F2Q13 Earnings Call
October 30, 2012 5:00 p.m. ET
Erica Abrams – Investor Relations
John M. Foraker – Chief Executive Officer
Kelly J. Kennedy – Chief Financial Officer and Treasurer
Jon Andersen - William Blair
Rachel Nabatian - Credit Suisse
Edward Aaron – RBC Capital Markets
Scott Van Winkle - Canaccord Genuity
Chris Growe - Stifel Nicolaus
Bill Chappell - SunTrust
» Annie's CEO Discusses F1Q13 Results - Earnings Call Transcript
» Northrop Grumman Management Discusses Q3 2012 Results - Earnings Call Transcript
Hello, and thanks for joining us today, as we report financial results for the second quarter of fiscal 2013. Joining me on the call today are John Foraker, CEO; and Kelly Kennedy, CFO of Annie’s.
I will now present our comments on forward-looking statements. Some of the statements we make during this conference call are forward-looking, including statements concerning our positioning for future growth; investments in areas of strategic focus including continued innovation; increasing demand for natural and organic food products; and our expectations concerning market position, financial performance, and operating information.
The forward-looking statements made on this conference call are based on management’s current expectations as of today’s date only, and are subject to uncertainty and changes in circumstances and are therefore subject to significant risks. We cannot assure you that future developments affecting us will be those that we have anticipated. Actual results may differ materially from those expectations.
Our reported results should not be considered an indication of future performance. There are many potential risks and uncertainties that could cause actual results to differ from our current expectations, as well as those risks and uncertainties included in the risk factors section of our filings with the SEC, which were available on our investor relations portion of our website at Annies.com, and on the SEC website at sec.gov.
Additional information is also available in our Annual Report filed on Form 10-K for the fiscal year ended March 31, 2012. All information provided in our release and in the attachment today is as of October 30, 2012, and we undertake no duty to update this information for any reason unless required by law.
Certain financial measures that we use on this conference call such as adjusted net income are not prepared in accordance with GAAP, and have been adjusted to eliminate the impact of certain non-recurring, expired, or non-cash expenses or charges, as the case may be. Our GAAP results and reconciliation of GAAP to non-GAAP financial measures can be found in our earnings press release.
This conference call is being webcast, and an archive of the webcast will be available on the investor relations section of our website at Annies.com. It’s also available live at this time.
Now, I will turn the call over to John. Please go ahead.
John M. Foraker
Hello, and thanks to everyone for joining us today as we report our fiscal 2013 second quarter financial results. We know it may have been difficult for some of you to make this call today, so we’re really grateful for your participation. We hope that you, your families, and friends are all safe.
Our strong second quarter results were driven by robust consumer trends and execution of our proven growth strategies. We achieved 20% top line growth, or $46.7 million in net sales, and adjusted net income of $4.2 million, or $0.24 per share.
In light of our strong growth in the first half, current sales momentum, and our conference looking ahead, we are now raising our full year sales guidance from a prior range of 16% to 19% to a new range of 19% to 21%.
In the second quarter, we continued to focus on our four strategic growth drivers. First, expanding mainstream distribution. Second, improving placement locations in stores. Third, increasing Annie’s brand awareness and household penetration, and finally, continuing to deliver existing innovation that our consumers love.
We made good progress during the quarter in each of these areas. The consumer opportunity for natural and organic alternatives remains very strong. More and more consumers are seeking cleaner and simpler food options for their families.
Against this favorable consumer backdrop, we continue to experience strong consumption trends. During the quarter we saw year over year consumption growth in our key product categories, retail channels, and top customers that was in the mid to high teens. We’re very consistent with our trends over the last three quarters.
Our mainline initiative, where we are moving our best-selling items out of standalone natural sets and into mainline grocery aisles progressed nicely. During the quarter we made significant progress against this initiative, placing approximately 17,000 SKU points of distribution in grocery mainline sets. About two-thirds of these placements were moves from natural sets to mainline sets in the same store. The remaining placements were incremental points of new mainline aisle distribution.
Our mainline wins were most heavily focused in macaroni and cheese, primarily because we’ve been making that case to retailers for a longer period of time. During the quarter Annie’s macaroni and cheese consumption grew by more than 20% in grocery and mass channels, clearly benefiting from improved placement, deeper distribution, more competitive price points, and stronger merchandising. We are gaining similar traction in our other product categories such as grahams, snack crackers, fruit snacks, and dressings, and we expect to benefit in the future as a result.