Annie's files to raise $100 million in IPO

The maker of organic food sees strong earnings potential after profit tripled in its most recent fiscal year.

By Jonathan Berr Dec 2, 2011 1:16PM
Forget the volatility of LinkedIn (LNKD) and the disappointment surrounding Groupon (GRPN). One of the more promising initial public offerings of this year comes in a humble bowl of mac and cheese.

Annie's, the California maker of organic pasta and other foods, has filed to raise $100 million in an IPO. It will be listed on the New York Stock Exchange under the too-cute ticker symbol BNNY.

It won't get the pre-IPO buzz that surrounded Groupon and LinkedIn, but Annie's has something much more valuable: a profit. Net income at the company more than tripled to $20.2 million in the year ended March 31. Sales jumped 22% to $117.6 million, fueled by strong demand for its 125 products, such as Bunny Grahams, that are well-known to parents of young children.

And growth prospects are bright, as the company notes in its S-1 filing with the the Securities and Exchange Commission.
"Our brand and premium products appeal to our consumers, who tend to be better-educated, be more health-conscious, spend more on food and buy higher margin items than the average consumer," the company says in its filing. "Because our products are profitable and attractive to retailers, we believe we can continue to expand in the mainstream grocery and mass merchandiser channels, while continuing to innovate and grow our sales in the natural retailer channel. "

Annie's is poised to profit from the growing interest in natural and organic food. Data provided by the company say the market for such products rose at a compound annual growth rate of 12% from 2000 to 2010 and will continue growing at an 8% rate from 2010 to 2013. That view is backed up by information from the U.S. Department of Agriculture. Nearly three-quarters of families buy organic foods at least occasionally, a remarkable statistic in these tough economic times.

Although Annie's is in a vastly different industry than Groupon or LinkedIn, it's worth noting the dramatic differences in finances the companies bring to the IPO table.

Groupon had an accumulated deficit of $522.1 million as of March 31, though it narrowed its loss in the third quarter to $1.7 million and was able to make money in its North American business. LinkedIn, the professional social network site, reported a third quarter net loss of $1.6 million after earning a 2010 profit of $15.4 million.

Wall Street analysts expect Groupon to lose money through the next two quarters. LinkedIn is forecast to lose money in the current quarter and break even in the March period. Another closely watched tech firm, consumer reviews site Yelp, warned investors about its history of operating losses in an SEC filing, adding that "our recent growth rate will likely not be sustainable." In the 9 months ended Sept. 30, it lost $7.62 million.

Investing in Annie's is not without risks. The company's filing notes that its headquarters are in the San Francisco Bay area traversed by the Hayward Fault, a major branch of the San Andreas Fault. "The impact of a major earthquake or tsunami, or both, or other natural disasters in the San Francisco Bay area on our facilities and overall operations is difficult to predict, but such a natural disaster could seriously disrupt our entire business," the filing said.

No kidding.

But when it comes to profits, Annie's is no match for FarmVille. Facebook game maker Zynga filed for a $1 billion IPO today. According its SEC filing, Zynga had $90.6 million in net income in 2010.



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