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INTERNATIONAL HOME FOODS REPORTS SECOND -- QUARTER RESULTS
PARSIPPANY, N.J., July 20. International Home Foods, Inc. (NYSE: IHF;
the "Company") today reported diluted earnings per share of $0.38 for the second
quarter ended June 30, 2000, an increase of 12% over diluted earnings per share
of $0.34 in the second quarter of 1999. Net income was $29.0 million for the
quarter, an increase of 11% over the comparable 1999 period.
For the six-month period ended June 30, 2000, diluted earnings per
share were $0.73, an increase of 12% over the $0.65 diluted earnings per share
during the comparable period, which excluded a $9.6 million after-tax
non-recurring gain that the Company recorded in the first quarter of 1999
related to the sale of its Polaner business. Net income for the period was $55.5
million, an increase of $6.5 million, or 13%, excluding the 1999 non-recurring
gain. Including the gain from the sale of Polaner, diluted earnings per share
decreased 5% and net income decreased $3.1 million, or 5%, for the six-month
period ended June 30, 2000 as compared to the first half of 1999.
Net sales for the second quarter were $530.6 million, an increase of
$18.0 million, or 4%, over a very strong second quarter of 1999. Net sales for
the quarter increased in each of the Company's business segments versus the
comparable period. Organic sales (excluding the net sales of Polaner and the
July 1999 acquisition of Louis Kemp) for the quarter decreased $7.7 million, or
1%, versus the comparable 1999 period. Organic sales were negatively impacted by
the planned exit from the low-margin international seafood business, a list
price rollback on light meat tuna and a significant decline in third-party
contract manufacturing sales. Excluding these items, which have no significant
impact on operating profit, organic sales increased 3% for the quarter.
Net sales for the six-month period ended June 30, 2000 were $1,092.0
million, an increase of $65.2 million, or 6%, versus the comparable 1999 period.
Net sales for the six-month period increased in each of the Company's business
segments versus the comparable period. Organic sales for the six-month period
increased $17.0 million, or 2%, over the comparable 1999 period. Excluding the
aforementioned items that negatively impacted net sales, organic sales for the
six-month period increased 5%.
Gross profit as a percentage of net sales in the second quarter
increased significantly to 49.0% from 46.9% during the comparable 1999 period.
For the six-month period, gross profit as a percentage of net sales increased to
48.4% from 46.2% in the comparable 1999 period. This increase was due to savings
associated with the Company's previously announced restructuring program, lower
purchasing costs, continued improvement in operating efficiencies and product
mix.
Marketing expenses in the second quarter as a percentage of net sales
increased to 22.6% versus 21.8% in the comparable 1999 period. For the six-month
period ended, marketing expenses as a percentage of net sales increased to 22.8%
versus 21.5% in the comparable 1999 period. The increase in both periods was
primarily due to a $9 million incremental investment in slotting and
introductory marketing programs to successfully launch new Chef Boyardee and
Libby's products.
SALE OF THE COMPANY
On June 23, 2000, the Company and ConAgra, Inc. announced that they had
entered into a definitive merger agreement under which ConAgra will acquire the
Company. The proposed merger is subject to approval by a majority of the
Company's stockholders, and to clearance or expiration of the applicable waiting
period under the Hart-Scott-Rodino Act, the Competition Act of Canada and the
Mexican Federal Economic Competition Law, and the satisfaction of other
customary closing conditions. The merger is expected to close in the third
quarter of 2000.
MANAGEMENT COMMENT
C. Dean Metropoulos, International Home Foods Chairman and Chief
Executive officer, said: "International Home Foods once again delivered
double-digit earnings growth and maintained its market share momentum. In
addition, the Company launched several new products in the first half of 2000
that should generate
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continued sales growth in the future. This momentum, combined with significant
productivity gains, will translate into improved margins and should allow the
business to continue to deliver strong results."
BRAND TRENDS/DEVELOPMENTS
The references made below to consumer case sales (or consumer sales)
reflect the Company's most recent data for grocery sales only (excluding mass
merchandisers, club and convenience stores) as gathered by A.C. Nielsen for the
twelve-week period ended June 3, 2000 and, where applicable, as compared to the
prior year. Market share data, unless otherwise indicated, reflects case share
for the 52-week period ended June 3, 2000.
For comparative purposes, results for the Seafood segment are presented
on a pro forma basis as if the 1999 acquisitions of Clover Leaf/Paramount and
Louis Kemp occurred as of January 1, 1999.
CHEF-BOYARDEE(R)
Net sales increased 4% for the second quarter and 9% for the first half
of 2000 versus the comparable 1999 periods. Chef Boyardee consumer trends in the
canned pasta category continue to improve with consumer sales increasing 9% and
5% for the twelve-week and year-to-date periods, respectively. Chef Boyardee's
share of the canned pasta category has increased to 54%, a gain of three share
points versus the year-ago period.
The significant Chef Boyardee sales increase is driven by new
advertising focusing on mothers and teens, as well as the introduction of
several new products. The new items introduced in the first quarter (Overstuffed
Italian Sausage Ravioli, Jumbo Spaghetti and Meatballs, Homestyle Chicken
Parmesan and Homestyle Chicken Alfredo) continue to gain market share and
command a combined 7% dollar share of the category.
PAM(R)
Net sales increased 4% for the second quarter compared to a very strong
1999 period. PAM's trends in the cooking spray category improved with consumer
sales increasing 6% for the twelve-week period. PAM's share of the cooking spray
category increased by four points to 42%. The sales increase is driven by a
successful new advertising campaign for PAM and consumer promotions.
LIBBY'S(R)
Libby's net sales increased 4% for the second quarter and 9% for the
first half of 2000 versus the comparable 1999 periods. The sales increase was
primarily due to increased distribution, better merchandising and the
introduction of several new products. The Company will further support the
broadened Libby's portfolio by continuing to selectively build distribution
throughout 2000. Libby's consumer sales for the twelve-week and year-to-date
period grew 10% and 14%, respectively.
RO*TEL(R)
Ro*Tel continued its strong performance with net sales increasing 21%
in the second quarter, driven by diced tomatoes and salsas. The sales increase
in diced tomatoes reflects growth in both the heartland and expansion markets.
Ro*Tel Pico de Gallo salsas benefited from the May 2000 expansion into several
new markets and the introduction of three additional salsa product offerings:
Mild and Medium Picante Sauces and Pico de Gallo Hot Salsa.
SEAFOOD SEGMENT
Net sales for the Seafood segment increased 10% in the second quarter.
On a pro-forma basis, Seafood net sales declined 7% primarily due to an
industry-wide list price rollback on light meat tuna, which was in response to
lower raw material costs and the planned exit from the low-margin international
business. Excluding these items, net sales for the segment increased 2% for the
second quarter. Consistent with the Company's focus on optimizing
2
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seafood margins, operating profit for the Seafood segment increased 12% on a
pro-forma basis, driven primarily by operating efficiencies and synergies
associated with the integration of the 1999 acquisitions.
Bumble Bee(R) consumer sales increased 15% in the twelve-week period
and Bumble Bee's share of the tuna category increased two points to 23%. The
Bumble Bee and Orleans brands continue to improve in the specialty seafood
category with consumer sales increasing 15% in the twelve-week period and
category share increasing two points to 13%
ABOUT INTERNATIONAL HOME FOODS
International Home Foods, Inc. is a nationally prominent manufacturer,
distributor and marketer of food products. Its significant established brands
include Chef Boyardee(R) prepared foods, Bumble Bee(R), Orleans(R), Louis
Kemp(R), Clover Leaf(R) and Paramount(R) seafood, PAM(R) cooking spray,
Libby's(R) canned meats, Gulden's(R) mustard, Crunch 'n Munch(R) glazed popcorn
and pretzels, Campfire(R) marshmallows, Ro*Tel(R) tomatoes with green chilies,
Dennison's(R) chili, and Ranch Style(R) and Luck's(R) beans.
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements as defined by
the Private Securities Litigation Reform Act of 1996, which are inherently
subject to various risks and uncertainties. The forward-looking statements
include, without limitation, the Company's ability to achieve growth and strong
financial results. There are many risks associated with these forward-looking
statements. In particular, in addition to other risks, the Company's ability to
successfully implement these and other business strategies is subject to adverse
changes in general economic conditions, changing consumer preferences based on
nutrition, health and other concerns, the availability and cost of raw materials
used in the Company's products, competition from other brands and other food
product categories, and the effects of evolving health, safety, environmental
and other governmental regulation. These risks and uncertainties, as well as
others related to the Company, are set forth in greater detail in the Company's
Annual Reports on Form 10-K and Quarterly Reports on Forms 10-Q filed with the
Securities and Exchange Commission.
INTERNATIONAL HOME FOODS, INC.
(Dollars in millions except per share and share data)
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THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
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2000 1999 2000 1999
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<S> <C> <C> <C> <C>
Net sales .............................. $ 530.6 512.6 $ 1,092.0 $ 1,026.8
Cost of sales .......................... 270.4 272.1 563.6 552.5
Gross profit ........................... 260.2 240.5 528.4 474.3
% of net sales ......................... 49.0% 46.9% 48.4% 46.2%
Total operating expenses ............... 188.9 173.5 389.0 344.2
Income from operations ................. 71.3 67.0 139.4 130.1
% of net sales ......................... 13.4% 13.1% 12.8% 12.7%
Interest expense ....................... 24.3 24.6 49.3 50.4
Other (income) expense, net ............ 0.3 (0.4) 0.6 (0.6)
Gain on sale of business ............... -- -- -- (15.8)
Income before provision for income
taxes ................................ 46.7 42.8 89.5 96.1
Provision for income taxes ............. 17.7 16.7 34.0 37.5
Net income ............................. $ 29.0 $ 26.1 $ 55.5 $ 58.6
Basic earnings per share ............... $ 0.39 $ 0.36 $ 0.75 $ 0.80
Weighted average basic shares
outstanding .......................... 74,081,914 73,427,938 74,000,144 73,365,602
Diluted earnings per share ............. $ 0.38 $ 0.34 $ 0.73 $ 0.77
Weighted average diluted shares
outstanding .......................... 76,170,434 75,781,554 76,099,571 75,792,114
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