Net revenue from continuing operations for the nine months ended September 29, 2007 was $577.5 million, an increase of 4% compared with the same period in the prior year. For the first nine months of 2007, net income from continuing operations was $22.7 million, or $0.72 per diluted share, compared to net income from continuing operations, excluding special items, of $14.2 million, or $0.46 per diluted share, in the first nine months of the prior year. Special items in the first nine months of 2006 were related to the integration of the Tom's acquisition. Including these special items, net income from continuing operations for the first nine months of 2006 was $12.4 million, or $0.40 per diluted share.
During the third quarter of 2007, Lance successfully completed the previously announced exit of its Company-owned vending business, which has been reported as a discontinued operation. The Company reported a net loss of $0.1 million from its discontinued vending business in the third quarter of 2007, and net income of less than $0.1 million for the first nine months of 2007.
Comments from Management
Dave Singer, President and Chief Executive Officer, commented, "Overall third quarter sales increased 5%, with 4% growth in branded sales and 6% growth in non-branded sales. In addition to our solid top-line growth, we realized meaningful progress on our key operating initiatives resulting in lower delivery costs and higher manufacturing efficiencies. Unfortunately, the benefits of higher sales and operational improvements were offset by a sharp escalation in commodity costs, particularly flour, driven by the unprecedented trend in the price of wheat. Commodity costs in the third quarter of 2007 were higher than in the second quarter of this year, resulting in lower operating margins."
Mr. Singer added, "In response to the increase in commodity costs, we have developed pricing actions that will be implemented and take effect later in the fourth quarter of 2007 and in the first half of 2008. However, our gross margin will be impacted considerably during the fourth quarter of 2007, reflecting the lag between increases in commodity prices and the effective date of price increases to our customers, and resulting in our revised earnings estimate for the year."
Mr. Singer said, "Although the unprecedented commodity pressure is masking the solid profit margin improvements that we posted through the first half of 2007, our underlying performance has remained very solid relative to cost efficiencies in the supply chain and DSD areas of our business. The infrastructure improvements continue to generate benefits and have offset some of the rapid increases in commodities to date. We are confident that our operating margins will rebound once all required pricing actions are taken, and we remain focused on growing our revenues and delivering against our efficiency initiatives that will drive sustainable margin enhancement for the long-term."
Revised 2007 Estimates
Based upon the changing outlook for commodity costs in the fourth quarter, the Company revised its full year 2007 estimates for earnings per diluted share from continuing operations to a range of $0.76 to $0.80. Previously, the Company had provided a full year earnings per diluted share estimate of $0.86 to $0.92. The Company also narrowed its net sales estimate to a range of $760 to $770 million. Previously, the Company had provided a full year net sales estimate of $750 to $775 million.
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 November 20, 2007 to stockholders of record at the close of business on November 12, 2007.
Lance, Inc. has scheduled a conference call discussion with investors at 5:00 pm eastern time on Thursday, November 1, 2007 to discuss third quarter financial results. To participate in the call, the dial-in numbers are (800) 789-3681 for U.S. callers and (706) 634-1425 for international callers. The access code is "LANCE." A continuous replay of the call will be available beginning at 8:00 pm on November 1 and running through midnight November 9, 2007. The replay telephone number is (800) 642-1687. The international number is (706) 645-9291. The replay access code is 19248543. A web-based replay of the conference call will also be available in the investor relations section of Lance's web site, www.lance.com.
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, restaurant style crackers, potato chips, tortilla chips, cookies, sugar wafers, nuts, candy and other snacks. Lance has manufacturing facilities in North Carolina, Georgia, Florida, Texas, Iowa, Massachusetts and Ontario, Canada. Products are sold under the Lance, Cape Cod and Tom'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 1,500 sales routes, a network of independent distributors and direct shipments to customer locations. Products are distributed widely through grocery stores, convenience stores, mass merchants, 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, industry consolidation, changes in consumer preferences, product recalls, safety concerns, natural disasters, catastrophic events, raw material costs, food industry and regulatory factors, risks from large customers, interest rate, foreign exchange rate, and credit risks, acquisition integration and divestitures are discussed in the Company's most recent Form 10-K filed with the Securities and Exchange Commission.
This press release presents measures not derived in accordance with generally accepted accounting principles ("GAAP"). Such measures should not be considered substitutes for any measures derived in accordance with GAAP and may also be inconsistent with similar measures presented by other companies. Reconciliation of these non-GAAP measures to the most nearly comparable GAAP measures, if applicable, is presented in the attached pages.
LANCE, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except share and per-share amounts) (unaudited) Quarter Ended September 29, 2007 September 30, 2006 Revenue $198,052 $188,628 Cost of sales 115,692 106,768 Gross margin 82,360 81,860 Selling, marketing and delivery 58,985 60,571 General and administrative 11,268 9,296 Other expense/(income), net 522 (243) Income from continuing operations before interest and taxes 11,585 12,236 Interest expense, net 550 901 Income tax expense 3,448 3,940 Net income from continuing operations $7,587 $7,395 (Loss)/income from discontinued operations (146) 129 Income tax (benefit)/expense (54) 45 Net (loss)/income from discontinued operations (92) 84 Net Income $7,495 $7,479 Basic earnings per share: From continuing operations $0.24 $0.24 From discontinued operations 0.00 0.00 Basic earnings per share $0.24 $0.24 Weighted average shares outstanding - basic 31,034,000 30,716,000 Diluted earnings per share: From continuing operations $0.24 $0.24 From discontinued operations 0.00 0.00 Diluted earnings per share $0.24 $0.24 Weighted average shares outstanding - diluted 31,693,000 31,154,000 LANCE, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except share and per-share amounts) (unaudited) Nine Months Ended September 29, 2007 September 30, 2006 Revenue $577,515 $557,714 Cost of sales 328,104 317,294 Gross margin 249,411 240,420 Selling, marketing and delivery 175,328 185,901 General and administrative 36,008 32,525 Other expense, net 1,405 436 Income from continuing operations before interest and taxes 36,670 21,558 Interest expense, net 1,768 2,398 Income tax expense 12,174 6,795 Net income from continuing operations $22,728 $12,365 Income from discontinued operations 45 797 Income tax expense 16 289 Net income from discontinued operations 29 508 Net Income $22,757 $12,873 Basic earnings per share: From continuing operations $0.74 $0.41 From discontinued operations 0.00 0.01 Basic earnings per share $0.74 $0.42 Weighted average shares outstanding - basic 30,921,000 30,370,000 Diluted earnings per share: From continuing operations $0.72 $0.40 From discontinued operations 0.00 0.02 Diluted earnings per share $0.72 $0.42 Weighted average shares outstanding - diluted 31,506,000 30,803,000 LANCE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited) September 29, 2007 December 30, 2006 Assets: Cash and cash equivalents $14,313 $5,504 Accounts receivable, net 68,845 61,690 Inventories 38,729 36,838 Deferred income tax asset 9,697 8,811 Assets held for sale 505 6,552 Prepaid expenses and other current assets 9,739 6,298 Total Current Assets 141,828 125,693 Property plant and equipment, net 202,152 193,009 Goodwill and other intangibles, net 68,432 62,300 Other assets 6,752 4,450 Total Assets $419,164 $385,452 Liabilities and Equity: Accounts payable $22,057 18,194 Other current liabilities 54,492 53,426 Total Current Liabilities 76,549 71,620 Long-term debt 50,000 50,000 Other liabilities 43,364 41,432 Stockholders' equity 249,251 222,400 Total Liabilities and Stockholders' Equity $419,164 $385,452 LANCE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (in thousands) (unaudited) Nine Months Ended September 29, 2007 September 30, 2006 Operating Activities: Net income $22,757 $12,873 Depreciation and amortization 21,839 20,096 Equity-based compensation expense 2,680 1,762 Gain/(loss) on disposition of property, net (839) 69 Changes in operating assets and liabilities (3,991) (15,751) Net cash flow from operating activities 42,446 19,049 Investing Activities: Purchases of property and equipment (28,299) (34,678) Proceeds from sale of property 6,895 3,382 Purchase of investment (2,090) - Net cash used in investing activities (23,494) (31,296) Financing Activities: Dividends paid (14,878) (14,617) Issuances of common stock 4,600 17,862 Net proceeds from revolving credit facilities - 8,396 Net cash (used in)/from financing activities (10,278) 11,641 Effect of exchange rate changes on cash 135 253 Increase/(decrease) in cash and cash equivalents 8,809 (353) Cash and cash equivalents at beginning of period 5,504 3,543 Cash and cash equivalents at end of period $14,313 $3,190 LANCE, INC. RECONCILIATION OF NON-GAAP MEASURES (in thousands, except per-share amounts) (unaudited) Third Quarter Ended September 30, 2006 Net of Per diluted Tax share Net Income from continuing operations $7,395 $0.24 Tom's integration related charges 333 0.01 Income from continuing operations, excluding special charges $7,728 $0.25 Nine Months Ended September 30, 2006 Net of Per diluted Tax share Net Income from continuing operations $12,365 $0.40 Tom's integration related charges 1,794 0.06 Income from continuing operations, excluding special charges $14,159 $0.46
SOURCE Lance, Inc.
Director of Planning & IR, Lance, Inc.
Financial Relations Board
for Lance, Inc.