Inventure Foods, Inc. (Nasdaq:SNAK) ("Inventure Foods" or "the
Company"), a leading specialty food marketer and manufacturer,
today reported financial results for the first quarter ended March
28, 2015.
First Quarter 2015 Highlights
- Net revenues increased 15.0% to $77.6 million.
- Diluted loss per share was $0.75, primarily due to the product
recall costs, intangible asset impairment and planned incremental
slotting and promotional trade spend investments.
- Adjusted diluted earnings per share* was $0.06, inclusive of
$0.05 per share associated with planned incremental slotting and
promotional trade spend investments.
- Adjusted EBITDA* was $4.6 million.
"We started the year with positive sales momentum, led by a
22.0% increase in our healthy/natural product portfolio as our
Boulder Canyon, Radar Farms, Fresh Frozen and Jamba brands all
posted solid double digit increases in net revenues," said Terry
McDaniel, Chief Executive Officer of Inventure Foods. "Our
achievements in the first quarter were offset by the expenses
associated with our voluntary product recall that we announced late
last month, which in turn, negatively impacted our margin
performance and profitability for the quarter. We remain committed
to product quality and safety, and we will continue to work
diligently to stabilize our Fresh Frozen business while maintaining
momentum for our other brands."
(All comparisons above are to the first
quarter 2014 |
|
*Please see the tabular reconciliation of
financial measures prepared in accordance with United States
generally accepted accounting principles ("GAAP") to non-GAAP
financial measures included at the end of this press release for
the definition and information concerning certain items affecting
comparability and reconciliations of the non-GAAP term EBITDA,
Adjusted EBITDA, adjusted net income and adjusted diluted earnings
per share, to the most comparable GAAP financial measures. |
First Quarter Fiscal 2015
Net revenues increased 15.0% to $77.6 million, compared to $67.5
million in the prior year period. The increase in net revenues was
due to a 17.6% increase in frozen segment net revenues and a 10.1%
increase in snack segment net revenues.
Gross profit was $(3.7) million, compared to gross profit of
$11.6 million in the prior year period. The Company recorded $15.3
million of additional charges to cost of revenues in the first
quarter of 2015 related to the product recall, outlined in
additional detail below. Excluding the product recall*, gross
profit was $11.6 million and as a percent of net revenues decreased
220 basis points to 14.9% compared to 17.1% in the prior year. This
decline is primarily due to planned slotting and promotional
expenses, as well as increased freight costs and a shift in product
and channel mix.
Selling, general and administrative expenses ("SG&A") was
$9.2 million, compared to $8.4 million in the prior year period.
The Company recorded $0.2 million of additional reserves for
accounts receivable associated with the product recall in the first
quarter of 2015. Excluding the product recall*, SG&A
increased $0.5 million, or 6.2%, to $8.9 million, primarily due to
increased marketing spend. Excluding the product recall, as a
percentage of net revenues, SG&A decreased 90 basis points to
11.5%, compared to 12.4% in the prior year period. During the
quarter the Company also recorded an impairment of $9.3 million
associated with the Fresh Frozen customer relationship intangible
asset based on cash flows that include the cost of the recent
recall.
Net loss was $14.6 million, or $0.75 diluted loss per share,
compared to net income of $1.6 million, or $0.08 diluted earnings
per share. The Company recorded product recall charges of $9.9
million, net of tax, or $0.51 diluted earnings per share, and an
intangible asset impairment charge of $5.9 million, net of tax, or
$0.30 diluted earnings per share in the first quarter of 2015.
Excluding the impact of the product recall*, net income was
$1.2 million, or $0.06 diluted earnings per share for the first
quarter of 2015. Net income in the first quarter of 2015
includes approximately $1.5 million, or $0.05 per diluted share, in
planned incremental slotting and promotional trade spend
investments.
Adjusted EBITDA was $4.6 million, compared to EBITDA of $5.1
million in the prior year period.
Segment Review
The Company has two reportable segments: frozen and snack. The
frozen product segment includes frozen fruits, vegetables and
beverages, for sale primarily to groceries, club stores and mass
merchandisers. The snack segment includes manufactured potato
chips, kettle chips, potato crisps, potato skins, pellet snacks,
sheeted dough products, cereal and extruded product for sale
primarily to snack food distributors and retailers.
Frozen Segment: Net revenues during the first
quarter increased 17.6% to $51.3 million, compared to $43.7 million
in the prior year period. Gross profit was $(7.5) million, compared
to a gross profit of $7.8 million in the prior year period.
Excluding the impact of the product recall*, gross profit of $7.8
million was comparable to the prior year period, and decreased as a
percentage of net revenues 290 basis points to 15.1% compared to
the prior year period, primarily as a result of the increased
slotting and promotional trade spend investments as well as
increased freight cost.
Snack Segment: Net revenues during the first
quarter increased 10.1% to $26.3 million, compared to $23.9 million
in the prior year period. Gross profit increased $0.1
million, or 1.9%, to $3.8 million, compared to $3.7 million in the
prior year period. As a percentage of net revenues, first quarter
gross profit decreased 120 basis points to 14.4% compared to the
prior year period primarily as a result of product sales and
channel mix and higher freight cost.
Mr. McDaniel concluded, "We are pleased with our volume growth
in both our Frozen and Snack segments for the first quarter. For
the remainder of 2015, our team will work diligently to rebuild
distribution of our Fresh Frozen products and will be intently
focused on our opportunities for operational and financial
improvement as we work to better position our business to produce
results that are more consistent with our track record of
growth."
Product Recall
On April 23, 2015, the Company announced a voluntary product
recall for certain of its Fresh Frozen™ line of frozen vegetables,
and certain of its Jamba® "At Home" line of smoothie kits, because
the Jefferson, Georgia facility tested positive for Listeria
monocytogenes. The product recall expenses recorded in our
consolidated statement of operations include valuation and
liability estimates as of the end of the quarter and do not include
estimated lost sales. These costs for the quarter ended March
28, 2015 are summarized as follows (in thousands):
|
Increase /
(Decrease) |
Net revenues |
$ -- |
Cost of revenues |
15,260 |
Gross profit |
(15,260) |
Operating expenses: |
|
Selling, general & administrative
expenses |
233 |
Impairment of intangible asset |
9,277 |
Operating income |
(24,770) |
Interest expense, net |
-- |
Income before income taxes |
(24,770) |
Income tax benefit |
8,882 |
Net income |
$ (15,888) |
In connection with the recall, the Company temporarily suspended
production and distribution of the recalled products. While
it is too soon to reliably estimate the impact of this recall on
the Company's future sales of the Fresh FrozenTM brand and the
Jamba® "At Home" line of smoothie kits, net revenues of the
products affected by the recall are expected to be reduced for the
second fiscal quarter of 2015 and potentially subsequent
periods.
No potential insurance recovery related to the product recall
has been recorded in the first quarter of 2015.
Conference Call
The Company will hold an investor conference call today,
Thursday, May 7, 2015, at 11:00 a.m. Eastern time. To participate
on the live call listeners in North America may dial (877) 853-7702
and international listeners may dial (408) 940-3848; the conference
ID is 42731283. In addition, the call will be broadcast live over
the Internet hosted at the "Investor Relations" section of the
Company's website at www.inventurefoods.com and will be archived
online for one year.
About Inventure Foods
With manufacturing facilities in Arizona, Indiana, Washington,
Oregon, Georgia and Florida, Inventure Foods, Inc. (SNAK) is a
marketer and manufacturer of specialty food brands in
better-for-you and indulgent categories under a variety of Company
owned and licensed brand names, including Boulder Canyon Authentic
Foods®, Jamba®, Seattle's Best Coffee®, Rader Farms®, T.G.I.
Friday's®, Nathan's Famous®, Vidalia Brands®, Poore Brothers®, Tato
Skins®, Willamette Valley Fruit CompanyTM, Fresh FrozenTM, Bob's
Texas Style® and Sin In A Tin®. For further information about
Inventure Foods, please visit www.inventurefoods.com.
Contact
Katie Turner, ICR (646) 277-1200
Note Regarding Forward-looking Statements
This press release contains forward-looking statements,
including, but not limited to, our expectations regarding
delivering improved financial results and operating margin in
fiscal 2014, the ability to strengthen our core brand portfolios
and expand our health/natural product portfolios, the ability to
capitalize on our growth opportunities in the better-for-you and
snack food categories and to generate long-term sustainable growth
for stockholders, and the ability to achieve a record performance
in 2014 and capitalize on our growth opportunities. Because such
statements include risks and uncertainties, actual results may
differ materially from those expressed or implied by such
forward-looking statements. Factors that may cause actual results
to differ from the forward-looking statements contained in this
press release and that may affect the Company's prospects in
general include, but are not limited to, general economic
conditions, increases in cost or availability of ingredients,
packaging, energy and employees, price competition and industry
consolidation, ability to execute strategic initiatives, product
recalls or safety concerns, disruptions of supply chain or
information technology systems, customer acceptance of new products
and changes in consumer preferences, food industry and regulatory
factors, interest rate risks, dependence upon major customers,
dependence upon existing and future license agreements, the
possibility that we will need additional financing due to future
operating losses or in order to implement the Company's business
strategy, acquisition and divestiture-related risks, the volatility
of the market price of the Company's common stock, and such other
factors as are described from time to time in the Company's filings
with the Securities and Exchange Commission. All
forward−looking statements are based on information available to
the Company as of the date of this news release, and the Company
assumes no obligation to update such statements.
|
|
INVENTURE FOODS, INC.
AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS (in thousands, except per share
data) (unaudited) |
|
|
|
Quarter
Ended |
|
March 28,
2015 |
March 29,
2014 |
Net revenues |
$ 77,607 |
$ 67,509 |
Cost of revenues |
81,307 |
55,946 |
Gross profit |
(3,700) |
11,563 |
Operating expenses: |
|
|
Selling, general & administrative
expenses |
9,152 |
8,398 |
Impairment of intangible asset |
9,277 |
-- |
Operating income (loss) |
(22,129) |
3,165 |
Non-operating expense: |
|
|
Interest expense, net |
730 |
670 |
Income (loss) before income taxes |
(22,859) |
2,495 |
Income tax benefit (expense) |
8,224 |
(898) |
Net income (loss) |
$ (14,635) |
$ 1,597 |
|
|
|
Earnings (loss) per common share: |
|
|
Basic |
$ (0.75) |
$ 0.08 |
Diluted |
$ (0.75) |
$ 0.08 |
Weighted average number of common
shares: |
|
|
Basic |
19,581 |
19,437 |
Diluted |
19,581 |
19,924 |
INVENTURE FOODS, INC.
AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE
SHEETS (in thousands)
(unaudited) |
|
|
|
|
March 28,
2015 |
December 27,
2014 |
Assets |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$ 920 |
$ 495 |
Accounts receivable, net |
26,128 |
22,420 |
Inventories |
56,724 |
65,216 |
Deferred income tax asset |
1,224 |
1,228 |
Other current assets |
12,671 |
1,220 |
Total current assets |
97,667 |
90,579 |
|
|
|
Property and equipment, net |
55,799 |
55,200 |
Goodwill |
23,286 |
23,286 |
Trademarks and other intangibles, net |
14,965 |
24,543 |
Other assets |
1,506 |
1,702 |
Total assets |
$ 193,223 |
$ 195,310 |
|
|
|
Liabilities and Stockholders'
Equity |
|
|
Current liabilities: |
|
|
Accounts payable |
$ 18,701 |
$ 15,533 |
Accrued liabilities |
23,036 |
12,978 |
Current portion of long-term debt |
7,281 |
7,041 |
Total current liabilities |
49,018 |
35,552 |
|
|
|
Long-term debt, less current portion |
57,296 |
59,218 |
Line of credit |
20,077 |
18,802 |
Deferred income tax liability |
6,874 |
6,869 |
Interest rate swaps |
326 |
349 |
Other liabilities |
2,109 |
2,554 |
Total liabilities |
135,700 |
123,344 |
|
|
|
Stockholders' equity: |
|
|
Common stock |
199 |
200 |
Additional paid-in capital |
33,278 |
33,100 |
Accumulated other comprehensive loss |
(119) |
(134) |
Retained earnings |
24,636 |
39,271 |
|
57,994 |
72,437 |
Less: treasury stock |
(471) |
(471) |
Total stockholders' equity |
57,523 |
71,966 |
Total liabilities and stockholders'
equity |
$ 193,223 |
$ 195,310 |
INVENTURE FOODS, INC.
AND SUBSIDIARIES RECONCILIATION OF EBITDA AND
ADJUSTED EBITDA (in thousands)
(unaudited) |
|
|
|
Quarter Ended |
|
March 28,
2015 |
March 29,
2014 |
Reconciliation – EBITDA(1): |
|
|
Reported net income (loss) |
$ (14,635) |
$ 1,597 |
Add back: Interest, net |
730 |
670 |
Add back: Income tax (benefit)
expense |
(8,224) |
898 |
Add back: Depreciation |
1,701 |
1,616 |
Add back: Amortization of intangible
assets |
301 |
301 |
EBITDA(1) |
$ (20,127) |
$ 5,082 |
Adjustments: |
|
|
Add back: Product recall charges |
15,493 |
-- |
Add back: Impairment of intangible
asset |
9,277 |
-- |
ADJUSTED EBITDA(1) |
$ 4,643 |
$ 5,082 |
|
|
INVENTURE FOODS, INC.
AND SUBSIDIARIES ITEMS AFFECTING COMPARABILITY –
RECONCILIATION OF ADJUSTED INFORMATION TO GAAP INFORMATION
(in thousands) (unaudited) |
|
|
|
Quarter
Ended |
|
March 28,
2015 |
March
29, 2014 |
Reported net income (loss) |
$ (14,635) |
$ 1,597 |
Product recall charges, net of tax |
9,919 |
-- |
Impairment of intangible asset, net of
tax |
5,939 |
-- |
Adjusted net income(2) |
$ 1,223 |
$ 1,597 |
Adjusted diluted shares outstanding |
20,002 |
19,924 |
Adjusted diluted earnings per
share(2) |
$ 0.06 |
$ 0.08 |
(1) EBITDA is defined as net income, net of taxes, interest
expense, income taxes, depreciation and amortization. We further
adjust EBITDA to exclude the charges related to the product recall
and the intangible asset impairment which are believed to be
nonrecurring items and not reflective of our core business to
arrive at adjusted EBITDA. The GAAP financial measure that is most
directly comparable to EBITDA is net cash provided by operating
activities. We present adjusted EBITDA because we believe it
provides useful information regarding our ability to meet our
future debt payment requirements, capital expenditures and working
capital requirements and it provides an overall evaluation of our
financial condition. We include adjusted EBITDA in this earnings
announcement to provide transparency to investors and to assist
investors in comparing our performance across reporting periods on
a consistent basis by excluding items that we do not believe are
indicative of our core operating performance. Adjusted EBITDA
has certain inherent limitations as an analytical tool and should
not be used in isolation or as a substitute for net income, cash
flows, or other consolidated income or cash flow data prepared in
accordance with GAAP or as a measure of our profitability or our
liquidity. Further, EBITDA may not be comparable to similarly
titled measures used by other companies.
(2) Adjusted net income (loss) and adjusted diluted
earnings per share permit a comparative assessment of our net
income and diluted earnings per share by excluding the product
recall and the intangible asset impairment to make a more
meaningful comparison of our operating performance.
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