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 July 1, 2017.
Second Quarter 2017
Highlights:
- Snack segment net revenues increased 11.6% to $30.7
million
- Boulder Canyon brand net revenues increased 11.2%; Boulder
Canyon snack net revenues increased 9.4%
- Snack private label net revenues increased 34.5%
- Snack segment gross profit as a percentage of net revenues
increased 150 basis points to 21.2%
- Frozen segment gross profit as a percentage of net revenues
increased 330 basis points to 17.4%
- Net loss from continuing operations was $(1.0) million, or
$(0.05) per share
- EBITDA* and Adjusted EBITDA* from continuing operations was
$3.0 million and $4.0 million, respectively
(All comparisons above are to the second
quarter of fiscal 2016)
“Our second quarter financial results reflect
another sequential quarterly improvement in our operating and
financial results and we are pleased with our continued progress,”
commented Terry McDaniel, Chief Executive Officer of Inventure
Foods. “The second quarter benefited from positive demand for
our snack products as evidenced by the strength of the Boulder
Canyon brand and premium private label sales growth, as well as an
increase in both our snack and frozen segment gross profit margin
as compared to the prior year. Going forward, our management team
and Board of Directors remain diligently focused on our ongoing
strategic and financial review to maximize value for our
shareholders.”
Second Quarter Fiscal 2017
Consolidated net revenues decreased 11.1% to $51.4
million, compared to $57.8 million in the second quarter of the
prior year. An 11.6% increase in snack segment net revenues was
offset by a 31.7% decrease in frozen segment net revenues which is
discussed further under “Segment Review” below.
Gross profit was $10.1 million compared to $9.7
million in the second quarter of 2016 and as a percentage of net
revenues increased 290 basis points to 19.7% compared to 16.8% in
the prior year period. This increase in gross profit was
attributable to a $1.1 million increase in the snack segment,
partially offset by a $0.7 million decrease in the frozen segment,
which is discussed further under “Segment Review” below.
Selling, general and administrative (“SG&A”)
expenses were $8.7 million an increase of $1.1 million compared to
the prior year period. SG&A expenses as a percentage of net
revenues increased to 16.9% compared to 13.2% in the second quarter
of 2016. Excluding a $1.0 million of professional fees associated
with the Company’s ongoing strategic review in the second quarter
of 2017, adjusted SG&A expenses* remained flat, and as a
percentage of net revenues increased to 14.9% compared to 13.2% in
the second quarter of 2016 as a result of increased expenses
associated with other legal, medical and accrued bonus costs.
Interest expense was $2.4 million for the second
quarter of 2017, an increase of $0.4 million, compared to $2.0
million in the prior year period as a result of higher interest
rates.
The second quarter of 2017 EBITDA from continuing
operations* was adjusted to exclude $1.0 million related to
professional fees associated with the ongoing strategic review.
Adjusted EBITDA from continuing operations* for the second quarter
of 2017 was $4.0 million compared to $3.7 million for the second
quarter of 2016.
Net loss from continuing operations was $(1.0)
million, or a loss of $(0.05) per share, for the second quarter of
2017, compared to net income of $61,000, or income of $0.01 per
share, for the prior year period. Adjusted net income from
continuing operations* was $37,000, or $0.00 adjusted diluted
income from continuing operations per share* for the second quarter
of 2017, compared to adjusted net income from continuing
operations* of $61,000, or $0.01 adjusted diluted income from
continuing operations per share*, for the second quarter of
2016.
Year-to-Date Fiscal 2017
Consolidated net revenues decreased 12.2% to $101.0
million for the six months ended July 1, 2017, compared to $115.0
million in the prior year period. Snack segment net revenues
increased 8.5% and frozen products segment net revenues decreased
29.5%.
Net loss from continuing operations was $(2.2)
million, or $(0.11) loss per share, for the first six months of
2017, compared to net income of $0.1 million, or $0.01 diluted
income per share, in the prior year period. Excluding a tax
effected gain of $1.3 million related to an escrow settlement and
tax effected professional fees associated with the ongoing
strategic review of $1.1 million, adjusted net loss from continuing
operations* was $(2.4) million, or $(0.12) adjusted diluted loss
from continuing operations per share*, for the first six months of
2017.
Adjusted EBITDA* was $5.6 million for the first six
months of 2017, compared to $7.3 million in the prior year
period.
Segment Review
The Company has two reportable segments: snack
products and frozen products. The snack products segment includes
manufactured potato chips, kettle chips, potato crisps, potato
skins, pellet snacks, sheeted dough products, popcorn and extruded
products for sale primarily to snack food distributors and
retailers. The frozen products segment includes frozen fruits,
beverages and desserts, for sale primarily to grocery stores, club
stores and mass merchandisers.
Snack Products Segment: Net
revenues for the second quarter of 2017 increased 11.6% to $30.7
million, compared to $27.5 million in the prior year period,
primarily as a result of strong increases in both Boulder Canyon
and private label sales partially offset by reduced license brand
sales. For the second quarter of 2017, gross profit was $6.5
million compared to $5.4 million, and as a percentage of net
revenues increased 150 basis points to 21.2%, compared to 19.7% in
prior year period, primarily due to lower trade promotion spending
compared to the second quarter of 2016.
Net revenues during the six months ended July 1,
2017 were $56.8 million, an 8.5% increase from $52.4 million in the
prior year period. This increase was driven primarily as a result
of strong increases in both Boulder Canyon and private label sales
partially offset by reduced license brand sales. Gross profit
for the six months ended July 1, 2017 was $10.3 million, compared
to $9.9 million in the prior year, and as a percentage of net
revenues decreased slightly to 18.1% compared to 18.9% in the prior
year period, primarily due to higher trade promotion spending
primarily in the first quarter of 2017 and reductions in inventory
standard costs that occurred in the first quarter of 2017.
Frozen Products Segment: Net
revenues for the second quarter of 2017 decreased 31.7% to $20.7
million, compared to $30.3 million in the prior year period,
primarily as a result of reduced private label sales distribution
and a frozen berry market price decrease, as well as a reduction in
Jamba at-home smoothie sales. For the second quarter of 2017,
gross profit was $3.6 million, compared to $4.3 million in the
prior year period, and as a percentage of net revenues increased
330 basis points to 17.4% compared to 14.1%. The significant
improvement in the frozen segment gross margin was driven by fewer
purchases of higher priced frozen berries in addition to reduced
2016 harvest fruit prices.
Net revenues for the six months ended July 1, 2017
were $44.2 million, a decrease of 29.5%, from $62.6 million in the
prior year period, a result of reduced private label sales
distribution and a frozen berry market price decrease, as well as a
reduction in Jamba at-home smoothie sales. For the six month ended
July 1, 2017, gross profit was $8.3 million compared to $9.1
million in the prior year period, and as a percentage of net
revenues increased 440 basis points to 18.9% compared to 14.5% in
the prior year period. The significant improvement in the frozen
products segment gross margin was driven by a fewer purchases of
higher priced frozen berries in addition to reduced 2016 harvest
fruit prices.
*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 from continuing operations:
Adjusted selling, general and administrative expenses, EBITDA,
adjusted EBITDA, adjusted net income (loss) and adjusted diluted
income (loss) per share to the most comparable GAAP financial
measures.
Conference CallThe Company will
hold an investor conference call today, Wednesday, August 9, 2017,
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 55497820. 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, and
Oregon, 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®, Rader Farms®,
TGI Fridays™, Nathan's Famous®, Vidalia Brands®, Poore Brothers®,
Tato Skins®, Willamette Valley Fruit Company™, and 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
achieve revenue and profit growth in the short or long term, its
ability to complete a strategic alternative or transaction to
increase shareholder value, its ability manage or mitigate
operational issues, and its ability to turnaround or improve its
consolidated financial performance during 2017. 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, ability to execute
strategic initiatives, ability to continue as a going concern,
general economic conditions, increases in cost or availability of
ingredients, packaging, energy and employees, price competition and
industry consolidation, 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) |
|
|
Quarter Ended |
Six Months Ended |
|
July 1, 2017 |
|
June 25, 2016 |
|
July 1, 2017 |
|
June 25, 2016
|
Net revenues |
$ |
51,356 |
|
|
$ |
57,797 |
|
|
$ |
100,974 |
|
|
$ |
114,977 |
|
Cost of revenues |
|
41,244 |
|
|
|
48,094 |
|
|
|
82,348 |
|
|
|
95,994 |
|
Gross
profit |
|
10,112 |
|
|
|
9,703 |
|
|
|
18,626 |
|
|
|
18,983 |
|
Operating
expenses: |
|
|
|
|
Selling,
general & administrative expenses |
|
8,668 |
|
|
|
7,609 |
|
|
|
15,924 |
|
|
|
14,763 |
|
Operating
income |
|
1,444 |
|
|
|
2,094 |
|
|
|
2,702 |
|
|
|
4,220 |
|
Non-operating
expense: |
|
|
|
|
Interest
expense |
|
2,425 |
|
|
|
1,967 |
|
|
|
4,787 |
|
|
|
3,968 |
|
Income
(loss) from continuing operations before income tax expense |
|
(981 |
) |
|
|
127 |
|
|
|
(2,085 |
) |
|
|
252 |
|
Income tax expense |
|
11 |
|
|
|
66 |
|
|
|
113 |
|
|
|
114 |
|
Net
Income (loss) from continuing operations. |
|
(992 |
) |
|
|
61 |
|
|
|
(2,198 |
) |
|
|
138 |
|
Discontinued
operations, net of taxes |
|
75 |
|
|
|
(339 |
) |
|
|
(12,858 |
) |
|
|
(1,434 |
) |
Net loss |
$ |
(917 |
) |
|
$ |
(278 |
) |
|
$ |
(15,056 |
) |
|
$ |
(1,296 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per
common share: |
|
|
|
|
|
|
|
|
|
Basic
income (loss) from continuing operations |
$ |
(0.05 |
) |
|
$ |
0.01 |
|
|
$ |
(0.11 |
) |
|
$ |
0.01 |
|
Basic
income (loss) from discontinued operations |
$ |
0.00 |
|
|
$ |
(0.02 |
) |
|
$ |
(0.66 |
) |
|
$ |
(0.08 |
) |
Basic
loss per share |
$ |
(0.05 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.77 |
) |
|
$ |
(0.07 |
) |
|
|
|
|
|
Diluted
income (loss) from continuing operations |
$ |
(0.05 |
) |
|
$ |
0.01 |
|
|
$ |
(0.11 |
) |
|
$ |
0.01 |
|
Diluted
income(loss) from discontinued operations |
$ |
0.00 |
|
|
$ |
(0.02 |
) |
|
$ |
(0.66 |
) |
|
$ |
(0.08 |
) |
Diluted
loss per share |
$ |
(0.05 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.77 |
) |
|
$ |
(0.07 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number
of common shares: |
|
|
|
|
Basic |
|
19,741 |
|
|
|
19,628 |
|
|
|
19,708 |
|
|
|
19,616 |
|
Diluted |
|
19,741 |
|
|
|
19,902 |
|
|
|
19,708 |
|
|
|
19,881 |
|
INVENTURE FOODS, INC. AND
SUBSIDIARIES |
CONDENSED CONSOLIDATED BALANCE
SHEETS |
(in thousands) |
(unaudited) |
|
|
July
1, 2017 |
|
December
31, 2016 |
|
|
|
Assets |
|
|
Current assets: |
|
|
Cash and
cash equivalents |
$ |
3,007 |
|
|
$ |
776 |
|
Accounts
receivable, net allowance |
|
16,929 |
|
|
|
16,334 |
|
Inventories |
|
44,325 |
|
|
|
72,188 |
|
Other
current assets |
|
2,607 |
|
|
|
3,216 |
|
Total
current assets |
|
66,868 |
|
|
|
92,514 |
|
|
|
|
Property and equipment,
net |
|
52,069 |
|
|
|
65,484 |
|
Goodwill |
|
14,985 |
|
|
|
14,985 |
|
Trademarks and other
intangibles, net |
|
4,749 |
|
|
|
7,243 |
|
Other assets |
|
1,326 |
|
|
|
1,254 |
|
Total
assets |
$ |
139,997 |
|
|
$ |
181,480 |
|
|
|
|
|
|
|
|
|
Liabilities and
Shareholders’ Equity |
|
|
Current
liabilities: |
|
|
Accounts
payable |
$ |
25,959 |
|
|
$ |
29,462 |
|
Accrued
liabilities |
|
8,367 |
|
|
|
9,533 |
|
Line of
credit |
|
19,949 |
|
|
|
32,761 |
|
Current
portion of term debt |
|
71,051 |
|
|
|
82,380 |
|
Total
current liabilities |
|
125,326 |
|
|
|
154,136 |
|
|
|
|
Deferred income tax
liability |
|
3,353 |
|
|
|
1,376 |
|
Other liabilities |
|
2,065 |
|
|
|
2,279 |
|
Total
liabilities |
|
130,744 |
|
|
|
157,791 |
|
|
|
|
Shareholders’
equity: |
|
|
Common stock |
|
202 |
|
|
|
200 |
|
Additional paid-in
capital |
|
36,339 |
|
|
|
35,721 |
|
Accumulated
deficit |
|
(26,817 |
) |
|
|
(11,761 |
) |
Retained
earnings |
|
9,724 |
|
|
|
24,160 |
|
|
|
|
Less: treasury
stock |
|
(471 |
) |
|
|
(471 |
) |
Total shareholders’
equity |
|
9,253 |
|
|
|
23,689 |
|
Total liabilities and
shareholders’ equity |
$ |
139,997 |
|
|
$ |
181,480 |
|
|
|
|
|
|
|
|
|
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 from continuing
operations and adjusted EBITDA from continuing operations 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) from continuing
operations, adjusted diluted income (loss) from continuing
operations per share, and adjusted SG&A expenses 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 from continuing operations is defined as net
income (loss) from continuing operations with interest expense,
income taxes, depreciation and amortization added back. EBITDA from
continuing operations for the fiscal quarter and six months ended
July 1, 2017 were further adjusted for professional fees associated
with the strategic review and to exclude the gain on escrow
settlement. These adjustments were made since they are not
related to our core business, to arrive at adjusted EBITDA from
continuing operations. The GAAP financial measure that is most
directly comparable to EBITDA from continuing operations is net
cash provided by operating activities.
|
Quarter Ended |
|
Six Months Ended |
|
July 1, 2017 |
|
June 25, 2016 |
|
July 1, 2017 |
|
June 25, 2016 |
Reconciliation – EBITDA
from continuing operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported
net income (loss) from continuing operations |
$ |
(992 |
) |
|
$ |
61 |
|
|
$ |
(2,198 |
) |
|
$ |
138 |
|
Add back:
Interest |
|
2,425 |
|
|
|
1,967 |
|
|
|
4,787 |
|
|
|
3,968 |
|
Add back:
Income tax expense |
|
11 |
|
|
|
66 |
|
|
|
113 |
|
|
|
114 |
|
Add back:
Depreciation |
|
1,472 |
|
|
|
1,490 |
|
|
|
2,956 |
|
|
|
2,943 |
|
Add back:
Amortization of intangible assets |
|
82 |
|
|
|
83 |
|
|
|
164 |
|
|
|
165 |
|
EBITDA from continuing
operations |
|
2,998 |
|
|
|
3,667 |
|
|
|
5,822 |
|
|
|
7,328 |
|
Adjustments: |
|
|
|
|
Add:
Strategic review professional fees |
|
1,017 |
|
|
|
- |
|
|
|
1,052 |
|
|
|
- |
|
Less:
Gain on escrow settlement |
|
- |
|
|
|
- |
|
|
|
(1,236 |
) |
|
|
- |
|
ADJUSTED EBITDA from
continuing operations |
$ |
4,015 |
|
|
$ |
3,667 |
|
|
$ |
5,638 |
|
|
$ |
7,328 |
|
Adjusted net income (loss) from continuing
operations and adjusted diluted income (loss) from continuing
operations per share for the fiscal quarter and six months ended
July 1, 2017 were further adjusted for professional fees associated
with the strategic review and to exclude the gain on escrow
settlement. These adjustments were made in order to make a more
meaningful comparison of our 2017 operating performance. A
reconciliation of adjusted net income (loss) from continuing
operations to net income (loss) from continuing operations is as
follows (in thousands):
|
Quarter Ended |
|
Six Months Ended |
|
July
1, 2017 |
|
June 25, 2016 |
|
July 1, 2017 |
|
June 25, 2016 |
Reported net income
(loss) from continuing operations |
$ |
(992 |
) |
|
$ |
61 |
|
|
$ |
(2,198 |
) |
|
$ |
138 |
|
Add: Strategic review
professional fees, net of tax |
|
1,029 |
|
|
|
- |
|
|
|
1,109 |
|
|
|
- |
|
Less: Gain on escrow
settlement, net of tax |
|
- |
|
|
|
- |
|
|
|
(1,303 |
) |
|
|
- |
|
Adjusted net income
(loss) from continuing operations |
$ |
37 |
|
|
$ |
61 |
|
|
$ |
(2,392 |
) |
|
$ |
138 |
|
Adjusted
diluted income (loss) from continuing operations per share |
$ |
0.00 |
|
|
$ |
0.01 |
|
|
$ |
(0.12 |
) |
|
$ |
0.01 |
|
Adjusted selling, general and administrative
expenses for the fiscal quarter and six months ended July 1, 2017
were further adjusted for professional fees associated with the
strategic review and to exclude the gain on escrow
settlement. A reconciliation of adjusted SG&A expenses to
SG&A expenses is as follows (in thousands):
|
Quarter Ended |
|
Six Months Ended |
|
July 1, 2017 |
|
June 25, 2016 |
|
July 1, 2017 |
|
June 25, 2016 |
Adjusted selling,
general and administrative expenses |
$ |
7,651 |
|
|
$ |
7,609 |
|
|
$ |
16,108 |
|
|
$ |
14,763 |
|
Add: Strategic review
professional fees. |
|
1,017 |
|
|
|
- |
|
|
|
1,052 |
|
|
|
- |
|
Less: Gain on escrow
settlement |
|
- |
|
|
|
- |
|
|
|
(1,236 |
) |
|
|
- |
|
Selling,
general and administrative expenses |
$ |
8,668 |
|
|
$ |
7,609 |
|
|
$ |
15,924 |
|
|
$ |
14,763 |
|
Contact
Katie Turner, ICR (646) 277-1200
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