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Aurora Foods Inc.
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NEWS
Contact: Mark Kollar
Broadgate Consultants, Inc.
212-232-2222
FOR IMMEDIATE RELEASE
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Aurora Foods Reports Third-Quarter
Results; EBITDA Shows Meaningful Increase as
Recovery Accelerates
ST. LOUIS, Nov. 9 -- Aurora Foods Inc. (NYSE: AOR) today announced results for
the third quarter ending September 30, 2000, with adjusted EBITDA at $43.9
million, an increase of 16.0% from the restated year-ago quarter.
The Company also said that net sales in the third quarter increased 9.7% to
$227.7 million, compared with year-ago net sales of $207.5 million.
Net income for the third quarter was a loss of $15.3 million, or $0.22 per
share, compared with restated year-ago income of $3.8 million, or $0.06 per
share. The loss for the quarter primarily reflects a pre-tax charge of $23.2
million, $17.1 million of which was non-cash for financial, legal and accounting
expenses in connection with the accounting restatements announced in the first
quarter.
Aurora also reported that third-quarter adjusted EBITDA of $43.9 million was a
35.8% increase from the second-quarter adjusted EBITDA of $32.4 million, marking
the second consecutive quarter-to-quarter increase for the Company.
Third-quarter adjusted EBITDA increased 52.7% from the first quarter, despite
the typically higher seasonal sales in the first quarter.
In addition, adjusted EBITDA as a percent of net sales grew significantly to
19.3% in the third quarter from 15.1% in the second quarter and 10.2% in the
first quarter, or almost double the margin from the first three months of the
year. This continuing progress primarily reflects improving cost controls and
reductions in inefficient marketing spending, especially those associated with
prior practices of trade loading. Despite these marketing spending reductions,
IRI/Nielsen market-share data remained positive, with 12 of 18 unit market
shares up versus year ago in the most recent four weeks.
On a pro-forma basis (which treats the acquisitions of Chef's Choice(R) and
Lender's(R) and the adoption of EITF 00-14 as if they had occurred at the
beginning of 1999), third-quarter adjusted EBITDA was essentially equal to year
ago, a significant improvement versus the first six months of fiscal 2000, when
adjusted EBITDA was down 24.8%, compared with the same year-ago period. The
Company said that it expects full-year adjusted EBITDA in the range of $155
million, which would reflect an increase of over 33% in the second six months
versus year ago pro-forma results.
Jim Smith, President and Chief Executive Officer, said, "Our quarter-to-quarter
improvement in
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EBITDA and EBITDA as a percent of net sales clearly indicate that our turnaround
is accelerating. We are seeing the benefit of instituting more normal business
practices, which include more reasonable marketing spending. As a result, our
brands are growing in strength behind the consistency of our programs and
improved execution from the frozen and dry sales consolidation. We are very
encouraged by our third-quarter results. Our improvement should continue to
accelerate, and we expect strong EBITDA growth in the fourth quarter."
Net sales for the third quarter of 2000 were down 7.6%, compared with pro-forma
results for the same period last year. This decline primarily reflects an
inflated September 1999 when over 2.0 million cases were loaded in at the end of
the quarter. Sales were also influenced by the continued drawdown in trade
inventories, especially during July and August in syrup and Duncan Hines(R), and
the Company's determination to discontinue prior practices of selling products
at substantial discounts to boost current revenue.
Added Mr. Smith, "Our pro-forma third quarter net sales reduction versus year
ago was expected. We believe the unusually heavy year-ago September loading
makes for particularly difficult comparisons. For example, the unit volume for
July and August grew 13.4%, compared with year-ago levels, while unit volume in
October grew 20.6%. Yet September was down 30.3%, the major difference being
excess inventories loaded at the end of September 1999. These 1999 business
practices have been stopped, which means that comparisons and improvements in
2001 and beyond will be more predictable and steady.
"On other fronts, the frozen and dry divisions' consolidation is complete and
all management and administrative activities have been transferred to the
headquarters in St. Louis. This move alone is expected to save about $12 million
annually. In addition, the consolidation of the frozen and dry sales force is
complete and we are seeing broad-based improvements in basic execution. We have
added a significant number of new people to the Company, which is expanding our
capabilities and increasing efficiency as we now have resources on all key
strategic projects. Concurrent with our consolidation, the Company has replaced
12 of the top 16 executives of the Company employed as of February 1, 2000."
The Company said that its anticipated full-year adjusted EBITDA in the range of
$155 million represents a 2% to 3% increase over restated pro-forma adjusted
1999 EBITDA of $151.6 million. Although there will be significant adjusted
EBITDA growth in the second six months, the annual EBITDA projection is expected
to be about $20 million below initial estimates. This primarily reflects the
persistent effect of certain one-time programs instituted by prior management
that were executed in the marketplace prior to the consolidation, and
secondarily, a slower overall pace of cost savings.
"The absolute progress against cost reduction has been strong, but the
activities needed to complete the consolidation on time have temporarily
detracted from achieving some identified cost-savings opportunities," Mr. Smith
added. "These savings opportunities will be realized next fiscal year."
Another principal focus of the Company's efforts has been to resolve the issues
arising from the accounting restatements announced in the first quarter. In this
regard, the third quarter includes a pre-tax $23.3 million charge, of which
$17.1 million represents the non-cash cost of an agreement reached with holders
of the Company's subordinated bonds. Shares of common stock were issued in
return for consents to waivers, amendments and releases associated with the
restatement related covenant defaults and were assigned a total value of $21.1
million. With the resolution of these issues, the Company has reclassified its
senior secured debt and senior subordinated notes from current to long-term. In
addition, the Company believes that cash expenditures related to issues
surrounding the restatements will be materially reduced in coming periods.
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Attached are financial tables for the third quarter as well as IRI/Nielsen
dollar and unit market share trends.
Aurora Foods will host a teleconference call to discuss third-quarter financial
results at 10:30 ET Thursday, Nov. 9, 2000, which will be also available over
the Internet at http://www.aurorafoods.com.
About Aurora Foods
Aurora Foods Inc., which is based in St. Louis, is a leading producer and
marketer of premium branded food products including Duncan Hines(R) baking
mixes, Log Cabin(R) and Mrs. Butterworth's(R) syrup, Lender's(R) bagels, Van de
Kamp's(R) and Mrs. Paul's(R) frozen seafood, Aunt Jemima(R) frozen breakfast
products, Celeste(R) frozen pizza and Chef's Choice(R) skillet meals. Aurora's
products can be found in all Retail classes of trade, and Foodservice, and
command strong positions in their respective categories and/or markets.
Statements contained in this press release that are not historical facts are
forward-looking statements as that term is defined in the Private Securities
Litigation Reform Act of 1995. All forward-looking statements are subject to
risks and uncertainties which could cause actual results to differ from the
forward-looking statements contained in this release and that may affect the
Company's prospects in general are described in the Company's filing with the
Securities and Exchange Commission.
###
Aurora Foods - IRI/Nielsen Market Shares - 9/30/00
(Point Change Vs. Year Ago)
<TABLE>
<CAPTION>
Dollar Basis
Past Past Past Past
1 Month 3 Months 6 Months 12 Months
<S> <C> <C> <C> <C>
Total Seafood
(ex. Shrimp) 48.0 45.9 47.2 48.7
(+4.2) (+0.1) (-1.1) (-1.8)
Total Frozen Breakfast 14.3 14.1 14.1 13.8
(+2.6) (+2.2) (+1.1) (+0.8)
Frozen Pizza 3.5 3.2 3.1 3.2
(-0.5) (-0.4) (-0.6) (-0.7)
Frozen Skillet Meals 14.3 16.0 16.2 15.5
(-0.4) (+0.1) (+1.8) (+2.1)
Total Lender's 32.2 31.8 32.2 32.9
(-4.0) (-4.9) (-3.8) (-3.3)
Total Syrups 29.7 30.0 31.5 33.2
(-2.0) (-2.6) (-1.1) (+0.7)
Total Baking Mix 17.4 18.0 18.5 18.8
(+1.1) (+0.7) (+0.4) (+0.7)
<CAPTION>
Unit Basis
Past Past Past Past
1 Month 3 Months 6 Months 12 Months
<S> <C> <C> <C> <C>
Total Seafood
(ex. Shrimp) 42.1 40.3 41.8 43.9
(+2.4) (-1.8) (-3.1) (-3.5)
Total Frozen Breakfast 16.3 16.2 16.3 15.8
(+3.7) (+3.3) (+1.5) (+0.5)
Frozen Pizza 5.6 5.5 5.3 5.4
(-0.4) (-0.2) (-0.5) (-0.8)
Frozen Skillet Meals 10.5 11.7 11.6 10.9
(+0.4) (+0.5) (+1.7) (+2.0)
Total Lender's 39.3 38.4 38.9 39.2
(-2.8) (-3.7) (-2.3) (-1.9)
Total Syrups 25.6 26.2 27.9 29.1
(-1.4) (-2.2) (-0.7) (+0.7)
Total Baking Mix 14.0 14.2 15.2 15.8
(+1.1) (+0.5) (+0.1) (NC)
</TABLE>
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AURORA FOODS INC.
CONSOLIDATED
BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
Sept. 30, Dec. 31,
2000 1999
(Unaudited)
<S> <C> <C>
ASSETS:
CASH & CASH EQUIVALENTS 2,596 315
ACCOUNTS RECEIVABLE, NET 78,658 96,332
INVENTORIES 112,490 123,967
PREPAID EXPENSES AND OTHER CURRENT ASSETS 9,523 21,876
CURRENT DEFERRED TAX ASSETS 25,790 17,338
TOTAL CURRENT ASSETS 229,057 259,828
PROPERTY, PLANT AND EQUIPMENT, NET 247,113 257,443
DEFERRED TAX ASSET 28,134 2,357
GOODWILL AND OTHER INTANGIBLE ASSETS, NET 1,274,569 1,294,995
ASSET HELD FOR SALE 0 800
OTHER ASSETS 35,871 35,693
TOTAL ASSETS 1,814,744 1,851,116
LIABILITIES & STOCKHOLDERS' EQUITY:
SENIOR SECURED TERM DEBT 0 543,591
SENIOR SECURED REVOLVING FACILITY 0 105,600
SENIOR SUBORDINATED NOTES 0 402,049
CURRENT PORTION OF SENIOR SECURED TERM DEBT 32,926 27,980
ACCOUNTS PAYABLE 51,177 87,942
ACCRUED LIABILITIES 84,460 105,192
TOTAL CURRENT LIABILITIES 168,563 1,272,354
SENIOR SECURED TERM DEBT 518,896 0
SENIOR SECURED REVOLVING FACILITY 170,600 0
SENIOR SUBORDINATED NOTES 401,901 0
OTHER LIABILITIES 5,004 2,504
TOTAL LIABILITIES 1,264,964 1,274,858
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY
PREFERRED STOCK 37 0
COMMON STOCK 739 670
PAID-IN CAPITAL 684,498 648,254
PROMISSORY NOTES (281) (323)
ACCUMULATED DEFICIT (135,213) (72,343)
TOTAL STOCKHOLDERS' EQUITY 549,780 576,258
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 1,814,744 1,851,116
</TABLE>
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AURORA FOODS INC.
CONSOLIDATED
INCOME STATEMENT
(DOLLARS AND SHARES IN THOUSANDS)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended September 30,
Pro forma
2000 1999 1999
<S> <C> <C> <C>
NET SALES 227,722 207,496 246,373
COST OF GOODS SOLD (117,326) (101,536) (122,279)
GROSS PROFIT 110,396 105,960 124,094
BROKERAGE, DISTRIBUTION AND
MARKETING EXPENSES
BROKERAGE AND DISTRIBUTION (26,461) (23,535) (29,210)
TRADE PROMOTIONS (30,181) (28,211) (35,015)
CONSUMER MARKETING (7,664) (11,574) (13,446)
TOTAL BROKERAGE, DISTRIBUTION
AND MARKETING EXPENSES (64,306) (63,320) (77,671)
AMORTIZATION OF GOODWILL
AND OTHER INTANGIBLES (10,663) (9,600) (10,750)
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES (8,239) (8,377) (11,356)
OTHER FINANCIAL, LEGAL AND
ACCOUNTING EXPENSES (23,227) 0 0
TRANSITION EXPENSES (698) (1,697) (1,697)
TOTAL OPERATING EXPENSES (107,133) (82,994) (101,474)
OPERATING INCOME 3,263 22,966 22,620
INTEREST EXPENSE, NET (29,579) (16,874) (23,052)
AMORTIZATION OF DEFERRED
FINANCING EXPENSES (735) (498) (498)
OTHER BANK AND FINANCING EXPENSES (100) (48) (48)
INCOME (LOSS) BEFORE
INCOME TAXES (27,151) 5,546 (978)
INCOME TAX (EXPENSE) BENEFIT 11,857 (1,719) (214)
NET INCOME (LOSS) (15,294) 3,827 (1,192)
PREFERRED DIVIDENDS (33) 0 0
NET INCOME (LOSS) AVAILABLE
TO COMMON STOCKHOLDERS (15,327) 3,827 (1,192)
BASIC AND DILUTED EARNINGS
(LOSS) PER SHARE (0.22) 0.06 (0.02)
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 67,925 67,030 67,030
ADJUSTED EBITDA(1) 43,925 37,868 43,961
</TABLE>
(1) Adjusted EBITDA represents earnings before interest, taxes,
depreciation and amortization and before transition expense, other
financial, legal and accounting expenses and Columbus consolidation
costs.
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AURORA FOODS INC.
CONSOLIDATED
INCOME STATEMENT
(DOLLARS AND SHARES IN THOUSANDS)
Unaudited
<TABLE>
<CAPTION>
Nine Months Ended September 30,
Pro forma
2000 1999 1999
<S> <C> <C> <C>
NET SALES 724,451 615,628 764,309
COST OF GOODS SOLD (357,186) (297,469) (373,642)
GROSS PROFIT 367,265 318,159 390,667
BROKERAGE, DISTRIBUTION
AND MARKETING EXPENSES
BROKERAGE AND DISTRIBUTION (85,845) (69,100) (91,773)
TRADE PROMOTIONS (126,388) (100,894) (123,247)
CONSUMER MARKETING (37,624) (37,563) (43,023)
TOTAL BROKERAGE, DISTRIBUTION
AND MARKETING EXPENSES (249,857) (207,557) (258,043)
AMORTIZATION OF GOODWILL
AND OTHER INTANGIBLES (32,143) (27,764) (31,532)
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES (30,908) (24,170) (33,482)
OTHER FINANCIAL, LEGAL
AND ACCOUNTING EXPENSES (41,315) 0 0
COLUMBUS CONSOLIDATION COSTS (6,550) 0 0
TRANSITION EXPENSES (2,082) (9,095) (9,095)
TOTAL OPERATING EXPENSES (362,855) (268,586) (332,152)
OPERATING INCOME 4,410 49,573 58,515
INTEREST EXPENSE, NET (81,126) (47,202) (66,746)
AMORTIZATION OF DEFERRED
FINANCING EXPENSES (2,178) (1,380) (1,380)
OTHER BANK AND FINANCING EXPENSES (288) (151) (151)
INCOME (LOSS) BEFORE INCOME TAXES
AND CUMULATIVE CHANGE
IN ACCOUNTING (79,182) 840 (9,762)
INCOME TAX (EXPENSE) BENEFIT 28,506 (261) 3,312
INCOME (LOSS) BEFORE
CUMULATIVE CHANGE
IN ACCOUNTING (50,676) 579 (6,450)
CUMULATIVE CHANGE IN ACCOUNTING,
NET OF TAX (12,161) 0 0
NET INCOME (LOSS) (62,837) 579 (6,450)
PREFERRED DIVIDENDS (33) 0 0
NET INCOME (LOSS) AVAILABLE
TO COMMON STOCKHOLDERS (62,870) 579 (6,450)
BASIC AND DILUTED EARNINGS
(LOSS) PER SHARE (0.93) 0.01 (0.10)
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 67,344 67,021 67,021
ADJUSTED EBITDA(1) 105,050 96,135 125,269
</TABLE>
(1) Adjusted EBITDA represents earnings before interest, taxes,
depreciation and amortization and before transition expense,
other financial, legal and accounting expenses and Columbus
consolidation costs.
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AURORA FOODS INC.
CONSOLIDATED
CASH FLOW STATEMENT
(IN THOUSANDS)
Unaudited
<TABLE>
<CAPTION>
Nine Months Ended
Sept. 30, Sept. 30,
2000 1999
<S> <C> <C>
CASH FROM OPERATIONS:
NET INCOME (LOSS) (62,837) 579
ADD BACK ITEMS NOT AFFECTING CASH
DEPRECIATION AND AMORTIZATION EXPENSE 52,807 39,448
DEFERRED INCOME TAXES (28,506) 261
NON-CASH RESTRUCTURING COST 3,050 0
NON-CASH OTHER FINANCIAL, LEGAL &
ACCOUNTING EXPENSE 17,130 0
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING 12,161 0
(GAIN) LOSS ON SALE OF ASSETS (303) 14
CHANGES TO OPERATING ASSETS AND LIABILITIES:
RECEIVABLES (19,916) (25,443)
ACCOUNTS RECEIVABLE SOLD 37,591 0
INVENTORIES 11,210 (5,306)
PREPAID EXPENSES AND OTHER CURRENT ASSETS 12,183 (8,361)
ACCOUNTS PAYABLE (36,821) 4,026
ACCRUED EXPENSES (35,417) (22,501)
OTHER ASSETS AND LIABILITIES, NET (1,338) (17,022)
NET CASH USED IN OPERATIONS (39,006) (34,305)
CASH FLOWS FROM INVESTING ACTIVITIES
ASSET ADDITIONS (12,285) (15,805)
PROCEED FROM ASSET SALES 1,175 0
PAYMENT FOR ACQUISITION OF BUSINESSES (7,984) (76,756)
NET CASH (USED FOR) INVESTMENT ACTIVITIES (19,094) (92,561)
CASH (USED FOR) PROVIDED BY
FINANCING ACTIVITIES:
PROCEEDS FROM SENIOR SECURED
REVOLVING AND TERM DEBT 65,000 308,150
REPAYMENT OF BORROWINGS (19,749) (179,321)
ISSUANCE OF PREFERRED STOCK 15,000 0
CAPITAL CONTRIBUTIONS, NET OF
OFFICER PROMISSORY NOTES 262 452
DEBT ISSUANCE AND EQUITY RAISING COSTS (132) (2,323)
NET CASH FROM FINANCING ACTIVITIES 60,381 126,958
NET CHANGE IN CASH 2,281 92
BEGINNING CASH AND CASH EQUIVALENTS 315 354
ENDING CASH AND CASH EQUIVALENTS 2,596 446
</TABLE>
SOURCE: Aurora Foods Inc.
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