Del Monte Foods reports fiscal Q2 earnings of US$17.2M, down 79% from year-ago period on expenses tied to its takeover, weakness in its consumer products segment

SAN FRANCISCO , December 9, 2011 (press release) – Del Monte Corporation:

Announcement Highlights

For the second quarter fiscal 2012:

* Net sales increased 5.7%, primarily due to new product volume and list pricing actions net of trade spend
* Operating income declined 27.6%, primarily due to higher costs including $32.2 million of expenses associated with the March 2011 merger and severance-related costs
* Adjusted EBITDA1 declined 7.7%
* Total net debt was $3,880.5 million as of October 30, 2011

1 Reflects “EBITDA” and “Consolidated EBITDA” as calculated pursuant to the Company’s 7.625% Notes Indenture and credit agreements, respectively. Please refer to the reconciliation of non-GAAP financial measures located at the end of this press release.

Del Monte Foods Three Months Ended October 30, 2011

Del Monte Foods today reported net sales for the second quarter fiscal 2012 of $994.3 million compared to $940.9 million in the second quarter fiscal 2011, an increase of 5.7%. New Pet products volume growth and list pricing actions net of trade spend were the primary drivers of the increase.

Operating income declined from $148.0 million in the prior year period to $107.1 million. The decrease in operating income reflects the impact of higher operating costs and SG&A (primarily due to severance-related costs, amortization of intangibles and other expenses related to the merger). List pricing actions net of trade spend contributed positively to operating income.

Adjusted EBITDA declined 7.7% to $158.9 million compared to $172.1 million in the prior year. The drivers of the decline in Adjusted EBITDA are similar to those for operating income, except for SG&A. In calculating Adjusted EBITDA, SG&A is lower year-over-year because it does not include the severance-related expenses, amortization of intangibles and other expenses related to the merger.

“While the macro environment remained challenging and input cost inflation was high, we delivered strong topline results,” said Dave West, CEO of Del Monte Foods. “Our new products, particularly Kibbles ‘n Bits Bistro Meals and Milo’s Kitchen, along with our list pricing actions, contributed significantly to our results. The lag between price realization and input cost inflation impacted our bottom line, but we are on track to deliver on our productivity initiatives in fiscal 2012. We will continue our long-term efforts in becoming a more consumer focused company through foundational research and brand building efforts, along with building strategies to more effectively align with our customers.”

Reportable Segments – Results for Three Months Ended October 30, 2011

Pet Products

Pet Products net sales were $469.6 million, an increase of 8.4% from net sales of $433.2 million in the prior year period. The increase in Pet Products net sales was primarily driven by new product volume growth and list pricing actions net of trade spend.

Pet Products operating income decreased from $92.7 million in the second quarter fiscal 2011 to $79.5 million in the second quarter fiscal 2012, or 14.2%. The decrease was primarily driven by higher ingredient costs and SG&A (primarily due to amortization of intangibles, severance-related costs and other expenses related to the merger). These were partially offset by list pricing actions net of trade spend.

Pet Products Adjusted EBITDA decreased from $102.1 million in the second quarter fiscal 2011 to $100.5 million in the second quarter fiscal 2012, or 1.6%. The drivers of the decline in Adjusted EBITDA are similar to those for Pet Products operating income, except for SG&A. In calculating Adjusted EBITDA, SG&A is lower year-over-year because it does not include the severance-related expenses, amortization of intangibles and other expenses related to the merger.

Consumer Products

Consumer Products net sales were $524.7 million, an increase of 3.3% from net sales of $507.7 million in the second quarter fiscal 2011. The increase in Consumer Products net sales was primarily due to non-retail volume growth and list pricing actions net of trade spend.

Consumer Products operating income declined from $74.4 million in second quarter fiscal 2011 to $51.6 million in the second quarter fiscal 2012, or 30.6%. The decline was primarily driven by higher packaging and other operating costs. This was partially offset by list pricing actions net of trade spend.

Consumer Products Adjusted EBITDA declined from $81.0 million in the second quarter fiscal 2011 to $70.7 million in the second quarter fiscal 2012, or 12.7%. The drivers of the decline in Adjusted EBITDA are similar to those for Consumer Products operating income.

Del Monte Foods Six Months Ended October 30, 2011

Net sales for the six months ended October 30, 2011 were $1,770.5 million compared to $1,745.5 million for the prior year period, an increase of 1.4%. The increase was driven by new Pet products volume growth and list pricing actions net of trade spend.

Operating income declined from $267.4 million in the prior year period to $156.4 million, or 41.5%. The decrease in operating income reflects the impact of higher operating costs and SG&A (primarily due to severance-related costs, amortization of intangibles and other expenses related to the merger). List pricing actions net of trade spend contributed positively to operating income.

Adjusted EBITDA declined 18.7% to $260.1 million compared to $319.9 million in the prior year period. The drivers of the decline in Adjusted EBITDA are similar to those for operating income, except for SG&A. In calculating Adjusted EBITDA, SG&A is lower year-over-year because it does not include the severance-related expenses, amortization of intangibles and other expenses related to the merger.

Select Liquidity Data

At October 30, 2011, total debt was $3,998.0 million and cash and cash equivalents were $117.5 million. As of October 30, 2011, there were no outstanding borrowings under the Company’s $750.0 million ABL Facility. For the six months ended October 30, 2011, capital expenditures totaled $33.2 million.

Free Cash Flow2 for the six months ended October 30, 2011 was ($90.5) million, compared to ($122.1) million in fiscal 2011. The increase was primarily due to favorable working capital and lower cash taxes. Lower Adjusted EBITDA and higher cash interest payments partially offset the year-over-year improvement.

2 Free Cash Flow is defined as Adjusted EBITDA less cash interest, cash taxes (net of refunds), capital expenditures and plus/less decrease/ increase in working capital (excluding the impact of the merger). Accordingly, this excludes, among other things, $44.0 million related to tax refunds. Please refer to the reconciliation of non-GAAP financial measures located at the end of this press release.

Conference Call/Webcast Information

Del Monte Foods will host a live audio webcast, accompanied by a slide presentation, to discuss the second quarter fiscal 2012 results at 8:00 a.m. PT (11:00 a.m. ET) today. To access the live webcast and slides, go to http://investors.delmonte.com. Under Events, click Q2 F12 Del Monte Foods Earnings Conference Call. Printable slides are expected to be available in advance of the call. Historical quarterly results can be accessed at http://investors.delmonte.com. The audio portion of the webcast may also be accessed during the call (listen-only mode) as follows: 1-888-788-9432 (1-210-795-9068 outside the U.S. and Canada), verbal code: Del Monte Foods. The webcast and slide presentation will be available online following the presentation.

Merger

On March 8, 2011, Del Monte Foods Company was acquired by an investor group led by funds affiliated with Kohlberg Kravis Roberts & Co. L.P., Vestar Capital Partners and Centerview Capital, L.P. The acquisition is referred to as the “Merger.” As a result of the Merger, the Company applied the acquisition method of accounting and established a new basis of accounting on March 8, 2011. Periods presented prior to March 8, 2011 represent the operations of the predecessor company (“Predecessor”) and periods presented after March 8, 2011 represent the operations of the successor company (“Successor”). The comparability of the financial statements of the Predecessor and Successor periods has been impacted by the application of acquisition accounting and changes in the Company’s capital structure resulting from the Merger.

About Del Monte Foods

Del Monte Foods is one of the country’s largest producers, distributors and marketers of premium quality, branded pet products and food products for the U.S. retail market, generating approximately $3.7 billion in net sales in fiscal 2011. With a powerful portfolio of brands, Del Monte products are found in eight out of ten U.S. households. Pet food and pet snacks brands include Meow Mix®, Kibbles 'n Bits®, Milk-Bone®, 9Lives®, Pup-Peroni®, Gravy Train®, Nature’s Recipe®, Canine Carry Outs®, Milo’s Kitchen® and other brand names. Food product brands include Del Monte®, Contadina®, S&W®, College Inn® and other brand names. The Company also produces and distributes private label pet products and food products.

For more information on Del Monte Foods, visit the Company’s website at www.delmontefoods.com.

Del Monte. Nourishing Families. Enriching Lives. Every Day®

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