UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended JuneSeptember 30, 2012
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Transition Period From To
Commission File Number: 001-35470
Annie’s, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 20-1266625 | |||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||
1610 Fifth Street Berkeley, CA | 94710 | |||
(Address of principal executive offices) | (Zip Code) |
(510) 558-7500
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non–acceleratednon-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b–212b-2 of the Exchange Act.
Large accelerated filer | ¨ | Accelerated filer | ¨ | |||
Non-accelerated filer | x (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b–212b-2 of the Exchange Act). Yes ¨ No x
Under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), Annie’s, Inc. qualifies as an “emerging growth company,” as defined under the JOBS Act.
On JulyOctober 15, 2012, the registrant had 17,060,11117,122,249 shares of common stock, par value $0.001 per share, outstanding.
Annie’s, Inc.
FORM 10-Q
PART I – FINANCIAL INFORMATION
PART I – FINANCIAL INFORMATION | ||||||
Item 1. | 2 | |||||
Condensed Consolidated Balance Sheets as of | 2 | |||||
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Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |||||
Item 3. | ||||||
Item 4. | ||||||
PART II – OTHER INFORMATION | ||||||
Item 1. | 30 | |||||
Item 2. | ||||||
Item 6. | ||||||
PART I – FINANCIAL INFORMATION
ITEM 1 – CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands)
June 30, | March 31, | September 30, | March 31, | |||||||||||||
2012 | 2012 | 2012 | 2012 | |||||||||||||
ASSETS | ||||||||||||||||
CURRENT ASSETS: | ||||||||||||||||
Cash | $ | 5,102 | $ | 562 | $ | 14,629 | $ | 562 | ||||||||
Accounts receivable, net | 7,388 | 11,870 | 11,708 | 11,870 | ||||||||||||
Inventory | 14,596 | 10,202 | 12,401 | 10,202 | ||||||||||||
Deferred tax assets | 1,995 | 1,995 | 1,995 | 1,995 | ||||||||||||
Income tax receivable | 2,870 | 164 | 1,743 | 164 | ||||||||||||
Prepaid expenses and other current assets | 1,604 | 1,252 | 2,503 | 1,252 | ||||||||||||
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Total current assets | 33,555 | 26,045 | 44,979 | 26,045 | ||||||||||||
Property and equipment, net | 4,888 | 4,298 | 4,887 | 4,298 | ||||||||||||
Goodwill | 30,809 | 30,809 | 30,809 | 30,809 | ||||||||||||
Intangible assets, net | 1,161 | 1,176 | 1,146 | 1,176 | ||||||||||||
Deferred tax assets, long-term | 4,504 | 4,650 | 4,433 | 4,650 | ||||||||||||
Deferred initial public offering costs | — | 5,343 | — | 5,343 | ||||||||||||
Other non-current assets | 103 | 108 | 99 | 108 | ||||||||||||
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Total assets | $ | 75,020 | $ | 72,429 | $ | 86,353 | $ | 72,429 | ||||||||
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LIABILITIES, CONVERTIBLE PREFERRED STOCK ANDSTOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||||||||||
CURRENT LIABILITIES: | ||||||||||||||||
Accounts payable | $ | 1,185 | $ | 861 | $ | 2,233 | $ | 861 | ||||||||
Related-party payable | — | 1,305 | — | 1,305 | ||||||||||||
Accrued liabilities | 4,304 | 7,452 | 9,042 | 7,452 | ||||||||||||
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Total current liabilities | 5,489 | 9,618 | 11,275 | 9,618 | ||||||||||||
Credit facility | — | 12,796 | — | 12,796 | ||||||||||||
Convertible preferred stock warrant liability | — | 2,157 | — | 2,157 | ||||||||||||
Other non-current liabilities | 956 | 921 | 992 | 921 | ||||||||||||
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Total liabilities | 6,445 | 25,492 | 12,267 | 25,492 | ||||||||||||
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Convertible preferred stock | — | 81,373 | — | 81,373 | ||||||||||||
STOCKHOLDERS’ EQUITY (DEFICIT): | ||||||||||||||||
Preferred stock | — | — | — | — | ||||||||||||
Common stock | 17 | 1 | 17 | 1 | ||||||||||||
Additional paid-in capital | 105,256 | 4,392 | 106,982 | 4,392 | ||||||||||||
Accumulated deficit | (36,698 | ) | (38,829 | ) | (32,913 | ) | (38,829 | ) | ||||||||
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Total stockholders’ equity (deficit) | 68,575 | (34,436 | ) | 74,086 | (34,436 | ) | ||||||||||
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Total liabilities, convertible preferred stock and stockholders’ equity (deficit) | $ | 75,020 | $ | 72,429 | $ | 86,353 | $ | 72,429 | ||||||||
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See accompanying notes to the unaudited condensed consolidated financial statements
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except share and per share amounts)
Three Months Ended June 30, | Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||
Net sales | $ | 34,293 | $ | 28,610 | $ | 46,686 | $ | 38,872 | $ | 80,979 | $ | 67,482 | ||||||||||||
Cost of sales | 20,486 | 17,022 | 28,786 | 24,737 | 49,272 | 41,759 | ||||||||||||||||||
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Gross profit | 13,807 | 11,588 | 17,900 | 14,135 | 31,707 | 25,723 | ||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Selling, general and administrative | 10,211 | 8,303 | 11,539 | 8,056 | 21,750 | 16,359 | ||||||||||||||||||
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Income from operations | 3,596 | 3,285 | 6,361 | 6,079 | 9,957 | 9,364 | ||||||||||||||||||
Interest expense | (40 | ) | (18 | ) | (40 | ) | (23 | ) | (80 | ) | (41 | ) | ||||||||||||
Other income (expense), net | 49 | (484 | ) | 36 | 13 | 85 | (471 | ) | ||||||||||||||||
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Income before provision for income taxes | 3,605 | 2,783 | 6,357 | 6,069 | 9,962 | 8,852 | ||||||||||||||||||
Provision for income taxes | 1,474 | 971 | 2,572 | 2,453 | 4,046 | 3,424 | ||||||||||||||||||
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Net income | $ | 2,131 | $ | 1,812 | $ | 3,785 | $ | 3,616 | $ | 5,916 | $ | 5,428 | ||||||||||||
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Net income attributable to common stockholders | $ | 2,131 | $ | 54 | $ | 3,785 | $ | 107 | $ | 5,916 | $ | 161 | ||||||||||||
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Net income per share attributable to common stockholders | ||||||||||||||||||||||||
—Basic | $ | 0.13 | $ | 0.12 | $ | 0.22 | $ | 0.23 | $ | 0.35 | $ | 0.35 | ||||||||||||
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—Diluted | $ | 0.12 | $ | 0.04 | $ | 0.21 | $ | 0.11 | $ | 0.34 | $ | 0.16 | ||||||||||||
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Weighted average shares of common stock outstanding used in computing net income per share attributable to common stockholders | ||||||||||||||||||||||||
—Basic | 16,936,007 | 464,994 | 17,070,327 | 465,045 | 17,003,534 | 465,019 | ||||||||||||||||||
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—Diluted | 17,600,908 | 1,236,410 | 17,702,516 | 1,018,359 | 17,656,356 | 986,680 | ||||||||||||||||||
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See accompanying notes to the unaudited condensed consolidated financial statements
Condensed Consolidated StatementsStatement of Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(unaudited)
(in thousands, except share amounts)
Convertible Preferred Stock | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders’ Equity (Deficit) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | Convertible Preferred Stock | Preferred Stock | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders’ Equity (Deficit) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2012 | 12,281,553 | $ | 81,373 | — | $ | — | 483,242 | $ | 1 | $ | 4,392 | $ | (38,829 | ) | $ | (34,436 | ) | 12,281,553 | $ | 81,373 | — | $ | — | 483,242 | $ | 1 | $ | 4,392 | $ | (38,829 | ) | $ | (34,436 | ) | ||||||||||||||||||||||||||||||||||||||
Reclassification of convertible preferred stock warrant liability upon consummation of IPO | — | — | — | — | — | — | 2,170 | — | 2,170 | — | — | — | — | — | — | 2,170 | — | 2,170 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion of convertible preferred stock into common stock upon consummation of IPO | (12,281,553 | ) | (81,373 | ) | — | — | 15,221,571 | 15 | 81,358 | — | 81,373 | (12,281,553 | ) | (81,373 | ) | — | — | 15,221,571 | 15 | 81,358 | — | 81,373 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Shares issued upon consummation of IPO | — | — | — | — | 950,000 | 1 | 11,145 | — | 11,146 | — | — | — | — | 950,000 | 1 | 11,145 | — | 11,146 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | — | — | — | — | 342,105 | — | 1,774 | — | 1,774 | — | — | — | — | 403,243 | — | 2,204 | — | 2,204 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Excess tax benefit from stock-based compensation | — | — | — | — | — | — | 4,201 | — | 4,201 | — | — | — | — | — | — | 5,266 | — | 5,266 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net exercise of warrant to purchase shares of common stock | 63,193 | — | — | — | — | 63,193 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | 216 | — | 216 | — | — | — | — | — | — | 447 | — | 447 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income | — | — | — | — | — | — | — | 2,131 | 2,131 | — | — | — | — | — | — | — | 5,916 | 5,916 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Balance at June 30, 2012 | — | $ | — | — | $ | — | 17,060,111 | $ | 17 | $ | 105,256 | $ | (36,698 | ) | $ | 68,575 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2012 | — | $ | — | — | $ | — | 17,121,249 | $ | 17 | $ | 106,982 | $ | (32,913 | ) | $ | 74,086 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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See accompanying notes to the unaudited condensed consolidated financial statements
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
Three Months Ended June 30, | Six Months Ended September 30, | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||
Net Income | $ | 2,131 | $ | 1,812 | $ | 5,916 | $ | 5,428 | ||||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||||||||||
Depreciation and amortization | 200 | 152 | 463 | 302 | ||||||||||||
Stock-based compensation | 216 | 106 | 447 | 239 | ||||||||||||
Allowances for trade discounts and other | — | (670 | ) | (1,100 | ) | 556 | ||||||||||
Inventory reserves | (112 | ) | — | (80 | ) | — | ||||||||||
Excess tax benefit from stock-based compensation | (4,201 | ) | — | (5,266 | ) | — | ||||||||||
Accretion of imputed interest on purchase of intangible asset | 35 | — | 71 | — | ||||||||||||
Change in fair value of convertible preferred stock warrant liability | 13 | 518 | 13 | 538 | ||||||||||||
Amortization of deferred financing costs | 5 | 8 | 9 | 17 | ||||||||||||
Deferred taxes | 146 | (332 | ) | 217 | (332 | ) | ||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Accounts receivable, net | 4,482 | 5,017 | 1,262 | 2,652 | ||||||||||||
Inventory | (4,282 | ) | (7,146 | ) | (2,119 | ) | (2,174 | ) | ||||||||
Income tax receivable | 164 | — | (149 | ) | — | |||||||||||
Prepaid expenses, other current and non-current assets | (352 | ) | (61 | ) | 4,092 | (773 | ) | |||||||||
Accounts payable | 284 | (5,611 | ) | 1,359 | (7,887 | ) | ||||||||||
Related-party payable | (1,305 | ) | 47 | (1,305 | ) | (3 | ) | |||||||||
Accrued expenses and other non-current liabilities | 3,526 | (515 | ) | 5,426 | 1,190 | |||||||||||
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Net cash provided by (used in) operating activities | 950 | (6,675 | ) | 9,256 | (247 | ) | ||||||||||
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CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||
Purchase of property and equipment | (735 | ) | (380 | ) | (1,009 | ) | (860 | ) | ||||||||
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Net cash used in investing activities | (735 | ) | (380 | ) | (1,009 | ) | (860 | ) | ||||||||
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CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||
Proceeds from credit facility | 735 | 20,198 | 2,663 | 33,206 | ||||||||||||
Payments to credit facility | (13,531 | ) | (16,774 | ) | (15,459 | ) | (33,206 | ) | ||||||||
Proceeds from common shares issued in initial public offering, net of issuance costs | 11,146 | — | 11,146 | — | ||||||||||||
Dividends paid | — | (1,519 | ) | |||||||||||||
Net repurchase of stock options | — | (602 | ) | — | (602 | ) | ||||||||||
Excess tax benefit from stock-based compensation | 4,201 | — | 5,266 | — | ||||||||||||
Proceeds from exercises of stock options | 1,774 | — | 2,204 | 10 | ||||||||||||
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Net cash provided by financing activities | 4,325 | 2,822 | ||||||||||||||
Net cash provided by (used in) financing activities | 5,820 | (2,111 | ) | |||||||||||||
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NET INCREASE (DECREASE) IN CASH | 4,540 | (4,233 | ) | 14,067 | (3,218 | ) | ||||||||||
CASH—Beginning of period | 562 | 7,333 | 562 | 7,333 | ||||||||||||
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CASH—End of period | $ | 5,102 | $ | 3,100 | $ | 14,629 | $ | 4,115 | ||||||||
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NONCASH INVESTING AND FINANCING ACTIVITIES: | ||||||||||||||||
Purchase of property and equipment funded through accounts payable | $ | 40 | $ | — | $ | 13 | $ | — | ||||||||
Conversion of convertible preferred stock into common stock | $ | 81,373 | $ | — | $ | 81,373 | $ | — |
See accompanying notes to the unaudited condensed consolidated financial statements
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. | Description of Business |
Annie’s, Inc. (the “Company”), a Delaware corporation incorporated on April 28, 2004, is a natural and organic food company. The Company offers over 125 products in the following three product categories: meals; snacks; and dressings, condiments and other. The Company’s products are sold throughout the U.S. and Canada via a multi-channel distribution network that serves the mainstream grocery, mass merchandiser and natural retailer channels. The Company’s headquarters are located in Berkeley, California.
2. | Summary of Significant Accounting Policies |
Basis of Presentation and Consolidation
The accompanying interim condensed consolidated balance sheets as of JuneSeptember 30, 2012 and March 31, 2012, interim condensed consolidated statements of convertible preferred stock and stockholders’ equity (deficit) as of September 30, 2012 and March 31, 2012, and the interim condensed consolidated statements of operations for the three and six months ended September 30, 2012 and 2011, and cash flows for the threesix months ended JuneSeptember 30, 2012 and 2011 are unaudited. These interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of thecertain information and notes required byfootnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP for complete financial statements.have been condensed or omitted pursuant to such rules and regulations. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in Company’s Annual Report on Form 10-K filed with the SEC on June 8, 2012. The March 31, 2012 condensed consolidated balance sheet included herein was derived from the audited financial statements as of that date, but does not include all disclosures including notes required by U.S. GAAP for completeaudited financial statements.
The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments of a normal recurring nature considered necessary to state fairly our financial position as of JuneSeptember 30, 2012 and results of our operations for the three and six months ended September 30, 2012 and 2011, and cash flows for the threesix months ended JuneSeptember 30, 2012 and 2011. The interim results for the threesix months ended JuneSeptember 30, 2012 are not necessarily indicative of the results that may be expected for the year ending March 31, 2013.
The unaudited interim condensed consolidated financial statements include the accounts of the Company and its wholly-ownedwholly owned subsidiaries, Annie’s Homegrown, Inc., Annie’s Enterprises, Inc. and Napa Valley Kitchen, Inc. and Annie’s Enterprises, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.
Initial Public Offering (IPO)
On April 2, 2012, the Company closed its IPO, in which it sold 950,000 shares and certain stockholders sold 4,800,000 shares of common stock at aan offering price to the public of $19.00 per share. The aggregate amount of consideration for shares sold in the offering was $109.3 million. The shares sold by such stockholders included 750,000 additional shares purchased by the underwriters from certain of these stockholders pursuant to an option the underwriters held to cover overallotments of shares. The Company did not receive any proceeds from the sale of shares by the stockholders. The Companyshare and raised $11.1 million in net proceeds after deducting underwriting discounts and commissions of $1.3 million and other offering expenses of $5.6 million. In addition, certain of the Company’s stockholders, including funds administered by Solera Capital, LLC (“Solera”), sold 4.8 million shares at the $19.00 offering price in the IPO.
Immediately prior to the closing of the IPO, the outstanding shares of convertible preferred stock were automatically converted into 15,221,571 shares of common stock, the Company’s outstanding convertible preferred stock warrant was automatically converted into a common stock warrant to purchase a total of 80,560 shares of common stock and the related convertible preferred stock warrant liability was reclassified to additional paid-in capital.
Upon consummation of the IPO,Pursuant to our Amended and Restated Certificate of Incorporation or Charter and Amended and Restated Bylaws, took effect. The Charterwhich became effective upon consummation of the IPO, the Company has authorized 35,000,000 shares of capital stock, 30,000,000 shares, par value $0.001 per share, of which are common Stockstock and 5,000,000 shares, par value $0.001 per share, of which are preferred stock. NoAs of September 30, 2012, 17,121,249 shares of common stock were issued and outstanding and no shares of preferred stock were issued and outstanding as of June 30, 2012.outstanding.
Annie’s, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Secondary Public Offering
On August 6, 2012, the Company closed a secondary public offering, in which certain stockholders, including funds administered by Solera, sold 3,649,976 shares of common stock at an offering price of $39.25 per share. The Company did not receive any proceeds from the sale of shares by the selling stockholders. The offering expenses incurred by the Company were $0.7 million, including legal, accounting and printing costs and various other fees associated with the registration and sale of common stock sold in the secondary public offering.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and expenses during the reported periods. Actual results could differ from those estimates.
Concentration Risk
Customers with 10% or more of the Company’s net sales consist of the following:
Net Sales | Net Sales | |||||||||||||||||||||||
Customer A | Customer B | Customer C | Customer A | Customer B | Customer C | |||||||||||||||||||
Three Months Ended June 30, | ||||||||||||||||||||||||
Three Months Ended September 30, | ||||||||||||||||||||||||
2012 | 28 | % | 9 | % | 10 | % | 27 | % | 13 | % | 14 | % | ||||||||||||
2011 | 25 | % | 11 | % | 12 | % | 25 | % | 14 | % | 12 | % | ||||||||||||
Six Months Ended September 30, | ||||||||||||||||||||||||
2012 | 27 | % | 11 | % | 12 | % | ||||||||||||||||||
2011 | 25 | % | 13 | % | 12 | % |
As of JuneSeptember 30, 2012, two customersCustomer A and Customer B represented 25%26% and 22%18%, respectively, of accounts receivable. The same two customers represented 45%21% and 21%45%, respectively, of accounts receivable as of March 31, 2012.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:
Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The categorization of a financial instrument within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.
Annie’s, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The carrying amounts of the Company’s financial instruments, including accounts receivable, accounts payable and accrued liabilities, approximate fair value due to their relatively short maturities. The carrying amount of the convertible preferred stock warrant liability at March 31, 2012 represented its estimated fair value (Note 7).value. Upon consummation of the IPO on April 2, 2012, prior to the automatic conversion of the convertible preferred stock warrant into a common stock warrant, itthe estimated fair value was remeasured and the change in fair value was recorded as a non-cash charge in other income (expense), net and the related liability was reclassified to additional paid-in capital.
Property and Equipment
The Company capitalizes certain internal and external costs related to the development and enhancement of the Company’s internal-use software. Capitalized internal-use software development costs are included in property and equipment on the accompanying consolidated balance sheets. At JuneSeptember 30, 2012 and March 31, 2012, capitalized software development costs, net of accumulated amortization, totaled $2.4$2.3 million and 2.0 million, respectively. As of JuneSeptember 30, 2012, of the $2.4Company had $2.1 million capitalized software development costs, net of accumulated amortization $2.2and $0.2 million was in construction in progress.
Annie’s, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Shipping and Handling Costs
Shipping and handling costs are included in selling, general and administrative expenses in the consolidated statements of operations. Shipping and handling costs primarily consist of costs associated with moving finished products to customers, including costs associated with the Company’s distribution center, route delivery costs and the cost of shipping products to customers through third-party carriers. Shipping and handling costs recorded as a component of selling, general and administrative expenses were $1.3$1.5 million and $1.1 million for the three months ended JuneSeptember 30, 2012 and 2011, respectively and were $2.8 million and $2.2 million for the six months ended September 30, 2012 and 2011, respectively.
Research and Development Costs
Research and development costs primarily consist of consumer research, employee-related costs for personnel responsible for the research and development of new products, supplies and materials. Research and development costs recorded as a component of selling, general and administrative expenses were $0.8$0.7 million and $0.4$0.5 million for the three months ended JuneSeptember 30, 2012 and 2011, respectively and were $1.5 million and $0.9 million for the six months ended September 30, 2012 and 2011, respectively.
Advertising Costs
Advertising costs include the costs of producing advertisements and the costs of communicating advertisements. The costs of producing advertisements are expensed as incurred.incurred and the costs of communicating advertising are expensed over the period of communication. Total advertising costs for the three months ended JuneSeptember 30, 2012 and 2011 included in selling, general and administrative expenses were $0.1 million and $0.3 million, respectively. Total advertising costs were $0.4 million and $0.1$0.4 million for the six months ended September 30, 2012 and 2011, respectively.
Net Income Per Share of Common Stock
Basic net income per share of common stock is calculated by dividing the net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted net income per share of common stock is computed by giving effect to all potentially dilutive securities outstanding during the period. Potential common shares included those underlying our convertible preferred stock (using the if-converted method), stock options to purchase our common stock and restricted stock units (using the treasury stock method) and the warrant to purchase our common stock (using the treasury stock method). Performance share units were excluded from potential common shares since no shares were issuable as of JuneSeptember 30, 2012 and March 31, 2012. The performance share units vest based on achievement of specified percentage of targeted cumulative compounded earnings per share growth rate during the three-year period beginning April 1, 2012 and ending March 31, 2015.
Annie’s, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The potential common shares from the convertible preferred stock warrant had an anti-dilutive effect on the earnings per share for the six months ended September 30, 2011, and the potential common shares from convertible preferred stock had an anti-dilutive effect on the earnings per share for the three and six months ended JuneSeptember 30, 2011, and, accordingly, were excluded from the calculation. Additionally, certain stock options to purchase our common stock had an anti-dilutive effect on the earnings per share for the periods presented, and were also excluded. Further, certain restricted stock units had an anti-dilutive effect on the earnings per share for the three and six months ended September 30, 2012 and were excluded.
Net income attributable to common stockholders during the three and six months ended JuneSeptember 30, 2011, was allocated using the two-class method. The two-class method is an earnings allocation method for calculating earnings per share when a company’s capital structure includes two or more classes of common stock or common stock and participating securities. Under this method, the Company reduced income from operations by the dividends paid to convertible preferred stockholders and the rights of the convertible preferred stockholders to participate in undistributed earnings. The undistributed earnings were allocated based on the relative percentage of weighted average shares of outstanding convertible preferred stock to the total number of weighted average shares of outstanding common and convertible preferred stock.
However, during the three months ended June 30, 2012, the Company did not allocate earnings using the two-class method because the earnings attributable to convertible preferred stockholders, prior to their conversion into common stockholders on April 2, 2012, were deemed not material.
Out-of-period Adjustment
During the first quarter of the prior fiscal year,six months ended September 30, 2011, the Company corrected an error in the measurement of the convertible preferred stock warrant liability. The correction increased the fair value of the convertible preferred stock warrant liability by $0.9 million and decreased additional paid-in capital by $0.4 million with a corresponding increase in expense of $0.5 million, which was recorded in other income (expense), net in the accompanying statement of operations during the threesix months ended JuneSeptember 30, 2011. The correction was an accumulation of an error that should have been recorded in prior periods and would have increased net loss for fiscal 2009 by $44,000, increased net income by $79,000 for
Annie’s, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
fiscal 2010 and decreased net income by $0.6 million for fiscal 2011. Management had assessed the impact of this error and did not believe that it was material, either individually or in the aggregate, to any prior period financial statements or to the financial statements for the year ended March 31, 2012.
Annie’s, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
3. | Balance Sheet Components |
Inventory
Inventory is comprised of the following (in thousands):
June 30, | March 31, | September 30, | March 31, | |||||||||||||
2012 | 2012 | 2012 | 2012 | |||||||||||||
Raw materials | $ | 2,110 | $ | 1,938 | $ | 3,096 | $ | 1,938 | ||||||||
Work in process | 2,055 | 754 | 725 | 754 | ||||||||||||
Finished goods | 10,431 | 7,510 | 8,580 | 7,510 | ||||||||||||
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Inventory | $ | 14,596 | $ | 10,202 | $ | 12,401 | $ | 10,202 | ||||||||
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Property and Equipment, Net
Property and equipment, net are comprised of the following (in thousands):
June 30, | March 31, | September 30, | March 31, | |||||||||||||
2012 | 2012 | 2012 | 2012 | |||||||||||||
Equipment and automotive | $ | 1,701 | $ | 1,730 | $ | 1,876 | $ | 1,730 | ||||||||
Software | 1,281 | 1,188 | 3,189 | 1,188 | ||||||||||||
Leasehold improvements | 566 | 566 | 566 | 566 | ||||||||||||
Plates and dies | 352 | 352 | 365 | 352 | ||||||||||||
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Total property and equipment | 3,900 | 3,836 | 5,996 | 3,836 | ||||||||||||
Less: Accumulated depreciation and amortization | (1,852 | ) | (1,719 | ) | (2,099 | ) | (1,719 | ) | ||||||||
Construction in progress | 2,840 | 2,181 | 990 | 2,181 | ||||||||||||
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Property and equipment, net | $ | 4,888 | $ | 4,298 | $ | 4,887 | $ | 4,298 | ||||||||
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The Company incurred depreciation expense of $185,000$248,000 and $150,000 during$433,000 for the three and six months ended JuneSeptember 30, 2012, respectively. The depreciation expense for the same periods in prior year was $147,000 and 2011,$297,000, respectively.
Annie’s, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Intangible Assets, Net
Intangible assets, net are comprised of the following (in thousands):
June 30, | March 31, | September 30, | March 31, | |||||||||||||
2012 | 2012 | 2012 | 2012 | |||||||||||||
Product formulas | $ | 1,023 | $ | 1,023 | $ | 1,023 | $ | 1,023 | ||||||||
Other intangible assets | 189 | 189 | 189 | 189 | ||||||||||||
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Total intangible assets | 1,212 | 1,212 | 1,212 | 1,212 | ||||||||||||
Less: accumulated amortization | (51 | ) | (36 | ) | (66 | ) | (36 | ) | ||||||||
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Intangible assets, net | $ | 1,161 | $ | 1,176 | $ | 1,146 | $ | 1,176 | ||||||||
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Annie’s, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The Company incurred amortization expense of $15,000 and $2,000$30,000 on its intangible assets during the three and six months ended JuneSeptember 30, 20122012. The amortization expense for the same periods over the prior year was $3,000 and 2011,$5,000, respectively.
The estimated future amortization expense relating to intangible assets for the remainder of fiscal 2013, for each of the next five years through fiscal 2018 and thereafter is $45,000,$30,000, $60,000 and $816,000, respectively.
Accrued Liabilities
The following table shows the components of accrued liabilities (in thousands):
June 30, | March 31, | September 30, | March 31, | |||||||||||||
2012 | 2012 | 2012 | 2012 | |||||||||||||
Payroll and employee-related expenses | $ | 1,480 | $ | 2,768 | $ | 2,672 | $ | 2,768 | ||||||||
Accrued trade expenses | 1,158 | 2,631 | 1,928 | 2,631 | ||||||||||||
Inventory received not invoiced | 845 | 531 | 3,542 | 531 | ||||||||||||
Deferred rent | 253 | 264 | 242 | 264 | ||||||||||||
Brokerage commissions | 317 | 382 | 313 | 382 | ||||||||||||
Other accrued liabilities | 251 | 876 | 345 | 876 | ||||||||||||
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Total accrued liabilities | $ | 4,304 | $ | 7,452 | $ | 9,042 | $ | 7,452 | ||||||||
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4. | Credit Facility |
TheIn December 2011, the Company hasentered into a line ofsecond amendment and restated credit agreement (the “Credit Agreement”) with Bank of America, N.A., which provides for revolving loans and letters of credit up to $20.0 million and is available to the Company for a term through August 2014. The Credit Agreement is collateralizedsecured by substantially all of the Company’s assets.
Revolving advances under the Credit Agreement bear interest at the LIBOR plus 1.50 percentage points,1.5%, as defined. Weighted average interest was 1.5% for each of the three and 1.86%six months ended September 30, 2012. Weighted average interest was 1.8% and 2.2% for the three and six months ended JuneSeptember 30, 2012 and 2011, respectively. As of JuneSeptember 30, 2012 and March 31, 2012, there was $20.0 million and $7.2 million, respectively, of availability for borrowings under the Credit Agreement. An unused line fee of 0.0625% per quarter is applied to the available balance unless the Company’s outstanding borrowings exceed half of the borrowing limit. Interest is payable monthly.
There are various financial and other covenants under the Credit Agreement. Financial covenants, as defined in the Credit Agreement, include a net income covenant, total liabilities to tangible net worth covenant and a minimum fixed charge coverage covenant, through the term of the agreement.covenant. The Credit Agreement requires the Company to submit interim and annual financial statements by specified dates after each reporting period. The Company was in compliance with the financial covenants under the Credit Agreement as of JuneSeptember 30, 2012 and March 31, 2012.
Annie’s, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
5. | Related Party Transactions |
Agreement with Solera Capital, LLC
The Company had a managementan advisory services agreement with Solera Capital, LLC, or Solera, an affiliate of its principal stockholder, Solera Partners, L.P., to provide consulting and advisory services to the Company for a term ending on the later of: (i) March 5, 2014, or (ii) the date on which Solera and its affiliates cease to own at least 10% of the voting equity of the Company (including any successor thereto). The services to be provided under the agreement included (i) assisting in the raising of additional debt and equity capital from time to time for the Company, if deemed advisable by the BoardCompany’s board of Directors of the Company,directors, (ii) assisting the Company in its long-term strategic planning generally, and (iii) providing such other consulting and advisory services as the Company may reasonably request.
Annie’s, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
In consideration of Solera providing the services listed above, effective April 1, 2011, the Company was obliged to pay Solera an annual advisory fee of $600,000, payable quarterly. The Company was also obliged to reimburse Solera for out-of-pocket costs and expenses incurred by Solera on behalf of the Company. During the three and six months ended JuneSeptember 30, 2011, the Company incurred $150,000 and $300,000, respectively, for such consulting and advisory services. The advisory services agreement with Solera was terminated upon the consummation of the IPO and as such the Company paid Solera a one-time termination fee of $1.3 million in April 2012.
6. | Commitments and Contingencies |
Lease Commitments
The Company leasesentered into a lease agreement (the “Lease”) for its headquarters at 1610 Fifth Street, Berkeley, California on November 15, 2010 with an initial term that expires in February 2016. On September 25, 2012, the Company entered into an amendment to the Lease (the “Lease Amendment”). The Lease Amendment provides (i) for reconfiguration of the sample storage area to additional office space to accommodate growth, and other equipment under noncancelable operating leases(ii) the Company with a first option to extend the initial term of the lease for three years (the “First Option”) followed by a second option to extend the lease for an additional two years (the “Second Option and, together with the First Option, the “Option Periods”). The terms, covenants and conditions of the Lease, as amended, will continue to govern the Options Periods, except that the applicable monthly rent for the Option Periods will be equal to 95% of the fair market rental rate for the property, however, the monthly rent payable during the Option Periods will not be less than the monthly rent payable during the immediately preceding month of the initial term or First Option period, as applicable. The landlord is required to deliver to the Company a notice of the fair market rental rate for the property no later than August 1, 2015. If the Company does not agree with the proposed fair market rental rate, then the term of the lease will expire through fiscal yearat the end of the initial term in February 2016. In such event, the Company will have to reimburse to the landlord, an amount not to exceed 40% of the total tenant improvement allowance plus interest, as determined in accordance with the Lease. Concurrently with the execution of the Lease Amendment, the Company exercised the First Option to extend the initial lease for an additional three years to February 2019.
Rent expense for non-cancellablenon-cancelable operating leases with scheduled rent increases is recognized on a straight-line basis over the lease term. Rent expense for the three and six months ended JuneSeptember 30, 2012 was $120,000 and $239,000, respectively. Rent expense for the three and six months ended September 30, 2011 was $120,000 and $160,000,$280,000, respectively.
Future minimum lease payments under the noncancelable operating lease as of JuneSeptember 30, 2012 are as follows (in thousands):
Lease Payments | Lease Payments | |||||||
Nine Months Ending March 31, 2013 | $ | 412 | ||||||
Six Months Ending March 31, 2013 | $ | 278 | ||||||
Fiscal Year Ending March 31: | ||||||||
2014 | 563 | 601 | ||||||
2015 | 557 | 621 | ||||||
2016 | 476 | 638 | ||||||
2017 | 638 | |||||||
2018 | 638 | |||||||
2019 | 585 | |||||||
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Total future minimum lease payments | $ | 2,008 | $ | 3,999 | ||||
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Purchase Commitments
The Company has material non-cancelable purchase commitments, directly or through contract manufacturers, to purchase ingredients to be used in the future to manufacture its products. As of JuneSeptember 30, 2012, the Company’s purchase commitments totaled $13.1$16.3 million, which will substantially be incurred within a year.
Annie’s, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The Company has an agreement with its contract warehousing company that includes minimum overhead fees of $200,000 annually beginning April 1, 2012 through June 2015. The expense is included in selling, general and administrative expenses in the condensed consolidated statements of operations.
Annie’s, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Indemnifications
In the normal course of business, the Company enters into contracts that contain a variety of representations and provide for general indemnifications. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future but have not yet been made. To date, the Company has not paid any claims or been required to defend any action related to its indemnification obligations, and, accordingly, the Company believes that the estimated fair value of these indemnification obligations is minimal and has not accrued any amounts for these obligations.
Legal Matters
From time to time, the Company is subject to claims and assessments in the ordinary course of business. The Company is not currently a party to any litigation matter that, individually or in the aggregate, is expected to have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows.
7. | Convertible Preferred Stock |
In connection with a prior term loan, the Company had issued a warrant to Hercules Technology II, L.P. (“Hercules”) for the purchase of 80,560The outstanding shares of Series A 2005 Convertible Preferred Stock at an exercise priceconvertible preferred stock, immediately prior to the closing of $8.07 per share. The warrant was immediately exercisable on the date of issuance and was scheduled to expire at the earlier of five years from a qualifying IPO of the Company’s common stock or April 1, 2018. Upon the consummation of the Company’s IPO on April 2, 2012, the warrant became a warrant to purchase 80,560 shares of our common stock and the related convertible preferred stock warrant liability was reclassified to additional paid-in capital. On April 12, 2012, Hercules exercised the warrant to purchase 80,560 shares of our common stock by surrendering 17,367 shares to pay for the exercise. As a result, the Company issued Hercules 63,193were automatically converted into 15,221,571 shares of common stock.
As of April 2, 2012, During the Company measured the fair value of the outstanding convertible preferred stock warrant using an option pricing method with several possible distribution outcomes depending on the timingthree and kind of liquidity event utilizing the following assumptions:
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Remaining Contractual Life. The Company derived the remaining contractual life based on the remaining term through actual exercise on April 12, 2012.
Risk-Free Interest Rate. The risk-free interest rate was based upon U.S. Treasury zero-coupon issues with remaining terms similar to the expected term of the warrant.
Volatility. Since prior to the IPO the Company was a private entity with no historical data regarding the volatility of its preferred stock, the expected volatility used was based upon the volatility of a group of similar entities, referred to as “guideline” companies. In evaluating similarity, the Company considered factors such as industry, stage of life cycle and size.
Dividend Yield. Although the Company in the past declared dividends, no future dividends are expected to be available to benefit the warrant holder, and, accordingly, the Company used an expected dividend yield of zero in the valuation model.
Annie’s, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Prior to April 2, 2012, the Company categorizedsix months ended September 30, 2011, the convertible preferred stock warrant liabilitystockholders received a cash dividend of $0.097 per share, or approximately $1.5 million in the aggregate, as a Level 3 financial liability since there was no market activity for the underlying sharesresult of the 2005 Convertible Preferred Stock. The following table sets forth a summary of the changesparticipating in the fair value ofcommon stock dividend. No dividend was declared or paid during the Company’s Level 3 financial liabilities (in thousands):three and six months ended September 30, 2012.
April 2, 2012 | ||||
Fair value at March 31, 2012 | $ | 2,157 | ||
Change in fair value recorded in other income (expense), net | 13 | |||
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Fair value at April 2, 2012 | $ | 2,170 | ||
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8. | Preferred Stock |
The Company’s certificate of incorporation authorized 5,000,000 shares of preferred stock, $0.001 par value per share. As of JuneSeptember 30, 2012, no certificate of designations defining the rights and preferences of the preferred stock had been filed and no shares of preferred stock were outstanding.
9. | Common Stock |
As of JuneSeptember 30, 2012 and March 31, 2012, the Company’s certificate of incorporation authorized 30,000,000 and 24,000,000 shares of common stock, $0.001 par value per share, respectively, of which 17,060,11117,121,249 and 483,242 shares were issued and outstanding, respectively. Each share of the common stock has the right to one vote. The holders of common stock are also entitled to receive dividends wheneverout of funds are legally available therefor and if, as and when or if declared by the BoardCompany’s board of Directors.directors. During the three and six months ended September 30, 2011, the Company declared and paid common shareholders a cash dividend of $0.097 per share, or $45,000 in the aggregate. No dividends were declared or paid during the three and six months ended JuneSeptember 30, 2012.
10. | Stock-Based Compensation |
The Company has adopted performance incentive plans (2004 Stock Option Plan and Omnibus Incentive Plan together “Plans”) under which nonqualified stock options, restricted stock units and performance share units are granted to eligible employees, officers and directors. The Company has also granted non-plan performance based option awards to certain key management. Options granted under Plans to date generally vest over a two- to five-year period from the date of grant. Vested options can be exercised and generally expire ten years after the grant date. The restricted stock units granted to employees vest 50% on the second anniversary of the grant date, and the remaining 50% on the third anniversary of the grant date, provided continuance of the employment with the Company. The performance share units granted to employees vest based on achievement of required cumulative compounded earnings per share growth during the three-year period beginning at the first fiscal quarter beginning after the grant date and ending March 31, 2015. Stock-based compensation expense included in selling, general and administrative expenses was $231,000 and $133,000 for the three months ended September 30, 2012 and 2011, respectively, and was $447,000 and $239,000 for the six months ended September 30, 2012 and 2011, respectively.
Annie’s, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The following table summarizes the activity of stock options during the six months ended September 30, 2012:
Number | Weighted-Average | |||||||
of Shares | Exercise Price | |||||||
Balance, March 31, 2012 | 1,759,367 | $ | 9.56 | |||||
Granted | 2,562 | 36.30 | ||||||
Cancelled | (2,523 | ) | 6.29 | |||||
Exercised | (403,243 | ) | 5.47 | |||||
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Balance, September 30, 2012 | 1,356,163 | $ | 10.84 | |||||
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The following table summarizes the activity of unvested restricted stock units and performance share units during the six months ended September 30, 2012:
Shares-Based Awards | Shares | Weighted- Average Grant Date Fair Value | ||||||
Unvested at March 31, 2012 | 65,899 | $ | 19.00 | |||||
Granted | 7,220 | 44.07 | ||||||
Vested | — | — | ||||||
Performance Shares Adjustment | — | — | ||||||
Forfeited | (500 | ) | 19.00 | |||||
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Unvested at September 30, 2012 | 72,619 | $ | 21.49 | |||||
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As of September 30, 2012, there was $3.4 million of total unrecognized compensation cost related to unvested share-based compensation arrangements which is expected to be recognized over a weighted average period of 3.2 years.
Income Taxes |
We recognized income tax expense of $1.4$2.6 million and $4.0 million for the three and six months ended JuneSeptember 30, 2012, compared to $1.0$2.5 million and $3.4 million in the same periodperiods last year. The estimated effective tax rate was 40.9%40.6% for the threesix months ended JuneSeptember 30, 2012, compared to 34.9%38.7% in the same period last year. The effective tax rate is based on a projection of our annual fiscal year results. Our effective tax rate for the threesix months ended JuneSeptember 30, 2012 was higher than the effective tax rate for the threesix months ended JuneSeptember 30, 2011 largely due to a tax benefit recorded during the threesix months ended JuneSeptember 30, 2011 related to an increase in the tax rate applied for deferred tax assets due to an increase in the federal and state tax rates.
In addition, during the three and six months ended JuneSeptember 30, 2012, we recognized $11.8$2.3 million and $14.1 million of tax deductions associated with stock option exercises. As of JuneSeptember 30, 2012, $11.4$2.1 million and $13.5 million of these tax deductions are considered “excess” stock compensation related deductions, resulting in a reduction in taxes payable of $1.3$3.8 million, recording a tax refund receivable of $2.9$1.4 million, with a corresponding increase in additional paid in capital of $4.2$5.3 million. We will recognize the remaining $0.4$0.2 million of stock compensation related deductions as a reduction in taxes payable in future periods as we generate state taxable income.
Annie’s, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The Company files consolidated tax returns for federal income taxes as well as for state income taxes in various state jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities. These audits include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal, state and local tax laws. The Company is potentially subject to U.S. federal, state and local income tax examinations for years 2005 and beyond.
The Company does not have any unrecognized tax positions as of JuneSeptember 30, 2012 that if recognized would affect the annual effective tax rate. No interest or penalties have been accrued for any period presented. Based on the Company’s assessment, including past experience and complex judgments about future events, the Company does not expect that changes in the liability for unrecognized tax benefits during the next twelve months will have a significant impact on its financial position or results of operations.
Annie’s, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Net Income per Share of Common Stock attributable to Common Stockholders |
The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net income per share of common stock for the periods presented, because including them would have been anti-dilutive:
Three Months Ended June 30, | Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||
Convertible preferred stock | — | 15,221,571 | — | 15,221,571 | — | 15,221,571 | ||||||||||||||||||
Options to purchase common stock | 2,562 | 68,164 | 2,562 | 167,314 | 2,562 | 167,314 | ||||||||||||||||||
Restricted stock units | 6,256 | — | 6,256 | — | ||||||||||||||||||||
Convertible preferred stock warrant | — | 80,560 | — | — | — | 80,560 | ||||||||||||||||||
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Total | 2,562 | 15,370,295 | 8,818 | 15,388,885 | 8,818 | 15,469,445 | ||||||||||||||||||
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A reconciliation of the basic and diluted net income per share attributable to common stockholders is as follows (in thousands except share and per share amounts):
Three Months Ended June 30, | Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||
Net income per share: | ||||||||||||||||||||||||
Net income | $ | 2,131 | $ | 1,812 | $ | 3,785 | $ | 3,616 | $ | 5,916 | $ | 5,428 | ||||||||||||
Less: Dividends paid to convertible preferred stockholders | — | 1,474 | — | 1,474 | ||||||||||||||||||||
Less: Income attributable to convertible preferred stockholders | — | 1,758 | — | 2,035 | — | 3,793 | ||||||||||||||||||
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Net income attributable to common stockholders—basic and diluted | $ | 2,131 | $ | 54 | $ | 3,785 | $ | 107 | $ | 5,916 | $ | 161 | ||||||||||||
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Weighted average shares of common stock outstanding used in computing net income attributable to common stockholders—basic | 16,936,007 | 464,994 | 17,070,327 | 465,045 | 17,003,534 | 465,019 | ||||||||||||||||||
Potential dilutive options | 659,040 | 771,416 | 625,684 | 509,794 | 646,468 | 521,661 | ||||||||||||||||||
Potential dilutive convertible preferred stock warrant | — | 43,520 | — | — | ||||||||||||||||||||
Potential dilutive restricted stock units | 5,861 | — | 6,505 | — | 6,354 | — | ||||||||||||||||||
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Weighted average shares of common stock outstanding used in computing net income attributable to common stockholders—diluted | 17,600,908 | 1,236,410 | 17,702,516 | 1,018,359 | 17,656,356 | 986,680 | ||||||||||||||||||
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Net income per share attributable to common stockholders | ||||||||||||||||||||||||
—Basic | $ | 0.13 | $ | 0.12 | $ | 0.22 | $ | 0.23 | $ | 0.35 | $ | 0.35 | ||||||||||||
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—Diluted | $ | 0.21 | $ | 0.11 | $ | 0.34 | $ | 0.16 | ||||||||||||||||
$ | 0.12 | $ | 0.04 |
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Annie’s, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Geographic Areas and Product Sales |
The Company’s net sales by geographic areas,area, based on the location to where the product was shipped, are summarized as follows (in thousands):
Three Months Ended June 30, | Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||
United States | $ | 33,148 | $ | 27,764 | $ | 44,423 | $ | 37,532 | $ | 77,571 | $ | 65,296 | ||||||||||||
Canada | 1,145 | 846 | 2,263 | 1,340 | 3,408 | 2,186 | ||||||||||||||||||
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$ | 34,293 | $ | 28,610 | $ | 46,686 | $ | 38,872 | $ | 80,979 | $ | 67,482 | |||||||||||||
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The following table sets forth net sales by product category (in thousands):
Three Months Ended June 30, | Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||
Meals | $ | 14,667 | $ | 10,452 | $ | 21,869 | $ | 16,724 | $ | 36,536 | $ | 27,176 | ||||||||||||
Snacks | 13,463 | 11,898 | 19,146 | 16,338 | 32,609 | 28,236 | ||||||||||||||||||
Dressings, condiments and other | 6,163 | 6,260 | 5,671 | 5,810 | 11,834 | 12,070 | ||||||||||||||||||
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$ | 34,293 | $ | 28,610 | $ | 46,686 | $ | 38,872 | $ | 80,979 | $ | 67,482 | |||||||||||||
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All of the Company’s long-lived assets are located in the U.S.
Filing of S-1 Registration Statement
On July 17, 2012, the Company filed a registration statement on Form S-1 under the Securities Act with the SEC (the “S-1 Registration Statement”) for a secondary public offering of common stock of the Company. Certain stockholders, including Solera and certain other affiliates, intend to sell 3,173,892 shares of common stock in the offering. The Company will not receive any proceeds from the sale of shares by the stockholders. The underwriters have an option to purchase a maximum of 476,084 additional shares from the stockholders to cover overallotments of shares. The Company will not receive any proceeds from the exercise of the underwriters’ option to purchase additional shares. The estimated offering expenses payable by the Company are $0.7 million, which includes legal, accounting and printing costs and various other fees associated with the registration of common stock.
ITEM 2 –— MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended March 31, 2012 (“fiscal 2012”) included in our Annual Report on Form 10-K filed with the SEC on June 8, 2012. This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended,( the “Exchange Act”). These statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “should,” “estimate,” or “continue,” and similar expressions or variations. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those in our Form 10-K discussed in the section titled “Risk Factors.” The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Quarterly Report on Form 10-Q. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q.
Overview
Annie’s, Inc. is a rapidly growing natural and organic food company with a widely recognized brand, offering consumers great-tasting products in large packaged foods categories. We sell premium products made from high-quality ingredients at affordable prices. We have the #1 natural and organic market position in four product lines: macaroni and cheese, snack crackers, fruit snacks and graham crackers.
Our loyal and growing consumer following has enabled us to migrate from our natural and organic roots to a brand sold across the mainstream grocery, mass merchandiser and natural retailer channels. We offer over 125 products and are present in over 25,000 retail locations in the United States and Canada.
Our net sales are derived primarily from the sale of meals, snacks, dressings, condiments and other products under the Annie’s Homegrown and Annie’s Naturals brand names. We have experienced strong growth, driven by our meals and snacks categories, resulting from our focus on supporting our best-selling items and the introduction of new products in these categories. We have reduced our offerings in our dressings and condiments product lines and discontinued our cereal product line in the fourth quarter of fiscal 2012, which has resulted in nolow or negative growth in that category. However, excluding our cereal product line, the dressings, condiments and other category grew modestly. Sales are reported net of estimated sales and promotion incentives, slotting, customer discounts and spoils.
Gross profit is net of cost of sales, which consists of the costs of ingredients in the manufacture of products, contract manufacturing fees, packaging costs and in-bound freight charges. Ingredients account for the largest portion of the cost of sales followed by contract manufacturing fees and packaging.
Our selling, general and administrative expenses consist primarily of marketing and advertising expenses, freight and warehousing, wages, related payroll and employee benefit expenses, including stock-based compensation, commissions to outside sales representatives, legal and professional fees, travel expenses, other facility related costs, such as rent and depreciation, and consulting expenses. The primary components of our marketing and advertising expenses include trade advertising, samples, consumer events, sales data, consumer research and search engine and digital advertising.
Trends and Other Factors Affecting Our Business
Net sales growth continues to be driven by increased penetration of mainstream grocery and mass merchandiser channels, product innovation, increased brand awareness and greater consumer demand for natural and organic food products. In the second half of fiscaltwelve months ended September 30, 2012, through our first quarter of the fiscal year ending March 31, 2013 (“fiscal 2013”), we have experienced acceleration in consumer trends for many of our products. We also have benefited from improved placement in the mainstream grocery channel, which we believe has resulted in increased sales of our products. Our net sales growth has been primarily driven by volume; however, we have demonstrated the ability to execute price increases as needed to maintain margins, driven by our strong brand loyalty and perceived value relative to the competition.
We purchase finished products from independent contract manufacturers. We have long standing, strategic relationships with many of our contract manufacturers and suppliers of organic ingredients. We enter either directly or through contract manufacturers into purchase commitmentsforward pricing contracts with certain suppliers for key ingredients that represent approximately half our cost of goods sold.ingredient suppliers. This practice provides us with significant visibility into our cost structure over the next six to twelve months. In fiscal 2012, our contracted ingredients represented approximately 48% of our material costs and 25% of our cost of sales. Over the past 18 months, we have experienced increased costs for many of our inputs and expect these higher costs to continue throughout the remainder of our fiscal 2013.year ending March 31, 2013 (“fiscal 2013”). We have been successful in maintainingstrive to maintain or improvingimprove gross margins despite the increasing commodity cost environmentcosts through a combination of cost management and price increases. We actively manage our input and production costs through a combination of commodity management practices, vendor negotiation, productivity improvements and cost reductions in our supply chain. We invest significant time and effort to achieve permanent cost reductions in our supply chain. To drive these initiatives, we have begun to selectively invest capital in equipment located at our contract manufacturers to drive down costs, improve throughput and improve product quality.
Selling, general and administrative expenses have increased as a result of the investment we have made in building our organization and adding headcount to support our growth and operating as a public company. Many of our selling, general and administrative expenses are variable with volume including freight and warehouse expenses and commissions paid to our sales brokers. In addition, we continue to make investments in marketing to drive trial of our products and promote awareness of our brand and in research and development to support our robust innovation pipeline. Starting in fiscal 2012, we incurred incremental expense related to getting ready to operate as a public company. We expect to incur approximately $2 million in incremental expense annually related to being a public company.
Results of Operations
The following table sets forth items included in our consolidated statements of operations in dollars and as a percentage of net sales for the periods presented:
Thee Months Ended June 30, | % of Net Sales | Three Months Ended September 30, | % of Net Sales | Six Months Ended September 30, | % of Net Sales | |||||||||||||||||||||||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||||||||||||||||||||
(in thousands, except for percentages) | (in thousands, except for percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
Net sales | $ | 34,293 | $ | 28,610 | 100.0 | % | 100.0 | % | $ | 46,686 | $ | 38,872 | 100.0 | % | 100.0 | % | $ | 80,979 | $ | 67,482 | 100.0 | % | 100.0 | % | ||||||||||||||||||||||||
Cost of sales | 20,486 | 17,022 | 59.7 | % | 59.5 | % | 28,786 | 24,737 | 61.7 | % | 63.6 | % | 49,272 | 41,759 | 60.8 | % | 61.9 | % | ||||||||||||||||||||||||||||||
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Gross profit | 13,807 | 11,588 | 40.3 | % | 40.5 | % | 17,900 | 14,135 | 38.3 | % | 36.4 | % | 31,707 | 25,723 | 39.2 | % | 38.1 | % | ||||||||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||||||||||||||||||
Selling, general and administrative expenses | 10,211 | 8,303 | 29.8 | % | 29.0 | % | 11,539 | 8,056 | 24.7 | % | 20.7 | % | 21,750 | 16,359 | 26.9 | % | 24.2 | % | ||||||||||||||||||||||||||||||
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Total operating expenses | 10,211 | 8,303 | 29.8 | % | 29.0 | % | 11,539 | 8,056 | 24.7 | % | 20.7 | % | 21,750 | 16,359 | 26.9 | % | 24.2 | % | ||||||||||||||||||||||||||||||
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Income from operations | 3,596 | 3,285 | 10.5 | % | 11.5 | % | 6,361 | 6,079 | 13.6 | % | 15.6 | % | 9,957 | 9,364 | 12.3 | % | 13.9 | % | ||||||||||||||||||||||||||||||
Interest expense | (40 | ) | (18 | ) | (0.1 | )% | (0.1 | )% | (40 | ) | (23 | ) | (0.1 | )% | (0.1 | )% | (80 | ) | (41 | ) | (0.1 | )% | (0.1 | )% | ||||||||||||||||||||||||
Other income (expense), net | 49 | (484 | ) | 0.1 | % | (1.7 | )% | 36 | 13 | 0.1 | % | 0.0 | % | 85 | (471 | ) | 0.1 | % | (0.7 | )% | ||||||||||||||||||||||||||||
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Income before provision for income taxes | 3,605 | 2,783 | 10.5 | % | 9.7 | % | 6,357 | 6,069 | 13.6 | % | 15.6 | % | 9,962 | 8,852 | 12.3 | % | 13.1 | % | ||||||||||||||||||||||||||||||
Provision for income taxes | 1,474 | 971 | 4.3 | % | 3.4 | % | 2,572 | 2,453 | 5.5 | % | 6.3 | % | 4,046 | 3,424 | 5.0 | % | 5.1 | % | ||||||||||||||||||||||||||||||
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Net income | $ | 2,131 | $ | 1,812 | 6.2 | % | 6.3 | % | $ | 3,785 | $ | 3,616 | 8.1 | % | 9.3 | % | $ | 5,916 | $ | 5,428 | 7.3 | % | 8.0 | % | ||||||||||||||||||||||||
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Three Months Ended JuneSeptember 30, 2012 Compared to Three Months Ended JuneSeptember 30, 2011
Net Sales
Three Months Ended June 30, | Change | % of Net Sales | Three Months Ended September 30, | Change | % of Net Sales | |||||||||||||||||||||||||||||||||||||||||||
2012 | 2011 | $ | % | 2012 | 2011 | 2012 | 2011 | $ | % | 2012 | 2011 | |||||||||||||||||||||||||||||||||||||
(in thousands, except for percentages) | (in thousands, except for percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
Meals | $ | 14,667 | $ | 10,452 | $ | 4,215 | 40.3 | % | 42.8 | % | 36.5 | % | $ | 21,869 | $ | 16,724 | $ | 5,145 | 30.8 | % | 46.9 | % | 43.0 | % | ||||||||||||||||||||||||
Snacks | 13,463 | 11,898 | 1,565 | 13.2 | % | 39.2 | % | 41.6 | % | 19,146 | 16,338 | 2,808 | 17.2 | % | 41.0 | % | 42.0 | % | ||||||||||||||||||||||||||||||
Dressings, condiments and other | 6,163 | 6,260 | (97 | ) | (1.5 | )% | 18.0 | % | 21.9 | % | 5,671 | 5,810 | (139 | ) | (2.4 | )% | 12.1 | % | 15.0 | % | ||||||||||||||||||||||||||||
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Net sales | $ | 34,293 | $ | 28,610 | $ | 5,683 | 19.9 | % | 100.0 | % | 100.0 | % | $ | 46,686 | $ | 38,872 | $ | 7,814 | 20.1 | % | 100.0 | % | 100.0 | % | ||||||||||||||||||||||||
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Net sales increased $5.7$7.8 million, or 19.9%20.1%, to $34.3$46.7 million during the three months ended JuneSeptember 30, 2012 compared to $28.6$38.9 million during the three months ended JuneSeptember 30, 2011. This increase reflects an increase in net sales of meals and snacks of $4.2$5.1 million and $1.6$2.8 million, respectively, offset by a slight decrease in dressings, condiments and other of $0.1 million. The increase in meals was predominantly driven by strong growth in the macaroni and cheese product line with a modest increasebenefit from organic and made with organic frozen pizza which weproducts. Organic frozen pizza first shipped in January 2012. We experienced growth across all of our snack product lines.2012 and made with organic frozen pizza first shipped this quarter. The growthincrease in snacks was more modest relativeprimarily due to prior quarters because of channel mix.growth in our snack mix, fruit snacks, grahams and crackers product lines. The slight decrease in dressings, condiments and other was attributable to the discontinuation of cereal.our cereal product line. Excluding our cereal product line, the dressings, condiments and other category grew by $0.5 million.modestly. Distribution gains and our mainline placement initiatives also contributed to net sales growth, primarily in the mainstream grocery channel. The net sales increase was primarily driven by volume with slightly higher average selling prices adding modest growth.
Gross Profit
Three Months Ended June 30, | Change | Three Months Ended September 30, | Change | |||||||||||||||||||||||||||||
2012 | 2011 | $ | % | 2012 | 2011 | $ | % | |||||||||||||||||||||||||
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Cost of sales | $ | 20,486 | $ | 17,022 | $ | 3,464 | 20.4 | % | $ | 28,786 | $ | 24,737 | $ | 4,049 | 16.4 | % | ||||||||||||||||
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Gross profit | $ | 13,807 | $ | 11,588 | $ | 2,219 | 19.1 | % | $ | 17,900 | $ | 14,135 | $ | 3,765 | 26.6 | % | ||||||||||||||||
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Gross margin % | 40.3 | % | 40.5 | % | 38.3 | % | 36.4 | % | ||||||||||||||||||||||||
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Gross profit increased $2.2$3.8 million, or 19.1%26.6%, to $13.8$17.9 million for the three months ended JuneSeptember 30, 2012 from $11.6$14.1 million for the three months ended JuneSeptember 30, 2011. Gross margin decreased 0.2increased 1.9 percentage points to 40.3%38.3% from 40.5%36.4% during the three months ended JuneSeptember 30, 2012 compared to the three months ended JuneSeptember 30, 2011. The increase in gross profit was primarily driven by the increase in net sales. The slight decreaseincrease in gross margin resulted from higher commodity costs,price increases and the cumulative impact of various cost reduction initiatives, which were partially offset by price increases and cost reduction initiatives.higher commodity costs.
Operating Expenses
Three Months Ended June 30, | Change | Three Months Ended September 30, | Change | |||||||||||||||||||||||||||||
2012 | 2011 | $ | % | 2012 | 2011 | $ | % | |||||||||||||||||||||||||
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Operating expenses: | ||||||||||||||||||||||||||||||||
Selling, general and administrative expenses | $ | 10,211 | $ | 8,303 | $ | 1,908 | 23.0 | % | $ | 11,539 | $ | 8,056 | $ | 3,483 | 43.2 | % | ||||||||||||||||
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Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $1.9$3.5 million, or 23.0%43.2%, to $10.2$11.5 million during the three months ended JuneSeptember 30, 2012 from $8.3$8.0 million during the three months ended JuneSeptember 30, 2011. This increase was due primarily to an increase in payroll expense resulting from increased headcount to support our
growth and operations as a public company. Additionally, public company related expenses impacted selling, general and administrative expenses during the three months ended September 30, 2012 compared with the three months ended September 30, 2011. Further, during the three months ended September 30, 2012, we incurred $0.7 million including legal, accounting and printing costs and various other fees associated with the registration and sale of common stock in the secondary public offering by certain stockholders including Solera. We did not receive any proceeds from the sale of shares by the selling stockholders. As a percentage of net sales, selling, general and administrative expenses increased 4.0 percentage points to 24.7% during the three months ended September 30, 2012 from 20.7% during the three months ended September 30, 2011.
Income from Operations
Three Months Ended September 30, | Change | |||||||||||||||
2012 | 2011 | $ | % | |||||||||||||
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Income from operations | $ | 6,361 | $ | 6,079 | $ | 282 | 4.6 | % | ||||||||
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Income from operations as a percentage of net sales | 13.6 | % | 15.6 | % |
As a result of the factors above, income from operations increased $0.3 million, or 4.6%, to $6.4 million during the three months ended September 30, 2012, from $6.1 million during the three months ended September 30, 2011. Income from operations as a percentage of net sales decreased 2.0 percentage points to 13.6% in the three months ended September 30, 2012, from 15.6% in the three months ended September 30, 2011.
Interest Expense
Three Months Ended September 30, | Change | |||||||||||||||
2012 | 2011 | $ | % | |||||||||||||
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Interest expense | $ | (40 | ) | $ | (23 | ) | $ | (17 | ) | nm | ||||||
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Interest expense during the three months ended September 30, 2012 primarily related to non-cash imputed interest expense related to financing of product formulas intangible asset acquired in fiscal 2012. Interest expense during the three months ended September 30, 2011 consisted of expense related to borrowings on our revolving line of credit.
Other Income (Expense), Net
Three Months Ended September 30, | Change | |||||||||||||||
2012 | 2011 | $ | % | |||||||||||||
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Other income (expense), net | $ | 36 | $ | 13 | $ | 23 | nm | |||||||||
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Other income (expense), net during the three months ended September 30, 2012 consisted of royalty income. Other income (expense), net during the three months ended September 30, 2011 primarily reflects royalty income partially offset by non-cash charge of $20,000 related to the increase in the fair value of our convertible preferred stock warrant liability.
Provision for income taxes
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Provision for income taxes | $ | 2,572 | $ | 2,453 | $ | 119 | nm | |||||||||
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Effective tax rate | 40.5 | % | 40.4 | % |
Our effective tax rate was 40.5% for the three months ended September 30, 2012, compared to 40.4% in the same period last year. The effective tax rate is based on a projection of our annual fiscal year results. Our effective tax rate for the three months ended September 30, 2012 was higher than the effective tax rate for the three months ended September 30, 2011 largely due to a tax benefit recorded during the three months ended September 30, 2011 related to an increase in the tax rate applied for deferred tax assets due to an increase in the federal and state tax rates.
In addition, during the three months ended September 30, 2012, we recognized $2.3 million of tax deductions associated with stock option exercises. As of September 30, 2012, $2.1 million of these tax deductions are considered “excess” stock compensation related deductions, resulting in a reduction in taxes payable of $3.8 million, recording a tax refund receivable of $1.4 million, with a corresponding increase in additional paid in capital of $5.3 million. We will recognize the remaining $0.2 million of stock compensation related deductions as a reduction in taxes payable in future periods as we generate state taxable income.
Net income
Three Months Ended September 30, | Change | |||||||||||||||
2012 | 2011 | $ | % | |||||||||||||
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Net income | $ | 3,785 | $ | 3,616 | $ | 169 | 4.7 | % | ||||||||
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As a result of the factors above, net income increased $0.2 million, or 4.7%, to $3.8 million for the three months ended September 30, 2012 from $3.6 million for the three months ended September 30, 2011.
Six Months Ended September 30, 2012 Compared to Six Months Ended September 30, 2011
Net Sales
Six Months Ended September 30, | Change | % of Net Sales | ||||||||||||||||||||||
2012 | 2011 | $ | % | 2012 | 2011 | |||||||||||||||||||
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Meals | $ | 36,536 | $ | 27,176 | $ | 9,360 | 34.4 | % | 45.1 | % | 40.3 | % | ||||||||||||
Snacks | 32,609 | 28,236 | 4,373 | 15.5 | % | 40.3 | % | 41.8 | % | |||||||||||||||
Dressings, condiments and other | 11,834 | 12,070 | (236 | ) | (2.0 | )% | 14.6 | % | 17.9 | % | ||||||||||||||
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Net sales | $ | 80,979 | $ | 67,482 | $ | 13,497 | 20.0 | % | 100.0 | % | 100.0 | % | ||||||||||||
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Net sales increased $13.5 million, or 20.0%, to $81.0 million during the six months ended September 30, 2012 compared to $67.5 million during the six months ended September 30, 2011. This increase reflects an increase in net sales of meals and snacks of $9.3 million and $4.4 million, respectively, offset by a slight decrease in dressings, condiments and other of $0.2 million. The increase in meals was predominantly driven by strong growth in the macaroni and cheese product line with a benefit from organic and made with organic frozen pizza products. Organic frozen pizza first shipped in January 2012 and made with organic pizza first shipped this quarter. The increase in snacks was primarily due to growth in our fruit snacks, grahams, crackers and snack mix product lines. The slight decrease in dressings, condiments and other was attributable to the discontinuation of our cereal product line. Excluding our cereal product line, the dressings, condiments and other category grew modestly. Distribution gains
and our mainline placement initiatives also contributed to net sales growth, primarily in the mainstream grocery channel. The net sales increase was primarily driven by volume with slightly higher average selling prices adding modest growth.
Gross Profit
Six Months Ended September 30, | Change | |||||||||||||||
2012 | 2011 | $ | % | |||||||||||||
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Cost of sales | $ | 49,272 | $ | 41,759 | $ | 7,513 | 18.0 | % | ||||||||
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Gross profit | $ | 31,707 | $ | 25,723 | $ | 5,984 | 23.3 | % | ||||||||
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Gross margin % | 39.2 | % | 38.1 | % | ||||||||||||
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Gross profit increased $6.0 million, or 23.3%, to $31.7 million for the six months ended September 30, 2012 from $25.7 million for the six months ended September 30, 2011. Gross margin increased 1.1 percentage points to 39.2% from 38.1% during the six months ended September 30, 2012 compared to the six months ended September 30, 2011. The increase in gross profit was primarily driven by the increase in net sales. The increase in gross margin resulted from price increases and the cumulative benefit of various cost reduction initiatives, which were partially offset by higher commodity costs.
Operating Expenses
Six Months Ended September 30, | Change | |||||||||||||||
2012 | 2011 | $ | % | |||||||||||||
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Operating expenses: | ||||||||||||||||
Selling, general and administrative expenses | $ | 21,750 | $ | 16,359 | $ | 5,391 | 33.0 | % | ||||||||
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Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $5.4 million, or 33.0%, to $21.8 million during the six months ended September 30, 2012 from $16.4 million during the six months ended September 30, 2011. This increase was due primarily to an increase in payroll expense resulting from increased headcount to support our growth and operatingoperations as a public company. In addition, during the three months ended June 30, 2012, we made additional investments in
research and development to support our innovation pipeline compared with the three months ended June 30, 2011. Additionally, public company related expenses impacted selling, general and administrative expenses during the threesix months ended JuneSeptember 30, 2012 compared with the threesix months ended JuneSeptember 30, 2011. Further, during the six months ended September 30, 2012, we incurred $0.7 million including legal, accounting and printing costs and various other fees associated with the registration and sale of common stock in the secondary public offering by certain stockholders including Solera. We did not receive any proceeds from the sale of shares by the selling stockholders. As a percentage of net sales, selling, general and administrative expenses increased 0.82.7 percentage points to 29.8%26.9% during the threesix months ended JuneSeptember 30, 2012 from 29.0%24.2% during the threesix months ended JuneSeptember 30, 2011.
Income from Operations
Three Months Ended June 30, | Change | Six Months Ended September 30, | Change | |||||||||||||||||||||||||||||
2012 | 2011 | $ | % | 2012 | 2011 | $ | % | |||||||||||||||||||||||||
(in thousands, except for percentages) | (in thousands, except for percentages) | |||||||||||||||||||||||||||||||
Income from operations | $ | 3,596 | $ | 3,285 | $ | 311 | 9.5 | % | $ | 9,957 | $ | 9,364 | $ | 593 | 6.3 | % | ||||||||||||||||
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Income from operations as a percentage of net sales | 10.5 | % | 11.5 | % | 12.3 | % | 13.9 | % |
As a result of the factors above, income from operations increased $0.3$0.6 million, or 9.5%6.3%, to $3.6$10.0 million during the threesix months ended JuneSeptember 30, 2012, from $3.3$9.4 million during the threesix months ended JuneSeptember 30, 2011. Income from operations as a percentage of net sales decreased 1.01.6 percentage pointpoints to 10.5%12.3% in the threesix months ended JuneSeptember 30, 2012, from 11.5%13.9% in the threesix months ended JuneSeptember 30, 2011.
Interest Expense
Three Months Ended June 30, | Change | |||||||||||||||
2012 | 2011 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Interest expense | $ | (40 | ) | $ | (18 | ) | $ | (22 | ) | nm | ||||||
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Six Months Ended September 30, | Change | |||||||||||||||
2012 | 2011 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Interest expense | $ | (80 | ) | $ | (41 | ) | $ | (39 | ) | nm | ||||||
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Interest expense increased slightly during the threesix months ended JuneSeptember 30, 2012 compared to the three months ended June 30, 2011 dueprimarily related to non-cash imputed interest expense related to financing of product formulas intangible asset acquired in fiscal 2012. Interest expense during the six months ended September 30, 2011 consisted of expense related to borrowings on our revolving line of credit.
Other Income (Expense), Net
Three Months Ended June 30, | Change | |||||||||||||||
2012 | 2011 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Other income (expense), net | $ | 49 | $ | (484 | ) | $ | 533 | nm | ||||||||
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Six Months Ended September 30, | Change | |||||||||||||||
2012 | 2011 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Other income (expense), net | $ | 85 | $ | (471 | ) | $ | 556 | nm | ||||||||
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Other income (expense), net during the threesix months ended JuneSeptember 30, 2012 primarily reflects royalty income partially offset by non-cash charge of $13,000 related to the increase in the fair value of the convertible preferred stock warrant on April 2, 2012, prior to its conversion into a common stock warrant. Other income (expense), net during the three monthsix months ended JuneSeptember 30, 2011 primarily reflects a non-recurring, non-cash out-of-periodout of period charge of $0.5 million related to the increase in the fair value of our convertible preferred stock warrant liability offset by royalty income.
Provision for income taxes
Three Months Ended June 30, | Change | Six Months Ended September 30, | Change | |||||||||||||||||||||||||||||
2012 | 2011 | $ | % | 2012 | 2011 | $ | % | |||||||||||||||||||||||||
(in thousands, except for percentages) | (in thousands, except for percentages) | |||||||||||||||||||||||||||||||
Provision for income taxes | $ | 1,474 | $ | 971 | $ | 503 | nm | $ | 4,046 | $ | 3,424 | $ | 622 | nm | ||||||||||||||||||
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Effective tax rate | 40.9 | % | 34.9 | % | 40.6 | % | 38.7 | % |
Our estimated effective tax rate was 40.9%40.6% for the threesix months ended JuneSeptember 30, 2012, compared to 34.9%38.7% in the same period last year. The effective tax rate is based on a projection of our annual fiscal year results. Our effective tax rate for the threesix months ended JuneSeptember 30, 2012 was higher than the effective tax rate for the threesix months ended JuneSeptember 30, 2011 largely due to a tax benefit recorded during the threesix months ended JuneSeptember 30, 2011 related to an increase in the tax rate applied for deferred tax assets due to an increase in the federal and state tax rates.
In addition, during the threesix months ended JuneSeptember 30, 2012, we recognized $11.8$14.1 million of tax deductions associated with stock option exercises. As of JuneSeptember 30, 2012, $11.4$13.5 million of these tax deductions are considered “excess” stock compensation related deductions, resulting in a reduction in taxes payable of $1.3$3.8 million, recording a tax refund receivable of $2.9$1.4 million, with a corresponding increase in additional paid in capital of $4.2$5.3 million. We will recognize the remaining $0.4$0.2 million of stock compensation related deductions as a reduction in taxes payable in future periods as we generate state taxable income.
Net income
Three Months Ended June 30, | Change | |||||||||||||||
2012 | 2011 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Net income | $ | 2,131 | $ | 1,812 | $ | 319 | 17.6 | % | ||||||||
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Six Months Ended September 30, | Change | |||||||||||||||
2012 | 2011 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Net income | $ | 5,916 | $ | 5,428 | $ | 488 | 9.0 | % | ||||||||
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As a result of the factors above, net income increased $0.3$0.5 million, or 17.6%9.0%, to $2.1$5.9 million for the threesix months ended JuneSeptember 30, 2012 from $1.8$5.4 million for the threesix months ended JuneSeptember 30, 2011.
Seasonality
Historically, we have experienced greater net sales in the second and fourth fiscal quarters than in the first and third fiscal quarters due to our customers’ merchandising and promotional activities around the back-to-school and spring seasons. Concurrently, inventory levels and working capital requirements increase during the first and third fiscal quarters of each fiscal year to support higher levels of net sales in the subsequent quarters. We anticipate that this seasonal impact on our net sales and working capital is likely to continue. Accordingly, our results of operations for any particular quarter are not indicative of the results we expect for the full year.
Liquidity and Capital Resources
June 30, | March 31, | September 30, | March 31, | |||||||||||||
2012 | 2012 | 2012 | 2012 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Cash | $ | 5,102 | $ | 562 | $ | 14,629 | $ | 562 | ||||||||
Accounts receivable, net | 7,388 | 11,870 | 11,708 | 11,870 | ||||||||||||
Accounts payable, related-party payable and accrued liabilities | 5,489 | 9,618 | 11,275 | 9,618 | ||||||||||||
Working capital(1) | 28,066 | 16,427 | ||||||||||||||
Working capital(1) | 33,704 | 16,427 |
(1) | Working capital consists of total current assets less total current liabilities |
Our principal sources of liquidity are our cash and accounts receivable, as well as cash flows from operations. Additionally, we have a line of credit with Bank of America, N.A., which provides for revolving loans and letters of credit up to $20.0 million and is available to us through August 2014. We believe that our cash and accounts receivable and potential cash flows from operations will be sufficient to satisfy our currently anticipated cash requirements through at least the next twelve months. We have historically generated cash from our operations, however, there can be no assurance that our operations will continue to generate cash flows in the future. We use cash generated from our operations to fund our ongoing operations including business expansion and growth.
The following table sets forth, for the periods indicated, our beginning balance of cash, net cash flows provided by (used in) operating, investing and financing activities and our ending balance of cash:
June 30, | June 30, | Six Months Ended September 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Cash at beginning of period | $ | 562 | $ | 7,333 | $ | 562 | $ | 7,333 | ||||||||
Net cash provided (used in) by operating activities | 950 | (6,675 | ) | |||||||||||||
Net cash provided by (used in) operating activities | 9,256 | (247 | ) | |||||||||||||
Net cash used in investing activities | (735 | ) | (380 | ) | (1,009 | ) | (860 | ) | ||||||||
Net cash used in financing activities | 4,325 | 2,822 | ||||||||||||||
Net cash provided by (used in) financing activities | 5,820 | (2,111 | ) | |||||||||||||
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Cash at end of period | $ | 5,102 | $ | 3,100 | $ | 14,629 | $ | 4,115 | ||||||||
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Cash Flows from Operating Activities.
Operating activities provided $1.0$9.3 million of cash during the threesix months ended JuneSeptember 30, 2012, primarily due to our net income of $2.1$5.9 million, which included net non-cash charges of $0.5 million.million for depreciation and amortization, $0.4 million for stock-based compensation and a $1.1 million reduction in allowances for trade discounts and other. Changes in operating asset and liability accounts provided an additional $2.5$8.6 million of net cash, which was comprised of a $4.5 million decrease in accounts receivable, a $3.5$5.4 million increase in accrued expenses, offset by a $4.3$4.1 million increase in inventoryprepaid expenses, other current and non-current assets, a $1.4 million increase in accounts payable and a $1.3 million decrease in related-party payable,accounts receivable, partially offset by a $2.1 million increase in inventory, other current and non-current assets and a $1.3 million decrease in related party-payable, resulting from the termination of our advisory services agreement with Solera effective upon the consummation of our IPO. This increase in cash was offset by the excess tax benefit from stock-based compensation of $4.2$5.3 million.
Operating activities used $6.7$0.2 million of cash during the threesix months ended JuneSeptember 30, 2011, primarily due to our net income of $1.8$5.4 million, which included net non-cash benefitcharges of $0.2$1.3 million. Changes in operating asset and liability accounts used $8.3$7.0 million of net cash during the threesix months ended JuneSeptember 30, 2011.
Cash Flows from Investing Activities.
Cash used in investing activities related to purchases of property and equipment during the threesix months ended JuneSeptember 30, 2012 and 2011 was $0.7$1.0 million and $0.4$0.9 million, respectively.
Cash Flows from Financing Activities.
Cash provided by financing activities totaled $4.3$5.8 million during the threesix months ended JuneSeptember 30, 2012, comprised of:
net proceeds of $11.1 million received from common shares issued in the IPO, net of issuance costs;
excess tax benefit from stock-based compensation of $4.2$5.3 million;
proceeds of $1.8$2.2 million received from exercises of stock options; and
net pay down of the outstanding balance of $12.8 million of our credit facility.
Cash provided byused in financing activities totaled $2.8$2.1 million during the threesix months ended JuneSeptember 30, 2011, including net proceedswhich consisted of $3.4$1.5 million received from borrowings under our credit facility offset byin cash dividend payments ofmade to stockholders and $0.6 million to repurchase certain stock options.
Credit Facility
In December 2011, we entered into a second amended and restated credit agreement (the “Credit Agreement”) with Bank of America, N.A., which provides for revolving loans and letters of credit up to $20.0 million and is available to us through August 2014. The Credit Agreement is secured by a lien on substantially all of our assets.
Revolving advances under the Credit Agreement bear interest at the LIBOR plus 1.50%, as defined. Weighted average interest was 1.5% for each of the three and six months ended September 30, 2012. Weighted average interest was 1.8% and 2.2% for the three and six months ended September 30, 2011, respectively. As of September 30, 2012 and March 31, 2012, there was $20.0 million and $7.2 million, respectively, of availability for borrowings under the Credit Agreement. An unused line fee of 0.0625% per quarter is applied to the available balance unless our outstanding borrowing exceeds half of the borrowing limit. Interest is payable monthly.
There are various financial and other covenants under the Credit Agreement. Financial covenants, as defined in the Credit Agreement, include a net income covenant, total liabilities to tangible net worth covenant and a minimum fixed charge coverage covenant. The Credit Agreement requires us to submit interim and annual financial statements by specified dates after each reporting period. We were in compliance with the financial covenants under the Credit Agreement as of September 30, 2012.
Contractual Obligations and Commitments
The following table summarizes our contractual obligations as of JuneSeptember 30, 2012:
Payments Due by Period | ||||||||||||||||||||||||||||||||||||||||
Total | Less Than One Year | 1-3 Years | 3-5 Years | More than Five Years | Payments Due by Period | |||||||||||||||||||||||||||||||||||
Total | Less Than One Year | 1-3 Years | 3-5 Years | More than Five Years | ||||||||||||||||||||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||||||||||||||||||
Rent obligations(1) | $ | 1,964 | $ | 524 | $ | 1,440 | $ | — | $ | — | $ | 3,999 | $ | 577 | $ | 1,241 | $ | 1,277 | $ | 904 | ||||||||||||||||||||
Equipment lease obligations(2) | 44 | 25 | 19 | — | — | 38 | 25 | 13 | — | — | ||||||||||||||||||||||||||||||
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Total operating lease obligations | 2,008 | 549 | 1,459 | — | — | 4,037 | 602 | 1,254 | 1,277 | 904 | ||||||||||||||||||||||||||||||
Purchase commitments(3) | 13,064 | 12,792 | 272 | — | — | 16,330 | 16,092 | 238 | — | — | ||||||||||||||||||||||||||||||
Warehousing overheads obligations(4) | 600 | 200 | 400 | 550 | 200 | 350 | ||||||||||||||||||||||||||||||||||
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Total | $ | 15,672 | $ | 13,541 | $ | 2,131 | $ | — | $ | — | $ | 20,917 | $ | 16,894 | $ | 1,842 | $ | 1,277 | $ | 904 | ||||||||||||||||||||
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(1) | We lease approximately 33,500 square feet of space that houses our corporate headquarters and a sample warehouse at 1610 Fifth Street, Berkeley, California pursuant to a lease agreement that expires in February |
(2) | We lease equipment under non-cancelable operating leases. These leases expire at various dates through |
(3) | We have non-cancelable purchase commitments, directly or through contract manufacturers, to purchase ingredients to be used in the future to manufacture products. |
(4) | We have an agreement with our contract warehousing company to pay minimum overhead fees through June 2015. |
Off-balance Sheet Arrangements
We do not have any off-balance sheet arrangements or any holdings in variable interest entities.
Out-of-period Adjustment
During the first quartersix months of the prior fiscal year, we corrected an error in theour measurement of ourthe convertible preferred stock warrant liability. The correction increased the fair value of the convertible preferred stock warrant liability by $0.9 million and decreased additional paid-in capital by $0.4 million with a corresponding increase in expense of $0.5 million, which was recorded in other income (expense), net in the statement of operations during the threesix months ended JuneSeptember 30, 2011. The correction was an accumulation of an error that should have been recorded in prior periods and would have increased net loss for fiscal 2009 by $44,000, increased net income by $79,000 for fiscal 2010 and decreased net income by $0.6 million for fiscal 2011. Management had assessed the impact of this error and did not believe that it was material, either individually or in the aggregate, to any prior period financial statements or to the financial statements for the year ended March 31, 2012.
ITEM 3 –— QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our Form 10-K for fiscal 2012, filed with the SEC on June 8, 2012, provides a detailed discussion of the market risks affecting our operations. We believe our exposure to these market risks did not change materially during the three and six months ended JuneSeptember 30, 2012.
ITEM 4 –— CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures and internal controls that are designed to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Interim Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
Our management, including our disclosure committee, Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as required by Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended.Act. Based on this review, our Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective as of JuneSeptember 30, 2012.
Changes in Internal Control Over Financial Reporting
There were noDuring the three months ended September 30, 2012, we made changes into our internal control over financial reporting identified(as defined in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our last fiscal quarter13a-15(f) and 15d-15(f)) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Those changes were the installation of an integrated enterprise resource planning system to replace our legacy system.
Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
From time to time, we are subject to claims and assessmentsa variety of legal proceedings in the ordinary course of our business. We are not currently a party to any litigation matterlegal proceeding that, individually or in the aggregate, is expected to have a material adverse effect on our business, financial condition, results of operations or cash flows.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Dividend Policy
No cash dividends were paid during the three months ended June 30, 2012 and 2011. Although we have paid cash dividends on our capital stock from time to time in the past, we currently expect to retain all future earnings for use in the operation and expansion of our business and do not anticipate paying cash dividends in the foreseeable future. The declaration and payment of any dividends in the future will be determined by our board of directors, in its discretion, and will depend on a number of factors, including our earnings, capital requirements, overall financial condition and contractual restrictions, including under our revolving credit facility and other indebtedness we may incur.
Use of Proceeds from Public Offering of Common Stock
On April 2, 2012, we closed our IPO, in which we sold 950,000 shares and certain stockholders sold 4,800,000 shares of common stock at a price to the public of $19.00 per share. The aggregate amount of consideration for shares sold in the offering was $109.3 million. The shares sold by such stockholders included 750,000 additional shares purchased by the underwriters from certain of these stockholders pursuant to an option the underwriters held to cover overallotments of shares. We did not receive any proceeds from the sale of shares by the stockholders.
The offer and sale of all of the shares in the IPO were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-178270), which was declared effective by the SEC on March 27, 2012. The offering commenced as of March 28, 2012 and did not terminate before all of the securities registered in the registration statement were sold. Credit Suisse Securities (USA) LLC, J. P. Morgan Securities LLC, William Blair & Company, LLC, RBC Capital Markets, LLC, Stifel, Nicolaus & Company, Incorporated and Canaccord Genuity, Inc., acted as the underwriters. We raised $11.1 million in net proceeds after deducting underwriting discounts and commissions of $1.3 million and other offering expenses of $5.6 million.
We used $1.3 million of the net proceeds to pay Solera in connection with the termination of its advisory services agreement with us and the remaining balance of the net proceeds was used to repay a portion of our indebtedness outstanding under our credit facility. No other payments were made by us to directors, officers or persons owning ten percent or more of our common stock or to their associates, or to our affiliates, other than payments in the ordinary course of business to officers for salaries and to non-employee directors as compensation for board or board committee service.
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Sales of Unregistered Securities
During the fiscalsecond quarter ended JuneSeptember 30 2012, we issued an aggregate of 326,612 shares and 15,49361,138 shares of our common stock to certain employees and officers upon the exercise of options awarded under our 2004 Plan and non-plan based awards, respectively.since October 1, 2012 through October 15, 2012, we issued an aggregate of 1,000 shares of our common stock to an employee upon the exercise of options awarded under our 2004 Plan. We received aggregate proceeds of $1.8$0.4 million during the three months ended JuneSeptember 30, 2012 and $7,000 in the period since October 1, 2012 through October 15, 2012 as a result of the exercise of these options. We believe these transactions were exempt from the registration requirements of the Securities Act in reliance on Rule 701 thereunder as transactions pursuant to compensatory benefit plans and contracts relating to compensation as provided under Rule 701. As of JulyOctober 15, 2012, options to purchase an aggregate of 992,053929,915 shares and 161,122 shares of our common stock remain outstanding under the 2004 Plan and non-plan based awards, respectively. All option awards granted under the 2004 Plan and non-plan based awards were made prior to the effectiveness of our IPO. No further option grants will be made under our 2004 Plan.
None of the foregoing transactions involved any underwriters, underwriting discounts or commissions, or any public offering.
ITEM 6. | EXHIBITS |
The exhibits listed below are filed as a part of this Quarterly Report on Form 10-Q.
Exhibit
| Description | |
4.1 | Termination Agreement relating to Stockholders Agreement, between the Company and Solera Capital, LLC, dated as of July 26, 2012 (incorporated by reference to Exhibit 4.4 of the Company’s amendment number 1 to registration statement on Form S-1 filed with the SEC on July 30, 2012). | |
10.1 | Amended and Restated Contract Manufacturing and Packaging Agreement between the Company and Philadelphia Macaroni Company dated as of September 25, 2012.* | |
10.2 | Amendment to Contract Manufacturing and Packaging Agreement between the Company and Chelten House Products, Inc. dated as of September 25, 2012.* | |
10.3 | Contract Manufacturing and Packaging Agreement between the Company and Little Lady Foods, Inc. dated as of September 28, 2012.* | |
31.1 | Certification of the Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2 | Certification of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1 | Certification of Chief Executive Officer and Chief Financial Officer, pursuant to Section 906 of the Sarbanes- Oxley Act of 2002. | |
101 | The following materials from the Company’s Quarterly Report on Form 10-Q for the three and six months ended | |
(i) Unaudited Condensed Consolidated Balance Sheets, (ii) Unaudited Condensed Consolidated Statements of Operations, (iii) Unaudited Condensed Consolidated |
* | Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the SEC. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: July 27,October 31, 2012
ANNIE’S, INC. | ||
By: | /s/ Kelly J. Kennedy | |
Kelly J. Kennedy | ||
Chief Financial Officer | ||
(Principal Financial and Accounting | ||
Officer and Duly Authorized Officer) |
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