Pinnacle Foods Inc. Reports Strong 1st Quarter Fiscal 2013 Results
Company Provides Guidance for the Full Year
PARSIPPANY, NJ (May 15, 2013) - Pinnacle Foods Inc. (NYSE: PF) today announced strong financial results for its first quarter ended March 31, 2013 and provided its outlook for the full year. Net earnings in the first quarter of 2013 more than doubled to $24.8 million, compared with net earnings of $9.5 million in the first quarter of 2012, and Adjusted EBITDA advanced 16% to $104.5 million, compared to Adjusted EBITDA of $89.9 million last year. Net sales in the Company's North America Retail business, which is comprised of the Birds Eye Frozen and Duncan Hines Grocery segments, increased 1.4% in the first quarter.
Pinnacle completed its Initial Public Offering of common stock and began trading on the NYSE under the ticker symbol PF on March 28, 2013. All of the proceeds from the IPO, which closed on April 3, 2013, were used to pay down debt. In addition, Pinnacle refinanced all of its outstanding indebtedness in April, in a series of transactions that significantly reduced its annual cash interest expense and extended its maturity profile. Both of these events will benefit the Company's financial performance beginning in the second quarter of fiscal 2013.
In addition, Pinnacle announced yesterday that its Board of Directors has adopted a policy to pay a regular quarterly dividend. As a result, Pinnacle Foods will pay an initial quarterly cash dividend of $0.18 per share on July 10, 2013 to all common stockholders of record at the close of business on June 20, 2013.
Commenting on the results of the quarter, Pinnacle Foods Chief Executive Officer Bob Gamgort stated, "We are pleased with our excellent start to the year. The significant growth in our earnings reflects the strength of our business model and provides us with the flexibility to invest in our business and respond, as needed, to potential heightened promotional activity."
First Quarter Consolidated Results
Net sales in the first quarter declined 0.6% to $613.0 million, compared to net sales of $616.9 million in the first quarter of 2012, driven by a 10.6% decline in the Specialty Foods segment, stemming from the planned exit of low-margin, unbranded businesses, which offset solid growth in the Company's North America Retail business.
North America Retail sales increased 1.4% due to a 1.2% benefit from higher volume/mix, driven in part by an earlier Easter this year which drove about half of the volume/mix benefit in the quarter, as well as the positive impact of 0.2% from higher net pricing.
Adjusted EBITDA advanced 16.2% to $104.5 million in the first quarter of 2013, compared to Adjusted EBITDA of $89.9 million in the first quarter of 2012. The growth in Adjusted EBITDA primarily reflected higher gross profit due largely to the benefit of productivity savings and favorable product mix, which more than offset modest input cost inflation in the quarter. Adjusted EBITDA is a Non-GAAP measure defined below under "Non-GAAP Financial Measures," and is reconciled to Net Earnings in the tables that accompany this release.
Earnings before interest and taxes (EBIT) increased 23.8% to $80.7 million in the first quarter of 2013, compared to EBIT of $65.2 million in the first quarter of 2012. Excluding restructuring-related and other items in both periods, EBIT advanced 19.1%.
Net earnings more than doubled in the first quarter of 2013 to $24.8 million, compared to net earnings of $9.5 million in the first quarter of 2012. Excluding restructuring-related and other items in both periods, adjusted net earnings totaled $27.6 million in the first quarter of 2013, compared to $13.4 million in the first quarter of 2012, primarily reflecting the growth in EBIT as well as an 18% decline in interest expense, resulting from the Company's 2012 refinancing activities and lower overall debt levels.
Net cash provided by operating activities in the first quarter of 2013 was $67.7 million, compared to $33.9 million in the year-ago period. This improvement was driven by the growth in earnings and continued strong management of working capital.
First Quarter Segment Results
Birds Eye Frozen
Net sales for the Birds Eye Frozen segment increased 0.7% to $292.5 million in the first quarter of 2013, compared to $290.5 million in the year-ago period. This growth reflected a 0.5% increase from volume/mix, which was entirely driven by the benefit of an earlier Easter this year, as well as an increase of 0.2% from higher net pricing. The increase in sales was driven by growth of Birds Eye® Voila! ® complete bag meals, including the Birds Eye® Voila!® Chipotle Chicken line extension introduced during the quarter, and Lender's® bagels, as well as the launch of Mrs. Paul's® and Van de Kamp's® Spicy Fish Fillet Sandwiches, partially offset by a sales decline for Birds Eye® vegetables, driven by a heightened promotional environment.
EBIT for the Birds Eye Frozen segment increased 31.4% to $48.9 million in the first quarter of 2013, compared to $37.2 million in the year-ago period. Excluding restructuring-related and other items in both periods, EBIT advanced 16.3%, due to higher gross profit primarily driven by productivity savings.
Duncan Hines Grocery
Net sales for the Duncan Hines Grocery segment increased 2.3% to $227.2 million in the first quarter of 2013, compared to $222.0 million in the year-ago period. This growth reflected a 2.0% increase in volume/mix, with approximately one-third of the benefit due to the earlier timing of Easter, as well as an increase of 0.3% from higher net pricing. The increase in sales was driven by growth of Mrs. Butterworth's® and Log Cabin® syrups, Vlasic® pickles, including the benefit of Vlasic® Farmer's Garden® introduced in the second half of last year, Comstock® and Wilderness® pie and pastry fruit fillings and the Company's Canadian business, partially offset by lower sales of Duncan Hines® frostings.
EBIT for the Duncan Hines Grocery segment advanced 11.9% to $29.4 million in the first quarter of 2013, compared to $26.3 million in the year-ago period. Excluding restructuring-related and other items in both periods, EBIT advanced 20.7%, due to higher gross profit stemming from lower commodity costs and favorable product mix.
Net sales for the Specialty Foods segment declined 10.6% to $93.3 million in the first quarter of 2013, compared to $104.4 million in the first quarter of 2012, reflecting the planned exit of the Company's low-margin, unbranded pickle business and lower sales of private label canned meat.
EBIT for the Specialty Foods segment advanced 19.1% to $8.2 million in the first quarter of 2013, compared to $6.9 million in the first quarter of 2012. This improvement primarily reflected higher gross profit largely due to productivity savings.
First Quarter Pro Forma Consolidated Results
The Company's recent IPO and refinancing will have a material, positive impact on its net interest expense and net earnings metrics, beginning in the second quarter of 2013. As a result, the Company is providing its consolidated results for the first quarter on a pro forma basis, assuming the IPO and refinancing occurred on the first day of fiscal 2013. In addition, the pro forma basis excludes restructuring-related and other items and some modest IPO expenses. A reconciliation of the pro forma results to the Company's reported results is included in the tables that accompany this release.
For the first quarter of 2013 on a pro forma basis, net interest expense totaled $20.3 million and net earnings totaled $39.6 million, or $0.34 per diluted share, assuming diluted shares outstanding of 117.4 million.
Outlook for Full Year 2013
Due to the impacts that the Company's IPO and 2013 refinancing will have on its interest expense and diluted EPS beginning in the second quarter of 2013, the Company is providing its annual outlook for these measures for the year on a pro forma basis. The pro forma basis assumes that the IPO and 2013 refinancing occurred on the first day of fiscal 2013 and excludes IPO and refinancing charges, restructuring-related and other items and non-cash stock-based compensation expense that, combined, total approximately $65 million on an after-tax basis. Pro forma interest expense is expected to be approximately $82 million for fiscal 2013, and the Company's corresponding outlook for diluted EPS is estimated in the range of $1.49 to $1.55. This reflects a weighted average share count for the year of 117.4 million shares. The Company expects to grow its North America Retail revenue in line with the growth of its categories in 2013.
Finally, to facilitate comparability between 2012 and 2013, the Company is providing key earnings statement data on a pro forma basis for 2012 by quarter, assuming the IPO occurred on January 1, 2012. This information is provided in the tables that accompany this release.
Conference Call Information
The Company will host an investor conference call on Wednesday, May 15, 2013 at 9:30AM (ET) to discuss the results of the quarter. To access the call, investors and analysts can dial (866) 793-1344 in the U.S. and Canada or (703) 639-1315 from outside the U.S. and Canada and reference conference name: Pinnacle Foods Q1 Earnings Call. A replay of the call will be available, beginning May 15, 2013 at 1:00 PM (ET) until May 30, 2013, by dialing (888) 266-2081 in the U.S. and Canada or (703) 925-2533 from the U.S. and Canada and referencing Access Code 1607442. Access to a live audio webcast and replay of the event will be available in the Investor Center of the Company's corporate website at www.pinnaclefoods.com.
About Pinnacle Foods Inc.
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 2012 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 of the 12 major categories in which they compete. Our Duncan Hines Grocery Division manages brands such as Duncan Hines® baking mixes and frostings, Vlasic® shelf-stable pickles, Mrs. Butterworth's® and Log Cabin® table syrups, Armour® canned meats, Brooks® and Nalley® chili and chili ingredients, Duncan Hines® Comstock® and Wilderness® pie and pastry fruit fillings and Open Pit® barbecue sauces. Our Birds Eye Frozen Division manages brands such as Birds Eye®, Birds Eye Steamfresh®, C&W®, McKenzie's®, and Freshlike® frozen vegetables, Birds Eye Voila!® complete bagged frozen meals, Van de Kamp's® and Mrs. Paul's® frozen prepared seafood, Hungry-Man® frozen dinners and entrées, Aunt Jemima® frozen breakfasts, Lender's® frozen and refrigerated bagels, and Celeste® frozen pizza. Our Specialty Foods Division manages Tim's Cascade Snacks®, Hawaiian® kettle style potato chips, Erin's® popcorn, Snyder of Berlin® and Husman's® snacks 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, 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 final prospectus filed with the Securities and Exchange Commission on March 28, 2013 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.