Snyder's-Lance Inc. (LNCE) Warns for Q1, Confirm CEO Transition Plan

(Updated - April 17, 2017 6:11 AM EDT)

Snyder’s-Lance, Inc. (NASDAQ: LNCE) today announced a CEO transition and reported preliminary unaudited financial results for the first quarter ended April 1, 2017.

CEO Transition Underway

Snyder’s-Lance, Inc. has announced that its President and CEO, Carl E. Lee, Jr., has retired after 12 years of service to the Company. Brian J. Driscoll, former President and CEO of Diamond Foods and a current Director of Snyder’s-Lance, has agreed to step in as interim CEO.

In announcing the transition, Chairman of the Board, James Johnston said the following, “On behalf of the entire Snyder’s-Lance organization, the Board of Directors would like to thank Carl for his many contributions to the Company, and welcome Brian into his new role.” Mr. Johnston continued, “We see great potential in the strategic direction of the Company, and are excited to have access to Brian’s talent and experience to bring the Company to the next level of performance. With increased focus on margin expansion and profitable growth, we are confident that Brian has the skills to address some of the recent performance challenges, as well as drive the Company to a level of profitability more in line with the expectations of our shareholders.”

Brian Driscoll has more than 35 years of experience in the food industry having served most recently as the President and CEO of Diamond Foods until its acquisition by Snyder’s-Lance in February of 2016. In response to his most recent appointment, Mr. Driscoll said, “I am honored and excited to be asked by the Board to fulfill this critical role for the Company at such an important time in its development. I plan to immediately diagnose the underlying drivers of the Company’s margin and revenue performance and put in place strategies to continue to deliver on the expectations of our shareholders.”

The Company has announced that it will launch a national search for a permanent replacement to Mr. Lee. Mr. Driscoll is considered a strong candidate for that role, and will have full faith and confidence of the Board to develop and execute the Company’s strategies until a permanent decision is made.

Preliminary Unaudited Financial Results

For the first quarter of 2017, the Company expects net revenue in the range of $530 million to $532 million (*** consensus is $551.2 million), an increase of approximately 18% to 19% from continuing operations in the first quarter of 2016, which benefited from two additional months of contribution from the Diamond brands. On a pro-forma basis, as if the transaction were completed on January 1, 2016, growth would have been approximately 1-3%. Snyder’s-Lance legacy branded net revenue is expected to increase approximately 8% to 9%.

GAAP net income attributable to Snyder’s-Lance, Inc. in the first quarter of 2017 is expected to be in the range of $11 million to $12 million, or $0.11 to $0.12 per diluted share. Net income attributable to Snyder’s-Lance, Inc. excluding special items is expected to be in the range of $13 million to $14 million, or $0.13 to $0.14 per diluted share (*** consensus is $0.27). Adjusted EBITDA in the first quarter of 2017 is expected to be in the range of $52 million to $54 million. Net income, excluding special items, and adjusted EBITDA are non-GAAP measures defined herein under “Use and Definition of Non-GAAP Measures,” and are reconciled to GAAP net income in the tables that accompany this release.

“Our Company faced difficult challenges during the first quarter that have negatively impacted earnings,” said Alex Pease, Executive Vice President and Chief Financial Officer. “Although we saw sales and market share growth in the majority of our categories, this has come at a higher cost than planned. Increased investments in promotional and marketing spending combined with gross margin pressure had an adverse effect on our performance and more than offset the benefits of synergy delivery related to the Diamond Foods transaction.”

Mr. Pease continued, “Under Brian’s leadership, we are moving aggressively to take the actions necessary to improve earnings. Specifically, we are focused on improving cost of goods productivity, net price realization, and accelerating our zero-based budgeting plans. We are not satisfied with our early 2017 performance, and our organization is laser-focused on improved execution and continuous improvement to return the business back to more expected levels of profitability.”

The Company expects to report final results for its first quarter ended April 1, 2017 before the market opens on May 8, 2017.

The Company does not plan to release preliminary financial information on an ongoing basis. The financial information presented above is preliminary and based upon information available as of the date of this release. As of the date of this release, the Company has not completed the financial reporting process and review of its first fiscal quarter ended April 1, 2017. During the course of that process, the Company may identify items that would require it to make adjustments, some of which may be material, to the preliminary financial information presented above.

Revised 2017 Full-Year Outlook

Based on the Company’s year to date performance and the current outlook for the remainder of the year, the Company is revising its previous full-year expectations provided on February 13, 2017. For the full-year of fiscal 2017, the Company now expects net revenue to be between $2,200 million and $2,250 million (*** consensus is $2.27 billion), adjusted EBITDA to be between $290 million and $315 million, and earnings per diluted share from continuing operations, excluding special items, to be between $1.05 and $1.20 (*** consensus is $1.38.). 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 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.

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 33.5% to 35.5%; and
• Weighted average diluted share count of approximately 98 million shares.

Conference Call

Management will host a conference call today at 8:30 a.m. ET to discuss the Company's preliminary unaudited first quarter financial results and updated full-year 2017 outlook. 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 9408303. A continuous telephone replay of the call will be available between 12:00 p.m. ET on April 17 and 12:00 a.m. ET on April 24. The replay telephone number is (855) 859-2056 for U.S. callers or (404) 537-3406 for international callers. The replay access code is 9408303. Investors may also access a web-based replay of the conference call at www.snyderslance.com. 

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