Michael Foods announced last month that it has retained Banc of America Securities and J.P. Morgan Securities as its financial advisors in evaluating “strategic alternatives.” The Minnetonka, Minn.-based company says that “there can be no assurances that any transaction will occur, or the timing, structure or terms of any transaction.”
The company also reported that for the second quarter ended June 30, 2007, its egg products earnings before interest, taxes, depreciation, and amortization (EBITDA) was $33 million, down 1 percent from the same quarter in 2006. Egg products sales totaled $243.5 million, up 17 percent from the previous year.
For the six months ended June 30, 2007, egg products EBITDA was $62.5 million, down 3 percent from the preceding year, on sales of $472.7 million, up 11 percent.
Chairman and CEO Gregg Ostrander said that food service value-added egg product unit sales results easily outpaced those of the prior year period. “A stand-out performer,” he said, “was the food ingredient portion of our egg products division. A rising egg market has resulted in improved pricing of these egg products used to make other food items.” Meanwhile, egg costs have not risen as rapidly, providing the company with a favorable spread of the products sold in this category, Ostrander said. This business generated a positive margin this year versus losses in 2006. “The solid performance of the food ingredient channel speaks to the balance of our overall egg products portfolio. This balance has enabled us to weather volatile egg and grain markets while still delivering strong operating profits and free cash flow.”
Overall in the second quarter, he said that “we continued to battle cost pressures. Grain, egg, cheese and energy markets were all well above historical levels. These factors caused production costs to rise significantly from the levels seen in 2006. While we have taken pricing actions with our customers, normal delays in affecting pass-throughs resulted in more modest margins for most of our sales in the second quarter.”
Ostrander added that “we expect our second half EBITDA to improve over what we have accomplished in the first half. We will begin to realize the impact of the price increases taken during the first six months of the year on egg products. This should provide some relief as we continue to deal with high costs.”