Del Monte Foods reported net sales for the three months ended May 1, 2011 of $951.2 million compared to $954.0 million in the fourth quarter fiscal 2010, a decrease of 0.3 percent. This decline was driven by increased promotional spending and consumer products unit volume declines, partially offset by new product volume growth in pet products.
Operating income/(loss) declined from $108.1 million in the prior year period to ($73.5) million, which included transaction expenses of $144.0 million and expenses of $39.8 million related to purchase accounting impact from the merger.
On March 8, 2011, Del Monte Foods was acquired by an investor group led by funds affiliated with Kohlberg Kravis Roberts & Co. L.P., Vestar Capital Partners and Centerview Capital, L.P. The acquisition is referred to as the “merger.” As a result of the merger, the company applied the acquisition method of accounting and established a new basis of accounting on March 8, 2011.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) grew 6.2 percent to $150.4 million compared to $141.6 million in the prior year. The increase in adjusted EBITDA reflects lower marketing investment (which was offset by the increased promotional spend mentioned above), lower G&A expenses and new product volume growth in pet products.
Pet products net sales were $465.2 million, an increase of 4.1 percent over net sales of $446.8 million in the prior year period. The increase in Pet Products net sales was primarily driven by new product volume growth, which was partially offset by increased promotional spend.
Pet products operating income decreased from $76.4 million in fourth quarter fiscal 2010 to $74.2 million (which included expenses of $20.6 million related to purchase accounting impact from the merger) in the three months ended May 1, 2011, or 2.9 percent.
Pet Products Adjusted EBITDA increased from $90.3 million in fourth quarter fiscal 2010 to $107.3 million in the three months ended May 1, 2011, or 18.8 percent. The increase was primarily driven by lower marketing investment (which was offset by the increased promotional spend mentioned above) and the positive impact of the topline.
Consumer products net sales were $486.0 million, a decrease of 4.2 percent from net sales of $507.2 million in the fourth quarter fiscal 2010. The decrease in consumer products net sales was driven mainly by lower unit volumes and higher promotional spend.
Consumer products operating income declined from $48.7 million in fourth quarter fiscal 2010 to $14.7 million (which included expenses of $19.2 million related to purchase accounting impact from the merger) in the three months ended May 1, 2011, or 69.8 percent.
Consumer products adjusted EBITDA declined from $58.0 million in the fourth quarter fiscal 2010 to $44.4 million in the three months ended May 1, 2011, or 23.4 percent. This decline was primarily driven by increased operational costs and the negative impact of the topline.
The company reported net sales for the twelve months ended May 1, 2011 of $3,666.1 million compared to $3,739.8 million for full year fiscal 2010, a decrease of 2.0 percent. The decrease was primarily driven by unit volume declines in consumer products and increased promotional spend in both pet and consumer products.
Operating income declined from $508.0 million in fiscal 2010 to $339.3 million (which included transaction expenses of $151.6 million and expenses of $39.8 million related to purchase accounting impact from the merger) in the twelve months ended May 1, 2011, or 33.2 percent.
Adjusted EBITDA increased 5.4 percent to $661.0 million from $626.9 million in the prior year. The increase was driven by lower marketing investment (which was partially offset by the increased promotional spend) and G&A expenses.
At May 1, 2011 total debt was $4,008.6 million and cash and cash equivalents were $205.2 million. As of May 1, 2011 there were no outstanding borrowings under the Company’s ABL facility. For the twelve months ended May 1, 2011, capital expenditures totaled $91.9 million.
Free cash flow for the twelve months ended May 1, 2011 was $333.8 million, compared to $251.0 million in fiscal 2010, an increase of 33 percent. The increase was primarily due to lower inventories, lower cash interest payments, lower cash taxes, increased adjusted EBITDA, and lower capital expenditures.
