Snyder's-Lance, Inc.
Oct 28, 2015

Snyder's-Lance, Inc. Reports Results for Third Quarter 2015

- Company announced definitive agreement to acquire Diamond Foods, Inc. earlier today
- Reports net revenue of $417 million for Q3, a 2% increase over prior year and 6% year to date
- EPS of $0.26, excluding special items, +13% to prior year
- EPS of $0.22, including special items
- Declares quarterly dividend of $0.16 per share of common stock
- Updates full year financial estimates for 2015
- Significant margin improvement program underway with positive impact in 2016

CHARLOTTE, N.C., Oct. 28, 2015 /PRNewswire/ -- Snyder's-Lance, Inc. (Nasdaq-GS: LNCE) today reported third quarter net revenue growth of 2% over last year, with earnings of $0.26 per diluted share excluding special items and $0.22 per diluted share including special items. 

Snyder's-Lance Inc. Logo

"We are excited about our announcement made earlier this morning of a definitive agreement to acquire Diamond Foods, Inc. in a deal that is expected to close early in 2016.  As we have worked toward the signing of this agreement, we have also reacted to the short term challenges of Q3 and continue to execute our strategic plan," said Carl E. Lee, Jr., President and CEO.  "Late July® and Snack Factory® Pretzel Crisps® brought in solid top line performance for our Clearview Division while Snyder's of Hanover® and Lance® continued to drive good year-over-year increases for the quarter.  Cape Cod® kettle chips delivered strong sales increases as well.  Overall, we delivered year over year growth and gained share in all five core brands in spite of retailer consolidations, a softer back-to-school selling season and significant challenges in the mass merchandiser channel."

Mr. Lee continued, "In today's environment, it is critical to remain competitive on the cost side of the business.  We announced on our last earnings call our intention to reach of 10% operating income run rate.  We made significant progress toward realizing this goal in Q3 with our 'Drive for 10' initiative, which will be ongoing throughout the year.  Led by senior leaders and staffed with some of our most talented cross functional associates, we expect to realize our goals in cost savings and leverage from this program in 2016.  With a clear focus on top line growth and cost savings, we look forward to driving more positive near term results and moving forward with increased momentum. I am confident in our ability to deliver positive results as we continue the work to complete the acquisition of Diamond Foods."

Third Quarter Financial Summary

  • Net revenue for the third quarter of 2015 was $416.8 million, an increase of 1.8% compared to the third quarter of 2014 net revenue of $409.3 million.
  • Net income excluding special items for the third quarter of 2015 was $18.6 million, or $0.26 per diluted share, as compared to net income excluding special items of $16.4 million for the third quarter of 2014, or $0.23 per diluted share.
  • Including special items, net income for the third quarter of 2015 was $15.7 million, or $0.22 per diluted share, as compared to net income including special items of $13.7 million for the third quarter of 2014, or $0.19 per diluted share.
  • Special items for the third quarter of 2015 included after-tax expenses of $2.9 million primarily associated with an accrual for the expected settlement of certain litigation. Special items for the third quarter of 2014 included after-tax expenses of $2.7 million primarily associated with a deferred tax revaluation which was required as a result of the sale of Private Brands.

First Nine Months Financial Summary

  • Net revenue for the first nine months of 2015 was $1.25 billion, an increase of 5.8% compared to the first nine months of 2014 net revenue of $1.18 billion.
  • Net income excluding special items for the first nine months of 2015 was $49.7 million, or $0.70 per diluted share, as compared to net income excluding special items of $44.0 million for the first nine months of 2014, or $0.62 per diluted share.
  • Including special items, net income for the first nine months of 2015 was $43.6 million, or $0.61 per diluted share, as compared to net income including special items of $32.3 million for the first nine months of 2014, or $0.46 per diluted share.
  • Special items for the first nine months of 2015 included after-tax expenses of $6.0 million primarily associated with legal fees and accruals for expected settlements of certain litigation. Special items associated with continuing operations for the first nine months of 2014 included after-tax expenses of $4.8 million for impairment charges, $2.3 million for restructuring charges, $2.0 million in professional fees, $0.6 million for self-funded medical expenses and a $2.1 million deferred tax revaluation.

Dividend Declared
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 27, 2015 to stockholders of record at the close of business on November 20, 2015.

Estimates for 2015 and 2016
The estimates for 2015 reflect the results of the third quarter, with net revenue for the full year expected to be in the range of $1.68 to $1.70 billion. The earnings per diluted share estimates are a range of $1.07 - $1.12 with capital expenditures for 2015 projected to be $56 - $58 million.

For 2016, net revenue growth is estimated to be between 3% - 5%. Earnings per diluted share are estimated to be $1.35 - $1.42, resulting from increased revenue and our Drive for 10 initiatives.  Capital expenditures are projected to be $50 - $55 million for the full year.

Conference Call
Management will host a conference call to discuss Q3 results as well as the recently announced transaction with Diamond Foods, scheduled to begin at 10:00am eastern time on October 28, 2015.  The conference call and accompanying slide presentation will be webcast live through the Investor Relations section of Snyder's-Lance website, www.snyderslance.com.  To participate in the conference call, the dial-in number is (844) 830-1960 for U.S. callers or (315) 625-6883 for international callers.  The conference ID is 69017426.  A continuous telephone replay of the call will be available between 2:00pm on October 28 and midnight on November 4.  The replay telephone number is (855) 859-2056 for U.S. callers or (404) 537-3406 for international callers.  The replay access code is 69017426.  Investors may also access a web-based replay of the conference call at www.snyderslance.com.

About Snyder's-Lance, Inc.
Snyder's-Lance, Inc., headquartered in Charlotte, NC, manufactures and markets snack foods throughout the United States and internationally. Snyder's-Lance's products include pretzels, sandwich crackers, pretzel crackers, potato chips, cookies, tortilla chips, restaurant style crackers, nuts and other snacks. Snyder's-Lance has manufacturing facilities in North Carolina, Pennsylvania, Indiana, Georgia, Arizona, Massachusetts, Florida, Ohio and Wisconsin. Products are sold under the Snyder's of Hanover®, Lance®, Cape Cod®, Snack Factory® Pretzel Crisps®, Late July®, Krunchers!®, Tom's®, Archway®, Jays®, Stella D'oro®, Eatsmart™, O-Ke-Doke®, and other brand names along with a number of third party brands. Products are distributed nationally through grocery and mass merchandisers, convenience stores, club stores, food service outlets and other channels. LNCE-E

Cautionary Information about Forward Looking Statements
This press release contains statements which may be forward looking within the meaning of applicable securities laws. The statements include projections regarding future revenues, earnings and other 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 include general economic conditions or an economic turndown; volatility in the price or availability of inputs, including raw materials, packaging, energy and labor; price competition and industry consolidation; changes in our top retail customer relationships; inability to maintain profitability in the face of a consolidating retail environment; failure to successfully integrate acquisitions or execute divestitures; loss of key personnel; failure to execute and accomplish our strategy; concerns with the safety and quality of certain food products or ingredients; adulterated, misbranded or mislabeled products or product recalls; disruption of our supply chain; inadequacies in, or security breaches of, our information technology systems; improper use of social media; changes in consumer preferences and tastes or inability to innovate or market our products effectively; reliance on distribution through a significant number of independent business owners; protection of our trademarks and other intellectual property rights; impairment in the carrying value of goodwill or other intangible assets; new regulations or legislation; interest rate volatility, and the interests of a few individuals who control a significant portion of our outstanding shares of common stock may conflict with those of other stockholders, which have been discussed in greater detail in our most recent Form 10-K and other reports filed with the Securities and Exchange Commission.

 

SNYDER'S-LANCE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income (Unaudited)

For the Quarters and Nine Months Ended October 3, 2015 and September 27, 2014

 



Quarter Ended


Nine Months Ended

(in thousands, except per share data)


October 3,
 2015


September 27,
 2014


October 3,
 2015


September 27,
 2014

Net revenue


$

416,773



$

409,308



$

1,250,542



$

1,181,920


Cost of sales


274,287



266,088



817,211



760,625


Gross margin


142,486



143,220



433,331



421,295











Selling, general and administrative


114,835



116,659



355,828



354,035


Settlements of certain litigation


2,900





5,675




Impairment charges








7,503


(Gain)/loss on sale of route businesses, net


(501)



22



(1,368)



(1,438)


Other expense/(income), net


115



61



(731)



642


Income before interest and income taxes


25,137



26,478



73,927



60,553











Interest expense, net


2,851



2,984



7,989



10,485


Income before income taxes


22,286



23,494



65,938



50,068











Income tax expense


6,557



9,809



22,233



17,719


Income from continuing operations


15,729



13,685



43,705



32,349


Income from discontinued operations, net of income tax




124,097





133,942


Net income


15,729



137,782



43,705



166,291


Net income attributable to noncontrolling interests


52



16



63



32


Net income attributable to Snyder's-Lance, Inc.


$

15,677



$

137,766



$

43,642



$

166,259











Amounts attributable to Snyder's-Lance, Inc.:









Continuing operations


$

15,677



$

13,669



$

43,642



$

32,317


Discontinued operations




124,097





133,942


Net income


$

15,677



$

137,766



$

43,642



$

166,259











Basic earnings per share:









Continuing operations


$

0.22



$

0.19



$

0.62



$

0.46


Discontinued operations




1.77





1.91


Total basic earnings per share


$

0.22



$

1.96



$

0.62



$

2.37











Diluted earnings per share:









Continuing operations


$

0.22



$

0.19



$

0.61



$

0.46


Discontinued operations




1.75





1.89


Total diluted earnings per share


$

0.22



$

1.94



$

0.61



$

2.35











Cash dividends declared per share


$

0.16



$

0.16



$

0.48



$

0.48


 

 

SNYDER'S-LANCE, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

As of October 3, 2015 and January 3, 2015

 

(in thousands, except share data)


October 3,
 2015


January 3,
 2015

ASSETS





Current assets:





Cash and cash equivalents


$

64,316



$

35,373


Restricted cash


966



966


Accounts receivable, net of allowances of $1,262 and $1,778, respectively


134,357



126,093


Inventories


125,065



116,236


Prepaid income taxes and income taxes receivable


7,028



4,175


Deferred income taxes


11,544



13,189


Assets held for sale


14,879



11,007


Prepaid expenses and other current assets


19,008



22,112


Total current assets


377,163



329,151







Noncurrent assets:





Fixed assets, net


415,916



423,612


Goodwill


539,651



541,539


Other intangible assets, net


532,296



545,212


Other noncurrent assets


22,603



23,874


Total assets


$

1,887,629



$

1,863,388







LIABILITIES AND STOCKHOLDERS' EQUITY





Current liabilities:





Current portion of long-term debt


$

8,541



$

8,561


Accounts payable


65,296



57,407


Accrued compensation


24,842



32,774


Accrued casualty insurance claims


4,388



4,320


Accrued selling and promotional costs


14,267



13,141


Other payables and accrued liabilities


31,100



24,723


Total current liabilities


148,434



140,926







Noncurrent liabilities:





Long-term debt


431,991



438,376


Deferred income taxes


172,869



168,593


Accrued casualty insurance claims


12,309



13,755


Other noncurrent liabilities


16,511



15,030


Total liabilities


782,114



776,680







Commitments and contingencies










Stockholders' equity:





Common stock, $0.83 1/3 par value. 110,000,000 shares authorized; 70,794,643 and 70,406,086 shares outstanding, respectively


58,993



58,669


Preferred stock, $1.00 par value. Authorized 5,000,000 shares; no shares outstanding





Additional paid-in capital


787,176



776,930


Retained earnings


242,571



232,812


Accumulated other comprehensive loss


(2,592)



(1,007)


Total Snyder's-Lance, Inc. stockholders' equity


1,086,148



1,067,404


Noncontrolling interests


19,367



19,304


Total stockholders' equity


1,105,515



1,086,708


Total liabilities and stockholders' equity


$

1,887,629



$

1,863,388


 

 

 

SNYDER'S-LANCE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

For the Nine Months Ended October 3, 2015 and September 27, 2014

 



Nine Months Ended

(in thousands)


October 3,
 2015


September 27,
 2014

Operating activities:





Net income


$

43,705



$

166,291


Adjustments to reconcile net income to cash from operating activities:





Depreciation and amortization


52,585



46,084


Stock-based compensation expense


4,255



4,962


(Gain)/loss on sale of fixed assets, net


(90)



827


Gain on sale of route businesses, net


(1,368)



(1,438)


Gain on sale of investments, net


(585)




Gain on sale of Private Brands, excluding transaction costs




(229,322)


Impairment charges




7,503


Deferred income taxes


6,627



(26,899)


Provision for doubtful accounts


866



1,413


Change in inventory reserves


647



(293)


Changes in operating assets and liabilities, excluding business acquisition and disposal


(12,184)



29,456


Net cash provided by/(used in) operating activities


94,458



(1,416)







Investing activities:





Purchases of fixed assets


(38,800)



(52,990)


Purchases of route businesses


(19,622)



(19,102)


Proceeds from sale of fixed assets and insurance recoveries


1,524



1,843


Proceeds from sale of route businesses


23,750



21,072


Proceeds from sale of investments


826




Proceeds from sale of Private Brands




430,017


Business acquisition, net of cash acquired




(202,230)


Net cash (used in)/provided by investing activities


(32,322)



178,610







Financing activities:





Dividends paid to stockholders


(33,884)



(33,666)


Debt issuance costs




(1,854)


Issuances of common stock


7,152



5,442


Repurchases of common stock


(836)



(1,328)


Repayments of long-term debt


(5,625)



(11,624)


Net repayments of existing credit facilities




(35,000)


Net cash used in financing activities


(33,193)



(78,030)







Increase in cash and cash equivalents


28,943



99,164


Cash and cash equivalents at beginning of period


35,373



14,080


Cash and cash equivalents at end of period


$

64,316



$

113,244







Supplemental information:





Cash paid for income taxes, net of refunds of $678 and $192, respectively


$

18,420



$

113,246


Cash paid for interest


$

7,008



$

8,976


 

 

 

SNYDER'S-LANCE, INC. AND SUBSIDIARIES

Reconciliation of Non-GAAP Measures (Unaudited)

For the Quarters and Nine Months Ended October 3, 2015 and September 27, 2014

 

(in thousands, except per share data)


Net of

Tax


Per Diluted

Share

Quarter Ended October 3, 2015





Income from continuing operations


$

15,677



$

0.219











Severance charges


655



0.009


Settlements and legal fees associated with certain litigation


1,992



0.028


Professional fees


289



0.004











Income from continuing operations, excluding special items


$

18,613



$

0.260




















Quarter Ended September 27, 2014









Income from continuing operations


$

13,669



$

0.193







Restructuring charges


329



0.004


Professional fees


292



0.004


Deferred tax revaluation


2,062



0.029







Income from continuing operations, excluding special items


$

16,352



$

0.230











(in thousands, except per share data)



Net of

Tax




Per Diluted

Share


Nine Months Ended October 3, 2015









Income from continuing operations


$

43,642



$

0.612







Severance charges


903



0.013


Settlements and legal fees associated with certain litigation


4,543



0.063


Professional fees


588



0.008







Income from continuing operations, excluding special items


$

49,676



$

0.696







Nine Months Ended September 27, 2014





Income from continuing operations


$

32,317



$

0.456







Impairment charges


4,819



0.067


Restructuring charges


2,297



0.033


Professional fees


1,983



0.028


Self-funded medical insurance claim


564



0.008


Deferred tax revaluation


2,062



0.029







Income from continuing operations, excluding special items


$

44,042



$

0.621












 

 

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