February 16, 2011

Michael Foods reports preliminary Q4 and annual results

Michael Foods Group, Inc. has reported preliminary financial results for the fourth quarter of 2010; net sales for the quarter ended January 1, 2011 are expected to be US$428.9 million compared to US$390.3 million for the fourth quarter of 2009, an increase of approximately 10%. 

Net sales for the year ended January 1, 2011 are expected to be US$1,602.3 million compared to US$1,542.8 million in 2009, an increase of approximately 4%. 

Net income was significantly impacted by expenses related to the June 29, 2010 change-in-control transaction, its financing, the associated revaluation of our tangible and intangible assets, and the subsequent depreciation and amortisation of those assets.  Accordingly, net income does not provide a meaningful comparison between the respective periods. 

Earnings before interest, taxes, depreciation and amortisation and other adjustments (EBITDA, as defined in our credit facility) for the quarter ended January 1, 2011 is expected to be in the range of US$61 to US$63 million, compared to US$54.1 million in 2009.  EBITDA for the year ended January 1, 2011 is expected to be in the range of US$225 to US$227 million, compared to US$214.4 million in 2009, an increase of between 5 and 6%.  Michael Foods Group, 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, President and Chief Executive Officer James E. Dwyer, Jr. said, "Our fourth quarter EBITDA results were driven by improved performance across all segments of our business.  Fourth quarter volumes increased 3% in total with each of our businesses showing growth. Our focus on moving our customers up the value chain to our higher-margin products and tight cost controls allowed us to grow EBITDA at a rate in excess of our volume growth."

Dwyer concluded, "Our free cash flow remains strong, which allowed us to make an US$8 million voluntary prepayment on our term debt in December 2010, bringing our total debt down to US$1.23 billion, while maintaining approximately US$45 million of cash on the balance sheet at year-end.  In January 2011, the company made an additional US$17.7 million voluntary prepayment on its term debt." 

Michael Foods Group, Inc. will release its final results in late March, after its audit is complete.