Exhibit 99.1
Contact:
Mark Westphal
Senior Vice President and
Chief Financial Officer (952) 258-4000
MICHAEL FOODS REPORTS THIRD QUARTER RESULTS
MINNETONKA, MN, November 12—Michael Foods Group, Inc. today reported financial results for the third quarter of 2013.
Net sales for the quarter ended September 28, 2013 were $486.9 million, compared to $470.9 million in 2012, an increase of 3.4%. Net earnings for the quarter ended September 28, 2013 were $10.6 million, compared to $8.7 million in 2012. Net sales for the nine months ended September 28, 2013 were $1,435.5 million, compared to $1,352.4 million in 2012, an increase of 6.1%. Net earnings for the nine months ended September 28, 2013 were $34.5 million, compared to $16.4 million in 2012.
Earnings before interest, taxes, depreciation, amortization (“EBITDA”) and other adjustments (“adjusted EBITDA,” as defined in the Company’s credit facility) for the quarter ended September 28, 2013 were $61.3 million, compared to $61 million in 2012. Adjusted EBITDA for the nine months ended September 28, 2013 were $188.1 million, compared to $175.5 million in 2012, an increase of 7.2%.
Michael Foods Group, Inc. uses adjusted EBITDA as a measurement of financial results, as an indication of the relative strength of its operating performance, and to determine incentive compensation levels. Management believes that EBITDA and adjusted EBITDA provide potential investors with useful information with which to analyze and compare with other companies in our industry our operating performance and our ability to service debt.
Certain items contained in this release may be “forward-looking statements.” Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future sales or performance, capital expenditures, financing needs, ability to fund operations, intentions relating to acquisitions, our competitive strengths and weaknesses, our business strategy and the trends we anticipate in the industries and economies in which we operate and other information that is not historical information. When used herein, the words “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes” and variations of such words or similar expressions are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance.
All forward-looking statements are based upon our current expectations and various assumptions. Our expectations, beliefs and projections are expressed in good faith, and we believe there is a reasonable basis for them, but there can be no assurance that our expectations, beliefs and projections will be realized. There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in this release, including the factors described under “Risk Factors” in our 2012 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 22, 2013. Important factors that could cause our actual results to differ materially from the forward-looking statements we make in this release include changes in domestic and international economic conditions.
Unaudited segment data follows (in thousands):
| Egg |
|
| Refrigerated |
|
| Cheese & |
|
| Corporate |
|
| Total |
| |||||
Three months ended September 28, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External net sales | $ | 366,351 |
|
| $ | 41,336 |
|
| $ | 79,239 |
|
| $ | — |
|
| $ | 486,926 |
|
Net earnings (loss) |
| 14,174 |
|
|
| 2,447 |
|
|
| 2,885 |
|
|
| (8,935 | ) |
|
| 10,571 |
|
Adjusted EBITDA |
| 47,889 |
|
|
| 7,259 |
|
|
| 7,499 |
|
|
| (1,329 | ) |
|
| 61,318 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 29, 2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External net sales | $ | 339,242 |
|
| $ | 38,033 |
|
| $ | 93,672 |
|
| $ | — |
|
| $ | 470,947 |
|
Net earnings (loss) |
| 12,362 |
|
|
| 2,478 |
|
|
| 2,519 |
|
|
| (8,619 | ) |
|
| 8,740 |
|
Adjusted EBITDA |
| 48,504 |
|
|
| 7,292 |
|
|
| 7,130 |
|
|
| (1,885 | ) |
|
| 61,041 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 28, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External net sales | $ | 1,055,179 |
|
| $ | 123,190 |
|
| $ | 257,178 |
|
| $ | — |
|
| $ | 1,435,547 |
|
Net earnings (loss) |
| 44,658 |
|
|
| 7,235 |
|
|
| 8,541 |
|
|
| (25,972 | ) |
|
| 34,462 |
|
Adjusted EBITDA |
| 149,163 |
|
|
| 21,946 |
|
|
| 22,878 |
|
|
| (5,881 | ) |
|
| 188,106 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 29, 2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External net sales | $ | 960,148 |
|
| $ | 109,862 |
|
| $ | 282,424 |
|
| $ | — |
|
| $ | 1,352,434 |
|
Net earnings (loss) |
| 29,125 |
|
|
| 4,919 |
|
|
| 10,217 |
|
|
| (27,875 | ) |
|
| 16,386 |
|
Adjusted EBITDA |
| 140,852 |
|
|
| 18,563 |
|
|
| 25,710 |
|
|
| (9,581 | ) |
|
| 175,544 |
|
Beginning January 1, 2013, we changed our retail selling costs allocation methodology between segments. The allocation impacts the net earnings and adjusted EBITDA reported by each segment. This change increased the net earnings and adjusted EBITDA for the Cheese and Other Dairy-Case Products segment and decreased the net earnings and adjusted EBITDA for the Egg Products and Refrigerated Potato Products segments. The amounts for the September 29, 2012 three and nine-month periods have been restated to reflect the allocation change.
Adjusted EBITDA is a 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 (loss) to adjusted EBITDA for the three-month period ended September 28, 2013 (unaudited, in thousands):
| Egg Products |
|
| Refrigerated Potato Products |
|
| Cheese & |
|
| Corporate |
|
| Total |
| |||||
Net earnings (loss) | $ | 14,174 |
|
| $ | 2,447 |
|
| $ | 2,885 |
|
| $ | (8,935 | ) |
| $ | 10,571 |
|
Unrealized gain on currency transactions (a) |
| (290 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (290 | ) |
Consolidated net earnings (loss) |
| 13,884 |
|
|
| 2,447 |
|
|
| 2,885 |
|
|
| (8,935 | ) |
|
| 10,281 |
|
Interest expense |
| 76 |
|
|
| 50 |
|
|
| — |
|
|
| 21,534 |
|
|
| 21,660 |
|
Intercompany interest expense (income) |
| 6,643 |
|
|
| 464 |
|
|
| 1,012 |
|
|
| (8,119 | ) |
|
| — |
|
Income tax expense (benefit) |
| 7,708 |
|
|
| 980 |
|
|
| 1,502 |
|
|
| (4,467 | ) |
|
| 5,723 |
|
Depreciation and amortization |
| 17,986 |
|
|
| 2,901 |
|
|
| 1,728 |
|
|
| 1 |
|
|
| 22,616 |
|
Non-cash and stock option compensation |
| — |
|
|
| — |
|
|
| — |
|
|
| 540 |
|
|
| 540 |
|
Costs associated with permitted acquisition |
| 246 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 246 |
|
Realized gain upon the disposition of property not in the ordinary course of business |
| (282 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (282 | ) |
Equity sponsor management fee |
| — |
|
|
| — |
|
|
| — |
|
|
| 661 |
|
|
| 661 |
|
Expenses related to industrial revenue bonds guaranteed by certain of our subsidiaries |
| 109 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 109 |
|
Unrealized gain on swap contracts |
| (236 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (236 | ) |
Intercompany allocation of corporate admin costs |
| 1,755 |
|
|
| 417 |
|
|
| 372 |
|
|
| (2,544 | ) |
|
| — |
|
Adjusted EBITDA, as defined in the credit agreement | $ | 47,889 |
|
| $ | 7,259 |
|
| $ | 7,499 |
|
| $ | (1,329 | ) |
| $ | 61,318 |
|
(a) | The unrealized gain on currency transactions relates to an intercompany note receivable denominated in Canadian currency due from our Canadian subsidiary, MFI Food Canada Ltd. |
|
|
The following table reconciles net earnings (loss) to adjusted EBITDA for the three-month period ended September 29, 2012 (unaudited, in thousands):
| Egg |
|
|
|
| Refrigerated |
|
|
|
| Cheese & |
|
|
|
| Corporate |
|
|
|
| Total |
|
| |||||||||||||||
Net earnings (loss) | $ | 12,362 |
|
|
|
| $ | 2,478 |
|
|
|
| $ | 2,519 |
|
|
|
| $ | (8,619 |
| ) |
|
| $ | 8,740 |
|
| ||||||||||
Unrealized gain on currency transactions (a) |
|
| (780 | ) |
|
|
|
|
|
| — |
|
|
|
|
|
| — |
|
|
|
|
|
| — |
|
|
|
|
|
| (780 | ) |
|
| |||
Consolidated net earnings (loss) |
|
| 11,582 |
|
|
|
|
|
| 2,478 |
|
|
|
|
|
| 2,519 |
|
|
|
|
|
| (8,619 |
| ) |
|
|
|
| 7,960 |
|
| |||||
Interest expense |
|
| 166 |
|
|
|
|
|
| 103 |
|
|
|
|
|
| — |
|
|
|
|
|
| 22,212 |
|
|
|
|
|
| 22,481 |
|
| |||||
Intercompany interest expense (income) |
|
| 7,082 |
|
|
|
|
|
| 494 |
|
|
|
|
|
| 1,079 |
|
|
|
|
|
| (8,655 |
| ) |
|
|
|
| — |
|
| |||||
Income tax expense (benefit) |
|
| 7,237 |
|
|
|
|
|
| 1,142 |
|
|
|
|
|
| 1,454 |
|
|
|
|
|
| (5,501 |
| ) |
|
|
|
| 4,332 |
|
| |||||
Depreciation and amortization |
|
| 20,274 |
|
|
|
|
|
| 2,817 |
|
|
|
|
|
| 1,810 |
|
|
|
|
|
| 1 |
|
|
|
|
|
| 24,902 |
|
| |||||
Non-cash and stock option compensation |
|
| — |
|
|
|
|
|
| — |
|
|
|
|
|
| — |
|
|
|
|
|
| 533 |
|
|
|
|
|
| 533 |
|
| |||||
Equity sponsor management fee |
|
| — |
|
|
|
|
|
| — |
|
|
|
|
|
| — |
|
|
|
|
|
| 617 |
|
|
|
|
|
| 617 |
|
| |||||
Expenses related to industrial revenue bonds guaranteed by certain of our subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 139 |
|
|
|
|
|
| — |
|
|
|
|
|
| — |
|
|
|
|
|
| — |
|
|
|
|
|
| 139 |
|
| ||||||
Unrealized loss on swap contracts |
|
| 77 |
|
|
|
|
|
| — |
|
|
|
|
|
| — |
|
|
|
|
|
| — |
|
|
|
|
|
| 77 |
|
| |||||
Intercompany allocation of corporate admin costs |
|
| 1,947 |
|
|
|
|
|
| 258 |
|
|
|
|
|
| 268 |
|
|
|
|
|
| (2,473 |
| ) |
|
|
|
| — |
|
| |||||
Adjusted EBITDA, as defined in the credit agreement | $ | 48,504 |
|
|
|
| $ | 7,292 |
|
|
|
| $ | 7,130 |
|
|
|
| $ | (1,885 |
| ) |
|
| $ | 61,041 |
|
| ||||||||||
(a) | The unrealized gain on currency transactions relates to an intercompany note receivable denominated in Canadian currency due from our Canadian subsidiary, MFI Food Canada Ltd. |
The following table reconciles net earnings (loss) to adjusted EBITDA for the nine-month period ended September 28, 2013 (unaudited, in thousands):
| Egg Products |
|
| Refrigerated Potato Products |
|
| Cheese & |
|
| Corporate |
|
| Total |
| |||||
Net earnings (loss) | $ | 44,658 |
|
| $ | 7,235 |
|
| $ | 8,541 |
|
| $ | (25,972 | ) |
| $ | 34,462 |
|
Unrealized loss on currency transactions (a) |
| 617 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 617 |
|
Consolidated net earnings (loss) |
| 45,275 |
|
|
| 7,235 |
|
|
| 8,541 |
|
|
| (25,972 | ) |
|
| 35,079 |
|
Interest expense |
| 197 |
|
|
| 190 |
|
|
| — |
|
|
| 64,536 |
|
|
| 64,923 |
|
Intercompany interest expense (income) |
| 19,983 |
|
|
| 1,395 |
|
|
| 3,045 |
|
|
| (24,423 | ) |
|
| — |
|
Income tax expense (benefit) |
| 24,335 |
|
|
| 3,222 |
|
|
| 4,740 |
|
|
| (14,269 | ) |
|
| 18,028 |
|
Depreciation and amortization |
| 54,791 |
|
|
| 8,758 |
|
|
| 5,278 |
|
|
| 3 |
|
|
| 68,830 |
|
Non-cash and stock option compensation |
| — |
|
|
| — |
|
|
| — |
|
|
| 1,623 |
|
|
| 1,623 |
|
Unusual charges (b) |
| — |
|
|
| — |
|
|
| — |
|
|
| (1,342 | ) |
|
| (1,342 | ) |
Costs associated with permitted acquisition |
| 246 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 246 |
|
Realized gain upon the disposition of property not in the ordinary course of business |
| (362 | ) |
|
| (283 | ) |
|
| — |
|
|
| — |
|
|
| (645 | ) |
Equity sponsor management fee |
| — |
|
|
| — |
|
|
| — |
|
|
| 1,959 |
|
|
| 1,959 |
|
Expenses related to industrial revenue bonds guaranteed by certain of our subsidiaries |
| 333 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 333 |
|
Unusual gain |
| (943 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (943 | ) |
Unrealized loss on swap contracts |
| 15 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 15 |
|
Intercompany allocation of corporate admin costs |
| 5,293 |
|
|
| 1,429 |
|
|
| 1,274 |
|
|
| (7,996 | ) |
|
| — |
|
Adjusted EBITDA, as defined in the credit agreement | $ | 149,163 |
|
| $ | 21,946 |
|
| $ | 22,878 |
|
| $ | (5,881 | ) |
| $ | 188,106 |
|
(a) | The unrealized loss on currency transactions relates to an intercompany note receivable denominated in Canadian currency due from our Canadian subsidiary, MFI Food Canada Ltd. |
(b) | The unusual charges relate to the jury award and subsequent mediated settlement in theNational Pasteurized Eggs, Inc.litigation. |
|
|
The following table reconciles net earnings (loss) to adjusted EBITDA for the nine-month period ended September 29, 2012 (unaudited, in thousands):
| Egg |
|
|
|
| Refrigerated |
|
|
|
| Cheese & |
|
|
|
| Corporate |
|
|
| Total |
|
| ||||||||||||||||||
Net earnings (loss) | $ | 29,125 |
|
|
|
| $ | 4,919 |
|
|
|
| $ | 10,217 |
|
|
|
| $ | (27,875 |
| ) |
|
| $ | 16,386 |
|
| ||||||||||||
Unrealized gain on currency transactions (a) |
|
| (696 | ) |
|
|
|
|
|
| — |
|
|
|
|
|
| — |
|
|
|
|
|
| — |
|
|
|
|
| (696 | ) |
|
| ||||||
Consolidated net earnings (loss) |
|
| 28,429 |
|
|
|
|
|
| 4,919 |
|
|
|
|
|
| 10,217 |
|
|
|
|
|
| (27,875 |
| ) |
|
|
|
| 15,690 |
|
| |||||||
Interest expense |
|
| 546 |
|
|
|
|
|
| 349 |
|
|
|
|
|
| — |
|
|
|
|
|
| 67,407 |
|
|
|
|
| 68,302 |
|
| ||||||||
Intercompany interest expense (income) |
|
| 21,258 |
|
|
|
|
|
| 1,483 |
|
|
|
|
|
| 3,240 |
|
|
|
|
|
| (25,981 |
| ) |
|
|
|
| — |
|
| |||||||
Income tax expense (benefit) |
|
| 17,015 |
|
|
|
|
|
| 2,187 |
|
|
|
|
|
| 5,602 |
|
|
|
|
|
| (16,043 |
| ) |
|
|
|
| 8,761 |
|
| |||||||
Depreciation and amortization |
|
| 60,296 |
|
|
|
|
|
| 8,451 |
|
|
|
|
|
| 5,431 |
|
|
|
|
|
| 4 |
|
|
|
|
| 74,182 |
|
| ||||||||
Non-cash and stock option compensation |
|
| — |
|
|
|
|
|
| — |
|
|
|
|
|
| — |
|
|
|
|
|
| 1,586 |
|
|
|
|
| 1,586 |
|
| ||||||||
Unusual charges (b) |
|
| — |
|
|
|
|
|
| — |
|
|
|
|
|
| — |
|
|
|
|
|
| 5,842 |
|
|
|
|
| 5,842 |
|
| ||||||||
Equity sponsor management fee |
|
| — |
|
|
|
|
|
| — |
|
|
|
|
|
| — |
|
|
|
|
|
| 1,838 |
|
|
|
|
| 1,838 |
|
| ||||||||
Expenses related to industrial revenue bonds guaranteed by certain of our subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
| 425 |
|
|
|
|
|
| — |
|
|
|
|
|
| — |
|
|
|
|
|
| — |
|
|
|
|
| 425 |
|
| |||||||||
Unrealized gain on swap contracts |
|
| (1,082 |
| ) |
|
|
|
| — |
|
|
|
|
|
| — |
|
|
|
|
|
| — |
|
|
|
|
| (1,082 |
| ) | ||||||||
Intercompany allocation of corporate admin costs |
|
| 13,965 |
|
|
|
|
|
| 1,174 |
|
|
|
|
|
| 1,220 |
|
|
|
|
|
| (16,359 |
| ) |
|
|
|
| — |
|
| |||||||
Adjusted EBITDA, as defined in the credit agreement | $ | 140,852 |
|
|
|
| $ | 18,563 |
|
|
|
| $ | 25,710 |
|
|
|
| $ | (9,581 |
| ) |
|
| $ | 175,544 |
|
| ||||||||||||
(a) | The unrealized gain on currency transactions relates to an intercompany note receivable denominated in Canadian currency due from our Canadian subsidiary, MFI Food Canada Ltd. |
(b) | The unusual charges relate to the jury award in theNational Pasteurized Eggs, Inc. trial. |
Michael Foods Group, Inc., based in Minnetonka, Minnesota, is a producer and distributor of food products to the foodservice, retail and food-ingredient markets. Its principal products are egg products, refrigerated potato products, cheese and other dairy-case products.
Consolidated statements of earnings are as follows:
Michael Foods Group, Inc.
Consolidated Statements of Earnings
For the three and nine-month periods ended September 28, 2013 and September 29, 2012
(In thousands)
| Three Months Ended |
|
|
| Nine Months Ended |
| |||||||||
|
| 2013 |
|
|
| 2012 |
|
|
| 2013 |
|
|
| 2012 |
|
Net sales | $ | 486,926 |
|
| $ | 470,947 |
|
| $ | 1,435,547 |
|
| $ | 1,352,434 |
|
Cost of sales |
| 410,840 |
|
|
| 395,589 |
|
|
| 1,194,449 |
|
|
| 1,124,110 |
|
Gross profit |
| 76,086 |
|
|
| 75,358 |
|
|
| 241,098 |
|
|
| 228,324 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
| 38,436 |
|
|
| 40,438 |
|
|
| 122,312 |
|
|
| 135,154 |
|
Operating profit |
| 37,650 |
|
|
| 34,920 |
|
|
| 118,786 |
|
|
| 93,170 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
| 21,646 |
|
|
| 22,426 |
|
|
| 64,891 |
|
|
| 68,151 |
|
Unrealized (gain) loss on currency transactions |
| (290 | ) |
|
| (780 | ) |
|
| 617 |
|
|
| (696 | ) |
Earnings before income taxes and equity in losses of unconsolidated subsidiary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 16,294 |
|
|
| 13,274 |
|
|
| 53,278 |
|
|
| 25,715 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
| 5,723 |
|
|
| 4,332 |
|
|
| 18,028 |
|
|
| 8,761 |
|
Equity in losses of unconsolidated subsidiary |
| — |
|
|
| 202 |
|
|
| 788 |
|
|
| 568 |
|
Net earnings | $ | 10,571 |
|
| $ | 8,740 |
|
| $ | 34,462 |
|
| $ | 16,386 |
|
| September 28, |
|
| December 29, |
| |||
|
|
|
| |||||
Selected Balance Sheet Information: |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
| |
Cash and equivalents | $ | 39,334 |
|
| $ | 43,274 |
| |
|
|
|
|
|
|
|
| |
Accrued interest | $ | 17,925 |
|
| $ | 22,920 |
| |
|
|
|
|
|
|
|
| |
Long-term debt, including current maturities | $ | 1,194,658 |
|
| $ | 1,209,403 |
| |
# # #
11-12-13