Inventure Foods, Inc. (NASDAQ:SNAK) (“Inventure Foods” or the
“Company”), a leading specialty food marketer and manufacturer,
today reported financial results for the second quarter and six
months ended June 25, 2016.
Second Quarter 2016
Highlights:
- Consolidated net revenues increased 4.3% to $69.3 million
- Net loss of $(0.3) million, or $(0.01) loss per share
- EBITDA* of $3.6 million
- Healthy/natural products net sales increased 9.3%
- Frozen fruit net revenues increased 7.4%
- Rader Farms branded net revenues increased 158.8%
- Snack segment gross margin increased 250 basis points to
19.7%
(All comparisons above are to the second quarter of
fiscal 2015)
“We remain focused on the operational and financial
improvement of our business,” said Terry McDaniel, Chief Executive
Officer of Inventure Foods. “During the second quarter, we made
progress on our key initiatives with another quarter of sequential
improvement in gross margin, which contributed to a $1.1 million
increase in EBITDA, as compared to the first quarter of 2016.”
Mr. McDaniel continued, “As our management team and
our Board of Directors commence a comprehensive strategic and
financial review of the Company, we are simultaneously moving
forward with our initiatives to strengthen our foundation, increase
productivity across our frozen and snack segments and sustain
operating momentum to maximize shareholder value.”
Second Quarter Fiscal 2016
Consolidated net revenues increased 4.3% to $69.3
million, compared to $66.4 million in the second quarter of the
prior year. Frozen segment net revenues increased 19.7% and snack
segment net revenues decreased 12.8%, which is discussed further
under “Segment Review” below.
Gross profit was $10.3 million, compared to $8.0
million in the second quarter of 2015. This increase in gross
profit was attributable to a $2.3 million increase in the frozen
segment while the snack segment gross profit remained consistent
with the prior year period.
Selling, general and administrative (“SG&A”)
expenses were $8.5 million for the second quarter of 2016.
Excluding the $1.3 million of product recall expenses recorded in
SG&A in the second quarter of 2015, adjusted SG&A expenses*
decreased $0.5 million and as a percentage of net revenues
decreased 120 basis points to 12.3% compared to 13.5% in the second
quarter of 2015.
Interest expense was $2.3 million for the second
quarter of 2016, an increase of $1.4 million, compared to $0.9
million in the prior year period as a result of increased
borrowings and higher interest rates.
Net loss was $(0.3) million, or $(0.01) loss per
share, for the second quarter of 2016, compared to net loss of
$(2.0) million, or $(0.10) loss per share, for the prior year
period. Excluding the costs associated with the product
recall in 2015, adjusted net loss* was $(0.5) million, or $(0.02)
adjusted diluted loss per share* in the second quarter of 2015.
EBITDA* for the second quarter of 2016 was $3.6
million compared to adjusted EBITDA* of $2.0 million for the second
quarter of 2015. EBITDA for the second quarter of 2015 was
adjusted to exclude product recall expenses of $2.4 million. EBITDA
increased $1.1 million in the second quarter of 2016 compared to
the first quarter of 2016.
Year-to-Date Fiscal
2016
Consolidated net revenues decreased 3.4% to $139.1
million for the six months ended June 25, 2016, compared to $144.0
million in the prior year period. A decrease of 9.4% in snack
segment net revenues was partially offset by a 0.6% increase in
frozen segment net revenues.
Net loss was $(1.3) million, or $(0.07) loss per
share, for the first six months of 2016, compared to net loss of
$(16.6) million, or $(0.85) 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 income* was
$0.8 million, or $0.04 adjusted diluted earnings per share*, for
the first six months of 2015.
EBITDA* was $6.0 million for the first six months
of 2016, compared to adjusted EBITDA* of $6.6 million in the prior
year period. Adjusted net income* and adjusted EBITDA* for
the first six months of 2015 was adjusted to exclude product recall
expenses of $17.9 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 groceries, 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 second quarter of 2016 increased 19.7% to $41.8
million, compared to $34.9 million in the prior year period.
Excluding Fresh Frozen business net revenues, adjusted frozen
products segment net revenues* for the second quarter of 2016
increased 4.4% primarily as a result of increased demand of branded
frozen fruit. For the second quarter of 2016, gross profit
was $4.8 million compared to $2.6 million in the prior year
period. For the second quarter of 2016, adjusted frozen
products segment gross profit* was $4.8 million compared to $3.7
million and as a percentage of net revenues increased 90 basis
points to 11.6% compared to 10.7%, excluding $1.1 million of
product recall expenses recorded in cost of revenues in the second
quarter of 2015. The improvements in gross margin were primarily
driven by steps taken to improve the frozen vegetable products
margin profile, including reducing certain retail packaging
size.
Net revenues during the six months ended June 25,
2016 were $86.7 million, an increase of 0.6%, from $86.2 million in
the prior year period. Excluding Fresh Frozen business net
revenues, adjusted frozen products segment net revenues* for the
first six months of 2016 decreased 2.7%. For the six months
ended June 25, 2016, gross profit was $9.2 million compared to
$(4.9) million in the prior year period. For the second
quarter of 2016, adjusted frozen products segment gross profit* was
$9.2 million compared to $11.5 million, and gross margin as a
percentage of revenue decreased to 10.6% compared to 13.3% in the
prior year, excluding $16.4 million of product recall expenses
recorded in cost of revenues in the first six months of 2015.
Snack Products Segment: Net
revenues during the second quarter of 2016 decreased 12.8% to $27.5
million, compared to $31.5 million in the prior year period,
primarily as a result of a reduction of products the Company
produces for third parties and decreased Boulder Canyon net
revenues due to capacity constraints, a shortage of organic
potatoes caused by weather, and slotting investments. In
total, the effect on Boulder Canyon sales of these three items
reduced net revenues by over $1.0 million for the second
quarter. For the second quarter of 2016, gross profit was
consistent with the prior year period at $5.4 million, and as a
percentage of net revenues increased 250 basis points to 19.7%,
compared to 17.2% in prior year period as a result of increased
capacity.
Net revenues during the six months ended June 25,
2016 were $52.4 million, a 9.4% decrease from $57.8 million in the
prior year period. Gross profit for the six months ended June 25,
2016 was $9.9 million, compared to $9.2 million in the prior year
period, and as a percentage of net revenues increased 290 basis
points to 18.9% compared to 16.0% in the prior year
period.
*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 Review
In a separate press release issued today, the
Company and its Board of Directors announced the commencement of 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. The Company has retained
Rothschild as its financial advisor and DLA Piper LLP (US) as its
legal advisor to assist in this process.
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, July 27, 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 42838187. 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
improve its operational and financial performance, execute its
strategic initiatives and pursue value-enhancing initiatives.
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 |
|
Six Months Ended |
|
|
June 25, 2016 |
|
June 27, 2015 |
|
June 25, 2016 |
|
June 27, 2015 |
|
Net revenues |
$ |
69,263 |
|
|
$ |
66,422 |
|
|
$ |
139,118 |
|
|
$ |
144,029 |
|
|
Cost of revenues |
|
58,996 |
|
|
|
58,397 |
|
|
|
120,034 |
|
|
|
139,704 |
|
|
Gross profit |
|
10,267 |
|
|
|
8,025 |
|
|
|
19,084 |
|
|
|
4,325 |
|
|
Selling, general &
administrative expenses |
|
8,493 |
|
|
|
10,217 |
|
|
|
16,602 |
|
|
|
19,369 |
|
|
Impairment of intangible
asset |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
9,277 |
|
|
Operating income (loss) |
|
1,774 |
|
|
|
(2,192 |
) |
|
|
2,482 |
|
|
|
(24,321 |
) |
|
Interest expense, net |
|
2,320 |
|
|
|
928 |
|
|
|
4,676 |
|
|
|
1,658 |
|
|
Loss before income taxes |
|
(546 |
) |
|
|
(3,120 |
) |
|
|
(2,194 |
) |
|
|
(25,979 |
) |
|
Income tax benefit |
|
268 |
|
|
|
1,169 |
|
|
|
898 |
|
|
|
9,393 |
|
|
Net loss |
$ |
(278 |
) |
|
$ |
(1,951 |
) |
|
$ |
(1,296 |
) |
|
$ |
(16,586 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common
share: |
|
|
|
|
Basic |
$ |
(0.01 |
) |
|
$ |
(0.10 |
) |
|
$ |
(0.07 |
) |
|
$ |
(0.85 |
) |
|
Diluted |
$ |
(0.01 |
) |
|
$ |
(0.10 |
) |
|
$ |
(0.07 |
) |
|
$ |
(0.85 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
common shares: |
|
|
|
|
|
|
|
Basic |
|
19,628 |
|
|
|
19,566 |
|
|
|
19,616 |
|
|
|
19,574 |
|
|
Diluted |
|
19,628 |
|
|
|
19,566 |
|
|
|
19,616 |
|
|
|
19,574 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVENTURE FOODS, INC. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED BALANCE SHEETS |
(in thousands) |
(unaudited) |
|
|
June
25, 2016 |
|
December
26, 2015 |
|
|
|
|
|
|
Assets |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$ |
1,203 |
|
|
$ |
2,319 |
|
Accounts receivable, net
allowance |
|
22,681 |
|
|
|
19,928 |
|
Inventories |
|
71,217 |
|
|
|
81,807 |
|
Deferred income tax asset |
|
3,788 |
|
|
|
3,788 |
|
Other current assets |
|
3,686 |
|
|
|
6,262 |
|
Total current assets |
|
102,575 |
|
|
|
114,104 |
|
|
|
|
Property and equipment,
net |
|
66,675 |
|
|
|
59,963 |
|
Goodwill |
|
23,286 |
|
|
|
23,286 |
|
Trademarks and other
intangibles, net |
|
14,553 |
|
|
|
14,718 |
|
Other assets |
|
1,186 |
|
|
|
962 |
|
Total assets |
$ |
208,275 |
|
|
$ |
213,033 |
|
|
|
|
|
|
|
|
|
Liabilities and
Shareholders’ Equity |
|
|
Current liabilities: |
|
|
Accounts payable |
$ |
32,341 |
|
|
$ |
35,983 |
|
Accrued liabilities |
|
11,697 |
|
|
|
8,629 |
|
Current portion of long-term
debt |
|
2,407 |
|
|
|
1,826 |
|
Total current liabilities |
|
46,445 |
|
|
|
46,438 |
|
|
|
|
Long-term debt, less
current portion |
|
82,803 |
|
|
|
83,300 |
|
Line of credit |
|
22,690 |
|
|
|
25,951 |
|
Deferred income tax
liability |
|
2,560 |
|
|
|
2,560 |
|
Other liabilities |
|
2,035 |
|
|
|
2,296 |
|
Total liabilities |
|
156,533 |
|
|
|
160,545 |
|
|
|
|
Shareholders’ equity: |
|
|
Common stock |
|
201 |
|
|
|
200 |
|
Additional paid-in
capital |
|
34,820 |
|
|
|
34,271 |
|
Retained earnings |
|
17,192 |
|
|
|
18,488 |
|
|
|
52,213 |
|
|
|
52,959 |
|
|
|
|
Less: treasury stock |
|
(471 |
) |
|
|
(471 |
) |
Total shareholders’
equity |
|
51,742 |
|
|
|
52,488 |
|
Total liabilities and
shareholders’ equity |
$ |
208,275 |
|
|
$ |
213,033 |
|
|
|
|
|
|
|
|
|
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, adjusted
diluted earnings (loss) per share, adjusted SG&A expense,
adjusted frozen products segment net revenues 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 |
|
Six Months Ended |
|
|
June 25, 2016 |
|
June 27, 2015 |
|
June 25, 2016 |
|
June 27, 2015 |
|
Reconciliation –
EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported net loss |
$ |
(278 |
) |
|
$ |
(1,951 |
) |
|
$ |
(1,296 |
) |
|
$ |
(16,586 |
) |
|
Add back: Interest, net |
|
2,320 |
|
|
|
928 |
|
|
|
4,676 |
|
|
|
1,658 |
|
|
Add back: Income tax benefit |
|
(268 |
) |
|
|
(1,169 |
) |
|
|
(898 |
) |
|
|
(9,393 |
) |
|
Add back: Depreciation |
|
1,711 |
|
|
|
1,704 |
|
|
|
3,381 |
|
|
|
3,405 |
|
|
Add back: Amortization of
intangible assets |
|
83 |
|
|
|
82 |
|
|
|
165 |
|
|
|
383 |
|
|
EBITDA |
$ |
3,568 |
|
|
$ |
(406 |
) |
|
$ |
6,028 |
|
|
$ |
(20,533 |
) |
|
Adjustments: |
|
|
|
|
Add back: Product recall costs |
|
- |
|
|
|
2,394 |
|
|
|
- |
|
|
|
17,887 |
|
|
Add back: Impairment of intangible
asset |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
9,277 |
|
|
Adjusted EBITDA |
$ |
3,568 |
|
|
$ |
1,988 |
|
|
$ |
6,028 |
|
|
$ |
6,631 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income (loss) and adjusted diluted
earnings (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 income (loss)
to net income (loss) is as follows (in thousands):
|
Quarters Ended |
|
Six Months Ended |
|
|
June 25, 2016 |
|
June 27, 2015 |
|
June 25, 2016 |
|
June 27, 2015 |
|
Reported net loss |
$ |
(278 |
) |
|
$ |
(1,951 |
) |
|
$ |
(1,296 |
) |
|
$ |
(16,586 |
) |
|
Product recall costs, net
of tax |
|
- |
|
|
|
1,497 |
|
|
|
- |
|
|
|
11,413 |
|
|
Impairment of intangible
asset, net of tax |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5,939 |
|
|
Adjusted net income (loss) |
$ |
(278 |
) |
|
$ |
(454 |
) |
|
$ |
(1,296 |
) |
|
$ |
766 |
|
|
Adjusted diluted earnings (loss)
per share |
$ |
(0.01 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.07 |
) |
|
$ |
0.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of adjusted SG&A expenses,
which exclude product recall costs, to SG&A expenses is as
follows (in thousands):
|
|
Quarters Ended |
|
Six Months Ended |
|
|
|
June 25, 2016 |
|
June 27, 2015 |
|
June 25, 2016 |
|
June 27, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
selling, general and administrative expenses |
$ |
8,493 |
|
$ |
8,950 |
|
$ |
16,602 |
|
$ |
17,869 |
|
|
Product recall
costs included in SG&A |
|
- |
|
|
1,267 |
|
|
- |
|
|
1,500 |
|
|
Selling, general and
administrative expenses |
$ |
8,493 |
|
$ |
10,217 |
|
$ |
16,602 |
|
$ |
19,369 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of adjusted frozen products
segment net revenues, which exclude the Fresh Frozen business net
revenues, to frozen products segment net revenues is as follows (in
thousands):
|
|
Quarters Ended |
|
Six Months Ended |
|
|
June 25, 2016 |
|
June 27, 2015 |
|
June 25, 2016 |
|
June 27, 2015 |
Frozen
products segment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
frozen products segment net revenues |
$ |
30,312 |
|
$ |
29,038 |
|
$ |
62,608 |
|
$ |
64,376 |
|
Net revenues
of Fresh Frozen business |
|
11,467 |
|
|
5,862 |
|
|
24,141 |
|
|
21,873 |
|
Frozen products segment
net revenues |
$ |
41,779 |
|
$ |
34,900 |
|
$ |
86,749 |
|
$ |
86,249 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
Six Months Ended |
|
|
|
June 25, 2016 |
|
June 27, 2015 |
|
June 25, 2016 |
|
June 27, 2015 |
|
Frozen
products segment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
frozen products segment gross profit |
$ |
4,848 |
|
$ |
3,719 |
|
|
$ |
9,169 |
|
$ |
11,490 |
|
|
|
Product recall
costs included in cost of revenues |
|
- |
|
|
(1,127 |
) |
|
|
- |
|
|
(16,387 |
) |
|
|
Frozen products segment
gross profit |
$ |
4,848 |
|
$ |
2,592 |
|
|
$ |
9,169 |
|
$ |
(4,897 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contact
Katie Turner, ICR (646) 277-1200
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