B&G Foods, Inc 8-K/A, filed Feb 16, 2021
B&G Foods, Inc. (BGS)
About this 8-K/A
B&G Foods, Inc filed this 8-K/A on February 16, 2021, reporting on events of December 1, 2020.
Items reported
- Item 9.01: Financial statements and exhibits
As filed with the Securities and Exchange Commission on February 16, 2021
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Explanatory Note
This Amendment No. 1 is being filed by B&G Foods to amend the Current Report on Form 8-K originally filed by B&G Foods with the Securities and Exchange Commission (the SEC) on December 1, 2020 to provide the information required by Item 9.01(a) and (b) of Form 8-K relating to B&G Foods’ acquisition of the Crisco oils and shortening business from The J.M. Smucker Company and certain of its affiliates. In this amendment, we refer to this acquisition as the Crisco acquisition and the Crisco oils and shortening business as the Crisco business. The information previously reported and the exhibits previously filed or furnished in Items 2.01, 7.01 and 9.01(d) of the original filing are incorporated by reference into this amendment.
Item 9.01. Financial Statements and Exhibits.
It is impracticable to prepare and audit complete stand-alone financial statements of the Crisco business because:
| · | the Crisco business consisted of only part of The J.M. Smucker Company and was not operated as a “stand-alone” division or subsidiary; |
| · | Stand-alone financial statements relating to the Crisco business were never previously prepared, and The J.M. Smucker Company’s independent auditors have not historically audited or reported separately on the operations or net assets of the Crisco business. As a result, the distinct and separate accounts necessary to present a complete “stand-alone” balance sheet and statements of income and cash flows have not been maintained; and |
| · | The J.M. Smucker Company does not believe that it can objectively allocate certain corporate expenses to the Crisco business. |
In addition, we do not believe that such financial statements would provide relevant information to users of our financial statements about the specific assets and operations acquired from The J.M. Smucker Company. Among other reasons, because we are integrating the Crisco business into our organizational structure (and accordingly our cost structure), we believe that a presentation of complete financial statements that includes allocations of certain corporate expenses of The J.M. Smucker Company would not be meaningful to our investors. The Crisco business represented less than 2% of the total assets and less than 4% of the total revenues of The J.M. Smucker Company on a consolidated basis for its most recently completed fiscal year.
As a result, in accordance with Rule 3-05 of Regulation S-X, B&G Foods has provided the abbreviated financial statements described below.
(a) Financial Statements of Business Acquired.
The following abbreviated financial statements of the Crisco business are being filed with this amendment as Exhibits 99.1 and 99.2 and are incorporated by reference herein:
| · | Audited Abbreviated Financial Statements of The J.M. Smucker Company Crisco Business, which Comprise the Statement of Assets Acquired and Liabilities Assumed as of April 30, 2020 and the related Statement of Revenue and Direct Operating Expenses for the year ended April 30, 2020. |
| · | Unaudited Abbreviated Interim Financial Statements of The J.M. Smucker Company Crisco Business, which Comprise the Statement of Assets Acquired and Liabilities Assumed as of October 31, 2020 and the related Statement of Revenue and Direct Operating Expenses for the two quarters ended October 31, 2020. |
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(b) Pro Forma Financial Information.
The pro forma financial information required by Item 9.01(b) is filed as Exhibit 99.3 to this amendment and is incorporated by reference herein.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| B&G FOODS, INC. | ||
| Dated: February 16, 2021 | By: | /s/ Scott E. Lerner |
| Scott E. Lerner | ||
| Executive Vice President, | ||
| General Counsel and Secretary | ||
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Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement Nos. 333-150903 and 333-168845 on Form S-8 and No. 333-233099 on Form S-3 of B&G Foods, Inc. of our report dated January 28, 2021, relating to the abbreviated financial statements of The J. M. Smucker Company Crisco Business as of and for the year ended April 30, 2020 appearing in this Current Report on Form 8-K/A of B&G Foods, Inc.
/s/ Ernst & Young LLP
Akron, Ohio
February 16, 2021
Exhibit 99.1
THE J. M. SMUCKER COMPANY CRISCO BUSINESS
Abbreviated Financial Statements
April 30, 2020
(With Independent Auditors’ Report Thereon)
Report of Independent Auditors
The Board of Directors of The J. M. Smucker Company
We have audited the accompanying abbreviated financial statements of The J. M. Smucker Company Crisco Business, which comprise the statement of assets acquired and liabilities assumed as of April 30, 2020, and the related statement of revenue and direct operating expenses for the year then ended, and the related notes to the abbreviated financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these abbreviated financial statements in conformity with U.S. generally accepted accounting principles; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these abbreviated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the abbreviated financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the abbreviated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the abbreviated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the abbreviated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the abbreviated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the abbreviated financial statements referred to above present fairly, in all material respects, the statement of assets acquired and liabilities assumed as of April 30, 2020, and the related statement of revenue and direct operating expenses for the year then ended in conformity with U.S. generally accepted accounting principles.
Basis of Accounting
As described in Note 1, the abbreviated financial statements have been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and are not intended to be a complete presentation of the Crisco Business’ financial position, revenue and expenses. Our opinion is not modified with respect to this matter.
/s/Ernst & Young LLP
Akron, Ohio
January 28, 2021
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THE J. M. SMUCKER COMPANY CRISCO BUSINESS
Statement of Assets Acquired and Liabilities Assumed
| Dollars in millions | April 30, 2020 | |||
| Assets: | ||||
| Inventories | $ | 30.0 | ||
| Property, plant, and equipment – net | 37.6 | |||
| Operating lease right-of-use assets | 2.0 | |||
| Other intangible assets – net | 121.1 | |||
| Other noncurrent assets | 0.2 | |||
| Total assets | $ | 190.9 | ||
| Liabilities: | ||||
| Current operating lease liabilities | $ | 0.8 | ||
| Noncurrent operating lease liabilities | 1.2 | |||
| Total liabilities | 2.0 | |||
| Net assets | $ | 188.9 | ||
See accompanying notes to abbreviated financial statements.
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THE J. M. SMUCKER COMPANY CRISCO BUSINESS
Statement of Revenue and Direct Operating Expenses
| Dollars in millions | Year Ended April 30, 2020 | |||
| Revenue | $ | 269.2 | ||
| Cost of products sold | 173.9 | |||
| Gross Profit | 95.3 | |||
| Selling, distribution, and administrative expenses | 24.8 | |||
| Amortization | 7.7 | |||
| Other operating expense (income) – net | (0.5 | ) | ||
| Operating Income | $ | 63.3 | ||
See accompanying notes to abbreviated financial statements.
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THE J. M. SMUCKER COMPANY CRISCO BUSINESS
Notes to Abbreviated Financial Statements
April 30, 2020
(Dollars in millions)
NOTE 1: DESCRIPTION OF BUSINESS
The J. M. Smucker Company (“Smucker”) entered into an Asset Purchase Agreement (the “Agreement”) with B&G Foods North America, Inc. (the “Buyer”), which provides for the sale of certain assets of Smucker, pertaining to the The J. M. Smucker Company Crisco Business (the “Crisco Business”). The sale closed on December 1, 2020. The transaction included oils and shortening products sold under the Crisco brand, certain trademarks and licensing agreements, and dedicated manufacturing and warehouse facilities located in Cincinnati, Ohio, inclusive of certain employees who support the Crisco Business. The transaction also included the oils and shortening business outside of the U.S., which is primarily in Canada. The operating results for the Crisco Business were primarily included in Smucker’s U.S. Retail Consumer Foods segment. The accompanying statements for the Crisco Business present the assets acquired and liabilities assumed as of April 30, 2020, and the revenue and direct operating expenses for the fiscal year ended April 30, 2020.
The accompanying statement of assets acquired and liabilities assumed and the statement of revenue and direct operating expenses of the Crisco Business were prepared for the purpose of assisting the Buyer in complying with the rules and regulations of the Securities and Exchange Commission and are not intended to be a complete presentation of the Crisco Business’ assets, liabilities, equity, revenues, expenses, and cash flows.
NOTE 2: ACCOUNTING POLICIES
Basis of Presentation: The statement of revenues and direct operating expenses of the Crisco Business was derived from Smucker’s historical accounting records, which are maintained in accordance with U.S. generally accepted accounting principles (“GAAP”). The statement of revenues and direct operating expenses is not intended to be a complete presentation of the results of operations as if the Crisco Business had operated independently during the period presented. Further, we do not represent that the results as presented are indicative of the results of operations that would have been achieved if the Crisco Business had operated as a separate, stand-alone entity as of or for the period presented, nor are they indicative of the financial condition or results of operations to be expected in the future due to changes in the business and the omission of certain operating expenses as described below. Certain expenses, such as corporate and administrative, are not tracked or monitored in a manner that would enable the development of full financial statements. Such costs include, but are limited to general overhead costs, such as costs related to corporate human resources, accounting, legal, and other administrative services; interest income or expense; and income taxes. As such, only costs directly related to the revenue-generating activities of the Crisco Business are included in this abbreviated financial statement as permitted by Rule 3-05 of Regulation S-X. The statement of revenue and direct operating expenses includes allocations of certain costs directly related to revenue-generating activities as discussed in the policies below. Management believes that the allocations are reasonable.
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The statement of assets acquired and liabilities assumed includes only the assets of Smucker’s Crisco Business to be acquired by the Buyer pursuant to the Agreement. Certain assets and liabilities of the Crisco Business will not be sold per the terms of the Agreement, and therefore, are not included in the statement of assets acquired and liabilities assumed including, but not limited to, accounts receivable and accounts payable. Outside of operating lease liabilities, no other liabilities, contingent or otherwise, were assumed by the buyer.
Under Smucker’s centralized cash management system, cash requirements of the Crisco Business are provided directly by Smucker, and cash generated by the Crisco Business is remitted directly to Smucker. Transaction systems (i.e., payroll, employee benefits, and accounts payable) used to record and account for cash disbursements are provided by centralized Smucker organizations. Smucker also provides centralized sales, order management, billing, credit, and collection functions to the Crisco Business. These functions are operated on a regional basis and are customer focused rather than business or product focused. Transaction systems (e.g., billing, accounts receivable, and cash application) used to account for cash receipts are also provided by centralized Smucker organizations outside the defined scope of the Crisco Business. These systems are not designed to track the detail of operating, financing, or investing cash flows necessary to separately disclose these activities related to the Crisco Business. To the extent available, selected information pertaining to operating cash flows of the Crisco Business have been included within the notes to the abbreviated financial statements. There were no significant cash flows related to investing or financing activities.
Use of Estimates: The preparation of the abbreviated financial statements in conformity with U.S. GAAP require management to make certain estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures. Actual results could differ from these estimates. Further, these financial statements include allocations and estimates that are not necessarily indicative of the costs and expenses that would have resulted if the Crisco Business had been operated as a separate entity, or the future results of the Crisco Business.
Inventories: Inventories are stated at the lower of cost or market, with market being defined as net realizable value, less costs to sell. Cost for all inventories is determined using the first-in, first-out method applied on a consistent basis. The cost of finished products and work-in process inventory includes materials, direct labor, and overhead.
Property, Plant, and Equipment: Property, plant, and equipment is recognized at cost and is depreciated on a straight-line basis over the estimated useful life of the asset (3 to 20 years for machinery and equipment and 5 to 40 years for buildings, fixtures, and improvements). Included in property, plant, and equipment are certain manufacturing assets located at Smucker’s Cincinnati, Ohio, manufacturing and warehouse facilities.
The Crisco Business long-lived assets are reviewed for impairment whenever events or circumstances indicate that the carrying value may not be recoverable. There are no events or changes in circumstances of which Smucker is aware of that indicate the carrying value of the Crisco Business long-lived assets was not recoverable as of April 30, 2020.
Leases: The manufacturing and warehouse facilities located in Cincinnati, Ohio, equipment, and vehicles are leased through operating lease agreements. Leases with a term of 12 months or less on the balance sheet are not recognized. Instead, the related lease expense is expensed on a straight-line basis over the lease term.
Although the majority of the right-of-use asset and liability balances for the Cincinnati, Ohio, location consist of leases with renewal options, generally it is not reasonably certain they will be exercised, and therefore, the optional periods do not typically impact the lease term. Certain leases also include termination provisions or an option to purchase the leased property. Since it is not reasonably certain that these types of options will be exercised, minimum lease payments do not include any amounts related to these termination or purchase options. The lease agreements generally do not contain residual value guarantees or restrictive covenants that are material.
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It is determined if an agreement is or contains a lease at inception by evaluating whether an identified asset exists that Smucker controls over the term of the arrangement. A lease commences when the lessor makes the identified asset available for use. In general, the lease and non-lease components are accounted for as a single lease component. Minimum lease payments do not include variable lease payments other than those that depend on an index or rate.
For the majority of the leases, the interest rate implicit in the lease cannot be readily determined, so the incremental borrowing rate is utilized to present value lease payments using information available at the lease commencement date. The credit rating and current economic environment is considered in determining this collateralized rate.
Lease expense for the Cincinnati, Ohio, facilities totaled $1.3 million for the year-ended April 30, 2020.
Finite-Lived Intangible Asset: The Crisco brand is a finite-lived intangible asset, which is amortized on a straight-line basis over the estimated useful life and is evaluated on an annual basis. Amortization expense of $7.7 million related to the Crisco brand intangible asset was recognized in the statement of revenue and direct operating expenses for the year ended April 30, 2020.
Revenue Recognition: Revenue from the sale of products is recognized when obligations under the terms of a contract with a customer have been satisfied. This occurs when control of the products transfers, which typically takes place upon delivery to or pick up by the customer.
Transaction price is based on the list price included in the published price list, which is then reduced by the estimated impact of variable consideration, such as trade marketing and merchandising programs, discounts, unsaleable product allowances, returns, and similar items, in the same period that revenue is recognized. To estimate the impact of the costs, customer contract provisions are considered, as well as historical data, and current expectations.
Trade marketing and merchandising programs support our products and consist of various promotional activities conducted through retail, distributors, or directly with consumers, including in-store display and product placement programs, price discounts, coupons, and other similar activities. The costs of these programs are recorded based upon volume and classified as a reduction of sales. The estimates of these costs for promotional programs are regularly reviewed and revised, when deemed necessary, based on estimates of what will be redeemed by retail, distributors, or consumers. These estimates are made using various techniques, including historical data on performance of similar promotional programs. Total promotional expenditures for the Crisco Business, including amounts classified as a reduction of sales, represented 23 percent of net sales for the year ended April 30, 2020.
Cost of Products Sold: Cost of products sold includes direct variable and fixed costs of materials, labor, overhead, and transportation costs, which relate to the costs incurred to ship the products.
Selling, Distribution, and Administrative (“SD&A”) Expenses: In general, SD&A activity is expensed as incurred and includes costs related to marketing, advertising, selling, distribution, and general and administrative activities, which are associated with the revenue-generating activities of the Crisco Business. General and administrative expenses primarily include corporate headquarter-related costs, as well as other facility and service-related costs shared by the Crisco Business with other Smucker businesses. SD&A expenses are allocated based on their respective underlying cost driver.
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Foreign Currency Translation: Assets and liabilities of foreign subsidiaries are translated to U.S. dollars using the exchange rate in effect at the balance sheet date, while revenue and direct operating expense accounts are translated to U.S. dollars using average rate throughout the periods.
NOTE 3: INVENTORIES
The components of inventories are as follows:
| April 30, 2020 | ||||
| Finished products | $ | 9.9 | ||
| Raw materials | 8.6 | |||
| Work-in-process | 11.5 | |||
| Total inventory | $ | 30.0 | ||
NOTE 4: PROPERTY, PLANT, AND EQUIPMENT
The components of property, plant, and equipment – net are as follows:
| April 30, 2020 | ||||
| Land and land improvements | $ | 9.3 | ||
| Buildings and fixtures | 40.0 | |||
| Machinery and equipment | 87.2 | |||
| Construction in progress | 2.2 | |||
| Gross property, plant, and equipment | 138.7 | |||
| Less accumulated depreciation | (101.1 | ) | ||
| Total property, plant, and equipment | $ | 37.6 | ||
Depreciation expense assigned to the Crisco Business of $4.9 million for the year ended April 30, 2020, is primarily included in cost of products sold in the statement of revenue and direct operating expenses.
NOTE 5: SUBSEQUENT EVENTS
Subsequent events have been evaluated through January 28, 2021, the date these abbreviated financial statements were issued.
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Exhibit 99.2
THE J. M. SMUCKER COMPANY CRISCO BUSINESS
Abbreviated Financial Statements (Unaudited)
October 31, 2020
THE J. M. SMUCKER COMPANY CRISCO BUSINESS
Statement of Assets Acquired and Liabilities Assumed (Unaudited)
| Dollars in millions | October 31, 2020 | |||
| Assets: | ||||
| Inventories | $ | 37.0 | ||
| Property, plant, and equipment – net | 36.9 | |||
| Operating lease right-of-use assets | 1.6 | |||
| Other intangible assets – net | 117.5 | |||
| Other noncurrent assets | 0.1 | |||
| Total assets | $ | 193.1 | ||
| Liabilities: | ||||
| Current operating lease liabilities | $ | 0.6 | ||
| Noncurrent operating lease liabilities | 1.0 | |||
| Total liabilities | 1.6 | |||
| Net assets | $ | 191.5 | ||
See accompanying notes to abbreviated financial statements.
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THE J. M. SMUCKER COMPANY CRISCO BUSINESS
Statement of Revenue and Direct Operating Expenses (Unaudited)
| Six Months Ended | ||||
| Dollars in millions | October 31, 2020 | |||
| Revenue | $ | 164.4 | ||
| Cost of products sold | 98.9 | |||
| Gross Profit | 65.5 | |||
| Selling, distribution, and administrative expenses | 13.8 | |||
| Amortization | 3.6 | |||
| Other operating expense (income) – net | (0.8 | ) | ||
| Operating Income | $ | 48.9 | ||
See accompanying notes to abbreviated financial statements.
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THE J. M. SMUCKER COMPANY CRISCO BUSINESS
Notes to Abbreviated Financial Statements (Unaudited)
October 31, 2020
(Dollars in millions)
NOTE 1: DESCRIPTION OF BUSINESS
The J. M. Smucker Company (“Smucker”) entered into an Asset Purchase Agreement (the “Agreement”) with B&G Foods North America, Inc. (the “Buyer”), which provides for the sale of certain assets of Smucker, pertaining to the The J. M. Smucker Company Crisco Business (the “Crisco Business”). The sale closed on December 1, 2020.
The accompanying statement of assets acquired and liabilities assumed and the statement of revenue and direct operating expenses of the Crisco Business were prepared for the purpose of assisting the Buyer in complying with the rules and regulations of the Securities and Exchange Commission and are not intended to be a complete presentation of the Crisco Business’ assets, liabilities, equity, revenues, expenses, and cash flows.
These statements should be read in conjunction with the audited financial statements and footnotes of the Crisco Business for the fiscal year ended April 30, 2020, that are filed as an exhibit to the same Form 8-K to which these financial statements are filed as an exhibit. The accounting policies used in preparing these financial statements are the same as those described in Note 2 to the financial statements in that Form 8-K.
The preparation of abbreviated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures. Actual results could differ from these estimates. These financial statements include allocations and estimates that are not indicative of the costs and expenses that would have resulted if the Crisco Business had operated as a separate entity, or the future results of the Crisco Business.
NOTE 2: INVENTORIES
The components of inventories are as follows:
| October 31, 2020 | ||||
| Finished products | $ | 18.2 | ||
| Raw materials | 9.6 | |||
| Work-in-process | 9.2 | |||
| Total inventory | $ | 37.0 | ||
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NOTE 3: PROPERTY, PLANT, AND EQUIPMENT
The components of property, plant, and equipment – net are as follows:
| October 31, 2020 | ||||
| Land and land improvements | $ | 9.3 | ||
| Buildings and fixtures | 40.0 | |||
| Machinery and equipment | 89.7 | |||
| Construction in progress | 1.0 | |||
| Gross property, plant, and equipment | 140.0 | |||
| Less accumulated depreciation | (103.1 | ) | ||
| Total property, plant, and equipment | $ | 36.9 | ||
Depreciation expense assigned to the Crisco Business of $2.3 million for the six months ended October 31, 2020, is primarily included in cost of products sold in the statement of revenue and direct operating expenses.
NOTE 4: SUBSEQUENT EVENTS
Subsequent events have been evaluated through January 28, 2021, the date these abbreviated financial statements were issued.
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Exhibit 99.3
B&G Foods, Inc. and Subsidiaries
Unaudited Pro Forma Combined Financial Statements
On December 1, 2020, pursuant to an agreement entered into on October 26, 2020, B&G Foods, Inc. and its subsidiaries completed the acquisition of the Crisco oils and shortening business from The J.M. Smucker Company and certain of its affiliates, for $550.0 million in cash less an adjustment for inventory at closing of $10.7 million. We refer to this acquisition as the Crisco acquisition and the Crisco oils and shortening business as the Crisco business. In connection with the Crisco acquisition, we amended our amended and restated senior secured credit agreement. Among other things, the amendment provided for a $300.0 million add-on tranche B term loan facility, which closed and funded on December 16, 2020. The tranche B term loan facility was issued at a price equal to 99.00% of its face value. The add-on term loans, which have the same terms as, and are fungible with, B&G Foods’ existing $371.6 million of tranche B term loans, have a maturity date of October 10, 2026. We used the proceeds of the add-on term loans to repay $290.0 million of revolving credit facility borrowings and to pay related fees and expenses. The amendment also increased the revolver capacity from $700.0 million to $800.0 million and extended the maturity date of our revolving credit facility from November 21, 2022 to December 16, 2025.
The unaudited pro forma combined balance sheet at October 3, 2020 combines our historical consolidated balance sheet at October 3, 2020 with the statement of assets acquired of the Crisco business at October 31, 2020, and gives effect to the Crisco acquisition and related financing as if such transactions occurred on October 3, 2020.
The unaudited pro forma combined statements of operations for the three quarters ended October 3, 2020 and the fiscal year ended December 28, 2019 combines our historical consolidated statements of operations for the periods then ended with the statements of net revenues and direct expenses of the Crisco business for the three quarters ended October 31, 2020 and its four quarter period ended January 31, 2020, respectively, and gives effect to the Crisco acquisition and related financing as if such transactions occurred on December 30, 2018. The J.M. Smucker Company has an April 30 fiscal year end. These periods were presented to comply with Item 9.01(b) reporting rules when an acquired business has a different fiscal year than the acquiring company. The impact of the reversal of the inventory step up to be recorded in our acquisition accounting is not reflected in our pro forma results of operations because it is directly related to the acquisition and is non-recurring. It will, however, be recorded in our actual results of operations in the period following the acquisition closing date based on estimated inventory turnover for the Crisco business.
The Crisco acquisition has been accounted for by the acquisition method of accounting. The pro forma combined financial information sets forth the preliminary allocation of the purchase price for the Crisco acquisition based upon the estimated fair value of the assets acquired at the date of acquisition using available information. The preliminary purchase price allocation may be adjusted as a result of the finalization of our purchase price allocation procedures.
The unaudited pro forma combined financial information set forth below reflects pro forma adjustments that are based upon available information and certain assumptions that we believe are reasonable. The unaudited pro forma combined financial information does not purport to represent our results of operations or financial position that would have resulted had the Crisco acquisition and related financing transaction to which pro forma effect is given been consummated as of the dates indicated. Additionally, the unaudited pro forma combined statements of operations should not be considered indicative of expected future results. Furthermore, no effect has been given in the unaudited pro forma combined statements of operations for synergistic benefits that may be realized through the combination of B&G Foods and the Crisco business or the costs that will be incurred in integrating the operations of the Crisco business.
On February 19, 2020, we acquired Farmwise, LLC for an undisclosed purchase price. We refer to this acquisition as the Farmwise acquisition. The Farmwise acquisition was not deemed to be material at that time and therefore, no estimated impact of the acquired business before the closing date has been added to the pro forma statement of operations data presented in this Exhibit 99.3. Actual results for the Farmwise business are included in the actual results of B&G Foods since the closing date of that acquisition.
The unaudited pro forma combined financial statements and accompanying notes should be read in conjunction with the historical financial statements and the notes thereto for B&G Foods that are included in our Annual Report on Form 10-K for the Year Ended December 28, 2019, filed with the Securities and Exchange Commission (SEC) on February 26, 2020, our Quarterly Report on Form 10-Q for the period ended October 3, 2020 filed with the SEC on November 9, 2020, and the historical financial statements of the Crisco business that are filed as Exhibits 99.1 and 99.2 to our Current Report on Form 8-K/A filed on February 16, 2021.
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B&G Foods, Inc. and Subsidiaries
Unaudited Pro Forma Combined Balance Sheet
October 3, 2020
(Dollars in thousands, except per share amounts)
| Historical | Pro Forma | Pro Forma | ||||||||||||||
| B&G Foods(1) | Crisco(2) | Adjustments | Combined | |||||||||||||
| Assets | ||||||||||||||||
| Cash and cash equivalents | $ | 56,967 | $ | — | $ | 7,753 | (3) | $ | 64,720 | |||||||
| Trade accounts receivable, net | 163,713 | — | — | 163,713 | ||||||||||||
| Inventories | 476,275 | 36,957 | 2,775 | (4) | 516,007 | |||||||||||
| Prepaid expenses and other current assets | 37,603 | — | — | 37,603 | ||||||||||||
| Income tax receivable | 18,063 | — | — | 18,063 | ||||||||||||
| Total current assets | 752,621 | 36,957 | 10,528 | 800,106 | ||||||||||||
| Property, plant and equipment, net | 283,046 | 36,892 | 43,739 | (4) | 363,677 | |||||||||||
| Operating lease right-of-use assets, net | 33,336 | 1,631 | (34 | )(4) | 34,933 | |||||||||||
| Goodwill | 598,860 | — | 47,885 | (4) | 646,745 | |||||||||||
| Other intangibles, net | 1,601,429 | 117,485 | 253,415 | (4) | 1,972,329 | |||||||||||
| Other assets | 2,853 | 113 | 3,199 | (5) | 6,165 | |||||||||||
| Deferred income taxes | 6,760 | — | — | 6,760 | ||||||||||||
| Total assets | $ | 3,278,905 | $ | 193,078 | $ | 358,732 | $ | 3,830,715 | ||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||||
| Trade accounts payable | $ | 185,362 | $ | — | $ | — | $ | 185,362 | ||||||||
| Accrued expenses | 45,681 | — | 45,681 | |||||||||||||
| Current portion of operating lease liabilities | 10,731 | 632 | (36 | )(4) | 11,327 | |||||||||||
| Current portion of long-term debt | — | — | — | — | ||||||||||||
| Income tax payable | 21,971 | — | — | 21,971 | ||||||||||||
| Dividends payable | 30,520 | — | — | 30,520 | ||||||||||||
| Total current liabilities | 294,265 | 632 | (36 | ) | 294,861 | |||||||||||
| Long-term debt | 1,804,586 | — | 553,774 | (5) | 2,358,360 | |||||||||||
| Deferred income taxes | 274,795 | — | 274,795 | |||||||||||||
| Long-term operating lease liabilities, net of current portion | 25,509 | 986 | 15 | (4) | 26,510 | |||||||||||
| Other liabilities | 36,374 | — | — | 36,374 | ||||||||||||
| Total liabilities | 2,435,529 | 1,618 | 553,753 | 2,990,900 | ||||||||||||
| Preferred stock, $0.01 par value per share. Authorized 1,000,000 shares; no shares issued and outstanding | — | — | — | — | ||||||||||||
| Common stock, $0.01 par value per share. Authorized 125,000,000 shares; issued and outstanding 64,252,859 shares | 643 | — | — | 643 | ||||||||||||
| Additional paid-in-capital | — | — | — | — | ||||||||||||
| Accumulated other comprehensive loss | (39,177 | ) | — | — | (39,177 | ) | ||||||||||
| Retained earnings | 881,910 | — | (3,561 | )(3) | 878,349 | |||||||||||
| Total stockholders’ equity | 843,376 | — | (3,561 | ) | 839,815 | |||||||||||
| Total liabilities and stockholders’ equity | $ | 3,278,905 | $ | 1,618 | $ | 550,192 | $ | 3,830,715 | ||||||||
See accompanying notes to unaudited pro forma combined financial statements.
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B&G Foods, Inc. and Subsidiaries
Unaudited Pro Forma Combined Statement of Operations
Year Ended December 28, 2019
(In thousands, except per share data)
| Historical | Reclassification | Pro Forma | Pro Forma | |||||||||||||||||
| B&G Foods(6) | Crisco(7) | Adjustments(8) | Adjustments | Combined | ||||||||||||||||
| Net sales | $ | 1,660,414 | $ | 245,443 | $ | 545 | $ | — | $ | 1,906,402 | ||||||||||
| Cost of goods sold | 1,277,290 | 160,230 | 4,581 | 11,080 | (4) | 1,453,181 | ||||||||||||||
| Gross profit | 383,124 | 85,213 | (4,036 | ) | (11,080 | ) | 453,221 | |||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Sales, general and administrative | 160,745 | 24,197 | (4,361 | ) | — | 180,581 | ||||||||||||||
| Amortization expense | 18,543 | 7,650 | — | (5,505 | )(4) | 20,688 | ||||||||||||||
| Operating income | 203,836 | 53,366 | 325 | (5,575 | ) | 251,952 | ||||||||||||||
| Other expenses: | ||||||||||||||||||||
| Interest expense, net | 98,126 | — | — | 13,230 | (9) | 111,356 | ||||||||||||||
| Loss on extinguishment of debt | 1,177 | — | — | — | 1,177 | |||||||||||||||
| Other (income) | (1,159 | ) | (325 | ) | 325 | — | (1,159 | ) | ||||||||||||
| Income before income tax expense | 105,692 | 53,691 | — | (18,805 | ) | 140,578 | ||||||||||||||
| Income tax expense | 29,303 | - | — | 5,842 | (10) | 35,145 | ||||||||||||||
| Net income | $ | 76,389 | $ | 53,691 | $ | — | $ | (24,647 | ) | $ | 105,433 | |||||||||
| Weighted average common shares outstanding: | ||||||||||||||||||||
| Basic | 65,013 | — | — | — | 65,013 | |||||||||||||||
| Diluted | 65,039 | — | — | — | 65,039 | |||||||||||||||
| Earnings per share: | ||||||||||||||||||||
| Basic | $ | 1.17 | N/A | N/A | N/A | $ | 1.62 | |||||||||||||
| Diluted | $ | 1.17 | N/A | N/A | N/A | $ | 1.62 | |||||||||||||
| Cash dividends declared per share | $ | 1.90 | N/A | N/A | N/A | $ | 1.90 | |||||||||||||
See accompanying notes to unaudited pro forma combined financial statements.
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B&G Foods, Inc. and Subsidiaries
Unaudited Pro Forma Combined Statement of Operations
Three Quarters Ended October 3, 2020
(In thousands, except per share data)
| Historical | Reclassification | Pro Forma | Pro Forma | |||||||||||||||||
| B&G Foods(6) | Crisco(7) | Adjustments(8) | Adjustments | Combined | ||||||||||||||||
| Net sales | $ | 1,457,668 | $ | 236,124 | $ | 233 | $ | — | $ | 1,694,025 | ||||||||||
| Cost of goods sold | 1,082,625 | 143,035 | 2,772 | 8,310 | (4) | 1,236,742 | ||||||||||||||
| Gross profit | 375,043 | 93,089 | (2,539 | ) | (8,310 | ) | 457,283 | |||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Sales, general and administrative | 127,715 | 19,326 | (3,569 | ) | 143,472 | |||||||||||||||
| Amortization expense | 14,197 | 5,553 | — | (3,944 | )(4) | 15,806 | ||||||||||||||
| Operating income | 233,131 | 68,210 | 1,030 | (4,366 | ) | 298,005 | ||||||||||||||
| Other expenses: | ||||||||||||||||||||
| Interest expense, net | 77,318 | — | — | 9,923 | (9) | 87,241 | ||||||||||||||
| Other income | (1,856 | ) | (1,030 | ) | 1,030 | — | (1,856 | ) | ||||||||||||
| Income before income tax expense | 157,669 | 69,240 | — | (14,289 | ) | 212,620 | ||||||||||||||
| Income tax expense | 37,853 | — | — | 15,302 | (10) | 53,155 | ||||||||||||||
| Net income | $ | 119,816 | $ | 69,240 | — | $ | (29,591 | ) | $ | 159,465 | ||||||||||
| Weighted average common shares outstanding: | ||||||||||||||||||||
| Basic | 64,133 | — | — | — | 64,133 | |||||||||||||||
| Diluted | 64,434 | — | — | — | 64,434 | |||||||||||||||
| Earnings per share: | ||||||||||||||||||||
| Basic | $ | 1.87 | N/A | N/A | N/A | $ | 2.49 | |||||||||||||
| Diluted | $ | 1.86 | N/A | N/A | N/A | $ | 2.47 | |||||||||||||
| Cash dividends declared per share | $ | 1.425 | N/A | N/A | N/A | $ | 1.425 | |||||||||||||
See accompanying notes to unaudited pro forma combined financial statements.
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B&G Foods, Inc. and Subsidiaries
Notes to Unaudited Pro Forma Combined Financial Statements
Year Ended December 28, 2019 and Three Quarters Ended October 3, 2020
| (1) | Represents our historical unaudited consolidated balance sheet as of October 3, 2020. |
| (2) | Represents the historical statement of net assets to be sold of The J.M. Smucker Company Crisco business as of October 31, 2020. |
| (3) | Net change in cash is as follows (dollars in thousands): |
| Debt incurred under amended credit agreement for the acquisition: | ||||
| Revolving credit facility | $ | 550,000 | ||
| Add-on tranche B term loans due 2026 (A) | 300,000 | |||
| Less: Prepayment of revolving credit facility | (290,000 | ) | ||
| Incremental borrowings (B) | 560,000 | |||
| Cash purchase price | 539,261 | |||
| Acquisition-related transaction costs | 3,561 | |||
| Deferred debt financing charges (C) | 9,425 | |||
| Total reductions | 552,247 | |||
| Net cash provided by financing activities after related expenses, acquisition purchase price and acquisition-related costs | $ | 7,753 |
| (A) | Reflects the incurrence of $300.0 million of tranche B term loans issued on December 16, 2020 at a price equal to 99.0% of their face value, for net proceeds before fees and expenses of $297.0. See Note 9 below. |
| (B) | None of the incremental borrowings is due in the next twelve months. |
| (C) | Includes $3.0 million of discount on the add-on tranche B term loans. See (A) above. |
| (4) | The total purchase price for the Crisco acquisition was approximately $539.3 million, inclusive of an adjustment for inventory at closing of $10.7 million. The following table sets forth the preliminary allocation of the Crisco purchase price to the estimated fair value of the net assets acquired assuming an acquisition date of October 31, 2020, based upon currently available information. Inventory has been recorded at estimated selling price less costs of disposal and a reasonable profit. Equipment has been recorded at estimated fair value. A third party valuation specialist assisted us with our determination of the valuation for the intangible assets acquired (including trademarks and customer relationship intangibles). The preliminary purchase price allocation will be adjusted as a result of the finalization of our purchase price allocation procedures. We anticipate completing the purchase price allocation as of December 1, 2020, the actual closing date of the acquisition, in the second quarter of fiscal 2021. |
| (Dollars in thousands) | ||||
| Property, plant and equipment, net | $ | 80,631 | ||
| Inventories | 39,732 | |||
| Operating lease right-of-use assets | 1,597 | |||
| Other assets | 113 | |||
| Assumption of current portion of operating lease liabilities | (596 | ) | ||
| Assumption of long-term operating lease liabilities, net of current portion | (1,001 | ) | ||
| Trademarks – indefinite life intangible assets | 328,000 | |||
| Customer relationship – finite-lived intangible assets | 42,900 | |||
| Goodwill | 47,885 | |||
| Total preliminary purchase price (paid in cash) | $ | 539,261 |
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The following table provides a reconciliation of the pro forma adjustment to other intangibles, net (dollars in thousands):
| Acquired trademarks | $ | 328,000 | ||
| Acquired customer relationship intangibles | 42,900 | |||
| Acquired technology-related intangibles | — | |||
| Less historical Crisco intangibles | (117,485 | ) | ||
| Net adjustment to other intangibles, net | $ | 253,415 |
The excess of the purchase price over the fair value of identifiable tangible and intangible assets acquired represents goodwill. Trademarks are deemed to have an indefinite useful life and are not amortized.
The pro forma combined statement of operations reflects an adjustment for acquired intangible asset amortization expense as follows (dollars in thousands):
| Amortization | ||||||||||||
| Amortization Period (Years) | Year Ended December 28, 2019 | Three Quarters Ended October 3, 2020 | ||||||||||
| Customer relationship intangibles | 20 | $ | 2,145 | $ | 1,609 | |||||||
| Trademarks (A) | 20 | (7,650 | ) | (5,553 | ) | |||||||
| $ | (5,505 | ) | $ | (3,944 | ) | |||||||
| (A) | This adjustment reverses the amortization expense recognized by the Crisco business because we deem the trademarks to have an indefinite useful life and they will not be amortized. |
Acquired property, plant and equipment will be depreciated over the estimated remaining useful life, which is approximately 5.8 years on a weighted average basis. Cost of goods sold in our pro forma combined statement of operations has been adjusted to reflect incremental depreciation expense in the year ended December 28, 2019 and the three quarters ended October 3, 2020 of approximately $11.1 million and $8.3 million, respectively, for the step-up in fair value of certain property, plant and equipment acquired in the acquisition.
| (5) | Reflects deferred financing charges incurred in connection with the add-on tranche B term loan borrowings under our amended and restated credit agreement used to finance the acquisition. The deferred financing charges related to the tranche B term loans will be amortized as interest expense over the remaining 5.8 years until maturity. The deferred financing charges related to the revolver will be amortized as interest expense over the remaining 5.0 years until maturity. |
| (6) | Represents our consolidated results of operations for our fiscal year ended December 28, 2019 and the three quarters ended October 3, 2020. |
| (7) | Represents the historical statements of net revenues and direct expenses for the Crisco business for its four quarters ended January 31, 2020 and its three quarters ended October 31, 2020. The historical statements of net revenues and direct expenses for the Crisco business for these periods were derived from the historical statements of net revenues and direct expenses for the Crisco business for its fiscal years ended April 30, 2020 and April 30, 2019 and its two quarters ended October 31, 2020. |
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| (8) | Based on our preliminary review of the accounting policies and financial statement presentation for the historical financial statements for the Crisco business, certain balances from the historical financial statements for the Crisco business have been reclassified to conform its presentation to that of B&G Foods. |
| (9) | Adjustment to reflect our incurrence of an incremental $560.0 million of borrowings, amortization of debt discount and amortization of deferred financing costs relating to such additional borrowings (dollars in thousands): |
| Year Ended December 28, 2019 | Three Quarters Ended October 3, 2020 | |||||||
| Interest expense relating to: | ||||||||
| Revolving loans ($260,000 at 1.91%) | 4,966 | 3,725 | ||||||
| Add-on tranche B term loans due 2026 ($300,000 at 2.6455%) | 7,937 | 5,953 | ||||||
| Unused revolver fees (savings) | (800 | ) | (600 | ) | ||||
| Amortization of deferred debt issuance costs, including debt discount | 1,127 | 845 | ||||||
| Adjustment to interest expense | $ | 13,230 | $ | 9,923 | ||||
In connection with the Crisco acquisition, we amended our amended and restated senior secured credit agreement. Among other things, the amendment provided for a $300.0 million add-on tranche B term loan facility, which closed and funded on December 16, 2020. The tranche B term loan facility was issued at a price equal to 99.00% of its face value. The add-on term loans, which have the same terms as, and are fungible with, B&G Foods’ existing $371.6 million of tranche B term loans, have a maturity date of October 10, 2026. We used the proceeds of the add-on term loans to repay $290.0 million of revolving credit facility borrowings and to pay related fees and expenses. The amendment also increased the revolver capacity from $700.0 million to $800.0 million and extended the maturity date of our revolving credit facility from November 21, 2022 to December 16, 2025.
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 2.50%.
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. At October 3, 2020, the revolving credit facility interest rate was approximately 1.91%.
If the interest rates were to increase or decrease by 0.125% from the rates assumed in the table above, pro forma interest expense would change by approximately $7.0 million for the fiscal year ended December 28, 2019 and $5.3 million for the three quarters ended October 3, 2020.
| (10) | Adjustment to reflect income tax expense on the results of operations of the Crisco business and the pro forma adjustments for the year ended December 28, 2019 and three quarters ended October 3, 2020 using estimated statutory income tax rates of 25.0% (federal and state) for both periods. Income tax expense was not allocated to the Crisco business in the pre-acquisition statements of net revenues and direct expenses. |
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