Snyder's-Lance, Inc. Reports Results for Second Quarter of Fiscal 2016

CHARLOTTE, N.C., Aug. 9, 2016 /PRNewswire/ -- Snyder's-Lance, Inc. (Nasdaq-GS: LNCE) today reported financial results for the second quarter ended July 2, 2016 and narrowed its full-year 2016 earnings per diluted share* and adjusted EBITDA* outlook.  Total net revenue in the second quarter of 2016 increased 41.3% including the contribution of Diamond Foods. GAAP net income attributable to Snyder's-Lance, Inc. in the second quarter of 2016 was $19.7 million, or $0.20 per diluted share, as compared to $17.3 million, or $0.24 per diluted share, in the second quarter of 2015.  Net income attributable to Snyder's-Lance, Inc. excluding special items* for the second quarter of 2016 increased 43.7% to $27.5 million as compared to $19.1 million in the second quarter of 2015.  Earnings per diluted share excluding special items* was $0.28 in the second quarter of 2016 compared to $0.27 in the second quarter of 2015.  All financial comparisons to the prior year are compared against the legacy Snyder's-Lance results, where the prior year does not include any contribution from Diamond Foods.

"In the second quarter we continued to focus on our margin expansion initiatives, the integration of Diamond Foods, and improving performance in our legacy Snyder's-Lance branded business.  I'm pleased to report that we've made good progress across all three fronts," said Carl E. Lee, Jr., President and Chief Executive Officer.  "We increased operating margin by expanding gross margin and reducing SG&A expenses.  The gross margin performance was driven by manufacturing efficiencies, as well as improved capacity utilization and procurement savings.  Our legacy branded net revenue increased year over year as trends in Snyder's of Hanover® improved, and Lance®, Snack Factory® and Cape Cod® all outperformed their respective categories.  The integration of Diamond Foods is progressing as planned with key milestones achieved in the quarter, and we are on track to deliver the expected cost synergies over time as well as revenue synergies as a result of this strategic combination."

Mr. Lee continued, "Our second quarter results have led us to narrow our full-year EPS and adjusted EBITDA guidance ranges, raising the lower-end of our expectations.  We have momentum as we move into the back-half of the year, and I'm confident that we will continue to execute our strategies as a leading provider of premium and differentiated snacks.  We are fortunate to have a hard working and dedicated team, and we have the right strategic plan in place to drive sustainable growth and shareholder value."

Second Quarter 2016 Results

Total net revenue in the second quarter of 2016 was $609.5 million, an increase of 41.3% compared to net revenue of $431.4 million in the second quarter of 2015.  Net revenue in the second quarter of 2016, excluding Diamond Foods, included Branded category growth of 0.4% driven by a 3.1% increase in volume, Partner Brand category growth of 1.7%, and a decline in net revenue for the Other category of 18.3%.  The decline in Other net revenue was consistent with the Company's expectations, and was primarily due to the planned exit of certain contract manufacturing agreements.  Excluding the contribution from Diamond Foods, net revenue in the second quarter of 2016 decreased 1.3% compared to the second quarter of 2015, due to the decline in Other revenue.

Operating income in the second quarter of 2016 increased 33.9% to $39.8 million as compared to $29.7 million in the second quarter of 2015.  Excluding special items, operating income in the second quarter of 2016 increased 57.9% to $51.2 million, or 8.4% of net revenue, as compared to $32.4 million, or 7.5% percent of net revenue, in the second quarter of 2015.  The improvement in operating margin was primarily the result of higher gross margin and lower administrative expenses, as a percentage of net revenue, partially offset by the planned higher marketing and advertising expenses to support the Company's pretzel brands, Snyder's of Hanover® and Snack Factory® Pretzel Crisps®. 

Adjusted EBITDA in the second quarter of 2016 increased 56.6% to $78.6 million, or 12.9% of revenue, as compared to adjusted EBITDA of $50.2 million, or 11.6% of revenue, in the second quarter of 2015. Adjusted EBITDA is a non-GAAP measure defined herein under "Use and Definition of Non-GAAP Measures," and is reconciled to net income in the tables that accompany this release.

Net interest expense in the second quarter of 2016 increased to $9.4 million as compared to $2.7 million in the second quarter of 2015.  The increase in net interest expense was the result of additional debt utilized to finance the acquisition of Diamond Foods.  The effective tax rate, excluding special items, was 35.3% in the second quarter of 2016 as compared to 35.8% in the second quarter of 2015.

Outlook^*
For the full-year of fiscal 2016, the Company now expects earnings per diluted share to be in the range of $1.22 to $1.30 (previously $1.20 to $1.30).  The Company's fiscal 2016 outlook excludes special items and charges associated with the acquisition of Diamond Foods, and includes an estimated negative impact of $0.10 to $0.12 per diluted share, from purchase accounting adjustments.  For the third quarter of fiscal 2016, the Company expects earnings per diluted share, excluding special items, to be in the range of $0.28 to $0.31.   

The Company's 2016 full-year outlook also includes the following assumptions:

• Net revenue of $2,290 million to $2,330 million, an increase of approximately 39% to 41%;
  • Excluding the contribution from Diamond Foods net revenue growth is expected to be approximately flat to up 2%;
  • Net revenue contribution from Diamond Foods for the 10 months beginning February 29, 2016, of approximately $630 million to $650 million, net of the impact of intercompany eliminations and reflecting the negative impact of net price realization from lower commodity costs and unfavorable foreign currency;
• Adjusted EBITDA of $313 million to $325 million (previously $310 million to $325 million); and
• Capital expenditures of $80 million to $85 million.

The Company's 2016 full-year outlook is also based on the following assumptions, reflecting the acquisition of Diamond Foods:

• Net interest expense of $33 million to $35 million;
• Effective tax rate of 34% to 35%; and
• Weighted average diluted share count of approximately 93 million to 94 million shares.

Conference Call
Management will host a conference call to discuss second quarter 2016 results at 8:00 a.m. Eastern Daylight Time on August 9, 2016.  The conference call will be webcast live through the Investor Relations section of Snyder's-Lance website (www.snyderslance.com) where the accompanying slide presentation will also be available.  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 26596533.  A continuous telephone replay of the call will be available between 12:00 p.m. on August 9 and midnight on August 16.  The replay telephone number is (855) 859-2056 for U.S. callers or (404) 537-3406 for international callers.  The replay access code is 26596533.  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, popcorn, nuts and other snacks. Products are sold under the Snyder's of Hanover®, Lance®, Kettle Brand®, KETTLE® Chips, Cape Cod®, Snack Factory® Pretzel Crisps®, Pop Secret®, Emerald®, Diamond of California®, Late July®, Krunchers!®, Tom's®, Archway®, Jays®, Stella D'oro®, Eatsmart Snacks™, 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. For more information, visit the Company's corporate website: www.snyderslance.com. LNCE-E

Use and Definition of Non-GAAP Measures
Snyder's-Lance's management uses non-GAAP financial measures to evaluate our operating performance and to facilitate a comparison of the Company's operating performance on a consistent basis from period to period and to provide measures that, when viewed in combination with its results prepared in accordance with GAAP, allow for a more complete understanding of factors and trends affecting the Company's business than GAAP measures alone.  The non-GAAP measures and related comparisons should be considered in addition to, not as a substitute for, our GAAP disclosure, as well as other measures of financial performance reported in accordance with GAAP, and may not be comparable to similarly titled measures used by other companies. Our management believes these non-GAAP measures are useful for providing increased transparency and assisting investors in understanding our ongoing operating performance.

Operating Income, Excluding Special Items
Operating Income, excluding special items, is provided because Snyder's-Lance believes it is useful information for understanding our results by improving the comparability of year-to-year results. Additionally, operating income, excluding special items, provides transparent and useful information to management, investors, analysts and other parties in evaluating and assessing the Company's primary operating results from period to period after removing the impact of unusual, non-operational or restructuring-related activities that affect comparability. Operating Income, excluding special items, is one of the measures management uses for planning and budgeting, monitoring and evaluating financial and operating results, and in the analysis of ongoing operating trends.

Net Income, Earnings per Share and Effective Income Tax Rate, Excluding Special Items
Net income, earnings per share, and the effective income tax rate, excluding special items, are metrics provided to present the reader with the after-tax impact of operating income, excluding special items, in order to improve the comparability and understanding of the related GAAP measures. Net income, earnings per share, and the effective income tax rate, excluding special items, provide transparent and useful information to management, investors, analysts and other parties in evaluating and assessing our primary operating results from period to period after removing the impact of unusual, non-operational or restructuring-related activities that affect comparability. Net income, earnings per share, and the effective income tax rate, excluding special items, are measures management uses for planning and budgeting, monitoring and evaluating financial and operating results.

Adjusted EBITDA
Snyder's-Lance defines adjusted EBITDA as earnings before interest expense, income taxes, depreciation and amortization ("EBITDA"), further adjusted to exclude transaction-related expenses, and other non-cash or non-operating items as well as any other unusual items that impact the comparability of our financial information. 

Management uses adjusted EBITDA as a key metric in the evaluation of underlying Company performance, in making financial, operating and planning decisions.  The Company believes this measure is useful to investors because it increases transparency and assists investors in understanding the underlying performance of the Company and in the analysis of ongoing operating trends. Additionally, Snyder's-Lance believes adjusted EBITDA is frequently used by analysts, investors and other interested parties in their evaluation of companies, many of which present an adjusted EBITDA measure when reporting their results. The Company has historically reported adjusted EBITDA to analysts and investors and believes that its continued inclusion provides consistency in financial reporting and enables analysts and investors to perform meaningful comparisons of past, present and future operating results.

Adjusted EBITDA should not be considered as an alternative to net income, determined in accordance with Generally Accepted Accounting Principles ("GAAP"), as an indicator of the Company's operating performance, as an indicator of cash flows, or as a measure of liquidity. While EBITDA and adjusted EBITDA and similar measures are frequently used as measures of operations and the ability to meet debt service requirements, they are not necessarily comparable to other similarly titled captions of other companies due to the potential inconsistencies in the method of calculation.

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, quality or availability of inputs, including walnuts and other 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; failure to maintain satisfactory labor relations; risks related to our foreign operations, including foreign currency risks; 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, political and economic conditions of the countries in which we conduct business, 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.

Investor Contact
Kevin Powers, Senior Director, Investor Relations
[email protected], (704) 557-8279

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SOURCE Snyder's-Lance, Inc.

Related Links

http://www.snyderslance.com