Annie's Reports Third Quarter Fiscal 2014 Financial Results

BERKELEY, Calif., Feb. 10, 2014 /PRNewswire/ -- Annie's, Inc. (NYSE: BNNY), a leading natural and organic food company, today announced financial results for its third quarter of fiscal 2014, ended December 31, 2013.

Highlights:

• Net sales were $46.2 million in the third quarter; adjusted net sales¹ were $46.1 million, an increase of 21.7%
• Consumption grew an estimated 24% in the third quarter, representing further acceleration versus prior growth trends²
• Diluted EPS were $0.16 in the third quarter; adjusted diluted EPS¹ were $0.17, an increase of 7.6%
• Management lowers guidance for adjusted diluted EPS to $0.92 to $0.93, reflecting higher anticipated cost pressure in the fourth quarter

"Our results reflected continued top-line strength and accelerating momentum in consumption, driven by growing brand awareness, expansion in our mainline distribution, and the success of our new products," commented John Foraker, CEO of Annie's. "Consumers continue to adopt natural and organic food into their lifestyles and are demanding greater transparency in food labeling, which are important and positive trends for us.

"Earnings in the quarter reflected an improved gross margin trend versus the second quarter, as well as significant investments in our brand and the expansion of our talent base to help us meet the needs of our rapidly growing business. We expect solid adjusted earnings per share growth in the fourth quarter, despite tight supply conditions in the organic wheat market, the timing of certain productivity projects and a later Easter holiday this year.

"Importantly, our authentic and trusted brand, the additions we are making to our team and our deep innovation pipeline position us well for fiscal 2015 and beyond," concluded Foraker.   

Third Quarter Results
For the third quarter, Annie's reported net sales of $46.2 million. Excluding the benefit to net sales from the pizza recall, primarily related to insurance recoveries, adjusted net sales increased 21.7% to $46.1 million. Net sales growth in the third quarter was led by strength in meals, which benefited from continued base business strength and new product introductions, especially in mac & cheese. 

EBITDA for the quarter was $5.2 million, with adjusted EBITDA increasing 8.2% year-over-year to $5.6 million. Adjusted EBITDA growth was driven by strong net sales growth, partially offset by a lower adjusted gross margin percentage year-over-year, resulting from higher commodity costs and inventory obsolescence. Adjusted selling, general and administrative expenses improved slightly as a percentage of adjusted net sales, as investments in marketing and headcount growth were supported by leverage from the strong sales growth.

Net income for the quarter was $2.8 million, or $0.16 per diluted share, as compared to $1.4 million, or $0.08 per diluted share, in the third quarter of fiscal 2013. Adjusted net income was $2.9 million, or $0.17 per diluted share, as compared to adjusted net income of $2.7 million, or $0.15 per diluted share, in the third quarter of fiscal 2013. 

Revised Fiscal 2014 Outlook
The company updated its fiscal 2014 financial outlook to reflect the following:

• Adjusted net sales growth of 19.0% to 19.5% (narrowed within prior guidance range)
• Adjusted EBITDA of $29 million to $30 million (updated from approximately $31 million)
• Adjusted diluted EPS of $0.92 to $0.93 (updated from the lower end of $0.97 to $1.01)

Conference Call Information for Today, February 10, 2014
Annie's will host a conference call and live webcast today, February 10, 2014 at 2:00 p.m. PT (5:00 p.m. ET). The conference call can be accessed by dialing 1-877-941-9205, or 1-480-629-9771 (outside the U.S. and Canada). A live webcast will be available on the Investor Relations section of Annie's corporate website at www.annies.com and via replay beginning approximately two hours after the completion of the call for 90 days. An audio replay of the call will also be available to all interested parties beginning at approximately 5:00 p.m. Pacific Time on Monday, February 10, 2014 until 11:59 p.m. Pacific Time on Monday, February 17, 2014, by dialing 1-800-406-7325 or 1-303-590-3030 (outside the U.S. and Canada) and entering pass code 4665678#.

About Annie's 
Annie's, Inc. (NYSE: BNNY) is a natural and organic food company that offers great-tasting products in large packaged food categories. Annie's products are made without artificial flavors, synthetic colors, and preservatives regularly used in many conventional packaged foods. Additionally, Annie's sources ingredients so as to avoid synthetic growth hormones and genetically modified food ingredients. Today, Annie's offers over 135 products and is present in over 26,500 retail locations in the United States and Canada. Founded in 1989, Annie's is committed to operating in a socially responsible and environmentally sustainable manner. For more information, visit www.annies.com.  

Forward-Looking Statements
Certain statements in this press release and the accompanying conference call, including Annie's statements regarding expected full-year and fourth-quarter fiscal 2014 results, including adjusted net sales, adjusted EBITDA, adjusted diluted EPS, cash flow, and related drivers; growth prospects, including for fiscal 2015 and beyond; the planned acquisition of the Joplin plant; expected growth in the Company's snacks and frozen businesses; innovation and new products, including our single-serve microwavable cup and frozen entrée products; anticipated savings from "fat rabbit" and other initiatives; macro trends; the impact of competition; and anticipated costs are "forward-looking statements" within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may be identified by words like "anticipate," "assume," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "future," "will," "seek" and similar terms or phrases.

The forward-looking statements contained in this press release and the accompanying conference call are based on management's current expectations, are subject to uncertainty and changes in circumstances and are subject to significant risks. We cannot assure you that future developments affecting us will be those that we have anticipated.

Actual results may differ materially from the forward-looking statements contained in this press release and the accompanying conference call due to changes in global, national, regional or local economic, business, competitive, market, regulatory and other factors, many of which are beyond our control. We believe that these factors include those disclosed in the section entitled "Risk Factors" in our Annual Report on Form 10-K for fiscal 2013 filed with the U.S. Securities and Exchange Commission (the "SEC") on June 14, 2013, our Quarterly Report on Form 10-Q ("Form 10-Q") for the quarter ended September 30, 2013 filed with the SEC on November 7, 2013, and our Form 10-Q for the quarter ended December 31, 2013 to be filed today and in our other filings with the SEC, including risks relating to competition; new product introductions; our growth strategy; our planned acquisition of the Joplin Plant; our brand; reputation; product liability claims; recalls and related insurance proceeds (if any); economic disruptions; changes in consumer preferences; ingredient and packaging costs and availability; reliance on a limited number of distributors, retailers, contract manufacturers and third-party suppliers and on an outside warehouse facility; efficiency projects; intellectual property and related disputes; regulatory compliance; transportation; supply-chain; inventory levels; and seasonality. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, our actual results may vary in material respects from those projected in these forward-looking statements.

Any forward-looking statement made by us in this press release or the accompanying conference call speaks only as of the date hereof. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise, except as may be required by any applicable securities laws.

Non-GAAP Financial Measures
Adjusted net sales, adjusted gross margin, adjusted selling, general and administrative expenses, EBITDA, adjusted EBITDA, adjusted net income and adjusted diluted EPS are not financial measures prepared in accordance with U.S. generally accepted accounting principles, or GAAP. As used in this press release: (1) adjusted net sales represents net sales adjusted for impact on net sales due to frozen pizza recall and related insurance recoveries; (2) adjusted gross margin represents gross margin adjusted for impact on gross margin due to frozen pizza recall and related insurance recoveries; (3) adjusted selling, general and administrative expenses reflect selling, general and administrative expenses adjusted for impact on selling general and administrative expenses due to frozen pizza recall and related insurance recoveries, secondary offering costs, and costs associated with the planned Joplin plant acquisition; (4) EBITDA represents net income plus interest expense, provision for income taxes, and depreciation and amortization; (5) adjusted EBITDA represents EBITDA adjusted for impact on net sales, cost of sales, and selling, general and administrative expenses due to frozen pizza recall and related insurance recoveries; costs associated with the planned Joplin plant acquisition; secondary offering costs; stock-based compensation; and the change in fair value of convertible preferred stock warrant liability; (6) adjusted net income represents net income adjusted for impact on net sales, cost of sales, selling, general and administrative expenses and provision for income taxes due to frozen pizza recall and related insurance recoveries; costs associated with planned Joplin plant acquisition, secondary offering costs, the change in fair value of convertible preferred stock warrant liability and the provision for income taxes on these; and (7) adjusted diluted EPS represents adjusted net income divided by weighted average diluted shares of common stock.

We present adjusted net sales, adjusted gross margin, adjusted selling, general and administrative expenses, EBITDA, adjusted EBITDA, adjusted net income and adjusted diluted EPS because we believe these measures provide additional metrics to evaluate our operations and, when considered with both our GAAP results and the related reconciliation to the most directly comparable GAAP measure, provide a more complete understanding of our business than could be obtained absent this disclosure. We use adjusted net sales, adjusted gross margin, adjusted selling, general and administrative expenses, EBITDA, adjusted EBITDA, adjusted net income and adjusted diluted EPS together with financial measures prepared in accordance with GAAP to assess our operating performance, to provide meaningful comparisons of operating performance across periods, to enhance our understanding of our core operating performance and to compare our performance to that of our peers and competitors. We believe that these non-GAAP financial measures are also useful to investors in assessing the operating performance of our business without the effect of the items described above. Adjusted net sales, adjusted gross margin, adjusted selling, general and administrative expenses, EBITDA, adjusted EBITDA, adjusted net income and adjusted diluted EPS are subject to inherent limitation as they reflect the exercise of judgment by management in determining how they are formulated. Further, our computation of these non-GAAP measures is likely to differ from methods used by other companies in computing similarly titled or defined terms, limiting the usefulness of these measures. These non-GAAP measures should not be considered in isolation or as alternatives to GAAP measures and do not purport to be alternatives to either net income as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. We urge investors to review the reconciliation of these non-GAAP financial measures to the comparable GAAP financial measures included in this press release, and not to rely on any single financial measure to evaluate our business.

CONTACT:  

Ed Aaron                                    
510-558-7574   
303-868-5551
[email protected]  

SOURCE Annie's, Inc.