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8-K - FORM 8-K - MICHAEL FOODS GROUP, INC.8-K.htm

Exhibit 99.1

   

 

LOGO

   

   

   

   

   

Contact:

Mark Westphal

Senior Vice President and

Chief Financial Officer

(952) 258-4000

MICHAEL FOODS REPORTS FIRST QUARTER RESULTS

MINNETONKA, MN, May 13—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.

   

   

   

   

   

   

   

   

 

LOGO

   

   

   


   

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 

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 

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,
2013

   

December 29
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 

   

   

   

   

   

   

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05-13-13