Pinnacle Foods Finance LLC Reports Third Quarter Fiscal 2012 Results

| November 11, 2012 | 0 Comments

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.

Conference Call Information

The Company will host a conference call on Thursday, November 8, 2012 at
2:00PM (ET) to discuss results of the quarter.

To access the call, interested parties can dial (866) 837-9779 and
reference conference name: Pinnacle Foods Q3 Earnings Call. A replay of
the call will be available, beginning November 8, 2012 at 5:00 PM (ET)
until November 22, 2012, by dialing 1-888-266-2081 and referencing
Access Code 1595622.

About Pinnacle Foods Finance LLC

Millions of times a day in more than 85% of American households,
consumers reach for Pinnacle Foods brands. Pinnacle Foods is a Top 1000
Company ranked on Fortune Magazine’s 2011 Top 1000 companies list. We
are a leading producer, marketer and distributor of high-quality branded
food products, which have been trusted household names for decades.
Headquartered in Parsippany, NJ, our business employs an average of
approximately 4,300 employees. We are a leader in the shelf stable and
frozen foods segments and our brands hold the #1 or #2 market position
in 8 out of 12 major category segments in which they compete. Our Duncan
Hines Grocery Division manages Leadership brands such as Duncan Hines®
baking mixes and frostings, Vlasic® shelf-stable pickles and Mrs.
Butterworth’s® and Log Cabin® table syrups and Foundation brands such as
Armour® canned meats, Brooks® and Nalley® chili and chili ingredients,
Comstock® and Wilderness® pie and pastry fillings and Open Pit® barbecue
sauces. Our Birds Eye Frozen Division manages Leadership brands such as
Birds Eye®, Birds Eye Steamfresh®, CW®, McKenzie’s®, and Fresh like®
vegetables, Birds Eye Voila!® complete bagged meals and Van de Kamp’s®
and Mrs. Paul’s® seafood and Foundation brands such as Lender’s®
bagels,Celeste® pizza, Hungry-Man® dinners and entrées and Aunt Jemima®
frozen breakfasts. Our Specialty Foods Division manages Tim’s Cascade
Snacks®, Hawaiian™ Kettle Style Potato Chips, Snyder of Berlin® and
Husman’s® in addition to our food service and private label businesses.
Further information is available at www.pinnaclefoods.com.

Forward Looking Statements

This release may contain statements that predict or forecast future
events or results, depend on future events for their accuracy or
otherwise contain “forward-looking information.” The words “estimates,”
“expects,” “contemplates,” “anticipates,” “projects,” “plans,”
“intends,” “believes,” “forecasts,” “may,” “should,” and variations of
such words or similar expressions are intended to identify
forward-looking statements. These statements are made based on
management’s current expectations and beliefs concerning future events
and various assumptions and are not guarantees of future performance.
Actual results may differ materially as a result of various factors,
some of which are beyond our control, including but not limited to:
general economic and business conditions, deterioration of the credit
and capital markets, industry trends, our substantial leverage and
changes in our leverage, interest rate changes, changes in our ownership
structure, competition, the loss of any of our major customers or
suppliers, changes in demand for our products, changes in distribution
channels or competitive conditions in the markets where we operate,
costs of integrating acquisitions, the successful integration and
achievement of estimated future cost savings related to the Birds Eye
Foods acquisition, loss of our intellectual property rights,
fluctuations in price and supply of raw materials, seasonality, our
reliance on co-packers to meet our manufacturing needs, availability of
qualified personnel, changes in the cost of compliance with laws and
regulations, including environmental laws and regulations, and the other
risks and uncertainties detailed in our Quarterly Report on Form 10-Q
for the quarter ended September 23, 2012 and subsequent reports filed
with the Securities and Exchange Commission. There may be other factors
that may cause our actual results to differ materially from the
forward-looking statements. We assume no obligation to update the
information contained in the presentation.

Non-GAAP Financial Matters

The Company’s metric of Adjusted EBITDA, which is used in creating
targets for the bonus and equity portions of our compensation plans, is
equivalent to Covenant Compliance EBITDA under our debt agreements.

Pinnacle believes that the presentation of Adjusted EBITDA provides
investors with useful information, as it is important in measuring
covenant compliance in accordance with the financial covenants and
determining our ability to engage in certain transactions in compliance
with our debt facilities and it is a metric used internally by our Board
of Directors and senior management.

Adjusted EBITDA is a non-GAAP measure and may not be comparable to
similarly named measures used by other companies. You should not
consider Adjusted EBITDA as an alternative to operating or net earnings
(loss), determined in accordance with GAAP, as an indicator of
Pinnacle’s operating performance, or as an alternative to cash flows
from operating activities, determined in accordance with GAAP, as an
indicator of cash flows, or as a measure of liquidity.

Adjusted EBITDA is defined as earnings (loss) before interest expense,
taxes, depreciation and amortization (“EBITDA”), further adjusted to
exclude non-cash items, non-recurring items and other adjustment items
permitted in calculating Adjusted under the Senior Secured Credit
Facility and the indentures governing the Senior Notes.

EBITDA and Adjusted EBITDA do not represent net earnings or (loss) or
cash flow from operations as those terms are defined by Generally
Accepted Accounting Principles (“GAAP”) and do not necessarily indicate
whether cash flows will be sufficient to fund cash needs. In particular,
the definitions of Adjusted EBITDA in the Senior Secured Credit Facility
and the indentures allow us to add back certain non-cash, extraordinary,
unusual or non-recurring charges that are deducted in calculating net
earnings or loss. However, these are expenses that may recur, vary
greatly and are difficult to predict. While EBITDA and Adjusted EBITDA
and similar measures are frequently used as measures of operations and
the ability to meet debt service requirements, they are not necessarily
comparable to other similarly titled captions of other companies due to
the potential inconsistencies in the method of calculation.

Our ability to comply with the financial covenants and engage in certain
transactions in compliance with our debt agreements in future periods
will depend on events beyond our control, and we cannot assure you that
we will meet those ratios. A breach of any of these covenants in the
future could result in a default under, or an inability to undertake
certain activities in compliance with, the Senior Secured Credit
Facility and the indentures governing the Senior Notes, at which time
the lenders could elect to declare all amounts outstanding under the
Senior Secured Credit Facility to be immediately due and payable. Any
such acceleration would also result in a default under the indentures
governing the Senior Notes.

The following table provides a reconciliation from our net earnings
(loss) to EBITDA and Adjusted EBITDA for the nine months ended
September 23, 2012 and September 25, 2011 and the fiscal year ended
December 25, 2011. The terms and related calculations are defined in the
Senior Secured Credit Facility and the indentures governing the 8.25%
Senior Notes and the 9.25% Senior Notes.

 

 

 

 

 

 

 

 

 

 

 

Three months ended

Nine months ended

Fiscal Year Ended

 

 

December 25,

2011

Net earnings (loss)

$

9,878

$

12,777

$

8,857

$

40,610

$

(46,914

)

Interest expense, net

44,458

52,144

154,496

155,385

208,078

Income tax expense (benefit)

5,559

373

3,701

13,007

22,103

Depreciation and amortization expense

26,486

 

22,163

 

68,542

 

65,065

 

88,476

 

EBITDA

$

86,381

 

$

87,457

 

$

235,596

 

$

274,067

 

$

271,743

 

Non-cash items (a)

(2,967

)

2,409

(1,368

)

6,291

152,245

Non-recurring items (as defined) (b)

13,310

2,478

32,134

17,130

20,264

Other adjustment items (c)

1,188

 

1,092

 

6,758

 

3,146

 

5,440

 

Adjusted EBITDA (unaudited)

97,912

 

93,436

 

273,120

 

300,634

 

449,692

 

Last twelve months Adjusted EBITDA

(unaudited)

$

422,178

 

 

 

 

 

 

 

Three months ended

Nine months ended

Fiscal Year Ended

 

 

December 25,

2011

Non-cash equity-related compensation charges

$

125

$

300

$

725

$

900

$

1,151

(3,092

)

2,109

(2,093

)

4,105

1,608

Goodwill impairment charge (1)

122,900

Other impairment charge (2)

 

 

 

1,286

 

26,586

Total non-cash items

$

(2,967

)

$

2,409

 

$

(1,368

)

$

6,291

 

$

152,245

_________________

(1)

 

For the fiscal year ended December 25, 2011, represents goodwill
impairments on the Breakfast ($51,700), Private Label ($49,700) and
Food Service ($21,500) reporting Units.

(2)

For the fiscal year ended December 25, 2011 represents tradename
impairments on Aunt Jemima ($23,700), Lenders ($1,200) and
Bernstein’s ($400), as well as a plant asset impairment on the
previously announced closure of the Tacoma, WA facility ($1,286).

 

 

 

 

 

 

 

 

 

Three months ended

Nine months ended

Fiscal Year Ended

 

 

$

(3

)

$

2

$

1,620

$

9,039

$

8,771

9,812

2,115

15,289

7,119

9,485

Employee severance

31

361

964

972

2,008

Other non-recurring items (1)

$

3,470

 

$

 

$

14,261

 

$

 

$

Total non-recurring items

$

13,310

 

$

2,478

 

$

32,134

 

$

17,130

 

$

20,264

 

 

 

 

 

 

 

Three months ended

Nine months ended

Fiscal Year Ended

 

 

$

1,188

$

1,082

$

3,534

$

3,422

$

4,572

Other (1)

 

10

 

3,224

 

(276

)

868

Total other adjustments

$

1,188

 

$

1,092

 

$

6,758

 

$

3,146

 

$

5,440

 

 

 

 

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

 

Three months ended

Nine months ended

 

September 25,
2011

September 23,
2012

 

September 25,
2011

Net sales

$

567,905

$

574,746

$

1,773,425

$

1,783,081

Cost of products sold

438,564

 

440,496

 

1,376,251

 

1,353,759

Gross profit

129,341

134,250

397,174

429,322

Operating expenses

Marketing and selling expenses

38,336

43,306

130,540

131,764

Administrative expenses

21,349

19,510

66,089

62,640

Research and development expenses

2,677

2,282

8,211

6,343

Other expense (income), net

7,084

 

3,858

 

25,280

 

19,573

Total operating expenses

69,446

 

68,956

 

230,120

 

220,320

Earnings before interest and taxes

59,895

65,294

167,054

209,002

Interest expense

44,462

52,241

154,601

155,624

Interest income

4

 

97

 

105

 

239

Earnings before income taxes

15,437

13,150

12,558

53,617

Provision for income taxes

5,559

 

373

 

3,701

 

13,007

Net earnings

$

9,878

 

$

12,777

 

$

8,857

 

$

40,610

 

 

 

 

 

 

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (unaudited)

 

September 23,
2012

December 25,
2011

Current assets:

$

5,891

$

151,031

Accounts receivable, net of allowances of $6,085 and $5,440,
respectively

166,279

159,981

Inventories

402,820

335,812

Other current assets

7,150

7,549

Deferred tax assets

72,844

 

71,109

 

Total current assets

654,984

725,482

Plant assets, net of accumulated depreciation of $255,029 and
$205,281, respectively

495,916

501,283

Tradenames

1,604,512

1,604,512

Other assets, net

161,518

178,849

Goodwill

1,441,495

 

1,441,495

 

Total assets

$

4,358,425

 

$

4,451,621

 

 

Current liabilities:

Short-term borrowings

$

560

$

1,708

Current portion of long-term obligations

30,406

15,661

Accounts payable

186,805

152,869

Accrued trade marketing expense

39,104

35,125

Accrued liabilities

125,681

 

128,785

 

Total current liabilities

382,556

334,148

Long-term debt (includes $62,335 and $121,992 owed to related
parties, respectively)

2,583,635

2,738,650

Pension and other postretirement benefits

84,558

93,406

Other long-term liabilities

29,877

22,099

Deferred tax liabilities

423,107

 

417,966

 

Total liabilities

3,503,733

3,606,269

Commitments and contingencies

Member’s equity:

Limited liability company interests

Additional paid-in-capital

697,231

697,352

Retained earnings

209,293

200,436

Accumulated other comprehensive loss

(51,832

)

(52,436

)

Total member’s equity

854,692

 

845,352

 

Total liabilities and member’s equity

$

4,358,425

 

$

4,451,621

 

 

 

 

 

PINNACLE FOODS FINANCE LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

 

Nine months ended

September 23,
2012

 

September 25,
2011

Cash flows from operating activities

Net earnings

$

8,857

$

40,610

Non-cash charges (credits) to net earnings

Depreciation and amortization

68,542

65,065

Amortization of discount on term loan

669

904

Amortization of debt acquisition costs

6,745

7,812

Call premium on note redemptions

14,255

Refinancing costs and write off of debt issuance costs

17,482

Amortization of deferred mark-to-market adjustment on terminated
swaps

444

1,684

Plant asset impairment charges

1,286

Change in value of financial instruments

(2,002

)

3,984

Equity-based compensation charge

725

900

Pension expense, net of contributions

(8,924

)

(11,313

)

Other long-term liabilities

3,210

(1,375

)

Other long-term assets

(601

)

170

Deferred income taxes

2,637

10,797

Changes in working capital

Accounts receivable

(5,974

)

(32,925

)

Inventories

(66,822

)

(76,919

)

Accrued trade marketing expense

3,853

(7,607

)

Accounts payable

14,198

51,533

Accrued liabilities

4,340

9,621

Other current assets

750

 

4,892

 

Net cash provided by operating activities

62,384

 

69,119

 

Cash flows from investing activities

Capital expenditures

(49,796

)

(90,832

)

Proceeds from sale of plant assets

570

 

7,900

 

Net cash used in investing activities

(49,226

)

(82,932

)

Cash flows from financing activities

Proceeds from bank term loans

842,625

Repayments of long-term obligations

(625,172

)

Repurchase of notes

(373,255

)

Proceeds from short-term borrowings

1,216

845

Repayments of short-term borrowings

(2,364

)

(2,002

)

Borrowings under revolving credit facility

5,000

Repayments of revolving credit facility

(5,000

)

Repayment of capital lease obligations

(2,803

)

(1,997

)

Equity contributions

558

Repurchases of equity

(846

)

(1,624

)

Debt acquisition costs

(17,414

)

(546

)

Change in bank overdrafts

19,327

Other financing

 

2,730

 

Net cash used in financing activities

(158,686

)

(2,036

)

Effect of exchange rate changes on cash

388

(60

)

Net change in cash and cash equivalents

(145,140

)

(15,909

)

Cash and cash equivalents – beginning of period

151,031

 

115,286

 

Cash and cash equivalents – end of period

$

5,891

 

$

99,377

 

 

Supplemental disclosures of cash flow information:

Interest paid

$

138,622

$

133,770

Interest received

105

193

Income taxes paid (refunded)

1,933

(2,365

)

Non-cash investing and financing activities:

New capital leases

1,549

1,500

 

Pinnacle Foods Finance LLC
Craig Steeneck, 973-541-6622
EVP CFO

Filed Under: Credit Card News

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