As I have a number of times mentioned BGS here I offer the following news which is perhaps significant. First, the new CEO announced that the company will now have four individual business units, each with its own chief.....one for frozen, one for spices and seasonings, and so on, the purpose to establish clear focus and expectations and drive organic and acquisition growth....These units will define the categories and brands that we will resource and grow, the platforms for future acquisitions, the brands that will run for efficiency and cash flow, and the businesses we may exit over time. (my bold)
My thought is that this is probably a good thing as the company has grown and grown and perhaps become somewhat unwieldy. I also think, as has been suggested in the past on cc's and such, that they will attempt to sell some of the smaller brands that, while they produce cash flow, take up more attention than they wish. This would be a change from prior statements by prior CEOs that they like to use the cash flow from smaller brands to assist with growing the larger brands. But I also think they want any $ they get through sales of some brands to help with debt and such. Underwood Deviled Ham, anyone?
Which leads into the latest piece of news announced Tuesday which is probably more important. They have arranged to increase the leverage ratio. They already have a high ratio and lots of debt (which has forever made me somehat uncomfortable despite my liking the company very much) B&G Foods’ maximum consolidated leverage ratio ...will increase from 7.00 to 1.00 to 7.50 to 1.00 for the quarter ending July 2, 2022, and then to 8.00 to 1.00 for the quarter ending October 1, 2022 through the quarter ending September 30, 2023. The maximum consolidated leverage ratio will decrease to 7.50 to 1.00 for the quarter ending December 30, 2023 before returning to 7.00 to 1.00 for the quarters ending March 30, 2024 and thereafter.
They say they are doing this because “We believe that temporarily increasing our maximum consolidated leverage ratio and selling shares under our ATM equity offering program are prudent steps given the current inflationary environment and our typical inventory build and working capital needs during the second and third quarters. We have taken and are continuing to take pricing actions and cost reduction efforts to offset inflation, however, pricing actions and cost reduction efforts typically lag input cost inflation.
Selling shares? What's that about? during the second quarter of 2022, B&G Foods sold 2,739,568 shares of common stock under its previously announced “at‑the-market” (ATM) equity offering program. B&G Foods generated $63.2 million in gross proceeds, or $23.08 per share,
Yikes. $23 a share? Not such a great price, though . In total since launching the ATM equity offering program during the third quarter of 2021, B&G Foods has sold 6,547,627 shares of common stock and has generated $179.0 million in gross proceeds, or $27.34 per share
So.....borrowing more $, selling shares (and diluting) makes me a bit uncomfortable and wonder just what is happening. Hopefully just what they are saying and nothing more. I shall wait and see for now though one wonders about a distribution cut which has been mentioned by BGS bears for some time on this or that message board. They did cut the distribution back in 2009 during that financial "crisis" but reinstated it and increased it over time.