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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Blue Buffalo Pet Products, Inc. (delisted) | NASDAQ:BUFF | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 40.00 | 39.99 | 40.00 | 0 | 01:00:00 |
ý
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2016
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
TO
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Delaware
|
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46-0552933
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(State or Other Jurisdiction of
Incorporation or Organization)
|
|
(I.R.S. Employer
Identification No.)
|
|
|
|
11 River Road, Wilton, CT
|
|
06897
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(Address of Principal Executive Offices)
|
|
(Zip Code)
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Title of Each Class
|
|
Name of Each Exchange on Which Registered
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Common Stock, $0.01 par value
|
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The NASDAQ Stock Market LLC
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|
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Page No.
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PART I.
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|
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PART II.
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PART III.
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PART IV.
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•
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We may not be able to successfully implement our growth strategy on a timely basis or at all;
|
•
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The growth of our business depends on our ability to accurately predict consumer trends and demand and successfully introduce new products and product line extensions and improve existing products;
|
•
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Any damage to our reputation or our brand could have a material adverse effect on our business, financial condition, and results of operations;
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•
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Our growth and business are dependent on trends that may change or not continue, and our historical growth may not be indicative of our future growth;
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•
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There may be decreased spending on pets in a challenging economic climate;
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•
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Our business depends, in part, on the sufficiency and effectiveness of our marketing and trade promotion programs;
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•
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If we are unable to maintain or increase prices, our margins may decrease;
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•
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We are dependent on a relatively limited number of customers for a significant portion of our sales; and
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•
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We rely upon a limited number of contract manufacturers to provide a significant portion of our supply of products.
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•
|
enter into distribution and other strategic arrangements with retailers and other potential distributors of our products;
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•
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continue to effectively compete in specialty channels;
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•
|
secure shelf space in the stores and websites of our retail partners;
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•
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increase our brand recognition by effectively implementing our marketing strategy and advertising initiatives;
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•
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expand and maintain brand loyalty;
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•
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develop new products and product line extensions that appeal to consumers;
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•
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maintain and, to the extent necessary, improve our high standards for product quality, safety and integrity;
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•
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maintain sources for the required supply of quality raw ingredients to meet our growing demand;
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•
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continue to successfully expand our internal manufacturing capabilities, including completing construction of our new manufacturing facilities and ramping up production of those facilities;
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•
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successfully operate our Heartland facility;
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•
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further expand in both new and existing international markets;
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•
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identify and successfully enter and market our products in new geographic markets and market segments; and
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•
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continue to educate the veterinarian community about our line of veterinary exclusive therapeutic products and generate recommendations from veterinarians for our current portfolio of wholesome natural products.
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•
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fluctuations in currency exchange rates;
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•
|
the difficulty of enforcing agreements and collecting receivables through some foreign legal systems;
|
•
|
customers in some foreign countries potentially having longer payment cycles;
|
•
|
changes in local tax laws, tax rates in some countries that may exceed those of the United States or Canada and lower earnings due to withholding requirements or the imposition of tariffs, exchange controls or other restrictions;
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•
|
seasonal reductions in business activity;
|
•
|
the credit risk of local customers and distributors;
|
•
|
general economic and political conditions;
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•
|
any attempt by the Trump administration to withdraw from or materially modify the North American Free Trade Agreement (“NAFTA”) and certain other international trade agreements;
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•
|
unexpected changes in legal, regulatory or tax requirements;
|
•
|
differences in culture and trends in foreign countries with respect to pets and pet care;
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•
|
the difficulties associated with managing a large global organization;
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•
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the risk that certain governments may adopt regulations or take other actions that would have a direct or indirect adverse impact on our business and market opportunities, including nationalization of private enterprise;
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•
|
non-compliance with applicable currency exchange control regulations, transfer pricing regulations or other similar regulations;
|
•
|
violations of the Foreign Corrupt Practices Act or comparable local anticorruption laws by acts of agents and other intermediaries whom we have limited or no ability to control; and
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•
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violations of regulations enforced by the U.S. Department of The Treasury’s Office of Foreign Asset Control.
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•
|
problems assimilating the purchased business, facilities, technologies or products;
|
•
|
issues maintaining uniform standards, procedures, controls and policies;
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•
|
unanticipated costs associated with acquisitions, investments or strategic alliances;
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•
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diversion of management’s attention from our existing business;
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•
|
adverse effects on existing business relationships with suppliers, contract manufacturers, retail partners and distribution customers;
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•
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increased complexity of running a broader portfolio of products, brands or facilities, which may conflict with our existing business
|
•
|
risks associated with entering new markets in which we have limited or no experience;
|
•
|
potential loss of key employees of acquired businesses; and
|
•
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increased legal and accounting compliance costs.
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•
|
requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of funding growth, working capital, capital expenditures, investments or other cash requirements;
|
•
|
reducing our flexibility to adjust to changing business conditions or obtain additional financing;
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•
|
exposing us to the risk of increased interest rates as certain of our borrowings, including borrowings under our term loan facilities are at variable rates;
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•
|
making it more difficult for us to make payments on our indebtedness;
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•
|
restricting us from making strategic acquisitions or causing us to make non-strategic divestitures;
|
•
|
subjecting us to restrictive covenants that may limit our flexibility in operating our business; and
|
•
|
limiting our ability to obtain additional financing for working capital, capital expenditures, debt service requirements and general corporate or other purposes.
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•
|
pay substantial damages (potentially treble damages in the United States);
|
•
|
cease the manufacture, use or sale of the infringing products;
|
•
|
discontinue the use of the infringing processes;
|
•
|
expend significant resources to develop non-infringing processes; and
|
•
|
enter into licensing arrangements from the third party claiming infringement, which may not be available on commercially reasonable terms, or may not be available at all.
|
•
|
although we do not have a stockholder rights plan, these provisions allow us to authorize the issuance of undesignated preferred stock in connection with a stockholder rights plan or otherwise, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include super voting, special approval, dividend, or other rights or preferences superior to the rights of the holders of common stock;
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•
|
these provisions provide for a classified Board of Directors with staggered three-year terms;
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•
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these provisions require advance notice for nominations of directors by stockholders and for stockholders to include matters to be considered at our annual meetings;
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•
|
these provisions prohibit stockholder action by written consent from and after the date on which Invus, The Bishop Family Limited Partnership, or The Bishop Family Partnership, and their affiliates beneficially own, in the aggregate, less than 40% of our outstanding shares of common stock;
|
•
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these provisions provide for the removal of directors only for cause and only upon affirmative vote of holders of at least 66 2/3% of the shares of common stock entitled to vote generally in the election of directors if Invus, The Bishop Family Partnership and their affiliates beneficially own, in the aggregate, less than 40% of our outstanding shares of common stock; and
|
•
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these provisions require the amendment of certain provisions only by the affirmative vote of at least 66 2/3% of the shares of common stock entitled to vote generally in the election of directors if Invus, The Bishop Family Partnership and their affiliates beneficially own, in the aggregate, less than 40% of our outstanding shares of common stock.
|
Location
|
|
Approximate
Square Footage
|
|
Principal Use
|
|
Owned or Leased
|
Joplin, Missouri
|
|
200,000
|
|
Manufacturing
|
|
Leased, expires December 2027
|
|
|
215,000
|
|
Distribution/warehousing/office
|
|
Owned
|
Monroe, Ohio
|
|
390,000
|
|
Distribution/warehousing
|
|
Leased; expires December 2018
|
Bellevue, Nebraska
|
|
210,000
|
|
Distribution/warehousing
|
|
Leased; expires May 2025
|
Wilton, Connecticut
|
|
41,000
|
|
Corporate headquarters
|
|
Leased; expires June 2021
|
Phoenix, Arizona
|
|
8,600
|
|
Sales office
|
|
Leased; expires December 2018
|
|
|
Market Price
|
||||||
Fiscal Year Ended December 31, 2016
|
|
High
|
|
Low
|
||||
|
|
|
|
|
||||
Fourth Quarter
|
|
$
|
26.03
|
|
|
$
|
21.60
|
|
Third Quarter
|
|
27.50
|
|
|
23.16
|
|
||
Second Quarter
|
|
27.37
|
|
|
22.50
|
|
||
First Quarter
|
|
25.98
|
|
|
15.19
|
|
||
|
|
|
|
|
||||
Fiscal Year Ended December 31, 2015
|
|
|
|
|
||||
|
|
|
|
|
||||
Fourth Quarter
|
|
$
|
20.96
|
|
|
$
|
16.22
|
|
Third Quarter (from July 22, 2015)
|
|
28.80
|
|
|
17.61
|
|
||
|
|
|
|
|
|
Fiscal Year Ended December 31,
|
||||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
||||||||||
|
(dollars in thousands, except share and per share amounts)
|
||||||||||||||||||
Statements of Income Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net sales
|
$
|
1,149,778
|
|
|
$
|
1,027,447
|
|
|
$
|
917,760
|
|
|
$
|
719,509
|
|
|
$
|
522,999
|
|
Operating income
|
220,922
|
|
|
160,115
|
|
|
179,003
|
|
|
158,626
|
|
|
118,410
|
|
|||||
Interest expense
|
14,619
|
|
|
15,091
|
|
|
13,887
|
|
|
20,640
|
|
|
10,209
|
|
|||||
Loss on extinguishment of debt
|
—
|
|
|
—
|
|
|
—
|
|
|
15,918
|
|
|
—
|
|
|||||
Income before income taxes
|
206,808
|
|
|
145,318
|
|
|
165,289
|
|
|
122,193
|
|
|
108,353
|
|
|||||
Provision for income taxes
|
76,567
|
|
|
55,930
|
|
|
63,358
|
|
|
43,957
|
|
|
42,853
|
|
|||||
Net income
|
$
|
130,241
|
|
|
$
|
89,388
|
|
|
$
|
101,931
|
|
|
$
|
78,236
|
|
|
$
|
65,500
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic income per common share
|
$
|
0.66
|
|
|
$
|
0.46
|
|
|
$
|
0.52
|
|
|
$
|
0.40
|
|
|
$
|
0.34
|
|
Diluted income per common share
|
$
|
0.65
|
|
|
$
|
0.45
|
|
|
$
|
0.52
|
|
|
$
|
0.40
|
|
|
$
|
0.33
|
|
Dividends declared and paid per common share
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2.05
|
|
Basic weighted average shares
|
196,363,084
|
|
|
195,933,800
|
|
|
195,735,309
|
|
|
195,619,943
|
|
|
195,298,147
|
|
|||||
Diluted weighted average shares
|
199,348,707
|
|
|
198,047,453
|
|
|
197,852,932
|
|
|
196,559,084
|
|
|
195,707,975
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance Sheet Data (end of period):
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
292,656
|
|
|
$
|
224,253
|
|
|
$
|
95,788
|
|
|
$
|
42,874
|
|
|
$
|
45,770
|
|
Working capital (1)
|
386,346
|
|
|
286,483
|
|
|
202,243
|
|
|
114,622
|
|
|
87,148
|
|
|||||
Property, plant, and equipment, net
|
162,232
|
|
|
115,160
|
|
|
113,863
|
|
|
85,830
|
|
|
23,778
|
|
|||||
Total assets (2)
|
650,350
|
|
|
512,546
|
|
|
383,167
|
|
|
254,797
|
|
|
160,518
|
|
|||||
Total debt, including current maturities
|
383,137
|
|
|
387,097
|
|
|
391,057
|
|
|
395,017
|
|
|
392,395
|
|
|||||
Stockholders' equity (deficit)
|
146,338
|
|
|
9,281
|
|
|
(87,297
|
)
|
|
(191,085
|
)
|
|
(270,868
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Other Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Adjusted net income (3)
|
$
|
156,763
|
|
|
$
|
122,477
|
|
|
$
|
106,569
|
|
|
$
|
88,930
|
|
|
$
|
65,500
|
|
Adjusted basic net income per common share (3)
|
$
|
0.80
|
|
|
$
|
0.63
|
|
|
$
|
0.54
|
|
|
$
|
0.45
|
|
|
$
|
0.34
|
|
Adjusted diluted net income per common share (3)
|
$
|
0.79
|
|
|
$
|
0.62
|
|
|
$
|
0.54
|
|
|
$
|
0.45
|
|
|
$
|
0.33
|
|
EBITDA (4)
|
230,122
|
|
|
168,285
|
|
|
183,863
|
|
|
143,994
|
|
|
119,617
|
|
|||||
Adjusted EBITDA (4)
|
275,577
|
|
|
221,689
|
|
|
193,189
|
|
|
162,442
|
|
|
119,983
|
|
|||||
Depreciation and amortization
|
9,200
|
|
|
8,170
|
|
|
4,860
|
|
|
1,286
|
|
|
1,207
|
|
|||||
Capital expenditures
|
56,345
|
|
|
9,556
|
|
|
32,948
|
|
|
63,507
|
|
|
22,787
|
|
(1)
|
Working capital is defined as current assets, including cash and cash equivalents, minus current liabilities. As disclosed in “Recently Issued Accounting Pronouncements,” the Company elected to early adopt ASU 2015-17, “Balance Sheet Classification of Deferred Taxes,” as of the fourth quarter of fiscal 2015, utilizing retrospective application as permitted. Accordingly, working capital for prior years has been reclassified to conform to the new standard.
|
(2)
|
Total assets for the fiscal year ended December 31, 2014, has been reclassified to conform to the requirements of ASU 2015-17.
|
(3)
|
Adjusted net income represents net income plus loss on extinguishment of debt, public offering preparation costs, litigation expenses, and an unusual, non-recurring or one-time item (provision for legal settlement), net of tax. We present adjusted net income because our management uses it as a supplemental measure in assessing our operating performance, and we believe that it is helpful to investors, securities analysts and other interested parties, in evaluating the performance of companies in our industry. We also believe adjusted net income is useful to management and investors, securities analysts and other interested parties as a measure of our comparative operating performance from period to period. Adjusted net income is not a measurement of financial performance under GAAP. It should not be considered an alternative to net income as a measure of our operating performance or any other measure of performance derived in accordance with GAAP. In addition, adjusted net income should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Adjusted net income has limitations as an analytical tool, and you should not consider such measure either in isolation or as a substitute for analyzing our results as reported under GAAP. Our definition and calculation of adjusted net income is not necessarily comparable to other similarly titled measures used by other companies due to different methods of calculation.
Adjusted basic net income per common share is defined as adjusted net income divided by basic weighted average shares. Adjusted diluted net income per common share is defined as adjusted net income divided by diluted weighted average shares.
|
|
|
Fiscal Year Ended December 31, 2016
|
||||||||||
(dollars in thousands)
|
|
Pre-Tax
|
|
Tax Impact
|
|
After-Tax
|
||||||
|
|
|
|
|
|
|
||||||
Net income
|
|
$
|
206,808
|
|
|
$
|
76,567
|
|
|
$
|
130,241
|
|
Public offering preparation costs (3a)
|
|
2,132
|
|
|
—
|
|
|
2,132
|
|
|||
Litigation expenses (3b)
|
|
6,714
|
|
|
(2,484
|
)
|
|
4,230
|
|
|||
Litigation provision (3c)
|
|
32,000
|
|
|
(11,840
|
)
|
|
20,160
|
|
|||
Adjusted net income
|
|
$
|
247,654
|
|
|
$
|
(14,324
|
)
|
|
$
|
156,763
|
|
|
|
Fiscal Year Ended December 31, 2015
|
||||||||||
(dollars in thousands)
|
|
Pre-Tax
|
|
Tax Impact
|
|
After-Tax
|
||||||
|
|
|
|
|
|
|
||||||
Net income
|
|
$
|
145,318
|
|
|
$
|
55,930
|
|
|
$
|
89,388
|
|
Public offering preparation costs (3a)
|
|
8,513
|
|
|
(1,508
|
)
|
|
7,005
|
|
|||
Litigation expenses (3b)
|
|
10,071
|
|
|
(3,827
|
)
|
|
6,244
|
|
|||
Litigation provision (3c)
|
|
32,000
|
|
|
(12,160
|
)
|
|
19,840
|
|
|||
Adjusted net income
|
|
$
|
195,902
|
|
|
$
|
(17,495
|
)
|
|
$
|
122,477
|
|
|
|
Fiscal Year Ended December 31, 2014
|
||||||||||
(dollars in thousands)
|
|
Pre-Tax
|
|
Tax Impact
|
|
After-Tax
|
||||||
|
|
|
|
|
|
|
||||||
Net income
|
|
$
|
165,289
|
|
|
$
|
63,358
|
|
|
$
|
101,931
|
|
Public offering preparation costs (3a)
|
|
2,886
|
|
|
(1,109
|
)
|
|
1,777
|
|
|||
Litigation expenses (3b)
|
|
4,621
|
|
|
(1,760
|
)
|
|
2,861
|
|
|||
Adjusted net income
|
|
$
|
172,796
|
|
|
$
|
(2,869
|
)
|
|
$
|
106,569
|
|
|
|
Fiscal Year Ended December 31, 2013
|
||||||||||
(dollars in thousands)
|
|
Pre-Tax
|
|
Tax Impact
|
|
After-Tax
|
||||||
|
|
|
|
|
|
|
||||||
Net income
|
|
$
|
122,193
|
|
|
$
|
43,957
|
|
|
$
|
78,236
|
|
Loss on extinguishment of debt (3d)
|
|
15,918
|
|
|
(5,921
|
)
|
|
9,997
|
|
|||
Public offering preparation costs (3a)
|
|
1,110
|
|
|
(413
|
)
|
|
697
|
|
|||
Adjusted net income
|
|
$
|
139,221
|
|
|
$
|
(6,334
|
)
|
|
$
|
88,930
|
|
(3a)
|
Represents costs incurred in preparing for our public offerings and common stock issued to our employees.
|
(3b)
|
Represents costs primarily related to the litigation with Nestlé Purina.
|
(3c)
|
Represents provision related to the settlement agreements entered into in November 2016 and December 2015, respectively for our U.S. consumer class action and Nestlé Purina lawsuits. See Note 14 to our consolidated financial statements.
|
(3d)
|
Represents the loss on extinguishment of debt associated with the repricing of our senior secured credit facilities in December 2013.
|
(4)
|
EBITDA represents net income plus interest expense, less interest income and plus provision for income taxes and depreciation and amortization. Adjusted EBITDA represents EBITDA plus loss on extinguishment of debt, public offering preparation costs, litigation expenses, stock-based compensation and an unusual, non-recurring or one-time item (provision for legal settlements).
We present EBITDA and Adjusted EBITDA because our management uses these as supplemental measures in assessing our operating performance, and we believe they are helpful to investors, securities analysts and other interested parties, in evaluating the performance of companies in our industry. We also believe EBITDA and Adjusted EBITDA are useful to management and investors, securities analysts and other interested parties as measures of our comparative operating performance from period to period. EBITDA and Adjusted EBITDA are not measurements of financial performance under GAAP. They should not be considered as alternatives to cash flow from operating activities, as measures of liquidity, or as alternatives to net income as a measure of our operating performance or any other measures of performance derived in accordance with GAAP. In addition, EBITDA and Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider such measures either in isolation or as substitutes for analyzing our results as reported under GAAP. Our definitions and calculations of EBITDA and Adjusted EBITDA are not necessarily comparable to other similarly titled measures used by other companies due to different methods of calculation.
|
|
|
Fiscal Year Ended December 31,
|
||||||||||||||||||
(dollars in thousands)
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income
|
|
130,241
|
|
|
$
|
89,388
|
|
|
$
|
101,931
|
|
|
$
|
78,236
|
|
|
$
|
65,500
|
|
|
Interest expense
|
|
14,619
|
|
|
15,091
|
|
|
13,887
|
|
|
20,640
|
|
|
10,209
|
|
|||||
Interest income
|
|
(505
|
)
|
|
(294
|
)
|
|
(173
|
)
|
|
(125
|
)
|
|
(152
|
)
|
|||||
Provision for income taxes
|
|
76,567
|
|
|
55,930
|
|
|
63,358
|
|
|
43,957
|
|
|
42,853
|
|
|||||
Depreciation and amortization
|
|
9,200
|
|
|
8,170
|
|
|
4,860
|
|
|
1,286
|
|
|
1,207
|
|
|||||
EBITDA
|
|
$
|
230,122
|
|
|
$
|
168,285
|
|
|
$
|
183,863
|
|
|
$
|
143,994
|
|
|
$
|
119,617
|
|
Loss on extinguishment of debt (4a)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15,918
|
|
|
—
|
|
|||||
Public offering preparation costs (4b)
|
|
2,132
|
|
|
8,513
|
|
|
2,886
|
|
|
1,110
|
|
|
—
|
|
|||||
Litigation expenses (4c)
|
|
6,714
|
|
|
10,071
|
|
|
4,621
|
|
|
—
|
|
|
—
|
|
|||||
Provision for legal settlements (4d)
|
|
32,000
|
|
|
32,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Stock-based compensation (4e)
|
|
4,609
|
|
|
2,820
|
|
|
1,819
|
|
|
1,420
|
|
|
366
|
|
|||||
Adjusted EBITDA
|
|
$
|
275,577
|
|
|
$
|
221,689
|
|
|
$
|
193,189
|
|
|
$
|
162,442
|
|
|
$
|
119,983
|
|
(4a)
|
Represents the loss on extinguishment of debt associated with the repricing of our senior secured credit facilities in December 2013. See Note 5 to our audited consolidated financial statements.
|
(4b)
|
Represents costs incurred in preparing for our public offerings and common stock issued to our employees.
|
(4c)
|
Represents costs primarily related to the litigation with Nestlé Purina.
|
(4d)
|
Represents provisions related to the settlement agreements entered into in December 2015 and November 2016 for our U.S. consumer class action and Nestlé Purina lawsuits. See Note 14 to our consolidated financial statements.
|
(4e)
|
Represents non-cash, stock-based compensation expense
|
•
|
continued humanization of pets – more pet parents consider their pets to be a family member, driving demand for more premium and specialized pet foods;
|
•
|
strong health and wellness trends crossing over from human foods – there is increased focus on pets consuming high-quality, natural foods, as evidenced by the growth in the Wholesome Natural market segment; and
|
•
|
growth of the specialty channels – the specialty channels have been growing faster than the FDM channel as pet parents are attracted to the variety, premium assortment and tailored shopping experience offered by retailers in specialty channels, including eCommerce.
|
•
|
the pet food industry's continued ability to innovate and meet pet parents' future needs;
|
•
|
increased promotional activity in the pet food industry;
|
•
|
despite experiencing significant growth over the past 10 years, national pet superstores recently have been experiencing reduced foot traffic and increased competition from other channels including eCommerce;
|
•
|
a challenging economic climate, which may impact spending on pets; and
|
•
|
new or increased regulatory requirements and scrutiny, including increased oversight by the FDA and the implementation of the Food Safety Modernization Act.
|
•
|
our increased availability to a greater proportion of pet parents as we have expanded our distribution to other retailers in the specialty channels including farm and feed stores and eCommerce retailers;
|
•
|
our continued investment in our highly-effective marketing and brand-building; and
|
•
|
our continued innovation, including the expansion of existing product lines, the introduction of new product types and the introduction of new product lines that are tailored to meet evolving consumer preferences and the needs of different pets. The revenue per pound of new products that we introduce across our product lines is typically higher than the average revenue per pound of existing products in our portfolio due to their more specialized and higher cost formulas.
|
•
|
our ability to introduce new product offerings that will gain broad market acceptance;
|
•
|
reduced traffic trends at national pet superstores;
|
•
|
competitive threats from other pet foods companies;
|
•
|
our ability to pass along increases in commodity costs to our customers and ultimately to
|
•
|
reduced customer and consumer demand for our products due to a recession, financial and credit market disruptions, or other global economic downturns.
|
|
Fiscal Year Ended December 31,
|
|
% of Net Sales
|
|||||||||||||||||
(dollars in thousands)
|
2016
|
|
2015
|
|
2014
|
|
2016
|
|
2015
|
|
2014
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Net sales
|
$
|
1,149,778
|
|
|
$
|
1,027,447
|
|
|
$
|
917,760
|
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
Cost of sales
|
634,095
|
|
|
608,616
|
|
|
550,893
|
|
|
55.1
|
%
|
|
59.2
|
%
|
|
60.0
|
%
|
|||
Gross profit
|
515,683
|
|
|
418,831
|
|
|
366,867
|
|
|
44.9
|
%
|
|
40.8
|
%
|
|
40.0
|
%
|
|||
Selling, general, and administrative expenses
|
262,761
|
|
|
226,716
|
|
|
187,864
|
|
|
22.9
|
%
|
|
22.1
|
%
|
|
20.5
|
%
|
|||
Provision for legal settlement
|
32,000
|
|
|
32,000
|
|
|
—
|
|
|
2.8
|
%
|
|
3.1
|
%
|
|
—
|
%
|
|||
Operating income
|
220,922
|
|
|
160,115
|
|
|
179,003
|
|
|
19.2
|
%
|
|
15.6
|
%
|
|
19.5
|
%
|
|||
Interest expense
|
14,619
|
|
|
15,091
|
|
|
13,887
|
|
|
1.3
|
%
|
|
1.5
|
%
|
|
1.5
|
%
|
|||
Interest income
|
(505
|
)
|
|
(294
|
)
|
|
(173
|
)
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|||
Income before income taxes
|
206,808
|
|
|
145,318
|
|
|
165,289
|
|
|
18.0
|
%
|
|
14.1
|
%
|
|
18.0
|
%
|
|||
Provision for income taxes
|
76,567
|
|
|
55,930
|
|
|
63,358
|
|
|
6.7
|
%
|
|
5.4
|
%
|
|
6.9
|
%
|
|||
Net income
|
$
|
130,241
|
|
|
$
|
89,388
|
|
|
$
|
101,931
|
|
|
11.3
|
%
|
|
8.7
|
%
|
|
11.1
|
%
|
Basic net income per common share
|
$
|
0.66
|
|
|
$
|
0.46
|
|
|
$
|
0.52
|
|
|
|
|
|
|
|
|||
Diluted net income per common share
|
$
|
0.65
|
|
|
$
|
0.45
|
|
|
$
|
0.52
|
|
|
|
|
|
|
|
•
|
$19.9 million of incremental expense related to ongoing investment in advertising and marketing ($7.7 million) consistent with our strategy to invest in our brand and product lines and investments made in strategic initiatives ($12.2 million); and
|
•
|
$11.1 million of incremental expense related to the initial public offering ($5.6 million) and the Nestlé Purina litigation ($5.5 million).
|
•
|
a pledge of 100% of the capital stock of the borrower and 100% of the equity interests directly held by the borrower and each guarantor in any wholly-owned material subsidiary of the borrower or any guarantor (which pledge, in the case of any non-U.S. subsidiary of a U.S. subsidiary, will
|
•
|
a security interest in, and mortgages on, substantially all tangible and intangible assets of the borrower and each guarantor, subject to certain exceptions.
|
|
Payments Due by Period
|
||||||||||||||||||
(dollars in thousands)
|
Total
|
|
Less Than 1 Year
|
|
1-3 Years
|
|
3-5 Years
|
|
More than 5 Years
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Long-term debt (1)
|
$
|
383,137
|
|
|
$
|
3,960
|
|
|
$
|
379,177
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest on debt (2)
|
37,087
|
|
|
14,357
|
|
|
22,730
|
|
|
—
|
|
|
—
|
|
|||||
Operating lease obligations
|
26,001
|
|
|
5,868
|
|
|
9,395
|
|
|
5,272
|
|
|
5,466
|
|
|||||
Capital lease obligations
|
161
|
|
|
58
|
|
|
103
|
|
|
—
|
|
|
—
|
|
|||||
Finished goods minimum purchase obligations (3)
|
32,991
|
|
|
18,170
|
|
|
14,821
|
|
|
—
|
|
|
—
|
|
|||||
Raw material purchase obligations
|
321,842
|
|
|
314,941
|
|
|
6,901
|
|
|
—
|
|
|
—
|
|
|||||
Total contractual obligations
|
$
|
801,218
|
|
|
$
|
357,353
|
|
|
$
|
433,127
|
|
|
$
|
5,272
|
|
|
$
|
5,466
|
|
|
|
|
Page No.
|
|
December 31,
2016 |
|
December 31,
2015 |
||||
|
|
|
|
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
292,656
|
|
|
$
|
224,253
|
|
Receivables, net
|
115,446
|
|
|
80,103
|
|
||
Inventories
|
70,941
|
|
|
83,482
|
|
||
Prepaid expenses and other current assets
|
6,130
|
|
|
4,492
|
|
||
Total current assets
|
485,173
|
|
|
392,330
|
|
||
|
|
|
|
||||
Restricted cash
|
781
|
|
|
473
|
|
||
Property, plant, and equipment, net
|
162,232
|
|
|
115,160
|
|
||
Deferred income taxes
|
1,311
|
|
|
3,907
|
|
||
Other assets
|
853
|
|
|
676
|
|
||
Total assets
|
$
|
650,350
|
|
|
$
|
512,546
|
|
|
|
|
|
||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Current maturities of long-term debt
|
$
|
3,960
|
|
|
$
|
3,960
|
|
Accounts payable
|
35,238
|
|
|
31,428
|
|
||
Other current liabilities
|
59,629
|
|
|
70,459
|
|
||
Total current liabilities
|
98,827
|
|
|
105,847
|
|
||
|
|
|
|
||||
Long-term debt
|
379,177
|
|
|
383,137
|
|
||
Deferred income taxes
|
12,660
|
|
|
3,268
|
|
||
Other long-term liabilities
|
13,348
|
|
|
11,013
|
|
||
Total liabilities
|
504,012
|
|
|
503,265
|
|
||
|
|
|
|
||||
Commitments and contingencies
|
|
|
|
||||
Stockholders' equity:
|
|
|
|
||||
Preferred stock; $0.01 par value; 150,000,000 shares authorized; none issued or outstanding at December 31, 2016 and December 31, 2015
|
—
|
|
|
—
|
|
||
Common stock, voting; $0.01 par value; 1,500,000,000 shares authorized; 196,524,010 and 196,216,596 shares issued and outstanding at December 31, 2016 and December 31, 2015, respectively
|
1,965
|
|
|
1,962
|
|
||
Additional paid-in capital
|
71,420
|
|
|
64,899
|
|
||
Retained earnings (accumulated deficit)
|
72,692
|
|
|
(57,549
|
)
|
||
Accumulated other comprehensive income (loss)
|
261
|
|
|
(31
|
)
|
||
Total stockholders' equity
|
146,338
|
|
|
9,281
|
|
||
Total liabilities and stockholders' equity
|
$
|
650,350
|
|
|
$
|
512,546
|
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
|
|
|
|
|
||||||
Net sales
|
$
|
1,149,778
|
|
|
$
|
1,027,447
|
|
|
$
|
917,760
|
|
Cost of sales
|
634,095
|
|
|
608,616
|
|
|
550,893
|
|
|||
Gross profit
|
515,683
|
|
|
418,831
|
|
|
366,867
|
|
|||
Selling, general, and administrative expenses
|
262,761
|
|
|
226,716
|
|
|
187,864
|
|
|||
Provision for legal settlement
|
32,000
|
|
|
32,000
|
|
|
—
|
|
|||
Operating income
|
220,922
|
|
|
160,115
|
|
|
179,003
|
|
|||
Interest expense
|
14,619
|
|
|
15,091
|
|
|
13,887
|
|
|||
Interest income
|
(505
|
)
|
|
(294
|
)
|
|
(173
|
)
|
|||
Income before income taxes
|
206,808
|
|
|
145,318
|
|
|
165,289
|
|
|||
Provision for income taxes
|
76,567
|
|
|
55,930
|
|
|
63,358
|
|
|||
Net income
|
$
|
130,241
|
|
|
$
|
89,388
|
|
|
$
|
101,931
|
|
|
|
|
|
|
|
||||||
Basic net income per common share
|
$
|
0.66
|
|
|
$
|
0.46
|
|
|
$
|
0.52
|
|
Diluted net income per common share
|
$
|
0.65
|
|
|
$
|
0.45
|
|
|
$
|
0.52
|
|
Basic weighted average shares
|
196,363,084
|
|
|
195,933,800
|
|
|
195,735,309
|
|
|||
Diluted weighted average shares
|
199,348,746
|
|
|
198,047,453
|
|
|
197,852,932
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2016
|
|
2015
|
|
2014
|
||||||
Net income
|
|
$
|
130,241
|
|
|
$
|
89,388
|
|
|
$
|
101,931
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
||||||
Foreign currency translation adjustment
|
|
292
|
|
|
(31
|
)
|
|
—
|
|
|||
Other comprehensive income (loss), before tax
|
|
292
|
|
|
(31
|
)
|
|
—
|
|
|||
Income tax expense on other comprehensive income (loss)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Other comprehensive income (loss), net of tax
|
|
292
|
|
|
(31
|
)
|
|
—
|
|
|||
Comprehensive income
|
|
$
|
130,533
|
|
|
$
|
89,357
|
|
|
$
|
101,931
|
|
|
Common shares outstanding
|
|
Common stock
|
|
Additional paid-in capital
|
|
(Accumulated deficit) retained earnings
|
|
Accumulated other comprehensive income (loss)
|
|
Total
|
|||||||||||
Balance at December 31, 2013
|
195,720,894
|
|
|
$
|
1,957
|
|
|
$
|
55,826
|
|
|
$
|
(248,868
|
)
|
|
$
|
—
|
|
|
$
|
(191,085
|
)
|
Exercise of stock options
|
22,260
|
|
|
—
|
|
|
37
|
|
|
—
|
|
|
—
|
|
|
37
|
|
|||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
1,820
|
|
|
—
|
|
|
—
|
|
|
1,820
|
|
|||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
101,931
|
|
|
—
|
|
|
101,931
|
|
|||||
Balance at December 31, 2014
|
195,743,154
|
|
|
$
|
1,957
|
|
|
$
|
57,683
|
|
|
$
|
(146,937
|
)
|
|
$
|
—
|
|
|
$
|
(87,297
|
)
|
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(31
|
)
|
|
(31
|
)
|
|||||
Exercise of stock options
|
396,010
|
|
|
5
|
|
|
2,246
|
|
|
—
|
|
|
—
|
|
|
2,251
|
|
|||||
Income tax benefit from exercise of stock options
|
—
|
|
|
—
|
|
|
1,536
|
|
|
—
|
|
|
—
|
|
|
1,536
|
|
|||||
Issuance of restricted stock
|
46,750
|
|
|
—
|
|
|
935
|
|
|
—
|
|
|
—
|
|
|
935
|
|
|||||
Issuance of common stock
|
30,682
|
|
|
—
|
|
|
614
|
|
|
—
|
|
|
—
|
|
|
614
|
|
|||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
1,885
|
|
|
—
|
|
|
—
|
|
|
1,885
|
|
|||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
89,388
|
|
|
—
|
|
|
89,388
|
|
|||||
Balance at December 31, 2015
|
196,216,596
|
|
|
$
|
1,962
|
|
|
$
|
64,899
|
|
|
$
|
(57,549
|
)
|
|
$
|
(31
|
)
|
|
$
|
9,281
|
|
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
292
|
|
|
292
|
|
|||||
Exercise of stock options
|
275,543
|
|
|
3
|
|
|
1,912
|
|
|
—
|
|
|
—
|
|
|
1,915
|
|
|||||
Issuance of restricted stock awards
|
31,871
|
|
|
—
|
|
|
814
|
|
|
—
|
|
|
—
|
|
|
814
|
|
|||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
3,795
|
|
|
—
|
|
|
—
|
|
|
3,795
|
|
|||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
130,241
|
|
|
—
|
|
|
130,241
|
|
|||||
Balance at December 31, 2016
|
196,524,010
|
|
|
$
|
1,965
|
|
|
$
|
71,420
|
|
|
$
|
72,692
|
|
|
$
|
261
|
|
|
$
|
146,338
|
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net income
|
$
|
130,241
|
|
|
$
|
89,388
|
|
|
$
|
101,931
|
|
Adjustments to reconcile net income to net cash provided
|
|
|
|
|
|
||||||
by operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
9,200
|
|
|
8,170
|
|
|
4,860
|
|
|||
Amortization of debt issuance costs
|
122
|
|
|
122
|
|
|
122
|
|
|||
Stock-based compensation
|
4,609
|
|
|
3,434
|
|
|
1,820
|
|
|||
Deferred compensation
|
—
|
|
|
19
|
|
|
115
|
|
|||
Loss on disposal of fixed assets
|
49
|
|
|
89
|
|
|
55
|
|
|||
Deferred income taxes
|
11,988
|
|
|
(12,071
|
)
|
|
14,835
|
|
|||
Income tax benefit from exercise of stock options
|
—
|
|
|
(1,536
|
)
|
|
—
|
|
|||
Provision for class action legal settlement
|
—
|
|
|
32,000
|
|
|
—
|
|
|||
Payment for class action legal settlement
|
(32,000
|
)
|
|
—
|
|
|
—
|
|
|||
Effect of changes in operating assets and liabilities:
|
|
|
|
|
|
||||||
Receivables
|
(35,509
|
)
|
|
(1,487
|
)
|
|
(26,245
|
)
|
|||
Inventories
|
12,493
|
|
|
5,140
|
|
|
(20,746
|
)
|
|||
Prepaid expenses and other assets
|
(2,109
|
)
|
|
(1,189
|
)
|
|
(1,917
|
)
|
|||
Accounts payable
|
4,563
|
|
|
(1,733
|
)
|
|
9,910
|
|
|||
Other liabilities
|
23,596
|
|
|
17,873
|
|
|
5,395
|
|
|||
Net cash provided by operating activities
|
127,243
|
|
|
138,219
|
|
|
90,135
|
|
|||
|
|
|
|
|
|
||||||
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Capital expenditures
|
(56,345
|
)
|
|
(9,556
|
)
|
|
(32,948
|
)
|
|||
Restricted cash
|
(308
|
)
|
|
—
|
|
|
(350
|
)
|
|||
Proceeds from the sale of fixed assets
|
15
|
|
|
—
|
|
|
—
|
|
|||
Net cash used in investing activities
|
(56,638
|
)
|
|
(9,556
|
)
|
|
(33,298
|
)
|
|||
|
|
|
|
|
|
||||||
Cash flows from financing activities:
|
|
|
|
|
|
||||||
Principal payments on long-term debt
|
(3,960
|
)
|
|
(3,960
|
)
|
|
(3,960
|
)
|
|||
Income tax benefit from exercise of stock options
|
—
|
|
|
1,536
|
|
|
—
|
|
|||
Proceeds from exercise of stock options
|
1,915
|
|
|
2,251
|
|
|
37
|
|
|||
Net cash used in financing activities
|
(2,045
|
)
|
|
(173
|
)
|
|
(3,923
|
)
|
|||
|
|
|
|
|
|
||||||
Effect of exchange rate changes on cash and cash equivalents
|
(157
|
)
|
|
(25
|
)
|
|
—
|
|
|||
Net increase in cash and cash equivalents
|
68,403
|
|
|
128,465
|
|
|
52,914
|
|
|||
Cash and cash equivalents at beginning of period
|
224,253
|
|
|
95,788
|
|
|
42,874
|
|
|||
Cash and cash equivalents at end of period
|
$
|
292,656
|
|
|
$
|
224,253
|
|
|
$
|
95,788
|
|
(dollars in thousands)
|
2016
|
|
2015
|
||||
Trade receivables, net
|
$
|
110,873
|
|
|
$
|
66,648
|
|
Other receivables
|
4,573
|
|
|
13,455
|
|
||
Total
|
$
|
115,446
|
|
|
$
|
80,103
|
|
(dollars in thousands)
|
2016
|
|
2015
|
||||
Finished goods
|
$
|
67,187
|
|
|
$
|
76,987
|
|
Work in process
|
286
|
|
|
352
|
|
||
Raw materials
|
2,346
|
|
|
2,583
|
|
||
Packaging and supplies
|
1,122
|
|
|
3,560
|
|
||
Total
|
$
|
70,941
|
|
|
$
|
83,482
|
|
(dollars in thousands)
|
2016
|
|
2015
|
||||
Buildings
|
59,314
|
|
|
59,315
|
|
||
Machinery and equipment
|
49,079
|
|
|
47,234
|
|
||
Computer software
|
14,849
|
|
|
11,641
|
|
||
Computer equipment
|
4,599
|
|
|
4,055
|
|
||
Furniture and fixtures
|
1,772
|
|
|
1,585
|
|
||
Leasehold improvements
|
1,477
|
|
|
1,413
|
|
||
Land improvements
|
493
|
|
|
493
|
|
||
Land
|
401
|
|
|
346
|
|
||
Buildings improvements
|
189
|
|
|
86
|
|
||
Construction in progress
|
53,891
|
|
|
3,673
|
|
||
|
186,064
|
|
|
129,841
|
|
||
Accumulated depreciation and amortization
|
(23,832
|
)
|
|
(14,681
|
)
|
||
Total
|
$
|
162,232
|
|
|
$
|
115,160
|
|
(dollars in thousands)
|
2016
|
|
2015
|
||||
Term loan
|
$
|
383,137
|
|
|
$
|
387,097
|
|
Less current maturities
|
(3,960
|
)
|
|
(3,960
|
)
|
||
Total long-term debt
|
$
|
379,177
|
|
|
$
|
383,137
|
|
(dollars in thousands)
|
2016
|
|
2015
|
||||
Accrued bonuses
|
$
|
12,951
|
|
|
$
|
9,727
|
|
Trade promotions
|
18,658
|
|
|
14,521
|
|
||
Deferred compensation - current portion
|
—
|
|
|
677
|
|
||
Accrued legal settlement
|
—
|
|
|
32,000
|
|
||
Accrued inventory in transit
|
5,278
|
|
|
1,098
|
|
||
Accrued media
|
10,109
|
|
|
1,779
|
|
||
Other current liabilities
|
12,633
|
|
|
10,657
|
|
||
Total
|
$
|
59,629
|
|
|
$
|
70,459
|
|
|
For the years ended
|
||||||||||
(dollars in thousands)
|
December 31,
2016 |
|
December 31,
2015 |
|
December 31,
2014 |
||||||
Current tax provision:
|
|
|
|
|
|
||||||
Federal
|
$
|
57,605
|
|
|
$
|
60,826
|
|
|
$
|
39,576
|
|
State
|
6,933
|
|
|
7,164
|
|
|
8,947
|
|
|||
Foreign
|
41
|
|
|
11
|
|
|
—
|
|
|||
Total current provision
|
64,579
|
|
|
68,001
|
|
|
48,523
|
|
|||
|
|
|
|
|
|
||||||
Deferred tax provision:
|
|
|
|
|
|
||||||
Federal
|
9,391
|
|
|
(9,855
|
)
|
|
16,037
|
|
|||
State
|
2,644
|
|
|
(2,216
|
)
|
|
(1,202
|
)
|
|||
Foreign
|
(47
|
)
|
|
—
|
|
|
—
|
|
|||
Total deferred (benefit) provision
|
11,988
|
|
|
(12,071
|
)
|
|
14,835
|
|
|||
Total provision
|
$
|
76,567
|
|
|
$
|
55,930
|
|
|
$
|
63,358
|
|
|
For the years ended
|
||||||||||
|
December 31,
2016 |
|
December 31,
2015 |
|
December 31,
2014 |
||||||
|
|
|
|
|
|
||||||
United States
|
$
|
211,419
|
|
|
$
|
147,427
|
|
|
$
|
165,289
|
|
Foreign
|
(4,611
|
)
|
|
(2,109
|
)
|
|
—
|
|
|||
Total income before income taxes
|
$
|
206,808
|
|
|
$
|
145,318
|
|
|
$
|
165,289
|
|
|
For the years ended
|
|||||||
|
December 31,
2016 |
|
December 31,
2015 |
|
December 31,
2014 |
|||
|
|
|
|
|
|
|||
Federal statutory income tax rate
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
State income taxes, net of federal income tax benefit
|
3.3
|
|
|
2.5
|
|
|
2.1
|
|
Non-deductible expenses
|
0.7
|
|
|
2.0
|
|
|
0.3
|
|
Domestic manufacturing deduction
|
(1.4
|
)
|
|
(1.3
|
)
|
|
—
|
|
Unrecognized tax benefits
|
0.5
|
|
|
0.8
|
|
|
1.3
|
|
Valuation allowance
|
0.5
|
|
|
0.5
|
|
|
—
|
|
Other
|
(1.6
|
)
|
|
(1.0
|
)
|
|
(0.4
|
)
|
Total
|
37.0
|
%
|
|
38.5
|
%
|
|
38.3
|
%
|
(dollars in thousands)
|
December 31,
2016 |
|
December 31,
2015 |
||||
Deferred tax assets:
|
|
||||||
Inventories
|
$
|
1,440
|
|
|
$
|
1,228
|
|
Accrued liabilities
|
413
|
|
|
12,491
|
|
||
Stock-based compensation
|
2,544
|
|
|
1,378
|
|
||
Long-term incentive plan
|
1,600
|
|
|
834
|
|
||
State net operating loss carryforwards
|
1,509
|
|
|
2,152
|
|
||
Foreign net operating loss carryforwards
|
1,380
|
|
|
254
|
|
||
State tax credits
|
1,447
|
|
|
1,826
|
|
||
Federal benefit related to uncertain tax positions
|
2,724
|
|
|
2,697
|
|
||
Other
|
1,057
|
|
|
755
|
|
||
Deferred tax assets, gross
|
14,114
|
|
|
23,615
|
|
||
Valuation allowance
|
(1,772
|
)
|
|
(782
|
)
|
||
Total deferred tax assets, net
|
12,342
|
|
|
22,833
|
|
||
|
|
|
|
||||
Deferred tax liabilities:
|
|
|
|
||||
Property, plant, and equipment
|
(22,173
|
)
|
|
(20,441
|
)
|
||
Other
|
(1,518
|
)
|
|
(1,753
|
)
|
||
Total deferred tax liabilities
|
(23,691
|
)
|
|
(22,194
|
)
|
||
|
|
|
|
||||
Net deferred tax (liabilities) assets
|
$
|
(11,349
|
)
|
|
$
|
639
|
|
|
For the years ended
|
||||||||||
|
December 31,
2016 |
|
December 31,
2015 |
|
December 31,
2014 |
||||||
|
|
|
|
|
|
||||||
Volatility
|
32.58
|
%
|
|
23.85
|
%
|
|
32.84
|
%
|
|||
Risk-free interest rate
|
1.23
|
%
|
|
1.88
|
%
|
|
2.16
|
%
|
|||
Expected term (years)
|
5
|
|
|
6.5
|
|
|
6.5
|
|
|||
Dividend yield
|
—
|
|
|
—
|
|
|
—
|
|
|||
Grant-date fair value
|
$
|
7.81
|
|
|
$
|
5.74
|
|
|
$
|
5.15
|
|
|
RSAs
|
|
RSUs
|
||||||||||
|
Number of
Shares |
|
Weighted Average Grant Date Fair Value
|
|
Number of
Shares |
|
Weighted Average Grant Date Fair Value
|
||||||
Outstanding at December 31, 2015
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
Granted
|
31,871
|
|
|
$
|
25.57
|
|
|
87,203
|
|
|
$
|
25.48
|
|
Vested
|
(31,871
|
)
|
|
$
|
25.57
|
|
|
—
|
|
|
$
|
—
|
|
Forfeited
|
—
|
|
|
$
|
—
|
|
|
(25,342
|
)
|
|
$
|
25.57
|
|
Outstanding at December 31, 2016
|
—
|
|
|
$
|
—
|
|
|
61,861
|
|
|
$
|
25.45
|
|
|
|
Twelve months ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
|||||||
(dollars in thousands, except for share data)
|
|
|
|
|
|
|
||||||
Net income
|
|
$
|
130,241
|
|
|
$
|
89,388
|
|
|
$
|
101,931
|
|
|
|
|
|
|
|
|
||||||
Basic weighted average number of shares outstanding
|
|
196,363,084
|
|
|
195,933,800
|
|
|
195,735,309
|
|
|||
Dilutive effect of stock options and RSUs
|
|
2,985,662
|
|
|
2,113,653
|
|
|
2,117,623
|
|
|||
Diluted weighted average number of shares outstanding
|
|
199,348,746
|
|
|
198,047,453
|
|
|
197,852,932
|
|
|||
|
|
|
|
|
|
|
||||||
Basic net income per common share
|
|
$
|
0.66
|
|
|
$
|
0.46
|
|
|
$
|
0.52
|
|
Diluted net income per common share
|
|
$
|
0.65
|
|
|
$
|
0.45
|
|
|
$
|
0.52
|
|
Anti-dilutive shares excluded from diluted earnings per share computation
|
|
275,194
|
|
|
49,795
|
|
|
—
|
|
|
Total
|
|
Less Than 1 Year
|
|
1-3 Years
|
|
3-5 Years
|
|
More Than 5 Years
|
||||||||||
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
||||||||||
Finished goods minimum purchase obligations
|
$
|
32,991
|
|
|
$
|
18,170
|
|
|
$
|
14,821
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Raw material purchase obligations
|
321,842
|
|
|
314,941
|
|
|
6,901
|
|
|
—
|
|
|
—
|
|
|||||
Total contractual obligations
|
$
|
354,833
|
|
|
$
|
333,111
|
|
|
$
|
21,722
|
|
|
$
|
—
|
|
|
$
|
—
|
|
(dollars in thousands)
|
Quarter 1
|
|
Quarter 2
|
|
Quarter 3
|
|
Quarter 4
|
||||||||
2016:
|
|
|
|
|
|
|
|
||||||||
Net sales
|
$
|
279,836
|
|
|
$
|
286,850
|
|
|
$
|
287,996
|
|
|
$
|
295,096
|
|
Gross profit
|
123,232
|
|
|
127,303
|
|
|
133,209
|
|
|
131,939
|
|
||||
Selling, general, and administrative expenses
|
59,756
|
|
|
65,600
|
|
|
65,493
|
|
|
71,912
|
|
||||
Operating income
|
63,476
|
|
|
61,703
|
|
|
35,716
|
|
|
60,027
|
|
||||
Net income
|
37,333
|
|
|
36,624
|
|
|
21,482
|
|
|
34,802
|
|
||||
Basic net income per common share
|
$
|
0.19
|
|
|
$
|
0.19
|
|
|
$
|
0.11
|
|
|
$
|
0.18
|
|
Diluted net income per common share
|
$
|
0.19
|
|
|
$
|
0.18
|
|
|
$
|
0.11
|
|
|
$
|
0.17
|
|
Basic weighted average shares
|
196,217,311
|
|
|
196,270,119
|
|
|
196,445,684
|
|
|
196,516,632
|
|
||||
Diluted weighted average shares
|
198,160,465
|
|
|
198,441,315
|
|
|
199,452,308
|
|
|
199,446,875
|
|
||||
|
|
|
|
|
|
|
|
||||||||
2015:
|
|
|
|
|
|
|
|
||||||||
Net sales
|
$
|
248,774
|
|
|
$
|
253,998
|
|
|
$
|
259,437
|
|
|
$
|
265,238
|
|
Gross profit
|
99,534
|
|
|
99,795
|
|
|
108,285
|
|
|
111,217
|
|
||||
Selling, general, and administrative expenses
|
47,399
|
|
|
59,660
|
|
|
58,664
|
|
|
60,993
|
|
||||
Operating income
|
52,135
|
|
|
40,135
|
|
|
49,621
|
|
|
18,224
|
|
||||
Net income
|
$
|
30,046
|
|
|
$
|
22,638
|
|
|
$
|
27,066
|
|
|
$
|
9,638
|
|
Basic net income per common share
|
$
|
0.15
|
|
|
$
|
0.12
|
|
|
$
|
0.14
|
|
|
$
|
0.05
|
|
Diluted net income per common share
|
$
|
0.15
|
|
|
$
|
0.11
|
|
|
$
|
0.14
|
|
|
$
|
0.05
|
|
Basic weighted average shares
|
195,745,670
|
|
|
195,747,954
|
|
|
196,062,348
|
|
|
196,173,169
|
|
||||
Diluted weighted average shares
|
197,773,850
|
|
|
197,709,082
|
|
|
198,254,808
|
|
|
198,076,031
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|||||
Plan Category
|
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights
|
|
Weighted Average
Exercise Price of
Outstanding Options,
Warrants and Rights
|
|
Number of Securities
Remaining Available
for Future Issuance Under Equity
Compensation Plans
(Excluding Securities
Reflected in Column (a))
|
|||||
Equity compensation plans approved by security holders:
|
|
|
|
|
|
|||||
Amended and Restated 2012 Stock Purchase and Option Plan of Blue Buffalo Pet Products, Inc.
|
4,004,483
|
|
(1
|
)
|
$
|
6.11
|
|
|
98,275
|
|
Blue Buffalo Pet Products, Inc. 2015 Omnibus Incentive Plan
|
305,534
|
|
(2
|
)
|
$
|
25.26
|
|
|
8,015,845
|
|
Equity compensation plans not approved by security holders
|
—
|
|
|
N/A
|
|
|
—
|
|
||
Total
|
4,310,017
|
|
|
|
|
8,114,120
|
|
|
|
|
Page No.
|
|
(A)
|
1.
|
Audited Consolidated Financial Statements
|
|
|
|
|
|
||
|
|
|
||
|
|
|
||
|
|
|
||
|
|
|
||
|
2.
|
Financial Statement Schedules: None
|
—
|
|
(B)
|
|
Exhibits:
|
|
|
|
Exhibit Number
|
|
Description of Exhibits
|
3.1
|
|
Amended and Restated Certificate of lncorporation of Blue Buffalo Pet Products, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on July 27, 2015).
|
3.2
|
|
Amended and Restated Bylaws of Blue Buffalo Pet Products, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on July 27, 2015).
|
10.1**
|
|
Amended and Restated Investor Rights Agreement, dated January 21, 2015, by and among the Registrant, certain stockholders party thereto and Invus, L.P. (incorporated by reference to Exhibit 10.1 to the Blue Buffalo Pet Products, Inc. Registration Statement on Form S-1 (file no. 333-204847) filed on June 10, 2015 (the "June 10, 2015 Form S-1")).
|
10.2†**
|
|
Form of Director and Officer Indemnification Agreement (incorporated by reference to Exhibit 10.2 to the June 10, 2015 Form S-1).
|
10.3†**
|
|
Offer Letter, dated September 12, 2012, between Michael Nathenson and Blue Buffalo (incorporated by reference to Exhibit 10.3 to the Blue Buffalo Pet Products, Inc. Registration Statement on Form S-1/A (file no. 333-204847) filed on July 8, 2015 (the "July 8, 2015 Form S-1/A")).
|
10.4†**
|
|
Offer Letter, dated October 1, 2012, between Kurt T. Schmidt and Blue Buffalo (incorporated by reference to Exhibit 10.4 to the July 8, 2015 Form S-1/A).
|
10.4A†**
|
|
Retirement and Separation Agreement, dated November 9, 2016, between Blue Buffalo Pet Products, Inc. and Kurt Schmidt (incorporated by reference to Company’s Current Report on Form 8-K filed November 10, 2016).
|
10.5†**
|
|
Amended and Restated 2012 Stock Purchase and Option Plan of Blue Buffalo Pet Products, Inc. (incorporated by reference to Exhibit 10.5 to the June 10, 2015 Form S-1).
|
10.6†**
|
|
Form of 2012 Stock Purchase and Option Plan of Blue Buffalo Pet Products, Inc. Incentive Stock Option Agreement (incorporated by reference to Exhibit 10.6 to the June 10, 2015 Form S-1).
|
10.7†**
|
|
Blue Buffalo Pet Products, Inc. 2015 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.7 to the July 8, 2015 Form S-1/A).
|
10.8†**
|
|
Form of Option Agreement under the Blue Buffalo Pet Products, Inc. 2015 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.8 to Annual Report on Form 10-K filed with the SEC on March 10, 2016).
|
10.9†**
|
|
Form of Restricted Stock Unit Agreement under the Blue Buffalo Pet Products, Inc. 2015 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K filed with the SEC on March 10, 2016).
|
10.10†**
|
|
Form of Restricted Stock Agreement under the Blue Buffalo Pet Products, Inc. 2015 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.10 to the July 8, 2015 Form S-1/A).
|
10.11†**
|
|
Form of Confidentiality, Intellectual Property Ownership and Non-Competition Agreement (incorporated by reference to Exhibit 10.11 to the Blue Buffalo Pet Products, Inc. Registration Statement on Form S-1/A (file no. 333-204847) filed on June 25, 2015 (the "June 25, 2015 Form S-1/A")).
|
10.12**
|
|
Credit Agreement dated August 8, 2012 among Blue Pet Products, Inc., Blue Buffalo Company, Ltd., the lenders party thereto and Citibank, N.A., as administrative agent, swingline lender and an issuing bank, Citigroup Global Markets Inc. and Morgan Stanley Senior Funding, Inc., as joint lead arrangers and joint bookrunners, and Morgan Stanley Senior Funding, Inc., as syndication agent (incorporated by reference to Exhibit 10.12 to the June 25, 2015 Form S-1/A).
|
10.13**
|
|
Collateral Agreement dated August 8, 2012 among Blue Pet Products, Inc., Blue Buffalo Company, Ltd., the other grantors party thereto and Citibank, N.A., as administrative agent (incorporated by reference to Exhibit 10.13 to the June 25, 2015 Form S-1/A).
|
10.14**
|
|
Guarantee Agreement dated August 8, 2012 among Blue Pet Products, Inc., the subsidiary guarantors identified therein and Citibank, N.A., as administrative agent (incorporated by reference to Exhibit 10.14 to the June 25, 2015 Form S-1/A).
|
10.15**
|
|
Amendment Agreement No. 1 dated December 6, 2012 among Blue Pet Products, Inc., Blue Buffalo Company, Ltd., the other loan parties party thereto, the existing lenders, Citibank, N.A., as administrative agent, Citigroup Global Markets Inc. and Morgan Stanley Senior Funding, Inc., as joint lead arrangers and the initial Incremental Term B-1 Lenders (incorporated by reference to Exhibit 10.15 to the June 25, 2015 Form S-1/A).
|
10.16**
|
|
Amendment Agreement No. 2 dated February 15, 2013 among Blue Pet Products, Inc., Blue Buffalo Company, Ltd., the other loan parties party thereto, the existing lenders, Citibank, N.A., as administrative agent, and the initial Additional Term B-2 Lenders (incorporated by reference to Exhibit 10.16 to the June 25, 2015 Form S-1/A).
|
10.17**
|
|
Amendment Agreement No. 3 dated February 15, 2013 among Blue Pet Products, Inc., Blue Buffalo Company, Ltd., the other loan parties party thereto, the revolving lenders and Citibank, N.A., as administrative agent (incorporated by reference to Exhibit 10.17 to the June 25, 2015 Form S-1/A).
|
10.18**
|
|
Amendment Agreement No. 4 dated December 9, 2013 among Blue Pet Products, Inc., Blue Buffalo Company, Ltd., the other loan parties party thereto, the existing lenders and Citibank, N.A., as administrative agent (incorporated by reference to Exhibit 10.18 to the June 25, 2015 Form S-1/A).
|
21.1
|
|
Subsidiaries of Blue Buffalo Pet Products, Inc.
|
23.1
|
|
Consent of Independent Registered Public Accounting Firm.
|
31.1
|
|
Certification of Periodic Report by Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2
|
|
Certification of Periodic Report by Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
|
32.1
|
|
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
101.INS
|
|
XBRL Instance Document (filed herewith).
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document (filed herewith).
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith).
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document (filed herewith).
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document (filed herewith).
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith).
|
|
|
|
**
|
|
Previously filed.
|
†
|
|
Identifies exhibits that consist of a management contract or compensatory plan or arrangement.
|
|
|
|
BLUE BUFFALO PET PRODUCTS, INC.
|
||
|
|
|
By:
|
|
/s/ William Bishop, Jr.
|
|
|
William Bishop, Jr.
|
|
|
Chief Executive Officer and President
|
/s/ William Bishop, Jr.
|
|
Chief Executive Officer, President, and Director
(Principal Executive Officer)
|
March 1, 2017
|
William Bishop, Jr.
|
|
Date
|
|
/s/ Michael Nathenson
|
|
Executive Vice President, Chief Financial Officer, and Treasurer
(Principal Financial Officer and Principal Accounting Officer)
|
March 1, 2017
|
Michael Nathenson
|
|
Date
|
|
/s/ William Bishop
|
|
Non-Executive Chairman of the Board and Director
|
March 1, 2017
|
William Bishop
|
|
Date
|
|
/s/ Raymond Debbane
|
|
Director
|
March 1, 2017
|
Raymond Debbane
|
|
Date
|
|
/s/ Philippe Amouyal
|
|
Director
|
March 1, 2017
|
Philippe Amouyal
|
|
Date
|
|
/s/ Evren Bilimer
|
|
Director
|
March 1, 2017
|
Evren Bilimer
|
|
Date
|
|
/s/ Aflalo Guimaraes
|
|
Director
|
March 1, 2017
|
Aflalo Guimaraes
|
|
Date
|
|
/s/ Michael A. Eck
|
|
Director
|
March 1, 2017
|
Michael A. Eck
|
|
Date
|
|
/s/ Frances Frei
|
|
Director
|
March 1, 2017
|
Frances Frei
|
|
Date
|
|
/s/ Amy Schulman
|
|
Director
|
March 1, 2017
|
Amy Schulman
|
|
Date
|
1 Year BLUE BUFFALO PET PRODUCTS, INC. Chart |
1 Month BLUE BUFFALO PET PRODUCTS, INC. Chart |
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