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Michael Foods Reports First Quarter Results

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MINNETONKA, Minn., May 14, 2012 /PRNewswire/ -- Michael Foods Group, Inc. today reported financial results for the first quarter of 2012.

Net earnings for the quarter ended March 31, 2012 were $9.4 million, compared to a net loss of $0.4 million in 2011, an increase of $9.8 million.  The earnings increase in the current year was primarily due to the 2011 credit agreement refinancing-related costs of approximately $8.1 million, the resulting reduction in interest expense, and improved margins in 2012 due to better alignment of pricing with our input costs.  Net sales for the quarter ended March 31, 2012 were $444.8 million, compared to $417.1 million in 2011, an increase of 6.6%. 

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 31, 2012 were $61.8 million, compared to $56.4 million in 2011, an increase of 9.6%.

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







Three months ended March 31, 2012






External net sales

$  310,615

$  36,820

$   97,391

$              -

$ 444,826

Net earnings (loss)

13,146

2,938

2,752

(9,484)

9,352

Adjusted EBITDA

49,245

8,053

7,464

(2,938)

61,824













Three months ended April 2, 2011






External net sales

$  297,463

$  32,894

$   86,744

$             -

$  417,101

Net earnings (loss)

17,325

2,090

2,612

(22,462)

(435)

Adjusted EBITDA

46,423

6,022

6,536

(2,576)

56,405

 

 

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 Crystal Farms segment.  The April 2, 2011 period has 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 March 31, 2012 (unaudited, in thousands):

 





Cheese &






Refrigerated

Other





Egg

Potato

Dairy-Case





Products

Products

Products

Corporate

Total

Net earnings (loss)


$13,146

$       2,938

$      2,752

$  (9,484)

$  9,352

Unrealized gain on currency transactions (a)


(403)

-

-

-

(403)

  Consolidated net earnings (loss)


12,743

2,938

2,752

(9,484)

8,949

Interest expense


202

130

-

22,470

22,802

Intercompany interest expense (income)


7,091

495

1,081

(8,667)

0

Income tax expense (benefit)


7,317

1,390

1,526

(5,423)

4,810

Depreciation and amortization


20,018

2,817

1,810

2

24,647

Non-cash and stock option compensation


-

-

-

524

524

Equity sponsor management fee


-

-

-

605

605

Expenses related to industrial revenue bonds







    guaranteed by certain of our subsidiaries


147

-

-

-

147

Unrealized gain on swap contracts


(660)

-

-

-

(660)

Intercompany allocation of corporate admin costs


2,387

283

295

(2,965)

-

Adjusted EBITDA, as defined







    in the credit agreement


$49,245

$       8,053

$      7,464

$  (2,938)

$61,824








(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.

 

The following table reconciles net earnings (loss) to Adjusted EBITDA for the quarter ended April 2, 2011 (unaudited, in thousands):





Cheese &






Refrigerated

Other





Egg

Potato

Dairy-Case





Products

Products

Products

Corporate

Total

Net earnings (loss)


$17,325

$       2,090

$      2,612

$(22,462)

$   (435)

Unrealized gain on currency transactions (a)


(579)

-

-

-

(579)

  Consolidated net earnings (loss)


16,746

2,090

2,612

(22,462)

(1,014)

Interest expense


247

178

-

24,789

25,214

Income tax expense (benefit)


9,014

795

1,750

(11,804)

(245)

Depreciation and amortization


19,641

2,851

1,981

1

24,474

Non-cash and stock option compensation


-

-

-

525

525

Cash expenses incurred in connection







    with the transaction


-

-

-

4,496

4,496

Realized gain upon the disposition of property







    not in the ordinary course of business


-

(88)

-

-

(88)

Equity sponsor management fee


-

-

-

600

600

Fees and expenses in connection with the







   exchange of the 9.75% senior notes


-

-

-

50

50

Expenses related to industrial revenue bonds







    guaranteed by certain of our subsidiaries


157

-

-

-

157

Unrealized gain on swap contracts


(1,291)

-

-

-

(1,291)

Loss attributable to the early







    extinguishment of indebtedness


-

-

-

3,527

3,527

Intercompany allocation of corporate admin costs


1,909

196

193

(2,298)

-

Adjusted EBITDA, as defined







    in the credit agreement


$46,423

$       6,022

$      6,536

$  (2,576)

$56,405


(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 operations are as follows:

 

Michael Foods Group, Inc.

Consolidated Statements of Operations

For the three-month periods Ended March 31, 2012 and April 2, 2011

(In thousands)




2012


2011

Net sales


$    444,826


$    417,101

Cost of sales


365,425


344,488

  Gross profit


79,401


72,613






Selling, general and administrative expenses


42,680


45,021

  Operating profit


36,721


27,592






Interest expense, net


22,769


25,205

Unrealized gain on currency transactions


(403)


(579)

Loss on early extinguishment of debt


-


3,527

  Earnings (loss) before income taxes and equity





    in losses of unconsolidated subsidiary


14,355


(561)






Income tax expense (benefit)


4,810


(245)

Equity in losses of unconsolidated subsidiary


193


119

    Net earnings (loss)


$       9,352


$        (435)













March 31,


December 31,



2012


2011

Selected Balance Sheet Information:










Cash and equivalents


$      79,236


$      68,118






Accrued interest


$       9,797


$      20,420






Long-term debt, including current maturities


$ 1,249,316


$ 1,251,089

 

 

 

SOURCE Michael Foods Group, Inc.



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