Michael Foods Reports First Quarter Results

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 (loss)

16,225

2,848

3,560

(8,390)

14,243

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 (loss)

12,394

2,185

4,257

(9,484)

9,352

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 (loss)


$   16,225

$       2,848

$      3,560

$    (8,390)

$  14,243

Unrealized loss on currency transactions (a)


377

-

-

-

377

  Consolidated net earnings (loss)


16,602

2,848

3,560

(8,390)

14,620

Interest expense


101

77

-

21,656

21,834

Intercompany interest expense (income)


6,697

467

1,021

(8,185)

-

Income tax expense (benefit)


8,601

1,326

2,130

(5,070)

6,987

Depreciation and amortization


18,090

2,885

1,764

1

22,740

Non-cash and stock option compensation


-

-

-

535

535

Unusual charges


-

-

-

157

157

Equity sponsor management fee 


-

-

-

646

646

Expenses related to industrial revenue bonds







    guaranteed by certain of our subsidiaries


115

-

-

-

115

Unrealized gain on swap contracts


(393)

-

-

-

(393)

Intercompany allocation of corporate admin costs


2,449

541

482

(3,472)

-

Adjusted EBITDA, as defined







    in the credit agreement


$   52,262

$       8,144

$      8,957

$    (2,122)

$  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 transactions (a)


(403)

-

-

-

(403)

  Consolidated net earnings (loss)


11,991

2,185

4,257

(9,484)

8,949

Interest expense


202

130

-

22,470

22,802

Intercompany interest expense (income)


7,091

495

1,081

(8,667)

-

Income tax expense (benefit)


6,937

1,010

2,286

(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


$   48,113

$       6,920

$      9,729

$  (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.

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 transactions


377


(403)

  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.




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