|Sales of B&G's Rickland Orchards products declined during the quarter.|
PARSIPPANY, N.J. — An impairment charge of $22.2 million that primarily was associated with B&G Foods’ Rickland Orchards brand led the company to record a loss during the third quarter of fiscal 2014, ended Sept. 27.
“The impairment and other charges related to last year’s Rickland Orchards acquisition reflect obviously disappointing sales results in that brand, primarily in the warehouse club channel,” said David L. Wenner, president and chief executive officer of B&G Foods. “However, we believe that B&G Foods’ overall business is headed in the right direction in both volume and pricing going into the fourth quarter and fiscal 2015.”
For the quarter, B&G Foods recorded a loss of $4,413,000. During the third quarter of fiscal 2013, B&G Foods’ net income equaled $15,350,000, equal to 29c per share on the common stock.
Sales during the quarter totaled $208,998,000, an increase compared to the same quarter of the previous year when sales totaled $181,350,000.
“On the second-quarter call, I spoke about the disappointing performance of the Rickland Orchards brand,” Mr. Wenner said in a conference call with analysts on Oct. 21. “… It’s obvious the situation has not improved; and, in fact, sales declined from $7.1 million in the second quarter to $4.5 million in the third quarter. When we bought this brand, its sales were disproportionately in the warehouse club channel, with limited distribution in more traditional retail. We were very interested in the strength in clubs, and have used that expertise to grow Pirate’s Booty, and, as I referred to earlier, open opportunities in our other brands as well.
“Unfortunately, the risk of concentration in clubs is that you may lose distribution of key products due to competitive pressure or the ever-changing nature of club sales. That is exactly what has happened in the case of Rickland Orchards’ core Greek-yogurt-coated bar and bite products, which has led to the impairment charge. We estimate that sales for the brand in the foreseeable future will be on the order of the third quarter.
“Recent sales to the brand were aided by innovation that led to the introduction of organic trail mix and salad toppers under the Rickland Orchards brand. We believe we have acquired the expertise with this acquisition to continue to innovate under this brand and introduce products that speak to consumer trends and warehouse club interests.”
For the year B&G Foods lowered its EBITDA approximately 1% to a range of $202 million to $206 million.“This is largely due to reduced expectations for the Rickland Orchards business for the second half, offset somewhat by positives from the Specialty Brands acquisition,” Mr. Wenner said. “At the midpoint of this guidance, our 2014 adjusted EBITDA would increase by 10.9% from 2013; a positive result, but not what we hoped for.”