During the three months ended Oct. 28, 2012, Del Monte Foods reported net sales in the second quarter fiscal 2013 of $1,009.7 million compared to $994.3 million in the second quarter fiscal 2012, an increase of 1.5 percent. Pet new product volumes and list pricing actions net of trade spend drove the increase. Existing product declines in both Pet and Consumer partially offset the increase.
Operating income declined 1.8 percent from $107.1 million in the prior year period to $105.2 million. The decrease was primarily driven by increased marketing and operating costs. This was partially offset by list pricing actions net of trade spend and lower general and administrative (G&A).
Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 1.1 percent to $160.7 million compared to $158.9 million in the prior year period. The drivers of Adjusted EBITDA were similar to those of operating income noted above. In addition, the cash impact of hedging activity drove the increase in Adjusted EBITDA. Gains and losses on economic hedging positions are recorded as other (income) expense. For cash flow hedges, the effective portion of gains and losses is deferred in equity and recognized as part of cost of products sold in the appropriate period. The cash impact of all hedging activities is reflected in Corporate Adjusted EBITDA. In calculating Adjusted EBITDA, the adjustment for cash benefits from economic hedge positions is calculated pursuant to the company’s 7.625 percent notes indenture and credit agreements.
“The company remains committed to long-term brand building in both Pet and Consumer,” said Dave West, CEO of Del Monte Foods, in a prepared statement. “In November, the company launched a national integrated marketing campaign to support the iconic Del Monte brand, highlighting the brand’s vitality and nutritional appeal. Also, we continue to support new Pet Products such as Meow Mix Tender Centers, Pup-Peroni Mix-Stix, and Milo’s Kitchen Chicken Grillers Chicken Recipe through increased marketing investment.”