Michael Foods 8-K Michael Foods Reports 2006 Results

Exhibit 99.1

[Logo of Michael Foods, Inc.]

NEWS

	301 Carlson Parkwayn Suite 400n Minnetonka, MN 55305n (952) 258-4000 FAX (952) 258-4911 Visit Michael Foods, Inc. on the Internet: www.michaelfoods.com
CONTACT:	Mark D. Witmer Treasurer & Secretary (952) 258-4906

For Immediate Release

MICHAEL FOODS REPORTS 2006 RESULTS

MINNETONKA, March 26 — Michael Foods, Inc. today reported financial results for 2006. Net earnings for the year ended December 31, 2006 were $19.2 million, compared to $38.9 million in the 2005 period, a decrease of 51%. Net sales for the year ended December 31, 2006 increased slightly to $1,247.3 million, compared to $1,242.5 million in the 2005 period. Net earnings for the three months ended December 31, 2006 were $4.6 million, compared to $14.5 million in the 2005 period, a decrease of 68%. Net sales for the three months ended December 31, 2006 were $332.1 million, compared to $327.3 million in the 2005 period, an increase of 1.5%.

Earnings before interest, taxes, depreciation and amortization (EBITDA, as defined in our senior credit facility) for the year ended December 31, 2006 increased slightly to $180.9 million, compared to $180.6 million in the 2005 period. EBITDA for the three months ended December 31, 2006 was $50.8 million, compared to $49.7 million in the 2005 period, an increase of 2%. We use EBITDA as a measurement of our financial results because we believe it is indicative of the relative strength of our operating performance, it is used to determine incentive compensation levels and it is a key measurement contained in the financial covenants of our senior credit facility.

Commenting on the 2006 results, Chairman, Chief Executive Officer and President Gregg A. Ostrander said, “Although we faced notable challenges in 2006, we achieved our tenth straight record year of EBITDA growth. We operated in a difficult input cost environment within our Egg Division. Egg markets saw low levels early in the year, but strengthened substantially during the fourth quarter. We also experienced a substantial run-up in corn costs in the fourth quarter. With the rapid increase in our costs, we were unable to offset the cost increases in a timely manner with selective price increases. Both factors caused margin pressure in our largest division, Egg Products, resulting in a 4% decline in EBITDA for the division. As was true in 2005, the lower value-added portion of our Egg Products business operated at a loss, while the higher value-added products performed well in total, although at somewhat lower levels of operating profit than in 2005. Unit sales for the division rose by 2% for the year.” Regarding 2007, Ostrander said, “We are faced with on-going cost pressures in 2007. In particular, corn costs, driven by robust ethanol demand, are very high and show few signs of abating. Given this significant cost headwind and the egg product market’s lag in adjusting prices to reflect such cost increases, we expect similar margin pressure to continue in 2007.”

Ostrander continued, “Our other two divisions had good results in 2006, with each generating higher EBITDA than in 2005. Refrigerated Distribution EBITDA increased 14% year-over-year, driven by market share gains in branded cheese and lower market costs for cheese. Potato Products 2006 EBITDA rose by 7%, with both the foodservice and retail parts of the business showing good volume and earnings growth.”

Ostrander concluded, “Our free cash flow generation was once again strong in 2006. We prepaid another $60 million of credit facility debt in December.

Unaudited segment data follows (in thousands):

	Egg Products		Refrigerated Distribution		Potato Products		Corporate			Total
Quarter ended December 31, 2006:
External net sales	$	221,216	$	78,916	$	31,972	$	—		$	332,104
Net earnings		7,922		4,409		4,351		(12,091	)		4,591
EBITDA*		36,083		7,491		7,875		(638	)		50,811
Quarter ended December 31, 2005:
External net sales	$	215,316	$	82,342	$	29,597	$	—		$	327,255
Net earnings		17,940		3,697		4,589		(11,730	)		14,496
EBITDA*		36,572		6,330		7,626		(876	)		49,652
Year ended December 31, 2006:
External net sales	$	858,352	$	275,016	$	113,980	$	—		$	1,247,348
Net earnings		34,869		11,975		12,400		(40,089	)		19,155
EBITDA*		137,134		23,086		25,155		(4,510	)		180,865
Year ended December 31, 2005:
External net sales	$	860,925	$	279,328	$	102,245	$	—		$	1,242,498
Net earnings		52,610		10,027		11,236		(35,014	)		38,859
EBITDA*		142,205		20,318		23,443		(5,381	)		180,585

* As defined in our senior credit facility.

We believe EBITDA is a widely accepted financial indicator used to analyze and compare companies on the basis of operating performance. It should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles and is not indicative of operating profit or cash flow from operations as determined under generally accepted accounting principles.

The following table reconciles our net earnings to EBITDA for the quarter ended December 31, 2006 (in thousands):

	Egg Products		Refrigerated Distribution		Potato Products		Corporate			Total
Net earnings (loss)	$	7,922	$	4,409	$	4,351	$	(12,091	)	$	4,591
Interest expense, excluding amortization of debt issuance costs		123		—		—		13,544			13,667
Amortization of debt issuance costs		—		—		—		3,601			3,601
Income tax expense		8,676		1,990		1,968		(5,440	)		7,194
Depreciation and amortization		15,796		1,019		1,478		3			18,296
Equity sponsor management fee		—		—		—		439			439
Industrial revenue bonds related expenses		250		—		—		—			250
Other		4,030		73		78		(694	)		3,487
		36,797		7,491		7,875		(638	)		51,525
Less:
Unrealized gains on swap contracts		714		—		—		—			714
EBITDA (as defined in our senior credit facility)	$	36,083	$	7,491	$	7,875	$	(638	)	$	50,811

The following table reconciles our net earnings to EBITDA for the quarter ended December 31, 2005 (in thousands):

	Egg Products		Refrigerated Distribution		Potato Products		Corporate			Total
Net earnings (loss)	$	17,940	$	3,697	$	4,589	$	(11,730	)	$	14,496
Interest expense, excluding amortization of debt issuance costs		115		—		—		11,573			11,688
Amortization of debt issuance costs		—		—		—		445			445
Income tax expense		2,738		1,348		1,466		(5,896	)		(344	)
Depreciation and amortization		14,731		1,182		1,460		8			17,381
Equity sponsor management fee		—		—		—		485			485
Industrial revenue bonds related expenses		243		—		—		—			243
Other		892		103		111		4,239			5,345
		36,659		6,330		7,626		(876	)		49,739
Less:
Unrealized gains on swap contracts		87		—		—		—			87
EBITDA (as defined in our senior credit facility)	$	36,572	$	6,330	$	7,626	$	(876	)	$	49,652

The following table reconciles our net earnings to EBITDA for the year ended December 31, 2006 (in thousands):

	Egg Products			Refrigerated Distribution		Potato Products		Corporate			Total
Net earnings (loss)	$	34,869		$	11,975	$	12,400	$	(40,089	)	$	19,155
Interest expense, excluding amortization of debt issuance costs		415			—		—		51,475			51,890
Amortization of debt issuance costs		—			—		—		4,743			4,743
Income tax expense		24,465			6,160		6,388		(20,719	)		16,294
Depreciation and amortization		64,443			4,492		5,913		10			74,858
Equity sponsor management fee		—			—		—		1,809			1,809
Industrial revenue bonds related expenses		996			—		—		—			996
Other		11,097			459		454		(1,739	)		10,271
		136,285			23,086		25,155		(4,510	)		180,016
Minus:
Unrealized gains on swap contracts		(849	)		—		—		—			(849	)
EBITDA (as defined in our senior credit facility)	$	137,134		$	23,086	$	25,155	$	(4,510	)	$	180,865

The following table reconciles our net earnings to EBITDA for the year ended December 31, 2005 (in thousands):

	Egg Products		Refrigerated Distribution		Potato Products		Corporate			Total
Net earnings (loss)	$	52,610	$	10,027	$	11,236	$	(35,014	)	$	38,859
Interest expense, excluding amortization of debt issuance costs		394		—		—		44,898			45,292
Amortization of debt issuance costs		—		—		—		1,993			1,993
Income tax expense		22,404		5,148		5,456		(18,742	)		14,266
Depreciation and amortization		59,214		4,624		6,243		11			70,092
Equity sponsor management fee		—		—		—		2,036			2,036
Industrial revenue bonds related expenses		964		—		—		—			964
Other		6,993		519		508		(563	)		7,457
		142,579		20,318		23,443		(5,381	)		180,959
Minus:
Unrealized gains on swap contracts		374		—		—		—			374
EBITDA (as defined in our senior credit facility)	$	142,205	$	20,318	$	23,443	$	(5,381	)	$	180,585

Michael Foods, Inc. is a diversified food processor and distributor with particular interests in egg products, refrigerated grocery products and refrigerated potato products. Principal subsidiaries include M. G. Waldbaum Company, Papetti’s Hygrade Egg Products, Inc., Crystal Farms Refrigerated Distribution Company and Northern Star Co.

Condensed consolidated statements of earnings are as follows:

Michael Foods, Inc.

Consolidated Statements of Earnings

(000’s, unaudited)

	Quarter ended December 31,					Year ended December 31,
	2006		2005			2006			2005
Net sales	$	332,104	$	327,255		$	1,247,348		$	1,242,498
Cost of sales		270,842		265,437			1,016,832			1,005,418
Gross profit		61,262		61,818			230,516			237,080
Selling, general & administrative		29,359		30,405			133,287			130,833
Plant closing expenses		3,139		—			3,139			—
Operating profit		28,764		31,413			94,090			106,247
Interest expense, net		16,979		11,969			55,928			47,119
Loss on early extinguishment of debt		—		5,548			—			5,548
Earnings before income taxes and equity in earnings (losses) of unconsolidated subsidiary		11,785		13,896			38,162			53,580
Income tax expense (benefit)		7,194		(344	)		16,294			14,266
Earnings before equity in earnings (losses) of unconsolidated subsidiary		4,591		14,240			21,868			39,314
Equity in earnings (losses) of unconsolidated subsidiary		—		256			(2,713	)		(455	)
NET EARNINGS	$	4,591	$	14,496		$	19,155		$	38,859

Selected Balance Sheet Information (unaudited):

	December 31, 2006		December 31, 2005
Cash and equivalents	$	21,576	$	42,179
Accrued interest		2,497		2,632
Total debt, including current maturities		645,794		709,723

Certain items in this release may be forward-looking statements. Such forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, changes in domestic and international economic conditions. Risks and uncertainties also include how the Company’s cash management activities, and those of its customers and suppliers, along with the Company’s growth plans, affect working capital components. Also, the Company faces normal, and at times notable, variances in the supply of, and demand for, eggs, grain feed inputs, and cheese, which can result in pricing and profit margin volatility for certain egg products and cheese. As a result, the Company’s actual financial results could differ materially from the results estimated by, forecasted by, or implied by the Company in such forward-looking statements.

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03-26-07