By RTT News,
August 13, 2014, 10:11:00 AM EDT
(RTTNews.com) - Convenience food products company Pinnacle Foods, Inc. ( PF ) on Wednesday reported a turnaround to profit in the second quarter on improved gross margins and higher sales reflecting continued benefit from the company's acquisition of the Wish-Bone salad dressings business.
Adjusted earnings per share for the quarter matched analysts' expectations, while revenues missed their estimates. Looking ahead, the company reaffirmed its earnings guidance for fiscal 2014.
Bob Gamgort, CEO of Pinnacle Foods said, "Our business model has proven to be resilient in a food industry characterized by weak growth and heavier promotional spending. We have been able to strike the right balance between investing in our brands, remaining price competitive and delivering strong earnings growth, and we are pleased that we delivered another quarter of market share growth."
The maker of Birds Eye frozen foods, Duncan Hines baking mixes and frostings, and Vlasic shelf-stable pickles reported net earnings for the second quarter of $35.58 million or $ 0.30 per share, compared to net loss of $31.84 million or $0.28 per share in the prior-year quarter.
Excluding items, proforma net earnings for the quarter was $38.27 million or $0.33 per share, compared to pro forma net earnings of $31.21 million or $0.27 per share in the year-ago quarter.
On average, 11 analysts polled by Thomson Reuters expected the company to report earnings of $0.33 per share for the quarter. Analysts' estimates typically exclude one-time items.
Net sales for the quarter grew 9 percent to $617.80 million from $569.04 million in the same quarter last year, but missed analysts' consensus revenue estimate of $629.33 million.
The increase in sales were due mainly to a 9.6 percent benefit from the Wish-Bone acquisition and a 2.0 percent increase from higher volume and mix, largely reflecting the benefit of the Easter-related shift of sales from the first quarter to the second quarter.
This was partially offsetting by lower net pricing of 2.8 percent, stemming from Easter-related promotional activity and trade investments made during the quarter to enhance competitiveness at retail. In addition, unfavorable foreign currency translation of 0.2 percent impacted sales.
The company completed the $575 million acquisition of the Wish-Bone salad dressings business from Anglo-Dutch consumer goods giant Unilever Plc. (UL, ULVR.L, UN) in October 2013.
Net sales for North America Retail, which is comprised of the Birds Eye Frozen and Duncan Hines Grocery segments, increased 11 percent from last year to $536.2 million. The increase was driven by Wish-Bone and strength across the Leadership Brand portfolio, partly offset by lower sales of the Foundation Brand portfolio.
Meanwhile, net sales for the Specialty Foods segment declined 5 percent from the year-ago period to $81.6 million, reflecting lower volume/mix of 4.6 percent and lower net pricing of 1.7 percent. These were partly offset by a 1.0 percent benefit from the Wish-Bone foodservice business.
The company's gross profit margin for the quarter improved 90 basis points from last year to 26.3 percent.
Looking ahead to fiscal 2014, Pinnacle Foods reiterated its outlook for adjusted earnings in a range of $1.70 to $1.75 per share, or growth of 12 percent to 15 percent versus last year. Street is currently looking for full-year 2014 earnings of $1.74 per share.
Hillshire Brands Co. ( HSH ) agreed in May to acquire Pinnacle Foods in a cash and stock deal valued at $6.6 billion, including outstanding net debt. However, Pinnacle Foods said in late June that it exercised its right to terminate its merger deal with Hillshire.
The termination cleared the way for meat producer Tyson Foods Inc. ( TSN ) to acquire Hillshire Brands for $8.55 billion, including debt. Due to the termination of Pinnacle Foods' merger deal with Hillshire, Pinnacle Foods received a $163 million termination fee at the beginning of the third quarter. The fee, in concert with cash on hand, was used to reduce the company's debt by $200 million.
The company now expects to achieve a 25 basis point step down in its term-loan interest rate at the end of the fiscal third quarter, one quarter earlier than previously anticipated.
PF is trading at $30.73, down $0.21 or 0.68 percent on a volume of 197,101 shares.
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