Exhibit 99.1
[Logo of Michael Foods, Inc.]
NEWS
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301 Carlson Parkway¡ Suite 400¡ Minnetonka, MN 55305¡ (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 FIRST QUARTER RESULTS
MINNETONKA, MN May 14 — Michael Foods, Inc. today reported financial results for the first quarter of 2010. Net earnings for the quarter ended April 3, 2010 were $17.5 million, compared to $20.8 million in 2009, a decrease of 16%, partly as a result of increased interest costs related to our May 2009 credit agreement refinancing. Net sales for the quarter ended April 3, 2010 were $395.3 million, compared to $401.2 million in 2009, a decrease of 1.5%.
Earnings before interest, taxes, depreciation and amortization and other adjustments (EBITDA, as defined in Michael Foods’ credit facility) for the quarter ended April 3, 2010 were $56.5 million, compared to $54.7 million in 2009. Michael Foods, Inc. uses EBITDA as a measurement of financial results, as an indication of the relative strength of its operating performance and to determine incentive compensation levels.
Commenting on the results, Chief Executive Officer and President James E. Dwyer, Jr. said, “Our first quarter EBITDA results were driven by improved performance by our Egg Products Division due to stronger volumes of higher value-added precooked products in the foodservice channel, offset slightly by weaker market conditions in the food ingredient channel. Results from the Potato Products Division improved, with the 2009 period containing unusual costs tied to a voluntary product recall. The Crystal Farms Division gross margin contribution fell, despite a volume increase for branded cheese of 10%, due to the unusually robust margin in the first quarter of 2009 driven by low cheese costs.”
Dwyer concluded, “Our free cash flow remains strong. We continue to invest in our businesses and a major capital project — our new potato processing plant — is nearly complete.”
Unaudited segment data follows (in thousands):
| Egg Products | Potato Products | Crystal Farms | Corporate | Total | |||||||||||||
Quarter ended April 3, 2010: | |||||||||||||||||
External net sales | $ | 265,686 | $ | 30,362 | $ | 99,254 | $ | — | $ | 395,302 | |||||||
Net earnings | 22,628 | (1,411 | ) | 4,755 | (8,481 | ) | 17,491 | ||||||||||
EBITDA* | 48,474 | 2,119 | 8,584 | (2,664 | ) | 56,513 | |||||||||||
Quarter ended April 4, 2009: | |||||||||||||||||
External net sales | $ | 279,314 | $ | 26,305 | $ | 95,630 | $ | — | $ | 401,249 | |||||||
Net earnings | 22,153 | (1,771 | ) | 6,579 | (6,192 | ) | 20,769 | ||||||||||
EBITDA* | 46,347 | 18 | 11,330 | (3,008 | ) | 54,687 | |||||||||||
| * | As defined in Michael Foods’ credit facility. |
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 net earnings to EBITDA for the quarter ended April 3, 2010 (unaudited, in thousands):
| Egg Products | Potato Products | Crystal Farms | Corporate | Total | |||||||||||||
Net earnings (loss) | $ | 22,628 | $ | (1,411 | ) | $ | 4,755 | $ | (8,481 | ) | $ | 17,491 | |||||
Interest expense, excluding amortization of financing costs | 279 | 60 | — | 9,261 | 9,600 | ||||||||||||
Amortization of financing costs | — | — | — | 1,645 | 1,645 | ||||||||||||
Income tax expense (benefit) | 11,492 | (727 | ) | 2,460 | (3,856 | ) | 9,369 | ||||||||||
Depreciation and amortization | 12,009 | 3,972 | 1,146 | 1 | 17,128 | ||||||||||||
Equity sponsor management fee | — | — | — | 565 | 565 | ||||||||||||
Industrial revenue bonds related expenses | 157 | — | — | — | 157 | ||||||||||||
Other | 1,854 | 225 | 223 | (1,799 | ) | 503 | |||||||||||
| 48,419 | 2,119 | 8,584 | (2,664 | ) | 56,458 | ||||||||||||
Plus: | |||||||||||||||||
Unrealized losses on swap contracts | 55 | — | — | — | 55 | ||||||||||||
EBITDA (as defined in the credit facility) | $ | 48,474 | $ | 2,119 | $ | 8,584 | $ | (2,664 | ) | $ | 56,513 | ||||||
The following table reconciles net earnings to EBITDA for the quarter ended April 4, 2009 (unaudited, in thousands):
| Egg Products | Potato Products | Crystal Farms | Corporate | Total | |||||||||||||
Net earnings (loss) | $ | 22,153 | $ | (1,771 | ) | $ | 6,579 | $ | (6,192 | ) | $ | 20,769 | |||||
Interest expense, excluding amortization of financing costs | 364 | — | — | 6,898 | 7,262 | ||||||||||||
Amortization of financing costs | — | — | — | 970 | 970 | ||||||||||||
Income tax expense (benefit) | 11,419 | (972 | ) | 3,400 | (2,883 | ) | 10,964 | ||||||||||
Depreciation and amortization | 11,825 | 2,463 | 1,053 | 1 | 15,342 | ||||||||||||
Equity sponsor management fee | — | — | — | 523 | 523 | ||||||||||||
Industrial revenue bonds related expenses | 244 | — | — | — | 244 | ||||||||||||
Other | 2,256 | 298 | 298 | (2,325 | ) | 527 | |||||||||||
| 48,261 | 18 | 11,330 | (3,008 | ) | 56,601 | ||||||||||||
Minus: | |||||||||||||||||
Unrealized gains on swap contracts | 1,914 | — | — | — | 1,914 | ||||||||||||
EBITDA (as defined in the credit facility) | $ | 46,347 | $ | 18 | $ | 11,330 | $ | (3,008 | ) | $ | 54,687 | ||||||
Michael Foods, Inc., based in Minnetonka, MN, is a producer and distributor of food products to the foodservice, retail and food-ingredient markets. Its principal products are specialty egg products, refrigerated potato products, cheese and other dairy products.
Consolidated statements of earnings are as follows:
Michael Foods, Inc.
Consolidated Statements of Earnings
For the periods ended April 3, 2010 and April 4, 2009
(in thousands)
| Three months | ||||||
| 2010 | 2009 | |||||
Net sales | $ | 395,302 | $ | 401,249 | ||
Cost of sales | 322,061 | 323,798 | ||||
Gross profit | 73,241 | 77,451 | ||||
Selling, general & administrative | 34,760 | 37,241 | ||||
Operating profit | 38,481 | 40,210 | ||||
Interest expense, net | 11,621 | 8,477 | ||||
Earnings before income taxes | 26,860 | 31,733 | ||||
Income tax expense | 9,369 | 10,964 | ||||
Net earnings | $ | 17,491 | $ | 20,769 | ||
| April 3, 2010 | January 2, 2010 | |||||
Selected Balance Sheet Information: | ||||||
Cash and equivalents | $ | 81,502 | $ | 87,061 | ||
Accrued interest | $ | 5,970 | $ | 3,062 | ||
Total debt, including current maturities | $ | 556,533 | $ | 553,037 | ||
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. Also, the Company faces normal, and at times notable, variances in the supply of, and demand for, eggs, grain feed inputs, potatoes and cheese, which can result in pricing and profit margin volatility for certain egg products, potato 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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5-14-10
