3Q15 performance highlights
For 3Q15, B&G Foods’ (BGS) net sales rose by $4.3 million, or 2.1%, to $213.3 million from $209 million in 3Q14. The gross profit for 3Q15 rose by $8.5 million, or 13.5%, to $71.6 million from $63.1 million in 3Q14. The gross margin, or gross profit expressed as a percentage of net sales, rose to 33.6% in 3Q15 from 30.2% in 3Q14. The SG&A (selling, general, and administrative) expenses rose by $6.1 million, or 29%, to $27.3 million for 3Q15 from $21.2 million in 3Q14.
B&G Foods reported strong GAAP (generally accepted accounting principles) net income of $19.8 million, or $0.34 per diluted share, for 3Q15—compared to a reported net loss of $4.4 million, or $0.08 per diluted share, in 3Q14. The company’s adjusted net income for 3Q15, which excludes the after-tax impact of acquisition-related expenses and distribution restructuring expenses, was $22.7 million, or $0.39 per adjusted diluted share.
The adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) rose 7.4% to $53.1 million from $49.5 million in 3Q14. It excludes the impact of acquisition-related expenses, distribution restructuring expenses, the non-cash impairment charges of Rickland Orchards’ intangible assets, and the related loss on the disposal of inventory.
Through its subsidiaries, B&G Foods manufactures, sells, and distributes shelf-stable food and household products in the US, Canada, and Puerto Rico. Its portfolio of products includes hot cereals, fruit spreads, canned meats and beans, bagel chips, spices, and seasonings.
What items impact the performance?
The 3.4 percentage point rise in the gross profit resulted primarily from price increases and lower delivery costs. A minor cost increase in commodities and packaging and the negative impact of the Canadian exchange rate on the company’s net sales in Canada partially contributed to the rise in the gross profit. The rise in the gross profit percentage YoY (year-over-year) was also favorably impacted by the charge of ~$3 million in 3Q14. The charge was for the cost of goods sold relating to a write-off of certain raw material and finished goods inventory. The inventory was used to produce Rickland Orchards’ products.
There was a $3.4 million fall in the net sales for Rickland Orchards compared to 3Q14. This had a negative impact on the company’s net sales for 3Q15. It’s a continuation of the weakness that caused the impairment of the Rickland brand’s trademark.
B&G Foods’ competitors in the industry are Pinnacle Foods (PF), General Mills (GIS), and Bunge (BG). They had net margins of 6.9%, 10.1%, and 0.8% for their last reported quarter, respectively. The Guggenheim S&P Equal Weight Consumer Staples ETF (RHS) invests 2.8% of its portfolio in General Mills. The Fidelity MSCI Consumer Staples Index ETF (FSTA) also invests 1.8% of its portfolio in General Mills’ stock.