Net Income of $28 million; Adjusted Net
Income of $24 million; Adjusted EBITDA of $76 million
AdvancePierre Foods Holdings, Inc. (NYSE:APFH) (“AdvancePierre”
or the “Company”), a leading national producer and distributor of
sandwiches, sandwich components and other entrées and snacks, today
reported financial results for the first quarter ended April 1,
2017.
First Quarter Highlights
- GAAP net income of $28.2 million, or
$0.36 per diluted share, and Adjusted Net Income1 of $24.3 million,
or $0.31 per diluted share.
- Net sales of $402.7 million included
organic core volume growth2 of 0.5%.
- Adjusted EBITDA1 of $75.8 million.
- Quarterly dividend of $12.7 million, or
$0.16 per share in the first quarter.
1See “About Non-GAAP Financial Measures”
2”Organic core volume growth” refers to the period-to-period
change in volume generated by the Company’s three core segments,
excluding volume from acquisitions and the industrial segment.
Consolidated Financial
Results
Net sales for the first quarter of 2017 were $402.7 million
compared to $394.5 million for the first quarter of 2016. The
increase was primarily attributable to volume from the acquisition
of Allied Specialty Foods (“Allied”) during the fourth quarter of
2016, and organic volume growth, partially offset by strategic
price and trade spending investments which reduced net sales to
reflect lower raw material costs.
Gross profit for the first quarter of 2017 increased by $7.3
million to $107.5 million, or 26.7% of net sales, compared to
$100.2 million, or 25.4% of net sales, for the first quarter of
2016, reflecting an increase of 130 basis points of margin. Gross
profit increased primarily due to productivity improvements,
positive price realization (net of raw material cost movements),
and contributions from the Allied acquisition and organic volume
growth.
Selling, general and administrative expenses for the first
quarter of 2017 were $53.4 million, or 13.3% of net sales, compared
to $54.4 million, or 13.8% of net sales for the first quarter of
2016.
Interest expense for the first quarter of 2017 was $13.9
million, a decrease of $11.9 million compared to $25.8 million for
the first quarter of 2016. The decrease was primarily from lower
rates due to the fiscal year 2016 refinancing activities and lower
borrowings.
Income tax provision was $18.5 million for the first quarter of
2017 reflecting a 39.7% effective tax rate, as compared to an
income tax provision of $1.4 million for the first quarter of
2016.
AdvancePierre’s reported GAAP net income was $28.2 million, or
$0.36 per diluted share, for the first quarter of 2017, compared to
$16.6 million, or $0.25 per diluted share, for the first quarter of
2016. Adjusted Net Income for the first quarter of 2017 was $24.3
million, or $0.31 per diluted share compared to $23.0 million, or
$0.34 per diluted share, for the first quarter of 2016. For the
first quarter of 2017, Adjusted EBITDA increased 10.2% to $75.8
million from $68.8 million for the first quarter of 2016.
Segment Financial
Results
Foodservice
Net sales for the Foodservice segment increased 0.6% to $217.4
million in the first quarter of 2017, compared to $216.0 million
for the first quarter of 2016, reflecting acquired revenue (5.2%)
and organic volume growth (0.5%), partially offset by a reduction
in average sales price (4.3%) and unfavorable mix (0.8%).
Operating income for the segment improved 9.5% reflecting
productivity improvements and positive price realization (net of
raw material movements), as well as income from acquisition volume,
partially offset by mix in schools and chains business
channels.
Retail
Net sales for the Retail segment increased 1.5% to $107.5
million in the first quarter of 2017, compared to $105.9 million
for the first quarter of 2016, reflecting favorable mix (0.5%),
increased organic volume (0.3%), acquired volume (0.1%), and an
increase in net pricing (0.6%). The increase in volume was
primarily due to expanded distribution in traditional grocery
highlighted by continued growth in the stuffed entrées category,
and value channels.
Operating income for the Retail segment increased 20.6% to $11.0
million in the first quarter of 2017, compared to $9.1 million for
the first quarter of 2016, primarily as a result of higher sales
volume, positive business mix, and productivity improvements.
Convenience
Net sales for the Convenience segment increased 1.5% to $53.8
million in the first quarter of 2017, compared to $53.0 million for
the first quarter of 2016 reflecting favorable mix (1.5%), organic
volume growth (0.8%), acquired volume (0.5%), partially offset by a
reduction in net pricing (1.3%).
Operating income for the Convenience segment increased 15.1% to
$10.1 million in the first quarter of 2017, compared to $8.8
million for the first quarter of 2016, reflecting higher sales
volume, productivity improvements and positive price realization
(net of raw materials movements), partially offset by other input
cost movements.
Industrial
Net sales for the Industrial segment increased 22.7% to $24.0
million in the first quarter of 2017, compared to $19.5 million for
the first quarter of 2016, reflecting the benefit of acquired
volume (12.3%), higher organic volume (6.1%), and favorable mix
(6.1%), partially offset by a reduction in net pricing (1.8%).
Operating income for the Industrial segment increased to $1.7
million in the first quarter of 2017 from $0.5 million for the
first quarter of 2016, primarily as a result of increased acquired
volume.
Unallocated Corporate Expenses
Unallocated corporate expenses decreased to $3.1 million in the
first quarter of 2017 from $12.0 million for the first quarter of
2016. The $8.9 million reduction was driven by a $6.6 million
credit adjustment relating to the earn-out that was recorded in
connection with the Landshire acquisition, and a $5.4 million
reduction in expenses related to sponsor fees and public filing.
This was partially offset by a $2.4 million increase in non-cash
stock based compensation expense.
About Non-GAAP Financial
Measures
“Adjusted Net Income”, “Adjusted Diluted Net Income per Share,”
“EBITDA”, and “Adjusted EBITDA” are “non-GAAP financial measures.”
A non-GAAP financial measure is a numerical measure of financial
performance that excludes or includes amounts that are different
from the most directly comparable measure calculated and presented
in accordance with GAAP in AdvancePierre’s consolidated balance
sheets and related consolidated statements of operations,
comprehensive income, changes in stockholders’ equity and cash
flows.
AdvancePierre presents Adjusted Net Income, Adjusted Diluted Net
Income per Share, EBITDA and Adjusted EBITDA as performance
measures because it believes these measures facilitate a comparison
of its operating performance on a consistent basis from
period-to-period and provide for a more complete understanding of
factors and trends affecting its business than measures under GAAP
can provide alone. AdvancePierre also believes these non-GAAP
financial measures are useful tools because they are frequently
used by securities analysts, investors and other interested parties
in their evaluation of the operating performance of companies in
industries similar to AdvancePierre’s. However, AdvancePierre’s
definition of these non-GAAP financial measures may not be the same
as similarly titled measures used by other companies.
AdvancePierre also believes that Adjusted EBITDA is useful to
investors in evaluating its operating performance because it
provides a means to evaluate the operating performance of its
business on an ongoing basis using criteria that management uses
for evaluation and planning purposes. Because Adjusted EBITDA
facilitates internal comparisons of AdvancePierre’s historical
financial position and operating performance on a more consistent
basis, management also uses Adjusted EBITDA in measuring
AdvancePierre’s performance relative to that of its competitors, in
communications with its board of directors concerning its operating
performance and in evaluating acquisition opportunities. In
addition, targets for Adjusted EBITDA are among the measures
AdvancePierre uses to evaluate management's performance for
purposes of determining their compensation.
Non-GAAP financial measures have limitations as analytical tools
and should not be considered in isolation from, or as an
alternative to, or more meaningful than, the most directly
comparable measure calculated and presented in accordance with
GAAP. Because of these limitations, investors should rely primarily
on the most directly comparable measure calculated and presented in
accordance with GAAP and use non-GAAP financial measures only as a
supplement. In evaluating non-GAAP financial measures, investors
should be aware that in the future AdvancePierre may incur expenses
similar to those for which adjustments are made in calculating
Adjusted Net Income, Adjusted Diluted Net Income per Share, EBITDA
and Adjusted EBITDA. These non-GAAP financial measures should not
be considered as a measure of discretionary cash available to
AdvancePierre to invest in the growth of its business.
Reconciliations from net income to Adjusted Net Income, Adjusted
Diluted Net Income per Share, EBITDA and Adjusted EBITDA are
included in the tables below for the first quarter of 2017 and
2016.
Conference Call
The Company will not host a conference call in conjunction with
this release.
About AdvancePierre
Foods
AdvancePierre Foods Holdings, Inc., headquartered in Cincinnati,
Ohio, is a leading national producer and distributor of
value-added, convenient, ready-to-eat sandwiches, sandwich
components and other entrées and snacks to a wide variety of
distribution outlets including foodservice, retail and convenience
store providers. With revenues of $1.6 billion in 2016 and
approximately 4,500 employees, the Company offers a broad line of
products across all day parts including: ready-to-eat sandwiches
(such as breakfast sandwiches, peanut butter and jelly sandwiches
and hamburgers); sandwich components (such as flame-grilled
hamburger and chicken patties, and Philly steaks); and other
entrées and snacks (such as country-fried steak, stuffed entrées,
chicken tenders and cinnamon dough bites).
Forward-Looking
Statements
This report contains “forward-looking statements.” The words
“estimates,” “expects,” “contemplates”, “anticipates,” “projects,”
“plans,” “intends,” “believes,” “forecasts,” “may,” “should” and
variations of such words or similar expressions are intended to
identify forward-looking statements and not historical facts. The
forward-looking statements are based upon the Company’s current
expectations, beliefs and projections, and various assumptions,
many of which, by their nature, are inherently uncertain and beyond
the Company’s control. Actual results may vary materially from what
is expressed in or indicated by the forward-looking statements as a
result of various factors, some of which are beyond the Company’s
control, including but not limited to: competition, disruption of
the Company’s supply chain, the loss of or reduced purchasing by
any of the Company’s major customers, increases in the prices of
raw materials, deterioration of general economic conditions,
changes in consumer eating habits, potential product liability
claims and inadequacy of insurance and indemnification agreements
in covering any successful claims, adverse publicity, exposure to
legal proceedings or other claims, claims regarding the Company’s
intellectual property rights or termination of the Company’s
material licenses, failure to comply with government contracts or
applicable laws and regulations, failure to comply with
governmental and environmental regulations, labor disruptions,
failure to retain members of the Company’s senior management team,
inability to identify, complete and integrate acquired businesses,
inability to realize anticipated cost savings or incurrence of
additional costs in efforts to realize such cost savings, breaches
of data security, disruptions in the Company’s information
technology systems, the impact of the Company’s high level of
indebtedness, and Oaktree’s control of the Company, and the other
risks and uncertainties detailed in the Company’s periodic
reporting, including the Company’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2016, and any subsequent
quarterly reports on Form 10-Q. The Company does not undertake any
obligation to update any forward-looking statement except as
required by law.
AdvancePierre Foods Holdings, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share
amounts)
First Quarter Ended April 1, April 2,
2017 2016 Net sales $ 402,729 $ 394,495 Cost
of goods sold 269,069 270,104 Distribution expenses 26,200
24,200 Gross profit 107,460 100,191 Selling, general
and administrative expenses 53,441 54,396 Other (income) expense,
net (6,672 ) 1,985 Operating income 60,691 43,810
Interest expense: Third party interest 12,548 22,466 Related party
interest 825 754 Amortization of debt issuance costs and original
issue discount 566 2,587 Income before income
tax provision 46,752 18,003 Income tax provision 18,544
1,439 Net income $ 28,208 $ 16,564 Net
income per common share Weighted average common shares
outstanding—basic 78,126 66,025 Net income per common share—basic $
0.36 $ 0.25 Weighted average common shares outstanding—diluted
78,173 66,881 Net income per common share—diluted $ 0.36 $ 0.25
Adjusted EBITDA $ 75,840 $ 68,824 Adjusted Net Income $
24,266 $ 23,031 Adjusted Net Income per Common Share - diluted $
0.31 $ 0.34
AdvancePierre Foods
Holdings, Inc. Condensed Consolidated Balance Sheets
(In thousands, except per share amounts) April 1,
December 31, 2017 2016 Assets Current
Assets: Cash and cash equivalents $ 114,058 $ 104,440 Accounts
receivable, net of allowances of $442 and $291 at April 1, 2017 and
December 31, 2016, respectively 95,553 82,458 Inventories 179,720
165,626 Donated food value of USDA commodity inventory 46,951
45,022 Prepaid expenses and other current assets 10,852
12,111 Total current assets 447,134 409,657
Property, plant and equipment, net 262,701
257,300 Other Assets Goodwill 330,393 330,393 Other
intangibles, net 234,983 242,537 Deferred tax asset - 2,707 Other
4,584 4,417 Total other assets
569,960 580,054 Total assets $ 1,279,795
$ 1,247,011
Liabilities and Stockholders’
Deficit Current Liabilities: Current maturities of long-term
debt $ 475 $ 274 Liabilities under tax receivable agreement -
current portion 35,793 35,793 Trade accounts payable 68,744 57,374
Accrued payroll and payroll taxes 15,896 27,539 Accrued interest
9,586 1,791 Accrued promotion and marketing 31,025 33,212 Accrued
obligations under USDA commodity program 46,084 44,937 Other
accrued liabilities 21,155 23,773 Total
current liabilities 228,758 224,693 Noncurrent liabilities:
Long-term debt, net of current maturities (including related party
debt) 1,079,782 1,078,657 Liabilities under tax receivable
agreement, net of current portion 218,362 218,362 Deferred tax
liability 10,968 - Other long-term liabilities 23,057
26,501 Total liabilities 1,560,927
1,548,213 Stockholders’ Deficit: Common stock—$0.01
par value, 500,000 shares authorized; 78,183 and 78,079 issued at
April 1, 2017 and December 31, 2016, respectively 783 781
Additional paid-in capital 17,056 12,323 Stockholder notes
receivable (721 ) (902 ) Accumulated deficit (298,250 )
(313,404 ) Total stockholders’ deficit (281,132 )
(301,202 ) Total liabilities and stockholders’ deficit $
1,279,795 $ 1,247,011
AdvancePierre Foods Holdings, Inc. Condensed Consolidated
Statements of Cash Flows (In thousands) First Quarter
Ended April 1, April 2, 2017 2016
Cash flows from operating activities Net income $ 28,208 $
16,564 Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization charges 16,532
15,808 Deferred income tax provision 13,758 1,013 Stock-based
compensation expense 5,151 2,739 Amortization of debt issuance
costs and original issue discount 566 2,587 Contingent
consideration fair value adjustment (6,582 ) - Other changes in
operating assets and liabilities (18,427 ) 1,702 Other 254
(280 ) Net cash provided by operating activities
39,460 40,133
Cash flows used in
investing activities Purchases of property, plant and equipment
(12,329 ) (9,762 ) Net cash used in investing
activities (12,329 ) (9,762 )
Cash flows used in
financing activities Repayments of term loans and capital
leases (178 ) (3,294 ) Borrowings on revolving line of credit, net
- 185 Repayments of other long-term liabilities (3,906 ) (6,558 )
Dividends and dividend equivalents (12,712 ) - Other, net
(717 ) 1,689 Net cash used in financing activities
(17,513 ) (7,978 ) Net increase in cash and cash
equivalents 9,618 22,393 Cash and cash equivalents, beginning of
period 104,440 4,505 Cash and cash
equivalents, end of period $ 114,058 $ 26,898
AdvancePierre Foods Holdings, Inc. Segment Data
(Unaudited) (In thousands, except for percent amounts)
First Quarter Ended
April 1, April 2, 2017
2016 Net sales Foodservice $ 217,406 $ 216,040 Retail
107,531 105,899 Convenience 53,827 53,023 Industrial 23,965
19,533 $ 402,729 $ 394,495
Operating income Foodservice $ 40,992 $ 37,448 Retail
10,987 9,104 Convenience 10,074 8,750 Industrial 1,704 513
Unallocated corporate expenses, net (3,066 ) (12,005
) $ 60,691 $ 43,810
Change in Net Sales for First
Quarter
Due to Changes in: ended April 1, 2017
Acquisitions Volume Mix Pricing
Total Foodservice 5.2 % 0.5 % -0.8 % -4.3 % 0.6 %
Retail 0.1 % 0.3 % 0.5 % 0.6 % 1.5 % Convenience 0.5 % 0.8 % 1.5 %
-1.3 % 1.5 % Industrial 12.3 % 6.1 % 6.1 % -1.8 %
22.7 % 3.6 % 0.8 % 0.2 % -2.5 % 2.1 % Memo:
Core Segments 3.1 % 0.5 % -0.1 % -2.5 % 1.0 %
AdvancePierre Foods Holdings, Inc. Reconciliation
of EBITDA and Adjusted EBITDA to Net Income (In
thousands) First Quarter Ended April 1, April
2, 2017 2016 Net
income $ 28,208 $ 16,564 Interest expense 13,939 25,807 Income
tax provision 18,544 1,439 Depreciation and amortization expense
16,532 15,808
EBITDA 77,223 59,618
Restructuring expenses (a) - 12 Non-cash stock based compensation
expense (b) 5,151 2,739 Contingent consideration fair value
adjustment (c) (6,582 ) - Sponsor fees and expenses (d) - 4,201
Merger and acquisition expenses and public filing expenses (e) 731
1,928 Other (683 ) 326
Adjusted EBITDA $
75,840 $ 68,824
(a) Costs associated with reorganization and restructuring
activities, business acquisitions, integration of acquired
businesses and implementation of the APF Way. (b) Employee stock
and option grants, which we expense over the vesting period, based
on the fair value of the award on the date of the grant or any
subsequent modification date. (c) Adjustment relating to an
earn-out amount that was recorded in connection with the
acquisition of Landshire. (d) Quarterly management fees and expense
reimbursements paid to affiliates of Oaktree and and certain of our
pre-IPO stockholders. (e) Certain public filing expenses.
AdvancePierre Foods Holdings, Inc.
Reconciliation of Adjusted Net Income to Net Income (In
thousands, except per share amounts) First Quarter Ended
April 1, April 2, 2017 2016 Net
income $ 28,208 $ 16,564 Restructuring expenses (a) - 12
Contingent consideration fair value adjustment (b) (6,582 ) -
Sponsor fees and expenses (c) - 4,201 Merger and acquisition
expenses and public filing expenses (d) 731 1,928 Other (683 ) 326
Tax effect of the above adjustments (e) 2,592
-
Adjusted Net Income $ 24,266 $ 23,031
Adjusted
Diluted Net Income per Share $ 0.31 $ 0.34
(a) Costs associated with reorganization and
restructuring activities, business acquisitions, integration of
acquired businesses and implementation of the APF Way. (b)
Adjustment relating to an earn-out amount that was recorded in
connection with the acquisition of Landshire. (c) Quarterly
management fees and expense reimbursements paid to affiliates of
Oaktree and and certain of our pre-IPO stockholders. (d) Certain
public filing expenses. (e) For 1st Quarter 2017, the tax effect
was computed using a tax rate of 39.7%, the effective tax rate for
1st Quarter 2017. For 1st Quarter 2016, the estimated tax effect of
the adjustments was insignificant as the release of the valuation
allowance in Fiscal 2016 resulted in no change to Adjusted Net
Income with or without these adjustments. If not for the valuation
allowance, these adjustments would be tax effected at the
approximate blended tax rate of 39.0%.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170510005701/en/
InvestorsAdvancePierre Foods Holdings, Inc.John W.
Morgan, 513-372-9338Vice President, Investor
RelationsJohn.Morgan@advancepierre.comorMediaVehr
CommunicationsLaura Phillips,
513-381-8347lphillips@vehrcommunications.com
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