™™1391_Cover.indd 13/4/19 4:57 PM Financial Highlights
FISCAL YEAR
(Dollars in millions)
Net Sales*
Net Income
Adjusted EBITDA**
2018
2017
2016
2015
2014
$ 1,700.8
$ 1,646.4
$ 1,372.3
$ 172.4
$ 314.2
$ 217.5
$ 333.2
$ 109.4
$ 322.0
$ 958.9
$ 69.1
$ 217.8
$ 837.3
$ 41.0
$ 194.1
Net Sales*
Net Income
Adjusted EBITDA**
5
.
7
1
2
$
4
.
2
7
1
$
2
.
3
3
3
$
0
.
2
2
3
$
2
.
4
1
3
$
8
.
7
1
2
1 $
.
4
9
1
$
8
.
0
0
7
,
1
$
4
.
6
4
6
,
1
$
3
.
2
7
3
,
1
$
9
.
8
5
9
3 $
.
7
3
8
$
4
.
9
0
1
$
1
.
9
6
$
0
.
1
4
$
14
15
16
17
18
14
15
16
17
18
14
15
16
17
18
Net sales for fiscal 2017, 2016, 2015 and 2014 have been adjusted as a result of our retrospective adoption of new accounting standards relating to revenue recognition. The adjustments had no impact on
*
net income or adjusted EBITDA. See Note 2(s), “Summary of Significant Accounting Policies — Recently Issued Accounting Standards” to our consolidated financial statements in Part II, Item 8 of the
following Annual Report for detailed information.
Adjusted EBITDA is a “non-GAAP (Generally Accepted Accounting Principles) financial measure.” Please see the discussion within the footnotes to Item 6, “Selected Financial Data” in the following
Annual Report for a more detailed discussion of adjusted EBITDA and a reconciliation of adjusted EBITDA with the most directly comparable GAAP measures for fiscal 2018, 2017, 2016, 2015 and 2014,
along with the components of adjusted EBITDA.
**
Company Information
Board of Directors
Stephen C. Sherrill
Chairman of the Board
Director since 1996
Robert C. Cantwell*
President and Chief Executive Officer
Director since 2005
DeAnn L. Brunts
Director since 2015
Charles F. Marcy
Director since 2010
Robert D. Mills
Director since 2018
Dennis M. Mullen
Director since 2006
Cheryl M. Palmer
Director since 2010
Alfred Poe
Director since 1997
David L. Wenner
Director since 1997
Executive Officers
Robert C. Cantwell*
President and Chief Executive Officer
Erich A. Fritz
Executive Vice President and
Chief Supply Chain Officer
Jordan E. Greenberg
Executive Vice President and
Chief Commercial Officer
Eric H. Hart
Executive Vice President of Human Resources and
Chief Human Resources Officer
William F. Herbes
Executive Vice President of Operations
Scott E. Lerner
Executive Vice President, General Counsel,
Secretary and Chief Compliance Officer
Vanessa E. Maskal*
Executive Vice President of Sales and Marketing
Kenneth G. Romanzi*
Executive Vice President and Chief Operating Officer
Ellen M. Schum
Executive Vice President and
Chief Customer Officer
Bruce C. Wacha
Executive Vice President of Finance and
Chief Financial Officer
Corpor ate headquarters
B&G Foods, Inc.
Four Gatehall Drive
Parsippany, NJ 07054
Telephone: 973.401.6500
Website: www.bgfoods.com
Stock Exchange Listlng
B&G Foods’ common stock is traded on the
New York Stock Exchange under the ticker symbol BGS.
corporate news releases and sec filings
Corporate news releases and SEC filings, including Forms
10-K, 10-Q and 8-K are available free of charge in the
Investor Relations section of our website, www.bgfoods.com.
If you do not have internet access, you may contact
ICR, Inc. at the address and telephone number listed below
to request these materials.
Investor Relations
Inquiries and requests regarding this annual report and other
stockholder questions should be directed to:
ICR, Inc.
685 Third Avenue, 2nd Floor, New York, NY 10017
Attn: Dara Dierks
Telephone: 866.211.8151
Please also visit the Investor Relations section of our website,
www.bgfoods.com.
Tr ansfer Agent and Registr ar
Computershare Trust Company, N .A.
P.O. Box 30170
College Station, TX 77842
Private Couriers/Registered Mail:
Computershare Trust Company, N .A.
211 Quality Circle, Suite 210
College Station, TX 77845
Telephone: 800.522.6645
Website: www.computershare.com/investor
Hearing Impaired #: TDD: 800.952.9245
Independent Registered Public
Accounting Firm
KPMG LLP
51 John F. Kennedy Parkway
Short Hills, NJ 07078
Annual Meeting
The annual meeting of stockholders will be held on Tuesday,
May 21, 2019, at 10:00 a.m., local time, at the Hilton Parsippany,
1 Hilton Court, Parsippany, NJ 07054.
* As previously announced, Bob Cantwell is retiring as President and Chief
Executive Officer and as a director on April 5, 2019 and Ken Romanzi has
been appointed as President and Chief Executive Officer and a director
effective April 6, 2019. Vanessa Maskal is retiring on April 5, 2019.
This Annual Report includes certain forward-looking statements that are based
upon current expectations and are subject to a number of risks and uncertain-
ties. Please see “Forward-Looking Statements” beginning on page 3 of this
Annual Report.
© 2019 B&G Foods, Inc. All rights reserved.
1391_Cover.indd 2
4/2/19 6:21 PM
TO OUR STOCKHOLDERS:
Business Performance
21MAR201707310323
I am pleased to report that fiscal 2018 was another record breaking year for B&G Foods. Once
again we set a company record for net sales, which increased 3.3% to $1.7 billion. We also achieved the
high end of our inventory reduction plan target for the year, reducing our inventory by approximately
$100 million as compared to year end 2017.
Another highlight was our Green Giant frozen business, which continued to perform well in 2018,
largely on the strength of innovation products we launched over the last three years since acquiring the
iconic brand in late 2015. Net sales of Green Giant frozen increased $42.7 million, or 12.9%, to
$372.7 million for fiscal 2018 compared to fiscal 2017, primarily driven by strong customer and
consumer acceptance of Green Giant Veggie Spirals, launched in 2018, as well as continued demand for
Green Giant Riced Veggies, Green Giant Veggie Tots and Green Giant Mashed Cauliflower. Net sales of
Green Giant frozen products also benefited from Green Giant Cauliflower Pizza Crusts, Green Giant
Protein Bowls and Little Green Sprout’s Organics by Green Giant, which began shipping in September
2018 and will continue their rollout in the first half of 2019.
Notwithstanding the growth we achieved in net sales, our margins and our adjusted EBTIDA*, fell
short of our expectations, as we continue to face elevated input and freight costs that in 2018 we were
unable to fully offset with price increases and cost savings initiatives. While we are disappointed in our
2018 profitability, we are confident that the actions we are now taking will enable us to achieve our full
year 2019 guidance.
Investment Highlights
In our fourteen years as a publicly held company, we have proven our commitment to creating
stockholder value by consistently paying a generous and growing cash dividend. We have paid a
dividend every quarter since our initial public offering and over the last five years we have increased
the dividend at a compound annual growth rate of 7.6%. We have been able to keep that commitment
year after year by growing net sales and adjusted EBITDA over the past fourteen years at compound
annual growth rates of 11.5% and 11.3%, respectively. Our dividend yield is among the highest in the
industry and we remain as committed as ever to our policy of returning a meaningful portion of our
excess cash to stockholders. Assuming the reinvestment of dividends, total stockholder return over the
past five fiscal years through the end of fiscal 2018 was 12.9%.
Over the past year pursuant to a $50 million stock repurchase program authorized in March 2018,
we repurchased $36.9 million of our common stock. In addition, last month we announced that our
board has authorized an extension of the stock repurchase program for another year through March 15,
2020 and reset the repurchase authorization to up to $50 million, which gives us an additional option to
return excess cash to our stockholders.
*
Adjusted EBITDA is a ‘‘non-GAAP (Generally Accepted Accounting Principles) financial measure.’’ Please see the
discussion in the footnotes to Item 6, ‘‘Selected Financial Data’’ and in the Management’s Discussion and Analysis section
in the following Annual Report on Form 10-K for a more detailed discussion of adjusted EBITDA and reconciliations of
adjusted EBITDA with the most directly comparable GAAP measures along with the components of adjusted EBITDA.
Acquisition Strategy
Our acquisition strategy, which we have executed successfully over many years, continued to yield
positive results in 2018. In July 2018, we successfully completed the acquisition of the McCann’s brand
of premium Irish oatmeal from TreeHouse Foods. The McCann’s brand is an excellent complement to
our existing portfolio of brands, including our Cream of Wheat hot cereal brand. This acquisition is
another example, along with our acquisitions of Green Giant, Spice Islands and other spices &
seasoning brands, Victoria and Back to Nature, of our efforts in recent years to acquire better-for-you
brands that taste great and resonate with today’s consumer.
During 2018, we also successfully monetized a prior acquisition when in October we completed the
sale of Pirate Brands to The Hershey Company for $420 million, more than double the $195 million
price we paid for Pirate Brands five years ago.
In Closing
As previously announced, I will be retiring on April 5, 2019 and Ken Romanzi will succeed me as
President and Chief Executive Officer and as a director of B&G Foods. It has been an honor and a
privilege to serve as President and Chief Executive Officer and Chief Financial Officer of B&G Foods
over the last 35 years. I am very proud of the tremendous growth we have achieved over that time—
growing from a small, regional pickle company to a leading public food company with a diverse
portfolio of iconic brands—and I would like to thank my senior leadership team and each and every
employee of B&G Foods. We could not have achieved this growth without their extraordinary efforts.
Over the four years that I have served as CEO, we have completed six acquisitions, more than
doubled net sales from $837.3 million in fiscal 2014 to $1.7 billion in fiscal 2018, increased headcount
from approximately 1,000 employees to approximately 2,700 employees, acquired our two largest
manufacturing facilities and established a more sophisticated distribution network that now also
includes a frozen distribution network. Although we did not achieve every objective we set for ourselves
at the beginning of my tenure as CEO in 2015, I believe we made valuable progress in positioning our
company for future success. B&G Foods is in many ways a different company now than the one I took
over four years ago, but we have the same values. Passion for what we do, our commitment to food
safety and quality, integrity and accountability, our customer and consumer focus, our commitment to
the safety and health of our employees and our belief in collaboration and empowerment are the
values that have driven the success of this company for many years and will continue to drive our
company’s success in the future.
Since joining B&G Foods in December 2017 as Executive Vice President and Chief Operating
Officer, Ken has demonstrated that he has the experience and leadership skills to successfully lead
B&G Foods to its next phase of growth. Ken has been a terrific partner and I am confident that he is
the right person to guide B&G Foods into the future. It is because of the values I mentioned above
that we have been able to create tremendous stockholder value over the years, and I believe
stockholders of B&G Foods should continue to expect a bright future under Ken’s leadership.
Sincerely,
30MAR201622420353
Robert C. Cantwell
President and Chief Executive Officer
April 1, 2019
As filed with the Securities and Exchange Commission on February 26, 2019
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - K
(Mark one)
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 29, 2018
or
For the transition period from to .
Commission file number 001 - 32316
B&G FOODS, INC.
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
Four Gatehall Drive, Parsippany, New Jersey
(Address of principal executive offices)
13 - 3918742
(I.R.S. Employer
Identification No.)
07054
(Zip Code)
Registrant’s telephone number, including area code: (973) 401 - 6500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $0.01 per share
Name of exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well - known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No
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 whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S - T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). 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 the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10 - K or any amendment to this Form 10 - K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and
“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
The aggregate market value of the registrant’s outstanding shares of common stock held by non-affiliates of the registrant (assuming for
these purposes, but without conceding, that all executive officers, directors and holders of more than 10% of the registrant’s common stock are
affiliates of the registrant) as of June 29, 2018, the last business day of the registrant's most recently completed second fiscal quarter, was
$1,468,230,919 (based on the $29.90 per share closing price of the registrant's common stock on that date as reported on the New York Stock
Exchange).
As of February 22, 2019, the registrant had 65,638,701 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Selected designated portions of the registrant’s definitive proxy statement to be filed on or before April 29, 2019 in connection with the
registrant’s 2019 annual meeting of stockholders are incorporated by reference into Part III of this annual report.
B&G FOODS, INC.
ANNUAL REPORT ON FORM 10 - K
FOR THE FISCAL YEAR ENDED DECEMBER 29, 2018
TABLE OF CONTENTS
PART I
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results of Operations . . .
Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . .
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART III
Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . .
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART IV
Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 15.
Item 16.
Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
5
13
24
25
25
25
26
29
35
57
59
108
108
109
110
110
110
111
111
112
115
116
Forward-Looking Statements
This report includes forward-looking statements, including without limitation the statements under
“Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The words “believes,”
“belief,” “expects,” “projects,” “intends,” “anticipates,” “assumes,” “could,” “should,” “estimates,” “potential,” “seek,”
“predict,” “may,” “will” or “plans” and similar references to future periods are intended to identify forward-looking
statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that
may cause our actual results, performance and achievements, or industry results, to be materially different from any
future results, performance, or achievements expressed or implied by any forward-looking statements. We believe
important factors that could cause actual results to differ materially from our expectations include the following:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
our substantial leverage;
the effects of rising costs for our raw materials, packaging and ingredients;
crude oil prices and their impact on distribution, packaging and energy costs;
our ability to successfully implement sales price increases and cost saving measures to offset any cost
increases;
intense competition, changes in consumer preferences, demand for our products and local economic and
market conditions;
our continued ability to promote brand equity successfully, to anticipate and respond to new consumer
trends, to develop new products and markets, to broaden brand portfolios in order to compete effectively
with lower priced products and in markets that are consolidating at the retail and manufacturing levels and
to improve productivity;
the risks associated with the expansion of our business;
our possible inability to identify new acquisitions or to integrate recent or future acquisitions or our failure
to realize anticipated revenue enhancements, cost savings or other synergies;
tax reform and legislation, including the effects of the U.S. Tax Cuts and Jobs Act;
our ability to access the credit markets and our borrowing costs and credit ratings, which may be influenced
by credit markets generally and the credit ratings of our competitors;
unanticipated expenses, including, without limitation, litigation or legal settlement expenses;
the effects of currency movements of the Canadian dollar and the Mexican peso as compared to the U.S.
dollar;
the effects of international trade disputes, tariffs, quotas, and other import or export restrictions on our
international procurement, sales and operations;
future impairments of our goodwill and intangible assets;
our ability to successfully implement a new enterprise resource planning (ERP) system;
our ability to protect information systems against, or effectively respond to, a cybersecurity incident or
other disruption;
our sustainability initiatives and changes to environmental laws and regulations;
other factors that affect the food industry generally, including:
•
recalls if products become adulterated or misbranded, liability if product consumption causes injury,
ingredient disclosure and labeling laws and regulations and the possibility that consumers could lose
confidence in the safety and quality of certain food products;
•
•
•
competitors’ pricing practices and promotional spending levels;
fluctuations in the level of our customers’ inventories and credit and other business risks related to our
customers operating in a challenging economic and competitive environment; and
the risks associated with third-party suppliers and co-packers, including the risk that any failure by one
or more of our third-party suppliers or co-packers to comply with food safety or other laws and
regulations may disrupt our supply of raw materials or certain finished goods products or injure our
reputation; and
- 3 -
•
other factors discussed elsewhere in this report, including under Part I, Item 1A, “Risk Factors,” and in our
other public filings with the SEC.
Developments in any of these areas could cause our results to differ materially from results that have been or
may be projected by or on our behalf.
All forward-looking statements included in this report are based on information available to us on the date of
this report. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result
of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable
to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in
this report.
We caution that the foregoing list of important factors is not exclusive. There may be other factors that may
cause our actual results to differ materially from the forward-looking statements in this report, including factors
disclosed under the sections of this report titled “Risk Factors” and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in this report. You should evaluate all forward-looking statements made
in this report in the context of these risks and uncertainties. We urge investors not to unduly rely on forward-looking
statements contained in this report.
- 4 -
Item 1. Business.
Overview
PART I
The terms “B&G Foods,” “our,” “we” and “us,” as used in this report, refer to B&G Foods, Inc. and its
wholly owned subsidiaries, except where it is clear that the term refers only to the parent company. Throughout this
report, we refer to our fiscal years ended January 3, 2015, January 2, 2016, December 31, 2016, December 30, 2017,
December 29, 2018 and December 28, 2019 as “fiscal 2014,” “fiscal 2015,” “fiscal 2016,” “fiscal 2017,” “fiscal
2018” and “fiscal 2019,” respectively. Our fiscal year is the 52 or 53 week reporting period ending on the Saturday
closest to December 31. Fiscal 2014 contained 53 weeks and fiscal 2019, 2018, 2017, 2016, and 2015 each contained or
contain 52 weeks.
B&G Foods manufactures, sells and distributes a diverse portfolio of branded, high quality, shelf - stable and
frozen food and household products across the United States, Canada and Puerto Rico. Many of our branded products
have leading regional or national market shares. In general, we position our products to appeal to the consumer desiring
a high quality and reasonably priced product. We complement our branded product retail sales with institutional and
foodservice sales and private label sales.
B&G Foods, including our subsidiaries and predecessors, has been in business for over 125 years. We were
incorporated in Delaware on November 25, 1996 under the name B Companies Holdings Corp. On August 11, 1997, we
changed our name to B&G Foods Holdings Corp. On October 14, 2004, B&G Foods, Inc., then our wholly owned
subsidiary, was merged with and into us and we were renamed B&G Foods, Inc.
Our company has been built upon a successful track record of both organic and acquisition - related growth. Our
goal is to continue to increase sales, profitability and cash flows through organic growth, disciplined acquisitions of
complementary branded businesses and new product development. Since 1996, we have successfully acquired and
integrated more than 45 brands into our company.
The table below includes some of the acquisitions and the divestiture we have completed in recent years:
Date
October 2018 . . . . . . . .
July 2018 . . . . . . . . . . .
October 2017 . . . . . . . .
December 2016 . . . . . .
November 2016 . . . . . .
November 2015 . . . . . .
July 2015 . . . . . . . . . . .
April 2014 . . . . . . . . . .
Significant Event
Divestiture of Pirate Brands, including the Pirate’s Booty, Smart Puffs, and Original Tings
brands, which was sold to The Hershey Company, referred to as the “Pirate Brands sale” in
the remainder of this report.
Acquisition of the McCann’s brand of premium Irish oatmeal from TreeHouse Foods, Inc.,
referred to as the “McCann’s acquisition” in the remainder of this report.
Acquisition of Back to Nature Foods Company, LLC and related entities, including the
Back to Nature and SnackWell’s brands, from Brynwood Partners VI L.P., Mondelēz
International and certain other sellers, referred to as the “Back to Nature acquisition” in the
remainder of this report.
Acquisition of Victoria Fine Foods, LLC, and a related entity, from Huron Capital Partners
and certain other sellers, referred to as the “Victoria acquisition” in the remainder of this
report.
Acquisition of the spices & seasonings business of ACH Food Companies, Inc., including
the Spice Islands, Tone’s, Durkee and Weber brands, referred to as the “spices & seasonings
acquisition” in the remainder of this report.
Acquisition of the Green Giant and Le Sueur brands from General Mills, Inc., referred to as
the “Green Giant acquisition” in the remainder of this report.
Acquisition of Spartan Foods of America, Inc., and related entities, including the
Mama Mary’s brand, from Linsalata Capital Partners and certain other sellers, referred to as
the “Mama Mary’s acquisition” in the remainder of this report.
Acquisition of Specialty Brands of America, Inc. and related entities, including the
Bear Creek Country Kitchens, Spring Tree, Cary’s, MacDonald’s, New York Flatbreads and
Canoleo brands, from affiliates of American Capital, Ltd., referred to as the “Specialty
Brands acquisition” in the remainder of this report.
- 5 -
Products and Markets
The following is a brief description of some of our brands and product lines:
The Green Giant and Le Sueur brands trace their roots to Le Sueur, Minnesota in 1903, and the Minnesota
Valley Canning Company. For more than 100 years, fresh and great - tasting Green Giant and Le Sueur vegetables have
been grown and picked at the peak of perfection in the Valley of the Jolly Green Giant. In the remainder of this report,
we generally refer to the Green Giant and Le Sueur brands collectively as the “Green Giant brand.”
The Ortega brand has been in existence since 1897; its products span the shelf - stable Mexican food segment
including taco shells, tortillas, seasonings, dinner kits, taco sauces, peppers, refried beans, salsas and related food
products.
The Maple Grove Farms of Vermont brand, which originated in 1915, is one of the leading brands of pure
maple syrup sold in the United States. Other products under the Maple Grove Farms of Vermont label include a line of
gourmet salad dressings, sugar free syrups, marinades, fruit syrups, confections, pancake mixes and organic products.
The Cream of Wheat brand was introduced in 1893 and is among the leading brands and one of the most trusted
and widely recognized brands of hot cereals sold in the United States. Cream of Wheat is available in Original, Whole
Grain and Maple Brown Sugar stove top, and also in instant packets of Original and other flavors. We also offer
Cream of Rice, a gluten - free, rice - based hot cereal.
The Mrs. Dash brand, which was introduced in 1983 as the original brand in salt - free seasonings, is available in
more than a dozen blends. In 2005, the leading brand in salt - free seasonings introduced salt - free marinades. Mrs. Dash’s
brand essence, “Salt - Free, Flavor - Full,” resonates with consumers and underscores the brand’s commitment to provide
healthy products that fulfill consumers’ expectations for taste.
Back to Nature has been a pioneer in the better-for-you snack foods category and it is a leading cookie and
cracker brand in the category. The Back to Nature brand’s product offerings include Non-GMO Project Verified, organic
and gluten free products.
The Bear Creek Country Kitchens brand is the leading brand of hearty dry soups in the United States.
Bear Creek Country Kitchens also offers a line of savory pasta dishes and hearty rice dishes.
Victoria Fine Foods is a Brooklyn-based business founded in 1929. The Victoria brand offers a variety of
premium pasta and specialty sauces, savory condiments and tasty gourmet spreads. Using traditional cooking methods,
Victoria sauces are slow kettle-cooked in small batches to ensure rich flavor and a homemade taste. Committed to its
values of quality, honesty, authenticity and community, Victoria believes that Ingredients Come First.
The Las Palmas brand originated in 1922 and primarily includes authentic Mexican enchilada sauce, chili sauce
and various pepper products.
The Spice Islands brand, established in San Francisco in 1941, is a leading premium spices and extracts brand
offering a diverse line of high quality products including spices, seasonings, dried herbs, extracts, flavorings and sauce
blends. The brand recently expanded into organic products.
The Polaner brand was introduced in 1880 and is comprised of a broad array of fruit - based spreads as well as
jarred wet spices such as chopped garlic and oregano. Polaner All Fruit is a leading national brand of fruit - juice
sweetened fruit spread. The spreads are available in more than a dozen flavors. Polaner Sugar Free preserves are the
second leading brand of sugar free preserves nationally.
The Mama Mary’s brand was introduced in 1986 and is a leading brand of shelf - stable pizza crusts.
Mama Mary’s also offers pizza sauces and premium gourmet pepperoni slices.
The Weber brand of seasonings and other flavor enhancers was introduced in 2006 under a licensing agreement
with Weber-Stephen Products LLC, maker of the popular Weber grills. Under the Weber brand, we offer a wide range of
grilling seasoning blends, rubs, marinades, sprays and sauces.
The Tone’s brand started as a family business in 1873 and was responsible for many of the early advancements
in the spice industry. The Tone’s brand sells predominantly in the club channel while also servicing traditional grocery.
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The Bloch & Guggenheimer (B&G) brand originated in 1889, and its pickle, pepper and relish products are a
leading brand in the New York metropolitan area. This line consists of shelf - stable pickles, peppers, relishes, olives and
other related specialty items.
The Underwood brand’s “Underwood Devil” logo, which was registered in 1870, is believed to be the oldest
registered trademark still in use for a prepackaged food product in the United States. Underwood meat spreads, which
were introduced in the late 1860s, include deviled ham, white - meat chicken, roast beef, corned beef and liverwurst.
The New York Style brand was created in 1985 and includes Original Bagel Crisps, Pita Chips and Panetini
Italian Toast.
The Ac’cent brand was introduced in 1947 as a flavor enhancer for meat preparation and is generally used on
beef, poultry, fish and vegetables. We believe that Ac’cent is positioned as a unique flavor enhancer that provides food
with the “umami” flavor sensation.
The B&M brand was introduced in 1927 and is the original brand of brick - oven baked beans and remains one
of the very few authentic baked beans. The B&M line includes a variety of baked beans and brown bread. The B&M
brand currently has a leading market share in the New England region.
The SnackWell’s brand of reduced fat snacks originated in 1992. SnackWell’s offerings include a variety of
delicious reduced fat products such as its signature Devil’s Food Cookie Cakes and peanut-free treats such as its tasty
Vanilla Creme Sandwich Cookies.
The Spring Tree brand originated in 1976 in Brattleboro, Vermont, and consists of pure maple syrup and sugar
free syrup.
The Grandma’s brand of molasses, which was introduced in 1890, is the leading brand of premium - quality
molasses sold in the United States. Grandma’s molasses products are offered in two distinct styles: Grandma’s Original
Molasses and Grandma’s Robust Molasses.
The Durkee brand was established in 1850 and, like our Tone’s brand, started as a family business and was an
early leader in the spice industry.
The Old London brand was created in 1932 and offers a wide variety of flavors available in melba toasts, melba
rounds and other snacks. Old London also markets specialty snacks under the Devonsheer and JJ Flats brand names.
The Trappey’s brand, which was introduced in 1898, has a Louisiana heritage. Trappey’s products fall into two
major categories—high quality peppers and hot sauces, including Trappey’s Red Devil.
The McCann’s brand has been in existence since 1800 and offers classic traditional steel cut Irish oatmeal as
well as convenience-oriented oatmeal products.
The Don Pepino and Sclafani brands originated in 1955 and 1900, respectively, and primarily include pizza and
spaghetti sauces, whole and crushed tomatoes and tomato puree.
The Emeril’s brand was introduced in 2000 under a licensing agreement with celebrity chef Emeril Lagasse.
We offer a line of pasta sauces, seasonings, cooking stocks, mustards and cooking sprays under the Emeril’s brand
name.
The TrueNorth brand was introduced in 2008. TrueNorth nut cluster snacks combine freshly roasted nuts, a
dash of sea salt and just a hint of sweetness. TrueNorth varieties include almond pecan crunch, chocolate nut crunch and
cashew crunch.
The Static Guard brand, the number one brand name in static elimination sprays, created the anti - static spray
category when it was launched in 1978 to fulfill a previously unmet consumer need. The brand’s ability to consistently
deliver on its promise to “instantly eliminate static cling” has resulted in a loyal consumer following.
The Cary’s brand originated in 1904 and is the oldest brand of pure maple syrup in the United States. Cary’s
also offers sugar free syrup.
The Joan of Arc brand, which originated in 1895, includes a full range of canned beans including kidney, chili
and other varieties.
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The Baker’s Joy brand was introduced in 1982 and is the original brand of no - stick baking spray with flour.
Baker’s Joy’s product proposition has been to “generate a perfect release from the pan every time,” making baking
easier, faster and more successful for everyday bakers.
The Regina brand, which has been in existence since 1949, includes vinegars and cooking wines. Regina
products are most commonly used in the preparation of salad dressings as well as in a variety of recipe applications,
including sauces, marinades and soups.
The Sugar Twin brand was developed in 1968 and is a calorie free sugar substitute.
The Wright’s brand was introduced in 1895 and is a seasoning that reproduces the flavor and aroma of pit
smoking in meats, chicken and fish. Wright’s is offered in three flavors: Hickory, Mesquite and Applewood.
The Sa - són brand was introduced in 1947 as a flavor enhancer used primarily for Puerto Rican and Hispanic
food preparation. The product is generally used on beef, poultry, fish and vegetables. The brand’s flavor enhancer is
offered in four flavors: Original, Coriander and Achiote, Garlic and Onion, and Tomato. We also offer reduced sodium
versions of Sa - són.
The Brer Rabbit brand has been in existence since 1907 and currently offers mild and full - flavored molasses as
well as blackstrap molasses. Mild molasses is designed for table use and full - flavored molasses is typically used in
baking, barbeque sauces and as a breakfast syrup.
The New York Flatbreads brand is a line of thin, crispy, flavorful crispbread that is available in several
toppings.
The Vermont Maid brand has been in existence since 1919 and offers maple - flavored syrups. Vermont Maid
syrup is available in regular, sugar - free and sugar - free butter varieties.
The Molly McButter brand created the butter - flavored sprinkles category in 1987. Molly McButter is available
in butter and cheese flavors.
The Canoleo brand offers an all - purpose margarine used for spreading, cooking and baking.
Food Industry
The food industry is one of the United States’ largest industries. Historically, it has been characterized by
relatively stable sales growth, based largely on price and population increases. In recent years, however, many traditional
center of store grocery brands in the industry have often experienced flat to modestly declining sales. Over the past
decade or so, the retail side of the food industry has seen a continuing shift of sales to alternate food outlets such as
supercenters, warehouse clubs, organic and “natural” food stores, dollar stores, drug stores and e-tailers. Among other
things, this shift has caused consolidation of traditional grocery chains into larger entities, often spanning the country
under varying banner names. Consolidation has increased the importance of having a number one or two brand within a
category, be that position national or regional. At the same time, this shift has also introduced many alternatives to
traditional grocery chains. A broad sales and distribution infrastructure has also become critical for food companies,
allowing them to reach all outlets selling food to consumers and expanding their growth opportunities.
Sales, Marketing and Distribution
Overview. We sell, market and distribute our products through a multiple - channel sales, marketing and
distribution system to all major U.S. food channels, including sales and shipments to supermarkets, mass merchants,
warehouse clubs, wholesalers, foodservice distributors and direct accounts, specialty food distributors, military
commissaries and non - food outlets such as drug, dollar store chains and e-tailers. Certain of our brands, including
Green Giant, Cream of Wheat, Back to Nature, Ac’cent, Crock Pot® seasoning mixes, Underwood, Polaner,
Static Guard, Mrs. Dash, New York Style, Sugar Twin and Victoria are also distributed to similar food channels in
Canada. We sell, market and distribute our household brand, Static Guard, through the same sales, marketing and
distribution system to many of the same customers who buy our food products as well as to other household product
retailers and distributors.
We sell our products primarily through broker sales networks to supermarket chains, foodservice outlets, mass
merchants, warehouse clubs, non - food outlets and specialty distributors. The broker sales network handles the sale of
our products at the retail level.
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Sales. Our sales organization is aligned by distribution channels and consists of regional sales managers, key
account managers and sales persons. Regional sales managers sell our products nationwide through national and regional
brokers, with separate organizations focusing on foodservice, grocery chain accounts and special markets. Our sales
managers coordinate our broker sales efforts, make key account calls with buyers or distributors and supervise broker
retail coverage of the products at the store level.
Our sales strategy is centered on individual brands. We allocate promotional spending for each of our brands
and our regional sales managers coordinate promotions with customers. Additionally, our marketing department works
in conjunction with the sales department to coordinate special account activities and marketing support, such as
couponing, public relations and media advertising.
We have a national sales force that is capable of supporting our current brands and quickly integrating and
supporting any newly acquired brands.
Marketing. Our marketing organization is aligned by brand and is responsible for the strategic planning for each
of our brands. We focus on deploying promotional dollars where we believe the spending will have the greatest impact
on sales. Marketing and trade spending support, on a national basis, typically consists of advertising trade promotions,
coupons and cross - promotions with supporting products. Radio, internet, social media and limited television advertising
supplement this activity.
Distribution. We distribute our products through a multiple - channel system that covers every class of customer
nationwide. Due to the different demands of distribution for frozen and shelf-stable products, we maintain separate
distribution systems.
Our shelf-stable distribution network consists of five primary locations, four of which are leased by us and are
operated for us by a third party logistics provider, and one that is located at an owned manufacturing facility and is
operated by us. In Canada, Mexico and from time to time in the United States we also use public warehouse and
distribution facilities for our shelf-stable products.
Our frozen distribution network consists of seven primary locations, which are owned and operated by third
party logistics providers.
We believe that our distribution systems for shelf - stable and frozen products have sufficient capacity to
accommodate incremental product volume. See Item 2, “Properties” for a listing of our owned and leased distribution
centers and warehouses. During 2018, we were negatively impacted by industry-wide increases in the cost of
distribution, primarily driven by freight costs. We expect this to continue in 2019. To date our sales price increases and
cost savings initiatives have not been sufficient to fully offset these distribution cost increases. To the extent we are
unable to offset present and future cost increases, our operating results will be negatively impacted.
Customers
Our top ten customers accounted for approximately 54.4% of our net sales and 54.8% of our end of the year
receivables for fiscal 2018. Other than Walmart, which accounted for 23.1% of our fiscal 2018 net sales, no single
customer accounted for 10.0% or more of our fiscal 2018 net sales. Other than Walmart, which accounted for 24.9% of
our receivables as of the end of fiscal 2018, no single customer accounted for more than 10.0% of our receivables as of
the end of fiscal 2018. During fiscal 2018, 2017 and 2016, our net sales to foreign countries represented approximately
7.3%, 6.3% and 7.1%, respectively, of our total net sales. Our foreign sales are primarily to customers in Canada.
Seasonality
Sales of a number of our products tend to be seasonal and may be influenced by holidays, changes in
seasons/weather or certain other annual events. In general, our sales are higher in the first and fourth quarters.
We purchase most of the produce used to make our frozen and shelf - stable canned vegetables, pickles, relishes,
peppers, tomatoes and other related specialty items during the months of June through October, and we generally
purchase the majority of our maple syrup requirements during the months of April through August. Consequently, our
liquidity needs are greatest during these periods.
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Competition
We face competition in each of our product lines. Numerous brands and products compete for shelf space and
sales, with competition based primarily on product quality, convenience, price, trade promotion, consumer promotion,
brand recognition and loyalty, customer service, advertising and other activities and the ability to identify and satisfy
emerging consumer preferences. We compete with numerous companies of varying sizes, including divisions or
subsidiaries of larger companies. Many of these competitors have multiple product lines, substantially greater financial
and other resources and may have lower fixed costs and/or be substantially less leveraged than we are. Our ability to
grow our business could be impacted by the relative effectiveness of, and competitive response to, our product
initiatives, product innovation, advertising and promotional activities. In addition, from time to time, we experience
margin pressure in certain markets as a result of competitors’ pricing practices.
Our products compete not only against other brands in their respective product categories, but also against
products in similar or related product categories. For example, our shelf - stable pickles compete not only with other
brands of shelf - stable pickles, but also with pickle products found in the refrigerated sections of grocery stores, and all
our brands compete against private label products to varying degrees.
Raw Materials
We purchase raw materials, including agricultural products, meat, poultry, flour, other raw materials,
ingredients and packaging materials from growers, commodity processors, other food companies and packaging
suppliers located in U.S. and foreign locations. The principal raw materials for our products include corn, peas, broccoli,
beans, pepper, garlic and other spices, maple syrup, wheat, corn, nuts, cheese, fruits, beans, tomatoes, peppers, meat,
sugar, concentrates, molasses and corn sweeteners. Vegetables for the Green Giant brand are primarily purchased under
dedicated acreage supply contracts from a number of growers prior to each growing season with the remaining demand
being sourced directly from third parties. We purchase certain other agricultural raw materials in bulk or pursuant to
short - term supply contracts. Most of our agricultural products are purchased between April 1 and October 31. We
generally source pepper, garlic and other spices and herbs from locations other than the United States. We purchase the
majority of our maple syrup from Canada. We also use packaging materials, particularly glass jars, cans, cardboard and
plastic containers. The profitability of our business relies in substantial part on the prices we and our co - packers pay for
these raw materials and packaging materials, which can fluctuate due to a number of factors, including changes in crop
size, national, state and local government sponsored agricultural programs, export demand, currency exchange rates,
natural disasters, weather conditions during the growing and harvesting seasons, water supply, general growing
conditions, the effect of insects, plant diseases and fungi, and glass, metal and plastic prices.
Fluctuations in commodity prices can lead to retail price volatility and intensive price competition, and can
influence consumer and trade buying patterns.
The cost of labor, manufacturing, energy, fuel, packaging materials and other costs related to the production
and distribution of our food products can from time to time increase significantly and unexpectedly. We attempt to
manage these risks by entering into short - term supply contracts and advance commodities purchase agreements,
implementing cost saving measures and raising sales prices. During the past three years, our cost saving measures and
sales price increases have not been sufficient to fully offset increases to our raw material, ingredient and packaging
costs. To the extent we are unable to offset present and future cost increases, our operating results will be negatively
impacted.
Production
Manufacturing. We operate ten manufacturing facilities for our products. See Item 2, “Properties” for a listing
of our manufacturing facilities.
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Co-Packing Arrangements. In addition to our own manufacturing facilities, we source a significant portion of
our products under “co - packing” arrangements, a common industry practice in which manufacturing is outsourced to
other companies. We regularly evaluate our co - packing arrangements to ensure the most cost - effective manufacturing of
our products and to utilize company - owned manufacturing facilities most effectively. Third parties located in U.S. and
foreign locations produce our Back to Nature, Baker’s Joy, Bear Creek Country Kitchens, Canoleo, Cream of Rice,
Crock Pot, Green Giant, JJ Flats, Joan of Arc, Le Sueur, MacDonald’s, McCann’s, New York Flatbreads, Regina,
SnackWell’s, Spring Tree, Static Guard, Sugar Twin and TrueNorth products and certain B&G, Cary’s, Cream of Wheat,
Emeril’s, Las Palmas and Ortega products under co - packing agreements or purchase orders. Each of our co - packers
produces products for other companies as well. We believe that there are alternative sources of co - packing production
readily available for the majority of our products, although we may experience short - term disturbances in our operations
if we are required to change our co - packing arrangements unexpectedly.
Trademarks and Licensing Agreements
Trademarks. We consider our trademarks, in the aggregate, to be material to our business. We protect our
trademarks by registration in the United States, Canada and in other countries where we sell our products. We also
oppose any infringement in key markets. Trademark protection continues in some countries for as long as the mark is
used and in other countries for as long as it is registered. Registrations generally are for renewable, fixed terms.
Examples of our trademarks and registered trademarks include Ac’cent, Back to Nature, B&G, B&G Sandwich Toppers,
B&M, Baker’s Joy, Bear Creek Country Kitchens, Brer Rabbit, Canoleo, Cary’s, Cream of Rice, Cream of Wheat,
Devonsheer, Don Pepino, Durkee, Emeril’s, Grandma’s, Green Giant, JJ Flats, Joan of Arc, Las Palmas, Le Sueur,
MacDonald’s, Mama Mary’s, Maple Grove Farms of Vermont, McCann’s, Molly McButter, Mrs. Dash,
New York Flatbreads, New York Style, Old London, Ortega, Polaner, Regina, Sa - són, Sclafani SnackWell’s,
Spice Islands, Spring Tree, Static Guard, Sugar Twin, Tone’s, Trappey’s, TrueNorth, Underwood, Vermont Maid,
Victoria, Weber and Wright’s.
Inbound License Agreements. From time to time we enter into inbound licensing agreements. For example, we
sell our Emeril’s brand products pursuant to a license agreement with Sequential Brands Group, Cream of Wheat
Cinnabon®, a co - branded product, pursuant to a licensing agreement with Cinnabon, Inc., Crock Pot seasoning mixes
pursuant to a licensing agreement with Sunbeam Products, Inc. dba Jarden Consumer Solutions, Weber seasonings and
other flavor enhancers pursuant to a licensing agreement with Weber-Stephen Products LLC. French’s® seasoning mixes
were sold pursuant to a licensing agreement with French’s Food Company LLC, but that licensing agreement was
terminated effective June 30, 2018 and we no longer sell any French’s products.
Outbound License Agreements. We also from time to time enter into outbound license agreements for our
trademarks and other intellectual property. For example, the Green Giant trademark is licensed to third parties for use in
connection with their sale of fresh produce in the United States and Europe. We also license the Green Giant name and
related intellectual property to General Mills for use with its sale of frozen and shelf stable products in parts of Europe,
Asia and in various other locations outside of the United States and Canada.
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Employees and Labor Relations
As of December 29, 2018, our workforce consisted of 2,675 employees. Of that total, 2,322 employees were
engaged in manufacturing, 131 were engaged in marketing and sales, 142 were engaged in warehouse and distribution
and 80 were engaged in administration. Approximately 61% of our employees, located at five facilities in the United
States and one facility in Mexico, are covered by collective bargaining agreements. The agreements covering employees
at the five facilities in the United States, which vary in term depending on the location, expire on December 31, 2019
(Brooklyn, NY; United Food and Commercial Workers, Local No. 342), March 31, 2020 (Roseland, New Jersey;
International Brotherhood of Teamsters, Chauffeurs, Warehousemen & Helpers of America, Local No. 863), April 5,
2020 (Ankeny, Iowa; International Brotherhood of Teamsters, Local No. 238), March 27, 2021 (Stoughton, Wisconsin;
Drivers, Salesmen, Warehousemen, Milk Processors, Cannery, Dairy Employees and Helpers Union, Local No. 695),
and April 30, 2022 (Portland, Maine; Bakery, Confectionery, Tobacco Workers and Grain Millers International Union,
AFL - CIO, Local No. 334). There are two unions representing employees at our facility in Mexico, (1) the Industrial
Union of Stevedore Workers, Cargo Transport Operators and Similar from the Mexican Republic and (2) the Union of
Agriculture Workers at the Service of the Region. Our collective bargaining agreements with these two unions do not
expire, however, certain terms of the agreements must be reviewed periodically. The collective bargaining agreement
covering our Brooklyn facility, which covers approximately 80 employees, is the only collective bargaining agreement
expiring in the next twelve months. While we believe that our relations with our union employees are in general good,
we cannot assure you that we will be able to negotiate a new collective bargaining agreement for our Brooklyn facility
on terms satisfactory to us, or at all, and without production interruptions, including labor stoppages. At this time,
however, management does not expect that the outcome of these negotiations will have a material adverse impact on our
business, financial condition or results of operations.
Government Regulation
As a manufacturer and marketer of food and household products, our operations are subject to extensive
regulation by the United States Food and Drug Administration (FDA), the United States Department of Agriculture
(USDA), the Federal Trade Commission (FTC), the Consumer Product Safety Commission (CPSC), the United States
Department of Labor, the Environmental Protection Agency and various other federal, state, local and foreign authorities
(including government authorities in Canada and Mexico) regarding the manufacturing, processing, packaging, storage,
labeling, sale and distribution of our products and the health and safety of our employees. Our manufacturing facilities
and products are subject to periodic inspection by federal, state, local and foreign authorities. In addition, our meat
processing operation in Portland, Maine is subject to daily inspection by the USDA.
We are subject to the Food, Drug and Cosmetic Act and the Food Safety Modernization Act and the 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. We are also subject to the U.S.
Bio - Terrorism Act of 2002 which imposes on us import and export regulations. Under the Bio - Terrorism Act we are
required, among other things, to provide specific information about the food products we ship into the United States and
to register our manufacturing, warehouse and distribution facilities with the FDA.
We believe that we are currently in substantial compliance with all material governmental laws and regulations
and maintain all material permits and licenses relating to our operations. Nevertheless, there can be no assurance that we
are in full compliance with all such laws and regulations or that we will be able to comply with any future laws and
regulations in a cost - effective manner. Failure by us to comply with applicable laws and regulations could subject us to
civil remedies, including fines, injunctions, recalls or seizures, as well as potential criminal sanctions, all of which could
have a material adverse effect on our business, consolidated financial condition, results of operations or liquidity.
Environmental Matters
Environmental Sustainability. As part of our commitment to being a good corporate citizen, we consider
environmental sustainability to be an important strategic focus area. For instance, our manufacturing operations have a
variety of initiatives in place to reduce energy usage, conserve water, improve wastewater management, reduce
packaging and where possible use recycled and recyclable packaging. We continue to evaluate and modify our
manufacturing and other processes on an ongoing basis to mitigate risk and further reduce our impact on the
environment, conserve water and reduce waste.
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Environmental Laws and Regulations. We are also subject to environmental laws and regulations in the normal
course of business. We have not made any material expenditures during the last three fiscal years in order to comply
with environmental laws or regulations. Based on our experience to date, we believe that the future cost of compliance
with existing environmental laws and regulations (and liability for known environmental conditions) will not have a
material adverse effect on our business, consolidated financial condition, results of operations or liquidity. However, we
cannot predict what environmental laws or regulations will be enacted in the future or how existing or future laws or
regulations will be enforced, administered or interpreted, nor can we predict the amount of future expenditures that may
be required in order to comply with such environmental laws or regulations or to respond to such environmental claims.
Available Information
Under the Securities Exchange Act of 1934, as amended, we are required to file with or furnish to the Securities
and Exchange Commission (SEC) annual, quarterly and current reports, proxy and information statements and other
information. The SEC maintains an internet site at http://www.sec.gov that contains reports, proxy and information
statements, and other information regarding issuers that file electronically with the SEC. We file electronically with the
SEC.
We make available, free of charge, through the investor relations section of our web site, our reports on
Forms 10 - K, 10 - Q and 8 - K, and amendments to those reports, filed with or furnished to the SEC as soon as reasonably
practicable after they are filed or furnished to the SEC. The address for the investor relations section of our web site is
https://www.bgfoods.com/investor-relations.
The full text of the charters for each of the audit, compensation, nominating and governance, and risk
committees of our board of directors as well as our Code of Business Conduct and Ethics is available at the investor
relations section of our web site, https://www.bgfoods.com/investor-relations/governance/documents. Our Code of
Business Conduct and Ethics applies to all of our employees, officers and directors, including our chief executive
officer, chief financial officer and chief accounting officer. We intend to disclose any amendment to, or waiver from, a
provision of the Code of Business Conduct and Ethics that applies to our chief executive officer, chief financial officer
or chief accounting officer in the investor relations section of our web site.
The information contained on our web site is not part of, and is not incorporated in, this or any other report we
file with or furnish to the SEC.
Item 1A. Risk Factors.
Any investment in our company will be subject to risks inherent to our business. Before making an investment
decision, investors should carefully consider the risks described below together with all of the other information included
in this report. The risks and uncertainties described below are not the only ones facing our company. Additional risks
and uncertainties that we are not aware of or focused on or that we currently deem immaterial may also impair our
business operations. This report is qualified in its entirety by these risk factors.
Any of the following risks could materially and adversely affect our business, consolidated financial condition,
results of operations or liquidity. In that case, holders of our securities may lose all or part of their investment.
Risks Specific to Our Company
The packaged food industry is highly competitive.
The packaged food industry is highly competitive. Numerous brands and products, including private label
products, compete for shelf space and sales, with competition based primarily on product quality, convenience, price,
trade promotion, brand recognition and loyalty, customer service, effective consumer advertising and promotional
activities and the ability to identify and satisfy emerging consumer preferences. We compete with a significant number
of companies of varying sizes, including divisions or subsidiaries of larger companies. Many of these competitors have
multiple product lines, substantially greater financial and other resources available to them and may have lower fixed
costs and/or are substantially less leveraged than our company. If we are unable to continue to compete successfully with
these companies or if competitive pressures or other factors cause our products to lose market share or result in
significant price erosion, our business, consolidated financial condition, results of operations or liquidity could be
materially and adversely affected.
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We may be unable to maintain our profitability in the face of a consolidating retail environment.
Our largest customer, Walmart, accounted for 23.1% of our fiscal 2018 net sales, and our ten largest customers
together accounted for approximately 54.4% of our fiscal 2018 net sales. As the retail grocery trade continues to
consolidate and our retail customers grow larger and become more sophisticated, our retail customers may demand lower
pricing and increased promotional programs. Further, these customers are reducing their inventories and increasing their
emphasis on products that hold either the number one or number two market position and private label products. If we
fail to use our sales and marketing expertise to maintain our category leadership positions to respond to these trends, or if
we lower our prices or increase promotional support of our products and are unable to increase the volume of our
products sold, our profitability and financial condition may be adversely affected.
We are vulnerable to decreases in the supply and increases in the price of raw materials and labor, manufacturing,
distribution and other costs, and we may not be able to offset increasing costs by increasing prices to our customers.
We purchase agricultural products, including vegetables and spices and seasonings, meat, poultry, other raw
materials, ingredients and packaging materials from growers, commodity processors, other food companies and
packaging manufacturers. Raw materials, ingredients and packaging materials are subject to increases in price
attributable to a number of factors, including changes in crop size, federal and state agricultural programs, export
demand, currency exchange rates, energy and fuel costs, water supply, weather conditions during the growing and
harvesting seasons, insects, plant diseases and fungi, and glass, metal and plastic prices. Fluctuations in commodity
prices can lead to retail price volatility and intensive price competition, and can influence consumer and trade buying
patterns. The cost of labor, manufacturing, energy, fuel, packaging materials and other costs related to the production
and distribution of our products can from time to time increase significantly and unexpectedly. We attempt to manage
these risks by entering into short - term supply contracts and advance commodities purchase agreements from time to
time, by implementing cost saving measures and by raising sales prices. During the past three years, our cost saving
measures and sales price increases have not been sufficient to fully offset increases to our raw material, ingredient,
packaging and distribution costs. To the extent we are unable to offset present and future cost increases, our operating
results will be negatively impacted.
We may be unable to offset any reduction in net sales in our mature food product categories through an increase in
trade spending for these categories or an increase in net sales in other categories.
Most of our food product categories are mature and certain categories have experienced declining consumption
rates from time to time. If consumption rates and sales in our mature food product categories decline, our revenue and
operating income may be adversely affected, and we may not be able to offset this decrease in business with increased
trade spending or an increase in sales or profitability of other products and product categories.
We may have difficulties integrating acquisitions or identifying new acquisitions.
A major part of our strategy is to grow through acquisition. We completed the McCann’s acquisition in
July 2018 and the Back to Nature acquisition in October 2017 and we expect to pursue additional acquisitions of food
product lines and businesses. However, we may be unable to identify and consummate additional acquisitions or may be
unable to successfully integrate and manage the product lines or businesses that we have recently acquired or may
acquire in the future. In addition, we may be unable to achieve a substantial portion of any anticipated cost savings from
acquisitions or other anticipated benefits in the timeframe we anticipate, or at all. Moreover, any acquired product lines
or businesses may require a greater than anticipated amount of trade, promotional and capital spending. Acquisitions
involve numerous risks, including difficulties in the assimilation of the operations, technologies, services and products of
the acquired companies, personnel turnover and the diversion of management’s attention from other business concerns.
Any inability by us to integrate and manage any product lines or businesses that we have recently acquired or may
acquire in the future in a timely and efficient manner, any inability to achieve a substantial portion of any anticipated
cost savings or other anticipated benefits from these acquisitions in the time frame we anticipate or any unanticipated
required increases in trade, promotional or capital spending could adversely affect our business, consolidated financial
condition, results of operations or liquidity. Moreover, future acquisitions by us could result in our incurring substantial
additional indebtedness, being exposed to contingent liabilities or incurring the impairment of goodwill and other
intangible assets, all of which could adversely affect our financial condition, results of operations and liquidity.
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We have substantial indebtedness, which could restrict our ability to pay dividends and impact our financing options
and liquidity position.
At December 29, 2018, we had total long - term indebtedness of $1,650.0 million (before debt discount),
including $50.0 million principal amount of senior secured indebtedness and $1,600.0 million principal amount of senior
unsecured indebtedness. Our ability to pay dividends is subject to contractual restrictions contained in the instruments
governing our indebtedness. Although our credit agreement and the indentures governing our senior notes (which we
refer to as the senior notes indentures) contain covenants that restrict our ability to incur debt, as long as we meet these
covenants we will be able to incur additional indebtedness. The degree to which we are leveraged on a consolidated
basis could have important consequences to the holders of our securities, including:
•
our ability in the future to obtain additional financing for working capital, capital expenditures or
acquisitions may be limited;
• we may not be able to refinance our indebtedness on terms acceptable to us or at all;
•
a significant portion of our cash flow is likely to be dedicated to the payment of interest on our
indebtedness, thereby reducing funds available for future operations, capital expenditures, acquisitions
and/or dividends on our common stock; and
• we may be more vulnerable to economic downturns and be limited in our ability to withstand competitive
pressures.
We are subject to restrictive debt covenants and other requirements related to our debt that limit our business
flexibility by imposing operating and financial restrictions on our operations.
The agreements governing our indebtedness impose significant operating and financial restrictions on us. These
restrictions prohibit or limit, among other things:
•
•
•
•
•
•
•
•
the incurrence of additional indebtedness and the issuance of certain preferred stock or redeemable capital
stock;
the payment of dividends on, and purchase or redemption of, capital stock;
a number of restricted payments, including investments;
specified sales of assets;
specified transactions with affiliates;
the creation of certain types of liens;
consolidations, mergers and transfers of all or substantially all of our assets; and
entry into certain sale and leaseback transactions.
Our credit agreement requires us to maintain specified financial ratios and satisfy financial condition tests,
including, without limitation, a maximum leverage ratio and a minimum interest coverage ratio.
Our ability to comply with the ratios or tests may be affected by events beyond our control, including prevailing
economic, financial and industry conditions. A breach of any of these covenants, or failure to meet or maintain ratios or
tests could result in a default under our credit agreement and/or our senior notes indentures. Certain events of default
under our credit agreement and our senior notes indentures would prohibit us from paying dividends on our common
stock. In addition, upon the occurrence of an event of default under our credit agreement or our senior notes indentures,
the lenders could elect to declare all amounts outstanding under the credit agreement and the senior notes, together with
accrued interest, to be immediately due and payable. If we were unable to repay those amounts, the credit agreement
lenders could proceed against the security granted to them to secure that indebtedness. If the lenders accelerate the
payment of the indebtedness, our assets may not be sufficient to repay in full this indebtedness and our other
indebtedness.
- 15 -
To service our indebtedness, we require a significant amount of cash. Our ability to generate cash depends on many
factors beyond our control.
Our ability to make interest payments on and to refinance our indebtedness, and to fund planned capital
expenditures and potential acquisitions depends on our ability to generate cash flow from operations in the future. This
ability, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors
that are beyond our control.
A significant portion of our cash flow from operations is dedicated to servicing our debt requirements. In
addition, in accordance with our current dividend policy we intend to continue distributing a significant portion of any
remaining cash flow to our stockholders as dividends.
Our ability to continue to expand our business is, to a certain extent, dependent upon our ability to borrow
funds under our credit agreement and to obtain other third - party financing, including through the issuance and sale of
additional debt or equity securities.
Financial market conditions may impede our access to, or increase the cost of, financing for acquisitions.
Any future financial market disruptions or tightening of the credit markets, may make it more difficult for us to
obtain financing for acquisitions or increase the cost of obtaining financing. In addition, our borrowing costs can be
affected by short and long - term debt ratings assigned by independent rating agencies that are based, in significant part,
on our performance as measured by credit metrics such as interest coverage and leverage ratios. A decrease in these
ratings could increase our cost of borrowing or make it more difficult for us to obtain financing.
Future disruptions in the credit markets or other factors, could impair our ability to refinance our debt upon terms
acceptable to us or at all.
Our $700.0 million revolving credit facility matures on November 21, 2022, our $700.0 million of 4.625%
senior notes mature on June 1, 2021 and our $900.0 million of 5.25% senior notes mature on April 1, 2025. Our ability
to raise debt or equity capital in the public or private markets in order to effect a refinancing of our debt at or prior to
maturity could be impaired by various factors, including factors beyond our control. For example, in recent years U.S.
credit markets experienced significant dislocations and liquidity disruptions that caused the spreads on prospective debt
financings to widen considerably. These circumstances materially impacted liquidity in the debt markets, making
financing terms for borrowers less attractive, and in certain cases resulted in the unavailability of certain types of debt
financing. Any future uncertainty in the credit markets could negatively impact our ability to access additional debt
financing or to refinance existing indebtedness on favorable terms, or at all. In addition, any future uncertainty in other
financial markets in the U.S. could make it more difficult or costly for us to raise capital through the issuance of
common stock or other equity securities. Any of these risks could impair our ability to fund our operations or limit our
ability to expand our business or increase our interest expense, which could have a material adverse effect on our
financial results.
If we are unable to refinance our indebtedness at or prior to maturity on commercially reasonable terms or at
all, we would be forced to seek other alternatives, including:
•
•
•
sales of assets;
sales of equity; and
negotiations with our lenders or noteholders to restructure the applicable debt.
If we are forced to pursue any of the above options, our business and/or the value of an investment in our
securities could be adversely affected.
We rely on co - packers for a significant portion of our manufacturing needs, and the inability to enter into additional
or future co - packing agreements may result in our failure to meet customer demand.
We rely upon co - packers for a significant portion of our manufacturing needs. The success of our business
depends, in part, on maintaining a strong sourcing and manufacturing platform. We believe that there are a limited
number of competent, high - quality co - packers in the industry, and if we were required to obtain additional or alternative
co - packing agreements or arrangements in the future, we can provide no assurance that we would be able to do so on
satisfactory terms or in a timely manner. Our inability to enter into satisfactory co - packing agreements could limit our
ability to implement our business plan or meet customer demand.
- 16 -
We rely on the performance of major retailers, wholesalers, specialty distributors and mass merchants for the success
of our business, and should they perform poorly or give higher priority to other brands or products, our business
could be adversely affected.
We sell our products principally to retail outlets and wholesale distributors including, traditional supermarkets,
mass merchants, warehouse clubs, wholesalers, foodservice distributors and direct accounts, specialty food distributors,
military commissaries and non - food outlets such as drug store chains, dollar stores and e-tailers. The replacement by or
poor performance of our major wholesalers, retailers or chains or our inability to collect accounts receivable from our
customers could materially and adversely affect our results of operations and financial condition. In addition, our
customers offer branded and private label products that compete directly with our products for retail shelf space and
consumer purchases. Accordingly, there is a risk that our customers may give higher priority to their own products or to
the products of our competitors. In the future, our customers may not continue to purchase our products or provide our
products with adequate levels of promotional support. It is also possible that our customers may replace our branded
products with private label products.
We may be unable to anticipate changes in consumer preferences and consumer demographics, which may result in
decreased demand for our products.
Our success depends in part on our ability to anticipate and offer products that appeal to the changing tastes,
dietary habits and product packaging preferences of consumers in the market categories in which we compete. If we are
not able to anticipate, identify or develop and market products that respond to these changes in consumer preferences,
whether resulting from changing consumer demographics or otherwise, demand for our products may decline and our
operating results may be adversely affected. In addition, we may incur significant costs related to developing and
marketing new products or expanding our existing product lines in reaction to what we perceive to be increased
consumer preference or demand. Such development or marketing may not result in the volume of sales or profitability
anticipated.
Severe weather conditions and natural disasters can affect crop supplies and reduce our operating results.
Severe weather conditions and natural disasters, such as floods, droughts, frosts, earthquakes or pestilence, may
affect the supply of the raw materials that we use for our products. Our maple syrup products, for instance, are
particularly susceptible to severe freezing conditions in Québec, Canada and Vermont during the season in which maple
syrup is produced. Our Green Giant frozen vegetable manufacturing facility in Irapuato, Mexico is located in a region
affected by water scarcity and restrictions on usage. Competing manufacturers can be affected differently by weather
conditions and natural disasters depending on the location of their supplies. If our supplies of raw materials are reduced,
we may not be able to find supplemental supply sources on favorable terms or at all, which could adversely affect our
business and operating results.
Climate change, water scarcity or legal, regulatory, or market measures to address climate change or water scarcity,
could negatively affect our business and operations.
In the event that climate change has a negative effect on agricultural productivity, we may be subject to
decreased availability or less favorable pricing for certain commodities that are necessary for our products. We may also
be subjected to decreased availability or less favorable pricing for water as a result of such change, which could impact
our manufacturing and distribution operations. For example, our Green Giant frozen vegetable manufacturing facility in
Irapuato, Mexico is already affected by water scarcity in that region of Mexico. Any further restrictions on, or loss of,
water rights due to water scarcity, water rights violations or otherwise for our Irapuato manufacturing facility could have
a material adverse effect on our business and operating results.
The increasing concern over climate change also may result in more regional, federal, foreign and/or global
legal and regulatory requirements to reduce or mitigate the effects of greenhouse gases. In the event that such regulation
is enacted and is more aggressive than the sustainability measures that we are currently undertaking to monitor our
emissions and improve our energy and resource efficiency, we may experience significant increases in our
manufacturing and distribution costs. In particular, increasing regulation of fuel emissions could substantially increase
the supply chain and distribution costs associated with our products. As a result, climate change or increased concern
over climate change could negatively affect our business and operations.
- 17 -
Most of our products are sourced from single manufacturing sites, which means disruptions in our or our
co - packers’ operations for any number of reasons could have a material adverse effect on our business.
Our products are manufactured at many different manufacturing facilities, including our ten manufacturing
facilities and manufacturing facilities operated by our co - packers. However, in most cases, individual products are
produced only at a single location. If any of these manufacturing locations experiences a disruption for any reason,
including a work stoppage, power failure, fire, or weather related condition or natural disaster, etc., this could result in a
significant reduction or elimination of the availability of some of our products. If we were not able to obtain alternate
production capability in a timely manner or on satisfactory terms, this could have a material adverse effect on our
business, consolidated financial condition, results of operations or liquidity.
Our operations are subject to numerous laws and governmental regulations, exposing us to potential claims and
compliance costs that could adversely affect our business.
Our operations are subject to extensive regulation by the FDA, the USDA, the FTC, the SEC, the CPSC, the
United States Department of Labor, the Environmental Protection Agency and various other federal, state, local and
foreign authorities. We are also subject to U.S. laws affecting operations outside of the United States, including
anti - bribery laws such as the Foreign Corrupt Practices Act (FCPA). Any changes in these laws and regulations, or any
changes in how existing or future laws or regulations will be enforced, administered or interpreted could increase the
cost of developing, manufacturing and distributing our products or otherwise increase the cost of conducting our
business, or expose us to additional risk of liabilities and claims, which could have a material adverse effect on our
business, consolidated financial condition, results of operations or liquidity. In addition, failure by us to comply with
applicable laws and regulations, including future laws and regulations, could subject us to civil remedies, including
fines, injunctions, recalls or seizures, as well as potential criminal sanctions, which could have a material adverse effect
on our business, consolidated financial condition, results of operations or liquidity. See Item 1, “Business—Government
Regulation” and “—Environmental Matters.”
Failure by third - party co - packers or suppliers of raw materials to comply with food safety, environmental or other
regulations may disrupt our supply of certain products and adversely affect our business.
We rely on co - packers to produce certain of our products and on other suppliers to supply raw materials. Such
co - packers and other suppliers, whether in the United States or outside the United States, are subject to a number of
regulations, including food safety and environmental regulations. Failure by any of our co - packers or other suppliers to
comply with regulations, or allegations of compliance failure, may disrupt their operations. Disruption of the operations
of a co - packer or other suppliers could disrupt our supply of product or raw materials, which could have an adverse
effect on our business, consolidated financial condition, results of operations or liquidity. Additionally, actions we may
take to mitigate the impact of any such disruption or potential disruption, including increasing inventory in anticipation
of a potential production or supply interruption, may adversely affect our business, consolidated financial condition,
results of operations or liquidity.
A recall of our products could have a material adverse effect on our business. In addition, we may be subject to
significant liability should the consumption of any of our products cause injury, illness or death.
The sale of food products for human consumption involves the risk of injury to consumers. Such injuries may
result from mislabeling, tampering by unauthorized third parties or product contamination or spoilage, including the
presence of foreign objects, undeclared allergens, substances, chemicals, other agents or residues introduced during the
growing, manufacturing, storage, handling or transportation phases of production. Under certain circumstances, we may
be required to recall products, leading to a material adverse effect on our business, consolidated financial condition,
results of operations or liquidity. Even if a situation does not necessitate a recall, product liability claims might be
asserted against us. We have from time to time been involved in product liability lawsuits, none of which have been
material to our business. While we are subject to governmental inspection and regulations and believe our facilities
comply in all material respects with all applicable laws and regulations, if the consumption of any of our products
causes, or is alleged to have caused, a health - related illness in the future we may become subject to claims or lawsuits
relating to such matters. Even if a product liability claim is unsuccessful or is not fully pursued, the negative publicity
surrounding any assertion that our products caused injury, illness or death could adversely affect our reputation with
existing and potential customers and our corporate and brand image. Moreover, claims or liabilities of this sort might not
be covered by our insurance or by any rights of indemnity or contribution that we may have against others. We maintain
product liability insurance and product contamination insurance in amounts we believe to be adequate. However, we
- 18 -
cannot assure you that we will not incur claims or liabilities for which we are not insured or that exceed the amount of
our insurance coverage. A product liability judgment against us or a product recall or the damage to our reputation
resulting therefrom could have a material adverse effect on our business, consolidated financial condition, results of
operations or liquidity.
Pending and future litigation may lead us to incur significant costs.
We are, or may become, party to various lawsuits and claims arising in the normal course of business, which
may include lawsuits or claims relating to contracts, intellectual property, product recalls, product liability, the marketing
and labeling of products, employment matters, environmental matters or other aspects of our business. Even when not
merited, the defense of these lawsuits may divert our management’s attention, and we may incur significant expenses in
defending these lawsuits. In addition, we may be required to pay damage awards or settlements or become subject to
injunctions or other equitable remedies, which could have a material adverse effect on our business, consolidated
financial condition, results of operations or liquidity. The outcome of litigation is often difficult to predict, and the
outcome of pending or future litigation may have a material adverse effect on our business, consolidated financial
condition, results of operations or liquidity.
Consumer concern regarding the safety and quality of food products or health concerns could adversely affect sales
of certain of our products.
If consumers in our principal markets lose confidence in the safety and quality of our food products even
without a product liability claim or a product recall, our business could be adversely affected. Consumers have been
increasingly focused on food safety and health and wellness with respect to the food products they buy. We have been
and will continue to be impacted by publicity concerning the health implications of food products generally, which could
negatively influence consumer perception and acceptance of our products and marketing programs. Developments in any
of these areas could cause our results to differ materially from results that have been or may be projected.
A weakening of the U.S. dollar in relation to the Canadian dollar would significantly increase our future costs
relating to the production of maple syrup products.
We purchase a significant majority of our maple syrup requirements from suppliers in Québec, Canada. A
weakening of the U.S. dollar in relation to the Canadian dollar would significantly increase our future costs relating to
the production of our maple syrup products to the extent we have not purchased Canadian dollars or otherwise entered
into a currency hedging arrangement in advance of any such weakening of the U.S. dollar. These increased costs may
not be fully offset by the positive impact the change in the relative strength of the Canadian dollar versus the U.S. dollar
would have on our net sales in Canada.
Our operations in foreign countries are subject to political, economic and foreign currency risk.
Our relationships with foreign suppliers and co - packers as well as our manufacturing location in Irapuato,
Mexico also subject us to the risks of doing business outside the United States. The countries from which we source our
raw materials and certain of our finished goods may be subject to political and economic instability, and may
periodically enact new or revise existing laws, taxes, duties, quotas, tariffs, currency controls or other restrictions to
which we are subject, including restrictions on the transfer of funds to and from foreign countries or the nationalization
of operations. Our products are subject to import duties and other restrictions, and the U.S. government may periodically
impose new or revise existing duties, quotas, tariffs or other restrictions to which we are subject, including restrictions
on the transfer of funds to and from foreign countries.
In particular, our financial condition and results of operations could be materially and adversely affected by the
new United States-Mexico-Canada Agreement, or other regulatory and economic impact of changes in taxation and trade
relations among the United States and other countries.
In addition, changes in respective wage rates among the countries from which we and our competitors source
product could substantially impact our competitive position. Changes in exchange rates, import/export duties or relative
international wage rates applicable to us or our competitors could adversely impact our business, financial condition and
results of operations. These changes may impact us in a different manner than our competitors.
- 19 -
Our financial performance on a U.S. dollar denominated basis is subject to fluctuations in currency exchange
rates. These fluctuations could cause material variations in our results of operations. Our principal exposures are to the
Canadian dollar and the Mexican peso. For example, our foreign sales are primarily to customers in Canada. Net sales in
Canada accounted for 5.7% of our total net sales in 2018. Although our sales for export to other countries are generally
denominated in U.S. dollars, our sales to Canada are generally denominated in Canadian dollars. As a result, our net
sales to Canada are subject to the effect of foreign currency fluctuations, and these fluctuations could have an adverse
impact on operating results. From time to time, we may enter into agreements that are intended to reduce the effects of
our exposure to currency fluctuations, but these agreements may not be effective in significantly reducing our exposure.
Litigation regarding our trademarks and any other proprietary rights and intellectual property infringement claims
may have a significant negative impact on our business.
We maintain an extensive trademark portfolio that we consider to be of significant importance to our business.
If the actions we take to establish and protect our trademarks and other proprietary rights are not adequate to prevent
imitation of our products by others or to prevent others from seeking to block sales of our products as an alleged
violation of their trademarks and proprietary rights, it may be necessary for us to initiate or enter into litigation in the
future to enforce our trademark rights or to defend ourselves against claimed infringement of the rights of others. Any
legal proceedings could result in an adverse determination that could have a material adverse effect on our business,
consolidated financial condition, results of operations or liquidity.
We face risks associated with our defined benefit pension plans and multiemployer pension plan obligations.
We maintain four defined benefit pension plans that cover approximately 43% of our employees. A
deterioration in the value of plan assets resulting from poor market performance, a general financial downturn or
otherwise could cause an increase in the amount of contributions we are required to make to these plans. For example,
our defined benefit pension plans may from time to time move from an overfunded to underfunded status driven by
decreases in plan asset values that may result from changes in long - term interest rates and disruptions in U.S. or global
financial markets. Additionally, historically low interest rates coupled with poor market performance would have the
effect of decreasing the funded status of these plans which would result in greater required contributions. For a more
detailed description of these plans, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition
and Results of Operations—Critical Accounting Policies; Use of Estimates—Pension Expense” and Note 12, “Pension
Benefits,” to our consolidated financial statements in Part II, Item 8 of this report.
We also participate in a multiemployer pension plan maintained by the labor union representing certain of our
employees at our Portland, Maine facility. We make periodic contributions to this plan pursuant to the terms of a
collective bargaining agreement. In the event that we withdraw from participation in this plan or substantially reduce our
participation in this plan (such as due to a workforce reduction), applicable law could require us to make withdrawal
liability payments to the plan, and we would have to reflect that liability on our balance sheet. The amount of our
withdrawal liability would depend on the extent of this plan’s funding of vested benefits at the time of our withdrawal.
Furthermore, our withdrawal liability could increase as the number of employers participating in this plan decreases.
For a more detailed description of this multiemployer plan, see Note 12, “Pension Benefits,” to our
consolidated financial statements in Part II, Item 8 of this report.
An obligation to make additional, unanticipated contributions to our defined benefit plans or the multiemployer
plan described above could reduce the cash available for working capital and other corporate uses, and may have a
material adverse effect on our business, consolidated financial position, results of operations and liquidity.
- 20 -
Our financial well - being could be jeopardized by unforeseen changes in our employees’ collective bargaining
agreements, shifts in union policy or labor disruptions in the food industry.
As of December 29, 2018, approximately 61% of our 2,675 employees were covered by collective bargaining
agreements. A prolonged work stoppage or strike at any of our facilities with union employees or a significant work
disruption from other labor disputes in the food or related industries could have a material adverse effect on our
business, consolidated financial condition, results of operations or liquidity. Later this year we will begin negotiations
for a new collective bargaining agreement to replace the existing collective bargaining agreement for our Brooklyn
manufacturing facility, which covers approximately 80 employees, that is scheduled to expire on December 31, 2019.
However, we cannot assure you that we will be able to negotiate a new collective bargaining agreement for our Brooklyn
facility on terms satisfactory to us, or at all, and without production interruptions, including labor stoppages. If, prior to
the expiration of the collective bargaining agreement for the Brooklyn facility or prior to the expiration of any of our
other existing collective bargaining agreements, we are unable to reach new agreements without union action or any
such new agreements are not on terms satisfactory to us, our business, consolidated financial condition, results of
operations or liquidity could be materially and adversely affected.
We are increasingly dependent on information technology; Disruptions, failures or security breaches of our
information technology infrastructure could have a material adverse effect on our operations.
Information technology is critically important to our business operations. We rely on information technology
networks and systems, including the Internet, to process, transmit and store electronic and financial information, to
manage a variety of business processes and activities, including manufacturing, financial, logistics, sales, marketing and
administrative functions.
We depend on our information technology infrastructure to communicate internally and externally with
employees, customers, suppliers and others. We also use information technology networks and systems to comply with
regulatory, legal and tax requirements. These information technology systems, many of which are managed by third
parties or used in connection with shared service centers, may be susceptible to damage, disruptions or shutdowns due to
failures during the process of upgrading or replacing software, databases or components thereof, issues with or errors in
systems’ maintenance or security, migration of applications to the cloud, power outages, hardware or software failures,
computer viruses, malware, attacks by computer hackers or other cybersecurity risks, telecommunication failures, denial
of service, user errors, natural disasters, terrorist attacks or other catastrophic events.
Cyberattacks and other cyber incidents are occurring more frequently in the United States, are constantly
evolving in nature, are becoming more sophisticated and are being made by groups and individuals (including criminal
hackers, hacktivists, state-sponsored institutions, terrorist organizations and individuals or groups participating in
organized crime) with a wide range of expertise and motives (including monetization of corporate, payment or other
internal or personal data, theft of trade secrets and intellectual property for competitive advantage and leverage for
political, social, economic and environmental reasons). Such cyberattacks and cyber incidents can take many forms
including cyber extortion, denial of service, social engineering, such as impersonation attempts to fraudulently induce
employees or others to disclose information or unwittingly provide access to systems or data, introduction of viruses or
malware, such as ransomware through phishing emails, website defacement or theft of passwords and other credentials.
We may incur significant costs in protecting against or remediating cyberattacks or other cyber incidents.
If any of our significant information technology systems suffer severe damage, disruption or shutdown, whether
due to natural disaster, cyberattacks or otherwise, and our disaster recovery and business continuity plans, or those of our
third party providers, do not effectively respond to or resolve the issues in a timely manner, our product sales, financial
condition and results of operations may be materially and adversely affected, and we could experience delays in
reporting our financial results, loss of intellectual property and damage to our reputation or brands.
In addition, if we are unable to prevent physical and electronic break-ins, cyberattacks and other information
security breaches, we may suffer financial and reputational damage, be subject to litigation or incur remediation costs or
penalties because of the unauthorized disclosure of confidential information belonging to us or to our partners,
customers, suppliers or employees. The mishandling or inappropriate disclosure of non-public sensitive or protected
information could lead to the loss of intellectual property, negatively impact planned corporate transactions or damage
our reputation and brand image. Misuse, leakage or falsification of legally protected information could also result in a
violation of data privacy laws and regulations and have a negative impact on our reputation, business, financial condition
and results of operations.
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We may experience difficulties fully implementing our new enterprise resource planning system.
We are implementing a new enterprise resource planning (ERP) system. The implementation of the new ERP
system has required, and will continue to require, the investment of significant financial and human resources. We may
not be able to complete successfully the full implementation of the ERP system without experiencing difficulties. Any
disruptions, delays or deficiencies in the design and implementation of the new ERP system could adversely affect our
ability to produce products, process orders, ship products, provide services and customer support, send invoices and
track payments, fulfill contractual obligations, integrate acquisitions, or otherwise operate our business. It is also
possible that the migration to a new ERP system could adversely affect our internal controls over financial reporting.
If we are unable to retain our key management personnel, our growth and future success may be impaired and our
results of operations could suffer as a result.
Our success depends to a significant degree upon the continued contributions of senior management, certain of
whom would be difficult to replace. As a result, departure by members of our senior management could have a material
adverse effect on our business and results of operations. In addition, we do not maintain key - man life insurance on any
of our executive officers.
We are a holding company and we rely on dividends, interest and other payments, advances and transfers of funds
from our subsidiaries to meet our obligations.
We are a holding company, with all of our assets held by our direct and indirect subsidiaries, and we rely on
dividends and other payments or distributions from our subsidiaries to meet our debt service obligations and to enable us
to pay dividends. The ability of our subsidiaries to pay dividends or make other payments or distributions to us depends
on their respective operating results and may be restricted by, among other things, the laws of their jurisdiction of
organization (which may limit the amount of funds available for the payment of dividends), agreements of those
subsidiaries, our credit agreement, our senior notes indentures and the covenants of any future outstanding indebtedness
we or our subsidiaries incur.
Future changes that increase cash taxes payable by us could significantly decrease our future cash flow available to
make interest and dividend payments with respect to our securities.
We are able to amortize goodwill and certain intangible assets within the meaning of Section 197 of the Internal
Revenue Code of 1986. We expect to be able to amortize for tax purposes approximately $1,048.7 million between 2019
and 2033. The expected annual deductions are approximately $108.0 million for fiscal 2019, approximately $106.4
million for fiscal 2020, approximately $103.8 million for fiscal 2021, approximately $92.2 million for fiscal 2022,
approximately $90.3 million per year for fiscal 2023 through fiscal 2024, approximately $90.0 million for fiscal 2025,
approximately $86.1 million for fiscal 2026, approximately $66.2 million for fiscal 2027, approximately $63.7 million
for fiscal 2028, approximately $63.1 million for fiscal 2029, approximately $57.0 million for fiscal 2030, approximately
$24.3 million for fiscal 2031, approximately $6.1 million for fiscal 2032 and approximately $1.2 million for fiscal 2033.
If there is a change in U.S. federal tax policy that reduces any of these available deductions, eliminates, limits or reduces
the interest deduction we receive on our substantial indebtedness, or otherwise results in an increase in our corporate tax
rate, our cash taxes payable would increase, which could significantly reduce our future cash and impact our ability to
make interest and dividend payments. Likewise, the ultimate impact of the U.S. Tax Cuts and Jobs Act signed into law
on December 22, 2017 on our reported results in fiscal 2019 and beyond may differ from the estimates provided in this
report, possibly materially, due to, among other things, changes in interpretations and assumptions we have made,
guidance that may be issued, and other actions we may take as a result of the new tax law different from that currently
contemplated. See Note 10, “Income Taxes,” to our consolidated financial statements in Part II, Item 8 of this report for
information about the U.S. Tax Cuts and Jobs Act.
A change in the assumptions used to value our goodwill or our unamortizable intangible assets could negatively
affect our consolidated results of operations and net worth.
Our total assets include substantial goodwill and unamortizable intangible assets (trademarks). These assets are
tested for impairment at least annually and whenever events or circumstances occur indicating that goodwill or
unamortizable intangibles might be impaired. The annual goodwill impairment test involves a two - step process. The first
step of the impairment test involves comparing our company’s market capitalization with our company’s carrying value,
including goodwill. If the carrying value of our company exceeds our market capitalization, we perform the second step
of the impairment test to determine the amount of the impairment loss. The second step of the goodwill impairment test
- 22 -
involves comparing the implied fair value of goodwill with the carrying value and recognizing a loss for the difference.
We test our unamortizable intangibles by comparing the fair value with the carrying value and recognize a loss for the
difference. We estimate the fair value of our unamortizable intangibles based on discounted cash flows that reflect
certain third party market value indicators. Estimating our fair value for these purposes requires significant estimates and
assumptions by management. We completed our annual impairment tests for fiscal 2018, 2017 and 2016 with no
adjustments to the carrying values of goodwill and unamortizable intangibles. However, an interim impairment analysis
relating to one of our brands performed during fiscal 2014 resulted in our company recording non - cash impairment
charges to amortizable trademarks and customer relationship intangibles for the brand of $26.9 million and $7.3 million,
respectively, during fiscal 2014. During the second quarter of 2016, we discontinued that brand because there was not
sufficient demand to warrant continued production. Accordingly, we wrote off the related intangible assets and recorded
non-cash impairment charges to amortizable trademarks and customer relationship intangibles of $4.5 million and $0.9
million, respectively, which are recorded in “Impairment of intangible assets” on the accompanying consolidated
statement of operations for fiscal 2016. If operating results for any of our other brands, including newly acquired brands,
deteriorate, at rates in excess of our current projections, we may be required to record additional non - cash impairment
charges to certain intangible assets. In addition, any significant decline in our market capitalization, even if due to
macroeconomic factors, could put pressure on the carrying value of our goodwill. A determination that all or a portion of
our goodwill or unamortizable intangible assets are impaired, although a non - cash charge to operations, could have a
material adverse effect on our business, consolidated financial condition and results of operations.
Any future financial market disruptions or tightening of the credit markets could expose us to additional credit risks
from customers and supply risks from suppliers and co - packers.
Any future financial market disruptions or tightening of the credit markets could result in some of our
customers experiencing a significant decline in profits and/or reduced liquidity. A significant adverse change in the
financial and/or credit position of a customer could require us to assume greater credit risk relating to that customer and
could limit our ability to collect receivables. A significant adverse change in the financial and/or credit position of a
supplier or co - packer could result in an interruption of supply. This could have a material adverse effect on our business,
consolidated financial condition, results of operations and liquidity.
Risks Relating to our Securities
Holders of our common stock may not receive the level of dividends provided for in our dividend policy or any
dividends at all.
Dividend payments are not mandatory or guaranteed and holders of our common stock do not have any legal
right to receive, or require us to pay, dividends. Our board of directors may, in its sole discretion, decrease the level of
dividends provided for in our dividend policy or entirely discontinue the payment of dividends. Future dividends with
respect to shares of our capital stock, if any, depend on, among other things, our results of operations, cash requirements,
financial condition, contractual restrictions (including restrictions in our credit agreement and senior notes indentures),
business opportunities, provisions of applicable law (including certain provisions of the Delaware General Corporation
Law) and other factors that our board of directors may deem relevant.
If our cash flows from operating activities were to fall below our minimum expectations (or if our assumptions
as to capital expenditures or interest expense were too low or our assumptions as to the sufficiency of our revolving
credit facility to finance our working capital needs were to prove incorrect), we may need either to reduce or eliminate
dividends or, to the extent permitted under our credit agreement and senior notes indentures, fund a portion of our
dividends with borrowings or from other sources. If we were to use working capital or permanent borrowings to fund
dividends, we would have less cash and/or borrowing capacity available for future dividends and other purposes, which
could negatively impact our financial condition, results of operations, liquidity and ability to maintain or expand our
business.
- 23 -
Our dividend policy may negatively impact our ability to finance capital expenditures, operations or acquisition
opportunities.
Under our dividend policy, a substantial portion of our cash generated by our business in excess of operating
needs, interest and principal payments on indebtedness, and capital expenditures sufficient to maintain our properties and
assets is in general distributed as regular quarterly cash dividends to the holders of our common stock. As a result, we
may not retain a sufficient amount of cash to finance growth opportunities or unanticipated capital expenditure needs or
to fund our operations in the event of a significant business downturn. We may have to forego growth opportunities or
capital expenditures that would otherwise be necessary or desirable if we do not find alternative sources of financing. If
we do not have sufficient cash for these purposes, our financial condition and our business will suffer.
Our certificate of incorporation authorizes us to issue without stockholder approval preferred stock that may be
senior to our common stock in certain respects.
Our certificate of incorporation authorizes the issuance of preferred stock without stockholder approval and, in
the case of preferred stock, upon such terms as the board of directors may determine. The rights of the holders of shares
of our common stock will be subject to, and may be adversely affected by, the rights of holders of any class or series of
preferred stock that may be issued in the future, including any preferential rights that we may grant to the holders of
preferred stock. The terms of any preferred stock we issue may place restrictions on the payment of dividends to the
holders of our common stock. If we issue preferred stock that is senior to our common stock in right of dividend
payment, and our cash flows from operating activities or surplus are insufficient to support dividend payments to the
holders of preferred stock, on the one hand, and to the holders of common stock, on the other hand, we may be forced to
reduce or eliminate dividends to the holders of our common stock.
Future sales or the possibility of future sales of a substantial number of shares of our common stock or other
securities convertible or exchangeable into common stock may depress the price of our common stock.
We may issue shares of our common stock or other securities convertible or exchangeable into common stock
from time to time in future financings or as consideration for future acquisitions and investments. In the event any such
future financing, acquisition or investment is significant, the number of shares of our common stock or other securities
convertible or exchangeable into common stock that we may issue may in turn be significant. In addition, we may grant
registration rights covering shares of our common stock or other securities convertible or exchangeable into common
stock, as applicable, issued in connection with any such future financing, acquisitions and investments.
Future sales or the availability for sale of a substantial number of shares of our common stock or other
securities convertible or exchangeable into common stock, whether issued and sold pursuant to our currently effective
shelf registration statement or otherwise, would dilute our earnings per share and the voting power of each share of
common stock outstanding prior to such sale or distribution, could adversely affect the prevailing market price of our
securities and could impair our ability to raise capital through future sales of our securities.
Our certificate of incorporation and bylaws and several other factors could limit another party’s ability to acquire us
and deprive our investors of the opportunity to obtain a takeover premium for their securities.
Our certificate of incorporation and bylaws contain certain provisions that may make it difficult for another
company to acquire us and for holders of our securities to receive any related takeover premium for their securities. For
example, our certificate of incorporation authorizes the issuance of preferred stock without stockholder approval and
upon such terms as the board of directors may determine. The rights of the holders of shares of our common stock will
be subject to, and may be adversely affected by, the rights of holders of any class or series of preferred stock that may be
issued in the future.
Item 1B. Unresolved Staff Comments.
None.
- 24 -
Item 2. Properties.
Our corporate headquarters are located at Four Gatehall Drive, Parsippany, NJ 07054. Our manufacturing
facilities are generally located near major customer markets and raw materials. Of our ten manufacturing facilities, eight
are owned and two are leased. Management believes that our manufacturing facilities have sufficient capacity to
accommodate our planned growth. Listed below are our manufacturing facilities and the principal warehouses,
distribution centers and offices that we own or lease.
Description
Owned/Leased
Facility Location
Leased
Parsippany, New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leased
Mississauga, Ontario . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ankeny, Iowa. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Owned
Hurlock, Maryland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owned
Irapuato, Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owned
Portland, Maine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owned
St. Johnsbury, Vermont . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owned
Stoughton, Wisconsin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owned
Williamstown, New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owned
Yadkinville, North Carolina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owned
Leased
Brooklyn, New York . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leased
Roseland, New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leased
Easton, Pennsylvania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leased
Fontana, California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leased
Joliet, Illinois . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leased
Lebanon, Tennessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
St. Evariste, Québec . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owned
Leased
Bentonville, Arkansas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate Headquarters
Canadian Headquarters
Manufacturing/Warehouse
Manufacturing/Warehouse
Manufacturing/Warehouse
Manufacturing/Warehouse
Manufacturing/Warehouse
Manufacturing/Warehouse
Manufacturing/Warehouse
Manufacturing/Warehouse
Manufacturing/Warehouse
Manufacturing/Warehouse
Distribution Center
Distribution Center
Distribution Center
Distribution Center
Storage Facility
Sales Office
Item 3. Legal Proceedings.
The information set forth under the heading “Legal Proceedings” in Note 13 of Notes to Consolidated
Financial Statements in Part II, Item 8 of this Annual Report on Form 10 - K is incorporated herein by reference.
Item 4. Mine Safety Disclosures.
Not applicable.
- 25 -
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
Shares of our common stock are traded on the New York Stock Exchange under the symbol “BGS” and have
been so traded since May 23, 2007. According to the records of our transfer agent, we had 71 holders of record of our
common stock as of February 22, 2019, including Cede & Co. as nominee for The Depository Trust Company (DTC).
Cede & Co. as nominee for DTC holds shares of our common stock on behalf of participants in the DTC system, which
in turn hold the shares of common stock on behalf of beneficial owners.
Performance Graph
Set forth below is a line graph comparing the change in the cumulative total shareholder return on our
company’s common stock with the cumulative total return of the Russell 2000 Index and the S&P Packaged Foods &
Meats Index for the period from December 28, 2013 to December 29, 2018, assuming the investment of $100 on
December 28, 2013 and the reinvestment of dividends. The common stock price performance shown on the graph only
reflects the change in our company’s common stock price relative to the noted indices and is not necessarily indicative of
future price performance.
Comparison of 5 Year Cumulative Total Return
Among B&G Foods, Inc. Common Stock, the Russell 2000 Index
and the S&P Packaged Foods & Meats Index
$160
$140
$120
$100
$80
$60
$40
$20
$0
12/28/13
1/3/15
1/2/16
12/31/16
12/30/17
12/29/18
B&G Foods Inc
Russell 2000
S&P Packaged Foods & Meats
B&G Foods, Inc. (NYSE: BGS) . . . . . . . $
Russell 2000 Index . . . . . . . . . . . . . . . . . . $
S&P Packaged Foods & Meats Index . . . $
12/28/2013 *
100.00
100.00
100.00
91.52
104.89
111.51
112.65
100.26
130.90
12/31/2016 12/30/2017 12/29/2018
112.94
124.09
117.57
146.67
121.63
142.86
123.97
139.44
144.79
1/3/2015
1/2/2016
*
$100 invested on December 28, 2013 in B&G Foods’ common stock or index, including reinvestment of dividends. Indexes
calculated on month - end basis.
- 26 -
Dividend Policy
General
Our dividend policy reflects a basic judgment that our stockholders are better served when we distribute a
substantial portion of our cash available to pay dividends to them instead of retaining it in our business. Under this
policy, a substantial portion of the cash generated by our company in excess of operating needs, interest and principal
payments on indebtedness, capital expenditures sufficient to maintain our properties and other assets is distributed as
regular quarterly cash dividends to the holders of our common stock and not retained by us. We have paid dividends
every quarter since our initial public offering in October 2004.
For fiscal 2018 and fiscal 2017, we had cash flows from operating activities of $209.5 million and
$37.8 million, respectively, and distributed $124.5 million and $123.6 million as dividends, respectively. At our current
dividend rate of $1.90 per share per annum, we expect our aggregate dividend payments in 2019 to be approximately
$124.7 million.
The following table sets forth the dividends per share we have declared in each of the quarterly periods of 2018
and 2017:
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Fiscal 2018 Fiscal 2017
0.465
0.475 $
0.465
0.475 $
0.465
0.475 $
0.465
0.465 $
Under U.S. federal income tax law, distributions to holders of our common stock are taxable to the extent they
are paid out of current or accumulated earnings and profits. Generally, the portion of the distribution treated as a return
of capital should reduce the tax basis in the shares of common stock up to a holder’s adjusted basis in the common stock,
with any excess treated as capital gains. Qualifying dividend income and the return of capital, if any, will be allocated on
a pro - forma basis to all distributions for each fiscal year. Based on U.S. federal income tax laws, B&G Foods has
determined that for fiscal 2018 and fiscal 2017, 0.0% and 69.5%, respectively, of distributions paid on common stock
will be treated as a return of capital and 100.0% and 30.5%, respectively, will be treated as a taxable dividend paid from
earnings and profits.
Our dividend policy is based upon our current assessment of our business and the environment in which we
operate, and that assessment could change based on competitive or other developments (which could, for example,
increase our need for capital expenditures or working capital), new acquisition opportunities or other factors. Our board
of directors is free to depart from or change our dividend policy at any time and could do so, for example, if it was to
determine that we have insufficient cash to take advantage of growth opportunities.
Restrictions on Dividend Payments
Our ability to pay future dividends, if any, with respect to shares of our capital stock will depend on, among
other things, our results of operations, cash requirements, financial condition, contractual restrictions, provisions of
applicable law and other factors that our board of directors may deem relevant. Under Delaware law, our board of
directors may declare dividends only to the extent of our “surplus” (which is defined as total assets at fair market value
minus total liabilities, minus statutory capital), or if there is no surplus, out of our net profits for the then current and/or
immediately preceding fiscal years. Our board of directors will periodically and from time to time assess the
appropriateness of the then current dividend policy before actually declaring any dividends.
In general, our senior notes indentures restrict our ability to declare and pay dividends on our common stock as
follows:
• we may use up to 100% of our excess cash (as defined below) for the period (taken as one accounting
period) from and including March 31, 2013 to the end of our most recent fiscal quarter for which internal
financial statements are available at the time of such payments, plus certain incremental funds described in
the indentures for the payment of dividends so long as the fixed charge coverage ratio for the four most
recent fiscal quarters for which internal financial statements are available is not less than 1.6 to 1.0; and
- 27 -
• we may not pay any dividends on any dividend payment date if a default or event of default under our
indentures has occurred or is continuing.
Excess cash is defined in our senior notes indentures and under the terms of our credit agreement. Excess cash
is calculated as “consolidated cash flow,” as defined in the indentures and under the terms of our credit agreement
(which, in each case, allows for certain adjustments and which is equivalent to the term adjusted EBITDA), minus the
sum of cash tax expense, cash interest expense, certain capital expenditures, excess tax benefit from issuance of
performance share long-term incentive award (LTIA) shares, certain repayment of indebtedness and the cash portion of
restructuring charges.
In addition, the terms of our credit agreement also restrict our ability to declare and pay dividends on our
common stock. In accordance with the terms of our credit agreement, we are not permitted to declare or pay dividends
unless we are permitted to do so under our senior notes indentures. In addition, our credit agreement does not permit us
to pay dividends unless we maintain:
•
•
a “consolidated interest coverage ratio” (defined as the ratio of our adjusted EBITDA for any period of four
consecutive fiscal quarters to our consolidated interest expense for such period payable in cash) of not less
than 1.75 to 1.00; and
a “consolidated leverage ratio” (defined as the ratio of our consolidated net debt, as of the last day of any
period of four consecutive fiscal quarters to our adjusted EBITDA for such period) of not more than 7.00 to
1.00.
Recent Sales of Unregistered Securities
We did not issue any unregistered securities in fiscal 2018.
Issuer Purchases of Equity Securities
Period
September 30, 2018 - October 27, 2018 . . . . .
October 28, 2018 - November 24, 2018 . . . . .
November 25, 2018 - December 29, 2018 . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Number of
Shares
Repurchased
Average Price
Paid per Share
—
28.07
29.27
28.39
— $
217,072 $
78,305 $
295,377 2 $
Total Number of
Shares Purchased
as Part of
Publicly Announced
Plans
or Programs
Maximum Number
(or Approximate
Dollar Value)
of Shares that
May Yet Be
Purchased Under the
Plans or Programs
— $
217,072 $
78,305 $
295,377 $
31,471,005 1
25,373,672
23,080,321
23,080,321
(1) On March 13, 2018, our board of directors authorized a stock repurchase program for the repurchase of up to $50.0
million of our common stock through March 15, 2019.
(2) During the fourth quarter of 2018, we repurchased and retired 295,377 shares of common stock pursuant to the stock
repurchase program. As of December 29, 2018, we had $23.1 million available for future purchases of our common
stock under the stock repurchase program.
- 28 -
Item 6. Selected Financial Data.
The following selected historical consolidated financial data should be read in conjunction with Part II, Item 7,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited
consolidated financial statements and related notes to those statements included in this report. The selected historical
consolidated financial data as of and for the fiscal years ended December 29, 2018 (fiscal 2018), December 30, 2017
(fiscal 2017), December 31, 2016 (fiscal 2016), January 2, 2016 (fiscal 2015) and January 3, 2015 (fiscal 2014) have
been derived from our audited consolidated financial statements.
Fiscal 2018
Fiscal 2017
Fiscal 2016
(In thousands, except per share data and ratios)
Fiscal 2015
Fiscal 2014
349,500
167,389
18,343
(176,386)
—
—
340,154
108,334
13,135
(3,592)
222,277
49,842
676,794
282,085
99,250
11,255
—
—
—
171,580
51,131
—
(790)
121,239
52,149
69,090 $
Consolidated Statement of Operations Data(1):
Net sales(2)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,700,764 $ 1,646,387 $ 1,372,307 $ 958,879 $ 837,336
Cost of goods sold(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,351,264 1,205,809
600,246
237,090
440,578
84,267
183,448
12,692
17,611
—
1,608
34,154
—
(8,206)
—
114,183
237,911
46,573
91,784
5,748
1,163
(1,915)
(3,098)
63,777
148,062
22,821
(69,401)
40,956
943,295
Gross profit(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
429,012
Selling, general and administrative expenses(2)(5) . . . . . . . . . .
157,028
Amortization expense(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,803
(Gain) loss on sale of assets(7) . . . . . . . . . . . . . . . . . . . . . . . . .
—
Impairment of intangible assets(8) . . . . . . . . . . . . . . . . . . . . . .
5,405
Gain on change in fair value of contingent consideration(9) . . .
—
Operating income(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
252,776
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
74,456
Loss on extinguishment of debt(10) . . . . . . . . . . . . . . . . . . . . . .
2,836
Other income(2)(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,582)
Income before income tax expense . . . . . . . . . . . . . . . . . . . .
177,066
67,641
Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 172,435 $ 217,463 $ 109,425 $
Earnings per share data:
Weighted average basic common shares outstanding . . . . . . .
Weighted average diluted common shares outstanding . . . . . .
Cash dividends declared per common share . . . . . . . . . . . . . . $
Basic earnings per common share . . . . . . . . . . . . . . . . . . . . . . $
Diluted earnings per common share . . . . . . . . . . . . . . . . . . . . $
Other Financial Data(1):
99,126
Net cash provided by operating activities . . . . . . . . . . . . . . . . $ 209,456 $
(41,627)
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(19,025)
(30,787) (162,965) (438,787) (873,811) (154,277)
Cash payments for acquisition of businesses . . . . . . . . . . . . . .
Net cash (used in) provided by financing activities . . . . . . . . . (753,327)
71,619
216,005
EBITDA(12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 397,385 $ 290,181 $ 291,624 $ 201,023 $ 143,532
Senior debt / EBITDA(13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.2x
7.1x
Total debt / EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EBITDA / cash interest expense(14) . . . . . . . . . . . . . . . . . . . . .
3.4x
Consolidated Balance Sheet Data (at end of year)(1):
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,490
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,054,799 3,561,038 3,043,505 2,571,715 1,649,353
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,653,371 2,251,741 1,746,769 1,759,616 1,025,857
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 900,049 $ 880,819 $ 785,657 $ 457,685 $ 337,995
37,799 $ 289,661 $ 128,479 $
(18,574)
(42,418)
(59,802)
56,585
56,656
1.38 $
1.22 $
1.22 $
66,487
66,706
1.86 $
3.27 $
3.26 $
66,145
66,255
1.89 $
2.61 $
2.60 $
63,203
63,420
1.73 $
1.73 $
1.73 $
53,658
53,747
1.36
0.76
0.76
8.8x
8.8x
4.3x
4.2x
4.2x
3.9x
7.8x
7.8x
3.4x
6.0x
6.0x
4.2x
11,648 $ 206,506 $
359,336
767,444
28,833 $
5,246 $
(1) We completed the sale of Pirate Brands to The Hershey Company on October 17, 2018. We completed the
McCann’s acquisition from TreeHouse Foods, Inc. on July 16, 2018. We completed the Back to Nature acquisition
from Brynwood Partners VI L.P., Mondelēz International and certain other sellers on October 2, 2017. We
completed the Victoria acquisition from Huron Capital Partners and certain other sellers on December 2, 2016. We
completed the spices & seasonings acquisition from ACH Food Companies, Inc. on November 21, 2016. We
completed the Green Giant acquisition from General Mills, Inc., on November 2, 2015. We completed the
Mama Mary’s acquisition from Linsalata Capital Partners and certain other sellers on July 10, 2015. We completed
the Specialty Brands acquisition from affiliates of American Capital, Ltd., and certain individual sellers, on
April 23, 2014. Each of the acquisitions listed above has been accounted for using the acquisition method of
accounting and, accordingly, the assets acquired, liabilities assumed and results of operations of the acquired
business is included in our consolidated financial statements from the date of acquisition.
- 29 -
(2) Net sales, gross profit, selling, general and administrative expenses, operating income and other income for fiscal
2017, 2016, 2015 and 2014 have been adjusted as a result of our retrospective adoption of new accounting standards
relating to revenue recognition and the presentation of net periodic pension cost and net periodic post-retirement
benefit cost. We also reclassified a $1.6 million pre-tax loss on sale of assets for fiscal 2017 from selling, general
and administrative expenses to loss on sale of assets. The adjustments described above had no impact on net income
or earnings per share. See Note 2(s), “Summary of Significant Accounting Policies — Recently Issued Accounting
Standards” to our consolidated financial statements in Part II, Item 8 of this report, for detailed information.
(3) Fiscal 2018, 2017, 2016 and 2015 each contained 52 weeks and fiscal 2014 contained 53 weeks. Net sales for fiscal
2015 and fiscal 2014 were negatively impacted by $1.2 million and $4.1 million, respectively, of customer refunds,
net of insurance recoveries, related to our November 2014 voluntary recall of certain Ortega and Las Palmas
products.
(4) Cost of goods sold for fiscal 2018 includes $76.3 million of non-recurring expenses, including $66.3 million relating
to the non-cash accounting impact of our inventory reduction plan and $10.0 million of warehouse, delivery and
other costs associated with our transition from certain of our existing distribution centers to new distribution centers.
Cost of goods sold for fiscal 2017 includes $2.4 million of amortization of acquisition -related inventory fair value
step-up (for certain spices & seasonings business and Back to Nature inventory acquired and sold during the period)
and a $3.3 million loss on disposal of inventory related to the write-off of discontinued and expired inventory from
recent acquisitions. Fiscal 2016 includes $5.4 million of amortization of acquisition-related inventory fair value
step-up (for certain spices & seasonings business inventory acquired and sold during the period and certain
Green Giant inventory sold during the period) and a $0.8 million loss on disposal of inventory related to the
impairment of Rickland Orchards. Fiscal 2015 includes $6.1 million of amortization of acquisition - related
inventory fair value step - up (for certain Green Giant inventory acquired and sold during the period) and
$0.5 million of charges, net of insurance recoveries, related to the Ortega and Las Palmas recall. Fiscal 2014
includes $8.2 million of inventory write - off and other cost of goods sold charges, net of insurance recoveries,
related to the Ortega and Las Palmas recall and a $4.5 million loss on disposal of inventory related to the
impairment of Rickland Orchards.
(5) Selling, general and administrative expenses for fiscal 2018 includes $16.9 million of acquisition/divestiture-related
and non-recurring expenses, including divestiture expenses for the Pirate Brands sale and acquisition and integration
expenses for the McCann’s, Green Giant, spices & seasonings, Victoria and Back to Nature acquisitions. Selling,
general and administrative expenses for fiscal 2017 include $35.6 million of acquisition-related and non-recurring
expenses, including acquisition and integration expenses for the Green Giant, spices & seasonings, Victoria and
Back to Nature acquisitions, severance and hiring costs and a non-recurring startup surcharge paid to a co-packer.
Selling, general and administrative expenses for fiscal 2016 include $17.5 million of acquisition - related expenses
for the Victoria, spices & seasonings, Green Giant and Mama Mary’s acquisitions and $1.3 million of distribution
restructuring expenses. Selling, general and administrative expenses for fiscal 2015 include $6.1 million of
acquisition - related expenses for the Green Giant and Mama Mary’s acquisitions, $2.7 million of distribution
restructuring expenses and $0.2 million of administrative expenses, net of insurance recoveries, related to the
Ortega and Las Palmas recall. Selling, general and administrative expenses for fiscal 2014 include $7.3 million of
acquisition - related expenses for the Specialty Brands, Rickland Orchards and Pirate Brands acquisitions and
$0.5 million of administrative expenses, net of insurance recoveries, related to the Ortega and Las Palmas recall.
(6) Amortization expense includes the amortization of customer relationships, amortizable trademarks and other
intangible assets acquired in the McCann’s, Back to Nature, Victoria, spices & seasonings, Green Giant,
Mama Mary’s, Specialty Brands, Rickland Orchards, Pirate Brands, TrueNorth and prior acquisitions.
(7) During fiscal 2018, we recognized a pre-tax gain on the Pirate Brands sale of $176.4 million. See Note 3,
“Acquisitions and Divestitures” to our consolidated financial statements in Part II, Item 8 of this report, for detailed
information. During fiscal 2017, we recorded a $1.6 million pre-tax loss as we sold to a third-party co-packer our
Le Sueur, Minnesota research center, including the seed technology assets, property, plant and equipment.
(8) Impairment of intangible assets for fiscal 2016 includes a $4.5 million loss for the impairment of amortizable
trademarks and a $0.9 million loss for the impairment of customer relationship intangibles, both relating to Rickland
Orchards. Impairment of intangible assets for fiscal 2014 includes a $26.8 million loss for the impairment of
amortizable trademarks and a $7.4 million loss for the impairment of customer relationship intangibles, both relating
to Rickland Orchards.
- 30 -
(9) In addition to the base purchase price consideration paid at closing, the acquisition agreement for Rickland
Orchards required that we pay additional purchase price earn - out consideration contingent upon the achievement of
revenue growth targets for fiscal 2014, 2015 and 2016. At the time of acquisition, we established the fair value of
the contingent consideration using revenue growth targets meant to achieve operating results in excess of base
purchase price acquisition model assumptions. As required, at June 28, 2014 we remeasured the fair value of the
contingent consideration using actual operating results through June 28, 2014 and revised forecasted operating
results for the remainder of fiscal 2014, 2015 and 2016, and reduced the probability of achievement and the fair
value of the contingent consideration to zero. This resulted in a non - cash gain of $8.2 million that is included in gain
on change in fair value of contingent consideration in fiscal 2014.
(10) Fiscal 2018 loss on extinguishment of debt includes the write-off of deferred debt financing costs and unamortized
discount of $11.1 million and $2.0 million, respectively, relating to the repayment of all outstanding borrowings
under the tranche B term loans. Fiscal 2017 loss on extinguishment of debt includes the write-off of deferred debt
financing costs of $0.9 million and the write-off of unamortized discount of $0.2 million in connection with the
repayment of all outstanding borrowings under the tranche A term loans and the write-off of deferred debt financing
costs and the write-off of unamortized discount of less than $0.1 million in connection with the refinancing of our
tranche B term loans. Fiscal 2016 loss on extinguishment of debt includes the write-off of deferred debt financing
costs of $2.2 million and the write-off of unamortized discount of $0.6 million in connection with the repayment of
$40.1 million aggregate principal amount of our tranche A term loans and $109.9 million aggregate principal
amount of our tranche B term loans. Fiscal 2014 loss on extinguishment of debt includes the write - off of deferred
debt financing costs of $5.4 million and the write - off of unamortized discount of $0.3 million in connection with the
termination of our prior credit agreement and the repayment of all outstanding obligations thereunder.
(11) Other income for fiscal 2018 includes remeasurement of monetary assets denominated in a foreign currency into
U.S. dollars of $1.2 million and includes the impact of the newly adopted presentation of net periodic pension cost
and net periodic post-retirement benefit costs below operating profit in the amount of $2.4 million. Other income for
fiscal 2017 includes remeasurement of monetary assets denominated in a foreign currency into U.S. dollars of $1.6
million and includes the impact of the newly adopted presentation of net periodic pension cost and net periodic post-
retirement benefit costs below operating profit in the amount of $1.5 million. Other income for fiscal 2016 includes
remeasurement of monetary assets denominated in a foreign currency into U.S. dollars of $0.4 million and includes
the impact of the newly adopted presentation of net periodic pension cost and net periodic post-retirement benefit
costs below operating profit in the amount of $1.2 million. Other income for fiscal 2015 includes the impact of the
newly adopted presentation of net periodic pension cost and net periodic post-retirement benefit costs below
operating profit in the amount of $0.8 million. Other income for fiscal 2014 includes the impact of the newly
adopted presentation of net periodic pension cost and net periodic post-retirement benefit costs below operating
profit in the amount of $1.9 million.
- 31 -
(12) EBITDA and adjusted EBITDA are non-GAAP financial measures used by management to measure operating
performance. A non - GAAP financial measure is defined as a numerical measure of our financial performance that
excludes or includes amounts so as to be different from the most directly comparable measure calculated and
presented in accordance with GAAP in our consolidated balance sheets and related consolidated statements of
operations, comprehensive income, changes in stockholders’ equity and cash flows. We define EBITDA as net
income before net interest expense, income taxes, depreciation and amortization and loss on extinguishment of debt
(see footnote (10) above). We define adjusted EBITDA as EBITDA adjusted for cash and non-cash
acquisition/divestiture-related expenses, gains and losses (which may include third party fees and expenses,
integration, restructuring and consolidation expenses, amortization of acquired inventory fair value step-up and
gains and losses on the sale of assets); non-recurring expenses, gains and losses; gains and losses related to changes
in the fair value of contingent liabilities from earn-outs; the non-cash accounting impact of our inventory reduction
plan; intangible asset impairment charges and related asset write-offs; loss on product recalls, including customer
refunds, selling, general and administrative expenses and the impact on cost of sales; and distribution restructuring
expenses. Management believes that it is useful to eliminate these items because it allows management to focus on
what it deems to be a more reliable indicator of ongoing operating performance and our ability to generate cash flow
from operations. We use EBITDA and adjusted EBITDA in our business operations to, among other things, evaluate
our operating performance, develop budgets and measure our performance against those budgets, determine
employee bonuses and evaluate our cash flows in terms of cash needs. We also present EBITDA and adjusted
EBITDA because we believe they are useful indicators of our historical debt capacity and ability to service debt and
because covenants in our credit agreement and our senior notes indentures contain ratios based on these measures.
As a result, reports used by internal management during monthly operating reviews feature the EBITDA and
adjusted EBITDA metrics. However, management uses these metrics in conjunction with traditional GAAP
operating performance and liquidity measures as part of its overall assessment of company performance and
liquidity, and therefore does not place undue reliance on these measures as its only measures of operating
performance and liquidity.
EBITDA and adjusted EBITDA are not recognized terms under GAAP and do not purport to be alternatives to
operating income, net income or any other GAAP measure as an indicator of operating performance. EBITDA and
adjusted EBITDA are not complete net cash flow measures because EBITDA and adjusted EBITDA are measures
of liquidity that do not include reductions for cash payments for an entity’s obligation to service its debt, fund its
working capital, capital expenditures and acquisitions and pay its income taxes and dividends. Rather, EBITDA and
adjusted EBITDA are two potential indicators of an entity’s ability to fund these cash requirements. EBITDA and
adjusted EBITDA are not complete measures of an entity’s profitability because they do not include certain costs
and expenses and gains and losses described above. Because not all companies use identical calculations, this
presentation of EBITDA and adjusted EBITDA may not be comparable to other similarly titled measures of other
companies. However, EBITDA and adjusted EBITDA can still be useful in evaluating our performance against our
peer companies because management believes these measures provide users with valuable insight into key
components of GAAP amounts. A reconciliation of EBITDA and adjusted EBITDA to net income and to net cash
provided by operating activities for fiscal 2018, 2017, 2016, 2015 and 2014 along with the components of EBITDA
and adjusted EBITDA follows:
- 32 -
Fiscal 2018 Fiscal 2017 Fiscal 2016 Fiscal 2015 Fiscal 2014
(In thousands)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 172,435 $ 217,463 $ 109,425 $ 69,090 $ 40,956
Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22,821
46,573
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . .
27,434
Loss on extinguishment of debt(A) . . . . . . . . . . . . . . . . . . . . . . . .
5,748
143,532
EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition/divestiture-related and non-recurring expenses(B) . .
7,315
Inventory reduction plan impact(C) . . . . . . . . . . . . . . . . . . . . . . .
—
Amortization of acquisition-related inventory step-up(D) . . . . . . .
—
Impairment of intangible assets(E) . . . . . . . . . . . . . . . . . . . . . . . .
34,154
Loss on disposal of inventory(F) . . . . . . . . . . . . . . . . . . . . . . . . . .
4,535
(Gain) loss on sale of assets(G) . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Loss on product recall, net of insurance recoveries(H) . . . . . . . . .
12,798
Distribution restructuring expenses(I) . . . . . . . . . . . . . . . . . . . . . .
—
Gain on change in fair value of contingent consideration(J) . . . . .
(8,206)
194,128
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(22,821)
Income tax (expense) benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(46,573)
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition/divestiture-related and non-recurring expenses(B) . .
(7,315)
Inventory reduction plan impact(C) . . . . . . . . . . . . . . . . . . . . . . .
—
Amortization of acquisition-related inventory step-up(D) . . . . . . .
—
Loss on product recall, net of insurance recoveries(H) . . . . . . . . .
(12,798)
Distribution restructuring expenses(I) . . . . . . . . . . . . . . . . . . . . . .
—
Write-off of property, plant and equipment(J) . . . . . . . . . . . . . . .
—
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,855
3,790
Amortization of deferred financing costs and bond discount . . . .
2,235
Share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . .
(2,356)
Excess tax benefits from share-based compensation . . . . . . . . . .
Acquisition-related contingent consideration expense, including
49,842
108,334
53,639
13,135
397,385
26,863
66,320
—
—
—
(176,386)
—
—
—
314,182
(49,842)
(108,334)
(26,863)
(66,320)
—
—
—
931
(1,494)
5,282
3,025
—
52,149
51,131
28,653
—
201,023
6,118
—
6,127
—
—
—
1,868
2,665
—
217,801
(52,149)
(51,131)
(6,118)
—
(6,127)
(1,868)
(2,665)
(107)
29,152
3,900
5,817
(539)
67,641
74,456
37,266
2,836
291,624
17,523
—
5,424
5,405
791
—
—
1,273
—
322,040
(67,641)
(74,456)
(17,523)
—
(5,424)
—
(1,273)
337
56,190
5,426
5,798
(343)
(69,401)
91,784
49,172
1,163
290,181
35,745
—
2,380
—
3,287
1,608
—
—
—
333,201
69,401
(91,784)
(35,745)
—
(2,380)
—
—
208
(80,525)
5,812
4,615
—
interest accretion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
432
Changes in assets and liabilities, net of effects of business
combinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
138,889
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . $ 209,456 $
(A) See footnote (10) above.
(165,004)
(23,451)
37,799 $ 289,661 $ 128,479 $ 99,126
66,530
(7,487)
(B) Acquisition/divestiture-related and non-recurring expenses for fiscal 2018 primarily includes divestiture expenses
for the Pirate Brands sale and acquisition and integration expenses for the McCann’s, Green Giant, spices &
seasonings, Victoria and Back to Nature acquisitions. Fiscal 2017 primarily includes acquisition and integration
expenses for the Green Giant, spices & seasonings, Victoria and Back to Nature acquisitions, severance and hiring
costs, a non-recurring interest charge relating to the refinancing of our credit agreement and a non-recurring startup
surcharge paid to a co-packer. Fiscal 2016 primarily includes acquisition and integration expenses for the
Green Giant, spices & seasonings, Victoria and Back to Nature acquisitions, and severance and hiring costs. Fiscal
2015 primarily includes acquisition and integration expenses for the Green Giant and Mama Mary’s acquisition and
severance and hiring costs. Fiscal 2014 primarily includes acquisition and integration expenses for the Special
Brands acquisition and severance and hiring costs.
(C) For fiscal 2018, the inventory reduction plan impact of $66.3 million includes $51.1 million of fixed manufacturing,
warehouse and other corporate overhead costs associated with inventory purchased and converted into finished
goods in fiscal 2017 and sold in fiscal 2018 and $15.2 million for the underutilization of our manufacturing facilities
as we reduced inventory during the implementation of the inventory reduction plan.
(D) See footnote (4) above.
(E) See footnote (8) above.
(F) Fiscal 2017 represents a loss on disposal of inventory related to the write-off of discontinued and expired inventory
from recent acquisitions. Fiscal 2016 and 2014 represent a loss on disposal of inventory related to the impairment of
Rickland Orchards. See footnote (8) above.
- 33 -
(G) During fiscal 2018, we completed the Pirate Brands sale. The sale resulted in a pre-tax gain of $176.4 million.
During fiscal 2017, we sold to a third-party co-packer our Le Sueur, Minnesota research center, including the seed
technology assets, property, plant and equipment. We acquired the research center and related assets on
November 2, 2015, as part of the Green Giant acquisition. The sale resulted in a $1.6 million pre-tax loss on sale of
assets.
(H) On November 14, 2014, we announced a voluntary recall for certain Ortega and Las Palmas products after learning
that one or more of the spice ingredients purchased from a third party supplier contained peanuts and almonds,
allergens that are not declared on the products’ ingredient statements. The cost impact of this recall during fiscal
2015 was $1.9 million, of which $1.2 million was recorded as a decrease in net sales related to customer refunds;
$0.5 million was recorded as an increase in cost of goods sold primarily related to costs associated with product
retrieval, destruction charges and customer fees; and $0.2 million was recorded as an increase in selling, general,
and administrative expenses related to administrative costs. The charges we recorded are based upon costs incurred
to date. During fiscal 2015, we recovered $5.0 million of insurance proceeds. The cost impact of this recall during
fiscal 2014 (not including lost sales during the period of time production and distribution of the affected products
were suspended), net of insurance recoveries of $5.0 million (received in fiscal 2015), was $12.8 million, of which
$4.1 million was recorded as a decrease in net sales related to customer refunds; $8.2 million was recorded as an
increase in cost of goods sold primarily related to costs associated with product retrieval, destruction charges and
customer fees; and $0.5 million was recorded as an increase in selling, general, and administrative expenses related
to administrative costs
(I) Distribution restructuring expenses for fiscal 2016 and fiscal 2015 includes expenses relating to our transitioning of
the operations of our then three primary shelf-stable distribution centers and a new fourth primary shelf-stable
distribution center in the United States to a third party logistics provider.
(J) See footnote (9) above.
(K) See footnote (H) above.
(13) As of the end of each fiscal year presented, senior debt is defined as the face amount of all of our outstanding debt.
Current and former senior secured credit agreement:
Fiscal 2018 Fiscal 2017 Fiscal 2016 Fiscal 2015 Fiscal 2014
(In thousands, except ratios)
Revolving credit facility . . . . . . . . . . . . . . . . . . . . . . . . . $
Tranche A term loan due 2019 . . . . . . . . . . . . . . . . . . . .
Tranche B term loan due 2022 . . . . . . . . . . . . . . . . . . . .
4.625% senior notes due 2021 . . . . . . . . . . . . . . . . . . . . . .
5.25% senior notes due 2025 . . . . . . . . . . . . . . . . . . . . . . .
34,000
50,000 $
292,500
—
—
—
700,000
700,000
—
900,000
Senior debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,650,000 $ 2,250,110 $ 1,749,750 $ 1,763,750 $ 1,026,500
143,532
7.2x
194,128
5.3x
EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Senior debt / EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Senior debt /adjusted EBITDA . . . . . . . . . . . . . . . . . . . . .
176,000 $
233,640
640,110
700,000
—
— $
—
650,110
700,000
900,000
397,385 $
4.2x
314,182 $
5.3x
290,181 $
7.8x
333,201 $
6.8x
291,624 $
6.0x
322,040 $
5.4x
201,023 $
8.8x
217,801 $
8.1x
273,750
750,000
700,000
—
40,000 $
See Note 7, “Long-Term Debt,” to our consolidated financial statements in Part II, Item 8 of this report, for more
information about our long-term debt. As of December 29, 2018, we were in compliance with all of the covenants,
including the financial covenants, in our credit agreement and the indentures governing the 4.625% senior notes and
5.25% senior notes.
(14) Cash interest expense, calculated below, is equal to net interest expense less amortization of deferred financing and
bond discount.
Fiscal 2018 Fiscal 2017 Fiscal 2016 Fiscal 2015 Fiscal 2014
(In thousands, except ratios)
Cash interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 103,052 $
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 108,334 $
Amortization of deferred financing and bond discount . . . .
46,573
(3,790)
42,783
EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 397,385 $ 290,181 $ 291,624 $ 201,023 $ 143,532
EBITDA / cash interest expense . . . . . . . . . . . . . . . . . . . . .
3.4x
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 314,182 $ 333,201 $ 322,040 $ 217,801 $ 194,128
4.5x
Adjusted EBITDA / cash interest expense . . . . . . . . . . . . . .
74,456 $
(5,426)
69,030 $
51,131 $
(3,900)
47,231 $
91,784 $
(5,812)
85,972 $
(5,282)
4.2x
4.7x
4.6x
4.3x
3.9x
3.0x
3.4x
3.9x
- 34 -
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations
contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain factors, including those set forth under Part I,
Item 1A, “Risk Factors,” under the heading “Forward-Looking Statements” before Part I of this report and elsewhere in
this report. The following discussion should be read in conjunction with the consolidated financial statements and related
notes included elsewhere in this report.
General
We manufacture, sell and distribute a diverse portfolio of branded, high quality, shelf - stable and frozen foods
and household products, many of which have leading regional or national market shares. In general, we position our
branded products to appeal to the consumer desiring a high quality and reasonably priced product. We complement our
branded product retail sales with institutional and foodservice sales and private label sales.
Our company has been built upon a successful track record of acquisition-driven growth. Our goal is to
continue to increase sales, profitability and cash flows through strategic acquisitions, new product development and
organic growth. We intend to implement our growth strategy through the following initiatives: expanding our brand
portfolio with disciplined acquisitions of complementary branded businesses, continuing to develop new products and
delivering them to market quickly, leveraging our multiple channel sales and distribution system and continuing to focus
on higher growth customers and distribution channels.
Since 1996, we have successfully acquired and integrated more than 45 brands into our company. Most
recently, on July 16, 2018, we completed the acquisition of McCann’s brand of premium Irish oatmeal from TreeHouse
Foods, Inc. On October 2, 2017, we completed the acquisition of Back to Nature Foods Company, LLC and related
entities from Brynwood Partners VI L.P., Mondelēz International and certain other sellers. On December 2, 2016, we
acquired Victoria Fine Foods, LLC, and a related entity, from Huron Capital Partners and certain other sellers. On
November 21, 2016, we completed the acquisition of the spices & seasonings business of ACH Food Companies, Inc.
We refer to these acquisitions in this report as the “McCann’s acquisition,” “Back to Nature acquisition,” “Victoria
acquisition” and “spices & seasonings acquisition,” respectively. Each of these recent acquisitions has been accounted
for using the acquisition method of accounting and, accordingly, the assets acquired, liabilities assumed and results of
operations of the acquired businesses are included in our consolidated financial statements from the respective dates of
acquisition. These acquisitions and the application of the acquisition method of accounting affect comparability between
periods.
During the fourth quarter of 2018, we completed the sale of Pirate Brands to The Hershey Company for a
purchase price of $420.0 million in cash. We refer to this sale in this report as the “Pirate Brands sale.” We recognized a
pre-tax gain on the Pirate Brands sale of $176.4 million.
We are subject to a number of challenges that may adversely affect our businesses. These challenges, which are
discussed above before Part I of this report under the heading “Forward - Looking Statements” and in Part I, Item 1A,
“Risk Factors” include:
Fluctuations in Commodity Prices and Production and Distribution Costs. We purchase raw materials,
including agricultural products, meat, poultry, ingredients and packaging materials from growers, commodity processors,
other food companies and packaging suppliers located in U.S. and foreign locations. Raw materials and other input costs,
such as fuel and transportation, are subject to fluctuations in price attributable to a number of factors. Fluctuations in
commodity prices can lead to retail price volatility and intensive price competition, and can influence consumer and
trade buying patterns. The cost of raw materials, fuel, labor, distribution and other costs related to our operations can
increase from time to time significantly and unexpectedly.
We attempt to manage cost inflation risks by locking in prices through short - term supply contracts and advance
commodities purchase agreements and by implementing cost saving measures. We also attempt to offset rising input
costs by raising sales prices to our customers. However, increases in the prices we charge our customers may lag behind
rising input costs. Competitive pressures also may limit our ability to quickly raise prices in response to rising costs.
- 35 -
We experienced moderate net cost increases for raw materials during fiscal 2018 and anticipate higher raw
materials cost increases for fiscal 2019. We are currently locked into our supply and prices for a majority of our most
significant commodities (excluding, among others, maple syrup) through fiscal 2019. In addition, we expect higher
distribution costs industry-wide for fiscal 2019. To the extent we are unable to avoid or offset any present or future cost
increases by locking in our costs, implementing cost saving measures or increasing prices to our customers, our
operating results could be materially adversely affected. In addition, if input costs begin to decline, customers may look
for price reductions in situations where we have locked into purchases at higher costs.
Consolidation in the Retail Trade and Consequent Inventory Reductions. As the retail grocery trade continues
to consolidate and our retail customers grow larger and become more sophisticated, our retail customers may demand
lower pricing and increased promotional programs. These customers are also reducing their inventories and increasing
their emphasis on private label products.
Changing Consumer Preferences. Consumers in the market categories in which we compete frequently change
their taste preferences, dietary habits and product packaging preferences.
Consumer Concern Regarding Food Safety, Quality and Health. The food industry is subject to consumer
concerns regarding the safety and quality of certain food products. If consumers in our principal markets lose confidence
in the safety and quality of our food products, even as a result of a product liability claim or a product recall by a food
industry competitor, our business could be adversely affected.
Fluctuations in Currency Exchange Rates. Our foreign sales are primarily to customers in Canada. Our sales to
Canada are generally denominated in Canadian dollars and our sales for export to other countries are generally
denominated in U.S. dollars. During fiscal 2018, 2017 and 2016, our net sales to customers in foreign countries
represented approximately 7.3%, 6.3% and 7.1%, respectively, of our total net sales. We also purchase a significant
majority of our maple syrup requirements from suppliers located in Québec, Canada. Any weakening of the U.S. dollar
against the Canadian dollar could significantly increase our costs relating to the production of our maple syrup products
to the extent we have not purchased Canadian dollars in advance of any such weakening of the U.S. dollar or otherwise
entered into a currency hedging arrangement in advance of any such weakening of the U.S. dollar. These increased costs
would not be fully offset by the positive impact the change in the relative strength of the Canadian dollar versus the U.S.
dollar would have on our net sales in Canada. Our purchases of raw materials from other foreign suppliers are generally
denominated in U.S. dollars. We also operate a manufacturing facility in Irapuato, Mexico for the manufacture of
Green Giant frozen products and are as a result exposed to fluctuations in the Mexican peso. Our results of operations
could be adversely impacted by changes in foreign currency exchange rates. Costs and expenses in Mexico are
recognized in local foreign currency, and therefore we are exposed to potential gains or losses from the translation of
those amounts into U.S. dollars for consolidation into our consolidated financial statements.
To confront these challenges, we continue to take steps to build the value of our brands, to improve our existing
portfolio of products with new product and marketing initiatives, to reduce costs through improved productivity, to
address consumer concerns about food safety, quality and health and to favorably manage currency fluctuations.
Critical Accounting Policies; Use of Estimates
The preparation of financial statements in accordance with generally accepted accounting principles in the
United States (GAAP) requires our management to make a number of estimates and assumptions relating to the reporting
of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the reporting period. Some of the more significant
estimates and assumptions made by management involve revenue recognition as it relates to trade and consumer
promotion expenses; pension benefits; acquisition accounting fair value allocations; the recoverability of goodwill, other
intangible assets, property, plant and equipment, and deferred tax assets; the determination of the useful life of customer
relationship and amortizable trademark intangibles; and the fair value of contingent consideration liabilities. Actual
results could differ significantly from these estimates and assumptions.
Our significant accounting policies are described more fully in note 2 to our consolidated financial statements
included elsewhere in this report. We believe the following critical accounting policies involve the most significant
judgments and estimates used in the preparation of our consolidated financial statements.
- 36 -
Revenue Recognition and Trade and Consumer Promotion Expenses
We offer various sales incentive programs to customers and consumers, such as price discounts, in - store
display incentives, slotting fees and coupons. The recognition of expense for these programs involves the use of
judgment related to performance and redemption estimates. Estimates are made based on historical experience and other
factors. Actual expenses may differ if the level of redemption rates and performance vary from our estimates.
In May 2014, the Financial Accounting Standards Board (FASB) issued authoritative guidance related to new
accounting requirements for the recognition of revenue from contracts with customers. The core principle of the
guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in
an amount that reflects the consideration to which the entity expects to be entitled to in exchange for the goods or
services.
We adopted this guidance and related amendments as of the first quarter of fiscal 2018 applying the full
retrospective transition approach to all contracts. Based on our comprehensive assessment of the new guidance,
including our evaluation of the five-step approach outlined within the guidance, we concluded that the adoption would
not have a significant impact to our core revenue generating activities. However, the adoption did result in a change in
presentation of certain trade and consumer promotion expenses, specifically in-store display incentives, also referred to
as marketing development funds.
We previously recorded in-store display incentives, or marketing development funds, within selling, general
and administrative expenses in our consolidated statements of operations. Upon the adoption of the new guidance, many
of these cash payments did not meet the specific criteria within the new guidance of providing a “distinct” good or
service, and therefore, is required to be presented as a reduction of net sales. The impact of this change resulted in a
reduction of net sales, gross profit and selling, general and administrative expenses during fiscal 2018, the first year of
adoption, with no impact to net income. See Note 2(s), “Summary of Significant Accounting Policies — Recently Issued
Accounting Standards,” to our consolidated financial statements in Part II, Item 8 of this report for the adjustments to net
sales, gross profit and selling, general and administrative expenses for fiscal 2017 and 2016 as a result of the newly
adopted revenue recognition standard.
Long - Lived Assets
Long - lived assets, such as property, plant and equipment, and intangibles with estimated useful lives are
depreciated or amortized over their respective estimated useful lives to their estimated residual values, and 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 estimated undiscounted net future cash flows expected to be generated by the asset. If the carrying amount of an asset
exceeds its estimated undiscounted net future cash flows, an impairment charge is recognized by the amount by which
the carrying amount of the asset exceeds the fair value of the asset. Recoverability of assets held for sale is measured by
a comparison of the carrying amount of an asset or asset group to their fair value less estimated costs to sell. Estimating
future cash flows and calculating the fair value of assets requires significant estimates and assumptions by management.
Goodwill and Other Intangible Assets
Our total assets include substantial goodwill and unamortizable intangible assets (trademarks). These assets are
tested for impairment at least annually and whenever events or circumstances occur indicating that goodwill or
unamortizable intangibles might be impaired. We perform the annual impairment tests as of the last day of each fiscal
year. The annual goodwill impairment test involves a two - step process. The first step of the impairment test involves
comparing our company’s market capitalization with our company’s carrying value, including goodwill. If the carrying
value of our company exceeds our market capitalization, we perform the second step of the impairment test to determine
the amount of the impairment loss. The second step of the goodwill impairment test involves comparing the implied fair
value of goodwill with the carrying value and recognizing a loss for the difference. As of December 29, 2018, we had
$584.4 million of goodwill recorded in our consolidated balance sheet. Our testing indicates that the implied fair value of
goodwill is significantly in excess of the carrying value. Therefore, we believe that only significant changes in the cash
flow assumptions would result in an impairment of goodwill.
- 37 -
We test our unamortizable intangibles by comparing the fair value with the carrying value and recognize a loss
for the difference. We estimate the fair value of our unamortizable intangibles based on discounted cash flows that
reflect certain third party market value indicators. Calculating our fair value for these purposes requires significant
estimates and assumptions by management, including future cash flows consistent with management’s expectations,
annual sales growth rates, and certain assumptions underlying a discount rate based on available market data. Significant
management judgment is necessary to estimate the impact of competitive operating, macroeconomic and other factors to
estimate the future levels of sales and cash flows.
As of December 29, 2018, we had $1,355.7 million of unamortizable intangibles recorded in our consolidated
balance sheet and none of the balances exceed their calculated fair values, and the percentage excess of calculated fair
value over book value was 172.9% or more. The table below sets forth the book value as of December 29, 2018, of the
trademarks of each of our brands whose fiscal 2018 net sales were equal to or exceeded 3% of our total fiscal 2018 net
sales and for “all other brands” in the aggregate.
Brand: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(in thousands)
Green Giant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Mrs. Dash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bear Creek Country Kitchens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Spices & Seasonings(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ortega . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cream of Wheat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maple Grove Farms of Vermont . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All other brands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
422,000
189,000
113,400
65,200
32,339
27,000
11,627
495,134
1,355,700
Fiscal 2018
(1) The spices & seasonings acquisition was completed on November 21, 2016. Includes trademark values for multiple brands
acquired as part of the acquisition.
All assumptions used in our impairment evaluations for goodwill and unamortizable intangibles, such as
forecasted growth rates and discount rate, are based on the best available market information and are consistent with our
internal forecasts and operating plans. We believe these assumptions to be reasonable, but they are inherently uncertain.
These assumptions could be adversely impacted by certain of the risks described in Part I, Item 1A, “Risk Factors,” of
this report.
We completed our annual impairment tests for fiscal 2018, 2017 and 2016 with no adjustments to the carrying
values of goodwill and unamortizable intangibles. However, materially different assumptions regarding the future
performance of our businesses could result in significant impairment losses. For example, an interim impairment
analysis relating to one of our brands performed during fiscal 2014 resulted in our company recording non-cash
impairment charges to amortizable trademarks and customer relationship intangibles for the brand of $26.9 million and
$7.3 million, respectively, during fiscal 2014. During the second quarter of 2016, we discontinued that brand because
there was not sufficient demand to warrant continued production. Accordingly, we wrote off the related intangible assets
and recorded non-cash impairment charges to amortizable trademarks and customer relationship intangibles of $4.5
million and $0.9 million, respectively, which are recorded in “Impairment of intangible assets” on the accompanying
consolidated statement of operations for fiscal 2016. In addition, any significant decline in our market capitalization,
even if due to macroeconomic factors, could put pressure on the carrying value of our goodwill. A determination that all
or a portion of our goodwill or unamortizable intangible assets are impaired, although a non - cash charge to operations,
could have a material adverse effect on our business, consolidated financial condition and results of operations.
- 38 -
Income Tax Expense Estimates and Policies
As part of the income tax provision process of preparing our consolidated financial statements, we are required
to estimate our income taxes. This process involves estimating our current tax expenses together with assessing
temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences
result in deferred tax assets and liabilities. We then assess the likelihood that our deferred tax assets will be recovered
from future taxable income and to the extent we believe the recovery is not likely, we establish a valuation allowance.
Further, to the extent that we establish a valuation allowance or increase this allowance in a financial accounting period,
we include such charge in our tax provision, or reduce our tax benefits in our consolidated statements of operations. We
use our judgment to determine our provision or benefit for income taxes, deferred tax assets and liabilities and any
valuation allowance recorded against our deferred tax assets.
There are various factors that may cause these tax assumptions to change in the near term, and we may have to
record a valuation allowance against our deferred tax assets. We cannot predict whether future U.S. federal and state
income tax laws and regulations might be passed that could have a material effect on our results of operations. We assess
the impact of significant changes to the U.S. federal and state income tax laws and regulations on a regular basis and
update the assumptions and estimates used to prepare our consolidated financial statements when new regulations and
legislation are enacted. We recognize the benefit of an uncertain tax position that we have taken or expect to take on the
income tax returns we file if it is more likely than not that such tax position will be sustained based upon its technical
merits.
See “U.S. Tax Act” below for a discussion of the U.S. Tax Cuts and Jobs Act that was signed into law on
December 22, 2017, and the impact it has had and may have on our business and financial results.
Pension Expense
We have defined benefit pension plans covering approximately 43% of our employees. Our funding policy is to
contribute annually not less than the amount recommended by our actuaries. The funded status of our pension plans is
dependent upon many factors, including returns on invested assets and the level of certain market interest rates,
employee-related demographic factors, such as turnover, retirement age and mortality, and the rate of salary increases.
Certain assumptions reflect our historical experience and management’s best judgment regarding future expectations.
Due to the significant management judgment involved, our assumptions could have a material impact on the
measurement of our pension expenses and obligations. We review pension assumptions regularly and we may from time
to time make voluntary contributions to our pension plans, which exceed the amounts required by statute. During fiscal
2018, we made total contributions to our pension plans of $5.6 million. During fiscal 2017, we made total contributions
to our pension plans of $8.7 million. Changes in interest rates and the market value of the securities held by the plans
could materially change, positively or negatively, the funded status of the plans and affect the level of pension expense
and required contributions in fiscal 2019 and beyond.
Our discount rate assumption for our four defined benefit plans changed from 3.45% - 3.56% at December 30,
2017 to 4.08% - 4.18% at December 29, 2018. While we do not currently anticipate a change in our fiscal 2019
assumptions, as a sensitivity measure, a 0.25% decline or increase in our discount rate would increase or decrease our
pension expense by approximately $0.5 million to $0.6 million. Similarly, a 0.25% decrease or increase in the expected
return on pension plan assets would increase or decrease our pension expense by approximately $0.3 million. We
currently do not expect to make any contributions to our defined benefit pension plans during fiscal 2019.
Acquisition Accounting
Our consolidated financial statements and results of operations include an acquired business’s operations after
the completion of the acquisition. We account for acquired businesses using the acquisition method of accounting, which
requires that the assets acquired and liabilities assumed be recorded at the date of acquisition at their respective fair
values. Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill.
Transaction costs are expensed as incurred.
- 39 -
The judgments made in determining the estimated fair value assigned to each class of assets acquired and
liabilities assumed, as well as asset lives, can materially impact our results of operations. Accordingly, for significant
items, we typically obtain assistance from third party valuation specialists. Determining the useful life of an intangible
asset also requires judgment as different types of intangible assets will have different useful lives and certain assets may
even be considered to have indefinite useful lives. All of these judgments and estimates can materially impact our results
of operations.
U.S. Tax Act
On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act, which we refer to as the
“U.S. Tax Act.” The changes in the U.S. Tax Act are broad and complex and we continue to examine the impact the U.S.
Tax Act may have on our business and financial results. The U.S. Tax Act contains provisions with separate effective
dates but is generally effective for taxable years beginning after December 31, 2017.
Under FASB Accounting Standards Codification (ASC) Topic 740, Income Taxes, we are required to revalue
any deferred tax assets or liabilities in the period of enactment of change in tax rates. The U.S. Tax Act lowers the
federal corporate income tax rate from 35% to 21%. In the fourth quarter of 2017 we revalued our prior year U.S.
deferred tax assets and liabilities at the lower U.S. corporate income tax rate, which resulted in a discrete tax benefit of
approximately $133.3 million. This tax benefit was partially offset by an increase in our blended state rate of
approximately $5.8 million and a repatriation expense of $0.9 million.
The reduction in the corporate income tax rate from 35% to 21% was effective for our fiscal 2018. Our
consolidated effective tax rate for fiscal 2018 was 22.4%.
We also expect to realize a cash tax benefit for future bonus depreciation on certain business additions, which,
together with the reduced income tax rate, we expect to reduce our cash income tax payments.
The U.S. Tax Act also limits the deduction for net interest expense incurred by a corporate taxpayer to 30% of
the taxpayer’s adjusted taxable income. Although we currently expect that our interest expense may exceed 30% of our
adjusted taxable income, at this time we do not believe this limitation will have a material adverse impact on our
business or financial results because any interest that is non-deductible may be carried forward indefinitely.
The U.S. Treasury's proposed 2018 regulations also seek to clarify the application of the U.S. Tax Act
provisions for the limitation of interest expense, including treatment of depreciation and other deductions in arriving at
adjusted taxable income and application of the rules to controlled foreign affiliates. These regulations remain open for
comment and are not effective until published in the federal register. As a result, we will monitor their impact to our
filing positions and will record the impacts as discrete income tax expense adjustments in the period that the guidance is
finalized.
The SEC issued guidance on December 23, 2017 providing a one-year measurement period from a registrant’s
reporting period that includes the U.S. Tax Act’s enactment date to allow the registrant sufficient time to obtain, prepare
and analyze information to complete the accounting required under ASC 740. As of December 29, 2018, we have
recorded all known and estimable impacts of the U.S. Tax Act that are effective for fiscal 2018.
The ultimate impact of the U.S. Tax Act on our reported results in fiscal 2019 and beyond may differ from the
estimates provided in this report, possibly materially, due to, among other things, changes in interpretations and
assumptions we have made, guidance that may be issued, and other actions we may take as a result of the U.S. Tax Act
different from that currently contemplated.
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Results of Operations(1)
The following table sets forth the percentages of net sales represented by selected items reflected in our
consolidated statements of operations. The comparisons of financial results are not necessarily indicative of future
results:
Statement of Operations Data:
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2018
Fiscal 2017
Fiscal 2016
100.0 %
79.5 %
20.5 %
100.0 %
73.2 %
26.8 %
100.0 %
68.7 %
31.3 %
Operating expenses:
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . .
Amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) loss on sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.8 %
1.1 %
(10.4) %
— %
20.0 %
Other income and expenses:
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income tax expense (benefit) . . . . . . . . . . . . . . . . . . .
Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.4 %
0.8 %
(0.3) %
13.1 %
3.0 %
10.1 %
As used in this section the terms listed below have the following meanings:
11.1 %
1.1 %
0.1 %
— %
14.5 %
5.6 %
0.1 %
(0.2) %
9.0 %
(4.2) %
13.2 %
11.4 %
1.1 %
— %
0.4 %
18.4 %
5.4 %
0.2 %
(0.1) %
12.9 %
4.9 %
8.0 %
Net Sales. Our net sales represents gross sales of products shipped to customers plus amounts charged to
customers for shipping and handling, less cash discounts, coupon redemptions, slotting fees and trade promotional
spending.
Gross Profit. Our gross profit is equal to our net sales less cost of goods sold. The primary components of our
cost of goods sold are cost of internally manufactured products, purchases of finished goods from co - packers, a portion
of our warehousing expenses plus freight costs to our distribution centers and to our customers.
Selling, General and Administrative Expenses. Our selling, general and administrative expenses include costs
related to selling our products, as well as all other general and administrative expenses. Some of these costs include
administrative, marketing and internal sales force employee compensation and benefits costs, consumer advertising
programs, brokerage costs, a portion of our warehousing expenses, information technology and communication costs,
office rent, utilities, supplies, professional services, acquisition/divestiture-related and non-recurring expenses and other
general corporate expenses.
Amortization Expense. Amortization expense includes the amortization expense associated with customer
relationships, amortizable trademarks and other intangibles.
(Gain) Loss on Sale of Assets. (Gain) loss on sale of assets includes a gain recognized on the Pirate Brands sale
in fiscal 2018 and a loss recognized on the sale of our Le Sueur, Minnesota research center in fiscal 2017.
Impairment of Intangible Assets. Impairment of intangible assets represents a reduction of the carrying value of
amortizable intangible assets to fair value when the carrying value of the assets is no longer recoverable.
(1) Net sales, gross profit, selling, general and administrative expenses, operating income and other income for fiscal 2017 and 2016
have been adjusted as a result of our retrospective adoption of new accounting standards relating to revenue recognition and the
presentation of net periodic pension cost and net periodic post-retirement benefit cost. We also reclassified a $1.6 million pre-tax
loss on sale of assets for fiscal 2017 from selling, general and administrative expenses to loss on sale of assets. The adjustments
described above had no impact on net income or earnings per share. See Note 2(s), “Summary of Significant Accounting Policies
— Recently Issued Accounting Standards” to our consolidated financial statements in Part II, Item 8 of this report, for detailed
information.
- 41 -
Net Interest Expense. Net interest expense includes interest relating to our outstanding indebtedness,
amortization of bond discount and amortization of deferred debt financing costs (net of interest income).
Loss on Extinguishment of Debt. Loss on extinguishment of debt includes costs relating to the retirement of
indebtedness, including repurchase premium, if any, and write - off of deferred debt financing costs and unamortized
discount, if any.
Other Income. Other income includes expense and/or income resulting from the remeasurement of monetary
assets denominated in a foreign currency into U.S. dollars for financial reporting purposes and the impact of the recently
and retrospectively adopted presentation of net periodic pension cost and net periodic post-retirement benefit cost below
operating profit, in accordance with the FASB ASU issued in March 2017. See Note 2(s), “Summary of Significant
Accounting Policies — Recently Issued Accounting Standards,” to our consolidated financial statements in Part II, Item
8 of this report for further details.
Non-GAAP Financial Measures
Certain disclosures in this report include non-GAAP financial measures. A non-GAAP financial measure is
defined as a numerical measure of our financial performance that excludes or includes amounts so as to be different from
the most directly comparable measure calculated and presented in accordance with GAAP in our consolidated balance
sheets and related consolidated statements of operations, comprehensive income, changes in stockholders’ equity and
cash flows.
Base Business Net Sales. Base business net sales is a non-GAAP financial measure used by management to
measure operating performance. We define base business net sales as our net sales excluding (1) the net sales of
acquisitions until at least one full quarter of net sales from such acquisitions are included in both comparable periods, (2)
net sales of discontinued or divested brands and (3) net sales of our IQF bulk rice products, see footnote 3 to the table
below. The portion of current period net sales attributable to recent acquisitions for which there is not at least one full
quarter of net sales in the comparable period of the prior year is excluded. For each acquisition, the excluded period
starts at the beginning of the most recent fiscal period being compared and ends on the last day of the quarter in which
the first anniversary of the date of acquisition occurs, and the period from the date of acquisition to the end of the quarter
in which the acquisition occurred. For discontinued or divested brands, the entire amount of net sales is excluded from
each fiscal period being compared. Management has included this financial measure because it provides useful and
comparable trend information regarding the results of our business without the effect of the timing of acquisitions and
the effect of discontinued or divested brands. The definition of base business net sales was modified in the first quarter
of 2018 to exclude net sales of our IQF bulk rice products, as described in footnote 3 below.
A reconciliation of base business net sales to net sales for fiscal 2018 and 2017 follows (in thousands):
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,700,764
Net sales from acquisitions(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(60,193)
Net sales of non-branded IQF bulk rice products(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,494)
Net sales from divested brands(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(74,853)
Base business net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,564,224
Fiscal 2018
Fiscal 2017(1)
$ 1,646,387
—
(8,518)
(87,705)
$ 1,550,164
(1) Prior period net sales have been adjusted as a result of our retrospective adoption of the new accounting standard relating to
revenue recognition. See Note 2(s), “Summary of Significant Accounting Policies — Recently Issued Accounting Standards,” to
our consolidated financial statements in Part II, Item 8 of this report.
(2) Reflects net sales for Back to Nature for the first three quarters of 2018 and net sales of McCann’s for fiscal 2018.
Back to Nature was acquired on October 2, 2017 and McCann’s was acquired on July 16, 2018.
(3) Reflects net sales of our non-branded individually quick frozen (IQF) bulk rice products, which is a product line we acquired as
part of the Green Giant acquisition, and which we are excluding from net sales for the purposes of calculating base business net
sales because we do not consider the non-branded IQF bulk rice products to be part of our core business or material.
(4) Reflects net sales of Pirate Brands. We completed the Pirate Brands sale on October 17, 2018. See Note 3, “Acquisitions and
Divestitures,” to our consolidated financial statements in Part II, Item 8 of this report.
- 42 -
A reconciliation of base business net sales to net sales for fiscal 2017 and 2016 follows (in thousands):
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,646,387
Net sales from acquisitions(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(321,540)
Net sales of Rickland Orchards(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Base business net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,324,847
Fiscal 2017(1)
Fiscal 2016(1)
$ 1,372,307
(31,416)
(515)
$ 1,340,376
(1) Prior period net sales have been adjusted as a result of our retrospective adoption of the new accounting standard relating to
revenue recognition. See Note 2(s), “Summary of Significant Accounting Policies — Recently Issued Accounting Standards,” to
our consolidated financial statements in Part II, Item 8 of this report.
(2) Reflects all net sales for Victoria and the spices & seasonings business for each period presented and net sales for Back to Nature
for fiscal 2017. Back to Nature was acquired on October 2, 2017, Victoria was acquired on December 2, 2016, and the spices &
seasonings business was acquired on November 21, 2016.
(3) Reflects all fiscal 2016 net sales of Rickland Orchards. Rickland Orchards was discontinued during the second quarter of 2016.
EBITDA and Adjusted EBITDA. EBITDA and adjusted EBITDA are non-GAAP financial measures used by
management to measure operating performance. We define EBITDA as net income before net interest expense, income
taxes, depreciation and amortization and loss on extinguishment of debt. We define adjusted EBITDA as EBITDA
adjusted for cash and non-cash acquisition/divestiture-related expenses, gains and losses (which may include third party
fees and expenses, integration, restructuring and consolidation expenses, amortization of acquired inventory fair value
step-up and gains and losses on the sale of assets); non-recurring expenses, gains and losses; gains and losses related to
changes in the fair value of contingent liabilities from earn-outs; the non-cash accounting impact of our inventory
reduction plan; intangible asset impairment charges and related asset write-offs; loss on product recalls, including
customer refunds, selling, general and administrative expenses and the impact on cost of sales; and distribution
restructuring expenses. Management believes that it is useful to eliminate these items because it allows management to
focus on what it deems to be a more reliable indicator of ongoing operating performance and our ability to generate cash
flow from operations. We use EBITDA and adjusted EBITDA in our business operations to, among other things,
evaluate our operating performance, develop budgets and measure our performance against those budgets, determine
employee bonuses and evaluate our cash flows in terms of cash needs. We also present EBITDA and adjusted EBITDA
because we believe they are useful indicators of our historical debt capacity and ability to service debt and because
covenants in our credit agreement and our senior notes indentures contain ratios based on these measures. As a result,
reports used by internal management during monthly operating reviews feature the EBITDA and adjusted EBITDA
metrics. However, management uses these metrics in conjunction with traditional GAAP operating performance and
liquidity measures as part of its overall assessment of company performance and liquidity, and therefore does not place
undue reliance on these measures as its only measures of operating performance and liquidity.
EBITDA and adjusted EBITDA are not recognized terms under GAAP and do not purport to be alternatives to
operating income, net income or any other GAAP measure as an indicator of operating performance. EBITDA and
adjusted EBITDA are not complete net cash flow measures because EBITDA and adjusted EBITDA are measures of
liquidity that do not include reductions for cash payments for an entity’s obligation to service its debt, fund its working
capital, capital expenditures and acquisitions and pay its income taxes and dividends. Rather, EBITDA and adjusted
EBITDA are two potential indicators of an entity’s ability to fund these cash requirements. EBITDA and adjusted
EBITDA are not complete measures of an entity’s profitability because they do not include certain costs and expenses
and gains and losses described above. Because not all companies use identical calculations, this presentation of EBITDA
and adjusted EBITDA may not be comparable to other similarly titled measures of other companies. However, EBITDA
and adjusted EBITDA can still be useful in evaluating our performance against our peer companies because management
believes these measures provide users with valuable insight into key components of GAAP amounts.
- 43 -
A reconciliation of EBITDA and adjusted EBITDA to net income and to net cash provided by operating
activities for fiscal 2018, 2017 and 2016 along with the components of EBITDA and adjusted EBITDA follows (in
thousands):
Fiscal 2018 Fiscal 2017 Fiscal 2016
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 172,435 $ 217,463 $ 109,425
67,641
Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
74,456
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37,266
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of debt(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,836
291,624
EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition/divestiture-related and non-recurring expenses(2) . . . . . . . . . . . . . . .
17,523
Inventory reduction plan impact(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Amortization of acquisition-related inventory step-up(4) . . . . . . . . . . . . . . . . . . .
5,424
Impairment of intangible assets(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,405
Loss on disposal of inventory(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
791
(Gain) loss on sale of assets(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Distribution restructuring expenses(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,273
322,040
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(67,641)
Income tax (expense) benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(74,456)
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition/divestiture-related and non-recurring expenses(2) . . . . . . . . . . . . . . .
(17,523)
Inventory reduction plan impact(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Amortization of acquisition-related inventory step-up(4) . . . . . . . . . . . . . . . . . . .
(5,424)
(1,273)
Distribution restructuring expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
337
Write-off of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
56,190
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,426
Amortization of deferred financing costs and bond discount . . . . . . . . . . . . . . . .
5,798
Share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(343)
Excess tax benefits from share-based compensation . . . . . . . . . . . . . . . . . . . . . .
66,530
Changes in assets and liabilities, net of effects of business combinations . . . . .
37,799 $ 289,661
(69,401)
91,784
49,172
1,163
290,181
35,745
—
2,380
—
3,287
1,608
—
333,201
69,401
(91,784)
(35,745)
—
(2,380)
—
208
(80,525)
5,812
4,615
—
(165,004)
49,842
108,334
53,639
13,135
397,385
26,863
66,320
—
—
—
(176,386)
—
314,182
(49,842)
(108,334)
(26,863)
(66,320)
—
—
931
(1,494)
5,282
3,025
—
138,889
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 209,456 $
(1) Loss on extinguishment of debt for fiscal 2018 includes the write-off of deferred debt financing costs and
unamortized discount of $11.1 million and $2.0 million, respectively, relating to the prepayment of outstanding
borrowings under the tranche B term loans. Fiscal 2017 includes the write-off of deferred debt financing costs and
unamortized discount of $0.9 million and $0.2 million, respectively, relating to the prepayment of all outstanding
borrowings under the tranche A term loans and less than $0.1 million relating to the refinancing of our tranche B
term loans. Fiscal 2016 includes the write-off of deferred debt financing costs and unamortized discount of $2.2
million and $0.6 million, respectively, relating to the repayment of $40.1 million aggregate principal amounts of our
tranche A term loans and $109.9 million aggregate principal amount of our tranche B term loans.
(2) Acquisition/divestiture-related and non-recurring expenses for fiscal 2018 of $26.9 million primarily include
divestiture expenses for the Pirate Brands sale and acquisition and integration expenses for the McCann’s,
Green Giant, spices & seasonings, Victoria and Back to Nature acquisitions. Acquisition/divestiture-related and
non-recurring expenses for fiscal 2017 of $35.7 million primarily include acquisition and integration expenses for
the Green Giant, spices & seasonings, Victoria and Back to Nature acquisitions, severance and hiring costs, a non-
recurring interest charge relating to the refinancing of our credit agreement and a non-recurring startup surcharge
paid to a co-packer. Acquisition/divestiture-related and non-recurring expenses for fiscal 2016 of $17.5 million
primarily include acquisition and integration expenses for the Green Giant, spices & seasonings, Victoria and
Back to Nature acquisitions, and severance and hiring costs.
- 44 -
(3) For fiscal 2018, the inventory reduction plan impact of $66.3 million includes $51.1 million of fixed manufacturing,
warehouse and other corporate overhead costs associated with inventory purchased and converted into finished
goods in fiscal 2017 and sold in fiscal 2018 and $15.2 million for the underutilization of our manufacturing facilities
as we reduced inventory during the implementation of the inventory reduction plan.
(4) Amortization of acquisition-related inventory step-up for fiscal 2017 of $2.4 million relates to the purchase
accounting adjustments made to the finished goods inventory acquired in the Back to Nature acquisition and
spices & seasonings acquisition that we completed on October 2, 2017 and November 21, 2016, respectively. Fiscal
2016 includes $5.4 million of purchase accounting adjustments made to the finished goods inventory acquired in the
spices & seasonings acquisition.
(5) During the second quarter of fiscal 2016, we discontinued the Rickland Orchards brand because there was not
sufficient demand to warrant continued production. Accordingly, we wrote off the related intangible assets and
recorded non-cash impairment charges to amortizable trademarks and customer relationship intangibles of $4.5
million and $0.9 million, respectively, which are recorded in “Impairment of intangible assets” in our consolidated
statement of operations for fiscal 2016.
(6) During the fourth quarter of 2017, we recorded a pre-tax loss on disposal of inventory of $3.3 million related to the
write-off of discontinued and expired inventory from recent acquisitions. During the second quarter of 2016, we
recorded a charge to cost of goods sold of approximately $0.8 million in connection with the write-off of raw
materials and finished goods inventory used for the Rickland Orchards brand.
(7) During the fourth quarter of 2018, we completed the Pirate Brands sale. The sale resulted in a pre-tax gain of $176.4
million. During fiscal 2017, we sold to a third-party co-packer our Le Sueur, Minnesota research center, including
the seed technology assets, property, plant and equipment. We acquired the research center and related assets on
November 2, 2015, as part of the Green Giant acquisition. The sale resulted in a $1.6 million pre-tax loss on sale of
assets.
(8) Distribution restructuring expenses for fiscal 2016 includes expenses relating to our transitioning of the operations
of our then three primary shelf-stable distribution centers and a new fourth primary shelf-stable distribution center in
the United States to a third party logistics provider.
- 45 -
We use “adjusted net income” and “adjusted diluted earnings per share,” which are calculated as reported net
income and reported diluted earnings per share adjusted for certain items that affect comparability. These non-GAAP
financial measures reflect adjustments to reported net income and diluted earnings per share to eliminate the items
identified below. This information is provided in order to allow investors to make meaningful comparisons of our
operating performance between periods and to view our business from the same perspective as our management.
Because we cannot predict the timing and amount of these items, management does not consider these items when
evaluating our performance or when making decisions regarding allocation of resources.
A reconciliation of adjusted net income and adjusted diluted earnings per share to net income for fiscal 2018,
2017 and 2016 along with the components of adjusted net income and adjusted diluted earnings per share follows (in
thousands):
Fiscal 2018
Fiscal 2017
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-recurring adjustment to deferred income taxes(1) . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of debt, net of tax(2) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition/divestiture-related and non-recurring expenses, net of tax(3) . . . .
Inventory reduction plan impact, net of tax(4) . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution restructuring expenses, net of tax(5) . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of acquisition-related inventory step-up, net of tax(6) . . . . . . . .
Impairment of intangible assets, net of tax(7) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on disposal of inventory, net of tax(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) loss on sale of assets, net of tax(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax true-ups(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Adjusted diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
172,435 $
—
10,190
20,754
51,451
—
—
—
—
(133,172)
650
122,308 $
1.85 $
217,463 $
(109,641)
847
26,497
—
—
1,733
—
2,393
1,171
—
140,463 $
2.12 $
Fiscal 2016
109,425
881
1,770
10,934
—
794
3,385
3,373
494
—
—
131,056
2.07
(1) Non-recurring adjustment to deferred income taxes for fiscal 2017 relates to the revaluation of our deferred income
taxes as a result of the U.S. Tax Cuts and Jobs Act. Non-recurring adjustment to deferred income taxes for fiscal
2016 relates to a true-up of deferred income taxes resulting from our decision during the second quarter of 2016 to
discontinue the Rickland Orchards brand and the related impairment of intangible assets.
(2) Loss on extinguishment of debt for fiscal 2018 includes the write-off of deferred debt financing costs and
unamortized discount of $8.6 million, net of tax, and $1.6 million, net of tax, respectively, relating to the
prepayment of outstanding borrowings under the tranche B term loans. Fiscal 2017 includes the write-off of
deferred debt financing costs and unamortized discount of $0.7 million, net of tax, and $0.1 million, net of tax,
respectively, relating to the prepayment of all outstanding borrowings under the tranche A term loans and less than
$0.1 million, net of tax, relating to the refinancing of our tranche B term loans. Fiscal 2016 includes the write-off of
deferred debt financing costs and unamortized discount of $1.4 million, net of tax, and $0.4 million, net of tax,
respectively, relating to the repayment of $40.1 million aggregate principal amounts of our tranche A term loans and
$109.9 million aggregate principal amount of our tranche B term loans.
(3) Acquisition/divestiture-related and non-recurring expenses for fiscal 2018 primarily includes divestiture expenses
for the Pirate Brands sale and acquisition and integration expenses for the McCann’s, Green Giant, spices &
seasonings, Victoria and Back to Nature acquisitions. Acquisition/divestiture-related and non-recurring expenses for
fiscal 2017 primarily includes acquisition and integration expenses for the Green Giant, spices & seasonings,
Victoria and Back to Nature acquisitions, severance and hiring costs, a non-recurring interest charge relating to the
refinancing of our credit agreement and a non-recurring startup surcharge paid to a co-packer.
Acquisition/divestiture-related and non-recurring expenses for fiscal 2016 primarily includes acquisition and
integration expenses for the Green Giant, spices & seasonings, Victoria and Back to Nature acquisitions, and
severance and hiring costs.
- 46 -
(4) For fiscal 2018, the inventory reduction plan impact of $66.3 million (or $51.5 million net of taxes) includes $51.1
million of fixed manufacturing, warehouse and other corporate overhead costs associated with inventory purchased
and converted into finished goods in fiscal 2017 and sold in fiscal 2018 and $15.2 million for the underutilization of
our manufacturing facilities as we reduced inventory during the implementation of the inventory reduction plan.
(5) Distribution restructuring expenses for fiscal 2016 includes expenses relating to our transitioning of the operations
of our then three primary shelf-stable distribution centers and a new fourth primary shelf-stable distribution center in
the United States to a third party logistics provider.
(6) Amortization of acquisition-related inventory step-up for fiscal 2017 relates to the purchase accounting adjustments
made to the finished goods inventory acquired in the Back to Nature acquisition and spices & seasonings acquisition
that we completed on October 2, 2017 and November 21, 2016, respectively. Acquisition-related inventory step-up
for fiscal 2016 relates to the purchase accounting adjustments made to the finished goods inventory acquired in the
spices & seasonings acquisition.
(7) During the second quarter of fiscal 2016, we discontinued the Rickland Orchards brand because there was not
sufficient demand to warrant continued production. Accordingly, we wrote off the related intangible assets and
recorded non-cash impairment charges to amortizable trademarks and customer relationship intangibles of $2.8
million, net of tax, and $0.6 million, net of tax, respectively, which are recorded in “Impairment of intangible
assets” in our consolidated statement of operations for fiscal 2016.
(8) During the fourth quarter of 2017, we recorded a loss on disposal of inventory related to the write-off of
discontinued and expired inventory from recent acquisitions. During the second quarter of 2016, we recorded a
charge to cost of goods sold in connection with the write-off of raw materials and finished goods inventory used for
the Rickland Orchards brand.
(9) During the fourth quarter of 2018, we completed the Pirate Brands sale. The sale resulted in a gain of $133.2
million, net of tax. During fiscal 2017, we sold to a third-party co-packer our Le Sueur, Minnesota research center,
including the seed technology assets, property, plant and equipment. We acquired the research center and related
assets on November 2, 2015, as part of the Green Giant acquisition. The sale resulted in a $1.2 million loss on sale
of assets, net of tax.
(10) Tax true-ups for fiscal 2018 reflects prior year foreign tax expense true-up and impact of enacted state rate changes.
Fiscal 2018 Compared to Fiscal 2017
Net Sales. Net sales increased $54.4 million, or 3.3%, to $1,700.8 million for fiscal 2018 from $1,646.4 million
for fiscal 2017. The $54.4 million increase in net sales was attributable to an increase in unit volume of $42.2 million
and an increase in net pricing of $12.2 million. Net sales of McCann’s, which was acquired on July 16, 2018 and
therefore not owned during fiscal 2017, and an additional three quarters of net sales of Back to Nature, which was
acquired on October 2, 2017, combined to contribute $60.2 million to our overall net sales for fiscal 2018. Our net sales
for 2018 were negatively impacted by the divestiture of Pirate Brands during the fourth quarter of 2018. Net sales of
Pirate Brands were $87.7 million in fiscal 2017, compared to $74.9 million in fiscal 2018 through the date of divestiture,
which was October 17, 2018.
Base business net sales increased $14.0 million, or 0.9%, to $1,564.2 million for fiscal 2018 from $1,550.2
million for fiscal 2017. The increase was attributable to an increase in unit volume for the base business of $4.0 million
and an increase in net pricing of $10.0 million, or 0.6% of base business net sales.
Net sales of Green Giant frozen increased $42.7 million, or 12.9%, to $372.7 million for fiscal 2018 compared
to fiscal 2017, driven by strong customer and consumer acceptance of Green Giant Veggie Spirals, launched earlier this
year, as well as continued demand for Green Giant Riced Veggies, Green Giant Veggie Tots and Green Giant Mashed
Cauliflower. Net sales of Green Giant frozen products also benefited from Green Giant Cauliflower Pizza Crusts and
Little Green Sprout’s Organics, which began shipping in September 2018. Net sales of all Green Giant products in the
aggregate (including Le Sueur) increased $29.7 million, or 6.1%, to $518.9 million in fiscal 2018, as net sales growth of
frozen products was offset in part by Green Giant shelf stable (including Le Sueur), whose net sales decreased $13.0
million, or 8.2%, to $146.2 million.
- 47 -
Net sales of Ortega increased $4.0 million, or 2.9%, for fiscal 2018 compared to fiscal 2017. Net sales of
Cream of Wheat increased $1.7 million, or 2.8%; New York Style increased $1.7 million, or 4.7%; and Victoria increased
$1.2 million, or 2.8%, for fiscal 2018. Net sales of all of our spices & seasonings, including the brands acquired in the
fall of 2016, as well as our legacy spices & seasonings brands such as Mrs. Dash and Ac’cent, decreased $3.5 million, or
1.0%, for fiscal 2018. Net sales of all other brands in the aggregate accounted for a decrease of $20.8 million, or 4.6%,
for fiscal 2018.
See Note 15, “Net Sales by Brand,” to our consolidated financial statements in Part I, Item 1 of this report, for
detailed information regarding total net sales by brand for fiscal 2018 and fiscal 2017 for each of our brands that equaled
or exceeded approximately 3% of our fiscal 2018 net sales and for all other brands in the aggregate.
The following chart sets forth the most significant base business net sales increases and decreases by brand for
fiscal 2018:
Brand:
Base Business
Net Sales Increase (Decrease)
Dollars
(in millions)
Percentage
Green Giant - frozen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Ortega . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cream of Wheat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Green Giant - shelf stable(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Spices & Seasonings(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bear Creek Country Kitchens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mrs. Dash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All other brands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Base business net sales increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
42.7
4.0
1.7
(13.0)
(3.2)
(2.0)
(1.1)
(15.1)
14.0
12.9 %
2.9 %
2.8 %
(8.2)%
(1.2)%
(4.0)%
(1.9)%
(3.0)%
0.9 %
(1) Includes net sales of the Le Sueur brand.
(2) Includes net sales for multiple brands acquired as part of the spices & seasonings acquisition that we completed on November 21,
2016. Does not include net sales for Mrs. Dash and our other legacy spices & seasonings brands.
Gross Profit. Gross profit was $349.5 million for fiscal 2018, or 20.5% of net sales. Excluding the negative
impact of non-recurring charges relating to our inventory reduction plan of $66.3 million and acquisition/divestiture-
related expenses of $10.0 million, our gross profit would have been $425.8 million, or 25.0% of net sales. This compares
to gross profit of $440.6 million for fiscal 2017, or 26.8% of net sales. For 2018, gross profit benefited from an increase
in net pricing of $12.2 million and was also negatively impacted by input cost inflation, inclusive of freight, warehousing
and procurement, as well as mix.
Selling, general and administrative expenses. Selling, general and administrative expenses decreased $16.0
million, or 8.8%, to $167.4 million for fiscal 2018 from $183.4 million for fiscal 2017. The decrease was composed of a
decrease in acquisition/divestiture-related and non-recurring expenses of $18.7 million and decreased consumer
marketing expenses of $7.9 million, partially offset by increased warehousing expenses of $0.9 million, increased
general and administrative expenses of $8.5 million (primarily consisting of compensation, professional and consulting
fees, technology related expenses and real property leases) and other increases of $1.2 million. Expressed as a
percentage of net sales, selling, general and administrative expenses improved by 1.3 percentage points to 9.8% for fiscal
2018 compared to 11.1% for fiscal 2017.
Amortization Expense. Amortization expense increased $0.7 million to $18.3 million for fiscal 2018 from $17.6
million for fiscal 2017 due to the McCann’s acquisition completed in fiscal 2018 and the Back to Nature acquisition
completed in fiscal 2017.
(Gain) Loss on Sale of Assets. On October 17, 2018, we completed the Pirate Brands sale. We recognized a pre-
tax gain on the Pirate Brands sale of $176.4 million. During fiscal 2017, we recorded a $1.6 million pre-tax loss on the
sale of assets.
- 48 -
Operating Income. As a result of the foregoing, operating income increased $102.3 million, or 43.0%, to $340.2
million for fiscal 2018 from $237.9 million for fiscal 2017. Operating income expressed as a percentage of net sales
increased to 20.0% in fiscal 2018 from 14.5% in fiscal 2017.
Net Interest Expense. Net interest expense increased $16.5 million, or 18.0%, to $108.3 million for fiscal 2018
from $91.8 million in fiscal 2017. The increase was primarily attributable to additional borrowings made in the third
quarter of 2018 to fund the McCann’s acquisition, in the fourth quarter of 2017 to fund the Back to Nature acquisition,
and in the second and fourth quarters of 2017 in connection with our senior notes offerings, partially offset by our
prepayment in full of the tranche B term loans in the beginning of the fourth quarter of 2018 in connection with the
closing of the Pirate Brands sale. See “—Liquidity and Capital Resources—Debt” below.
Loss on Extinguishment of Debt. On October 18, 2018, we made a mandatory prepayment of $352.2 million
principal amount of tranche B term loans with the net proceeds of the Pirate Brands sale. On October 19, 2018, we made
an optional prepayment of the remaining $147.9 million principal amount of tranche B term loans outstanding under our
credit agreement from cash on hand and the proceeds of additional revolving loans under our credit agreement. There are
no longer any term loans outstanding under our credit facility. As a result of these prepayments of the tranche B term
loans and additional prepayments in the first two quarters of 2018, we recognized a loss on extinguishment of debt of
$13.1 million in fiscal 2018, including $2.8 million in the first quarter of 2018, $0.5 million in the second quarter of
2018 and $9.8 million in the fourth quarter of 2018. See “—Liquidity and Capital Resources—Debt” below.
Other Income. Other income for fiscal 2018 includes remeasurement of monetary assets denominated in a
foreign currency into U.S. dollars of $1.2 million and includes the impact of the newly adopted presentation of net
periodic pension cost and net periodic post-retirement benefit costs below operating profit in the amount of $2.4 million.
Other income for fiscal 2017 includes remeasurement of monetary assets denominated in a foreign currency into U.S.
dollars of $1.6 million and includes the impact of the newly adopted presentation of net periodic pension cost and net
periodic post-retirement benefit costs below operating profit in the amount of $1.5 million.
Income Tax Expense (Benefit). Income tax expense (benefit) changed $119.2 million to a tax expense of $49.8
million in fiscal 2018 from a tax benefit of $(69.4) million for fiscal 2017. See “U.S. Tax Act” above for a discussion of
the impact of the tax legislation on income tax expense (benefit).
Fiscal 2017 Compared to Fiscal 2016
Net Sales. Net sales increased $274.1 million, or 20.0%, to $1,646.4 million for fiscal 2017 from $1,372.3
million for fiscal 2016. The net sales increase was due to an increase in unit volume, of $287.5 million, partially offset
by a decrease in net pricing of $13.4 million. The unit volume increase was primarily driven by an additional eleven plus
months of net sales of the spices & seasonings business, acquired on November 21, 2016, an additional eleven months of
net sales of Victoria, acquired on December 2, 2016, and three months of net sales of Back to Nature, acquired on
October 2, 2017.
Base business net sales decreased $15.6 million, or 1.2%, to $1,324.8 million for fiscal 2017 compared to
$1,340.4 million for fiscal 2016. The decrease in base business net sales was primarily driven by a decrease in unit
volume of $4.3 million, or 0.3% of base business net sales, and a decrease in net pricing of $10.7 million, or 0.8% of
base business net sales.
Net sales of Green Giant frozen products, benefitting from the strong performance of new innovation products,
increased $35.0 million, or 11.9%, and net sales of Pirate Brands, benefitting from new distribution gains, plus
momentum from a strong back-to-school season and successful promotional events, increased $4.8 million, or 5.8%. Net
sales of Green Giant shelf-stable products (including Le Sueur decreased $30.0 million, or 15.9%, primarily due to weak
consumption trends and distribution losses with a key customer. Net sales of our maple syrup products decreased $7.1
million, or 7.0%, primarily due to our decision during the first quarter of 2017 to discontinue certain private label sales.
And net sales of Ortega decreased $2.9 million, or 2.1%, primarily due to heightened competitive activity. The overall
decline in base business net sales in fiscal 2017 was concentrated in the first half of the year. Base business net sales in
the third and fourth quarters of fiscal 2017 increased compared to the third and fourth quarters of 2016.
The spices & seasonings business and Victoria, each acquired in the fourth quarter of 2016, generated fiscal
2017 net sales of $259.2 million and $42.1 million, respectively, compared to our initial forecasts at the time of
acquisition of $220.0 million of net sales for the spices & seasonings business and $41.0 million of net sales for Victoria.
- 49 -
See Note 15, “Net Sales by Brand,” to our consolidated financial statements in Part I, Item 1 of this report, for
detailed information regarding total net sales by brand for fiscal 2017 and 2016 for each of our brands that equaled or
exceeded approximately 3% of our fiscal 2018 net sales and for all other brands in the aggregate.
The following chart sets forth the most significant base business net sales increases and decreases by brand for
fiscal 2017:
Brand:
Base Business
Net Sales Increase (Decrease)
Dollars
(in millions)(1)
Percentage
Green Giant - frozen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Pirate Brands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New York Style . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Underwood . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Grandma's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Green Giant - shelf stable(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maple Grove Farms of Vermont . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mama Mary's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ortega . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bear Creek Country Kitchens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Las Palmas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Spring Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TrueNorth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bloch & Guggenheimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B&M . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Emeril . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All other brands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Base business net sales decrease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
35.0
4.8
2.6
1.6
0.9
(30.0)
(4.5)
(3.0)
(2.9)
(2.7)
(2.3)
(1.9)
(1.7)
(1.5)
(1.4)
(1.2)
(7.4)
(15.6)
11.9 %
5.8 %
8.0 %
7.9 %
6.9 %
(15.9)%
(6.3)%
(8.6)%
(2.1)%
(5.2)%
(6.1)%
(10.4)%
(13.9)%
(5.8)%
(7.5)%
(8.8)%
(2.5)%
(1.2)%
(1) Fiscal 2017 and 2016 net sales have been adjusted as a result of our retrospective adoption of the new accounting standard
relating to revenue recognition. See Note 2(s), “Summary of Significant Accounting Policies — Recently Issued Accounting
Standards,” to our consolidated financial statements in Part II, Item 8 of this report.
(2) Includes net sales of the Le Sueur brand.
Gross Profit. Gross profit increased $11.6 million, or 2.7%, to $440.6 million for fiscal 2017 from $429.0
million for fiscal 2016. Gross profit expressed as a percentage of net sales was 26.8% for fiscal 2017 compared to 31.3%
for fiscal 2016. Excluding the 2.3 percentage point impact due to product mix, gross profit as a percentage of net sales
decreased 2.2 percentage points. Approximately 1.5 percentage points of the decrease in gross profit percentage was due
to an increase in warehousing and distribution costs and 0.7 percentage points of the decrease was due to a decrease in
net pricing.
Selling, general and administrative expenses. Selling, general and administrative expenses increased $26.4
million, or 16.8%, to $183.4 million for fiscal 2017 from $157.0 million for fiscal 2016. The increase was attributable to
increased warehousing expenses of $12.8 million, acquisition-related and non-recurring expenses of $11.4 million and
selling expenses of $7.4 million (which includes increases on brokerage expenses of $5.9 million and $0.9 million of
salesperson compensation), slightly offset by decreases of $1.3 million of distribution restructuring expenses, consumer
marketing expenses of $2.1 million and all other expenses of $1.8 million. Expressed as a percentage of net sales,
selling, general and administrative expenses improved by 0.3 percentage points to 11.1% for fiscal 2017 compared to
11.4% for fiscal 2016.
Amortization Expense. Amortization expense increased $3.8 million to $17.6 million for fiscal 2017 from $13.8
million for fiscal 2016 due to the Back to Nature acquisition completed in fiscal 2017 and the spices & seasonings and
Victoria acquisitions completed in fiscal 2016.
- 50 -
Impairment of Intangible Assets. Impairment of intangible assets of $5.4 million for fiscal 2016 includes a $4.5
million loss for the impairment of amortizable trademarks and a $0.9 million loss for the impairment of customer
relationship intangibles, both relating to Rickland Orchards, as we discontinued the Rickland Orchards brand during the
second quarter of 2016 because there was not sufficient demand to warrant continued production.
Operating Income. As a result of the foregoing, operating income decreased $14.9 million, or 5.9%, to $237.9
million for fiscal 2017 from $252.8 million for fiscal 2016. Operating income expressed as a percentage of net sales
decreased to 14.5% in fiscal 2017 from 18.4% in fiscal 2016.
Net Interest Expense. Net interest expense increased $17.3 million, or 23.3%, to $91.8 million for fiscal 2017
from $74.5 million in fiscal 2016. The increase was primarily attributable to additional borrowings made in the fourth
quarter of 2016 to fund the spices & seasonings acquisition and the Victoria acquisition and in the fourth quarter of 2017
to fund the Back to Nature acquisition, and our senior notes offerings in second quarter and fourth quarter of 2017. See
“Liquidity and Capital Resources—Debt” below.
Loss on Extinguishment of Debt. Loss on extinguishment of debt for fiscal 2017 includes the write-off of
deferred debt financing costs and unamortized discount of $0.9 million and $0.2 million, respectively, relating to the
repayment of all outstanding borrowings under the tranche A term loans. Loss on extinguishment of debt for fiscal 2016
includes the write-off of deferred debt financing costs and unamortized discount of $2.2 million and $0.6 million,
respectively, relating to the repayment of $40.1 million aggregate principal amount of our tranche A term loans and
$109.9 million aggregate principal amount of our tranche B term loans. See “Liquidity and Capital Resources—Debt”
below.
Other Income. Other income for fiscal 2017 includes remeasurement of monetary assets denominated in a
foreign currency into U.S. dollars of $1.6 million and includes the impact of the newly adopted presentation of net
periodic pension cost and net periodic post-retirement benefit costs below operating profit in the amount of $1.5 million.
Other income for fiscal 2016 includes remeasurement of monetary assets denominated in a foreign currency into U.S.
dollars of $0.4 million and includes the impact of the newly adopted presentation of net periodic pension cost and net
periodic post-retirement benefit costs below operating profit in the amount of $1.2 million.
Income Tax Expense (Benefit). Income tax expense (benefit) changed $137.0 million to a tax benefit of $(69.4)
million in fiscal 2017 from a tax expense of $67.6 million for fiscal 2016. See “U.S. Tax Act” above for a discussion of
the impact of the recently enacted tax legislation on income tax expense (benefit). Without the impact of the U.S. Tax
Act, our income tax expense for fiscal 2017 would have been approximately $57.1 million and our effective tax rate
would have been 38.6%.
Liquidity and Capital Resources
Our primary liquidity requirements include debt service, capital expenditures and working capital needs. See
also, “Dividend Policy” and “Commitments and Contractual Obligations” below. We fund our liquidity requirements, as
well as our dividend payments and financing for acquisitions, primarily through cash generated from operations and
external sources of financing, including our revolving credit facility.
Cash Flows
Net Cash Provided by Operating Activities. Net cash provided by operating activities increased $171.7 million
to $209.5 million for fiscal 2018 from $37.8 million for fiscal 2017. The increase in net cash provided by operating
activities primarily reflects favorable working capital, primarily driven by reduced inventory levels resulting from our
2018 inventory reduction plan and favorable changes in income tax receivables/payables, accrued expenses, other assets
and accounts receivables as compared to fiscal 2017. This increase was partially offset by lower net income and non-
cash items and unfavorable working capital changes in prepaid expenses, trade accounts payable and other liabilities.
Net cash provided by operating activities decreased $251.9 million to $37.8 million for fiscal 2017 from $289.7
million for fiscal 2016. The decrease in net cash provided by operating activities primarily reflects unfavorable working
capital (comprised of changes in inventories, other current assets, accounts payable and accrued expenses) comparisons
to the fiscal year 2016. This decrease is primarily due to a significant increase in inventory net of businesses acquired in
2017 compared to a decrease in inventory net of businesses acquired in 2016, and the timing of payments received from
post-acquisition transition services agreements.
- 51 -
Net Cash Provided by (Used in) Investing Activities. Net cash provided by (used in) investing activities
increased $568.1 million to cash provided by investing activities of $347.6 million for fiscal 2018 compared to cash used
in investing activities of $220.5 million for fiscal 2017. The increase was due primarily to gross pre-tax proceeds
received from the Pirate Brands sale in fiscal 2018 of $420.0 million, lower cash paid for business acquired and lower
capital expenditures in fiscal 2018.
Net cash used in investing activities decreased $260.7 million to $220.5 million for fiscal 2017 from $481.2
million for fiscal 2016. The decrease was primarily attributable to the decrease in payments made for the acquisition of
businesses, net of cash acquired, and an increase in proceeds from the sale of assets, partially offset by an increase in
capital spending. Capital expenditures in fiscal year 2017 and 2016 included expenditures for building improvements,
purchases of manufacturing equipment, expenditures in connection with the implementation of a new enterprise resource
planning (ERP) system and capitalized interest.
Net Cash Used in (Provided by) Financing Activities. In fiscal 2018, we had net cash used in financing
activities of $753.3 million as compared to net cash provided by financing activities of $359.3 million for fiscal 2017.
Net cash used in financing activities in fiscal 2018 consist of $650.1 million for the prepayment of tranche B terms
loans, $170.0 million for the repayment of revolving credit facility borrowing, $124.5 million of dividend payments,
$26.9 million for the repurchase of common stock and $1.8 million of payments of tax withholdings on behalf of
employees for net share settlement of share based compensation, partially offset by $220.0 million of revolving credit
facility borrowings.
Net cash provided by financing activities for fiscal 2017 increased $143.3 million to $359.3 million from
$216.0 million for fiscal 2016. Net cash provided by financing activities for the fiscal year 2017 consisted of $914.0
million of proceeds from the issuance of our 5.25% senior notes and $395.0 million of revolving credit facility
borrowings, partially offset by $233.6 million repayment of our tranche A term loans, $571.0 million of repayments of
revolving credit facility borrowings, $123.6 million of dividend payments, $19.5 million of debt financing costs and $2.0
million of payments of tax withholding on behalf of employees for net share settlement of share based compensation.
Cash Income Tax Payments. During fiscal 2018 we made cash tax payments of approximately $4.7 million.
During fiscal 2017 we made cash tax payments of approximately $17.2 million even though we recorded a tax benefit
for financial reporting purposes. See “U.S. Tax Act” above for a discussion of the impact and expected impact of the
U.S. Tax Act on our cash income tax payments. Based on a number of factors, including amortization for tax purposes of
our trademarks, goodwill and other intangible assets acquired in prior acquisitions, we realized a significant reduction in
cash taxes in fiscal 2016 as compared to our tax expense for financial reporting purposes. During the second quarter of
fiscal 2016, we discontinued the Rickland Orchards brand, which resulted in a one-time cash taxes benefit of $17.3
million for fiscal 2016. We believe that we will realize a benefit to our cash taxes payable from amortization of our
trademarks, goodwill and other intangible assets for the taxable years 2019 through 2033. If there is a change in U.S.
federal tax policy that reduces any of these available deductions or results in an increase in our corporate tax rate, our
cash taxes payable may increase further, which could significantly reduce our future liquidity and impact our ability to
make interest and dividend payments.
Dividend Policy
For a discussion of our dividend policy, see the information set forth under the heading “Dividend Policy” in
Part II, Item 5 of this report.
Acquisitions
Our liquidity and capital resources have been significantly impacted by acquisitions and may be impacted in the
foreseeable future by additional acquisitions. As discussed elsewhere in this report, as part of our growth strategy we
plan to expand our brand portfolio with disciplined acquisitions of complementary brands. We have historically financed
acquisitions by incurring additional indebtedness, issuing equity and/or using cash flows from operating activities. Our
interest expense has over time increased as a result of additional indebtedness we have incurred in connection with
acquisitions and will increase with any additional indebtedness we may incur to finance future acquisitions. Although we
may subsequently issue equity and use the proceeds to repay all or a portion of the additional indebtedness incurred to
finance an acquisition and reduce our interest expense, the additional shares of common stock would increase the
amount of cash flows from operating activities necessary to fund dividend payments.
- 52 -
We financed the Green Giant acquisition, completed in November 2015, with additional indebtedness, and we
repaid a portion of that additional indebtedness with the proceeds of a public offering of common stock we completed in
March 2016. We financed the spices & seasonings acquisition, completed in November 2016, with cash on hand,
including the net proceeds of our August 2016 public offering of common stock, and additional revolving loans under
our existing credit facility. We financed the Victoria acquisition, completed in December 2016, with cash on hand and
additional revolving loans under our existing credit facility. We financed the Back to Nature acquisition, completed in
October 2017, with cash on hand and additional revolving loans under our existing credit facility. We financed the
McCann’s acquisition, completed in October 2018, with cash on hand. The impact of future acquisitions, whether
financed with additional indebtedness or otherwise, may have a material impact on our liquidity and capital resources.
Divestitures
We used the net proceeds from the Pirate Brands sale, completed in October 2018, along with additional
borrowings under our revolving credit facility, to prepay the entire $500.1 million principal amount of tranche B term
loans outstanding under our credit facility. See “Debt” below.
Debt
Senior Secured Credit Agreement. In fiscal 2017, we refinanced our senior secured credit facility twice by
amending and restating our senior secured credit agreement, first on March 30, 2017, and again on November 20, 2017.
The first refinancing, on March 30, 2017, reduced by 0.75% the spread over LIBOR or the applicable base rate
on the then outstanding $640.1 million of tranche B term loans.
On April 3, 2017, we repaid all of the outstanding borrowings and amounts due under our revolving credit
facility and tranche A term loans using a portion of the net proceeds of our registered public offering of $500.0 million
aggregate principal amount of 5.25% senior notes due 2025.
On November 20, 2017, we again refinanced our senior secured credit facility. This second refinancing
increased the principal amount of the tranche B term loans by $10.0 million to $650.1 million, reduced by 25 basis
points the spread over LIBOR or the applicable base rate on the tranche B term loans and any revolving loans, increased
the aggregate commitments under our revolving credit facility from $500.0 million to $700.0 million, and extended the
maturity date applicable to our revolving credit facility from June 2019 to November 2022.
We made optional prepayments of our tranche B term loans of $125.0 million principal amount in the first
quarter of 2018 and $25.0 million principal amount in the second quarter of 2018. On October 18, 2018, we made a
mandatory prepayment of $352.2 million principal amount of tranche B term loans with the net proceeds of the Pirate
Brands sale. On October 19, 2018, we made an optional prepayment of the remaining $147.9 million principal amount of
tranche B term loans outstanding under our credit agreement from cash on hand and the proceeds of additional revolving
loans under our credit agreement. As a result of the optional and mandatory prepayments of the tranche B term loans, we
recognized a loss on extinguishment of debt of $9.8 million in the fourth quarter of 2018.
At December 29, 2018, the available borrowing capacity under our revolving credit facility, net of outstanding
letters of credit of $2.2 million, was $647.8 million. Proceeds of the revolving credit facility may be used for general
corporate purposes, including acquisitions of targets in the same or a similar line of business as our company, subject to
specified criteria. At December 29, 2018, there was $50.0 million outstanding under our revolving credit facility. The
revolving credit facility matures on November 21, 2022.
Our credit agreement is secured by substantially all of our and our domestic subsidiaries’ assets except our and
our domestic subsidiaries’ real property.
Interest under the revolving credit facility, including any outstanding letters of credit is determined based on
alternative rates that we may choose in accordance with the credit agreement, including a base rate per annum plus an
applicable margin ranging from 0.25% to 0.75%, and LIBOR plus an applicable margin ranging from 1.25% to 1.75%,
in each case depending on our consolidated leverage ratio.
Interest under the tranche B term loan facility was determined based on alternative rates that we could choose in
accordance with the credit agreement, including a base rate per annum plus an applicable margin of 1.00%, and LIBOR
plus an applicable margin of 2.00%. As of December 29, 2018, there were no tranche B term loans outstanding under
our credit facility.
- 53 -
For further information regarding our credit agreement, including a description of optional and mandatory
prepayment terms, and financial and restrictive covenants, see Note 7, “Long-Term Debt,” to our consolidated financial
statements in Part II, Item 8 of this report.
4.625% Senior Notes due 2021. On June 4, 2013, we issued $700.0 million aggregate principal amount of
4.625% senior notes due 2021 at a price to the public of 100% of their face value. We used the net proceeds from the
issuance of the 4.625% senior notes to purchase or redeem all $248.5 million principal amount of our then existing
7.625% senior notes due 2018, to repay $222.2 million principal amount of our then existing tranche B term loans and
approximately $40.0 million principal amount of revolving loans under our then existing credit agreement, and to pay
related premiums, fees and expenses. We used the remaining net proceeds for our acquisition of Pirate Brands,
completed in July 2013.
Interest on the 4.625% senior notes is payable on June 1 and December 1 of each year. The 4.625% senior notes
will mature on June 1, 2021, unless earlier retired or redeemed as permitted or required by the terms of the indenture
governing the 4.625% senior notes as described in Note 7, “Long-Term Debt,” to our consolidated financial statements
in Part II, Item 8 of this report. We may also, from time to time, seek to retire the 4.625% senior notes through cash
repurchases of the 4.625% senior notes or exchanges of the 4.625% senior notes for equity securities or both, in open
market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on
prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved
may be material.
We may also, from time to time, seek to retire the 4.625% senior notes through cash repurchases of the 4.625%
senior notes and/or exchanges of the 4.625% senior notes for equity securities, in open market purchases, privately
negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market
conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
See Note 7, “Long-Term Debt,” to our consolidated financial statements in Part II, Item 8 of this report for a
more detailed description of the 4.625% senior notes.
5.25% Senior Notes due 2025. On April 3, 2017, we issued $500.0 million aggregate principal amount of
5.25% senior notes due 2025 at a price to the public of 100% of their face value. On November 20, 2017, we issued an
additional $400.0 million aggregate principal amount of 5.25% senior notes due 2025 at a price to the public 101% of
their face value plus accrued interest from October 1, 2017, which equates to a yield to worst of 5.03%. The notes issued
in November were issued as additional notes under the same indenture as our 5.25% senior notes due 2025 that were
issued in April, and, as such, form a single series and trade interchangeably with the previously issued 5.25% senior
notes.
We used the net proceeds of the April 2017 offering to repay all of the outstanding borrowings and amounts
due under our revolving credit facility and tranche A term loans, and to pay related fees and expenses. We used the net
proceeds of the November 2017 offering to repay all of the then outstanding borrowings and amounts due under our
revolving credit facility and to pay related fees and expenses. We have used a portion of, and intend to use the remaining
portion of, the net proceeds of the April 2017 and November 2017 offerings for general corporate purposes, which have
included and could include, among other things, repayment of other long term debt or possible acquisitions.
Interest on the 5.25% senior notes is payable on April 1 and October 1 of each year, commencing October 1,
2017. The 5.25% senior notes will mature on April 1, 2025, unless earlier retired or redeemed as permitted or required
by the terms of the indenture governing the 5.25% senior notes as described in Note 7, “Long-Term Debt,” to our
consolidated financial statements in Part II, Item 8 of this report.
We may also, from time to time, seek to retire the 5.25% senior notes through cash repurchases of the 5.25%
senior notes and/or exchanges of the 5.25% senior notes for equity securities, in open market purchases, privately
negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market
conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
See Note 7, “Long-Term Debt,” to our consolidated financial statements in Part II, Item 8 of this report for a
more detailed description of the 5.25% senior notes.
- 54 -
Loss on Extinguishment of Debt. Loss on extinguishment of debt for fiscal 2018 includes the write-off of
deferred debt financing costs and unamortized discount of $11.1 million and $2.0 million, respectively, relating to the
repayment of all outstanding borrowings under the tranche B term loans. Loss on extinguishment of debt for fiscal 2017
includes the write-off of deferred debt financing costs and unamortized discount of $0.9 million and $0.3 million,
respectively, relating to the repayment of all outstanding borrowings under the tranche A term loans. Loss on
extinguishment of debt for fiscal 2016 includes the write-off of deferred debt financing costs and unamortized discount
of $2.2 million and $0.6 million, respectively, relating to the repayment of $40.1 million aggregate principal amount of
our tranche A term loans and $109.9 million aggregate principal amount of our tranche B term loans.
Stock Repurchase Program
On March 13, 2018, our board of directors authorized a stock repurchase program for the repurchase of up to
$50.0 million of our company’s common stock through March 15, 2019. Under the authorization, we may purchase
shares of common stock from time to time in the open market or in privately negotiated transactions in compliance with
the applicable rules and regulations of the SEC.
The timing and amount of stock repurchases under the program will be at the discretion of management, and
will depend on available cash, market conditions and other considerations. Therefore, we cannot assure you as to the
number or aggregate dollar amount of shares that will be repurchased under the repurchase program. We may
discontinue the program at any time. Any shares repurchased pursuant to the repurchase program will be retired.
During the second quarter of 2018, we repurchased and retired 694,749 shares of common stock at an average
price per share (excluding fees and commissions) of $26.65, or $18.5 million in the aggregate. During the fourth quarter
of 2018, we repurchased and retired 295,377 shares of common stock at an average price per share (excluding fees and
commissions) of $28.39, or $8.4 million in the aggregate. As of December 29, 2018, we had $23.1 million available for
future repurchases of common stock under the stock repurchase program. We did not repurchase any shares of common
stock during fiscal 2017 or fiscal 2016. See Note 12, “Pension Benefits,” to our consolidated financial statements in Part
II, Item 8 of this report for disclosure relating to shares of our company’s common stock purchased by our defined
benefit pension plans.
Future Capital Needs
On December 29, 2018, our total long-term debt of $1,635.9 million, net of our cash and cash equivalents of
$11.6 million, was $1,624.3 million. Stockholders’ equity as of that date was $900.0 million.
Our ability to generate sufficient cash to fund our operations depends generally on our results of operations and
the availability of financing. Our management believes that our cash and cash equivalents on hand, cash flow from
operating activities and available borrowing capacity under our revolving credit facility will be sufficient for the
foreseeable future to fund operations, meet debt service requirements, fund capital expenditures, make future
acquisitions, if any, and pay our anticipated quarterly dividends on our common stock.
We expect to make capital expenditures of approximately $45.0 million to $50.0 million in the aggregate during
fiscal 2019. Our projected capital expenditures for fiscal 2019 include, among other things, approximately $9.1 million
in connection with the implementation of a new enterprise resource planning (ERP) system, $5.4 million for new
productivity projects, $4.4 million for IT infrastructure including cyber security and $3.8 million to fund infrastructure
optimization projects.
Seasonality
Sales of a number of our products tend to be seasonal and may be influenced by holidays, changes in seasons or
certain other annual events. In general our sales are higher during the first and fourth quarters.
We purchase most of the produce used to make our frozen and shelf-stable vegetables, shelf-stable pickles,
relishes, peppers, tomatoes and other related specialty items during the months of June through October, and we
generally purchase the majority of our maple syrup requirements during the months of April through August.
Consequently, our liquidity needs are greatest during these periods.
- 55 -
Inflation
We experienced moderate net cost increases for raw materials during fiscal 2018 and anticipate higher raw
materials cost increases for fiscal 2019. We are currently locked into our supply and prices for a majority of our most
significant commodities (excluding, among others, maple syrup) through fiscal 2019. In addition, we expect higher
distribution costs industry-wide for fiscal 2019. During fiscal 2017, we had a minimal cost increase for a majority of our
most significant commodities (excluding, among others, maple syrup). During fiscal 2016 we had a minimal cost
decrease.
We plan to continue managing inflation risk by entering into short term supply contracts and advance
commodities purchase agreements from time to time, and, if necessary, by raising prices. To the extent we are unable to
avoid or offset any present or future cost increases by locking in our costs, implementing cost saving measures or
increasing prices to our customers, our operating results could be materially and adversely affected. In addition, if input
costs begin to decline, customers may look for price reductions in situations where we have locked into purchases at
higher costs. During the past three years, our cost saving measures and sales price increases have not been sufficient to
fully offset increases to our raw material, ingredient and packaging and distribution costs.
Contingencies
See Note 13, “Commitments and Contingencies,” to our consolidated financial statements in Part II, Item 8 of
this report.
Recent Accounting Pronouncements
See Note 2(s), “Summary of Significant Accounting Policies — Recently Issued Accounting Standards,” to our
consolidated financial statements in Part II, Item 8 of this report.
Off-balance Sheet Arrangements
As of December 29, 2018, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii)
of Regulation S-K.
- 56 -
Commitments and Contractual Obligations
Our contractual obligations and commitments principally include obligations associated with our outstanding
indebtedness, future minimum operating lease obligations, future purchase obligations and future pension obligations as
set forth in the following table as of December 29, 2018.
Payments Due by Period
Contractual Obligations:
Total
Fiscal
2019
Fiscal 2020 Fiscal 2022 Fiscal 2024
and 2023
and Thereafter
and 2021
(In thousands)
Long-term debt—principal . . . . . . . . . . . . . . . . . . . . . $ 1,650,000 $
Long-term debt—interest(1) . . . . . . . . . . . . . . . . . . . .
Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase obligations(2) . . . . . . . . . . . . . . . . . . . . . . . .
Pension obligations(3) . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,190,280 $ 159,663 $ 872,505 $ 166,213 $
140,365
19,944
12,196
—
82,750
12,298
64,615
—
94,500
9,517
12,196
—
376,677
50,204
113,399
—
— $ 700,000 $ 50,000 $
900,000
59,063
8,445
24,392
—
991,900
(1) Expected interest payments on long - term debt are based on principal amounts outstanding, scheduled maturity dates and interest
rates at December 29, 2018. See Note 7, “Long - Term Debt,” to our consolidated financial statements in Part II, Item 8 for further
information as to our long - term debt interest obligations.
(2) For the purposes of this table, purchase obligations means agreements to purchase goods or services (such as raw materials,
commodities, packaging, other materials and supplies and co - manufacturing arrangements) that are enforceable and legally
binding on B&G Foods and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed,
minimum or variable price provisions; and the approximate timing of the transaction. The purchase obligations in the above table
do not represent our entire expected future purchases for goods and services, which are significantly higher than the amounts set
forth above. The table does not include purchase obligations under contracts that may be cancelled by B&G Foods without
material penalty. Any amounts reflected on our consolidated balance sheet as accounts payable and accrued liabilities are
excluded from the purchase obligations set forth in the table above. Penalties, if any, related to molds and equipment based upon
failure to meet minimum volume requirements are also excluded from the table because we are unable to determine whether such
penalties will be incurred and, if incurred, over what time period they will be paid.
(3) We currently do not expect to make any contributions to our defined benefit pension plans during fiscal 2019. We are unable to
reliably estimate the timing of pension contributions and contribution amounts beyond fiscal 2019.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Our principal market risks are exposure to changes in commodity prices, interest rates on borrowings and
foreign currency exchange rates and market fluctuation risks related to our defined benefit pension plans.
Commodity Prices and Inflation. The information under the heading “Inflation” in Item 7, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” is incorporated herein by reference.
Interest Rate Risk. In the normal course of operations, we are exposed to market risks relating to our long-term
debt arising from adverse changes in interest rates. Market risk is defined for these purposes as the potential change in
the fair value of a financial asset or liability resulting from an adverse movement in interest rates.
Changes in interest rates impact our fixed and variable rate debt differently. For fixed rate debt, a change in
interest rates will only impact the fair value of the debt, whereas for variable rate debt, a change in the interest rates will
impact interest expense and cash flows. At December 29, 2018, we had $1,600.0 million of fixed rate debt and $50.0
million of variable rate debt.
Based upon our principal amount of long-term debt outstanding at December 29, 2018, a hypothetical 1.0%
increase or decrease in interest rates would have affected our annual interest expense by approximately $0.5 million.
- 57 -
The carrying values and fair values of our revolving credit loans, term loans and senior notes as of
December 29, 2018 and December 30, 2017 are as follows (in thousands):
December 29, 2018
December 30, 2017
Revolving credit loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Tranche B term loans due 2022 . . . . . . . . . . . . . . . . . . . . . .
4.625% senior notes due 2021 . . . . . . . . . . . . . . . . . . . . . . .
5.25% senior notes due 2025 . . . . . . . . . . . . . . . . . . . . . . . . $
— (2)
50,000 $ 50,000 (1) $
— (2)
684,250 (3)
700,000
903,371 (4) $ 837,877 (3) $
647,831 (2) 652,689 (1)
710,500 (3)
700,000
903,910 (4) $ 919,729 (3)
Carrying Value Fair Value Carrying Value Fair Value
—
— $
(1) Fair values are estimated based on Level 2 inputs, which were quoted prices for identical or similar instruments in markets that
are not active.
(2) The carrying value of the tranche B term loans is net of discount. At December 30, 2017, the face amount of the tranche B term
loans was $650.1 million. There are no tranche B term loans outstanding under our credit facility as of December 29, 2018. See
Note 7, “Long-Term Debt,” to our consolidated financial statements in Part II, Item 8 of this report.
(3) Fair values are estimated based on quoted market prices.
(4) The carrying values of the 5.25% senior notes due 2025 include a premium. At December 29, 2018 the face amount of the 5.25%
senior notes due 2025 was $900.0 million.
Cash and cash equivalents, trade accounts receivable, income tax receivable/payable, trade accounts payable,
accrued expenses and dividends payable are reflected on our consolidated balance sheets at carrying value, which
approximates fair value due to the short-term nature of these instruments.
For more information, see Note 7, “Long-Term Debt,” to our consolidated financial statements in Part II, Item 8
of this report.
Foreign Currency Risk. Our foreign sales are primarily to customers in Canada. Our sales to Canada are
generally denominated in Canadian dollars and our sales for export to other countries are generally denominated in U.S.
dollars. During fiscal 2018, 2017 and 2016, our net sales to customers in foreign countries represented approximately
7.3%, 6.3% and 7.1%, respectively, of our total net sales. We also purchase certain raw materials from foreign suppliers.
For example, we purchase a significant majority of our maple syrup requirements from suppliers in Québec, Canada.
These purchases are made in Canadian dollars. A weakening of the U.S. dollar in relation to the Canadian dollar would
significantly increase our future costs relating to the production of our maple syrup products to the extent we have not
purchased Canadian dollars or otherwise entered into a currency hedging arrangement in advance of any such weakening
of the U.S. dollar. Our purchases of raw materials from other foreign suppliers are generally denominated in U.S.
dollars, but certain purchases of raw materials in Mexico are denominated in Mexican pesos.
As a result, certain revenues and expenses have been, and are expected to be, subject to the effect of foreign
currency fluctuations, and these fluctuations may have an adverse impact on operating results.
Market Fluctuation Risks Relating to our Defined Benefit Pension Plans. See Part II, Item 7, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies; Use of
Estimates – Pension Plans” and Note 12, “Pension Benefits,” to our consolidated financial statements in Part II, Item 8
of this report for a discussion of the exposure of our defined benefit pension plan assets to risks related to market
fluctuations.
- 58 -
Item 8. Financial Statements and Supplementary Data.
The consolidated balance sheets at December 29, 2018 and December 30, 2017 and the consolidated statements
of operations, comprehensive income, changes in stockholders’ equity and cash flows for fiscal 2018, 2017 and 2016
and related notes are set forth below.
Reports of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
60
Consolidated Balance Sheets as of December 29, 2018 and December 30, 2017 . . . . . . . . . . . . . . . . . . .
63
Consolidated Statements of Operations for the fiscal years ended December 29, 2018,
December 30, 2017 and December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
64
Consolidated Statements of Comprehensive Income for the fiscal years ended December 29,
2018, December 30, 2017 and December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65
Consolidated Statements of Changes in Stockholders’ Equity for the fiscal years ended
December 29, 2018, December 30, 2017 and December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
66
Consolidated Statements of Cash Flows for the fiscal years ended December 29, 2018,
December 30, 2017 and December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
67
68
Schedule II—Schedule of Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
107
- 59 -
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
B&G Foods, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of B&G Foods, Inc. and subsidiaries (the
“Company”) as of December 29, 2018 and December 30, 2017, the related consolidated statements of operations,
comprehensive income, changes in stockholders’ equity, and cash flows for the fiscal years ended December 29, 2018,
December 30, 2017 and December 31, 2016, and the related notes and the schedule of valuation and qualifying accounts
(collectively, the “consolidated financial statements”). In our opinion, the consolidated financial statements present
fairly, in all material respects, the financial position of the Company as of December 29, 2018 and December 30, 2017,
and the results of its operations and its cash flows for the fiscal years ended December 29, 2018, December 30, 2017 and
December 31, 2016, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 29, 2018, based on
criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission, and our report dated February 26, 2019 expressed an unqualified opinion
on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Company’s auditor since 1996.
/s/ KPMG LLP
Short Hills, New Jersey
February 26, 2019
- 60 -
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
B&G Foods, Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited B&G Foods, Inc.’s and subsidiaries’ (the “Company”) internal control over financial reporting
as of December 29, 2018, based on criteria established in Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of December 29, 2018, based on criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 29, 2018 and
December 30, 2017, the related consolidated statements of operations, comprehensive income, changes in stockholders’
equity, and cash flows for the fiscal years ended December 29, 2018, December 30, 2017 and December 31, 2016, and
the related notes and the schedule of valuation and qualifying accounts (collectively, the consolidated financial
statements), and our report dated February 26, 2019 expressed an unqualified opinion on those consolidated financial
statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
“Management’s Report on Internal Control Over Financial Reporting.” Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also
included performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a
material effect on the financial statements.
- 61 -
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls
may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
/s/ KPMG LLP
Short Hills, New Jersey
February 26, 2019
- 62 -
B&G FOODS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share and per share data)
December 29, December 30,
2018
2017
Current assets:
Assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Trade accounts receivable, less allowance for doubtful accounts and discounts of $1,851
11,648 $ 206,506
and $1,824 as of December 29, 2018 and December 30, 2017, respectively . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
151,707
401,355
19,988
1,398
586,096
141,392
501,849
20,054
16,794
886,595
Property, plant and equipment, net of accumulated depreciation of $230,200 and $200,664
as of December 29, 2018 and December 30, 2017, respectively . . . . . . . . . . . . . . . . . . . . .
282,553
584,435
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangibles, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,595,569
1,206
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,940
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
272,192
649,292
1,748,220
1,617
3,122
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,054,799 $ 3,561,038
Current liabilities:
Liabilities and Stockholders’ Equity
Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 140,000 $ 122,358
48,067
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
139
Income tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30,922
Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
201,486
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
55,660
31,624
31,178
258,462
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,635,881
24,505
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
235,902
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,154,750
2,217,574
24,881
236,278
2,680,219
Commitments and contingencies (Note 13)
Stockholders’ equity:
Preferred stock, $0.01 par value per share. Authorized 1,000,000 shares; no shares
issued or outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
Common stock, $0.01 par value per share. Authorized 125,000,000 shares; 65,638,701 and
66,499,044 shares issued and outstanding as of December 29, 2018 and December 30,
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
665
266,789
(20,756)
634,121
880,819
Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,054,799 $ 3,561,038
656
116,339
(23,502)
806,556
900,049
See accompanying Notes to Consolidated Financial Statements.
- 63 -
B&G FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share data)
December 29,
Fiscal Year Ended
December 30, December 31,
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018
2017
1,700,764 $ 1,646,387 $ 1,372,307
943,295
1,205,809
1,351,264
429,012
440,578
349,500
2016
Operating expenses:
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . .
Amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) loss on sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
167,389
18,343
(176,386)
—
340,154
183,448
17,611
1,608
—
237,911
157,028
13,803
—
5,405
252,776
Other income and expenses:
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income tax expense (benefit) . . . . . . . . . . . . . . . . . . . .
Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
108,334
13,135
(3,592)
222,277
49,842
172,435 $
91,784
1,163
(3,098)
148,062
(69,401)
217,463 $
74,456
2,836
(1,582)
177,066
67,641
109,425
Weighted average shares outstanding:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
66,145
66,255
66,487
66,706
63,203
63,420
Earnings per share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2.61 $
2.60 $
3.27 $
3.26 $
1.73
1.73
Cash dividends declared per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1.89 $
1.86 $
1.73
See accompanying Notes to Consolidated Financial Statements.
- 64 -
B&G FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(In thousands)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2018
172,435 $
2017
217,463 $
2016
109,425
Other comprehensive income:
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of unrecognized prior service cost and pension deferrals, net of tax . . . . .
Other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(3,507)
761
(2,746)
169,689 $
4,393
(5,785)
(1,392)
216,071 $
(8,180)
1,512
(6,668)
102,757
Fiscal Year Ended
December 29, December 30, December 31,
See accompanying Notes to Consolidated Financial Statements.
- 65 -
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- 66 -
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S
B&G FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Adjustments to reconcile net income to net cash provided by operating activities:
172,435 $
217,463 $
109,425
Fiscal Year Ended
December 29, December 30, December 31,
2018
2017
2016
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred debt financing costs and bond discount/premium . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) loss on sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-off of property, plant, and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on disposal of inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefits from share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in assets and liabilities, net of effects of businesses acquired:
Trade accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax receivable/payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from investing activities:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments for acquisition of businesses, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from financing activities:
Repayments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments of borrowings under revolving credit facility . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings under revolving credit facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of common stock, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefits from share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments for repurchase of common stock, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments of tax withholding on behalf of employees for net share settlement of share-
based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash (used in) provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
53,639
5,282
(1,494)
—
(176,386)
931
—
13,135
3,025
—
(12,933)
88,037
(302)
45,973
307
14,773
1,449
1,585
209,456
(41,627)
420,002
(30,787)
347,588
(650,110)
—
(170,000)
220,000
60
(124,524)
—
(26,920)
(1,833)
—
(753,327)
Effect of exchange rate fluctuations on cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . .
Net (decrease) increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,425
(194,858)
49,172
5,812
(80,525)
—
1,608
208
3,287
1,163
4,615
—
(18,034)
(139,512)
6,596
(9,829)
(6,542)
16,623
(17,344)
3,038
37,799
(59,802)
2,229
(162,965)
(220,538)
(233,640)
914,000
(571,000)
395,000
112
(123,631)
—
—
(1,962)
(19,543)
359,336
1,076
177,673
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
206,506
28,833
11,648 $
206,506 $
37,266
5,426
56,190
5,405
—
337
791
2,836
5,798
(343)
(45,763)
2,396
41,929
(3,658)
(747)
47,250
23,832
1,291
289,661
(42,418)
—
(438,787)
(481,205)
(150,000)
—
(99,000)
235,000
331,879
(100,807)
343
—
(1,410)
—
216,005
(874)
23,587
5,246
28,833
Supplemental disclosures of cash flow information:
Cash interest payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Cash income tax payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-cash investing and financing transactions:
102,114 $
4,669 $
75,784 $
17,231 $
69,755
15,406
Dividends declared and not yet paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accruals related to purchases of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . $
31,178 $
5,520 $
30,922 $
330 $
30,879
—
See accompanying Notes to Consolidated Financial Statements.
- 67 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 29, 2018, December 30, 2017 and December 31, 2016
(1)
Nature of Operations
Organization and Nature of Operations
B&G Foods, Inc. is a holding company whose principal assets are the shares of capital stock of its subsidiaries.
Unless the context requires otherwise, references in this report to “B&G Foods,” “our company,” “we,” “us” and “our”
refer to B&G Foods, Inc. and its subsidiaries. Our financial statements are presented on a consolidated basis.
We operate in a single industry segment and manufacture, sell and distribute a diverse portfolio of high-quality
shelf-stable and frozen foods across the United States, Canada and Puerto Rico. Our products include frozen and canned
vegetables, oatmeal and other hot cereals, fruit spreads, canned meats and beans, bagel chips, spices, seasonings, hot
sauces, wine vinegar, maple syrup, molasses, salad dressings, pizza crusts, Mexican-style sauces, dry soups, taco shells
and kits, salsas, pickles, peppers, tomato-based products, puffed corn and rice snacks, cookies and crackers, nut clusters
and other specialty products. Our products are marketed under many recognized brands, including Ac’cent, B&G, B&M,
Back to Nature, Baker’s Joy, Bear Creek Country Kitchens, Brer Rabbit, Canoleo, Cary’s, Cream of Rice,
Cream of Wheat, Devonsheer, Don Pepino, Durkee, Emeril’s, Grandma’s Molasses, Green Giant, JJ Flats, Joan of Arc,
Las Palmas, Le Sueur, MacDonald’s, Mama Mary’s, Maple Grove Farms of Vermont, McCann’s, Molly McButter,
Mrs. Dash, New York Flatbreads, New York Style, Old London, Ortega, Polaner, Red Devil, Regina, Sa-són, Sclafani,
SnackWell’s, Spice Islands, Spring Tree, Sugar Twin, Tone’s, Trappey’s, TrueNorth, Underwood, Vermont Maid,
Victoria, Weber and Wright’s. We also sell and distribute Static Guard, a household product brand. We compete in the
retail grocery, foodservice, specialty, private label, club and mass merchandiser channels of distribution. We sell and
distribute our products directly and via a network of independent brokers and distributors to supermarket chains,
foodservice outlets, mass merchants, warehouse clubs, non-food outlets and specialty distributors.
Sales of a number of our products tend to be seasonal and may be influenced by holidays, changes in seasons/weather
or certain other annual events. In general, our sales are higher in the first and fourth quarter. We purchase most of the produce
used to make our frozen and shelf-stable canned vegetables, pickles, relishes, peppers, tomatoes and other related specialty
items during the months of June through October, and we generally purchase the majority of our maple syrup requirements
during the months of April through August. Consequently, our liquidity needs are greatest during these periods.
Fiscal Year
We utilize a 52-53 week fiscal year ending on the Saturday closest to December 31. The fiscal years ended
December 29, 2018 (fiscal 2018) December 30, 2017 (fiscal 2017) and December 31, 2016 (fiscal 2016) contained
52 weeks each.
Business and Credit Concentrations
Our exposure to credit loss in the event of non-payment of accounts receivable by customers is estimated in the
amount of the allowance for doubtful accounts. We perform ongoing credit evaluations of the financial condition of our
customers. Our top ten customers accounted for approximately 54.4%, 54.6% and 56.0% of consolidated net sales in
fiscal 2018, 2017 and 2016, respectively. Our top ten customers accounted for approximately 54.8%, 49.4% and 53.4%
of our consolidated trade accounts receivables as of the end of fiscal 2018, 2017 and 2016, respectively. Other than
Walmart, which accounted for 23.1%, 24.1% and 24.1% of our consolidated net sales in fiscal 2018, 2017 and 2016,
respectively, no single customer accounted for more than 10.0% of consolidated net sales in fiscal 2018, 2017 or 2016.
Other than Walmart, which accounted for 24.9%, 21.5% and 21.2% of our consolidated trade accounts receivables as of
the end of fiscal 2018, 2017 and 2016, respectively, no single customer accounted for more than 10.0% of our
consolidated trade accounts receivables as of the end of fiscal 2018, 2017 and 2016. As of December 29, 2018, we do
not believe we have any significant concentration of credit risk with respect to our consolidated trade accounts
receivable with any single customer whose failure or nonperformance would materially affect our results other than as
described above with respect to Walmart.
During fiscal 2018, 2017 and 2016, our sales to foreign countries represented approximately 7.3%, 6.3% and
7.1%, respectively, of net sales. Our foreign sales are primarily to customers in Canada.
- 68 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(2)
Summary of Significant Accounting Policies
(a)
Basis of Presentation
The consolidated financial statements include the accounts of B&G Foods, Inc. and its subsidiaries. All
intercompany balances and transactions have been eliminated. Certain prior year amounts have been reclassified to
conform to the current year’s presentation. See (r) “Newly Adopted Accounting Standards,” below, for further details.
(b)
Use of Estimates
The preparation of financial statements in accordance with generally accepted accounting principles in the
United States (GAAP) requires our management to make a number of estimates and assumptions relating to the reporting
of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the reporting period. Some of the more significant
estimates and assumptions made by management involve revenue recognition as it relates to trade and consumer
promotion expenses; allowances for excess, obsolete and unsaleable inventories; pension benefits; acquisition
accounting fair value allocations; the recoverability of goodwill, other intangible assets, property, plant and equipment
and deferred tax assets; the determination of the useful life of customer relationship and amortizable trademark
intangibles; and the fair value of contingent consideration. Actual results could differ significantly from these estimates
and assumptions.
Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other
factors that management believes to be reasonable under the circumstances, including the current economic
environment. We adjust such estimates and assumptions when facts and circumstances dictate. Volatility in the credit
and equity markets can increase the uncertainty inherent in such estimates and assumptions.
(c)
Subsequent Events
We have evaluated subsequent events for disclosure through the date of issuance of the accompanying
consolidated financial statements.
(d)
Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows, all highly liquid instruments with maturities of three
months or less when acquired are considered to be cash and cash equivalents.
(e)
Inventories
Inventories are stated at the lower of cost or net realizable value and include direct material, direct labor,
overhead, warehousing and product transfer costs. Cost is determined using the first-in, first-out and average cost
methods. Inventories have been reduced by an allowance for excess, obsolete and unsaleable inventories. The allowance
is an estimate based on our management’s review of inventories on hand compared to estimated future usage and sales.
(f)
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation on plant and equipment is calculated using the
straight-line method over the estimated useful lives of the assets, 10 to 30 years for buildings and improvements, 5 to 12
years for machinery and equipment, and 2 to 5 years for office furniture and vehicles. 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. We capitalize interest on qualifying assets based on our effective interest rate. During
fiscal 2018, 2017 and 2016, we capitalized $1.1 million, $1.0 million and $0.5 million, respectively.
- 69 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(2)
Summary of Significant Accounting Policies (Continued)
(g)
Goodwill and Other Intangible Assets
Goodwill and unamortizable intangible assets (trademarks) are tested for impairment at least annually and
whenever events or circumstances occur indicating that goodwill or unamortizable intangibles might be impaired. We
perform the annual impairment tests as of the last day of each fiscal year. The annual goodwill impairment test involves
a two-step process. The first step of the impairment test involves comparing our company’s market capitalization with
our company’s carrying value, including goodwill. If the carrying value of our company exceeds our market
capitalization, we perform the second step of the impairment test to determine the amount of the impairment loss. The
second step of the goodwill impairment test involves comparing the implied fair value of goodwill with the carrying
value and recognizing a loss for the difference.
We test our unamortizable intangibles by comparing the fair value with the carrying value and recognize a loss
for the difference. We estimate the fair value of our unamortizable intangibles based on discounted cash flows that
reflect certain third party market value indicators.
Calculating our fair value for these purposes requires significant estimates and assumptions by management.
We completed our annual impairment tests for fiscal 2018, 2017 and 2016 with no adjustments to the carrying values of
goodwill and unamortizable intangibles. Each annual test confirmed that the market capitalization and fair values of our
goodwill and unamortizable intangibles, respectively, exceeded their current carrying values.
Customer relationship intangibles and amortizable trademarks are presented at cost, net of accumulated
amortization, and are amortized on a straight-line basis over their estimated useful lives of 10 to 20 years.
Seed technology assets are presented at cost, net of accumulated amortization, and are amortized utilizing a
declining balance approach over their estimated useful lives of 5 years. During fiscal 2017, we sold to a third-party co-
packer our Le Sueur, Minnesota research center, including the seed technology assets, property, plant and equipment,
which we acquired as part of the Green Giant acquisition, resulting in a $1.6 million pre-tax loss on sale of assets.
(h)
Deferred Debt Financing Costs
Debt financing costs are capitalized and amortized over the term of the related debt agreements and are
included as a reduction of long-term debt. Amortization of deferred debt financing costs for fiscal 2018, 2017 and 2016
was $5.3 million, $5.4 million and $4.9 million, respectively.
(i)
Long-Lived Assets
Long-lived assets, such as property, plant and equipment, and intangibles with estimated useful lives, are
depreciated or amortized over their respective estimated useful lives to their estimated residual values, and 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 estimated undiscounted future net cash flows expected to be generated by the asset. If the carrying amount of an asset
exceeds its estimated undiscounted future net cash flows, an impairment charge is recognized by the amount by which
the carrying amount of the asset exceeds the fair value of the asset. Recoverability of assets held for sale is measured by
a comparison of the carrying amount of an asset or asset group to their fair value less estimated costs to sell. Estimating
future cash flows and calculating the fair value of assets requires significant estimates and assumptions by management.
Assets to be disposed of are separately presented in the consolidated balance sheets and are no longer
depreciated.
(j)
Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss includes foreign currency translation adjustments relating to assets and
liabilities located in our foreign subsidiaries and changes in our pension benefits due to the initial adoption and ongoing
application of the authoritative accounting literature relating to pensions, net of tax.
- 70 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(2)
Summary of Significant Accounting Policies (Continued)
(k)
Revenue Recognition
Revenues are recognized when our performance obligation is satisfied. Our primary performance obligation is
satisfied when products are shipped. We report all amounts billed to a customer in a sale transaction as revenue,
including those amounts related to shipping and handling. Shipping and handling costs are included in cost of goods
sold. Consideration from a vendor to a retailer is presumed to be a reduction to the selling prices of the vendor’s
products and, therefore, is characterized as a reduction of sales when recognized in the vendor’s income statement. As a
result, coupon incentives, slotting and promotional expenses are recorded as a reduction of sales. Additionally, as a result
of the newly adopted revenue recognition standard, certain payments to customers related to in-store display incentives,
or marketing development funds, are also recorded as a reduction of sales. See (r) “Newly Adopted Accounting
Standards,” below, for further details regarding the newly adopted revenue recognition standard.
(l)
Selling, General and Administrative Expenses
We promote our products with advertising, consumer incentives and trade promotions. These programs include,
but are not limited to, discounts, slotting fees, coupons, rebates, in-store display incentives and volume-based incentives.
Consumer incentive and trade promotion activities are recorded as a reduction to revenues based on amounts estimated
as being due to customers and consumers at the end of a period. We base these estimates principally on historical
utilization and redemption rates. We expense our advertising costs either in the period the advertising first takes place or
as incurred. Advertising expenses were approximately $15.9 million, $22.7 million and $26.0 million, for fiscal 2018,
2017 and 2016, respectively.
(m)
Pension Plans
We have defined benefit pension plans covering approximately 43% of our employees. Our funding policy is to
contribute annually the amount recommended by our actuaries. From time to time, however, we voluntarily contribute
greater amounts based on pension asset performance, tax considerations and other relevant factors.
(n)
Share Based Compensation Expense
We provide compensation benefits in the form of stock options, performance share long-term incentive awards
(LTIAs) and common stock to employees and non-employee directors. The cost of share based compensation is recorded at
fair value at the date of grant and expensed in our consolidated statements of operations over the requisite service period, if
any.
Performance share LTIAs granted to our executive officers and certain other members of senior management
entitle each participant to earn shares of common stock upon the attainment of certain performance goals over the
applicable performance period. The recognition of compensation expense for the performance share LTIAs is initially
based on the probable outcome of the performance condition based on the fair value of the award on the date of grant
and the anticipated number of shares to be awarded on a straight-line basis over the applicable performance period. The
fair value of the awards on the date of grant is determined based upon the closing price of our common stock on the
applicable measurement dates (i.e., the deemed grant dates for accounting purposes) reduced by the present value of
expected dividends using the risk-free interest-rate as the award holders are not entitled to dividends or dividend
equivalents during the vesting period. Our company’s performance against the defined performance goals are re-
evaluated on a quarterly basis throughout the applicable performance period and the recognition of compensation
expense is adjusted for subsequent changes in the estimated or actual outcome. The cumulative effect of a change in the
estimated number of shares of common stock to be issued in respect of performance share awards is recognized as an
adjustment to earnings in the period of the revision.
- 71 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(2)
Summary of Significant Accounting Policies (Continued)
The fair value of stock option awards is estimated on the date of grant using the Black-Scholes option pricing
model and is recognized in expense over the vesting period of the options using the straight-line method. The Black-
Scholes option pricing model requires various assumptions, including the expected volatility of our stock, the expected
term of the option, the risk-free interest rate and the expected dividend yield. Expected volatility is based on both
historical and implied volatilities of our common stock over the estimated expected term of the award. The risk-free rate
for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. All stock
option grants have an exercise price equal to the fair market value of our common stock on the date of grant and have a
10-year term. Employee stock options cliff vest three years after the date of grant and non-employee director stock
options vest one year after the date of grant.
We recognize compensation expense for only that portion of share based awards that are expected to vest. We
utilize historical employee termination behavior to determine our estimated forfeiture rates. If the actual forfeitures differ
from those estimated by management, adjustments to compensation expense will be made in future periods.
(o)
Income Tax Expense Estimates and Policies
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities of our
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 differences are expected to be recovered or settled. A valuation allowance
is provided when it is more likely than not that all or some portion of the deferred tax asset will not be realized. The
effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes
the enactment date.
As part of the income tax provision process of preparing our consolidated financial statements, we are required
to estimate our income taxes. This process involves estimating our current tax expenses together with assessing
temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences
result in deferred tax assets and liabilities. We then assess the likelihood that our deferred tax assets will be recovered
from future taxable income and to the extent we believe the recovery is not likely, we establish a valuation allowance.
Further, to the extent that we establish a valuation allowance or increase this allowance in a financial accounting period,
we include such charge in our tax provision, or reduce our tax benefits in our consolidated statements of operations. We
use our judgment to determine our provision or benefit for income taxes, deferred tax assets and liabilities and any
valuation allowance recorded against our deferred tax assets.
There are various factors that may cause these tax assumptions to change in the near term, and we may have to
record a valuation allowance against our deferred tax assets. We cannot predict whether future U.S. federal and state
income tax laws and regulations might be passed that could have a material effect on our results of operations. See Note
10, “Income Taxes,” for a discussion of the Tax Cuts and Jobs Act enacted in December 2017, which we refer to in this
report as the “U.S. Tax Act.” We assess the impact of significant changes to the U.S. federal and state income tax laws
and regulations on a regular basis and update the assumptions and estimates used to prepare our consolidated financial
statements when new regulations and legislation are enacted. We recognize the benefit of an uncertain tax position that
we have taken or expect to take on our income tax returns we file if it is “more likely than not” that such tax position will
be sustained based on its technical merits.
(p)
Dividends
Cash dividends, if any, are accrued as a liability on our consolidated balance sheets and recorded as a decrease
to additional paid-in capital when declared.
- 72 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(2)
Summary of Significant Accounting Policies (Continued)
(q)
Earnings Per Share
Basic earnings per share is calculated by dividing net income by the weighted average number of shares of
common stock outstanding. Diluted earnings per share is calculated by dividing net income by the weighted average
number of shares of common stock outstanding plus all additional shares of common stock that would have been
outstanding if potentially dilutive shares of common stock had been issued upon the exercise of stock options or in
connection with performance share LTIAs that may be earned as of the beginning of the period using the treasury stock
method.
Fiscal
2018
Fiscal
2017
(in thousands, except share and per share data)
Fiscal
2016
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
172,435 $
217,463 $
109,425
Weighted average common shares outstanding:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net effect of potentially dilutive share-based compensation awards(1) . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
66,144,703
109,851
66,254,554
66,487,403
219,060
66,706,463
63,202,900
216,892
63,419,792
Earnings per share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2.61 $
2.60 $
3.27 $
3.26 $
1.73
1.73
(1) For fiscal 2018, 2017 and 2016, outstanding stock options of 1,091,478, 348,894 and 22,692, respectively, were excluded from
diluted earnings per share as their effect was antidilutive.
(r)
Newly Adopted Accounting Standards
In March 2017, the Financial Accounting Standards Board (FASB) issued a new accounting standards update
(ASU) that improves the presentation of net periodic pension cost and net periodic post-retirement benefit cost. The new
guidance revises how employers that sponsor defined benefit pension and other post-retirement plans present the net
periodic benefit cost in their income statement and requires that the service cost component of net periodic benefit cost
be presented in the same income statement line items as other employee compensation costs from services rendered
during the period and present the other components of net periodic pension cost below operating profit. The update was
effective beginning with the first quarter of fiscal 2018. We adopted this standard retrospectively as of the first quarter of
fiscal 2018. The adoption of this ASU did not have any impact on our consolidated financial position, results of
operations or liquidity, but did require a reclassification among selling, general and administrative expenses and other
income on our consolidated statements of operations.
In May 2014, the FASB issued guidance on revenue recognition, with final guidance issued in 2016. The
guidance provides for a five-step model to determine the revenue to be recognized from the transfer of goods or services
to customers. The guidance also requires improved disclosures to help users of the financial statements better understand
the nature, amount, timing and uncertainty of revenue and cash flows relating to customer contracts. It also provides
clarification for principal versus agent considerations, identifying performance obligations and the accounting of
intellectual property licenses. In addition, the FASB introduced practical expedients related to disclosures of remaining
performance obligations, as well as other amendments to guidance on collectability, non-cash consideration and the
presentation of sales and other similar taxes.
- 73 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(2)
Summary of Significant Accounting Policies (Continued)
We adopted this guidance and related amendments as of the first quarter of fiscal 2018, applying the full
retrospective transition method to all contracts. We concluded that the adoption of this standard primarily affected our
policies and estimation methodologies of variable consideration associated with rebates and bill-backs, product returns
and cash discounts. The provisions of the new standard did not impact the timing of revenue recognition but did impact
the classification of certain payments to customers, moving an immaterial amount of such payments from expense to a
deduction from net sales.
Our sales predominantly contain a single performance obligation and revenue is recognized at a single point in
time when ownership, risks and rewards transfer. Typically, this occurs when the goods are shipped to the customer.
Revenues are recognized in an amount that reflects the net consideration we expect to receive in exchange for the goods.
We report all amounts billed to a customer in a sale transaction as revenue, including those amounts related to shipping
and handling. Shipping and handling costs are included in cost of goods sold. Under the new revenue guidance, we
recognize our shipping and handling activities as a fulfillment of our promise to transfer products to our customers.
We promote our products with advertising, consumer incentives and trade promotions. These programs include
discounts, slotting fees, coupons, rebates, in-store display incentives and volume-based incentives. Customer trade
promotion and consumer incentive activities are recorded as a reduction to the sale price based on amounts estimated as
being due to customers and consumers at the end of a period. We derive these estimates principally on historical
utilization and redemption rates.
Payment terms in our invoices are based on the billing schedule established in our contracts or purchase orders
with customers. We generally recognize the related trade receivable when the goods are shipped. In certain cases, we
require a payment in advance of performance when the customer’s credit has not been established. We record these
revenues as a contract liability; however, these amounts have historically been immaterial.
The below tables set forth the adjustments to net sales, gross profit, selling, general and administrative
expenses, operating income and other income during fiscal 2017 and 2016 as a result of the newly adopted revenue
recognition standard and newly adopted presentation of net periodic pension cost and net periodic post-retirement benefit
cost (in thousands, except per share data).
As Reported
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,668,056 $
Cost of goods sold . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative
1,205,809
462,247
Impact of
Revenue
Adoption
(21,669) $
—
(21,669)
Fiscal 2017
Impact of
Pension
Adoption
Reclassification
of Loss on Sale of
Assets
— $
—
—
As Adjusted
— $ 1,646,387
1,205,809
—
440,578
—
expenses . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on sale of assets . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . $
205,234
—
239,402
(1,607)
217,463 $
(21,669)
—
—
—
— $
1,491
—
(1,491)
(1,491)
— $
(1,608)
1,608
—
—
— $
183,448
1,608
237,911
(3,098)
217,463
Earnings per share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3.27 $
3.26 $
— $
— $
— $
— $
— $
— $
3.27
3.26
- 74 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(2)
Summary of Significant Accounting Policies (Continued)
Fiscal 2016
As Reported
Impact of
Revenue
Adoption
Impact of
Pension
Adoption
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,391,257 $ (18,950) $
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 109,425 $
—
(18,950)
(18,950)
—
—
—
943,295
447,962
174,759
253,995
(363)
$
As Adjusted
— $ 1,372,307
943,295
—
429,012
—
157,028
1,219
252,776
(1,219)
(1,582)
(1,219)
— $ 109,425
Basic and diluted earnings per share . . . . . . . . . . . . . . . . . . . . $
1.73 $
—
$
— $
1.73
In January 2017, the FASB issued a new ASU that clarifies the definition of a business with the objective of
adding guidance to assist companies with evaluating whether transactions should be accounted for as acquisitions or
disposals of assets or businesses. The definition of a business may affect many areas of accounting, including
acquisitions, disposals, goodwill and consolidation. The ASU is applied on a prospective basis and was effective for
fiscal years beginning after December 15, 2017. We adopted this standard as of the first quarter of fiscal 2018, and there
was no material impact to our consolidated financial statements. We applied this ASU while evaluating whether
McCann’s, acquired on July 16, 2018, and Pirate Brands, sold on October 17, 2018, met the definition of a business. See
Note 3, “Acquisitions and Divestitures.”
In August 2016, the FASB issued a new ASU to provide guidance on eight specific cash flow classification
issues and reduce diversity in practice in how some cash receipts and cash payments are presented and classified on the
statement of cash flows. The ASU was effective for fiscal years beginning after December 15, 2017. We adopted this
standard as of the first quarter of fiscal 2018, and there was no material impact to our consolidated financial statements.
In March 2016, the FASB issued a new ASU that changes the accounting for certain aspects of share-based
payments to employees. The new guidance requires that excess tax benefits (which represent the excess of actual tax
benefits received at the date of vesting or settlement over the benefits recognized over the vesting period or upon
issuance of share-based payments) and tax deficiencies (which represent the amount by which actual tax benefits
received at the date of vesting or settlement is lower than the benefits recognized over the vesting period or upon
issuance of share-based payments) be recorded in the income statement as a reduction of income taxes when the awards
vest or are settled. The new guidance also requires excess tax benefits to be classified as an operating activity in the
statement of cash flows rather than as a financing activity. As a result of this adoption, we recognized discrete tax
benefits of $0.8 million in the income taxes line item of our consolidated statement of operations for fiscal 2017 related
to excess tax benefits upon vesting or settlement in that period. We elected to adopt the cash flow presentation of the
excess tax benefits prospectively, commencing with our statement of cash flows for the first quarter of 2017, where we
began classifying these benefits, along with other income tax cash flows, as an operating activity. We excluded the
excess tax benefits from the assumed proceeds available to repurchase shares in the computation of our diluted earnings
per share for fiscal 2017.
In November 2015, the FASB issued a new ASU that requires deferred tax assets and liabilities to be classified
as noncurrent on the balance sheet. The ASU was effective beginning with the first quarter of fiscal 2017. We adopted
the provisions of this ASU at the beginning of fiscal 2017 and applied the required changes in accounting principle on a
retrospective basis. The update impacted presentation and disclosure only, and therefore, the adoption of this ASU did
not have any impact on our results of operations or liquidity.
- 75 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(2)
Summary of Significant Accounting Policies (Continued)
In July 2015, the FASB issued a new ASU that simplifies the subsequent measurement of inventories by
replacing the current lower of cost or market test with a lower of cost and net realizable value test. We adopted the
provisions of this ASU at the beginning of fiscal 2017. The adoption of this ASU did not have any impact on our
consolidated financial position, results of operations or liquidity.
(s)
Recently Issued Accounting Standards
In August 2018, the FASB issued a new ASU which clarifies that implementation costs incurred by customers
in cloud computing arrangements are deferred if they would be capitalized by customers in software licensing
arrangements under the internal-use software guidance. The update is effective for fiscal years beginning after
December 15, 2019. Early adoption is permitted, including adoption in any interim period. We currently do not expect
the adoption of this ASU to have a material impact to our consolidated financial statements.
In August 2018, the FASB issued a new ASU that aims to improve the overall usefulness of disclosures to
financial statement users and reduce unnecessary costs to companies by changing disclosure requirements for employers
that sponsor defined benefit pension or other post-retirement plans. The update is effective for fiscal years beginning
after December 15, 2020. We expect to update our defined benefit pension plan disclosures when the new standard
becomes effective. We do not expect the adoption of this ASU to have an impact to our consolidated financial statements
as this ASU only modifies disclosure requirements.
In August 2018, the FASB issued a new ASU that aims to improve the overall usefulness of disclosures to
financial statement users and reduce unnecessary costs to companies by changing disclosure requirements for fair value
measurement. The update is effective for fiscal years beginning after December 15, 2019. We expect to update our fair
value measurement disclosures when the new standard becomes effective. We do not expect the adoption of this ASU to
have an impact to our consolidated financial statements as this ASU only modifies disclosure requirements.
In January 2017, the FASB issued an amendment to the standards of goodwill impairment testing. The new
guidance simplifies the test for goodwill impairment, by comparing the fair value of a reporting unit with its carrying
amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the
reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that
reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the
carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The update is
effective for fiscal years beginning after December 15, 2019. We expect to adopt the standards when they become
effective.
In February 2016, the FASB issued a new ASU that requires lessees to recognize lease assets and lease
liabilities on the balance sheet for those leases classified as operating leases under current guidance and to disclose key
information about leasing arrangements. The new standard establishes a right-of-use model (ROU) that requires a lessee
to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases
will be classified as finance or operating, with classification affecting the pattern and classification of expense
recognition in the statement of operations.
The effective date for the new standard is December 30, 2018, with early adoption permitted. We elected a
modified retrospective transition approach, applying the new standard to all leases existing at the date of initial
application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative
period presented in the financial statements as its date of initial application. If an entity chooses the second option, the
transition requirements for existing leases also apply to leases entered into between the date of initial application and the
effective date. The entity must also recast its comparative period financial statements and provide the disclosures
required by the new standard for the comparative periods. We will adopt the new standard prospectively when it
becomes effective in the first quarter of 2019.
- 76 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(2)
Summary of Significant Accounting Policies (Continued)
The new standard provides a number of optional practical expedients in transition. We expect to elect the
‘package of practical expedients’, which permits us not to reassess under the new standard our prior conclusions about
lease identification, lease classification and initial direct costs. We do not expect to elect the use-of-hindsight or the
practical expedient pertaining to land easements; the latter not being applicable to us. We expect to elect all of the new
standard’s available transition practical expedients.
We do not expect that this standard will have a material effect on our financial statements. Upon adoption, the
most significant effects are expected to relate to (1) the recognition of new ROU assets and lease liabilities on our
balance sheet for our operating leases, which is expected to be approximately $40.0 million at the beginning of fiscal
2019; and (2) providing significant new disclosures about our leasing activities.
The new standard also provides practical expedients for an entity’s initial and ongoing accounting. We
currently expect to elect the short-term lease recognition exemption for all leases that qualify. This means, for those
leases that qualify, we will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or
lease liabilities for existing short-term leases of those assets in transition. We also currently expect to elect the practical
expedient to not separate lease and non-lease components for all of our leases.
(3)
Acquisitions and Divestitures
Acquisitions
On July 16, 2018, we acquired the McCann’s brand of premium Irish oatmeal from TreeHouse Foods, Inc. for
approximately $30.8 million in cash. We refer to this acquisition as the “McCann’s acquisition.”
On October 2, 2017, we completed the acquisition of Back to Nature Foods Company, LLC and related entities,
including the Back to Nature and SnackWell’s brands, from Brynwood Partners VI L.P., Mondelēz International and
certain other sellers for approximately $162.8 million in cash. We refer to this acquisition as the “Back to Nature
acquisition.”
On December 2, 2016, we acquired Victoria Fine Foods, LLC, and a related entity, from Huron Capital
Partners and certain other sellers for a purchase price of $71.9 million in cash. We refer to this acquisition as the
“Victoria acquisition.”
On November 21, 2016, we completed the acquisition of the spices & seasonings business of ACH Food
Companies, Inc. for a purchase price of $366.9 million. We refer to this acquisition as the “spices & seasonings
acquisition.” In connection with the acquisition, as of December 31, 2016, we had payables related to a transition
services agreement with ACH Food Companies of $12.6 million included in accrued expenses in the accompanying
consolidated balance sheets.
We have accounted for each of these acquisitions using the acquisition method of accounting and, accordingly,
have included the assets acquired, liabilities assumed and results of operations in our consolidated financial statements
from the respective date of acquisition. The excess of the purchase price over the fair value of identifiable net assets
acquired represents goodwill. Unamortizable trademarks are deemed to have an indefinite useful life and are not
amortized. Customer relationship intangibles and amortizable trademarks acquired are amortized over 10 to 20 years.
Goodwill and other intangible assets, except in the case of the Victoria and Back to Nature acquisitions, are deductible
for income tax purposes. Inventory has been recorded at estimated selling price less costs of disposal and a reasonable
selling profit and the property, plant and equipment and other intangible assets (including trademarks, customer
relationships and other intangibles) acquired have been recorded at fair value as determined by our management with the
assistance of a third-party valuation specialist. See Note 6, “Goodwill and Other Intangible Assets.”
- 77 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(3)
Acquisitions and Divestitures (Continued)
The following table sets forth the preliminary allocation of the McCann’s acquisition purchase price to the
estimated fair value of the net assets acquired at the date of acquisition. The preliminary purchase price allocation may
be adjusted as a result of the finalization of our purchase price allocation procedures related to the assets acquired and
liabilities assumed. During the fourth quarter of 2018, we recorded a purchase price adjustment to increase accrued
expenses and goodwill by $0.2 million. We anticipate completing the purchase price allocation during the third quarter
of fiscal 2019.
McCann’s Acquisition (in thousands):
Purchase Price:
Cash paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
$
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30,787
30,787
Preliminary Allocation:
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trademarks—unamortizable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationship intangibles—amortizable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
12
973
24,800
2,000
(292)
3,294
30,787
The following table sets forth the allocation of the Back to Nature acquisition purchase price to the estimated
fair value of the net assets acquired at the date of acquisition. During fiscal 2018, we recorded a purchase price
adjustment to increase unamortizable trademarks by $0.1 million, goodwill by $2.8 million and other working capital by
$2.1 million, and decrease inventory by $1.7 million and long-term deferred income tax liabilities, net, by $0.9 million.
Back to Nature Acquisition (in thousands):
Purchase Price:
Cash paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
$
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
162,848
162,848
Allocation:
Trademarks—unamortizable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trademarks—amortizable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationship intangibles—amortizable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term deferred income tax liabilities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
109,900
12,800
36,334
14,700
5,088
(9,892)
(6,082)
162,848
- 78 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(3)
Acquisitions and Divestitures (Continued)
The following table sets forth the allocation of the Victoria acquisition purchase price to the estimated fair
value of the net assets acquired at the date of acquisition.
Victoria Acquisition (in thousands):
Purchase Price:
Cash paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
71,972
71,972
Allocation:
Trademarks—unamortizable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationship intangibles—amortizable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term deferred income tax liabilities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
45,500
12,298
9,298
6,400
5,729
(5,206)
(2,047)
71,972
The following table sets forth the allocation of the spices & seasonings acquisition purchase price to the
estimated fair value of the net assets acquired at the date of acquisition.
Spices & Seasonings Acquisition (in thousands):
Purchase Price:
Cash paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
366,932
366,932
Allocation:
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationship intangibles—amortizable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trademarks—unamortizable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
120,545
89,250
65,200
62,193
49,571
(17,939)
(1,888)
366,932
(1) In connection with the spices & seasonings acquisition, we agreed to establish a defined benefit plan for certain employees
transferred to B&G Foods and certain former employees of the acquired spices & seasonings business. We also agreed to assume
certain liabilities relating to the underfunded status of the former plan that such employees participated in prior to the acquisition.
At each of December 29, 2018 and December 30, 2017, we recognized $17.9 million in “other liabilities” in the accompanying
consolidated balance sheets to reflect our obligations with respect to the underfunded status of the defined benefit plan assets and
liabilities transferred to us.
- 79 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(3)
Acquisitions and Divestitures (Continued)
Unaudited Pro Forma Summary of Operations
The following pro forma summary of operations presents our operations as if the spices & seasonings
acquisition had occurred as of the beginning of fiscal 2016. In addition to including the results of operations of this
acquisition, the pro forma information gives effect to the interest on additional borrowings, the amortization of
trademark, customer relationship and seed technology intangibles, and the issuance of shares of common stock. On an
actual basis, the spices & seasonings business contributed $256.0 million, $259.2 million and $28.2 million of our
consolidated net sales for fiscal 2018, 2017 and 2016, respectively. (In thousands, except per share data):
Net sales(1) (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic earnings per share(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per share(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
Fiscal 2016
1,587,212
129,712
2.01
2.00
(1) The pro forma information presented above does not purport to be indicative of the results that actually would have been attained
had the spices & seasonings acquisition occurred as of the beginning of fiscal 2016, and is not intended to be a projection of
future results.
(2) Net sales has been adjusted as a result of our retrospective adoption of the new accounting standard relating to revenue
recognition. See Note 2(s), “Summary of Significant Accounting Policies — Recently Issued Accounting Standards” above. The
adjustments described above had no impact on net income or earnings per share.
None of the McCann’s, Back to Nature and Victoria acquisitions were material to our consolidated results of
operations or financial position and, therefore, pro forma financial information is not presented.
Divestitures
On October 17, 2018, we completed the sale of Pirate Brands to The Hershey Company for a purchase price of
$420.0 million in cash. Pirate Brands includes the Pirate’s Booty, Smart Puffs and Original Tings brands. We refer to
this divestiture as the “Pirate Brands sale.” Net deferred tax liabilities associated with the Pirate Brands sale were $107.3
million. We recognized a pre-tax gain on the Pirate Brands sale of $176.4 million, as calculated below (in thousands):
Cash received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Assets sold:
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships—amortizable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trademarks—unamortizable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
420,002
(6,688)
(404)
(8,408)
(152,800)
(70,952)
(77)
(239,328)
(4,288)
176,386
In December 2018, the compensation committee of our board of directors approved a special bonus pool of $6.0
million to be paid in fiscal 2019 to our executive officers and certain members of senior management to recognize their
significant contributions to the successful operation of Pirate Brands during our company’s five years of ownership of
Pirate Brands and to the successful completion of the Pirate Brands sale at a sale price more than double what our
company paid for Pirate Brands in 2013.
- 80 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(4)
Inventories
Inventories consist of the following, as of the dates indicated (in thousands):
Raw materials and packaging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Work-in-process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
December 29, 2018 December 30, 2017
70,315
140,425
291,109
501,849
61,905
95,282
244,168
401,355
$
$
(5)
Property, Plant and Equipment, net
Property, plant and equipment, net, consists of the following as of the dates indicated (in thousands):
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Office furniture and vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction-in-progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
December 29, 2018
11,718
125,768
311,457
45,230
18,580
512,753
(230,200)
282,553
$
December 30, 2017
11,671
118,534
285,813
40,341
16,497
472,856
(200,664)
272,192
$
Depreciation expense was $35.3 million, $31.6 million and $23.5 million for fiscal 2018, 2017 and 2016,
respectively.
(6)
Goodwill and Other Intangible Assets
The carrying amounts of goodwill and other intangible assets, as of the dates indicated, consist of the following
(in thousands):
December 29, 2018
December 30, 2017
Gross Carrying Accumulated Net Carrying Gross Carrying Accumulated Net Carrying
Amount
Amortization Amount
Amount
Amortization
Amount
Amortizable Intangible Assets
Trademarks . . . . . . . . . . . . . . . . . . . $
Customer relationships . . . . . . . . . .
Total amortizable intangible assets . . $
3,369 $
16,231 $
19,600 $
335,590 111,952 223,638
355,190 $ 115,321 $ 239,869 $
19,600 $
344,990
364,590 $
17,324
2,276 $
97,695 247,295
99,971 $ 264,619
Unamortizable Intangible Assets
Goodwill(1) . . . . . . . . . . . . . . . . . . . . . . $
584,435
Trademarks(1) . . . . . . . . . . . . . . . . . . . . $ 1,355,700
$
649,292
$ 1,483,601
(1) The decreases in the carrying amounts of unamortizable intangible assets during fiscal 2018 are attributable to the Pirate Brands
sale.
During fiscal 2018, 2017 and 2016, we amortized $18.3 million, $17.6 million and $13.8 million, respectively,
of the amortizable intangible assets. We expect to recognize $18.0 million of amortization expense in each of the fiscal
years 2019, 2020, 2021 and 2022, respectively, and $17.8 million in fiscal 2023. See Note 3, “Acquisitions and
Divestitures.”
- 81 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(6)
Goodwill and Other Intangible Assets (Continued)
Rickland Orchards. During the second quarter of 2016, we discontinued the Rickland Orchards brand because
there was not sufficient demand to warrant continued production. Accordingly, we wrote off the related intangible assets
and recorded non-cash impairment charges to amortizable trademarks and customer relationship intangibles of $4.5
million and $0.9 million, respectively, which are recorded in “Impairment of intangible assets” in the accompanying
consolidated statement of operations.
(7)
Long-Term Debt
Long-term debt consists of the following, as of the dates indicated (in thousands):
Revolving credit loans:
Outstanding principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Unamortized deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revolving credit loans, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
50,000 $
(2,996)
47,004
—
(3,778)
(3,778)
December 29, 2018 December 30, 2017
Tranche B term loans due 2022:
Outstanding principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unamortized deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unamortized discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tranche B term loans due 2022, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.625% senior notes due 2021:
Outstanding principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unamortized deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.625% senior notes due 2021, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.25% senior notes due 2025:
Outstanding principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unamortized deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unamortized premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.25% senior notes due 2025, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
700,000
(3,687)
696,313
900,000
(10,807)
3,371
892,564
650,110
(12,648)
(2,279)
635,183
700,000
(5,206)
694,794
900,000
(12,535)
3,910
891,375
Total long-term debt, net of unamortized financing costs and discount/premium . . . . $
1,635,881 $
2,217,574
Senior Secured Credit Agreement. In fiscal 2017, we refinanced our senior secured credit facility twice by
amending and restating our senior secured credit agreement, first on March 30, 2017, and again on November 20, 2017.
The first refinancing, on March 30, 2017, reduced by 0.75% the spread over LIBOR or the applicable base rate
on the then outstanding $640.1 million of tranche B term loans.
On April 3, 2017, we repaid all of the outstanding borrowings and amounts due under our revolving credit
facility and tranche A term loans using a portion of the net proceeds of our registered public offering of $500.0 million
aggregate principal amount of 5.25% senior notes due 2025.
On November 20, 2017, we again refinanced our senior secured credit facility. This second refinancing
increased the principal amount of the tranche B term loans by $10.0 million to $650.1 million, reduced by 25 basis
points the spread over LIBOR or the applicable base rate on the tranche B term loans and any revolving loans, increased
the aggregate commitments under our revolving credit facility from $500.0 million to $700.0 million, and extended the
maturity date applicable to our revolving credit facility from June 2019 to November 2022.
- 82 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(7)
Long-Term Debt (Continued)
We made optional prepayments of our tranche B term loans of $150.0 million principal amount in fiscal 2018.
On October 18, 2018, we made a mandatory prepayment of $352.2 million principal amount of tranche B term loans
with the net proceeds of the Pirate Brands sale. On October 19, 2018, we made an optional prepayment of the remaining
$147.9 million principal amount of tranche B term loans outstanding under our credit agreement from cash on hand and
the proceeds of additional revolving loans under our credit agreement. As a result of the optional and mandatory
prepayments of the tranche B term loans, we recognized a loss on extinguishment of debt of $13.1 million in fiscal 2018.
At December 29, 2018, the available borrowing capacity under our revolving credit facility, net of outstanding
letters of credit of $2.2 million, was $647.8 million. Proceeds of the revolving credit facility may be used for general
corporate purposes, including acquisitions of targets in the same or a similar line of business as our company, subject to
specified criteria. At December 29, 2018, there was $50.0 million outstanding under our revolving credit facility.
We are required to pay a commitment fee of 0.50% per annum on the unused portion of the revolving credit
facility. The maximum letter of credit capacity under the revolving credit facility is $50.0 million, with a fronting fee of
0.25% per annum for all outstanding letters of credit and a letter of credit fee equal to the applicable margin for
revolving loans that are Eurodollar (LIBOR) loans. The revolving credit facility matures on November 21, 2022.
We may prepay the term loans or permanently reduce the revolving credit facility commitment under the credit
agreement at any time without premium or penalty (other than customary “breakage” costs with respect to the early
termination of LIBOR loans). Subject to certain exceptions, the credit agreement provides for mandatory prepayment
upon certain asset dispositions or casualty events and issuances of indebtedness.
Interest under the revolving credit facility, including any outstanding letters of credit is determined based on
alternative rates that we may choose in accordance with the credit agreement, including a base rate per annum plus an
applicable margin ranging from 0.25% to 0.75%, and LIBOR plus an applicable margin ranging from 1.25% to 1.75%,
in each case depending on our consolidated leverage ratio.
Interest under the tranche B term loan facility was determined based on alternative rates that we could choose in
accordance with the credit agreement, including a base rate per annum plus an applicable margin of 1.00%, and LIBOR
plus an applicable margin of 2.00%. As of December 29, 2018, there were no tranche B term loans outstanding under
our credit facility.
Our obligations under the credit agreement are jointly and severally and fully and unconditionally guaranteed
on a senior basis by all of our existing and certain future domestic subsidiaries. The credit agreement is secured by
substantially all of our and our domestic subsidiaries’ assets except our and our domestic subsidiaries’ real property. The
credit agreement contains customary restrictive covenants, subject to certain permitted amounts and exceptions,
including covenants limiting our ability to incur additional indebtedness, pay dividends and make other restricted
payments, repurchase shares of our outstanding stock and create certain liens.
The credit agreement also contains certain financial maintenance covenants, which, among other things, specify
a maximum consolidated leverage ratio and a minimum interest coverage ratio, each ratio as defined in the credit
agreement. Our consolidated leverage ratio (defined as the ratio of our consolidated net debt, as of the last day of any
period of four consecutive fiscal quarters to our adjusted EBITDA for such period) may not exceed 7.00 to 1.00. We are
also required to maintain a consolidated interest coverage ratio of at least 1.75 to 1.00 as of the last day of any period of
four consecutive fiscal quarters. As of December 29, 2018, we were in compliance with all of the covenants, including
the financial covenants, in the credit agreement.
The credit agreement also provides for an incremental term loan and revolving loan facility, pursuant to which
we may request that the lenders under the credit agreement, and potentially other lenders, provide unlimited additional
amounts of term loans or revolving loans or both on terms substantially consistent with those provided under the credit
agreement. Among other things, the utilization of the incremental facility is conditioned on our ability to meet a
maximum senior secured leverage ratio of 4.00 to 1.00, and a sufficient number of lenders or new lenders agreeing to
participate in the facility.
- 83 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(7)
Long-Term Debt (Continued)
4.625% Senior Notes due 2021. On June 4, 2013, we issued $700.0 million aggregate principal amount of
4.625% senior notes due 2021 at a price to the public of 100% of their face value.
Interest on the 4.625% senior notes is payable on June 1 and December 1 of each year. The 4.625% senior notes
will mature on June 1, 2021, unless earlier retired or redeemed. We may redeem some or all of the 4.625% senior notes
at a redemption price of 103.469% beginning June 1, 2016 and thereafter at prices declining annually to 100% on or
after June 1, 2019, in each case plus accrued and unpaid interest to the date of redemption. In addition, if we undergo a
change of control or upon certain asset sales, we may be required to offer to repurchase the 4.625% senior notes at the
repurchase price set forth in the indenture plus accrued and unpaid interest to the date of repurchase.
We may also, from time to time, seek to retire the 4.625% senior notes through cash repurchases of the 4.625%
senior notes and/or exchanges of the 4.625% senior notes for equity securities, in open market purchases, privately
negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market
conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
Our obligations under the 4.625% senior notes are jointly and severally and fully and unconditionally
guaranteed on a senior basis by all of our existing and certain future domestic subsidiaries. The 4.625% senior notes and
the subsidiary guarantees are our and the guarantors’ general unsecured obligations and are effectively junior in right of
payment to all of our and the guarantors’ secured indebtedness and to all existing and future indebtedness and other
liabilities of our non-guarantor subsidiaries; are pari passu in right of payment to all of our and the guarantors’ existing
and future unsecured senior debt; and are senior in right of payment to all of our and the guarantors’ future subordinated
debt. Our foreign subsidiaries are not guarantors, and any future foreign or partially owned domestic subsidiaries will not
be guarantors, of the 4.625% senior notes.
The indenture governing the 4.625% senior notes contains covenants with respect to us and the guarantors and
restricts the incurrence of additional indebtedness and the issuance of capital stock; the payment of dividends or
distributions on, and redemption of, capital stock; a number of other restricted payments, including certain investments;
creation of specified liens, certain sale-leaseback transactions and sales of certain specified assets; fundamental changes,
including consolidation, mergers and transfers of all or substantially all of our assets; and specified transactions with
affiliates. Each of the covenants is subject to a number of important exceptions and qualifications. As of December 29,
2018, we were in compliance with all of the covenants in the indenture governing the 4.625% senior notes.
5.25% Senior Notes due 2025. On April 3, 2017, we issued $500.0 million aggregate principal amount of
5.25% senior notes due 2025 at a price to the public of 100% of their face value. On November 20, 2017, we issued an
additional $400.0 million aggregate principal amount of 5.25% senior notes due 2025 at a price to the public 101% of
their face value plus accrued interest from October 1, 2017, which equates to a yield to worst of 5.03%. The notes issued
in November were issued as additional notes under the same indenture as our 5.25% senior notes due 2025 that were
issued in April, and, as such, form a single series and trade interchangeably with the previously issued 5.25% senior
notes.
We used the net proceeds of the April 2017 offering to repay all of the outstanding borrowings and amounts
due under our revolving credit facility and tranche A term loans, and to pay related fees and expenses. We used the net
proceeds of the November 2017 offering to repay all of the then outstanding borrowings and amounts due under our
revolving credit facility and to pay related fees and expenses. We have used a portion of, and intend to use the remaining
portion of, the net proceeds of the April 2017 and November 2017 offerings for general corporate purposes, which have
included and could include, among other things, repayment of other long term debt or possible acquisitions.
- 84 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(7)
Long-Term Debt (Continued)
Interest on the 5.25% senior notes is payable on April 1 and October 1 of each year, commencing October 1,
2017. The 5.25% senior notes will mature on April 1, 2025, unless earlier retired or redeemed. On or after April 1, 2020,
we may redeem some or all of the 5.25% senior notes at a redemption price of 103.9375% beginning April 1, 2020 and
thereafter at prices declining annually to 100% on or after April 1, 2023, in each case plus accrued and unpaid interest to
the date of redemption. In addition, if we undergo a change of control or upon certain asset sales, we may be required to
offer to repurchase the 5.25% senior notes at the repurchase price set forth in the indenture plus accrued and unpaid
interest to the date of repurchase.
We may also, from time to time, seek to retire the 5.25% senior notes through cash repurchases of the 5.25%
senior notes and/or exchanges of the 5.25% senior notes for equity securities, in open market purchases, privately
negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market
conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
Our obligations under the 5.25% senior notes are jointly and severally and fully and unconditionally guaranteed
on a senior basis by all of our existing and certain future domestic subsidiaries. The 5.25% senior notes and the
subsidiary guarantees are our and the guarantors’ general unsecured obligations and are effectively junior in right of
payment to all of our and the guarantors’ secured indebtedness and to all existing and future indebtedness and other
liabilities of our non-guarantor subsidiaries; are pari passu in right of payment to all of our and the guarantors’ existing
and future unsecured senior debt; and are senior in right of payment to all of our and the guarantors’ future subordinated
debt. Our foreign subsidiaries are not guarantors, and any future foreign or partially owned domestic subsidiaries will not
be guarantors, of the 5.25% senior notes.
The indenture governing the 5.25% senior notes contains covenants with respect to us and the guarantors and
restricts the incurrence of additional indebtedness and the issuance of capital stock; the payment of dividends or
distributions on, and redemption of, capital stock; a number of other restricted payments, including certain investments;
creation of specified liens, certain sale-leaseback transactions and sales of certain specified assets; fundamental changes,
including consolidation, mergers and transfers of all or substantially all of our assets; and specified transactions with
affiliates. Each of the covenants is subject to a number of important exceptions and qualifications. As of December 29,
2018, we were in compliance with all of the covenants in the indenture governing the 5.25% senior notes.
Subsidiary Guarantees. We have no assets or operations independent of our direct and indirect subsidiaries. All
of our present domestic subsidiaries jointly and severally and fully and unconditionally guarantee our long-term debt.
There are no significant restrictions on our ability and the ability of our subsidiaries to obtain funds from our respective
subsidiaries by dividend or loan. See Note 18, “Guarantor and Non-Guarantor Financial Information.”
Loss on Extinguishment of Debt. Loss on extinguishment of debt for fiscal 2018 includes the write-off of
deferred debt financing costs and unamortized discount of $11.1 million and $2.0 million, respectively, relating to the
repayment of all outstanding borrowings under the tranche B term loans. Loss on extinguishment of debt for fiscal 2017
includes the write-off of deferred debt financing costs and unamortized discount of $0.9 million and $0.3 million,
respectively, relating to the repayment of all outstanding borrowings under the tranche A term loans. Loss on
extinguishment of debt for fiscal 2016 includes the write-off of deferred debt financing costs and unamortized discount
of $2.2 million and $0.6 million, respectively, relating to the repayment of $40.1 million aggregate principal amount of
our tranche A term loans and $109.9 million aggregate principal amount of our tranche B term loans.
- 85 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(7)
Long-Term Debt (Continued)
Contractual Maturities. As of December 29, 2018, the aggregate contractual maturities of long-term debt are as
follows (in thousands):
Fiscal Year:
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
700,000
50,000
—
900,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,650,000
Accrued Interest. At December 29, 2018 and December 30, 2017, accrued interest of $15.6 million and $14.6
million, respectively, is included in accrued expenses in the accompanying consolidated balance sheets.
(8)
Fair Value Measurements
The authoritative accounting literature relating to fair value measurements defines fair value as the price that
would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at
the measurement date (an exit price). The accounting literature outlines a valuation framework and creates a fair value
hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures.
Under GAAP, certain assets and liabilities must be measured at fair value, and the accounting literature details the
disclosures that are required for items measured at fair value.
Financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy under
the accounting literature. The three levels are as follows:
Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2—Observable inputs other than Level 1 quoted prices, such as quoted prices for similar instruments in
active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived
valuations whose inputs are observable or whose significant value driver is observable for the asset or liability, either
directly or indirectly.
Level 3—Unobservable inputs that reflect our assumptions about the assumptions that market participants
would use in pricing the asset or liability.
Cash and cash equivalents, trade accounts receivable, income tax receivable, trade accounts payable, accrued
expenses, income tax payable and dividends payable are reflected in the consolidated balance sheets at carrying value,
which approximates fair value due to the short-term nature of these instruments.
- 86 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(8)
Fair Value Measurements (Continued)
The carrying values and fair values of our revolving credit loans, term loans, 4.625% senior notes and 5.25%
senior notes as of December 29, 2018 and December 30, 2017 are as follows (in thousands):
December 29, 2018
December 30, 2017
Revolving credit loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Tranche B term loans due 2022 . . . . . . . . . . . . . . . . . . . . . .
4.625% senior notes due 2021 . . . . . . . . . . . . . . . . . . . . . . .
5.25% senior notes due 2025 . . . . . . . . . . . . . . . . . . . . . . . . $
— (2)
50,000 $ 50,000 (1) $
— (2)
684,250 (3)
700,000
903,371 (4) $ 837,877 (3) $
647,831 (2) 652,689 (1)
710,500 (3)
700,000
903,910 (4) $ 919,729 (3)
Carrying Value Fair Value Carrying Value Fair Value
—
— $
(1) Fair values are estimated based on Level 2 inputs, which were quoted prices for identical or similar instruments in markets that
are not active.
(2) The carrying value of the tranche B term loans is net of discount. At December 30, 2017, the face amount of the tranche B term
loans was $650.1 million. There are no tranche B term loans outstanding under our credit facility as of December 29, 2018. See
Note 7, “Long-Term Debt.”
(3) Fair values are estimated based on quoted market prices.
(4) The carrying values of the 5.25% senior notes due 2025 include a premium. At December 29, 2018 the face amount of the 5.25%
senior note due 2025 was $900.0 million.
There was no Level 3 activity during fiscal 2018, 2017 or 2016.
(9)
Accumulated Other Comprehensive Loss
The reclassifications from accumulated other comprehensive loss (AOCL) for fiscal 2018, 2017 and 2016 are as
follows (in thousands):
Amount Reclassified
From AOCL
Affected Line Item in the
Details about AOCL Components
Defined benefit pension plan items
Amortization of unrecognized prior service
December 29, December 30, December 31, Statement Where Net Income
2016
(loss) is Presented
2018
2017
cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of unrecognized loss . . . . . . . . . . .
$
2 $
696
35 $
517
44 See (1) below
454 See (1) below
Accumulated other comprehensive loss before
tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total reclassification . . . . . . . . . . . . . . . . . . . . . . . . $
698
(174)
524 $
552
(218)
334 $
498 Total before tax
(188) Income tax expense
310 Net of tax
(1) These items are included in the computation of net periodic pension cost. See Note 12, “Pension Benefits,” for additional
information.
- 87 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(9)
Accumulated Other Comprehensive Loss (Continued)
Changes in AOCL for fiscal 2018, 2017 and 2016 are as follows (in thousands):
Defined Benefit
Pension Plan Items
Foreign Currency
Translation
Adjustments
Balance at January 2, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other comprehensive income (loss) before reclassifications . .
Amounts reclassified from AOCL . . . . . . . . . . . . . . . . . . . . . . .
Net current period other comprehensive income (loss) . . . . . . . . .
Balance at December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive (loss) income before reclassifications . .
Amounts reclassified from AOCL . . . . . . . . . . . . . . . . . . . . . . .
Net current period other comprehensive (loss) income . . . . . . . . .
Balance at December 30, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss) before reclassifications . .
Amounts reclassified from AOCL . . . . . . . . . . . . . . . . . . . . . . .
Net current period other comprehensive income (loss) . . . . . . . . .
Balance at December 29, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(8,712) $
1,202
310
1,512
(7,200)
(6,119)
334
(5,785)
(12,985)
237
524
761
(12,224) $
(3,984) $
(8,180)
—
(8,180)
(12,164)
4,393
—
4,393
(7,771)
(3,507)
—
(3,507)
(11,278) $
Total
(12,696)
(6,978)
310
(6,668)
(19,364)
(1,726)
334
(1,392)
(20,756)
(3,270)
524
(2,746)
(23,502)
(10)
Income Taxes
The components of income before income tax expense consist of the following (in thousands):
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
217,044 $
5,233
222,277 $
136,015 $
12,047
148,062 $
150,266
26,800
177,066
Fiscal 2018
Fiscal 2017
Fiscal 2016
Income tax expense (benefit) consists of the following (in thousands):
Fiscal 2018
Fiscal 2017
Fiscal 2016
Current:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
41,583 $
7,775
1,978
51,336
3,508
(3,190)
(1,812)
(1,494)
49,842 $
3,977 $
2,584
4,563
11,124
(88,716)
10,401
(2,210)
(80,525)
(69,401) $
1,993
1,348
8,110
11,451
50,587
6,229
(626)
56,190
67,641
- 88 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(10)
Income Taxes (Continued)
Income tax expense differs from the expected income tax expense (computed by applying the U.S. federal
income tax rate of 21% for fiscal year 2018 and 35% for fiscal years 2017 and 2016 to income before income tax
expense) as a result of the following:
Fiscal 2018
Fiscal 2017
35.0 %
Fiscal 2016
35.0 %
Expected tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease):
State income taxes, net of federal income tax benefit . . . . . . . . . . . . . . . .
Impact on deferred taxes from changes in state tax rates . . . . . . . . . . . . .
Foreign income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impact on deferred taxes from U.S. Tax Act . . . . . . . . . . . . . . . . . . . . . . .
Permanent differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign tax credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21.0 %
2.9
(1.6)
0.8
0.3
0.1
(0.1)
(1.0)
22.4 %
4.4
3.9
2.3
(90.0)
(0.4)
(1.6)
(0.5)
(46.9)%
2.9
1.0
2.8
—
(0.1)
(3.1)
(0.3)
38.2 %
In the fourth quarter of 2017, as a result of the U.S. Tax Act, we remeasured our U.S. deferred tax assets and
liabilities at the lower U.S. corporate income tax rate, which resulted in a discrete tax benefit of approximately $133.3
million. In fiscal 2018, 2017 and 2016, changes in state apportionments or state tax laws impacted our blended state rate,
resulting in a state tax benefit in fiscal 2018 of $3.5 million and state tax expense in fiscal 2017 and 2016 of $5.8 million
and $1.8 million, respectively.
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and
deferred tax liabilities are presented below (in thousands):
December 29, December 30,
2018
2017
Deferred tax assets:
Accounts receivable, principally due to allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Inventories, principally due to additional costs capitalized for tax purposes . . . . . . . . . .
Accruals and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net operating loss and tax credit carry forwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24 $
2,090
8,512
4,663
15,289
(961)
14,328
37
2,695
6,806
4,462
14,000
—
14,000
Deferred tax liabilities:
Plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill and other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(16,224)
(222,851)
(8,081)
(247,156)
Net deferred tax liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (230,962) $ (233,156)
(18,592)
(217,811)
(8,887)
(245,290)
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 and reversal of deferred tax liabilities over the periods in which the deferred tax assets are
deductible, a valuation allowance of $1.0 million was recorded during fiscal 2018 to record only the portion of the
deferred tax asset that management believes it is more likely than not that we will realize the benefits of these deductible
differences. There was no valuation allowance recorded during fiscal 2017 or 2016. The amount of the deferred tax
assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during
future periods are reduced.
- 89 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(10)
Income Taxes (Continued)
At December 29, 2018 and December 30, 2017, we had $0.6 million and $0.0 million, respectively, of reserves
for uncertain tax positions which represents an increase of $0.6 million in fiscal 2018 for tax positions taken during
2018. Our policy is to classify interest and penalties that result from any income tax uncertainties as income tax expense.
At December 29, 2018 we had intangibles of $1,048.7 million for tax purposes, which are amortizable through
2033.
We operate in multiple taxing jurisdictions within the United States, Canada and Mexico and from time to time
face audits from various tax authorities regarding the deductibility of certain expenses, state income tax nexus,
intercompany transactions, transfer pricing and other matters. Examinations are ongoing in a number of jurisdictions
within the United States. In August 2016, our company received notice that the IRS intended to conduct an audit of our
2014 tax year. During the third and fourth quarter of 2016, we provided documents and information to the IRS in
response to its questions. During 2017 we closed this audit with no changes. We remain subject to examination in all of
our tax jurisdictions until the applicable statutes of limitations expire. As of December 29, 2018, a summary of the tax
years that remain subject to examination in our major tax jurisdictions are:
United States—Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 and forward
United States—States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2014 and forward
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2014 and forward
2015 and forward
Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. Tax Act. On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act, which we
refer to as the “U.S. Tax Act.” The U.S. Tax Act provides for significant changes in the U.S. Internal Revenue Code of
1986, as amended. The U.S. Tax Act contains provisions with separate effective dates but is generally effective for
taxable years beginning after December 31, 2017.
Beginning on January 1, 2018, the U.S. Tax Act lowered the U.S. federal corporate income tax rate from 35%
to 21% on our U.S. earnings from that date and beyond. The revaluation of our U.S. deferred tax assets and liabilities to
the 21% corporate tax rate reduced our net U.S. deferred income tax liability by approximately $133.3 million and has
been reflected as a reduction in our income tax benefit in our results for the fourth quarter ended December 30, 2017.
This tax benefit was partially offset by an increase in our blended state rate of approximately $5.8 million and a
repatriation expense of $0.9 million. The U.S. Tax Act also limits the deduction for net interest expense incurred by a
corporate taxpayer to 30% of the taxpayer’s adjusted taxable income. We were not impacted by this limitation in fiscal
2018, however, we may be limited in 2019 and future years.
The U.S. Treasury issued several proposed regulations supplementing the U.S. Tax Act in 2018, including
detailed guidance clarifying the calculation of the mandatory tax on previously unrepatriated earnings, application of the
existing foreign tax credit rules to newly created categories and expanding details for application of the base erosion tax
on affiliate payments. These proposed regulations are intended to be applied retroactively and would not materially
impact our 2018 tax rate if finalized in current form. We currently do not expect these regulations to have a material
impact on income tax expense upon final adoption.
The U.S. Treasury's proposed 2018 regulations also seek to clarify the application of the U.S. Tax Act
provisions for the limitation of interest expense, including treatment of depreciation and other deductions in arriving at
adjusted taxable income and application of the rules to controlled foreign affiliates. These regulations remain open for
comment and are not effective until published in the federal register. As a result, we will monitor their impact to our
filing positions and will record the impacts as discrete income tax expense adjustments in the period that the guidance is
finalized.
- 90 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(10)
Income Taxes (Continued)
The SEC issued guidance on December 23, 2017 providing a one-year measurement period from a registrant’s
reporting period that includes the U.S. Tax Act’s enactment date to allow the registrant sufficient time to obtain, prepare
and analyze information to complete the accounting required under ASC 740. As of December 29, 2018, we have
recorded all known and estimable impacts of the U.S. Tax Act that are effective for fiscal 2018.
The ultimate impact of the U.S. Tax Act on our reported results in fiscal 2018 may differ from the estimates
provided herein, possibly materially, due to, among other things, changes in interpretations and assumptions we have
made, guidance that may be issued, and other actions we may take as a result of the U.S. Tax Act different from that
currently contemplated.
(11)
Capital Stock
Voting Rights. The holders of our common stock are entitled to one vote per share with respect to each matter
on which the holders of our common stock are entitled to vote. The holders of our common stock are not entitled to
cumulate their votes in the election of our directors.
Dividends. The holders of our common stock are entitled to receive dividends, if any, as they may be lawfully
declared from time to time by our board of directors, subject to any preferential rights of holders of any outstanding
shares of preferred stock. In the event of any liquidation, dissolution or winding up of our company, common
stockholders are entitled to share ratably in our assets available for distribution to the stockholders, subject to the prior
rights of holders of any outstanding preferred stock. See Note 17, “Quarterly Financial Data (unaudited),” for dividends
declared for each quarter of fiscal 2018 and 2017.
Additional Issuance of Our Authorized Common Stock and Preferred Stock. Additional shares of our authorized
common stock and preferred stock may be issued, as determined by our board of directors from time to time, without
approval of holders of our common stock, except as may be required by applicable law or the rules of any stock
exchange or automated quotation system on which our securities may be listed or traded. Our board of directors has the
authority by resolution to determine and fix, with respect to each series of preferred stock prior to the issuance of any
shares of the series to which such resolution relates, the designations, powers, preferences and rights of the shares of
preferred stock of such series and any qualifications, limitations or restrictions thereof.
Stock Repurchases. On March 13, 2018, our board of directors authorized a stock repurchase program for the
repurchase of up to $50.0 million of our company’s common stock through March 15, 2019. Under the authorization, we
may purchase shares of common stock from time to time in the open market or in privately negotiated transactions in
compliance with the applicable rules and regulations of the SEC.
The timing and amount of stock repurchases under the program will be at the discretion of management, and
will depend on available cash, market conditions and other considerations. Therefore, we cannot assure you as to the
number or aggregate dollar amount of shares that will be repurchased under the repurchase program. We may
discontinue the program at any time. Any shares repurchased pursuant to the repurchase program will be cancelled.
During the second quarter of 2018, we repurchased and retired 694,749 shares of common stock at an average
price per share (excluding fees and commissions) of $26.65, or $18.5 million in the aggregate. During the fourth quarter
of 2018, we repurchased and retired 295,377 shares of common stock at an average price per share (excluding fees and
commissions) of $28.39, or $8.4 million in the aggregate. As of December 29, 2018, we had $23.1 million available for
future repurchases of common stock under the stock repurchase program. We did not repurchase any shares of common
stock during fiscal 2017 or fiscal 2016.
See Note 12, “Pension Benefits,” for disclosure relating to shares of our company’s common stock purchased
by our defined benefit pension plans.
- 91 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(11)
Capital Stock (Continued)
August 2016 Common Stock Offering. On August 12, 2016, we completed an underwritten public offering of
3,750,000 shares of our common stock at a price to the public of $49.00 per share. The proceeds of the offering were
$179.9 million, after deducting underwriting discounts and commissions and other offering expenses. The offering was
made by means of a prospectus and related prospectus supplement included as part of a new shelf registration statement
filed with the SEC. We used the net proceeds of the offering to fund a portion of the purchase price for the spices &
seasonings acquisition. See Note 3, “Acquisitions and Divestitures.”
March 2016 Common Stock Offering. On March 15, 2016, we completed an underwritten public offering of
4,600,000 shares of our common stock at a price to the public of $33.55 per share. The proceeds of the offering were
$152.0 million, after deducting underwriting discounts and commissions and other offering expenses. The offering was
made by means of a prospectus and related prospectus supplement included as part of an effective shelf registration
statement previously filed with the SEC. We used the net proceeds of the offering to repay a portion of our long-term
debt. See Note 7, “Long-Term Debt.”
(12)
Pension Benefits
As of December 29, 2018, we had four defined benefit pension plans covering approximately 43% of our
employees. The benefits are based on years of service and the employee’s compensation, as defined.
The following table sets forth our defined benefit pension plans’ benefit obligation, fair value of plan assets and
funded status recognized in the consolidated balance sheets. We used December 29, 2018 and December 30, 2017
measurement dates for fiscal 2018 and 2017, respectively, to calculate end of year benefit obligations, fair value of plan
assets and annual net periodic benefit cost (in thousands):
December 29, December 30,
2018
2017
—
(15,126)
7,710
5,064
(3,468)
138,152
Change in projected benefit obligation:
Projected benefit obligation at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 143,972 $
Projected benefit obligation acquired (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Projected benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in plan assets:
Fair value of plan assets at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets acquired (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employer contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net amount recognized:
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Funded status at the end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount recognized in accumulated other comprehensive loss consists of:
Prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2)
(20,799)
7,816
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (12,224) $ (12,985)
70,425
50,939
14,219
6,334
4,998
(2,943)
143,972
74,397
33,000
11,148
8,650
(2,943)
124,252
1,135
(20,857)
(19,722)
124,252
—
(6,678)
5,600
(3,468)
119,706
805
(19,251)
(18,446)
—
(19,786)
7,562
(1) Relates to the spices & seasonings acquisition, discussed below in this Note 12.
- 92 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(12)
Pension Benefits (Continued)
The accumulated benefit obligations of these plans were $129.4 million and $134.4 million at December 29,
2018 and December 30, 2017, respectively. The following information is presented for those plans with an accumulated
benefit obligation in excess of plan assets (in thousands):
December 29, December 30,
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2018
54,601 $
40,935 $
2017
59,010
39,956
The amounts in accumulated other comprehensive loss that are expected to be recognized as components of net
periodic benefit cost in fiscal 2018 are as follows (in thousands):
Prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
—
858
858
Fiscal 2018
December 29,
2018
December 30,
2017
Weighted-average assumptions:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.08 - 4.18 %
3.00 %
Rate of compensation increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.50 %
Expected long-term rate of return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.45 - 3.56 %
3.00 %
6.50 %
The discount rate used to determine year-end fiscal 2018 and fiscal 2017 pension benefit obligations was
derived by matching the plans’ expected future cash flows to the corresponding yields from the Citigroup Pension
Discount Curve. This yield curve has been constructed to represent the available yields on high-quality fixed-income
investments across a broad range of future maturities.
The overall expected long-term rate of return on plan assets assumption is based upon a building-block method,
whereby the expected rate of return on each asset class is broken down into the following components: (1) inflation;
(2) the real risk-free rate of return (i.e., the long-term estimate of future returns on default-free U.S. government
securities); and (3) the risk premium for each asset class (i.e., the expected return in excess of the risk-free rate).
All three components are based primarily on historical data, with modest adjustments to take into account
additional relevant information that is currently available. For the inflation and risk-free return components, the most
significant additional information is that provided by the market for nominal and inflation-indexed U.S. Treasury
securities. That market provides implied forecasts of both the inflation rate and risk-free rate for the period over which
currently available securities mature. The historical data on risk premiums for each asset class is adjusted to reflect any
systemic changes that have occurred in the relevant markets; e.g., the higher current valuations for equities, as a multiple
of earnings, relative to the longer-term average for such valuations.
Net periodic pension cost includes the following components (in thousands):
Service cost—benefits earned during the period . . . . . . . . . . . . . . . . . . . . . .
Interest cost on projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of unrecognized prior service cost . . . . . . . . . . . . . . . . . . . . .
Amortization of unrecognized loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net periodic pension cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
Fiscal 2018 Fiscal 2017 Fiscal 2016
3,325
2,717
(4,434)
44
454
2,106
6,334
4,998
(7,041)
35
517
4,843
7,710
5,064
(8,134)
2
696
5,338
$
$
$
- 93 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(12)
Pension Benefits (Continued)
As a result of adopting the ASU issued by the FASB in March 2017, that improves the presentation of net
periodic pension cost and net periodic post-retirement benefit cost, we have reclassified net periodic pension cost,
excluding service cost, out of selling, general and administrative expenses and into other income on our consolidated
statements of operations in the amount of $2.4 million, $1.5 million and $1.2 million for fiscal 2018, 2017 and 2016,
respectively.
The asset allocation for our pension plans at the end of fiscal 2018 and fiscal 2017, and the target allocation for
fiscal 2018, by asset category, follows.
Our pension plan assets are managed by outside investment managers; assets are rebalanced at the end of each
quarter. Our investment strategy with respect to pension assets is to maximize return while protecting principal. The
investment manager has the flexibility to adjust the asset allocation and move funds to the asset class that offers the most
opportunity for investment returns.
Percentage of Plan
Assets at Year End
Target
December 29, December 30,
Asset Category
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed income securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allocation
75 %
25 %
— %
100 %
2018
65 %
31 %
4 %
100 %
2017
68 %
28 %
4 %
100 %
The general investment objective of each of the pension plans is to grow the plan assets in relation to the plan
liabilities while prudently managing the risk of a decrease in the plan’s assets relative to those liabilities. To meet this
objective, our management has adopted the above target allocations that it reconsiders from time to time as
circumstances change. The actual plan asset allocations may be within a range around these targets. The actual asset
allocations are reviewed and rebalanced on a periodic basis.
The fair values of our pension plan assets at December 29, 2018 and December 30, 2017, utilizing the fair value
hierarchy discussed in Note 8, “Fair Value Measurements” follow (in thousands):
December 29, 2018
December 30, 2017
Level 1
Levels 2 & 3 Level 1
Levels 2 & 3
Asset Category
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,235 $
Equity securities:
— $ 5,655 $
—
U.S. mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. common stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign common stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
43,645
14,678
19,031
511
—
—
—
—
52,058
9,143
10,465
12,481
Fixed income securities:
U.S. mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37,606
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 119,706 $
34,450
—
— $ 124,252 $
—
—
—
—
—
—
The investment portfolio contains a diversified blend of common stocks, bonds, cash equivalents and other
investments, which may reflect varying rates of return. The investments are further diversified within each asset
classification. The portfolio diversification provides protection against a single security or class of securities having a
disproportionate impact on aggregate performance. Of the $19.0 million of U.S. common stocks in the investment
portfolio at the end of fiscal 2018, $11.5 million was invested in B&G Foods’ common stock. Of the $10.5 million of
U.S. common stocks in the investment portfolio at the end of fiscal 2017, $5.8 million was invested in B&G Foods’
common stock.
- 94 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(12)
Pension Benefits (Continued)
Information about the expected cash flows for the pension plan follows (in thousands):
Pension Payments
Benefit payments:
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 to 2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
3,845
4,187
4,601
5,125
5,514
35,511
We currently do not anticipate making any contributions to our pension plans in fiscal 2019.
We also sponsor defined contribution plans covering substantially all of our employees. Employees may
contribute to these plans and these contributions are matched by us at varying amounts. Contributions for the matching
component of these plans amounted to $1.7 million for fiscal 2018, $1.6 million for fiscal 2017 and $1.1 million for
fiscal 2016.
During the second quarter of 2018, our defined benefit pension plans purchased 227,667 shares of our
company’s common stock at an average price per share (excluding fees and commissions) of $28.27, or $6.4 million in
the aggregate.
Multi-Employer Defined Benefit Pension Plan. We also contribute to the Bakery and Confectionery Union and
Industry International Pension Fund (EIN 52-6118572, Plan No. 001), a multi-employer defined benefit pension plan,
sponsored by the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM). The plan
provides multiple plan benefits with corresponding contribution rates that are collectively bargained between
participating employers and their affiliated BCTGM local unions.
We were notified that for the plan year beginning January 1, 2012, the plan was in critical status and classified
in the Red Zone. As of the date of the accompanying audited consolidated financial statements, the plan remains in
critical status. The law requires that all contributing employers pay to the plan a surcharge to help correct the plan’s
financial situation. The amount of the surcharge is equal to a percentage of the amount an employer is otherwise required
to contribute to the plan under the applicable collective bargaining agreement. During the second quarter of 2015, we
agreed to a collective bargaining agreement that, among other things, implements a rehabilitation plan. As a result, our
contributions to the plan are expected to increase by at least 5.0% per year.
B&G Foods made contributions to the plan of $0.8 million, $0.9 million and $0.8 million, in fiscal 2018, 2017
and 2016, respectively. In each of fiscal 2018, 2017 and 2016, we paid less than $0.1 million in surcharges and expect to
pay surcharges of less than $0.1 million in fiscal 2019 assuming consistent hours are worked. These contributions
represented less than five percent of total contributions made to the plan.
Spices & Seasonings Acquisition. In connection with the spices & seasonings acquisition, we agreed to and did
establish a defined benefit plan for certain employees transferred to us and certain former employees of the acquired
spices & seasonings business. We also agreed to and did assume certain liabilities relating to the underfunded status of
the former plan that such employees participated in prior to the acquisition. At December 31, 2016, we recognized an
initial $17.5 million in “other liabilities” in the accompanying consolidated balance sheet to reflect our obligations with
respect to the underfunded status of the defined benefit plan assets and liabilities transferred to us, and during fiscal 2017
we adjusted that amount to $17.9 million, which consists of a projected benefit obligation of $50.9 million and fair value
of plan assets of $33.0 million.
- 95 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(13) Commitments and Contingencies
Operating Leases. We have several noncancelable operating leases, primarily for our corporate headquarters,
certain of our manufacturing facilities, warehouses, transportation equipment and machinery. These leases generally
require us to pay all executory costs such as maintenance, taxes and insurance. Total rental expense for our operating
leases was $13.1 million, $12.4 million and $9.1 million, for fiscal 2018, 2017 and 2016, respectively.
As of December 29, 2018, future minimum lease payments under non-cancelable operating leases (with initial
or remaining lease terms in excess of one year) for the periods set forth below were as follows (in thousands):
Fiscal year ending:
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
12,298
10,953
8,991
4,733
4,784
8,445
50,204
Legal Proceedings. We are from time to time involved in various claims and legal actions arising in the
ordinary course of business, including proceedings involving product liability claims, product labeling claims, worker’s
compensation and other employee claims, and tort and other general liability claims, as well as trademark, copyright,
patent infringement and related claims and legal actions. While we cannot predict with certainty the results of these
claims and legal actions in which we are currently or in the future may be involved, we do not expect that the ultimate
disposition of any currently pending claims or actions will have a material adverse effect on our consolidated financial
position, results of operations or liquidity.
Environmental. We are subject to environmental laws and regulations in the normal course of business. We did
not make any material expenditures during fiscal 2018, 2017 or 2016 in order to comply with environmental laws and
regulations. Based on our experience to date, management believes that the future cost of compliance with existing
environmental laws and regulations (and liability for any known environmental conditions) will not have a material
adverse effect on our consolidated financial position, results of operations or liquidity. However, we 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 we 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.
Collective Bargaining Agreements. As of December 29, 2018, approximately 1,626 of our 2,675 employees, or
61%, were covered by collective bargaining agreements. The collective bargaining agreement covering our Brooklyn
facility, which covers approximately 80 employees, is the only collective bargaining agreement expiring in the next
twelve months. While we believe that our relations with our union employees are in general good, we cannot assure you
that we will be able to negotiate a new collective bargaining agreement for our Brooklyn facility on terms satisfactory to
us, or at all, and without production interruptions, including labor stoppages. At this time, however, management does
not expect that the outcome of these negotiations will have a material adverse impact on our business, financial condition
or results of operations.
Severance and Change of Control Agreements. We have employment agreements with each of our executive
officers. The agreements generally continue until terminated by the executive or by us, and provide for severance
payments under certain circumstances, including termination by us without cause (as defined in the agreements) or as a
result of the employee’s death or disability, or termination by us or a deemed termination upon a change of control (as
defined in the agreements). Severance benefits generally include payments for salary continuation, continuation of health
care and insurance benefits, present value of additional pension credits and, in the case of a change of control,
accelerated vesting under compensation plans and, in certain cases, potential gross up payments for excise tax liability.
- 96 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(14)
Incentive Plans
Annual Bonus Plan. Annually, our board of directors establishes a bonus plan that provides for cash awards to
be made to our executive officers and other senior managers upon our company’s attainment of pre-set annual financial
objectives and individual performance. Awards are normally paid in cash in a lump sum following the close of each plan
year. Threshold performance objectives were not attained for fiscal 2018 or 2017 and therefore accrued expenses in the
accompanying consolidated balance sheets do not include an accrual for the annual bonus plan at December 29, 2018 or
December 30, 2017.
Omnibus Incentive Compensation Plan. Upon the recommendation of our compensation committee, our board
of directors on March 10, 2008 adopted (subject to stockholder approval) the B&G Foods, Inc. 2008 Omnibus Incentive
Compensation Plan, which we refer to as the Omnibus Plan. Our stockholders approved the Omnibus Plan at our annual
meeting on May 6, 2008. Our stockholders reapproved the material terms of the performance goals in our Omnibus Plan
at our annual meeting on May 16, 2013. Upon the recommendation of our compensation committee, our board of
directors in March 2017 approved (subject to stockholder approval) the amendment and restatement of the Omnibus
Plan, renamed the Omnibus Incentive Compensation Plan. Our stockholders approved the amended and restated
Omnibus Plan, including the materials terms of the performance goals, at our annual meeting on May 23, 2017.
The Omnibus Plan authorizes the grant of performance share awards, restricted stock, options, stock
appreciation rights, deferred stock, stock units and cash-based awards to employees, non-employee directors and
consultants. The total number of shares available for issuance under the Omnibus Plan is 4,500,000, of which 2,274,515
were available for future issuance as of December 29, 2018. Some of those shares are subject to outstanding
performance share LTIAs and stock options as described in the table below.
Performance Share Awards. Beginning in fiscal 2008, our compensation committee has made annual grants of
performance share LTIAs to our executive officers and certain other members of senior management under the Omnibus
Plan. The performance share LTIAs entitle the participants to earn shares of common stock upon the attainment of
certain performance goals over the applicable performance period. The performance period is typically three years.
Each performance share LTIA has a threshold, target and maximum payout. The awards are settled based upon
our performance over the applicable performance period. For the performance share LTIAs granted to date, the
applicable performance metric is and has been “excess cash” (as defined in the award agreements). If our performance
fails to meet the performance threshold, then the awards will not vest and no shares will be issued pursuant to the
awards. If our performance meets or exceeds the performance threshold, then a varying amount of shares from the
threshold amount (50% of the target number of shares) up to the maximum amount (200% of the target number of
shares) may be earned.
Subject to the performance goal for the applicable performance period being certified in writing by our
compensation committee as having been achieved, shares of common stock are issued prior to March 15 following the
completion of the performance period.
- 97 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(14)
Incentive Plans (Continued)
The following table details the activity in our performance share LTIAs for fiscal 2018:
Beginning of fiscal 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
End of fiscal 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance Shares (1)
437,218
242,436
(150,255)
(20,082)
509,317
Number of
Weighted Average
Grant Date Fair Value
(per share)(2)
$
$
$
$
$
29.36
21.39
23.84
26.86
27.30
(1) Solely for purposes of this table, the number of performance shares is based on the participants earning the maximum number of
performance shares (i.e., 200% of the target number of performance shares).
(2) The fair value of the awards was determined based upon the closing price of our common stock on the applicable measurement
dates (i.e., the deemed grant dates for accounting purposes) reduced by the present value of expected dividends using the risk-
free interest-rate as the award holders are not entitled to dividends or dividend equivalents during the vesting period.
Stock Options.
The following table details our stock option activity for fiscal 2018:
Outstanding at beginning of fiscal 2018 . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at end of fiscal 2018 . . . . . . . . . . .
Exercisable at end of fiscal 2018 . . . . . . . . . . .
Options
832,569
397,864
(1,787)
(33,515)
(1,026)
1,194,105
531,316
Weighted
Average
Weighted Average
Contractual Life
Exercise Price Remaining (Years)
$
$
$
$
$
$
$
33.45
27.00
27.77
30.66
27.77
31.40
31.36
7.46
6.15
Aggregate
Intrinsic Value
$
$
986
149
The fair value of the options was estimated on the date of grant using the Black-Scholes option-pricing model
utilizing the following assumptions. Expected volatility was based on both historical and implied volatilities of our
common stock over the estimated expected term of the award. The expected term of the options granted represents the
period of time that options were expected to be outstanding and is based on the “simplified method” in accordance with
accounting guidance. We utilized the simplified method to determine the expected term of the options as we do not have
sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. The risk-free
interest rate for the expected term of the option is based on the U.S. Treasury implied yield at the date of grant.
Weighted average grant date fair value . . . . . . . . . . . . . . . . . . . . . . . . . . $
Expected volatility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018
3.74
30.6% - 31.7%
5.5 - 6.5 years
2.6% - 2.8%
6.7% - 8.1%
$
2017
7.29
27.5% - 29.2%
5.5 - 6.5 years
1.8% - 2.4%
4.5% - 5.22%
- 98 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(14)
Incentive Plans (Continued)
Non-Employee Director Grants. Each of our non-employee directors receives an annual grant of common stock
as part of his or her non-employee director compensation. These shares fully vest when issued. In addition, each of our
non-employee directors is given the option to receive all or a portion of his or her annual board service fee in cash or an
equivalent amount of stock options. Such stock options are reflected in the information provided above under “Stock
Options.”
The following table details the number of shares of common stock issued by our company during fiscal 2018,
2017 and 2016 upon the vesting of performance share long-term incentive awards and for non-employee director annual
equity grants and other share based compensation:
Number of performance shares vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares withheld to fund statutory minimum tax withholding . . . . . . . . . . . . . .
Shares of common stock issued for performance share LTIAs . . . . . . . . . . .
Shares of common stock issued upon the exercise of stock options . . . . . . .
Shares of common stock issued to non-employee directors for annual
2018
150,255
57,298
92,957
1,787
2017
110,528
42,368
68,160
4,011
December 29, December 30,
December 31,
2016
101,094
37,596
63,498
—
equity grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total shares of common stock issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
35,039
129,783
—
20,559
92,730
—
16,072
79,570
343
$
$
The following table sets forth the compensation expense recognized for share-based payments (performance
share LTIAs, stock options, non-employee director stock grants and other share based payments) during the last three
fiscal years and where that expense is reflected in our consolidated statements of operations (in thousands):
Consolidated Statements of Operations Location
Compensation expense included in cost of goods sold . . . . . . . . . . . . . . . . . . . . . . $
Compensation expense included in selling, general and administrative
Fiscal 2018 Fiscal 2017 Fiscal 2016
1,060
1,236 $
1,203 $
expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total compensation expense for share-based payments . . . . . . . . . . . . . . . . . . $
1,789
3,025 $
3,412
4,615 $
4,738
5,798
As of December 29, 2018, we currently do not have any unrecognized compensation expense related to
performance share LTIAs, as threshold performance objectives are not expected to be attained for the 2017 to 2019
performance share LTIAs or the 2018 to 2020 performance share LTIAs.
As of December 29, 2018, there was $1.2 million of unrecognized compensation expense related to stock
options, which is expected to be recognized over the next three fiscal years.
- 99 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(15) Net Sales by Brand
The following table sets forth net sales by brand (in thousands):
Brand(1):
Fiscal 2018
Fiscal 2017(2) Fiscal 2016(2)
Green Giant - frozen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Spices & Seasonings(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ortega . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Green Giant - shelf stable(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pirate Brands(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Back to Nature(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maple Grove Farms of Vermont . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cream of Wheat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mrs. Dash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All other brands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
294,963
28,171
140,248
153,636
82,865
—
72,525
61,661
60,388
477,850
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,700,764 $ 1,646,387 $ 1,372,307
372,696 $
255,965
141,265
107,476
74,853
69,704
68,048
62,520
58,676
489,561
330,004 $
259,196
137,276
120,541
87,705
20,283
67,987
60,833
59,816
502,746
(1) Table includes net sales for each of our brands whose fiscal 2018 net sales equaled or exceeded 3% of our total fiscal 2018 net
sales and for all other brands in the aggregate. Net sales for each brand includes branded net sales and, if applicable, any private
label and foodservice net sales attributable to the brand.
(2) Net sales for fiscal 2017 and 2016 have been adjusted to reflect our retrospective adoption of the new revenue recognition
standard. See Note 2, “Summary of Significant Accounting Policies — Newly Adopted Accounting Standards.”
(3) Includes net sales for multiple brands acquired as part of the spices & seasonings acquisition that we completed on November 21,
2016. Does not include net sales for Mrs. Dash and our other legacy spices & seasonings brands.
(4) Does not include net sales of the Le Sueur brand. Net sales of the Le Sueur brand are included below in “All other brands.”
(5) We completed the Pirate Brands sale on October 17, 2018. See Note 3, “Acquisitions and Divestitures.”
(6) We completed the Back to Nature acquisition on October 2, 2017. See Note 3, “Acquisitions and Divestitures.”
(16) Restructuring
During fiscal 2016, we closed our Spartanburg, South Carolina manufacturing and warehouse facilities and
moved our Mama Mary’s operations to our manufacturing facility in Yadkinville, North Carolina. This decision was
consistent with our ongoing efforts to reduce excess production capacity, improve productivity and operating efficiencies
and reduce overall costs. In connection with the restructuring, we recorded a charge for employee severance and other
employee costs of approximately $0.8 million during the third quarter of 2016 and a non-cash write-off of equipment of
approximately $0.3 million during the fourth quarter of 2016. There were no restructuring expenses during fiscal 2017 or
2018.
- 100 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(17)
Quarterly Financial Data (unaudited)
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
(in thousands, expect per share data)
Net sales
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 431,729 $ 388,378 $ 422,602 $ 458,055
2017(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 412,307 $ 361,676 $ 406,051 $ 466,353
Gross profit
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 103,356 $ 81,173 $ 115,039 $ 49,932
2017(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 121,219 $ 104,557 $ 120,942 $ 93,860
Net income
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,547 $ 7,976 $ 31,988 $ 111,924
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 32,764 $ 22,061 $ 32,730 $ 129,908
Basic earnings per share
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.31 $
0.49 $
0.12 $
0.33 $
0.49 $
0.49 $
Diluted earnings per share
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.31 $
0.49 $
0.12 $
0.33 $
0.48 $
0.49 $
Cash dividends declared per share
1.70
1.95
1.70
1.95
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.465 $ 0.475 $ 0.475 $ 0.475
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.465 $ 0.465 $ 0.465 $ 0.465
(1) Net sales and gross profit have been adjusted as a result of our retrospective adoption of the new accounting standard relating to
revenue recognition for each of the quarters in fiscal 2017. See Note 2, “Summary of Significant Accounting Policies – Newly
Adopted Accounting Standards” for detailed information.
Earnings per share were computed individually for each of the quarters presented using the weighted average
number of shares outstanding during each quarterly period, while earnings per share for the full year were computed
using the weighted average number of shares outstanding during the full year; therefore, the sum of the earnings per
share amounts for the quarters may not equal the total for the full year.
(18) Guarantor and Non-Guarantor Financial Information
As further discussed in Note 7, “Long-Term Debt,” our obligations under the 4.625% senior notes and the
5.25% senior notes are jointly and severally and fully and unconditionally guaranteed on a senior basis by all of our
existing and certain future domestic subsidiaries, which we refer to in this note as the guarantor subsidiaries. Our foreign
subsidiaries, which we refer to in this note as the non-guarantor subsidiaries, do not guarantee the 4.625% senior notes or
the 5.25% senior notes.
The following condensed consolidating financial information presents the condensed consolidating balance
sheet as of December 29, 2018 and December 30, 2017, the related condensed consolidating statement of operations for
the fiscal years ended December 29, 2018 and December 30, 2017, and the related condensed consolidating statement of
cash flows for the fiscal years ended December 29, 2018 and December 30, 2017, for:
1.
2.
3.
4.
B&G Foods, Inc. (the Parent),
the guarantor subsidiaries,
the non-guarantor subsidiaries, and
the Parent and all of its subsidiaries on a consolidated basis.
- 101 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(18) Guarantor and Non-Guarantor Financial Information (Continued)
The information includes elimination entries necessary to consolidate the Parent with the guarantor subsidiaries
and non-guarantor subsidiaries. The guarantor subsidiaries and non-guarantor subsidiaries are presented on a combined
basis. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and
transactions. Separate financial information for each of the guarantor subsidiaries and non-guarantor subsidiaries are not
presented because management believes such financial statements would not be meaningful to investors.
Condensed Consolidating Balance Sheet
As of December 29, 2018
(In thousands)
Parent
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminations
Consolidated
Current Assets:
Assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . .
Trade accounts receivable, net . . . . . . . . . . . . . . . . . . .
Inventories, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . .
Income tax receivable . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . .
$
—
—
—
—
—
—
$
9,871
140,464
332,774
15,995
—
499,104
Property, plant and equipment, net . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangibles, net . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in subsidiaries . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
—
2,584,598
$ 2,584,598
238,128
584,435
1,595,569
1,193
—
93,069
$ 3,011,498
Liabilities and Stockholders' Equity
Current Liabilities:
Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany payables . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . .
$
$
—
—
—
31,178
—
31,178
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,653,371
—
—
1,684,549
115,946
53,386
31,247
—
(16,581)
183,998
(17,490)
24,490
235,902
426,900
$
$
$
1,777
11,243
68,581
3,993
1,398
86,992
44,425
—
—
13
4,940
—
136,370
24,054
2,274
377
—
16,581
43,286
—
15
—
43,301
$
—
—
—
—
—
—
$
11,648
151,707
401,355
19,988
1,398
586,096
—
—
—
—
—
(2,677,667)
$ (2,677,667)
282,553
584,435
1,595,569
1,206
4,940
—
$ 3,054,799
$
—
—
—
—
—
—
—
—
—
—
$
140,000
55,660
31,624
31,178
—
258,462
1,635,881
24,505
235,902
2,154,750
Stockholders' Equity:
Preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . .
Total liabilities and stockholders’ equity . . . . . . . .
—
656
116,339
(23,502)
806,556
900,049
$ 2,584,598
—
—
1,803,769
(23,502)
804,331
2,584,598
$ 3,011,498
$
—
—
68,253
(11,279)
36,095
93,069
136,370
—
—
(1,872,022)
34,781
(840,426)
(2,677,667)
$ (2,677,667)
—
656
116,339
(23,502)
806,556
900,049
$ 3,054,799
- 102 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(18) Guarantor and Non-Guarantor Financial Information (Continued)
Condensed Consolidating Balance Sheet
As of December 30, 2017
(In thousands)
Parent
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminations
Consolidated
Current Assets:
Assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . .
Trade accounts receivable, net . . . . . . . . . . . . . . . . . . .
Inventories, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . .
Income tax receivable . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . .
$
—
—
—
—
—
—
$
204,815
129,769
428,613
15,932
16,259
795,388
Property, plant and equipment, net . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangibles, net . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in subsidiaries . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
—
3,163,482
$ 3,163,482
229,219
649,292
1,748,220
1,603
(1)
91,766
$ 3,515,487
Liabilities and Stockholders' Equity
Current Liabilities:
Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany payables . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . .
$
$
—
—
—
30,922
—
30,922
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,251,741
—
—
2,282,663
102,594
45,586
—
—
(23,167)
125,013
(34,167)
24,881
236,278
352,005
$
$
$
1,691
11,623
73,236
4,122
535
91,207
42,973
—
—
14
3,123
—
137,317
19,764
2,481
139
—
23,167
45,551
—
—
—
45,551
$
—
—
—
—
—
—
$
206,506
141,392
501,849
20,054
16,794
886,595
—
—
—
—
—
(3,255,248)
$ (3,255,248)
272,192
649,292
1,748,220
1,617
3,122
—
$ 3,561,038
$
—
—
—
—
—
—
—
—
—
—
$
122,358
48,067
139
30,922
—
201,486
2,217,574
24,881
236,278
2,680,219
Stockholders' Equity:
Preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . .
Total liabilities and stockholders’ equity . . . . . .
—
665
266,789
(20,756)
634,121
880,819
$ 3,163,482
—
—
2,552,342
(20,756)
631,896
3,163,482
$ 3,515,487
$
—
—
68,253
(7,771)
31,284
91,766
137,317
—
—
(2,620,595)
28,527
(663,180)
(3,255,248)
$ (3,255,248)
—
665
266,789
(20,756)
634,121
880,819
$ 3,561,038
- 103 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(18) Guarantor and Non-Guarantor Financial Information (Continued)
Condensed Consolidating Statements of Operations and Comprehensive Income
Fiscal Year Ended December 29, 2018
(In thousands)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— $ 1,609,650 $
—
—
1,272,381
337,269
195,593 $
183,362
12,231
Consolidated
(104,479) $ 1,700,764
1,351,264
(104,479)
349,500
—
Parent
Guarantor Non-Guarantor
Subsidiaries
Subsidiaries
Eliminations
Operating expenses:
Selling, general and administrative expenses . . . . . . . . . . .
Amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
160,392
18,343
(176,386)
334,920
6,997
—
—
5,234
—
—
—
—
167,389
18,343
(176,386)
340,154
Other income and expenses:
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income tax expense . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of subsidiaries . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Comprehensive income (loss) . . . . . . . . . . . . . . . . . . . $
—
—
—
—
—
172,435
172,435 $
169,689 $
108,334
13,135
(3,592)
217,043
49,419
4,811
172,435 $
171,674 $
—
—
—
5,234
423
—
4,811 $
1,304 $
—
—
—
—
—
(177,246)
(177,246) $
(172,978) $
108,334
13,135
(3,592)
222,277
49,842
—
172,435
169,689
Condensed Consolidating Statements of Operations and Comprehensive Income
Fiscal Year Ended December 30, 2017
(In thousands)
Net sales(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— $ 1,557,328 $
—
—
1,141,080
416,248
176,694 $
152,364
24,330
Consolidated
(87,635) $ 1,646,387
1,205,809
(87,635)
440,578
—
Parent
Guarantor Non-Guarantor
Subsidiaries
Subsidiaries
Eliminations
Operating expenses:
Selling, general and administrative expenses(1) . . . . . . . . .
Amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on sale of assets(1) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
171,165
17,611
1,608
225,864
12,283
—
—
12,047
—
—
—
—
183,448
17,611
1,608
237,911
Other income and expenses:
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . .
Other income(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income tax expense . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of subsidiaries . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Comprehensive income (loss) . . . . . . . . . . . . . . . . . . . $
—
—
—
—
—
217,463
217,463 $
216,071 $
91,784
1,163
(3,098)
136,015
(71,682)
9,766
217,463 $
223,248 $
—
—
—
12,047
2,281
—
9,766 $
14,158 $
—
—
—
—
—
(227,229)
(227,229) $
(237,406) $
91,784
1,163
(3,098)
148,062
(69,401)
—
217,463
216,071
(1) Net sales, gross profit, selling, general and administrative expenses, operating income and other income have been adjusted as a
result of our retrospective adoption of new accounting standards relating to revenue recognition and the presentation of net
periodic pension cost and net periodic post-retirement benefit cost. We also reclassified a $1.6 million pre-tax loss on sale of
assets for fiscal 2017 from selling, general and administrative expenses to loss on sale of assets. The adjustments described above
had no impact on net income or earnings per share. See Note 2(s), “Summary of Significant Accounting Policies — Recently
Issued Accounting Standards” to our consolidated financial statements for detailed information.
- 104 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(18) Guarantor and Non-Guarantor Financial Information (Continued)
Condensed Consolidating Statement of Cash Flows
Fiscal Year Ended December 29, 2018
(In thousands)
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . $
— $
197,094 $
12,362 $
Parent
Guarantor Non-Guarantor
Subsidiaries Subsidiaries
Eliminations Consolidated
209,456
— $
Cash flows from investing activities:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments for acquisition of businesses, net of cash acquired . . . . .
Net cash provided by (used in) investing activities . . . . . . . . . . .
—
—
—
—
(34,503)
420,002
(30,787)
354,712
Cash flows from financing activities:
Repayments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments of borrowings under revolving credit facility . . . . . . .
Borrowings under revolving credit facility . . . . . . . . . . . . . . . . . .
Proceeds from issuance of common stock, net . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments for the repurchase of common stock, net . . . . . . . . . . . .
Payments of tax withholding on behalf of employees for net share
(650,110)
(170,000)
220,000
60
(124,524)
(26,920)
—
—
—
—
—
—
(7,124)
—
—
(7,124)
—
—
—
—
—
—
settlement of share-based compensation . . . . . . . . . . . . . . . . . . .
Intercompany transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rate fluctuations on cash and cash equivalents .
Net (decrease) increase in cash and cash equivalents . . . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . .
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . $
—
751,494
—
—
—
—
— $
(1,833)
(744,918)
(746,751)
—
(194,945)
204,815
9,870 $
—
(6,576)
(6,576)
1,425
87
1,691
1,778 $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— $
(41,627)
420,002
(30,787)
347,588
(650,110)
(170,000)
220,000
60
(124,524)
(26,920)
(1,833)
—
(753,327)
1,425
(194,858)
206,506
11,648
Condensed Consolidating Statement of Cash Flows
Fiscal Year Ended December 30, 2017
(In thousands)
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . $
— $
44,762 $
(6,963) $
Parent
Guarantor Non-Guarantor
Subsidiaries Subsidiaries
Eliminations Consolidated
37,799
— $
Cash flows from investing activities:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments for acquisition of businesses, net of cash acquired . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
(47,503)
2,229
(162,965)
(208,239)
(12,299)
—
—
(12,299)
Cash flows from financing activities:
Repayments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . . . .
Repayments of borrowings under revolving credit facility . . . . . . .
Borrowings under revolving credit facility . . . . . . . . . . . . . . . . . .
Proceeds from issuance of common stock, net . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments of tax withholding on behalf of employees for net share
(233,640)
914,000
(571,000)
395,000
112
(123,631)
—
—
—
—
—
—
—
(1,962)
—
—
—
—
—
—
—
settlement of share-based compensation . . . . . . . . . . . . . . . . . . .
Debt financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by financing activities . . . . . . . . . . . . . . . . . .
Effect of exchange rate fluctuations on cash and cash equivalents .
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . .
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . $
—
(380,841)
—
—
—
—
— $
(19,543)
364,678
343,173
—
179,696
25,119
204,815 $
—
16,163
16,163
1,076
(2,023)
3,714
1,691 $
—
—
—
—
—
—
— $
—
—
—
—
—
—
—
—
—
—
—
(59,802)
2,229
(162,965)
(220,538)
(233,640)
914,000
(571,000)
395,000
112
(123,631)
(1,962)
(19,543)
—
359,336
1,076
177,673
28,833
206,506
- 105 -
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 29, 2018, December 30, 2017 and December 31, 2016
(19)
Subsequent Events
Workforce Reduction. In February 2019, we implemented a reduction in workforce. On a pre-tax basis, we
expect that the reduction in workforce will save our company an estimated $4.0 million on an annualized basis. We
expect to record severance and related charges of approximately $1.9 million. Substantially all of these charges will
result in cash payments. These payments will primarily be made during the first quarter of 2019 but a relatively small
portion will continue through the first quarter of 2020.
Leadership Appointments and Retirement. On February 25, 2019, our board of directors made the following
appointments, each effective as of March 11, 2019: Erich A. Fritz to the position of Executive Vice President and Chief
Supply Chain Officer, Jordan E. Greenberg to the position of Executive Vice President and Chief Commercial Officer
and Ellen M. Schum to the position of Executive Vice President and Chief Customer Officer. Mr. Greenberg currently
serves as our Vice President and General Manager – Green Giant and Ms. Schum currently serves as our Vice President
of U.S. Retail Sales. Mr. Fritz is new to our company and will join us on the effective date of his appointment. On
February 25, 2019, we also entered into a retirement agreement with Vanessa E. Maskal, our Executive Vice President
of Sales and Marketing, regarding the terms of her retirement on April 5, 2019. The retirement and other benefits
payable to Ms. Maskal pursuant to the retirement agreement are included in the estimated charges set forth above under
“Workforce Reduction.”
- 106 -
B&G FOODS, INC. AND SUBSIDIARIES
Schedule of Valuation and Qualifying Accounts
(In thousands)
Schedule II
Column A
Column B
Column C
Additions
Column D
Column E
Description
Fiscal year ended December 31, 2016:
Allowance for doubtful accounts and discounts . . . . . $
Fiscal year ended December 30, 2017:
Allowance for doubtful accounts and discounts . . . . . $
Fiscal year ended December 29, 2018:
Allowance for doubtful accounts and discounts . . . . . $
Balance at Charged to Charged to
beginning of costs and
expenses
describe
year
other accounts— Deductions— Balance at
end of year
describe
1,167 $
559
— $
7 (a) $ 1,719
1,719 $
378
— $
273 (a) $ 1,824
1,824 $
65
— $
38 (a) $ 1,851
(a) Represents bad-debt write-offs.
- 107 -
Item 9. Changes in and Disagreement with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures.
As required by Rule 13a - 15(b) under the Securities Exchange Act of 1934, as amended, our management,
including our chief executive officer and our chief financial officer, conducted an evaluation of the effectiveness of the
design and operation of our disclosure controls and procedures as of the end of the period covered by this report. As
defined in Rules 13a - 15(e) and 15d - 15(e) under the Exchange Act, disclosure controls and procedures are controls and
other procedures that we use that are designed to ensure that information required to be disclosed by us in the reports we
file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods
specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the
Exchange Act is accumulated and communicated to our management, including our chief executive officer and our chief
financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Based on that evaluation, our chief executive officer and our chief financial officer concluded that our
disclosure controls and procedures were effective as of the end of the period covered by this report.
Management’s Report on Internal Control over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in Rules 13a - 15(f) and 15d - 15(f) under the Exchange Act. Our management, including
our chief executive officer and our chief financial officer, conducted an evaluation of our internal control over financial
reporting based on the framework in Internal Control—Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
Based on our evaluation under the framework of Internal Control—Integrated Framework (2013), our
management concluded that our internal control over financial reporting was effective at December 29, 2018. The
effectiveness of our internal control over financial reporting as of December 29, 2018 was audited by KPMG LLP, an
independent registered public accounting firm, as stated in their report which is included in Part II, Item 8, “Financial
Statements and Supplementary Data” of this report.
Our internal control system is designed to provide reasonable assurance to our management and board of
directors regarding the preparation and fair presentation of published consolidated financial statements in accordance
with GAAP. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those
systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation
and presentation and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control over Financial Reporting.
As required by Rule 13a - 15(d) under the Exchange Act, our management, including our chief executive officer
and our chief financial officer, also conducted an evaluation of our internal control over financial reporting to determine
whether any change in our internal control over financial reporting occurred during the last quarter of fiscal 2018 that
has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Based on
that evaluation, our chief executive officer and our chief financial officer concluded that there has been no change in our
internal control over financial reporting during the last quarter of fiscal 2018 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial reporting.
- 108 -
We transitioned the spices & seasonings business that we acquired in late 2016 to a new enterprise resource
planning (ERP) system during the third quarter of 2018. Since then, we have been planning for the transition of the
remainder of our business to that new ERP system. Implementation and transition efforts continued during the fourth
quarter of 2018 and continue during fiscal 2019. We currently expect the implementation and transition to the new ERP
system to be completed during the second or third quarter of 2019. In connection with the implementation and transition,
and resulting business process changes, we continue to review and enhance the design and documentation of our internal
control over financial reporting processes to maintain effective controls over our financial reporting following the
completion of the implementation and transition. To date, the implementation and transition have not materially affected,
and upon completion we do not expect the implementation and transition to have any material effect on, our internal
control over financial reporting.
Inherent Limitations on Effectiveness of Controls.
Our company’s management, including the chief executive officer and chief financial officer, does not expect
that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud.
A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that
the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent
limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to
error or fraud will not occur or that all control issues and instances of fraud, if any, within our company have been
detected. These inherent limitations include the realities that judgments in decision - making can be faulty and that
breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of
some persons, by collusion of two or more people, or by management override of the controls. The design of any system
of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any
evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate
because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
Item 9B. Other Information.
None.
- 109 -
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
With the exception of the information relating to our Code of Business Conduct and Ethics that is presented in
Part I, Item 1 of this report under the heading “Available Information,” the information required by this Item will appear
in the sections entitled “Corporate Governance,” “Proposal 1—Election of Directors,” “Our Management” and “Section
16(a) Beneficial Ownership Reporting Compliance” included in our definitive proxy statement to be filed on or before
April 29, 2019, relating to the 2019 annual meeting of stockholders, which information is incorporated herein by
reference.
Item 11. Executive Compensation.
The information required by this item will appear in the section entitled “Executive Compensation,”
“Compensation Discussion and Analysis,” “Compensation Committee Interlocks and Insider Participation” and “Report
of the Compensation Committee” included in our definitive proxy statement to be filed on or before April 29, 2019,
relating to the 2019 annual meeting of stockholders, which information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Securities Authorized for Issuance Under Equity Compensation Plans. The following table summarizes
information, as of December 29, 2018, relating to the Omnibus Incentive Compensation Plan, which was approved by
our stockholders and under which restricted stock, options, stock appreciation rights, deferred stock, stock units and
cash - based awards to employees, non - employee directors and consultants may be granted from time to time.
Equity Compensation Plan Information
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
(a)
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))
(c)
Plan Category
Equity compensation plans approved by
security holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,703,422 (1) $
31.40 (2)
571,093 (1)
Equity compensation plans not approved by security
holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
1,703,422 (1) $
—
31.40 (2)
—
571,093 (1)
(1) Includes 1,194,105 stock options and 509,317 performance share LTIAs (for the 2016 to 2018, 2017 to 2019 and 2018 to 2020
performance periods) outstanding as of December 29, 2018, under the Omnibus Incentive Compensation Plan. The performance
share LTIAs include the maximum number of shares (i.e., 200% of the target number of shares) of common stock that, as of
December 29, 2018, may be issued under the Omnibus Incentive Compensation Plan in respect of the performance share LTIAs,
subject to the achievement of specified performance goals. There is, however, no guarantee that all or any part of these
performance - based awards will actually be earned and that shares of common stock will be issued upon completion of the
performance cycles. In addition, if performance goals are achieved for the performance share LTIAs, plan participants are
required to have shares withheld by our company to satisfy tax withholding requirements. Shares not issued due to withholding
and shares not issued due to failure to satisfy performance goals do not count against the maximum number of remaining
authorized shares under the plan.
(2) Reflects the weighted average exercise price of 1,194,105 stock options outstanding under the Omnibus Incentive Compensation
Plan. 509,317 performance share LTIAs do not have an exercise price and are not included in calculation of the weighted average
exercise price set forth in column (b).
The remaining information required by this item will appear in the section entitled “Security Ownership of
Certain Beneficial Owners and Management” included in our definitive proxy statement to be filed on or before
April 29, 2019 relating to the 2019 annual meeting of stockholders, which information is incorporated herein by
reference.
- 110 -
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this item will appear in the section entitled “Certain Relationships and Related
Transactions” and “Corporate Governance” included in our definitive proxy statement to be filed on or before April 29,
2019, relating to the 2019 annual meeting of stockholders, which information is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services.
The information required by this item will appear in the section entitled “Independent Registered Public
Accounting Firm Fees” included in our definitive proxy statement to be filed on or before April 29, 2019, relating to the
2019 annual meeting of stockholders, which information is incorporated herein by reference.
- 111 -
Item 15. Exhibits, Financial Statement Schedules.
(a)
The following documents are filed as part of this report
PART IV
(1) Consolidated Financial Statements: The following consolidated financial statements are included in Part II,
Item 8 of this report
Reports of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of December 29, 2018 and December 30, 2017 . . . . . . . . . . . . .
Consolidated Statements of Operations for the fiscal years ended December 29, 2018,
December 30, 2017 and December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Comprehensive Income for the fiscal years ended December 29,
2018, December 30, 2017 and December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Changes in Stockholders’ Equity for the fiscal years ended
December 29, 2018, December 30, 2017 and December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for the fiscal years ended December 29, 2018,
December 30, 2017 and December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
60
63
64
65
66
67
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
68
(2) Financial Statement Schedule. The following financial statement schedule is included in Part II,
Item 8 of this report
Schedule II—Schedule of Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . .
107
(3) Exhibits
- 112 -
EXHIBIT
NO.
DESCRIPTION
2.1
2.2
2.3
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
10.1
10.2
Asset Purchase Agreement, dated as of September 2, 2015, among General Mills, Inc., B&G Foods North
America, Inc., and B&G Foods, Inc. (Filed as Exhibit 2.1 to B&G Foods’ Current Report on Form 8 - K
filed September 3, 2015, and incorporated by reference herein)
Asset Purchase Agreement, dated as of September 21, 2016, among ACH Food Companies, Inc., B&G
Foods North America, Inc., B&G Foods, Inc. and Associated British Foods PLC (Filed as Exhibit 2.1 to
B&G Foods’ Current Report on Form 8-K filed September 21, 2016, and incorporated by reference herein)
Asset Purchase Agreement, dated as of September 12, 2018, among B&G Foods, Inc., B&G Foods North
America, Inc., Pirate Brands, LLC and The Hershey Company (Filed as Exhibit 2.1 to B&G Foods’
Current Report on Form 8‑K filed on September 13, 2018, and incorporated by reference herein).
Second Amended and Restated Certificate of Incorporation of B&G Foods, Inc. (Filed as Exhibit 3.1 to
B&G Foods’ Current Report on Form 8 - K filed on August 13, 2010, and incorporated by reference herein)
Bylaws of B&G Foods, Inc., as amended and restated through February 27, 2013 (Filed as Exhibit 3.1 to
B&G Foods’ Current Report on Form 8 - K filed on March 4, 2013, and incorporated by reference herein)
Indenture, dated as of June 4, 2013, between B&G Foods, Inc. and The Bank of New York Mellon Trust
Company, N.A., as trustee (Filed as Exhibit 4.1 to B&G Foods’ Current Report on Form 8 - K filed on
June 4, 2013, and incorporated by reference herein)
First Supplemental Indenture, dated as of June 4, 2013, among B&G Foods, Inc., B&G Foods North
America, Inc., B&G Foods Snacks, Inc., William Underwood Company, and The Bank of New York
Mellon Trust Company, N.A., as trustee, relating to the 4.625% senior notes due 2021 (Filed as Exhibit 4.2
to B&G Foods’ Current Report on Form 8 - K filed on June 4, 2013, and incorporated by reference herein)
Form of 4.625% Senior Note due 2021 (included in Exhibit 4.2)
Seventh Supplemental Indenture, dated as of April 3, 2017, among B&G Foods, Inc., the Guarantors (as
defined therein), and The Bank of New York Mellon Trust Company, N.A., as trustee, relating to the
5.25% senior notes due 2025 (Filed as Exhibit 4.1 to B&G Foods’ Current Report on Form 8-K filed
April 4, 2017, and incorporated by reference herein)
Form of 5.25% Senior Note due 2025 (included in Exhibit 4.4)
Form of stock certificate for common stock (Filed as Exhibit 4.1 to B&G Foods’ Current Report on
Form 8 - K filed on August 13, 2010, and incorporated by reference herein)
Second Amendment to Credit Agreement, dated as of November 20, 2017, to the Amended and Restated
Credit Agreement, dated as of October 2, 2015, among B&G Foods, Inc., as borrower, the several banks
and other financial institutions or entities from time to time party thereto as lenders and Barclays Bank
PLC, as administrative agent for the lenders and as collateral agent for the secured parties (Filed as Exhibit
10.1 to B&G Foods’ Current Report on Form 8-K filed on November 21, 2017, and incorporated by
reference herein)
Guarantee and Collateral Agreement, dated as of June 5, 2014, among B&G Foods, Inc., B&G Foods
North America, Inc., B&G Foods Snacks, Inc., BCCK Holdings, Inc., Bear Creek Country Kitchens, LLC,
Pirate Brands, LLC, Rickland Orchards LLC, Specialty Brands of America, Inc. and William Underwood
Company, and each other subsidiary of B&G Foods, Inc. party thereto from time to time, and Credit Suisse
AG, as collateral agent (Filed as Exhibit 10.2 to B&G Foods’ Current Report on Form 8 - K filed on June 9,
2014, and incorporated by reference herein)
- 113 -
EXHIBIT
NO.
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
DESCRIPTION
Second Amended and Restated Employment Agreement, dated as of December 11, 2014, between Robert
C. Cantwell and B&G Foods, Inc. (Filed as Exhibit 10.1 to B&G Foods’ Current Report on Form 8 - K filed
on December 16, 2014, and incorporated by reference herein)
Amended and Restated Employment Agreement by and between Vanessa E. Maskal and B&G Foods, Inc.,
dated as of December 31, 2008 (Filed as Exhibit 10.3 to B&G Foods’ Current Report on Form 8 - K filed on
January 6, 2009, and incorporated by reference herein)
Amended and Restated Employment Agreement by and between Scott E. Lerner and B&G Foods, Inc.,
dated as of December 31, 2008 (Filed as Exhibit 10.5 to B&G Foods’ Current Report on Form 8 - K filed on
January 6, 2009, and incorporated by reference herein)
Employment Agreement, dated as of August 6, 2009, between William F. Herbes and B&G Foods, Inc.
(Filed as Exhibit 10.2 to B&G Foods’ Current Report on Form 8 - K filed on August 10, 2009, and
incorporated by reference herein)
Employment Agreement, dated as of January 4, 2016, between Eric H. Hart and B&G Foods, Inc. (filed as
Exhibit 10.9 to B&G Foods’ Annual Report on Form 10-K filed on March 2, 2016, and incorporated by
reference herein)
Employment Agreement, dated as of August 1, 2017, between Bruce C. Wacha and B&G Foods, Inc.
(Filed as Exhibit 10.1 to B&G Foods Quarterly Report on Form 10-Q filed on November 3, 2017, and
incorporated herein by reference)
First Amendment to Employment Agreement, dated as of November 6, 2017, between, Bruce C. Wacha
and B&G Foods, Inc. (Filed as Exhibit 10.1 to B&G Foods’ Current Report on Form 8-K filed on
November 7, 2017, and incorporated by reference herein)
Employment Agreement, dated as of November 21, 2017, between Kenneth G. Romanzi and B&G Foods,
Inc. (Filed as Exhibit 10.1 to B&G Foods’ Current Report on Form 8-K filed on November 21, 2017, and
incorporated by reference herein)
Offer Letter, dated as of October 19, 2018, between Michael D. Adasczik and B&G Foods, Inc. (Filed as
Exhibit 10.1 to B&G Foods’ Current Report on Form 8‑K filed on November 16, 2018, and incorporated
by reference herein).
B&G Foods, Inc. Omnibus Incentive Compensation Plan, as amended and restated on May 23, 2017 (filed
as Annex A to B&G Foods’ Definitive Proxy Statement on Schedule 14A, filed on April 6, 2017, and
incorporated by reference herein)
Form of B&G Foods, Inc. Performance Share Long - Term Incentive Award Agreement (Filed as
Exhibit 10.11 to B&G Foods’ Annual Report on Form 10 - K filed on February 26, 2014, and incorporated
by reference herein)
Form of B&G Foods, Inc. Stock Option Agreement (Non - Qualified Stock Option) (Filed as Exhibit 10.2 to
B&G Foods’ Current Report on Form 8 - K filed on December 16, 2014, and incorporated by reference
herein)
21.1
Subsidiaries of B&G Foods, Inc.
23.1
Consent of KPMG LLP.
- 114 -
EXHIBIT
NO.
31.1
31.2
32.1
101.1
DESCRIPTION
Certification pursuant to Rule 13a - 14(a) or Rule 15d - 14(a) of the Securities Exchange Act of 1934 of the
Chief Executive Officer.
Certification pursuant to Rule 13a - 14(a) or Rule 15d - 14(a) of the Securities Exchange Act of 1934 of the
Chief Financial Officer.
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes - Oxley Act of 2002, of the Chief Executive Officer and Chief Financial Officer.
The following financial information from B&G Foods’ Annual Report for the fiscal year ended
December 29, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated
Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of
Comprehensive Income, (iv) the Consolidated Statements of Changes in Stockholders’ Equity, (v) the
Consolidated Statements of Cash Flows, (vi) Notes to Consolidated Financial Statements, and
(vii) document and entity information.
Item 16. Form 10-K Summary.
None.
- 115 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly authorized.
Dated: February 26, 2019
B&G FOODS, INC.
By: /s/ Bruce C. Wacha
Bruce C. Wacha
Executive Vice President of Finance
and Chief Financial Officer
(Principal Financial Officer)
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/ Stephen C. Sherrill
Stephen C. Sherrill
Chairman of the Board of Directors
February 26, 2019
/s/ Robert C. Cantwell
Robert C. Cantwell
President, Chief Executive Officer and Director
(Principal Executive Officer)
February 26, 2019
/s/ Bruce C. Wacha
Bruce C. Wacha
Executive Vice President of Finance and Chief Financial Officer
(Principal Financial Officer)
February 26, 2019
/s/ Michael D. Adasczik
Michael D. Adasczik
Vice President of Finance and Chief Accounting Officer
(Principal Accounting Officer)
/s/ DeAnn L. Brunts
DeAnn L. Brunts
/s/ Charles F. Marcy
Charles F. Marcy
/s/ Robert D. Mills
Robert D. Mills
Director
Director
Director
/s/ Dennis M. Mullen
Dennis M. Mullen
Director
/s/ Cheryl M. Palmer
Cheryl M. Palmer
/s/ Alfred Poe
Alfred Poe
/s/ David L. Wenner
David L. Wenner
Director
Director
Director
- 116 -
February 26, 2019
February 26, 2019
February 26, 2019
February 26, 2019
February 26, 2019
February 26, 2019
February 26, 2019
February 26, 2019
Exhibit 31.1
CERTIFICATION BY CHIEF EXECUTIVE OFFICER
I, Robert C. Cantwell, certify that:
1.
2.
I have reviewed this annual report on Form 10-K of B&G Foods, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this report is being prepared;
b)
designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
d)
disclosed in this report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
a)
all significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
b)
any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: February 26, 2019
/s/ ROBERT C. CANTWELL
Robert C. Cantwell
Chief Executive Officer
Exhibit 31.2
CERTIFICATION BY CHIEF FINANCIAL OFFICER
I, Bruce C. Wacha, certify that:
1.
2.
I have reviewed this annual report on Form 10-K of B&G Foods, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this report is being prepared;
b)
designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
d)
disclosed in this report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
a)
all significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
b)
any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: February 26, 2019
/s/ BRUCE C. WACHA
Bruce C. Wacha
Chief Financial Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report of B&G Foods, Inc. (the “Company”) on Form 10-K for the period ended
December 29, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert
C. Cantwell, Chief Executive Officer of the Company and I, Bruce C. Wacha, Chief Financial Officer of the Company,
certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to my
knowledge:
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
/s/ ROBERT C. CANTWELL
Robert C. Cantwell
Chief Executive Officer
February 26, 2019
/s/ BRUCE C. WACHA
Bruce C. Wacha
Chief Financial Officer
February 26, 2019
A signed original of this written statement required by Section 906 has been provided to the Company and will be
retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Financial Highlights
FISCAL YEAR
(Dollars in millions)
Net Sales*
Net Income
Adjusted EBITDA**
2018
2017
2016
2015
2014
$ 1,700.8
$ 1,646.4
$ 1,372.3
$ 172.4
$ 314.2
$ 217.5
$ 333.2
$ 109.4
$ 322.0
$ 958.9
$ 69.1
$ 217.8
$ 837.3
$ 41.0
$ 194.1
Net Sales*
Net Income
Adjusted EBITDA**
5
.
7
1
2
$
4
.
2
7
1
$
2
.
3
3
3
$
0
.
2
2
3
$
2
.
4
1
3
$
8
.
7
1
2
1 $
.
4
9
1
$
8
.
0
0
7
,
1
$
4
.
6
4
6
,
1
$
3
.
2
7
3
,
1
$
9
.
8
5
9
3 $
.
7
3
8
$
4
.
9
0
1
$
1
.
9
6
$
0
.
1
4
$
14
15
16
17
18
14
15
16
17
18
14
15
16
17
18
Net sales for fiscal 2017, 2016, 2015 and 2014 have been adjusted as a result of our retrospective adoption of new accounting standards relating to revenue recognition. The adjustments had no impact on
*
net income or adjusted EBITDA. See Note 2(s), “Summary of Significant Accounting Policies — Recently Issued Accounting Standards” to our consolidated financial statements in Part II, Item 8 of the
following Annual Report for detailed information.
Adjusted EBITDA is a “non-GAAP (Generally Accepted Accounting Principles) financial measure.” Please see the discussion within the footnotes to Item 6, “Selected Financial Data” in the following
Annual Report for a more detailed discussion of adjusted EBITDA and a reconciliation of adjusted EBITDA with the most directly comparable GAAP measures for fiscal 2018, 2017, 2016, 2015 and 2014,
along with the components of adjusted EBITDA.
**
Company Information
Board of Directors
Stephen C. Sherrill
Chairman of the Board
Director since 1996
Robert C. Cantwell*
President and Chief Executive Officer
Director since 2005
DeAnn L. Brunts
Director since 2015
Charles F. Marcy
Director since 2010
Robert D. Mills
Director since 2018
Dennis M. Mullen
Director since 2006
Cheryl M. Palmer
Director since 2010
Alfred Poe
Director since 1997
David L. Wenner
Director since 1997
Executive Officers
Robert C. Cantwell*
President and Chief Executive Officer
Erich A. Fritz
Executive Vice President and
Chief Supply Chain Officer
Jordan E. Greenberg
Executive Vice President and
Chief Commercial Officer
Eric H. Hart
Executive Vice President of Human Resources and
Chief Human Resources Officer
William F. Herbes
Executive Vice President of Operations
Scott E. Lerner
Executive Vice President, General Counsel,
Secretary and Chief Compliance Officer
Vanessa E. Maskal*
Executive Vice President of Sales and Marketing
Kenneth G. Romanzi*
Executive Vice President and Chief Operating Officer
Ellen M. Schum
Executive Vice President and
Chief Customer Officer
Bruce C. Wacha
Executive Vice President of Finance and
Chief Financial Officer
Corpor ate headquarters
B&G Foods, Inc.
Four Gatehall Drive
Parsippany, NJ 07054
Telephone: 973.401.6500
Website: www.bgfoods.com
Stock Exchange Listlng
B&G Foods’ common stock is traded on the
New York Stock Exchange under the ticker symbol BGS.
corporate news releases and sec filings
Corporate news releases and SEC filings, including Forms
10-K, 10-Q and 8-K are available free of charge in the
Investor Relations section of our website, www.bgfoods.com.
If you do not have internet access, you may contact
ICR, Inc. at the address and telephone number listed below
to request these materials.
Investor Relations
Inquiries and requests regarding this annual report and other
stockholder questions should be directed to:
ICR, Inc.
685 Third Avenue, 2nd Floor, New York, NY 10017
Attn: Dara Dierks
Telephone: 866.211.8151
Please also visit the Investor Relations section of our website,
www.bgfoods.com.
Tr ansfer Agent and Registr ar
Computershare Trust Company, N .A.
P.O. Box 30170
College Station, TX 77842
Private Couriers/Registered Mail:
Computershare Trust Company, N .A.
211 Quality Circle, Suite 210
College Station, TX 77845
Telephone: 800.522.6645
Website: www.computershare.com/investor
Hearing Impaired #: TDD: 800.952.9245
Independent Registered Public
Accounting Firm
KPMG LLP
51 John F. Kennedy Parkway
Short Hills, NJ 07078
Annual Meeting
The annual meeting of stockholders will be held on Tuesday,
May 21, 2019, at 10:00 a.m., local time, at the Hilton Parsippany,
1 Hilton Court, Parsippany, NJ 07054.
* As previously announced, Bob Cantwell is retiring as President and Chief
Executive Officer and as a director on April 5, 2019 and Ken Romanzi has
been appointed as President and Chief Executive Officer and a director
effective April 6, 2019. Vanessa Maskal is retiring on April 5, 2019.
This Annual Report includes certain forward-looking statements that are based
upon current expectations and are subject to a number of risks and uncertain-
ties. Please see “Forward-Looking Statements” beginning on page 3 of this
Annual Report.
© 2019 B&G Foods, Inc. All rights reserved.
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