Michael Foods Reports First Quarter Results PR Newswire MINNETONKA, Minn., May 13, 2013 MINNETONKA, Minn., May 13, 2013 /PRNewswire/ -- Michael Foods Group, Inc. today reported financial results for the first quarter of 2013. Net sales for the quarter ended March 30, 2013 were $484.3 million, compared to $444.8 million in 2012, an increase of 8.9%. Net earnings for the quarter ended March 30, 2013 were $14.2 million, compared to $9.4 million in 2012, an increase of 52.3%. Earnings before interest, taxes, depreciation, amortization ("EBITDA") and other adjustments ("adjusted EBITDA," as defined in the Company's credit facility) for the quarter ended March 30, 2013 were $67.2 million, compared to $61.8 million in 2012, an increase of 8.8%. "In the first quarter, despite continued headwinds associated with weaker consumer demand, we were able to find ways to help many of our customers grow their volumes and revenues. We also continued to improve our operations while maintaining safety, quality and service standards," said Jim Dwyer, CEO and Chairman. 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 2012 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 22, 2013. 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 Products Products Products Corporate Total Three months ended March 30, 2013 External net sales $ 345,321 $ 41,846 $ 97,104 $ - $ 484,271 Net earnings 16,225 2,848 3,560 (8,390) 14,243 (loss) Adjusted EBITDA 52,262 8,144 8,957 (2,122) 67,241 Three months ended March 31, 2012 External net sales $ 310,615 $ 36,820 $ 97,391 $ - $ 444,826 Net earnings 12,394 2,185 4,257 (9,484) 9,352 (loss) Adjusted EBITDA 48,113 6,920 9,729 (2,938) 61,824 Beginning January 1, 2013, we changed our retail selling costs allocation methodology between segments. The allocation impacts the net earnings and adjusted EBITDA reported by each segment. This change increased the net earnings and adjusted EBITDA for the Cheese and Other Dairy-Case Products segment and decreased the net earnings and adjusted EBITDA for the Egg Products and Refrigerated Potato Products segments. The amounts for the March 31, 2012 three-month period have been restated to reflect the allocation 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 three-month period ended March 30, 2013 (unaudited, in thousands): Cheese & Refrigerated Other Egg Potato Dairy-Case Products Products Products Corporate Total Net earnings $ 16,225 $ 2,848 $ 3,560 $ (8,390) $ (loss) 14,243 Unrealized loss on currency 377 - - - 377 transactions (a) Consolidated net 16,602 2,848 3,560 (8,390) 14,620 earnings (loss) Interest expense 101 77 - 21,656 21,834 Intercompany interest expense 6,697 467 1,021 (8,185) - (income) Income tax expense 8,601 1,326 2,130 (5,070) 6,987 (benefit) Depreciation and 18,090 2,885 1,764 1 22,740 amortization Non-cash and stock option - - - 535 535 compensation Unusual charges - - - 157 157 Equity sponsor - - - 646 646 management fee Expenses related to industrial revenue bonds guaranteed by certain of our 115 - - - 115 subsidiaries Unrealized gain on (393) - - - (393) swap contracts Intercompany allocation of 2,449 541 482 (3,472) - corporate admin costs Adjusted EBITDA, as defined in the credit $ 52,262 $ 8,144 $ 8,957 $ (2,122) $ agreement 67,241 (a) The unrealized loss on currency transactions relates to an intercompany 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 three-month period ended March 31, 2012 (unaudited, in thousands): Cheese & Refrigerated Other Egg Potato Dairy-Case Products Products Products Corporate Total Net earnings (loss) $ 12,394 $ 2,185 $ 4,257 $ (9,484) $ 9,352 Unrealized gain on currency (403) - - - (403) transactions (a) Consolidated net 11,991 2,185 4,257 (9,484) 8,949 earnings (loss) Interest expense 202 130 - 22,470 22,802 Intercompany interest expense 7,091 495 1,081 (8,667) - (income) Income tax expense 6,937 1,010 2,286 (5,423) 4,810 (benefit) Depreciation and 20,018 2,817 1,810 2 24,647 amortization Non-cash and stock - - - 524 524 option compensation Equity sponsor - - - 605 605 management fee Expenses related to industrial revenue bonds guaranteed by certain of our 147 - - - 147 subsidiaries Unrealized gain on (660) - - - (660) swap contracts Intercompany allocation of 2,387 283 295 (2,965) - corporate admin costs Adjusted EBITDA, as defined in the credit $ 48,113 $ 6,920 $ 9,729 $ (2,938) $61,824 agreement (a) The unrealized gain on currency transactions relates to an intercompany note receivable denominated in Canadian currency due from our Canadian subsidiary, MFI Food Canada Ltd. 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 For the three-month periods ended March 30, 2013 and March 31, 2012 (In thousands) 2013 2012 Net sales $ 484,271 $ 444,826 Cost of sales 397,803 365,425 Gross profit 86,468 79,401 Selling, general and administrative expenses 42,528 42,680 Operating profit 43,940 36,721 Interest expense, net 21,823 22,769 Unrealized (gain) loss on currency 377 (403) transactions Earnings before income taxes and equity in losses of unconsolidated subsidiary 21,740 14,355 Income tax expense 6,987 4,810 Equity in losses of unconsolidated subsidiary 510 193 Net earnings $ 14,243 $ 9,352 March 30, December 29, 2013 2012 Selected Balance Sheet Information: Cash and equivalents $ 29,864 $ 43,274 Accrued interest $ 9,675 $ 22,920 Long-term debt, including current maturities $ 1,197,977 $ 1,209,403 SOURCE Michael Foods Group, Inc. Contact: Mark Westphal, Senior Vice President and Chief Financial Officer, +1-952-258-4000
Michael Foods Reports First Quarter Results
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