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8-K - 8-K - INVENTURE FOODS, INC.a14-23326_18k.htm

Exhibit 99.1

 

GRAPHIC

 

Inventure Foods Reports Third Quarter 2014 Results

 

Third Quarter Healthy/Natural Products Revenues Increased 70.1%

 

PHOENIX, October 30, 2014 (GLOBE NEWSWIRE) — Inventure Foods, Inc. (NASDAQ: SNAK) (“Inventure Foods”, or the “Company”), a leading specialty food marketer and manufacturer, today reported financial results for the third quarter and nine months ended September 27, 2014.

 

Third Quarter Fiscal 2014 Highlights

 

·                  Net revenues increased 33.1% to $72.6 million.

·                  Adjusted EBITDA* increased 13.0% to $5.9 million.

·                  Diluted earnings per share was $0.15, or $0.11 adjusted diluted earnings per share*.

 

Year-to-Date Fiscal 2014 Highlights

 

·                  Net revenues increased 35.2% to $211.9 million.

·                  Adjusted EBITDA* increased 42.2% to $16.9 million.

·                  Diluted earnings per share was $0.36, or $0.30 adjusted diluted earnings per share*.

 

“Our strong double digit revenue growth underscores the continued demand for our products driven by 90.8% growth of our Boulder Canyon brand, 12.4% growth in frozen berries, 52.9% growth in snack private label, 30.8% increase in frozen beverage and the addition of our Fresh Frozen Foods business,” said Terry McDaniel, Chief Executive Officer of Inventure Foods. “We continued to execute our strategic initiatives in the quarter with our healthy/natural product line up 70.1%, which now represents over 84.3% of our business.  These results and the continued execution of our strategic initiatives helped us to deliver another quarter of profitability.”

 

(All comparisons above are to the third quarter and first nine fiscal months of 2013)

 


*Please see the tabular reconciliations 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 terms EBITDA, Adjusted EBITDA, adjusted net income and adjusted diluted earnings per share to the most comparable GAAP financial measures.

 

Third Quarter Fiscal 2014 compared to Third Quarter Fiscal 2013

 

Consolidated net revenues increased 33.1% to $72.6 million, compared to $54.5 million in the prior year period. The increase in net revenues was due to a 70.1% increase in our healthy/natural product portfolio, partially offset by a $3.5 million reduction in our Co-Pack business as a result of a ramp up for a product launch in the prior year and the Company’s decision to discontinue approximately $1.5 million in lower margin sales. Gross profit as a percent of net revenues decreased 60 basis points to 17.8%, compared to 18.4% in the prior year. This decrease is primarily due to the use of lower margin purchased frozen berries compared to the use of the Company’s higher margin grown berries in the prior year as a result of the timing of purchases.  The decrease in gross margin was partially offset by a 500 basis point margin improvement in the Company’s snack segment as a result of improved product and channel mix with a stronger emphasis on higher margin branded products.

 

Selling, general and administrative (“SG&A”) expenses included a number of adjustments including the reversal of the Fresh Frozen Foods contingent consideration liability, estimated Jamba litigation settlement cost and fees associated with our recent public offering. The net impact of these items reduced SG&A expenses by $1.4 million.  Excluding the impact of these items, SG&A expenses increased $2.6 million, or 39.9%, to $8.9 million,

 

Inventure Foods, Inc.    5415 E. High Street, Suite 350    Phoenix, AZ 85054    (623) 932-6200    Fax (602) 522-2690

 

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compared to $6.4 million in the prior year period. As a percentage of net revenues, SG&A expenses, excluding the aforementioned items, increased 60 basis points to 12.3%, compared to 11.7% in the prior year period.  The increase in SG&A expenses was primarily due to a $0.3 million, which equates to $0.01 per diluted share, increase in health insurance costs under our partially self-insured plan and as a result of reinvesting a portion of earnings back into the business to support future growth.

 

Net income was $3.1 million, or $0.15 diluted earnings per share for the third quarter of 2014. Excluding the aforementioned items, adjusted net income was $2.2 million, or $0.11 adjusted diluted earnings per share, for the third quarter of 2014, compared to $2.1 million, or $0.11 diluted earnings per share, for the third quarter of 2013.  As previously disclosed, due to primarily using lower margin purchased frozen berries in the third quarter of 2014, the Company expects a shift in earnings of approximately $0.06 per diluted share from the third quarter to the fourth quarter of 2014.  Adjusted EBITDA increased 13.0% to $5.9 million compared to $5.2 million.

 

Year to Date Fiscal 2014 compared to Year to Date Fiscal 2013

 

Consolidated net revenues for the nine months ended September 27, 2014 increased 35.2% to $211.9 million, compared to $156.7 million in the prior year period.  Gross profit increased 35.4% to $37.9 million, compared to $28.0 million in the prior year period and as a percentage of net revenues was 17.9% for the current and prior year.  For the first nine months of 2014 net income was $7.2 million and fully diluted earnings per share was $0.36.  Excluding the aforementioned items, adjusted net income increased 28.4% to $5.9 million compared to net income of $4.6 million in the prior year.  Adjusted diluted earnings per share was $0.30, versus $0.23 during the same period in 2013.  Adjusted EBITDA increased 42.2% to $16.9 million compared to $11.9 million.

 

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 third quarter of 2014 increased 67.8% to $46.1 million, compared to $27.5 million in the prior year period. Gross profit increased $1.6 million, or 26.1%, to $7.8 million in the third quarter of 2014, compared to $6.2 million in the prior year period. As a percentage of net revenues, gross profit decreased 560 basis points to 17.0% during the third quarter of 2014.

 

Net revenues for the first nine months increased 63.2% to $133.9 million in 2014, compared to $82.0 million in the prior year period. Gross profit increased $7.2 million, or 45.9% to $22.8 million in the first nine months of 2014, compared to $15.6 million in the prior year period.

 

Snack Segment: Net revenues during the third quarter decreased 2.2% to $26.4 million, compared to $27.0 million in the prior year period, due to a $3.5 million reduction in our Co-Pack business as a result of a prior year product launch and the Company’s decision to discontinue approximately $1.5 million in lower margin sales.  Excluding the reduction in our Co-Pack business and the discontinued lower margin sales, net revenues of the snack segment increased 21.1% during the third quarter of 2014.  Gross profit increased $1.2 million, or 32.5%, to $5.1 million during the third quarter of 2014, compared to $3.8 million in the prior year period.  As a percentage of net revenues, gross profit increased 500 basis points to 19.2% during the third quarter of 2014.

 

Net revenues for the nine months increased 4.4% to $78.0 million, compared to $74.7 million in the prior year period. Gross profit increased $2.8 million, or 22.2%, to $15.2 million during the first nine months of 2014, compared to $12.4 million in the prior year period.

 

Mr. McDaniel concluded, “We are pleased with our ability to generate solid top-line growth across our product portfolio. While snack segment sales decreased slightly versus the prior year, importantly, our gross margin increased an impressive 500 basis points to 19.2% and we expect to continue to realize margin improvements as we maintain our focus on better positioning our business for long-term growth.

 

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Going forward, our team remains committed to our ongoing strategic initiatives to expand EBITDA growth through strong sales growth, margin enhancements and leveraging the capabilities of our acquired businesses. These strategies have already proven to have a positive impact and over time we believe they will enable us to further streamline our business in order to deliver consistent returns to our shareholders.”

 

Conference Call

 

The Company will hold an investor conference call today, Thursday, October 30, 2014, 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. 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 and Georgia, 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 Natural 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 and Bob’s Texas Style®. For further information about Inventure Foods, please visit www.inventurefoods.com.

 

Contact
John Mills/Katie Turner, ICR (646) 277-1200

 

Note Regarding Forward-looking Statements

 

This press release contains forward-looking statements, including, but not limited to, our ability to improve business profitability to support our future growth, execute our ongoing initiative to generate healthy EBITDA growth through a focus on strong sales growth, enhancing margins and leveraging the capabilities of our acquired businesses, expand our distribution and further explore new product categories, execute our strategic initiatives to further strengthen our brand portfolios, expand our margin profile and increase profitability long-term. 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.

 

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INVENTURE FOODS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

(unaudited)

 

 

 

Quarter Ended

 

Nine Months Ended

 

 

 

September 27,
2014

 

September 28,
2013

 

September 27,
2014

 

September 28,
2013

 

Net revenues

 

$

72,556

 

$

54,514

 

$

211,917

 

$

156,728

 

Cost of revenues

 

59,630

 

44,458

 

173,972

 

128,711

 

Gross profit

 

12,926

 

10,056

 

37,945

 

28,017

 

Selling, general & administrative expenses

 

7,570

 

6,395

 

24,992

 

20,241

 

Operating income

 

5,356

 

3,661

 

12,953

 

7,776

 

Interest expense, net

 

646

 

250

 

1,900

 

641

 

Income before income taxes

 

4,710

 

3,411

 

11,053

 

7,135

 

Income tax provision

 

1,626

 

1,263

 

3,900

 

2,524

 

Net income

 

$

3,084

 

$

2,148

 

$

7,153

 

$

4,611

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.16

 

$

0.11

 

$

0.37

 

$

0.24

 

Diluted

 

$

0.15

 

$

0.11

 

$

0.36

 

$

0.23

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares:

 

 

 

 

 

 

 

 

 

Basic

 

19,530

 

19,473

 

19,478

 

19,329

 

Diluted

 

20,014

 

19,843

 

19,966

 

19,746

 

 

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INVENTURE FOODS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

 

 

September 27,
 2014

 

December 28,
 2013

 

 

 

(unaudited)

 

 

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

769

 

$

910

 

Accounts receivable, net allowance

 

25,971

 

23,618

 

Inventories

 

70,511

 

43,086

 

Deferred income tax asset

 

724

 

755

 

Other current assets

 

1,479

 

1,223

 

Total current assets

 

99,454

 

69,592

 

 

 

 

 

 

 

Property and equipment, net

 

55,888

 

50,140

 

Goodwill

 

23,064

 

23,064

 

Trademarks and other intangibles, net

 

24,721

 

25,624

 

Other assets

 

1,632

 

1,671

 

Total assets

 

$

204,759

 

$

170,091

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

18,719

 

$

19,380

 

Accrued liabilities

 

22,279

 

10,121

 

Current portion of long-term debt

 

6,998

 

6,110

 

Total current liabilities

 

47,996

 

35,611

 

 

 

 

 

 

 

Long-term debt, less current portion

 

60,851

 

61,865

 

Line of credit

 

20,718

 

3,223

 

Deferred income tax liability

 

4,215

 

4,188

 

Interest rate swaps

 

377

 

526

 

Other liabilities

 

2,760

 

5,525

 

Total liabilities

 

136,917

 

110,938

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

Common stock

 

199

 

198

 

Additional paid-in capital

 

32,405

 

30,960

 

Accumulated other comprehensive loss

 

(154

)

(244

)

Retained earnings

 

35,863

 

28,710

 

 

 

68,313

 

59,624

 

 

 

 

 

 

 

Less: treasury stock

 

(471

)

(471

)

Total shareholders’ equity

 

67,842

 

59,153

 

Total liabilities and shareholders’ equity

 

$

204,759

 

$

170,091

 

 

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INVENTURE FOODS, INC. AND SUBSIDIARIES

RECONCILIATION OF EBITDA AND ADJUSTED EBITDA

(in thousands)

(unaudited)

 

 

 

Quarter Ended

 

Nine Months Ended

 

 

 

September 27,
2014

 

September 28,
2013

 

September 27,
2014

 

September 28,
2013

 

Reconciliation — EBITDA (1):

 

 

 

 

 

 

 

 

 

Reported net income

 

$

3,084

 

$

2,148

 

$

7,153

 

$

4,611

 

Add back: Interest, net

 

646

 

250

 

1,900

 

641

 

Add back: Income tax provision

 

1,626

 

1,263

 

3,900

 

2,524

 

Add back: Depreciation

 

1,621

 

1,478

 

4,942

 

4,023

 

Add back: Amortization of intangible assets

 

301

 

83

 

903

 

88

 

EBITDA(1)

 

$

7,278

 

$

5,222

 

$

18,798

 

$

11,887

 

Adjustments:

 

 

 

 

 

 

 

 

 

Subtract: Fresh Frozen contingent consideration

 

(2,137

)

 

(2,653

)

 

Add back: Jamba litigation settlement

 

435

 

 

435

 

 

Add back: Offering costs

 

326

 

 

326

 

 

Adjusted EBITDA(1)

 

$

5,902

 

$

5,222

 

$

16,906

 

$

11,887

 

 

INVENTURE FOODS, INC. AND SUBSIDIARIES

ITEMS AFFECTING COMPARABILITY — RECONCILIATION OF ADJUSTED INFORMATION TO GAAP INFORMATION

(in thousands)

(unaudited)

 

 

 

Quarter Ended

 

Nine Months Ended

 

 

 

September 27,
2014

 

September 28,
2013

 

September 27,
2014

 

September 28,
2013

 

Reported net income

 

$

3,084

 

$

2,148

 

$

7,153

 

$

4,611

 

Fresh Frozen contingent consideration adjustment, net of tax

 

(1,399

)

 

(1,717

)

 

Jamba litigation settlement, net of tax

 

285

 

 

285

 

 

Offering costs, net of tax

 

213

 

 

213

 

 

Adjusted net income(2)

 

$

2,183

 

$

2,148

 

$

5,934

 

$

4,611

 

Adjusted diluted earnings per share(2)

 

$

0.11

 

$

0.11

 

$

0.30

 

$

0.23

 

 


(1)  EBITDA is defined as net income, net of taxes, interest expense, income taxes, depreciation and amortization. We further adjust EBITDA to exclude the Fresh Frozen Foods contingent consideration adjustment, the estimated Jamba litigation settlement and offering expenses which are not related to 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 and adjusted diluted earnings per share permit a comparative assessment of our SG&A expenses, net income and diluted earnings per share by excluding the Fresh Frozen Foods contingent consideration adjustment, the estimated Jamba litigation settlement and offering expenses to make a more meaningful comparison of our operating performance.

 

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