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 24, 2016.
Third Quarter 2016
Highlights:
- Boulder Canyon net revenues increased 8.6%
- Jamba net revenues increased 8.6%
- Rader Farms branded net revenues increased 37.2%
- Snack products segment gross margin increased 300 basis points
to 17.7%
(All comparisons above are to the third quarter
of fiscal 2015)
“Although our business continued to face certain
challenges, our efforts to drive improvement across key areas of
our business resulted in increased revenues for our Boulder Canyon,
Jamba, and Rader Farms brands,” said Terry McDaniel, Chief
Executive Officer of Inventure Foods. “Additionally, we achieved
margin expansion of approximately 300 basis points in the Snack
products segment, as a result of the strategic investments we made
to increase kettle capacity at our Bluffton, Indiana facility to
meet strong consumer demand.”
Mr. McDaniel continued, “Our management team continues to
evaluate opportunities for growth, increased productivity,
operational improvements, and in turn profitability expansion. Our
team remains focused on expanding distribution of our frozen and
snack product portfolios to drive sales, strengthen our business,
and drive long-term value creation for our shareholders.”
Third Quarter Fiscal 2016
Consolidated net revenues decreased 4.8% to
$66.5 million, compared to $69.9 million in the third quarter of
the prior year. Frozen products segment net revenues decreased 6.2%
and snack products segment net revenues decreased 2.8%, which is
discussed further under “Segment Review” below.
Gross profit was $7.9 million, compared to $8.7
million in the third quarter of 2015. This decrease in gross
profit was attributable to a $1.5 million decrease in the frozen
products segment, partially offset by an increase of $0.7 million
in the snack products segment, which is discussed further under
“Segment Review” below.
Selling, general and administrative (“SG&A”) expenses were
$9.2 million for the third quarter of 2016. Excluding the
$0.6 million of product recall expenses recorded in SG&A in the
third quarter of 2015, adjusted SG&A expenses* increased $0.6
million and as a percentage of net revenues increased 140 basis
points to 13.8% compared to 12.4% in the third quarter of 2015 as a
result of increased legal fees associated with the Company’s
previously announced strategic and financial review and other legal
matters.
Interest expense was $2.4 million for the third
quarter of 2016, an increase of $0.6 million, compared to $1.7
million in the prior-year period as a result of increased
borrowings and higher interest rates.
Net loss was $(2.6) million, or $(0.13) loss per share, for the
third quarter of 2016, compared to net loss of $(1.7) million, or
$(0.09) loss per share, for the prior-year period. Excluding
the costs associated with the product recall in 2015, adjusted net
loss* was $(1.0) million, or $(0.05) adjusted diluted loss per
share*, in the third quarter of 2015.
EBITDA* for the third quarter of 2016 was $0.6
million, compared to adjusted EBITDA* of $2.4 million for the third
quarter of 2015. EBITDA for the third quarter of 2015 was
adjusted to exclude product recall expenses, net of insurance
recoveries, of $1.0 million.
Year-to-Date Fiscal 2016
Consolidated net revenues decreased 3.9% to
$205.6 million for the nine months ended September 24, 2016,
compared to $213.9 million in the prior-year period. Frozen
products segment net revenues decreased 1.6% and snack products
segment net revenues decreased 7.1%.
Net loss was $(3.9) million, or $(0.20) diluted
loss per share, for the first nine months of 2016, compared to net
loss of $(18.3) million, or $(0.94) diluted loss per share, in the
prior-year period. Excluding the costs of the product recall
and the impairment of an intangible asset, adjusted net loss* was
$(0.1) million, or $(0.00) adjusted diluted earnings per share*,
for the first nine months of 2015.
EBITDA* was $6.7 million for the first nine
months of 2016, compared to adjusted EBITDA* of $9.0 million in the
prior-year period. Adjusted net loss* and adjusted EBITDA*
for the first nine months of 2015 was adjusted to exclude product
recall expenses, net of insurance recoveries, of $18.9 million,
pre-tax, and an intangible asset impairment of $9.3 million,
pre-tax.
Segment Review
The Company has two reportable segments: frozen products and
snack products. The frozen products segment includes frozen fruits,
vegetables, beverages and desserts, for sale primarily to grocery
stores, club stores and mass merchandisers. The snack products
segment includes manufactured potato chips, kettle chips, potato
crisps, potato skins, pellet snacks, sheeted dough products,
popcorn and extruded product for sale primarily to snack food
distributors and retailers.
Frozen Products Segment: Net revenues for the
third quarter of 2016 decreased 6.2% to $37.9 million, compared to
$40.5 million in the prior-year period. This decrease was
driven by lower revenues for the Company’s most significant frozen
berry product due to reduced sales distribution and a market price
decrease, which was partially offset by increased net revenues for
frozen vegetables and branded frozen fruit as compared to the
prior-year period. For the third quarter of 2016, gross
profit was $2.9 million, compared to $4.4 million in the prior-year
period. For the third quarter of 2016, adjusted frozen
products segment gross profit* was $2.9 million compared to $4.8
million, and as a percentage of net revenues decreased 430 basis
points to 7.6% compared to 11.9%, excluding $0.4 million of product
recall expenses, net of insurance recoveries, recorded in cost of
revenues in the third quarter of 2015. This decrease in gross
margin was primarily driven by the Company’s frozen fruit products
as a result of packing higher priced purchased fruit remaining from
2015 purchase commitments, as well as sales pricing pressure
attributable to decreasing market prices as compared to the
prior-year period. The frozen products segment gross margin decline
was also due to incremental costs incurred in our Fresh Frozen
business to enhance product testing and improve manufacturing
operations implemented throughout the second half of
2015.
Net revenues during the nine months ended September 24, 2016
were $124.7 million, a decrease of 1.6%, from $126.7 million in the
prior-year period, primarily as a result of lower revenues for the
Company’s most significant frozen berry product due to reduced
sales distribution and a market price decrease, which was
partially offset by increased net revenues for frozen vegetables
and branded frozen fruit as compared to the prior-year period.
For the nine months ended September 24, 2016, gross profit
was $12.0 million compared to $(0.5) million in the prior-year
period. For the first nine months of 2016, adjusted frozen
products segment gross profit* was $12.0 million compared to $16.3
million, and as a percentage of net revenues decreased to 9.7%
compared to 12.9% in the prior year, excluding $16.8 million of
product recall expenses, net of insurance recoveries, recorded in
cost of revenues in the first nine months of 2015. This decrease in
frozen products segment gross margin was attributable to
incremental costs incurred in the Fresh Frozen business to enhance
product testing and improve manufacturing operations, as well as
pricing pressure for the Company’s frozen fruit products
attributable to decreasing market prices as compared to the
prior-year period.
Snack Products Segment: Net revenues during the
third quarter of 2016 decreased 2.8% to $28.6 million, compared to
$29.4 million in the prior-year period, primarily driven by a
decline in production of products for third parties and increased
trade promotional investments to support future growth, partially
offset by increased Boulder Canyon net revenues. For the
third quarter of 2016, gross profit was $5.1 million compared to
$4.3 million, and as a percentage of net revenues increased 300
basis points to 17.7%, compared to 14.7% in prior-year period,
primarily due to increased capacity eliminating the need for
co-packers used in the prior year to supplement production.
The increased capacity also allows for improved efficiency and
overhead absorption. The snack products segment gross margin was
also negatively affected by product and sales channel mix.
Net revenues during the nine months ended September 24, 2016
were $81.0 million, a 7.1% decrease from $87.2 million in the
prior-year period. This decrease was driven by a decline in
production of product for third parties and license brand net
revenues, partially offset by a slight increase in Boulder Canyon
net revenues. Gross profit for the nine months ended
September 24, 2016 was $15.0 million, compared to $13.5 million in
the prior-year period, and as a percentage of net revenues
increased 300 basis points to 18.5% compared to 15.5% in the
prior-year period, primarily due to increased capacity eliminating
the need for co-packers used in the prior year to supplement
production. The increased capacity also allowed for improved
efficiency and overhead absorption. The snack products segment
gross margin was also negatively affected by product and sales
channel mix.
*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.
Strategic and Financial ReviewOn July 27, 2016,
Inventure Foods announced that the Company and its Board of
Directors will conduct a strategic and financial review with the
objective to increase shareholder value. This review will include a
thorough evaluation of the Company's current operating plan and may
result in the Company continuing to pursue value enhancing
initiatives as a standalone company, capital structure
optimization, a sale of the Company, a sale of certain assets of
the Company or other business combination. A committee of three
independent directors has been established to oversee the review.
There can be no assurance that this strategic and financial review
will result in any specific action, or any assurance as to its
outcome or timing. The Company does not intend to comment further
regarding the strategic and financial review until the Board of
Directors approves a specific action or concludes its review.
Conference CallThe Company will
hold an investor conference call today, Wednesday, November 2,
2016, at 11:00 a.m. ET. 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 94529882.
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 FoodsWith manufacturing
facilities in Arizona, Indiana, Washington, Oregon and Georgia,
Inventure Foods, Inc. (Nasdaq: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 Foods™, Jamba®, Seattle's Best Coffee®,
Rader Farms®, TGI Fridays™, Nathan's Famous®, Vidalia Brands®,
Poore Brothers®, Tato Skins®, Willamette Valley Fruit Company™,
Fresh Frozen™, Bob's Texas Style® and Sin In A Tin™. For further
information about Inventure Foods, please visit
www.inventurefoods.com.
Note Regarding Forward-looking Statements
This press release contains forward-looking
statements, including, but not limited to, the Company’s ability to
drive improvement across key areas of its business to improve
financial performance, evaluate opportunities for growth, increased
productivity, operational improvements, and profitability
expansion, and expand distribution of its frozen and snack product
portfolios to drive sales and long-term value creation for its
shareholders and strengthen the business. 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 the Company 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) |
|
|
|
|
Quarters Ended |
|
Nine
Months Ended |
|
|
September 24,
2016 |
|
September 26, 2015
|
|
September 24, 2016
|
|
September 26,
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenues |
$ |
66,529 |
|
|
$ |
69,865 |
|
|
$ |
205,647 |
|
|
$ |
213,894 |
|
|
Cost of revenues |
|
58,605 |
|
|
|
61,165 |
|
|
|
178,639 |
|
|
|
200,869 |
|
|
Gross profit |
|
7,924 |
|
|
|
8,700 |
|
|
|
27,008 |
|
|
|
13,025 |
|
|
Selling, general &
administrative expenses |
|
9,190 |
|
|
|
9,233 |
|
|
|
25,792 |
|
|
|
28,602 |
|
|
Impairment of intangible
asset |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
9,277 |
|
|
Operating income
(loss) |
|
(1,266 |
) |
|
|
(533 |
) |
|
|
1,216 |
|
|
|
(24,854 |
) |
|
Interest expense, net |
|
2,387 |
|
|
|
1,742 |
|
|
|
7,063 |
|
|
|
3,400 |
|
|
Loss before income
taxes |
|
(3,653 |
) |
|
|
(2,275 |
) |
|
|
(5,847 |
) |
|
|
(28,254 |
) |
|
Income tax benefit |
|
(1,089 |
) |
|
|
(538 |
) |
|
|
(1,987 |
) |
|
|
(9,931 |
) |
|
Net loss |
$ |
(2,564 |
) |
|
$ |
(1,737 |
) |
|
$ |
(3,860 |
) |
|
$ |
(18,323 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common
share: |
|
|
|
|
|
Basic |
$ |
(0.13 |
) |
|
$ |
(0.09 |
) |
|
$ |
(0.20 |
) |
|
$ |
(0.94 |
) |
|
Diluted |
$ |
(0.13 |
) |
|
$ |
(0.09 |
) |
|
$ |
(0.20 |
) |
|
$ |
(0.94 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
common shares: |
|
|
|
|
|
Basic |
|
19,671 |
|
|
|
19,594 |
|
|
|
19,634 |
|
|
|
19,580 |
|
|
Diluted |
|
19,671 |
|
|
|
19,594 |
|
|
|
19,634 |
|
|
|
19,580 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVENTURE FOODS, INC. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED BALANCE SHEETS |
(in thousands) |
(unaudited) |
|
|
September
24, 2016
|
|
December 26, 2015 |
|
|
|
|
|
|
|
Assets |
|
|
Current assets:
|
|
|
Cash and cash
equivalents |
$ |
|
956 |
|
|
$ |
2,319 |
|
Accounts
receivable, net allowance |
|
|
21,274 |
|
|
|
19,928 |
|
Inventories |
|
|
78,307 |
|
|
|
81,807 |
|
Other current
assets |
|
|
3,376 |
|
|
|
6,262 |
|
Total current assets |
|
|
103,913 |
|
|
|
110,316 |
|
|
|
|
Property and equipment,
net |
|
|
66,681 |
|
|
|
59,963 |
|
Goodwill |
|
|
23,286 |
|
|
|
23,286 |
|
Trademarks and other
intangibles, net |
|
|
14,470 |
|
|
|
14,718 |
|
Deferred income tax
asset |
|
|
3,300 |
|
|
|
1,228 |
|
Other assets |
|
|
1,234 |
|
|
|
962 |
|
Total assets |
$ |
|
212,884 |
|
|
$ |
210,473 |
|
|
|
|
|
|
|
|
|
|
Liabilities and
Shareholders’ Equity |
|
|
Current liabilities: |
|
|
Accounts
payable |
$ |
|
31,097 |
|
|
$ |
35,983 |
|
Accrued
liabilities |
|
|
13,625 |
|
|
|
8,629 |
|
Line of credit |
|
|
31,631 |
|
|
|
- |
|
Current portion of
long-term debt |
|
|
84,843 |
|
|
|
1,826 |
|
Total current
liabilities |
|
|
161,196 |
|
|
|
46,438 |
|
|
|
|
Long-term debt, less
current portion |
|
|
- |
|
|
|
83,300 |
|
Line of credit |
|
|
- |
|
|
|
25,951 |
|
Other liabilities |
|
|
2,039 |
|
|
|
2,296 |
|
Total liabilities |
|
|
163,235 |
|
|
|
157,985 |
|
|
|
|
Shareholders’ equity: |
|
|
Common stock |
|
|
200 |
|
|
|
200 |
|
Additional paid-in
capital |
|
|
35,292 |
|
|
|
34,271 |
|
Retained earnings |
|
|
14,628 |
|
|
|
18,488 |
|
|
|
|
50,120 |
|
|
|
52,959 |
|
|
|
|
Less: treasury stock |
|
|
(471 |
) |
|
|
(471 |
) |
Total shareholders’
equity |
|
|
49,649 |
|
|
|
52,488 |
|
Total liabilities and
shareholders’ equity |
$ |
|
212,884 |
|
|
$ |
210,473 |
|
Non-GAAP Financial Measures
In addition to reporting financial results in
accordance with GAAP, the Company presents certain non-GAAP
measures 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. The Company presents EBITDA and adjusted EBITDA
because it believes they provide useful information regarding the
Company’s ability to meet its future debt payment requirements,
capital expenditures and working capital requirements and they
provide an overall evaluation of the Company’s financial condition.
The Company also presents adjusted net income (loss),
adjusted diluted earnings (loss) per share, adjusted SG&A
expenses and adjusted frozen products segment gross profit because
it believes they provide useful information regarding the Company’s
normal operating results and allow for better comparability with
current period operating results. These non-GAAP measures are
intended to provide additional information only and have certain
inherent limitations as analytical tools and should not be used in
isolation or as a substitute for results reported under GAAP.
Further, non-GAAP measures may not be comparable to similarly
titled measures used by other companies. Reconciliations of
non-GAAP measures to the most directly comparable GAAP measures are
provided below.
INVENTURE FOODS, INC. AND
SUBSIDIARIESNON-GAAP MEASURE
RECONCILIATION (in
thousands)(unaudited)
EBITDA is defined as net income (loss) with net
interest expense, income taxes, depreciation and amortization added
back. We further adjust EBITDA to exclude the impact of 2015 Fresh
Frozen product recall costs and the impairment of an intangible
asset recorded in 2015, 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.
|
Quarters Ended |
|
Nine
Months Ended |
|
September
24, 2016 |
|
September
26, 2015 |
|
September
24,2016 |
|
September
26,2015 |
Reconciliation –
EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported net loss |
$ |
(2,564 |
) |
|
$ |
(1,737 |
) |
|
$ |
(3,860 |
) |
|
$ |
(18,323 |
) |
Add back: Interest, net |
|
2,387 |
|
|
|
1,742 |
|
|
|
7,063 |
|
|
|
3,400 |
|
Add back: Income tax benefit |
|
(1,089 |
) |
|
|
(538 |
) |
|
|
(1,987 |
) |
|
|
(9,931 |
) |
Add back: Depreciation |
|
1,827 |
|
|
|
1,804 |
|
|
|
5,208 |
|
|
|
5,209 |
|
Add back: Amortization of
intangible assets |
|
83 |
|
|
|
83 |
|
|
|
248 |
|
|
|
466 |
|
EBITDA |
$ |
644 |
|
|
$ |
1,354 |
|
|
$ |
6,672 |
|
|
$ |
(19,179 |
) |
Adjustments: |
|
|
|
|
Add back: Product recall costs |
|
- |
|
|
|
5,184 |
|
|
|
- |
|
|
|
23,071 |
|
Add back: Impairment of intangible
asset |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
9,277 |
|
Less: Insurance recovery of product
recall costs |
|
- |
|
|
|
(4,172 |
) |
|
|
- |
|
|
|
(4,172 |
) |
Adjusted EBITDA |
$ |
644 |
|
|
$ |
2,366 |
|
|
$ |
6,672 |
|
|
$ |
8,997 |
|
Adjusted net loss and adjusted diluted loss per share exclude
the 2015 Fresh Frozen product recall costs and the impairment of
intangible asset recorded in 2015 to make a more meaningful
comparison of our 2016 operating performance. A
reconciliation of adjusted net loss to net loss is as follows (in
thousands):
|
Quarters Ended |
|
Nine Months
Ended |
|
September 24, 2016 |
|
September
26,2015 |
|
September
24, 2016 |
|
September 26, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported net loss |
$ |
(2,564 |
) |
|
$ |
(1,737 |
) |
|
$ |
(3,860 |
) |
|
$ |
(18,323 |
) |
Product recall costs, net
of tax |
|
- |
|
|
|
3,957 |
|
|
|
- |
|
|
|
14,962 |
|
Impairment of intangible
asset, net of tax |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
6,016 |
|
Insurance recovery of
product recall costs, net tax |
|
- |
|
|
|
(3,185 |
) |
|
|
- |
|
|
|
(2,706 |
) |
Adjusted net loss |
$ |
(2,564 |
) |
|
$ |
(965 |
) |
|
$ |
(3,860 |
) |
|
$ |
(51 |
) |
Adjusted diluted loss per
share |
$ |
(0.13 |
) |
|
$ |
(0.05 |
) |
|
$ |
(0.20 |
) |
|
$ |
(0.00 |
) |
A reconciliation of adjusted SG&A expenses,
which exclude product recall costs, to SG&A expenses is as
follows (in thousands):
|
Quarters Ended |
|
Nine
Months Ended |
|
September
24, 2016 |
|
September
26, 2015 |
|
September
24, 2016 |
|
September
26, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted selling, general
and administrative expenses |
$ |
9,190 |
|
$ |
8,639 |
|
$ |
25,792 |
|
$ |
26,508 |
|
Product recall costs
included in SG&A |
|
- |
|
|
594 |
|
|
- |
|
|
2,094 |
|
Selling, general and administrative
expenses |
$ |
9,190 |
|
$ |
9,233 |
|
$ |
25,792 |
|
$ |
28,602 |
A reconciliation of adjusted frozen products
segment gross profit, which excludes products recall costs, to
frozen products segment gross profit is as follows (in
thousands):
|
Quarters
Ended |
|
Nine Months
Ended |
|
|
September
24, 2016 |
|
September
26,2015 |
|
September
24, 2016 |
|
September
26,2015 |
Frozen
products segment: |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted frozen products
segment gross profit |
|
$ |
2,870 |
|
$ |
4,804 |
|
|
$ |
12,039 |
|
$ |
16,294 |
|
|
|
Product recall costs
included in cost of revenues |
|
|
- |
|
|
(4,590 |
) |
|
|
- |
|
|
(20,977 |
) |
|
|
Insurance recovery of
product recall costs, net tax |
|
|
- |
|
|
4,172 |
|
|
|
- |
|
|
4,172 |
|
|
|
Frozen products segment
gross profit |
$ |
2,870 |
|
$ |
4,386 |
|
|
$ |
12,039 |
|
$ |
(511 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contact
Katie Turner, ICR (646) 277-1200
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