OREANDA-NEWS. The WhiteWave Foods Company (NYSE:WWAV) today reported record results for the first quarter ended March 31, 2016.


Financial Summary: Three Months Ended March 31,  
In millions, except EPS   2016       2015     % Change*  
             
Total Net Sales            
Reported $ 1,040     $   911         +14 %  
Constant Currency $ 1,047     $   911         +15 %  
Organic Constant Currency $   983     $   911         +8 %  
             
Total Operating Income            
Reported $   84     $   70         +20 %  
Adjusted $   90     $   75         +21 %  
Adjusted Constant Currency $   93     $   75         +24 %  
             
Net Income            
Reported $   43     $   33         +28 %  
Adjusted $   48     $   39         +24 %  
Adjusted, excluding China J.V. $   51     $   43         +18 %  
             
Diluted Earnings per Share (EPS)            
Reported $   0.24     $   0.19         +27 %  
Adjusted $   0.27     $   0.22         +24 %  
Adjusted, excluding China J.V. $   0.28     $   0.24         +17 %  
Adj. Constant Currency, excluding China J.V. $   0.29     $   0.24         +21 %  
             
EBITDA            
Adjusted $   134     $   109         +23 %  
Adjusted, excluding China J.V. $   137     $   113         +21 %  
Adj. Constant Currency, excluding China J.V. $   140     $   113         +24 %  
   
*Certain change percentages may not recalculate using the rounded dollar amounts provided  
   

WhiteWave reported first quarter 2016 adjusted diluted earnings per share of $0.28, excluding operating costs associated with its China joint venture. Including joint venture costs, WhiteWave reported first quarter 2016 adjusted diluted earnings per share of $0.27.

Net sales for the first quarter 2016 were $1.0 billion, a 14 percent increase from net sales of $911 million in first quarter 2015. These results were driven by strong organic growth across the Americas and Europe segments, as well as contributions from acquisitions.

On a constant currency basis, net sales increased 15 percent in first quarter 2016, when compared to first quarter 2015. Excluding acquisitions, organic constant currency net sales increased 8 percent in first quarter 2016, when compared to first quarter 2015.

Adjusted operating income for first quarter 2016 increased 21 percent to $90 million, compared to $75 million in first quarter 2015. On a constant currency basis, adjusted operating income increased 24 percent in first quarter 2016 over the same period in 2015.

“We are off to a very good start in 2016, delivering results ahead of our expectations with healthy topline growth and operating performance,” said Gregg Engles, chairman and chief executive officer. “Our robust organic constant currency sales growth in the first quarter was driven by strong growth across our legacy platforms in traditional retail outlets, along with increasing contributions from away-from-home channels and our growing international presence. Our Vega and Wallaby acquisitions also continued their robust growth trends, positively impacting our results as well. Our strong start to the year has led us to increase our guidance for full year 2016.”

AMERICAS FOODS & BEVERAGES SEGMENT
WhiteWave’s Americas Foods & Beverages segment consists of four platforms: Plant-based Foods and Beverages, Fresh Foods, Premium Dairy, and Coffee Creamers and Beverages. In first quarter 2016, net sales for Americas Foods & Beverages were $895 million, an increase of 15 percent over first quarter 2015. Growth in the segment reflects strong organic sales growth and contributions from acquisitions. Excluding acquisitions and the impact of currency translations, organic constant currency net sales in the segment increased 7 percent in first quarter 2016. The inclusion of Fresh Foods’ results within this segment, which began in 2016, reduced the growth rate by over one percentage point in the quarter. Organic growth in the segment continues to be driven largely by volumes, aided by some pricing benefits, primarily within the Premium Dairy platform. Adjusted constant currency operating income for Americas Foods & Beverages increased 24 percent for first quarter 2016, compared to the same period in 2015, with adjusted constant currency operating margins in the segment expanding over 80 basis points.

Americas Foods & Beverages Segment Summary
$ In millions Three Months Ended March 31,
    2016       2015     % Change*
Reported Net Sales $ 895     $ 780         +15 %
Constant Currency Net Sales $ 898     $ 780         +15 %
Organic Constant Currency Net Sales $ 833     $ 780         +7 %
           
Reported Segment Operating Income $ 96     $   82         +17 %
Adj. Segment Operating Income $ 102     $   83         +22 %
Adj. Constant Currency Segment Op. Income $ 103     $   83         +24 %
 
*Certain change percentages may not recalculate using the rounded dollar amounts provided
 

Plant-based Foods and Beverages
The Americas Plant-based Foods and Beverages platform includes Silk® beverages and yogurts, So Delicious® beverages, frozen desserts and yogurts, and Vega® nutritional protein powders and bars. Net sales for this platform increased 29 percent in first quarter 2016 compared to first quarter 2015. Sales were driven by strong organic growth across the platform, along with the contribution of Vega, which was acquired on August 1, 2015. Excluding Vega, organic constant currency sales increased high single-digits in first quarter 2016, driven by broad-based growth in beverages, yogurts and frozen desserts across retail and away-from-home channels, as well as increased sales in Canada and Latin America.

Fresh Foods
The Fresh Foods platform consists of the Earthbound Farm® brand, which includes organic salads, fruits and vegetables. Sales were flat in first quarter 2016 when compared with first quarter 2015, in line with management expectations as the platform continues to recover from SAP implementation-related business disruptions during fourth quarter 2015. A new larger warehouse for this platform is scheduled to become fully operational by the end of second quarter 2016 and is expected to provide improved shipping efficiencies. 

Premium Dairy
The Premium Dairy platform includes Horizon Organic® milk and dairy products, macaroni and cheese, and snacks, along with Wallaby® organic yogurts and kefir beverages. Net sales for this platform increased 16 percent in first quarter 2016 compared to first quarter 2015, due to the inclusion of Wallaby, which was acquired on August 31, 2015, and strong organic growth. Excluding Wallaby, organic sales grew high single-digits for first quarter 2016, in line with management expectations, behind continued growth in Horizon milk, other dairy products, as well as meals and snacks.

Coffee Creamers and Beverages
The Coffee Creamers and Beverages platform includes coffee creamers and ready-to-drink beverages under the International Delight®, Dunkin Donuts®, Silk and So Delicious brands, as well as half-and-half dairy creamers under the LAND O LAKES® and Horizon Organic brands. Net sales for this platform increased 10 percent in first quarter 2016 compared to first quarter 2015. Organic sales grew high single-digits for first quarter 2016 behind strong growth in International Delight flavored creamers, Silk and So Delicious plant-based creamers and Horizon Organic half-and-half creamers.

EUROPE FOODS & BEVERAGES SEGMENT
The Europe Foods & Beverages segment consists of plant-based foods and beverages that are sold primarily under the Alpro® brand. Net sales in the segment increased 14 percent on a constant currency basis and 11 percent on a reported basis in first quarter 2016 compared to first quarter 2015. Increased sales were driven by volume growth across the segment’s main European geographies and strong growth across beverages and plant-based yogurts. Operating income increased 15 percent on an adjusted constant currency basis for first quarter 2016 when compared with first quarter 2015. Constant currency operating margin for first quarter 2016 was the same as first quarter 2015, in spite of expected higher temporary third party warehousing and distribution costs related to a current warehouse capacity expansion project and an approximate $2 million non-cash asset write-down associated with this project in first quarter 2016.

Europe Foods & Beverages Segment Summary
$ In millions Three Months Ended March 31,
    2016       2015     % Change*
Reported Net Sales $   145     $   131       +11 %
Constant Currency Net Sales $   150     $   131       +14 %
           
Reported Segment Operating Income $   15     $   14         +6 %
Constant Currency Segment Op. Income $   16     $   14       +15 %
 
*Certain change percentages may not recalculate using the rounded dollar amounts provided
 

“We delivered a strong first quarter with double-digit top and bottom line growth. Excluding currency impacts, sales increased 15 percent and drove adjusted consolidated segment operating income growth of 22 percent, with 70 basis points of margin expansion, all while maintaining high levels of marketing investments,” said Greg Christenson, executive vice president and chief financial officer. “Based on our first quarter results and an expectation of continued strong performance, we are increasing our forecasts for the year. Our outlook for full year 2016 continues to include the expectation for high single-digit organic sales growth and 75 basis points of adjusted constant currency operating margin expansion from continued operational leverage.”

FORWARD OUTLOOK
The company expects continued category and volume growth across its core portfolio, along with strong constant currency net sales growth. A stronger U.S. dollar when compared with the prior year is expected to modestly lower reported net sales growth rates due to the translation of the Europe Foods & Beverages segment results, as well as growing sales in Canada and Latin America embedded in the Americas Foods & Beverages segment. On a constant currency basis, management expects second quarter 2016 net sales growth to be 12.0 percent to 13.0 percent and for full year 2016 net sales growth to be 11.0 percent to 12.0 percent. The company expects reported net sales growth to be 11.5 percent to 12.5 percent for second quarter 2016 and 10.5 percent to 11.5 percent for full year 2016. Management continues to expect organic net sales growth in the high single-digits on a constant currency percentage basis for full year 2016.

WhiteWave continues to expect strong adjusted operating income growth during 2016 from the realization of internal production capacity increases and cost reduction initiatives, further scale leverage, and increasing levels of contributions from completed acquisitions. As a result, management expects an adjusted total operating income growth rate for second quarter 2016 to be in the low twenties on a constant currency percentage basis, translating into high-teens percentage growth on a U.S. dollar reported basis, based on current foreign exchange rates. For full year 2016, management expects adjusted operating income percentage growth in the low twenties on a constant currency basis, converting into high-teens to twenty percent growth on a reported basis, based on current foreign exchange rates. Management continues to target 75 basis points of adjusted constant currency operating margin expansion for full year 2016.

Interest expense is expected to be approximately $70 million to $74 million in 2016, reflecting increased levels of indebtedness related to the financing of acquisitions in 2015. For second quarter 2016, interest expense is estimated to range from $18 million to $20 million. Management continues to estimate its effective tax rate to range from 33 percent to 34 percent for full year 2016, with variability by quarter.

The company continues to support the ongoing operating investments of its China joint venture behind the development of a plant-based beverages business. Management continues to expect the amount of the company’s investment in 2016 to be between $10 million and $12 million on an after-tax basis, and approximately $0.06 dilutive to full year 2016 adjusted diluted earnings per share, with an approximate $0.02 adjusted diluted earnings per impact in second quarter 2016. The timing and amount of actual investments made in 2016 may vary.

Based upon these factors, management expects to achieve $1.42 to $1.45 in constant currency adjusted diluted earnings per share for 2016, excluding investments in the China joint venture. On a U.S. dollar reported basis, management expects adjusted diluted earnings per share of $1.38 to $1.41 for 2016, based on current foreign exchange rates, excluding investments in the China joint venture.

For second quarter 2016, management expects constant currency adjusted diluted earnings per share of $0.30 to $0.32, excluding investments in the China joint venture. On a reported basis, management expects adjusted diluted earnings per share of between $0.29 and $0.31 for second quarter 2016, based on current foreign exchange rates, excluding China joint venture investments.

2016 Guidance Summary
  Second Quarter   Full Year
 
Reported		   Constant
Currency		  
Reported		   Constant
Currency
Net Sales Growth + 11.5% - 12.5%   + 12.0% - 13.0%   + 10.5% - 11.5%   + 11.0% - 12.0%
               
               
Adjusted Total Operating Income Growth + High Teens %   + Low Twenties %   + High Teens to
Twenty %		   + Low Twenties %
               
               
Adjusted Diluted EPS $0.27 - $0.29   $0.28 - $0.30   $1.32 - $1.35   $1.36 - $1.39
China Joint Venture Impact ?$0.02   ?$0.02   ?$0.06   ?$0.06
               
               
Adjusted Diluted EPS – Excluding China J.V. $0.29 - $0.31   $0.30 - $0.32   $1.38 - $1.41   $1.42 - $1.45
               

Management continues to forecast capital expenditures of approximately $325 million to $350 million for full year 2016, with the majority of investments being made to support continued growth requirements in 2016 and beyond. Timing of capital projects may vary and affect the amount of actual investments made in 2016.

The company continues to expect to achieve a leverage ratio, as defined by its credit agreements, of 3.5 times or below by the end of 2016, driven principally by strong growth in adjusted EBITDA, which management expects to be at least $615 million for full year 2016, before China joint venture investments.

OTHER ITEMS
Financial Reporting Changes
Beginning first quarter 2016, the business operations that were historically reported as the Americas Fresh Foods segment are now reported as the Fresh Foods platform within WhiteWave’s existing Americas Foods & Beverages segment.

CONFERENCE CALL WEBCAST
A live presentation webcast of WhiteWave’s financial results and outlook will be held at 10:00 am Eastern time today, May 10, 2016, and may be heard by visiting the “events and presentation” section of WhiteWave’s investor relations website at www.whitewave.com/investors. The webcast replay will be available for approximately 45 days. A slide presentation will be available on our website and will accompany the webcast.

ABOUT THE WHITEWAVE FOODS COMPANY
The WhiteWave Foods Company is a leading consumer packaged food and beverage company that manufactures, markets and sells branded plant-based foods and beverages, coffee creamers and beverages, premium dairy products and organic produce. It sells products primarily in North America, Europe and through a joint venture in China. WhiteWave is focused on providing consumers with innovative, great-tasting food and beverage choices that meet their increasing desires for nutritious, flavorful, convenient, and responsibly-produced products. The Company's widely-recognized, leading brands distributed in North America include Silk®, So Delicious® and Vega™ plant-based foods and beverages, International Delight® and LAND O LAKES®* coffee creamers and beverages, Horizon Organic® and Wallaby Organic® premium dairy products and Earthbound Farm® organic salads, fruits and vegetables. Its popular plant-based foods and beverages brands in Europe include Alpro® and Provamel®. T

The WhiteWave Foods Company
Condensed Consolidated Statements of Income
(Unaudited, GAAP Basis)
             
      Three months ended March 31,  
        2016       2015    
       (In thousands, except share and per share data)
             
  Net sales   $   1,039,695     $   911,142    
  Cost of sales       685,928         602,567    
  Gross profit       353,767         308,575    
  Operating expenses:          
  Selling, distribution and marketing       185,844         167,761    
  General and administrative       84,086         70,744    
  Total operating expenses       269,930         238,505    
  Operating income       83,837         70,070    
  Other expense:          
  Interest expense       13,680         8,667    
  Other expense, net       2,439         3,801    
  Total other expense       16,119         12,468    
  Income before income taxes       67,718         57,602    
  Income tax expense       22,908         20,182    
  Income before loss in equity method investments       44,810         37,420    
  Loss in equity method investments       2,210         4,073    
  Net income   $   42,600     $   33,347    
             
  Weighted average common shares:          
  Basic       176,550,367         174,693,383    
  Diluted       180,284,883         179,152,184    
             
  Net income per share:          
  Basic   $   0.24     $   0.19    
  Diluted   $   0.24     $   0.19    
The WhiteWave Foods Company
Condensed Consolidated Balance Sheets
(Unaudited, GAAP Basis)
               
        March 31,
2016		   December 31,
2015		  
         (In thousands)  
  ASSETS          
    Cash and cash equivalents   $   39,421     $   38,610    
    Trade receivables, net of allowance of $2,416 and $2,127       289,483         257,548    
    Inventories       277,632         270,737    
    Prepaid expenses and other current assets       36,504         39,782    
    Total current assets       643,040         606,677    
    Equity method investments       28,941         30,772    
    Property, plant, and equipment, net       1,144,258         1,137,521    
    Identifiable intangible and other assets, net       1,060,633         1,038,577    
    Goodwill       1,428,861         1,415,322    
  Total Assets   $   4,305,733     $   4,228,869    
               
  LIABILITIES AND SHAREHOLDERS' EQUITY          
    Accounts payable and accrued expenses   $   513,529     $   549,713    
    Current portion of debt and capital lease obligations       46,336         51,449    
    Income taxes payable       4,234         3,043    
    Total current liabilities       564,099         604,205    
    Long-term debt and capital lease obligations, net of debt issuance costs       2,089,244         2,078,940    
    Deferred income taxes       302,678         293,326    
    Other long-term liabilities       41,113         41,490    
  Total liabilities       2,997,134         3,017,961    
               
    Common stock       1,768         1,762    
    Additional paid-in capital       924,932         914,975    
    Retained earnings       468,305         425,705    
    Accumulated other comprehensive loss       (86,406 )       (131,534 )  
  Total shareholders' equity       1,308,599         1,210,908    
  Total Liabilities and Shareholders' Equity   $   4,305,733     $   4,228,869    
               
The WhiteWave Foods Company
Condensed Consolidated Statements of Cash Flows
(Unaudited, GAAP Basis)
             
      Three months ended March 31,  
        2016       2015    
       (In thousands)
Operating Activities          
  Net income   $   42,600     $   33,347    
  Adjustments to reconcile net income to net cash provided by operating activities:          
  Depreciation and amortization       33,440         27,530    
  Share-based compensation expense       12,945         12,796    
  Amortization of debt issuance costs       1,108         1,015    
  Mark-to-market on derivative instruments       322         2,979    
  Loss in equity method investments       2,210         4,073    
  Other       6,612         3,389    
  Net change in operating assets and liabilities, net of acquisitions       (51,448 )       (20,713 )  
  Net cash provided by operating activities       47,789         64,416    
             
Investing Activities          
  Payments for property, plant, and equipment       (48,559 )       (91,703 )  
  Proceeds from sale of fixed assets       49         1,589    
  Other       (60 )       346    
  Net cash used in investing activities       (48,570 )       (89,768 )  
             
Financing Activities          
  Debt related activities       4,026         11,085    
  Other financing activities       (2,860 )       (915 )  
  Net cash provided by financing activities       1,166         10,170    
  Effect of exchange rate changes on cash and cash equivalents       426         (4,118 )  
Increase/(decrease) in cash and cash equivalents       811         (19,300 )  
Cash and cash equivalents, beginning of period       38,610         50,240    
Cash and cash equivalents, end of period   $   39,421     $   30,940    
The WhiteWave Foods Company
GAAP to Non-GAAP Reconciliation
(Unaudited)
                           
    Three months ended March 31, 2016   Three months ended March 31, 2015  
    GAAP   Adjustments   Adjusted   GAAP   Adjustments   Adjusted  
     (In thousands, except share and per share data)  
                           
  Total net sales $   1,039,695     $   -      $   1,039,695     $   911,142     $   -      $   911,142    
  Cost of sales     685,928         (4,067 ) (a)(b)     681,861         602,567         233   (b)   602,800    
  Gross profit      353,767         4,067         357,834         308,575         (233 )     308,342    
  Operating expenses:                        
  Selling, distribution, and marketing     185,844         223   (b)     186,067         167,761         590   (b)   168,351    
  General and administrative     84,086         (2,617 ) (a)     81,469         70,744         (5,503 ) (a)   65,241    
  Total operating expenses     269,930         (2,394 )       267,536         238,505         (4,913 )     233,592    
  Operating income     83,837         6,461         90,298         70,070         4,680       74,750    
  Other expense:                        
  Interest expense     13,680         -          13,680         8,667         -        8,667    
  Other expense, net     2,439         (2,438 ) (c)     1         3,801         (3,801 ) (c)   -    
  Total other expense      16,119         (2,438 )       13,681         12,468         (3,801 )     8,667    
  Income before income taxes     67,718         8,899         76,617         57,602         8,481       66,083    
  Income tax expense     22,908         3,065   (d)     25,973         20,182         2,881   (d)   23,063    
  Income before loss in equity method investments     44,810         5,834         50,644         37,420         5,600       43,020    
  Loss in equity method investments     2,210         -          2,210         4,073         -        4,073    
  Net income $   42,600     $   5,834     $   48,434     $   33,347     $   5,600     $ 38,947    
  Earnings per Share:                        
  Basic         $   0.27             $   0.22    
  Diluted         $   0.27             $   0.22    
  Weighted Average Common Shares:                         
  Basic             176,550,367                 174,693,383    
  Diluted             180,284,883                 179,152,184    
                           
  Adjusted net income excluding China joint venture activities:                        
  Adjusted net income             48,434                 38,947    
  Corporate related joint venture expenses, net of tax             537   (e)             279   (e)
  Loss in China joint venture equity method investment             1,994   (f)             3,939   (f)
  Adjusted net income excluding China joint venture activities         $   50,965             $   43,165    
                           
  Adjusted earnings per share excluding China joint venture activities:                      
  Basic         $   0.29             $   0.25    
  Diluted         $   0.28             $   0.24    
The WhiteWave Foods Company
GAAP to Non-GAAP Reconciliation
(Unaudited)
                           
    Three months ended March 31, 2016   Three months ended March 31, 2015  
    GAAP   Adjustments   Adjusted   GAAP   Adjustments   Adjusted  
    (In thousands)  
  Income statement amounts by segment:                        
  Total net sales                        
  Americas Foods & Beverages $ 894,762     $ -     $ 894,762     $ 780,374     $ -     $ 780,374    
  Europe Foods & Beverages   144,933       -       144,933       130,768       -       130,768    
  Total $ 1,039,695     $ -     $ 1,039,695     $ 911,142     $ -     $ 911,142    
                           
  Operating income                        
  Americas Foods & Beverages   95,715       5,987   (a)(b)   101,702       81,705       1,568   (b)   83,273    
  Europe Foods & Beverages   15,204       -       15,204       14,364       -       14,364    
  Total consolidated segment operating income   110,919       5,987       116,906       96,069       1,568       97,637    
  Corporate and other   (27,082 )     474   (a)   (26,608 )     (25,999 )     3,112   (a)   (22,887 )  
  Total operating income $ 83,837     $ 6,461     $ 90,298     $ 70,070     $ 4,680     $ 74,750    
                           
                           
The WhiteWave Foods Company
Reconciliation of GAAP Net Income to EBITDA and Adjusted EBITDA
(Unaudited)
                    Three months ended March 31,  
                      2016       2015    
                     (In thousands)  
  Net income                 $   42,600     $   33,347    
  Interest expense, net                     13,680         8,667    
  Income tax expense                     22,908         20,182    
  Depreciation and amortization                     33,440         27,530    
  EBITDA                 $   112,628     $   89,726    
  Transaction, integration & transition costs                      7,747   (a)     2,491   (a)
  Mark to market adjustments on hedging transactions                     893   (b)(c)     2,979   (b)(c)
  IPO grants & non-cash stock-based compensation                     13,023   (a)(g)     13,605   (a)(g)
  Adjusted EBITDA                 $   134,291     $   108,801    
                           
  Corporate related joint venture expenses                  $   812   (e) $   429   (e)
  Loss in China joint venture equity method investment                   1,994   (f)     3,939   (f)
  Adjusted EBITDA excluding China joint venture activities               $   137,097     $   113,169    
                                 

The adjusted results differ from WhiteWave’s results under GAAP due to the following:

(a) The adjustment reflects:

i. Elimination of stock compensation expense for IPO grants.

  • $0.3 million for the three months ended March 31, 2016
  • $3.0 million for the three months ended March 31, 2015

ii. Elimination of non-recurring purchase accounting adjustments, transaction and integration costs related to acquisitions and other investments.

Americas Foods & Beverages

  • $6.9 million in SAP transition costs, and $0.6 million of other transaction and integration costs related to acquisitions for the three months ended March 31, 2016
  • $2.4 million transaction and integration costs related to acquisitions for the three months ended March 31, 2015

Corporate

  • $0.2 million in transaction costs related to acquisitions for the three months ended March 31, 2016
  • $0.1 million in transaction costs related to acquisitions for the three months ended March 31, 2015

(b) The adjustment reflects elimination of income related to the mark-to-market adjustment on commodity hedges.

  • $1.5 million for the three months ended March 31, 2016
  • $0.8 million for the three months ended March 31, 2015

(c) The adjustment reflects elimination of expense related to the mark-to-market adjustment on interest rate hedges and amortization on foreign exchange contracts.

  • $2.4 million for the three months ended March 31, 2016
  • $3.8 million for the three months ended March 31, 2015

(d) Income tax in the adjustments columns represent the adjustment to income tax expense required to arrive at an adjusted effective tax rate on adjusted income before taxes.

(e) The adjustment reflects the elimination of costs incurred to manage our China Joint Venture investment.

  • $0.8 million ($0.5 million, net of tax) for the three months ended March 31, 2016
  • $0.4 million ($0.3 million, net of tax) for the three months ended March 31, 2015

(f) The adjustment reflects the elimination of loss incurred on the investment in the China Joint Venture.

  • $2.0 million for the three months ended March 31, 2016
  • $3.9 million for the three months ended March 31, 2015

(g) The adjustment reflects non-cash related stock-based compensation expense, excluding amounts already included in IPO grants.

  • $12.8 million for the three months ended March 31, 2016
  • $10.6 million for the three months ended March 31, 2015