Del Monte Foods Company (NYSE: DLM):
Announcement
Highlights
- First quarter net sales declined
1.1%, driven by ~4% Pet Products net sales growth and ~6% Consumer
Products net sales decrease.
- Diluted EPS from continuing
operations of $0.29 decreased $0.01 from a record Q1 EPS of $0.30
in fiscal 2010.
- Company completes $100 million
share repurchase, repurchasing 7.1 million shares via an
accelerated share buyback program.
- Fiscal 2011 guidance:
- Net sales is now expected to
grow 1%-3% compared to prior expectations of 2%-4%.
- Diluted EPS from continuing
operations is maintained at $1.38-$1.42 due to lower net cost
inflation expectations.
- Cash from operations less cash
from investing is maintained at $260-$270 million.
Del Monte Foods First Quarter
Results
Del Monte Foods today reported net sales for the first quarter
fiscal 2011 of $804.6 million compared to $813.7 million last year,
a decrease of 1.1%. Operating income was $119.4 million compared to
$120.9 million last year, a decrease of 1.2%. Income from
continuing operations was $59.9 million compared to $58.9 million
last year, an increase of 1.7%. Earnings per share from continuing
operations (EPS) was $0.29 compared to $0.30 EPS last year.
“Del Monte’s first quarter EPS results of $0.29 reflect the
solid earnings base we established,” said Richard G. Wolford,
Chairman and CEO of Del Monte Foods. “Our 1.1% topline decline
reflects lower revenue from our Consumer business with continued
healthy topline performance in the Pet business. We are not
satisfied with our first quarter Consumer sales, but expect
performance will strengthen in the second half as competitive and
category performance return to historical levels and as we deliver
growth through the key holiday seasons. Our margins were strong in
Q1, as we delivered on our productivity savings and improved our
overall product mix, while we continued to invest in key
brands.
“For fiscal 2011, we are maintaining our EPS and cash flow
targets, reflecting the successful margin and working capital
management capabilities. We remain confident in our competitive,
long-term growth model, driven by brand-based fundamentals, our
growth strategy, and the strong margin structure we have
established.”
Net sales for the first quarter fiscal 2011 declined 1.1% as
Consumer Products decreased 6.0% and Pet Products increased 3.6%.
Overall unit volume declines negatively impacted the topline by
1.6% driven by non-retail and retail volume decline. Non-retail
unit volume decreased net sales by 1.1%, while retail unit volume
decreased net sales by 0.5% (driven by Consumer Products, primarily
in vegetable, partially offset by Pet Products). Higher trade spend
(primarily in dry pet food) and pricing elasticity reduced net
sales by 1.7%. Positively contributing to net sales was the impact
of new products across the portfolio which contributed 1.4%, and
the impact of Pet Products pricing (driven by the previously
implemented package resizing) which contributed 0.8%.
Operating income for the first quarter declined 1.2%. The $1.5
million decline in operating income reflects the negative impact of
the topline, partially offset by lower costs (primarily due to
productivity savings) as well as favorable mix. Higher G&A
expense and higher marketing investment (in Pet Products)
negatively impacted operating income.
Operating margin was 14.8% for the first quarter fiscal 2011
compared to 14.9% last year, a decrease of 10 basis points. Higher
gross margin (due to productivity savings and favorable mix) was
offset by higher SG&A as a percentage of sales (driven
primarily by higher marketing investment in Pet Products compared
to a year ago).
Income from continuing operations for the first quarter
increased $1.0 million to $59.9 from $58.9 million last year
primarily driven by lower interest expense (due to lower debt
levels and more favorable rates), partially offset by lower
operating income. First quarter EPS of $0.29 was down $0.01 from
first quarter fiscal 2010 EPS of $0.30 primarily due to higher
share count.
Cash provided by operating activities, less cash used in
investing activities was $31.3 million in the first quarter fiscal
2011 compared to negative $0.3 million in the prior year period
primarily due to lower working capital and lower capital
expenditures.
In the first quarter fiscal 2011, the Company announced that its
Board of Directors approved an 80% increase in the quarterly
dividend from $0.05 to $0.09 per common share. During the first
quarter, the Company also announced a three-year, $350 million
share repurchase authorization. Subsequently, the Company
repurchased a total of 7.1 million shares via an accelerated share
buyback program of $100 million.
Reportable Segments – First
Quarter Results
Pet Products
For the first quarter, Pet Products net sales were $427.3
million, an increase of 3.6% over net sales of $412.3 million in
the prior year period. The increase in Pet Products net sales was
primarily driven by strong unit volume growth (particularly in dry
pet food), supported by higher levels of trade spending. In
addition, pricing (driven by the previously implemented package
resizing) and new product volume positively impacted net sales.
Pet Products operating income decreased from $102.8 million in
first quarter fiscal 2010 to $98.7 million in first quarter fiscal
2011, a decline of 4.0%. Higher marketing investment and higher
G&A expense more than offset the positive impact of the
topline.
At 23.1%, for the first quarter 2011, operating margin for Pet
Products was at a historically high level in comparison to the last
several years, although it decreased 180 basis points versus the
prior year period. Higher gross margin (due to favorable mix) was
offset by higher SG&A as a percentage of sales (driven
primarily by higher marketing investment compared to a year ago
behind Milk-Bone and Kibbles ‘n Bits products).
Consumer Products
For the first quarter, Consumer Products net sales were $377.3
million, a decrease of 6.0% from net sales of $401.4 million in the
prior year period. The decrease in Consumer Products net sales was
driven almost entirely by a decline in base unit volume reflecting
declines in both retail (primarily due to vegetable) and non-retail
channels (primarily due to fruit and vegetable). Non-retail volume
was impacted by reduced government bid sales. Retail volume was
impacted by higher levels of competitor promotional activity, as
competitors reduced their prior year pack inventories, and overall
category softness. Positively contributing to net sales was new
product volume, including No Sugar Added Mixed Fruit and Diced
Pears in plastic cups and Cherry Punch flavored Fruit Chiller
tubes.
Consumer Products operating income increased from $32.1 million
in the first quarter fiscal 2010 to $34.3 million in the first
quarter fiscal 2011, or 6.9%. The positive impact of lower costs
(primarily due to productivity savings) and lower marketing
investment more than offset the negative impact of the topline.
Operating margin for Consumer Products was 9.1% for the first
quarter fiscal 2011 compared to 8.0% last year, an increase of 110
basis points. Higher gross margins (due to productivity savings)
and lower SG&A as a percentage of net sales (due to lower
marketing costs), positively impacted operating margins.
Outlook
Fiscal 2011
For fiscal 2011, the Company now expects net sales growth of 1%
to 3% over fiscal 2010 net sales of $3,739.8 million, compared to
previous expectations of 2% to 4%.
The Company continues to expect fiscal 2011 diluted EPS from
continuing operations target of $1.38 to $1.42 consistent with the
Company’s long-term EPS annual growth target of 7% to 9%. Reduced
cost inflation expectations net of productivity savings are
anticipated to offset the reduction in net sales growth
expectations. In fiscal 2010, the Company generated $1.30 Adjusted
EPS from continuing operations (which excluded the ~$0.11 EPS
relating to the closed notes and tender offer as well as the
refinancing of the Senior Credit Facility).
Fiscal 2011 EPS
Guidance
Full Year F11 Guidance F10
Adjusted EPS $1.38 to $1.42 $1.30
Excludes: Costs related to 7 1/2% notes offering and 8 5/8% notes
tender offer - ($0.05) Costs related to refinancing of Senior
Credit Facility - ($0.06)
In fiscal 2011, the Company continues to expect cash provided by
operating activities, less cash used in investing activities to be
approximately $260 to $270 million. This compares to $251 million
in fiscal 2010.
Webcast
Information
Del Monte Foods will host a live audio webcast, accompanied by a
slide presentation, to discuss its fiscal 2011 first quarter
results and fiscal 2011 outlook at 7:00 a.m. PT (10:00 a.m. ET)
today. To access the live webcast and slides, go to
http://investors.delmonte.com. Under Events, click Q1 F11 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.
About Del Monte
Foods
Del Monte Foods is one of the country’s largest and most
well-known 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 2010. 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® 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 Company (NYSE: DLM) visit the Company’s website at
www.delmonte.com.
Del Monte. Nourishing Families. Enriching Lives. Every
Day.TM
Non-GAAP Financial
Measures
Adjusted EPS
Del Monte Foods Company reports its financial results in
accordance with generally accepted accounting principles in the
United States (GAAP). In this press release and/or the accompanying
webcast, Del Monte is also providing certain non-GAAP financial
measures relating to earnings per share. Del Monte uses Adjusted
EPS as a financial measure internally to focus management on
year-over-year changes in the Company’s business and believes this
information is also helpful to investors. More specifically, when
looking internally at its fiscal 2011 EPS guidance as compared to
its fiscal 2010 EPS performance (and particularly at how the
expected year-over-year change in EPS performance compares to the
Company’s previously disclosed long-term guidance), the Company
excludes the impact of the fiscal 2010 expenses relating to its
closed notes offering and tender offer as well as the refinancing
of its Senior Credit Facility. In evaluating year-over-year changes
in the Company’s business, the Company believes that fiscal 2010
Adjusted EPS of $1.30 (rather than GAAP EPS of $1.19) provides a
useful period-to-period comparison to its $1.38-$1.42 expectations
for fiscal 2011, which is not expected to include the refinancing
expenses that impacted fiscal 2010. The Company cautions investors
that the non-GAAP financial measures presented are intended to
supplement the Company’s GAAP results and are not a substitute for
such results. Additionally, the Company cautions investors that the
non-GAAP financial measures used by Del Monte may differ from the
non-GAAP measures used by other companies.
Del Monte Foods Company Reconciliations of
Non-GAAP Financial Measures - Adjusted EPS --- Fiscal
Year ---
2011E
2010
EPS, as reported (GAAP) $1.38-1.42 $ 1.19 Adjustments to derive
Adjusted EPS: Expenses related to closed notes offer and tender
offer - 0.05 Expense related to refinancing of Senior Credit
Facility - 0.06 Adjusted EPS $1.38-1.42 $ 1.30
Cash Flow
Del Monte Foods Company reports its financial results in
accordance with generally accepted accounting principles in the
United States (GAAP). In this press release and/or the accompanying
webcast, Del Monte is also providing certain non-GAAP financial
measures of cash flow. Del Monte internally uses cash flow, which
it defines as cash provided by operating activities less cash used
in investing activities, as a financial measure. Del Monte uses
this non-GAAP financial measure, among others, internally to
benchmark its performance period-to-period and believes this
information is also helpful to investors. The Company cautions
investors that the non-GAAP financial measures presented are
intended to supplement the Company’s GAAP results and are not a
substitute for such results. Additionally, the Company cautions
investors that the non-GAAP financial measures used by Del Monte
may differ from the non-GAAP measures used by other companies.
Del Monte Foods Company
Reconciliations of Non-GAAP Financial Measures - Cash Flow (in
millions) --- Fiscal Year ---
Q1
F11
Q1
F10
2011E1
2010
Net cash provided by operating activities, as reported (GAAP) $
49.9 $ 23.9 $ 365.0 $ 355.9 Net cash used in investing
activities, as reported (GAAP) (18.6 ) (24.2 )
(100.0 ) (104.9 ) Cash flow $ 31.3
$ (0.3 ) $ 265.0 $ 251.0
1Cash flow guidance for Fiscal 2011E represents the
midpoint.
Forward-Looking
Statements
This press release and the accompanying webcast contain
forward-looking statements conveying management’s expectations as
to the future based on plans, estimates and projections at the time
the Company makes the statements. Forward-looking statements
involve inherent risks and uncertainties and the Company cautions
you that a number of important factors could cause actual results
to differ materially from those contained in any such
forward-looking statement. The forward-looking statements contained
in this press release and/or the accompanying webcast include or
may include statements related to fiscal 2011 or other future
financial operating results and related matters, including the
expected impact of the Accelerated Growth Plan strategy and its
related initiatives, expected costs, expected productivity savings,
expected sales and other matters; statements related to the 80%
increase in the Company’s quarterly dividend; and statements
related to the Company’s $350 million three-year share repurchase
authorization, including amounts expected to be executed in fiscal
2011 and the expected manner of such execution.
Factors that could cause actual results to differ materially
from those described in this press release and/or accompanying
webcast include, among others: competition, including pricing and
promotional spending levels by competitors; our ability to maintain
or increase prices and persuade consumers to purchase our branded
products versus lower-priced branded and private label offerings;
shifts in consumer purchases to lower-priced or other value
offerings, particularly during economic downturns; our ability to
implement productivity initiatives to control or reduce costs; cost
and availability of inputs, commodities, ingredients and other raw
materials, including without limitation, energy (including natural
gas), fuel, packaging, fruits, vegetables, tomatoes, grains
(including corn), sugar, spices, meats, meat by-products, soybean
meal, water, fats, oils and chemicals; logistics and other
transportation-related costs; sufficiency and effectiveness of
marketing and trade promotion programs; our ability to launch new
products and anticipate changing pet and consumer preferences;
performance of our pet products business and packaged produce
sales; our debt levels and ability to service our debt and comply
with covenants; the failure of the financial institutions that are
part of the syndicate of our revolving credit facility to extend
credit to us; product distribution; the loss of significant
customers or a substantial reduction in orders from these customers
or the financial difficulties, bankruptcy or other business
disruption of any such customer; industry trends, including changes
in buying, inventory and other business practices by customers;
hedging practices and the financial health of the counterparties to
our hedging programs; currency and interest rate fluctuations;
changes in, or the failure or inability to comply with U.S.,
foreign and local governmental regulations, including packaging and
labeling regulations, environmental regulations and import/export
regulations or duties; impairments in the book value of goodwill or
other intangible assets; strategic transaction endeavors, if any,
including identification of appropriate targets and successful
implementation; adverse weather conditions, natural disasters,
pestilences and other natural conditions that affect crop yields or
other inputs or otherwise disrupt operations; contaminated
ingredients; allegations that our products cause injury or illness,
product recalls and product liability claims and other litigation;
reliance on certain third parties, including co-packers, our
broker, and third-party distribution centers or managers; any
disruption to our manufacturing or supply chain, particularly any
disruption in or shortage of seasonal pack; pension costs and
funding requirements; risks associated with foreign operations;
protecting our intellectual property rights or intellectual
property infringement or violation claims; failure of information
technology systems; transformative plans; general economic and
business conditions; and other factors.
Generally, these factors and other risks and uncertainties are
described in more detail, from time to time, in the Company’s
filings with the Securities and Exchange Commission, including its
annual report on Form 10-K.
There can be no assurance that dividends will be declared or
paid in the future. The actual declaration and payment of future
dividends and the establishment of record and payment dates, if
any, are subject to determination by the Company’s Board of
Directors each quarter after its review of the Company’s
then-current strategy, applicable debt covenants and financial
performance and position, among other things. The Company’s
declaration and payment of future dividends is subject to risks and
uncertainties, including: deterioration of the Company’s financial
performance or position; inability to declare a dividend in
compliance with applicable laws or debt covenants; an increase in
the Company’s cash needs or decrease in available cash; and the
business judgment of the Board of Directors that a declaration of a
dividend is not in Del Monte Foods Company’s best interests, as
well as other risks that may be detailed, from time to time, in the
Company’s filings with the Securities and Exchange Commission.
Factors that could affect the Company’s financial performance or
position, compliance with applicable debt covenants, or cash flow
include those risks and uncertainties listed above and other risks
and uncertainties that may be described from time to time in the
Company’s filings with the Securities and Exchange Commission,
including its annual report on Form 10-K.
Under the Company’s June 2010 $350 million, three-year stock
repurchase authorization, repurchases of the Company’s common stock
may be made from time to time through a variety of methods,
including Accelerated Share Buybacks, open market purchases,
privately negotiated transactions, and block transactions. Del
Monte Foods Company has no obligation to repurchase shares under
the authorization and the timing, actual number and value of the
shares which are repurchased (and the manner of any such
repurchase) will be at the discretion of management and will depend
on a number of factors, including the price of the Company’s common
stock and other market conditions, an increase in the Company’s
cash needs or decrease in available cash and the Company’s
financial performance and position (including its performance
against its fiscal 2011 expectations), each of which may be
affected by those risks and uncertainties listed above and other
risks and uncertainties that may be described from time to time in
the Company’s filings with the Securities and Exchange Commission,
including its annual report on Form 10-K. The Company may resume,
suspend or discontinue repurchases at any time.
Investors are cautioned not to place undue reliance on the
forward-looking statements included in this release and the
accompanying webcast, which speak only as of the date hereof. The
Company does not undertake to update any of these statements in
light of new information or future events.
DEL MONTE FOODS COMPANY AND SUBSIDIARIES Condensed
Consolidated Statements of Income (in millions, except per share
data)
Three Months Ended
August 1, August 2, 2010
2009 (unaudited) Net sales $ 804.6 $ 813.7
Cost of products sold 537.9 553.8 Gross
profit 266.7 259.9 Selling, general and administrative expense
147.3 139.0 Operating income 119.4
120.9 Interest expense 19.7 24.2 Other expense 3.6
1.9 Income from continuing operations before income
taxes 96.1 94.8 Provision for income taxes 36.2
35.9 Income from continuing operations 59.9 58.9
Loss from discontinued operations before income taxes (0.2 )
(0.4 ) Provision (benefit) for income taxes 0.3
(0.1 ) Loss from discontinued operations (0.5 ) (0.3 )
Net income $ 59.4 $ 58.6
Earnings per common share Basic: Basic Average Shares 198.3 198.4
EPS - Continuing Operations $ 0.30 $ 0.30 EPS - Discontinued
Operations - - EPS - Total $ 0.30
$ 0.30 Diluted: Diluted Average Shares 204.0
199.5 EPS - Continuing Operations $ 0.29 $ 0.30 EPS - Discontinued
Operations - (0.01 ) EPS - Total $ 0.29
$ 0.29
Del Monte Foods Company - Selected
Financial Information Net Sales by Segment (in
millions)
Three Months Ended August 1,
August 2, Net Sales: 2010
2009 (unaudited) Pet Products $ 427.3 $ 412.3
Consumer Products 377.3 401.4 Total
company $ 804.6 $ 813.7
Operating
Income by Segment (in millions)
Three Months
Ended August 1, August 2, Operating
Income: 2010 2009
(unaudited) Pet Products $ 98.7 $ 102.8
Consumer Products
34.3 32.1 Corporate (a) (13.6 ) (14.0 ) Total company
$ 119.4 $ 120.9
(a) Corporate represents expenses
not directly attributable to reportable segments.
DEL MONTE FOODS COMPANY AND SUBSIDIARIES Condensed
Consolidated Balance Sheets (in millions, except per share data)
August 1, May 2,
2010 2010
(unaudited)
(derived fromaudited
financialstatements)
ASSETS Cash and cash equivalents $ 28.9 $ 53.7 Trade
accounts receivable, net of allowance 191.3 187.0 Inventories 843.2
726.4 Prepaid expenses and other current assets 119.0
128.5 TOTAL CURRENT ASSETS 1,182.4 1,095.6
Property, plant and equipment, net 650.0 658.8 Goodwill 1,337.9
1,337.7 Intangible assets, net 1,161.1 1,162.4 Other assets, net
32.8 34.4 TOTAL ASSETS $ 4,364.2
$ 4,288.9
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 527.0 $ 469.5
Short-term borrowings 55.7 5.6 Current portion of long-term debt
30.0 30.0 TOTAL CURRENT LIABILITIES
612.7 505.1 Long-term debt 1,247.9 1,255.2 Deferred tax
liabilities 450.3 441.0 Other non-current liabilities 268.6
260.2 TOTAL LIABILITIES 2,579.5
2,461.5
Stockholders' equity:
Common stock ($0.01 par value per
share, shares authorized:
500.0; 218.2 issued and 194.6
outstanding at August 1,
2010 and 216.6 issued and 199.2
outstanding at May 2, 2010)
$ 2.2 $ 2.2 Additional paid-in capital 1,100.5 1,085.0 Treasury
stock, at cost (283.1 ) (183.1 ) Accumulated other comprehensive
income (loss) (59.9 ) (59.8 ) Retained earnings 1,025.0
983.1 TOTAL STOCKHOLDERS' EQUITY 1,784.7
1,827.4 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $
4,364.2 $ 4,288.9
DEL MONTE FOODS COMPANY
AND SUBSIDIARIES Condensed Consolidated Statements of Cash
Flows (in millions)
Three Months Ended
August 1, August 2, 2010
2009 (unaudited) OPERATING ACTIVITIES: Net
income $ 59.4 $ 58.6 Adjustments to reconcile net income to net
cash provided by operating activities: Depreciation and
amortization 23.5 24.3 Deferred taxes 7.4 7.2 Loss on asset
disposals 0.2 0.4 Stock compensation expense 3.4 2.9 Excess tax
benefits from stock-based compensation (2.5 ) - Other non-cash
items, net 4.7 1.6 Changes in operating assets and liabilities
(46.2 ) (71.1 ) NET CASH PROVIDED BY OPERATING
ACTIVITIES 49.9 23.9 INVESTING
ACTIVITIES: Capital expenditures (18.6 ) (24.2 ) NET
CASH USED IN INVESTING ACTIVITIES (18.6 ) (24.2 )
FINANCING ACTIVITIES: Proceeds from short-term borrowings
79.3 0.4 Payments on short-term borrowings (29.2 ) (0.6 ) Principal
payments on long-term debt (7.5 ) (8.1 ) Dividends paid (10.0 )
(7.9 ) Issuance of common stock 9.6 0.3 Purchase of treasury stock
(100.0 ) - Excess tax benefits from stock-based compensation
2.5 - NET CASH USED IN FINANCING ACTIVITIES
(55.3 ) (15.9 ) Effect of exchange rate changes on
cash and cash equivalents (0.8 ) (0.2 ) NET CHANGE IN
CASH AND CASH EQUIVALENTS (24.8 ) (16.4 ) CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 53.7 142.7 CASH
AND CASH EQUIVALENTS AT END OF PERIOD $ 28.9 $ 126.3
Del Monte (NYSE:DLM)
Historical Stock Chart
From Jun 2024 to Jul 2024
Del Monte (NYSE:DLM)
Historical Stock Chart
From Jul 2023 to Jul 2024