Inventure foods final

Nasdaq: SNAK

Current Price: $11.67

Recommendation

Key Statistics Consumer Goods Packaged Foods

Market Cap: 52 Week High: 52 Week Low: Trailing P/E: Forward P/E: P/S: EV/EBITDA: P/B:

Target Price: $18.97

COLLEGE OF BUSINESS UNIVERSITY OF SOUTH FLORIDA

Intrinsic Value: $14.60

April 23, 2015

Company Profile Inventure Foods, Inc., is one of the market leaders in distributing, processing, and marketing both healthy/natural and indulgent foods. The company operates in two segments: frozen products (63%) and snack products (37%). The majority of its sales come from healthy/natural products (81%), while the rest consists of indulgent specialty foods (19%).

BUY Sector: Industry:

USF

MUMA

Price Performance

$236 M

10.0%

$14.11 $9.60

0.0%

23.16 19.09 0.86 12.04 3.3

• Continued product innovation will keep its brands at the forefront of the industry

5

• Diverse distribution network with large customer base

-­‐1

• Strong portfolio of brand name foods

ar

5

Investment Thesis • Management’s priority on growing healthy/natural food segment

M

1 n-­‐

Ja

5.78% 16.11%

-­‐30.0%

4

ROA: ROE:

-­‐20.0%

v-­‐1

0.61

S&P 500

-­‐10.0%

No

Beta:

SNAK

Catalysts • Increased freezing capacity will continue to increase margins • Leveraging existing relationships with customers to introduce new products into existing channels • Continued healthy/organic trend will drive revenue growth in both frozen and snack segments Risks

• Frozen vegetables market will improve top line growth and decrease seasonality of revenues.

• Increasing commodity prices

• Growing demand for healthy snack alternatives

• Operates in a highly competitive market

• Increasing demand for smoothies and frozen fruit products

• Costco accounted for 26% of total revenue

• New products could lose consumer’s appeal

Analysts: Jason Reyes, Giovanni Burbano, & Haomin Chen

1

Nasdaq: SNAK

Current Price: $11.67

Target Price: $18.97

USF

MUMA

COLLEGE OF BUSINESS UNIVERSITY OF SOUTH FLORIDA

Intrinsic Value: $14.60

April 23, 2015

Product Offerings Inventure Foods tailors a majority of its products towards a healthy lifestyle. Its diverse portfolio of brands are seen in large major retailers including Wal-Mart, Kroger, Costco, SafeWay, and also small convenience stores. With a strong management team, the company has been able to continually innovate and create new niche products in the healthy foods segment. Its strategy of creating complementary products instead of competing products against its competitors allows it to complete directly with them despite its small size.

The company has operated in both the indulgent snack segment and the healthy/natural foods segment ever since the introduction of Boulder Canyon in 2000. When the current CEO, Terry McDaniel, joined the company in 2006 as COO only 2-3% of the revenues came from healthy/natural foods. However, through his leadership and guidance, this segment grew to 81% of today’s revenues and continues to be one of the main focuses and drivers for the company.

Frozen Products Frozen Fruit Inventure Foods provides a variety of fruit focused product lines that will continue to benefit from the increasing demand for frozen fruit as more consumers begin to recognize the benefits of fruit that is harvested at the peak of ripeness and frozen immediately to keep in the vitamins and minerals. The different varieties of frozen fruits are branded under the names Rader Farm’s, Willamette Valley Fruit, and Fresh Frozen.

In 2014, Rader Farms introduced the first-ever fortified whole frozen fruit product, Frozen PLUS Vitamins. This patent-pending technology enables their fruit to have 100% of the daily-recommended consumption of 6 key vitamins per serving. Rader Farms’ products are mostly sold in Costco stores. However, we expect the brand will continue penetrate new markets by leveraging its existing relations in other channels.

The acquisition of Willamette Valley Fruit increased Inventure Foods’ freezing capability from around 25% to 50% of all berries. We expect this increase in freezing capacity to continue to increase margins in the future.

Frozen Vegetables Inventure entered the vegetables market through the acquisition of Fresh Frozen in 2013.

Fresh Frozen Foods is a full service processor and supplier of over 60 varieties of fruit and vegetables. Fresh Frozen differentiates itself by using clear bags in its packaging that makes it easier for the consumer to determine the quality of the products. Currently, only 16% of Fresh Frozen products are in grocery stores, 4% are in mass, and they do not have a presence in private label. Going forwards, we expect Inventure to have an increased presence as more than 1000 more doors will be added and they will increasing their slotting investment throughout 2015. They also anticipate that steamables is 30% of the Fresh Frozen business, a category that they were not participating in previously.

This acquisition not only benefits the vegetable segment but also supports the frozen fruits segment with the year-round freezing operations in a new region of the country. Fresh Frozen is a strategic fit for the healthy/natural portfolio, meeting the growing demand and diversifying Inventure’s products.

Analysts: Jason Reyes, Giovanni Burbano, & Haomin Chen

2

Nasdaq: SNAK

Current Price: $11.67

Target Price: $18.97

USF

MUMA

COLLEGE OF BUSINESS UNIVERSITY OF SOUTH FLORIDA

Intrinsic Value: $14.60

April 23, 2015

Frozen Products Continued Frozen Beverages Under a licensing agreement with the Jamba Juice Company that expires in 2035, Inventure sells Jamba Juice branded blend-and-serve smoothie kits and is the market leader for at home blended smoothies. The products include At Home Smoothies, natural fruit, and Fruit & Veggie Smoothies. Combined with Seattle’s Best Coffee, this segment represents 52% of the frozen food category. Jamba Juice will continue to benefit from a shift in consumption habits in the U.S. that prefer healthier, convenient, and portable snack alternatives. Going forward, this product segment will have the most potential to add new licensing segments. We do not anticipate the other segments to enter into new licensing agreements. Their focus is primarily towards internal brands.

Inventure offers frozen coffee blends under the licensing agreement with the Seattle’s Best Coffee Brand that expires in November 2017. Made from 100% Arabica coffee beans, their products include Coffee Chiller, Mega Mocha, Very Vanilla, and Creamy Caramel. In the future, we expect there will not be any additional investing towards this brand.

Snack Products Healthy Snacks Healthy/Natural snacks are one of the fastest growing segments in the snack food category.

The continued innovation of new health conscious products will continue drive the company’s growth and differentiate its products from its competitors. The healthy/natural portfolio is led by its Boulder Canyon brand, which is founded on the belief that great tasting snacks come from minimally processed, real food ingredients. This focus on high quality ingredients will attract the health conscious consumer and create brand loyalty.

The Boulder Canyon Authentic Foods brand provides healthy snacks ranging from kettle cooked potato chips to their baked sweet potato fries. The Boulder Canyon brand joined Inventure Foods in 2000 and were the only healthy alternative provided by the company at that time.

Boulder Brands is currently only offered in 33% of grocery stores. In 2014, Boulder Canyon’s revenues increased by 70.3% compared to the prior year and 2013’s revenues were up 23.5% compared to 2012.

Product innovation is a large focus for this brand. For example, Boulder Canyon created a coconut and avocado oil baked potato chip in 2015. As of March 2015, Boulder Brands is one of only two companies that is utilizing coconut oil to make potato chips. We expect Boulder Brand’s continued product innovation and ability to penetrate new markets to continue to drive revenue growth in the future.

Indulgent Snacks The indulgent specialty snack food category includes brands such as T.G.I. Fridays, Nathan’s Famous, Vidalia, and Poor Brothers. Inventure has shifted its focus from this segment as it puts larger emphasis on healthy foods and snack food. As a result of this shift, we expect this segment to be a small contributor to growth for the company.

As a result of this shift, we expect this segment to be only a small contributor to growth.

Analysts: Jason Reyes, Giovanni Burbano, & Haomin Chen

3

Nasdaq: SNAK

Current Price: $11.67

Target Price: $18.97

USF

MUMA

COLLEGE OF BUSINESS UNIVERSITY OF SOUTH FLORIDA

Intrinsic Value: $14.60

April 23, 2015

Industry Drivers Inventure Foods operates in the packaged foods industry with a focus on the healthy/organic foods segment. The attractive trends that are playing out in the overall healthy/organic foods market, frozen food market, and healthy snack market will continue to drive growth for the company. The source of these trends range from demographics, changes in technology, and advances in societies awareness of what goes into their food. The industry is very competitive but Inventure has shown that it has the capability and ingenuity to transition with a dynamic industry.

Healthy/Organic As the number of obese or overweight people climbs to over 30% of the global population, consumers are becoming more health conscious in their food choices. According to a study by Nielson, 72% of global respondents planned on changing their diet in order to lose weight. Consumers are turning to healthy/organic foods in order to change their lifestyle Healthy Snacks As life becomes faster paced, U.S. consumers have increased their frequency of snacking 67% from 1.9 to 2.8 snacks a day. Research shows that this figure is expect to increase 5% CAGR overall through 2018, with higher growth expected in healthier alternatives, due to a variety of social factors such as an increase in the amount of working hours. Inventure Foods healthy snack line by Boulder Brands will benefit from this increase as consumers look for healthy alternatives for snacks. The brands continuing product innovation will give it a competitive advantage over other healthy snack producers.

Frozen Foods There have been numerous studies about the health benefits of frozen produce compared to fresh produce. These studies show that the nutritional content of eating frozen produce are either the same or slightly higher than eating it fresh.

Consumers also prefer the convenience and shelf life of frozen foods compared to it being fresh. The frozen food market will continue grow along with Inventure Foods as more consumers begin to realize these benefits. They will also benefit by concentrating on investing and expanding on products that aren’t diet fads but instead on simple to prepare foods like fruit and vegetables.

Growth Catalysts Increased Freezing Capacity The acquisitions of Willamette Valley Fruit Company and Fresh Frozen Foods in 2013 increased Inventure Foods’ freezing capacity from 25% of total berries to 50% of total berries. This implies that the company will only have to purchase an additional 50% of berries to meet consumer demand. With berry prices at all time highs, the ability for the company to decrease the amount purchased in the market will increase margins going forward.

Distribution Network Inventure Foods’ products can be found all around the country. Freezer space for frozen berries and vegetables is very competitive in supermarkets and club stores, since these stores usually only carry 1 brand of frozen berries and a few brands of frozen vegetables. Its Boulder Brands healthy snack products can be found in multiple grocery stores and convenience stores. Inventure Foods can use its established relationships with distribution channels that stock its Boulder Brands products to bring its frozen berries and vegetables into new channels.

Healthy/Organic Trend The annual sales from the natural and organic food and beverage market doubled from $40 billion in 2010 to $80 billion in 2015. Although diet fads come and go, Inventure Foods will continue to benefit from its focus on natural and organic fruits and vegetables for years to come. Its Boulder Brands healthy snack line will continue to benefit from consumers increasing how often they snack. Its various products will continue to grow in popularity as the distribution network widens and more consumers will have access to them.

Analysts: Jason Reyes, Giovanni Burbano, & Haomin Chen

4

Nasdaq: SNAK

Current Price: $11.67

Target Price: $18.97 Recent Acquisitions

USF

MUMA

COLLEGE OF BUSINESS UNIVERSITY OF SOUTH FLORIDA

Intrinsic Value: $14.60

April 23, 2015

Willamette Valley Fruit Company Inventure Foods acquired Willamette in May 2013 for $9.3 million in cash. Willamette is a berry processing company with two processing facilities in Oregon. Given the seasonality of its fruit harvests, the facilities capacity varies from 20% in the off months to 100% in peak production around June to September. With the addition of this company, Inventure Foods is able to freeze 50% of its berry requirements and diversify its processing facilities across the country.

Fresh Frozen Foods Inventure Foods acquired Fresh Frozen in November 2013 for $38.4 million in cash. It operates out of its two processing facilities in Georgia and has the ability to process fruits and vegetables all year round. Inventure Foods gained access to the frozen vegetable market with this acquisition. Not only that, an important quality it has is the ability to process and freeze produce all year round. Starting in 2015, Fresh Frozen started to offer its frozen vegetables in steamable bags, which is a brand new product line. We expect this acquisition to be a large contributor for the growth of the company with its additional processing facilities and entrance into the steamables market.

Competitive Landscape Diamond Foods - DMND Diamond Foods operates under two business segments: Snacks and Nuts. Under its snack segment it offers popcorn, under the Pop Secret label, and potato chips, under the Kettle Brand label in the UK. Under the Nuts segment, using the Emerald and Diamond of California brand, it offers a variety of nut and trail mix products.

The company has not produced a profit since 2012, is extremely levered, and has seen a decline in revenue since 2011.

Townsend Farms – Private Townsend is a private grower, processor, and distributor of both frozen and fresh fruit and berries. Its operations are located in Fairview, Oregon. Their frozen products are individually quick frozen at peak ripeness.

Recently, Townsend Farms have been under litigation over the death of a 89-year-old woman who ate pomegranate seeds link to a Hepatitis A outbreak. In 2013, the Townsend was link to over 140 Hepatitis A cases.

Pepsi Co - PEP Frito-Lay competes with Inventure Foods through the snack category. Frito-Lays’ potato chips are consistently higher in calories and fat than Boulder Canyon’s. Pepsi Co is an international conglomerate with an established image of less than healthy snack foods. By delivering great tasting flavors and distinctive product forms, Inventure foods creates an intensely different snacking experience than the traditional Frito-Lay snacks. Inventure Foods’ competitive advantages against Frito-Lay are its branded natural and healthy snacks led by the Boulder Canyon product line. Moving forward, Inventure food plans on entering the popcorn industry with the introduction of Boulder Canyon’s line of popcorn. It’s a healthier alternative to Frito-Lay’s Smartfood Delight line of popcorn.

ConAgra Foods, Inc. - CAG ConAgra is a food packaging company with the majority of its business coming from the U.S. Its products range from popcorn, snacks, frozen foods, cooking oil, and peanut butter with brands such as Healthy Choice, Chef Boyardee, and Orville Redenbacher. It has been rumored that it is divesting its frozen food business. Recently, the company has failed to produce a profit. Additionally, it is highly levered and has had slower than expected deleveraging result after its acquisition of Ralcorp in 2013.

Analysts: Jason Reyes, Giovanni Burbano, & Haomin Chen

5

Nasdaq: SNAK

Current Price: $11.67

Target Price: $18.97

USF

MUMA

COLLEGE OF BUSINESS UNIVERSITY OF SOUTH FLORIDA

Intrinsic Value: $14.60

April 23, 2015

Risks and Mitigants

Risk: Increase in commodity prices

Mitigant: Its recent acquisitions of Willamette and Fresh Frozen increased the company’s freezing capacity from 25% to 50%. This decreased its need to purchase produce on the open market. When prices do rise, Inventure Foods passes on the costs to the consumer.

Risk: Costco accounted for 26% of total revenue

Mitigant: This figure has been declining from 35% of total revenue in 2012 and 2013 as Inventure Foods continues to expand its product offerings and expand its distribution channels. It has been able to decrease its dependability with Costco and still see an increase in revenue.

Risk: Competitive Market

Mitigant: Inventure Foods uses its diverse portfolio of brands, wide distribution network, and continued product innovation to operate in its own niche market. Many of its products are only offered by the company and have not direct competition.

Risk: New products would lose consumers appeal

Mitigant: Management has a proven track record of being at the forefront of changing lifestyle and consumer preference. Their ability to predict what will be the next hot product will allow the company to stay ahead of its competitors.

Management Terry McDaniel, Chief Executive Officer - 57 McDaniel’s tenure at the Company began in 2006. Under his leadership, Inventure transformed from a firm that only derived 2 to 3% of its revenue from its healthy and natural snack segment to one that now represents 80%. He is highly regarded as a snack food industry veteran with over 30 years of experience. Under his vision, he has rejuvenated the languishing Boulder Canyon Brand, which was acquired in 2000, and has expanded the company’s portfolio of heathy and natural products with key acquisitions such as Rader Farms in 2007 and Fresh Frozen in 2013.

Past Experience

Steve Weinberger, Chief Financial Officer - 62 Weinberger joined the Inventure team around the same time McDaniel’s joined in 2006. His responsibilities include information technology, financial planning, accounting, and business intelligence. He has over 30 years of financial leadership experience in food manufacturing, marketing, and distribution. Weinberger and the Inventure team have habitually expressed that their focus is not in the quarter-to-quarter results but instead in “managing for the long-term.”

Dan Hammer GM Frozen Division, 52 Dan Hammer is the Senior Vice President and General Manager of the Frozen Division of the Company. Hammer brings with him over 30 years of experience and plans on using his experience to grow the Frozen Division.

Analysts: Jason Reyes, Giovanni Burbano, & Haomin Chen

6

Nasdaq: SNAK

Current Price: $11.67

Target Price: $18.97

USF

MUMA

COLLEGE OF BUSINESS UNIVERSITY OF SOUTH FLORIDA

Intrinsic Value: $14.60

April 23, 2015

Valuation

Free Cash Flows to Equity Model

2014 2015 2016 2017 2018 Term Val $0.53 $0.68 $0.78 $0.93 $1.05 $ 18.97 $0.39 $0.43 $0.47 $0.52 $0.59 ($0.59) ($0.65) ($0.70) ($0.76) ($0.82) ($1.05) ($0.23) ($0.40) ($0.45) ($0.46) -­‐$ 0.72

$ 0.23

$ 0.15

$ 0.25

$ 0.36

$ (0.72) $ 0.21

$ 0.14

$ 0.21

$ 15.53 $ 15.38 11.67 Shares Out Discount Rate 32% 19,990 Beta 0.61 MRP 6.1% Risk FR 1.9% CAPM 5.6%

EPS Deprc / Sh Cap Ex / Sh NWC / Sh FCFE PV of FCFE Intrinsic Value Current Price % to fair value

Using a free cash flow to equity model, we found Inventure Foods’ intrinsic value or what shares should be worth today. We used a discount rate of 5.6%, calculated by using CAPM with a beta of 0.61. Using a terminal value of $18.9, we find that Inventure Foods is trading at a 32% discount at a price of $11.67.

We calculated the terminal value using a P/E sensitivity model for 2018 EPS and contracted Inventure Foods’ P/E to 18 to reflect its average.

In order to take different scenarios into consideration, we also conducted a scenario analysis using an EV/EBITDA model that is shown on the next page.

EPS / PE Multiple Sensitivity Analysis

PE Multiple

15.00 16.00 17.00 18.00 19.00 20.00 21.00

$0.90 $13.56 $14.46 $15.36 $16.27 $17.17 $18.07 $18.98

$0.95 $14.27 $15.22 $16.17 $17.12 $18.07 $19.02 $19.98

Est. EPS FY 2018 $1.00 $1.05 $15.02 $15.81 $16.02 $16.86 $17.02 $17.92 $18.02 $18.97 $19.02 $20.03 $20.03 $21.08 $21.03 $22.13

Analysts: Jason Reyes, Giovanni Burbano, & Haomin Chen

$1.11 $16.60 $17.71 $18.81 $19.92 $21.03 $22.13 $23.24

$1.16 $17.43 $18.59 $19.75 $20.92 $22.08 $23.24 $24.40

$1.22 $18.30 $19.52 $20.74 $21.96 $23.18 $24.40 $25.62

7

Nasdaq: SNAK

Current Price: $11.67

USF

Target Price: $18.97

MUMA

COLLEGE OF BUSINESS UNIVERSITY OF SOUTH FLORIDA

Intrinsic Value: $14.60

April 23, 2015

Valuation 2012 Frozen Products Snack Products Net Revenue

2013

2014

Bear 117124 179518 186699 Growth N/A 29.0% 53.3% 4.0% 94356 98456 106145 108268 Growth N/A 4.3% 7.8% 2.0% $185,179 $215,580 $285,663 $294,967

EBIT

Margin Depreciation & Amortization EBITDA EV/EBITDA Multiple

90823

EV/EBITDA 2015 2016 2017 2018 Base Bull Bear Base Bull Bear Base Bull Bear Base Bull 195675 199265 205458 215242 219156 228157 238919 243224 253254 265200 269978 9.0% 11.0% 5.0% 10.0% 12.0% 6.0% 11.0% 13.0% 6.0% 11.0% 13.0% 111452 112514 113681 116468 117582 118797 121126 122291 123549 125971 127183 5.0% 6.0% 2.0% 4.5% 5.5% 2.0% 4.0% 5.0% 2.0% 4.0% 5.0% $307,127 $311,779 $319,140 $331,710 $336,738 $346,954 $360,045 $365,515 $376,803 $391,171 $397,161

11,344 6.1% 4,701 16,045

10,850 5.0% 5,733 16,583

18,933 6.6% 7,887 26,820

18,178 6.2% 8,575 26,754

21,999 7.2% 8,575 30,574

25,450 8.2% 8,575 34,025

21,226 6.7% 9,399 30,625

25,379 7.7% 9,399 34,778

29,132 8.7% 9,399 38,530

25,454 7.3% 10,493 35,947

30,015 8.3% 10,493 40,508

34,126 9.3% 10,493 44,619

28,867 7.7% 11,831 40,698

33,879 8.7% 11,831 45,711

$38,370 9.66% 11,831 50,201

7.69

15.08

12.39

10

12

13

10.5

12

13.5

10

12

13

10

12

13

Enterprise Value

123,386 250,072 332,300 267,535 366,890 442,327 321,564 417,339 520,160 359,471 486,096 580,049 406,982 548,528 652,613 minus debt 8,543 67,975 66,259 66,259 66,259 66,259 66,259 66,259 66,259 66,259 66,259 66,259 66,259 66,259 66,259 plus cash $419 $910 $495 $614 $614 $614 $995 $995 $995 $1,332 $1,332 $1,332 $1,760 $1,760 $1,760 Market Capitalization $115,262 $183,007 $266,536 $201,890 $301,246 $376,683 $256,300 $352,076 $454,896 $294,544 $421,169 $515,122 $342,483 $484,029 $588,114 Shares Outstanding Equity Value Per share

Bear

19574 $5.89

19789 $9.25

19990 $13.33

19990 $10.10

19990 $15.07

19990 $18.84

19990 $12.82

19990 $17.61

19990 $22.76

19990 $14.73

19990 $21.07

19990 $25.77

19990 $17.13

19990 $24.21

19990 $29.42

When considering the bear case for Inventure Foods, we grew revenues at a modest 4% and 2% for frozen products and snack products respectively. This reflects a slowdown in growth for the the health foods snack segment as consumers do not like all of the new products made by Boulder Canyon. The slight decrease in margins comes from an increase in berry costs that could not all be passed on to the consumer. As the years progress to 2018, we still expect a growth rate of 6% in our bear case in the frozen products segment. Given the current health trends and product portfolio the company has, we do not expect this bear case to happen.

Base The base case for Inventure Foods, or what we expect will happen in the next few years, shows a steadily increasing growth rate for frozen products and almost steady growth rates for the snack product segment. The acquisition of Fresh Frozen provided another market for the company to tap into, and we expect the vegetable market to perform well for the company. Its recent move into the steamables market will support steady growth into the future. We expect growth in distribution for both frozen fruits and vegetables as Rader Farms and Fresh Frozen become a widely known name. We expect margins to steadily increase as the company starts to realize the synergies from the acquisitions it made. At the year 2018 we can expect a target price of $24.21 with the EV/EBITDA model, which gives over a 100% return. Historically the company has performed extremely well, and we expect that it will continue to for the next few years.

Bull In the most ideal situation, we expect the company to perform extremely well as it takes advantage of consumers increased demand for healthy/organic food. The company will see revenues growing steadily for both the frozen and snack segments and will see margin improvements as the prices of berries go down. This price decrease will trigger an increased demand for its products and help out the company two fold. Although the company has seen growth rates like these in the past, we do not expect that it will continue to have growth in the mid teens.

Analysts: Jason Reyes, Giovanni Burbano, & Haomin Chen

8

Nasdaq: SNAK

Current Price: $11.67

Target Price: $18.97

USF

MUMA

COLLEGE OF BUSINESS UNIVERSITY OF SOUTH FLORIDA

Intrinsic Value: $14.60

April 23, 2015

2014

2015

2016

2017

2018

73318 74969 148,287

117124 98456 $215,580 16.4% 94379 82315 176,694

179518 106145 $285,663 32.5% 147189 85353 232,542

36,892

38,886

53,121

195675 111452 307127 7.5% 158496 89162 247658 59469

215242 116468 331710 8.0% 173270 92592 265862 65848

238919 121126 360045 8.5% 191135 95690 286825 73220

265200 125971 391171 8.6% 210834 99517 310351 80820

25,548 11,344

28,036 10,850

34,188 18,933

37469 21999

40469 25379

43205 30015

46941 33879

-­‐1,101 764 11,681 4,232

872 9,978 3,360

2,604 16,329 5,768

$7,449

$6,618

$10,561

1536 20464 6958 13506

1659 23721 8065 15656

1800 28215 9593 18622

1956 31924 10854 21070

$0.38

$0.33

$0.53

0.68

0.78

0.93

1.05

19,574

19,789

19,990

19,990

19,990

19,990

19,990

Appendix

Income Statement in thousands

2012

CONSOLIDATED STATEMENTS OF OPERATIONS Frozen Products Snack Products Net revenues revenue growth rate N/A Frozen Products COGS Snack Products COGS Net Cost of revenues Gross profit Operating expenses: Selling, general and administrative expenses EBIT Non-­‐operating (income) expense: Gain on sale of DSD business Interest expense, net Income before income tax expense Income tax expense Net income Earnings per common share: Diluted (in dollars per share) Weighted average number of common shares: Diluted (in shares)

Common Size Net Revenues Cost of Revenues Gross Profit SGA % of total revenues Operating income Interest expense net Income Before Income Tax % Effective Interest Rate Net Income

2012 100.00% 80.08% 19.92% 13.80% 6.13% 0.41% 6.31% 36.23% 4.02%

2013

90823 94356 $185,179

2013 100.00% 81.96% 18.04% 13.00% 5.03% 0.40% 4.63% 33.67% 3.07%

Analysts: Jason Reyes, Giovanni Burbano, & Haomin Chen

2014 100.00% 81.40% 18.60% 11.97% 6.63% 0.91% 5.72% 35.32% 3.70%

2015 100.0% 80.6% 19.36% 12.2% 7.2% 0.5% 6.7% 34.0% 4.4%

2016 100.0% 80.1% 19.85% 12.2% 7.7% 0.5% 7.2% 34.0% 4.7%

2017 100.0% 79.7% 20.34% 12.0% 8.3% 0.5% 7.8% 34.0% 5.2%

2018 100.0% 79.3% 20.66% 12.0% 8.7% 0.5% 8.2% 34.0% 5.4%

9

Nasdaq: SNAK

Current Price: $11.67

Target Price: $18.97

USF

MUMA

COLLEGE OF BUSINESS UNIVERSITY OF SOUTH FLORIDA

Intrinsic Value: $14.60

April 23, 2015

Appendix

Balance Sheet in thousands Current assets: Cash and cash equivalents Accounts receivable, net Inventories Deferred income tax asset Other current assets Total current assets Property and equipment, net Goodwill Trademarks and other intangibles, net Other assets Total assets Current liabilities: Accounts payable Accrued liabilities Current portion of long-­‐term debt Total current liabilities Long-­‐term debt, less current portion Line of credit Deferred income tax liability Interest rate swaps Other liabilities Total liabilities Commitments and contingencies (see Notes 8 and 12) Shareholders' equity: Common stock, $.01 par value; 50,000 shares authorized; 19,961 and 19,845 shares issued and outstanding at December 27, 2014 and December 28, 2013, respectively Additional paid-­‐in capital Accumulated other comprehensive loss Retained earnings Total shareholders' equity before treasury stock Less: treasury stock, at cost: 368 shares at December 27, 2014 and December 28, 2013 Total shareholders' equity Total liabilities and shareholders' equity

2012 '

'

' '

2013

$419 17,547 27,071 1,030 1,323 47,390 34,051 11,616 2,010 827 95,894 12,178 8,415 1,646 22,239 6,897 10,117 3,968 766 808 44,795

$910 23,618 43,086 755 1,223 69,592 50,140 23,064 25,624 1,671 170,091

19,380 10,121 6,110 35,611 61,865 3,223 4,188 526 5,525 110,938

196 29,660 -­‐378 22,092

198 30,960 -­‐244 28,710

-­‐471 51,099 $95,894

-­‐471 59,153 $170,091

51,570

2014

59,624

Analysts: Jason Reyes, Giovanni Burbano, & Haomin Chen

2015

$495 614 22,420 24570 65,216 70117 755 755 1,220 1560 90,579 97616 55,200 61425 23,286 23,286 24,543 24,543 1,702 1989 195,310 208859

15,533 12,978 7,041 35,552 59,218 18,802 4,188 349 2,554 123,344

17721 13514 7,041 38276 59,218 18,802 4,188 349 2,554 123387

200 33,100 -­‐134 39,271

200 33,100 -­‐134 52,777

72,437

85943

-­‐471 -­‐471 71,966 85472 $195,310 208859

2016

2017

2018

995 26537 76073 755 1991 106351 68290 23,286 24,543 2322 224792

1332 28804 84611 755 2520 118022 77410 23,286 24,543 2520 245781

1760 31294 91925 755 2738 128472 88560 23,286 24,543 2738 267600

18244 13268 7,041 38553 59,218 18,802 4,188 349 2,554 123664

200 33,100 -­‐134 68,433

101599

-­‐471 101128 224792

19479 14401 7,041 40921 59,218 18,802 4,188 349 2,554 126032

19766 14863 7,041 41670 59,218 18,802 4,188 349 2,554 126781

200 200 33,100 33,100 -­‐134 -­‐134 87,054 108,124

120220

-­‐471 119749 245781

141290

-­‐471 140819 267600

10

Nasdaq: SNAK

Current Price: $11.67

Target Price: $18.97

USF

MUMA

COLLEGE OF BUSINESS UNIVERSITY OF SOUTH FLORIDA

Intrinsic Value: $14.60

April 23, 2015

Appendix

Liquidity Ratios Current Ratio Quick Ratio Cash Ratio

2012 2013 2014 2015 2016 2017 2018 2.13

1.95

2.55

2.55

2.76

2.88

3.08

0.81

0.69

0.64

0.66

0.71

0.74

0.79

0.02

0.03

0.01

0.02

0.03

0.03

0.04

Activity Ratios Recievables Turnover Avg. Collection Period Inventory Turnover Days in Inventory Payables Turnover Avg Payables Pmt. Per. Fixed Asset Turnover Total Asset Turnover

11.13

32.81

5.05

72.31

10.96

33.31

5.51

1.91

10.47

34.85

5.04

72.46

11.20

32.59

5.12

1.62

12.41

29.41

4.29

85.00

13.32

27.40

5.42

1.56

13.07

27.92

3.66

99.73

14.89

24.51

5.27

1.52

12.98

28.12

3.64

100.35 14.78

24.69

5.11

1.53

13.01

28.05

3.57

102.24 15.21

24.00

4.94

1.53

13.02

28.04

3.52

103.81 15.82

23.08

4.71

1.52

Leverage Ratios Debt/Equity Ratio Debt/Assets Ratio Fin. Leverage Ratio

0.17

1.15

0.92

0.78

0.66

0.55

0.47

0.09

0.40

0.34

0.32

0.29

0.27

0.25

2.09

2.41

2.79

2.57

2.32

2.13

1.97

Profitability Ratio Gross Profit Margin Op Profit Margin Net Profit Margin ROA ROE

19.92% 6.13% 4.02% 7.68% 16.07%

18.04% 5.03% 3.07% 4.98% 12.01%

18.60% 6.63% 3.70% 5.78% 16.11%

19.36% 7.16% 4.40% 6.68% 17.16%

19.85% 7.65% 4.72% 7.22% 16.78%

20.34% 8.34% 5.17% 7.91% 16.86%

20.66% 8.66% 5.39% 8.21% 16.17%

DuPont Analysis Net Profit Margin Asset Turnover Equity Multiplier ROE

4.02% 3.07% 3.70% 4.40% 4.72% 5.17% 5.39% 1.91

1.62

1.56

1.52

1.53

1.53

1.52

2.35

1.88

2.88

2.71

2.44

2.22

2.05

18.09% 9.34% 16.62% 18.14% 17.64% 17.59% 16.85%

Analysts: Jason Reyes, Giovanni Burbano, & Haomin Chen

11