Del Monte Corporation Reports Fiscal 2013 Third Quarter Results

11 Mar 2013 --- Del Monte Foods reported net sales in the third quarter fiscal 2013 of $1,028.2 million compared to $971.1 million in the third quarter fiscal 2012, an increase of 5.9%. List pricing actions net of trade spend along with new product volumes primarily in Pet drove the increase. Existing product declines in Consumer partially offset the increase.

Operating income declined 12.5% from $124.5 million in the prior year period to $108.9 million. The decrease was driven by increased marketing investment, higher ingredient costs in Pet, and $14.4 million of costs associated with the voluntary recall of certain Milo’s Kitchen chicken dog treat products. List pricing actions net of trade spend partially offset the decline.

Adjusted EBITDA declined 1.6% to $161.9 million compared to $164.6 million in the prior year period. The drivers of the decline were similar to those of operating income, except for the costs associated with the voluntary recall mentioned above. In calculating Adjusted EBITDA, the expenses associated with the voluntary recall were added back pursuant to the Company’s 7.625% Notes Indenture and credit agreements.

“Strong price realization and new product innovation drove the Company’s topline growth of 5.9%, as sales for both Pet and Consumer increased,” said Dave West, CEO of Del Monte Foods. “Our momentum in Pet was strong - net sales grew 10.1% and Adjusted EBITDA grew 5.6% - while we increased marketing investment and faced higher ingredient costs. In Consumer, we began national advertising behind the Del Monte brand, fueling this investment with planned lower trade spending. I am optimistic that these investments and initiatives will drive long-term success in the marketplace. We are continuing to become a more consumer-centric and market-driven Company.”

Pet Products
Pet Products net sales were $527.0 million, an increase of 10.1% from net sales of $478.8 million in the prior year period. The increase in Pet Products net sales was driven by list pricing actions net of trade spend and new product volume.
Pet Products operating income declined 8.6% from $95.3 million in the prior year period to $87.1 million in the third quarter fiscal 2013. The decline was primarily driven by higher ingredient costs, costs associated with the voluntary recall noted previously and increased marketing investment. We realized positive list pricing actions net of trade spend as well as the positive impact of increased volume.

Pet Products Adjusted EBITDA increased 5.6% from $117.2 million in the prior year period to $123.8 million in the third quarter fiscal 2013. The drivers of the change in Adjusted EBITDA were similar to those of operating income, except for the costs associated with the voluntary recall mentioned above. In calculating Adjusted EBITDA, the expenses associated with the voluntary recall were added back pursuant to the Company’s 7.625% Notes Indenture and credit agreements.

Consumer Products
Consumer Products net sales were $501.2 million, an increase of 1.8% from net sales of $492.3 million in the prior year period. The increase in Consumer Products net sales was driven by planned lower trade spending. Unit volume declines, mainly in vegetable and produce, partially offset the increase.

Consumer Products operating income declined 20.8% from $40.8 million in the prior year period to $32.3 million in the third quarter fiscal 2013. The decline was primarily driven by higher marketing investment and unfavorable mix. This was partially offset by planned lower trade spending, which was consistent with our long-term strategy of increased marketing investment behind the Del Monte brand.
Consumer Products Adjusted EBITDA declined from $57.1 million in the prior year period to $50.1 million in the third quarter fiscal 2013, or 12.3%. The drivers of the decline were similar to those of operating income noted above.