Parsippany / NJ. (pf) Pinnacle Foods Inc. reported its financial results for the fourth quarter and full year ended December 31, 2017. Diluted earnings per share for the year more than doubled to USD 4.45, largely due to items affecting comparability, including a one-time, non-cash benefit of USD 2.80 per share in 2017, stemming from revaluing deferred tax liabilities as a result of the Tax Cuts and Jobs Act of 2017 (U.S. tax reform). Adjusted diluted EPS for the year advanced approximately 19 percent to USD 2.55, and the Company expects another year of double-digit growth in Adjusted diluted EPS in 2018, guiding to the range of USD 2.85 to USD 2.95.
Full Year 2017 Highlights
- Significantly outpaced retail category performance, growing composite consumption by 2.4 percent (or 3.5 percent, excluding exited Aunt Jemima business) and market share by 0.5 points.
- Grew net sales by 0.5 percent to USD 3.14 billion (or 2.5 percent, excluding the AJ Exit[1]), including underlying net sales growth led by Birds Eye, Duncan Hines and gardein and the benefits of the 53[rd] week and three extra weeks of Boulder ownership.
- Achieved productivity savings of 4.1 percent of cost of products sold and Boulder acquisition synergies of USD 16 million.
- Delivered double-digit Adjusted diluted EPS growth for the fifth consecutive year since the IPO.
- Successfully refinanced the Company’s term loan debt in early 2017, significantly reducing interest expense, improving interest rate exposure on floating rate debt and improving Pinnacle’s liquidity profile.
- Acquired the Beaver Dam frozen warehouse and vegetable packaging business, which will expand the Company’s frozen manufacturing and warehousing capacity, enabling continued top-line growth of the Birds Eye franchise and future margin enhancement of the Frozen segment.
- Generated free cash flow[2] of USD 322 million and reduced total net leverage ratio[3] to 3.9x at year-end.
Commenting on the results, Pinnacle Foods Chief Executive Officer Mark Clouse stated, «We delivered another year of exceptional in-market performance, with retail consumption and market share advancing for the sixth consecutive year. At the same time, our financial results reflected a number of discrete issues that we navigated during the year, with the acceleration of strategic manufacturing investments strengthening our network and positioning us well for the future. All in, we are pleased that, despite the impact of the discrete items, we delivered Adjusted diluted EPS growth consistent with our guidance of almost 19 percent in 2017, including underlying Adjusted Ebit growth in excess of our long-term organic algorithm, due to modest gross margin improvement and aggressive management of expenses.»
[1] Aunt Jemima exit, including the Recall, of certain retail and foodservice breakfast products (the AJ Exit), initiated in May 2017.
[2] Reflects net cash provided by operating activities less capital expenditures.
[3] As defined in the Company’s credit facilities.
Full Year Fiscal 2017 Results
Consolidated net sales for the year increased 0.5 percent to USD 3.14 billion, compared to net sales of USD 3.13 billion in fiscal 2016. This performance reflected underlying net sales growth of 0.5 percent due to favorable volume/mix of 0.3 percent and net price realization of 0.2 percent, despite a reduction of retail inventories at several large customers during the fourth quarter of 2017. Also impacting the performance was the combined benefit of 2.7 percent from the 53[rd] week and the three extra weeks from the Boulder Brands acquisition, entirely offset by the AJ Exit of 2.0 percent and the combined impact of the Boulder SKU rationalization and UK business wind-down totalling 0.7 percent.
Gross profit declined 5.2 percent to USD 868.1 million, or 27.6 percent of net sales, compared to gross profit of USD 916.1 million, or 29.3 percent of net sales, in the year-ago period. This performance reflected the unfavorable impact versus year-ago of items affecting comparability, along with discrete costs totalling USD 42 million from both the AJ Exit and the acceleration into 2017 of strategic manufacturing investments, as well as unfavorable product mix and input cost inflation, the latter of which increased significantly in the second half of 2017 due to escalating logistics costs. These headwinds were only partially offset by very strong productivity, acquisition synergies, lower performance-based compensation expense and the higher net sales. Excluding items affecting comparability, Adjusted gross profit for the year declined 0.9 percent to USD 913.2 million and, as a percentage of net sales, gross profit margin declined 40 basis points to 29.0 percent, including the USD 42 million, or 80 basis point, headwind from the discrete items.
Earnings before interest and taxes (Ebit) decreased 6.5 percent in 2017 to USD 448.7 million, or 14.3 percent of net sales, compared to USD 479.6 million, or 15.3 percent of net sales, in 2016, primarily reflecting the lower gross profit and items affecting comparability—notably, non-cash tradename impairment charges totalling USD 66.5 million taken in 2017. Partially offsetting these factors were lower SG+A overhead expenses, largely reflecting reduced performance-based compensation, as well as aggressive cost management and lower marketing expense. Adjusted Ebit, excluding items affecting comparability, but including the discrete costs, increased 5.7 percent to USD 569.3 million, or 18.1 percent of net sales, compared to USD 538.6 million, or 17.2 percent of net sales, in 2016.
Net interest expense for the year increased to USD 169.4 million, compared to USD 139.1 million in 2016, largely driven by items affecting comparability associated with the term loan refinancing the Company completed in February of 2017 and, to a lesser extent, the impact of the rising interest rate environment on the Company’s floating rate debt. Excluding items affecting comparability, Adjusted net interest expense for the year, which includes interest expenses associated with the 53[rd] week, decreased 13.4 percent to USD 120.0 million, compared to USD 138.5 million in 2016.
The effective tax rate (ETR) for the year was a negative 90.6 percent, compared to 38.0 percent in the year-ago period, almost entirely due to items affecting comparability, which included the one-time, non-cash benefit approximating USD 335 million from the re-measurement of the Company’s deferred tax liability as a result of the aforementioned U.S. tax reform enacted in late 2017. Also benefiting the ETR in 2017 was the Company’s adoption of the new accounting standard for stock-based compensation. Adjusted ETR for the year declined to 32.3 percent, compared to 36.6 percent in the prior year.
Net earnings for the year increased to USD 532.2 million, or USD 4.45 per diluted share, compared to USD 211.1 million, or USD 1.79 per diluted share, in 2016, meaningfully impacted by items affecting comparability—notably, the impact of U.S. tax reform. Adjusted net earnings advanced 20.0 percent to USD 304.4 million, compared USD 253.7 million in the year-ago period, and Adjusted diluted EPS increased 18.6 percent to USD 2.55, including a USD 0.05 benefit from the 53[rd] week, compared to USD 2.15 in 2016.
Net cash provided by operating activities totalled USD 416 million in 2017 versus USD 488 million in 2016, primarily reflecting higher working capital associated with the Company’s robust innovation agenda and the cash costs of both discrete items and the Company’s debt refinancing in 2017.
Full Year Segment Results
Frozen
Net sales for the Frozen segment declined 0.4 percent to USD 1,299 million in 2017, compared to USD 1,305 million in 2016, reflecting underlying net sales that were essentially even with year-ago, as lower volume/mix of 0.3 percent was essentially offset by favorable foreign currency translation of 0.1 percent. Also impacting the performance was the unfavorable impact of 2.3 percent from the AJ Exit, largely offset by a 2.1 percent combined benefit from the 53[rd] week and the three extra weeks of Boulder ownership. The flat underlying net sales for the year largely reflected the benefit of strong in-market consumption, which was offset by a reduction of retail inventory levels at several large customers primarily in the fourth quarter.
In-market performance for the year was again exceptionally strong for the Frozen segment, with retail consumption advancing 1.9 percent (or 4.1 percent, excluding Aunt Jemima) in a category composite that was up 1.3 percent. This strong performance drove market share growth of 0.4 points for the year, fuelled by Birds Eye vegetables and Birds Eye meals, each up in excess of a full share point.
For the fourth consecutive year, the Birds Eye franchise posted strong in-market growth, with breakthrough innovation expanding the franchise and supporting significant retail distribution growth. Solid performance from core Birds Eye offerings and successful new innovation platforms launched in 2017—namely, Birds Eye Veggie Made Pasta, Birds Eye Veggie Made Mashed, Birds Eye Superfood Blends, and Birds Eye Organic—drove mid-single-digit net sales growth of the franchise for the year.
Ebit for the Frozen segment decreased 35.7 percent to USD 154.8 million in 2017, compared to USD 240.9 million in 2016, significantly driven by the unfavorable impact versus year-ago of items affecting comparability, most notably non-cash tradename impairment charges totalling approximately USD 52 million and the write-off of fixed assets and other charges related to the AJ Exit totalling USD 21 million. Also impacting the performance were discrete costs totalling USD 27 million related to both the AJ Exit and the accelerated manufacturing investments, as well as the impacts of input cost inflation and unfavorable product mix. Partially offsetting these factors were strong productivity, lower performance-based compensation expense and the benefit of the net sales increase. Excluding items affecting comparability, Adjusted Ebit declined 6.0 percent to USD 231.5 million in 2017, compared to USD 246.4 million in 2016, including the USD 27 million headwind from the discrete items representing 11 points of Ebit growth.
Grocery
Net sales for the Grocery segment increased 2.4 percent to USD 1,115 million in 2017, compared to USD 1,089 million in 2016, reflecting underlying net sales that were essentially even with year-ago, as volume/mix growth of 0.7 percent was offset by lower net price realization of 0.8 percent. The combined benefit of the 53[rd] week and three extra weeks of Boulder ownership added net sales growth of 2.5 percent to the segment.
In-market performance for the Grocery segment was strong, with retail consumption versus year-ago up 1.4 percent, in a category composite that was down almost 1 percent. Market share for the segment advanced 0.2 points, driven by Duncan Hines and Armour.
Strong double-digit net sales growth of both Duncan Hines baking products, driven by the first-half launch of Perfect Size for 1, and Armourcanned meat due, in part, to hurricane-related relief shipments, fueled the net sales performance of the segment. Partially offsetting this strong growth were lower sales of Wish-Bone salad dressings, Comstock + Wilderness pie fillings and, to a lesser extent, Smart Balance spreads.
Ebit for the Grocery segment advanced approximately 8.6 percent to USD 249.0 million in 2017, compared to USD 229.2 million in 2016, reflecting the increase in net sales, strong productivity and lower performance-based compensation expense, partially offset by input cost inflation, unfavorable product mix and the unfavorable impact versus year-ago of items affecting comparability. Excluding items affecting comparability, Adjusted Ebit increased 9.5 percent to USD 258.6 million in 2017, compared to USD 236.1 million in 2016.
Boulder
Net sales for the Boulder segment increased 10.6 percent to USD 403.4 million in 2017, compared to USD 364.7 million in 2016, reflecting strong underlying growth of both volume/mix of 7.3 percent and net price realization of 3.1 percent, as well as the combined benefit of 6.2 percent for the 53[rd] week and three extra weeks of Boulder Brands ownership. Partially offsetting these positive factors were the unfavorable impacts of 2.4 percent from the wind-down of the Boulder UK operations and 3.6 percent from the SKU rationalization program, both of which were completed in 2017.
The growth in underlying net sales reflected strength across the portfolio, with double-digit gains for gardein, Earth Balance and Evol, partially offset by lower sales for Udi’s.
Ebit for the Boulder segment increased to USD 59.9 million in 2017, compared to USD 9.1 million in 2016. This performance reflected the benefits of the strong net sales growth, acquisition synergies, productivity and lower performance-based compensation expense, as well as the favorable impact versus year-ago of items affecting comparability. Partially offsetting these positive drivers were input cost inflation and discrete costs totalling USD 2 million related to the accelerated manufacturing investments. Excluding items affecting comparability, Adjusted Ebit increased 55.1 percent in 2017 to USD 72.2 million, compared to USD 46.5 million in 2016.
Specialty
Net sales for the Specialty segment decreased 11.7 percent to USD 326.0 million in 2017, compared to USD 369.2 million in 2016, reflecting an 8.5 percent decline from the AJ Exit and lower volume/mix of 5.0 percent, partially offset by net price realization of 0.1 percent and the combined impact of 1.7 percent from the 53[rd] week and three extra weeks of Boulder ownership.
Ebit for the Specialty segment decreased to USD 10.8 million in 2017, compared to USD 32.3 million in 2016, significantly due to the unfavorable impact versus year-ago of items affecting comparability. Also impacting the performance were the lower net sales, input cost inflation and discrete costs totalling approximately USD 12 million from the AJ Exit and accelerated manufacturing investments, partially offset by productivity and lower performance-based compensation expense. Excluding items affecting comparability, Adjusted Ebit declined 5.3 percent to USD 32.8 million in 2017, compared to USD 34.6 million in the year ago period, including the USD 12 million headwind from the discrete items representing 35 points of Ebit growth.
Fourth Quarter Results
Net sales in the fourth quarter of 2017 increased 2.9 percent to USD 883.5 million, compared to net sales of USD 858.5 million in the year-ago period. This performance reflected the 53[rd] week benefit amounting to 7.2 percent in the quarter, as well as the 0.6 percent recovery from the hurricanes that negatively impacted the third quarter of 2017. These positive factors were partially offset by the unfavorable impacts of the AJ Exit of 2.4 percent, the residual Boulder SKU rationalization of 0.1 percent and an underlying net sales decline of 2.4 percent. The underlying net sales decline largely reflected a reduction of retail inventory levels in the quarter at several large customers, despite the continued strong in-market performance, and was comprised of lower volume/mix of 3.3 percent, partially offset by higher net price realization of 0.8 percent and favorable foreign currency translation of 0.1 percent.
Gross profit in the fourth quarter of 2017 increased 2.2 percent to USD 273.4 million, or 30.9 percent of net sales, compared to gross profit of USD 267.6 million, or 31.2 percent of net sales, in the year-ago period. This performance reflected the higher net sales, expected strong productivity and a further reduction in performance-based compensation expense, partially offset by higher-than-expected input cost inflation, stemming from escalating logistics and packaging costs, unfavorable product mix and the anticipated impact of residual discrete costs associated with the AJ Exit and accelerated manufacturing investments totalling a combined USD 7.3 million in the quarter. Also impacting the comparison were items affecting comparability. Excluding items affecting comparability, Adjusted gross profit advanced 2.5 percent to USD 274.3, or 31.1 percent of net sales, compared to USD 267.7 million, or 31.2 percent of net sales, in the year-ago period, including the USD 7.3 million headwind from the discrete items.
Ebit in the fourth quarter of 2017 increased 15.0 percent to USD 199.4 million, or 22.6 percent of net sales, compared to USD 173.3 million, or 20.2 percent of net sales, in the fourth quarter of 2016. This performance reflected the growth in gross profit, coupled with lower SG+A overhead expenses resulting from lower performance-based compensation expense and aggressive cost management, partially offset by the unfavorable impact versus year-ago of items affecting comparability. Adjusted Ebit, excluding items affecting comparability but including the discrete costs, advanced 11.9 percent in the fourth quarter of 2017 to USD 204.2 million, or 23.1 percent of net sales, compared to USD 182.5 million, or 21.3 percent of net sales, in the year-ago period.
Net interest expense for the quarter declined 12.6 percent to USD 31.1 million, compared to USD 35.6 million in the year-ago period. This reduction was driven by the term loan refinancing the Company completed in February 2017, including the reduction of outstanding indebtedness, partially offset by the additional interest expense associated with the 53[rd] week.
The ETR for the quarter was a negative 163.8 percent, compared to 36.0 percent in the prior-year period, almost entirely due to items affecting comparability, including the one-time, non-cash deferred tax benefit resulting from U.S. tax reform. Also benefiting the ETR was the Company’s adoption in 2017 of the new accounting standard for stock-based compensation. Excluding items affecting comparability, the Adjusted ETR for the quarter was 35.4 percent, compared to 36.3 percent in the year-ago period.
Net earnings in the fourth quarter increased to USD 443.9 million, or USD 3.71 per diluted share, compared to net earnings of USD 88.1 million, or USD 0.74 per diluted share, in the fourth quarter of 2016, including the one-time, non-cash deferred tax liability benefit in the fourth quarter of 2017. Excluding the deferred tax benefit and other items affecting comparability, Adjusted net earnings for the fourth quarter increased 19.5 percent to USD 111.8 million, compared to net earnings of USD 93.5 million in the year-ago period, while Adjusted diluted earnings per share advanced 19.0 percent to USD 0.94, including the 53[rd] week benefit of USD 0.05, compared to USD 0.79 in the fourth quarter of 2016.
Net cash provided by operating activities totalled USD 237 million in the fourth quarter of 2017, compared to USD 248 million in the year-ago period, primarily reflecting higher working capital, partially offset by the growth in Adjusted net earnings.
Fourth Quarter Segment Results
Frozen
Net sales for the Frozen segment advanced 2.7 percent in the fourth quarter of 2017 to USD 381.0 million, compared to USD 371.1 million in the year-ago period. This growth reflected the 53[rd] week benefit amounting to 7.1 percent in the quarter, as well as the 1.1 percent recovery from the hurricanes that negatively impacted the third quarter of 2017. Partially offsetting these positive factors were the unfavorable impacts of 2.6 percent from the AJ Exit and an underlying net sales decline of 2.9 percent, which was due to lower volume/mix of 4.4 percent, stemming from a reduction in retail inventories at several large customers late in the fourth quarter of 2017, partially offset by favorable net price realization of 1.3 percent and favorable foreign currency translation of 0.2 percent.
In-market performance for the Frozen segment remained robust in the quarter, with retail consumption advancing 1.5 percent (or 4.5 percent, excluding Aunt Jemima) in a category composite that was up 3.5 percent. Leading the retail consumption growth for the segment were Birds Eye vegetables, which advanced 9.2 percent, Birds Eye meals, which advanced 2.9 percent, and the new Hungry-Man Handfuls innovation. Market share for the segment, excluding Aunt Jemima, advanced 0.2 points, led by Birds Eye.
Ebit for the Frozen segment decreased 1.9 percent to USD 87.9 million in the fourth quarter of 2017, compared to USD 89.6 million in the fourth quarter of 2016, largely reflecting the unfavorable impact versus year-ago of items affecting comparability and discrete costs totalling USD 4.6 million associated with both the AJ Exit and accelerated manufacturing investments. Also impacting the performance were input cost inflation, driven by escalating logistics and packaging costs, and unfavorable product mix, partially offset by the higher net sales, strong productivity, and lower performance-based compensation expense. Adjusted Ebit in the fourth quarter, excluding items impacting comparability but including the USD 4.6 million of discrete costs, advanced 1.0 percent to USD 89.0 million, compared with USD 88.2 million in 2016.
Grocery
Net sales for the Grocery segment increased 3.8 percent to USD 309.6 million in the fourth quarter of 2017, compared to USD 298.4 million in the year-ago period. This performance reflected the 53[rd] week benefit amounting to 7.4 percent in the quarter, partially offset by an underlying net sales decline of 3.6 percent, which was due to lower volume/mix of 2.6 percent, stemming from the reduction in retail inventories at several large customers late in the fourth quarter of 2017, and lower net price realization of 1.0 percent.
The Grocery segment performed essentially in line with its category composite in the quarter, with Duncan Hines baking products, Vlasicpickles and syrups outpacing their respective categories, while Wish-Bone dressings and Comstock + Wilderness pie fillings trailed.
Ebit for the Grocery segment advanced 3.8 percent to USD 83.5 million in the fourth quarter of 2017, compared to USD 80.4 million in the year-ago period. This performance reflected the benefits of the net sales growth, strong productivity and lower performance-based compensation expense, partially offset by input cost inflation, driven by escalating logistics and packaging costs, unfavorable product mix and items affecting comparability. Excluding items affecting comparability, Adjusted Ebit increased 7.1 percent to USD 84.8 million.
Boulder
Net sales for the Boulder segment increased 13.4 percent to USD 110.5 million in the fourth quarter of 2017, compared to USD 97.4 million in the year-ago period, reflecting strong underlying net sales growth of 7.0 percent, which was driven by volume/mix growth of 3.5 percent and favorable net price realization of 3.5 percent, as well as the 53[rd] week benefit of 7.7 percent. Partially offsetting these growth drivers were the residual impacts of the Boulder SKU rationalization program of 1.1 percent and the wind-down of the Boulder UK operations of 0.2 percent.
The strong underlying net sales performance for the segment reflected double-digit growth for gardein and Earth Balance, partially offset by lower sales of Udi’s.
Ebit for the Boulder segment was USD 21.8 million in the fourth quarter of 2017, compared to Ebit of USD 0.8 million in the year-ago period, largely reflecting the benefits of the net sales growth, acquisition synergies, productivity and lower performance-based compensation expense, as well as the favorable impact versus year-ago of items affecting comparability. Partially offsetting these factors was input cost inflation. Excluding items affecting comparability, Adjusted Ebit almost doubled to USD 24.5 million, compared to USD 12.7 million in 2016.
Specialty
Net sales for the Specialty segment decreased 9.9 percent to USD 82.5 million in the fourth quarter of 2017, compared to USD 91.5 million in the fourth quarter of 2016. This performance reflected the unfavorable impact of 11.6 percent from the AJ Exit and an underlying net sales decline of 4.4 percent, which was driven by lower volume/mix of 5.6 percent, due to the previously-disclosed gardein private label business exit, partially offset by higher net price realization of 1.2 percent. Also impacting the performance was the 53[rd] week benefit of 6.1 percent.
Ebit for the Specialty segment increased 17.3 percent to USD 11.6 million in the fourth quarter of 2017, compared to USD 9.9 million in the fourth quarter of 2016, due to strong productivity, lower performance-based compensation expense and the favorable impact versus year-ago of items affecting comparability. Partially offsetting these factors were discrete costs totaling USD 1.8 million associated with the AJ Exit and accelerated manufacturing investments, as well as input cost inflation. Adjusted Ebit in the fourth quarter, excluding items affecting comparability but including the discrete costs, increased 13.5 percent to USD 11.3 million.
Outlook for 2018 and Long-Term Margin Objective
Forecasted Adjusted diluted EPS metrics provided below are non-GAAP measures. The Company does not provide guidance for the most directly comparable GAAP measure, diluted EPS, and we similarly cannot provide a reconciliation between our forecasted Adjusted diluted EPS and diluted EPS metrics without unreasonable effort due to the unavailability of reliable estimates for certain items, such as non-cash gains or losses resulting from mark-to-market adjustments of hedging activities and foreign currency impacts. These items are not within our control and may vary greatly between periods and could significantly impact future financial results.
The Company issued guidance for 2018 Adjusted diluted EPS in the range of USD 2.85 to USD 2.95. At the guidance mid-point, this outlook represents growth of 16 percent versus the comparable 52-week Adjusted diluted EPS of USD 2.50 in 2017.
Commenting on the Company’s outlook, Clouse added, «Our outlook for 2018 reflects another year of double-digit Adjusted diluted EPS growth, with a return to strong gross margin improvement, partially offset by a return to a more normalized level of SG+A spending and the reinvestment of a portion of the tax reform benefit back into our brands and our people. We remain committed to achieving our long-term gross margin objective but, given the short-term headwinds of escalating inflation and the negative mix effect of out-sourcing new product innovations, we now expect to achieve our targeted gross margin growth in 2020, one year later than previously planned.»
The following assumptions are incorporated into the Company’s 2018 guidance:
- Underlying net sales are expected to grow ahead of category trends, and the benefit of USD 11 million from lapping the AJ Recall will also drive growth. Significantly offsetting these positive drivers are the lapping in 2018 of the 2017 benefits from the 53[rd] week and the four months of sales from the exited AJ business.
- The impact of an earlier Easter in 2018 is expected to modestly benefit net sales in the first quarter of 2018, with a corresponding offset in the second quarter. The Frozen segment and, to a lesser extent, the Grocery segment are expected to be most affected by this shift, due to the seasonal nature of those portfolios.
- Approximately two-thirds of the USD 42 million in discrete items that weighed on 2017 gross margin performance are expected to be tailwinds to 2018 performance.
- The favorable spread between productivity and inflation is expected to narrow significantly in 2018.
- Input cost inflation for the year is estimated in the range of 3.8 percent to 4.2 percent, with first half inflation higher than the second half.
- Productivity for the year, including residual acquisition synergies and some early savings from the network optimization program, is estimated in the range of 4.0 percent to 4.5 percent of cost of products sold, with second half productivity higher than the first half.
- Net interest expense is forecasted in the range of USD 123 million to USD 126 million.
- The ETR for the year, including the impact of U.S. tax reform, is estimated to improve to a range of 24 percent to 25 percent, with a portion of the savings reinvested in innovation and marketing behind our brands and a higher 401K match for all our non-union employees.
- The weighted average diluted share count for the year is expected to approach 121 million shares, with the second half of the year higher than the first half.
- Capital expenditures for the full year are expected in the range of USD 155 million to USD 165 million.
Regarding its long-term gross margin objective, Pinnacle now expects to achieve its target of 300-400 basis points of improvement versus 2016 by 2020, one year later than previously anticipated. This modification in outlook reflects escalating input cost inflation, particularly with regard to elevated logistics and packaging expenses over the next 12 months, and unfavorable product mix largely associated with the accelerated growth of Birds Eye innovation and the need to outsource production while new capacity comes fully on stream and volume is repatriated.
