Pinnacle’s 2016 Outlook, Update on Boulder Brands Acquisition



Outlook for 2016

In its 4Q15 press release, Pinnacle Foods (PF) mentioned that it expects the adjusted diluted EPS (earnings per share) to be $2.08–$2.13. It includes the benefit of the Boulder Brands acquisition. It expects significant innovation and new product introductory expenses planned for 1Q16 to impact the EPS in the first quarter. The remaining quarters are projected to post strong growth. It also expects input cost inflation for the year to be 2%–3% including Boulder Brands.

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Pinnacle expects the productivity for the year to be 3.5%–4.0% of the cost of products sold. It includes Boulder Brands organic cost savings, but excludes acquisition synergies. The interest expense for the year is estimated to be ~$140 million including Boulder Brands. The effective tax rate for 2016 is expected to be comparable or slightly above the effective tax rate of 36.6% in 2015. It would reflect a higher effective tax rate structure for Boulder Brands. The weighted average diluted share count for the year is estimated to be ~118 million. Capital expenditures for 2016 are expected to be $135–$145 million including Boulder Brands. It’s estimated to be ~$30 million for the previously-disclosed Gardein capacity expansion.

Update on Boulder Brands acquisition

Pinnacle Foods completed its earlier announced acquisition of Boulder Brands on January 15. As a result, Boulder Brands will be consolidated with Pinnacle for 49 weeks in 2016. As mentioned in the 4Q15 press release, the company expects the Boulder Brands acquisition to contribute ~$0.05 to the adjusted diluted EPS based on a few assumptions. This includes the impact from Boulder’s 2016 net sales. The net sales are estimated to be $460–$480 million. The interest expense associated with the acquisition is expected to be ~$45 million. The capital expenditures are estimated to be ~$20 million.

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Pinnacle’s CEO, Bob Gamgort, mentioned that “We are excited about our recent Boulder Brands acquisition, which provides a stronger presence in faster-growing health and wellness categories and a rich source of both acquisition synergies and other cost savings opportunities. In 2016, in addition to improving Boulder’s cost structure, our focus will be on streamlining the portfolio and building the foundation for accelerated growth in 2017. As a result, we expect Boulder to be modestly accretive this year, with significant accretion thereafter.”


Pinnacle’s peers in the industry including Flowers Food (FLO) and ConAgra Foods (CAG) reported YTD (year-to-date) returns of -19.6% and -0.19%. McCormick & Company (MKC) reported YTD returns of 9.3%. The Vanguard Consumer Staples ETF (VDC) and the Fidelity MSCI Consumer Staples Index ETF (FSTA) invest a total of 1.9% in ConAgra Foods.


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