2 Asset Purchase Agreement, dated as of January 12, 1999, by
and among Roseland Distribution Company, International Home
Foods, Inc. and M. Polaner, Inc. (filed as an exhibit to
the Company's Report on Form 8-K filed February 19, 1999
and incorporated by reference).
Exhibit 10.1 Revolving Credit Agreement dated as of March 15, 1999 among
B&G Foods Holdings Corp., B&G Foods, Inc., as borrower, the
several lenders from time to time party thereto, Lehman
Brothers Inc., as Arranger, the Bank of New York, as
Documentation Agent, Heller Financial, Inc., as
Co-Documentation Agent, and Lehman Commercial Paper Inc. as
Syndication Agent and Administrative Agent (filed as
Exhibit 10.1 to the Company's Report on Form 10-Q filed May
17, 1999 and incorporated by reference).
Exhibit 10.2 Term Loan Agreement, dated as of March 15, 1999, among B&G
Foods Holdings Corp., B&G Foods, Inc., as borrower, the
several lenders from time to time party thereto, Lehman
Brothers Inc., as Arranger, The Bank of New York, as
Documentation Agent, Heller Financial, Inc., as
Co-Documentation Agent, and Lehman Commercial Paper, Inc.,
as Syndication Agent and Administrative Agent (filed as
Exhibit 10.2 to the Company's Report on Form 10-Q filed May
17, 1999 and incorporated by reference).
Exhibit 10.3 Guarantee and Collateral Agreement, dated as of March 15,
1999, by B&G Foods Holdings Corp., B&G Foods, Inc., and
certain of its subsidiaries in favor of Lehman Commercial
Paper, Inc., as Administrative Agent (filed as Exhibit 10.3
to the Company's Report on Form 10-Q filed May 17, 1999 and
incorporated by reference).
Exhibit 10.4 Transition Services Agreement, dated as of February 5,
1999, among International Home Foods, Inc., M. Polaner Inc.
and
16
<PAGE>
Roseland Distribution Company (filed as an exhibit to the
Company's Report on Form 8-K filed February 19, 1999 and
incorporated by reference).
Exhibit 10.5 Consent, Waiver and Second Amendment, dated as of
January 12, 1999 to the Second Amended and Restated Credit
Agreement, dated as of August 11, 1997, among B&G Foods,
Inc., the subsidiaries party thereto, Heller Financial,
Inc., as agent and lender, and the other lenders party
thereto (filed as an exhibit to the Company's Report on
Form 8-K filed February 19, 1999 and incorporated by
reference).
Exhibit 10.6 Guaranty, dated January 12, 1999, of B&G Foods, Inc. in
favor of International Home Foods, Inc. and M. Polaner,
Inc. (filed as an exhibit to the Company's Report on Form
8-K filed February 19, 1999 and incorporated by reference).
Exhibit 27 Financial Data Schedule
17
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
Exhibit 27
B&G FOODS, INC. AND SUBSIDIARIES
FINANCIAL DATA SCHEDULE
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-START> JAN-03-1999
<PERIOD-END> OCT-02-1999
<CASH> 1,280
<SECURITIES> 0
<RECEIVABLES> 27,021
<ALLOWANCES> (475)
<INVENTORY> 75,001
<CURRENT-ASSETS> 108,550
<PP&E> 42,305
<DEPRECIATION> (11,562)
<TOTAL-ASSETS> 474,154
<CURRENT-LIABILITIES> 45,080
<BONDS> 336,745
0
0
<COMMON> 0
<OTHER-SE> 57,851
<TOTAL-LIABILITY-AND-EQUITY> 474,154
<SALES> 241,652
<TOTAL-REVENUES> 241,652
<CGS> 129,072
<TOTAL-COSTS> 87,426
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,187
<INCOME-PRETAX> 3,967
<INCOME-TAX> 1,936
<INCOME-CONTINUING> 2,031
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,031
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
