Michael Foods Reports Fourth Quarter Results

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 sales

$   355,557

$     43,619

$   104,444

$           -

$   503,620

Net earnings (loss)

17,153

5,075

1,717

(10,237)

13,708

Adjusted EBITDA

51,104

12,534

5,573

(1,948)

67,263







Quarter ended December 31, 2011






External net sales

$   313,139

$     38,188

$   118,654

$           -

$   469,981

Net earnings (loss)

11,533

4,418

2,268

1,101

19,320

Adjusted EBITDA

52,318

10,900

9,399

(1,755)

70,862







Year ended December 29, 2012






External net sales

$ 1,315,705

$   153,481

$   386,868

$           -

$ 1,856,054

Net earnings (loss)

48,536

12,253

7,417

(38,112)

30,094

Adjusted EBITDA

195,354

34,496

24,486

(11,529)

242,807







Year ended December 31, 2011






External net sales

$ 1,228,410

$   138,004

$   400,174

$           -

$ 1,766,588

Net earnings (loss)

49,974

8,976

7,257

(51,918)

14,289

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

$      1,717

$(10,237)

$13,708

Unrealized loss on currency transactions (a)


256

-

-

-

256

  Consolidated net earnings (loss)


17,409

5,075

1,717

(10,237)

13,964

Interest expense


113

90

-

22,059

22,262

Intercompany interest expense (income)


7,084

495

1,079

(8,658)

-

Income tax expense (benefit)


6,669

3,716

590

(7,212)

3,763

Depreciation and amortization


18,605

2,919

1,939

1

23,464

Non-cash and stock option compensation


-

-

-

535

535

Costs associated with debt issuance


-

-

-

224

224

Costs associated with unconsummated acquisitions


-

-

-

1,832

1,832

Equity sponsor management fee


-

-

-

587

587

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


139

-

-

-

139

Unrealized loss on swap contracts


493

-

-

-

493

Intercompany allocation of corporate admin costs


592

239

248

(1,079)

-

Adjusted EBITDA, as defined in the credit agreement


$51,104

$     12,534

$      5,573

$  (1,948)

$67,263












(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 quarter ended December 31, 2011 (unaudited, in thousands):





Cheese &






Refrigerated

Other





Egg

Potato

Dairy-Case





Products

Products

Products

Corporate

Total

Net earnings


$11,533

$       4,418

$     2,268

$   1,101

$19,320

Unrealized gain on currency transactions (a)


(366)

-

-

-

(366)

  Consolidated net earnings


11,167

4,418

2,268

1,101

8,954

Interest (income) expense


(173)

148

-

21,581

21,556

Intercompany interest expense (income)


7,347

513

1,119

(8,979)

-

Income tax expense (benefit)


9,973

2,478

3,631

(14,745)

1,337

Depreciation and amortization


19,320

2,495

1,804

2

23,621

Non-cash and stock option compensation


-

-

-

529

529

Realized loss upon the disposition of property not in the ordinary course of business


-

324

-

-

324

Equity sponsor management fee


-

-

-

574

574

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


138

-

-

-

138

Unrealized loss on swap contracts


554

-

-

-

554

Intercompany allocation of corporate admin costs


717

524

577

(1,818)

-

Non-cash other expenses (b)


3,275

-

-

-

3,275

Adjusted EBITDA, as defined in the credit agreement


$52,318

$     10,900

$     9,399

$ (1,755)

$70,862


















(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.

(b)

The non-cash other expenses reflects an adjustment of inventory related 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

$     7,417

$(38,112)

$  30,094

Unrealized gain on currency transactions (a)


(440)

-

-

-

(440)

  Consolidated net earnings (loss)


48,096

12,253

7,417

(38,112)

29,654

Interest expense


659

439

-

89,466

90,564

Intercompany interest expense (income)


28,342

1,978

4,319

(34,639)

-

Income tax expense (benefit)


24,824

7,043

3,912

(23,255)

12,524

Depreciation and amortization


78,901

11,370

7,370

5

97,646

Non-cash and stock option compensation


-

-

-

2,121

2,121

Costs associated with debt issuance


-

-

-

224

224

Costs associated with unconsummated acquisitions


-

-

-

1,832

1,832

Unusual charges (b)


-

-

-

5,842

5,842

Equity sponsor management fee


-

-

-

2,425

2,425

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


564

-

-

-

564

Unrealized gain on swap contracts


(589)

-

-

-

(589)

Intercompany allocation of corporate admin costs


14,557

1,413

1,468

(17,438)

-

Adjusted EBITDA, as defined in the credit agreement


$195,354

$     34,496

$   24,486

$(11,529)

$242,807
















(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.

(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

$       8,976

$     7,257

$(51,918)

$ 14,289

Unrealized loss on currency transactions (a)


390

-

-

-

390

  Consolidated net earnings (loss)


50,364

8,976

7,257

(51,918)

14,679

Interest expense


536

645

-

97,008

98,189

Intercompany interest expense (income)


14,712

1,027

2,242

(17,981)

-

Income tax expense (benefit)


29,915

3,995

7,501

(42,126)

(715)

Depreciation and amortization


78,443

11,048

7,748

7

97,246

Non-cash and stock option compensation


-

-

-

1,947

1,947

Cash expenses incurred in connection with the transaction


-

-

-

4,760

4,760

Business optimization project expense


-

-

-

2,830

2,830

Realized gain upon the disposition of property not in the ordinary course of business


-

(30)

-

-

(30)

Equity sponsor management fee


-

-

-

2,300

2,300

Fees and expenses in connection with the exchange of the 9.75% senior notes


-

-

-

351

351

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


670

-

-

-

670

Unrealized loss on swap contracts


949

-

-

-

949

Loss attributable to the early extinguishment of indebtedness


-

-

-

3,527

3,527

Intercompany allocation of corporate admin costs


5,905

1,074

1,130

(8,109)

-

Non-cash other expenses (b)


3,275

-

-

-

3,275

Adjusted EBITDA, as defined in the credit agreement


$184,769

$     26,735

$   25,878

$ (7,404)

$229,978
















(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.

(b)

The non-cash other expenses reflects an adjustment of inventory related 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 31,


December 29,


December 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 administrative expenses


42,010


34,233


177,164


156,853

  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 transactions


256


(366)


(440)


390

Loss on early extinguishment of debt


-


-


-


3,527

  Earnings before income taxes and equity in losses of unconsolidated subsidiary


18,758


20,897


44,473


14,103










Income tax expense (benefit)


3,763


1,337


12,524


(715)

Equity in losses of unconsolidated subsidiary


1,287


240


1,855


529

    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 maturities






$   1,209,403


$   1,251,089










 

SOURCE Michael Foods



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