For the three months that ended June 30, 2001, unit volume and net sales increased 3.8% and 2.4%, respectively, compared with year-ago levels. Net sales grew to $219.9 million, led by Log Cabin and Mrs. Butterworth's Syrups (up 18.5%), Duncan Hines (up 8.9%), Celeste Pizza (up 5.8%) and Aunt Jemima Frozen Breakfast (up 4.3%).
Aurora also reported that adjusted EBITDA, or earnings before interest, taxes, depreciation, amortization and other special items, rose 3.6% to $33.5 million versus year-ago levels. The net loss for the quarter narrowed to $9.0 million, or $0.13 per share, a significant improvement compared with the year-ago loss of $18.9 million, or $0.28 per share.
The Company said that EBITDA and net income for the second quarter were negatively affected by an unexpected $4.0 million adjustment in marketing spending, which arose from the discovery at quarter close of a programming error in the Company's promotion spending tracking system. The computer systems have been corrected and all appropriate charges have been reflected in this statement. The Company also said that it could not provide any guidance on the expected second-half EBITDA growth until it completed a detailed analysis of its second six-month business programs with its corrected system, with the possibility of modifying them as necessary. The Company indicated this analysis would take two to three weeks to complete and would provide an update on its second six months at that time.
The Company said that in addition to the $4.0 million marketing spending adjustment, EBITDA for the quarter as compared to target was negatively impacted by net volume declines and unfavorable brand, channel and SKU volume mix, offset by significant reductions in marketing spending.
"The growth trend in net sales, both versus year ago and the first quarter, is a major indicator of the improving health of our business," said James T. Smith, Chairman and Chief Executive Officer of Aurora Foods. "Our brands are much stronger today as evidenced by the fact that seven of our nine brands have higher market shares."
The Company reported that absolute consumer consumption of its brands has successively improved in each of the last four three-month IRI periods, driven, in part, by substantial distribution gains at the retail level. There were especially strong results on Duncan Hines, the Company's largest brand, with major gains on cake mix, frosting and brownies, behind the strategy of building on cake to grow market share on frosting and brownies.
The Company said that despite the $4.0 million marketing spending adjustment, absolute marketing spending was $8.3 million below year ago, behind growing volume, offsetting negative brand, channel and SKU volume mix. Total Company unit volume, excluding Lender's retail, was up 9.0% versus year ago, highlighting the significance of Lender's disappointing performance. "We have learned a great deal about this business over the last six months. We are now even more convinced that the trends in this business are reversible and that Lender's can become a major contributor to the Company's earnings growth," said Mr. Smith. "For starters, we are seeing distribution improvements in each of the last three monthly IRI periods, and second-quarter volume on fresh Lender's was up 20% versus year ago."
The Company also reported that it recorded a net pre-tax gain of $3.1 million related to the receipt of shares from former management in excess of those required to be distributed to class members as part of the May 2001 settlement of shareholder class action claims, as well as the accrual of other legal and consolidation costs. This gain is not included in adjusted EBITDA. Interest expense for the quarter was a net $30.4 million and includes a $4.9 million non-cash charge related to the recognition of a longstanding and now ineffective interest rate hedge under FAS 133. Recognition of this expense in the second quarter will result in lower future recorded interest. Overall, Aurora will continue to benefit from the reduction in market interest rates.
For the six months that ended June 30, 2001, sales rose to $503.5 million, compared with $496.7 million in the same year-ago period, while the net loss was $16.8 million, or $0.24 per share, compared with a net loss of $47.5 million, or $0.71 per share, in 2000.
Finally, the Company indicated that it entered the second half of this year in significantly better financial condition. July unit volume will be at least 10% above year ago, and ending June inventories have been reduced from $124 million year ago to $85 million currently. The inventory reduction temporarily increased per-unit fixed manufacturing costs, but following quarters will benefit from a more normal flow of business through the Company's production facilities.
Attached are Aurora's financial tables for its second quarter 2001 as well as IRI/Nelson dollar-consumption and share trends.
About Aurora Foods Inc.
Aurora Foods Inc., which is based in St. Louis, is a leading producer and marketer of premium branded food products including Duncan Hines® baking mixes, Log Cabin® and Mrs. Butterworth's® syrups, Lender's® bagels, Van de Kamp's® and Mrs. Paul's® frozen seafood, Aunt Jemima® frozen breakfast products, Celeste® frozen pizza and Chef's Choice® skillet meals. Aurora's products can be found in all Retail classes of trade, and Foodservice, and command strong positions in their respective categories and/or markets.
Statements contained in this press release that are not historical facts are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. All forward-looking statements are subject to risks and uncertainties which could cause actual results to differ from the forward-looking statements contained in this release and that may affect the Company's prospects in general are described in the Company's filing with the Securities and Exchange Commission.
AURORA FOODS INC. CONSOLIDATED INCOME STATEMENTS (Dollars and shares in thousands) Three Months Ended June 30, 2001 2000 Net sales $219,898 $214,721 Cost of goods sold (108,904) (101,458) Gross profit 110,994 113,263 Brokerage, distribution and marketing expenses: Brokerage and distribution (25,516) (25,114) Trade promotions (38,291) (41,806) Consumer marketing (4,876) (8,293) Total brokerage, distribution and marketing expenses (68,683) (75,213) Amortization of goodwill and other intangibles (11,322) (10,729) Selling, general and administrative expenses (15,651) (12,095) Other financial, legal, accounting and consolidation expenses 3,066 (15,037) Transition expenses -- (19) Total operating expenses (92,590) (113,093) Operating income 18,404 170 Interest expense, net (30,362) (27,176) Amortization of deferred financing expense (867) (735) Other bank and financing expenses (37) (101) Loss before income taxes (12,862) (27,842) Income tax benefit 3,864 8,909 Net loss (8,998) (18,933) Preferred dividends (308) -- Net loss available to common stockholders $(9,306) $(18,933) Basic and diluted loss per share available to common stockholders $(0.13) $(0.28) Weighted average number of shares outstanding 72,675 67,050 EBITDA (1) $36,583 $17,301 ADJUSTED EBITDA (2) $33,517 $32,356 (1) EBITDA represents earnings before interest, taxes, depreciation and amortization. (2) Adjusted EBITDA represents earnings before interest, taxes, depreciation and amortization and before the accounting change, other financial, legal accounting and consolidation expenses, and transition expenses.
Certain reclassifications have been made to the prior year amounts to conform to the current year presentation.
AURORA FOODS INC. CONSOLIDATED INCOME STATEMENTS (Dollars and shares in thousands) Six Months Ended June 30, 2001 2000 Net sales $503,490 $496,729 Cost of goods sold (242,838) (239,860) Gross profit 260,652 256,869 Brokerage, distribution and marketing expenses: Brokerage and distribution (58,429) (59,077) Trade promotions (91,815) (96,207) Consumer marketing (23,881) (26,264) Total brokerage, distribution and marketing expenses (174,125) (181,548) Amortization of goodwill and other intangibles (22,523) (21,480) Selling, general and administrative expenses (31,384) (26,672) Other financial, legal, accounting and consolidation expenses 3,066 (24,638) Transition expenses -- (1,384) Total operating expenses (224,966) (255,722) Operating income 35,686 1,147 Interest expense, net (58,232) (51,547) Amortization of deferred financing expense (1,734) (1,443) Other bank and financing expenses (74) (188) Loss before income taxes and cumulative effect of change in accounting (24,354) (52,031) Income tax benefit 7,599 16,649 Net loss before cumulative effect of change in accounting (16,755) (35,382) Cumulative effect of change in accounting, net of tax $5,722 -- (12,161) Net loss (16,755) (47,543) Preferred dividends (615) -- Net loss available to common stockholders $(17,370) $(47,543) Basic and diluted loss per share available to common stockholders: Loss before cumulative effect of change in accounting $(0.24) $(0.53) Cumulative effect of change in accounting, net of tax -- (0.18) Net loss available to common stockholders $(0.24) $(0.71) Weighted average number of shares outstanding 73,395 67,050 EBITDA (1) $71,620 $35,104 ADJUSTED EBITDA (2) $68,554 $61,125 (1) EBITDA represents earnings before interest, taxes, depreciation and amortization. (2) Adjusted EBITDA represents earnings before interest, taxes, depreciation and amortization and before the accounting change, other financial, legal accounting and consolidation expenses, and transition expenses.
Certain reclassifications have been made to the prior year amounts to conform to the current year presentation.
AURORA FOODS INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) June 30, December 31, 2001 2000 ASSETS: Cash & cash equivalents $2,710 $525 Accounts receivable, net 73,391 121,193 Accounts receivable sold (28,606) (38,565) Inventories 84,755 104,319 Prepaid expenses and other assets 11,841 6,496 Current deferred tax assets 18,797 17,133 Total current assets 162,888 211,101 Property, plant and equipment, net 229,585 239,107 Deferred tax asset 47,353 40,045 Goodwill and other intangible assets, net 1,249,140 1,268,942 Other assets 32,219 35,091 Total assets $1,721,185 $1,794,286 LIABILITIES & STOCKHOLDERS' EQUITY: Current portion of senior secured term debt $32,926 $32,926 Accounts payable 47,214 50,456 Accrued liabilities 74,387 87,840 Total current liabilities 154,527 171,222 Senior secured term debt 494,202 510,665 Senior secured revolving debt facility 146,400 160,000 Senior subordinated notes 401,721 401,837 Other liabilities 12,122 5,848 Total liabilities 1,208,972 1,249,572 Commitments and contingent liabilities Stockholders' equity Preferred stock 37 37 Common stock 742 741 Paid-in capital 685,359 685,091 Treasury stock (13,266) -- Promissory notes (120) (227) Accumulated deficit (158,298) (140,928) Accumulated other comprehensive loss (2,241) -- Total stockholders' equity 512,213 544,714 Total liabilities and stockholders' equity $1,721,185 $1,794,286 AURORA FOODS INC. CONSOLIDATED CASH FLOW STATEMENT (IN THOUSANDS) Six Months Ended June 30, 2001 2000 Cash from operations: Net loss $(16,755) $(47,543) Adjustments to reconcile net loss to cash from operations: Depreciation and amortization expense 37,552 35,357 Deferred income taxes (7,599) (16,649) Recognition of loss on derivatives 4,901 -- Receipt of shares from former management (15,654) -- Recognition of liability to shareholder class 10,000 -- Non-cash restructuring cost -- 3,050 Cumulative effect of change in accounting, net of tax -- 12,161 Net loss on sale of fixed assets and other, net 189 -- Changes to operating assets and liabilities: Receivables 47,803 15,999 Accounts receivable sold (9,959) 20,418 Inventories 19,564 (659) Prepaid expenses and other current assets (5,330) 9,261 Accounts payable (3,857) (32,764) Accrued expenses (20,952) (30,143) Other non-current liabilities (2,712) (489) Net cash provided by (used in)operations 37,191 (32,001) Cash flows from investing activities: Asset additions (5,269) (6,973) Proceeds from asset sales 66 1,175 Changes to other non-current assets and liabilities -- (2,497) Payment for acquisition of businesses -- (7,984) Net cash (used for) investment activities (5,203) (16,279) Cash (used for) provided by financing activities: Senior secured revolving (repayments) borrowings, net (13,600) 65,000 Repayment of borrowings (16,462) (11,517) Capital contributions, net of officer promissory notes 259 237 Debt issuance and equity raising costs -- (132) Net cash (used for) provided by financing activities (29,803) 53,588 Net change in cash 2,185 5,308 Beginning cash and cash equivalents 525 315 Ending cash and cash equivalents $2,710 $5,623 Aurora Foods - IRI Consumption % Change in Dollars vs. Year Ago Through 6-10-01 Total Total Aurora Aurora Past Brands Excluding Lender's 3 Months +1.5% +3.7% 6 Months +0.5% +2.4% 9 Months -2.9% -1.8% 12 Months -3.4% -2.0% Aurora Foods IRI Dollar Market Shares Through 6-10-01 Past Past Past 3 Months 9 Months 12 Months Van de Kamps 22.9 22.9 22.3 Mrs. Paul's 16.8 16.4 16.3 TOTAL SEAFOOD 39.7 39.3 38.6 Frozen Breakfast 13.8 13.9 13.9 Frozen Pizza 3.3 3.1 3.1 Skillet Meals 15.1 13.4 14.2 Lender's 29.6 30.4 30.8 Log Cabin 15.7 14.6 14.7 Mrs. Butterworth's 11.7 10.2 10.7 TOTAL SYRUPS 27.4 24.7 25.2 Duncan Hines 19.0 17.8 17.5