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Michael Foods Reports Fourth Quarter Results



                 Michael Foods Reports Fourth Quarter Results

PR Newswire

MINNETONKA, Minn., March 22, 2013

MINNETONKA, Minn., March 22, 2013 /PRNewswire/ -- Michael Foods Group, Inc.
today reported financial results for the fourth quarter of 2012.

Net sales for the quarter ended December 29, 2012 were $503.6 million,
compared to $470 million in 2011, an increase of 7.2%.  Net earnings for the
quarter ended December 29, 2012 were $13.7 million, compared to $19.3 million
in 2011.

Net sales for the year ended December 29, 2012 were $1,856.1 million, compared
to $1,766.6 million in 2011, an increase of 5.1%.  Net earnings for the year
ended December 29, 2012 were $30.1 million, compared to $14.3 million in
2011. 

Earnings before interest, taxes, depreciation, amortization ("EBITDA") and
other adjustments ("adjusted EBITDA," as defined in the Company's credit
facility) for the quarter ended December 29, 2012 were $67.3 million, compared
to $70.9 million in 2011, a decrease of 5.1%.  Adjusted EBITDA for the year
ended December 29, 2012 were $242.8 million, compared to $230 million for the
same period in 2011, an increase of 5.6%.

"Our team did a good job of delivering record adjusted EBITDA in 2012.  We
drove volume and revenue in a volatile environment, gaining share in most of
our businesses with continued emphasis on value added products.  Our
continuous improvement efforts paid dividends by improving service and quality
levels while providing savings to offset increasing costs.  While pricing
lagged cost increases in 4th quarter, we are confident in our pass-through
pricing process and value-added product portfolio.   MFI is well positioned to
continue to grow in the coming year," said Jim Dwyer, President and CEO.

Michael Foods Group, Inc. uses Adjusted EBITDA as a measurement of financial
results, as an indication of the relative strength of its operating
performance, and to determine incentive compensation levels.  Management
believes that EBITDA and Adjusted EBITDA provide potential investors with
useful information with which to analyze and compare with other companies in
our industry our operating performance and our ability to service debt.

Certain items contained in this release may be "forward-looking statements."
Forward-looking statements include statements concerning our plans,
objectives, goals, strategies, future events, future sales or performance,
capital expenditures, financing needs, ability to fund operations, intentions
relating to acquisitions, our competitive strengths and weaknesses, our
business strategy and the trends we anticipate in the industries and economies
in which we operate and other information that is not historical information.
When used herein, the words "estimates," "expects," "anticipates," "projects,"
"plans," "intends," "believes" and variations of such words or similar
expressions are intended to identify forward-looking statements. These
forward-looking statements are not guarantees of future performance.

All forward-looking statements are based upon our current expectations and
various assumptions. Our expectations, beliefs and projections are expressed
in good faith, and we believe there is a reasonable basis for them, but there
can be no assurance that our expectations, beliefs and projections will be
realized.  There are a number of risks and uncertainties that could cause our
actual results to differ materially from the forward-looking statements
contained in this release, including the factors described under "Risk
Factors" in our 2011 Annual Report on Form 10-K, filed with the Securities and
Exchange Commission on March 30, 2012. Important factors that could cause our
actual results to differ materially from the forward-looking statements we
make in this release include changes in domestic and international economic
conditions.

Unaudited segment data follows (in thousands):

                                         Cheese &
                            Refrigerated Other
                Egg         Potato       Dairy-Case  Corporate &
                Products    Products     Products    Eliminations  Total
Quarter ended
December 29,
2012
External net    $   355,557 $     43,619 $   104,444 $           - $   503,620
sales
Net earnings    17,153      5,075        1,717       (10,237)      13,708
(loss)
Adjusted EBITDA 51,104      12,534       5,573       (1,948)       67,263
Quarter ended
December 31,
2011
External net    $   313,139 $     38,188 $   118,654 $           - $   469,981
sales
Net earnings    11,533      4,418        2,268       1,101         19,320
(loss)
Adjusted EBITDA 52,318      10,900       9,399       (1,755)       70,862
Year ended
December 29,
2012
External net    $ 1,315,705 $   153,481  $   386,868 $           - $ 1,856,054
sales
Net earnings    48,536      12,253       7,417       (38,112)      30,094
(loss)
Adjusted EBITDA 195,354     34,496       24,486      (11,529)      242,807
Year ended
December 31,
2011
External net    $ 1,228,410 $   138,004  $   400,174 $           - $ 1,766,588
sales
Net earnings    49,974      8,976        7,257       (51,918)      14,289
(loss)
Adjusted EBITDA 184,769     26,735       25,878      (7,404)       229,978

Beginning January 1, 2012, we changed our internal reporting of segment
information.  We now report all sales of shell egg and egg products and
refrigerated potato products in their respective segments and the balance of
our retail distributed products, cheese and other dairy-case products, as our
third segment.  This change increased the amount of external net sales, net
earnings and adjusted EBITDA reported for prior periods for both the egg
products and refrigerated potato products segments as we reclassified the egg
and refrigerated potato products previously reported under the cheese & other
dairy-case products segment.  The December 31, 2011 quarter and annual periods
have been restated to reflect the new internal reporting.  This change has no
impact on the assets of the segments as none of the underlying business unit
operations were affected by this reporting change.

Adjusted EBITDA is a financial indicator used to analyze and compare companies
on the basis of operating performance. It should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles and is not indicative
of operating profit or cash flow from operations as determined under generally
accepted accounting principles.

The following table reconciles net earnings (loss) to adjusted EBITDA for the
quarter ended December 29, 2012 (unaudited, in thousands):

                                                  Cheese &
                                   Refrigerated   Other
                          Egg      Potato         Dairy-Case
                          Products Products       Products   Corporate Total
Net earnings (loss)       $17,153  $       5,075  $          $(10,237) $13,708
                                                   1,717
Unrealized loss on
currency transactions     256      -              -          -         256
(a)
  Consolidated net        17,409   5,075          1,717      (10,237)  13,964
earnings (loss)
Interest expense          113      90             -          22,059    22,262
Intercompany interest     7,084    495            1,079      (8,658)   -
expense (income)
Income tax expense        6,669    3,716          590        (7,212)   3,763
(benefit)
Depreciation and          18,605   2,919          1,939      1         23,464
amortization
Non-cash and stock        -        -              -          535       535
option compensation
Costs associated with     -        -              -          224       224
debt issuance
Costs associated with
unconsummated             -        -              -          1,832     1,832
acquisitions
Equity sponsor            -        -              -          587       587
management fee
Expenses related to
industrial revenue bonds  139      -              -          -         139
guaranteed by certain of
our subsidiaries
Unrealized loss on swap   493      -              -          -         493
contracts
Intercompany allocation   592      239            248        (1,079)   -
of corporate admin costs
Adjusted EBITDA, as                               $          $
defined in the credit     $51,104  $     12,534    5,573      (1,948)  $67,263
agreement
      The unrealized loss on currency transactions relates to an intercompany
(a)   note receivable denominated in Canadian currency due from our Canadian
      subsidiary, MFI Food Canada Ltd.

 

The following table reconciles net earnings (loss) to adjusted EBITDA for the
quarter ended December 31, 2011 (unaudited, in thousands):

                                                  Cheese &
                                     Refrigerated Other
                            Egg      Potato       Dairy-Case
                            Products Products     Products   Corporate Total
Net earnings                $11,533  $            $          $   1,101 $19,320
                                     4,418        2,268
Unrealized gain on          (366)    -            -          -         (366)
currency transactions (a)
  Consolidated net          11,167   4,418        2,268      1,101     8,954
earnings
Interest (income) expense   (173)    148          -          21,581    21,556
Intercompany interest       7,347    513          1,119      (8,979)   -
expense (income)
Income tax expense          9,973    2,478        3,631      (14,745)  1,337
(benefit)
Depreciation and            19,320   2,495        1,804      2         23,621
amortization
Non-cash and stock option   -        -            -          529       529
compensation
Realized loss upon the
disposition of property     -        324          -          -         324
not in the ordinary course
of business
Equity sponsor management   -        -            -          574       574
fee
Expenses related to
industrial revenue bonds    138      -            -          -         138
guaranteed by certain of
our subsidiaries
Unrealized loss on swap     554      -            -          -         554
contracts
Intercompany allocation of  717      524          577        (1,818)   -
corporate admin costs
Non-cash other expenses     3,275    -            -          -         3,275
(b)
Adjusted EBITDA, as                               $    
defined in the credit       $52,318  $     10,900 9,399      $ (1,755) $70,862
agreement
       The unrealized gain on currency transactions relates to an intercompany
(a)    note receivable denominated in Canadian currency due from our Canadian
       subsidiary, MFI Food Canada Ltd.
       The non-cash other expenses reflects an adjustment of inventory related
(b)    to prior period activity, which was recorded in 2011 as it was not
       material to any prior period impacted or to 2011.

The following table reconciles net earnings (loss) to adjusted EBITDA for the
year ended December 29, 2012 (unaudited, in thousands):

                                                 Cheese &
                                    Refrigerated Other
                           Egg      Potato       Dairy-Case
                           Products Products     Products   Corporate Total
Net earnings (loss)        $ 48,536 $     12,253 $          $(38,112) $
                                                 7,417                 30,094
Unrealized gain on
currency transactions      (440)    -            -          -         (440)
(a)
  Consolidated net         48,096   12,253       7,417      (38,112)  29,654
earnings (loss)
Interest expense           659      439          -          89,466    90,564
Intercompany interest      28,342   1,978        4,319      (34,639)  -
expense (income)
Income tax expense         24,824   7,043        3,912      (23,255)  12,524
(benefit)
Depreciation and           78,901   11,370       7,370      5         97,646
amortization
Non-cash and stock         -        -            -          2,121     2,121
option compensation
Costs associated with      -        -            -          224       224
debt issuance
Costs associated with
unconsummated              -        -            -          1,832     1,832
acquisitions
Unusual charges (b)        -        -            -          5,842     5,842
Equity sponsor             -        -            -          2,425     2,425
management fee
Expenses related to
industrial revenue bonds   564      -            -          -         564
guaranteed by certain of
our subsidiaries
Unrealized gain on swap    (589)    -            -          -         (589)
contracts
Intercompany allocation    14,557   1,413        1,468      (17,438)  -
of corporate admin costs
Adjusted EBITDA, as
defined in the credit      $195,354 $     34,496 $   24,486 $(11,529) $242,807
agreement
     The unrealized gain on currency transactions relates to an intercompany
(a)  note receivable denominated in Canadian currency due from our Canadian
     subsidiary, MFI Food Canada Ltd.
(b)  The unusual charges relate to the jury award in the National Pasteurized
     Eggs, Inc. trial.

 

The following table reconciles net earnings (loss) to adjusted EBITDA for the
year ended December 31, 2011 (unaudited, in thousands):

                                                 Cheese &
                                    Refrigerated Other
                          Egg       Potato       Dairy-Case
                          Products  Products     Products   Corporate Total
Net earnings (loss)       $ 49,974  $            $          $(51,918) $ 14,289
                                    8,976        7,257
Unrealized loss on
currency transactions     390       -            -          -         390
(a)
  Consolidated net        50,364    8,976        7,257      (51,918)  14,679
earnings (loss)
Interest expense          536       645          -          97,008    98,189
Intercompany interest     14,712    1,027        2,242      (17,981)  -
expense (income)
Income tax expense        29,915    3,995        7,501      (42,126)  (715)
(benefit)
Depreciation and          78,443    11,048       7,748      7         97,246
amortization
Non-cash and stock        -         -            -          1,947     1,947
option compensation
Cash expenses incurred
in connection with the    -         -            -          4,760     4,760
transaction
Business optimization     -         -            -          2,830     2,830
project expense
Realized gain upon the
disposition of property   -         (30)         -          -         (30)
not in the ordinary
course of business
Equity sponsor            -         -            -          2,300     2,300
management fee
Fees and expenses in
connection with the       -         -            -          351       351
exchange of the 9.75%
senior notes
Expenses related to
industrial revenue
bonds guaranteed by       670       -            -          -         670
certain of our
subsidiaries
Unrealized loss on swap   949       -            -          -         949
contracts
Loss attributable to
the early                 -         -            -          3,527     3,527
extinguishment of
indebtedness
Intercompany allocation
of corporate admin        5,905     1,074        1,130      (8,109)   -
costs
Non-cash other expenses   3,275     -            -          -         3,275
(b)
Adjusted EBITDA, as
defined in the credit     $184,769  $     26,735 $   25,878 $ (7,404) $229,978
agreement
       The unrealized loss on currency transactions relates to an intercompany
(a)    note receivable denominated in Canadian currency due from our Canadian
       subsidiary, MFI Food Canada Ltd.
       The non-cash other expenses reflects an adjustment of inventory related
(b)    to prior period activity, which was recorded in 2011 as it was not
       material to any prior period impacted or to 2011.

Michael Foods Group, Inc., based in Minnetonka, Minnesota, is a producer and
distributor of food products to the foodservice, retail and food-ingredient
markets.  Its principal products are egg products, refrigerated potato
products, cheese and other dairy-case products.

Consolidated statements of earnings are as follows:

Michael Foods Group, Inc.

Consolidated Statements of Earnings

(In thousands)

 
                         Quarter Ended              Year Ended
                         December 29,  December     December 29,  December 31,
                                       31,
                         2012          2011         2012          2011
Net sales                $   503,620   $   469,981  $             $  
                                                    1,856,054     1,766,588
Cost of sales            420,391       393,683      1,544,501     1,493,575
  Gross profit           83,229        76,298       311,553       273,013
Selling, general and     42,010        34,233       177,164       156,853
administrative expenses
  Operating profit       41,219        42,065       134,389       116,160
Interest expense, net    22,205        21,534       90,356        98,140
Unrealized (gain) loss
on currency              256           (366)        (440)         390
transactions
Loss on early            -             -            -             3,527
extinguishment of debt
  Earnings before
income taxes and equity
in losses of             18,758        20,897       44,473        14,103
unconsolidated
subsidiary
Income tax expense       3,763         1,337        12,524        (715)
(benefit)
Equity in losses of
unconsolidated           1,287         240          1,855         529
subsidiary
    Net earnings         $     13,708  $            $             $      
                                       19,320        30,094        14,289
                                                    December 29,  December 31,
                                                    2012          2011
Selected Balance Sheet
Information:
Cash and equivalents                                $             $      
                                                     43,274        68,118
Accrued interest                                    $             $      
                                                     22,920        20,420
Long-term debt,                                     $             $  
including current                                   1,209,403     1,251,089
maturities

 

SOURCE Michael Foods

Website: http://www.michaelfoods.com
Contact: Mark Westphal, Senior Vice President and Chief Financial Officer,
(952) 258-4000
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