Blue Buffalo Pet Products (BUFF) 10-Q 13 Nov 15 2015 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information Document - shares	9 Months Ended
	Sep. 30, 2015	Nov. 13, 2015
Entity Information [Line Items]
Entity registrant name	Blue Buffalo Pet Products, Inc.
Entity central index key	1,609,989
Current fiscal year end date	--12-31
Entity filer category	Non-accelerated Filer
Document type	10-Q
Document period end date	Sep. 30, 2015
Document fiscal year focus	2,015
Document fiscal period focus	Q3
Amendment flag	false
Entity common stock, shares outstanding		196,162,518

Unaudited Condensed Consolidate

Unaudited Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 184,952	$ 95,788
Receivables, net	76,442	78,620
Inventories	96,902	88,620
Deferred income taxes	3,138	5,696
Prepaid expenses and other current assets	3,316	3,351
Total current assets	364,750	272,075
Restricted cash	473	473
Property, plant and equipment, net	113,186	113,863
Deferred debt issuance costs, net	226	317
Other assets	481	444
Total assets	479,116	387,172
Current liabilities:
Current maturities of long-term debt	3,960	3,960
Accounts payable	37,550	33,163
Other current liabilities	32,642	27,013
Total current liabilities	74,152	64,136
Long-term debt	384,127	387,097
Deferred income taxes	12,779	17,128
Other long-term liabilities	10,760	6,108
Total liabilities	$ 481,818	$ 474,469
Commitments and contingencies
Common stock, value, issued	$ 1,962	$ 1,957
Stockholders’ deficit:
Additional paid-in capital	62,523	57,683
Accumulated deficit	(67,187)	(146,937)
Total stockholders’ deficit	(2,702)	(87,297)
Total liabilities and stockholders’ deficit	$ 479,116	$ 387,172

Unaudited Condensed Consolidat3

Unaudited Condensed Consolidated Balance Sheets Parenthetical - $ / shares	Sep. 30, 2015	Dec. 31, 2014
Statement of Financial Position [Abstract]
Common stock, par or stated value per share	$ 0.01	$ 0.01
Common stock, shares authorized	207,060,000	207,060,000
Common stock, shares, issued	196,155,025	195,743,154
Common stock, shares, outstanding	196,155,025	195,743,154

Unaudited Condensed Consolidat4

Unaudited Condensed Consolidated Statements of Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Net sales	$ 259,437	$ 234,770	$ 762,209	$ 679,671
Cost of sales	151,152	140,544	454,595	404,117
Gross profit	108,285	94,226	307,614	275,554
Selling, general and administrative expenses	58,664	45,419	165,723	134,241
Operating income	49,621	48,807	141,891	141,313
Interest expense, net	3,722	3,470	11,097	9,926
Income before income taxes	45,899	45,337	130,794	131,387
Provision for income taxes	18,833	17,624	51,044	50,610
Net income	$ 27,066	$ 27,713	$ 79,750	$ 80,777
Basic net income per common share (in usd per share)	$ 0.14	$ 0.14	$ 0.41	$ 0.41
Diluted net income per common share (in usd per share)	$ 0.14	$ 0.14	$ 0.40	$ 0.41
Basic weighted average shares	196,062,348	195,743,154	195,852,404	195,732,663
Diluted weighted average shares	198,254,808	197,884,029	198,028,543	197,820,142

Unaudited Condensed Consolidat5

Unaudited Condensed Consolidated Statement of Changes in Stockholders' Deficit Statement - 9 months ended Sep. 30, 2015 - USD ($)	Total	Common stock	Additional paid-in capital	(Accumulated deficit) retained earnings
Balance at December 31, 2014 (shares) at Dec. 31, 2014	195,743,154	195,743,154
Balance at December 31, 2014 at Dec. 31, 2014	$ (87,297,000)	$ 1,957,000	$ 57,683,000	$ (146,937,000)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Exercise of stock options (shares)	334,439	334,439
Exercise of stock options	$ 1,910,000	$ 5,000	1,905,000
Restricted stock activity (shares)		46,750
Restricted stock activity	935,000		935,000
Issuance of common stock (shares)		30,682
Issuance of common stock	609,000		609,000
Stock-based compensation expense	1,391,000		1,391,000
Net income	$ 79,750,000			79,750,000
Balance at September 30, 2015 (shares) at Sep. 30, 2015	196,155,025	196,155,025
Balance at September 30, 2015 at Sep. 30, 2015	$ (2,702,000)	$ 1,962,000	$ 62,523,000	$ (67,187,000)

Unaudited Condensed Consolidat6

Unaudited Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Cash flows from operating activities:
Net income	$ 79,750	$ 80,777
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	5,981	2,841
Amortization of debt issuance costs	91	91
Stock-based compensation	2,935	1,350
Deferred compensation	19	61
Loss on disposal of assets	69	63
Deferred income taxes	(1,790)	1,795
Income tax benefit from exercise of stock options	(1,551)	0
Effect of changes in operating assets and liabilities:
Receivables	2,178	(8,279)
Inventories	(8,282)	(21,996)
Prepaid expenses and other current assets	(3)	(4,429)
Accounts payable	4,387	19,326
Other liabilities	10,263	2,249
Net cash provided by operating activities	94,047	73,849
Cash flows from investing activities:
Capital expenditures	(5,374)	(28,977)
Restricted cash	0	(350)
Net cash used in investing activities	(5,374)	(29,327)
Cash flows from financing activities:
Principal payments on long-term debt	(2,970)	(2,970)
Proceeds from exercise of stock options	1,910	38
Income tax benefit from exercise of stock options	1,551	0
Net cash provided by (used in) financing activities	491	(2,932)
Net increase in cash and cash equivalents	89,164	41,590
Cash and cash equivalents at beginning of period	95,788	42,874
Cash and cash equivalents at end of period	$ 184,952	$ 84,464

The Company

The Company	9 Months Ended
	Sep. 30, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]
The Company	The Company Blue Buffalo Pet Products, Inc. (“BBPP ” ) and together with its subsidiaries (the “Company,” “we,” “us,” “its,” and “our”) conducts its business exclusively through its wholly owned operating subsidiary, Blue Buffalo Company, Ltd. (“Blue”) (formerly The Blue Buffalo Company, LLC) and its subsidiaries. Blue was formed in August 2002 and is the parent company of five wholly owned subsidiaries, Blue Buffalo Pet Products Canada, Ltd., Blue Buffalo Japan Kabushiki Kaisha, Great Plains Leasing, LLC, Heartland Pet Food Manufacturing, Inc. (“Heartland”) and Sierra Pet Products, LLC. Additionally Blue Buffalo Import Mexico, S. de R.L. de C.V. and Blue Buffalo Mexico, S. de R.L. de C.V. are indirect wholly owned subsidiaries of BBPP. Blue and its subsidiaries develop, produce, market, and sell pet food under the BLUE Life Protection Formula, BLUE Wilderness, BLUE Basics, BLUE Freedom, and BLUE Natural Veterinary Diet lines. Our products are produced domestically at our Heartland facility and through contract manufacturers for distribution to retailers in specialty channels throughout the United States of America, Canada, Japan, and Mexico. In July 2012, Blue formed Heartland for the purpose of commencing internal manufacturing operations to eventually supplement its contract manufacturers. Manufacturing operations commenced at our Heartland facility in Joplin, Missouri in September 2014. On July 27, 2015, BBPP completed the initial public offering (“IPO”) of shares of its common stock. Existing stockholders of BBPP sold 38,906,286 shares of common stock in the IPO at an initial offering price of $20.00 per share, including 5,074,732 shares of common stock pursuant to the full exercise of the underwriters’ option to purchase additional shares. In addition, BBPP issued 30,682 shares of common stock to approximately 1,700 non-management employees at no cost to them. The Company recognized $0.6 million of stock-based compensation expense during the three months ended September 30, 2015 related to this issuance. BBPP did not receive any proceeds from the sale of shares of its common stock in the IPO by the selling stockholders or from the issuance of shares to non-management employees. The shares offered and sold in the IPO were registered under the Securities Act of 1933 (“Securities Act ” ) pursuant to BBPP’s Registration Statement on Form S-1, which was declared effective by the Securities and Exchange Commission (“SEC”) on July 21, 2015. The common stock is listed on the NASDAQ Stock Market under the symbol “BUFF.”

Basis of Presentation

Basis of Presentation	9 Months Ended
	Sep. 30, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Basis of presentation	Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of BBPP and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The unaudited condensed consolidated financial statements reflect all normal recurring adjustments which, in management’s opinion, are necessary for a fair statement of the results for interim periods. Results of operations for interim periods may not be representative of results to be expected for a full year. Certain prior year amounts have been reclassified to conform to the current period presentation. On July 7, 2015, BBPP effected a 4.2 -for-1 stock split of all outstanding shares of BBPP’s common stock. All share, option, and per share information presented in the accompanying unaudited condensed consolidated financial statements have been adjusted to reflect the stock split on a retroactive basis for all periods presented and all share information is rounded down to the nearest whole share after reflecting the stock split. Certain information and footnote disclosure normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s annual consolidated financial statements and related notes for the year ended December 31, 2014 , included in BBPP’s prospectus dated July 21, 2015, filed with the SEC pursuant to Rule 424(b) of the Securities Act, on July 23, 2015.

Receivables

Receivables	9 Months Ended
	Sep. 30, 2015
Receivables [Abstract]
Receivables	Receivables Receivables consisted of the following: (dollars in thousands) September 30, December 31, Trade receivables, net $ 68,794 $ 54,647 Other receivables 7,648 23,973 Total $ 76,442 $ 78,620 Other receivables consist primarily of reimbursable amounts due from co-manufacturers for packaging of $3.6 million and $4.4 million and income tax receivables of $3.9 million and $18.2 million at September 30, 2015 and December 31, 2014 , respectively.

Inventories

Inventories	9 Months Ended
	Sep. 30, 2015
Inventory Disclosure [Abstract]
Inventories	Inventories Inventories consisted of the following: (dollars in thousands) September 30, December 31, Finished goods $ 91,137 $ 83,904 Work in process 338 90 Raw materials 2,619 3,136 Packaging and supplies 2,808 1,490 Total $ 96,902 $ 88,620

Property, Plant, and Equipment

Property, Plant, and Equipment	9 Months Ended
	Sep. 30, 2015
Property, Plant and Equipment [Abstract]
Property, plant, and equipment	Property, Plant and Equipment Property, plant and equipment consisted of the following: (dollars in thousands) September 30, December 31, Buildings $ 59,315 $ 58,846 Machinery and equipment 46,769 44,702 Computer software 10,056 8,056 Computer equipment 3,968 3,589 Furniture and fixtures 1,564 1,429 Leasehold improvements 1,266 1,051 Land improvements 493 784 Land 346 346 Buildings improvements 86 86 Construction in progress 1,910 2,169 125,773 121,058 Accumulated depreciation and amortization (12,587) (7,195) Total $ 113,186 $ 113,863 Depreciation and amortization expense was approximately $2.1 million and $1.6 million for the three months ended September 30, 2015 and 2014 , respectively, and approximately $6.0 million and $2.8 million for the nine months ended September 30, 2015 and 2014 , respectively.

Long-term Debt

Long-term Debt	9 Months Ended
	Sep. 30, 2015
Debt Disclosure [Abstract]
Long-term debt	Long-term Debt Long-term debt consisted of the following: (dollars in thousands) September 30, 2015 December 31, 2014 Term loan $ 388,087 $ 391,057 Less current maturities (3,960 ) (3,960 ) Total long-term debt $ 384,127 $ 387,097 At September 30, 2015 , we had $388.1 million of term loan borrowings (fair value of $388.1 million ) at an effective interest rate of 3.62% and no outstanding borrowings under the revolving credit facility. At December 31, 2014 , the Company had $391.1 million of term loan borrowings (fair value of $386.2 million ) at an effective interest rate of 4.03% and no outstanding borrowings under the revolving credit facility. Principal payments on the term loan borrowings are due and payable in quarterly installments of approximately $1.0 million with the then expected remaining balance of $373.2 million due on August 8, 2019. During each of the three-month periods ended September 30, 2015 and 2014, the Company recorded amortization expense for deferred debt issuance costs of approximately $30,000 . During each of the nine-month periods ended September 30, 2015 and 2014, the Company recorded amortization expense for deferred debt issuance costs of approximately $91,000 . The Company’s term loan and revolving credit facility (the “Amended Facility”) contains and defines financial covenants, including a secured leverage ratio (defined as, with certain adjustments, the ratio of (i) the Company’s indebtedness less unrestricted cash and cash equivalents up to $40 million to (ii) consolidated net income before interest, taxes, depreciation and amortization) for the most recently ended 4 quarters not to exceed (a) as of September 30, 2015, 4.00 :1.00, and (b) for the periods ending on or after December 31, 2015, 3.75 :1.00. The Amended Facility also sets forth mandatory and optional prepayment conditions, including an annual excess cash flow requirement, as defined, that may result in our use of cash to reduce our debt obligations. For the year ended December 31, 2014 , the Company was not required to make an excess cash flow payment. As of September 30, 2015 , the Company believes it was in compliance with its financial debt covenants.

Fair Value Measurements

Fair Value Measurements	9 Months Ended
	Sep. 30, 2015
Fair Value Disclosures [Abstract]
Fair value measurements	Fair Value Measurements The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, other current liabilities, deferred compensation and debt, none of which are measured at fair value on a recurring basis. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and other current liabilities approximate their fair value due to the short-term nature of these financial instruments. The Company’s long-term financial liabilities consist of the long-term debt. Long-term debt is recorded on the unaudited condensed consolidated balance sheets at issuance price and adjusted for any applicable unamortized discounts or premiums. The Company accounts for its fair value measurements in accordance with accounting guidance which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The fair value hierarchy for disclosure of fair value measurements is as follows: Level 1 - Quoted prices in active markets for identical assets or liabilities Level 2 - Quoted prices for similar assets and liabilities in active markets or inputs that are observable Level 3 - Inputs that are unobservable (for example, cash flow modeling inputs based on assumptions) At September 30, 2015 and December 31, 2014 , the Company had approximately $155.3 million and $90.1 million , respectively, of cash invested in money market deposit accounts which were included in cash and cash equivalents on the accompanying unaudited condensed consolidated balance sheets (Level 1). The Company reports transfers in and out of Levels 1, 2 and 3, as applicable, using the fair value of the individual securities as of the beginning of the reporting period in which the transfer(s) occurred. There were no transfers in or out of Level 1, 2, or 3 during the nine months ended September 30, 2015 and the year ended December 31, 2014 . Assets that are measured at fair value on a nonrecurring basis relate primarily to our tangible fixed assets. For these assets, the Company does not periodically adjust carrying value to fair value, except in the event of impairment. When the Company determines that an impairment has occurred, the carrying value is reduced to fair value and the difference is recorded as an impairment loss in our consolidated statements of income. As of September 30, 2015 , the carrying value of the Company’s outstanding borrowings under the Amended Facility was approximately $388.1 million as compared to a fair value of $388.1 million (Level 2). As of December 31, 2014 , the carrying value of the Company’s outstanding borrowings under the Amended Facility was approximately $391.1 million as compared to a fair value of $386.2 million (Level 2). The estimated fair value of the Company’s debt was based primarily on reported market values, recently completed market transactions and estimates based upon interest rates, maturities and credit risk.

Stock-Based Compensation

Stock-Based Compensation	9 Months Ended
	Sep. 30, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock-based compensation	Stock-Based Compensation Incentive Plans Under the Company’s 2012 Blue Buffalo Pet Products, Inc. Stock Purchase and Option Plan (the “Plan”), the Board of Directors is authorized to award incentive stock options (ISOs and non-qualified), stock appreciation rights (SARs), restricted stock, performance units, performance-based stock awards, dividend equivalent rights and other stock-based grants. Participation in the Plan is limited to key employees, officers and directors. On March 4, 2013, the Plan was amended to increase the maximum number of shares of stock available under the Plan by 210,000 shares to 14,242,061 shares (the “Amended Plan”). As of September 30, 2015 , there were 5,230,642 shares of common stock reserved under the Amended Plan. As of September 30, 2015 , the maximum number of shares available for grant under the Amended Plan was 4,179 . In July 2015, the Board of Directors adopted and our shareholders approved the Company’s 2015 Omnibus Incentive Plan (“2015 Plan”). The 2015 Plan provides that the total number of shares of common stock that may be issued under our 2015 Plan is 8,400,000 . The 2015 Plan provides for the grant of stock options (ISOs and non-qualified), SARS, restricted stock awards, restricted stock units, performance units, performance-based stock awards, dividend equivalent rights and other stock-based incentive awards. As of September 30, 2015 , the Company has granted 46,750 restricted stock awards and 6,875 stock options under the 2015 Plan. As of September 30, 2015 , the maximum number of shares available for grant under the 2015 Plan was 8,346,375 . Stock Options The Company uses the Black-Scholes option-pricing model to determine the fair value of stock options on the date of grant. The fair value of stock options, which are subject to pro-rata vesting, is expensed on a straight-line basis over the vesting period of the stock options. Prior to the Company’s initial public offering, the Company used a third party valuation specialist to assist it in the estimation of the fair value of its common stock. The Company believed these valuations to be appropriate; however, the valuation of the equity of any private company involves various estimates and assumptions that may differ from actual values. Effective with our initial public offering, the Company bases its common stock value on actual transactions or other transactions that are representative of stock value. The expected volatility assumption is based on the combination of the industry index for pet food wholesalers and the volatility of the Company’s largest customer. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury implied yield at the date of grant. The weighted-average expected term is determined with reference to historical exercise and post-vesting cancellation experience, and the vesting period and contractual term of the awards. The following are the weighted-average assumptions used for grants issued during the nine month periods ended September 30: 2015 2014 Volatility 23.85 % 32.84 % Risk-free interest rate 1.88 % 2.16 % Expected term (years) 6.5 6.5 Dividend yield — — Grant-date fair value $ 5.74 $ 5.15 The following table summarizes stock option activity during the year and also presents stock options outstanding and exercisable as of September 30, 2015 (dollars in millions, except for per share data): Number of Weighted Average Exercise Price Per Share Options outstanding at December 31, 2014 4,671,639 $ 5.88 Granted 110,825 $ 20.00 Exercised (334,439 ) $ 5.70 Forfeited — $ — Expired (5,457 ) $ 6.12 Options outstanding at September 30, 2015 4,442,568 $ 6.25 Options exercisable at September 30, 2015 1,498,849 $ 5.78 During the three and nine months ended September 30, 2015 , the Company granted 110,825 of ISO and non-qualified stock options, of which 6,875 stock options were granted under the 2015 Plan, and 103,950 stock options were granted under the Amended Plan. Restricted Stock Awards The following table summarizes restricted stock activity for the nine months ended September 30, 2015 : Number of Weighted Average Grant Date Fair Value Restricted stock awards at December 31, 2014 — $ — Granted 46,750 20.00 Vested (46,750 ) 20.00 Forfeited — — Restricted stock awards at September 30, 2015 — — During the three and nine months ended September 30, 2015 and concurrent with our initial public offering, certain members of the Company's Board of Directors received a one-time fully-vested grant of 46,750 restricted stock awards with a three-year holding restriction. The total fair value of these restricted stock awards on the date of grant was $0.9 million , of which the full amount was recognized as a component of stock-based compensation expense during the three months ended September 30, 2015 . Stock-based Compensation Expense Stock-based compensation costs charged to operations (as a component of selling, general, and administrative expenses) during each of the three months ended September 30, 2015 and 2014 was approximately $2.0 million and $0.5 million , respectively. Stock-based compensation costs charged to operations (as a component of selling, general, and administrative expenses) during each of the nine months ended September 30, 2015 and 2014 was approximately $2.9 million and $1.4 million , respectively. During the three and nine months ended September 30, 2015 , the Company recorded benefits of tax deductions in excess of the grant date fair value of $1.6 million related to option exercises. The benefits of tax deductions in excess of the grant date fair value resulting from the exercise of non-qualified options was not material to the three and nine months ended September 30, 2014 . Unrecognized stock-based compensation related to outstanding unvested stock options is expected to be recognized in the Company’s statements of income as follows (by fiscal year): (dollars in thousands) 2015 (period from October 1 through December 31, 2015) $ 485 2016 1,851 2017 1,703 2018 318 2019 125 2020 52 Total $ 4,534

Earnings Per Share

Earnings Per Share	9 Months Ended
	Sep. 30, 2015
Earnings Per Share [Abstract]
Earnings per share	Earnings Per Share The details of the computation of basic and diluted earnings per common share are as follows: Three Months Ended September 30, Nine Months Ended September 30, (dollars in thousands, except for per share data) 2015 2014 2015 2014 Net income $ 27,066 $ 27,713 $ 79,750 $ 80,777 Basic weighted average number of shares outstanding 196,062,348 195,743,154 195,852,404 195,732,663 Dilutive effect of stock options 2,192,460 2,140,875 2,176,139 2,087,479 Diluted weighted average number of shares outstanding 198,254,808 197,884,029 198,028,543 197,820,142 Basic net income per common share $ 0.14 $ 0.14 $ 0.41 $ 0.41 Diluted net income per common share $ 0.14 $ 0.14 $ 0.40 $ 0.41 For the three and nine months ended September 30, 2015 , there were 86,733 and 29,229 shares, respectively, that were excluded from the computation of weighted average shares for diluted earnings per share due to their anti-dilutive effect. For the three and nine months ended September 30, 2014 , there were no shares that were excluded from the computation of weighted average shares for diluted earnings per share due to their anti-dilutive effect.

Related Parties

Related Parties	9 Months Ended
	Sep. 30, 2015
Related Party Transactions [Abstract]
Related Parties	Related Parties Invus Partners LLC which, as of September 30, 2015 , beneficially owned 58.6% of the Company's outstanding common stock, holds $20.0 million of the Company’s outstanding debt under the Amended Facility. Several of the members of the Company's Board of Directors (“BOD”) are members of Invus Partners LLC, as well as managing directors and officers of the general partner of Invus Partners LLC. In addition, Kunkemueller Enterprises LP, which is owned in part by the wife of one of the members of our BOD, holds $1.5 million of our debt under the Amended Facility.

Legal Proceedings

Legal Proceedings	9 Months Ended
	Sep. 30, 2015
Commitments and Contingencies Disclosure [Abstract]
Legal Proceedings	Legal Proceedings On May 6, 2014, Nestlé Purina Petcare Company (“Nestlé Purina”) filed a lawsuit against us in the United States District Court for the Eastern District of Missouri, alleging that we have engaged in false advertising, commercial disparagement, unfair competition, and unjust enrichment (the “Nestlé Purina litigation”). Nestlé Purina asserts that, contrary to our advertising and labeling claims, certain BLUE products contain chicken or poultry by-product meals, artificial preservatives and/or corn and that certain products in the BLUE grain-free lines contain grains. Nestlé Purina also alleges that we have made false claims that our products (including LifeSource Bits) provide superior nutrition and health benefits compared to our competitors’ products. In addition, Nestlé Purina contends that we have been unjustly enriched as consumers have paid a premium for BLUE products in reliance on these alleged false and misleading statements, at the expense of our competitors. Nestlé Purina seeks an injunction prohibiting us from making these alleged false and misleading statements, as well as treble damages, restitution and disgorgement of our profits, among other things. In addition, Nestlé Purina has issued press releases and made other public announcements, including advertising and promotional communications through emails and internet and social media websites that make claims similar to those contained in their lawsuit. Nestlé Purina seeks a declaratory judgment that these statements are true and do not constitute defamation. In the course of pretrial discovery in the consolidated Nestlé Purina lawsuit, beginning in September 2014 documents and information were revealed that indicate that a facility owned by a major supplier of ingredients to the pet food industry, including Blue Buffalo, for a period of time, had mislabeled as “chicken meal” or “turkey meal” ingredients that contained other poultry-based ingredients that were inappropriate for inclusion in “chicken meal” or “turkey meal” under industry standards, and it appears that this mislabeling was deliberate. This conduct was undertaken by the supplier without our knowledge, and we have since ceased purchasing ingredients from this supplier. This supplier was one of our primary sources of chicken meal and turkey meal. As a result of the supplier’s conduct, our advertising claims of “no chicken or poultry by-product meals” were inaccurate as to products containing the mislabeled ingredients. Therefore, we may be exposed to false advertising liability to Nestlé Purina and others to the extent a claimant can prove they were injured by our actions. Such liability may be material. We have brought third-party indemnity and damages claims, with respect to the Nestlé Purina lawsuit, against the supplier that mislabeled the ingredients, as well as a broker involved in those transactions for such mislabeled ingredients. The trial court narrowed certain of our third party claims in response to motions to dismiss filed by the third parties but allowed numerous claims to proceed. In addition, we maintain insurance coverage for some of the Nestlé Purina claims. On October 15, 2014, we initiated a separate lawsuit against Nestlé Purina in state court in Connecticut. Nestlé Purina subsequently removed the case to the United States District Court for the District of Connecticut, and the Connecticut District Court then granted Nestlé Purina’s motion to transfer this matter to the same court where Nestlé Purina’s lawsuit against us is pending. Our complaint in this matter alleges that Nestlé Purina has intentionally engaged in false advertising, unfair trade practices and unjust enrichment in the promotion and advertisement of numerous of its products. In particular, our complaint alleges that Nestlé Purina is deceptively advertising that certain high-quality, wholesome ingredients are present in certain of Nestlé Purina’s most popular pet food products in greater amounts, or are more prevalent in the products in relation to other ingredients, than is actually the case. In addition, our complaint alleges that Nestlé Purina is deceptively advertising certain of its products as healthy and nutritious when in fact Nestlé Purina knew that these products were unsafe and were responsible for illness and even death in many of the dogs that consumed them. And our complaint alleges that Nestlé Purina falsely claims its “Just Right” brand of dog food is personalized to match each dog’s unique nutritional needs when it consists of only a limited set of basic ingredient formulas, each of which is substantially similar to the others. Our complaint seeks an injunction prohibiting Nestlé Purina from continuing these false and misleading advertisements, as well as damages and disgorgement of profits, among other things. The matter is in the early stages of discovery. On July 31, 2015, Nestlé Purina filed an amended answer in this case that also asserted counterclaims against us. Nestlé Purina asserted that our complaint does not state viable claims, but that if a ruling is entered against it then “in the alternative” it asserts counterclaims that relate to the advertising of a variety of our products, which Nestlé Purina contends are misleading or deceptive as to the amounts of certain ingredients in those products. On August 28, 2015, we amended our complaint to include allegations that Nestlé Purina falsely claims that its “Bright Mind” dog food is proven to promote alertness, mental sharpness, memory, trainability, attention, and interactivity in dogs age seven and older, when in fact such claims are unsubstantiated and false. In response to Nestlé Purina’s amended answer and counterclaims, we filed a motion to dismiss the counterclaims in their entirety on October 2, 2015. That motion is pending. We believe Nestlé Purina’s claims are without merit and intend to vigorously defend ourselves. Although we have determined that a loss contingency with respect to the Nestlé Purina litigation is reasonably possible, such litigation and lawsuits are still in their early stages and the final outcome is uncertain. In particular, we have determined that the reasonably possible loss or range of loss resulting from Nestlé Purina proceedings cannot be reasonably estimated due to the following reasons: (1) the early stages of the proceedings, (2) the lack of specific damages sought by the plaintiffs, (3) the uncertainty as to plaintiffs’ support for their damages claim, (4) the uncertainty as to factual issues and (5) our claims against third party defendants and counterclaims against Nestlé Purina. In addition, a number of related putative consumer class action lawsuits have been filed making allegations similar to Nestlé Purina’s and seeking monetary damages and injunctive relief. We also have brought damages and indemnity claims against our former ingredient supplier and broker with respect to the class action lawsuits. In October 2015, we reached a tentative understanding with the plaintiffs on a potential settlement value of $32 million (the "Potential Settlement"). However, at the time of filing, we have not reached an agreement and no assurance can be given that an agreement can be reached. This tentative understanding is subject to further negotiations regarding other critical terms of the settlement, and the completion of a settlement stipulation by the parties as well as preliminary and final approval by the Court. We currently estimate that the reasonably possible loss relating to the Potential Settlement will not exceed the potential settlement value. The potential settlement value does not take into account any potential recovery from insurance or from our former ingredient supplier or broker, against whom we will continue to pursue our claims for indemnity and other damages. Given the uncertainty and the ongoing nature of our settlement discussions, the ultimate outcome of these class action lawsuits cannot be predicted as the parties could fail to reach an agreement in principle with respect to the critical terms, or a definitive settlement agreement; therefore, a liability, if any, is not determinable at this time and the ultimate outcome could differ materially from the current potential settlement value. In the normal course of business, we are subject to proceedings, lawsuits and other claims and assessments, which typically include consumer complaints and post-termination employment claims. We have assessed such contingent liabilities and believe the potential of these liabilities is not expected to have a material, if any, effect on our financial position, our results of operations or our cash flows.

Subsequent Event (Notes)

Subsequent Event (Notes)	9 Months Ended
	Sep. 30, 2015
Subsequent Events [Abstract]
Subsequent Events	Subsequent Event In October 2015, we reached a tentative understanding with the plaintiffs with respect to the class action lawsuits described in “Note 11 - Legal Proceedings” on the Potential Settlement. The understanding is subject to further negotiations regarding other critical terms of the settlement, and the completion of a settlement stipulation by the parties as well as preliminary and final approval by the Court. We currently estimate that the reasonably possible loss relating to the Potential Settlement will not exceed the potential settlement value. The potential settlement value does not take into account any potential recovery from insurance or from our former ingredient supplier or broker, against whom we will continue to pursue our claims for indemnity and other damages. Given the uncertainty and the ongoing nature of our settlement discussions, the ultimate outcome of these class action lawsuits cannot be predicted as the parties could fail to reach an agreement in principle with respect to the critical terms, or a definitive settlement agreement; therefore, a liability, if any, is not determinable at this time and the ultimate outcome could differ materially from the current potential settlement value.

Receivables (Tables)

Receivables (Tables)	9 Months Ended
	Sep. 30, 2015
Receivables [Abstract]
Schedule of composition of receivables	Receivables consisted of the following: (dollars in thousands) September 30, December 31, Trade receivables, net $ 68,794 $ 54,647 Other receivables 7,648 23,973 Total $ 76,442 $ 78,620

Inventories (Tables)

Inventories (Tables)	9 Months Ended
	Sep. 30, 2015
Inventory Disclosure [Abstract]
Schedule of inventories	Inventories consisted of the following: (dollars in thousands) September 30, December 31, Finished goods $ 91,137 $ 83,904 Work in process 338 90 Raw materials 2,619 3,136 Packaging and supplies 2,808 1,490 Total $ 96,902 $ 88,620

Property, Plant, and Equipment

Property, Plant, and Equipment (Tables)	9 Months Ended
	Sep. 30, 2015
Property, Plant and Equipment [Abstract]
Schedule of property, plant and equipment	Property, plant and equipment consisted of the following: (dollars in thousands) September 30, December 31, Buildings $ 59,315 $ 58,846 Machinery and equipment 46,769 44,702 Computer software 10,056 8,056 Computer equipment 3,968 3,589 Furniture and fixtures 1,564 1,429 Leasehold improvements 1,266 1,051 Land improvements 493 784 Land 346 346 Buildings improvements 86 86 Construction in progress 1,910 2,169 125,773 121,058 Accumulated depreciation and amortization (12,587) (7,195) Total $ 113,186 $ 113,863

Long-term Debt (Tables)

Long-term Debt (Tables)	9 Months Ended
	Sep. 30, 2015
Debt Disclosure [Abstract]
Schedule of components of long-term debt	Long-term debt consisted of the following: (dollars in thousands) September 30, 2015 December 31, 2014 Term loan $ 388,087 $ 391,057 Less current maturities (3,960 ) (3,960 ) Total long-term debt $ 384,127 $ 387,097

Stock-Based Compensation (Table

Stock-Based Compensation (Tables)	9 Months Ended
	Sep. 30, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Schedule of stock option activity	The following table summarizes stock option activity during the year and also presents stock options outstanding and exercisable as of September 30, 2015 (dollars in millions, except for per share data): Number of Weighted Average Exercise Price Per Share Options outstanding at December 31, 2014 4,671,639 $ 5.88 Granted 110,825 $ 20.00 Exercised (334,439 ) $ 5.70 Forfeited — $ — Expired (5,457 ) $ 6.12 Options outstanding at September 30, 2015 4,442,568 $ 6.25 Options exercisable at September 30, 2015 1,498,849 $ 5.78
Schedule of unrecognized compensation cost	Unrecognized stock-based compensation related to outstanding unvested stock options is expected to be recognized in the Company’s statements of income as follows (by fiscal year): (dollars in thousands) 2015 (period from October 1 through December 31, 2015) $ 485 2016 1,851 2017 1,703 2018 318 2019 125 2020 52 Total $ 4,534
Weighted Average Assumptions	The following are the weighted-average assumptions used for grants issued during the nine month periods ended September 30: 2015 2014 Volatility 23.85 % 32.84 % Risk-free interest rate 1.88 % 2.16 % Expected term (years) 6.5 6.5 Dividend yield — — Grant-date fair value $ 5.74 $ 5.15
Schedule of restricted stock awards activity	The following table summarizes restricted stock activity for the nine months ended September 30, 2015 : Number of Weighted Average Grant Date Fair Value Restricted stock awards at December 31, 2014 — $ — Granted 46,750 20.00 Vested (46,750 ) 20.00 Forfeited — — Restricted stock awards at September 30, 2015 — —

Earnings Per Share (Tables)

Earnings Per Share (Tables)	9 Months Ended
	Sep. 30, 2015
Earnings Per Share [Abstract]
Reconciliations of Basic and Diluted Shares Calculations	The details of the computation of basic and diluted earnings per common share are as follows: Three Months Ended September 30, Nine Months Ended September 30, (dollars in thousands, except for per share data) 2015 2014 2015 2014 Net income $ 27,066 $ 27,713 $ 79,750 $ 80,777 Basic weighted average number of shares outstanding 196,062,348 195,743,154 195,852,404 195,732,663 Dilutive effect of stock options 2,192,460 2,140,875 2,176,139 2,087,479 Diluted weighted average number of shares outstanding 198,254,808 197,884,029 198,028,543 197,820,142 Basic net income per common share $ 0.14 $ 0.14 $ 0.41 $ 0.41 Diluted net income per common share $ 0.14 $ 0.14 $ 0.40 $ 0.41

The Company (Details)

The Company (Details)	Jul. 27, 2015employee$ / sharesshares	Sep. 30, 2015subsidiary
Subsidiary, Sale of Stock [Line Items]
Number of wholly-owned subsidiaries | subsidiary		5
Number of shares issued to non-management employees	30,682
Number of non-management employees receiving shares | employee	1,700
IPO and over-allotment
Subsidiary, Sale of Stock [Line Items]
Number of shares sold	38,906,286
Initial public offering share price | $ / shares	$ 20
Over-allotment option
Subsidiary, Sale of Stock [Line Items]
Number of shares sold	5,074,732

The Company The Company (Detail

The Company The Company (Details) $ in Thousands	3 Months Ended
	Sep. 30, 2015USD ($)
Common stock
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Allocated Share-based Compensation Expense	$ 609

Basis of Presentation (Details)

Basis of Presentation (Details)	Jul. 07, 2015
Class of Stock [Line Items]
Stock split ratio	4.2

Receivables (Details)

Receivables (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Receivables [Abstract]
Trade receivables, net	$ 68,794	$ 54,647
Other receivables	7,648	23,973
Total	76,442	78,620
Due from co-manufacturers	3,600	4,400
Income taxes receivable	$ 3,900	$ 18,200

Inventories (Details)

Inventories (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Inventory Disclosure [Abstract]
Finished goods	$ 91,137	$ 83,904
Work in process	338	90
Raw materials	2,619	3,136
Packaging and supplies	2,808	1,490
Total	$ 96,902	$ 88,620

Property, Plant, and Equipmen30

Property, Plant, and Equipment (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 125,773		$ 125,773		$ 121,058
Accumulated depreciation and amortization	(12,587)		(12,587)		(7,195)
Total	113,186		113,186		113,863
Depreciation and amortization	2,100	$ 1,600
Depreciation and amortization			5,981	$ 2,841
Buildings
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	59,315		59,315		58,846
Machinery and equipment
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	46,769		46,769		44,702
Computer software
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	10,056		10,056		8,056
Computer equipment
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	3,968		3,968		3,589
Furniture and fixtures
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	1,564		1,564		1,429
Leasehold improvements
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	1,266		1,266		1,051
Land improvements
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	493		493		784
Land
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	346		346		346
Buildings improvements
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	86		86		86
Construction in progress
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 1,910		$ 1,910		$ 2,169

Long-term Debt - Schedule of Lo

Long-term Debt - Schedule of Long-term Debt (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Debt Disclosure [Abstract]
Term loan	$ 388,087	$ 391,057
Less current maturities	(3,960)	(3,960)
Total long-term debt	$ 384,127	$ 387,097

Long-term Debt - Narrative (Det

Long-term Debt - Narrative (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2015USD ($)	Sep. 30, 2014USD ($)	Sep. 30, 2015USD ($)	Sep. 30, 2014USD ($)	Dec. 31, 2015	Dec. 31, 2014USD ($)
Debt Instrument [Line Items]
Carrying value	$ 388,087,000		$ 388,087,000			$ 391,057,000
Amortization of debt issuance costs	30,000	$ 30,000	91,000	$ 91,000
Amended Facility
Debt Instrument [Line Items]
Carrying value	388,100,000		388,100,000			391,100,000
Unrestricted cash and cash equivalents limit for the secured leverage ratio	$ 40,000,000		$ 40,000,000
Secured leverage ratio	4		4
Amended Facility | Scenario, forecast
Debt Instrument [Line Items]
Secured leverage ratio					3.75
Amended Facility | Term loan
Debt Instrument [Line Items]
Carrying value	$ 388,100,000		$ 388,100,000			391,100,000
Fair value	$ 388,100,000		$ 388,100,000			$ 386,200,000
Effective interest rate	3.62%		3.62%			4.03%
Quarterly principal payment			$ 1,000,000
End of term payment	$ 373,200,000		373,200,000
Amended Facility | Revolving credit facility
Debt Instrument [Line Items]
Outstanding borrowings	$ 0		$ 0			$ 0

Fair Value Measurements (Detail

Fair Value Measurements (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Carrying value	$ 388,087	$ 391,057
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash invested in money market deposit accounts	155,300	90,100
Amended Facility
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Carrying value	388,100	391,100
Amended Facility | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value	$ 388,100	$ 386,200

Stock-Based Compensation - Narr

Stock-Based Compensation - Narrative (Details) - USD ($) $ in Thousands	Mar. 04, 2013	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Jul. 27, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Grants of ISO and non-qualified stock options (in shares)				110,825
Exercise of stock options (shares)				334,439
Income tax benefit from exercise of stock options				$ 1,551	$ 0
Selling, general and administrative expenses
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation costs charged to operations		$ 2,000	$ 500	$ 2,900	$ 1,400
Amended Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Increase in the maximum number of shares available under the Plan	210,000
New maximum number of shares available under the Plan	14,242,061
Number of shares reserved under the Plan		5,230,642		5,230,642
Maximum number of shares available for grant under the Plan		4,179		4,179
Grants of ISO and non-qualified stock options (in shares)		103,950		103,950
2015 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (shares)		46,750		46,750
New maximum number of shares available under the Plan						8,400,000
Maximum number of shares available for grant under the Plan		8,346,375		8,346,375
Grants of ISO and non-qualified stock options (in shares)		6,875		6,875
Grants of restricted stock awards (in shares)				46,750
Restricted Stock | Selling, general and administrative expenses
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation costs charged to operations		$ 935
Common stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation costs charged to operations		$ 609

Stock-Based Compensation - Sche

Stock-Based Compensation - Schedule of Stock Options Outstanding (Details)	3 Months Ended	9 Months Ended
	Sep. 30, 2015$ / sharesshares	Sep. 30, 2015$ / sharesshares
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Number of shares - outstanding, December 31, 2014		4,671,639
Number of shares - granted		110,825
Number of shares - exercised		(334,439)
Number of shares - forfeited		0
Number of shares - expired		(5,457)
Number of shares - outstanding, September 30, 2015	4,442,568	4,442,568
Number of shares - exercisable, September 30, 2015	1,498,849	1,498,849
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract]
Weighted average exercise price per share - outstanding, December 31, 2014 (in usd per share) | $ / shares		$ 5.88
Weighted average exercise price per share - granted (in usd per share) | $ / shares		20
Weighted average exercise price per share - exercised (in usd per share) | $ / shares		5.70
Weighted average exercise price per share - forfeited (in usd per share) | $ / shares		0
Weighted average exercise price per share - expired (in usd per share) | $ / shares		6.12
Weighted average exercise price per share - outstanding, September 30, 2015 (in usd per share) | $ / shares	$ 6.25	6.25
Weighted average exercise price per share - exercisable, September 30, 2015 (in usd per share) | $ / shares	$ 5.78	$ 5.78
Amended Plan
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Number of shares - granted	103,950	103,950
2015 Plan
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Number of shares - granted	6,875	6,875

Stock-Based Compensation - Sc36

Stock-Based Compensation - Schedule of Unrecognized Compensation Cost (Details) $ in Thousands	Sep. 30, 2015USD ($)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
2015 (period from October 1 through December 31, 2015)	$ 485
2,016	1,851
2,017	1,703
2,018	318
2,019	125
2,020	52
Total	$ 4,534

Stock-Based Compensation Schedu

Stock-Based Compensation Schedule of Restricted Stock Awards Outstanding (Details) - 2015 Plan - $ / shares	3 Months Ended	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2015
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Balance at beginning of period (shares)		0
Balance at beginning of period (dollars per share)		$ 0
Granted (shares)	46,750	46,750
Granted (dollars per share)		$ 20
Vested (shares)		(46,750)
Vested (dollars per share)		$ 20
Forfeited (shares)		0
Forfeited (dollars per share)		$ 0
Balance at end of period (dollars per share)	$ 0	$ 0
Balance at end of period (shares)	0	0

Stock-Based Compensation Sche38

Stock-Based Compensation Schedule of Weighted Average Assumptions (Details) - $ / shares	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Volatility	23.85%	32.84%
Risk-free interest rate	1.88%	2.16%
Expected term (years)	6 years 6 months	6 years 6 months
Dividend yield	0.00%	0.00%
Grant-date fair value	$ 5.74	$ 5.15

Earnings Per Share (Details)

Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Earnings Per Share [Abstract]
Net income	$ 27,066	$ 27,713	$ 79,750	$ 80,777
Basic weighted average number of shares outstanding	196,062,348	195,743,154	195,852,404	195,732,663
Dilutive effect of stock options	2,192,460	2,140,875	2,176,139	2,087,479
Diluted weighted average number of shares outstanding	198,254,808	197,884,029	198,028,543	197,820,142
Basic net income per common share (in usd per share)	$ 0.14	$ 0.14	$ 0.41	$ 0.41
Diluted net income per common share (in usd per share)	$ 0.14	$ 0.14	$ 0.40	$ 0.41
Anti-dilutive shares excluded from diluted earnings per share computation	86,733	0	29,229	0

Related Parties (Details)

Related Parties (Details) $ in Millions	Sep. 30, 2015USD ($)
Related Party Transaction [Line Items]
Beneficial Ownership by Invus Partners LLC	58.60%
Invus Partners LLC | Affiliated Entity
Related Party Transaction [Line Items]
The Company's outstanding debt held by related parties	$ 20
Kunkemueller Enterprises LP | Affiliated Entity
Related Party Transaction [Line Items]
The Company's outstanding debt held by related parties	$ 1.5

Legal Proceedings Legal Proceed

Legal Proceedings Legal Proceedings (Details) $ in Millions	Sep. 30, 2015USD ($)
Commitments and Contingencies Disclosure [Abstract]
Potential Legal Settlement of Class Action Lawsuits	$ 32