Inventure Foods continues to explore strategic options

by Monica Watrous
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Boulder Canyon chips
Within Inventure Foods' Snack segment, gross profit was $3.8 million in the first quarter.

PHOENIX — The board of directors and management team of Inventure Foods, Inc. continue to explore strategic options for the business as profitability again remained elusive in the recent quarter.

The company recorded a net loss of $14,139,000 in the first quarter ended April 1, which compared with a loss of $1,018,000 in the prior-year period. Discontinued operations representing the Fresh Frozen Foods business, which was sold in March, generated a net loss of $12,933,000 in the latest quarter. Adjusted EBITDA from continuing operations was $1,589,000, compared to $3,662,000 in the first quarter of 2016. Net revenues of $49,618,000 were down 13% from $57,180,000.

Terry McDaniel, chief executive officer and president, said the company made good progress during the quarter in its work to improve consolidated business performance.

Terry McDaniel, Inventure Foods
Terry McDaniel, c.e.o. and president of Inventure Foods

“We made two important steps during the quarter,” Mr. McDaniel said during a May 11 earnings call with investment analysts. “First, our Snack segment returned to growth, driven by the strength of our Boulder Canyon brand and our premium private label products. Second, we saw a 540-basis (point) improvement in our Frozen segment gross margin.

“We're also pleased that we took an initial step with the completion of our sale of Fresh Frozen Foods business in the first quarter. We remain intently focused on the execution of our strategic initiatives across the Frozen and Snack segments to generate improved results as we progress through the year.”

Within the Snack segment, gross profit was $3.8 million in the first quarter, down from $4.5 million in the comparable period, due to higher trade promotion spending and reductions in inventory standard costs. Net revenues in the segment rose 5.1% to $26.2 million from $24.9 million, as strong gains in Boulder Canyon and private label sales partially offset reduced license brand sales.

“Boulder Canyon net revenues were up 11.5% in the Snack segment, and the brand was up 15.3% overall,” Mr. McDaniel said. “Importantly, during the quarter, Boulder Canyon showed growth in every major channel, including grocery, natural, club, c-store and vend.”

Within the Frozen segment, gross profit was $4.7 million, compared with $4.8 million, on revenues of $23.5 million, which declined 27% from $32.3 million in the year-ago period. The decline in revenues was due to reduced private label sales distribution and a frozen berry market price decrease as well as lower sales of Jamba at-home smoothies.

Inventure Foods Jamba At Home Smoothie kits
Inventure's Frozen revenue was affected by lower sales of Jamba at-home smoothies.

“As we progress through the year, we believe we are much better positioned to benefit from improved fruit margins, which should continue at least through the summer harvest,” Mr. McDaniel said. “Our success in freezing more berries last year has enabled us to use more of our own fruit throughout the year and reduced our need to purchase potentially higher-priced fruit to meet our future sales demand.”

The company also plans to expand its Boulder Canyon brand further into the frozen category with the launch of new frozen products later this year, following the success of Boulder Canyon frozen riced vegetables.

“Within the Frozen segment, we continue to believe the Boulder Canyon brand has a compelling opportunity to extend into new product categories and new aisles at retail, particularly in the natural channel,” Mr. McDaniel said. “We have already seen success, primarily in the natural sales channel, since launching our line of frozen riced vegetable products under the Boulder Canyon brand, which generated a solid level of initial revenue in Q1.

Boulder Canyon riced vegetables
Inventure recently launched Boulder Canyon frozen riced vegetables. 

“We have also picked up new distribution within the quarter and now are up to 1,200 doors, mainly within the natural retailers in the natural section within grocery. We remain excited about the opportunities for the Boulder Canyon brand in the frozen products category as we continue to innovate and enhance our healthy natural product portfolio.”

Looking ahead, the company expects to further improve in several key areas of the business, Mr. McDaniel said.

“We believe our initiatives will result in top-line growth and expanded profitability across our Snack and Frozen business segments over time,” he said. “In 2017, we remain better positioned to begin the turnaround of our financial performance and increased profitability as we progress through the year.

“We expect to benefit from: one, within the Snack segment, we have made strategic infrastructure and brand support investments, which we expect to help us drive net revenue and improve gross margin; two, frozen food margin should increase as compared to prior year through the harvest as a result of better operational efficiencies, improved mix and less external purchased fruit; three, the sale of Fresh Frozen, which we expect will improve our gross margin performance throughout the year and reduce our cash requirements; and four, finally, we have a solid lineup of innovating new products coming to the market this year.” 
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