CINCINNATI--(BUSINESS WIRE)-- AdvancePierre Foods Holdings, Inc., a leading national producer and distributor of sandwiches, sandwich components and other entrées and snacks, today reported financial results for the second quarter and year-to-date period ended July 2, 2016.
Financial Results for the Second Quarter
Net sales for the second quarter of 2016 were $370.7 million compared to $391.9 million for the second quarter of 2015. The decline was primarily attributable to the Company’s elimination of lower margin business in its Industrial segment, which reduced net sales by $13.2 million, and to strategic price and trade spending investments to reflect lower raw material costs, which reduced net sales by $16.3 million. Excluding the impact of Industrial segment volume, volume and mix in the Company’s three core segments, including sales volume growth of 3.2%, increased net sales by $8.3 million.
Gross profit for the second quarter of 2016 increased by $17.1 million to $100.9 million, or 27.2% of net sales compared to $83.8 million, or 21.4% of net sales, for the second quarter of 2015, reflecting an increase of 580 basis points of margin. Gross profit increased primarily due to productivity improvements, positive price realization net of raw material cost movements, and contributions from volume, partially offset by other increases in costs of goods sold.
Selling, general and administrative expenses for the second quarter of 2016 were $55.0 million, or 14.8% of net sales, compared to $50.2 million, or 12.8% of net sales for the second quarter of 2015. The increase was primarily due to increased marketing and R&D investments and employee compensation expenses (including non-cash stock compensation), partially offset by lower sponsor management fees and expenses.
Interest expense for the second quarter of 2016 was $38.0 million, an increase of $11.8 million compared to $26.2 million for the second quarter of 2015. This increase was a result of the $15.3 million of charges related to the refinancing of the Company’s credit facilities in June 2016 including write-off of deferred loan fees and original issue discounts, payments of loan origination fees, and prepayment penalties, partially offset by the benefit of lower rates on the refinanced debt and lower average borrowings.
Income tax benefit was $57.8 million for the second quarter of 2016, as compared to an income tax provision of $0.6 million for the second quarter of 2015. Based on an assessment of the realizability of the Company’s deferred tax assets, management determined that a full valuation allowance should no longer be recorded against the deferred tax assets. As a result, the Company reversed $56.5 million of the existing valuation allowance during the second quarter of 2016 representing a decrease to income tax expense during the period.
AdvancePierre’s reported GAAP net income was $64.1 million, or $0.96 per diluted share, for the second quarter of 2016, as compared to reported net income of $2.3 million, or $0.03 per diluted share, for the second quarter of 2015. Adjusted net income for the second quarter of 2016 was $24.7 million, or $0.37 per diluted share. Adjusted net income for the second quarter of 2015 was $11.5 million, or $0.17 per adjusted diluted share.
For the second quarter of 2016, Adjusted EBITDA increased 16.3% to $71.2 million from $61.2 million for the second quarter of 2015.
Financial Results for the First Half
Net sales for the first half of 2016 were $765.2 million compared to $818.4 million for the first half of 2015. The decline was primarily attributable to elimination of lower margin business in the Company’s Industrial segment, which reduced net sales by $32.5 million, and strategic price and trade spending investments to reflect lower raw material costs, which reduced net sales by $25.4 million. Excluding the impact of Industrial segment volume, volume and mix in the Company’s three core segments, including sales volume growth of 2.4%, increased net sales by $4.7 million.
Gross profit for the first half of 2016 increased by $30.1 million to $201.1 million, or 26.3% of net sales compared to $171.0 million, or 20.9% of net sales, for the first half of 2015, reflecting an increase of 540 basis points of margin. Gross profit increased primarily due to productivity improvements, positive price realization net of raw material cost movements, and contributions from volume, partially offset by other increases in costs of goods sold.
Selling, general and administrative expenses for the first half of 2016 were $109.4 million, or 14.3% of net sales, compared to $96.4 million, or 11.8% of net sales for the first half of 2015. The increase was primarily due to increased marketing and R&D investments and employee compensation expenses (including non-cash stock compensation), partially offset by lower sponsor management fees and expenses.
Interest expense for the first half of 2016 was $63.8 million, an increase of $11.1 million compared to $52.7 million for the first half of 2015. This increase was a result of the $15.3 million of charges related to the refinancing of the Company’s credit facilities in June 2016 including write-off of deferred loan fees and original issue discounts, payments of loan origination fees, and prepayment penalties, partially offset by the benefit of lower rates on the refinanced debt and lower average borrowings.
Income tax benefit was $56.3 million for the first half of 2016, as compared to an income tax provision of $3.1 million for the first half of 2015. Based on an assessment of the realizability of the Company’s deferred tax assets, management determined that a full valuation allowance should no longer be recorded against the deferred tax assets. As a result, the Company reversed $56.5 million of the existing valuation allowance during the second quarter of 2016 representing a decrease to income tax expense during the period.
AdvancePierre’s reported net income under GAAP was $80.7 million, or $1.21 per diluted share, for the first half of 2016, as compared to reported net income of $12.8 million, or $0.19 per diluted share, for the first half of 2015. Adjusted net income for the first half of 2016 was $47.7 million, or $0.71 per diluted share. Adjusted net income for the first half of 2015 was $29.4 million, or $0.44 per adjusted diluted share.
For the first half of 2016, Adjusted EBITDA increased 13.9% to $140.0 million from $122.9 million for the first half of 2015. Full report.
