The Company's branded product sales, which represented 62% of total Company sales in the quarter, grew approximately 5%, driven by double digit growth in Lance branded home-pack sandwich crackers and Cape Cod branded potato chips, partially offset by the continued decline in certain trade channels that the Company deemphasized as part of its focused growth strategy.
The Company's non-branded business, which represented 38% of total Company sales in the quarter, increased approximately 14% compared to the prior year, driven by continued volume growth from existing and new customers, new product introductions and higher selling prices.
The acquisition of premium cookie manufacturer Brent & Sam's on March 14, 2008 had no material impact on the Company's consolidated first quarter net revenue or net income.
Lance realized first quarter 2008 net income from continuing operations of $0.6 million, or $0.02 per diluted share, compared to first quarter 2007 net income from continuing operations of $5.9 million, or $0.19 per diluted share.
Net income in the first quarter of 2008 as compared to the first quarter of 2007 was adversely impacted by an approximate $13 million pre-tax increase in the cost of ingredients, primarily flour and vegetable oils. As previously reported, the Company initiated price increases to its customers in early 2008 aimed at offsetting these rising costs; however, during the first quarter, and subsequent to the price increases, the cost of these key ingredients continued to escalate, leading to a marked decline in operating profit.
Comments from Management
"As anticipated, the escalating cost of flour and vegetable oils significantly reduced our first quarter profitability," commented Dave Singer, President and Chief Executive Officer. "We have executed additional pricing actions that will take effect during the second quarter. Our ingredient costs will be somewhat higher in the 2008 second quarter than in the first quarter, and based on our outlook for ingredient costs and our assessment of the competitive situation, we will continue to consider further pricing actions as the year progresses. Our first quarter sales volume was strong despite the initial round of price increases, which is encouraging. We remain cautious in our near-term outlook until we see additional data and evaluate the impact on volume following our planned second quarter price increases."
Mr. Singer added, "Although the higher cost of ingredients led to significant margin pressure in the first quarter, our underlying performance has remained solid relative to initiatives focused on enhancing supply chain and DSD efficiencies. During the quarter we continued to lower our supply chain costs and increase the leverage of our DSD network with higher sales per route. As previously stated, we are confident that our operating margins will rebound in the second half of this year, as pricing is aligned with ingredient costs and we continue to execute on our key operational initiatives."
Company Revises Revenue Estimate for 2008
Based on its assessment of the current pricing environment and the addition of revenue related to the acquisition of Brent & Sam's for the remainder of the year, the Company raised its 2008 full year net sales estimate to a range of $805 to $835 million. Previously, on February 14, 2008, the Company had provided a full year net sales estimate range of $790 to $820 million.
Due to the continued volatility of ingredient costs, the Company reaffirmed its previous estimate for full year earnings per diluted share of $0.70 to $0.80. The Company believes that its earnings per share will be heavily weighted toward the second half of 2008 due to the timing of price increases needed to offset ingredient costs.
The Company also announced the declaration of a regular quarterly cash dividend of $0.16 per share on the Company's common stock. The dividend is payable on May 20, 2008 to stockholders of record at the close of business on May 12, 2008.
Lance, Inc. has scheduled a conference call and presentation with investors at 9:00 am eastern time on Friday, April 25, 2008 to discuss first quarter financial results. To participate in the conference call, the dial-in number is (800) 789-3681 for U.S. callers, or (706) 634-1425 for international callers. The access code is "LANCE." A continuous telephone replay of the call will be available beginning at 12:00 pm on April 25th and running through May 2nd at midnight. The replay telephone number is (800) 642-1687 for U.S. callers, or (706) 645-9291 for international callers. The replay access code is 41863980. Investors may also access a web-based replay of the conference call at Lance's web site, www.lance.com.
The conference call and accompanying slide presentation will be webcast live through the Investor Relations section of Lance Inc.'s website www.lance.com. In addition, the slide presentation will be available to download and print approximately 30 minutes before the webcast at Lance's Investor Relations home page.
About Lance, Inc.
Lance, Inc., headquartered in Charlotte, NC, manufactures and markets snack foods throughout much of the United States and other parts of North America. The Company's products include sandwich crackers and cookies, potato chips, crackers, cookies, other snacks, sugar wafers, nuts, restaurant style crackers and candy. Lance has manufacturing facilities in North Carolina, Iowa, Georgia, Massachusetts, Texas, Florida, Arkansas and Ontario, Canada. Products are sold under the Lance, Cape Cod, Tom's and Brent & Sam's brand names along with a number of private label and third party brands. The Company's products are distributed through a direct-store-delivery system of approximately 1,400 sales routes, a network of independent distributors and direct shipments to customer locations. Products are distributed widely through grocery and mass merchant stores, convenience stores, food service outlets and other channels.
This news release contains statements which may be forward looking within the meaning of applicable securities laws. The statements may include projections regarding future earnings and results which are based upon the Company's current expectations and assumptions, which are subject to a number of risks and uncertainties. Factors that could cause actual results to differ, including price competition and industry consolidation, increases in prices or availability of ingredients, product price increases impact on total revenue, risks from large customers, changes in consumer preferences, implementation of a new information system, product recalls or safety concerns, food industry and regulatory factors, acquisition and divestiture risks, ability to execute strategic initiatives, interest rate, foreign exchange rate and credit risks and natural disasters or catastrophic events are discussed in the Company's most recent Form 10-K filed with the Securities and Exchange Commission.
LANCE, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except share and per-share amounts) (unaudited) Quarter Ended March 29, 2008 March 31, 2007 Net sales $197,968 $182,426 Cost of sales 123,460 102,976 Gross margin 74,508 79,450 Selling, general and administrative 72,857 69,616 Other income, net (4) (90) Income from continuing operations before interest and taxes 1,655 9,924 Interest expense, net 606 604 Income tax expense 404 3,448 Net income from continuing operations $645 $5,872 Income from discontinued operations - 537 Income tax expense - 199 Net income from discontinued operations - 338 Net Income $645 $6,210 Basic earnings per share: From continuing operations $ 0.02 $0.19 From discontinued operations - 0.01 Basic earnings per share $ 0.02 $0.20 Weighted average shares outstanding - basic 31,103,000 30,805,000 Diluted earnings per share: From continuing operations $ 0.02 $0.19 From discontinued operations - 0.01 Diluted earnings per share $ 0.02 $0.20 Weighted average shares outstanding - diluted 31,608,000 31,131,000 LANCE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited) March 29, 2008 December 29, 2007 Assets: Cash and cash equivalents $1,156 $8,647 Accounts receivable, net 73,843 64,081 Inventories 40,319 38,659 Other current assets 23,901 21,702 Total Current Assets 139,219 133,089 Fixed Assets, net 205,371 205,075 Goodwill and other intangibles, net 87,318 69,127 Other noncurrent assets 5,742 5,712 Total Assets $437,650 $413,003 Liabilities and Equity: Accounts payable $32,518 21,169 Other current liabilities 48,220 53,468 Total Current Liabilities 80,738 74,637 Long-term debt 74,703 50,000 Other liabilities 41,740 41,269 Stockholders' equity 240,469 247,097 Total Liabilities and Stockholders' Equity $437,650 $413,003 LANCE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (in thousands) (unaudited) Quarter Ended March 29, 2008 March 31, 2007 Operating Activities: Net income $645 $6,210 Depreciation and amortization 7,925 6,981 Stock-based compensation expense 1,003 876 Loss/(gain) on sale of fixed assets 102 (140) Changes in other operating assets and liabilities (3,738) (5,916) Net cash flow from operating activities 5,937 8,011 Investing Activities: Purchases of fixed assets (7,057) (7,073) Proceeds from sale of fixed assets 230 802 Business acquisitions net of cash acquired (24,123) - Net cash used in investing activities (30,950) (6,271) Financing Activities: Dividends paid (5,019) (4,935) Issuances of common stock 70 829 Proceeds from long-term debt 24,000 - Repayments of debt from business acquisitions (1,495) - Net cash from/(used in) financing activities 17,556 (4,106) Effect of exchange rate changes on cash (34) 108 Decrease in cash and cash equivalents (7,491) (2,258) Cash and cash equivalents at beginning of period 8,647 5,504 Cash and cash equivalents at end of period $1,156 $3,246
SOURCE Lance, Inc.
Director - Planning & IR
or Joe Calabrese
Financial Relations Board
both of Lance, Inc.