PARSIPPANY, N.J., Feb. 25, 2016 /PRNewswire/ -- Pinnacle Foods Inc. today reported its financial results for the fourth quarter and full year ended December 27, 2015 and provided its outlook for adjusted diluted EPS for the full year of 2016 in the range of $2.08 to $2.13, representing growth of approximately 10% at the midpoint.
Full Year 2015 Highlights
- Grew consolidated net sales 2.5% and North America Retail net sales 3.3%, both including the benefit of the Gardein acquisition
- Gained overall composite market share for the fourth consecutive year, fueled by strength of both existing and new products
- Expanded adjusted gross margin approximately 80 basis points, driven by strong productivity, higher net price realization and favorable product mix
- Drove adjusted diluted EPS growth of 10% to $1.92, despite an approximate $0.03 headwind from foreign exchange
- Delivered net cash provided by operating activities of $373 million and reduced net leverage by 0.4x to 3.8x
- Completed the previously-announced acquisition of Boulder Brands in January 2016, expanding the Company's presence in growing and complementary health and wellness categories, with clear line of sight to synergies in 2016 and 2017
- Added two new independent directors to the Company's Board of Directors, following Blackstone's final sale of its shares and its departure from the Board
Commenting on the results, Pinnacle Foods Chief Executive Officer Bob Gamgort stated, "This past year was another strong one for Pinnacle, driven by strength of the base business, highly-successful innovation and the addition of Gardein to our portfolio. For the fourth consecutive year, we grew our composite market share, and we again delivered strong gross margin expansion and double-digit growth in adjusted diluted EPS."
"We are excited about our recent Boulder Brands acquisition, which provides a stronger presence in faster-growing health and wellness categories and a rich source of both acquisition synergies and other cost savings opportunities. In 2016, in addition to improving Boulder's cost structure, our focus will be on streamlining the portfolio and building the foundation for accelerated growth in 2017. As a result, we expect Boulder to be modestly accretive this year, with significant accretion thereafter," continued Gamgort.
Full-year Fiscal 2015 Results
Consolidated net sales for the year increased 2.5% to $2.66 billion, compared to net sales of $2.59 billion in fiscal 2014. This growth reflected a 2.3% benefit from Gardein and higher net price realization of 1.3%, partially offset by lower volume/mix of 0.7% and unfavorable foreign currency translation of 0.4%.
Net sales for the Company's North America Retail business, which is comprised of the Birds Eye Frozen and Duncan Hines Grocery segments, advanced 3.3%, reflecting a 2.6% benefit from the Gardein acquisition and higher net price realization of 1.3%, partially offset by unfavorable foreign currency translation of 0.4% and lower volume/mix of 0.2%.
For the fourth consecutive year, Pinnacle's retail consumption outpaced the performance of the Company's categories, driving composite market share growth of approximately 50 basis points in 2015. This performance reflected strength of both existing and new products and was driven by significant market share growth for the Birds Eye Frozen segment, while market share for the Duncan Hines Grocery segment was even with year-ago.
Gross profit for the year increased 8.7% to $740.5 million, or 27.9% of net sales, compared to gross profit of $681.2 million, or 26.3% of net sales, in the year-ago period. Excluding items affecting comparability, gross profit advanced 5.4% to $749.8 million and, as a percentage of net sales, gross profit margin expanded by approximately 80 basis points to 28.2%. This performance reflected the benefit of productivity, higher net price realization and favorable product mix, partially offset by input cost inflation and the unfavorable impact of foreign exchange.
Earnings before interest and taxes (EBIT) declined to $424.7 million for the year, compared to $512.3 million in 2014, due to the prior year benefit of $163 million associated with the termination of the Company's merger agreement with The Hillshire Brands Company. Excluding the termination fee and other items affecting comparability, EBIT increased 4.6% to $443.1 million, reflecting the growth in gross profit, partially offset by higher selling, general and administrative expenses, including the impact of Gardein. Also impacting the growth in EBIT was the year-ago benefit of a vacation policy change totaling $6.5 million.
Adjusted EBITDA grew 5.5% to $531.6 million in 2015, compared to $504.0 million in 2014, despite the vacation policy benefit in the year-ago period. Adjusted EBITDA is a Non-GAAP measure defined below under "Non-GAAP Financial Measures," and is reconciled to net earnings in the tables that accompany this release.
Net interest expense for the year declined 8.1% to $88.3 million, reflecting the benefit of the Company's deleveraging and related interest rate step-down on its term loans in late 2014. The effective tax rate for the year, excluding items affecting comparability, was 36.6%, compared to 37.9% in the year-ago period, due to qualifying in 2015 for the Domestic Production Activities Deduction and foreign tax credit associated with the Company's Canadian operations.
GAAP net earnings declined to $212.5 million for the year, compared to $248.4 million in 2014, reflecting the prior year benefit of the aforementioned termination fee. Excluding items affecting comparability, net earnings advanced 10.6% to $224.9 million, compared to net earnings of $203.4 million in the year-ago period, while diluted earnings per share increased 10.3% to $1.92. This performance reflected the strong growth in EBIT, as well as a lower effective tax rate and lower interest expense.
Net cash provided by operating activities totaled $373 million in 2015 versus $551 million in 2014, which included the net cash benefit of $151 million from the termination fee.
Fourth Quarter Results
Net sales in the fourth quarter of 2015 increased 2.4% to $722.5 million, compared to net sales of $705.3 million in the year-ago period. This growth reflected a 1.6% benefit versus year-ago from approximately six extra weeks of Gardein sales in 2015, as well as higher net price realization of 2.0%. Partially offsetting this growth were lower volume/mix of 0.8% and unfavorable foreign currency translation of 0.4%.
North America Retail net sales advanced 2.7% to $639.6 million in the fourth quarter of 2015, compared to $622.7 million in the year-ago period, reflecting a 1.9% benefit from Gardein and higher net price realization of 2.1%, partially offset by lower volume/mix of 0.8% and unfavorable foreign currency translation of 0.5%.
Gross profit in the fourth quarter of 2015 increased 18.3% to $222.8 million, or 30.8% of net sales, compared to gross profit of $188.4 million, or 26.7% of net sales, in the year-ago period. Excluding items affecting comparability, gross profit advanced 7.9% to $224.0 million and, as a percentage of net sales, gross profit margin expanded by approximately 160 basis points to 31.0%. This performance reflected the benefit of productivity, higher net price realization, favorable product mix and Wish-Bone synergies, partially offset by input cost inflation and the unfavorable impact of foreign exchange.
Earnings before interest and taxes (EBIT) in the fourth quarter of 2015 increased to $148.6 million, compared to $93.6 million in the fourth quarter of 2014. Excluding items affecting comparability, EBIT in the fourth quarter advanced 7.1% to $152.6 million, compared to $142.5 million in 2014. This performance reflected the growth in gross profit, partially offset by higher consumer marketing. Also impacting the growth in EBIT was the year-ago benefit of the vacation policy change totaling $6.5 million. Adjusted EBITDA grew 7.2% to $174.8 million in the fourth quarter of 2015, compared to $163.1 million in the year-ago period.
Net interest expense for the quarter was even with year-ago at $22.4 million. The effective tax rate for the quarter, excluding items affecting comparability, was 36.6%, compared to 37.4% in the year-ago period. This was due to qualifying in 2015 for the Domestic Production Activities Deduction and foreign tax credit associated with the Company's Canadian operations.
Net earnings in the fourth quarter increased to $79.2, compared with net earnings of $36.1 million in the year-ago period. Excluding items affecting comparability, net earnings for the fourth quarter increased 9.8% to $82.5 million, compared to net earnings of $75.2 million in the year-ago period, while diluted earnings per share increased 9.4% to $0.70.
Net cash provided by operating activities totaled $162 million in the fourth quarter of 2015, compared to $138 million in the prior year, reflecting higher earnings partially offset by higher working capital. Full report.
