x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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) |
Large accelerated filer | Accelerated filer | x | ||||
Non-accelerated filer | o | Smaller reporting company |
PART I – FINANCIAL INFORMATIONItem 1. 2Condensed Consolidated Balance Sheets as of September 30, 2013 and March 31, 20132 4 5Item 2. 18Item 3. 31Item 4. 32Item 1. 33Item 1A. 33Item 5.34Item 6. 3637
Statements of Operations ASSETS CURRENT ASSETS: Cash Accounts receivable, net of allowance Inventory Deferred tax assets Income tax receivable Prepaid expenses and other current assets Total current assets Property and equipment, net Goodwill Intangible assets, net Deferred tax assets, long-term Other non-current assets Total assets LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable Accrued liabilities Total current liabilities Credit facility Other non-current liabilities Total liabilities Commitments and contingencies (Note 6) STOCKHOLDERS’ EQUITY Common stock Additional paid-in capital Accumulated deficit Total stockholders’ equity Total liabilities and stockholders’ equity thousands, except share and per share amounts) Balance Sheets Net sales (including product recall benefit of $751 during the three and six months ended September 30, 2013) Cost of sales (including product recall benefit of $490 and $273 during the three and six months ended September 30, 2013, respectively) Gross profit Operating expenses: Selling, general and administrative expenses (including product recall benefit of $32 and expense of $11 during the three and six months ended September 30, 2013, respectively) Income from operations Interest expense Other income (expense), net Income before provision for income taxes Provision for income taxes Net income Net income per share —Basic —Diluted Weighted average shares of common stock outstanding used in computing net income per share —Basic —Diluted thousands) Balance at March 31, 2013 Exercise of stock options Excess tax benefit from stock-based compensation Stock-based compensation Net Income Balance at September 30, 2013 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Stock-based compensation Provision for doubtful accounts Inventory reserves Excess tax benefit from stock-based compensation Accretion of imputed interest on purchase of intangible asset Change in fair value of convertible preferred stock warrant liability Amortization of deferred financing costs Deferred taxes Changes in operating assets and liabilities: Accounts receivable, net Inventory Income tax receivable Prepaid expenses, other current and non-current assets Accounts payable Related-party payable Accrued expenses and other non-current liabilities Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from credit facility Payments to credit facility Proceeds from common shares issued in initial public offering, net of issuance costs Excess tax benefit from stock-based compensation Proceeds from exercises of stock options Net cash provided by (used in) financing activities NET INCREASE IN CASH CASH—Beginning of period CASH—End of period NONCASH INVESTING AND FINANCING ACTIVITIES: Purchase of property and equipment funded through accounts payable Conversion of convertible preferred stock into common stock current year presentation. Three Months Ended September 30, 2013 2012 Six Months Ended September 30, 2013 2012 additional paid-in capital. Raw materials Work in process Finished goods Inventory Equipment and automotive Software Leasehold improvements Plates and dies Total property and equipment Less: Accumulated depreciation and amortization Construction in progress Property and equipment, net Product formulas Other intangible assets Total intangible assets Less: accumulated amortization Intangible assets, net Payroll and employee-related expenses Accrued trade expenses Inventory received not invoiced Deferred rent Brokerage commissions Other accrued liabilities Total accrued liabilities Six Months Ending March 31, 2014 Fiscal Year Ending March 31: 2015 2016 2017 2018 2019 Total future minimum lease payments $300,000. is seeking injunctive relief, relating to this suit. 2012. Balance, March 31, 2013 Granted Forfeited Exercised Balance, September 30, 2013 Shares-Based Awards Unvested at March 31, 2013 Granted Vested Forfeited Unvested at September 30, 2013 Options to purchase common stock Restricted stock units Total Net income per share: Net income Weighted average shares of common stock outstanding used in computing net income—basic Potential dilutive options Potential dilutive restricted stock units Weighted average shares of common stock outstanding used in computing net income—diluted Net income per share —Basic —Diluted United States Canada Meals Snacks Dressings, condiments and other December 31, 2013 and 2012. Benefit to net sales Benefit to cost of sales Benefit to/(incremental) selling, general and administrative expenses Total benefit to income before income taxes Benefit to net income Benefit to net income per diluted share Balance Sheetsthousands) September 30,
2013 March 31,
2013 $ 11,090 $ 4,930 19,100 20,015 17,333 15,147 2,558 2,558 — 588 5,411 5,050 55,492 48,288 6,192 6,138 30,809 30,809 1,086 1,116 3,617 3,704 147 157 $ 97,343 $ 90,212 $ 7,512 $ 4,342 13,652 12,021 21,164 16,363 — 7,007 984 913 22,148 24,283 17 17 94,875 93,190 (19,697 ) (27,278 ) 75,195 65,929 $ 97,343 $ 90,212 Three Months Ended December 31, Nine Months Ended December 31, 2013 2012 2013 2012 Net sales $ 46,177 $ 36,283 $ 143,867 $ 117,262 Cost of sales 27,951 23,267 88,978 72,539 Gross profit 18,226 13,016 54,889 44,723 Operating expenses: Selling, general and administrative expenses 13,421 10,687 37,286 32,437 Income from operations 4,805 2,329 17,603 12,286 Interest expense (80 ) (40 ) (255 ) (120 ) Other income (expense), net 30 31 88 116 Income before provision for income taxes 4,755 2,320 17,436 12,282 Provision for income taxes 1,966 919 7,066 4,965 Net income $ 2,789 $ 1,401 $ 10,370 $ 7,317 Earnings per share —Basic $ 0.16 $ 0.08 $ 0.61 $ 0.43 —Diluted $ 0.16 $ 0.08 $ 0.60 $ 0.41 Weighted average shares of common stock outstanding used in computing earnings per share —Basic 16,937,139 17,249,536 16,901,089 17,085,833 —Diluted 17,398,006 17,781,720 17,386,408 17,702,221 Statements of Operationsthousands, except share and per share amounts) Three Months Ended September 30, Six Months Ended September 30, 2013 2012 2013 2012 $ 58,650 $ 46,686 $ 97,690 $ 80,979 36,749 28,786 61,027 49,272 21,901 17,900 36,663 31,707 12,538 11,539 23,865 21,750 9,363 6,361 12,798 9,957 (104 ) (40 ) (175 ) (80 ) 32 36 58 85 9,291 6,357 12,681 9,962 3,739 2,572 5,100 4,046 $ 5,552 $ 3,785 $ 7,581 $ 5,916 $ 0.33 $ 0.22 $ 0.45 $ 0.35 $ 0.32 $ 0.21 $ 0.44 $ 0.34 16,896,227 17,070,327 16,882,965 17,003,534 17,392,447 17,702,516 17,376,646 17,656,356 December 31,
2013 March 31,
2013ASSETS CURRENT ASSETS: Cash $ 2,986 $ 4,930 Accounts receivable, net of allowance 18,796 20,015 Inventory 23,407 15,147 Deferred tax assets 2,565 2,558 Income tax receivable 988 588 Prepaid expenses and other current assets 5,572 5,050 Total current assets 54,314 48,288 Restricted cash 300 — Property and equipment, net 6,206 6,138 Goodwill 30,809 30,809 Intangible assets, net 1,071 1,116 Deferred tax assets, long-term 3,553 3,704 Other non-current assets 142 157 Total assets $ 96,395 $ 90,212 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable $ 6,784 $ 4,342 Accrued liabilities 9,104 12,021 Total current liabilities 15,888 16,363 Credit facility — 7,007 Other non-current liabilities 870 913 Total liabilities 16,758 24,283 Commitments and contingencies (Note 7) STOCKHOLDERS’ EQUITY Common stock 17 17 Additional paid-in capital 96,528 93,190 Accumulated deficit (16,908 ) (27,278 ) Total stockholders’ equity 79,637 65,929 Total liabilities and stockholders’ equity $ 96,395 $ 90,212 Additional Total Common Stock Paid-in Accumulated Stockholders’ Shares Amount Capital Deficit Equity 16,849,016 $ 17 $ 93,190 $ (27,278 ) $ 65,929 60,530 — 633 — 633 — — 643 — 643 — — 409 — 409 — — — 7,581 7,581 16,909,546 $ 17 $ 94,875 $ (19,697 ) $ 75,195 Additional Total Common Stock Paid-in Accumulated Stockholders’ Shares Amount Capital Deficit Equity Balance at March 31, 2013 16,849,016 $ 17 $ 93,190 $ (27,278 ) $ 65,929 Exercise of stock options 123,364 — 1,211 — 1,211 Excess tax benefit from stock-based compensation — — 1,467 — 1,467 Stock-based compensation — — 660 — 660 Net Income — — — 10,370 10,370 Balance at December 31, 2013 16,972,380 $ 17 $ 96,528 $ (16,908 ) $ 79,637 Six Months Ended September 30, 2013 2012 $ 7,581 $ 5,916 637 463 409 447 21 — 430 (80 ) (643 ) (5,266 ) 72 71 — 13 6 9 87 217 894 162 (2,616 ) (2,119 ) 588 (149 ) (174 ) 4,092 3,158 1,359 — (1,305 ) 2,273 5,426 12,723 9,256 (649 ) (1,009 ) (649 ) (1,009 ) 7,720 2,663 (14,727 ) (15,459 ) — 11,146 643 5,266 450 2,204 (5,914 ) 5,820 6,160 14,067 4,930 562 $ 11,090 $ 14,629 $ 12 $ 13 $ — $ 81,373 Nine Months Ended December 31, 2013 2012 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 10,370 $ 7,317 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,035 749 Stock-based compensation 660 677 Provision for doubtful accounts 21 — Excess tax benefit from stock-based compensation (1,467 ) (7,499 ) Accretion of imputed interest on purchase of intangible asset 107 107 Change in fair value of convertible preferred stock warrant liability — 13 Amortization of deferred financing costs 9 12 Loss on disposal of property and equipment 1 — Deferred taxes 144 535 Changes in operating assets and liabilities: Accounts receivable, net 1,198 1,760 Inventory (8,260 ) (10,925 ) Income tax receivable (400 ) 425 Prepaid expenses, other current and non-current assets (516 ) 4,400 Accounts payable 2,440 3,417 Related-party payable — (1,305 ) Accrued expenses and other non-current liabilities (1,592 ) 4,527 Net cash provided by operating activities 3,750 4,210 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (1,057 ) (1,498 ) Restricted cash (300 ) — Net cash used in investing activities (1,357 ) (1,498 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from credit facility 8,432 2,952 Payments to credit facility (15,439 ) (15,748 ) Proceeds from common shares issued in initial public offering, net of issuance costs — 11,146 Payment for intangible asset acquired by financing transaction (8 ) (7 ) Excess tax benefit from stock-based compensation 1,467 7,499 Proceeds from exercises of stock options 1,211 3,844 Net cash provided by (used in) financing activities (4,337 ) 9,686 NET INCREASE (DECREASE) IN CASH (1,944 ) 12,398 CASH—Beginning of period 4,930 562 CASH—End of period $ 2,986 $ 12,960 NONCASH INVESTING AND FINANCING ACTIVITIES: Purchase of property and equipment funded through accrued expenses and accounts payable $ 2 $ 425 Conversion of convertible preferred stock into common stock $ — $ 81,373 1.Description of Business2.Summary of Significant Accounting PoliciesSeptember 30,December 31, 2013 and March 31, 2013, the interim condensed consolidated statement of stockholders’ equity for the sixnine months ended September 30,December 31, 2013, and the interim condensed consolidated statements of operations for the three and six months ended September 30, 2013 and 2012, and cash flows for the sixnine months ended September 30,December 31, 2013 and 2012 are unaudited. These unaudited 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 the information and notes required by U.S. GAAP for complete financial statements. These unaudited 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 14, 2013. The March 31, 2013 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 complete financial statements.ourthe Company's financial position as of September 30,December 31, 2013 and results of ourits operations for the three and sixnine months ended September 30,December 31, 2013 and 2012, and the cash flows for the sixnine months ended September 30,December 31, 2013 and 2012. The interim results for the sixnine months ended September 30,December 31, 2013 are not necessarily indicative of the results that may be expected for the year ending March 31, 2014. and, Napa Valley Kitchen, Inc. and Annie's Baking, LLC. 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 at an offering price of $19.00 per share 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 affiliated with Solera Capital, LLC, sold 4.8 million shares at the $19.00 offering price in the IPO. The Company sometimes refers to Solera Capital, LLC and its affiliates as Solera in this Quarterly Report on Form 10-Q.Immediately prior Certain reclassifications were made 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 warrantCompany's prior financial statements 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.Pursuantconform to the Company’s Amended and Restated Certificate of Incorporation or Charter and its Amended and Restated Bylaws, which 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 stock and 5,000,000 shares, par value $0.001 per share, of which are preferred stock. As of September 30, 2013, 16,909,546 shares of common stock were issued and outstanding and no shares of preferred stock were issued and outstanding.Annie’s, Inc.Notes to Condensed Consolidated Financial Statements(unaudited)Secondary Public OfferingOn August 6, 2012, the Company closed a secondary public offering, in which certain stockholders, including 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.Shelf Registration StatementOn July 16, 2013, the Company filed a registration statement on Form S-3 to register 2,537,096 shares of common stock of the Company held by Solera. In connection with preparations for filing of this registration statement, the Company incurred $86,000 for legal, accounting and other out-of-pocket expenses on Solera’s behalf in the six months ended September 30, 2013. Net Sales Customer A Customer B Customer C 19 % 16 % 16 % 27 % 13 % 14 % 21 % 13 % 14 % 27 % 11 % 12 % Net Sales Customer A Customer B Customer C Three Months Ended December 31, 2013 22 % 18 % 11 % 2012 25 % 17 % 11 % Nine Months Ended December 31, 2013 21 % 15 % 13 % 2012 26 % 13 % 12 % September 30,December 31, 2013, two customers represented 31% and 18%, respectively, of accounts receivable. As of March 31, 2013, three customers represented 31%36%, 19%26%, and 10%, respectively, of accounts receivable. The same three customers represented 26%, 36% and 10%, respectively, of accounts receivable as of March 31, 2013.Annie’s, Inc.Notes to Condensed Consolidated Financial Statements(unaudited)IPOCompany's initial public offering on April 2, 2012, prior to the automatic conversion of the convertible preferred stock warrant into a common stock warrant, it 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 (Note 7)(see Note 8).Equipment and automotive 3 to 7 years Software 3 to 7 years Plates and dies 3 years Leasehold improvements Shorter of lease term or estimated useful life September 30,December 31, 2013, the Company had $2.2$2.3 million capitalized software development costs, net of accumulated amortization, including $0.6$0.6 million in construction in progress.construction-in-progress. As of March 31, 2013, the Company had $2.1$2.1 million capitalized software development costs, net of accumulated amortization, including $0.4$0.4 million in construction in progress.Shippingconstruction-in-progress.HandlingWarehousing CostsShippinghandlingwarehousing costs are included in selling, general and administrative expenses in the condensed consolidated statements of operations. ShippingFreight and handlingwarehousing 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. ShippingFreight and handlingwarehousing costs recorded as a component of selling, general and administrative expenses were $1.8 million and $1.5$1.4 million for the three months ended September 30,December 31, 2013 and 2012, respectively, and were $3.3$5.2 million and $2.8$4.2 million for the sixnine months ended September 30,December 31, 2013 and 2012, respectively.Research and developmentproducts.products and are expensed as incurred. These costs include consumer research, prototype development, materials and resources to conduct trial production runs, package development and employee-related costs for personnel responsible for product innovation. Research and developmentR&D costs recorded as a component of selling, general and administrative expenses were $0.6$0.5 million and $0.7$0.6 million for the three months ended September 30,December 31, 2013 and 2012, respectively, and were $1.2$1.7 million and $1.5$2.1 million for the sixnine months ended September 30,December 31, 2013 and 2012, respectively.advertisements and the costs of communicating advertisements. The costs of producing advertisements are expensed as incurred and the costs of communicating advertising are expensed over the period of communication. Total advertising costs for the three months ended September 30,December 31, 2013 and 2012 included in selling, general and administrative expenses were $0.4 million and $0.1$0.2 million, respectively, and were $0.8$1.2 million and $0.4$0.6 million for the sixnine months ended September 30,December 31, 2013 and 2012, respectively.reevaluatedre-evaluated each period and the related reserves are adjusted when these factors indicate that the recall reserves are either insufficient to cover or exceed the estimated product recall expenses.Annie’s, Inc.Notes to Condensed Consolidated Financial Statements(unaudited)Net Income Per ShareCommon StockBasic net income$19.00 per share and raised $11.1 million in net proceeds after deducting underwriting discounts and commissions of common$1.3 million and other offering expenses of $5.6 million. In addition, certain of the Company’s stockholders, including funds affiliated with Solera Capital, LLC, sold 4.8 million shares at the $19.00 offering price in the IPO. The Company sometimes refers to Solera Capital, LLC and its affiliates as Solera in this Quarterly Report on Form 10-Q.is calculated by dividing the net income attributable to common stockholders by the weighted-average number ofwere automatically converted into 15,221,571 shares of common stock, the Company’s outstanding for the period. Diluted net income per shareconvertible preferred stock warrant was automatically converted into a common stock warrant to purchase a total of 80,560 shares of common stock is computed by giving effectand the related convertible preferred stock warrant liability was reclassified to all potentially dilutive securities outstanding during the period. The Company utilizes the treasury stock method to calculate potential common shares that underlie its stock options to purchase common stock and restricted stock units. Performance share units were excluded from potential common shares since no shares were issuable as of September 30, 2013 and March 31, 2013. Certain stock options to purchase our common stock and restricted stock units had an anti-dilutive effect on the earnings per share for the periods presented, and were also excluded.3.Balance Sheet Components September 30,
2013 March 31,
2013 $ 2,063 $ 1,391 1,020 2,142 14,250 11,614 $ 17,333 $ 15,147 December 31,
2013 March 31,
2013Raw materials $ 2,659 $ 1,391 Work in process 1,494 2,142 Finished goods 19,254 11,614 Inventory $ 23,407 $ 15,147 September 30,
2013 March 31,
2013 $ 3,835 $ 2,959 2,410 2,410 1,344 1,195 318 244 7,907 6,808 (2,364 ) (1,760 ) 649 1,090 $ 6,192 $ 6,138 Annie’s, Inc.Notes to Condensed Consolidated Financial Statements(unaudited) December 31,
2013 March 31,
2013Equipment and automotive $ 3,897 $ 2,959 Software 2,570 2,410 Leasehold improvements 1,342 1,195 Plates and dies 333 244 Total property and equipment 8,142 6,808 Less: Accumulated depreciation and amortization (2,745 ) (1,760 ) Construction in progress 809 1,090 Property and equipment, net $ 6,206 $ 6,138 $313,000$383,000 and $607,000$990,000 for the three and sixnine months ended September 30,December 31, 2013, respectively. The depreciation expense for the same periods in the prior year was $248,000$271,000 and $433,000,$704,000, respectively. September 30,
2013 March 31,
2013 $ 1,023 $ 1,023 189 189 1,212 1,212 (126 ) (96 ) $ 1,086 $ 1,116 December 31, 2013 March 31, 2013 Gross Net Gross Net Carrying Accumulated Carrying Carrying Accumulated Carrying Useful Amount Amortization Amount Amount Amortization Amount Lives Product formulas $ 1,023 $ (106 ) $ 917 $ 1,023 $ (68 ) $ 955 5 - 25 years Other intangible assets 189 (35 ) 154 189 (28 ) 161 5 - 25 years Total $ 1,212 $ (141 ) $ 1,071 $ 1,212 $ (96 ) $ 1,116 $30,000$45,000 on its intangible assets during the three and sixnine months ended September 30,December 31, 2013. The amortization expense for the same periods over the prior year was $15,000 and $30,000,$45,000, respectively.$30,000,$15,000, $60,000 and $756,000, respectively.September 30,December 31, 2013 and March 31, 2013 include receivables from contract manufacturers and suppliers of $3.0$4.2 million and $3.9 million, respectively. September 30,
2013 March 31,
2013 $ 2,310 $ 3,779 5,060 2,299 4,818 4,038 253 260 231 407 980 1,238 $ 13,652 $ 12,021 Annie’s, Inc.Notes to Condensed Consolidated Financial Statements(unaudited)4.Credit FacilityIn 2005, the Company entered into a bank line of credit agreement (the “Credit Agreement”) with Bank of America, N.A., which provided for revolving loans up to $11.0 million. In March 2008, the Company amended the December 31, 2013 March 31, 2013 Payroll and employee-related expenses $ 2,903 $ 3,779 Accrued trade expenses 2,394 2,299 Inventory received not invoiced 2,720 4,038 Deferred rent 249 260 Brokerage commissions 320 407 Other accrued liabilities 518 1,238 Total accrued liabilities $ 9,104 $ 12,021 Agreement with Bank of America to establish an inter-creditor agreement with another lender (Note 7). In August 2010, the Company amended the Credit Agreement to decrease the maximum borrowing limit on revolving loans to $10.0 million and extended the expiration date to August 20, 2012. Facilitycredit facilityloan agreement (as amended from time to time, the "Credit Agreement") with Bank of America, N. A. that, among other things, provided for an increase in its line ofrevolving credit facility to $20.0 million and an extension of the term through August 2014. In March 2013, the Company entered into anotheran amendment to its credit facility.Credit Agreement. This amendment provides for, among other things, an increase in the line of credit facility to $40.0 million and an extension of the term through August 2016. TheOn November 5, 2013, the Company entered into another amendment to its Credit Agreement. This amendment provides for, among other things, consent for the Company to create a limited liability company and guarantee performance of the limited liability company in the event and to the extent the Company assigns to the limited liability company any of its rights or obligations under the Purchase Agreement dated November 5, 2013 among the Company, Safeway Inc. and Safeway Australia Holdings, LLC (see Note 16). Additionally, the amendment provides for the issuance of letters of credit and revises certain covenants and representations and warranties of the Company under the Credit Agreement. In connection with this amendment, Annie’s Baking, LLC, became a party to the Credit Agreement pursuant to a Joinder Agreement dated November 22, 2013. The credit facility is collateralized by substantially all of the Company’s assets.credit facility)Credit Agreement) plus 1.25%, (ii) IBOR (as defined in the credit facility)Credit Agreement) plus 1.25% or (iii) Prime Rate (as defined in the credit facility)Credit Agreement). Weighted average interest was 1.4% and 1.5% for each of the three and sixnine months ended September 30,December 31, 2013, respectively. Weighted average interest was 1.5% for each of the three and sixnine months ended September 30,December 31, 2012. The Company is required to pay a commitment fee on the unused credit facility commitments, if the outstanding balance is less than half the commitment, at an annual rate ranging from 0.25% to 0.40% depending on the utilization rate. As of September 30,December 31, 2013 and March 31, 2013, there was $40.0 million and $33.0 million, respectively, of availability for borrowings available under the Credit Agreement.credit facility. Interest is payable monthly.credit facilityCredit Agreement contains restrictions on, among other things, the Company’s ability to incur additional indebtedness, pay dividends or make other distributions and make investments and loans. The credit facilityCredit Agreement also limits the Company’s ability to make capital expenditures in excess of $15.0 million. The credit facilityCredit Agreement requires that the Company maintain a Funded Debt (as defined in the credit facility)Credit Agreement) to Adjusted EBITDA (as defined in the credit facility)Credit Agreement) ratio of not more than 2.75 to 1.0 and a minimum Net Worth (as defined in the credit facility)Credit Agreement) equal to at least $50.0 million, plus 30% of earnings after taxes earned each quarter (if positive), beginning with the June 2013 quarterly earnings. 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 covenants as of September 30,December 31, 2013 and March 31, 2013.5.Related Party Transactionsits shares of common stock of the Company held by certain affiliates of Solera and certain other stockholders. As discussed further below, on November 18, 2013 Solera completed the sale of its shares entitled to registration under this agreement.printing costs and various other fees associated with the registration and sale of common stock sold in the secondary public offering.In connection with Solera’s exercise of its rights under the Registration Rights Agreement,filedclosed a registration statement on Form S-3 on July 16, 2013 to register Solera’ssecondary public offering in which Solera sold remaining shares. In connection with preparations for filing2,537,096 shares of this registration statement,common stock of the Company at an offering price of $47.95 per share. The Company did not receive any proceeds from the sale of shares by Solera. The offering expenses incurred $86,000 for legal and other out-of-pocket expenses on Solera’s behalf duringby the sixCompany were $0.3 million in the nine months ended September 30, 2013.December 31, 2013, including legal, accounting and various other fees associated with the registration and sale of common stock of the Company sold in the secondary public offering.6.Commitments and Contingenciessixnine months ended September 30,December 31, 2013 was $156,000$155,000 and $306,000,$461,000, respectively. Rent expense for the three and sixnine months ended September 30,December 31, 2012 was $120,000$146,000 and $239,000,$386,000, respectively.September 30,December 31, 2013 are as follows (in thousands): Lease Payments $ 330 675 673 669 662 586 $ 3,595 Lease Payments Three Months Ending March 31, 2014 $ 166 Fiscal Year Ending March 31: 2015 675 2016 673 2017 669 2018 662 2019 586 Total future minimum lease payments $ 3,431 September 30,December 31, 2013, the Company’s purchase commitments totaled $14.5$15.9 million, which will substantially be incurred within a year.September 30,December 31, 2013, the remaining obligation under the agreement for overhead fees was $350,000.September 30,December 31, 2013, the Company’s remaining obligation for product formulas was $1.85$1.7 million.September 4,December 6, 2013, a private organization called the Center for Environmental Health (“CEH”) issued a 60-day notice of intent to sue (“Notice”)sued the Company and its subsidiary, Annie’s Homegrown, Inc., in Superior Court of the State of California in the County of Alameda under California Health & Safety Code §§ 25249.5 et seq. (commonly referred to as “Proposition 65”). In the Notice, CEH claims that warnings are required in California under Proposition 65 for alleged exposures to lead and lead compounds from cookies that contain ginger or molasses, including Annie’s Gluten-Free Ginger Snap Bunny Cookies. Under Proposition 65, any private enforcer such as CEH may file a lawsuit if it first issues a valid 60-day notice, and if the California Attorney General or other specified California public enforcers do not file suit within 60 days after service. A Proposition 65 plaintiff may seekAnnie’s, Inc.Notes to Condensed Consolidated Financial Statements(unaudited)as well as civil penalties which may be assessed up to a maximum of $2,500 per violation per day and a private plaintiff does not need to show that anyone has been harmed by the alleged exposures. A prevailing plaintiff may also seek its attorneys’ fees and costs undercosts. The lawsuit, entitled California laws.Although CEH has not yet filed a lawsuit naming the Companycompanies that are either suppliers or Annie’s Homegrown, Inc., within the past year CEH has filed several lawsuits against other manufacturers and retailers regarding various types of products containing molasses and/ginger- or ginger, such as licorice candy, cookies, and baking mix products. In CEH’s cases involving cookies and baking mix products, CEH’s operative complaints have put at issue only those cookies or baking mix products that contain ginger and/or molasses as ingredients.molasses-containing cookies. The Company cannot at this time reasonably estimate a range of exposure, if any, of the potential liability should a suit be brought in connection with the Notice.7.Convertible Preferred Stock Warrant8.Preferred StockSeptember 30,December 31, 2013 and March 31, 2013, the Company’s Chartercertificate of incorporation authorized 5,000,000 shares of preferred stock, $0.001 par value per share. As of September 30,December 31, 2013, no certificate of designations defining the rights and preferences of the preferred stock had been filed and no shares of preferred stock were issued and outstanding.9.Common StockSeptember 30,December 31, 2013 and March 31, 2013, the Company’s Chartercertificate of incorporation authorized 30,000,000 shares of common stock, $0.001 par value per share, respectively, of which 16,909,54616,972,380 and 16,849,016 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 whenever funds are legally available therefor and if, as and when declared by the Company’s Board of Directors. No dividends were declared or paid during the sixnine months ended September 30,December 31, 2013 and 2012, respectively.10.Stock-Based Compensationnonqualifiednon-qualified 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, providedAnnie’s, Inc.Notes to Condensed Consolidated Financial Statements(unaudited)continuance of the employment with the Company.date. The performance share units granted to employees vest based on achievement of required cumulative compounded adjusted diluted earnings per share growth during the stipulated three-year period applicable to a grant. The vesting of stock-based awards is subject to continuance of the employment with or service to the Company.$116,000$251,000 and $231,000$230,000 for the three months ended September 30,December 31, 2013 and 2012, respectively, and was $409,000$660,000 and $447,000$677,000 for the sixnine months ended September 30,December 31, 2013 and 2012, respectively.sixnine months ended September 30,December 31, 2013: Number of Shares Weighted-Average
Exercise Price 1,203,990 $ 13.26 42,276 38.62 (77,746 ) 18.31 (60,530 ) 10.46 1,107,990 $ 13.24 Number of Shares Balance at March 31, 2013 1,203,990 $ 13.26 Granted 62,387 41.87 Forfeited (99,066 ) 18.28 Exercised (123,364 ) 9.81 Balance at December 31, 2013 1,043,947 $ 14.90 sixnine months ended September 30,December 31, 2013 was $14.03$15.76 per share. The total intrinsic value of stock options exercised during the sixnine months ended September 30,December 31, 2013 was $1.9$4.1 million. The intrinsic value is calculated based on the difference between the exercise price and the fair value of the common stock at time of exercise.sixnine months ended September 30,December 31, 2013: Shares Weighted-Average
Grant Date
Fair Value 71,165 $ 21.73 47,366 39.91 (4,692 ) 45.27 (13,442 ) 24.16 100,397 $ 28.69 Shares-Based Awards Shares Unvested at March 31, 2013 71,165 $ 21.73 Granted 54,806 41.11 Vested (4,692 ) 45.27 Forfeited (19,922 ) 24.94 Unvested at December 31, 2013 101,357 $ 30.49 September 30,December 31, 2013, there were 73,33370,872 unvested performance share units outstanding, net of actual forfeitures. As of September 30,December 31, 2013, the number of shares estimated to be issued at the end of the performance period(s) is a total of 36,67235,441 shares. The maximum number of total shares that could be issued at the end of performance period(s) is 110,005106,313 shares.September 30,December 31, 2013, there was $3.9$4.0 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 3.13.0 years.Annie’s, Inc.Notes to Condensed Consolidated Financial Statements(unaudited)11.Income Taxesdecreasedincreased to 40.2%41.3% for the three months ended September 30,December 31, 2013, compared to 40.5%39.6% for the three months ended September 30,December 31, 2012. The effective tax rate was 40.2%40.5% for the sixnine months ended September 30,December 31, 2013, compared to 40.6%40.4% for the sixnine months ended September 30,December 31, 2012. The effective tax rate is based on a projection of the Company’s annual fiscal year results. The effective tax rate for the three and sixnine months ended September 30,December 31, 2013 was lowerhigher than the effective tax rate for the three and sixnine months ended September 30,December 31, 2012 due to the impact of permanent items and federal and state income tax credits.12.Net Income per Share of Common Stock attributable to Common Stockholdersnet incomeearnings per share of common stock for the periods presented, because including them would have been anti-dilutive: Three Months Ended September 30, Six Months Ended September 30, 2013 2012 2013 2012 85,046 2,562 133,515 2,562 5,434 6,256 12,864 6,256 90,480 8,818 146,379 8,818 Three Months Ended December 31, Nine Months Ended December 31, 2013 2012 2013 2012 Options to purchase common stock 105,157 2,562 105,157 2,562 Restricted stock units 5,141 — 10,575 6,256 Total 110,298 2,562 115,732 8,818 net incomeearnings per share attributable to common stockholders is as follows (in thousands except share and per share amounts): Three Months Ended September 30, Six Months Ended September 30, 2013 2012 2013 2012 $ 5,552 $ 3,785 $ 7,581 $ 5,916 16,896,227 17,070,327 16,882,965 17,003,534 482,058 625,684 480,517 646,468 14,162 6,505 13,164 6,354 17,392,447 17,702,516 17,376,646 17,656,356 $ 0.33 $ 0.22 $ 0.45 $ 0.35 $ 0.32 $ 0.21 $ 0.44 $ 0.34 13.Geographic Areas and Product Sales Three Months Ended December 31, Nine Months Ended December 31, 2013 2012 2013 2012 Earnings per share: Net income $ 2,789 $ 1,401 $ 10,370 $ 7,317 Weighted average shares of common stock outstanding used in computing earnings—basic 16,937,139 17,249,536 16,901,089 17,085,833 Potential dilutive options 444,822 523,881 471,427 609,222 Potential dilutive restricted stock units 16,045 8,303 13,892 7,166 Weighted average shares of common stock outstanding used in computing earnings—diluted 17,398,006 17,781,720 17,386,408 17,702,221 Earnings per share —Basic $ 0.16 $ 0.08 $ 0.61 $ 0.43 —Diluted $ 0.16 $ 0.08 $ 0.60 $ 0.41 Three Months Ended September 30, Six Months Ended September 30, 2013 2012 2013 2012 $ 56,226 $ 44,423 $ 93,671 $ 77,571 2,424 2,263 4,019 3,408 $ 58,650 $ 46,686 $ 97,690 $ 80,979 Annie’s, Inc.Notes to Condensed Consolidated Financial Statements(unaudited) Three Months Ended December 31, Nine Months Ended December 31, 2013 2012 2013 2012 United States $ 44,459 $ 34,413 $ 138,130 $ 111,984 Canada 1,718 1,870 5,737 5,278 $ 46,177 $ 36,283 $ 143,867 $ 117,262 Three Months Ended September 30, Six Months Ended September 30, 2013 2012 2013 2012 $ 29,739 $ 21,869 $ 46,293 $ 36,536 22,057 19,146 37,878 32,609 6,854 5,671 13,519 11,834 $ 58,650 $ 46,686 $ 97,690 $ 80,979 Three Months Ended December 31, Nine Months Ended December 31, 2013 2012 2013 2012 Meals $ 23,933 $ 16,223 $ 70,226 $ 52,759 Snacks 17,075 14,908 54,953 47,517 Dressings, condiments and other 5,169 5,152 18,688 16,986 $ 46,177 $ 36,283 $ 143,867 $ 117,262 14.Product Recallsixnine months ended September 30, 2013.$1.2$0.4 million and $1.6 million for insurance recoveries and a $0.1 million in reduction of net sales reserve in connection with the product recall in each of the three and sixnine months ended September 30,December 31, 2013, respectively. The impact of the recall-related charges and related insurance recoveries in the three and sixnine months ended September 30,December 31, 2013 and 2012 is as follows (in thousands except per share amount): Three Months Ended
September 30, 2013 Six Months Ended
September 30, 2013 $ 751 $ 751 490 273 32 (11 ) $ 1,273 $ 1,013 $ 761 $ 606 $ 0.04 $ 0.03 Three Months Ended December 31, Nine Months Ended December 31, 2013 2012 2013 2012 Benefit to/(reduction of) net sales $ 104 $ (1,570 ) $ 855 $ (1,570 ) Benefit to/(incremental) cost of sales 280 (690 ) 533 (690 ) Benefit to/(incremental) selling, general and administrative expenses (7 ) — (18 ) — Total benefit to/(reduction of) income before income taxes $ 377 $ (2,260 ) $ 1,370 $ (2,260 ) Benefit to/(reduction of) net income $ 224 $ (1,346 ) $ 827 $ (1,346 ) Benefit to/(reduction of) net income per diluted share $ 0.01 $ (0.08 ) $ 0.05 $ (0.08 ) Annie’s, Inc.Notes to Condensed Consolidated Financial Statements(unaudited)15.Subsequent Eventsfacility andfacility. The Company expects to close the acquisition in the first quarter of fiscal 2015. The Joplin Plant has been the primary manufacturer of the Company’s cookie and cracker products for more than ten years. Company products produced in the Joplin Plant currently account for over 50% of its total snacks net sales and represent the majority of the Joplin Plant’s total production volume. In connection with the closing of the acquisition, the Company expects to enter into a three-year supply agreement with an affiliate of Safeway Inc., pursuant to which the Company will manufacture products for the affiliate.On Further, in connection with the planned acquisition, on November 5,7, 2013, the Company entered intodeposited $300,000 in an amendment to its credit facility.escrow account with the title insurance company. This amendment provides for, among other things, consent foramount is reflected as restricted cash on the Company to create a limited liability company (“LLC”) and guarantee performancecondensed consolidated balance sheet at December 31, 2013.
products. fiscal 2015. The Joplin Plant has been the primary manufacturer of our cookie and cracker products for more than ten years. Our products produced in the Joplin Plant currently account for over 50% of our total snacks net sales and represent the majority of the Joplin Plant’s total production volume. In connection with the closing of the acquisition, we expect to enter into a three-year supply agreement with an condensed consolidated balance sheet at December 31, 2013. 2014 as compared to fiscal 2013. full year. In December 2013, we entered into gluten free chewy granola bars. increases, particularly for organic wheat. Net sales Cost of sales Gross profit Operating expenses: Selling, general and administrative expenses Total operating expenses Income from operations Interest expense Other income (expense), net Income before provision for income taxes Provision for income taxes Net income GAAP financial measures Reversal of net sales reserve related to product recall Recoveries from insurance carrier related to product recall: Net sales Cost of sales Selling, general and administrative expenses Administrative costs related to product recall Costs associated with our planned acquisition of the Joplin Plant Shelf registration costs Secondary offering costs Change in fair value of convertible preferred stock warrant liability Provision for income taxes Non-GAAP figures measures for the three months ended December 31, 2013 and 2012: Meals Snacks Dressings, condiments and other Net sales net sales growth, excluding the impact of the pizza recall. were largely unchanged compared to the prior year period. Cost of sales Gross profit Gross margin % costs and increased inventory obsolescence. Operating expenses: Selling, general and administrative expenses Selling, general and administrative expense as a percentage of net sales December 31, 2012 due to overall leverage resulting from strong net sales growth. Income from operations Income from operations as a percentage of net sales 12.2%. Interest expense Other income Provision for income taxes Effective tax rate Other income (expense), net Provision for income taxes Effective tax rate Net income December 31, 2013. nine months ended December 31, 2012. Cash Accounts receivable, net Accounts payable Accrued liabilities Working capital(1) 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(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 this Form 10-Q relating to the acquisition of the Joplin manufacturing plant and those in our Form 10-K discussed in the section titled “Risk Factors” including risks relating to competition; new product introductions; implementation of our growth strategy; our brand; our reputation; product liability claims; product recalls and related insurance recoveries (if any); economic disruptions; changes in consumer preferences; ingredient and packaging costs and availability; reliance on a limited number of distributors, retailers, contract manufacturers and third-party suppliers and an outside warehouse facility; efficiency projects; intellectual property and related disputes; regulatory compliance; transportation; our supply-chain; our and our customers’ inventory levels; and seasonality. 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.#1number one natural and organic market position in four product lines: macaroni and cheese, snack crackers, fruit snacks and graham crackers. primarily from the sale of meals, snacks, dressings, condiments and other products primarily under the Annie’s Homegrown and Annie’s Naturals brand names. We have experienced strong growth across all product categories, resulting from our focus on supporting our best-selling items and the introduction of new products in these categories.facility, andfacility. We expect to close the acquisition in the first quarter ofIncludingFurther, in connection with the impact of previously planned efficiency projects related toacquisition, on November 7, 2013, we deposited $300,000 in an escrow account with the Joplin Plant,title insurance company. This amount is reflected as restricted cash on the acquisition is not expected to materially impact our net income in fiscal 2015. The supply agreement is expected to have a positive impact on net sales and a negative impact on gross margin percentage. Over the long term, however, we expect the acquisition to have a positive impact on our gross margin percentage. Our Executive Vice President, Operations and Administration previously had oversight over the Joplin Plant when she was employed by Safeway, prior to joining us. Additionally, prior to joining us, our Senior Vice President, Supply Chain and Operations had experience running a variety of manufacturing plants.2014.second quarter of fiscalnine months ended December 31, 2013, we recorded $1.2$1.6 million for insurance recoveries and $0.1 million in reduction of net sales reserve in connection with the recall. We expect to recover additional amounts from the involved insurance carriersproviders in future quarters. Recoveries are recorded to offset the charges once recovery is probable.to receive additional recoveries fromfor the involved insurance carriers in future quarters.agreementagreements for future purchases to allow us sufficient time to respond to changes in our ingredient costs over time.reducingreduction initiatives, we have experienced increased margin pressure in fiscal 2014 resulting from several factors, including: continued input cost inflation; more limited price increases compared to prior years; a faster pace of product innovation; customer and product mix changes; increased inventory obsolescence;obsolescence and higher trade spending to support continued distribution and market share growth in a competitive food retailing environment. Although commodity costs for many conventional ingredients have recently moderated or declined, we have not yet experienced similar cost changes to our ingredients and continue to experience year-over-year commodity increases.buildingscaling our organization and adding headcount to support our growth. ManySome 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, promote awareness of our brand, and compete effectively against conventional as well as natural and organic brands, and in research and development to support our robust innovation pipeline. Despite these increased investments, our selling, general and administrative expenses did not increase as significantly as net sales, and resulted in lower expense as a percent Three Months Ended
September 30, % of Net
Sales Six Months Ended
September 30, % of Net
Sales 2013 2012 2013 2012 2013 2012 2013 2012 (in thousands, except for percentages) $ 58,650 $ 46,686 100.0 % 100.0 % $ 97,690 $ 80,979 100.0 % 100.0 % 36,749 28,786 62.7 % 61.7 % 61,027 49,272 62.5 % 60.8 % 21,901 17,900 37.3 % 38.3 % 36,663 31,707 37.5 % 39.2 % 12,538 11,539 21.4 % 24.7 % 23,865 21,750 24.4 % 26.9 % 12,538 11,539 21.4 % 24.7 % 23,865 21,750 24.4 % 26.9 % 9,363 6,361 16.0 % 13.6 % 12,798 9,957 13.1 % 12.3 % (104 ) (40 ) (0.2 )% (0.1 )% (175 ) (80 ) (0.2 )% (0.1 )% 32 36 0.1 % 0.1 % 58 85 0.1 % 0.1 % 9,291 6,357 15.8 % 13.6 % 12,681 9,962 13.0 % 12.3 % 3,739 2,572 6.4 % 5.5 % 5,100 4,046 5.2 % 5.0 % $ 5,552 $ 3,785 9.5 % 8.1 % $ 7,581 $ 5,916 7.8 % 7.3 % Three Months Ended
December 31, Nine Months Ended
December 31, 2013 2012 2013 2012 2013 2012 2013 2012 (in thousands, except for percentages) Net sales $ 46,177 $ 36,283 100.0 % 100.0 % $ 143,867 $ 117,262 100.0 % 100.0 % Cost of sales 27,951 23,267 60.5 % 64.1 % 88,978 72,539 61.8 % 61.9 % Gross profit 18,226 13,016 39.5 % 35.9 % 54,889 44,723 38.2 % 38.1 % Operating expenses: Selling, general and administrative expenses 13,421 10,687 29.1 % 29.5 % 37,286 32,437 25.9 % 27.7 % Total operating expenses 13,421 10,687 29.1 % 29.5 % 37,286 32,437 25.9 % 27.7 % Income from operations 4,805 2,329 10.4 % 6.4 % 17,603 12,286 12.2 % 10.5 % Interest expense (80 ) (40 ) (0.2 )% (0.1 )% (255 ) (120 ) (0.2 )% (0.1 )% Other income (expense), net 30 31 0.1 % 0.1 % 88 116 0.1 % 0.1 % Income before provision for income taxes 4,755 2,320 10.3 % 6.4 % 17,436 12,282 12.1 % 10.5 % Provision for income taxes 1,966 919 4.3 % 2.5 % 7,066 4,965 4.9 % 4.2 % Net income $ 2,789 $ 1,401 6.0 % 3.9 % $ 10,370 $ 7,317 7.2 % 6.2 % Quarterly Report on Form 10-Q includes certain adjusted net sales, gross profit, gross margin and net income figures that exclude the impact of our January 2013 voluntary product recall, costs associated with our planned acquisition of the Joplin Plant, shelf registration and secondary offering costs.figures. These figures are non-GAAP financial measures. We calculate these non-GAAP figures by eliminating the impact of our January 2013 voluntary product recall and related insurance recoveries, costs associated with our planned acquisition of the Joplin Plant, shelf registration and secondary offering costs and the change in fair value of the convertible preferred stock warrant liability, which we do not consider to be indicative of our ongoing operations. We believe these non-GAAP figures provide additional informationmetrics to facilitateevaluate our operations and, when considered with both our GAAP results and the comparisonrelated reconciliation to the most directly comparable GAAP measure, provide a more complete understanding of our pastbusiness than could be obtained absent this disclosure. We use these non-GAAP figures, together with financial measures prepared in accordance with GAAP, to assess our operating performance, to provide meaningful comparisons of operating performance across periods, to enhance our understanding of our core operating performance and present financial resultsto compare our performance to that of our peers and better visibility intocompetitors. We believe that these non-GAAP figures are also useful to investors in assessing the operating performance of our normal operating results by isolatingbusiness without the effectseffect of the items mentioneddescribed above. However,These non-GAAP figures are subject to inherent limitation as they reflect the exercise of judgment by management in determining how they are formulated. Further, our computation of these non-GAAP measuresfigures is likely to differ from methods used by other companies in computing similarly titled or defined terms, limiting the usefulness of these measures. These non-GAAP financial measuresfigures should not be considered in isolation or as alternatives to GAAP financial measures and investors should not rely on any single financial measure to evaluate our business.measures: Three months ended
September 30, 2013 Three months ended
September 30, 2012 Six months ended
September 30, 2013 Six months ended
September 30, 2012 Net Sales Gross Profit Net Income Net Income Net Sales Gross Profit Net Income Net Income $ 58,650 $ 21,901 $ 5,552 $ 3,785 $ 97,690 $ 36,663 $ 7,581 $ 5,916 (121 ) (121 ) (121 ) — (121 ) (121 ) (121 ) — (630 ) (630 ) (630 ) — (630 ) (630 ) (630 ) — — (490 ) (490 ) — — (273 ) (273 ) — — — (40 ) — — — (40 ) — — — 8 — — — 51 — — — 162 — — — 162 — — — 52 — — — 86 — — — — 704 — — — 704 — — — — — — — 13 — — 426 (285 ) — — 308 (286 ) $ 57,899 $ 20,660 $ 4,919 $ 4,204 $ 96,939 $ 35,639 $ 7,124 $ 6,347 Net Sales Gross Profit Net Income Net Sales Gross Profit Net Income GAAP financial measures $ 46,177 $ 18,226 $ 2,789 $ 36,283 $ 13,016 $ 1,401 Increase/(decrease) of net sales reserve related to product recall (13 ) (13 ) (13 ) 1,570 1,570 1,570 Incremental cost of sales related to product recall — 62 62 — 690 690 Recoveries from insurance carrier related to product recall: Net sales (91 ) (91 ) (91 ) — — — Cost of sales — (342 ) (342 ) — — — Selling, general and administrative expenses — — (7 ) — — — Administrative costs related to product recall — — 14 — — — Costs associated with our planned acquisition of the Joplin Plant — — 249 — — — Secondary offering costs — — 202 — — — Change in fair value of convertible preferred stock warrant liability — — — — — — Provision for income taxes — — 29 — — (914 ) Non-GAAP figures $ 46,073 $ 17,842 $ 2,892 $ 37,853 $ 15,276 $ 2,747 Net Sales Gross Profit Net Income Net Sales Gross Profit Net Income GAAP financial measures $ 143,867 $ 54,889 $ 10,370 $ 117,262 $ 44,723 $ 7,317 Increase/(decrease) of net sales reserve related to product recall (134 ) (134 ) (134 ) 1,570 1,570 1,570 Incremental cost of sales related to product recall — 279 279 — 690 690 Recoveries from insurance carrier related to product recall: Net sales (721 ) (721 ) (721 ) — — — Cost of sales — (832 ) (832 ) — — — Selling, general and administrative expenses — — (47 ) — — — Administrative costs related to product recall — — 65 — — — Costs associated with our planned acquisition of the Joplin Plant — — 411 — — — Secondary offering costs — — 288 — — 704 Change in fair value of convertible preferred stock warrant liability — — — — — 13 Provision for income taxes — — 351 — — (1,199 ) Non-GAAP figures $ 143,012 $ 53,481 $ 10,030 $ 118,832 $ 46,983 $ 9,095 September 30,December 31, 2013 Compared to Three Months Ended September 30,December 31, 2012 Three Months Ended September 30, Change % of Net Sales 2013 2012 $ % 2013 2012 (in thousands, except for percentages) $ 29,739 $ 21,869 $ 7,870 36.0 % 50.7 % 46.9 % 22,057 19,146 2,911 15.2 % 37.6 % 41.0 % 6,854 5,671 1,183 20.9 % 11.7 % 12.1 % $ 58,650 $ 46,686 $ 11,964 25.6 % 100.0 % 100.0 % Net sales increased $12.0 million, or 25.6%, to $58.7 million in the three months ended September 30, 2013 compared to $46.7 million in the three months ended September 30, 2012. Three Months Ended December 31, Change % of Net Sales $ % 2013 2012 (in thousands, except for percentages) Meals $ 23,933 $ 16,223 $ 7,710 47.5 % 51.8 % 44.7 % Snacks 17,075 14,908 2,167 14.5 % 37.0 % 41.1 % Dressings, condiments and other 5,169 5,152 17 0.3 % 11.2 % 14.2 % Net sales $ 46,177 $ 36,283 $ 9,894 27.3 % 100.0 % 100.0 % September 30,December 31, 2013 benefited fromincluded $0.1 million insurance recoveries of $0.6related to product recall.and a reversal ofreduction in net sales reservedue to product recall.$0.1$46.2 million relatedincreased $9.9 million, or 27.3%, in the three months ended December 31, 2013 compared to our January 2013 voluntary product recall. The net salesthe same period in the prior year. This increase was primarilylargely driven by volume with approximately 240 basis points of growth from higher average selling prices. Distributionthrough distribution gains and our mainline placement initiative, contributed to the volume increase, primarily impacting mass merchandiser and mainstream grocery and mass merchandiser channels. These gains were partially offset by lower volumechannels, as well as the impact of the pizza recall. Net sales in the natural channel due primarilygrew modestly in the three months ended December 31, 2013. Higher average selling prices contributed approximately one percent to inventory reductions by a large customer.$7.9 million, $2.9$7.7 million and $1.2$2.2 million increase in net sales offor meals snacks and dressings, condiments and other,snacks, respectively. The increase in meals was predominantly driven by strong growth in natural gluten-free and single-serve microwavablegluten-free macaroni and cheese products combined with initial shipmentsproducts. Additionally,which(which were introduced in August 2013. Net sales of meals also benefited from insurance recoveries and reversal of net sales reserve mentioned above.2013) contributed to the growth in meals. The increase in snacks was primarily due to growth in our fruit snacks, grahams, mixed snacks and granola bars product lines. The increasesnacks. Sales in the dressings, condiments and other category was driven by strength in both dressings and condiments.benefitimpact of insurance recoveries and reversal of net sales reserve,our voluntary product recall, our net sales would have increased $11.2$8.2 million, or 24.0%21.7%, to $57.9$46.1 million in the three months ended September 30,December 31, 2013 compared to $46.7$37.9 million in the three months ended September 30,December 31, 2012. Three Months Ended September 30, Change 2013 2012 $ % (in thousands, except for percentages) $ 36,749 $ 28,786 $ 7,963 27.7 % $ 21,901 $ 17,900 $ 4,001 22.4 % 37.3 % 38.3 % Three Months Ended December 31, Change 2013 2012 $ % (in thousands, except for percentages) Cost of sales $ 27,951 $ 23,267 $ 4,684 20.1 % Gross profit $ 18,226 $ 13,016 $ 5,210 40.0 % Gross margin % 39.5 % 35.9 % $4.0$5.2 million, or 22.4%40.0%, in the three months ended December 31, 2013 compared to $21.9the same period in the prior year, primarily driven by higher net sales and the impact of voluntary product recall, partially offset by higher commodity costs and increased inventory obsolescence.September 30, 2013 from $17.9December 31, 2013. Higher average selling prices and efficiency gains also contributed to the increase in gross margin. However, such gains were more than offset by higher commodity costs and increased inventory obsolescence.September 30,December 31, 2013 from $15.3 million in the three months ended December 31, 2012 and gross margin would have decreased 1.7 percentage points to 38.7% in the three months ended December 31, 2013 from 40.4% in the three months ended December 31, 2012. Three Months Ended December 31, Change 2013 2012 $ % (in thousands, except for percentages) Operating expenses: SG&A $ 13,421 $ 10,687 $ 2,734 25.6 % SG&A as a percentage of net sales 29.1 % 29.5 % Three Months Ended December 31, Change 2013 2012 $ % (in thousands, except for percentages) Income from operations $ 4,805 $ 2,329 $ 2,476 106.3 % Income from operations as a percentage of net sales 10.4 % 6.4 % Three Months Ended December 31, Change 2013 2012 $ % (in thousands, except for percentages) Interest expense $ (80 ) $ (40 ) $ (40 ) 100.0 % Three Months Ended December 31, Change 2013 2012 $ % (in thousands, except for percentages) Other income $ 30 $ 31 $ (1 ) (3.2 )% Three Months Ended December 31, Change 2013 2012 $ % (in thousands, except for percentages) Provision for income taxes $ 1,966 $ 919 $ 1,047 113.9 % Effective tax rate 41.3 % 39.6 % Three Months Ended December 31, Change 2013 2012 $ % (in thousands, except for percentages) Net income $ 2,789 $ 1,401 $ 1,388 99.1 % gross profitthe three months ended December 31, 2013 from $1.4 million in the three months ended December 31, 2012. Change % of Net Sales $ % 2013 2012 (in thousands, except for percentages) Meals $ 70,226 $ 52,759 $ 17,467 33.1 % 48.8 % 45.0 % Snacks 54,953 47,517 7,436 15.6 % 38.2 % 40.5 % Dressings, condiments and other 18,688 16,986 1,702 10.0 % 13.0 % 14.5 % Net sales $ 143,867 $ 117,262 $ 26,605 22.7 % 100.0 % 100.0 % highera reduction in inventory carrying levels at one of our major customers. Higher average selling prices contributed approximately one to two percent to net sales growth, excluding the impact of the pizza recall.relatedmentioned above. The increase in snacks of $7.4 million was primarily due to growth in our Januaryfruit snacks, grahams and crackers. The increase of $1.7 million in the dressings, condiments and other category was across the products in this category. Nine Months Ended December 31, Change 2013 2012 $ % (in thousands, except for percentages) Cost of sales $ 88,978 $ 72,539 $ 16,439 22.7 % Gross profit $ 54,889 $ 44,723 $ 10,166 22.7 % Gross margin % 38.2 % 38.1 % costs.decreased 1.0increased 0.1 percentage point to 37.3%38.2% in the threenine months ended September 30,December 31, 2013 from 38.3%38.1% in the threenine months ended September 30, 2012.December 31, 2012. The decreaseincrease in gross margin is primarily attributable to higher commodity costs, increased inventory obsolesce, customerinclusion of a $1.6 million reduction in net sales and a $0.7 million increase in cost of sales associated with our voluntary product mix changes,recall in the nine months ended December 31, 2012, as well as insurance recoveries that benefited net sales by $0.7 million and increased trade spending, partially offsetcost of sales by $0.8 million ininsurance recoveries relatedefficiency gains contributed to the increase in gross margin. However, such gains were more than offset by higher commodity costs, mix changes and the impact of inventory obsolescence. January 2013 voluntary product recall.Excluding the benefit of insurance recoveries and reversal of net sales reserve,recall, our gross profit would have increased $2.8$6.5 million, or 15.4%13.8%, to $20.7$53.5 million in the threenine months ended September 30,December 31, 2013 from $17.9$47.0 million in the threenine months ended September 30,December 31, 2012 and gross margin would have decreased 2.62.1 percentage points to 35.7% from 38.3%37.4% in the threenine months ended September 30,December 31, 2013 from 39.5% in the nine months ended December 31, 2012. Nine Months Ended December 31, Change 2013 2012 $ % (in thousands, except for percentages) Operating expenses: SG&A $ 37,286 $ 32,437 $ 4,849 14.9 % SG&A as a percentage of net sales 25.9 % 27.7 % three months ended September 30, 2012.Operating Expenses Three Months Ended September 30, Change 2013 2012 $ % (in thousands, except for percentages) $ 12,538 $ 11,539 $ 999 8.7 % 21.4 % 24.7 % Selling, General and Administrative ExpensesSelling, general and administrative expenses increased $1.0 million, or 8.7%, to $12.5 millionsame period in the three months ended September 30, 2013 from $11.5 million in the three months ended September 30, 2012. This increase wasprior year, due primarily to an increase in payroll expense resulting from increased headcount to support our growth. In addition, during the threenine months ended September 30,December 31, 2013, we incurred $0.2$0.4 million in legal, consulting and other costs associated with our planned acquisition of the Joplin Plant, $52,000$0.3 million for legal, accounting and other out-of-pocket expenses on Solera’s behalf forvarious other fees associated with the registration statement on Form S-3 filedand sale of common stock by Solera, and $18,000 in administrative costs associated with the SEC on July 16, 2013, and $40,000 involuntary product recall net of insurance recoveries to offset pizza recall related expenses in prior quarters.recovery of $47,000. During the threenine months ended September 30,December 31, 2012, we incurred $0.7 million in 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. As a percentage of net sales, selling, general and administrative expensesSG&A decreased 3.31.8 percentage points to 21.4%25.9% in the threenine months ended September 30,December 31, 2013 from 24.7%27.7% in the threenine months ended September 30, 2012. Three Months Ended September 30, Change 2013 2012 $ % (in thousands, except for percentages) $ 9,363 $ 6,361 $ 3,002 47.2 % 16.0 % 13.6 % Nine Months Ended December 31, Change 2013 2012 $ % (in thousands, except for percentages) Income from operations $ 17,603 $ 12,286 $ 5,317 43.3 % Income from operations as a percentage of net sales 12.2 % 10.5 % $3.0$5.3 million, or 47.2%43.3%, to $9.4 million in the threenine months ended September 30,December 31, 2013 from $6.4 millioncompared to the same period in the three months ended September 30, 2012. Income from operationsprior year, and as a percentage of net sales increased 2.41.7 percentage points to 16.0% in the three months ended September 30, 2013, from 13.6% in the three months ended September 30, 2012. Three Months Ended September 30, Change 2013 2012 $ % (in thousands, except for percentages) $ (104 ) $ (40 ) $ (64 ) 160.0 % Nine Months Ended December 31, Change 2013 2012 $ % (in thousands, except for percentages) Interest expense $ (255 ) $ (120 ) $ (135 ) 112.5 % threenine months ended September 30,December 31, 2013 compared to the threenine months ended September 30,December 31, 2012 due to higher non-utilization fees under our revolving line of credit facility, which was increased to $40.0 million from $20.0 million in March 2013.Other Income Three Months Ended September 30, Change 2013 2012 $ % (in thousands, except for percentages) $ 32 $ 36 $ (4 ) (11.1 )% Other income during the three months ended September 30, 2013 and 2012 reflect royalty income.Provision for income taxes Three Months Ended September 30, Change 2013 2012 $ % (in thousands, except for percentages) $ 3,739 $ 2,572 $ 1,167 45.4 % 40.2 % 40.5 % Our effective tax rate decreased to 40.2% for the three months ended September 30, 2013, compared to 40.5% for the three months ended September 30, 2012. The effective tax rate is based on a projection Six Months Ended September 30, Change 2013 2012 $ % (in thousands, except for percentages) $ 58 $ 85 $ (27 ) (31.8 )% Nine Months Ended December 31, Change 2013 2012 $ % (in thousands, except for percentages) Other income (expense), net $ 88 $ 116 $ (28 ) (24.1 )% sixnine months ended September 30,December 31, 2013 reflects royalty income. Other income (expense), net during the sixnine months ended September 30,December 31, 2012 primarily reflects royalty income partially offset by a 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. Six Months Ended September 30, Change 2013 2012 $ % (in thousands, except for percentages) $ 5,100 $ 4,046 $ 1,054 26.1 % 40.2 % 40.6 % Nine Months Ended December 31, Change 2013 2012 $ % (in thousands, except for percentages) Provision for income taxes $ 7,066 $ 4,965 $ 2,101 42.3 % Effective tax rate 40.5 % 40.4 % rate decreased to 40.2% forremained relatively unchanged from the six months ended September 30, 2013, compared to 40.6% for the six months ended September 30, 2012. The effective tax rateprior year and is based on a projection of our annual fiscal year results. Our effective tax rate for the six months ended September 30, 2013 was lower thanThe slight increase in the effective tax rate for the sixnine months ended September 30, 2012December 31, 2013 was due to the impact of permanent items and federal and state income tax credits.items. We expect our full year effective tax rate for fiscal 2014 to be approximately 40% to 41%. Six��Months Ended September 30, Change 2013 2012 $ % (in thousands, except for percentages) $ 7,581 $ 5,916 $ 1,665 28.1 % Nine Months Ended December 31, Change 2013 2012 $ % (in thousands, except for percentages) Net income $ 10,370 $ 7,317 $ 3,053 41.7 % $1.7$3.1 million, or 28.1%41.7%, to $7.6$10.4 million in the sixnine months ended September 30, 2013 from $5.9 million in the six months ended September 30, 2012.recall-related insurance recoveries, reversal of net sales reserve,voluntary product recall, costs associated with our planned acquisition of the Joplin Plant, and shelf registration costs recorded in the six months ended September 30, 2013, our net income would have increased $0.8 million, or 12.2%, to $7.1 million in the six months ended September 30, 2013 from $6.3 million in the six months ended September 30, 2012, which excludes secondary offering costs and non-cash charge related to the changeincrease in the fair value of the convertible preferred stock warrant liability.SeasonalityHistorically, we have experienced greaterliability, our net salesincome increased $0.9 million, or 10.3%, to $10.0 million in the second and fourth fiscal quarters thannine months ended December 31, 2013 from $9.1 million in the first and third fiscal quarters due to our customers’ and retailers’ merchandising and promotional activities around the back-to-school and spring seasons. Concurrently, inventory levels and working capital requirements generally 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. September 30,
2013 March 31,
2013 (in thousands) $ 11,090 $ 4,930 19,100 20,015 7,512 4,342 13,652 12,021 34,328 31,925 (in thousands) Cash $ 2,986 $ 4,930 Accounts receivable, net 18,796 20,015 Inventory 23,407 15,147 Accounts payable 6,784 4,342 Accrued liabilities 9,104 12,021 38,426 31,925 (1) Working capital consists of total current assets less total current liabilities
September 30, 2013 | September 30, 2012 | |||||||
(in thousands) | ||||||||
Cash at beginning of period | $ | 4,930 | $ | 562 | ||||
Net cash provided by operating activities | 12,723 | 9,256 | ||||||
Net cash used in investing activities | (649 | ) | (1,009 | ) | ||||
Net cash provided by (used in) financing activities | (5,914 | ) | 5,820 | |||||
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Cash at end of period | $ | 11,090 | $ | 14,629 | ||||
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December 31, 2013 | December 31, 2012 | ||||||
(in thousands) | |||||||
Cash at beginning of period | $ | 4,930 | $ | 562 | |||
Net cash provided by operating activities | 3,750 | 4,210 | |||||
Net cash used in investing activities | (1,357 | ) | (1,498 | ) | |||
Net cash provided by (used in) financing activities | (4,337 | ) | 9,686 | ||||
Cash at end of period | $ | 2,986 | $ | 12,960 |
OperatingActivities
Operating activities provided $9.3$6.0 million of cash during the six months ended September 30, 2012, primarily due to ourand higher net income of $5.9$3.1 million which included non-cash charges of $0.5 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 $8.6 million of net cash, which was comprised of a $5.4 million increase in accrued expenses, a $4.1 million increase in prepaid expenses, other current and non-current assets, a $1.4 million increase in accounts payable and a $1.3 million decrease in 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 fromcompared to the termination of our advisory services agreement upon consummation of our IPO. This increase in cash was offset by the excess tax benefit from stock-based compensation of $5.3 million.
nine months ended December 31, 2012.
CashActivities
Joplin Plant.
CashActivities
Cashcash provided by financing activities totaled $5.8of $9.7 million duringin the sixnine months ended September 30,December 31, 2012, comprised of:
net pay
of $5.7 million.
Payments Due by Period | ||||||||||||||||||||
Total | Less Than One Year | 1-3 Years | 3-5 Years | More than Five Years | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Rent obligations(1) | $ | 3,466 | $ | 635 | $ | 1,286 | $ | 1,279 | $ | 266 | ||||||||||
Equipment lease obligations(2) | 129 | 31 | 60 | 38 | — | |||||||||||||||
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Total operating lease obligations | 3,595 | 666 | 1,346 | 1,317 | 266 | |||||||||||||||
Purchase commitments(3) | 14,474 | 14,257 | 217 | — | — | |||||||||||||||
Product formula obligations(4) | 1,850 | 150 | 300 | 1,400 | — | |||||||||||||||
Warehousing overhead obligations(5) | 350 | 200 | 150 | — | — | |||||||||||||||
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Total | $ | 20,269 | $ | 15,273 | $ | 2,013 | $ | 2,717 | $ | 266 | ||||||||||
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Payments Due by Period | |||||||||||||||||||
Total | Less Than One Year | 1-3 Years | 3-5 Years | More than Five Years | |||||||||||||||
(in thousands) | |||||||||||||||||||
Rent obligations(1) | $ | 3,311 | $ | 640 | $ | 1,285 | $ | 1,279 | $ | 107 | |||||||||
Equipment lease obligations(2) | 120 | 30 | 60 | 30 | — | ||||||||||||||
Total operating lease obligations | 3,431 | 670 | 1,345 | 1,309 | 107 | ||||||||||||||
Purchase commitments(3) | 15,886 | 14,048 | 1,838 | — | — | ||||||||||||||
Product formula obligations(4) | 1,700 | 150 | 300 | 1,250 | — | ||||||||||||||
Warehousing overhead obligations(5) | 300 | 200 | 100 | — | — | ||||||||||||||
Total | $ | 21,317 | $ | 15,068 | $ | 3,583 | $ | 2,559 | $ | 107 |
(1) | We lease approximately 33,500 square feet of space that houses our corporate headquarters |
(2) | We lease equipment under non-cancelable operating leases. These leases expire at various dates through 2019, excluding extensions at our option, and contain provisions for rental adjustments. |
(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) | This represents our obligation, to one of our contract manufacturers, for the product formulas purchased in November 2011. Of these amounts, |
(5) | We have an agreement with our contract warehousing company to pay minimum overhead fees through June 2015. |
2013, filed with the SEC on June 14, 2013 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 sixnine months ended September December 31, 2013. 2013.
September 30,December 31, 2013.September 30,December 31, 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
relating to this suit.September 4,December 6, 2013, a private organization called the Center for Environmental Health (“CEH”) issued a 60-day notice of intent to sue (“Notice”)sued us and our subsidiary, Annie’s Homegrown, Inc., in Superior Court of the State of California in the County of Alameda under California Health & Safety Code §§ 25249.5 et seq. (commonly referred to as “Proposition 65”). In the Notice, CEH claims that warnings are required in California under Proposition 65 for alleged exposures to lead and lead compounds from cookies that contain ginger or molasses, including our Gluten-Free Ginger Snap Bunny Cookies. Under Proposition 65, any private enforcer such as CEH may file a lawsuit if it first issues a valid 60-day notice, and if the California Attorney General or other specified California public enforcers do not file suit within 60 days after service. A Proposition 65 plaintiff may seekis seeking injunctive relief, as well as civil penalties which may be assessed up to a maximum of $2,500 per violation per day and a private plaintiff does not need to show that anyone has been harmed by the alleged exposures. A prevailing plaintiff may also seek its attorneys’ fees and costs undercosts. The lawsuit, entitled Mondelez International, Inc., et al., Alameda County Superior Court Case No. RG13-677800, names nine other California laws.Although CEH has not yet filed a lawsuit naming uscompanies that are either suppliers or Annie’s Homegrown, Inc., within the past year CEH has filed several lawsuits against other manufacturers and retailers regarding various types of products containing molasses and/ginger- or ginger, such as licorice candy, cookies, and baking mix products. In CEH’s cases involving cookies and baking mix products, CEH’s operative complaints have put at issue only those cookies or baking mix products that contain ginger and/or molasses as ingredients.molasses-containing cookies. We cannot at this time reasonably estimate a range of exposure, if any, of the potential liability should a suit be brought in connection with the Notice.
Annual Report on Form 10-K for fiscal 2013 filed with the SEC on June 14, 2013.ITEM 5. OTHER INFORMATION
Agreement
Incorporation by Reference Exhibit Number Description Form File No. Exhibit(s) Filing Date /s/ 2.1* Agreement of Purchase and Sale by and among Safeway Australia Holdings, Inc., Safeway Inc. and Annie’s, Inc., dated November 5, 2013 3.3 Second Restated Certificate of Incorporation of Annie’s, Inc., dated September 10, 2013 Form 8-K 001-35470 3.3 September 12, 2013 3.4 Second Amended and Restated Bylaws of Annie’s, Inc., effective September 10, 2013 Form 8-K 001-35470 3.4 September 12, 2013 10.1 Executive Employment Agreement dated October 16, 2013 between Annie’s, Inc. and Zahir Ibrahim+ Form 8-K 001-35470 10.1 October 21, 2013 10.2 Transition and Separation Agreement dated October 16, 2013 between Annie’s, Inc. and Kelly J. Kennedy + Form 8-K 001-35470 10.2 October 21, 2013 10.3* Amendment No. 2 to the Second Amended and Restated Loan Agreement dated as of November 5, 2013 among Bank of America, N.A., Annie’s, Inc., Annie’s Homegrown, Inc., Annie’s Enterprises, Inc. and Napa Valley Kitchens, Inc. 31.1* Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended 31.2* Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended 32.1* Certification of Principal Executive Officer and Principal Financial Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350 101* The following materials from Company’s Quarterly Report on Form 10-Q for the three months ended September 30, 2013, formatted in Extensible Business Reporting Language (XBRL) includes: (i) Condensed Consolidated Balance Sheets as of September 30, 2013 and March 31, 2013, (ii) Condensed Consolidated Statements of Operations for the three and six months ended September 30, 2013 and 2012, (iii) Condensed Consolidated Statement of Stockholders’ Equity for the six months ended September 30, 2013, (iv) Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2013 and 2012 and (v) Notes to Condensed Consolidated Financial Statements. Incorporation by Reference Description Form File No. Exhibit(s) Filing Date 2.1 Agreement of Purchase and Sale by and among Safeway Australia Holdings, Inc., Safeway Inc. and Annie’s, Inc., dated November 5, 2013 Form 10-Q 001-35470 2.1 November 7, 2013 3.1 Second Restated Certificate of Incorporation of Annie’s, Inc., dated September 10, 2013 Form 8-K 001-35470 3.3 September 13, 2013 3.2 Second Amended and Restated Bylaws of Annie’s, Inc., effective September 10, 2013 Form 8-K 001-35470 3.4 September 13, 2013 10.1 Executive Employment Agreement dated October 16, 2013 between Annie’s, Inc. and Zahir Ibrahim+ Form 8-K 001-35470 10.1 October 21, 2013 10.2 Transition and Separation Agreement dated October 16, 2013 between Annie’s, Inc. and Kelly J. Kennedy + Form 8-K 001-35470 10.2 October 21, 2013 10.3 Amendment No. 2 to the Second Amended and Restated Loan Agreement dated as of November 5, 2013 among Bank of America, N.A., Annie’s, Inc., Annie’s Homegrown, Inc., Annie’s Enterprises, Inc. and Napa Valley Kitchens, Inc. Form 10-Q 001-35470 10.3 November 7, 2013 10.4* Joinder Agreement dated as of November 22, 2013 between Bank of America, N.A. and Annie’s, Inc., Annie’s Enterprises, Inc., Annie’s Homegrown, Inc. and Annie’s Baking, LLC 31.1* Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended 31.2* Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended 32.1* Certification of Principal Executive Officer and Principal Financial Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350 101* The following materials from Company’s Quarterly Report on Form 10-Q for the three months ended December 31, 2013, formatted in Extensible Business Reporting Language (XBRL) includes: (i) Condensed Consolidated Balance Sheets as of December 31, 2013 and March 31, 2013, (ii) Condensed Consolidated Statements of Operations for the three and nine months ended December 31, 2013 and 2012, (iii) Condensed Consolidated Statement of Stockholders’ Equity for the nine months ended December 31, 2013, (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 2013 and 2012 and (v) Notes to Condensed Consolidated Financial Statements. +Indicates a management contract or compensatory plan or arrangement.*Furnished or filed herewith, as applicableNovember 7, 2013February 10, 2014ANNIE’S, INC. By: Kelly J. Kennedy Kelly J. KennedyZahir M. Ibrahim Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer and Duly Authorized Officer)
37