Annie’s weathers pizza recall to post solid earnings

by Eric Schroeder
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BERKELEY, CALIF. — A strong fourth quarter buoyed full-year results at Annie’s, Inc. in fiscal 2013. Net income in the year ended March 31 was $11,551,000, equal to 67c per share on the common stock, up from $9,589,000, or 62c per share, in fiscal 2012. Adjusted EBITDA increased 21% to $25,765,000 from $21,315,000.

Net sales during fiscal 2013 totaled $169,977,000, up 20% from $141,304,000. Excluding items related to a frozen pizza recall, adjusted net sales increased 21% to $171,073,000. Strength in meals and snacks drove sales growth, according to Annie’s, while sales of dressing, condiments and other products were flat.

For the fourth quarter ended March 31, net income was $4,234,000, or 25c per share, up sharply from $1,929,000, or 12c per share, in the same period a year ago. Adjusted EBITDA was $8,960,000, up 34% from $6,707,000, while sales increased 23% to $52,715,000 from $42,984,000.

“Our strong fourth-quarter results capped off a successful year for our company,” said John Foraker, chief executive officer. “Our sales for both the quarter and full year exceeded our expectations and were driven by a continuation of strong consumption trends. Our sharp focus on execution enabled us to overcome the challenge presented by the voluntary pizza recall announced on Jan. 22 and deliver robust sales and e.p.s. growth.

“We enter fiscal 2014 in a position of strength. Consumer interest in natural and organic foods continues to increase, and as one of the leading brands in our space, we are well positioned to benefit from this trend. The robust momentum we are seeing in our base business, particularly in conventional channels, confirms that our core growth strategies are working, and our investments in our brand, people and infrastructure provide a strong foundation for sustainable growth.”

In a June 10 conference call with analysts to discuss full-year results, Mr. Foraker said Annie’s launched a number of meaningful new products in fiscal 2013, including made-with-organic rising crust pizza, cheddar squares and flat graham crackers.

“Consumer and retailer interest in these additions has been quite strong,” he said. “Looking ahead, we believe that growing awareness and relevance of our brands has greatly increased the potential size of our playing field. Over the past couple of years, we’ve invested heavily in our organization to widen the pipe and ensure we have the capabilities needed to execute at a high level so we can take full advantage of these growing opportunities. As a result, fiscal 2014 will be a year of accelerated innovation for Annie’s.”

Kicking off that innovation, Annie’s said it is introducing microwavable macaroni and cheese made with organic ingredients. The new cups will be available in Real Aged cheddar, white cheddar, and gluten-free rice pasta and cheddar.

The single- and two-pack varieties will be available at retailers nationwide this summer. Annie’s said the white cheddar and Real Aged cheddar varieties contain organic pasta, and the Real Aged cheddar flavor features 8 grams of whole grains per serving.

“The microwavable cup segment represents approximately 20% of the total mac and cheese category, and is growing at twice the rate of the overall category in conventional channels,” Mr. Foraker said. “Our offering is well positioned to meet the growing needs of millennial consumers, and we expect to bring many new consumers into the category. Our micro-cups are scheduled to begin shipping broadly to important retailers in all of our channels in early July.”

Elaborating on the development of the microwavable cups, Mr. Foraker said it was a category that Annie’s has wanted to get into for a long time.

“The development was very difficult for us to get a product that performed to consumer expectations without all the artificial ingredients,” he said. “We’ve developed what we think is a fantastic offering, and we believe Annie’s consumers are going to really like it.”

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