Pinnacle Foods

Pinnacle Foods Finance LLC Reports Fiscal 2010 Third Quarter Results

MOUNTAIN LAKES, N.J.--Pinnacle Foods Finance LLC (“Pinnacle” or the “Company”), a leading manufacturer, marketer and distributor of branded, high-quality food products in North America, announced its financial results for the third quarter ended September 26, 2010. Net sales were $541.7 million compared to $394.2 million in last year’s third quarter. This increase was principally due to the acquisition of Birds Eye Foods, Inc. late in 2009. Net loss was $12.2 million compared to net earnings of $10.4 million in the third quarter of last year. The decrease in earnings in the quarter is largely attributable to $20.9 million of charges related to the refinancing of certain debt, which will reduce future interest expense and improves the maturity profile of the Company’s debt portfolio. For the first nine months of 2010, net sales were $1.774 billion compared with $1.230 billion in last year’s first nine months and net earnings were $5.9 million compared to $10.8 million a year ago. Net cash provided by operating activities was $145.5 million in the first nine months of 2010 compared to $66.3 million last year primarily driven by a significant improvement in working capital. Consolidated EBITDA, as defined in our Senior Secured Credit Facility and the Indentures governing our Senior Notes and Senior Subordinated Notes, was $333.2 million in the first nine months of 2010 compared to $331.0 million for the first nine months of 2009, an increase of approximately 1%. For the last twelve months ended September 26, 2010, Consolidated EBITDA was $474.3 million. Consolidated EBITDA is defined below under “Non-GAAP Financial Matters”.

“The first nine months of 2010 has been a period of significant accomplishment for Pinnacle Foods. Our integration of the Birds Eye Foods acquisition has been seamless, we successfully refinanced a portion of our debt, and our brands are gaining share in a difficult trading environment,” said Pinnacle’s Chief Executive Officer, Robert J. Gamgort.

Third Quarter 2010

Consolidated net sales were $541.7 million in the third quarter of 2010  compared to $394.2 million in last year’s third quarter, an increase of  $147.5 million. The acquisition of Birds Eye Foods added $188.6 million  of net sales. On a proforma basis after giving effect to the acquisition  of Birds Eye Foods, net sales for the third quarter of 2010 were down  5.6% compared to the same period a year ago, with net sales in our North  American retail businesses down 3.2% driven by weak category  performance and Specialty Foods Division net sales down 15%, in line  with the company’s strategic initiative to de-emphasize lower margin  foodservice and private label products. Excluding the Birds Eye®  Steamfresh® and Swanson® frozen meals businesses which we are exiting,  net sales in the North American retail business were down 2.6%.

Net sales in the Birds Eye Frozen Division were $223.1 million in the  third quarter compared to $112.0 million in last year’s third quarter.  The acquisition of Birds Eye Foods added $127.0 million of net sales.  Birds Eye® Steamfresh® vegetables grew significantly when compared with  the same period a year ago driven by new items, promotional increases  and strong market share performance. Birds Eye® Voila!® complete bagged  meals also showed a significant increase in sales and market share.The  net sales of the remaining businesses in the division declined $15.9  million. The decrease was mainly driven by declines in our Hungry Man®  and Swanson® dinners in a category marked by significant competitive  activity. Aunt Jemima® increased slightly.

Net sales in the Duncan Hines Grocery Division were $214.1 million in  the third quarter compared to $199.8 million in last year’s third  quarter. The acquisition of Birds Eye Foods added $24.9 million of net  sales. The net sales of the remaining businesses in the division  declined $10.6 million primarily due to the Duncan Hines® brand in face  of intense competition where we chose not to participate in uneconomical  promotions. Armour® canned meat sales increased in the quarter.

Net sales in the Specialty Foods Division were $104.5 million in the  third quarter compared to $82.4 million in last year’s third quarter.  The acquisition of Birds Eye Foods added $36.7 million of net sales. The  net sales of the remaining businesses in the division declined $14.6  million.

Earnings before interest and taxes (EBIT) were $54.2 million in the  third quarter of 2010, or 10.0% of net sales, compared to 11.8% of net  sales in the third quarter of 2009. Excluding the impact of the write-up  of Birds Eye Foods’ inventories at the date of acquisition to fair  value ($9.7 million), employee severance benefits and lease termination  costs ($2.4 million) and integration costs ($0.3 million), EBIT would  have been $66.6 million, or 12.3% of net sales. The growth in the EBIT  margin was principally driven by lower commodity costs, improved product  mix and our productivity initiatives taking hold, as well as lower  administrative costs, reflecting the synergies realized from the Birds  Eye Foods acquisition. Synergies realized, defined as reduction in  operating costs resulting from the combination of Pinnacle and Birds Eye  Foods, increased EBIT by $9.2 million in the three months ended  September 27, 2010.

As noted earlier, earnings were also impacted by $20.9 million of  charges related to the refinancing of certain of our debt, which will  reduce future interest expense and improves the maturity profile of our  debt portfolio. Earnings were also effected by higher nterest expense to  fund the Birds Eye Foods acquisition and a lower effective tax rate.  This year’s effective tax rate was 38.4%.

Overall,  net loss was $12.2 million in the third quarter of 2010,  compared to net earnings of $10.4 million in the same period a year ago.