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Armanino Foods: Record Breaking Year-to-Date Financial Results
Posted by: Mark Lin (IP Logged)
Date: December 12, 2012 09:59AM
Armanino Foods of Distinction Inc. (AMNF) is an international food company that manufactures and markets frozen Italian specialty food items such as pestos, sauces and filled pastas to the foodservice, retail and industrial markets. In addition to a classic Basil Pesto, Armanino offers other flavors such as cilantro, dried tomato & garlic, roasted red bell pepper, southwest chipotle, artichoke, roasted garlic and light basil pesto. Armanino’s organic line includes classic basil pesto. Frozen pastas, sauces and meatballs are also offered by Armanino Foods. All Armanino Foods products are completely natural, with no artificial preservatives or colors added in the manufacture of any of our products. Its products are marketed through a network of food brokers and sold to retail, foodservice, and industrial accounts.
On July 19, 2012, AMNF reported its highest quarterly sales, profits and earnings per share in its history. Year-to-date results for sales, profits and earnings per share were also company records.
AMNF currently trades at a trailing 12 months P/E of 11.06 and a trailing 12 months EV/EBITDA of 6.34. Current P/E valuations are at parity with its five-year average P/E of 11.88.
Financial and Business Risks
AMNF has a strong balance sheet with a moderate gross debt-to-equity of 30% and a net cash financial position. Operating leases, relating to its office and production facility, amount to approximately $609,722.
AMNF is "borrowing" to fund its share repurchases and this makes me a bit uncomfortable. It is funding its stock repurchase program mainly through a $2 million line of credit which it entered into with a financial institution back in September 2010, with the remaining balance being funded through cash reserves. As of Dec. 31, 2011, AMNF has drawn $1.9 million from its line of credit.
AMNF faces significant customer concentration risk, with its top two customers accounting for 62% and 15% of its outstanding receivables at Dec. 31, 2011. Also, 51% and 50% of its total gross sales were handled by a non-exclusive national distributor in 2011 and 2010, respectively.
AMNF is not concerned about sourcing its main product ingredient, basil, from a single source of supply, because it believes that the supplier produces the product at multiple locations and has significant volumes of inventory available. In addition, AMNF has entered into long term contracts, up to one year, to purchase certain raw materials at fixed quantities and/or fixed prices.
Business Quality and Capital Allocation
AMNF achieved a 49.8% ROE for the past 12 months and a five-year average ROE of 30.3%. Management has grown its revenue, EPS and dividends by a five-year CAGR of 8.3%, 25.5% and 7.5%, respectively.
AMNF has paid dividends in every single year since 2001 and currently sports a dividend yield of 5.1% (excluding special dividends) with a dividend payout ratio of 57%. A regular cash dividend of $0.012 is paid quarterly. The most recent quarterly dividend announced on Dec. 6, 2012, will be AMNF's 50th consecutive regular quarterly dividend. In addition, it has had 10 special dividends.
The total amount authorized for AMNF's stock repurchase program is $2.5 million and it has acquired a total of 2,470,399 shares of its common stock at an aggregate purchase price of $1.87 million, as at Dec. 31, 2012.
The author does not have a position in any of the stocks mentioned.
Stocks Discussed: AMNF,