Parsippany, New Jersey, USA-headquartered Pinnacle Foods Inc. on November 12 reported that net sales during the third quarter rose 9% to $624.0 million, compared to net sales of $572.5 million in the third quarter of 2013. This was largely due to its acquisition of the Wish-Bone salad dressing line and growth of the base business. Net earnings and diluted earnings per share advanced approximately 17% on a pro forma basis excluding items affecting comparability.
Net sales for North America Retail, which is comprised of the Birds Eye Frozen and Duncan Hines Grocery segments, increased approximately 10% versus figures posted a year ago. Excluding the benefit of Wish-Bone, net sales advanced only 1%, while Pinnacle’s composite market share for the quarter increased compared to the same period last year.
Pinnacle Foods generated exceptional cash flow during the quarter, which ended on September 28, including both strong cash flow from operations and receipt of a $163 million fee associated with the termination of its merger agreement with The Hillshire Brands Company. The fee, net of expenses, along with cash on hand, was used to reduce indebtedness by $200 million.
Gross profit increased 4.1% to $163.9 million, or 26.3% of net sales, in the third quarter, compared to gross profit of $157.4 million, or 27.5% of net sales, in the year-ago period. Excluding items affecting comparability, gross profit advanced 9.1% to $171.0 million and, as a percentage of net sales, gross profit was even with the year-ago figure of 27.4%. This performance reflected improved productivity and favorable product mix, offset by the impacts of input cost inflation and lower net price realization, including the unfavorable impact of approximately 40 basis points related to the prior year insurance recovery.
Earnings before interest and taxes (EBIT) advanced significantly to $246.6 million in the third quarter of 2014, compared to $84.9 million in the third quarter of 2013, primarily driven by the Hillshire termination fee. Excluding this windfall and other items affecting comparability, EBIT on a pro forma basis increased approximately 19% to $101.9 million in the third quarter of 2014, compared to $85.9 million in the year-ago period. This primarily reflects growth in gross profit and lower administrative expenses, partially offset by higher consumer marketing.
Birds Eye Sales Top $257 Million
Net sales for the Birds Eye Frozen segment of $257.4 million in the third quarter were essentially even with the year-ago period, reflecting higher volume/mix of 1.8%, offset by lower net realized price of 2.0%, including the 0.7% unfavorable impact from comparison against the previous year insurance recovery.
Double-digit growth of Birds Eye Voila! skillet meals, due to distribution expansion and the continued momentum of the brand, and strong growth from Hungry-Man, driven by the success of the recently launched Hungry-Man Selects line, was largely offset by lower sales of Aunt Jemima breakfast products, including the impact of lapping the insurance recovery in the year-ago period. Birds Eye vegetables were down slightly in the quarter due to shipment timing, as retail consumption and market share remained strong.
During the quarter, the company introduced new varieties of Birds Eye Steamfresh and Birds Eye Chef’s Favorites, as well as new varieties of Voila! Family Size skillet meals. It also launched Mrs. Paul’s and Van de Kamp’s crab cakes and invested in new packaging for Aunt Jemima pancakes and waffles, introducing the first re-sealable bag in the category.
EBIT for the Birds Eye Frozen segment declined approximately 1.5% to $44.3 million in the third quarter of 2014, compared to $45.0 million during the same period in 2013. Excluding items affecting comparability, EBIT increased approximately 2.3% to $48.0 million. This growth came despite lapping the $2.7 million impact of the prior year insurance recovery and largely reflected productivity savings and lower marketing expense, partially offset by higher logistics costs and packaging investments.
