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PR Newswire  08/13/2014 8:30 AM ET
Pinnacle Foods Inc. Reports Fiscal Q2 Results

PARSIPPANY, N.J., Aug. 13, 2014 /PRNewswire/ --  Pinnacle Foods Inc. (NYSE: PF) today reported its financial results for the second quarter ended June 29, 2014 and reaffirmed its guidance for double-digit EPS growth for the year.   Net sales increased approximately 9% versus year-ago in the second quarter, primarily reflecting the benefit of the Wish-Bone acquisition, and earnings per share advanced 22%, on a pro forma basis excluding items affecting comparability.    

Net sales for North America Retail, which is comprised of the Birds Eye Frozen and Duncan Hines Grocery segments, increased 11% versus year-ago, driven by Wish-Bone and strength across the Company's Leadership Brand portfolio, partially offset by lower sales of the Company's Foundation Brand portfolio.

GAAP diluted earnings per share increased to $0.30 in the second quarter of 2014, compared to a loss per share of $0.28 in the year-ago period.   Excluding items affecting comparability, on a pro forma basis which is described in the accompanying reconciliation tables, diluted earnings per share advanced 22% to $0.33, compared to diluted earnings per share of $0.27 in the year-ago period.

Commenting on the results, Pinnacle Foods Chief Executive Officer Bob Gamgort stated, "We continue to execute well in an increasingly challenging environment.   Our business model has proven to be resilient in a food industry characterized by weak growth and heavier promotional spending.   We have been able to strike the right balance between investing in our brands, remaining price competitive and delivering strong earnings growth, and we are pleased that we delivered another quarter of market share growth."

The Company also announced that, subsequent to the end of the second quarter, it reduced indebtedness by $200 million and now expects to achieve a 25 basis point step down in its term loan interest rate at the end of the fiscal third quarter of 2014, one quarter earlier than previously anticipated.  In addition, the Company recently announced a 12% increase in its quarterly dividend to $0.235 per share, effective with its upcoming third quarter dividend to be paid in October 2014.   This increase, which is consistent with the Company's target of achieving a payout ratio of 50% of net earnings, reflects the Company's continuing strong cash flow performance and confidence in its business model.

Second Quarter Consolidated Results
Net sales in the second quarter of 2014 increased 8.6% to $617.8 million, compared to net sales of $569.0 million in the second quarter of 2013, primarily due to a 9.6% benefit from the Wish-Bone acquisition and a 2.0% increase from higher volume/mix, largely reflecting the benefit of the Easter-related shift of sales from the first quarter to the second quarter of 2014.   Partially offsetting this growth was lower net pricing of 2.8%, stemming from Easter-related promotional activity and trade investments made during the quarter to enhance competitiveness at retail.   Also impacting the comparison was unfavorable foreign currency translation of 0.2%.

North America Retail net sales increased 11.0% to $536.2 million in the second quarter of 2014, compared to $482.9 million in the year-ago period, reflecting an 11.2% benefit from the Wish-Bone acquisition and a 3.2% increase from higher volume/mix, including the Easter-related sales shift, partially offset by lower net pricing of 3.2% and unfavorable foreign currency translation of 0.2%.   The decrease in net pricing was largely due to the aforementioned Easter-related promotional activity and trade investments.

Adjusted EBITDA on a pro forma basis advanced 17.5% to $105.9 million in the second quarter of 2014, compared to $90.1 million in the second quarter of 2013.   This performance reflected the growth in net sales, gross margin expansion of 70 basis points, and lower administrative expenses, partially offset by higher consumer marketing investment.   The gross margin expansion was driven by productivity savings and favorable mix, partially offset by lower net pricing and inflation.  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) advanced significantly to $81.9 million in the second quarter of 2014, compared to $11.0 million in the second quarter of 2013.   Excluding items affecting comparability, EBIT on a pro forma basis increased approximately 21% to $86.3 million in the second quarter of 2014, compared to $71.3 million in the year-ago period.

Interest expense for the quarter on an adjusted pro forma basis increased 24% to $24.5 million, driven by debt incurred with the Wish-Bone acquisition.   On the same basis, the effective tax rate for the quarter was 38.1%, compared to 39.5% in the prior year period, due to a benefit in the current quarter from a change in state tax legislation.

Net earnings in the second quarter advanced to $35.6 million compared with a net loss of $31.8 million in the year-ago period.   Excluding items affecting comparability, on a pro forma basis, net earnings for the second quarter increased approximately 23% to $38.3 million compared to net earnings of $31.2 million in the year-ago period.  

Net cash provided by operating activities more than doubled in the second quarter of 2014 to $93 million, compared to $44 million in the year-ago period.   The strong cash flow performance reflected growth in earnings before income taxes and improvement in working capital in 2014.  

Second Quarter Segment Results

Birds Eye Frozen
Net sales for the Birds Eye Frozen segment increased approximately 1% to $246.2 million in the second quarter of 2014, compared to $244.0 million in the year-ago period.   The performance was due to a 5.0% increase from volume/mix, including the Easter-related sales shift for Birds Eye vegetables, partially offset by lower net pricing of 4.1%, largely reflecting the impact of Easter-related promotional spending and trade investments to enhance competitiveness at retail for Birds Eye vegetables and Birds Eye Voila! skillet meals.   These two Leadership Brands drove the net sales growth in the quarter,  partially offset by lower sales of Celeste pizza, Aunt Jemima breakfast products, and Mrs. Paul's and Van de Kamp's seafood.   During the quarter, Birds Eye introduced a Birds Eye Steamfresh kale variety and three new varieties of Birds Eye Steamfresh Chef's Favorites, while Birds Eye Voila! continued the expansion of its Family Size line.

EBIT for the Birds Eye Frozen segment increased approximately 1% to $37.1 million in the second quarter of 2014, compared to $36.5 million in second quarter of 2013.   Excluding items affecting comparability, EBIT declined approximately 5%, as the benefits of productivity savings and net sales growth were more than offset by trade investments made during the quarter and higher commodity and logistics costs.  

Duncan Hines Grocery
Net sales for the Duncan Hines Grocery segment advanced approximately 21% to $290.0 million in the second quarter of 2014, compared to $238.8 million in the year-ago period, due to a 22.6% benefit from the Wish-Bone acquisition and higher volume/mix of 1.3%.   Partially offsetting these growth drivers were lower net pricing of 2.0%, reflecting the impacts of Easter-related promotional spending and a heightened promotional environment in the Company's Canadian business, as well as unfavorable foreign currency translation of 0.5%.    

The growth in net sales was primarily driven by the Leadership Brands””namely, Wish-Bone salad dressings, Duncan Hines baking products and Vlasic pickles””due, in part, to the benefit of the later Easter holiday.   These growth drivers were partially offset by lower sales from the Foundation Brands and the Company's Canadian business.  During the quarter, Duncan Hines continued to expand its Decadent line and seasonal offerings with the introductions of Decadent Black & White Cupcake kit and Duncan Hines Limited Edition Summer Velvets.  

EBIT for the Duncan Hines Grocery segment advanced 56% to $46.3 million in the second quarter of 2014, compared to $29.7 million in the year-ago period.   Excluding items affecting comparability, EBIT advanced approximately 43% to $48.6 million, driven by the net sales growth, including the benefits of Wish-Bone, productivity savings and lower commodity prices, partially offset by higher logistics costs and increased consumer marketing.

Specialty Foods
Net sales for the Specialty Foods segment declined approximately 5% to $81.6 million in the second quarter of 2014, compared to $86.2 million in the second quarter of 2013, due to lower volume/mix of 4.6% and lower net pricing of  1.7%, partially offset by a 1.0% benefit from the Wish-Bone foodservice business.   For the base business, growth in snacks was more than offset by lower sales of private label canned meat.

EBIT for the Specialty Foods segment increased 30% to $6.3 million in the second quarter of 2014, compared to $4.9 million in the second quarter of 2013.   Excluding items affecting comparability, EBIT advanced approximately 25%, driven by productivity savings, reduced commodity prices and favorable mix.

Outlook for the Balance of the Year
The Company reaffirmed its adjusted EPS guidance for fiscal 2014 in the range of $1.70 - $1.75, or growth of 12% to 15% versus year-ago.   The Company continues to expect input cost inflation for 2014 of approximately 2%, productivity in the range of 3-4% of cost of products sold, and a diluted weighted average share count of 117.2 million.   Given the benefits realized in the first half, the Company now expects its effective tax rate for the year to be slightly below its previous guidance of 38.9%.

Due to the termination of the Company's merger agreement with Hillshire Brands, Pinnacle received a $163 million termination fee at the beginning of the third quarter of fiscal 2014.   The fee, in concert with cash on hand, was used to reduce debt by $200 million.   As a result of the debt pay-down and the Company's anticipated ongoing strong cash flow, Pinnacle expects its net leverage ratio at the end of the third quarter to fall below the 4.25x threshold that will trigger a 25 basis point reduction in the interest rate on its term loans.   The combination of the debt reduction and expected interest rate step-down would result in net interest expense for 2014 to be slightly below the $100 million previously forecasted.   The Company plans to reinvest the interest savings in 2014 back into the business.  

Conference Call Information
The Company will host an investor conference call on Wednesday, August 13, 2014 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 Q2 Earnings Call.   A replay of the call will be available, beginning August 13, 2014 at 1:00 PM (ET) until August 27, 2014, by dialing (888) 266-2081 in the U.S. and Canada or (703) 925-2533 from outside the U.S. and Canada and referencing Access Code 1618983.   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 ranked on Fortune Magazine's 2014 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 13 major categories in which they compete. Our Duncan Hines Grocery Division manages brands such as Duncan Hines™ baking mixes and frostings, Vlasic™ and Vlasic Farmer's Garden™ shelf-stable pickles, Wish-Bone™ and Western™ salad dressings, 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 Form 10-K filed with the Securities and Exchange Commission on March 6, 2014 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 this announcement, except as required by applicable law.

 

 

PINNACLE FOODS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(thousands, except per share data)








Three months ended


Six months ended



June 29,
 2014


June 30,
 2013


June 29,
 2014


June 30,
 2013

Net sales


$

617,800



$

569,044



$

1,261,839



$

1,182,025


Cost of products sold


455,583



424,616



932,961



882,756


Gross profit


162,217



144,428



328,878



299,269


Operating expenses













Marketing and selling expenses


47,970



47,508



92,098



93,136


Administrative expenses


24,618



45,327



50,595



67,885


Research and development expenses


2,876



2,789



5,358



5,116


Other expense (income), net


4,843



37,833



8,826



41,490


Total operating expenses


80,307



133,457



156,877



207,627


Earnings before interest and taxes


81,910



10,971



172,001



91,642


Interest expense


24,524



47,627



48,891



88,283


Interest income


32



42



58



45


Earnings (loss) before income taxes


57,418



(36,614)



123,168



3,404


Provision (benefit) for income taxes


21,834



(4,775)



46,836



10,447


Net earnings (loss)


$

35,584



$

(31,839)



$

76,332



$

(7,043)















Net earnings (loss) per share













Basic


$

0.31



$

(0.28)



$

0.66



$

(0.07)


Weighted average shares outstanding - basic


115,690



114,909



115,641



98,080


Diluted


$

0.30



$

(0.28)



$

0.65



$

(0.07)


Weighted average shares outstanding - diluted


116,901



114,909



116,794



98,080


Dividends declared


$

0.21



$

0.18



$

0.42



$

0.18


 

PINNACLE FOODS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (unaudited)

(thousands of dollars, except share and per share amounts)









June 29,
 2014


December 29,
 2013

Current assets:






Cash and cash equivalents

$

170,834



$

116,739


Accounts receivable, net of allowances of $6,234 and $5,849, respectively

173,120



164,664


Inventories

339,218



361,872


Other current assets

9,078



7,892


Deferred tax assets

150,029



141,142


Total current assets

842,279



792,309


Plant assets, net of accumulated depreciation of $326,694 and $297,103, respectively

552,947



523,270


Tradenames

1,951,392



1,951,392


Other assets, net

161,207



186,125


Goodwill

1,637,645



1,628,095


Total assets

$

5,145,470



$

5,081,191








Current liabilities:






Short-term borrowings

$

1,998



$

2,437


Current portion of long-term obligations

28,082



24,580


Accounts payable

157,765



142,353


Accrued trade marketing expense

31,930



37,060


Accrued liabilities

92,346



99,755


Dividends payable

25,746



25,119


Total current liabilities

337,867



331,304


Long-term debt (includes $54,376 and $63,796 owed to related parties, respectively)

2,475,975



2,476,167


Pension and other postretirement benefits

44,400



49,847


Other long-term liabilities

26,969



24,560


Deferred tax liabilities

645,666



601,272


Total liabilities

3,530,877



3,483,150


Commitments and contingencies






Shareholders' equity:






Pinnacle preferred stock: $.01 per share, 50,000,000 shares authorized, none issued

””



””


Pinnacle common stock: par value $.01 per share, 500,000,000 shares authorized;
issued and outstanding 117,303,176 and 117,231,853, respectively

1,173



1,172


Additional paid-in-capital

1,331,185



1,328,847


Retained earnings

302,545



275,519


Accumulated other comprehensive loss

(20,310)



(7,497)


Total shareholders' equity

1,614,593



1,598,041


Total liabilities and shareholders' equity

$

5,145,470



$

5,081,191








 

 

PINNACLE FOODS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(thousands of dollars)




Six months ended


June 29,
 2014


June 30,
 2013

Cash flows from operating activities






Net earnings (loss)

$

76,332



$

(7,043)


Non-cash charges (credits) to net earnings






Depreciation and amortization

39,958



38,025


Amortization of discount on term loan

1,267



410


Amortization of debt acquisition costs

2,056



2,755


Call premium on note redemptions

””



34,180


Refinancing costs and write off of debt issuance costs

””



19,668


Change in value of financial instruments

497



52


Equity-based compensation charge

4,448



3,325


Pension expense, net of contributions

(5,622)



(3,115)


                Gain on sale of assets held for sale

””



(701)


Other long-term liabilities

(10)



(1,218)


Other long-term assets

””



””


Deferred income taxes

45,438



8,953


Changes in working capital






Accounts receivable

(8,367)



(5,378)


Inventories

33,252



69,120


Accrued trade marketing expense

(5,177)



(7,959)


Accounts payable

13,840



(21,144)


Accrued liabilities

(9,477)



(13,163)


Other current assets

(1,881)



(4,650)


Net cash provided by operating activities

186,554



112,117


Cash flows from investing activities






Payments for business acquisition

(11,769)



””


Capital expenditures

(56,210)



(43,823)


Proceeds from sale of plant assets

””



1,775


Net cash used in investing activities

(67,979)



(42,048)


Cash flows from financing activities






Net proceeds from initial public offering

””



623,929


Net proceeds from issuance of common stock

165



217


Repurchases of equity

””



(191)


Excess tax benefits on equity-based compensation

786



””


Taxes paid related to net share settlement of equity awards

(3,061)



””


Dividends paid

(48,635)



””


Proceeds from bank term loans

””



1,625,925


Proceeds from notes offerings

””



350,000


Repayments of long-term obligations

(11,360)



(1,732,071)


Repurchase of notes

””



(899,180)


Proceeds from short-term borrowings

1,773



1,935


Repayments of short-term borrowings

(2,185)



(2,732)


Repayment of capital lease obligations

(1,755)



(1,377)


Debt acquisition costs

(214)



(12,491)


Net cash used in financing activities

(64,486)



(46,036)


Effect of exchange rate changes on cash

6



212


Net change in cash and cash equivalents

54,095



24,245


Cash and cash equivalents - beginning of period

116,739



92,281


Cash and cash equivalents - end of period

$

170,834



$

116,526








Supplemental disclosures of cash flow information:






Interest paid

$

45,375



$

77,734


Interest received

58



45


Income taxes paid

3,656



2,144


Non-cash investing and financing activities:






New capital leases

282



6,461


Dividends payable

25,746



21,107


Non-GAAP Financial Measures
Pinnacle Foods Inc. uses the following non-GAAP financial measures as defined by the Securities and Exchange Commission in our financial communications. These non-GAAP financial measures should be considered in addition to the GAAP reported measures, should not be considered replacements for the GAAP measures and may not be comparable to similarly named measures used by other companies.

  • North America Retail Net Sales
  • Adjusted Gross Profit
  • Adjusted EBITDA
  • Adjusted Earnings before Interest and Taxes (Adjusted EBIT)
  • Adjusted interest expense, net
  • Adjusted net earnings
  • Adjusted earnings per share

North America Retail Net Sales
North America Retail Net Sales is the sum of the net sales of the Birds Eye Frozen segment and the net sales of the Duncan Hines Grocery segment. We refer to this to measure net sales performance of our retail focused branded business in contrast to our Specialty Foods segment where over the last several years we have de-emphasized certain low margin foodservice and private label businesses.

Items Impacting Gross Profit and Earnings

Adjusted Gross Profit

Adjusted gross profit is defined as gross profit before accelerated depreciation related to restructuring activities, certain non-cash items, acquisition, merger and other restructuring charges and other adjustments. We believe that the presentation of Adjusted gross profit is useful to investors because it is consistent with our definition of Adjusted EBITDA (defined below), a measure frequently used by securities analysts, investors and other interested parties in their evaluation of the operating performance of companies in industries similar to ours. In addition, we also use targets based on Adjusted gross profit as one of the components used to evaluate our management's performance.

Adjusted EBITDA

The Company's metric of Adjusted EBITDA, which is used in creating targets for the bonus and equity portions of our compensation plans, is substantially 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 an important component 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.

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 certain non-cash items, non-recurring items and certain other adjustment items permitted in calculating Covenant Compliance EBITDA under the Senior Secured Credit Facility and the indentures governing the Senior Notes. Adjusted EBITDA does not include adjustments for equity based compensation and certain other adjustments related to acquisitions, both of which are permitted in calculating Covenant Compliance EBITDA.

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.

Adjusted Earnings Before Interest and Taxes (Adjusted EBIT)

Adjusted Earnings before Interest and Taxes is provided because Pinnacle believes it is useful information in understanding our EBIT results by improving the comparability of year-to-year results.

Adjusted Interest Expense, Net

Adjusted interest expense, net is provided to assist the reader by eliminating mark to market adjustments and the charges which result from refinancing activities.

Adjusted Net Earnings

Adjusted Earnings Per Share

Adjusted net earnings and the related adjusted earnings per share are provided to present the reader with the aftertax impact of Adjusted EBIT and Adjusted interest expense, net in order to improve the comparability and understanding of the related GAAP measures.

 

Pinnacle Foods Inc.

Reconciliation from Reported to Adjusted (Note 1) Statement of Operations Amounts (unaudited)

For the three months ended June 29, 2014

(thousands, except per share amounts)



Reported


Acquisition,












Three Months Ended


Merger and


Other





Adjusted



June 29,


Other Restructuring


Non-Cash


Other


June 29,



2014


Charges (2)


Items (3)


Adjustments (4)


2014

Net sales


$

617,800



$

””



$

””



$

””



$

617,800


Gross profit


$

162,217



$

2,108



$

(158)



$

””



$

164,167


% of net sales


26.3

%











26.6

%

















Operating expenses
















Marketing and selling expenses


$

47,970



$

””



$

””



$

””



$

47,970


Administrative expenses


24,618



(190)



””



(169)



24,259


Research and development expenses


2,876



””



””



””



2,876


Other expense (income), net


4,843



(2,086)



””



””



2,757


Total operating expenses


$

80,307



$

(2,276)



$

””



$

(169)



$

77,862


















Earnings before interest and taxes


$

81,910



$

4,384



$

(158)



$

169



$

86,305


















Interest expense, net


$

24,492



$

””



$

””



$

””



$

24,492


Provision for income taxes


$

21,834



$

1,705



$

(61)



$

66



$

23,544


% effective tax rate


38.0

%











38.1

%

















Net earnings


$

35,584



$

2,679



$

(97)



$

103



$

38,269


















Diluted net earnings per share


$

0.30












$

0.33


Diluted weighted average outstanding shares

116,901












116,901


















Adjusted EBITDA (Non GAAP - See separate discussion and tables)













EBIT


$

81,910



$

4,384



$

(158)



$

169



$

86,305


Depreciation


16,392



””



””



””



16,392


Amortization


3,186



””



””



””



3,186


EBITDA


$

101,488



$

4,384



$

(158)



$

169



$

105,883



(1) Excludes Wish-Bone pre-acquisition earnings and anticipated synergies which are included in calculating Covenant compliance.

(2) Represents plant integration and restructuring charges ($2.1MM), professional fees and other expenses related to the terminated Hillshire offer ($2.1MM) and other acquisition related expenses ($0.2MM).

(3) Represents unrealized mark-to-market gains +$0.2MM resulting from hedging activities.

(4) Represents miscellaneous other expenses ($0.2MM).


 

Pinnacle Foods Inc.

Reconciliation from Reported to Adjusted and Proforma (Notes 1 and 2) Statement of Operations Amounts (unaudited)

For the three months ended June 30, 2013

(thousands, except per share amounts)



Reported


Acquisition,





















Three Months Ended


Merger and


Other





Adjusted


IPO


Public


Proforma



June 30,


Other Restructuring


Non-Cash


Other


June 30,


Interest


Company


June 30,



2013


Charges (3)


Items (4)


Adjustments (5)


2013


Adjustments (2)


Costs (2)


2013

Net sales


$

569,044



$

””



$

””



$

””



$

569,044



$

””



$

””



$

569,044


Gross profit


$

144,428



$

2,354



$

430



$

””



$

147,212



””



$

””



$

147,212


% of net sales


25.4

%











25.9

%








25.9

%


























Operating expenses

























Marketing and selling expenses


$

47,508



$

(2,989)



$

””



$

””



$

44,519



$

””



$

””



$

44,519


Administrative expenses


45,327



(1,713)



””



(18,456)



25,158



””



(200)



24,958


Research and development expenses


2,789



(32)



””



””



2,757



””



””



2,757


Other expense (income), net


37,833



””



””



(34,180)



3,653



””



””



3,653


Total operating expenses


133,457



(4,734)



””



(52,636)



76,087



””



(200)



75,887



























Earnings before interest and taxes


$

10,971



$

7,088



$

430



$

52,636



$

71,125



””



$

200



$

71,325



























Interest expense, net


$

47,585



$

””



$

””



$

(22,467)



$

25,118



$

(5,396)



$

””



$

19,722


Provision for income taxes


$

(4,775)



$

2,588



$

168



$

20,230



$

18,211



$

2,104



$

78



$

20,393


% effective tax rate


13.0

%











39.6

%








39.5

%


























Net earnings


$

(31,839)



$

4,500



$

262



$

54,873



$

27,796



$

3,292



$

122



31,210



























Diluted net earnings per share


$

(0.28)












$

0.24



””






$

0.27


Diluted weighted average outstanding shares


114,909












114,909



1,180






116,089



























Adjusted EBITDA (Non GAAP - See separate discussion and tables)






















EBIT


$

10,971



$

7,088



$

430



$

52,636



$

71,125



””



$

200



$

71,325


Depreciation


14,883



””



””



””



14,883



””



””



14,883


Amortization


3,872



””



””



””



3,872



””



””



3,872


EBITDA


$

29,726



$

7,088



$

430



$

52,636



$

89,880



””



$

200



$

90,080



























(1) Excludes Wish-Bone pre-acquisition earnings and anticipated synergies which are included in calculating Covenant compliance.

(2) Reflects Adjusted Statement of Operations amounts, assuming IPO and 2013 Refinancing occurred on the first day of Fiscal 2013.

(3) Represents employee severance ($2.7MM), restructuring charges related to plant closures ($2.2MM), principally our Millsboro, Delaware facility, business optimization expenses related to the expansion of direct sales coverage for retailer headquarters to more than 50% of our U.S. retail business ($1.7MM), along with other IPO related expenses.

(4) Represents unrealized mark-to-market losses resulting from hedging activities ($0.4MM).

(5) Represents premiums paid on the redemption of Senior Notes ($34.2MM) and management/advisory fees and expenses paid to an affiliate of Blackstone ($18.5MM) which includes the termination of the Blackstone management fee agreement as a result of the IPO. Interest expense of $22.5MM includes charges associated with the 2013 refinancing, such as write offs of deferred financing costs, original issue discount and financing fees.


 

Pinnacle Foods Inc.

Reconciliation from Reported to Adjusted (Note 1) Statement of Operations Amounts (unaudited)

For the six months ended June 29, 2014

(thousands, except per share amounts)



Reported


Acquisition,












Six Months Ended


Merger and


Other





Adjusted



June 29,


Other Restructuring


Non-Cash


Other


June 29,



2014


Charges (2)


Items (3)


Adjustments (4)


2014

Net sales


$

1,261,839



$

””



$

””



$

””



$

1,261,839


Gross profit


$

328,878



$

3,663



$

264



$

””



$

332,805


% of net sales


26.1

%











26.4

%

















Operating expenses
















Marketing and selling expenses


$

92,098



$

””



$

””



$

””



$

92,098


Administrative expenses


50,595



(838)



””



(169)



49,588


Research and development expenses


5,358



””



””



””



5,358


Other expense (income), net


8,826



(2,086)



””



””



6,740


Total operating expenses


$

156,877



$

(2,924)



$

””



$

(169)



$

153,784


















Earnings before interest and taxes


$

172,001



$

6,587



$

264



$

169



$

179,021


















Interest expense, net


$

48,833



$

””



$

18



$

””



$

48,851


Provision for income taxes


$

46,836



$

2,562



$

96



$

66



$

49,560


% effective tax rate


38.0

%











38.1

%

















Net earnings


$

76,332



$

4,025



$

150



$

103



$

80,610


















Diluted net earnings per share


$

0.65












$

0.69


Diluted weighted average outstanding shares

116,794












116,794


















Adjusted EBITDA (Non GAAP - See separate discussion and tables)













EBIT


$

172,001



$

6,587



$

264



$

169



$

179,021


Depreciation


32,597



””



””



””



32,597


Amortization


7,361



””



””



””



7,361


EBITDA


$

211,959



$

6,587



$

264



$

169



$

218,979


















(1) Excludes Wish-Bone pre-acquisition earnings and anticipated synergies which are included in calculating Covenant compliance.

(2) Represents plant integration and restructuring charges ($3.7MM), professional fees and other expenses related to the terminated Hillshire offer ($2.1MM), employee severance ($0.4MM), and other acquisition related expenses ($0.4MM).

(3) Represents unrealized mark-to-market losses resulting from hedging activities ($0.3MM).

(4) Represents miscellaneous other expenses ($0.2MM).

 

Pinnacle Foods Inc.

Reconciliation from Reported to Adjusted and Proforma (Notes 1 and 2) Statement of Operations Amounts (unaudited)

For the six months ended June 30, 2013

(thousands, except per share amounts)



Reported


Acquisition,





















Six Months Ended


Merger and


Other





Adjusted


IPO


Public


Proforma



June 30,


Other Restructuring


Non-Cash


Other


June 30,


Interest


Company


June 30,



2013


Charges (3)


Items (4)


Adjustments (5)


2013


Adjustments (2)


Costs (2)


2013

Net sales


$

1,182,025



$

””



$

””



$

””



$

1,182,025



$

””



$

””



$

1,182,025


Gross profit


$

299,269



$

4,142



$

26



$

””



$

303,437



””



$

””



$

303,437


% of net sales


25.3

%











25.7

%








25.7

%


























Operating expenses

























Marketing and selling expenses


$

93,136



$

(4,560)



$

””



$

””



$

88,576



$

””



$

””



$

88,576


Administrative expenses


67,885



(2,284)



””



(19,179)



46,422



””



400



46,822


Research and development expenses


5,116



(120)



””



””



4,996



””



””



4,996


Other expense (income), net


41,490



””



””



(34,180)



7,310



””



””



7,310


Total operating expenses


207,627



(6,964)



””



(53,359)



147,304



””



400



147,704



























Earnings before interest and taxes


$

91,642



$

11,106



$

26



$

53,359



$

156,133



””



$

(400)



$

155,733



























Interest expense, net


$

88,238



$

””



$

””



$

(22,467)



$

65,771



$

(25,763)



$

””



$

40,008


Provision for income taxes


$

10,447



$

4,155



$

79



$

20,513



$

35,194



$

10,047



$

(156)



$

45,085


% effective tax rate


306.9

%











38.9

%








39.0

%


























Net earnings


$

(7,043)



$

6,951



$

(53)



$

55,313



$

55,168



$

15,716



$

(244)



70,640



























Diluted net earnings per share


$

(0.07)












$

0.56



””






$

0.60


Diluted weighted average outstanding shares


98,080












98,080



18,746






116,826



























Adjusted EBITDA (Non GAAP - See separate discussion and tables)






















EBIT


$

91,642



$

11,106



$

26



$

53,359



$

156,133



””



$

(400)



$

155,733


Depreciation


30,281



””



””



””



30,281



””



””



30,281


Amortization


7,744



””



””



””



7,744



””



””



7,744


EBITDA


$

129,667



$

11,106



$

26



$

53,359



$

194,158



””



$

(400)



$

193,758



























(1) Excludes Wish-Bone pre-acquisition earnings and anticipated synergies which are included in calculating Covenant compliance.

(2) Reflects Adjusted Statement of Operations amounts, assuming IPO and 2013 Refinancing occurred on the first day of Fiscal 2013.

(3) Represents restructuring charges related to plant closures ($4.1MM), principally our Millsboro, Delaware facility, business optimization expenses related to the expansion of direct sales coverage for retailer headquarters to more than 50% of our U.S. retail business ($3.3MM), employee severance ($2.9MM), along with other IPO related expenses.

(4) Represents unrealized mark-to-market losses resulting from hedging activities.

(5) Represents premiums paid on the redemption of Senior Notes ($34.2MM) and management/advisory fees and expenses paid to an affiliate of Blackstone ($19.2MM) which includes the termination of the Blackstone management fee agreement as a result of the IPO. Interest expense of $22.5MM includes charges associated with the 2013 refinancing, such as write offs of deferred financing costs, original issue discount and financing fees.

 

Pinnacle Foods Inc.

Reconciliation from Reported to Adjusted Segment Amounts (unaudited)

For the three months ended June 29, 2014 and June 30, 2013

(thousands)

 



Three Months Ended


Six Months Ended



June 29,


June 30,


June 29,


June 30,



2014



2013



2014



2013


Net sales - Reported













Birds Eye Frozen


$

246,188



$

244,040



$

540,466



$

536,491


Duncan Hines Grocery


289,963



238,821



554,867



466,029


North America Retail


536,151



482,861



1,095,333



1,002,520


Specialty Foods


81,649



86,183



166,506



179,505


Total


$

617,800



$

569,044



$

1,261,839



$

1,182,025




























Earnings before interest & taxes - Reported












Birds Eye Frozen


$

37,068



$

36,527



$

83,796



$

85,453


Duncan Hines Grocery


46,349



29,702



89,022



59,134


Specialty Foods


6,348



4,875



13,420



13,061


Unallocated corporate expenses

(7,855)



(60,133)



(14,237)



(66,006)


Total


$

81,910



$

10,971



$

172,001



$

91,642




























Adjustments (Non GAAP - See separate table)













Birds Eye Frozen


$

(57)



$

2,426



$

341



$

3,245


Duncan Hines Grocery


2,212



4,356



4,371



6,804


Specialty Foods


(15)



180



53



180


Unallocated corporate expenses

2,255



53,192



2,255



54,262


Total


$

4,395



$

60,154



$

7,020



$

64,491




























Earnings before interest & taxes - Adjusted (Non GAAP

- See separate discussion and tables)













Birds Eye Frozen


$

37,011



$

38,953



$

84,137



$

88,698


Duncan Hines Grocery


48,561



34,058



93,393



65,938


Specialty Foods


6,333



5,055



13,473



13,241


Unallocated corporate expenses


(5,600)



(6,941)



(11,982)



(11,744)


Total


$

86,305



$

71,125



$

179,021



$

156,133















 

Pinnacle Foods Inc.

Reconciliation from Reported to Adjusted Segment Amounts

Supplemental Schedule of Adjustments Detail

For the three months ended March 30, 2014 and March 31, 2013

(millions)



Adjustments to Earnings Before Interest and Taxes



Three Months Ended


Six Months Ended



June 29, 2014


June 30, 2013


June 29, 2014


June 30, 2013

Birds Eye Frozen













Restructuring charges


$

””



$

1.0



$

””



$

1.9


Employee severance


””



1.3



0.2



1.4


Unrealized mark-to-market (gain)/loss


(0.1)



0.3



0.1



0.1


Other


””



(0.2)



””



(0.2)


Total Birds Eye Frozen


$

(0.1)



$

2.4



$

0.3



$

3.2















Duncan Hines Grocery













Wish-Bone acquisition related charges


$

0.2



$

””



$

0.4



$

””


Restructuring charges


2.1



2.9



3.7



5.5


Employee severance


””



1.2



0.2



1.3


Unrealized mark-to-market (gain)/loss


(0.1)



0.2



0.1



””


Other


””



0.1



””



””


Total Duncan Hines Grocery


$

2.2



$

4.4



$

4.4



$

6.8















Specialty Foods













Employee severance


$

””



$

0.2



$

””



$

0.2


Other


””



””



0.1



””


Total Specialty Foods


$

””



$

0.2



$

0.1



$

0.2















Unallocated Corporate Expenses













Terminated Hillshire Offer expenses


$

2.1



$

””



$

2.1



$

””


Premiums paid on redemption of Senior Notes


””



34.2



””



34.2


Blackstone management/advisory fee


””



18.5



””



19.2


Other


0.2



0.5



0.2



0.9


Total Unallocated Corporate Expenses


$

2.3



$

53.2



$

2.3



$

54.3


 

SOURCE Pinnacle Foods Inc.

 

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