Pinnacle Foods Reports 1 Percent Net Sales Decline For Third Quarter 2012

Pinnacle Foods Finance LLC announced its financial results for the third quarter ended Sept. 23, 2012. Net sales for the quarter declined 1 percent versus year-ago to $568 million, and net earnings in the quarter were $10 million, after giving effect to approximately $14 million of after-tax charges related to restructuring and refinancing. For the first nine months of 2012, net sales of $1.77 billion were essentially even with year-ago, and net earnings were $9 million, after giving effect to approximately $35 million of after-tax charges related to restructuring and refinancing.

Commenting on the results, Pinnacle Foods Chief Executive Officer Bob Gamgort said, in a prepared statement, “We delivered solid results in an environment that continues to be challenging. We expanded our gross margin versus year-ago, excluding restructuring, as inflation moderated and we accelerated savings from our productivity initiatives. This improvement drove a healthy 5 percent increase versus year-ago in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in the quarter. Our North America retail sales grew slightly in the quarter, and we held or grew market share on brands representing over 50 percent of our product contribution. In addition, during the quarter, we completed another refinancing, which further improved our liquidity profile and reduced our interest expense.”

Net sales of $568 million in the third quarter of 2012 decreased 1.2 percent, compared to net sales of $575 million in the year-ago period. This performance reflected lower volume, primarily driven by the company's de-emphasis of low-margin Specialty Division businesses, and higher slotting investment principally behind the company's recent Vlasic® Farmer's Garden™ introduction. Almost entirely offsetting these factors were slightly higher net price realization and favorable mix.

Net sales in the company's North American retail businesses increased slightly in the quarter. By brand, the company registered sales growth for Birds Eye® vegetables, Duncan Hines® baking products, Van de Kamps® and Mrs. Paul's® seafood and Log Cabin® syrups, while net sales of Vlasic® pickles and Aunt Jemima® frozen breakfasts declined.

Earnings before interest and taxes (EBIT) were $60 million in the third quarter of 2012, after giving effect to $20 million of pre-tax charges related to restructuring and refinancing, compared to EBIT in the third quarter of 2011 of $65 million, which included $4 million of pre-tax charges related to restructuring. Excluding these charges in both periods, EBIT for the quarter improved 15 percent versus year-ago to $80 million, reflecting an improvement in gross profit, driven by net pricing actions that exceeded moderating inflation and strong productivity results, as well as lower overall selling, general and administrative expenses. Adjusted EBITDA, as defined in the company's borrowing agreements, advanced 5 percent to $98 million in the third quarter of 2012, compared to adjusted EBITDA of $93 million in the year-ago quarter.

The company reported net earnings of $10 million in the third quarter of 2012, after giving effect to approximately $14 million of after-tax charges related to restructuring and refinancing, compared to net earnings of $13 million in the third quarter of 2011, which included $2 million of after-tax charges related to restructuring. Excluding these charges in both periods, net earnings advanced 53 percent to $24 million in the third quarter of 2012, compared to approximately $15 million in the year-ago quarter. This improvement reflected the increase in EBIT, as well as lower interest expense, stemming from both the company's refinancing activities and lower overall debt level.

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