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EX-99.2 - EX-99.2 - INVENTURE FOODS, INC.a16-15480_1ex99d2.htm
8-K - 8-K - INVENTURE FOODS, INC.a16-15480_18k.htm

Exhibit 99.1

 

 

Inventure Foods Reports Second Quarter 2016 Financial Results

 

Company Announces Strategic and Financial Review

 

PHOENIX, July 27, 2016 (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 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.

 

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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.

 

2



 

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 Call

 

The 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 Foods

 

With 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.

 

Contact

Katie Turner, ICR (646) 277-1200

 

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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.

 

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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

 

 

5



 

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

 

 

6



 

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 SUBSIDIARIES

NON-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

 

 

7



 

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

)

 

8