Del Monte Foods Company (NYSE: DLM) today reported earnings per share, as adjusted, of $0.03, for the fiscal 2002 first quarter, compared to $0.08 for the same period in fiscal 2001. Net sales, as adjusted, for the quarter were $273.6 million, compared to $263.0 million for the first fiscal quarter of 2001. Net income, as adjusted, for the quarter was $1.4 million compared to $4.0 million for the same quarter last year. EBITDA, as adjusted, for the quarter was $25.5 million compared to $33.8 million in the same quarter last year. As adjusted results exclude special charges related to plant consolidations and other non-recurring items.
“Our first quarter performance is right in line with what we expected,” said Richard G. Wolford, Chairman and Chief Executive Officer. “Our SunFresh and S&W acquisitions, recent broker consolidation and the impact of our recent price increases are all on track and providing positive results. We also continue to invest marketing dollars behind our products. As expected, this investment spending has had a negative impact on earnings in the short term but is the right thing to do for the long-term health of the business.”
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The increase in net sales for the quarter, when compared to the first quarter of fiscal 2001, was due to the acquisitions of the S&W and SunFresh businesses, the impact of a July 1 price increase and increased sales in non-retail channels, partially offset by increased marketing investments in existing products and new products. The price increase resulted in higher sales which were partially offset by related volume losses and increased trade spending in support of the increase. Earnings per share, as adjusted, reflect these higher sales; an unfavorable sales mix; increased energy expenses and other operating costs as well as increased fixed costs, as production volumes are reduced to decrease inventory levels, to reduce debt and lower interest expense.
The Company reported net sales of $272.3 million and a net loss of $0.8 million, or $0.01 per share, for the first quarter ended September 30, 2001, compared to net sales of $263.0 million and net income of $6.4 million, or $0.12 per share, in the prior year period.
The Emerging Issues Task Force (EITF) of the Financial Accounting Standards Board has concluded that certain consumer and trade sales promotion expenses should be classified as a reduction of sales rather than as selling, administrative and general expenses. The Company has adopted this change effective for its first quarter of fiscal 2002. The impact of this change in classification is to reduce both net sales and selling, administrative and general expenses by $47.8 million in the three months ended September 30, 2000. These changes will not affect the Company’s financial position or net earnings.
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By GlobalDataLooking forward for the full fiscal year 2002, the Company continues to expect top line growth of 2 to 4% and adjusted earnings per share of approximately $0.83 to $0.87. The increase in net sales for the year, when compared to fiscal 2001, is expected to be due to the acquisitions of the S&W and SunFresh businesses and the impact of a July 1 price increase, partially offset by increased marketing investments in existing products and new products. The price increase is expected to result in higher sales which are expected to be partially offset by related volume losses and increased trade spending in support of the increase. Earnings per share, as adjusted, are expected to reflect these higher sales; an unfavorable sales mix; increased energy expenses and other operating costs as well as increased fixed costs, as production volumes are reduced to decrease inventory levels, to reduce debt and lower interest expense.
Del Monte Foods Company, with net sales (adjusted for the impact of the EITF changes noted above) of approximately $1.3 billion in fiscal 2001, is the largest producer and distributor of premium quality, branded processed fruit, vegetable and tomato products in the United States. The Del Monte brand was introduced in 1892 and is one of the best known brands in the United States. Del Monte products are sold through national grocery chains, independent grocery stores, warehouse club stores, mass merchandisers, drug stores and convenience stores under the Del Monte, Contadina, S&W and SunFresh brands. The Company also sells its products to the U.S. military, certain export markets, the foodservice industry and food processors. The Company operates twelve production facilities and seven distribution centers in the U.S., has operations in Venezuela and owns Del Monte brand marketing rights in South America.
This press release contains forward-looking statements conveying management’s expectations as to the future based on plans, estimates and projections at the time the Company makes the statements. Forward-looking statements involve inherent risks and uncertainties and the Company cautions you that a number of important factors could cause actual results to differ materially from those contained in any such forward-looking statement. These factors include, among others: general economic and business conditions; weather conditions; energy costs and availability; crop yields; competition, including pricing and promotional spending levels by competitors; raw material costs and availability; high leverage; the loss of significant customers or a substantial reduction in orders from these customers; market acceptance of new products; successful integration of acquired businesses; consolidation of processing plants; changes in business strategy or development plans; availability, terms and deployment of capital; ability to increase prices; changes in, or the failure or inability to comply with, governmental regulations, including, without limitation, environmental regulations; industry trends, including changes in buying and inventory practices by customers; production capacity constraints and other factors. These factors are described in more detail in the Company’s filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the fiscal year ended June 30, 2001. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company does not undertake to update any of these statements in light of new information or future events.
Selected Balance Sheet Data September 30,
(In millions) 2001
————-
Cash and cash equivalents $ 5.1
Trade accounts receivable, net of allowance 140.5
Inventories 749.5
Total assets 1,429.8
Accounts payable and accrued expenses 408.2
Short-term borrowings 124.8
Long-term debt, including current portion 712.9
Stockholders’ equity 24.2
Del Monte Foods Company For the Three Months Ended September 30,
(In millions, except share
data) As Adjusted (1) Reported
2001 2000 2001 2000
—- —- —- —-
Net sales (2) (3) $ 273.6 $ 263.0 $ 272.3 $ 263.0
Cost of products sold (4) 219.0 204.4 220.0 204.6
Selling, administrative and
general expenses (3) (5) 36.7 33.3 36.7 33.4
Special charges related to plant
consolidation (6) – – 0.7 0.7
Operating income 17.9 25.3 14.9 24.3
Interest expense 16.0 18.9 16.0 18.9
Other (income) expense (7) (0.1) 0.1 (0.1) (4.7)
Income (loss) before taxes 2.0 6.3 (1.0) 10.1
Income tax expense (benefit) (8) 0.6 2.3 (0.2) 3.7
Net income (loss) available to
common shares $ 1.4 $ 4.0 $ (0.8) $ 6.4
Diluted earnings (loss) per
common share $ 0.03 $ 0.08 $ (0.01) $ 0.12
Diluted weighted average
shares 53,001,292 52,571,470 52,266,716 52,571,470
(1) In order to provide comparability among all periods presented, the
Company’s reported results have been adjusted to exclude special
charges related to plant consolidation and non-recurring items.
(2) Net sales, as adjusted, for the three months ended September 30,
2001 exclude non-recurring trade promotion costs of an acquired
business.
(3) For the three months ended September 30, 2000, $47.8 million of
expenses have been reclassified from selling, administrative and
general expenses to net sales for as adjusted and reported. This
adjustment is in accordance with the EITF issues to reclassify
certain consumer and trade sales promotion expenses.
(4) In accordance with purchase accounting rules applied to the
acquisition of the SunFresh and S&W businesses, inventory was
increased to market value. This inventory step-up resulted in
one-time charges to cost of products sold as the inventory on hand
at the acquisition date was sold. Results, as adjusted, for the
three months ended September 30, 2001 and 2000 excluded step-up of
$1.0 million and $0.2 million, respectively.
(5) Selling, administrative and general expenses for the three months
ended September 30, 2000 have been adjusted to exclude indirect
expenses related to the acquisition of SunFresh.
(6) For the three months ended September 30, 2001 and 2000, special
charges related to plant consolidation included accelerated
depreciation and other restructuring costs related to the
consolidation of certain processing plants.
(7) For the three months ended September 30, 2000, the reversal of an
accrual on a contingent liability was excluded from the as
adjusted results.
(8) Income taxes, as adjusted, for the three months ended September
30, 2001 and 2000 included the impact of using an annualized rate
of 30.4% and 36.5%, respectively. These rates included the benefit
of net operating losses, other tax adjustments and reflect the tax
effect of the adjustments described in footnote (1) above..
