0001558370-18-006457.txt : 20180806 0001558370-18-006457.hdr.sgml : 20180806 20180806163227 ACCESSION NUMBER: 0001558370-18-006457 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 81 CONFORMED PERIOD OF REPORT: 20180630 FILED AS OF DATE: 20180806 DATE AS OF CHANGE: 20180806 FILER: COMPANY DATA: COMPANY CONFORMED NAME: B&G Foods, Inc. CENTRAL INDEX KEY: 0001278027 STANDARD INDUSTRIAL CLASSIFICATION: FOOD & KINDRED PRODUCTS [2000] IRS NUMBER: 133918742 STATE OF INCORPORATION: DE FISCAL YEAR END: 1229 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-32316 FILM NUMBER: 18995163 BUSINESS ADDRESS: STREET 1: FOUR GATEHALL DRIVE STREET 2: SUITE 110 CITY: PARSIPPANY STATE: NJ ZIP: 07054 BUSINESS PHONE: 9734016500 MAIL ADDRESS: STREET 1: FOUR GATEHALL DRIVE STREET 2: SUITE 110 CITY: PARSIPPANY STATE: NJ ZIP: 07054 FORMER COMPANY: FORMER CONFORMED NAME: B&G FOODS HOLDINGS CORP DATE OF NAME CHANGE: 20040129 10-Q 1 bgs-20180630x10q.htm QUARTERLY REPORT ON FORM 10-Q bgs_Current folio_10Q

 

As filed with the Securities and Exchange Commission on August 6, 2018

 

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

(Mark one)

 

Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

 

For the quarterly period ended June 30, 2018

 

or

 

Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

 

For the transition period from                    to                   .

 

Commission file number 001-32316

 

B&G FOODS, INC.

(Exact name of Registrant as specified in its charter)

 

 

 

 

Delaware

 

13-3918742

(State or other jurisdiction of

 

(I.R.S. Employer Identification No.)

incorporation or organization)

 

 

 

 

 

Four Gatehall Drive, Parsippany, New Jersey

 

07054

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code:  (973) 401-6500

 

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).  Yes ☒ No ☐

 

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 ☐

 

 

(Do not check if a 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 Exchange Act).  Yes ☐ No ☒

 

As of August 3, 2018, the registrant had 65,932,291 shares of common stock, par value $0.01 per share, issued and outstanding.

 

 

 

 

 

 

 


 

B&G Foods, Inc. and Subsidiaries

Index

 

 

 

 

 

 

 

 

Page No.

 

 

 

 

PART I FINANCIAL INFORMATION 

1

 

 

 

 

 

Item 1. Financial Statements (Unaudited)

1

 

Consolidated Balance Sheets

1

 

Consolidated Statements of Operations

2

 

Consolidated Statements of Comprehensive Income

3

 

Consolidated Statements of Cash Flows

4

 

Notes to Consolidated Financial Statements

5

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

28

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

45

 

Item 4. Controls and Procedures

46

 

 

 

 

PART II OTHER INFORMATION

47

 

 

 

 

Item 1. Legal Proceedings

47

 

Item 1A. Risk Factors

47

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

47

 

Item 3. Defaults Upon Senior Securities

47

 

Item 4. Mine Safety Disclosures

48

 

Item 5. Other Information

48

 

Item 6. Exhibits

48

 

 

 

SIGNATURE 

49

 

 

 

 

-  i  -


 

PART I

FINANCIAL INFORMATION

Item 1.  Financial Statements (Unaudited)

 

B&G Foods, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

    

June 30,

    

December 30,

 

 

2018

    

2017

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

62,840

 

$

206,506

Trade accounts receivable, net

 

 

137,147

 

 

141,392

Inventories

 

 

446,273

 

 

501,849

Prepaid expenses and other current assets

 

 

24,371

 

 

20,054

Income tax receivable

 

 

16,712

 

 

16,794

Total current assets

 

 

687,343

 

 

886,595

 

 

 

 

 

 

 

Property, plant and equipment, net of accumulated depreciation of $217,518 and $200,664

 

 

271,955

 

 

272,192

Goodwill

 

 

652,143

 

 

649,292

Other intangibles, net

 

 

1,739,102

 

 

1,748,220

Other assets

 

 

1,479

 

 

1,617

Deferred income taxes

 

 

3,091

 

 

3,122

Total assets

 

$

3,355,113

 

$

3,561,038

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Trade accounts payable

 

$

115,595

 

$

122,358

Accrued expenses

 

 

37,301

 

 

48,067

Income tax payable

 

 

140

 

 

139

Dividends payable

 

 

31,318

 

 

30,922

Total current liabilities

 

 

184,354

 

 

201,486

 

 

 

 

 

 

 

Long-term debt

 

 

2,073,874

 

 

2,217,574

Other liabilities

 

 

25,998

 

 

24,881

Deferred income taxes

 

 

243,873

 

 

236,278

Total liabilities

 

 

2,528,099

 

 

2,680,219

Commitments and contingencies (Note 11)

 

 

 

 

 

 

 

 

 

 

 

 

 

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; 65,932,291 and 66,499,044 shares issued and outstanding as of June 30, 2018 and December 30, 2017

 

 

659

 

 

665

Additional paid-in capital

 

 

186,745

 

 

266,789

Accumulated other comprehensive loss

 

 

(23,034)

 

 

(20,756)

Retained earnings

 

 

662,644

 

 

634,121

Total stockholders’ equity

 

 

827,014

 

 

880,819

Total liabilities and stockholders’ equity

 

$

3,355,113

 

$

3,561,038

See Notes to Consolidated Financial Statements.

-  1  -


 

B&G Foods, Inc. and Subsidiaries

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Thirteen Weeks Ended

 

Twenty-six Weeks Ended

 

    

June 30,

    

July 1,

    

June 30,

    

July 1,

 

    

2018

    

2017

    

2018

    

2017

Net sales

 

$

388,378

 

$

361,676

 

$

820,107

 

$

773,983

Cost of goods sold

 

 

307,205

 

 

257,119

 

 

635,578

 

 

548,207

Gross profit

 

 

81,173

 

 

104,557

 

 

184,529

 

 

225,776

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

37,272

 

 

43,586

 

 

79,840

 

 

92,106

Amortization expense

 

 

4,609

 

 

4,265

 

 

9,218

 

 

8,737

Operating income

 

 

39,292

 

 

56,706

 

 

95,471

 

 

124,933

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

27,607

 

 

21,998

 

 

55,913

 

 

41,645

Loss on extinguishment of debt

 

 

546

 

 

1,045

 

 

3,324

 

 

1,163

Other expense (income)

 

 

388

 

 

(1,269)

 

 

(1,666)

 

 

(3,866)

Income before income tax expense

 

 

10,751

 

 

34,932

 

 

37,900

 

 

85,991

Income tax expense

 

 

2,775

 

 

12,871

 

 

9,377

 

 

31,166

Net income

 

$

7,976

 

$

22,061

 

$

28,523

 

$

54,825

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

66,307

 

 

66,482

 

 

66,412

 

 

66,478

Diluted

 

 

66,354

 

 

66,711

 

 

66,535

 

 

66,748

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted earnings per share

 

$

0.12

 

$

0.33

 

$

0.43

 

$

0.82

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per share

 

$

0.475

 

$

0.465

 

$

0.940

 

$

0.930

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See Notes to Consolidated Financial Statements.

-  2  -


 

B&G Foods, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Thirteen Weeks Ended

 

Twenty-six Weeks Ended

 

    

June 30,

    

July 1,

    

June 30,

    

July 1,

 

    

2018

    

2017

    

2018

    

2017

Net income

 

$

7,976

 

$

22,061

 

$

28,523

 

$

54,825

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(5,659)

 

 

3,411

 

 

(2,527)

 

 

7,637

Amortization of unrecognized prior service cost and pension deferrals, net of tax

 

 

138

 

 

51

 

 

249

 

 

102

Other comprehensive (loss) income

 

 

(5,521)

 

 

3,462

 

 

(2,278)

 

 

7,739

Comprehensive income

 

$

2,455

 

$

25,523

 

$

26,245

 

$

62,564

 

 

 

 

See Notes to Consolidated Financial Statements.

 

 

 

-  3  -


 

B&G Foods, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

Twenty-six Weeks Ended

 

    

June 30,

    

July 1,

 

    

2018

    

2017

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

28,523

 

$

54,825

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

26,407

 

 

24,547

Amortization of deferred debt financing costs and bond discount

 

 

2,976

 

 

2,795

Deferred income taxes

 

 

7,511

 

 

19,992

Loss on sale of assets

 

 

 —

 

 

1,608

Write-off of property, plant, and equipment

 

 

29

 

 

105

Loss on extinguishment of debt

 

 

3,324

 

 

1,163

Share-based compensation expense

 

 

2,597

 

 

3,202

Changes in assets and liabilities, net of effects of businesses acquired:

 

 

 

 

 

 

Trade accounts receivable

 

 

2,397

 

 

(5,750)

Inventories

 

 

51,744

 

 

(60,555)

Prepaid expenses and other current assets

 

 

(4,320)

 

 

2,122

Income tax receivable/payable

 

 

51

 

 

(2,699)

Other assets

 

 

161

 

 

1,073

Trade accounts payable

 

 

(6,374)

 

 

(5,274)

Accrued expenses

 

 

(11,647)

 

 

(18,617)

Other liabilities

 

 

1,425

 

 

1,287

Net cash provided by operating activities

 

 

104,804

 

 

19,824

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Capital expenditures

 

 

(17,208)

 

 

(26,871)

Proceeds from sale of assets

 

 

 —

 

 

2,229

Payments for acquisition of businesses, net of cash acquired

 

 

 —

 

 

(117)

Net cash used in investing activities

 

 

(17,208)

 

 

(24,759)

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Repayments of long-term debt

 

 

(150,000)

 

 

(233,640)

Proceeds from issuance of long-term debt

 

 

 —

 

 

500,000

Repayments of borrowings under revolving credit facility

 

 

 —

 

 

(221,000)

Borrowings under revolving credit facility

 

 

 —

 

 

55,000

Proceeds from issuance of common stock, net

 

 

 —

 

 

36

Dividends paid

 

 

(61,888)

 

 

(61,790)

Payments for repurchase of common stock, net

 

 

(18,529)

 

 

 —

Payments of tax withholding on behalf of employees for net share settlement of share-based compensation

 

 

(1,832)

 

 

(1,962)

Debt financing costs

 

 

 —

 

 

(8,637)

Net cash (used in) provided by financing activities

 

 

(232,249)

 

 

28,007

 

 

 

 

 

 

 

Effect of exchange rate fluctuations on cash and cash equivalents

 

 

987

 

 

(235)

Net (decrease) increase in cash and cash equivalents

 

 

(143,666)

 

 

22,837

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

 

206,506

 

 

28,833

Cash and cash equivalents at end of period

 

$

62,840

 

$

51,670

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

Cash interest payments

 

$

53,025

 

$

34,674

Cash income tax payments

 

$

1,628

 

$

10,232

Non-cash transactions:

 

 

 

 

 

 

Dividends declared and not yet paid

 

$

31,318

 

$

30,920

Accruals related to purchases of property, plant and equipment

 

$

206

 

$

 —

 

 

 

See Notes to Consolidated Financial Statements.

 

 

-  4  -


 

Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

(1)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,  Molly McButter,  Mrs. Dash,  New York Flatbreads,  New York Style,  Old London,  Original Tings,  Ortega,  Pirate’s Booty,  Polaner,  Red Devil,  Regina,  Sa-són,  Sclafani,  Smart Puffs,  SnackWell’s, Spice Islands, Spring Tree,  Sugar Twin,  Tone’s,  Trappey’s,  TrueNorth,  Underwood,  Vermont Maid,  Victoria,  WeberWright’s and, as of July 16, 2018, McCann’s, see Note 17, “Subsequent Event.”    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.

 

(2)Summary of Significant Accounting Policies

Fiscal Year

Typically, our fiscal quarters and fiscal year consist of 13 and 52 weeks, respectively, ending on the Saturday closest to December 31 in the case of our fiscal year and fourth fiscal quarter, and on the Saturday closest to the end of the corresponding calendar quarter in the case of our fiscal quarters.  As a result, a 53rd week is added to our fiscal year every five or six years.  In a 53-week fiscal year our fourth fiscal quarter contains 14 weeks.  Our fiscal year ending December 29, 2018 (fiscal 2018) and our fiscal year ended December 30, 2017 (fiscal 2017) each contain 52 weeks.  Each quarter of fiscal 2018 and 2017 contains 13 weeks.

Basis of Presentation

The accompanying unaudited consolidated interim financial statements for the thirteen and twenty-six week periods ended June 30, 2018  (second quarter and first two quarters of 2018) and July 1, 2017 (second quarter and first two quarters of 2017) have been prepared by our company in accordance with generally accepted accounting principles (GAAP) in the United States of America pursuant to the rules and regulations of the Securities and Exchange Commission (SEC), and include the accounts of B&G Foods, Inc. and its subsidiaries.  Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations.  However, our management believes, to the best of their knowledge, that the disclosures herein are adequate to make the information presented not misleading.  All intercompany balances and transactions have been eliminated.  The accompanying unaudited consolidated interim financial statements contain all adjustments that are, in the opinion of management, necessary to present fairly our consolidated financial position as of June 30, 2018, and the results of our operations, comprehensive income and cash flows for the second quarter and first two quarters of 2018 and 2017.  Our results of operations for the second quarter and first two quarters of 2018 are not necessarily indicative of the results to be expected for the full year.  We have evaluated subsequent events for disclosure through the date of issuance of the accompanying unaudited consolidated interim financial statements. The accompanying unaudited consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for fiscal 2017 filed with the SEC on March 1, 2018.  Certain prior year amounts have been reclassified to conform to the current year presentation.

-  5  -


 

Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

 

Use of Estimates

The preparation of financial statements in accordance with GAAP in the United States 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 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; and the determination of the useful life of customer relationship and amortizable trademark intangibles.  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.

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 postretirement benefit cost.  The new guidance revises how employers that sponsor defined benefit pension and other postretirement 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 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 expense (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.

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.

-  6  -


 

Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

 

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 expense (income) during each quarter of 2017 as a result of the newly adopted revenue recognition standard and newly adopted presentation of net periodic pension cost and net periodic postretirement benefit cost (in thousands).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Thirteen Weeks Ended April 1, 2017

 

    

 

As Reported

    

 

Impact of Revenue Adoption

 

 

Impact of Pension Adoption

    

 

As Adjusted

Net sales

 

$

417,874

 

$

(5,567)

 

$

 —

 

$

412,307

Cost of goods sold

 

 

291,088

 

 

 —

 

 

 —

 

 

291,088

Gross profit

 

 

126,786

 

 

(5,567)

 

 

 —

 

 

121,219

Selling, general and administrative expenses

 

 

53,634

 

 

(5,567)

 

 

453

 

 

48,520

Operating income

 

 

68,680

 

 

 —

 

 

(453)

 

 

68,227

Other income

 

 

(2,144)

 

 

 —

 

 

(453)

 

 

(2,597)

Net income

 

$

32,764

 

$

 —

 

$

 —

 

$

32,764

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted earnings per share

 

$

0.49

 

$

 —

 

$

 —

 

$

0.49

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Thirteen Weeks Ended July 1, 2017

 

 

 

As Reported

    

 

Impact of Revenue Adoption

 

 

Impact of Pension Adoption

    

 

As Adjusted

Net sales

 

$

368,134

 

$

(6,458)

 

$

 —

 

$

361,676

Cost of goods sold

 

 

257,119

 

 

 —

 

 

 —

 

 

257,119

Gross profit

 

 

111,015

 

 

(6,458)

 

 

 —

 

 

104,557

Selling, general and administrative expenses

 

 

49,591

 

 

(6,458)

 

 

453

 

 

43,586

Operating income

 

 

57,159

 

 

 —

 

 

(453)

 

 

56,706

Other income

 

 

(816)

 

 

 —

 

 

(453)

 

 

(1,269)

Net income

 

$

22,061

 

$

 —

 

$

 —

 

$

22,061

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted earnings per share

 

$

0.33

 

$

 —

 

$

 —

 

$

0.33

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Thirteen Weeks Ended September 30, 2017

 

 

 

As Reported

    

 

Impact of Revenue Adoption

 

 

Impact of Pension Adoption

    

 

As Adjusted

Net sales

 

$

408,364

 

$

(2,313)

 

$

 —

 

$

406,051

Cost of goods sold

 

 

285,109

 

 

 —

 

 

 —

 

 

285,109

Gross profit

 

 

123,255

 

 

(2,313)

 

 

 —

 

 

120,942

Selling, general and administrative expenses

 

 

43,019

 

 

(2,313)

 

 

293

 

 

40,999

Operating income

 

 

75,971

 

 

 —

 

 

(293)

 

 

75,678

Other expense (income)

 

 

95

 

 

 —

 

 

(293)

 

 

(198)

Net income

 

$

32,730

 

$

 —

 

$

 —

 

$

32,730

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted earnings per share

 

$

0.49

 

$

 —

 

$

 —

 

$

0.49

 

-  7  -


 

Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Thirteen Weeks Ended December 30, 2017

 

 

 

As Reported

    

 

Impact of Revenue Adoption

 

 

Impact of Pension Adoption

    

 

As Adjusted

Net sales

 

$

473,684

 

$

(7,331)

 

$

 —

 

$

466,353

Cost of goods sold

 

 

372,493

 

 

 —

 

 

 —

 

 

372,493

Gross profit

 

 

101,191

 

 

(7,331)

 

 

 —

 

 

93,860

Selling, general and administrative expenses

 

 

58,990

 

 

(7,331)

 

 

292

 

 

51,951

Operating income

 

 

37,592

 

 

 —

 

 

(292)

 

 

37,300

Other expense (income)

 

 

1,258

 

 

 —

 

 

(292)

 

 

966

Net income

 

$

129,908

 

$

 —

 

$

 —

 

$

129,908

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted earnings per share

 

$

1.95

 

$

 —

 

$

 —

 

$

1.95

 

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 is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. We adopted this standard as of the first quarter of fiscal 2018, and there was no material impact to our consolidated financial statements.

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 is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. We adopted this standard as of the first quarter of fiscal 2018, and there was no material impact to our consolidated financial statements.

 

Recently Issued Accounting Standards

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 standard 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. The update is effective beginning with the first quarter of fiscal 2019. We have not yet completed our assessment of the impact from adoption of this ASU on our financial statements but we expect to complete the assessment before the end of the year and we do not expect the adoption of this ASU to have a material impact to our consolidated financial statements.

 

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Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

 

(3)Acquisitions

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.”

The following table sets forth the preliminary allocation of the Back to Nature 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 first two quarters of 2018, we recorded a purchase price adjustment to increase goodwill by $2.9 million and unamortizable trademarks by $0.1 million, and decrease inventory by $0.9  million and other working capital by $2.0 million.  We anticipate completing the purchase price allocation during the fourth quarter of fiscal 2018.

Back to Nature Acquisition (in thousands):

 

 

 

 

 

    

 

    

Purchase Price:

 

 

 

Cash paid

    

$

162,848

Total

 

$

162,848

 

 

 

 

Preliminary Allocation:

 

 

 

Trademarks—unamortizable intangible assets

 

$

109,900

Trademarks—amortizable intangible assets

 

 

12,800

Goodwill

 

 

36,383

Customer relationship intangibles—amortizable intangible assets

 

 

14,700

Inventory

 

 

5,823

Long-term deferred income tax liabilities, net

 

 

(10,801)

Other working capital

 

 

(5,957)

Total

 

$

162,848

 

The Back to Nature acquisition was not material to our consolidated results of operations or financial position and, therefore, pro forma financial information is not presented.

On July 16, 2018, we acquired the McCann’s brand of premium Irish oatmeal from TreeHouse Foods, Inc. for approximately $32.0 million in cash. See Note 17, “Subsequent Event.”  We refer to this acquisition as the “McCann’s acquisition.”

(4)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 management’s review of inventories on hand compared to estimated future usage and sales.

Inventories consist of the following, as of the dates indicated (in thousands):

 

 

 

 

 

 

 

 

    

June 30, 2018

    

December 30, 2017

Raw materials and packaging

 

$

71,438

 

$

70,315

Work-in-process

 

 

92,581

 

 

140,425

Finished goods

 

 

282,254

 

 

291,109

Total

 

$

446,273

 

$

501,849

 

 

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Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

 

(5)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):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2018

 

December 30, 2017

 

    

Gross Carrying

    

Accumulated

    

Net Carrying

    

Gross Carrying

    

Accumulated

    

Net Carrying

 

    

Amount

    

Amortization

    

Amount

    

Amount

    

Amortization

    

Amount

Amortizable Intangible Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trademarks

 

$

19,600

 

$

2,823

 

$

16,777

 

$

19,600

 

$

2,276

 

$

17,324

Customer relationships

 

 

344,990

 

 

106,366

 

 

238,624

 

 

344,990

 

 

97,695

 

 

247,295

Total amortizable intangible assets

 

$

364,590

 

$

109,189

 

$

255,401

 

$

364,590

 

$

99,971

 

$

264,619

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unamortizable Intangible Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

$

652,143

 

 

 

 

 

 

 

$

649,292

 

 

 

 

 

 

Trademarks

 

$

1,483,701

 

 

 

 

 

 

 

$

1,483,601

 

 

 

 

 

 

Amortization expense associated with amortizable intangible assets for the second quarter and first two quarters of 2018 was $4.6 million and $9.2 million, respectively, and is recorded in operating expenses. Amortization expense associated with amortizable intangible assets for the second quarter and first two quarters of 2017 was $4.3 million and $8.7 million, respectively.  We expect to recognize an additional $9.2 million of amortization expense associated with our amortizable intangible assets during the remainder of fiscal 2018, and thereafter $18.4 million of amortization expense in each of the fiscal years 2019 through 2022.    See Note 3, “Acquisitions.”

(6)Long-Term Debt

Long-term debt consists of the following, as of the dates indicated (in thousands):

 

 

 

 

 

 

 

 

    

June 30, 2018

    

December 30, 2017

Revolving credit loans

 

$

 —

 

$

 —

Tranche B term loans due 2022

 

 

500,110

 

 

650,110

4.625% senior notes due 2021

 

 

700,000

 

 

700,000

5.25% senior notes due 2025

 

 

900,000

 

 

900,000

Unamortized deferred financing costs

 

 

(28,292)

 

 

(34,167)

Unamortized discount

 

 

2,056

 

 

1,631

Total long-term debt, net of unamortized deferred financing costs and discount

 

 

2,073,874

 

 

2,217,574

Current portion of long-term debt

 

 

 —

 

 

 —

Long-term debt, net of unamortized deferred financing costs and discount, and excluding current portion

 

$

2,073,874

 

$

2,217,574

As of June 30, 2018, the aggregate contractual maturities of long-term debt are as follows (in thousands):

 

 

 

 

Years ending December:

 

 

 

2018

    

$

 —

2019

 

 

 —

2020

 

 

 —

2021

 

 

700,000

2022

 

 

500,110

Thereafter

 

 

900,000

Total

 

$

2,100,110

 

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Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

 

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 aggregate principal amount of our tranche B term loans of $125.0 million in the first quarter of 2018 and $25.0 million in the second quarter of 2018.    At June 30, 2018,  $500.1 million aggregate principal amount of tranche B term loans were outstanding and no amount of revolving credit loans were outstanding under our credit agreement.  See Note 17, “Subsequent Event.”  The entire $500.1 million principal amount of tranche B term loans outstanding are due and payable at maturity on November 2, 2022.

At June 30, 2018, the available borrowing capacity under our revolving credit facility, net of outstanding letters of credit of $2.2 million, was $697.8 million.  See Note 17, “Subsequent Event.” 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.

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 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 of 1.00%, and LIBOR plus an applicable margin of 2.00%. At June 30, 2018, the tranche B term loan interest rate was approximately 4.09%.

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.

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Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

 

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 June 30, 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.

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 June 30, 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.

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Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

 

We used the net proceeds of the April 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 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 and November 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.  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 June 30, 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 16, “Guarantor and Non-Guarantor Financial Information.”

Accrued Interest.  At June 30, 2018 and December 30, 2017, accrued interest of $14.6 million and $14.6 million, respectively, is included in accrued expenses in the accompanying unaudited consolidated balance sheets.

Loss on Extinguishment of Debt.  During the second quarter of 2018, we incurred a loss on extinguishment of debt in connection with the prepayment of our tranche B term loans, which includes the write-off of deferred debt financing costs of $0.4 million and the write-off of unamortized discount of $0.1 million. During the first two quarters of 2018, we incurred a loss on extinguishment of debt in connection with the prepayment of our tranche B term loans, which includes the write-off of deferred debt financing costs of $2.8 million and the write-off of unamortized discount of $0.5 million.  During the second quarter of 2017, the repayment of all outstanding borrowings under the tranche A term loans resulted in a loss on extinguishment of debt, which includes the write-off of deferred debt financing costs of $0.9 million and the write-off of unamortized discount of $0.2 million. During the first quarter of 2017, we incurred a loss on

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Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

 

extinguishment of debt in connection with the refinancing of our tranche B term loans, which includes the write-off of deferred debt financing costs and the write-off of unamortized discount of less than $0.1 million in each case.

 

(7)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 generally accepted accounting principles, 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.

The carrying values and fair values of our revolving credit loans, term loans, 4.625% senior notes and 5.25% senior notes as of June 30, 2018 and December 30, 2017 are as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2018

 

 

December 30, 2017

 

 

    

Carrying Value

      

Fair Value

      

Carrying Value

      

Fair Value

 

Revolving credit loans

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

Tranche B term loans due 2022

 

 

498,526

(2)  

 

500,395

(1)

 

647,831

(2)  

 

652,689

(1)

4.625% senior notes due 2021

 

 

700,000

 

 

688,625

(4)  

 

700,000

 

 

710,500

(4)  

5.25% senior notes due 2025

 

 

903,640

(3)  

 

851,681

(4)  

 

903,910

(3)  

 

919,729

(4)  


(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 values of the tranche B term loans are net of discount.  At June 30, 2018 and December 30, 2017, the face amounts of the tranche B term loans were $500.1 million and $650.1 million, respectively.

(3)

The carrying values of the 5.25% senior notes due 2025 include a premium.  At June 30, 2018 and December 30, 2017 the face amount of the 5.25% senior notes due 2025 was $900.0 million.

(4)

Fair values are estimated based on quoted market prices.

There was no Level 3 activity during the second quarter or first two quarters of 2018 or 2017.

 

-  14  -


 

Table of Contents

B&G Foods, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

 

(8)Accumulated Other Comprehensive Loss

The reclassifications from accumulated other comprehensive loss (AOCL) for the second quarter and first two quarters of 2018 and 2017 are as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amounts Reclassified from AOCL

 

 

 

 

 

Thirteen Weeks Ended

 

Twenty-six Weeks Ended

 

Affected Line Item in

 

 

    

June 30,

    

July 1,

    

June 30,

    

July 1,

 

the Statement Where

 

Details about AOCL Components

    

2018

    

2017

    

2018

    

2017

    

Net Income is Presented

 

Defined benefit pension plan items

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of unrecognized prior service cost

 

$

 1

 

$

 9

 

$

 1

 

$

18

 

See (1) below