Michael Foods Reports Second Quarter Results

MINNETONKA, Minn., Aug. 9, 2013 /PRNewswire/ -- Michael Foods Group, Inc. today reported financial results for the second quarter of 2013.

Net sales for the quarter ended June 29, 2013 were $464.4 million, compared to $436.7 million in 2012, an increase of 6.3%.  Net earnings for the quarter ended June 29, 2013 were $9.6 million, compared to a loss of $1.7 million in 2012. Net sales for the six months ended June 29, 2013 were $948.6 million, compared to $881.5 million in 2012, an increase of 7.6%.  Net earnings for the six months ended June 29, 2013 were $23.9 million, compared to $7.6 million in 2012.

Earnings before interest, taxes, depreciation, amortization ("EBITDA") and other adjustments ("adjusted EBITDA," as defined in the Company's credit facility) for the quarter ended June 29, 2013 were $59.5 million, compared to $52.7 million in 2012, an increase of 13%. Adjusted EBITDA for the six months ended June 29, 2013 were $126.8 million, compared to $114.5 million in 2012, an increase of 10.7%

"Michael Foods performed well in the second quarter, driven by continued growth in eggs and potatoes, cost favorability across our operations and reduced legal expenses versus year ago.  Cheese and dairy products continue to lag in the face of competitive spending that we are selectively defending.  Our integration of the Primera Foods egg business is going according to our acquisition plan," said Jim Dwyer, Chairman 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 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):


Egg
Products



Refrigerated
Potato
Products



Cheese &
Other
Dairy-Case
Products



Corporate



Total

Three months ended June 29, 2013



















External net sales

$

343,507



$

40,008



$

80,835



$



$

464,350

Net earnings (loss)


14,259




1,940




2,096




(8,647)




9,648

Adjusted EBITDA


49,012




6,543




6,422




(2,430)




59,547







































Three months ended June 30, 2012



















External net sales

$

310,291



$

35,009



$

91,361



$



$

436,661

Net earnings (loss)


4,369




256




3,441




(9,772)




(1,706)

Adjusted EBITDA


44,235




4,351




8,851




(4,758)




52,679







































Six months ended June 29, 2013



















External net sales

$

688,828



$

81,854



$

177,939



$



$

948,621

Net earnings (loss)


30,484




4,788




5,656




(17,037)




23,891

Adjusted EBITDA


101,274




14,687




15,379




(4,552)




126,788







































Six months ended June 30, 2012



















External net sales

$

620,906



$

71,829



$

188,752



$



$

881,487

Net earnings (loss)


16,763




2,441




7,698




(19,256)




7,646

Adjusted EBITDA


92,348




11,271




18,580




(7,696)




114,503

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 June 30, 2012 three and six-month periods 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 June 29, 2013 (unaudited, in thousands):



Egg Products



Refrigerated Potato Products



Cheese &
Other
Dairy-Case Products



Corporate



Total

Net earnings (loss)

$

14,259



$

1,940



$

2,096



$

(8,647)



$

9,648

Unrealized loss on currency transactions (a)


530













530

Consolidated net earnings (loss)


14,789




1,940




2,096




(8,647)




10,178

Interest expense


20




63







21,346




21,429

Intercompany interest expense (income)


6,643




464




1,012




(8,119)




Income tax expense (benefit)


8,026




916




1,108




(4,732)




5,318

Depreciation and amortization


18,715




2,972




1,786




1




23,474

Non-cash and stock option compensation











548




548

Unusual charges (b)











(1,499)




(1,499)

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


(80)




(283)










(363)

Equity sponsor management fee











652




652

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


109













109

Unusual gain


(943)













(943)

Unrealized loss on swap contracts


644













644

Intercompany allocation of corporate admin costs


1,089




471




420




(1,980)




Adjusted EBITDA, as defined in the credit agreement

$

49,012



$

6,543



$

6,422



$

(2,430)



$

59,547



(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 unusual charges relate to the jury award and subsequent mediated settlement in the National Pasteurized Eggs, Inc. litigation.

The following table reconciles net earnings (loss) to adjusted EBITDA for the three-month period ended June 30, 2012 (unaudited, in thousands):



Egg
Products



Refrigerated
Potato
Products



Cheese &
Other
Dairy-Case
Products



Corporate



Total

Net earnings (loss)

$

4,369



$

256



$

3,441



$

(9,772)



$

(1,706)

Unrealized loss on currency transactions (a)


487













487

Consolidated net earnings (loss)


4,856




256




3,441




(9,772)




(1,219)

Interest expense


178




116







22,725




23,019

Intercompany interest expense (income)


7,085




494




1,080




(8,659)




Income tax expense (benefit)


2,841




35




1,862




(5,119)




(381)

Depreciation and amortization


20,004




2,817




1,811




1




24,633

Non-cash and stock option compensation











529




529

Unusual charges (b)











5,842




5,842

Equity sponsor management fee











616




616

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




















139













139

Unrealized gain on swap contracts


(499)













(499)

Intercompany allocation of corporate admin costs


9,631




633




657




(10,921)




Adjusted EBITDA, as defined in the credit agreement

$

44,235



$

4,351



$

8,851



$

(4,758)



$

52,679



(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 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 six-month period ended June 29, 2013 (unaudited, in thousands):

 



Egg Products



Refrigerated Potato Products



Cheese &
Other
Dairy-Case Products



Corporate



Total

Net earnings (loss)

$

30,484



$

4,788



$

5,656



$

(17,037)



$

23,891

Unrealized loss on currency transactions (a)


907













907

Consolidated net earnings (loss)


31,391




4,788




5,656




(17,037)




24,798

Interest expense


121




140







43,002




43,263

Intercompany interest expense (income)


13,340




931




2,033




(16,304)




Income tax expense (benefit)


16,627




2,242




3,238




(9,802)




12,305

Depreciation and amortization


36,805




5,857




3,550




2




46,214

Non-cash and stock option compensation











1,083




1,083

Unusual charges (b)











(1,342)




(1,342)

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


(80)




(283)










(363)

Equity sponsor management fee











1,298




1,298

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


224













224

Unusual gain


(943)













(943)

Unrealized loss on swap contracts


251













251

Intercompany allocation of corporate admin costs


3,538




1,012




902




(5,452)




Adjusted EBITDA, as defined in the credit agreement

$

101,274



$

14,687



$

15,379



$

(4,552)



$

126,788



(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 unusual charges relate to the jury award and subsequent mediated settlement in the National Pasteurized Eggs, Inc. litigation.

The following table reconciles net earnings (loss) to adjusted EBITDA for the six-month period ended June 30, 2012 (unaudited, in thousands):


Egg
Products



Refrigerated
Potato
Products



Cheese &
Other
Dairy-Case
Products



Corporate



Total

Net earnings (loss)

$

16,763



$

2,441



$

7,698



$

(19,256)



$

7,646

Unrealized loss on currency transactions (a)


84













84

Consolidated net earnings (loss)


16,847




2,441




7,698




(19,256)




7,730

Interest expense


380




246







45,195




45,821

Intercompany interest expense (income)


14,176




989




2,161




(17,326)




Income tax expense (benefit)


9,778




1,045




4,148




(10,542)




4,429

Depreciation and amortization


40,022




5,634




3,621




3




49,280

Non-cash and stock option compensation











1,053




1,053

Unusual charges (b)











5,842




5,842

Equity sponsor management fee











1,221




1,221

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




















286













286

Unrealized gain on swap contracts


(1,159)













(1,159)

Intercompany allocation of corporate admin costs


12,018




916




952




(13,886)




Adjusted EBITDA, as defined in the credit agreement

$

92,348



$

11,271



$

18,580



$

(7,696)



$

114,503



(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 unusual charges relate to the jury award in the National Pasteurized Eggs, Inc. trial.

 

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 and six-month periods ended June 29, 2013 and June 30, 2012
(In thousands)








Three Months Ended




Six Months Ended



2013




2012




2013




2012

Net sales

$

464,350



$

436,661



$

948,621



$

881,487

Cost of sales


385,806




363,096




783,609




728,521

Gross profit


78,544




73,565




165,012




152,966
















Selling, general and administrative expenses


41,348




52,036




83,876




94,716

Operating profit


37,196




21,529




81,136




58,250
















Interest expense, net


21,422




22,956




43,245




45,725

Unrealized loss on currency transactions


530




487




907




84

Earnings (loss) before income taxes and equity in losses of unconsolidated subsidiary
















15,244




(1,914)




36,984




12,441
















Income tax expense (benefit)


5,318




(381)




12,305




4,429

Equity in losses of unconsolidated subsidiary


278




173




788




366

Net earnings (loss)

$

9,648



$

(1,706)



$

23,891



$

7,646


























June 29,
2013




December 29,
2012
















Selected Balance Sheet Information:






























Cash and equivalents









$

33,184



$

43,274
















Accrued interest









$

20,197



$

22,920
















Long-term debt, including current maturities









$

1,196,462



$

1,209,403
















 

SOURCE Michael Foods Group, Inc.



More by this Source


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

 

PR Newswire Membership

Fill out a PR Newswire membership form or contact us at (888) 776-0942.

Learn about PR Newswire services

Request more information about PR Newswire products and services or call us at (888) 776-0942.