Revenue from continuing operations for the six month period ended June, 30, 2007 was $379.5 million, an increase of 3% compared with the same period in the prior year. For the first half of 2007, net income from continuing operations was $15.1 million, or $0.49 per diluted share, compared to net income from continuing operations, excluding special items, of $6.4 million, or $0.21 per diluted share, in the first half of the prior year. Special items in the first half of 2006 were related to employee retention payments supporting the integration of the Tom's acquisition. Including these special items, first half 2006 net income from continuing operations was $5.0 million, or $0.17 per diluted share. The Company reported net income from discontinued vending operations of $0.1 million for the first half of 2007.
Comments from Management
"I am very pleased with our financial results in the first half as we have delivered solid performance against our key initiatives," said David V. Singer, President and Chief Executive Officer. "Second quarter net sales increased 5% over last year, reflecting a 5% increase in branded sales driven by continued strength in our core Lance® and Cape Cod® brands, and 4% growth in our non-branded sales. Our ongoing focus on improving the efficiency of our supply chain and DSD operations continued to flow through to our bottom line with another quarter of expanding profit margins."
Mr. Singer further commented, "While we anticipate that the efficiency improvements we have delivered in the first half will continue to gain momentum, the profit margin in the second half of the year will be impacted by a significant increase in commodity costs, particularly cooking oils and flour. The first half results reflect the impact of a $6.1 million increase in commodity costs compared to the first half of 2006, and we anticipate a greater increase in the second half of the year."
Consistent with its strategic plan to improve overall operational efficiency and profitability while reallocating resources to channels of business with stronger growth and profit potential, Lance continued its previously announced exit of its Company-owned vending business. The Company has reported the net impact of this business as a discontinued operation and reported a second quarter 2007 net loss from discontinued vending business of $0.2 million, or approximately $0.01 per diluted share. The Company believes that the discontinuation of its Company-owned vending business remains on track for completion by the end of the third quarter of 2007.
Revised 2007 Estimates
Based upon the performance in the second quarter and the outlook for the remainder of the year, the Company revised its full year 2007 estimates for earnings per diluted share from continuing operations to a range of $0.86 to $0.92. Previously, the Company had provided a full year earnings per diluted share estimate of $0.84 to $0.90. The Company confirmed its previous net sales estimate of $750 to $775 million for 2007.
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 August 20, 2007 to stockholders of record at the close of business on August 10, 2007.
Lance, Inc. has scheduled a conference call discussion with investors at 5:00 pm eastern time on Thursday, July 26, 2007 to discuss second 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 July 26 and running through midnight August 3, 2007. The replay telephone number is (800) 642-1687. The international number is (706) 645-9291. The replay access code is 6470731. 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 June 30, 2007 July 1, 2006 Revenue $197,036 $188,341 Cost of sales 109,435 105,660 Gross margin 87,601 82,681 Selling, marketing and delivery 59,864 60,285 General and administrative 11,603 11,771 Other expense, net 973 517 Income from continuing operations before interest and taxes 15,161 10,108 Interest expense, net (615) (828) Income tax expense (5,277) (3,386) Net income from continuing operations $9,269 $5,894 (Loss)/Income from discontinued operations (346) 418 Income tax benefit/(expense) 129 (153) Net (Loss)/Income from discontinued operations (217) 265 Net Income $9,052 $6,159 Basic earnings/(loss) per share: From continuing operations $ 0.30 $0.19 From discontinued operations (0.01) 0.01 Basic earnings per share $0.29 $0.20 Weighted average shares outstanding - basic 30,927,000 30,462,000 Diluted earnings/(loss) per share: From continuing operations $0.30 $0.19 From discontinued operations (0.01) 0.01 Diluted earnings per share $0.29 $0.20 Weighted average shares outstanding - diluted 31,414,000 30,935,000 LANCE, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except share and per-share amounts) (unaudited) Six Months Ended June 30, 2007 July 1, 2006 Revenue $379,463 $369,086 Cost of sales 212,412 210,526 Gross margin 167,051 158,560 Selling, marketing and delivery 116,343 125,330 General and administrative 24,739 23,229 Other expense, net 884 679 Income from continuing operations before interest and taxes 25,085 9,322 Interest expense, net (1,219) (1,497) Income tax expense (8,725) (2,855) Net income from continuing operations $15,141 $4,970 Income from discontinued operations 190 668 Income tax expense (69) (244) Net income from discontinued operations 121 424 Net Income $15,262 $5,394 Basic earnings per share: From continuing operations $0.49 $0.17 From discontinued operations 0.00 0.01 Basic earnings per share $0.49 $0.18 Weighted average shares outstanding - basic 30,866,000 30,197,000 Diluted earnings per share: From continuing operations $0.49 $0.17 From discontinued operations 0.00 0.01 Diluted earnings per share $0.49 $0.18 Weighted average shares outstanding - diluted 31,308,000 30,622,000 LANCE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited) June 30, 2007 December 30, 2006 Assets: Cash and cash equivalents $6,032 $5,504 Accounts receivable, net 71,139 61,690 Inventories 39,302 36,838 Deferred income tax asset 8,151 8,811 Assets held for sale 3,569 6,552 Prepaid expenses and other current assets 8,997 6,298 Total Current Assets 137,190 125,693 Property plant and equipment, net 202,268 193,009 Goodwill and other intangibles, net 65,660 62,300 Other assets 7,304 4,450 Total Assets $412,422 $385,452 Liabilities and Equity: Accounts payable $26,115 18,194 Other current liabilities 52,832 53,426 Total Current Liabilities 78,947 71,620 Long-term debt 50,000 50,000 Other liabilities 43,568 41,432 Stockholders' equity 239,907 222,400 Total Liabilities and Stockholders' Equity $412,422 $385,452 LANCE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (in thousands) (unaudited) Six Months Ended June 30, 2007 July 1, 2006 Operating Activities: Net income $15,262 $5,394 Depreciation and amortization 14,461 13,388 Equity-based compensation expense 1,767 1,068 Loss/(gain) on disposition of property, net 518 (4) Changes in operating assets and liabilities (3,057) (12,758) Net cash flow from operating activities 28,951 7,088 Investing Activities: Purchases of property and equipment (22,608) (27,198) Proceeds from sale of property 3,319 2,762 Purchase of investment (2,090) - Net cash used in investing activities (21,379) (24,436) Financing Activities: Dividends paid (9,900) (9,677) Issuances of common stock 2,769 17,036 Net proceeds from revolving credit facilities - 7,505 Net cash (used in)/from financing activities (7,131) 14,864 Effect of exchange rate changes on cash 87 220 Increase/(decrease) in cash and cash equivalents 528 (2,264) Cash and cash equivalents at beginning of period 5,504 3,543 Cash and cash equivalents at end of period $6,032 $1,279 LANCE, INC. RECONCILIATION OF NON-GAAP MEASURES (in thousands, except per-share amounts) (unaudited) Second Quarter Ended July 1, 2006 Net of Per diluted Tax share Net Income from continuing operations $5,894 $0.19 Tom's integration related charges 370 0.01 Income from continuing operations, excluding special charges $6,264 $0.20 Six Months Ended July 1, 2006 Net of Per diluted Tax share Net Income from continuing operations $4,970 $0.17 Tom's integration related charges 1,462 0.04 Income from continuing operations, excluding special charges $6,432 $0.21
SOURCE Lance, Inc.
Director of Planning & IR
Financial Relations Board
both for Lance, Inc.