Pinnacle Foods Finance LLC Reports Fourth Quarter Fiscal 2012 Results
PARSIPPANY, NJ (March 6, 2013) - Pinnacle Foods Finance LLC today announced its financial results for the fourth quarter and fiscal year ended December 30, 2012. Net sales for the quarter increased 3% versus year-ago to $705 million, and net earnings in the quarter were $44 million, after giving effect to approximately $10 million of after-tax charges, primarily related to restructuring. For 2012, net sales of $2.48 billion were essentially even with year-ago, and net earnings were $53 million, after giving effect to approximately $51 million of after-tax charges, principally related to restructuring and refinancing.
Commenting on the results, Pinnacle Foods Chief Executive Officer Bob Gamgort stated, "We posted solid performance in the fourth quarter by delivering a 3% increase in adjusted EBITDA. In a food industry environment that is showing some signs of improving, we generated share growth on more than half of our portfolio, driving 4% net sales growth on our North America retail business. Further, we expanded gross margin, excluding restructuring, as inflation moderated and our productivity initiatives accelerated."
Fourth Quarter 2012
Net sales of $705 million in the fourth quarter of 2012 increased 3%, compared to net sales of $686 million in the year-ago period. This performance reflected the benefit of a 53rd week in 2012 which added approximately 4% for the quarter, as well as favorable mix, partially offset by the impact of the Company's exit from lower-margin businesses in its Specialty Division.
Net sales in the Company's North America retail businesses increased 4% in the quarter, largely reflecting the 53rd week in 2012. By brand, the Company registered sales growth for Birds Eye® Voila!™, Van de Kamp's® and Mrs. Paul's® frozen seafood, Vlasic® pickles and Log Cabin® syrups, while net sales of Birds Eye® vegetables, Duncan Hines® baking products and Aunt Jemima® frozen breakfasts declined.
Adjusted EBITDA, as defined in the Company's borrowing agreements, advanced 3% to $153 million in the fourth quarter of 2012, compared to Adjusted EBITDA of $149 million in the year-ago quarter. Adjusted EBITDA is defined below under "Non-GAAP Financial Measures" and is reconciled to Net Earnings (Loss) in the tables that accompany this release.
Earnings before interest and taxes (EBIT) were $117 million in the fourth quarter of 2012, after giving effect to $16 million of pre-tax charges primarily related to restructuring, compared to a loss at the EBIT line in the fourth quarter of 2011 of $(26) million, which included $155 million of pre-tax charges primarily related to goodwill and tradename impairments. Excluding these charges in both periods, EBIT for the quarter improved 3% versus year-ago to $133 million. This improved performance resulted from strong productivity results and moderating inflation. Also, the 53rd week increased the comparison by approximately 4%. Partially offsetting these improvements was lower performance-based compensation expense in 2011. Excluding the two items from both years, adjusted EBIT increased 5%.
The Company reported net earnings of $44 million in the fourth quarter of 2012, after giving effect to approximately $10 million of after-tax charges primarily related to restructuring, compared to a net loss of $(88) million in the fourth quarter of 2011, which included $133 million of after-tax charges primarily related to goodwill and tradename impairments. Excluding these charges in both periods, net earnings advanced 17% to $54 million in the fourth quarter of 2012, compared to approximately $46 million in the year-ago quarter. This improvement reflected the increase in EBIT, as well as lower interest expense, stemming from the Company's refinancing activities and lower overall debt levels.
Fiscal Year 2012
Net sales of $2.48 billion in 2012 were essentially even with net sales of $2.47 billion in 2011. Net sales in the Company's North America retail businesses increased 1% to $2.08 billion in 2012, compared to net sales of $2.07 billion in the year-ago period. The 53rd week in 2012 benefited both the consolidated and the North America retail net sales comparisons by approximately 1%.
Adjusted EBITDA was $426 million in the fiscal year 2012, compared to Adjusted EBITDA of $450 million in 2011.
EBIT in 2012 was $284 million, after giving effect to $66 million in pre-tax charges principally related to restructuring and refinancing, compared to EBIT in the year-ago period of $183 million, which included $192 million in pre-tax charges primarily related to impairments, restructuring and a legal settlement.
Net earnings in 2012 were $53 million, after giving effect to $51 million in after-tax charges, primarily related to restructuring and refinancing compared to a net loss in 2011 of $(47) million, which included $156 million of after-tax charges, primarily related to impairments, restructuring and a legal settlement.
Net cash provided by operating activities in 2012 was $203 million, compared to net cash provided by operating activities of $204 million in the year-ago period. Total capital expenditures, including footprint consolidation, were $78 million in 2012 compared to $117 million in 2011. Ongoing capital expenditures, excluding footprint consolidation, were $70 million in 2012 and $88 million in 2011.
Conference Call Information
The Company will host a conference call on Wednesday, March 6, 2013 at 10:00AM (ET) to discuss its results, although the call this quarter will not include the usual question and answer session due to the Pinnacle Foods Inc. Registration Statement filing on December 19, 2012.
To access the call, interested parties can dial (866) 835-8903 and reference conference name: Pinnacle Foods Q4 Earnings Call. A replay of the call will be available, beginning March 6, 2013 at 1:00 PM (ET) until March 20, 2013, by dialing 1-888-266-2081 and referencing Access Code 1606400.
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 4,400 employees. We are a leader in the shelf stable and frozen foods segments and our brands hold the #1 or #2 market position in 10 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 fruit fillings and Open Pit® barbecue sauces. Our Birds Eye Frozen Division manages Leadership brands such as Birds Eye®, Birds Eye Steamfresh®, C&W®, 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 Hungry-Man® dinners and entrées, Aunt Jemima® frozen breakfasts, Lender's® bagels, and Celeste® pizza. Our Specialty Foods Division manages Tim's Cascade Snacks®, Hawaiian® Kettle Style Potato Chips, Erin's® Popcorn, Snyder of Berlin® and Husman's® in addition to our food service and private label businesses. Further information is available at http://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 Annual Report on Form 10-K for the year ended December 30, 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 Measures
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 EBITDA 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 three months and fiscal years ended December 30, 2012 and 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.