Achieves record third quarter net revenue of $225.6 million, a 14% increase over third quarter 2007
CHARLOTTE, N.C., Oct. 31 /PRNewswire-FirstCall/ -- Lance, Inc. (Nasdaq: LNCE - News) today reported net revenue for the third quarter ended September 27, 2008 of $225.6 million, an increase of 14% over the prior year third quarter net revenue of $198.1 million.
The Company's branded product sales, which represented 60% of total sales in the quarter, increased approximately 9% from the prior year, driven by higher selling prices and continued strong volume growth in Lance branded home pack sandwich crackers and Cape Cod branded potato chips. Sales gains were partially offset by the continued planned decline in certain trade channels and product lines that the Company has de-emphasized as part of its focused growth strategy.
The Company's non-branded product sales, which represented 40% of total sales in the quarter, increased approximately 22% from the prior year. These results were primarily driven by higher selling prices, continued volume growth from new and existing private brand customers, new product introductions and incremental private brand sales from acquisitions. Approximately 6% of the growth is attributable to acquisitions made earlier in the year.
Lance realized third quarter 2008 net income from continuing operations of $6.8 million, or $0.21 per diluted share, compared to third quarter 2007 net income from continuing operations of $7.6 million, or $0.24 per diluted share.
Net income in the third quarter of 2008, as compared with the third quarter of 2007, was adversely impacted by an approximate $18 million pre-tax increase in the cost of ingredients and higher energy costs of approximately $3 million. The majority of the ingredient cost increase was due to the escalation in flour and vegetable oil prices; however, during the quarter the Company also experienced significantly higher costs for potatoes and peanuts. During the first two months of the quarter, due largely to unusual weather conditions, the Company temporarily purchased potatoes and peanuts on the open market at prices that were significantly higher than its contracted prices, which negatively impacted the earnings for the quarter by approximately $0.05 per diluted share. In an effort to offset rising ingredient and energy costs, the Company has implemented price increases to its customers throughout the year, with the latest round of price increases effective beginning late in the third quarter. However, the timing of this latest round of pricing did not offset the higher input costs experienced in July and August, resulting in reduced earnings compared to the prior year.
Net revenue from continuing operations for the nine months ended September 27, 2008 was $637.2 million, an increase of approximately 10% compared with the same period in the prior year, and approximately 9% excluding the impact of the Brent & Sam's acquisition. For the first nine months of 2008, net income from continuing operations was $10.2 million, or $0.32 per diluted share, compared to net income from continuing operations of $22.7 million, or $0.72 per diluted share, for the first nine months of the prior year.
Comments from Management
"We are very encouraged with our continued strong sales growth and the progress we have made against our operational initiatives during the quarter," commented David V. Singer, President and Chief Executive Officer. "We are also pleased with the successful implementation of price increases that became effective in September and October. However, our third quarter earnings were disappointing and well below our expectations. The earnings shortfall in the quarter was due to a temporary increase in our cost of potatoes and peanuts, higher than anticipated energy costs, and a temporary increase in promotional spending. Our potato and peanut costs are now back to normal, energy costs are declining and we have implemented sufficient pricing to offset our higher input costs. Therefore, we expect a significant rebound in our operating profit margin beginning in the fourth quarter, consistent with our previous goals and expectations. In fact, we began experiencing this margin rebound in September once our pricing actions were implemented and we resumed buying peanuts and potatoes at our lower, contracted rates."
Mr. Singer added, "The unprecedented jump in the cost of ingredients and energy that began in mid-2007 has masked the improvements we have made in our Supply Chain and Direct Store Delivery systems. Now that our selling prices are aligned with our input costs, we will be back on the path of widening margins that we had established in the first half of 2007."
Company Revises Revenue, EPS and Capital Spending Estimates for 2008
Based on lower than anticipated third quarter earnings, due primarily to temporary spikes in the cost of potatoes, peanuts, energy and higher trade promotion support, the Company has lowered its 2008 full year earnings per diluted share estimate to a range of $0.53 to $0.57. This revised earnings estimate reflects fourth quarter 2008 earnings consistent with the estimate provided previously. Based on its third quarter results and the assessment of the current sales volume trends for the fourth quarter, the Company is narrowing its 2008 full year net sales estimate to a range of $840 to $850 million. The Company has also revised its capital expenditure projection to approximately $37 to $40 million for the year.
On July 25, 2008, the Company provided a full year net sales estimate range of $830 to $850 million, an earnings per diluted share range of $0.62 to $0.70, and a capital expenditure range of $40 to $42 million.
The Company also announced the declaration of a quarterly cash dividend of $0.16 per share on the Company's common stock. The dividend is payable on November 20, 2008 to stockholders of record at the close of business on November 10, 2008.
Lance, Inc. has scheduled a conference call and presentation with investors at 9:00 am eastern time on Friday, October 31, 2008 to discuss 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 October 31, 2008 and running through November 7th 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 68272348. 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 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 1,400 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 increase 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 risk, 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.