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8-K - 8-K - INVENTURE FOODS, INC.a15-11030_18k.htm

Exhibit 99.1

 

 

Inventure Foods Reports First Quarter 2015 Financial Results

 

First Quarter Revenues Increased 15.0% to $77.6 Million

 

PHOENIX, May 7, 2015 (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 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.

 

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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

)

 

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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 25597406. 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.

 

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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

 

 

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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

 

 

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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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