A Boulder bump for Pinnacle

by Jeff Gelski
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Boulder Brands products, Pinnacle Foods
Net sales in the quarter increased nearly 20% for Pinnacle Foods, largely reflecting the benefits of the Boulder Brands acquisition.

PARSIPPANY, N.J. — Pinnacle Foods got a bigger boost than expected from Boulder Brands in the second quarter ended June 26. Net sales in the quarter increased nearly 20% for Pinnacle, largely reflecting the benefits of the Boulder Brands acquisition, which contributed $122,607,000 in sales, and growth of 1.6% from North America retail.

Pinnacle Foods completed its acquisition of Boulder Brands on Jan. 15. EBIT for Boulder Brands in the second quarter was $7,028,000. Retail consumption versus year-ago advanced for the Glutino, Udi’s, Earth Balance and Evol brands, offset by a moderate decline for Smart Balance.

Adjusted EBIT for Boulder was $17.2 million, said Mark Clouse, chief executive officer for Pinnacle, in a July 28 earnings call.

Mark Clouse, Pinnacle Foods
Mark Clouse, c.e.o. of Pinnacle Foods

“The adjusted EBIT performance reflected input cost inflation and better-than-planned supply chain productivity,” he said.

Mr. Clouse said Boulder Brands has a “meaningful” business with Wal-Mart Stores, Inc., Bentonville, Ark.

“We did have distribution in Wal-Mart on several of the brands,” he said.

Pinnacle now expects Boulder Brands to contribute about 7c to 8c of adjusted, diluted earnings per share for the fiscal year, which compares to a previous expectation of 5c. Craig Steeneck, chief financial officer for Pinnacle, said the company now expects Boulder Brands to approach EBITDA growth of 65% from 2015 to 2017, which compares to an original target of 50%.

Parsippany-based Pinnacle Foods reported overall net sales of $756,381,000 in the quarter, up from $631,746,000 in the previous year’s second quarter. Net earnings of $45,783,000, or 39c per share on the common stock, marked a 5% increase from $43,679,000, or 38c per share, in the previous year’s second quarter.

Pinnacle Foods products
Adjusted net earnings exclude Boulder, Wish-Bone and Gardein anticipated synergies that are included in calculating covenant compliance.

Adjusted net earnings were $49,979,000, or 42c per share, which compared with $41,936,000, or 36c per share, in the previous year’s second quarter. Adjusted net earnings exclude Boulder, Wish-Bone and Gardein anticipated synergies that are included in calculating covenant compliance.

Pinnacle Foods raised its adjusted, diluted earnings per share for fiscal-year 2016 to a range of $2.10 to $2.15 from a range of $2.08 to $2.13.

North America retail for Pinnacle consists of the Birds Eye Frozen segment and the Duncan Hines Grocery segment.

Second-quarter EBIT for Birds Eye Frozen increased 23% to $46,794,000 in the second quarter, which compared with $37,978,000 in the previous year’s second quarter. Net sales growth and productivity savings drove EBIT growth, which was offset partially by modest input cost inflation, a double-digit increase in marketing investment and items affecting comparability, particularly unrealized mark-to-market impacts.

Bird's Eye new products, Pinnacle Foods
Recently introduced items behind the Birds Eye Voila!, Birds Eye Flavor Full, Birds Eye Protein Blends and Birds Eye Disney-themed platforms fueled the Birds Eye franchise.

Net sales within Birds Eye Frozen rose 6% in the second quarter to $285,155,000 from $268,859,000. Recently introduced items behind the Birds Eye Voila!, Birds Eye Flavor Full, Birds Eye Protein Blends and Birds Eye Disney-themed platforms fueled the Birds Eye franchise.

“Heading into the important holiday seasons later this year, we feel really good about the momentum we have behind our Birds Eye franchise, and we’re confident in our plans to continue to drive growth for the balance of this year and next,” Mr. Clouse said. “Our strategy and strong execution on this business has allowed Birds Eye over the last few years to transform not only frozen vegetables and meals but also to some degree the entire frozen aisle.”

The Gardein brand saw a double-digit increase in retail velocity.

Duncan Hines, Pinnacle Foods
BIT in the second quarter for the Duncan Hines Grocery segment increased 2.4%.

EBIT in the second quarter for the Duncan Hines Grocery segment increased 2.4% to $52,255,000 from $51,041,000. Strong productivity and items affecting comparability drove the growth. Net sales for the Duncan Hines Grocery segment dropped 2.7% to $270,471,000 from $277,994,000.

Within the Specialty Foods segment, EBIT of $6,333,000 in the second quarter marked a decrease of 17% from $7,599,000 in the previous year’s second quarter. Net sales dropped 8% to $78,148,000 from $84,893,000, reflecting lower volume/mix of 8.2%, partially offset by higher net price realization of 0.3%. Lower sales of private label canned meat drove the expected decline in volume/mix.

For the six months ended June 26, Pinnacle Foods posted net earnings of $70,620,000, or 61c per share, which marked a 17% decrease from $85,215,000, or 73c per share, in the same time period of the previous year. Six-month net sales were $1,510,636,000, up 16% from $1,297,027,000. 
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