US: Charges dent profits at Pinnacle Foods

By Katy Askew | 9 November 2012

  • Earnings down on charges
  • Sales slide 1% on volume declines
  • Adjusted EBIT up 15%
Pinnacle said profits were up when charges were excluded

Pinnacle said profits were up when charges were excluded

US food firm Pinnacle Foods has booked a drop in third-quarter earnings, which were hit be charges related to restructuring and refinancing. 

In a regulatory filing yesterday (8 November), Pinnacle said EBIT dropped to US$60m in the third quarter, down from $65m in the comparable period of last year. The company said earnings were hit by $20m in charges. Excluding one-offs EBIT would have risen 15%, the group emphasised. Adjusted EBITDA was up 5% to $98m. 

Sales during the period decreased 1.2%, falling to $568m. The fall was attributed to Pinnacle's move from lower-margin, higher volume business in its speciality business. The majority of volume declines were offset by pricing adjustments. 

Show the press release

 

Pinnacle Foods Finance LLC Reports Third Quarter Fiscal 2012 Results

PARSIPPANY, N.J.--(BUSINESS WIRE)--Pinnacle Foods Finance LLC today announced its financial results for the third quarter ended September 23, 2012. Net sales for the quarter declined 1% versus year-ago to $568 million, and net earnings in the quarter were $10 million, after giving effect to approximately $14 million of after-tax charges related to restructuring and refinancing. For the first nine months of 2012, net sales of $1.77 billion were essentially even with year-ago, and net earnings were $9 million, after giving effect to approximately $35 million of after-tax charges related to restructuring and refinancing.

Commenting on the results, Pinnacle Foods Chief Executive Officer Bob Gamgort stated, “We delivered solid results in an environment that continues to be challenging. We expanded our gross margin versus year-ago, excluding restructuring, as inflation moderated and we accelerated savings from our productivity initiatives. This improvement drove a healthy 5% increase versus year-ago in Adjusted EBITDA in the quarter. Our North America retail sales grew slightly in the quarter, and we held or grew market share on brands representing over 50% of our product contribution. In addition, during the quarter, we completed another refinancing, which further improved our liquidity profile and reduced our interest expense.”

Third Quarter 2012

Net sales of $568 million in the third quarter of 2012 decreased 1.2%, compared to net sales of $575 million in the year-ago period. This performance reflected lower volume, primarily driven by the Company's de-emphasis of low-margin Specialty Division businesses, and higher slotting investment principally behind the Company's recent Vlasic® Farmer's Garden™ introduction. Almost entirely offsetting these factors were slightly higher net price realization and favorable mix.

Net sales in the Company's North American retail businesses increased slightly in the quarter. By brand, the Company registered sales growth for Birds Eye® vegetables, Duncan Hines® baking products, Van de Kamps® and Mrs. Paul's® seafood and Log Cabin® syrups, while net sales of Vlasic® pickles and Aunt Jemima® frozen breakfasts declined.

Earnings before interest and taxes (EBIT) were $60 million in the third quarter of 2012, after giving effect to $20 million of pre-tax charges related to restructuring and refinancing, compared to EBIT in the third quarter of 2011 of $65 million, which included $4 million of pre-tax charges related to restructuring. Excluding these charges in both periods, EBIT for the quarter improved 15% versus year-ago to $80 million, reflecting an improvement in gross profit, driven by net pricing actions that exceeded moderating inflation and strong productivity results, as well as lower overall selling, general and administrative expenses. Adjusted EBITDA, as defined in the Company's borrowing agreements, advanced 5% to $98 million in the third quarter of 2012, compared to Adjusted EBITDA of $93 million in the year-ago quarter. Adjusted EBITDA is defined below under “Non-GAAP Financial Matters" and is reconciled to Net Earnings (Loss) in the tables that accompany this release.

The Company reported net earnings of $10 million in the third quarter of 2012, after giving effect to approximately $14 million of after-tax charges related to restructuring and refinancing, compared to net earnings of $13 million in the third quarter of 2011, which included $2 million of after-tax charges related to restructuring. Excluding these charges in both periods, net earnings advanced 53% to $24 million in the third quarter of 2012, compared to approximately $15 million in the year-ago quarter. This improvement reflected the increase in EBIT, as well as lower interest expense, stemming from both the Company's refinancing activities and lower overall debt level.

First Nine Months 2012

Net sales of $1.77 billion in the first nine months of 2012 were essentially even with net sales of $1.78 billion in the first nine months of 2011. Net sales in the Company's North American retail businesses were $1.47 billion in the first nine months of 2012, compared to net sales of $1.48 billion in the year-ago period.

EBIT in the first nine months of 2012 was $167 million, after giving effect to $40 million in pre-tax charges related to restructuring and refinancing, compared to EBIT in the year-ago period of $209 million, which included $26 million in pre-tax charges related to restructuring and a legal settlement.

Net earnings in the first nine months of 2012 were $9 million, after giving effect to $35 million in after-tax charges related to restructuring and refinancing compared to net earnings in the first nine months of 2011 of $41 million, which included $16 million of after-tax charges related to restructuring and a legal settlement. Adjusted EBITDA was $273 million in the first nine months of 2012, compared to Adjusted EBITDA of $301 million in the first nine months of 2011.

Net cash provided by operating activities in the first nine months of 2012 was $62 million, compared net cash provided by operating activities of $69 million in the year-ago period.

Refinancing Activities

Building on the successful refinancing actions taken in the second quarter of 2012, which extended the Company's debt maturities and reduced its interest expense, during the third quarter of 2012, the Company completed additional refinancing actions that further enhanced its liquidity profile and reduced its interest expense. Specifically, the Company entered into an amendment of its senior secured credit facility which provided for a new, $450 million Tranche F Term Loan due 2018. The Company used proceeds from the Tranche F Term Loan to repay $300 million of the aggregate principle amount of its Tranche B Non Extended Term Loan due 2014 and redeem $150 million of the aggregate principle amount of its 9.25% Senior Notes due 2015.

 

Original source: Pinnacle Foods Finance

Sectors: Canned food, Financials, Frozen

Companies: Pinnacle Foods

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