Michael Foods Group, Inc. reported financial results for the third quarter of 2012.
Net sales for the quarter ended September 29, 2012 were $470.9 million, compared to $459.5 million in 2011, an increase of 2.5%. Net earnings for the quarter ended September 29, 2012 were $8.7 million, compared to $0.6 million in 2011. The earnings increase resulted from higher volumes, improved margins in 2012 due to better alignment of pricing with our input costs, and reduced interest expense of approximately $2.9 million in 2012 compared to 2011 resulting from derivative accounting on interest rate swap contracts.
Net sales for the nine months ended September 29, 2012 were $1,352.4 million, compared to $1,296.6 million in 2011, an increase of 4.3%. Net earnings for the nine months ended September 29, 2012 were $16.4 million, compared to a net loss of $5 million in 2011. The earnings increase resulted from higher volumes, improved margins in 2012 due to better alignment of pricing with our input costs, costs of approximately $8 million in 2011 related to refinancing of our credit agreement, a reduction in cash interest expense in 2012 due to lower debt levels, and reduced interest expense of approximately $4.8 million in 2012 compared to 2011 resulting from derivative accounting on interest rate swap contracts.
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 29, 2012 were $61 million, compared to $55.3 million in 2011, an increase of 10.3%. Adjusted EBITDA for the nine months ended September 29, 2012 were $175.5 million, compared to $159.1 million for the same period in 2011, an increase of 10.3%.
“Our third quarter and year to date results reflect the success of our key growth initiatives and the strength of our underlying business processes,” said Jim Dwyer, President and CEO. “Our volume and revenue growth is being driven by new distribution and increased velocity with existing customers. We are also seeing the continued effectiveness of our pass-through pricing mechanisms and continuous improvement programs.”
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 2011 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 30, 2012. 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.
Beginning January 1, 2012, we changed our internal reporting of segment information. We now report all sales of shell egg and egg products and refrigerated potato products in their respective segments and the balance of our retail distributed products, cheese and other dairy-case products, as our third segment. This change increased the amount of external net sales, net earnings and Adjusted EBITDA reported for prior periods for both the egg products and refrigerated potato products segments as we reclassified the egg and refrigerated potato products previously reported under the Crystal Farms segment. The October 1, 2011 three and nine-month periods have been restated to reflect the new internal reporting. This change has no impact on the assets of the segments as none of the underlying business unit operations were affected by this reporting 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.
