ý
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2017
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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)
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(I.R.S. Employer
Identification No.)
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11 River Road, Wilton, CT
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06897
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(Address of Principal Executive Offices)
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(Zip Code)
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Title of Each Class
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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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Page No.
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PART I.
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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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the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement (as defined under the section entitled “Business” in this Annual Report on Form 10-K) could have a material adverse effect on us and our stock price;
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•
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the inability to consummate the proposed Merger (as defined under the section entitled “Business” in this Annual Report on Form 10-K) or the inability to consummate the Merger in the timeframe or manner currently anticipated, due to the failure to satisfy any of the conditions to completion of the proposed Merger, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the Merger, could have a material adverse effect on us and our stock price;
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•
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risks related to disruption of management's attention from our ongoing business operations due to the proposed Merger;
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•
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the effect of the announcement of the proposed Merger on the Company's relationships with its customers, suppliers, employees and others with whom it has relationships;
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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, including our launch into select grocery and mass retailers in the FDM channel;
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•
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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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•
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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;
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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; and
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•
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We may not be able to successfully complete construction of our new dry food facility, and ramp up operations at such facility or our new treats facility.
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•
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execution of the proposed Merger will require significant time and attention from management, which may distract them from the operation of our business and the execution of other initiatives that may have been beneficial to us;
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•
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our employees may be distracted due to uncertainty about their future roles with the Company pending the completion of the Merger;
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•
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parties with which we have business relationships may experience uncertainty as to the future of such relationships and may delay or defer certain business decisions, seek alternative relationships with third parties or alter their present business relationships with us;
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•
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we could be subject to litigation related to the proposed Merger, which could result in significant costs and expenses;
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•
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we will be required to pay significant costs and expenses relating to the Merger, such as legal, accounting and other professional fees, whether or not the Merger is completed;
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•
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we may have to forgo other opportunities in favor of the Merger instead of pursuing such other opportunities that could be beneficial to the Company; and
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•
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we may experience negative reactions from the financial markets, particularly if we fail to complete the Merger.
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•
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enter into distribution and other strategic arrangements with retailers and other potential distributors of our products;
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effectively compete in specialty and FDM channels;
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secure shelf space in the stores and websites of our retail partners;
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increase our brand recognition by effectively implementing our marketing strategy and advertising initiatives;
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expand and maintain brand loyalty;
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develop new products and product line extensions that appeal to consumers;
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maintain and, to the extent necessary, improve our high standards for product quality, safety and integrity;
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maintain sources for the required supply of quality raw ingredients to meet our growing demand;
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continue successfully to expand our internal manufacturing capabilities, including completing construction of our new dry food manufacturing facility and ramping up production of that facility;
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successfully operate our Heartland Facilities;
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further expand in both new and existing international markets;
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identify and successfully enter, and market our products in, new geographic markets and market segments; and
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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;
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customers in some foreign countries potentially having longer payment cycles;
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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;
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port conditions and the pricing of freight transport;
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the credit risk of local customers and distributors;
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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;
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unexpected changes in import and export regulations, processes and procedures;
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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;
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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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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;
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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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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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increased complexity of running a broader portfolio of products, brands or facilities, which may conflict with our existing business;
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risks associated with entering new markets in which we have limited or no experience;
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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;
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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;
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subjecting us to restrictive covenants that may limit our flexibility in operating our business; and
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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);
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cease the manufacture, use or sale of the infringing products;
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discontinue the use of the infringing processes;
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expend significant resources to develop non-infringing processes; and
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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.
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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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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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•
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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.
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Location
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Approximate
Square Footage
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Principal Use
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Owned or Leased
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Joplin, Missouri
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200,000
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Manufacturing
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Leased, expires December 2027
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215,000
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Distribution/warehousing/office
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Owned
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Monroe, Ohio
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535,000
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Distribution/warehousing
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Leased; expires December 2023
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Bellevue, Nebraska
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370,000
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Distribution/warehousing
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Leased; expires May 2025
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Wilton, Connecticut
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41,000
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Corporate headquarters
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Leased; expires June 2021
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Phoenix, Arizona
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8,600
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Sales office
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Leased; expires December 2018
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Market Price
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Fiscal Year Ended December 31, 2017
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High
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Low
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Fourth Quarter
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$
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33.09
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$
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25.00
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Third Quarter
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28.96
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21.51
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Second Quarter
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25.44
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21.71
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First Quarter
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25.96
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22.85
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Fiscal Year Ended December 31, 2016
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Fourth Quarter
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$
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26.03
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$
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21.60
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Third Quarter
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27.50
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23.16
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Second Quarter
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27.37
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22.50
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First Quarter
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25.98
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15.19
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Fiscal Year Ended December 31,
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2017
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2016
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2015
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2014
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2013
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(dollars in thousands, except share and per share amounts)
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Statements of Income Data:
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Net sales
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$
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1,274,589
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$
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1,149,778
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$
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1,027,447
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$
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917,760
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$
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719,509
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Operating income
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303,239
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220,922
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160,115
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179,003
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158,626
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|||||
Interest expense
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11,141
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14,619
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15,091
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13,887
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20,640
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Loss on extinguishment of debt
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—
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—
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|
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—
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—
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15,918
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Income before income taxes
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293,325
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206,808
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|
145,318
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165,289
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|
122,193
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Provision for income taxes
|
99,796
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|
76,567
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|
55,930
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63,358
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|
43,957
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|||||
Net income
|
$
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193,529
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$
|
130,241
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$
|
89,388
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$
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101,931
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$
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78,236
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Basic income per common share
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$
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0.99
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$
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0.66
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$
|
0.46
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$
|
0.52
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|
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$
|
0.40
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Diluted income per common share
|
$
|
0.97
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|
|
$
|
0.65
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|
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$
|
0.45
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|
|
$
|
0.52
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|
|
$
|
0.40
|
|
Dividends declared and paid per common share
|
$
|
—
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|
|
$
|
—
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|
|
$
|
—
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|
|
$
|
—
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|
|
$
|
—
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|
Basic weighted average shares
|
196,256,128
|
|
|
196,363,084
|
|
|
195,933,800
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|
|
195,735,309
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|
|
195,619,943
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|||||
Diluted weighted average shares
|
198,918,417
|
|
|
199,348,707
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|
|
198,047,453
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|
|
197,852,932
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|
|
196,559,084
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Balance Sheet Data (end of period):
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||||||||||
Cash and cash equivalents
|
$
|
282,223
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|
|
$
|
292,656
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|
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$
|
224,253
|
|
|
$
|
95,788
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|
|
$
|
42,874
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Working capital (1)
|
381,348
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|
|
386,346
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|
|
286,483
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|
|
202,243
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|
|
114,622
|
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|||||
Property, plant, and equipment, net
|
326,404
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|
|
162,232
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|
|
115,160
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|
|
113,863
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|
|
85,830
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|||||
Total assets (2)
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848,586
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650,350
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|
|
512,546
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|
|
383,167
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|
|
254,797
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|||||
Total debt, including current maturities
|
393,914
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|
|
383,137
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|
|
387,097
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|
|
391,057
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|
|
395,017
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|
|||||
Stockholders' equity (deficit)
|
299,136
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|
|
146,338
|
|
|
9,281
|
|
|
(87,297
|
)
|
|
(191,085
|
)
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|||||
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||||||||||
Other Data:
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|
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|
||||||||||
Adjusted net income (3)
|
$
|
194,800
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|
|
$
|
156,763
|
|
|
$
|
122,477
|
|
|
$
|
106,569
|
|
|
$
|
88,930
|
|
Adjusted basic net income per common share (3)
|
$
|
0.99
|
|
|
$
|
0.80
|
|
|
$
|
0.63
|
|
|
$
|
0.54
|
|
|
$
|
0.45
|
|
Adjusted diluted net income per common share (3)
|
$
|
0.98
|
|
|
$
|
0.79
|
|
|
$
|
0.62
|
|
|
$
|
0.54
|
|
|
$
|
0.45
|
|
EBITDA (4)
|
313,540
|
|
|
230,122
|
|
|
168,285
|
|
|
183,863
|
|
|
143,994
|
|
|||||
Adjusted EBITDA (4)
|
319,150
|
|
|
275,577
|
|
|
221,689
|
|
|
193,189
|
|
|
162,442
|
|
|||||
Depreciation and amortization
|
10,514
|
|
|
9,200
|
|
|
8,170
|
|
|
4,860
|
|
|
1,286
|
|
|||||
Capital expenditures
|
170,970
|
|
|
56,345
|
|
|
9,556
|
|
|
32,948
|
|
|
63,507
|
|
(1)
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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 year 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, 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, 2017
|
||||||||||
(dollars in thousands)
|
|
Pre-Tax
|
|
Income Taxes
|
|
After-Tax
|
||||||
|
|
|
|
|
|
|
||||||
Net income
|
|
$
|
293,325
|
|
|
$
|
99,796
|
|
|
$
|
193,529
|
|
Litigation expenses (3a)
|
|
1,927
|
|
|
656
|
|
|
1,271
|
|
|||
Adjusted net income
|
|
$
|
295,252
|
|
|
$
|
100,452
|
|
|
$
|
194,800
|
|
|
|
Fiscal Year Ended December 31, 2016
|
||||||||||
(dollars in thousands)
|
|
Pre-Tax
|
|
Income Taxes
|
|
After-Tax
|
||||||
|
|
|
|
|
|
|
||||||
Net income
|
|
$
|
206,808
|
|
|
$
|
76,567
|
|
|
$
|
130,241
|
|
Public offering preparation costs (3b)
|
|
2,132
|
|
|
—
|
|
|
2,132
|
|
|||
Litigation expenses (3a)
|
|
6,714
|
|
|
2,484
|
|
|
4,230
|
|
|||
Litigation provision (3c)
|
|
32,000
|
|
|
11,840
|
|
|
20,160
|
|
|||
Adjusted net income
|
|
$
|
247,654
|
|
|
$
|
90,891
|
|
|
$
|
156,763
|
|
|
|
Fiscal Year Ended December 31, 2015
|
||||||||||
(dollars in thousands)
|
|
Pre-Tax
|
|
Income Taxes
|
|
After-Tax
|
||||||
|
|
|
|
|
|
|
||||||
Net income
|
|
$
|
145,318
|
|
|
$
|
55,930
|
|
|
$
|
89,388
|
|
Public offering preparation costs (3b)
|
|
8,513
|
|
|
1,508
|
|
|
7,005
|
|
|||
Litigation expenses (3a)
|
|
10,071
|
|
|
3,827
|
|
|
6,244
|
|
|||
Litigation provision (3c)
|
|
32,000
|
|
|
12,160
|
|
|
19,840
|
|
|||
Adjusted net income
|
|
$
|
195,902
|
|
|
$
|
73,425
|
|
|
$
|
122,477
|
|
|
|
Fiscal Year Ended December 31, 2014
|
||||||||||
(dollars in thousands)
|
|
Pre-Tax
|
|
Income Taxes
|
|
After-Tax
|
||||||
|
|
|
|
|
|
|
||||||
Net income
|
|
$
|
165,289
|
|
|
$
|
63,358
|
|
|
$
|
101,931
|
|
Public offering preparation costs (3b)
|
|
2,886
|
|
|
1,109
|
|
|
1,777
|
|
|||
Litigation expenses (3a)
|
|
4,621
|
|
|
1,760
|
|
|
2,861
|
|
|||
Adjusted net income
|
|
$
|
172,796
|
|
|
$
|
66,227
|
|
|
$
|
106,569
|
|
|
|
Fiscal Year Ended December 31, 2013
|
||||||||||
(dollars in thousands)
|
|
Pre-Tax
|
|
Income Taxes
|
|
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 (3b)
|
|
1,110
|
|
|
413
|
|
|
697
|
|
|||
Adjusted net income
|
|
$
|
139,221
|
|
|
$
|
50,291
|
|
|
$
|
88,930
|
|
(3a)
|
Represents costs, net of insurance primarily related to the litigation with Nestlé Purina.
|
(3b)
|
Represents costs incurred in preparing for our public offerings and common stock issued to our employees.
|
(3c)
|
Represents provision related to the settlement agreements entered into in December 2015 and November 2016, 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, 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)
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income
|
|
$
|
193,529
|
|
|
$
|
130,241
|
|
|
$
|
89,388
|
|
|
$
|
101,931
|
|
|
$
|
78,236
|
|
Interest expense
|
|
11,141
|
|
|
14,619
|
|
|
15,091
|
|
|
13,887
|
|
|
20,640
|
|
|||||
Interest income
|
|
(1,440
|
)
|
|
(505
|
)
|
|
(294
|
)
|
|
(173
|
)
|
|
(125
|
)
|
|||||
Provision for income taxes
|
|
99,796
|
|
|
76,567
|
|
|
55,930
|
|
|
63,358
|
|
|
43,957
|
|
|||||
Depreciation and amortization
|
|
10,514
|
|
|
9,200
|
|
|
8,170
|
|
|
4,860
|
|
|
1,286
|
|
|||||
EBITDA
|
|
$
|
313,540
|
|
|
$
|
230,122
|
|
|
$
|
168,285
|
|
|
$
|
183,863
|
|
|
$
|
143,994
|
|
Loss on extinguishment of debt (4a)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15,918
|
|
|||||
Public offering preparation costs (4b)
|
|
—
|
|
|
2,132
|
|
|
8,513
|
|
|
2,886
|
|
|
1,110
|
|
|||||
Litigation expenses (4c)
|
|
1,927
|
|
|
6,714
|
|
|
10,071
|
|
|
4,621
|
|
|
—
|
|
|||||
Provision for legal settlements (4d)
|
|
—
|
|
|
32,000
|
|
|
32,000
|
|
|
—
|
|
|
—
|
|
|||||
Stock-based compensation (4e)
|
|
3,683
|
|
|
4,609
|
|
|
3,434
|
|
|
1,820
|
|
|
1,420
|
|
|||||
Adjusted EBITDA
|
|
$
|
319,150
|
|
|
$
|
275,577
|
|
|
$
|
222,303
|
|
|
$
|
193,190
|
|
|
$
|
162,442
|
|
(4a)
|
Represents the loss on extinguishment of debt associated with the repricing of our senior secured credit facilities in December 2013.
|
(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, respectively 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 eCommerce – which has resulted in the specialty channels growing faster than the FDM channel as pet parents are attracted to the variety and premium assortment offered by retailers in the specialty channels.
|
•
|
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 significantly reduced foot traffic and increased competition from other channels, including eCommerce; 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, and to retailers in the FDM channel;
|
•
|
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)
|
2017
|
|
2016
|
|
2015
|
|
2017
|
|
2016
|
|
2015
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Net sales
|
$
|
1,274,589
|
|
|
$
|
1,149,778
|
|
|
$
|
1,027,447
|
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
Cost of sales
|
685,501
|
|
|
634,095
|
|
|
608,616
|
|
|
53.8
|
%
|
|
55.1
|
%
|
|
59.2
|
%
|
|||
Gross profit
|
589,088
|
|
|
515,683
|
|
|
418,831
|
|
|
46.2
|
%
|
|
44.9
|
%
|
|
40.8
|
%
|
|||
Selling, general, and administrative expenses
|
285,849
|
|
|
262,761
|
|
|
226,716
|
|
|
22.4
|
%
|
|
22.9
|
%
|
|
22.1
|
%
|
|||
Provision for legal settlement
|
—
|
|
|
32,000
|
|
|
32,000
|
|
|
—
|
%
|
|
2.8
|
%
|
|
3.1
|
%
|
|||
Operating income
|
303,239
|
|
|
220,922
|
|
|
160,115
|
|
|
23.8
|
%
|
|
19.2
|
%
|
|
15.6
|
%
|
|||
Interest expense
|
11,141
|
|
|
14,619
|
|
|
15,091
|
|
|
0.9
|
%
|
|
1.3
|
%
|
|
1.5
|
%
|
|||
Interest income
|
(1,440
|
)
|
|
(505
|
)
|
|
(294
|
)
|
|
(0.1
|
)%
|
|
—
|
%
|
|
—
|
%
|
|||
Other non-operating expense, net
|
213
|
|
|
—
|
|
|
—
|
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|||
Income before income taxes
|
293,325
|
|
|
206,808
|
|
|
145,318
|
|
|
23.0
|
%
|
|
18.0
|
%
|
|
14.1
|
%
|
|||
Provision for income taxes
|
99,796
|
|
|
76,567
|
|
|
55,930
|
|
|
7.8
|
%
|
|
6.7
|
%
|
|
5.4
|
%
|
|||
Net income
|
$
|
193,529
|
|
|
$
|
130,241
|
|
|
$
|
89,388
|
|
|
15.2
|
%
|
|
11.3
|
%
|
|
8.7
|
%
|
Basic net income per common share
|
$
|
0.99
|
|
|
$
|
0.66
|
|
|
$
|
0.46
|
|
|
|
|
|
|
|
|||
Diluted net income per common share
|
$
|
0.97
|
|
|
$
|
0.65
|
|
|
$
|
0.45
|
|
|
|
|
|
|
|
•
|
a pledge of 100% of the equity interests directly held by the Company and each guarantor in any wholly-owned material subsidiary of the Company or any guarantor (which pledge, in the case of any non-U.S. subsidiary or FSHCO, will not include more than 65% of the voting stock of such non-U.S. subsidiary or FSHCO), subject to certain exceptions; and
|
•
|
a security interest in substantially all of the tangible and intangible assets of the Company and each guarantor, subject to customary 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)
|
$
|
398,000
|
|
|
$
|
4,000
|
|
|
$
|
12,000
|
|
|
$
|
8,000
|
|
|
$
|
374,000
|
|
Interest on debt (2)
|
88,198
|
|
|
14,194
|
|
|
41,645
|
|
|
27,024
|
|
|
5,335
|
|
|||||
Operating lease obligations
|
35,857
|
|
|
6,843
|
|
|
17,828
|
|
|
8,864
|
|
|
2,322
|
|
|||||
Capital lease obligations
|
102
|
|
|
58
|
|
|
44
|
|
|
—
|
|
|
—
|
|
|||||
Finished goods minimum purchase obligations (3)
|
15,863
|
|
|
13,596
|
|
|
2,267
|
|
|
—
|
|
|
—
|
|
|||||
Raw material purchase obligations
|
456,909
|
|
|
333,789
|
|
|
123,120
|
|
|
—
|
|
|
—
|
|
|||||
Total contractual obligations
|
$
|
994,987
|
|
|
$
|
372,479
|
|
|
$
|
196,963
|
|
|
$
|
43,888
|
|
|
$
|
381,657
|
|
|
|
|
Page No.
|
|
December 31,
2017 |
|
December 31,
2016 |
||||
|
|
|
|
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
282,223
|
|
|
$
|
292,656
|
|
Receivables, net
|
150,260
|
|
|
115,446
|
|
||
Inventories
|
79,945
|
|
|
70,941
|
|
||
Prepaid expenses and other current assets
|
7,893
|
|
|
6,130
|
|
||
Total current assets
|
520,321
|
|
|
485,173
|
|
||
|
|
|
|
||||
Restricted cash
|
781
|
|
|
781
|
|
||
Property, plant, and equipment, net
|
326,404
|
|
|
162,232
|
|
||
Deferred income taxes
|
52
|
|
|
1,311
|
|
||
Other assets
|
1,028
|
|
|
853
|
|
||
Total assets
|
$
|
848,586
|
|
|
$
|
650,350
|
|
|
|
|
|
||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Current maturities of long-term debt
|
$
|
4,000
|
|
|
$
|
3,960
|
|
Accounts payable
|
63,979
|
|
|
35,238
|
|
||
Other current liabilities
|
70,994
|
|
|
59,629
|
|
||
Total current liabilities
|
138,973
|
|
|
98,827
|
|
||
|
|
|
|
||||
Long-term debt
|
389,914
|
|
|
379,177
|
|
||
Deferred income taxes
|
7,095
|
|
|
12,660
|
|
||
Other long-term liabilities
|
13,468
|
|
|
13,348
|
|
||
Total liabilities
|
549,450
|
|
|
504,012
|
|
||
|
|
|
|
||||
Commitments and contingencies
|
|
|
|
||||
Stockholders' equity:
|
|
|
|
||||
Preferred stock; $0.01 par value; 150,000,000 shares authorized; none issued or outstanding at December 31, 2017 and December 31, 2016
|
—
|
|
|
—
|
|
||
Common stock, voting; $0.01 par value; 1,500,000,000 shares authorized; 197,615,064 and 196,524,010 shares issued at December 31, 2017 and December 31, 2016, respectively
|
1,976
|
|
|
1,965
|
|
||
Additional paid-in capital
|
81,113
|
|
|
71,420
|
|
||
Retained earnings
|
266,221
|
|
|
72,692
|
|
||
Accumulated other comprehensive income (loss)
|
(174
|
)
|
|
261
|
|
||
Treasury stock, at cost: 2,092,774 and no shares at December 31, 2017 and December 31, 2016, respectively
|
(50,000
|
)
|
|
—
|
|
||
Total stockholders' equity
|
299,136
|
|
|
146,338
|
|
||
Total liabilities and stockholders' equity
|
$
|
848,586
|
|
|
$
|
650,350
|
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
|
|
|
|
|
||||||
Net sales
|
$
|
1,274,589
|
|
|
$
|
1,149,778
|
|
|
$
|
1,027,447
|
|
Cost of sales
|
685,501
|
|
|
634,095
|
|
|
608,616
|
|
|||
Gross profit
|
589,088
|
|
|
515,683
|
|
|
418,831
|
|
|||
Selling, general, and administrative expenses
|
285,849
|
|
|
262,761
|
|
|
226,716
|
|
|||
Provision for legal settlement
|
—
|
|
|
32,000
|
|
|
32,000
|
|
|||
Operating income
|
303,239
|
|
|
220,922
|
|
|
160,115
|
|
|||
Interest expense
|
11,141
|
|
|
14,619
|
|
|
15,091
|
|
|||
Interest income
|
(1,440
|
)
|
|
(505
|
)
|
|
(294
|
)
|
|||
Other non-operating expense, net
|
213
|
|
|
—
|
|
|
—
|
|
|||
Income before income taxes
|
293,325
|
|
|
206,808
|
|
|
145,318
|
|
|||
Provision for income taxes
|
99,796
|
|
|
76,567
|
|
|
55,930
|
|
|||
Net income
|
$
|
193,529
|
|
|
$
|
130,241
|
|
|
$
|
89,388
|
|
|
|
|
|
|
|
||||||
Basic net income per common share
|
$
|
0.99
|
|
|
$
|
0.66
|
|
|
$
|
0.46
|
|
Diluted net income per common share
|
$
|
0.97
|
|
|
$
|
0.65
|
|
|
$
|
0.45
|
|
Basic weighted average shares
|
196,256,128
|
|
|
196,363,084
|
|
|
195,933,800
|
|
|||
Diluted weighted average shares
|
198,918,417
|
|
|
199,348,746
|
|
|
198,047,453
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Net income
|
|
$
|
193,529
|
|
|
$
|
130,241
|
|
|
$
|
89,388
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
||||||
Foreign currency translation adjustment
|
|
(435
|
)
|
|
292
|
|
|
(31
|
)
|
|||
Other comprehensive income (loss), before tax
|
|
(435
|
)
|
|
292
|
|
|
(31
|
)
|
|||
Income tax expense on other comprehensive income (loss)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Other comprehensive income (loss), net of tax
|
|
(435
|
)
|
|
292
|
|
|
(31
|
)
|
|||
Comprehensive income
|
|
$
|
193,094
|
|
|
$
|
130,533
|
|
|
$
|
89,357
|
|
|
Common Stock
|
|
|
|
|
|
|
|
Treasury Stock
|
|
|||||||||||||||||||
|
Shares
|
|
Amount
|
|
Additional paid-in capital
|
|
(Accumulated deficit) retained earnings
|
|
Accumulated other comprehensive income (loss)
|
|
Shares
|
|
Amount
|
|
Total
|
||||||||||||||
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
|
|
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(435
|
)
|
|
—
|
|
|
—
|
|
|
(435
|
)
|
||||||
Exercise of stock options
|
1,055,624
|
|
|
11
|
|
|
6,010
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,021
|
|
||||||
Issuance of restricted stock awards
|
35,430
|
|
|
—
|
|
|
815
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
815
|
|
||||||
Repurchases of common stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,092,774
|
|
|
(50,000
|
)
|
|
(50,000
|
)
|
||||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
2,868
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
2,868
|
|
||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
193,529
|
|
|
—
|
|
|
|
|
|
|
193,529
|
|
||||||||
Balance at December 31, 2017
|
197,615,064
|
|
|
$
|
1,976
|
|
|
$
|
81,113
|
|
|
$
|
266,221
|
|
|
$
|
(174
|
)
|
|
2,092,774
|
|
|
$
|
(50,000
|
)
|
|
$
|
299,136
|
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net income
|
$
|
193,529
|
|
|
$
|
130,241
|
|
|
$
|
89,388
|
|
Adjustments to reconcile net income to net cash provided
|
|
|
|
|
|
||||||
by operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
10,514
|
|
|
9,200
|
|
|
8,170
|
|
|||
Amortization of debt issuance costs
|
354
|
|
|
122
|
|
|
122
|
|
|||
Stock-based compensation
|
3,683
|
|
|
4,609
|
|
|
3,434
|
|
|||
Deferred compensation
|
—
|
|
|
—
|
|
|
19
|
|
|||
Loss on disposal of fixed assets
|
593
|
|
|
49
|
|
|
89
|
|
|||
Deferred income taxes
|
(4,306
|
)
|
|
11,988
|
|
|
(12,071
|
)
|
|||
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
|
(33,611
|
)
|
|
(35,509
|
)
|
|
(1,487
|
)
|
|||
Inventories
|
(8,930
|
)
|
|
12,493
|
|
|
5,140
|
|
|||
Prepaid expenses and other assets
|
(1,928
|
)
|
|
(2,109
|
)
|
|
(1,189
|
)
|
|||
Accounts payable
|
27,995
|
|
|
4,563
|
|
|
(1,733
|
)
|
|||
Other liabilities
|
5,966
|
|
|
23,596
|
|
|
17,873
|
|
|||
Net cash provided by operating activities
|
193,859
|
|
|
127,243
|
|
|
138,219
|
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Capital expenditures
|
(170,970
|
)
|
|
(56,345
|
)
|
|
(9,556
|
)
|
|||
Restricted cash
|
—
|
|
|
(308
|
)
|
|
—
|
|
|||
Proceeds from the sale of fixed assets
|
—
|
|
|
15
|
|
|
—
|
|
|||
Net cash used in investing activities
|
(170,970
|
)
|
|
(56,638
|
)
|
|
(9,556
|
)
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
||||||
Proceeds from issuance of debt
|
400,000
|
|
|
—
|
|
|
—
|
|
|||
Repayment of long-term debt
|
(382,147
|
)
|
|
—
|
|
|
—
|
|
|||
Repurchase of common stock
|
(50,000
|
)
|
|
—
|
|
|
—
|
|
|||
Payment of debt issuance costs
|
(4,352
|
)
|
|
—
|
|
|
—
|
|
|||
Principal payments on long-term debt
|
(2,990
|
)
|
|
(3,960
|
)
|
|
(3,960
|
)
|
|||
Income tax benefit from exercise of stock options
|
—
|
|
|
—
|
|
|
1,536
|
|
|||
Proceeds from exercise of stock options
|
6,021
|
|
|
1,915
|
|
|
2,251
|
|
|||
Net cash used in financing activities
|
(33,468
|
)
|
|
(2,045
|
)
|
|
(173
|
)
|
|||
Effect of exchange rate changes on cash and cash equivalents
|
146
|
|
|
(157
|
)
|
|
(25
|
)
|
|||
Net (decrease) increase in cash and cash equivalents
|
(10,433
|
)
|
|
68,403
|
|
|
128,465
|
|
|||
Cash and cash equivalents at beginning of period
|
292,656
|
|
|
224,253
|
|
|
95,788
|
|
|||
Cash and cash equivalents at end of period
|
$
|
282,223
|
|
|
$
|
292,656
|
|
|
$
|
224,253
|
|
|
|
|
|
|
|
||||||
Supplemental schedule of non-cash investing activities:
|
|
|
|
|
|
||||||
Accruals related to property, plant and equipment
|
5,411
|
|
|
—
|
|
|
—
|
|
(dollars in thousands)
|
2017
|
|
2016
|
||||
Trade receivables, net
|
$
|
139,165
|
|
|
$
|
110,873
|
|
Other receivables
|
11,095
|
|
|
4,573
|
|
||
Total
|
$
|
150,260
|
|
|
$
|
115,446
|
|
(dollars in thousands)
|
2017
|
|
2016
|
||||
Finished goods
|
$
|
76,606
|
|
|
$
|
67,187
|
|
Work in process
|
213
|
|
|
286
|
|
||
Raw materials
|
2,104
|
|
|
2,346
|
|
||
Packaging and supplies
|
1,022
|
|
|
1,122
|
|
||
Total
|
$
|
79,945
|
|
|
$
|
70,941
|
|
(dollars in thousands)
|
2017
|
|
2016
|
||||
Buildings
|
$
|
59,314
|
|
|
$
|
59,314
|
|
Machinery and equipment
|
52,383
|
|
|
49,079
|
|
||
Computer software
|
17,635
|
|
|
14,849
|
|
||
Computer equipment
|
4,855
|
|
|
4,599
|
|
||
Furniture and fixtures
|
1,876
|
|
|
1,772
|
|
||
Leasehold improvements
|
1,590
|
|
|
1,477
|
|
||
Land improvements
|
493
|
|
|
493
|
|
||
Land
|
395
|
|
|
401
|
|
||
Buildings improvements
|
613
|
|
|
189
|
|
||
Construction in progress
|
219,234
|
|
|
53,891
|
|
||
|
358,388
|
|
|
186,064
|
|
||
Accumulated depreciation and amortization
|
(31,984
|
)
|
|
(23,832
|
)
|
||
Total
|
$
|
326,404
|
|
|
$
|
162,232
|
|
(dollars in thousands)
|
2017
|
|
2016
|
||||
Term loan
|
$
|
393,914
|
|
|
$
|
383,137
|
|
Less current maturities
|
(4,000
|
)
|
|
(3,960
|
)
|
||
Total long-term debt
|
$
|
389,914
|
|
|
$
|
379,177
|
|
(dollars in thousands)
|
2017
|
|
2016
|
||||
Trade promotions
|
$
|
25,146
|
|
|
$
|
18,658
|
|
Accrued bonuses
|
11,196
|
|
|
12,951
|
|
||
Accrued capital expenditures
|
5,411
|
|
|
—
|
|
||
Accrued inventory in transit
|
2,921
|
|
|
5,278
|
|
||
Accrued media
|
1,287
|
|
|
10,109
|
|
||
Other current liabilities
|
25,033
|
|
|
12,633
|
|
||
Total
|
$
|
70,994
|
|
|
$
|
59,629
|
|
|
For the years ended
|
||||||||||
(dollars in thousands)
|
December 31,
2017 |
|
December 31,
2016 |
|
December 31,
2015 |
||||||
Current tax provision:
|
|
|
|
|
|
||||||
Federal
|
$
|
91,762
|
|
|
$
|
57,605
|
|
|
$
|
60,826
|
|
State
|
12,274
|
|
|
6,933
|
|
|
7,164
|
|
|||
Foreign
|
66
|
|
|
41
|
|
|
11
|
|
|||
Total current provision
|
104,102
|
|
|
64,579
|
|
|
68,001
|
|
|||
|
|
|
|
|
|
||||||
Deferred tax provision:
|
|
|
|
|
|
||||||
Federal
|
(6,833
|
)
|
|
9,391
|
|
|
(9,855
|
)
|
|||
State
|
2,532
|
|
|
2,644
|
|
|
(2,216
|
)
|
|||
Foreign
|
(5
|
)
|
|
(47
|
)
|
|
—
|
|
|||
Total deferred (benefit) provision
|
(4,306
|
)
|
|
11,988
|
|
|
(12,071
|
)
|
|||
Total provision
|
$
|
99,796
|
|
|
$
|
76,567
|
|
|
$
|
55,930
|
|
|
For the years ended
|
||||||||||
|
December 31,
2017 |
|
December 31,
2016 |
|
December 31,
2015 |
||||||
|
|
|
|
|
|
||||||
United States
|
$
|
298,994
|
|
|
$
|
211,419
|
|
|
$
|
147,427
|
|
Foreign
|
(5,669
|
)
|
|
(4,611
|
)
|
|
(2,109
|
)
|
|||
Total income before income taxes
|
$
|
293,325
|
|
|
$
|
206,808
|
|
|
$
|
145,318
|
|
|
For the years ended
|
|||||||
|
December 31,
2017 |
|
December 31,
2016 |
|
December 31,
2015 |
|||
|
|
|
|
|
|
|||
Federal statutory income tax rate
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
State income taxes, net of federal income tax benefit
|
3.4
|
|
|
3.3
|
|
|
2.5
|
|
Non-deductible expenses
|
0.3
|
|
|
0.7
|
|
|
2.0
|
|
Domestic manufacturing deduction
|
(1.6
|
)
|
|
(1.4
|
)
|
|
(1.3
|
)
|
Unrecognized tax benefits
|
1.3
|
|
|
0.5
|
|
|
0.8
|
|
Valuation allowance
|
—
|
|
|
0.5
|
|
|
0.5
|
|
Stock option exercises
|
(2.6
|
)
|
|
(0.7
|
)
|
|
—
|
|
Impact of Tax Act
|
(1.8
|
)
|
|
—
|
|
|
—
|
|
Other
|
—
|
|
|
(0.9
|
)
|
|
(1.0
|
)
|
Total
|
34.0
|
%
|
|
37.0
|
%
|
|
38.5
|
%
|
(dollars in thousands)
|
|
||
Balance at December 31, 2014
|
$
|
7,518
|
|
Increases in uncertain tax benefits as a result of tax positions taken in the current year
|
1,845
|
|
|
Decreases in uncertain tax benefits from a lapse of applicable statute of limitations
|
(156
|
)
|
|
Balance at December 31, 2015
|
$
|
9,207
|
|
Increases in uncertain tax benefits as a result of tax positions taken in a prior year
|
287
|
|
|
Increases in uncertain tax benefits as a result of tax positions taken in the current year
|
1,367
|
|
|
Decreases in uncertain tax benefits from a lapse of applicable statute of limitations
|
(233
|
)
|
|
Decreases in uncertain tax benefits as a result of tax positions taken in a prior year
|
(2,028
|
)
|
|
Balance at December 31, 2016
|
$
|
8,600
|
|
Increases in uncertain tax benefits as a result of tax positions taken in a prior year
|
1,013
|
|
|
Increases in uncertain tax benefits as a result of tax positions taken in the current year
|
545
|
|
|
Decreases in uncertain tax benefits from a lapse of applicable statute of limitations
|
(739
|
)
|
|
Decreases in uncertain tax benefits as a result of tax positions taken in a prior year
|
(93
|
)
|
|
Balance at December 31, 2017
|
$
|
9,326
|
|
(dollars in thousands)
|
December 31,
2017 |
|
December 31,
2016 |
||||
Deferred tax assets:
|
|
||||||
Inventories
|
$
|
2,010
|
|
|
$
|
1,440
|
|
Accrued liabilities
|
249
|
|
|
413
|
|
||
Stock-based compensation
|
1,587
|
|
|
2,544
|
|
||
Long-term incentive plan
|
849
|
|
|
1,600
|
|
||
State net operating loss carryforwards
|
317
|
|
|
1,509
|
|
||
Foreign net operating loss carryforwards
|
2,740
|
|
|
1,380
|
|
||
State tax credits
|
1,514
|
|
|
1,447
|
|
||
Federal benefit related to uncertain tax positions
|
1,922
|
|
|
2,724
|
|
||
Other
|
664
|
|
|
1,057
|
|
||
Deferred tax assets, gross
|
11,852
|
|
|
14,114
|
|
||
Valuation allowance
|
(3,489
|
)
|
|
(1,772
|
)
|
||
Total deferred tax assets, net
|
8,363
|
|
|
12,342
|
|
||
|
|
|
|
||||
Deferred tax liabilities:
|
|
|
|
||||
Property, plant, and equipment
|
(14,910
|
)
|
|
(22,173
|
)
|
||
Other
|
(496
|
)
|
|
(1,518
|
)
|
||
Total deferred tax liabilities
|
(15,406
|
)
|
|
(23,691
|
)
|
||
|
|
|
|
||||
Net deferred tax liabilities
|
$
|
(7,043
|
)
|
|
$
|
(11,349
|
)
|
|
For the years ended
|
||||||||||
|
December 31,
2017 |
|
December 31,
2016 |
|
December 31,
2015 |
||||||
|
|
|
|
|
|
||||||
Volatility
|
30.68
|
%
|
|
32.58
|
%
|
|
23.85
|
%
|
|||
Risk-free interest rate
|
1.93
|
%
|
|
1.23
|
%
|
|
1.88
|
%
|
|||
Expected term (years)
|
5
|
|
|
5
|
|
|
6.5
|
|
|||
Dividend yield
|
—
|
|
|
—
|
|
|
—
|
|
|||
Grant-date fair value
|
$
|
7.00
|
|
|
$
|
7.81
|
|
|
$
|
5.74
|
|
|
Number of
Shares |
|
Weighted Average Exercise Price Per Share
|
|
Weighted Average Remaining Contractual Life (In Years)
|
|
Aggregate Intrinsic Value
|
|||||
|
|
|
|
|
|
|
|
|||||
Outstanding, December 31, 2016
|
4,248,156
|
|
|
$
|
7.21
|
|
|
|
|
|
||
Granted
|
383,887
|
|
|
$
|
23.00
|
|
|
|
|
|
||
Exercised
|
(1,055,624
|
)
|
|
$
|
5.71
|
|
|
|
|
|
||
Forfeited
|
(117,245
|
)
|
|
$
|
15.99
|
|
|
|
|
|
||
Expired
|
(42,641
|
)
|
|
$
|
10.73
|
|
|
|
|
|
||
Outstanding, December 31, 2017
|
3,416,533
|
|
|
$
|
9.09
|
|
|
3.58
|
|
$
|
81.1
|
|
Exercisable, December 31, 2017
|
2,727,179
|
|
|
$
|
5.83
|
|
|
2.35
|
|
$
|
73.6
|
|
|
RSAs
|
|
RSUs
|
||||||||||
|
Number of
Shares |
|
Weighted Average Grant Date Fair Value
|
|
Number of
Shares |
|
Weighted Average Grant Date Fair Value
|
||||||
Outstanding at December 31, 2016
|
—
|
|
|
$
|
—
|
|
|
61,861
|
|
|
$
|
25.45
|
|
Granted
|
35,430
|
|
|
$
|
23.00
|
|
|
106,609
|
|
|
$
|
23.00
|
|
Vested
|
(35,430
|
)
|
|
$
|
23.00
|
|
|
(1,220
|
)
|
|
$
|
24.58
|
|
Forfeited
|
—
|
|
|
$
|
—
|
|
|
(9,458
|
)
|
|
$
|
24.44
|
|
Outstanding at December 31, 2017
|
—
|
|
|
$
|
—
|
|
|
157,792
|
|
|
$
|
23.86
|
|
|
|
Twelve months ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
|||||||
(dollars in thousands, except for share data)
|
|
|
|
|
|
|
||||||
Net income
|
|
$
|
193,529
|
|
|
$
|
130,241
|
|
|
$
|
89,388
|
|
|
|
|
|
|
|
|
||||||
Basic weighted average number of shares outstanding
|
|
196,256,128
|
|
|
196,363,084
|
|
|
195,933,800
|
|
|||
Dilutive effect of stock options and RSUs
|
|
2,662,289
|
|
|
2,985,662
|
|
|
2,113,653
|
|
|||
Diluted weighted average number of shares outstanding
|
|
198,918,417
|
|
|
199,348,746
|
|
|
198,047,453
|
|
|||
|
|
|
|
|
|
|
||||||
Basic net income per common share
|
|
$
|
0.99
|
|
|
$
|
0.66
|
|
|
$
|
0.46
|
|
Diluted net income per common share
|
|
$
|
0.97
|
|
|
$
|
0.65
|
|
|
$
|
0.45
|
|
Anti-dilutive shares excluded from diluted earnings per share computation
|
|
512,684
|
|
|
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
|
$
|
15,863
|
|
|
$
|
13,596
|
|
|
$
|
2,267
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Raw material purchase obligations
|
456,909
|
|
|
333,789
|
|
|
123,120
|
|
|
—
|
|
|
—
|
|
|||||
Total contractual obligations
|
$
|
472,772
|
|
|
$
|
347,385
|
|
|
$
|
125,387
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Quarter 1
|
|
Quarter 2
|
|
Quarter 3
|
|
Quarter 4
|
||||||||
2017:
|
|
|
|
|
|
|
|
||||||||
Net sales
|
$
|
301,951
|
|
|
$
|
294,831
|
|
|
$
|
340,845
|
|
|
$
|
336,963
|
|
Gross profit
|
138,675
|
|
|
137,737
|
|
|
160,817
|
|
|
151,859
|
|
||||
Selling, general, and administrative expenses
|
66,311
|
|
|
69,423
|
|
|
75,188
|
|
|
75,049
|
|
||||
Operating income
|
72,364
|
|
|
68,314
|
|
|
85,629
|
|
|
76,810
|
|
||||
Net income
|
44,090
|
|
|
42,682
|
|
|
53,137
|
|
|
53,620
|
|
||||
Basic net income per common share
|
$
|
0.22
|
|
|
$
|
0.22
|
|
|
$
|
0.27
|
|
|
$
|
0.27
|
|
Diluted net income per common share
|
$
|
0.22
|
|
|
$
|
0.21
|
|
|
$
|
0.27
|
|
|
$
|
0.27
|
|
Basic weighted average shares
|
196,621,906
|
|
|
196,994,210
|
|
|
196,121,691
|
|
|
195,302,613
|
|
||||
Diluted weighted average shares
|
199,524,913
|
|
|
199,618,809
|
|
|
198,659,459
|
|
|
197,889,189
|
|
||||
|
|
|
|
|
|
|
|
||||||||
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
|
|
|
(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.
|
2,842,346
|
|
(1
|
)
|
$
|
6.12
|
|
|
205,978
|
|
Blue Buffalo Pet Products, Inc. 2015 Omnibus Incentive Plan
|
731,979
|
|
(2
|
)
|
$
|
23.83
|
|
|
7,552,780
|
|
Equity compensation plans not approved by security holders
|
—
|
|
|
N/A
|
|
|
—
|
|
||
Total
|
3,574,325
|
|
|
|
|
7,758,758
|
|
|
|
|
Page No.
|
|
(A)
|
1.
|
Audited Consolidated Financial Statements
|
|
|
|
|
|
||
|
|
|
||
|
|
|
||
|
|
|
||
|
|
|
||
|
2.
|
Financial Statement Schedules: None
|
—
|
|
(B)
|
|
Exhibits:
|
|
|
|
Exhibit Number
|
|
Description of Exhibits
|
3.1
|
|
|
3.2
|
|
|
10.1**
|
|
|
10.2†**
|
|
|
10.3†**
|
|
|
10.4†**
|
|
|
10.4A†**
|
|
|
10.5†**
|
|
10.6†**
|
|
|
10.7†**
|
|
|
10.8†**
|
|
|
10.9†**
|
|
|
10.10†**
|
|
|
10.11†**
|
|
|
10.12**
|
|
|
21.1
|
|
|
23.1
|
|
|
31.1
|
|
|
31.2
|
|
|
32.1
|
|
|
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)
|
February 26, 2018
|
William Bishop, Jr.
|
|
Date
|
|
/s/ Michael Nathenson
|
|
Executive Vice President, Chief Financial Officer, and Treasurer
(Principal Financial Officer and Principal Accounting Officer)
|
February 26, 2018
|
Michael Nathenson
|
|
Date
|
|
/s/ William Bishop
|
|
Non-Executive Chairman of the Board and Director
|
February 26, 2018
|
William Bishop
|
|
Date
|
|
/s/ Raymond Debbane
|
|
Director
|
February 26, 2018
|
Raymond Debbane
|
|
Date
|
|
/s/ Philippe Amouyal
|
|
Director
|
February 26, 2018
|
Philippe Amouyal
|
|
Date
|
|
/s/ Evren Bilimer
|
|
Director
|
February 26, 2018
|
Evren Bilimer
|
|
Date
|
|
/s/ Aflalo Guimaraes
|
|
Director
|
February 26, 2018
|
Aflalo Guimaraes
|
|
Date
|
|
/s/ Michael A. Eck
|
|
Director
|
February 26, 2018
|
Michael A. Eck
|
|
Date
|
|
/s/ Frances Frei
|
|
Director
|
February 26, 2018
|
Frances Frei
|
|
Date
|
|
/s/ Amy Schulman
|
|
Director
|
February 26, 2018
|
Amy Schulman
|
|
Date
|
Entity Name
|
|
Jurisdiction of Organization
|
Blue Pet Products, Inc.
|
|
Delaware
|
Blue Buffalo Company, Ltd.
|
|
Delaware
|
Sierra Pet Products, LLC
|
|
Delaware
|
Great Plains Leasing, LLC
|
|
Delaware
|
Heartland Pet Food Manufacturing, Inc.
|
|
Delaware
|
Heartland Pet Food Manufacturing Holding, LLC
|
|
Delaware
|
Heartland Pet Food Manufacturing Indiana, LLC
|
|
Delaware
|
Blue Buffalo Pet Products Canada, Ltd.
|
|
Canada
|
Blue Buffalo Mexico, S. de R.L. de C.V.
|
|
Mexico
|
Blue Buffalo Import Mexico, S. de R.L. de C.V.
|
|
Mexico
|
Blue Buffalo Japan Kabushiki Kaisha
|
|
Japan
|
Blue Buffalo Pet Food Co., Ltd.
|
|
Taiwan (Republic of China)
|
1.
|
I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2017 of Blue Buffalo Pet Products, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
1.
|
I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2017 of Blue Buffalo Pet Products, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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•
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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•
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented therein.
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