- Total net revenue from continuing operations increased
3.3%
- GAAP EPS of $0.04; EPS excluding special items* of
$0.27
- GAAP net income from continuing operations of $4.3
million; net income from continuing operations excluding special
items* of $26.8 million
- Adjusted EBITDA* of $76.8 million
- Company updates full-year 2017 outlook
- Company provides further detail on broad-based
performance transformation plan
*Descriptions of measures excluding special items
are provided in “Use and Definition of Non-GAAP Measures” and
reconciliations are provided in the tables at the end of this
release.
Snyder’s-Lance, Inc. (Nasdaq:LNCE) today reported financial results
for the second quarter ended July 1, 2017 and updated its full-year
2017 outlook. Total net revenue from continuing operations in
the second quarter of 2017 increased 3.3% compared to the second
quarter of 2016. GAAP net income attributable to
Snyder’s-Lance from continuing operations in the second quarter of
2017 was $4.3 million, or $0.04 per diluted share, as compared to
$20.5 million, or $0.21 per diluted share, in the second quarter of
2016. Net income attributable to Snyder’s-Lance from
continuing operations, excluding special items, for the second
quarter of 2017 was $26.8 million, as compared to $26.7 million, in
the second quarter of 2016. Earnings per diluted share from
continuing operations, excluding special items, were $0.27 in the
second quarter of 2017, compared to earnings per diluted share from
continuing operations, excluding special items, of $0.28, in the
second quarter of 2016.
"I am pleased that we were able to deliver strong
top line performance and modest profitability improvement in the
second quarter, while stabilizing a very weak start to the year,"
said Brian J. Driscoll, President and Chief Executive Officer of
Snyder’s-Lance. “While we are encouraged by our branded sales
momentum, we are not satisfied with our aggregate financial
performance and have finalized a broad-based performance
transformation plan to sharply expand margins and unlock
substantial value for our shareholders.”
Performance Transformation
Plan
As announced on April 17, 2017, the
Snyder’s-Lance’s Board of Directors and senior management team have
been conducting a comprehensive review of the Company’s operations
with the goal of significantly improving the Company’s financial
performance to deliver greater value to shareholders. As a
result of this review, the Company has finalized a performance
transformation plan focused on six key areas:
1) SG&A Expense Efficiency.
Reduce direct spending and accelerate zero-based budgeting to
improve indirect costs.
2) Manufacturing and Supply Chain
Productivity. Reduce manufacturing and distribution
network complexity and improve productivity.
3) Product and Portfolio
Optimization. Reduce business complexity through
stock keeping unit, or SKU, rationalization and ongoing portfolio
maintenance.
4) Price Realization. Improve trade
spend productivity and effectiveness and optimize brand
assortment.
5) Marketing Investment
Optimization. Reset working/non-working ratios and
increase investment in the Company’s core branded portfolio.
6) Channel Execution Excellence.
Elevate the performance of the existing independent business owner
direct store delivery partnership.
Mr. Driscoll continued, “Snyder’s-Lance is well
positioned with an attractive portfolio of brands and a strong
track record of revenue growth. That said, we have not
delivered on expectations for profitability and value
creation. To address this shortfall, we have designed a
comprehensive transformation program we believe will unlock
operating profit improvement of approximately $175 million over the
next 3+ years. As we announced two weeks ago, we have
officially launched this effort, and we expect to achieve the full
benefits of the plan in fiscal 2020.”
2020 Financial Outlook
The Company believes that the execution of the
strategic initiatives underlying the transformation plan will
enhance the Company’s margin profile and deliver long-term
sustainable value to shareholders.
By 2020, the Company is targeting for operating
margin to reach 14.0% and earnings per share, excluding special
items, to grow at a four-year CAGR of 11-13%. The Company
will provide further details on the transformation plan on today’s
second quarter 2017 financial results call and will detail the key
initiatives supporting achievement of the plan and targets at the
Company’s Investor Day scheduled for September 28, 2017, in New
York City.
Second Quarter 2017 Results
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter Net Revenue by Product
Category |
|
|
(in thousands) |
|
|
Q2 2017 Net
Revenue |
|
Q2 2016 Net
Revenue(1) |
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
Core Brands(2) |
|
|
$ |
420,525 |
|
$ |
401,694 |
|
4.7 |
% |
|
|
Allied Brands(3) |
|
|
|
43,337 |
|
|
40,669 |
|
6.6 |
% |
|
|
Branded |
|
|
|
463,862 |
|
|
442,363 |
|
4.9 |
% |
|
|
Partner Brand |
|
|
75,401 |
|
|
78,958 |
|
-4.5 |
% |
|
|
Other |
|
|
|
40,332 |
|
|
39,971 |
|
0.9 |
% |
|
|
Total |
|
|
$ |
579,595 |
|
$ |
561,292 |
|
3.3 |
% |
|
|
(1) Includes net revenue results from
continuing operations only. (2) The Company's Core Brands include:
Snyder's of Hanover®, Lance®, Kettle Brand®, KETTLE® Chips, Cape
Cod®, Snack Factory® Pretzel Crisps®, Pop Secret®, Emerald® and
Late July®. (3) The Company's Allied Brands include: Krunchers!®,
Tom's®, Archway®, Jays®, Stella D'oro®, Eatsmart Snacks™,
O-Ke-Doke® and Metcalfe’s skinny® |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue in the second quarter of 2017 was $579.6
million, an increase of 3.3% compared to $561.3 million from
continuing operations in the second quarter of 2016. Branded net
revenue increased 4.9% as a result of a 6.6% increase in the
Company’s Allied Brands and a 4.7% increase in Core Brands.
The Core Brand net revenue increase was led by growth in Late
July®, Snack Factory® Pretzel Crisps®, Lance®, Snyder’s of
Hanover®, Cape Cod®, Pop Secret®, and Kettle Brand®, partially
offset by a decline in KETTLE® Chips. In addition, during the
second quarter of 2017, net revenue from the Partner Brand category
declined 4.5% while net revenue from the Other category increased
0.9%, each compared to the second quarter of 2016.
Operating income in the second quarter of 2017 was
$22.4 million, as compared to $41.9 million from continuing
operations in the second quarter of 2016. Operating income,
excluding special items, in the second quarter of 2017 was $52.3
million, or 9.0% as a percentage of net revenue, as compared to
$50.2 million from continuing operations, or 8.9% as a percentage
of net revenue, in the second quarter of 2016. The modest
operating margin expansion was the result of lower general and
administrative expenses and supply chain productivity and cost
initiatives. These were partially offset by higher service and
distribution costs, higher cost of sales related to new product
introductions, and higher costs related to a lower quality potato
crop which negatively impacted yields.
Net interest expense in the second quarter of 2017
was $9.5 million compared to $9.4 million in the second quarter of
2016. The GAAP effective income tax rate from continuing
operations in the second quarter of 2017 was 62.8% as compared to
37.8% in the second quarter of 2016. The increase in the GAAP
effective income tax rates was primarily due to certain executive
compensation awards that were not tax deductible. Excluding
special items, the effective income tax rate from continuing
operations was 36.2% in the second quarter of 2017 as compared to
35.2% in the second quarter of 2016. The increase in the effective
tax rate, excluding special items, was primarily due to lower
income from our U.K operations.
GAAP net income attributable to Snyder’s-Lance from
continuing operations in the second quarter of 2017 was $4.3
million, or $0.04 per diluted share, as compared to $20.5 million,
or $0.21 per diluted share, in the second quarter of 2016. In
the second quarter, the Company incurred $29.8 million in pre-tax
expenses which affected comparability, primarily related to
severance and impairment costs as part of the Company’s performance
transformation plan, and the relocation of Emerald® production from
the Stockton, CA manufacturing facility to the Company’s
manufacturing facility in Charlotte, NC.
Net income attributable to Snyder’s-Lance from
continuing operations, excluding special items, for the second
quarter of 2017, was $26.8 million, as compared to $26.7 million,
in the second quarter of 2016. Earnings per diluted share
from continuing operations, excluding special items, was $0.27 in
the second quarter of 2017 compared to $0.28, in the second quarter
of 2016.
Adjusted EBITDA from continuing operations in the
second quarter of 2017 was $76.8 million, or 13.2% of net revenue,
as compared to adjusted EBITDA of $75.7 million, or 13.5% of net
revenue, in the second quarter of 2016. 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.
Outlook
Based on the Company’s year-to-date performance,
and revised expectations for the remainder of the year, for the
full-year of fiscal 2017, the Company continues to expect net
revenue to be between $2,200 million and $2,250 million, and now
expects adjusted EBITDA to be between $300 million and $325
million, and earnings per diluted share, excluding special items,
to be between $1.10 and $1.20.
The Company’s 2017 full-year outlook also includes
the following assumptions:
- Capital expenditures of $75 million to $85 million;
- Net interest expense of $37 million to $40 million;
- Effective tax rate of 35.5% to 36.5%; and
- Weighted average diluted share count of approximately 98
million shares.
Full-year 2017 GAAP guidance is not provided in
this release due to the likely occurrence of one or more of the
following items where the Company is unable to reliably forecast
the timing and magnitude: continued transaction related costs
associated with the divestiture of Diamond of California and
integration of legacy Diamond Foods operations, other potential
transactions and their related costs, settlements of contingent
liabilities, possible gains or losses on the sale of businesses or
other assets, restructuring costs, impairment charges, and the
income tax effects of these potential items.
Conference Call
Management will host a conference call to discuss
the Company's second quarter 2017 results at
10:00 a.m. ET on August 8, 2017. The
conference call will be webcast live through the Investor Relations
section of the 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 48669256. A continuous
telephone replay of the call will be available between 12:00 p.m.
ET on August 8 and 12:00 a.m. ET on August 15. The replay
telephone number is (855) 859-2056 for U.S. callers or (404)
537-3406 for international callers. The replay access code is
48669256. 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®, Late July®, Krunchers! ®,
Tom's®, Archway®, Jays®, Stella D'oro®, Eatsmart Snacks™,
O-Ke-Doke®, Metcalfe’s skinny®, 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 web site:
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 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 and Gross Profit, Excluding
Special Items
Operating income and gross profit, excluding
special items, are provided because Snyder’s-Lance believes it is
useful information for understanding our results by improving the
comparability of our results. Additionally, operating income and
gross profit, excluding special items, provide transparent and
useful information to management, investors, analysts and other
parties in evaluating and assessing the Company’s primary operating
results after removing the impact of unusual, non-operational or
restructuring or transaction related activities that affect
comparability. Operating income and gross profit, excluding special
items, are two 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 after removing the impact of unusual,
non-operational or restructuring or transaction 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 restructuring
or 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 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
In this press release, we make statements which may
be forward-looking within the meaning of applicable securities
laws, which represent our current judgment about possible future
events. The statements include projections regarding future
revenues, earnings and other results. In making these
statements we rely on current expectations, assumptions and
analyses based on our experience and perception of historical
trends, current conditions and expected future developments as well
as other factors we consider appropriate under the circumstances.
We believe these judgments are reasonable, but these statements are
not guarantees of any events or financial results, and our actual
results may differ materially due to a variety of important
factors, both positive and negative. These factors include among
others: changes in general economic conditions; price or
availability of raw materials, packaging, energy and labor; food
industry competition; changes in top customer relationships;
consolidation of the retail environment; decision by British voters
to exit the European Union; failure to realize anticipated benefits
of acquisitions and divestitures; loss of key personnel; failure to
execute strategic initiatives; safety and quality of food products;
adulterated or misbranded products; disruption of our supply chain
or information technology systems; improper use or misuse of social
media; ability to anticipate changes in consumer preferences and
trends; distribution through independent operators; protection of
trademarks and intellectual property; impairment in the carrying
value of goodwill or other intangible assets; new regulations or
legislation; interest and foreign currency exchange rate
volatility; concentration of capital stock ownership; increasing
legal complexity and potential litigation; failure to realize the
expected benefits from the acquisition of Diamond Foods; the
inability to successfully execute international expansion
strategies; additional risks from foreign operations; our
substantial debt; and the restrictions and limitations on our
business operations in the agreements and instruments governing our
debt.
Our most recent report on Form 10-K and our other
reports filed with the U.S. Securities and Exchange Commission
provide information about these and other factors, which we may
revise or supplement in future reports. We caution readers not to
place undue reliance on forward-looking statements. We do not
undertake to update any forward-looking statements that it may make
except as required by applicable law. All subsequent written and
forward-looking statements attributed to Snyder’s-Lance or any
person acting on its behalf are expressly qualified in their
entirety by the factors referenced above.
(Tables to Follow)
SNYDER’S-LANCE, INC. AND SUBSIDIARIES |
Condensed Consolidated Statements of Income/(Loss)
(Unaudited) |
|
|
|
Quarter Ended |
|
Six Months Ended |
(in
thousands, except per share data) |
|
July 1, 2017 |
|
July 2, 2016 |
|
July 1, 2017 |
|
July 2, 2016 |
Net revenue |
|
$ |
579,595 |
|
|
$ |
561,292 |
|
|
$ |
1,111,096 |
|
|
$ |
1,009,161 |
|
Cost of sales |
|
369,308 |
|
|
349,736 |
|
|
716,043 |
|
|
654,515 |
|
Gross profit |
|
210,287 |
|
|
211,556 |
|
|
395,053 |
|
|
354,646 |
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses |
|
179,239 |
|
|
160,121 |
|
|
338,702 |
|
|
281,676 |
|
Transaction and
integration related expenses |
|
478 |
|
|
9,945 |
|
|
1,585 |
|
|
58,923 |
|
Impairment charges |
|
7,920 |
|
|
489 |
|
|
7,920 |
|
|
863 |
|
Other operating
expense/(income), net |
|
205 |
|
|
(914 |
) |
|
475 |
|
|
(1,419 |
) |
Operating income |
|
22,445 |
|
|
41,915 |
|
|
46,371 |
|
|
14,603 |
|
|
|
|
|
|
|
|
|
|
Other income, net |
|
(218 |
) |
|
(227 |
) |
|
(1,234 |
) |
|
(555 |
) |
Income before interest
and income taxes |
|
22,663 |
|
|
42,142 |
|
|
47,605 |
|
|
15,158 |
|
|
|
|
|
|
|
|
|
|
Loss on early
extinguishment of debt |
|
— |
|
|
— |
|
|
— |
|
|
4,749 |
|
Interest expense,
net |
|
9,492 |
|
|
9,361 |
|
|
18,446 |
|
|
14,090 |
|
Income/(loss) before
income taxes |
|
13,171 |
|
|
32,781 |
|
|
29,159 |
|
|
(3,681 |
) |
|
|
|
|
|
|
|
|
|
Income tax
expense/(benefit) |
|
8,270 |
|
|
12,381 |
|
|
12,932 |
|
|
(1,233 |
) |
Income/(loss) from
continuing operations |
|
4,901 |
|
|
20,400 |
|
|
16,227 |
|
|
(2,448 |
) |
Loss from discontinued
operations, net of income taxes |
|
(341 |
) |
|
(783 |
) |
|
(341 |
) |
|
(3,329 |
) |
Net income/(loss) |
|
4,560 |
|
|
19,617 |
|
|
15,886 |
|
|
(5,777 |
) |
Net income/(loss)
attributable to non-controlling interests |
|
590 |
|
|
(64 |
) |
|
754 |
|
|
(27 |
) |
Net income/(loss)
attributable to Snyder’s-Lance, Inc. |
|
$ |
3,970 |
|
|
$ |
19,681 |
|
|
$ |
15,132 |
|
|
$ |
(5,750 |
) |
|
|
|
|
|
|
|
|
|
Amounts
attributable to Snyder's-Lance, Inc.: |
|
|
|
|
|
|
|
|
Continuing
operations |
|
$ |
4,311 |
|
|
$ |
20,464 |
|
|
$ |
15,473 |
|
|
$ |
(2,421 |
) |
Discontinued
operations |
|
(341 |
) |
|
(783 |
) |
|
(341 |
) |
|
(3,329 |
) |
Net income/(loss)
attributable to Snyder's-Lance, Inc. |
|
$ |
3,970 |
|
|
$ |
19,681 |
|
|
$ |
15,132 |
|
|
$ |
(5,750 |
) |
|
|
|
|
|
|
|
|
|
Basic
earnings/(loss) per share: |
|
|
|
|
|
|
|
|
Continuing
operations |
|
$ |
0.04 |
|
|
$ |
0.21 |
|
|
$ |
0.16 |
|
|
$ |
(0.03 |
) |
Discontinued
operations |
|
— |
|
|
— |
|
|
— |
|
|
(0.04 |
) |
Total basic
earnings/(loss) per share |
|
$ |
0.04 |
|
|
$ |
0.21 |
|
|
$ |
0.16 |
|
|
$ |
(0.07 |
) |
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding - basic |
|
96,448 |
|
|
95,679 |
|
|
96,321 |
|
|
87,816 |
|
|
|
|
|
|
|
|
|
|
Diluted
earnings/(loss) per share: |
|
|
|
|
|
|
|
|
Continuing
operations |
|
$ |
0.04 |
|
|
$ |
0.21 |
|
|
$ |
0.16 |
|
|
$ |
(0.03 |
) |
Discontinued
operations |
|
— |
|
|
(0.01 |
) |
|
— |
|
|
(0.04 |
) |
Total diluted
earnings/(loss) per share |
|
$ |
0.04 |
|
|
$ |
0.20 |
|
|
$ |
0.16 |
|
|
$ |
(0.07 |
) |
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding - diluted |
|
97,704 |
|
|
96,666 |
|
|
97,629 |
|
|
87,816 |
|
|
|
|
|
|
|
|
|
|
Dividends declared per
common share |
|
$ |
0.16 |
|
|
$ |
0.16 |
|
|
$ |
0.32 |
|
|
$ |
0.32 |
|
SNYDER’S-LANCE, INC. AND SUBSIDIARIES |
Condensed Consolidated Balance Sheets
(Unaudited) |
|
(in
thousands, except share and per share data) |
|
July 1, 2017 |
|
December 31, 2016 |
ASSETS |
|
|
|
|
Current
assets: |
|
|
|
|
Cash and
cash equivalents |
|
$ |
18,430 |
|
|
$ |
35,409 |
|
Restricted cash |
|
446 |
|
|
714 |
|
Accounts
receivable, net of allowances of $1,727 and $1,290,
respectively |
|
224,401 |
|
|
210,723 |
|
Receivable from the sale of Diamond of California |
|
— |
|
|
118,577 |
|
Inventories, net |
|
189,821 |
|
|
173,456 |
|
Prepaid
income taxes and income taxes receivable |
|
6,994 |
|
|
5,744 |
|
Assets
held for sale |
|
22,051 |
|
|
19,568 |
|
Prepaid
expenses and other current assets |
|
34,917 |
|
|
27,666 |
|
Total current
assets |
|
497,060 |
|
|
591,857 |
|
|
|
|
|
|
Noncurrent
assets: |
|
|
|
|
Fixed
assets, net |
|
497,064 |
|
|
501,884 |
|
Goodwill |
|
1,322,047 |
|
|
1,318,362 |
|
Other
intangible assets, net |
|
1,368,014 |
|
|
1,373,800 |
|
Other
noncurrent assets |
|
49,388 |
|
|
48,173 |
|
Total assets |
|
$ |
3,733,573 |
|
|
$ |
3,834,076 |
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
Current
liabilities: |
|
|
|
|
Current
portion of long-term debt |
|
$ |
49,000 |
|
|
$ |
49,000 |
|
Accounts
payable |
|
134,937 |
|
|
99,249 |
|
Accrued
compensation |
|
37,826 |
|
|
44,901 |
|
Accrued
casualty insurance claims |
|
3,856 |
|
|
4,266 |
|
Accrued
marketing, selling and promotional costs |
|
57,755 |
|
|
50,179 |
|
Other
payables and accrued liabilities |
|
49,664 |
|
|
47,958 |
|
Total current
liabilities |
|
333,038 |
|
|
295,553 |
|
|
|
|
|
|
Noncurrent
liabilities: |
|
|
|
|
Long-term
debt, net |
|
1,084,772 |
|
|
1,245,959 |
|
Deferred
income taxes, net |
|
394,271 |
|
|
378,236 |
|
Accrued
casualty insurance claims |
|
12,919 |
|
|
13,049 |
|
Other
noncurrent liabilities |
|
25,018 |
|
|
25,609 |
|
Total
liabilities |
|
1,850,018 |
|
|
1,958,406 |
|
|
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
|
|
Stockholders’
equity: |
|
|
|
|
Common
stock, $0.83 1/3 par value. 110,000,000 shares authorized;
96,634,070 and 96,242,784 shares outstanding, respectively |
|
80,525 |
|
|
80,199 |
|
Preferred
stock, $1.00 par value. 5,000,000 shares authorized; no shares
outstanding |
|
— |
|
|
— |
|
Additional paid-in capital |
|
1,612,653 |
|
|
1,598,678 |
|
Retained
earnings |
|
179,994 |
|
|
195,733 |
|
Accumulated other comprehensive loss |
|
(9,408 |
) |
|
(17,977 |
) |
Total Snyder’s-Lance,
Inc. stockholders’ equity |
|
1,863,764 |
|
|
1,856,633 |
|
Non-controlling interests |
|
19,791 |
|
|
19,037 |
|
Total stockholders’
equity |
|
1,883,555 |
|
|
1,875,670 |
|
Total liabilities and stockholders’ equity |
|
$ |
3,733,573 |
|
|
$ |
3,834,076 |
|
SNYDER’S-LANCE, INC. AND SUBSIDIARIES |
Condensed Consolidated Statements of Cash Flows
(Unaudited) |
|
|
|
Six Months Ended |
(in
thousands) |
|
July 1, 2017 |
|
July 2, 2016 |
Operating
activities: |
|
|
|
|
Net
income/(loss) |
|
$ |
15,886 |
|
|
$ |
(5,777 |
) |
Adjustments to reconcile net income/(loss) to cash from operating
activities: |
|
|
|
|
Depreciation and amortization |
|
48,929 |
|
|
47,452 |
|
Stock-based compensation expense |
|
8,563 |
|
|
19,798 |
|
Loss on
sale of fixed assets, net |
|
405 |
|
|
1 |
|
Loss on
sale of Diamond of California |
|
540 |
|
|
— |
|
Gain on
sale of route businesses, net |
|
(761 |
) |
|
(691 |
) |
Loss on
early extinguishment of debt |
|
— |
|
|
4,749 |
|
Impairment charges |
|
7,920 |
|
|
863 |
|
Deferred
income taxes |
|
12,163 |
|
|
(4,760 |
) |
Provision
for doubtful accounts |
|
630 |
|
|
235 |
|
Changes
in operating assets and liabilities, excluding business
acquisitions, divestitures and foreign currency translation
adjustments |
|
(7,242 |
) |
|
20,065 |
|
Net cash provided by
operating activities |
|
87,033 |
|
|
81,935 |
|
|
|
|
|
|
Investing
activities: |
|
|
|
|
Purchases
of fixed assets |
|
(34,741 |
) |
|
(37,317 |
) |
Purchases
of route businesses |
|
(17,421 |
) |
|
(14,863 |
) |
Purchase
of equity method investment |
|
(1,500 |
) |
|
— |
|
Proceeds
from sale of fixed assets and insurance recoveries |
|
156 |
|
|
833 |
|
Proceeds
from sale of route businesses |
|
16,206 |
|
|
13,830 |
|
Proceeds
from sale of investments |
|
321 |
|
|
— |
|
Proceeds
from sale of discontinued operations |
|
121,681 |
|
|
— |
|
Business
acquisition, net of cash acquired |
|
— |
|
|
(1,021,434 |
) |
Net cash provided
by/(used in) investing activities |
|
84,702 |
|
|
(1,058,951 |
) |
|
|
|
|
|
Financing
activities: |
|
|
|
|
Dividends
paid to stockholders |
|
(30,871 |
) |
|
(26,702 |
) |
Debt
issuance costs |
|
(2,441 |
) |
|
(6,047 |
) |
Issuances
of common stock |
|
7,550 |
|
|
7,830 |
|
Excess
tax benefits from stock-based compensation |
|
— |
|
|
299 |
|
Share
repurchases, including shares surrendered for tax withholding |
|
(1,812 |
) |
|
(8,275 |
) |
Payments
on capital leases |
|
(1,399 |
) |
|
(1,015 |
) |
Repayments of long-term debt |
|
(24,500 |
) |
|
(120,295 |
) |
Proceeds
from issuance of long-term debt |
|
— |
|
|
1,130,000 |
|
Repayments of revolving credit facility |
|
(220,000 |
) |
|
(57,000 |
) |
Proceeds
from revolving credit facility |
|
84,000 |
|
|
57,000 |
|
Net cash (used
in)/provided by financing activities |
|
(189,473 |
) |
|
975,795 |
|
|
|
|
|
|
Effect of
exchange rate changes on cash |
|
491 |
|
|
(411 |
) |
|
|
|
|
|
Net
decrease |
|
(17,247 |
) |
|
(1,632 |
) |
Cash, cash
equivalents and restricted cash at beginning of
period |
|
36,123 |
|
|
40,071 |
|
Cash, cash
equivalents and restricted cash at end of period |
|
$ |
18,876 |
|
|
$ |
38,439 |
|
|
|
|
|
|
Supplemental
information: |
|
|
|
|
Cash paid for income
taxes, net of refunds of $330 and $1,360, respectively |
|
$ |
4,249 |
|
|
$ |
4,321 |
|
Cash paid for
interest |
|
$ |
17,594 |
|
|
$ |
13,528 |
|
|
|
|
|
|
Non-cash
investing activities: |
|
|
|
|
Increase in fixed asset
expenditures included in accounts payable |
|
$ |
(2,987 |
) |
|
$ |
(680 |
) |
Liability for
dissenters associated with the acquisition of Diamond Foods |
|
$ |
— |
|
|
$ |
12,418 |
|
|
|
|
|
|
Non-cash
financing activities: |
|
|
|
|
Common stock and
stock-based compensation issued for business acquisitions |
|
$ |
— |
|
|
$ |
800,987 |
|
|
|
|
|
|
|
|
|
|
SNYDER’S-LANCE, INC. AND SUBSIDIARIES |
Reconciliation of Non-GAAP Measures
(Unaudited) |
Gross profit, excluding special items |
|
|
|
Quarter Ended |
(in
thousands) |
|
July 1, 2017 |
|
July 2, 2016 |
Net revenue |
|
$ |
579,595 |
|
|
$ |
561,292 |
|
Cost of sales |
|
369,308 |
|
|
349,736 |
|
Gross profit
from continuing operations |
|
$ |
210,287 |
|
|
$ |
211,556 |
|
As a % of net
revenue |
|
36.3 |
% |
|
37.7 |
% |
|
|
|
|
|
Transaction and
integration related expenses(1) |
|
— |
|
|
186 |
|
Emerald move(2) |
|
3,629 |
|
|
— |
|
Transformation
initiative(3) |
|
2,744 |
|
|
— |
|
Inventory
step-up(4) |
|
— |
|
|
(2,289 |
) |
Other |
|
(15 |
) |
|
— |
|
|
|
|
|
|
Gross profit
from continuing operations, excluding special items |
|
$ |
216,645 |
|
|
$ |
209,453 |
|
As a % of net
revenue |
|
37.4 |
% |
|
37.3 |
% |
|
(1)
Transaction and integration related expenses consist of severance
benefits for Diamond Foods personnel. |
(2)
Expenses associated with the relocation of Emerald production from
Stockton, CA to Charlotte, NC. |
(3)
Transformation initiative costs primarily consist of severance and
retention benefits related to our performance transformation
plan. |
(4)
The inventory step-up represents the reversal included in cost of
sales as a result of a reduction in our calculated step-up of
Diamond Foods' inventory to fair value as of the acquisition
date. |
|
SNYDER’S-LANCE, INC. AND SUBSIDIARIES |
Reconciliation of Non-GAAP Measures
(Unaudited) |
Operating income, excluding special items |
|
|
|
Quarter Ended |
(in
thousands) |
|
July 1, 2017 |
|
July 2, 2016 |
Operating
income from continuing operations |
|
$ |
22,445 |
|
|
$ |
41,915 |
|
As a % of net
revenue |
|
3.9 |
% |
|
7.5 |
% |
|
|
|
|
|
|
|
|
|
Transaction and
integration related expenses(1)(2) |
|
478 |
|
|
10,131 |
|
Emerald move and
required packaging changes(3) |
|
4,548 |
|
|
251 |
|
Transformation
initiative(4) |
|
24,359 |
|
|
— |
|
Inventory
step-up(5) |
|
— |
|
|
(2,289 |
) |
Other(6)(7) |
|
423 |
|
|
178 |
|
|
|
|
|
|
|
|
|
|
Operating
income from continuing operations, excluding special
items |
|
$ |
52,253 |
|
|
$ |
50,186 |
|
As a % of net
revenue |
|
9.0 |
% |
|
8.9 |
% |
|
(1)
For the second quarter of 2017, transaction and integration related
expenses primarily consist of professional fees and idle facility
lease costs. |
(2)
For the second quarter of 2016, transaction and integration
related expenses include severance, retention and accelerated
stock-based compensation which was recognized due primarily to
change in control provisions and severance agreements with Diamond
Foods personnel. The remaining costs were primarily professional
fees and legal costs associated with the integration of Diamond
Foods. |
(3)
Expenses associated with the relocation of Emerald production from
Stockton, CA to Charlotte, NC, as well as costs related to our
Transition Services Agreement. |
(4)
Transformation initiative costs primarily consist of
severance and retention benefits, professional fees, and plant
closure-related fixed asset impairments resulting from our
performance transformation plan. Transformation initiative costs
also include $7.1 million of accelerated and modified stock-based
compensation and other benefits related to CEO retirement. |
(5)
The inventory step-up represents the reversal included in cost of
sales as a result of a reduction in our calculated step-up of
Diamond Foods' inventory to fair value as of the acquisition
date. |
(6)
For the second quarter of 2017, other items primarily consist of
professional and legal fees. |
(7)
For the second quarter of 2016, other items include severance
benefits and fixed asset impairments, offset by business
interruption insurance gains. |
|
SNYDER’S-LANCE, INC. AND SUBSIDIARIES |
Reconciliation of Non-GAAP Measures
(Unaudited) |
Earnings per diluted share, excluding special
items |
|
|
|
Quarter Ended |
|
|
July 1, 2017 |
|
July 2, 2016 |
Earnings per
diluted share from continuing operations |
|
$ |
0.04 |
|
|
$ |
0.21 |
|
|
|
|
|
|
Transaction and
integration related expenses(1)(2) |
|
0.01 |
|
|
0.08 |
|
Emerald move and
required packaging changes(3) |
|
0.03 |
|
|
— |
|
Transformation
initiative(4) |
|
0.19 |
|
|
— |
|
Inventory
step-up(5) |
|
— |
|
|
(0.01 |
) |
|
|
|
|
|
Earnings per
diluted share from continuing operations, excluding special
items |
|
$ |
0.27 |
|
|
$ |
0.28 |
|
|
(1)
For the second quarter of 2017, transaction and integration
related expenses primarily consist of professional fees and idle
facility lease costs. |
(2)
For the second quarter of 2016, transaction and integration
related expenses include severance, retention and accelerated
stock-based compensation which was recognized due primarily to
change in control provisions and severance agreements with Diamond
Foods personnel. The remaining costs were primarily professional
fees and legal costs associated with the integration of Diamond
Foods. |
(3)
Expenses associated with the relocation of Emerald production from
Stockton, CA to Charlotte, NC, as well as costs related to our
Transition Services Agreement. |
(4)
Transformation initiative costs primarily consist of severance and
retention benefits, professional fees, and plant closure-related
fixed asset impairments resulting from our performance
transformation plan. Transformation initiative costs also include a
$0.04 impact to earnings per diluted share for accelerated and
modified stock-based compensation and other benefits related to CEO
retirement, as well as a $0.03 impact to earnings per diluted share
for a write-off of the deferred tax asset for certain executive
stock-based compensation which is no longer deductible due to the
appointment of our new CEO. |
(5)
The inventory step-up represents the reversal included in cost of
sales as a result of a reduction in our calculated step-up of
Diamond Foods' inventory to fair value as of the acquisition
date. |
|
SNYDER’S-LANCE, INC. AND SUBSIDIARIES |
Reconciliation of Non-GAAP Measures
(Unaudited) |
EBITDA and Adjusted EBITDA |
|
|
|
Quarter Ended |
(in
thousands) |
|
July 1, 2017 |
|
July 2, 2016 |
Income from continuing
operations |
|
$ |
4,901 |
|
|
$ |
20,400 |
|
Income tax expense |
|
8,270 |
|
|
12,381 |
|
Interest expense,
net |
|
9,492 |
|
|
9,361 |
|
Depreciation |
|
17,388 |
|
|
17,997 |
|
Amortization |
|
6,934 |
|
|
7,311 |
|
EBITDA from
continuing operations |
|
$ |
46,985 |
|
|
$ |
67,450 |
|
As a % of net
revenue |
|
8.1 |
% |
|
12.0 |
% |
|
|
|
|
|
Transaction and
integration related expenses(1)(2) |
|
478 |
|
|
10,131 |
|
Emerald move and
required packaging changes(3) |
|
4,548 |
|
|
251 |
|
Transformation
initiative(4) |
|
24,359 |
|
|
— |
|
Inventory
step-up(5) |
|
— |
|
|
(2,289 |
) |
Other(6)(7) |
|
423 |
|
|
178 |
|
|
|
|
|
|
Adjusted EBITDA
from continuing operations |
|
$ |
76,793 |
|
|
$ |
75,721 |
|
As a % of net
revenue |
|
13.2 |
% |
|
13.5 |
% |
|
(1)
For the second quarter of 2017, transaction and integration related
expenses primarily consist of professional fees and idle facility
lease costs. |
(2)
For the second quarter of 2016, transaction and integration related
expenses include severance, retention and accelerated stock-based
compensation which was recognized due primarily to change in
control provisions and severance agreements with Diamond Foods
personnel. The remaining costs were primarily professional fees and
legal costs associated with the integration of Diamond Foods. |
(3)
Expenses associated with the relocation of Emerald production from
Stockton, CA to Charlotte, NC, as well as costs related to our
Transition Services Agreement. |
(4)
Transformation initiative costs primarily consist of severance and
retention benefits, professional fees, and plant closure-related
fixed asset impairments resulting from our performance
transformation plan. Transformation initiative costs also include
$7.1 million of accelerated and modified stock-based compensation
and other benefits related to CEO retirement. |
(5)
The inventory step-up represents the reversal included in cost of
sales as a result of a reduction in our calculated step-up of
Diamond Foods' inventory to fair value as of the acquisition
date. |
(6)
For the second quarter of 2017, other items primarily consist of
professional and legal fees. |
(7)
For the second quarter of 2016, other items include severance
benefits and fixed asset impairments, offset by business
interruption insurance gains. |
|
SNYDER’S-LANCE, INC. AND SUBSIDIARIES |
Reconciliation of Non-GAAP Measures
(Unaudited) |
Net
income attributable to Snyder's-Lance, excluding special
items |
|
|
|
Quarter Ended |
(in
thousands) |
|
July 1, 2017 |
|
July 2, 2016 |
Net income
attributable to Snyder’s-Lance, Inc. from continuing
operations |
|
$ |
4,311 |
|
|
$ |
20,464 |
|
|
|
|
|
|
Transaction and
integration related expenses, net of tax(1)(2) |
|
925 |
|
|
7,312 |
|
Emerald move and
required packaging changes, net of tax(3) |
|
2,978 |
|
|
180 |
|
Transformation
initiative, net of tax(4) |
|
18,365 |
|
|
— |
|
Inventory step-up, net
of tax(5) |
|
— |
|
|
(1,428 |
) |
Other, net of
tax(6)(7) |
|
259 |
|
|
128 |
|
|
|
|
|
|
Net income
attributable to Snyder’s-Lance, Inc. from continuing operations,
excluding special items |
|
$ |
26,838 |
|
|
$ |
26,656 |
|
|
(1)
For the second quarter of 2017, transaction and integration related
expenses primarily consist of professional fees and idle facility
lease costs. |
(2)
For the second quarter of 2016, transaction and integration related
expenses include severance, retention and accelerated stock-based
compensation which was recognized due primarily to change in
control provisions and severance agreements with Diamond Foods
personnel. The remaining costs were primarily professional fees and
legal costs associated with the integration of Diamond Foods. |
(3)
Expenses associated with the relocation of Emerald production from
Stockton, CA to Charlotte, NC, as well as costs related to our
Transition Services Agreement. |
(4)
Transformation initiative costs primarily consist of
severance and retention benefits, professional fees, and plant
closure-related fixed asset impairments resulting from our
performance transformation plan. Transformation initiative costs
also include $4.3 million of accelerated and modified stock-based
compensation and other benefits related to CEO retirement, as well
as a $3.2 million write-off of the deferred tax asset for certain
executive stock-based compensation which is no longer deductible
due to the appointment of our new CEO. |
(5)
The inventory step-up represents the reversal included in
cost of sales as a result of a reduction in our calculated step-up
of Diamond Foods' inventory to fair value as of the acquisition
date. |
(6)
For the second quarter of 2017, other items primarily consist
of professional and legal fees. |
(7)
For the second quarter of 2016, other items include severance
benefits and fixed asset impairments, offset by business
interruption insurance gains. |
|
SNYDER’S-LANCE, INC. AND SUBSIDIARIES |
Reconciliation of Non-GAAP Measures
(Unaudited) |
Adjusted effective income tax rate |
|
Quarter ended
July 1, 2017 |
|
|
|
|
|
|
(in thousands) |
|
Income from Continuing
Operations |
|
|
GAAP Income |
|
Adjustments |
|
Adjusted Income |
Income before
income taxes |
|
$ |
13,171 |
|
|
$ |
29,808 |
|
|
$ |
42,979 |
|
Income tax expense |
|
8,270 |
|
|
7,281 |
|
|
15,551 |
|
Net
income |
|
4,901 |
|
|
22,527 |
|
|
27,428 |
|
Net income attributable
to non-controlling interests |
|
590 |
|
|
— |
|
|
590 |
|
Net income
attributable to Snyder’s-Lance, Inc. |
|
$ |
4,311 |
|
|
$ |
22,527 |
|
|
$ |
26,838 |
|
|
|
|
|
|
|
|
Effective
income tax rate(1) |
|
62.8 |
% |
|
|
|
36.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended
July 2, 2016 |
|
|
|
|
|
|
(in thousands) |
|
Income from Continuing
Operations |
|
|
GAAP Income |
|
Adjustments |
|
Adjusted Income |
Income before
income taxes |
|
$ |
32,781 |
|
|
$ |
8,271 |
|
|
$ |
41,052 |
|
Income tax expense |
|
12,381 |
|
|
2,079 |
|
|
14,460 |
|
Net
income |
|
20,400 |
|
|
6,192 |
|
|
26,592 |
|
Net loss attributable
to non-controlling interests |
|
(64 |
) |
|
— |
|
|
(64 |
) |
Net income
attributable to Snyder’s-Lance, Inc. |
|
$ |
20,464 |
|
|
$ |
6,192 |
|
|
$ |
26,656 |
|
|
|
|
|
|
|
|
Effective
income tax rate(2) |
|
37.8 |
% |
|
|
|
35.2 |
% |
|
(1)
The tax rate on adjusted income varies from the tax rate on GAAP
income for the second quarter of 2017 primarily due to a $3.2
million write-off of the deferred tax asset for certain executive
stock-based compensation which is no longer deductible due to the
appointment of our new CEO. This deferred tax asset write-off
increased the tax rate on GAAP income by approximately 2430 basis
points. |
(2)
The tax rate on adjusted income varies from the tax rate on GAAP
income for the second quarter of 2016 primarily due to the
effective tax rate impact of non-deductible transaction costs
related to the acquisition of Diamond Foods. |
|
Investor Contact
Kevin Powers, Senior Director, Investor Relations
kpowers@snyderslance.com, (704) 557-8279
Media Contact
Joey Shevlin, Director, Corporate Communications & Public Affairs
JShevlin@snyderslance.com, (704) 557-8850
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