Aurora Foods, Inc. (NYSE: AOR), a producer and marketer of many well known and leading food brands, today announced third quarter results for the period ended September 30, 2001, which continue to reflect the significant Company turn-around that began 18 months ago.
Aurora announced that EBITDA (Earnings before interest, taxes, depreciation, and amortization) for the third quarter was on target at $46.6 million, up 6.1% versus the adjusted EBITDA in the year ago quarter. The increase in EBITDA was driven by strong topline growth, and the continued success of the Company’s cost effectiveness program.
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Net sales for the third quarter grew 6.6% to $242.7 million, compared with $227.7 million in the third quarter of last year. Consistent with the net sales increase, unit volume grew 7.1% versus last year. The net sales growth was broad based across most of the Company’s brands and in the outlets where they are sold. In five of the seven product lines sold in traditional grocery outlets, the net sales growth ranged from 4.7% to 12.6%. Net sales also grew strongly in Non-Grocery and Foodservice, where the bulk of the business is also branded.
“We are very pleased with our results this quarter,” said James T. Smith, Chairman and Chief Executive Officer of Aurora Foods. “Over the last 18 months our brands have continued to prove their inherent vitality, and the Company is now showing consistent topline growth across the breadth of its product line. The renewed health of our brands, coupled with our strong effort to drive unnecessary costs out of our operations, should produce the consistent earnings growth that was the underlying basis for the original creation of Aurora Foods.”
The Company announced that its cost effectiveness program, a major component of its strategy to drive unnecessary costs out of the Company, is producing very good results. Combined manufacturing and distribution costs as a percent of gross sales were down a strong 7.5% versus the year ago quarter. Total marketing-related spending grew versus last year consistent with the Company’s plan to redirect some of the cost improvement savings back into building the Company’s brand equities.
The Company reported a net loss for the third quarter of $3.2 million or $0.05 per share. This compares to a year ago net loss of $15.3 million or $0.22 per share. Additionally, and very importantly, this quarter’s results included a $6.4 million pre-tax non-cash charge related to an ineffective interest rate hedge that was put in place by previous Company management in 1999 as they engaged in general interest rate speculation. The hedge remains in effect until 2004. While the Company is a clear beneficiary of lower interest rates, it must recognize the future costs associated with this hedge on a current basis. As a result of recording this future cost now, future interest expense will be reduced by a like amount in subsequent quarters. Absent the non-cash hedge expense, the Company would have reported a profit in the quarter.
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By GlobalDataMr. Smith also indicated that a number of key initiatives were underway to build on the positive results obtained to date and to accelerate the Company’s progress. The most important initiative underway is the creation of a new distribution and production center at the newly purchased facility in St. Elmo, Illinois. “The start-up of our new St. Elmo distribution center is ahead of schedule,” said Mr. Smith. “Our next step is to move the production of some of our brands to this facility, which is scheduled to occur in early 2002. This should reduce our per-case costs significantly, and improve our flexibility and competitiveness. As we announced previously, the purchase and conversion of St. Elmo is expected to provide annualized savings of $8.0 million, and we will begin realizing these savings early next year.”
Added Mr. Smith, “We have also identified and are working on several other major opportunities that we believe can yield equally important results in the coming months. One of the most noteworthy activities underway is a new line of bigger Fresh Lender’s Bagels that are being sold in 75 Wal-Mart Super Centers. We have also recently begun the sell-in of new Mrs. Paul’s Shrimp Bowl meals, some of which will ship this quarter, and initial customer reaction has been very encouraging. Our greatest asset is the expandability of our brands. Our two part strategy of driving unnecessary costs out of our Company, and emphasizing topline growth on our brands, is the way we believe we can best create continued value enhancement for our shareholders and customers.”
Finally, the Company reiterated that with its on-target results in the third he Compa it continues to expect full year EBITDA in the $170 million — $175 million range for 2001.
Attached are Aurora’s financial tables for its third quarter 2001.
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 may affect the Company’s prospects in general. For a summary of such risks, see the Company’s periodic reports and other filings with the Securities and Exchange Commission.
AURORA FOODS INC.
CONSOLIDATED
BALANCE SHEETS
(IN THOUSANDS)
September 30, December 31,
2001 2000
ASSETS:
Cash & cash equivalents $3,260 $525
Accounts receivable, net 85,641 121,193
Accounts receivable sold (35,029) (38,565)
Inventories 97,322 104,319
Prepaid expenses and other assets 10,792 6,496
Current deferred tax assets 18,110 17,133
Total current assets 180,096 211,101
Property, plant and equipment, net 232,539 239,107
Deferred tax asset 50,678 40,045
Goodwill and other intangible
assets, net 1,239,496 1,268,942
Other assets 31,257 35,091
Total assets $1,734,066 $1,794,286
LIABILITIES & STOCKHOLDERS’ EQUITY:
Current portion of senior secured
term debt $35,512 $32,926
Accounts payable 79,174 50,456
Accrued liabilities 66,264 87,840
Total current liabilities 180,950 171,222
Senior secured term debt 483,498 510,665
Senior secured revolving debt
facility 140,000 160,000
Senior subordinated notes 401,663 401,837
Capital lease obligation 1,859 –
Other liabilities 19,127 5,848
Total liabilities 1,227,097 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 (57) (227)
Accumulated deficit (161,822) (140,928)
Accumulated other comprehensive loss (4,024) —
Total stockholders’ equity 506,969 544,714
Total liabilities and stockholders’
equity $1,734,066 $1,794,286
AURORA FOODS INC.
CONSOLIDATED
INCOME STATEMENTS
(Dollars and shares in thousands)
Three Months Ended September 30,
2001 2000
Net sales $242,718 $227,722
Cost of goods sold (114,309) (117,326)
Gross profit 128,409 110,396
Brokerage, distribution and marketing
expenses:
Brokerage and distribution (26,587) (26,517)
Trade promotions (41,880) (30,181)
Consumer marketing (6,156) (5,682)
Total brokerage, distribution
and marketing expenses (74,623) (62,380)
Amortization of goodwill and other
intangibles (10,896) (10,663)
Selling, general and administrative
expenses (14,454) (10,165)
Other financial, legal, accounting
and consolidation expenses — (23,227)
Transition expenses — (698)
Total operating expenses (99,973) (107,133)
Operating income 28,436 3,263
Interest expense, net (25,896) (29,579)
Adjustment of value of derivatives (6,386) —
Amortization of deferred financing
expense (867) (735)
Other bank and financing expenses (38) (100)
Loss before income taxes (4,751) (27,151)
Income tax benefit 1,545 11,857
Net loss (3,206) (15,294)
Preferred dividends (318) —
Net loss available to common
stockholders $(3,524) $(15,294)
Basic and diluted loss per share
available to common stockholders $(0.05) $(0.22)
Weighted average number of shares
outstanding 71,610 67,925
EBITDA (1) $46,588 $19,999
ADJUSTED EBITDA (2) $46,588 $43,925
(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)
Nine Months Ended September 30,
2001 2000
Net sales $746,208 $724,451
Cost of goods sold (357,147) (357,186)
Gross profit 389,061 367,265
Brokerage, distribution and marketing
expenses:
Brokerage and distribution (85,016) (85,594)
Trade promotions (133,695) (126,388)
Consumer marketing (30,037) (31,946)
Total brokerage, distribution
and marketing expenses (248,748) (243,928)
Amortization of goodwill and other
intangibles (33,419) (32,143)
Selling, general and administrative
expenses (45,838) (36,837)
Other financial, legal, accounting
and consolidation expenses 3,066 (47,865)
Transition expenses — (2,082)
Total operating expenses (324,939) (362,855)
Operating income 64,122 4,410
Interest expense, net (79,227) (81,126)
Adjustment of value of derivatives (11,287) —
Amortization of deferred financing
expense (2,601) (2,178)
Other bank and financing expenses (112) (288)
Loss before income taxes and
cumulative effect of
change in accounting (29,105) (79,182)
Income tax benefit 9,144 28,506
Net loss before cumulative effect
of change in accounting (19,961) (50,676)
Cumulative effect of change in
accounting, net of tax $5,722 — (12,161)
Net loss (19,961) (62,837)
Preferred dividends (933) —
Net loss available to common
stockholders $(20,894) $(62,837)
Basic and diluted loss per share
available to common stockholders:
Loss before cumulative effect of
change in accounting $(0.29) $(0.75)
Cumulative effect of change in
accounting, net of tax — (0.18)
Net loss available to common
stockholders $(0.29) $(0.93)
Weighted average number of shares
outstanding 72,794 67,344
EBITDA (1) $118,208 $55,103
ADJUSTED EBITDA (2) $115,142 $105,050
(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
CASH FLOW STATEMENT
(IN THOUSANDS)
Nine Months Ended September 30,
2001 2000
Cash from operations:
Net loss $(19,961) $(62,837)
Adjustments to reconcile net loss
to cash from operations:
Depreciation and amortization
expense 56,513 52,807
Deferred income taxes (9,144) (28,506)
Recognition of non-cash loss on
derivatives, net 10,265 —
Receipt of shares from former
management (15,654) —
Recognition of liability to
shareholder class 10,000 —
Non-cash other financial, legal and
accounting expense — 17,130
Non-cash restructuring cost — 3,050
Cumulative effect of change in
accounting, net of tax — 12,161
Net loss (gain) on sale of fixed
assets and other, net 261 (303)
Changes to operating assets and
liabilities:
Receivables 35,552 (19,916)
Accounts receivable sold (3,535) 37,591
Inventories 6,996 11,210
Prepaid expenses and other
current assets (4,196) 12,183
Accounts payable 27,786 (36,821)
Accrued expenses (28,820) (35,417)
Other non-current liabilities (4,615) (1,338)
Net cash provided by (used in)
operations 61,448 (39,006)
Cash flows from investing activities:
Asset additions (16,380) (12,285)
Proceeds from asset sales 66 1,175
Payment for acquisition of
businesses — (7,984)
Net cash (used for) investment
activities (16,314) (19,094)
Cash (used for) provided by financing
activities:
Senior secured revolving
(repayments) borrowings, net (20,000) 65,000
Repayment of borrowings (24,694) (19,749)
Issuance of preferred stock — 15,000
Capital lease obligation 1,972 —
Capital contributions, net of
officer promissory notes 323 262
Debt issuance and equity raising
costs — (132)
Net cash (used for) provided by
financing activities (42,399) 60,381
Net change in cash 2,735 2,281
Beginning cash and cash equivalents 525 315
Ending cash and cash equivalents $3,260 $2,596
