Annie´s: Reports Second Quarter Fiscal 2014 Results

Berkeley / CA. (ai) Annie´s Inc., a leading natural and organic food company in the United States, announced financial results for its second quarter of fiscal 2014, ended September 30, 2013. Highlights:

  • Net sales were 58,7 million USD in the second quarter; adjusted net sales were 57,9 million USD, an increase of 24,0 percent
  • Consumption grew an estimated 22 percent in the second quarter, representing further acceleration versus prior growth trends2
  • Diluted EPS was 0,32 USD in the second quarter; adjusted diluted EPS1 was 0,28 USD, an increase of 19,1 percent
  • As previously announced, management expects to achieve the upper end of its net sales guidance range and the lower end of adjusted diluted EPS guidance range for its fiscal 2014
  • Annie´s announces agreement to acquire its primary cookie and cracker manufacturing plant, positioning its snacks business for long-term growth

«We experienced accelerated growth in both shipments and consumption during the quarter, as we benefited from continued base business strength and the successful roll-out of our new microwavable mac + cheese cups and family-size frozen entrees», commented John Foraker, CEO of Annie´s. «Year-to-date consumption growth, which is in excess of 20 percent, is the strongest since our IPO and gives us increased confidence in our sales outlook».

«While we are very pleased with our top-line performance and strong operating expense leverage, gross margin was impacted by changes in customer mix and, to a lesser extent, higher-than-expected sales of new products and above-normal inventory obsolescence. Nevertheless, we expect to exit the year with more normalized gross margin trends».

«Our ability to generate strong growth across product categories and sales channels gives us confidence in our long-term growth prospects. One of our biggest growth opportunities is in our snacks business, which remains highly under-penetrated relative to its potential. The planned acquisition of Safeway´s cookie and cracker manufacturing plant in Joplin, Missouri will provide us with valuable long-term scale benefits, which we expect will enable us to accelerate our pace of innovation and distribution growth in snacks».

Second Quarter Results

For the second quarter, Annie´s reported net sales of 58,7 million USD. Excluding the benefit to net sales from the pizza recall, primarily related to insurance recoveries, adjusted net sales increased 24,0 percent to 57,9 million USD, driven by significant increases in conventional sales channels. Net sales growth in the second quarter was led by meals, which benefited from continued strength in mac + cheese and initial shipments of our new family-size frozen entrees. Net sales of snacks and dressings, condiments and other products were also strong, growing double digits on a year-over-year basis.

Ebitda for the quarter was 9,7 million USD, with adjusted Ebitda increasing 15,6 percent year-over-year to 8,8 million USD. Adjusted Ebitda was driven by strong net sales growth and improved selling, general and administrative expenses as a percentage of net sales, partially offset by a lower gross margin percentage year-over-year.

Net income for the quarter was 5,6 million USD or 0,32 USD per diluted share, as compared to 3,8 million USD or 0,21 USD per diluted share, in the second quarter of fiscal 2013. Adjusted net income was 4,9 million USD or 0,28 USD per diluted share, as compared to adjusted net income of 4,2 million USD or 0,24 USD per diluted share, in the second quarter of fiscal 2013.

Fiscal 2014 Outlook

Annie´s expects the following financial results for the current fiscal year:

  • Adjusted net sales growth toward the upper end of 18 to 20 percent guidance range
  • Adjusted Ebitda of approximately 31 million USD
  • Adjusted diluted EPS toward the lower end of 0,97 USD to 1,01 USD guidance range

    Planned Acquisition of Safeway´s Joplin Plant

    Annie´s also announced that on November 05, 2013, the Company entered into a definitive agreement with Safeway Inc. and Safeway Australia Holdings Inc. to acquire the snack manufacturing plant in Joplin, Missouri, which has been Annie´s primary manufacturer of cookie and cracker products since the inception of its snacks business in 2002. Under the agreement, the purchase price will be 6,0 million USD, plus the cost of inventory and supplies at closing. Annie´s expects to fund the acquisition with cash on hand and, if necessary, by drawing under its revolving credit facility. Including the impact of previously planned efficiency projects, the acquisition is not expected to materially impact net income in fiscal 2015.

    Annie´s products produced in the Joplin plant currently account for over 50 percent of its overall snacks net sales and represent the majority of the plant´s total production volume. In connection with the closing of the acquisition, which is expected to occur in the first quarter of Annie´s fiscal 2015 and is subject to the satisfaction of various closing conditions, Annie´s expects to enter into a three-year supply agreement to produce products on behalf of an affiliate of Safeway Inc.

    «The Joplin plant is of high strategic value to Annie´s», said Foraker. «The planned acquisition of the plant is consistent with our asset-light business model and provides capacity for future growth, a platform for innovation and an opportunity to further control and improve our cost structure».

    Added Amanda Martinez, EVP, Operations and Administration of Annie´s, «Having overseen the Joplin plant during my tenure with Safeway, I can speak first-hand to the focus on quality at the plant as well as the calibre of its workforce. We look forward to welcoming the plant´s employees to the Annie´s family».

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