Pinnacle Foods Finance LLC Reports Fiscal 2010 Second Quarter Results

Pinnacle Foods Finance LLC (“Pinnacle” or the “Company”), a leading manufacturer, marketer and distributor of branded, high-quality food products in North America, announced its financial results for the second quarter ended June 27, 2010. Net sales were $576.1 million compared to $408.8 million in last year’s second quarter. This increase was principally due to the acquisition of Birds Eye Foods, Inc. late in 2009. Net earnings were $14.2 million compared to $2.5 million in the second quarter of last year. For the first six months of 2010, net sales were $1.233 billion compared with $836.2 million in last year’s first six months and net earnings were $18.1 million compared to $0.4 million a year ago. Consolidated EBITDA, as defined in our Senior Secured Credit Facility and the Indentures governing our Senior Notes and Senior Subordinated Notes, was $243.4 million in the first six months of 2010 compared to $231.7 million for the first six months of 2009, an increase of 5.0%. For the last twelve months ended June 27, 2010, consolidated EBITDA was $483.8 million. Consolidated EBITDA is defined below under “Non-GAAP Financial Matters.”


Pinnacle’s Chief Executive Officer, Robert J. Gamgort said, “Operating in a challenging marketplace, we are pleased with our ability to deliver strong earnings and cash performance.”


Second Quarter 2010
Consolidated net sales were $576.1 million in the second quarter of 2010 compared to $408.8 million in last year’s second quarter, an increase of $167.3 million. The acquisition of Birds Eye Foods, Inc. added $197.2 million of net sales. On a proforma basis after giving effect to the acquisition of Birds Eye, net sales for the second quarter of 2010 were down 7.4% compared to the same period a year ago, with net sales in our North American retail businesses down 5.0% and Specialty Foods Division net sales down 17%.
Net sales in the Birds Eye Frozen Division were $230.7 million in the second quarter compared to $98.1 million in last year’s second quarter. The acquisition of Birds Eye Foods, Inc. added $138.1 million of net sales. Birds Eye® Steamfresh® vegetables grew compared with the same period a year ago driven by new product volume, promotional increases and strong market share performance. Birds Eye® Voila!® complete bagged meals showed a significant increase. The net sales of the remaining businesses in the division declined $5.5 million. Celeste® pizza sales declined in the quarter as there was increased competitive activity from new market entrants, more than offsetting increased sales of Aunt Jemima® frozen breakfasts.

Net sales in the Duncan Hines Grocery Division were $244.4 million in the second quarter compared to $229.8 million in last year’s second quarter. The acquisition of Birds Eye Foods, Inc. added $22.1 million of net sales. The net sales of the remaining businesses in the division declined $7.5 million. Sales of Duncan Hines® baking mixes and frostings declined in the quarter in the face of intense competition. However, Vlasic® pickles, Armour® canned meats and our Canadian business posted sales increases.
Net sales in the Specialty Foods Division were $101.0 million in the second quarter compared to $80.9 million in last year’s second quarter. The acquisition of Birds Eye Foods, Inc. added $37.0 million of net sales. The net sales of the remaining businesses in the division declined $16.9 million, in line with the company’s strategic initiative to de- emphasize lower margin foodservice and private label products.

Earnings before interest and taxes (EBIT) were $70.4 million in the second quarter of 2010, or 12.2% of net sales, compared to 9.5% of net sales in the second quarter of 2009. Excluding the impact of the write-up of Birds Eye inventories at the date of acquisition to fair value ($9.7 million), termination benefits ($1.7 million) and integration costs ($2.3 million), EBIT would have been $84.1 million, or 14.6% of net sales. The growth in EBIT and the EBIT margin was principally driven by lower commodity costs, improved product mix and our productivity initiatives taking hold, as well as reduced marketing and selling expenses.
“Operating in a challenging marketplace, we are pleased with our ability to deliver strong earnings and cash performance.”

Earnings were also impacted by higher interest expense to fund the Birds Eye acquisition and a lower effective tax rate.

This year’s effective tax rate was 16.5% which included a one-time adjustment. Excluding the adjustment, the tax rate would be 40.6%. Last year’s effective tax rate was influenced by the valuation allowance against deferred tax assets which was released in the fourth quarter of 2009.

Overall, net earnings were $14.2 million in the second quarter of 2010, compared to $2.5 million in the same period a year ago.