Michael Foods Reports First Quarter Results

MINNETONKA, Minn., May 8, 2014 /PRNewswire/ -- Michael Foods Group, Inc. today reported financial results for the first quarter of 2014.

Net sales for the quarter ended March 29, 2014 were $474 million, compared to $484.3 million in 2013, a decrease of 2.1%.  Net earnings for the quarter ended March 29, 2014 were $1.7 million, compared to $14.2 million in 2013.

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 29, 2014 were $48.2 million, compared to $67.2 million in 2013.

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 2013 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 21, 2014. 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 29, 2014






External net sales

$   349,104

$     42,409

$     82,526

$           -

$   474,039

Net earnings (loss)

8,891

1,509

(233)

(8,473)

1,694

Adjusted EBITDA

41,728

5,875

2,916

(2,344)

48,175













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

 

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 29, 2014 (unaudited, in thousands):





Cheese &






Refrigerated

Other





Egg

Potato

Dairy-Case





Products

Products

Products

Corporate

Total

Net earnings (loss)


$   8,891

$       1,509

$    (233)

$ (8,473)

$  1,694

Unrealized loss on currency transactions (a)


541

-

-

-

541

  Consolidated net earnings (loss)


9,432

1,509

(233)

(8,473)

2,235

Interest expense


51

15

-

21,129

21,195

Intercompany interest expense (income)


6,458

451

984

(7,893)

-

Income tax expense (benefit)


4,948

518

50

(4,476)

1,040

Depreciation and amortization


18,042

2,859

1,742

-

22,643

Non-cash and stock option compensation


-

-

-

533

533

Costs associated with permitted acquisition


179

-

-

-

179

Equity sponsor management fee


-

-

-

693

693

Expenses related to industrial revenue bonds guaranteed by certain of our subsidiaries


106

-

-

-

106

Unrealized gain on swap contracts


(449)

-

-

-

(449)

Intercompany allocation of corporate admin costs


2,961

523

373

(3,857)

-

Adjusted EBITDA, as defined in the credit agreement


$ 41,728

$       5,875

$      2,916

$ (2,344)

$  48,175








(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 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.

 

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 29, 2014 and March 30, 2013

(In thousands)




2014


2013

Net sales


$    474,039


$      484,271

Cost of sales


407,113


397,803

  Gross profit


66,926


86,468






Selling, general and administrative expenses


42,451


42,528

  Operating profit


24,475


43,940






Interest expense, net


21,193


21,823

Unrealized loss on currency transactions


541


377






    Earnings before income taxes and equity in losses of unconsolidated subsidiary


2,741


21,740






Income tax expense


1,040


6,987

Equity in losses of unconsolidated subsidiary


7


510

    Net earnings


$       1,694


$        14,243













March 29,


December 28,



2014


2013

Selected Balance Sheet Information:










Cash and equivalents


$      42,289


$        60,677






Accrued interest


$      12,007


$        22,534






Long-term debt, including current maturities


$ 1,170,049


$   1,171,062






 

SOURCE Michael Foods Group, Inc.



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