B&G Foods Inc CL A (BGS)

Twenty-six Week period ended July 1, 2006 compared to Twenty-six Week period ended July 2, 2005.

Net Sales.  Net sales increased $14.0 million or 7.6% to $198.2 million for the twenty-six week period ended July 1, 2006 from $184.2 million for the twenty-six week period ended July 2, 2005.  The Ortega food service dispensing pouch and dipping cup acquisition accounted for $6.2 million of the net sales increase, the Grandma’s molasses acquisition accounted for $2.4 million of the net sales increase and a temporary co-packing arrangement that is expected to remain in place for another three to six months accounted for $2.1 million of the net sales increase.  The remaining $3.3 million increase in net sales was related to increases in sales price and unit volume.  Net sales of our lines of Ortega (exclusive of food service dispensing pouch and dipping cup net sales), Underwood, Las Palmas, B&M and Maple Grove Farms products increased in the amounts of $3.9 million, $0.5 million, $0.5 million, $0.4 million and $0.4 million or 10.3%, 5.0%, 4.5%, 3.2% and 1.6%, respectively.  These increases were offset by a reduction of net sales in Emeril’s and B&G pickle and pepper products of $2.1 million and $0.8 million or 15.6% and 3.7%, respectively.  All other brands increased, in the aggregate, by $0.5 million or 1.0%.

Gross Profit.  Gross profit increased $5.8 million or 11.5% to $56.3 million for the twenty-six week period ended July 1, 2006 from $50.5 million for the twenty-six week period ended July 2, 2005.  On July 1, 2005, we closed our New Iberia, Louisiana, manufacturing facility as part of our ongoing efforts to improve our production capacity utilization, productivity, and operating efficiencies and lower our overall costs.  We recorded as cost of goods sold a restructuring charge associated with the plant closing, which included a cash charge for employee compensation and other costs of $0.8 million and a non-cash charge for the impairment of property, plant, equipment and inventory of $3.0 million.  In the twenty-six weeks ended July 2, 2005, we expensed $3.2 million of this $3.8 million charge.  No restructuring charges were recorded or expensed during the twenty-six weeks ended July 1, 2006.

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Pro forma gross profit, which excludes the restructuring charge described above, increased $2.6 million or 4.8% to $56.3 million for the twenty-six week period ended July 1, 2006 from $53.7 million for the twenty-six week period ended July 2, 2005.  Pro forma gross profit expressed as a percentage of net sales decreased 0.7% to 28.4% in the twenty-six week period ended July 1, 2006 from 29.1% in the twenty-six week period ended July 2, 2005.  The increase in pro forma gross profit was primarily due to sales price increases, which were partially offset by higher costs for packaging materials, transportation costs and maple syrup.

Sales, Marketing and Distribution Expenses.  Sales, marketing and distribution expenses increased $1.2 million or 5.8% to $22.1 million for the twenty-six week period ended July 1, 2006 from $20.9 million for the twenty-six week period ended July 2, 2005.  These expenses as a percentage of net sales decreased to 11.1% for the twenty-six week period ended July 1, 2006 from 11.3% for the twenty-six week period ended July 2, 2005.  The increase is primarily due to an increase in brokerage and salesmen commissions of $1.0 million relating to the increased sales volume.

General and Administrative Expenses.  General and administrative expenses increased $0.2 million or 4.1% to $3.5 million for the twenty-six week period ended July 1, 2006 from $3.3 million in the twenty-six week period ended July 2, 2005.  The increase was primarily due to an increase in employee compensation.

Amortization Expense—Customer Relationships.  Amortization expense—customer relationships, all of which relates to the amortization of customer relationship intangibles acquired in the Grandma’s molasses acquisition, was $0.4 million for the twenty-six week period ended July 1, 2006.  We had no amortization expense of customer relationship intangibles in the twenty-six week period ended July 2, 2005.

Operating Income.  As a result of the foregoing, operating income increased $4.1 million or 15.7% to $30.4 million for the twenty-six week period ended July 1, 2006 from $26.3 million for the twenty-six week period ended July 2, 2005.  Operating income expressed as a percentage of net sales increased to 15.3% in the twenty-six week period ended July 1, 2006 from 14.3% in the twenty-six week period ended July 2, 2005.  Operating income for the twenty-six week period ended July 1, 2005 was negatively impacted by $3.2 million as a result of the restructuring charge described above.

Interest Expense.  Net interest expense increased $0.9 million or 4.4% to $21.8 million for the twenty-six week period ended July 1, 2006 from $20.9 million in the twenty-six week period ended July 2, 2005.  The average debt outstanding increased approximately $25.0 million in the twenty-six week period ended July 1, 2006 as compared to the twenty-six week period ended July 2, 2005 as a result of the new term loan used to finance the Grandma’s molasses acquisition.  See “—Liquidity and Capital Resources—Debt” below.

Income Tax Expense.  Income tax expense increased $1.2 million or 57.7% to $3.3 million for the twenty-six week period ended July 1, 2006 from $2.1 million for the twenty-six week period ended July 2, 2005.  Our effective tax rate was 38.8% for the twenty-six week period ended July 1, 2006 and 39.1% for the twenty-six week period ended July 2, 2005.