Fri 08/03/2018 16:46 PM
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Privately owned Greek yogurt maker Chobani released earnings on Thursday for the second quarter ended June 30, reporting a 24% year-over-year decrease in adjusted EBITDA to $52 million, a 7.7% year-over-year decline in net sales to $322.9 million and a year-over-year gross margin decline of 460 bps to 27.1%, according to sources. Margins were hurt by higher transportation and logistics costs, material cost inflation and a lack of absorption of overhead, sources say the company reported on a call to review earnings. Sources told Reorg that even with these year-over-year declines, the company has increased its capex guidance for the year and that the owners took a $25 million dividend in the first half of this year.

The company told Reorg in an emailed statement, “It’s no surprise the entire food category is seeing unique challenges and opportunities, some of which have been driven by unprecedented expansion over the past decade that brought an abundance of duplication and irrational actions by larger players.” The company said “our incredibly strong team has overseen industry-leading results and innovation in recent years and will continue to execute plans designed to drive revenue, market share and quality growth.”

Chobani’s June 30 LTM adjusted EBITDA was $218 million, and fiscal 2017 EBITDA totaled $242 million, according to sources.

As shown below, company’s capital structure includes a $150 million cash flow revolver, an $825 million L+350 first-lien term loan B due Oct. 7, 2023, and $530 million of 7.5% senior notes due April 15, 2025. The company’s revolver was undrawn at quarter-end, according to sources.

After the release of earnings, the company’s term loan was quoted by a trading desk at 97.25 / 98.25, down from 99.875 / 100.375 on Wednesday. The company’s 7.5% notes due April 15, 2025, also traded down to 87 today, compared with 92.5 on Aug. 1, prior to the release of earnings, according to TRACE.

Management said on Thursday’s earnings call that rebranding during the quarter led to certain customer confusion, but it added that the company is now working to optimize its product labeling, with benefits expected to flow through in the second half of the year, sources told Reorg. The company also said on the call that while it will be making tweaks to ensure clarity for customers, it has received positive feedback on the rebrand and intends to stick with the new brand identity. In the first half of the year, Chobani drove household penetration to all-time highs and broke order and shipment records, the company said in a June 28 press release, citing internal Chobani data and Nielsen Total U.S. Household Panel data.

The company increased its capital expenditures guidance to $75 million from the mid-$60 millions previously, and, as noted above, the owners took a $25 million dividend during the first half of the year, sources said.

Thursday’s second-quarter earnings release follows Chobani’s announcement on June 28 that it secured a minority investment from the Healthcare of Ontario Pension Plan that “will help support the Company as it continues to lead innovation in the yogurt category and invests in its business.” As a result of the transaction, TPG Capital, which held a 20% stake in the company after making a $750 million investment in 2014, exited its investment in the company, Chobani announced. HOOPP will be given one board seat as part of the investment, which “was facilitated through the Company's discussions with a number of selected investors to buy back warrants from TPG by issuing equity to HOOPP,” according to the announcement.

The company’s founder, Hamdi Ulukaya, owned 79% of the company under the TPG structure, with the Chobani Foundation holding 1% ownership, according to a December 2017 Moody’s report. June’s HOOPP announcement discloses that the change in the structure “will also provide Ulukaya and its employees an opportunity to increase their equity position by as much as 10%, bringing the total equity controlled by them to as much as 90%.”

Chobani has more than 2,000 employees and represents a nearly 20% share of the U.S. yogurt market, the announcement states, citing a Nielsen report for the 13-week period ending March 31. The announcement, citing IPSOS 2017 Brand Equity Tracking reports for the fourth quarters of 2016 and 2017, also states that Chobani has the highest brand loyalty in the U.S. yogurt market.

The announcement also states that TD Securities (USA) LLC and Centerview Partners LLC served as financial advisors and Gibson, Dunn & Crutcher LLC served as legal advisor to Chobani in this transaction, and that Osler, Hoskin & Harcourt LLP served as legal advisor to HOOPP Capital Partners.

The financials reported in this story have not been verified to Reorg by Chobani, as Chobani is a private company that does not publicly report financials.
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