•  EBIT increases to $90.1m, up 11.7% YOY
  •  Sales up 5% to $644m 
  •  Net earnings up 64% 
  •  Sale to Hillshire Brands expected to close in September
Pinnable sale to Hillshire expected to close this Autumn

Pinnable sale to Hillshire expected to close this Autumn

Pinnacle Foods has booked higher earnings on increased sales and lower interest expenses.

The US food group said today (14 May) that EBIT rose 11.7% in the first quarter to 30 March. Sales increased 5% in the period. Gains were underpinned by a strong performance from its Duncan Hines grocery segment, which saw sales and EBIT rise by 16.6% and 45% respectively.

Net earnings rose 64% thanks to lower interest charges as well as the improved operating performance.

The group, which entered into a takeover agreement to Hillshire Brands earlier this week, said that it expects the transaction to close in September. The deal is pending regulatory approval and shareholder backing.

Show the press release

 

 
Company Reaffirms Guidance for Double-Digit EPS Growth for the Full Year

PARSIPPANY, N.J., May 14, 2014 /PRNewswire/ -- Pinnacle Foods Inc. (NYSE: PF) today reported its financial results for the first quarter ended March 30, 2014 and reaffirmed its guidance for double-digit EPS growth for the year.

Consolidated net sales in the first quarter ended March 30, 2014 increased 5% versus year-ago, largely reflecting the benefit of the Wish-Bone acquisition, partially offset by the unfavorable impacts of a later Easter in 2014 and a decline in sales at the Company's Specialty Foods division.  Net sales for North America Retail, which is comprised of the Birds Eye Frozen and Duncan Hines Grocery segments, increased 7.6% versus year-ago, fueled by the benefit of Wish-Bone.

GAAP diluted earnings per share increased 21% to $0.35 in the first quarter of 2014, compared to $0.29 in the year-ago period.  Excluding items affecting comparability, on a pro forma basis which is described in the accompanying reconciliation tables, diluted earnings per share advanced approximately 6% to $0.36, compared to diluted earnings per share of $0.34 in the year-ago period.

Commenting on the results, Pinnacle Foods Chief Executive Officer Bob Gamgort stated, "We are pleased with our performance in the quarter and continue to expect 2014 to be another year of double-digit EPS growth.  Our focus on driving margin improvement through productivity and enhanced product mix, while maintaining our lean operating structure and driving strong free cash flow, continued to serve us well during a quarter in which the industry continued to be pressured for growth.  Despite the industry headwinds, we again outpaced the performance of our composite categories, driving another quarter of market share growth."

On May 12, 2014, Pinnacle announced that it signed a definitive agreement for the sale of the Company to Hillshire Brands for a combination of cash and Hillshire common stock.  The transaction, which is subject to customary regulatory and shareholder approvals, is expected to close by the end of September 2014. 

First Quarter Consolidated Results
Net sales in the first quarter of 2014 increased 5.1% to $644.0 million, compared to net sales of $613.0 million in the first quarter of 2013, primarily reflecting a 7.4% benefit from Wish-Bone, partially offset by the impacts of lower volume/mix of 1.2%, lower net pricing of 0.8% related to increased new product introductory costs, and unfavorable foreign currency translation of 0.3%.  The Easter-related shift of sales from the first quarter to the second quarter of 2014 unfavorably impacted the sales comparison by approximately 2%.   

North America Retail net sales increased 7.6% to $559.2 million in the first quarter of 2014, compared to $519.7 million in the year-ago period, reflecting an 8.7% benefit from Wish-Bone and slightly higher volume/mix of 0.1%, including the unfavorable impact of the Easter shift.  Also impacting the comparison were lower net pricing of 0.8% related to higher new product introductory costs and unfavorable foreign currency translation of 0.4%.   

Adjusted EBITDA on a pro forma basis advanced 9.1% to $113.1 million in the first quarter of 2014, compared to $103.7 million in the first quarter of 2013.  This performance reflected the growth in net sales and gross margin expansion of 70 basis points, driven by the combined benefit of productivity and improved product mix in excess of inflation.  Partially offsetting this growth were increased administrative expenses, largely reflecting higher equity-based compensation expense.  Adjusted EBITDA is a Non-GAAP measure defined below under "Non-GAAP Financial Measures," and is reconciled to net earnings in the tables that accompany this release. 

Earnings before interest and taxes (EBIT) advanced approximately 12% versus year-ago to $90.1 million in the first quarter of 2014, compared to $80.7 million in the first quarter of 2013.  Excluding items affecting comparability, EBIT on a pro forma basis increased approximately 10% to $92.7 million in the first quarter of 2014, compared to $84.4 million in the year-ago period.

Net earnings in the first quarter advanced to $40.7 million, or $0.35 per diluted share, compared with net earnings of $24.8 million, or $0.29 per diluted share, in the year-ago period.  Excluding items affecting comparability, on a pro forma basis, net earnings for the first quarter increased approximately 7% to $42.3 million, or $0.36 per diluted share, compared to net earnings of $39.5 million, or $0.34per diluted share, in the year-ago period.  This performance primarily reflected the growth in EBIT, partially offset by higher interest expense associated with debt assumed to fund the Wish-Bone acquisition.  The unfavorable impact of the Easter shift approximated $0.02 per diluted share in the quarter.

Net cash provided by operating activities advanced significantly in the first quarter of 2014 to $94 million, compared to $68 million in the year-ago period, largely reflecting the growth in Earnings before income taxes.

First Quarter Segment Results

Birds Eye Frozen
Net sales for the Birds Eye Frozen segment increased 0.6% to $294.3 million in the first quarter of 2014, compared to $292.5 million in the year-ago period, reflecting a 0.7% increase from volume/mix, partially offset by lower net pricing of 0.1%. By brand, growth of Birds Eye Voila! skillet meals, Mrs. Paul's  and Van de Kamp's seafood and Hungry-Man entrees, including new Hungry-Man Selects varieties, was partially offset by lower sales of Birds Eye vegetables, due to the later Easter and new product introductory expenses behind new Birds Eye Steamfresh varieties.  

EBIT for the Birds Eye Frozen segment declined approximately 4% to $46.7 million in the first quarter of 2014, compared to $48.9 million in first quarter of 2013.  Excluding items affecting comparability, EBIT declined approximately 5% to $47.1 million, largely due to commodity and logistics cost inflation and the impact of the Easter shift, partially offset by productivity and timing of marketing investment. 

Duncan Hines Grocery 
Net sales for the Duncan Hines Grocery segment advanced 16.6% to $264.9 million in the first quarter of 2014, compared to $227.2 million in the year-ago period, reflecting a 19.8% benefit from Wish-Bone, partially offset by lower net pricing of 1.8%, a decrease from volume/mix of 0.5% and unfavorable foreign currency translation of 0.9%.  By brand, sales growth from Wish-Bone salad dressings,Armour canned meat and Nalley chili offset sales declines related to Easter timing for Duncan Hines baking products and Vlasic pickles, as well as new product introductory expenses behind our Duncan Hines Velvets and Decadent Salted Caramel Brownies varieties.

EBIT for the Duncan Hines Grocery segment advanced 45% to $42.7 million in the first quarter of 2014, compared to $29.4 million in the year-ago period.  Excluding items affecting comparability, EBIT advanced approximately 41% to $44.8 million, largely due to the benefit of Wish-Bone, favorable commodity prices and productivity, partially offset by the impact of the Easter shift. 

Specialty Foods
Net sales for the Specialty Foods segment declined approximately 9% to $84.9 million in the first quarter of 2014, compared to $93.3 million in the first quarter of 2013, due to lower volume/mix of 8.7% and lower net pricing of        1.0%, partially offset by a 0.6% benefit from the Wish-Bone foodservice business.  For the base business, lower sales of private label canned meat were only partially offset by growth in snacks.

EBIT for the Specialty Foods segment decreased to $7.1 million in the first quarter of 2014, compared to $8.2 million in the first quarter of 2013, primarily reflecting the lower sales of private label canned meat in a heightened competitive bidding environment. 

Fiscal Year 2014 Outlook 
The Company reaffirmed its adjusted EPS guidance for fiscal 2014 in the range of $1.70 - $1.75, or growth of 12% to 15% versus year-ago, after giving effect to stock-based compensation expense in both years.  This guidance continues to incorporate the following unchanged assumptions:

  • Input cost inflation of approximately 2%;
  • Productivity in the range of 3-4% of cost of products sold;
  • Interest expense of approximately $100 million;
  • An effective tax rate of approximately 38.9%; and
  • Diluted weighted average shares of 117.2 million.

Original source: Pinnacle Foods