Del Monte Foods Reports 0.2 Percent Gain In Third Quarter Net Sales

Del Monte Foods reported net sales for the third quarter fiscal 2012 of $971.1 million compared to $969.4 million in the third quarter fiscal 2011, an increase of 0.2 percent. Pet new product volume growth and list pricing actions net of trade spend, primarily in Pet, were offset by existing product unit volume declines in both pet and consumer.

Operating income declined from $145.4 million in the prior year period to $124.5 million. The decrease in operating income reflects the impact of higher operating costs, primarily due to higher input costs. List pricing actions net of trade spend contributed positively to operating income.

Adjusted EBITDA declined 13.7 percent to $164.6 million compared to $190.7 million in the prior year. The drivers of the decline in Adjusted EBITDA are similar to those for operating income, except for SG&A. In calculating adjusted EBITDA, SG&A is more favorable year-over-year because it does not include amortization of intangibles, severance-related expenses, and other expenses related to the merger.

“Consumer sentiment and macroeconomic factors continue to challenge the operating environment for both Del Monte Foods and the industry,” said Dave West, CEO of Del Monte Foods in a prepared statement. “Amidst this difficult environment, new pet product items such as Kibbles ‘n Bits Bistro Meals and Milo’s Kitchen dog snacks performed strongly, and we continued to invest in building new go-to-market capabilities, enabling the Company’s future growth. We are launching seven additional new Pet Products through the balance of the fiscal year, including Meow Mix Tender Centers and Meow Mix Paté Toppers. We also had solid in-market execution leading to share gains in Vegetable during the critical holiday season.”

For the three months ended Jan. 29, 2012, Pet Products net sales were $478.8 million, an increase of 4.4 percent from net sales of $458.5 million in the prior year period. The increase in Pet Products net sales was primarily driven by new product volume growth and list pricing actions net of trade spend. The increase was partially offset by unit volume declines in existing products.

Pet products operating income decreased from $112.1 million in the third quarter fiscal 2011 to $95.3 million in the third quarter fiscal 2012, or 15.0 percent. The decrease was primarily driven by higher ingredient costs and SG&A, primarily due to amortization of intangibles. The decline was partially offset by list pricing actions net of trade spend.

Pet products Adjusted EBITDA decreased from $122.7 million in the third quarter fiscal 2011 to $117.2 million in the third quarter fiscal 2012, or 4.5 percent. The drivers of the decline in Adjusted EBITDA are similar to those for Pet Products operating income. In calculating Adjusted 3

EBITDA, SG&A is lower year-over-year because it does not include the amortization of intangibles, severance-related expenses, and other expenses related to the merger.

Consumer products net sales were $492.3 million, a decrease of 3.6 percent from net sales of $510.9 million in the third quarter fiscal 2011. The decline in consumer products net sales was primarily due to unit volume declines in existing products.

Consumer products operating income declined from $56.6 million in third quarter fiscal 2011 to $40.8 million in the third quarter fiscal 2012, or 27.9 percent. The decline was primarily driven by higher manufacturing and raw product costs as well as the negative impact of the topline.

Consumer products Adjusted EBITDA declined from $74.8 million in the third quarter fiscal 2011 to $57.1 million in the third quarter fiscal 2012, or 23.6 percent. The drivers of the decline in Adjusted EBITDA are similar to those for consumer products operating income.

Net sales for the nine months ended January 29, 2012 were $2,741.6 million compared to $2,714.9 million for the prior year period, an increase of 1.0 percent. The increase was driven by Pet new product volume growth and list pricing actions net of trade spend. The increase was partially offset by unit volume declines in existing products.

Operating income declined from $412.8 million in the prior year period to $280.9 million, or 32.0 percent. The decrease in operating income reflects the impact of higher operating costs and SG&A (primarily due to amortization of intangibles, severance-related expenses, and other expenses related to the Merger). List pricing actions net of trade spend contributed positively to operating income.

Adjusted EBITDA declined 16.8 percent to $424.7 million compared to $510.6 million in the prior year period. The drivers of the decline in Adjusted EBITDA are similar to those for operating income, except for SG&A. In calculating Adjusted EBITDA, SG&A is lower year-over-year because it does not include the amortization of intangibles, severance-related expenses, and other expenses related to the merger.

At Jan. 29, 2012, total debt was $3,991.3 million and cash and cash equivalents were $238.3 million. As of Jan. 29, 2012, there were no outstanding borrowings under the company’s $750.0 million ABL facility. For the nine months ended Jan. 29, 2012, capital expenditures totaled $49.1 million.

 

 

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