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Zoetis announces second quarter 2020 results

  • Reports Flat Revenue of $1.5 Billion, and Net Income of $377 Million, or $0.79 per Diluted Share, Increasing 2% and 3%, Respectively, on a Reported Basis for Second Quarter 2020
  • Reports Adjusted Net Income of $427 Million, or Adjusted Diluted EPS of $0.89 for Second Quarter 2020
  • Delivers 4% Operational Growth in Revenue and 4% Operational Growth in Adjusted Net Income for Second Quarter 2020
  • Raises and Narrows Full Year 2020 Revenue Guidance to $6.300 – $6.475 Billion and Diluted EPS of $3.14 – $3.32 on a Reported Basis, or $3.52 – $3.68 on an Adjusted Basis

PARSIPPANY, N.J.–(BUSINESS WIRE)–$ZTS #animalhealth—Zoetis Inc. (NYSE: ZTS) today reported its financial results for the second quarter of 2020 and raised and narrowed its guidance for full year 2020 to reflect the company’s current view of the estimated full-year impact of the COVID-19 pandemic and foreign currency headwinds.

The company reported revenue of $1.5 billion for the second quarter of 2020, which is flat compared with the second quarter of 2019. Net income for the second quarter of 2020 was $377 million, or $0.79 per diluted share, an increase of 2% and 3%, respectively, on a reported basis.

Adjusted net income1 for the second quarter of 2020 was $427 million, or $0.89 per diluted share, a decrease of 2%, on a reported basis. Adjusted net income for the second quarter of 2020 excludes the net impact of $50 million for purchase accounting adjustments, acquisition-related costs and certain significant items.

On an operational2 basis, revenue for the second quarter of 2020 increased 4%, excluding the impact of foreign currency. Adjusted net income for the second quarter of 2020 increased 4% operationally, excluding the impact of foreign currency.

EXECUTIVE COMMENTARY

“As an essential business supporting the global food supply and the care of people’s pets during the pandemic, Zoetis demonstrated greater resiliency than expected in the second quarter, with 4% operational growth in revenue and 4% operational growth in adjusted net income,” said Kristin Peck, Chief Executive Officer of Zoetis. “Our strong companion animal portfolio, based on our internal innovations, helped offset some of the deeper challenges in the livestock market today.”

“Looking ahead, we expect our overall revenue growth for the remainder of the year to be driven largely by companion animal products, especially parasiticides and our key dermatology portfolio, and we are raising our guidance to reflect our current outlook for the year. We will continue to invest in products that will strengthen the innovations and digital solutions that are needed by our customers across the continuum of care – from prediction and prevention to detection and treatment of diseases,” said Peck.

QUARTERLY HIGHLIGHTS

Zoetis organizes and manages its commercial operations across two segments: United States (U.S.) and International. Within these segments, the company delivers a diverse portfolio of products for companion animals and livestock, tailored to local trends and customer needs. In the second quarter of 2020:

  • Revenue in the U.S. segment was $823 million, an increase of 6% compared with the second quarter of 2019. Sales of companion animal products increased 19% driven primarily by growth in the Simparica® franchise, including the continued launch of Simparica Trio®, the company’s new triple combination parasiticide for dogs. Also contributing to growth was the company’s key dermatology portfolio across both the Cytopoint® and Apoquel® brands. Additionally, companion animal sales benefited from the recent acquisitions of Platinum Performance and its nutritional product formulas, as well as a number of regional diagnostic reference labs. Sales of livestock products decreased 18% in the quarter. Disruptions in the food supply chain including reduced producer processing capacity and continued channel migration from dining out to preparing food at home impacted producer profitability and resulted in a decline across each of the cattle, swine and poultry portfolios. The decline in the cattle portfolio was also the result of continued unfavorable market conditions in beef and dairy, while swine product sales were negatively impacted by increased competition.
  • Revenue in the International segment was $708 million, a decrease of 5% on a reported basis and an increase of 3% operationally compared with the second quarter of 2019. Sales of companion animal products declined 3% on a reported basis and grew 2% on an operational basis. Growth resulted from increased sales of the company’s key dermatology portfolio across both the Apoquel and Cytopoint brands, as well as the Simparica franchise, including the launch of Simparica Trio in Canada and certain markets in the EU. Sales of companion animal products in China continued to grow rapidly driven by strong underlying market dynamics. Growth in companion animal products was partially offset by the impact of COVID-19 and social distancing measures in certain EU markets and in Latin America, including Brazil, that resulted in decreased veterinary clinic traffic. Sales of livestock products declined 5% on a reported basis and grew 4% operationally. Sales of swine products grew as a result of expanding herd production in key accounts and increased biosecurity measures in the wake of African Swine Fever in China. The timing of seasonal vaccination protocols in key salmon markets and the recently launched parasiticide Alpha Flux® were the primary drivers of growth in fish. Growth in our poultry portfolio was the result of increased sales of medicated feed additives and sales of biodevices. Sales of cattle products declined in the quarter due to the impact of COVID-19 in certain markets as well as the discontinuation of non-core products in Brazil.

INVESTMENTS IN GROWTH

Zoetis diversifies and grows its business through the introduction of new products, lifecycle innovations, business development initiatives, and entries into new markets and technologies. The company is increasingly focused on developing integrated solutions for pet owners, veterinarians and farmers that span the continuum of animal care – helping to predict, prevent, detect and treat diseases.

Since our last quarterly earnings announcement, Zoetis continued to bring leading products into new markets. In Brazil, Zoetis received approval for Vanguard® B Oral, a vaccine that aids in preventing kennel cough in dogs, as well as Excenel® RTU EZ (ceftiofur hydrochloride), an anti-infective that treats respiratory diseases in cattle and swine. Additionally, Fostera® Gold PCV MH was approved in Australia. This vaccine provides livestock farmers with greater options and flexibility to reduce the clinical symptoms in pigs associated with porcine circovirus (PCV2) and Mycoplasma hyopneumoniae (M. hyo). Fostera Gold PCV Metastim was also approved in Australia to reduce the clinical symptoms associated with PCV2.

In addition to new product approvals and lifecycle innovations, Zoetis continues to support future growth through business development activities. In July, the company acquired Fish Vet Group as a strategic addition to its Pharmaq business, which develops and commercializes fish vaccines and offers services in vaccination and diagnostics for aquaculture. Adding Fish Vet Group grows the geographic reach and enhances the diagnostics expertise and testing services for fish farmers in major aquaculture markets.

FINANCIAL GUIDANCE

Zoetis is raising and narrowing its full year 2020 guidance, which includes:

  • Revenue between $6.300 billion and $6.475 billion
  • Reported diluted EPS between $3.14 and $3.32
  • Adjusted diluted EPS between $3.52 and $3.68

This guidance reflects foreign exchange rates as of mid-July. Additional details on guidance are included in the financial tables and will be discussed on the company’s conference call this morning.

WEBCAST & CONFERENCE CALL DETAILS

Zoetis will host a webcast and conference call at 8:30 a.m. (ET) today, during which company executives will review second quarter 2020 results, discuss financial guidance and respond to questions from financial analysts. Investors and the public may access the live webcast by visiting the Zoetis website at http://investor.zoetis.com/events-presentations. A replay of the webcast will be archived and made available on Aug. 6, 2020.

About Zoetis

Zoetis is the leading animal health company, dedicated to supporting its customers and their businesses. Building on more than 65 years of experience in animal health, Zoetis discovers, develops, manufactures and commercializes medicines, vaccines and diagnostic products, which are complemented by biodevices, genetic tests and precision livestock farming. Zoetis serves veterinarians, livestock producers and people who raise and care for farm and companion animals with sales of its products in more than 100 countries. In 2019, the company generated annual revenue of $6.3 billion with approximately 10,600 employees. For more information, visit www.zoetis.com.

1 Adjusted net income and its components and adjusted diluted earnings per share (non-GAAP financial measures) are defined as reported net income attributable to Zoetis and reported diluted earnings per share, excluding purchase accounting adjustments, acquisition-related costs and certain significant items.

2 Operational revenue growth (a non-GAAP financial measure) is defined as growth excluding the impact of foreign exchange.

DISCLOSURE NOTICES

Forward-Looking Statements: This press release contains forward-looking statements, which reflect the current views of Zoetis with respect to: business plans or prospects; future operating or financial performance, future guidance, future operating models; expectations regarding products, product approvals or products under development; expected timing of product launches; the potential impact of the coronavirus (COVID-19) pandemic on our business, suppliers, customers and employees; expectations regarding the performance of acquired companies and our ability to integrate new businesses; expectations regarding the financial impact of acquisitions; future use of cash and dividend payments; tax rate and tax regimes; changes in the tax regimes and laws in other jurisdictions; and other future events. These statements are not guarantees of future performance or actions. Forward-looking statements are subject to risks and uncertainties. If one or more of these risks or uncertainties materialize, or if management’s underlying assumptions prove to be incorrect, actual results may differ materially from those contemplated by a forward-looking statement. Forward-looking statements speak only as of the date on which they are made. Zoetis expressly disclaims any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. A further list and description of risks, uncertainties and other matters can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, including in the sections thereof captioned “Forward-Looking Statements and Factors That May Affect Future Results” and “Item 1A. Risk Factors,” in our Quarterly Reports on Form 10-Q and in our Current Reports on Form 8-K. Such risks and uncertainties may be amplified by the coronavirus (COVID-19) pandemic and its potential impact on the global economy and our business. These filings and subsequent filings are available online at www.sec.gov, www.zoetis.com, or on request from Zoetis.

Use of Non-GAAP Financial Measures: We use non-GAAP financial measures, such as adjusted net income, adjusted diluted earnings per share and operational results (which exclude the impact of foreign exchange), to assess and analyze our results and trends and to make financial and operational decisions. We believe these non-GAAP financial measures are also useful to investors because they provide greater transparency regarding our operating performance. The non-GAAP financial measures included in this press release should not be considered alternatives to measurements required by GAAP, such as net income, operating income, and earnings per share, and should not be considered measures of liquidity. These non-GAAP financial measures are unlikely to be comparable with non-GAAP information provided by other companies. Reconciliation of non-GAAP financial measures and GAAP financial measures are included in the tables accompanying this press release and are posted on our website at www.zoetis.com.

Internet Posting of Information: We routinely post information that may be important to investors in the ‘Investors’ section of our website at www.zoetis.com, on our Facebook page at http://www.facebook.com/zoetis and on Twitter@zoetis. We encourage investors and potential investors to consult our website regularly and to follow us on Facebook and Twitter for important information about us.

ZTS-IR

ZTS-FIN

ZOETIS INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME(a)

(UNAUDITED)

(millions of dollars, except per share data)

Quarter Ended

Six Months Ended

June 30,

June 30,

2020

2019

% Change

2020

2019

% Change

Revenue

$

1,548

$

1,547

—

$

3,082

$

3,002

3

Costs and expenses:

Cost of sales

451

465

(3)

910

983

(7)

Selling, general and administrative expenses

393

406

(3)

782

775

1

Research and development expenses

111

111

—

218

213

2

Amortization of intangible assets

40

39

3

80

77

4

Restructuring charges and certain acquisition-related costs

8

22

(64)

17

27

(37)

Interest expense, net of capitalized interest

58

55

5

111

111

—

Other (income)/deductions—net

5

(6)

*

(15)

(20)

(25)

Income before provision for taxes on income

482

455

6

979

836

17

Provision for taxes on income

106

84

26

180

153

18

Net income before allocation to noncontrolling interests

376

371

1

799

683

17

Less: Net loss attributable to noncontrolling interests

(1)

—

*

(1)

—

*

Net income attributable to Zoetis

$

377

$

371

2

$

800

$

683

17

Earnings per share—basic

$

0.79

$

0.77

3

$

1.68

$

1.43

17

Earnings per share—diluted

$

0.79

$

0.77

3

$

1.67

$

1.41

18

Weighted-average shares used to calculate earnings per share

Basic

475.3

478.8

475.4

479.2

Diluted

478.1

482.3

478.6

482.7

(a)

The condensed consolidated statements of income present the quarter and six months ended June 30, 2020 and June 30, 2019. Subsidiaries operating outside the United States are included for the quarter and six months ended May 31, 2020 and May 31, 2019.
* Calculation not meaningful.

ZOETIS INC.

RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION

CERTAIN LINE ITEMS

(UNAUDITED)

(millions of dollars, except per share data)

Quarter Ended June 30, 2020

GAAP

Reported(a)

Purchase

Accounting

Adjustments

Acquisition-

Related

Costs(1)

Certain

Significant

Items(2)

Non-GAAP

Adjusted(b)

Cost of sales

$

451

$

(2)

$

—

$

(1)

$

448

Gross profit

1,097

2

—

1

1,100

Selling, general and administrative expenses

393

(17)

—

(4)

372

Research and development expenses

111

(1)

—

—

110

Amortization of intangible assets

40

(33)

—

—

7

Restructuring charges and certain acquisition-related costs

8

—

(7)

(1)

—

Other (income)/deductions–net

5

—

—

—

5

Income before provision for taxes on income

482

53

7

6

548

Provision for taxes on income

106

14

1

1

122

Net income attributable to Zoetis

377

39

6

5

427

Earnings per common share attributable to Zoetis–diluted

0.79

0.08

0.01

0.01

0.89

Quarter Ended June 30, 2019

GAAP

Reported(a)

Purchase

Accounting

Adjustments

Acquisition-

Related

Costs(1)

Certain

Significant

Items(2)

Non-GAAP

Adjusted(b)

Cost of sales

$

465

$

(5)

$

—

$

(3)

$

457

Gross profit

1,082

5

—

3

1,090

Selling, general and administrative expenses

406

(18)

—

—

388

Research and development expenses

111

(1)

—

—

110

Amortization of intangible assets

39

(34)

—

—

5

Restructuring charges and certain acquisition-related costs

22

—

(22)

—

—

Other (income)/deductions–net

(6)

—

—

—

(6)

Income before provision for taxes on income

455

58

22

3

538

Provision for taxes on income

84

13

4

1

102

Net income attributable to Zoetis

371

45

18

2

436

Earnings per common share attributable to Zoetis–diluted

0.77

0.09

0.04

—

0.90

(a)

The condensed consolidated statements of income present the quarter and six months ended June 30, 2020 and June 30, 2019. Subsidiaries operating outside the United States are included for the second quarter ended May 31, 2020 and May 31, 2019.

(b)

Non-GAAP adjusted net income and its components and non-GAAP adjusted diluted EPS are not, and should not be viewed as, substitutes for U.S. GAAP net income and its components and diluted EPS. Despite the importance of these measures to management in goal setting and performance measurement, non-GAAP adjusted net income and its components and non-GAAP adjusted diluted EPS are non-GAAP financial measures that have no standardized meaning prescribed by U.S. GAAP and, therefore, have limits in their usefulness to investors. Because of the non-standardized definitions, non-GAAP adjusted net income and its components and non-GAAP adjusted diluted EPS (unlike U.S. GAAP net income and its components and diluted EPS) may not be comparable to the calculation of similar measures of other companies. Non-GAAP adjusted net income and its components, and non-GAAP adjusted diluted EPS are presented solely to permit investors to more fully understand how management assesses performance.
See Notes to Reconciliation of GAAP Reported to Non-GAAP Adjusted Information for notes (1) and (2).

ZOETIS INC.

RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION

CERTAIN LINE ITEMS – Continued

(UNAUDITED)

(millions of dollars, except per share data)

Six Months Ended June 30, 2020

GAAP

Reported(a)

Purchase

Accounting

Adjustments

Acquisition-

Related

Costs(1)

Certain

Significant

Items(2)

Non-GAAP

Adjusted(b)

Cost of sales

$

910

$

(4)

$

—

$

(3)

$

903

Gross profit

2,172

4

—

3

2,179

Selling, general and administrative expenses

782

(35)

—

(6)

741

Research and development expenses

218

(1)

—

—

217

Amortization of intangible assets

80

(67)

—

—

13

Restructuring charges and certain acquisition-related costs

17

—

(14)

(3)

—

Other (income)/deductions–net

(15)

—

—

17

2

Income before provision for taxes on income

979

107

14

(5)

1,095

Provision for taxes on income

180

36

—

(2)

214

Net income attributable to Zoetis

800

71

14

(3)

882

Earnings per common share attributable to Zoetis–diluted

1.67

0.15

0.03

(0.01)

1.84

Six Months Ended June 30, 2019

GAAP

Reported(a)

Purchase

Accounting

Adjustments

Acquisition-

Related

Costs(1)

Certain

Significant

Items(2)

Non-GAAP

Adjusted(b)

Cost of sales

$

983

$

(19)

$

—

$

(73)

$

891

Gross profit

2,019

19

—

73

2,111

Selling, general and administrative expenses

775

(36)

—

—

739

Research and development expenses

213

(1)

—

—

212

Amortization of intangible assets

77

(68)

—

—

9

Restructuring charges and certain acquisition-related costs

27

—

(27)

—

—

Other (income)/deductions–net

(20)

—

—

—

(20)

Income before provision for taxes on income

836

124

27

73

1,060

Provision for taxes on income

153

33

5

9

200

Net income attributable to Zoetis

683

91

22

64

860

Earnings per common share attributable to Zoetis–diluted

1.41

0.19

0.05

0.13

1.78

(a)

The condensed consolidated statements of income present the quarter and six months ended June 30, 2020 and June 30, 2019. Subsidiaries operating outside the United States are included for the second quarter ended May 31, 2020 and May 31, 2019.

(b)

Non-GAAP adjusted net income and its components and non-GAAP adjusted diluted EPS are not, and should not be viewed as, substitutes for U.S. GAAP net income and its components and diluted EPS. Despite the importance of these measures to management in goal setting and performance measurement, non-GAAP adjusted net income and its components and non-GAAP adjusted diluted EPS are non-GAAP financial measures that have no standardized meaning prescribed by U.S. GAAP and, therefore, have limits in their usefulness to investors. Because of the non-standardized definitions, non-GAAP adjusted net income and its components and non-GAAP adjusted diluted EPS (unlike U.S. GAAP net income and its components and diluted EPS) may not be comparable to the calculation of similar measures of other companies. Non-GAAP adjusted net income and its components, and non-GAAP adjusted diluted EPS are presented solely to permit investors to more fully understand how management assesses performance.
See Notes to Reconciliation of GAAP Reported to Non-GAAP Adjusted Information for notes (1) and (2).

ZOETIS INC.

NOTES TO RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION

CERTAIN LINE ITEMS

(UNAUDITED)

(millions of dollars)

(1) Acquisition-related costs include the following:

Quarter Ended

Six Months Ended

June 30,

June 30,

2020

2019

2020

2019

Integration costs(a)

$

6

$

8

$

12

$

9

Restructuring charges(b)

1

14

2

18

Total acquisition-related costs—pre-tax

7

22

14

27

Income taxes(c)

1

4

—

5

Total acquisition-related costs—net of tax

$

6

$

18

$

14

$

22

(a)

Integration costs represent external, incremental costs directly related to integrating acquired businesses and primarily include expenditures for consulting and the integration of systems and processes. Included in Restructuring charges and certain acquisition-related costs.

(b)

Represents employee termination costs, included in Restructuring charges and certain acquisition-related costs.

(c)

Included in Provision for taxes on income. Income taxes include the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying that jurisdiction’s applicable tax rate. For the six months ended June 30, 2020, also includes a tax charge related to a remeasurement of deferred taxes resulting from the integration of acquired businesses.

(2) Certain significant items include the following:

Quarter Ended

Six Months Ended

June 30,

June 30,

2020

2019

2020

2019

Operational efficiency initiative(a)

$

—

$

—

$

(17)

$

—

Supply network strategy(b)

1

3

3

5

Other restructuring charges and cost-reduction/productivity initiatives(c)

1

—

3

—

Other(d)

4

—

6

68

Total certain significant items—pre-tax

6

3

(5)

73

Income taxes(e)

1

1

(2)

9

Total certain significant items—net of tax

$

5

$

2

$

(3)

$

64

(a)

Represents a net gain resulting from net cash proceeds received pursuant to an agreement related to the 2016 sale of certain U.S. manufacturing sites, included in Other (income)/deductions-net.

(b)

Represents consulting fees, included in Cost of sales, related to cost-reduction and productivity initiatives.

(c)

Represents employee termination costs incurred as a result of the CEO transition, included in Restructuring charges and certain acquisition-related costs.

(d)

For the quarter and six months ended June 30, 2020, primarily represents the modification of share-based compensation related to CEO transition costs, included in Selling, general and administrative expenses. For the six months ended June 30, 2019, represents a change in estimate related to inventory costing, included in Cost of sales.

(e)

Included in Provision for taxes on income. Income taxes include the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pretax amounts and applying that jurisdiction’s applicable tax rate.

Contacts

Media Contacts:

Bill Price

1-973-443-2742 (o)

william.price@zoetis.com

Kristen Seely

1-973-443-2777 (o)

kristen.seely@zoetis.com

Investor Contacts:

Steve Frank

1-973-822-7141 (o)

steve.frank@zoetis.com

Keith Gaub

1-973-822-7154 (o)

keith.gaub@zoetis.com

Read full story here

Categories
Business

Church & Dwight reports Q2 results

2020 Second Quarter Results

  • Sales growth +10.6%: Dom. +13.6%; Int’l +0.5%; SPD +3.0%
  • Organic sales +8.4%: Dom. +10.7%; Int’l +0.6%; SPD +3.0%
  • Gross Margin +220 bps. to 46.8%
  • EPS +36.4%; Adjusted EPS +35.1%
  • YTD Cash from Operations +70%; Ex tax deferral +47%

2020 Full Year Outlook Raised from Original Outlook

  • Reported Sales growth raised to 9-10% (initially 6.5%)
  • Organic Sales growth raised to 7-8% (initially 3.5%)
  • Adjusted EPS growth raised to 13% (initially 7 to 9%)1
  • Cash from Operations raised to $960MM (initially $890MM)

EWING, N.J.–(BUSINESS WIRE)–Church & Dwight Co., Inc. (NYSE: CHD) today announced reported second quarter 2020 EPS of $0.75, a 36.4% increase versus year ago. Adjusted EPS, which excludes an acquisition related earn-out adjustment, grew 35.1% to $0.77.2

Second quarter net sales grew 10.6% to $1,194.3 million. The Company continued to experience a significant increase in consumer demand for many of its products, primarily in response to the COVID-19 pandemic. Organic sales grew 8.4% driven by a volume increase of 4.9% and positive product mix and pricing of 3.5%. Organic sales growth was driven by higher consumption, lower couponing, and restocking of retailer inventories.

Matthew Farrell, Chief Executive Officer, commented, “Q2 was an extraordinarily strong quarter for Church & Dwight. Both our household and personal care businesses delivered higher growth as consumers and retailers focused on core essentials. We experienced strong consumption in Q2 and continue to see similar strength in July. The pandemic drove double digit consumption growth in several domestic categories, especially gummy vitamins, women’s hair removal, cleaners, and baking soda while restrictions on consumer mobility drove double-digit declines in other domestic categories, notably condoms, dry shampoo, and water flossers. Year-to-date shipments and consumption are in balance for our brands. However, retailer in-stocks lag normal levels for some brands, including gummy vitamins, baking soda, and cleaners. Online sales as a percentage of total sales continued to grow rapidly and reached 13% of sales in Q2. The International business grew slightly despite the global COVID-19 pandemic. SPD recorded its third consecutive quarter of organic growth as demand for our non-dairy products grew in both domestic and international markets.

“In this unusual time, our focus is on the safety of our employees, meeting the needs of our customers and consumers, and ensuring our brands are even stronger moving forward. I want to again thank Church & Dwight employees around the world for their dedication to keeping our Company going during the pandemic, especially our manufacturing and distribution employees and lab technicians.”

Second Quarter Review

Consumer Domestic net sales were $931.1 million, a $111.8 million or 13.6% increase driven by household and personal care sales growth and the FLAWLESS® acquisition. Organic sales increased 10.7% due to higher volume (+6.3%) and positive price and product mix (+4.4%). Contributing to the sales increase was strong consumption, restocking retailer inventories, and lower couponing. Organic sales growth was led by ARM & HAMMER® liquid laundry detergent, VITAFUSION® and L’IL CRITTERS® gummy vitamins, ARM & HAMMER clumping cat litter and baking soda, OXICLEAN® stain fighters, ARM & HAMMER laundry detergent scent boosters, and FLAWLESS® women’s hair removal.

Consumer International net sales were $187.5 million, a $0.9 million or 0.5% increase versus the prior year. Organic sales increased 0.6% due to positive price and product mix (+1.3%) offset by lower volume (-0.7%). Organic sales growth was driven primarily by the Global Markets Group, offset by declines in Europe and Mexico.

Specialty Products net sales were $75.7 million, a $2.2 million or 3.0% increase. Organic sales increased 3.0% due to higher volume (+3.3%) offset by lower pricing (-0.3%). Milk prices have returned to pre-COVID-19 pandemic levels and demand from dairy customers is expected to strengthen in the second half. Demand for prebiotic and probiotic products continues to grow in the poultry industry.

Gross margin increased 220 basis points to 46.8% due to higher pricing including a significant reduction in trade promotions and couponing, and productivity improvements, partially offset by significant COVID-19 pandemic related expenses including higher manufacturing costs due to outsourcing, and foreign exchange.

Marketing expense was $122.3 million, a decrease of $6.8 million or 5.3%. Marketing expense as a percentage of net sales decreased 180 basis points to 10.2%. Due to retailer out of stocks, marketing spend was significantly reduced.

Selling, general, and administrative expense (SG&A) was $186.6 million or 15.6% of net sales, a 30 basis point increase, primarily due to higher compensation, intangible amortization related to acquisitions, and investments in R&D and IT.

Income from Operations was $250.7 million or 21.0% of net sales.

Other Expense of $14.7 million declined slightly due to lower interest expense resulting from lower interest rates.

The effective tax rate was 19.6% compared to 18.7% in 2019, an increase of 90 basis points, primarily driven by lower tax benefits related to stock option exercises.

Operating Cash Flow

Cash flow was exceptionally strong. The borrowing on the revolving credit line that was accessed in Q1 during the early days of the COVID-19 pandemic was completely repaid in Q2. For the first six months of 2020, cash from operating activities increased 70.4% to $598.6 million, a $247.4 million increase from the prior year due to significantly higher cash earnings and a decrease in working capital. In accordance with IRS guidelines, the Company elected to defer $81 million of U.S. Federal income tax payments to July which contributed to the significant increase in cash flow. Capital expenditures for the first six months were $30.9 million, a $7.3 million increase from the prior year. We now expect full year capex spending to be approximately $100 million (initially $85 million), reflecting plans for expansion in manufacturing capacity for laundry, litter, and vitamins.

At June 30, 2020, cash on hand was $451.7 million, while total debt was $1,877.2 million.

2020 New Products

Mr. Farrell commented, “Innovation will continue to be a big driver of our success. Church and Dwight will continue to invest in new products and R&D to drive long-term revenue and earnings growth. We continue to be excited about this year’s new product launches.

“In the household products portfolio, we launched a new ARM & HAMMER laundry detergent called CLEAN & SIMPLE™ which has only 6 ingredients plus water (compared to 15 to 30 ingredients for the typical liquid detergent), provides no compromise on efficacy, and cleaning power comparable to our bestselling consumer favorite – ARM & HAMMER with OXICLEAN. CLEAN & SIMPLE is on trend with consumers’ desire for ‘better for me’ products, which are simple and have fewer ingredients. The advertising and trade support for the CLEAN & SIMPLE launch has been shifted entirely to the second half.

“In July, ARM & HAMMER clumping cat litter launched CLUMP & SEAL ABSORBx™, a first of its kind revolutionary new litter made from DESERT DRY MINERALS™. It rapidly absorbs wetness in seconds to form rock hard clumps. The 100% dust free litter is guaranteed to trap and seal odors. ABSORBx is 55% lighter than our regular litter.

“In the personal care portfolio, BATISTE® has launched a line of waterless cleansing foam for normal, dry, and curly hair. The weightless foam dries in 60 seconds and delivers an instant refresh for hair that looks revived, feels soft and smells amazing. We have launched TROJAN G SPOT™, a condom featuring a unique shape for targeted stimulation. FLAWLESS has launched NU RAZOR™, a waterless whole-body hair removal product for women to use anywhere, anytime. WATERPIK® is in the second year of the SONIC FUSION® launch, the world’s first flossing toothbrush combining the convenience of a sonic toothbrush with a water flosser in a single device. In the second quarter, we launched WATERPIK WATER FOR WELLNESS® showerheads across the power pulse product line, incorporating our FDA registered therapeutic massage technology that provides clinically proven results to help soothe muscle tension, increase flexibility, and promote restful sleep. VITAFUSION gummy vitamins launched a number of new products including Triple Immune Power, Apple Cider Vinegar, Organic Prenatal Multi, and IRRESISTIBLE SKIN™. In Q3, VITAFUSION will continue to capitalize on increased consumer interest in immunity products with the launch of POWER ZINC™ and Elderberry gummies in both adult and kids variants.”

Outlook for 2020

Mr. Farrell stated, “The Company is well positioned for the current economic environment, due to a combination of being in the right categories and having a balance of value and premium brands.

“With seven months behind us, we are re-instating our 2020 sales and EPS outlook. However, due to volatility in consumer demand, supply constraints, and uncertainty regarding a COVID-19 resurgence, we will not provide a quarterly financial outlook.

“Given our strong first half performance, we have raised our full year outlook for sales and EPS. We now expect approximately 9-10% full year 2020 sales growth (initial outlook 6.5%) and approximately 7-8% organic sales growth (initially 3.5%). Adjusted EPS growth is expected to be 13% (initially 7 to 9%).1 This implies a front-end loaded year and flat EPS in the second half as the Company has higher amounts of trade promotions and advertising dollars in the second half in support of new products. Gross margin is expected to decline in the second half due to new product promotional support, the year over year impact of FLAWLESS accounting, incremental manufacturing and distribution capacity investments, and higher tariffs on WATERPIK.

“In the second half, we intend to make incremental investments for surge capacity in manufacturing, R&D, new product development, consumer research, digital advertising, and predictive analytics. These investments are intended to position the Company for future growth.

“Our outlook will continue to adapt to the changing environment and as such, we may continue to defer trade, couponing and advertising until late in the second half or into next year depending on: (1) consumption trends, (2) a resurgence of COVID-19, and (3) supply constraints.”

1 This press release does not provide a forward-looking reconciliation of adjusted EPS to reported EPS, the most directly comparable GAAP financial measure, expected for 2020, because we are unable to provide such a reconciliation without unreasonable effort. We have excluded the Company’s potential earn-out liability from our acquisition of the FLAWLESS business from our expected adjusted EPS for these periods. We are required to review the fair value of the earn-out liability quarterly based on changes in sales forecasts, discount rates, volatility assumptions, and other inputs. Our inability to provide a reconciliation to GAAP EPS for future periods is due to the uncertainty and inherent difficulty of predicting what these changes will be on a quarter-by-quarter basis. For the same reasons, we are unable to address the probable significance of the unavailable information, which could be material to our future results.

2 See non-GAAP reporting reconciliations.

Church & Dwight Co., Inc. will host a conference call to discuss second quarter 2020 earnings results on July 31, 2020 at 10:00 am (EDT). To participate, dial 877-322-9846 within the U.S. and Canada, or 631-291-4539 internationally, using access code 8495695. A replay will be available at 855-859-2056 using the same access code through the close of business on August 7, 2020. You also can participate via webcast by visiting the Investor Relations section of the Company’s website at www.churchdwight.com.

Church & Dwight Co., Inc. (NYSE: CHD) founded in 1846, is the leading U.S. producer of sodium bicarbonate, popularly known as baking soda. The Company manufactures and markets a wide range of personal care, household, and specialty products under recognized brand names such as ARM & HAMMER®, TROJAN®, OXICLEAN®, SPINBRUSH®, FIRST RESPONSE®, NAIR®, ORAJEL®, XTRA®, L’IL CRITTERS® and VITAFUSION®, BATISTE®, WATERPIK®, and FLAWLESS®. These twelve key brands represent approximately 85% of the Company’s products sales. For more information, visit the Company’s website.

Church & Dwight has a strong heritage of commitment to people and the planet. In the early 1900’s, we began using recycled paperboard for all packaging of household products. Today, virtually all our paperboard packaging is from certified, sustainable sources. In 1970, the ARM & HAMMER® brand introduced the first nationally-distributed, phosphate-free detergent. That same year, Church & Dwight was honored to be the sole corporate sponsor of the first annual Earth Day. Church & Dwight is notably ranked in the 2019 Barron’s 100 Most Sustainable Companies and on the EPA’s Green Power Partnership Top 100 List of Green Power Users.

For more information, see the Church & Dwight 2019 Sustainability Report at:

https://churchdwight.com/pdf/Sustainability/2019-Sustainability-Report.pdf

This press release contains forward-looking statements, including, among others, statements relating to net sales and earnings growth; the impact of the COVID-19 pandemic and the Company’s response; gross margin changes; trade, marketing, and SG&A spending; sufficiency of cash flows from operations; earnings per share; cost savings programs; consumer demand and spending; the effects of competition; the effect of product mix; volume growth, including the effects of new product launches into new and existing categories; the impact of acquisitions (including earn-outs); and capital expenditures. Other forward-looking statements in this release may be identified by the use of such terms as “may,” “could,” “expect,” “intend,” “believe,” “plan,” “estimate,” “forecast,” “project,” “anticipate,” “to be,” “to make” or other comparable terms. These statements represent the intentions, plans, expectations and beliefs of the Company, and are based on assumptions that the Company believes are reasonable but may prove to be incorrect. In addition, these statements are subject to risks, uncertainties and other factors, many of which are outside the Company’s control and could cause actual results to differ materially from such forward-looking statements. Factors that could cause such differences include a decline in market growth, retailer distribution and consumer demand (as a result of, among other things, political, economic and marketplace conditions and events); including those relating to the outbreak of contagious diseases; other impacts of the COVID-19 pandemic and its impact on the Company’s operations, customers, suppliers, employees, and other constituents, and market volatility and impact on the economy (including causing recessionary conditions), resulting from nationwide or local or regional outbreaks or increases in infections and the risk that the Company will not be able to successfully execute its response plans with respect to the pandemic or localized outbreaks and the corresponding uncertainty; the impact of regulatory changes or policies associated with the COVID-19 pandemic, including continuing or renewed shutdowns of retail and other businesses in various jurisdictions; the impact of the CARES Act and other governmental actions; unanticipated increases in raw material and energy prices; delays or other problems in manufacturing or distribution; increases in transportation costs; adverse developments affecting the financial condition of major customers and suppliers; changes in marketing and promotional spending; growth or declines in various product categories and the impact of customer actions in response to changes in consumer demand and the economy, including increasing shelf space of private label products; consumer and competitor reaction to, and customer acceptance of, new product introductions and features; the Company’s ability to maintain product quality and characteristics at a level acceptable to our customers and consumers; disruptions in the banking system and financial markets; foreign currency exchange rate fluctuations; implications of the United Kingdom’s withdrawal from the European Union; transition to, and shifting economic policies in the United States; potential changes in export/import and trade laws, regulations and policies of the United States and other countries, including any increased trade restrictions or tariffs, including the actual and potential effect of tariffs on Chinese goods imposed by the United States; issues relating to the Company’s information technology and controls; the impact of natural disasters on the Company and its customers and suppliers, including third party information technology service providers; the integration of acquisitions or divestiture of assets; the outcome of contingencies, including litigation, pending regulatory proceedings and environmental matters; and changes in the regulatory environment.

For a description of additional factors that could cause actual results to differ materially from the forward-looking statements, please see Item 1A, “Risk Factors” in the Company’s annual report on Form 10-K and quarterly reports on Form 10Q. The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by the U.S. federal securities laws. You are advised, however, to consult any further disclosures the Company makes on related subjects in its filings with the United States Securities and Exchange Commission.

This press release also contains non-GAAP financial information. Management uses this information in its internal analysis of results and believes that this information may be informative to investors in gauging the quality of the Company’s financial performance, identifying trends in its results and providing meaningful period-to-period comparisons. The Company has included reconciliations of these non-GAAP financial measures to the most directly comparable financial measure calculated in accordance with GAAP. See the end of this press release for these reconciliations. These non-GAAP financial measures should not be considered in isolation or as a substitute for the comparable GAAP measures. In addition, these non-GAAP financial measures may not be the same as similar measures provided by other companies due to potential differences in methods of calculation and items being excluded. They should be read in connection with the Company’s financial statements presented in accordance with GAAP.

CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income (Unaudited)

Three Months Ended

Six Months Ended

(In millions, except per share data)

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Net Sales

$

1,194.3

$

1,079.4

$

2,359.5

$

2,124.1

Cost of sales

634.7

597.9

1,267.9

1,171.8

Gross Profit

559.6

481.5

1,091.6

952.3

Marketing expenses

122.3

129.1

218.7

227.2

Selling, general and administrative expenses

186.6

165.0

307.6

296.9

Income from Operations

250.7

187.4

565.3

428.2

Equity in earnings of affiliates

2.0

1.7

3.6

3.4

Other income (expense), net

(16.7

)

(18.8

)

(33.5

)

(36.2

)

Income before Income Taxes

236.0

170.3

535.4

395.4

Income taxes

46.3

31.8

115.9

81.2

Net Income

$

189.7

$

138.5

$

419.5

$

314.2

Net Income per share – Basic

$

0.77

$

0.56

$

1.71

$

1.28

Net Income per share – Diluted

$

0.75

$

0.55

$

1.67

$

1.25

Dividends per share

$

0.24

$

0.23

$

0.48

$

0.45

Weighted average shares outstanding – Basic

246.2

246.4

245.9

246.2

Weighted average shares outstanding – Diluted

251.3

252.7

251.2

252.3

CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

(Dollars in millions)

June 30, 2020

December 31, 2019

Assets

Current Assets

Cash and Cash Equivalents

$

451.7

$

155.7

Accounts Receivable

344.5

356.4

Inventories

455.5

417.4

Other Current Assets

25.0

26.9

Total Current Assets

1,276.7

956.4

Property, Plant and Equipment (Net)

568.7

573.0

Equity Investment in Affiliates

10.6

9.7

Trade Names and Other Intangibles

2,697.9

2,750.0

Goodwill

2,078.2

2,079.5

Other Long-Term Assets

286.9

288.8

Total Assets

$

6,919.0

$

6,657.4

Liabilities and Stockholders’ Equity

Short-Term Debt

$

65.8

$

252.9

Other Current Liabilities

930.8

839.4

Total Current Liabilities

996.6

1,092.3

Long-Term Debt

1,811.4

1,810.2

Other Long-Term Liabilities

1,112.2

1,087.1

Stockholders’ Equity

2,998.8

2,667.8

Total Liabilities and Stockholders’ Equity

$

6,919.0

$

6,657.4

CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flow (Unaudited)

Six Months Ended

(Dollars in millions)

June 30, 2020

June 30, 2019

Net Income

$

419.5

$

314.2

Depreciation and amortization

92.4

82.9

Deferred income taxes

11.4

6.0

Non-cash compensation

15.8

15.0

Gain on sale of assets

(3.0

)

–

Other

0.7

1.7

Subtotal

536.8

419.8

Changes in assets and liabilities:

Accounts receivable

5.9

(37.3

)

Inventories

(42.7

)

(17.9

)

Other current assets

(2.1

)

0.9

Accounts payable and accrued expenses

35.8

6.7

Income taxes payable

87.1

(11.6

)

Change in fair value of business acquisition liabilities

(20.7

)

–

Other

(1.5

)

(9.4

)

Net cash from operating activities

598.6

351.2

Capital expenditures

(30.9

)

(23.6

)

Acquisitions

–

(475.0

)

Proceeds from sale of assets

7.0

–

Other

(2.5

)

(3.8

)

Net cash (used in) investing activities

(26.4

)

(502.4

)

Net change in short-term debt

(186.2

)

109.8

Payment of cash dividends

(118.1

)

(112.0

)

Proceeds from stock option exercises

44.9

37.0

Purchase of treasury stock

–

(100.0

)

Payment of contingent consideration

(14.5

)

–

Deferred financing and other

(0.1

)

(2.5

)

Net cash (used in) financing activities

(274.0

)

(67.7

)

F/X impact on cash

(2.2

)

0.1

Net change in cash and cash equivalents

$

296.0

$

(218.8

)

2020 and 2019 Product Line Net Sales

Three Months Ended

Percent

6/30/2020

6/30/2019

Change

Household Products

$

544.7

$

464.3

17.3

%

Personal Care Products

386.4

355.0

8.8

%

Consumer Domestic

$

931.1

$

819.3

13.6

%

Consumer International

187.5

186.6

0.5

%

Total Consumer Net Sales

$

1,118.6

$

1,005.9

11.2

%

Specialty Products Division

75.7

73.5

3.0

%

Total Net Sales

$

1,194.3

$

1,079.4

10.6

%

Six Months Ended

Percent

6/30/2020

6/30/2019

Change

Household Products

$

1,039.0

$

907.6

14.5

%

Personal Care Products

783.1

696.6

12.4

%

Consumer Domestic

$

1,822.1

$

1,604.2

13.6

%

Consumer International

386.1

373.3

3.4

%

Total Consumer Net Sales

$

2,208.2

$

1,977.5

11.7

%

Specialty Products Division

151.3

146.6

3.2

%

Total Net Sales

$

2,359.5

$

2,124.1

11.1

%

Contacts

Rick Dierker

Chief Financial Officer

609-806-1200

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Business

B&G Foods reports strong net sales and earnings growth for second quarter 2020

— Net Cash Provided by Operating Activities Increased to $246.4 Million for the First Two Quarters of 2020 —

PARSIPPANY, N.J.–(BUSINESS WIRE)–B&G Foods, Inc. (NYSE: BGS) today announced financial results for the second quarter and first two quarters of 2020 and provided an update as to how the COVID-19 pandemic is impacting the Company.

Second Quarter 2020 Financial Summary (vs. Second Quarter 2019 where applicable):

  • Net sales increased 38.1% to $512.5 million
  • Base business net sales1 increased 33.9% to $496.9 million
  • Diluted earnings per share increased 150.0% to $0.70
  • Adjusted diluted earnings per share1 increased 86.8% to $0.71
  • Net income increased 146.1% to $44.9 million
  • Adjusted net income1 increased 87.6% to $46.0 million
  • Adjusted EBITDA1 increased 44.6% to $102.6 million
  • Net cash provided by operating activities for the first two quarters of 2020 increased to $246.4 million

“At B&G Foods we remain committed to the health and safety of our employees and doing our part to keep our nation supplied with food during this difficult time,” stated Kenneth G. Romanzi, President and Chief Executive Officer of B&G Foods. Mr. Romanzi continued, “Thanks to the tremendous efforts of our employees, we were able to achieve both of these goals during the second quarter. We had an outstanding second quarter in terms of net sales, net income, adjusted EBITDA and cash flow as our portfolio of brands served consumers very well as they continued to cook and eat more at home.”

“We continue to take a wide range of precautionary measures at our manufacturing facilities and other work locations in response to COVID-19. And, although we are operating in a very challenging environment, our employees have done a fantastic job ensuring that our supply chain has been able to meet an unprecedented increase in demand for our products.”

Mr. Romanzi, continued, “During the second half of the year, we remain focused on working closely with our supply chain partners and our customers to ensure that we can continue to provide uninterrupted service and meet the increased demand resulting from the pandemic. At the same time, we will continue our new product innovation and other brand building efforts as we look to turn some of this pandemic-related increase in demand into long-term growth opportunities for our brands.”

1

Please see “About Non-GAAP Financial Measures and Items Affecting Comparability” below for the definition of the non-GAAP financial measures “adjusted diluted earnings per share,” “adjusted net income,” “EBITDA,” “adjusted EBITDA” and “base business net sales,” as well as information concerning certain items affecting comparability and reconciliations of the non-GAAP terms to the most comparable GAAP financial measures.

Financial Results for the Second Quarter of 2020

Net sales for the second quarter of 2020 increased $141.3 million, or 38.1%, to $512.5 million from $371.2 million for the second quarter of 2019. The increase was primarily attributable to materially increased net sales resulting from increased demand for the Company’s products due to the COVID-19 pandemic. The Company’s net sales also benefited from the Clabber Girl and Farmwise acquisitions, which were completed on May 15, 2019 and February 19, 2020, respectively. An additional one and one-half months of net sales of Clabber Girl and an additional three months of net sales of Farmwise contributed $15.0 million and $0.6 million, respectively, to the Company’s net sales for the second quarter of 2020.

Base business net sales1 for the second quarter of 2020 increased $125.7 million, or 33.9%, to $496.9 million from $371.2 million for the second quarter of 2019. The increase in base business net sales reflected an increase in unit volume of $111.7 million and an increase in net pricing (inclusive of the impact of the Company’s 2019 list price increases, the trade spend optimization program the Company initiated in 2019, and a temporarily lower trade spend environment) of $15.3 million, or 4.1% of base business net sales, partially offset by the negative impact of foreign currency of $1.3 million.

Net sales of Green Giant (including Le Sueur) increased $51.2 million, or 45.4%; net sales of the Company’s spices & seasonings2 increased $17.4 million, or 21.4%; net sales of Ortega increased $12.8 million, or 37.4%; net sales of Cream of Wheat increased $6.3 million, or 54.0%; and net sales of Maple Grove Farms increased $0.2 million, or 1.5%, for the second quarter of 2020 as compared to the second quarter of 2019. Net sales of all other brands in the aggregate increased $37.8 million, or 33.3%, for the second quarter of 2020.

Gross profit was $134.1 million for the second quarter of 2020, or 26.2% of net sales. Excluding the negative impact of $0.5 million of acquisition/divestiture-related and non-recurring expenses during the second quarter of 2020, the Company’s gross profit would have been $134.6 million, or 26.3% of net sales. Gross profit was $91.9 million for the second quarter of 2019, or 24.7% of net sales. Excluding the negative impact of $4.9 million of acquisition/divestiture-related and non-recurring expenses during the second quarter of 2019, which includes expenses relating to the trailing non-cash accounting impact of the Company’s 2018 inventory reduction plan, the Company’s gross profit would have been $96.8 million, or 26.0% of net sales.

Selling, general and administrative expenses increased $4.4 million, or 11.3%, to $44.3 million for the second quarter of 2020 from $39.9 million for the second quarter of 2019. The increase was composed of increases in general and administrative expenses of $4.7 million and selling expenses of $2.7 million, partially offset by decreases in acquisition/divestiture-related and non-recurring expenses of $2.7 million, warehousing expenses of $0.2 million and consumer marketing expenses of $0.1 million. Expressed as a percentage of net sales, selling, general and administrative expenses improved by 2.0 percentage points to 8.7% for the second quarter of 2020, compared to 10.7% for the second quarter of 2019.

Net interest expense increased $1.6 million, or 7.2%, to $24.8 million for the second quarter of 2020 from $23.2 million in the second quarter of 2019. The increase was primarily attributable to an increase in average long-term debt outstanding during the second quarter of 2020 as compared to the second quarter of 2019, primarily as a result of borrowings made during the last three quarters of fiscal 2019 primarily to fund the Clabber Girl acquisition, to pay cash taxes resulting from the 2018 gain on sale of Pirate Brands and to fund the repurchase of shares of the Company’s common stock as part of the Company’s stock repurchase program, and a $100.0 million revolver draw made by the Company in March 2020, which was subsequently repaid in May and June 2020.

The Company’s net income was $44.9 million, or $0.70 per diluted share, for the second quarter of 2020, compared to net income of $18.3 million, or $0.28 per diluted share, for the second quarter of 2019. The Company’s adjusted net income1 for the second quarter of 2020 was $46.0 million, or $0.71 per adjusted diluted share, compared to $24.5 million, or $0.38 per adjusted diluted share, for the second quarter of 2019.

2

Includes the spices & seasoning brands acquired in the fourth quarter of 2016, as well as the Company’s legacy spices & seasonings brands, such as Dash and Ac’cent.

For the second quarter of 2020, adjusted EBITDA was $102.6 million, an increase of $31.6 million, or 44.6%, compared to $71.0 million for the second quarter of 2019. The increase in adjusted EBITDA was primarily attributable to the positive impact of increased base business unit volume on the Company’s net sales as a result of the COVID-19 pandemic, as well as increased net sales due to an extra one and one-half months of net sales of Clabber Girl in the second quarter of 2020. Adjusted EBITDA as a percentage of net sales was 20.0% for the second quarter of 2020, compared to 19.1% in the second quarter of 2019.

Financial Results for the First Two Quarters of 2020

Net sales for the first two quarters of 2020 increased $178.0 million, or 22.7%, to $961.9 million from $783.9 million for the first two quarters of 2019. The increase was primarily attributable to materially increased net sales in March through June 2020 (as compared to March through June 2019) resulting from increased demand for the Company’s products due to the COVID-19 pandemic. The Company’s net sales also benefited from the Clabber Girl and Farmwise acquisitions, which were completed on May 15, 2019 and February 19, 2020, respectively. An additional four and one-half months of net sales of Clabber Girl and an additional four and one-half months of net sales of Farmwise contributed $33.7 million and $0.8 million, respectively, to the Company’s net sales for the first two quarters of 2020.

Base business net sales for the first two quarters of 2020 increased $143.5 million, or 18.3%, to $927.4 million from $783.9 million for the first two quarters of 2019. The increase in base business net sales reflected an increase in unit volume of $119.9 million and an increase in net pricing (inclusive of the impact of the Company’s 2019 list price increases, the trade spend optimization program the Company initiated in 2019, and a temporarily lower trade spend environment) of $24.5 million, or 3.1% of base business net sales, partially offset by the negative impact of foreign currency of $0.9 million.

Net sales of Green Giant (including Le Sueur) increased $73.5 million, or 29.5%; net sales of Ortega increased $14.3 million, or 20.0%; net sales of Cream of Wheat increased $7.8 million, or 26.9%; net sales of the Company’s spices & seasonings2 increased $4.5 million, or 2.7%; and net sales of Maple Grove Farms increased $0.8 million, or 2.3%, in the first two quarters of 2020, as compared to the first two quarters of 2019. Net sales of all other brands in the aggregate increased $42.6 million, or 18.4%, for the first two quarters of 2020.

Gross profit was $239.0 million for the first two quarters of 2020, or 24.8% of net sales. Excluding the negative impact of $2.8 million of acquisition/divestiture-related and non-recurring expenses during the first two quarters of 2020, the Company’s gross profit would have been $241.8 million, or 25.1% of net sales. Gross profit was $179.9 million for the first two quarters of 2019, or 23.0% of net sales. Excluding the negative impact of $18.0 million of acquisition/divestiture-related and non-recurring expenses during the first two quarters of 2019, which includes expenses relating to the trailing non-cash accounting impact of the Company’s 2018 inventory reduction plan, the Company’s gross profit would have been $197.9 million, or 25.2% of net sales.

Selling, general and administrative expenses increased $6.1 million, or 7.9%, to $84.3 million for the first two quarters of 2020 from $78.2 million for the first two quarters of 2019. The increase was composed of increases in general and administrative expenses of $6.4 million and selling expenses of $4.7 million, partially offset by decreases in acquisition/divestiture-related and non-recurring expenses of $3.8 million, warehousing expenses of $0.6 million and consumer marketing expenses of $0.6 million. Expressed as a percentage of net sales, selling, general and administrative expenses improved by 1.2 percentage points to 8.8% for the first two quarters of 2020, compared to 10.0% for the first two quarters of 2019.

Net interest expense increased $4.6 million, or 10.0%, to $50.9 million for the first two quarters of 2020 from $46.3 million in the first two quarters of 2019. The increase was primarily attributable to an increase in average long-term debt outstanding during the first two quarters of 2020 as compared to the first two quarters of 2019, primarily as a result of borrowings made during the last three quarters of fiscal 2019 primarily to fund the Clabber Girl acquisition, to pay cash taxes resulting from the 2018 gain on sale of Pirate Brands and to fund the repurchase of shares of the Company’s common stock as part of the Company’s stock repurchase program, and a $100.0 million revolver draw made by the Company in March 2020, which was subsequently repaid in May and June 2020.

The Company’s net income was $73.0 million, or $1.14 per diluted share, for the first two quarters of 2020, compared to net income of $35.0 million, or $0.53 per diluted share, for the first two quarters of 2019. The Company’s adjusted net income for the first two quarters of 2020 was $75.3 million, or $1.17 per adjusted diluted share, compared to $53.5 million, or $0.82 per adjusted diluted share, for the first two quarters of 2019.

For the first two quarters of 2020, adjusted EBITDA was $183.3 million, an increase of $36.5 million, or 24.9%, compared to $146.8 million for the first two quarters of 2019. The increase in adjusted EBITDA was primarily attributable to the positive impact of increased base business unit volume on the Company’s net sales as a result of the COVID-19 pandemic, as well as increased net sales due to an extra four and one-half months of Clabber Girl in the first two quarters of 2020. Adjusted EBITDA as a percentage of net sales was 19.1% for the first two quarters of 2020, compared to 18.7% in the first two quarters of 2019.

Full Year Fiscal 2020 Guidance

Although B&G Foods’ management continues to believe that B&G Foods’ net sales and adjusted EBITDA for full year fiscal 2020 will materially exceed the full year fiscal 2020 net sales and adjusted EBITDA guidance provided by management when the Company reported fiscal 2019 results in February 2020, the Company’s management is unable to fully estimate the impact the COVID-19 pandemic will have on the Company’s third quarter and full year fiscal 2020 results and therefore is unable at this time to provide guidance for the remainder of 2020. The ultimate impact of the COVID-19 pandemic on the Company’s business will depend on many factors, including, among others, the duration of social distancing and stay-at-home mandates and whether a second or third wave of COVID-19 will affect the United States and the rest of North America, the Company’s ability to continue to operate its manufacturing facilities, maintain its supply chain without material disruption, procure ingredients, packaging and other raw materials when needed despite unprecedented demand in the food industry, and the extent to which macroeconomic conditions resulting from the pandemic and the pace of the subsequent recovery may impact consumer eating habits.

Conference Call

B&G Foods will hold a conference call at 4:30 p.m. ET today, July 30, 2020 to discuss second quarter 2020 financial results. The live audio webcast of the conference call can be accessed at www.bgfoods.com/investor-relations. A replay of the webcast will be available following the conference call through the same link.

About Non-GAAP Financial Measures and Items Affecting Comparability

“Adjusted net income” (net income adjusted for certain items that affect comparability), “adjusted diluted earnings per share,” (diluted earnings per share adjusted for certain items that affect comparability), “base business net sales” (net sales without the impact of acquisitions until the acquisitions are included in both comparable periods and without the impact of discontinued or divested brands), “EBITDA” (net income before net interest expense, income taxes, depreciation and amortization and loss on extinguishment of debt) and “adjusted EBITDA” (EBITDA as adjusted for cash and non-cash acquisition/divestiture-related expenses, gains and losses (which may include third party fees and expenses, integration, restructuring and consolidation expenses, amortization of acquired inventory fair value step-up and gains and losses on sale of assets), non-recurring expenses, gains and losses and the non-cash accounting impact of the Company’s inventory reduction plan) are “non-GAAP financial measures.” A non-GAAP financial measure is a numerical measure of financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles in the United States (GAAP) in B&G Foods’ consolidated balance sheets and related consolidated statements of operations, comprehensive income, changes in stockholders’ equity and cash flows. Non-GAAP financial measures should not be considered in isolation or as a substitute for the most directly comparable GAAP measures. The Company’s non-GAAP financial measures may be different from non-GAAP financial measures used by other companies.

The Company uses non-GAAP financial measures to adjust for certain items that affect comparability. This information is provided in order to allow investors to make meaningful comparisons of the Company’s operating performance between periods and to view the Company’s business from the same perspective as the Company’s management. Because the Company cannot predict the timing and amount of these items that affect comparability, management does not consider these items when evaluating the Company’s performance or when making decisions regarding allocation of resources.

Additional information regarding EBITDA and adjusted EBITDA, and a reconciliation of EBITDA and adjusted EBITDA to net income and to net cash provided by operating activities, is included below for the second quarter and first two quarters of 2020 and 2019, along with the components of EBITDA and adjusted EBITDA. Also included below are reconciliations of the non-GAAP terms adjusted net income, adjusted diluted earnings per share and base business net sales to the most directly comparable measure calculated and presented in accordance with GAAP in the Company’s consolidated balance sheets and related consolidated statements of operations, comprehensive income, changes in stockholders’ equity and cash flows.

About B&G Foods, Inc.

Based in Parsippany, New Jersey, B&G Foods and its subsidiaries manufacture, sell and distribute high-quality, branded shelf-stable and frozen foods across the United States, Canada and Puerto Rico. With B&G Foods’ diverse portfolio of more than 50 brands you know and love, including Back to Nature, B&G, B&M, Cream of Wheat, Dash, Green Giant, Las Palmas, Le Sueur, Mama Mary’s, Maple Grove Farms, New York Style, Ortega, Polaner, Spice Islands and Victoria, there’s a little something for everyone. For more information about B&G Foods and its brands, please visit www.bgfoods.com.

Forward-Looking Statements

Statements in this press release that are not statements of historical or current fact constitute “forward-looking statements.” The forward-looking statements contained in this press release include, without limitation, statements related to B&G Foods’ net sales, adjusted EBITDA and overall expectations for fiscal 2020 and beyond, including statements related to the future impact of the COVID-19 pandemic on the Company’s business and financial results, ability to provide uninterrupted service and meet the increased demand resulting from the pandemic, and the Company’s plans to continue new product innovation and other brand building efforts to promote long-term growth opportunities. Such forward-looking statements involve known and unknown risks, uncertainties and other unknown factors that could cause the actual results of B&G Foods to be materially different from the historical results or from any future results expressed or implied by such forward-looking statements. In addition to statements that explicitly describe such risks and uncertainties, readers are urged to consider statements labeled with the terms “believes,” “belief,” “expects,” “projects,” “intends,” “anticipates,” “assumes,” “could,” “should,” “estimates,” “potential,” “seek,” “predict,” “may,” “will” or “plans” and similar references to future periods to be uncertain and forward-looking. Factors that may affect actual results include, without limitation: the impact of the COVID-19 pandemic on the Company’s business, including, without limitation, the ability of the Company and its supply chain partners to continue to operate manufacturing facilities, distribution centers and other work locations without material disruption; the Company’s substantial leverage; the effects of rising costs for the Company’s raw materials, packaging and ingredients; crude oil prices and their impact on distribution, packaging and energy costs; the Company’s ability to successfully implement sales price increases and cost saving measures to offset any cost increases; intense competition, changes in consumer preferences, demand for the Company’s products and local economic and market conditions; the Company’s continued ability to promote brand equity successfully, to anticipate and respond to new consumer trends, to develop new products and markets, to broaden brand portfolios in order to compete effectively with lower priced products and in markets that are consolidating at the retail and manufacturing levels and to improve productivity; the risks associated with the expansion of the Company’s business; the Company’s possible inability to identify new acquisitions or to integrate recent or future acquisitions or the Company’s failure to realize anticipated revenue enhancements, cost savings or other synergies; tax reform and legislation, including the effects of the U.S. Tax Cuts and Jobs Act and the U.S. CARES Act; the Company’s ability to access the credit markets and the Company’s borrowing costs and credit ratings, which may be influenced by credit markets generally and the credit ratings of the Company’s competitors; unanticipated expenses, including, without limitation, litigation or legal settlement expenses; the effects of currency movements of the Canadian dollar and the Mexican peso as compared to the U.S. dollar; the effects of international trade disputes, tariffs, quotas, and other import or export restrictions on the Company’s international procurement, sales and operations; future impairments of the Company’s goodwill and intangible assets; the Company’s ability to successfully complete the implementation of additional modules and the integration and operation of a new enterprise resource planning (ERP) system; the Company’s ability to protect information systems against, or effectively respond to, a cybersecurity incident or other disruption; the Company’s sustainability initiatives and changes to environmental laws and regulations; and other factors that affect the food industry generally. The forward-looking statements contained herein are also subject generally to other risks and uncertainties that are described from time to time in B&G Foods’ filings with the Securities and Exchange Commission, including under Item 1A, “Risk Factors” in the Company’s most recent Annual Report on Form 10-K and in its subsequent reports on Forms 10-Q and 8‑K. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. B&G Foods undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

B&G Foods, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share data)

(Unaudited)

June 27,

December 28,

2020

2019

Assets

Current assets:

Cash and cash equivalents

$

181,200

$

11,315

Trade accounts receivable, net

141,216

143,908

Inventories

356,803

472,187

Prepaid expenses and other current assets

34,434

25,449

Income tax receivable

4,196

8,934

Total current assets

717,849

661,793

Property, plant and equipment, net

283,827

304,934

Operating lease right-of-use assets, net

35,925

38,698

Goodwill

598,860

596,391

Other intangible assets, net

1,606,164

1,615,126

Other assets

3,017

3,277

Deferred income taxes

6,180

7,371

Total assets

$

3,251,822

$

3,227,590

Liabilities and Stockholders’ Equity

Current liabilities:

Trade accounts payable

$

122,887

$

114,936

Accrued expenses

58,780

55,659

Current portion of operating lease liabilities

10,946

9,813

Current portion of long-term debt

4,500

5,625

Income tax payable

2,297

454

Dividends payable

30,476

30,421

Total current liabilities

229,886

216,908

Long-term debt

1,874,442

1,874,158

Deferred income taxes

268,962

254,339

Long-term operating lease liabilities, net of current portion

28,003

31,997

Other liabilities

33,380

37,646

Total liabilities

2,434,673

2,415,048

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; 64,160,453 and 64,044,649 shares issued and outstanding as of June 27, 2020 and December 28, 2019, respectively

642

640

Additional paid-in capital

—

—

Accumulated other comprehensive loss

(44,057

)

(31,894

)

Retained earnings

860,564

843,796

Total stockholders’ equity

817,149

812,542

Total liabilities and stockholders’ equity

$

3,251,822

$

3,227,590

Contacts

Investor Relations:

ICR, Inc.

Dara Dierks

866.211.8151

Media Relations:

ICR, Inc.

Matt Lindberg

203.682.8214

Read full story here

Categories
Business

COVID-19 crushes construction starts in most metro areas during first-half 2020

New York and Washington DC top the list despite sizable declines in construction

HAMILTON, N.J.–(BUSINESS WIRE)–The COVID-19 pandemic and resulting recession have wreaked havoc on U.S. building markets. According to Dodge Data & Analytics, commercial and multifamily starts were quite healthy during January and February but stalled as the pandemic hit the nation in March. For the first three months of 2020, U.S. multifamily and commercial building starts inched up 1% from the same period of 2019. The commercial and multifamily group is comprised of office buildings, stores, hotels, warehouses, commercial garages, and multifamily housing. Not included in this ranking are institutional building projects (such as educational facilities, hospitals, convention centers, casinos, transportation terminals), manufacturing buildings, single family housing, public works, and electric utilities/gas plants.


The full force of the pandemic bore down on U.S. construction starts in April as economic activity virtually shut down and local restrictions on construction took effect. Construction resumed in some areas in May allowing starts to post a mild gain over the month. Advances continued in June. However, the damage to commercial and multifamily construction during the first half of the year was palpable. Starts plunged 22% below the first half of 2019, with only warehouse construction posting a very small gain. Commercial and multifamily construction starts in the top 20 metropolitan areas posted a similar drop of 22% through the first six months of 2020.

In the top 10 metro areas, commercial and multifamily starts slid 21% and only one metro area posted an increase. The New York metro area held on to its top spot, despite falling 24% below year-ago levels to $11.5 billion. Washington DC held to second place even though commercial and multifamily construction starts fell 42% to $4.2 billion. The Dallas TX metro area rounded out the top three, with commercial and multifamily activity dropping just 2% to $3.8 billion. The remaining markets in the top 10 were Los Angeles CA (-18% to $3.3 billion), Chicago IL (-9% to $3.0 billion), Boston MA (-31% to $3.0 billion), Miami FL (-16% to $2.8 billion), Phoenix AZ (+82% to $2.8 billion), Austin TX (-12% to $2.4 billion), and Houston TX (-38% to $2.4 billion).

Among the second-tier (ranked 11-20) metro areas, commercial and multifamily starts plummeted 25% with just one metro area posting an increase. The second tier metros include Atlanta GA (-32% to $2.4 billion), Philadelphia PA (-25% to $2.1 billion), Seattle WA (-26% to $1.6 billion), Orlando FL (-28% to $1.3 billion), Nashville TN (-45% to $1.3 billion), Portland OR (-33% to $1.1 billion), Denver CO (-15% to $1.1 billion), Kansas City MO (-20% to $1.1 billion), Tampa FL (-19% to $941 million), and Detroit MI (+96% to $929 million).

“The COVID-19 pandemic and recession have devastated most local construction markets,” stated Richard Branch, Chief Economist for Dodge Data & Analytics. “Across the board, building projects have been halted or delayed with virtually no sector immune from damage. Construction starts have begun to increase from their April lows and there is cautious optimism that as the year progresses construction markets around the country will begin a modest recovery. However, the recent acceleration of COVID-19 cases in the South and West as well as the upcoming expiration of expanded unemployment insurance benefits (from the CARES Act) puts the recovery at significant risk and could undermine the construction sector’s ability to grow.”

During the first half of 2020, commercial and multifamily starts in New York NY fell 24% to $11.5 billion relative to the first six months of 2019. Commercial starts were 18% lower, a relatively sanguine decline given the almost two-month ban on nonessential construction in the city. However, the modest impact on construction was due to the start of two very large office projects that broke ground in February — the $1.3 billion Two Manhattan West office building and the $760 million Disney/ABC Headquarters. Removing those two buildings would have resulted in a 50% decline in commercial starts during the first half of the year. Multifamily starts dropped 29% in the first six months of the year. The largest multifamily projects to get underway were the $420 million Hunter’s Point South mixed-use project in Long Island City NY and the $260 million 451 10th Ave. apartment building.

In Washington DC, commercial and multifamily starts fell 42% to $4.2 billion during the first half of 2020 relative to the same period of 2019. Multifamily starts lost 27% over this year’s first six months. The largest multifamily projects were the $150 million Ripley II–Solaire Apartments in Silver Spring MD and the $150 million Storey Park mixed-use building in Washington DC. Commercial starts fell 50% during the first half of the year, with the only gain coming from the hotel sector, which posted a $67 million gain (38%) over 2019. The largest commercial project to break ground in the Washington DC metro was the $306 million Aligned Energy Data Center (Building II) in Ashburn VA. Amazon Inc. also broke ground on two buildings associated with the HQ2 project in Arlington VA, each totaling $240 million.

Commercial and multifamily starts in the Dallas TX metro area hit $3.8 billion in the first six months of the year, a decline of just 2% from 2019’s first half. Multifamily starts gained 8%, one of the few top metros to post a gain in this market. The largest multifamily projects to get started in the first six months were the $75 million Novel Turtle Creek residential tower in Dallas TX and the $65 million Shannon Creek apartments in Burleson TX. Commercial starts fell 6% in this year’s first six months, with declines in hotel, office, and parking structures partly offset by gains in retail and warehouse starts. The largest commercial projects were the $136 million Epic Deep Ellum (building II) in Dallas TX and the $100 million American Airlines flight kitchen (food service is considered part of the retail sector).

Los Angeles CA commercial and multifamily starts dropped 18% during the first six months of 2020 to $3.3 billion. Commercial starts fell 9% on a year-to-date basis, with strength coming from the office market which posted a large gain. That gain, however, was not enough to offset declines elsewhere in the commercial space. The largest commercial projects to break ground during the first half of 2020 were the $355 million Fig + Pico AC Marriott/Hilton hotel in Los Angeles and the $240 million first phase of the Iceberg Tower office project in Burbank. Multifamily starts were down 26% over the same time period. The largest multifamily projects to start during the first half of the year were the $95 million 3535 W 8th St. mixed-use project in Los Angeles and the $93 million First Point residential building in Santa Ana CA.

Commercial and multifamily starts in Chicago IL were 9% lower on a year-to-date basis through June, reaching $3.0 billion. Commercial starts increased 24% on the strength of a near-doubling in office starts as well as an increase in hotel construction that more than offset steep declines in retail, warehouses, and parking structures. The two largest commercial projects to get underway in the first six months of 2020 were the $476 million BMO Office Tower and the $360 million Wolf Point South Tower B, both in Chicago. Multifamily starts in 2020 were 44% lower than in the first half of 2019. The largest multifamily structures to get started were the $150 million 354 N Union apartments in Chicago and the $100 million Maple Street Lofts in Mount Prospect.

During the first half of 2020, commercial and multifamily starts in Boston MA declined by 30% to $3.0 billion. Multifamily starts dropped 10% on a year-to-date basis. The largest multifamily projects to get underway were the $150 million Cambridge Crossing (Parcel I) complex in Cambridge MA and the $115 million Woburn Avalon Bay project in Woburn MA. Starts on the commercial side fell 43% with all commercial sectors except warehouses posting a decline. The largest commercial projects were the $450 million first phase of the South Station Office Tower and the $250 million Seaport Square/400 Summer Street office building, both in Boston.

Miami FL commercial and multifamily starts fell 16% year-to-date through June to $2.8 billion. Multifamily construction was 11% lower over the same time period. The largest multifamily projects to break ground in the first six months were the $249 million Downtown 5th Luxury Apartments in Miami and the $115 million Miami Urban Village apartments in Homestead. On the commercial side, starts were 22% lower, with warehouse starts the only sector to post a gain year-to-date. The largest commercial projects were the $80 million Pier Sixty-Six Hotel and a $67 million Home Depot distribution center.

Commercial and multifamily construction starts in Phoenix AZ bucked the national trend posting a sizeable 82% increase to $2.8 billion during the first half of 2020 relative to the same time frame in 2019. The increase was fueled by the start of some sizeable projects. Multifamily starts rose sharply, jumping 85%. The largest multifamily projects to get started were the $300 million Pier 202 mixed-use building and the $125 million Adeline Residences at Collier Center, both in Tempe. Commercial starts meanwhile rose 79%. The largest commercial projects were the $200 million 100 Mill Ave office development and the $115 million Park 303 warehouse building.

Year-to-date commercial and multifamily construction starts in Austin TX fell 12% through June to $2.4 billion. Multifamily starts increased 21% in the first half of 2020, boosted by the $150 million 44 East Condo Tower and the $120 million Hanover Republic Square apartment building. Commercial starts fell 28% during the first six months despite sizeable gains in warehouse and hotel starts. The largest commercial projects were the $300 million Project Charm Amazon distribution center and the $89 million Capitol Complex Office Building.

Completing the top 10 for commercial and multifamily construction starts was Houston TX where starts were 38% lower at $2.4 billion through the first six months of 2020. Multifamily starts posted a 38% decline through June. The largest multifamily projects to break ground were the $217 million Hanover Square & Bayou Apartments as well as the $70 million Boone Manor Apartments. Commercial starts also fell 38% during the first six months of the year, with only parking structures posting a gain. The largest commercial projects to start were the $100 million Hewlett Packard Enterprises Campus @ Cityplace and the $58 million Empire West Business Park.

About Dodge Data & Analytics: Dodge Data & Analytics is North America’s leading provider of commercial construction project data, market forecasting & analytics services and workflow integration solutions for the construction industry. Building product manufacturers, architects, engineers, contractors, and service providers leverage Dodge to identify and pursue unseen growth opportunities that help them grow their business. On a local, regional or national level, Dodge empowers its customers to better understand their markets, uncover key relationships, size growth opportunities, and pursue specific sales opportunities with success. The company’s construction project information is the most comprehensive and verified in the industry. Dodge is leveraging its more than 125-year-old legacy of continuous innovation to help the industry meet the building challenges of the future. Learn more at www.construction.com.

Contacts

Media: Nicole Sullivan | AFFECT Public Relations & Social Media | +1-212-398-9680, nsullivan@affectstrategies.com