Sector News

Pinnacle Foods starts to lay out plans for Boulder Brands

February 26, 2016
Food & Drink

Boulder Brands could be a springboard for Pinnacle Foods to acquire smaller natural and organic companies, the packaged and frozen food giant’s CEO, Bob Gamgort, said Thursday.

“There is good, healthy growth in this business,” he said, during the company’s earnings call with analysts.

But to get there, he said, will require paring product lines at the Boulder-based maker of Udi’s, Evol and Smart Balance brands, eliminating duplicated costs, integrating some supply chains and investing to help set up the company for even faster growth.

Boulder Brands will remain as a separate operating unit, which could open the doors for the Parsippany, N.J.-based company to consider buying and integrating other smaller brands, he said.

Pinnacle officials declined to comment beyond what was included in the earnings release and call, its first since acquiring Boulder Brands in November for $982 million, including debt.

At the time of the acquisition, Boulder Brands was in a period of turbulence that included the resignation of its CEO, layoffs and weak earnings.

Gamgort said Pinnacle has a track-record of growing under-performing businesses and sees similar potential in Boulder Brands, which had operated under the weight of management problems.

Opportunities include expanding Boulder Brands into natural and traditional channels and maintaining a leadership position in the gluten-free sector with the No. 1 and No. 2 brands of Udi’s and Glutino.

“This is not a fad. This is a long-term trend,” Gamgort said, adding that gluten-free products are sold at premium prices.

Boulder Brands’ downtown Boulder headquarters, where about 100 of the company’s 900 workers are based, is being positioned as a hub for upping Pinnacle’s profile in the natural and organic market.

Boulder Brands also has production facilities in metro Denver.

The company projected 2016 net sales for Boulder Brands in the $460 million to $480 million range, down from the more than $500 million recorded in 2014 and projected for 2015. Sales are expected to take a hit as stock-keeping units are pared from Boulder Brands’ lines, likely from the struggling Smart Balance and vegetable spread lines.

Pinnacle recorded about $1.7 million in expenses related to the Boulder Brands acquisition during the fourth quarter. Integration costs are expected to run $10 million to $15 million in 2016. Top Boulder Brands executives received retention bonuses during the fourth quarter.

Pinnacle estimates Boulder Brands’ earnings before interest, taxes, depreciation and amortization to grow by 50 percent in two years.

Pinnacle on Thursday reported earnings for its fourth-quarter and full-year periods, which ended Dec. 27. The company reported earnings of $79.2 million for the quarter, up from $36.1 million in the fourth-quarter of 2014. For the year, earnings dipped to $212.5 million from $248.4 million. Quarterly and annual revenue had single-digit percentage gains to $722.5 million and nearly $2.7 billion, respectively.

Pinnacle recorded quarterly sales growth in its Birds Eye frozen segment but saw sales tail off in its Duncan Hines grocery segment, which primarily lost revenue because of category weakness, Pinnacle said.

By Alicia Wallace

Source: Denver Post

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