Snyder's-Lance (LNCE, Financial) is perfectly positioned for success as consumers and retailers continue to reshape the snacking industry. As a nimble midsize company, it is able to respond quickly to emerging trends with a balanced portfolio and balanced distribution strategies.
Snyder's-Lance manufactures and markets snack foods in the U.S. and internationally. The company's products include pretzels, sandwich crackers, pretzel crackers, potato chips, cookies, tortilla chips, restaurant-style crackers, nuts and other snacks. With more than 5,000 dedicated associates as well as an extensive Direct Store Delivery (DSD) and Direct Sales network, Snyder's-Lance is focused on creating shareholder value through growth, innovation and stewardship.
The company recently posted first-quarter results. Though the company’s top line remains under pressure by the challenges in the food industry, it managed diligently to save costs and drove operational efficiencies to deliver strong earnings growth.
This stock has plenty of opportunities. It has a robust pipeline of products and is constantly adapting itself to improve returns. The food industry is changing rapidly, and the company is making continual innovations and proactively embracing these changes by refining the strategy.
First-quarter results
Net revenue during the first quarter of 2016 was $462.8 million (an increase of 15.0% from the prior-year quarter’s $402.3).
Adjusted EBITDA for the first quarter of 2016 was $55.7 million (which was $38.4 million during the prior-year quarter).
Net income excluding special items for the first quarter of 2016 was $19.9 million, or 25 cents per diluted share on 80.8 million weighted average diluted shares outstanding (which was $12.0 million during the first quarter of 2015, or 17 cents per diluted share on 71.0 million weighted average diluted shares outstanding).
Including special items, the net loss for the first quarter of 2016 was $25.4 million, or 32 cents per share on 80.0 million weighted average shares outstanding (which compares to the net income of $10.6 million, or 15 cents per diluted share on 71.0 million weighted average diluted shares outstanding during the prior-year quarter).
Special items for the first quarter of 2016 included after-tax expenses of $45.3 million (which was $1.3 million during the prior-year quarter).
Expectations for 2016
The company expects the following:
| Metrics | Range |
| Earnings per diluted share | To be between $1.20 and $1.30 |
| Net revenue | To be between $2.29 billion and $2.33 billion |
| Adjusted EBITDA | To be between $310 million and $325 million |
| Capex | To be around $80 million to $85 million |
| Net interest expense | To be around $33 million to $35 million |
| Effective tax rate | To be around 34% to 35% |
Positive attributes of the quarter
- Savings in cost.
- Operational efficiencies.
- Revenue growth and market share gains by these brands – Lance, Cape Cod and Late July.
- Improved product formulation.
- Packaging design and innovative new products like Gluten Free sandwich crackers drove base business growth.
Focus
- Balancing its product portfolio.
- The company is leveraging the power of its commercial team to balance speed and scale.
- Expanding channels and geography.
- Driving productivity to increase margins.
- Improving efficiencies.
- Optimizing product mix.
- Top line growth.
- SG&A cost reduction initiatives.
- Strong, growing brands
New launch
Lance Quick Starts introduced five new flavors to its lineup of convenient, delicious and nutritious breakfast biscuits designed to make the morning meal a lot easier and a lot more interesting.
Like all Lance sandwich crackers, the new Quick Starts offerings feature two whole grain biscuits on the outside with a filling in the middle. The expansion of the Quick Starts line is tied to the rise in popularity of the breakfast biscuit category, which surged 43% to $172 million in sales from March 2014 to March 2015, according to Nielsen Scan data. As consumers seek alternative breakfast options better suited to their nutrition and lifestyle needs, they're either replacing or complementing their consumption of traditional, grain-based breakfast foods like cereal, toast and muffins with more satisfying, protein-rich products like Lance Quick Starts.
Acquisition of Diamond Foods
In February the company completed acquisition of Diamond Foods Inc. (DMND, Financial). As per terms of the deal, Snyder's-Lance has acquired all outstanding shares of Diamond Foods in a cash and stock merger transaction. Under the terms of the agreement, Diamond Foods stockholders receive 0.775 Snyder's-Lance shares and $12.50 in cash per share of Diamond Foods. The acquisition creates a powerful, international snack foods company with an innovative and diversified product portfolio.
During the first quarter, the company closed the Diamond Foods acquisition. The company is already benefiting from the combination of these two great companies. This combination provides Snyder's-Lance an enhanced portfolio of brands across key snack food categories with stronger distribution opportunities. Snyder's-Lance is going to benefit from significant cost and revenue synergies.
This combination will provide the following benefits:
- Expand core brands internationally.
- Leverage innovation pipeline.
- Extend presence and scale.
(Source: Company’s website)
On a concluding note
Today consumers are smarter and more informed. These days everyone is looking to balance convenience and nutrition in their morning routine, and many are finding an on-the-go solution like Quick Starts fits their lifestyle better than a traditional sit-down breakfast. Snyder's-Lance is coming up with healthier options. Natural & Organic retail food sales in the U.S. are greater than $60 billion annually.
Snyder's-Lance is committed to innovation and is focusing on cost curtailment. Over the past few years, the company invested in manufacturing capacity, brands, systems, research and development, sales teams and productivity while increasing margins. It is spending more time on expanding margins and driving shareholder value.
Disclosure: I do not hold any position in the company.
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