The Marzetti (MZTI) Q4 2015 earnings summary

Executive summary

• FY2015 net sales, operating income, net income and diluted EPS grew; stronger second-half performance followed a soft first half. Flatout, dressings capacity and promotional-spending adjustments supported the finish.

• Flatout contributed $13 million of FY2015 sales and was not material to consolidated results; FY2016 was expected to benefit incrementally from the acquisition.

Financial highlights

• Net sales rose 6% to $1,104.5 million; gross margin increased 4% to $257.7 million, while gross margin rate declined to 23.3% from 23.9%.

• Operating income was $154.9 million, up 1%; net income was $101.7 million versus $75.0 million, and diluted EPS was $3.72 versus $2.74.

• 2014 net income included a $29.1 million after-tax loss on the candle operations sale; excluding discontinued operations, 2014 continuing income was $101.0 million and diluted EPS was $3.69.

• Cash from operations totaled $132.8 million; cash and equivalents ended at $182.2 million, with shareholders’ equity of $580.9 million and no debt.

Outlook and guidance

• FY2016 outlook called for incremental Flatout benefits and volume-driven growth in retail and foodservice, with modestly unfavorable material cost comparisons, chiefly from higher egg costs.

• Pricing actions were expected to partly offset higher egg costs beginning in Q1; modest pricing, mostly to address ingredient costs, was anticipated for FY2016.

• FY2016 capital expenditures were projected at $15–$20 million, funded from operating cash flow; supply-chain initiatives were expected to improve manufacturing efficiency and reduce logistics costs.

• Growth depended on innovation, successful Flatout integration, efficiency gains from the dressing expansion and other cost initiatives, and continued acquisition opportunities.