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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended January 2, 1999
/ / 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
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B&G Foods, Inc.
(Exact name of Registrant as specified in its charter)
DELAWARE 13-3916496
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
426 Eagle Rock Avenue, Roseland, New Jersey 07068
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (973) 228-2500
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark 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 No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10K or any amendment to this
Form 10K. .
The aggregate market value of the voting stock held by non-affiliates of
the registrant is not applicable as no public market for the voting stock of the
registrant exists.
As of March 16, 1999, B&G Foods, Inc. had one share of its common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
None
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PART I
ITEM 1. BUSINESS
Company Overview
B&G Foods, Inc. and its subsidiaries (collectively, "B&G" or the "Company")
currently manufacture, market and distribute a diversified portfolio of
shelf-stable branded food products. Some of the products manufactured and
distributed by the Company include Bloch & Guggenheimer pickles and peppers,
Burns & Ricker and New York Style bagel chips and Regina vinegars.
The Company was organized by Bruckmann, Rosser, Sherrill & Co., L.P.
("BRS") in November 1996 to acquire Bloch & Guggenheimer, Inc., Burns & Ricker,
Inc. and certain related entities (the "B&G and B&R Acquisition") from Specialty
Foods Corporation ("Specialty Foods"), which is not an affiliate of the Company.
The B&G and B&R Acquisition was consummated on December 27, 1996 as a purchase
of all of the outstanding capital stock of BGH Holdings, Inc., the parent of
Bloch & Guggenheimer, Inc. and BRH Holdings, Inc., the parent of Burns & Ricker,
Inc.
On June 17, 1997, the Company acquired certain assets relating to the
Regina wine vinegars and cooking wines, Wright's liquid smoke hickory flavoring,
Brer Rabbit molasses and Vermont Maid syrup brands (the "Nabisco Brands
Acquisition"), including trademarks, inventory and certain equipment used to
bottle the Regina wine vinegars and cooking wines, from Nabisco, Inc.
("Nabisco"), which is not an affiliate of the Company.
On August 15, 1997, through a subsidiary, the Company acquired from E.
McIlhenny's Son Corporation (the "Trappey's Acquisition") all of the outstanding
capital stock of JEM Brands, Inc. ("JEM"), the holding company of Trappey's Fine
Foods, Inc. (together with JEM, "Trappey's").
On July 17, 1998, through a subsidiary, the Company acquired all of the
outstanding capital stock of Maple Grove Farms of Vermont, Inc. and related
entities (the "Maple Grove Acquisition") from certain individual investors. The
Maple Grove Acquisition included the Maple Grove Farms of Vermont and UpCountry
Naturals labels of pure maple syrup.
On February 5, 1999, subsequent to the Company's fiscal year end, the
Company acquired certain assets related to the Polaner brand of fruit spreads,
preserves and wet spices (the "Polaner Acquisition") from International Home
Foods, Inc.("IHF") and M. Polaner, Inc. Prior to consummation of the Polaner
Acquisition, the Company had been the exclusive manufacturer, or "co-packer," of
the Polaner products for IHF, and had distributed the Polaner products
regionally, under co-packing and distribution contracts that were terminated
upon consummation of the Polaner Acquisition. See "--Co-Packing."
On March 15, 1999, subsequent to the Company's fiscal year end, through a
subsidiary, the Company acquired the assets of The Heritage Portfolio of Brands
from The Pillsbury Company, Indivined B.V. and IC Acquisition Corp. for $192
million in cash (the "Heritage
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Brands Acquisition"). The Heritage Portfolio of Brands include Underwood meat
spreads, B&M baked beans, Ac'cent flavor enhancer, Sa-son Ac'cent flavor
enhancer, Las Palmas Mexican sauces and food products and Joan of Arc dry bean
products businesses.
The Company is wholly-owned by B&G Foods Holdings Corp. ("Holdings"), which
in turn is owned by BRS and its affiliates, and members of the Company's
management and board of directors. See "Security Ownership of Certain Beneficial
Owners and Management." The Company maintains its corporate headquarters at 426
Eagle Rock Avenue, Roseland, New Jersey 07068.
Products and Markets
The Company manufactures, markets and distributes a diversified portfolio
of shelf-stable branded products with leading regional or national market
positions. Set forth below is a brief description of the Company's products:
B&G Pickles & Peppers
The Company manufactures and distributes shelf-stable pickles, relishes,
peppers, olives and other related specialty items ("Pickles & Peppers")
primarily under the B&G and Bloch & Guggenheimer brand names. The Company's
Pickle & Peppers have strong sales in the New York area, and the Company
believes they are the leading brand of shelf-stable pickles sold in the New York
metropolitan area.
The Company positions its Pickles & Peppers as a quality, competitively
priced product. The Company currently offers 77 distinct pickle products and 41
distinct pepper products. Nationally, pepper products have enjoyed modest sales
growth over the past five years driven by changes in consumer trends and eating
styles.
Trappey's
Trappey's products fall in two major categories, shelf-stable peppers and
hot sauces. Trappey's, founded in 1898, was one of the first packers of pepper
hot sauce and the first to process peppers for pickling. Since its inception,
Trappey's has introduced many new products including Red Devil branded hot
sauce, Trappey's brand peppers, Torrido brand chili peppers and Italian
peperoncini peppers under the Dulcito brand.
Burns & Ricker Baked Snack Foods
B&G manufactures, markets and distributes bagel chips, snack mixes and
other baked specialty products ("Baked Snack Foods") primarily under the Burns &
Ricker and New York Style brands. Presently, the Burns & Ricker and New York
Style brands are the leading national brands of bagel chips.
Management believes that a key to growth in the highly competitive snack
foods market is the continual introduction of new products. The Company has
successfully introduced additional bagel chip flavors, snack mixes, the Coffee
Break line of breakfast toasts and the Regina Panetini
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line of light Italian toasts. Management believes that these initiatives will
enable the Company to diversify and expand its snack food business.
Regina Vinegars and Cooking Wines
The Company manufactures and distributes vinegars and cooking wines under
the Regina label. The brand, which has been in existence since 1949, is most
commonly used in the preparation of salad dressings as well as in a variety of
recipe applications, including sauces, marinades, and soups. Regina's premium
packaging, reputation and product quality have allowed it to maintain its number
one position nationally and command premium pricing while outselling
competitors. The Company expanded the Regina product line with the introduction
of a balsamic vinegar in 1998.
Wright's Liquid Smoke
The Company manufactures and distributes Wright's, a leading brand of
liquid smoke. Wright's liquid smoke is an all-natural hickory seasoning that
reproduces the flavor and aroma of hickory pit smoking in meats, chicken and
fish. Wright's is manufactured by a patented process and has one primary
national competitor. Since acquiring Wright's, the Company has sought to
increase the brand's marketing by adding recipes and incentives on package and
display shippers. Wright's liquid smoke is also used by commercial processors to
smoke hams, bacon, sausage and barbeque sauces.
Brer Rabbit Molasses
The Company markets and distributes molasses under its Brer Rabbit label,
which enjoys significant national market share. Brer Rabbit molasses is
typically used in baking, barbeque sauces and as a breakfast syrup. The Brer
Rabbit product comes in mild and full varieties. The mild molasses is designed
for table use as well as cooking, while the full flavor molasses has a stronger
flavor and is used primarily for cooking.
Vermont Maid Syrup
Vermont Maid was a regional brand of maple-flavored syrup in the Boston
area market when it was acquired by the Company in 1997. The Company has
reformulated the brand into a thicker, richer formula and contemporized its look
by introducing more appealing packaging. Vermont Maid syrup is available in two
flavors, regular and lite. The Company is attempting to increase the national
distribution of Vermont Maid syrup.
Maple Grove Products
The Company manufactures, markets and distributes pure maple syrup under
the Maple Grove Farms of Vermont label ("Maple Grove"). The Company's pure maple
syrup is processed and bottled at the Company's facility in St. Johnsbury,
Vermont. The Company also manufactures, markets and distributes a line of
gourmet salad dressings, marinades, fruit syrups, and confections and markets
and distributes pancake mixes under the Maple Grove label.
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Hot Sauces
The Company manufactures, markets and distributes a variety of hot sauces
under the brand names Trappey's, Red Devil, Bull's and Louisiana Hot Sauce. The
Company processes its hot sauces in its plants in Louisiana. The market for hot
sauces is very competitive and the Company faces competition from a number of
national, regional and local competitors.
Polaner Fruit Spreads, Preserves and Wet Spices
On February 5, 1999, the Company completed the Polaner Acquisition. The
Company now manufactures, markets and distributes the Polaner brand, which is
comprised of a broad array of fruit-based spreads as well as packed wet spices
such as bottled chopped garlic and basil. Polaner All-Fruit is the leading
national brand of fruit-juice sweeted fruit spread. Prior to completion of the
Polaner Acquisition, the Company had manufactured and partially distributed the
Polaner products pursuant to several co-packing agreements. These agreements,
which were terminated upon consummation of the Polaner Acquisition, are further
described below under the caption "--Co-Packing." The Polaner products are
manufactured by the Company at its facilities in Roseland, New Jersey. The
Company's management is extremely familiar with the Polaner brand and believes
that the brand can be grown through focused marketing efforts and new product
introductions.
Heritage Brands
On March 15, 1999, the Company completed the Heritage Brands Acquisition.
The Heritage Brands portfolio is comprised of brands in several niche categories
including (i) B&M baked beans, (ii) Underwood meat spreads, (iii) Ac'cent and
Ac'cent/Sa-son flavor enhancers, (iv) Las Palmas Mexican foods and (v) Joan of
Arc canned beans.
B&M Baked Beans
B&M is the original brand of brick-oven baked beans, having been produced
since 1927. The B&M line includes a variety of baked beans, brown bread (a
dense, traditional New England bread baked in the can), and also the Friends
brand of baked beans, which is only available in New England. To further
increase the brand's image, B&M recently was re-staged with a re-styled label
and a re-formulated recipe.
Underwood Meat Spreads
The Underwood brand markets meat spreads of several types, including
deviled ham, chicken and roast beef. Management believes that Underwood products
are unique because of their spreadable consistency, with no competitors offering
directly comparable products. Liver pate and sardines are also marketed under
the Underwood label.
Ac'cent / Sa-son
Ac'cent was introduced in 1947 as a flavor enhancer for meat preparation.
The product is an all-natural flavor enhancer primarily used on beef, poultry,
fish and vegetables. The brand is
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regionally strongest on the East Coast and is marketed in the United States
under the Ac'cent and the Ac'cent/Sa-son labels.
Las Palmas
Las Palmas, started in 1923, is a leading provider of enchilada sauce in
the authentic Mexican foods segment. Besides enchilada sauce, the Las Palmas
brand also applies to other canned products, including jalapenos, green chilies
and crushed tomatillo.
Joan of Arc
The Joan of Arc label applies to a full range of dry canned beans packed in
salt water. The best selling products under this label are kidney and chili
beans.
Co-Packing
The Company manufactures and packages food products for third parties under
other brand names, an industry practice commonly known as "co-packing." During
fiscal 1998 and prior to the Company's acquisition of the Polaner brand of
products, the Company had two co-packing contracts with IHF pursuant to which
the Company manufactured for IHF the Polaner lines of fruit spreads, preserves
and wet spices. In addition, the Company had a third contract with IHF under
which the Company distributed the Polaner lines of fruit spreads, preserves and
wet spices in the New York metropolitan area. The IHF contracts, in the
aggregate, accounted for $36.9 million and $46.2 million, or 20.5% and 30.5%, of
the Company's net sales for fiscal 1998 and fiscal 1997, respectively. These
contracts were terminated upon completion of the Company's acquisition of the
Polaner and related brands on February 5, 1999.
Distribution & Marketing
The Company uses several methods to distribute its products on a regional
and national basis. The Company distributes its products in the greater New York
metropolitan area primarily through its direct-store-door ("DSD") sales and
distribution system. The Company distributes its products nationally through a
network of independent national brokers, specialty food distributors and direct
sales to mass merchants and warehouse clubs.
The Company's DSD sales and distribution system supports an organization of
sales personnel who directly service individual grocery stores with the
Company's products. The DSD system relies on account managers to work with
buyers at the grocery chain's headquarters level, introducing new products and
organizing promotional support for existing product lines, as well as sales
personnel to operate at the store level by calling on store and grocery
department managers on a weekly basis, writing orders for products, positioning
new products and selling product displays to support promotional activity.
Products are delivered directly to stores by a fleet of trucks operated by
independent owners/operators.
Products sold nationally to supermarket chains and food service outlets are
generally distributed through brokers or distributors. National and regional
food brokers sell the entire portfolio of the Company's products. Broker sales
efforts are coordinated by B&G regional sales
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managers, who supervise brokers' activities with buyers or distributors and
brokers' retail coverage of the products at the store level.
Marketing support for the products distributed through the DSD system
consists primarily of trade promotions aimed at gaining display activity to
produce impulse sales. Trade advertising and coupons supplement this activity. A
variety of in-store support vehicles such as hang tags, racks, signs and shipper
displays are used by the individual sales personnel to highlight the Company's
products. Marketing support on a national basis typically consists of scheduled
trade promotions, targeted coupons and cross-promotions with supporting
products. Initially, advertising generally has consisted of magazine and trade
advertisements, to be supplemented at a later date with television advertising
for selected brands.
The Company did not export a significant amount of any of its products
during the 1998 fiscal year.
Competition
The food products business is highly competitive. The Company competes with
other producers of its products on the basis of price, convenience, quality and
product development expertise. The Company operates in markets that are highly
competitive, and the Company faces competition in each of its product lines. The
Company competes with a significant number of companies of varying sizes,
including divisions or subsidiaries of larger companies. Many of these
competitors have multiple product lines and may have substantially greater
financial and other resources.
During the 1998 fiscal year, the Company's most significant competitors for
its Pickles & Peppers were Vlasic and Heinz branded products. In addition, J.M.
Smucker and Sorrell Ridge were and continue to be the main competitors of the
Company's fruit spread products marketed under the Polaner label. The Maple
Grove Farms of Vermont line of syrups and salad dressings compete directly with
the Camp brand in the pure maple syrup category but, along with the Company's
Vermont Maid syrup products, also had a number of competitors in the general
pancake syrup market, such as Aunt Jemima, Mrs. Buttersworth and Log Cabin. The
Company's bagel chips were and continue to be the national market leader and
have no one direct competitor.
In addition, the Company's products compete not only against other brands
in their product category, but also against products in similarly related
product categories. For example, the Company's shelf-stable pickles compete not
only with other brands of shelf-stable pickles, but also those found in the
refrigerated sections of grocery stores. Likewise, the bagel chips manufactured
and distributed by the Company compete not only with other brands of bagel
chips, but also with other kinds of baked snacks and snacks in general.
Customers and Seasonality
Other than IHF, none of the Company's customers accounted for more than 10%
of its net sales in fiscal 1998, 1997 or 1996. The IHF contracts, in the
aggregate, accounted for $36.9
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million and $46.2 million, or 20.5% and 30.5% of the Company's net sales for
fiscal 1998 and fiscal 1997, respectively.
Sales of a number of the Company's products tend to be seasonal. The
Company purchases most of the produce used to make its Pickles & Peppers during
the period from July 1 to October 31 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.
Inflation
The Company does not believe that its operating results have been
materially affected by inflation during the preceding three years. There can be
no assurance, however, that the Company's operating results will not be affected
by inflation in the future.
Production
The Company purchases agricultural products and other raw materials from
growers, commodity processors and other food companies. The Company's principal
raw materials include peppers, cucumbers, vegetables, maple syrup, meat, flour,
vegetable oils, fruit concentrate and strawberries and other fruits. The Company
purchases its agricultural raw materials in bulk, from a variety of suppliers,
on an as-needed basis or pursuant to short-term supply contracts. Approximately
75% of B&G's pickle and pepper agricultural products come from sources near its
manufacturing facilities in order to minimize the high transportation costs
associated with transporting these products.
The Company currently has agreements for manufacture by third parties of
its Brer Rabbit, Regina and Vermont Maid products. These co-packing arrangements
require the Company to pay a fixed price per unit of the co-packed product, with
prices subject to annual adjustment. The Company believes that there are
alternative sources of co-packing production readily available for its products.
During the 1998 fiscal year, the Company had two co-packing agreements with
IHF. Under one agreement, the Company manufactured and sold wet spices to IHF
and under the second, the Company manufactured and sold fruit spread and
preserves to IHF. All of the co-packing arrangements with IHF were terminated
upon consummation of the Polaner Acquisition.
In addition, the Company was party to a third contract pursuant to which it
sold and distributed the Polaner and other products for IHF through the
Company's DSD system and which also was terminated upon consummation of the
Polaner Acquisition.
The Company manufactures Polaner wet spices in the Hurlock, Maryland
facility. The Hurlock facility, which the Company also uses to produce its
pickle and relish products, is owned by the Company and all employees at the
facility are employed by the Company. The Company produces Polaner preserves and
fruit spreads at its Roseland, New Jersey facility.
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Trademarks and Patents
The Company owns numerous trademarks which are registered in the United
States and abroad, including in Canada, the Dominican Republic, Japan, South
Korea, the Philippines and Thailand. As of December 31, 1998, the Company's
trademarks included B&G, Block & Guggenheimer, Bagel ChipMix, Brer Rabbit, Burns
& Ricker, New York Style, Regina, San-Del, Sandwich Toppers, Vermont Maid and
Wright's.
The Company considers its trademarks to be of significant importance in the
Company's business. The Company is not aware of any circumstances that would
have a material adverse effect on the Company's ability to use its trademarks.
Governmental Regulation
The operations of the Company are subject to extensive regulation by the
United States Food and Drug Administration ("FDA"), the United States Department
of Agriculture and other state and local authorities regarding the processing,
packaging, storage, distribution and labeling of the Company's products. The
Company's processing facilities and products are subject to periodic inspection
by federal, state and local authorities. The Company believes that it is
currently in substantial compliance with all material governmental laws and
regulations and maintains all material permits and licenses relating to its
operations. Nevertheless, there can be no assurance that the Company is in full
compliance with all such laws and regulations or that it will be able to comply
with any future laws and regulations in a cost-effective manner. Failure by the
Company to comply with applicable laws and regulations could subject it to civil
remedies, including fines, injunctions, recalls or seizures, as well as
potential criminal sanctions, which could have a material adverse effect on the
business, financial condition or results of operation of the Company.
As described above, the Company is subject to the Food, Drug and Cosmetic
Act and regulations promulgated thereunder by the FDA. This comprehensive
regulatory program governs, among other things, the manufacturing, composition
and ingredients, labeling, packaging and safety of food. For example, the FDA
regulates manufacturing practices for foods through its current "good
manufacturing practices" regulations and specifies the recipes for certain
foods. In addition, the Nutrition Labeling and Education Act of 1990 prescribes
the format and content of certain information required to appear on the labels
of food products. The Company is subject to regulation by certain other
governmental agencies, including the U.S. Department of Agriculture. Management
believes that the Company's facilities and practices are sufficient to maintain
compliance with applicable government regulations, although there can be no
assurances in this regard.
Environmental Matters
The Company has not made any material expenditures during the last three
fiscal years in order to comply with environmental laws or regulations. Based on
the Company's experience to date, the Company believes that the future cost of
compliance with existing environmental laws and regulations (and liability for
known environmental conditions) will not have a material adverse
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effect on the Company's business, financial condition or results of operations.
However, the Company cannot predict what environmental or health and safety
legislation or regulations will be enacted in the future or how existing or
future laws or regulations will be enforced, administered or interpreted, nor
can it predict the amount of future expenditures that may be required in order
to comply with such environmental or health and safety laws or regulations or to
respond to such environmental claims.
Employees
On January 31, 1999, B&G's workforce consisted of 523 employees. Of that
total, 321 employees were engaged in manufacturing, 90 were engaged in marketing
and sales, 87 were engaged in distribution and 25 were engaged in
administration. Approximately 60 of the Company's 523 employees, as of January
31, 1999 were covered by a collective bargaining agreement. In general the
Company considers its employee and union relations to be good and has not
experienced any work stoppages in over 30 years.
ITEM 2. PROPERTIES
The Company's plants are generally located near major customer markets and
raw materials. Management believes that the Company's manufacturing plants have
sufficient capacity to accommodate B&G's planned growth. As of January 31, 1999,
the Company operated the manufacturing and warehouse facilities described in the
table below.
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Facility Location Products Manufactured Approx.
Sq. Ft.
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Roseland, NJ Headquarters/ Manufacturing 124,000
South Brunswick, NJ Manufacturing/Warehouse 144,000
Hurlock, MD* Manufacturing/Warehouse 236,000
St. Johnsbury, VT* Manufacturing/Warehouse 92,000
New Iberia, LA* Manufacturing/Warehouse 158,000
Hurlock, MD* Warehouse 80,000
Hurlock, MD Warehouse 35,000
Hurlock, MD Warehouse 66,000
Sharptown, MD* Storage facility 3,000
La Vergne, TN Distribution Center 140,000
St. Evariste, Quebec* Storage Facility 60,000
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*Owned.
ITEM 3 LEGAL PROCEEDINGS
The Company, in the ordinary course of business, is involved in various
legal proceedings. The Company does not believe the outcome of these proceedings
will have a material adverse effect on the Company's financial condition or
results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During fiscal 1998, no matters were submitted to a vote of stockholders
through the solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Not applicable.
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------------------------------------------------------
Dec. 31, Dec. 30, Dec. 28, Jan. 3, Jan. 2,
1994 1995 1996 1998 1999
(Predecessor) (Predecessor) (Predecessor) (Successor) (Successor)
--------------- ---------------- ---------------- --------------- ----------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data (1):
Net sales........................... $ 113,812 $ 112,245 $ 129,307 $ 151,615 $ 179,780
Cost of goods sold.................. 82,833 79,293 91,187 98,950 108,186
Gross profit.................... 30,979 32,952 38,120 52,665 71,594
Sales, marketing and distribution
expenses........................ 23,336 23,863 28,414 36,884 49,430
General and administrative expenses
2,589 2,598 2,941 4,688 5,725
Management fees..................... -- 1,097 1,249 250 250
Operating income................ 5,054 5,394 5,516 10,843 16,189
Interest expense.................... 2,394 3,780 4,649 9,578 13,908
Income before income tax
expense and extraordinary
item......................... 2,660 1,614 867 1,265 2,281
Income tax expense (2).............. 1,458 896 591 833 1,431
Income before extraordinary
item......................... 1,202 718 276 432 850
Extraordinary item, net of income
tax benefit (3)................. -- -- -- (1,804) --
Net income (loss)............... $ 1,202 $ 718 $ 276 $ (1,372) $ 850
Balance Sheet Data (at period end)
(1):
Total assets.................... $ 69,936 $ 82,012 $ 103,412 $ 180,035 $ 211,873
Long-term debt, including
current portion.............. 25,654 30,163 53,513 121,376 144,696
Total stockholder's equity...... 29,261 29,979 12,500 18,628 20,820
Other Financial Data (1):
EBITDA (4)...................... $ 8,452 $ 8,905 $ 9,621 $ 16,263 $ 23,372
</TABLE>
(1) The B&G and B&R Acquisition and the acquisitions of the Nabisco Brands,
Trappey's and Maple Grove were consummated on December 27, 1996, June 17,
1997, August 15, 1997 and July 17, 1998, respectively, and were accounted
for using the purchase method of accounting. The selected financial data
set forth above as of January 3, 1998 and January 2, 1999 (the "Successor")
is presented on a consolidated basis. The selected financial data set forth
above as of all periods ending prior to December 28, 1996 (the
"Predecessor") is presented on a combined basis because the Predecessor
companies were under common control. As a result of these acquisitions, the
selected financial data subsequent to the acquisitions is presented on a
different cost basis and uses certain different accounting policies than
the selected financial data prior to the acquisitions and, therefore, is
not comparable. Further, related party transactions affect the
comparability of the selected financial data. Additionally, the
comparability of the data presented above is affected by the acquisition by
the
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Predecessor of the New York Style brand in September 1995, which was
accounted for using the purchase method of accounting.
(2) The Company was part of the consolidated federal income tax returns of its
parent from August 1993 through December 27, 1996. Income tax expense has
been computed as if the Company filed a separate federal income tax return
for each period presented.
(3) Reflects the write-off of deferred debt issuance costs in connection with
the debt repayments and amendments relating to the Company's prior credit
facility.
(4) EBITDA is defined as earnings before interest, taxes, depreciation and
amortization and extraordinary item and is presented because it is commonly
used by certain investors and analysts to analyze and compare companies on
the basis of operating performance and to determine a company's ability to
service and incur debt. EBITDA should not be considered in isolation from
or as a substitute for net income, cash flows from operating activities or
other consolidated income or cash flow statement data prepared in
accordance with generally accepted accounting principles or as a measure of
profitability or liquidity.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The B&G and B&R Acquisition and the acquisitions of the Nabisco Brands,
Trappey's and Maple Grove were consummated on December 27, 1996, June 17, 1997,
August 15, 1997 and July 17, 1998, respectively. The above acquisitions have
been accounted for using the purchase method of accounting and, accordingly, the
results of operations of the acquired companies are included in the Company's
operating results from the dates of acquisition. Operating results for the years
ended January 2, 1999 and January 3, 1998 are presented on a consolidated basis
("Successor Consolidated"). Operating results for the year ended December 28,
1996 are presented on a combined basis ("Predecessor Combined") because the
Predecessor companies were under common control. Such acquisitions and the
application of the purchase method of accounting affect comparability between
periods.
Year Ended January 2, 1999 Compared to Year Ended January 3, 1998
Net Sales
Net sales increased $28.2 million or 18.6% to $179.8 million for the 52
week period ended January 2, 1999 (the "1998 Period") from $151.6 million for
the 53 week period ended January 3, 1998 (the "1997 Period"). The net sales
increase included increases of $19.4 million for Maple Grove, $10.3 million for
the Nabisco Brands and $10.2 million for Trappey's (collectively, the "Acquired
Brands). Sales of B&G Pickle and Pepper products increased $0.9 million or 1.7%
from the 1997 Period, largely reflecting a higher unit volume of food service
products sales. These sales increases were partially offset by a decrease of
$9.3 million or 20.1%, in sales of co-packed Polaner products to IHF and sales
of Polaner products distributed by the Company in the northeastern U.S., and a
decrease in sales of $3.3 million or 11.2% of Burns & Ricker Snack Food
products, due primarily to a decline in sales to the deli departments of grocery
stores.
12
<PAGE>
Gross Profit
Gross profit increased $18.9 million or 35.9% to $71.6 million for the 1998
Period from $52.7 million in the 1997 Period. Gross profit expressed as a
percentage of net sales, increased to 39.8% in the 1998 Period from 34.7% 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. The co-packing services provided
under the IHF contracts are on a significantly lower profit margin level than
the Company's base businesses.
Sales, Marketing and Distribution Expenses
Sales, marketing and distribution expenses increased $12.5 million, or
34.0%, to $49.4 million for the 1998 Period from $36.9 million for the 1997
Period. Such expenses as a percentage of net sales increased to 27.5% in the
1998 Period from 24.3% in the 1997 Period. The Acquired Brands accounted for
$10.8 million of the increase.
General and Administrative Expenses
General and administrative expenses, (including amortization of intangibles
and management fees), increased $1.0 million, or 21.0%, to $6.0 million for the
1998 Period from $4.9 million in the 1997 Period, primarily due to increased
amortization of intangibles associated with the acquisitions of the Acquired
Brands.
Operating Income
As a result of the foregoing, operating income increased $5.3 million, or
49.3%, to $16.2 million for the 1998 Period from $10.8 million in the 1997
Period. Operating income expressed as a percentage of net sales increased to
9.0% in the 1998 Period from 7.2% in the 1997 Period.
Interest Expense
Interest expense increased $4.3 million to $13.9 million for the 1998
Period from $9.6 million in the 1997 Period as a result of the additional debt
incurred by the Company to fund the Maple Grove Acquisition.
Year Ended January 3, 1998 Compared to Year Ended December 28, 1996
Net Sales
Net sales increased $22.3 million or 17.3% to $151.6 million for the 53
week period ended January 3, 1998 (the "1997 Period") from $129.3 million for
the 52 week period ended December 28, 1996 (the "1996 Period"). The net sales
increase included $16.8 million for the Nabisco Brands and $6.0 million for
Trappey's. Sales of B&G Pickle and
13
<PAGE>
Pepper products increased $3.9 million or 8.1% from the 1996 Period, largely
reflecting sales of food service products and the Sandwich Toppers line. Sales
of food service products increased in the 1997 Period by $3.4 million, or 17.5%,
reflecting higher unit volume. Sales of retail B&G Pickle and Pepper products
increased by $0.5 million, or 1.7%, reflecting the successful introduction of
six new Sandwich Toppers products and generally higher retail unit volume. These
sales increases were partially offset by a decrease of $4.6 million or 9.0%, 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 $14.5 million or 38.2% to $52.7 million for the 1997
Period from $38.1 million in the 1996 Period. Gross profit expressed as a
percentage of net sales, increased to 34.7% in the 1997 Period from 29.5% in the
1996 Period due to a favorable shift in the sales mix to higher gross profit
margin B&G pickle and pepper product sales Nabisco Brands and Trappey's sales
from lower gross profit margin Polaner co-packing sales. The co-packing services
provided under the IHF contracts are on a significantly lower profit margin
level than the Company's base businesses.
Sales, Marketing and Distribution Expenses
Sales, marketing and distribution expenses increased $8.5 million, or
29.8%, to $36.9 million for the 1997 Period from $28.4 million for the 1996
Period. Such expenses as a percentage of net sales increased to 24.3% in the
1997 Period from 22.0% in the 1996 Period. The Nabisco Brands and Trappey's
accounted for $8.3 million of the increase.
General and Administrative Expenses
General and administrative expenses, (including amortization of intangibles
and management fees), increased $0.7 million, or 17.9%, to $4.9 million for the
1997 Period from $4.2 million in the 1996 Period, primarily due to increased
amortization of intangibles associated with the acquisitions of B&G and B&R, the
Nabisco Brands, and Trappey's, offset by a decrease in management fees.
Operating Income
As a result of the foregoing, operating income increased $5.3 million, or
96.6%, to $10.8 million for the 1997 Period from $5.5 million in the 1996
Period. Operating income expressed as a percentage of net sales increased to
7.2% in the 1997 Period from 4.3% in the 1996 Period.
Interest Expense
Interest expense increased $4.9 million to $9.6 million for the 1997 Period
from $4.6 million in the 1996 Period as a result of the additional debt incurred
by the Company relating to $120.0 million Senior Subordinated Notes.
14
<PAGE>
Liquidity and Capital Resources
Cash Flows
Cash provided by operations increased $10.2 million or 305.1%, to $13.6
million for the 1998 Period from $3.4 million in the 1997 Period. This increase
is primarily due to improved working capital management and an increase in net
income. Working capital at January 2, 1999 was $30.6 million, an increase of
$9.0 million over working capital at January 3, 1998 of $21.6 million. Cash
provided by operations increased $1.1 million or 47.0%, to $3.4 million for the
1997 Period from $2.3 million in the 1996 Period. This increase is primarily due
to improved working capital management. Working capital at January 3, 1998 was
$21.6 million, an increase of $14.6 million over working capital at December 28,
1996 of $7.0 million.
Net cash used in investing activities for the 1998 Period was $37.6 million
as compared to $70.9 million for the 1997 Period. The change primarily related
to a final $4.0 million payment to Specialty Foods for the B&G and B&R
Acquisition and the purchase of the Nabisco Brands and Trappey's of $63.0
million in the 1997 Period. This was offset by the purchase of Maple Grove of
$34.1 million in the 1998 Period. Capital expenditures during the 1998 Period of
$3.8 million included purchases of manufacturing and computer equipment. Net
cash used in investing activities for the 1997 Period was $70.9 million as
compared to $2.6 million for the 1996 Period. The change primarily related to a
final $4.0 million payment to Specialty Foods for the B&G and B&R Acquisition
and the purchase of the Nabisco Brands and Trappey's of $63.0 million in the
1997 Period. Capital expenditures during the 1997 Period of $4.0 million
included purchases of manufacturing equipment.
Net cash provided by financing activities for the 1998 Period was $23.9
million as compared to net cash provided by financing activities for the 1997
Period of $67.9 million. The change related primarily to the proceeds from the
issuance of long-term debt in the 1997 Period to finance the acquisition of
Nabisco Brands and Trappey's offset by the proceeds from the issuance of
long-term debt in the 1998 Period to finance the Maple Grove Acquisition. Net
cash provided by financing activities for the 1997 Period was $67.9 million as
compared to net cash used in financing activities for the 1996 Period of $0.3
million. The change related primarily to the proceeds from the issuance of
long-term debt in the 1997 Period to finance the acquisition of the Nabisco
Brands and Trappey's.
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 flow 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.
15
<PAGE>
On February 5, 1999, the Company acquired the assets of Polaner and related
brands for $30 million in cash (subject to post closing adjustments) from IHF
pursuant to an Asset Purchase Agreement (the "Asset Purchase Agreement") dated
January 12, 1999. Financing for this acquisition and certain related transaction
fees and expenses was provided by borrowings from the $50 million revolving
credit facility (the "Credit Facility"). In connection with the Asset Purchase
Agreement, a consent waiver and second amendment of the Credit Facility was
entered into which included, among other things, an increase in the maximum
borrowings to $60 million.
On March 15, 1999, the Company acquired the assets and stock of The
Heritage Portfolio of Brands for $192 million from The Pillsbury Company,
Indivined B.V. and IC Acquisition Corp. pursuant to an Asset and Stock Purchase
Agreement dated January 29, 1999. In connection with this transaction, the
Company entered into a $280 million senior secured credit facility comprised of
a $60 million five-year revolving credit facility, a $70 million five-year term
loan facility ("Term Loan A") and a $150 million 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
million of equity from BRS, were used to fund the Heritage Brands Acquisition
and refinance borrowings under the Company's Credit Facility.
Future Capital Needs
The Company is highly leveraged. On January 2, 1999, the Company's total
debt and stockholder's equity was $144.7 million and $20.8 million,
respectively.
The Company's primary sources of capital are cash flows from operations and
borrowings under a $60 million (increased from $50 million at January 2, 1999)
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 $27.0 at January 2, 1999, and possible future debt
financings 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.
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. This Statement is effective for all quarters of all fiscal years
beginning after June 15, 1999. This Statement should have no impact on the
Company's consolidated financial statements.
16
<PAGE>
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 and errors and
cause significant business interruptions for the Company, as well as for the
government and most other companies. The Company has instituted a 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, approximately 50 percent of the IT systems have been
remediated. For the IT systems not yet remediated, the Company has purchased
third party software that will be operational by June 30, 1999. The final phase
of the Company's remediation is its manufacturing systems, which are expected to
be completed by June 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 compiled an inventory of its non-IT systems, which include
those systems containing embedded chip technology commonly found in buildings
and manufacturing equipment. Preliminary investigations of the embedded chip
systems indicate that Y2K will not affect these systems.
The Company is in the process of distributing a comprehensive Y2K
compliance questionnaire to key vendors, service providers and co-packers.
Management will be addressing 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, excluding the Wide Area Network, which was undertaken for reasons
unrelated to Y2K, 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 in the process of developing contingency plans for those
areas which 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, which could have a material adverse effect on the results of
operations or financial condition of the Company.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
17
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated balance sheets (Successor Consolidated) at January 2, 1999
and January 3, 1998 and the consolidated statements of operations and cash flows
(Successor Consolidated) for the years ended January 2, 1999 and January 3, 1998
and the statements of operations and cash flows (Predecessor Combined) for the
year ended December 28, 1996 and related notes thereto are set forth below.
18
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholder
B&G Foods, Inc.:
We have audited the financial statements of B&G Foods, Inc. and
subsidiaries as listed in the accompanying index. In connection with our audits
of the financial statements, we also have audited the financial statement
schedule as listed in the accompanying index. These financial statements and
financial statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
financial statement schedule base on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As further described in note 1, the Predecessor was acquired on December
27, 1996 in a business combination accounted for as a purchase. As a result, the
Successor Consolidated financial statements are presented on a different basis
of accounting than the Predecessor Combined financial statements and, therefore,
are not comparable. Also, as further described in note 14, on February 5, 1999,
the Company acquired Polaner and related brands, and on March 15, 1999, the
Company acquired The Heritage Portfolio of Brands.
In our opinion, the Successor Consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of B&G Foods, Inc. and subsidiaries as of January 2, 1999 and January
3, 1998, and the results of their operations and their cash flows for the years
then ended, in conformity with generally accepted accounting principles.
Further, in our opinion, the Predecessor Combined financial statements referred
to above present fairly, in all material respects, the results of operations and
cash flows of the Predecessor Combined for the year ended December 28, 1996, in
conformity with generally accepted accounting principles. Also in our opinion,
the related financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
KPMG LLP
Short Hills, New Jersey
February 24, 1999, except as to
the third paragraph of note 14,
which is as of March 15, 1999
19
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
January 2, 1999 and January 3, 1998
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Jan. 2, 1999 Jan. 3, 1998
(Successor (Successor
Assets Consolidated) Consolidated)
------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 599 691
Trade accounts receivable, less allowance for doubtful
accounts of $679 and $687 in 1998 and 1997, respectively 15,656 13,074
Inventories 39,764 31,467
Prepaid expenses 1,646 1,792
Deferred income taxes 2,938 2,819
------- -------
Total current assets 60,603 49,843
Property, plant and equipment, net 26,486 23,619
Intangible assets, net 119,542 100,831
Other assets 5,242 5,742
------- -------
Total assets $ 211,873 180,035
======= =======
Liabilities and Stockholder's Equity
Current liabilities:
Current installments of long-term debt, including amounts
payable to related parties of $1,038 in 1998 1,431 293
Trade accounts payable 17,508 15,752
Accrued expenses 10,335 11,990
Due to related parties 705 197
------- -------
Total current liabilities 29,979 28,232
Long-term debt, including amounts payable to related
parties of $844 in 1997 143,265 121,083
Other liabilities - 59
Deferred income taxes 17,809 12,033
------- -------
Total liabilities 191,053 161,407
------- -------
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 21,342 20,000
Accumulated deficit (522) (1,372)
Total stockholder's equity 20,820 18,628
Commitments and contingencies (notes 6, 12, 13 and 14)
------- -------
Total liabilities and stockholder's equity $ 211,873 180,035
======= =======
</TABLE>
See accompanying notes to financial statements.
20
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Statements of Operations
Years ended January 2, 1999, January 3, 1998,
and December 28, 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Year Year
ended ended ended
Jan. 2, Jan. 3, Dec. 28,
1999 1998 1996
(Successor (Successor (Predecessor
Consolidated) Consolidated) Combined)
------------- ------------- ------------
<S> <C> <C> <C>
Net sales $ 179,780 151,615 129,307
Cost of goods sold 108,186 98,950 91,187
------- ------- -------
Gross profit 71,594 52,665 38,120
Sales, marketing and distribution expenses 49,430 36,884 28,414
General and administrative expenses 5,725 4,688 2,941
Management fees - related parties 250 250 1,249
------- ------- -------
Operating income 16,189 10,843 5,516
Other expense:
Interest expense - related parties 74 811 4,452
Interest expense 13,834 8,767 197
------- ------- -------
Income before income tax expense
and extraordinary item 2,281 1,265 867
Income tax expense 1,431 833 591
------- ------- -------
Income before extraordinary item 850 432 276
Extraordinary item, net of income tax benefit of
$1,138 - (1,804) -
------- ------- -------
Net income (loss) $ 850 (1,372) 276
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
21
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Statements of Cash Flows
Years ended January 2, 1999, January 3, 1998,
and December 28, 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Year Year
ended ended ended
Jan. 2, Jan. 3, Dec. 28,
1999 1998 1996
(Successor (Successor (Predecessor
Consolidated) Consolidated) Combined)
------------- ------------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 850 (1,372) 276
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 7,183 5,420 4,105
Amortization of deferred debt issuance costs 589 630 -
Deferred income tax expense (benefit) 1,069 (310) 386
Extraordinary item - 2,942 -
Provision for doubtful accounts 43 687 -
Changes in assets and liabilities, net of effects
from businesses acquired:
Trade accounts receivable (587) (4,510) (190)
Inventories 5,491 (2,612) (1,305)
Prepaid expenses and other current assets 1,014 (1,286) (595)
Other assets 38 (46) (11)
Trade accounts payable 1,068 953 (1,214)
Accrued expenses (3,664) 3,142 (1,496)
Due to related parties 508 197 2,316
Other liabilities - (477) 12
- -------- ------
Net cash provided by operating activities 13,602 3,358 2,284
-------- -------- ------
Cash flows from investing activities:
Paid for Successor Acquisitions (34,137) (63,019) -
Paid for Acquired Companies - (4,009) -
Capital expenditures (3,780) (4,022) (2,573)
Proceeds from sales of property, plant and equipment 351 162 -
-------- -------- ------
Net cash used in investing activities (37,566) (70,888) (2,573)
-------- -------- ------
</TABLE>
22
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Statements of Cash Flows, Continued
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Year Year
ended ended ended
Jan. 2, Jan. 3, Dec. 28,
1999 1998 1996
(Successor (Successor (Predecessor
Consolidated) Consolidated) Combined)
------------- ------------- ------------
<S> <C> <C> <C>
Cash flows from financing activities:
Payments of long-term debt (318) (68,453) (318)
Proceeds from issuance of long-term debt 22,975 143,000 -
Proceeds from issuance of equity 1,342 500 -
Payments of debt issuance costs (127) (7,117) -
----------- --------- ---------
Net cash provided by (used in) financing
activities 23,872 67,930 (318)
----------- --------- ---------
(Decrease) increase in cash and cash equivalents (92) 400 (607)
Cash and cash equivalents at beginning of period 691 291 898
----------- --------- ---------
Cash and cash equivalents at end of period $ 599 691 291
=========== ========= =========
Supplemental disclosure of cash flow information - cash paid for:
Interest $ 13,290 4,261 197
=========== ========= =========
Income taxes $ 146 209 203
=========== ========= =========
B&G Foods, Inc. cash transactions as of December 27, 1996:
Cash paid for Acquired Companies (note 1) $ 63,240
Cash paid for deferred debt issuance costs 1,328
---------
Total investing activities $ 64,568
=========
Cash proceeds from debt ($52,068) and equity ($12,500)
financing activities (note 1) $ 64,568
=========
</TABLE>
See accompanying notes to financial statements.
23
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Financial Statements
January 2, 1999 and January 3, 1998
(Dollars in thousands)
(1) 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. (collectively, the Acquired Companies or the Predecessor),
subsidiaries of Specialty Foods Corporation (SFC). B&G Foods, Inc. and the
Acquired Companies upon the Acquisition are hereinafter referred to as the
Successor or the Company. 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. (Holdings), 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).
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, bagel chips, hot sauces, maple syrup, salad dressings
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.
24
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Financial Statements, Continued
(Dollars in thousands)
(1) Continued
Acquisition Accounting
The Acquisition has been accounted for using the purchase method.
Accordingly, the excess of the purchase price over the fair value of
identifiable net assets acquired, representing goodwill, is included in
intangible assets. The consideration (including acquisition costs of $1,329) and
allocation of the purchase price are summarized below:
Purchase Price Consideration:
Term Loan Facilities A and B $ 26,500
Revolving Credit Facility 11,240
Proceeds from Common Stock Issuance 12,500
12% Senior Subordinated Notes due to
related parties 13,000
Cash paid subsequent to December 27, 1996 5,337
Long-term liabilities assumed 1,445
----------
$ 70,022
==========
Allocation of Purchase Price:
Property, plant and equipment 15,584
Intangible assets - trademarks 29,804
Intangible assets - goodwill 20,846
Other assets, principally net current assets 12,858
Deferred income tax liabilities (9,070)
----------
$ 70,022
==========
Restructuring
As part of the Acquisition, management authorized and committed to a plan
to undertake certain restructuring moves, principally involving the
consolidation of several warehouse and production facilities resulting in
restructuring accruals of $1,536 as part of the allocation of the purchase
price. The restructuring consisted primarily of approximately $952 of estimated
lease and other tenancy costs through 1998, $228 in severance and termination
benefits for approximately 100 warehouse and production employees, and the
remaining portion relating to charges resulting from changes in the production
process as part of the consolidation, which was completed in June 1997. The
Company does not expect to incur material incremental costs. As of January 3,
1998, the restructuring reserve balance was reduced to $656 as a result of cash
expenditures of $880 relating primarily to tenancy costs, severance payments,
and charges
25
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Financial Statements, Continued
(Dollars in thousands)
(1) Continued
resulting from changes in the production process, which was completed in June
1997. In fiscal 1998, the Company concluded its restructuring plan and, as of
January 2, 1999, the restructuring reserve balance was reduced to $0 as a result
of cash expenditures relating primarily to tenancy costs.
Successor Acquisitions and Accounting
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, 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 Senior Subordinated Notes on August
11, 1997.
On July 2, 1998, BGH Holdings, Inc. (the Buyer), a subsidiary of B&G Foods,
Inc., entered into a Stock Purchase Agreement by and among the Buyer, Maple
Grove Farms of Vermont, Inc., Up Country Naturals of Vermont, Inc. and Les
Produits Alimentaires Jacques et Fils, Inc. (collectively, Maple Grove), and
William F. Callahan and Ruth M. Callahan (collectively, the Sellers), pursuant
to which the Buyer would acquire all of the issued and outstanding capital stock
of Maple Grove (the Maple Grove Acquisition) for aggregate consideration of
$34,137, consisting of $14,170 in cash, 1,000 shares of common stock of Holdings
having an aggregate value of $10, and 990 shares of the 13% Series A Cumulative
Preferred Stock of Holdings, having an initial aggregate liquidation preference
of $990, plus the assumption of $17,325 in debt which was paid at closing and
transaction costs of $1,265. The closing under the Stock Purchase Agreement
occurred on July 17, 1998. The Stock Purchase Agreement provides for a
post-closing adjustment to be paid by the Buyer or Sellers under certain
circumstances. The parties are currently determining the amount of the
post-closing adjustment. Financing for this acquisition and certain related
transaction fees and expenses was provided by borrowings from the Company's
$50,000 credit facility.
The above acquisitions (collectively, the Successor Acquisitions) have been
accounted for using the purchase method and, accordingly, the assets acquired,
liabilities assumed, and results of operations are included in the Successor
Consolidated financial statements from the date of the
26
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Financial Statements, Continued
(Dollars in thousands)
(1) Continued
acquisitions. The excess of the purchase price over the fair value of
identifiable net assets acquired, representing goodwill, is included in
intangible assets.
The costs of the 1997 Nabisco and JEM acquisitions as of January 3, 1998, and
the costs of the 1998 Maple Grove Acquisition as of January 2, 1999, have been
allocated to tangible and intangible assets as follows:
Jan. 2, Jan. 3,
1999 1998
------- -------
Property, plant and equipment $ 2,908 7,111
Intangible assets - trademarks 12,970 24,500
Intangible assets - goodwill 8,985 28,045
Other assets, principally net current assets 13,862 4,621
Deferred income tax liabilities, net (4,588) (1,258)
----------- -----------
$ 34,137 63,019
=========== ===========
Pro Forma Summary of Operations
The following unaudited pro forma summary of operations for the fiscal
years ended January 2, 1999 and January 3, 1998 presents the results of
operations of the Company as if the Successor Acquisitions had occurred as of
the beginning of each of the respective fiscal years. In addition to including
the results of operations of the Successor Acquisitions, the pro forma
information gives effect primarily to interest on additional borrowings and
changes in depreciation and amortization of intangible assets.
27
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Financial Statements, Continued
(Dollars in thousands)
(1) Continued
Year Year
ended ended
Jan. 2, Jan. 3,
1999 1998
------- -------
Net sales $ 200,449 209,470
Income before extraordinary
item $ 754 563
============ =========
The unaudited pro forma information presented above does not purport to be
indicative of the results that actually would have been attained if the
Successor Acquisitions, and related financing transactions had occurred at the
beginning of the years presented and is not intended to be a projection of
future results.
(2) Summary of Significant Accounting Policies
(a) Fiscal Year and Basis of Presentation
The Company utilizes, as did the Predecessor, a 52-53 week fiscal year
ending on the last Saturday in December. Fiscal year 1997 contains 53
weeks. Fiscal 1998 and 1996 contain 52 weeks.
The Successor's financial statements are presented on a consolidated basis.
The Predecessor's financial statements are presented on a combined basis
because all of the Acquired Companies were under common control. All
significant intercompany balances and transactions have been eliminated.
B&G Foods, Inc. had no operations prior to the Acquisition and neither B&G
Foods, Inc. nor the Acquired Companies had any operations on Saturday,
December 28, 1996. As a result, the combined statements of operations and
cash flows for the fiscal year ended December 28, 1996 present the results
of operations of the Acquired Companies (Predecessor Combined). The
consolidated financial statements subsequent to the Acquisition are
presented on a different cost basis than the financial statements prior to
the Acquisition and, therefore, are not comparable. Further, related party
transactions (see note 11) affect the comparability of the financial
statements.
28
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Financial Statements, Continued
(Dollars in thousands)
(2) Continued
(b) Cash and Cash Equivalents
For purposes of the statements of cash flows, all highly liquid debt
instruments with original maturities of three months or less are considered
to be cash and cash equivalents.
(c) Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out and average cost methods.
(d) Property, Plant and Equipment
Property, plant, and equipment are stated at cost. Plant and equipment
under capital leases are stated at the present value of minimum lease
payments. Depreciation on plant and equipment is calculated using the
straight-line method over the estimated useful lives of the assets,
generally 12 to 20 years for buildings and improvements, 5 to 10 years for
machinery and equipment, and 3 to 5 years for office furniture and
vehicles. Plant and equipment held under capital leases and leasehold
improvements are amortized on a straight-line basis over the shorter of the
lease term or estimated useful life of the asset. Expenditures for
maintenance, repairs and minor replacements are charged to current
operations. Expenditures for major replacements and betterments are
capitalized.
(e) Intangible Assets
Intangible assets consist of goodwill and trademarks. Goodwill is amortized
on a straight-line basis over 40 years. Trademarks are amortized on a
straight-line basis over 20 to 40 years. The Company assesses the
recoverability of the intangible assets by determining whether the
amortization of the intangible assets over their remaining lives can be
recovered through undiscounted future operating cash flows. The amount of
impairment, if any, is measured based on projected discounted future
operating cash flows using a discount rate reflecting the Company's average
cost of funds. The assessment of the recoverability of intangible assets
will be impacted if estimated future operating cash flows are not achieved.
29
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Financial Statements, Continued
(Dollars in thousands)
(2) Continued
(f) Deferred Debt Issuance Costs
Deferred debt issuance costs are amortized using the straight-line method
over the term of the related debt agreements and are classified as other
non-current assets. Amortization of deferred debt issuance costs for fiscal
years 1998 and 1997 was $589 and $630, respectively (none in 1996).
As a result of the debt repayments and amendments described in note 7,
during fiscal year 1997, the Company recorded an extraordinary charge of
$1,804, net of income tax benefit of $1,138, to write off deferred debt
issuance costs relating to its Senior Secured Credit Agreement and the
Interim Notes.
(g) Advertising Costs
Advertising costs are expensed as incurred. Advertising costs amounted to
approximately $988, $121 and $285 during the fiscal years 1998, 1997 and
1996, respectively.
(h) Income Taxes
From August 17, 1993 to the date of the Acquisition, the Predecessor was
included in the consolidated federal income tax return of SFC. SFC was
responsible for the filing of income tax returns and payment of income
taxes. No formal tax sharing agreement existed between SFC and the
Predecessor, and no federal income taxes were allocated to the Predecessor.
State income taxes were allocated to the Predecessor based on the actual
state income tax liability. Income tax expense reported in the accompanying
statement of operations for fiscal 1996 has been computed as if the
Predecessor filed a separate federal tax return.
Effective December 28, 1996, the Company is included in the consolidated
federal income tax return of B Companies Holdings Corp. Income tax expense
reported in the accompanying consolidated statements of operations for the
years ended January 2, 1999 and January 3, 1998 has been computed as if the
Company filed a separate federal tax return.
Deferred tax assets and liabilities of the Company are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
30
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Financial Statements, Continued
(Dollars in thousands)
(2) Continued
differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income
in the period that includes the enactment date.
(i) Pension Plans
The Company has defined benefit pension plans covering substantially all of
its employees. The Company's funding policy is to contribute annually the
amount recommended by its actuaries. Such plans are the same as the plans
of the Predecessor.
(j) Fair Value of Financial Instruments
Cash and cash equivalents, accounts receivable, accounts payable and
accrued expenses are reflected in the consolidated financial statements at
carrying value, which approximates fair value due to the short-term nature
of these instruments. The fair value on the $120,000 Senior Subordinated
Notes at January 2, 1999, based on quoted market prices, was $117,000. The
carrying value of the Company's remaining borrowings approximates the fair
value based on the current rates available to the Company for similar
instruments.
(k) Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(l) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed
Of
The provisions of Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," were adopted on December 31, 1995. This
statement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by
which the carrying amount of the assets exceeds the fair value of the
assets.
31
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Financial Statements, Continued
(Dollars in thousands)
(2) Continued
Assets to be disposed of are reported at the lower of the carrying amount
or fair value less costs to sell. Adoption of this statement did not have a
material impact on the Company's financial position, results of operations,
or liquidity.
(m) Reclassifications
Certain amounts in the January 3, 1998 consolidated financial statements
have been reclassified to conform with the January 2, 1999 consolidated
financial statement presentation.
(n) Statements of Cash Flows - Noncash Financing and Investing Activities
Capital lease obligations of $469 and $122 were incurred during fiscal
years 1998 and 1997, respectively (none in 1996), when the Company entered
into leases for new machinery and equipment. As described in note 7, on
June 17, 1997, $7,000 of the BRS Note was contributed to capital. Notes
payable were issued in payment of rent owed to a related party in the
amounts of $194, $194 and $206 during the fiscal years 1998, 1997 and 1996,
respectively. In connection with the Acquisition, the Company assumed
long-term liabilities (capital leases and unsecured notes payable to a
related party) of $1,445.
(3) Inventories
Inventories consists of the following:
Jan. 2, Jan. 3,
1999 1998
------- -------
Raw materials and packaging $ 10,337 6,146
Work in process 2,862 1,924
Finished goods 26,565 23,397
------- ---------
$ 39,764 31,467
========== =========
32
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Financial Statements, Continued
(Dollars in thousands)
(4) Property, Plant and Equipment
Property, plant and equipment, net consists of the following:
Jan. 2, Jan. 3,
1999 1998
------- -------
Land $ 2,309 2,307
Buildings and improvements 8,359 6,783
Leasehold improvements 653 622
Machinery and equipment 17,111 14,963
Office furniture and vehicles 2,443 925
Leased property under capital leases 1,377 908
Construction in progress 1,194 169
----- ----
33,446 26,677
Less accumulated depreciation and
amortization
6,960 3,058
---------- ---------
$ 26,486 23,619
========= =========
Plant and equipment includes amounts under capital leases as follows:
Jan. 2, Jan. 3,
1999 1998
------- -------
Machinery and equipment $ 591 122
Office furniture and vehicles 786 786
--------- ---------
1,377 908
Less accumulated amortization 654 239
--------- ---------
$ 723 669
======== =========
Amortization of assets held under capital leases is included with depreciation
expense.
33
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Financial Statements, Continued
(Dollars in thousands)
(5) Intangible Assets
Intangible assets consists of the following:
Jan. 2, Jan. 3,
1999 1998
------- -------
Goodwill $ 57,874 48,889
Trademarks 67,274 54,304
----------- ---------
125,148 103,193
Less accumulated amortization 5,606 2,362
----------- ---------
$ 119,542 100,831
========== =========
(6) Leases
The Company has several noncancelable operating leases, primarily for
warehouses, transportation equipment and machinery. These leases generally
require the Company to pay all executory costs such as maintenance, taxes and
insurance.
Future minimum lease payments under noncancelable operating leases (with initial
or remaining lease terms in excess of one year) for the periods set forth below
are as follows:
Years ended December:
1999 $ 1,415
2000 1,399
2001 1,200
2002 1,112
2003 1,012
Thereafter 3,907
-------
$ 10,045
=======
34
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Financial Statements, Continued
(Dollars in thousands)
(6) Continued
Future minimum capital lease payments as of January 2, 1999 are as follows:
Years ended December 31:
1999 $ 363
2000 151
2001 189
Thereafter 73
-----------
Total minimum lease payments 776
Less amount representing interest (at 9% to 13%) 93
-----------
Present value of net minimum capital
lease payments 683
Less current installments of obligations under
capital leases 393
-----------
Obligations under capital leases, excluding
current installments (included in long-
term debt) $ 290
===========
Total rental expense was $2,157, $1,543 and $1,735 for the fiscal years 1998,
1997 and 1996, respectively.
The Company leases a manufacturing, warehouse and corporate headquarters
facility from the Chairman of the Board of the Company under an operating lease
expiring in April 1999. Total rent expense associated with this lease for the
fiscal years 1998, 1997 and 1996 was $477, $463 and $492, respectively. The
Company is in the process of negotiating a new lease at a new location for its
corporate headquarters. The Company expects to renew the existing lease with the
Company's Chairman under different terms and will attempt to sublease the office
space.
35
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Financial Statements, Continued
(Dollars in thousands)
(7) Long-term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
Jan. 2, Jan. 3,
1999 1998
------- -------
<S> <C> <C>
Revolving credit facility $ 22,975 -
9.625% Senior Subordinated Notes due
August 1, 2007 120,000 120,000
Obligations under capital leases with interest at 9%
to 13% collateralized by certain machinery,
equipment and vehicles 683 532
Unsecured notes payable to related party with various
interest rates ranging from 6.20% to 6.68%, due
April 1999 1,038 844
----------- ----------
Total long-term debt 144,696 121,376
Less current installments 1,431 293
----------- ----------
Long-term debt, excluding current
installments $ 143,265 121,083
============ ==========
</TABLE>
In connection with the Acquisition, B&G Foods, Inc. entered into a $50,000
Credit Agreement (the Credit Facility) which consisted of a $23,500 revolving
credit facility, Term Loan A of $14,500 and Term Loan B of $12,000. Interest was
determined based on several available rates as stipulated in the Credit
Facility, and borrowings on the revolver were limited to specified percentages
of eligible accounts receivable and inventories, as defined. In connection with
the Company's acquisition of certain assets from Nabisco on June 17, 1997, the
Credit Facility was amended and restated to increase the Company's revolving
credit facility by $1,500 and increase Term Loans A and B by $33,500 in the
aggregate, with new repayment terms beginning September 1997 on the term loans.
Additionally, on June 17, 1997, $6,000 of the BRS Note was repaid (plus accrued
interest) and $7,000 of the BRS Note was contributed to capital. In connection
with the issuance of the 9.625% $120,000 Senior Subordinated Notes on August 11,
1997 (described below), the term loans were repaid in full, and the Credit
Facility was further amended and restated to provide for, among other things, a
maximum $50,000 revolving credit facility due August 31, 2002. In connection
with the Maple Grove Acquisition, a consent, waiver
36
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Financial Statements, Continued
(Dollars in thousands)
(7) Continued
and first amendment to the $50,000 Credit Facility was entered into, which
included, among other things, a prospective change in certain financial
covenants and a consent by the lender regarding the purchase of Maple Grove.
Borrowings under the revolver are not limited by percentages of underlying
assets.
Interest on the Credit Facility is determined based on several alternative rates
as stipulated in the Credit Facility, including the base lending rate per annum
plus 1.0% or LIBOR plus 2.50% (8.20% at January 2, 1999). The Credit Facility is
secured by substantially all of the Company's assets. The Credit Facility also
provides for mandatory prepayment requirements based on asset dispositions and
issuance of securities, as defined. The Credit Facility contains covenants that
will restrict, among other things, the ability of the Company to incur
additional indebtedness, pay dividends and create certain liens. The Credit
Facility also contains certain financial covenants which, among other things,
specify maximum capital expenditure limits, a minimum fixed charge coverage
ratio, a minimum total interest coverage ratio and a maximum indebtedness to
EBIDAT ratio, each ratio as defined. Proceeds of the Credit Facility are
restricted to funding the Company's working capital requirements, capital
expenditures and acquisitions of companies in the same line of business as the
Company, subject to certain criteria. The Credit Facility limits acquisitions to
$20,000 per year as well as $20,000 per acquisition.
The Credit Facility requires an annual commitment fee of an amount equal to
0.50% of the average daily unused portion of the Credit Facility. The Credit
Facility also provides a maximum commitment for letters of credit of $3,000 and
requires an annual commitment fee of 2.50% of the aggregate unused portion. At
January 2, 1999 and January 3, 1998, letters of credit of approximately $593 and
$661, respectively, have been issued under the Credit Facility.
On February 7, 1997, the Company entered into a two-year $13,000 interest rate
cap agreement in order to reduce the exposure of changes in interest rates on
the Credit Facility. The interest rate cap agreement consists of a cap rate of
11.25%. The cost of the interest rate cap agreement was $16, which is recorded
in deferred financing fees (other assets) in the accompanying consolidated
balance sheets at January 2, 1999 and January 3, 1998 and is being amortized
over the life of the Credit Facility. The fair value of the agreement at January
2, 1999 and January 3, 1998 is not materially different than the carrying
amount.
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, to pay certain related fees and expenses, and
for general corporate purposes. The indenture for the Notes contains certain
covenants that,
37
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Financial Statements, Continued
(Dollars in thousands)
(7) Continued
among other things, limit the ability of the Company to incur additional debt,
issue preferred stock, pay dividends or make certain other restricted payments,
enter into transactions with affiliates, make certain asset dispositions, merge
or consolidate with, or transfer substantially all of its assets to, another
person, as defined, encumber assets under certain circumstances, restrict
dividends and other payments from subsidiaries, engage in sale and leaseback
transactions, issue capital stock, as defined, or engage in certain business
activities.
The Notes are redeemable at the option of the Company, in whole or in part, at
any time on or after August 1, 2002 at 104.813% of their principal amount plus
accrued and unpaid interest and Liquidated Damages, as defined, if any,
beginning August 1, 2002, and thereafter at prices declining annually to 100% on
or after August 1, 2005. In addition, at any time prior to August 1, 2000, the
Company may, at its discretion, redeem up to 35% of the original aggregate
principal amount of the Notes at a redemption price equal to 109.625% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, as defined, if any, to the date of redemption, with the net proceeds of
one or more Public Equity Offering, as defined; provided that at least 65% of
the original aggregate principal amount of the Notes remains outstanding
immediately after each redemption. Upon the occurrence of a Change in Control,
as defined, the Company will have the option, at any time on or prior to August
1, 2002, to redeem the Notes, in whole but not in part, at a redemption price
equal to 100% of the principal amount plus the Applicable Premium, as defined,
plus accrued and unpaid interest and Liquidated Damages, as defined, if any, to
the date of redemption, and if the Company does not so redeem the Notes or if
such Change in Control, as defined, occurs after August 1, 2002, the Company
will be required to make an offer to repurchase the Notes at a price equal to
101% of the principal amount, together with accrued and unpaid interest and
Liquidated Damages, as defined, if any, to the date of repurchase. The Notes are
not subject to any sinking fund requirements.
The Company has no assets or operations independent of its subsidiaries. All of
the Company's subsidiaries (the Guarantors) are wholly-owned, and all of the
Company's subsidiaries jointly and severally, and fully and unconditionally,
guarantee the Notes (the Subsidiary Guarantees). Consequently, separate
financial statements have not been presented for the guarantor subsidiaries
because management has determined that they would not be material to investors.
The Subsidiary Guarantee of each Guarantor is subordinate to the prior payment
in full of all Senior Debt, as defined. As of January 2, 1999, the Company and
its subsidiaries had Senior Debt and additional liabilities (including trade
payables, accrued expenses, amounts due to related parties, deferred income
taxes and other liabilities) aggregating approximately $48.1 million.
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
38
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Financial Statements, Continued
(Dollars in thousands)
(7) Continued
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.
As described in note 6, the Company leases a manufacturing, warehouse and
corporate headquarters facility from the Chairman of the Board of the Company.
The Company pays $44 per month in rent in cash and, pursuant to a Memorandum of
Agreement, an additional amount in the form of unsecured notes payable, which
are issued in an annual aggregate principal amount of $188. The Company's
liability under the issued unsecured notes as of January 2, 1999 and January 3,
1998 was $1,038 and $844, respectively. The notes are due in April 1999, the
date of the lease expiration. The Company estimates that the remaining
obligation of the notes to be issued is $59 and $295 as of January 2, 1999 and
January 3, 1998, respectively. Such amounts are included in accrued expenses and
other liabilities.
At January 2, 1999 and January 3, 1998, accrued interest of $5,397 and $4,779,
respectively, is included in accrued expenses in the accompanying balance
sheets.
The aggregate maturities of long-term debt are as follows:
Years ended December:
1999 $ 1,431
2000 151
2001 66
2002 23,043
2003 5
Thereafter 120,000
-------
$ 144,696
39
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Financial Statements, Continued
(Dollars in thousands)
(8) Income Tax Expense (Benefit)
Income tax expense (benefit) has been classified in the accompanying statements
of operations as follows:
Income tax expense (benefit) consists of the following:
Year Year Year
ended ended ended
Jan. 2, Jan. 3, Dec. 28,
1999 1998 1996
------- ------- --------
Income before extraordinary item $1,431 833 591
Extraordinary item - (1,138) -
------ ------ ---
$1,431 (305) 591
====== ====== ===
Year Year Year
ended ended ended
Jan. 2, Jan. 3, Dec. 28,
1999 1998 1996
------- ------- --------
Current:
Federal $ - - 95
State 113 5 110
------ ------ ---
113 5 205
------ ------ ---
Deferred:
Federal 1,228 (295) 271
State 90 ( 15) 115
------ ------ ---
1,318 (310) 386
------ ------ ---
$ 1,431 (305) 591
====== ====== ===
40
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Financial Statements, Continued
(Dollars in thousands)
(8) Continued
Income tax expense (benefit) differs from the expected income tax expense
(benefit) (computed by applying the U.S. federal income tax rate of 34% to
pretax income) as a result of the following:
Year Year Year
ended ended ended
Jan. 2, Jan. 3, Dec. 28,
1999 1998 1996
------- ------- --------
Computed expected tax expense (benefit) $ 776 (570) 295
State income taxes, net of federal
income tax benefit 134 (7) 149
Nondeductible expenses, principally
amortization of goodwill 224 172 274
Change in valuation allowance for
deferred income taxes
allocated to income tax
expense 84 5 (389)
Other 213 95 262
------ ------ ---
$ 1,431 (305) 591
====== ====== ===
41
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Financial Statements, Continued
(Dollars in thousands)
(8) Continued
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities are presented below:
Jan. 2, Jan. 3,
1999 1998
------- -------
Deferred tax assets:
Accounts receivable, principally due to allowance $ 392 275
Inventories, principally due to additional costs
capitalized for tax purposes 748 590
Accruals and other liabilities not currently
deductible 1,902 2,302
Net operating loss carryforwards 4,034 3,574
Deferred financing costs 990 1,178
-------- --------
Total gross deferred tax assets 8,066 7,919
Less valuation allowance 934 773
-------- --------
Net deferred tax assets 7,132 7,146
-------- --------
Deferred tax liabilities:
Plant and equipment (2,300) (2,173)
Intangible assets (19,703) (14,187)
---------- --------
Total deferred tax liabilities (22,003) (16,360)
---------- --------
Net deferred tax liability $ (14,871) (9,214)
========== ========
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment. Based upon the level of
historical taxable income and projections for future taxable income over the
periods in which the deferred tax assets are deductible, management believes it
is more likely than not that the Company will realize the
42
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Financial Statements, Continued
(Dollars in thousands)
(8) Continued
benefits of these deductible differences, net of the existing valuation
allowances at January 2, 1999 and January 3, 1998. The amount of the deferred
tax asset considered realizable, however, could be reduced in the near term if
estimates of future taxable income during the carryforward period are reduced.
The valuation allowance at January 2, 1999 and January 3, 1998 of $934 and $773,
respectively, represents the allowance for state net operating loss
carryforwards of $15,600 and $12,900, respectively, which are available to
offset future state taxable income, if any, through 2005. The Company
established a valuation allowance for the deferred tax assets associated with
state net operating loss carryforwards at January 2, 1999 and January 3, 1998
because management believes that based upon historical and projected state
taxable income, it is not more likely than not that the deferred tax asset
related to such net operating loss carryforwards will be realized. Any future
utilization of these state net operating loss carryforwards will result in an
adjustment to goodwill to the extent it reduces the valuation allowance. The
change in the valuation allowance in fiscal 1998 and 1997 was primarily due to
the utilization of state net operating loss carryforwards.
At January 2, 1999, the Company has net operating loss carryforwards for federal
income tax purposes of $9,119 which are available to offset future federal
taxable income, if any, through 2018. As a result of the Acquisition and
Successor Acquisitions, the annual utilization of the net operating loss
carryforwards is limited under certain provisions of the Internal Revenue Code.
(9) Pension Benefits
The Company has defined benefit pension plans covering substantially all of its
employees, which plans were previously provided by the Predecessor. The benefits
are based on years of service and the employee's compensation, as defined. The
Company makes annual contributions to the plans equal to the maximum amount that
can be deducted for income tax purposes.
43
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Financial Statements, Continued
(Dollars in thousands)
(9) Continued
The following table sets forth the Company's defined benefit pension plans'
benefit obligation, fair value of plan assets and funded status recognized in
the Successor Consolidated balance sheets:
<TABLE>
<CAPTION>
Jan. 2, Jan. 3,
1999 1998
------- -------
<S> <C> <C>
Change in benefit obligation
Benefit obligation at beginning of year $ 6,824 6,047
Actuarial loss 253 110
Service cost 470 464
Interest cost 478 436
Benefits paid (240) (233)
----------- ---------
Benefit obligation at end of year 7,785 6,824
----------- ---------
Change in plan assets
Fair value of plan assets at beginning of year 4,927 4,190
Actual return on plan assets 863 659
Employer contribution 426 311
Benefits paid (240) (233)
----------- ---------
Fair value of plan assets at end of year 5,976 4,927
----------- ---------
Funded status (1,809) (1,897)
Unrecognized net gain (401) (198)
----------- ---------
Accrued pension cost $ (2,210) (2,095)
=========== =========
Change in prepaid pension cost
Accrued benefit cost at beginning of year $ (2,095) (1,857)
Net periodic pension cost (531) (549)
Additional liability (10) -
Contributions 426 311
----------- ---------
Accrued pension cost at end of year $ (2,210) (2,095)
=========== =========
Weighted-average assumptions as of
January 2, 1999 and January 3, 1998
Discount rate 6.75% 7.25%
Rate of increase in compensation levels 4.50% 5.00%
Expected long-term rate of return on plan assets 8.50% 8.50%
</TABLE>
Plan assets are invested primarily in government securities and mutual funds.
44
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Financial Statements, Continued
(Dollars in thousands)
(9) Continued
Net periodic cost includes the following components:
Year Year Year
ended ended ended
Jan. 2, Jan. 3, Dec. 28,
1999 1998 1996
------- ------- --------
Service cost - benefits earned during the
period $ 470 464 412
Interest cost on projected benefit obligation 478 436 387
Expected return on plan assets (472) (673) (168)
Net amortization and deferral 55 322 (107)
------- ---- ----
Net pension cost $ 531 549 524
======= ==== ====
The Company sponsors several defined contribution plans covering substantially
all of its employees, which plans were previously sponsored by the Predecessor.
Employees may contribute to these plans and these contributions are matched at
varying amounts by the Company. Company contributions for the matching component
of these plans amounted to $226, $225 and $229 for the fiscal years ended
January 2, 1999, January 3, 1998 and December 28, 1996, respectively.
45
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Financial Statements, Continued
(Dollars in thousands)
(10) Changes in Stockholder's Equity
The changes in stockholder's equity for the fiscal years ended January 2, 1999,
January 3, 1998 and December 28, 1996 are as follows:
<TABLE>
<CAPTION>
Common Stock Additional Receivable
------------ paid-in from stock Accumulated
Shares Amount capital issuance deficit Total
------ ------ ---------- ---------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 30, 1995 8,900 $ 15,131 13,331 -- 1,517 29,979
Net income -- -- -- -- 276 276
----- --------- ------ --- ----- ------
Balance at
December 27, 1996,
immediately prior to
Acquisition 8,900 15,131 13,331 -- 1,793 30,255
Adjustment associated
with Acquisition* -- -- 369 -- -- 369
Eliminate predecessor equity
upon Acquisition (8,900) (15,131) (13,700) -- (1,793) (30,624)
Successor shares issued upon
Acquisition 1 -- 13,000 (500) -- 12,500
----- --------- ------ --- ----- ------
Balance at December 28, 1996
1 -- 13,000 (500) -- 12,500
Net loss -- -- -- -- (1,372) (1,372)
Capital contribution (note 7)
-- -- 7,000 -- -- 7,000
Payment of receivable from
stock issuance -- -- -- 500 -- 500
----- --------- ------ --- ----- ------
Balance at January 3, 1998 1 -- 20,000 -- (1,372) 18,628
Net income -- -- -- -- 850 850
Proceeds from issuance of
equity -- -- 1,342 -- -- 1,342
----- --------- ------ --- ----- ------
Balance at January 2, 1999 1 $-- 21,342 -- (522) 20,820
===== ========= ====== === ===== ======
</TABLE>
*In accordance with the acquisition agreement between SFC and the
Company, the net of all intercompany accounts was settled by way of a
capital contribution to the Company immediately prior to the
Acquisition.
46
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Financial Statements, Continued
(Dollars in thousands)
(11) Related-party Transactions
In conjunction with the Acquisition, the Company entered into a Management
Agreement with BRS, in which BRS is paid an annual fee of $250 for certain
management, business and organizational strategy, and merchant and investment
banking services. Charges for such services amounted to approximately $250
during the fiscal years ended January 2, 1999 and January 3, 1998. The
Management Agreement will expire either on December 27, 2006 or the date that
BRS owns less than 20% of the outstanding common stock, if sooner.
The Company entered into a Transaction Services Agreement pursuant to which BRS
will be paid a transaction fee for management, financial and other corporate
advisory services rendered by BRS in connection with acquisitions by the
Company, which fee will not exceed 1.0% of the total transaction value. In
connection with the Maple Grove Acquisition in fiscal 1998 and the acquisition
of certain assets from Nabisco and JEM in fiscal 1997, the Company paid
transaction fees aggregating $250 and $620, respectively, which were included in
the allocation of the respective purchase prices.
Due to Related Parties
Due to related parties at January 2, 1999 includes management fees to BRS,
accrued interest payable under the unsecured notes payable to related party and
an amount due to the former owner of Maple Grove (and current director of the
Company) resulting from the Maple Grove Acquisition. Due to related parties at
January 3, 1998 includes management fees to BRS and accrued interest payable
under the unsecured notes payable to related party.
Related party interest expense on the unsecured notes payable to related party
and the BRS Note was $74, $811 and $38 for the fiscal years ended January 2,
1999, January 3, 1998 and December 28, 1996, respectively.
In connection with the Company's acquisition of certain assets from Nabisco on
June 17, 1997, the Company entered into a co-packing agreement with Nabisco
under which Nabisco will continue to bottle products until March 1998, and
assumed certain co-packing contracts. In addition, the Company entered into a
Transition Services Agreement (as defined) with Nabisco, under which Nabisco
provided field sales force, administrative warehousing and delivery, and other
administrative support on a national basis for the brands acquired from June 17,
1997 through September 1, 1997. Amounts paid by the Company for the co-packing
agreement and the Transition Services Agreement (as defined) in 1997 amounted to
$879.
47
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Financial Statements, Continued
(Dollars in thousands)
(11) Continued
Prior to the Acquisition, SFC provided certain financing and cash management
services for the Company and allocated certain costs for services provided. Such
charges terminated upon the completion of the Acquisition and have been replaced
with the Company's own costs. Allocations to the Company by SFC were based on
the Company's share of costs paid by SFC on its behalf for consolidated
programs. Such allocations may not be reflective of the costs which would have
been incurred if the Company operated on a stand-alone basis or which will be
incurred in the future. Management believes that the basis for allocation was
reasonable. Management does not believe it is practicable to estimate the amount
of expenses which would have been incurred during fiscal year 1996 had the
Company operated as a separate entity during these periods. The following is a
summary of the amounts charged or allocated to the Company:
Trade Accounts Receivable
During the period the Company was a subsidiary of SFC (from August 1993 through
December 27, 1996), the Company sold its trade accounts receivable as they arose
from sales to a financing subsidiary of SFC. Discounting expense, net of
servicing income, related to this arrangement was recorded as interest expense
and totaled approximately $807 in fiscal year 1996.
Management Fee
On January 1, 1995, the Company entered into an Administrative Services and
Management Agreement with SFC, in which SFC was paid an annual fee equal to 1%
of gross revenues, as defined, for certain accounting, legal, tax and management
advisory services. Charges for such services amounted to $1,249 in fiscal year
1996.
Borrowings
The weighted average interest rate on borrowings from SFC for fiscal year 1996
was 9.94%. The related interest expense recognized by the Company on such
borrowings was $3,607 in fiscal year 1996.
(12) Commitments and Contingencies
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position, results of operations or liquidity.
48
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Financial Statements, Continued
(Dollars in thousands)
(12) Continued
On January 2, 1999, the Company had purchase commitments with various suppliers
to purchase certain raw materials in the aggregate amount of approximately
$2,700. Management believes that all such commitments will be fulfilled within
one year.
The Company is subject to environmental regulations in the normal course of
business. Management believes that the cost of compliance with such regulations
will not have a material adverse effect on the Company's business, consolidated
financial position or results of operations.
(13) Business and Credit Concentrations
The Company's exposure to credit loss in the event of non-payment of accounts
receivable by customers is represented in the amount of those receivables. The
Company performs ongoing credit evaluations of its customers' financial
condition and generally requires no collateral from those customers. As of
January 2, 1999, other than accounts receivable from International Home Foods,
Inc. (IHF), the Company does not believe it has any significant concentration of
credit risk with respect to its trade accounts receivable.
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 IHF which expire 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 fiscal years 1998, 1997
and 1996 were $36,906, $46,216 and $50,778, respectively. Receivables due from
IHF included in trade accounts receivable at January 2, 1999 and January 3, 1998
were $1,176 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, dated as of March 19, 1993, which
expired on March 31, 1998, the Company renewed the agreement on May 18, 1998
without a specific term, terminable by either party upon 90 days written notice.
49
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Financial Statements, Continued
(Dollars in thousands)
(14) Subsequent Events
On February 5, 1999, the Company acquired the assets of the Polaner Brand, the
Maxams Brand, the Eagle Rock Farms Brand, and assorted products, including
associated private label products (collectively, the Acquired Businesses) from
IHF pursuant to an Asset Purchase Agreement (the Asset Purchase Agreement) dated
as of January 12, 1999 among the Company, IHF, and M. Polaner, Inc., a
wholly-owned subsidiary of IHF (collectively, the Sellers). Pursuant to the
Asset Purchase Agreement, the Company purchased the Acquired Businesses for
$30,000 in cash (subject to post closing adjustments). The Sellers agreed to
provide certain transition services to the Company for 90 days pursuant to a
Transaction Services Agreement.
Financing for this acquisition and certain related transaction fees and expenses
was provided by borrowings from the Credit Facility. In connection with the
Asset Purchase Agreement, a consent waiver and second amendment of the Credit
Facility was entered into which included, among other things, an increase in the
maximum borrowings to $60,000, a change in interest rate, a change in certain
financial covenants, and a consent by the lender regarding the purchase of the
Acquired Businesses.
On March 15, 1999, the Company acquired the assets and stock of The Heritage
Portfolio of Brands for $192,000 (the "Heritage Acquisition") from The Pillsbury
Company. In connection with this transaction, 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 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 BRS, were used to
fund the Heritage Acquisition and refinance borrowings under the Company's
Credit Facility.
50
<PAGE>
(15) Quarterly Financial Data (unaudited)
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
----------------------------------------------------
Net sales
1998 $38,398 42,633 46,477 52,272 179,780
1997 30,363 38,040 35,934 47,278 151,615
Gross profit
1998 $14,925 16,635 18,122 21,912 71,594
1997 8,661 12,117 13,495 18,392 52,665
Income before
extraordinary item
1998 $ (236) 433 224 429 850
1997 (304) 311 26 399 432
Net income (loss)
1998 $ (236) 433 224 429 850
1997 (304) 311 (1,778) 399 (1,372)
51
<PAGE>
Schedule II
B&G Foods, Inc. and Subsidiaries
Valuation and Qualifying Accounts
(dollars in thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
Additions
Balance at Charged to Charged to
beginning of costs and other accounts Deductions - Balance at end
Description period expenses - describe describe of period
<S> <C> <C> <C> <C> <C>
1998:
Allowance for doubtful
accounts $ 687 $ 43 -- $ 51(a) $ 679
Restructuring accruals
$ 656 -- -- $ 656(b) $ 0
1997:
Allowance for doubtful
accounts $ 0 $ 687 -- -- $ 687
Restructuring accruals
$ 1,536 -- -- $ 880(c) $ 656
</TABLE>
(a) Represents bad-debt write-offs.
(b) Cash expenditures relating primarily to tenancy costs.
(c) Cash expenditures relating primarily to tenancy costs, severance payments,
and charges relating from changes in the production process.
52
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information with respect to the
persons who are members of the Board of Directors or executive officers of B&G.
Other officers may also be appointed to fill certain positions. Each director of
B&G holds office until the next annual meeting of shareholders of B&G or until
his successor has been elected and qualified.
Name Age Position
Leonard S. Polaner 68 Chairman of the Board of Directors
David L. Wenner 49 President, Chief Executive Officer and
Director
Robert C. Cantwell 42 Executive Vice President of Finance and
Chief Financial Officer
David H. Burke 56 Executive Vice President of Sales and
Marketing
James H. Brown 56 Executive Vice President of Manufacturing
Thomas Baldwin 39 Director
William F. Callahan III 57 Director
Alfred Poe 49 Director
Harold O. Rosser II 50 Director
Stephen C. Sherrill 45 Director
Leonard S. Polaner, Chairman of the Board: Leonard Polaner has been
Chairman of the Board of B&G since March 1993 when the Polaner business was sold
to IHF. Prior to that time, Mr. Polaner was President and Chief Executive
Officer of B&G, positions which he had assumed upon joining the Company in 1986.
Mr. Polaner began his career in the food products industry in 1956 when, after
earning his Masters Degree from Harvard Business School, he joined Polaner, a
family-run business. He has been active in many industry trade groups, including
the New York Preservers Association and the International Jelly and Preservers
Association, organizations in which he served as President and a member of the
Board, respectively.
David L. Wenner, President and Chief Executive Officer: David Wenner is the
President and Chief Executive Officer of the Company, positions he has held
since March 1993. Mr. Wenner joined B&G in 1989 as Assistant to the President,
directly responsible for the Company's distribution and Bloch & Guggenheimer
operations. In 1991, he was promoted to Vice President. He continued to be
responsible for distribution and assumed responsibility for all company
operations. Prior to joining B&G, Mr. Wenner spent nine
53
<PAGE>
years in the consumer products division at Johnson & Johnson in supervision and
management positions responsible for manufacturing, maintenance and purchasing.
Mr. Wenner is active in industry trade groups and has served as President of
Pickle Packers International.
Robert C. Cantwell, Executive Vice President of Finance and Chief Financial
Officer: Robert Cantwell is the Executive Vice President of Finance and Chief
Financial Officer of B&G. He joined the Company in 1983 as the Assistant Vice
President of Finance. In that position, Mr. Cantwell had responsibility for all
financial reporting, including budgeting. Mr. Cantwell was promoted to his
current position in 1991, assuming full responsibility for all financial
matters, as well as MIS, Data Processing, Administration and Corporate Human
Resources. Prior to joining the Company, Mr. Cantwell spent four years at
Deloitte & Touche, where he received accreditation as a Certified Public
Accountant.
David H. Burke, Executive Vice President of Sales and Marketing: David
Burke is the Executive Vice President of Sales and Marketing of the Company. Mr.
Burke has an extensive background with major consumer products companies. His
experience includes eight years with Procter & Gamble in sales and sales
management and 12 years at Quaker Oats, where he was a Regional Sales Manager
and later the director of Broker Sales. Mr. Burke also spent four years with Pet
Inc. as Vice President for their frozen foods business. Mr. Burke joined B&G in
1990 and since that time has been responsible for the national expansion of
Polaner All-Fruit and the sales and marketing of all of the Bloch &
Guggenheimer, Burns & Ricker and New York Style products.
James H. Brown, Executive Vice President of Manufacturing: James Brown is
the Senior Vice President of Manufacturing and has 24 years of experience in
manufacturing with B&G and Polaner. He has been responsible for all
manufacturing at the Roseland facility since 1981. In 1994, he assumed
responsibility for B&G's other manufacturing facilities. Prior to joining B&G
(Polaner) in 1972, Mr. Brown worked at Kraft Foods for two years as a project
engineer and spent four years in the U.S. Navy.
Thomas J. Baldwin, Director: Since 1995, Thomas Baldwin has been the Chief
Executive Officer and a founding stockholder of Christmas Corner, Inc., a
specialty retail chain that owns and operates seasonal Christmas stores. Mr.
Baldwin is also a principal and co-founder of PB Ventures. From 1993 through
1995, Mr. Baldwin was a Managing Director of the leveraged buyout firm Invus
Group, Ltd.
William F. Callahan III, Director: Since 1998, William Callahan has been a
Director since B&G acquired Maple Grove. Mr. Callahan was the C.E.O. and owner
of Maple Grove. Mr. Callahan began his career in the specialty foods business in
1975 when he acquired Maple Grove. Prior to the acquisition of Maple Grove, Mr.
Callahan was Vice President, Sales, of Blyth, Eastman, Dillon and Co. in New
York and a trial attorney for the U.S. Securities and Exchange Commission in New
York. Mr. Callahan is a graduate of Georgetown University and the Boston
University Law School. He is a
54
<PAGE>
member of the State of Vermont Chamber of Commerce, a member of the Vermont
Maple Industry Council and the State of Vermont Agriculture Commissioner's Task
Force.
Alfred Poe, Director: Mr. Poe has been a director since 1997. He is
Chairman of the Board of the MenuDirect Corporation, a provider of specialty
meals for people on restricted diets and has been the Chief Executive Officer
since 1997. Mr. Poe was a Corporate Vice President of Campbell's Soup Company
from 1991 through 1996. from 1993 through 1996 he was the President of
Campbell's Meat Enhancement Group. Previously, from 1982 to 1991, Alfred Poe
held various positions, including Vice President, Brands Director and Commercial
Director, with Mars, Inc.
Harold O. Rosser II, Director: Since its formation in 1995, Harold Rosser
has been a Managing Director of BRS. Mr. Rosser was an officer of Citicorp
Venture Capital from 1987 through 1994. Previously, he spent 12 years with
Citicorp/Citibank in various management and corporate finance positions. Mr.
Rosser is a director of Jitney-Jungle Stores of America, Inc., American Paper
Group, Inc., Acapulco Restaurants, Inc., California Pizza Kitchen, Inc. and
Penhall International, Inc.
Stephen C. Sherrill, Director: Since its formation in 1995, Stephen
Sherrill has been a Managing Director of BRS. Mr. Sherrill was an officer of
Citicorp Venture Capital from 1983 through 1994. Previously, he was an associate
at the New York law firm of Paul, Weiss, Rifkind, Wharton & Garrison. Mr.
Sherrill is a director of Galey & Lord, Inc., Jitney-Jungle Stores of America,
Inc., Doane Pet Care Enterprises, Inc., Mediq Incorporated, Health Plus
Corporation and Alliance Laundry Systems LLC.
ITEM 11. EXECUTIVE COMPENSATION
The following table presents certain summary information concerning
compensation earned by the Company's Chief Executive Officers and the four other
most highly paid executive officers of the Company, including the Chairman
(collectively, the "Named Executive Officers"), for services rendered in all
capacities to the Company for fiscal 1998:
55
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
All Other
Name and Principal Position Year Salary Bonus Other Compensation
--------------------------- ---- ------ ----- ----- ------------
(1) (2) (3)
--- --- ---
<S> <C> <C> <C> <C> <C>
Leonard S. Polaner
Chairman of the Board 1998 $100,000 $35,000 $13,800 $8,100
David L. Wenner
President and Chief Executive Officer 1998 200,102 100,000 10,000 9,600
Robert C. Cantwell
Executive Vice President of Finance and Chief
Financial Officer 1998 161,640 56,000 10,000 9,600
David H. Burke
Executive Vice President of Sales and Marketing
1998 157,102 56,000 10,000 9,600
James H. Brown
Executive Vice President of Manufacturing
1998 151,640 52,500 10,850 9,600
</TABLE>
(1) Includes annual bonus payment under the Company's Annual Bonus Plan.
(2) Includes personal use of a Company automobile or automobile allowances.
(3) Includes the Company's matching contributions to the 401(k) Plan and
contribution to the Company's Pension Plan.
Director Compensation and Arrangements
Directors of the Company will receive compensation for their services as
directors in the amount of $1,000 per meeting of the Board of Directors.
Directors of the Company are entitled to reimbursement of their reasonable
out-of-pocket expenses in connection with their travel to and attendance at
meetings of the board of directors or committees thereof.
Annual Bonus Plan
The Company also maintains an Annual Bonus Plan that provides for annual
incentive awards to be made to key executives upon the Company's attainment of
pre-set annual financial objectives. The amount of the annual award to each
executive is based upon a percentage of the executive's annualized base salary.
Awards are paid in a cash lump sum following the close of each plan year. The
plan provides for forfeiture of proration of awards in the event of certain
circumstances such as the executive's promotions or demotion, death, retirement
or resignation.
Stock Option Plan
In order to attract, retain and motivate selected employees and officers of
the Company, Holdings adopted the B&G Foods Holdings Corp. 1997 Incentive Stock
56
<PAGE>
Option Plan (the "Option Plan") for key employees of the Company and its
subsidiaries. The Option Plan provides that it may be administered by Holdings'
Board of Directors or a committee designated by the Board of Directors of
Holdings. Holdings' Board of Directors has designated a committee comprised
initially of Stephen C. Sherrill and Harold O. Rosser II. Options granted under
the Option Plan will be exercisable in accordance with terms established by the
Holdings Board. Options will expire on the date determined by the Holdings
Board, which shall not be later than the tenth anniversary of the date of grant.
No grants of options were made under the Option Plan during fiscal 1998.
Compensation Committee Interlocks and Insider Participation
The Board of Directors of the Company has appointed a Compensation
Committee comprised of Mr. Sherrill and Mr. Rosser. Mr. Sherrill is a former
officer of the Company, for which position he received no compensation; Mr.
Rosser is not and has not been an officer of the Company. Each of Mr. Sherrill
and Mr. Rosser are principals of BRS.
Employment Agreements
The Company has no employment agreements.
401(k) Plan
The Company maintains a tax-qualified defined contribution plan with a cash
or deferred arrangement intended to qualify under Section 401(k) of the Internal
Revenue Code of 1986, as amended (the "Code"). Company employees become eligible
to participate in the plan upon reaching age 21 and completing one year of
employment with the Company. Each participant in the plan may elect to defer, in
the form of contributions to the plan, up to 17% of compensation that would
otherwise be paid to the participant in the applicable year, which percentage
may be increased or decreased by the administrative committee of the plan, but
is otherwise not to exceed the statutorily prescribed annual limit ($10,000 in
1998). The Company makes a 50% matching contribution with respect to each
participant's elective contributions, up to six percent of such participant's
compensation. Matching contributions vest over a rolling five-year period.
57
<PAGE>
Pension Plan
PENSION PLAN TABLE
Years of Service
Renumeration 15 20 25 30 35
- ------------ -- -- -- -- --
40,000 $ 5,032 $ 6,710 $ 8,387 $10,065 $11,742
60,000 $ 8,482 $11,310 $14,137 $16,965 $19,792
80,000 $11,932 $15,910 $19,887 $23,865 $27,842
100,000 $15,382 $20,510 $25,637 $30,765 $35,892
120,000 $18,832 $25,110 $31,387 $37,665 $43,942
140,000 $22,282 $29,710 $37,137 $44,565 $51,992
160,000 $25,732 $34,310 $42,887 $51,465 $60,042
Benefits under the plans are calculated generally under a formula of 0.75%
of final average earnings multiplied by service plus 0.4% of final average
earnings in excess of covered compensation multiplied by service limited to 35
years. The compensation covered by the pension plan is W-2 earnings and any
amounts contributed to any tax qualified profit sharing plan or cafeteria plan
limited to $160,000 as required by Section 401(a)(17) of the Code. As of January
2, 1999, the years of credited service for each of the Named Executive Officers
were: Mr. Polaner, 11; Mr. Wenner, 9; Mr. Cantwell, 15; Mr. Burke, 8; and Mr.
Brown, 11.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company is a wholly owned subsidiary of Holdings. The following table
sets forth certain information as of January 2, 1999 with respect to the
beneficial ownership of the 13% Series A Cumulative Preferred Stock, par value
$0.01 per share, of Holdings ("Holdings Preferred Stock") and the common stock,
par value $0.01 per share, of Holdings ("Holdings Common Stock") by (i) each
person or entity who owns five percent or more thereof, (ii) each director of
the Company who is a stockholder, (iii) the Named Executive Officers and (iv)
all directors and officers of the Company as a group. Unless otherwise
specified, all shares are directly held.
58
<PAGE>
Number and Percent of Shares
Holdings Holdings
Preferred Stock Common Stock Preferred Stock
- --------------------------------------------------------------------------------
Name of Beneficial Owner Number Percent Number Percent
- ------------------------ ------ ------- ------ -------
Bruckmann, Rosser, Sherrill & Co., L.P(1)
Two Greenwich Plaza, Suite 100
Greenwich, CT 06830 85,000 82.9% 18,775 92.4%
Leonard S. Polaner (3) 3,000 2.9% 145 *
David L. Wenner (3) 3,000 2.9% 20 *
David H. Burke (3) 3,000 2.9% 20 *
James H. Brown (3) 3,000 2.9% 20 *
Robert C. Cantwell (3) 3,000 2.9% 20 *
Thomas J. Baldwin (3) 500 * 110.4 *
Alfred Poe (3) 500 * 110.4 *
William F. Callahan III (3) 1,450 1.4% 1,050.9 5.2%
All directors and officers as a group
(9 persons) (2) (3)
* Less than 1%
(1) Includes shares held by certain other entities and individuals affiliated
with BRS (together with BRS, the "BRS Investors"). BRS disclaims beneficial
ownership of such shares. BRS is a limited partnership, the sole general
partner of which is BRS Partners, Limited Partnership ("BRS Partners") and
the manager of which is Bruckmann, Rosser, Sherrill & Co., Inc. ("BRS &
Co."). The sole general partner of BRS Partners is BRSE Associates, Inc.
("BRSE Associates"). Bruce C. Bruckmann, Harold O. Rosser II and Stephen C.
Sherrill are stockholders of BRS & Co. and BRSE Associates and may be
deemed to share beneficial ownership of the shares shown as beneficially
owned by BRS. Such individuals disclaim beneficial ownership of any such
shares.
(2) With respect to Mr. Sherrill and Mr. Rosser, directors of the Company,
excludes shares held by BRS and certain other entities and individuals
affiliated with BRS, of which shares Mr. Sherrill and Mr. Rosser disclaim
beneficial ownership.
(3) The address of such person is c/o B&G Foods, Inc., 426 Eagle Rock Avenue,
Roseland, New Jersey, 07068.
59
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Stockholders Agreement and Registration Rights Agreement
The BRS Investors, the Management Investors and Holdings are parties to the
Stockholders Agreement and the Holding Registration Rights Agreement.
BRS Management and Transaction Services Agreements
The Company and Holdings are party to a management services agreement (the
"BRS Management Agreement") with BRS & Co., the manager of BRS, pursuant to
which BRS & Co. is paid $250,000 per annum for certain management, business and
organizational strategy and merchant and investment banking services rendered to
the Company and Holdings, which services include, but are not limited to, advice
on corporate and financial planning, oversight of operations, including the
manufacturing, marketing and sales of the Company's products, development of
business plans, the structure of the Company's debt and equity capitalization
and the identification and development of business opportunities. Any future
increase in payments under the BRS Management Agreement are restricted by the
terms of the Company's indenture governing its 9 5/8% Senior Subordinated Notes
due 2007. The Company and BRS & Co. also are party to a transaction services
agreement pursuant to which BRS & Co. will be paid a transaction fee for
management, financial and other corporate advisory services rendered by BRS &
Co. in connection with acquisitions by the Company, which fee will not exceed
1.0% of total transaction value. Additional transaction fees which were paid in
fiscal 1998 and fiscal 1997 were (i) $500,000 upon the acquisition of four
brands from Nabisco, Inc. in May 1997, (ii) $120,000 upon the acquisition of
Trappey's and other brands in August 1997, and (iii) $250,000 upon the
acquisition of Maple Grove Farms of Vermont, Inc. in July 1998. The Company also
paid transaction fees of $300,000 in connection with the Polaner Acquisition and
approximately $1,920,000 for the Heritage Brands Acquisition.
Eagle Rock Notes
The Company's subsidiary, Roseland Distribution Company ("RDC"), is party
to a lease (the "Roseland Lease") for its Roseland facility with 426 Eagle Rock
Avenue Associates ("Eagle Rock"), a real estate partnership of which Leonard S.
Polaner, the Company's Chairman, is the general partner. RDC pays $43,938 per
month in rent in cash to Eagle Rock pursuant to a Memorandum of Agreement
entered into in connection with the Roseland Lease, and an additional amount in
the form of promissory notes payable to Eagle Rock (the "Eagle Rock Notes"),
which are issued in an annual aggregate principal amount of $187,740. The Eagle
Rock Notes mature on the expiration date of the Roseland Lease, April 18, 1999
and bear interest at a rate equal to the rate, as of the issue date of an Eagle
Rock Note, for Treasuries with a maturity of April 1999. The Eagle Rock Notes
are not guaranteed by the Company. RDC's liability under the Eagle Rock Notes as
of January 2, 1999 was $1,038,057, and the Company estimates that the aggregate
principal amount of all Eagle Rock Notes issued and to be issued will be
60
<PAGE>
approximately $1.1 million. In the opinion of management, the terms of the Eagle
Rock Notes and the Roseland Lease are at least as favorable to the Company as
the terms that could have been obtained from unaffiliated third parties.
The Company is currently negotiating a new lease to replace the Roseland
Lease when it expires in April 1999.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) (1) FINANCIAL STATEMENTS.
Independent Auditors' Report
Consolidated Balance Sheets (Successor Consolidated) as of January 2,
1999 and January 3, 1998.
Consolidated Statements of Operations (Successor Consolidated) for the
years ended January 2, 1999 and January 3, 1998, and Statement of
Operations (Predecessor Combined) for the year ended December 28,
1996.
Consolidated Statements of Cash Flows (Successor Consolidated) for the
years ended January 2, 1999 and January 3, 1998, and Statement of Cash
Flows (Predecessor Combined) for the year ended December 28, 1996.
Notes to Financial Statements.
(2) FINANCIAL STATEMENT SCHEDULE.
Valuation and Qualifying Accounts.
(b) REPORTS ON FORM 8-K:
Form 8-K/A, filed October 2, 1998.
61
<PAGE>
(c) EXHIBITS
EXHIBIT NO. DESCRIPTION
- --------------------------------------------------------------------------------
2.1 Stock Purchase Agreement, dated July 2, 1998, by and
among BGH Holdings, Inc., Maple Grove Farms of Vermont,
Inc., Up Country Naturals of Vermont, Inc., Les
Produits Alimentaires Jacques et Fils Inc., William F.
Callahan and Ruth M. Callahan. (Filed with the
Securities and Exchange Commission as Exhibit 2.1 to
Commission Filing No. 333-39813 on August 3, 1998 and
incorporated herein by reference)
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 with the Securities and Exchange Commission as
Exhibit 1 to Commission Filing No. 333-39813 on
February 19, 1999 and incorporated herein by reference)
3.1 Certificate of Incorporation of B&G Foods, Inc. (Filed
with the Securities and Exchange Commission as Exhibit
3.1 to Amendment No. 1 to Registration Statement No.
333-39813 on January 14, 1998 and incorporated herein
by reference)
3.2 Bylaws of B&G Foods, Inc. (Filed with the Securities
and Exchange Commission as Exhibit 3.2 to Amendment No.
1 to Registration Statement No. 333-39813 on January
14, 1998 and incorporated herein by reference)
3.3 Certificate of Incorporation of BGH Holdings, Inc.
(Filed with the Securities and Exchange Commission as
Exhibit 3.3 to Amendment No. 1 to Registration
Statement No. 333-39813 on January 14, 1998 and
incorporated herein by reference)
3.4 Bylaws of BGH Holdings, Inc. (Filed with the Securities
and Exchange Commission as Exhibit 3.4 to Amendment No.
1 to Registration Statement No. 333-39813 on January
14, 1998 and incorporated herein by reference)
3.5 Intentionally omitted.
3.6 Intentionally omitted.
3.7 Certificate of Incorporation of Trappey's Fine Foods,
Inc. (Filed with the Securities and Exchange Commission
as Exhibit 3.7 to Amendment No. 1 to Registration
Statement No. 333-39813 on January 14, 1998 and
incorporated herein by reference)
3.8 Bylaws of Trappey's Fine Foods, Inc. (Filed with the
Securities and Exchange Commission as Exhibit 3.8 to
Amendment No. 1 to Registration Statement No. 333-39813
on January 14, 1998 and incorporated herein by
reference)
3.9 Certificate of Incorporation for Bloch & Guggenheimer,
Inc. (Filed with the Securities and Exchange Commission
as Exhibit 3.9 to Amendment No. 1 to Registration
Statement No. 333-39813 on January 14, 1998 and
incorporated herein by reference)
3.10 Bylaws of Bloch & Guggenheimer, Inc. (Filed with the
Securities and Exchange Commission as Exhibit 3.10 to
Amendment No. 1 to Registration Statement No. 333-39813
on January 14, 1998 and incorporated herein by
reference)
3.11 Certificate of Incorporation of RWBW Acquisition Corp.
(Filed with the Securities and Exchange Commission as
Exhibit 3.11 to Amendment No. 1
62
<PAGE>
to Registration Statement No. 333-39813 on January 14,
1998 and incorporated herein by reference)
3.12 Bylaws of RWBW Acquisition Corp. (Filed with the
Securities and Exchange Commission as Exhibit 3.12 to
Amendment No. 1 to Registration Statement No. 333-39813
on January 14, 1998 and incorporated herein by
reference)
3.13 Intentionally omitted.
3.14 Intentionally omitted.
3.15 Certificate of Incorporation of Roseland Distribution
Company. (Filed with the Securities and Exchange
Commission as Exhibit 3.15 to Amendment No. 1 to
Registration Statement No. 333-39813 on January 14,
1998 and incorporated herein by reference)
3.16 Bylaws of Roseland Distribution Company. (Filed with
the Securities and Exchange Commission as Exhibit 3.16
to Amendment No. 1 to Registration Statement No.
333-39813 on January 14, 1998 and incorporated herein
by reference)
3.17 Intentionally omitted.
3.18 Intentionally omitted.
3.19 Certificate of Incorporation of Burns & Ricker, Inc.
(Filed with the Securities and Exchange Commission as
Exhibit 3.19 to Amendment No. 1 to Registration
Statement No. 333-39813 on January 14, 1998 and
incorporated herein by reference)
3.20 Bylaws of Burns & Ricker, Inc. (Filed with the
Securities and Exchange Commission as Exhibit 3.20 to
Amendment No. 1 to Registration Statement No. 333-39813
on January 14, 1998 and incorporated herein by
reference)
4.1 Indenture dated as of August 11, 1997 between B&G
Foods, Inc. (the "Company"), BGH Holdings, Inc., RWBW
Acquisition Corp., BRH Holdings, Inc., Bloch &
Guggenheimer, Inc., Roseland Distribution Company,
Burns & Ricker, Inc., Roseland Manufacturing, Inc., and
RWBW Brands Company (collectively, the "Guarantors")
and The Bank of New York, as trustee (the "Trustee").
(Filed with the Securities and Exchange Commission as
Exhibit 4.1 to Registration Statement No. 333-39813 on
November 7, 1997 and incorporated herein by reference)
4.2 Form of the Company's 9% Senior Notes due 2007. (Filed
with the Securities and Exchange Commission as Exhibit
4.1 to Registration Statement No. 333-39813 on November
7, 1997 and incorporated herein by reference)
10.1 Registration Rights Agreement dated as of August 11,
1997 by and among the Company, the Guarantors party
thereto, Lehman Brothers, Inc. and Lazard Freres & Co.,
LLC. (Filed with the Securities and Exchange Commission
as Exhibit 10.1 to Registration Statement No. 333-39813
on November 7, 1997 and incorporated herein by
reference)
10.2 Purchase Agreement dated August 6, 1997 among the
Company, the Guarantors party thereto, Lehman Brothers,
Inc., and Lazard Freres & Co., LLC.
63
<PAGE>
(Filed with the Securities and Exchange Commission
as Exhibit 10.2 to Registration Statement No. 333-39813
on November 7, 1997 and incorporated herein by
reference)
10.3 Second Amended and Restated Credit Agreement dated as
of August 11, 1997 among the Company, the guarantors
party thereto, Heller Financial Inc., as agent and
lender, and the lenders party hereto. (Filed with the
Securities and Exchange Commission as Exhibit 10.3 to
Amendment No. 1 to Registration Statement No. 333-39813
on January 14, 1998 and incorporated herein by
reference)
10.4 Securities Purchase and Holders Agreement, dated as of
March 27, 1997, by and among B Companies Holdings
Corp., Bruckmann, Rosser, Sherrill & Co., L.P., and the
investors party thereto. (Filed with the Securities and
Exchange Commission as Exhibit 10.4 to Amendment No. 1
to Registration Statement No. 333-39813 on January 14,
1998 and incorporated herein by reference)
10.5 Amended and Restated Jams Manufacturing Agreement dated
as of March 3, 1997 by and between Roseland
Manufacturing, Inc., and International Home Foods, Inc.
(Filed with the Securities and Exchange Commission as
Exhibit 10.5 to Amendment No. 2 to Registration
Statement No. 333-39813 on February 4, 1998 and
incorporated herein by reference)
10.6 Sales and Distribution Agreement dated as of March 19,
1993 by and between M. Polaner, Inc. and DSD, Inc.
(Filed with the Securities and Exchange Commission as
Exhibit 10.6 to Amendment No. 2 to Registration
Statement No. 333-39813 on February 4, 1998 and
incorporated herein by reference)
10.7 Spices Supply Agreement dated as of March 19, 1993 by
and between Bloch & Guggenheimer, Inc. and M. Polaner,
Inc. (Filed with the Securities and Exchange Commission
as Exhibit 10.7 to Amendment No. 2 to Registration
Statement No. 333-39813 on February 4, 1998 and
incorporated herein by reference)
10.8 Transition Services Agreement, dated as of February 5,
1999, among International Home Foods, Inc., M. Polaner,
Inc. and Roseland Distribution Company. (Filed with the
Securities and Exchange Commission as Exhibit 2 to
Commission Filing No. 333-39813 on February 19, 1999
and incorporated herein by reference)
10.9 Guaranty, dated as of January 12, 1999, of B&G Foods,
Inc. in favor of International Home Foods, Inc. and M.
Polaner, Inc. (Filed with the Securities and Exchange
Commission as Exhibit 3 to Commission Filing No.
333-39813 on February 19, 1999 and incorporated herein
by reference)
10.10 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 with the Securities and
Exchange Commission as Exhibit 4 to Commission Filing
No. 333-39813 on February 19, 1999 and incorporated
herein by reference)
64
<PAGE>
12.1 Computation of Ratio of Earnings to Fixed Charges
(Filed herewith)
21.1 Subsidiaries of the Company and the Additional
Registrants. (Filed herewith)
27.1 Financial Data Schedule. (Filed herewith)
65
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
B&G FOODS, INC.
By: /s/ David L. Wenner
--------------------------------
David L. Wenner
Chief Executive Officer
Date: March 16, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
NAME TITLE DATE
- --------------------------- -------------------------------- --------------
/s/ David L. Wenner President, Chief Executive March 16, 1999
- ---------------------------
David L. Wenner Officer and Director
(Principal Executive Officer)
/s/ Robert C. Cantwell Executive Vice President of March 16, 1999
- ---------------------------
Robert C. Cantwell Finance and Chief Financial
Officer (Principal Financial
and Accounting Officer)
/s/ Thomas Baldwin Director March 16, 1999
- ---------------------------
Thomas Baldwin
/s/ William F. Callahan III Director March 16, 1999
- ---------------------------
William F. Callahan III
/s/ Alfred Poe Director March 16, 1999
- ---------------------------
Alfred Poe
Director March 16, 1999
- ---------------------------
Harold O. Rosser
/s/ Stephen C. Sherrill Director March 16, 1999
- ---------------------------
Stephen C. Sherrill
<PAGE>
Exhibit 12.1
B&G FOODS, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
January 2, 1999 January 3, 1998 December 28, 1996
--------------- --------------- -----------------
<S> <C> <C> <C>
Income before income tax expense and
extraordinary item................... $ 2,281 $ 1,265 $ 867
Add:
Interest expense..................... 13,319 8,948 4,649
Amortization of deferred financing
costs............................. 589 630 --
Portion of rents representative of
the interest factor............... 719 514 578
--------- --------- ---------
Income as adjusted....................... $ 16,908 $ 11,357 $ 6,094
========= ========= =========
Fixed charges:
Interest expense..................... $ 13,319 $ 8,948 $ 4,649
Amortization of deferred financing
costs............................. 589 630 --
Portion of rents representative of
the interest factor............... 719 514 578
--------- --------- ---------
Fixed charges............................ $ 14,627 $ 10,092 $ 5,227
========= ========= =========
Ratio of earnings to fixed charges....... 1.16 1.13 1.17
========= ========= =========
</TABLE>
<PAGE>
Exhibit 21.1
Subsidiaries of the Company*
BGH Holdings, Inc., a Delaware corporation
Burns & Ricker, Inc., a Delaware corporation
Block & Guggenheimer, Inc., a Delaware corporation
Roseland Distribution Company, a Delaware corporation
RWBV Acquisition Corp., a Delaware corporation
Trappey's Fine Foods, Inc., a Delaware corporation
Maple Grove Farms of Vermont, Inc., a Vermont corporation
Les Products Alimentaires Jacques et Fils, a Quebec company
Heritage Acquisition Corp., a Delaware corporation
William Underwood Company, a Massachusetts business trust
- -------------------
* As of March 16, 1999
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
B&G FOODS, INC., AND SUBSIDIARIES
FINANCIAL DATA SCHEDULE
Exhibit 27.1
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-START> JAN-04-1998
<PERIOD-END> JAN-02-1999
<CASH> 599
<SECURITIES> 0
<RECEIVABLES> 15,656
<ALLOWANCES> (679)
<INVENTORY> 39,764
<CURRENT-ASSETS> 60,603
<PP&E> 26,486
<DEPRECIATION> (6,960)
<TOTAL-ASSETS> 211,873
<CURRENT-LIABILITIES> 29,979
<BONDS> 143,265
0
0
<COMMON> 0
<OTHER-SE> 20,820
<TOTAL-LIABILITY-AND-EQUITY> 211,873
<SALES> 179,780
<TOTAL-REVENUES> 179,780
<CGS> 108,186
<TOTAL-COSTS> 55,405
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,908
<INCOME-PRETAX> 2,281
<INCOME-TAX> 1,431
<INCOME-CONTINUING> 850
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 850
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
