Pinnacle Foods: Reports Strong Fiscal Q3 Results

Parsippany / NJ. (pf) Pinnacle Foods Inc. reported another quarter of strong growth in net earnings and diluted earnings per share, excluding items affecting comparability and now expects pro forma diluted EPS for fiscal 2013 to be at the high end of its previous guidance range of 1,53 to 1,57 USD.

Consolidated net sales in the third quarter ended September 29, 2013 increased approximately one percent versus year-ago, driven by a two percent increase in net sales for the Company´s North America Retail business, which is comprised of the Birds Eye Frozen and Duncan Hines Grocery segments.

Diluted earnings per share in the third quarter of 2013 increased to 0,35 USD, compared to diluted earnings per share of 0,11 USD in the year-ago period. Excluding items affecting comparability, on a pro forma basis which is described in the accompanying reconciliation tables, diluted earnings per share advanced 38 percent to 0,36 USD, compared to diluted earnings per share of 0,26 USD in the year-ago period.

Commenting on the results, Pinnacle Foods Chief Executive Officer Bob Gamgort stated, «The third quarter results demonstrate the success of our strategy of «Reinvigorating Iconic Brands» through focused investment spending, strong productivity results and maintaining a lean and efficient organization structure. We achieved solid net sales growth in our North America retail business and we expanded our margins and EPS meaningfully in the quarter. We are confident that our programs for the balance of the year appropriately address continuing challenges in the industry».

Third Quarter Consolidated Results

Net sales in the third quarter of 2013 increased 0,8 percent to 572,5 million USD, compared to net sales of 567,9 million USD in the third quarter of 2012. This performance reflected growth in North America Retail, driven by the Duncan Hines Grocery segment, partially offset by planned lower sales in the Company´s Specialty Foods segment.

North America Retail net sales increased 2,2 percent to 482,2 million USD in the third quarter of 2013, compared to 471,6 million USD in the year-ago period, almost entirely due to volume/mix growth of 2,1 percent. Fuelling the growth in net sales were the Company´s Leadership Brands.

Adjusted Ebitda on a pro forma basis advanced eleven percent to 107,9 million USD in the third quarter of 2013, compared to 97,2 million USD in the third quarter of 2012. This performance reflected a 220 basis point increase in gross margin, due to favourable product mix and productivity, which collectively more than offset modest input cost inflation. Also contributing to the gross margin growth was the benefit in the current quarter of the expected insurance recovery of expenses related to a voluntary product recall in 2012.

Earnings before interest and taxes (Ebit) advanced 42 percent versus year-ago to 84,9 million USD in the third quarter of 2013, compared to 59,9 million USD in the third quarter of 2012. Excluding items affecting comparability, Ebit on a pro forma basis increased approximately 13 percent to 88,2 million USD in the third quarter of 2013, compared to 78,4 million USD in the year-ago period, due to the growth in gross profit, partially offset by higher marketing investment behind the Company´s Leadership Brands and increased administrative expenses.

Net earnings in the third quarter advanced to 40,7 million USD or 0,35 USD per diluted share, compared with net earnings of 9,9 million USD or 0,11 USD per diluted share, in the year-ago period. Excluding items affecting comparability, on a pro forma basis, net earnings for the third quarter increased to 42,4 million USD or 0,36 USD per diluted share, compared to net earnings of 30,5 million USD or 0,26 USD per diluted share, in the year-ago period.

Net cash provided by operating activities advanced significantly in the third quarter of 2013 to 29,6 million USD, compared to a net operating cash outflow of 5,3 million USD in the year-ago period.

Nine Months Consolidated Results

Consolidated net sales for the first nine months of 2013 declined 1,1 percent to 1,75 billion USD, compared to net sales of 1,77 billion USD in the year-ago period. This performance primarily reflected the planned exit of low-margin, unbranded Specialty businesses, partially offset by net sales growth of 0,7 percent for the Company´s North America Retail businesses. Pinnacle´s retail consumption, as measured by IRI, outpaced the performance of its composite categories, which declined by approximately one percent versus year-ago for the nine months ended September 29, 2013. Adjusted Ebitda on a pro forma basis advanced 12,6 percent to 305,0 million USD in the first nine months of 2013, compared to 270,9 million USD in the year-ago period. Excluding items affecting comparability in both periods, Ebit increased 15,2 percent to 247,3 million USD in the first nine months of 2013, compared to Ebit of 214,6 million USD in the year-ago period. On the same basis, net earnings advanced 62 percent to 115,7 million USD or 0,99 USD per diluted share, compared to net earnings of 71,3 million USD or 0,61 USD per diluted share, in the year-ago period. Net cash provided by operating activities increased significantly in the first nine months of 2013 to 141,7 million USD, compared to 62,4 million USD in the year-ago period.

Outlook

Given the Company´s strong performance through the first nine months of 2013, Pinnacle strengthened its pro forma EPS outlook for 2013 and now expects to be at the high end of its previous EPS guidance range of 1,53 to 1,57 USD for the full year, excluding items affecting comparability. This updated guidance continues to include 0,01 to 0,02 USD accretion in the fourth quarter from the recently-acquired Wish-Bone business and a diluted weighted average share count for the year of 116,5 million.

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