Packaging
Pinnacle Foods Finance LLC Reports 2010 Fiscal Year Results
Monday 14. March 2011 - Pinnacle Foods Finance LLC ("Pinnacle", "we", or "our"), a leading manufacturer, marketer and distributor of branded, high-quality food products in North America, announced its financial results for the fourth quarter and year ended December 26, 2010. N
et sales were $662 million compared to $412 million in last years fourth quarter. This increase was principally due to the acquisition of Birds Eye Foods, Inc. late in 2009. Net earnings were $16 million compared to net earnings of $292 million in the fourth quarter of last year, which is an increase of $40 million excluding the one-time $316 million reversal of deferred tax valuation reserves in the fourth quarter of last year. For fiscal year 2010, net sales were $2.44 billion compared with $1.64 billion last year, again principally due to the acquisition of Birds Eye Foods, Inc. On a proforma basis, net sales in the North American retail business, excluding the Birds Eye Steamfresh and the U.S. Swanson frozen meals businesses which we have exited, were down 1.2% for the year. Net earnings were $22 million compared to $303 million a year ago, also impacted by the one-time $316 million reversal of deferred tax valuation reserves in the fourth quarter of last year. Net cash provided by operating activities was $257 million in 2010 compared to $116 million last year primarily driven by a significant improvement in working capital and the earnings of Birds Eye Foods. Consolidated EBITDA, as defined in our Senior Secured Credit Facility and the Indentures governing our Senior Notes and Senior Subordinated Notes, was $475 million in 2010 compared to $472 million last year, an increase of approximately 1%. Consolidated EBITDA is defined below under “Non-GAAP Financial Matters”.
“2010 was a year of significant accomplishment for Pinnacle Foods. Our integration of the Birds Eye Foods acquisition is complete and we have already realized $25 million of synergies. In a highly competitive marketplace, we grew or held market share on brands accounting for 66% of our product contribution, re-energized our innovation pipeline, and delivered significant productivity gains. Our cash flow from operations was strong, topping $250 million and we successfully refinanced a portion of our debt at attractive interest rates,” said Pinnacles Chief Executive Officer, Bob Gamgort.
Fourth Quarter 2010
Consolidated net sales were $662 million in the fourth quarter of 2010 compared to $412 million in last years fourth quarter, an increase of $250 million. The acquisition of Birds Eye Foods added $264 million of net sales. On a proforma basis after giving effect to the acquisition of Birds Eye Foods, net sales for the fourth quarter of 2010 were down 4.9% compared to the same period year ago, with net sales in our North American retail businesses down 5.0% driven by weak category performance. Excluding the Birds Eye Steamfresh and U.S. Swanson frozen meals businesses which we have exited, net sales in the North American retail business were down 3.4%.
Net sales in the Birds Eye Frozen Division were $288 million in the fourth quarter compared to $117 million in last years fourth quarter. The acquisition of Birds Eye Foods added $180 million of net sales, led by Birds Eye Steamfresh vegetables and Birds Eye Voila! compete bagged meals. The net sales of the remaining businesses in the division decreased $9 million, driven by declines in Aunt Jemima, Lenders bagels, and the exit of the U.S. Swanson dinners.
Net sales in the Duncan Hines Grocery Division were $273 million in the fourth quarter compared to $229 million in last years fourth quarter. The acquisition of Birds Eye Foods added $46 million of net sales. The net sales of the remaining businesses in the division declined $2 million driven by increases in our Canadian business, Armour canned meats, and syrups offset by declines in Duncan Hines, where we chose not to participate in inefficient promotions in a category marked by significant competitive activity.
Net sales in the Specialty Foods Division were $101 million in the fourth quarter compared to $67 million in last years fourth quarter. The acquisition of Birds Eye Foods added $38 million of net sales. The net sales of the remaining businesses in the division declined $4 million, driven by exiting lower margin foodservice products.
Earnings before interest and taxes (EBIT) were $78 million in the fourth quarter of 2010, or 11.8% of net sales, compared to 6.4% of net sales in the fourth quarter of 2009. Excluding the impact of the non-cash tradename impairment ($29 million) and integration costs ($1 million), EBIT would have been $108 million, or 16.3% of net sales. The growth in the EBIT margin was principally driven by lower commodity costs, improved product mix and our productivity initiatives taking hold, as well as lower administrative costs, reflecting the synergies realized from the Birds Eye Foods acquisition. Synergies realized, defined as reduction in operating costs resulting from the combination of Pinnacle and Birds Eye Foods, increased EBIT by $11 million in the fourth quarter of 2010.
Net earnings were impacted by higher interest expense to fund the Birds Eye Foods acquisition which occurred at the end of 2009. The effective tax rate in this years fourth quarter was 36.2%.
Overall, net earnings were $16 million in the fourth quarter of 2010, compared to net earnings of $292 million in the same period a year ago, which included a $316 million one-time adjustment of the deferred tax valuation allowance.
Fiscal Year 2010
Consolidated net sales were $2.44 billion in 2010 compared to $1.64 billion last year, an increase of $794 million. The acquisition of Birds Eye Foods added $893 million of net sales. On a proforma basis after giving effect to the acquisition of Birds Eye Foods, net sales for fiscal 2010 were down 4.4% compared to the same period year ago, with net sales in our North American retail businesses down 2.4% and Specialty Foods Division net sales down 13%. Excluding the Birds Eye Steamfresh and the U.S. Swanson frozen meals businesses which we have exited, net sales in the North American retail business were down 1.2% for the year.
Net sales in the Birds Eye Frozen Division were $1.07 billion in 2010 compared to $473 million last year. The acquisition of Birds Eye Foods added $625 million of net sales. Birds Eye Steamfresh vegetables and Birds Eye Voila! complete bagged meals showed sizable sales and market share gains. The net sales of the remaining businesses in the division declined $33 million. The decrease was mainly driven by Hungry Man and Swanson dinners, a category marked by significant competitive activity, and Lenders bagels, partially offset by gains in Aunt Jemima, principally in the first six months of 2010.
Net sales in the Duncan Hines Grocery Division were $958 million in the year compared to $855 million last year. The acquisition of Birds Eye Foods added $121 million of net sales. The net sales of the remaining businesses in the division declined $18 million, mostly due to the Duncan Hines brand in the face of intense competition. Armour canned meats posted a 3% increase in sales in 2010, and our syrup businesses rebounded in the fourth quarter.
Net sales in the Specialty Foods Division were $413 million in the year compared to $315 million last year. The acquisition of Birds Eye Foods added $146 million of net sales. The net sales of the remaining businesses in the division declined $48 million, in line with our strategic initiative to de-emphasize lower margin foodservice and private label products.
Earnings before interest and taxes (EBIT) were $265 million in the year, or 10.9% of net sales, compared to 8.9% of net sales in 2009. Excluding the impact of the write-up of Birds Eye Foods inventories to fair value at the date of acquisition ($37 million), the non-cash tradename impairment ($29 million), employee severance benefits and lease termination costs ($13 million) and integration costs ($6 million), EBIT would have been $350 million, or 14.4% of net sales. The growth in the EBIT margin was principally driven by lower commodity costs and improved product mix, our productivity initiatives taking hold, and synergies realized of $25 million in 2010.
Earnings were also impacted by higher interest expense to fund the Birds Eye Foods acquisition and the refinancing costs of $21 million related to the third quarter refinancing of certain of our debt, which will reduce future interest expense and improves our debt maturity profile. This years effective tax rate was 25.1%.
Overall, net earnings were $22 million in 2010, compared to $303 million in the same period a year ago, which included a $316 million one-time adjustment of the deferred tax valuation allowance.
Our cash flow from operating activities in 2010 was $257 million dollars, a significant increase over the 2009 level of $116 million dollars, driven by working capital improvements and earnings from Birds Eye Foods.
In 2010, we paid down $104 million of the bank term loans. In August, we refinanced the Tranche C Term Loan which initially partially funded the Birds Eye Foods acquisition. We fully paid off the Tranche C Term Loan of $842 million with the proceeds of a new $442 million Tranche D Term Loan and $400 million of 8.25% Senior Notes maturing in 2017.