Charlotte / NC. (sli) Snyder’s-Lance Inc. reported financial results for the fourth quarter and full-year ended December 31, 2016. Overview:
Fourth Quarter 2016 Highlights
- Net revenue from continuing operations increased 37 percent to 556.2 million USD
- Total net revenue* increased 61 percent to 652.6 million USD
- Snyder’s-Lance legacy core branded net revenue increased 6.1 percent
- GAAP earnings per share from continuing operations of 0.19 USD
- Adjusted earnings per share* increased 22 percent to 0.38 USD
Full-Year 2016 Highlights
- Net revenue from continuing operations increased 27 percent to 2’109.2 million USD
- Total net revenue* increased 40 percent to 2’313.7 million USD
- Snyder’s-Lance legacy core branded net revenue increased 2.1 percent
- GAAP earnings per share from continuing operations of 0.45 USD
- Adjusted earnings per share* increased 26 percent to 1.27 USD
(*)The results of operations of the Diamond of California culinary nut business have been treated as discontinued operations. All GAAP financial statement items for both current and prior periods exclude the results of Diamond of California. Total net revenue includes net revenue from both continuing and discontinued operations. All adjusted financial results referred to in this release, include the results of both continuing and discontinued operations and exclude special items for comparability. 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.
«We are proud of the significant accomplishments the Snyder’s-Lance team has delivered for our shareholders in 2016», said Carl E. Lee, Jr., President and Chief Executive Officer. «In the fourth quarter alone, we grew our legacy core brands 6.1 percent, completed the divestiture of the Diamond of California culinary nut business and continued the integration of the remaining Diamond brands. Over the course of 2016, we continued to strengthen our better-for-you product offerings, expanded our portfolio of brands with the acquisition of Diamond Foods, and delivered against our synergy and ongoing continuous improvement goals. Our strategic investments in innovation, marketing and promotion have been successful with our Snyder’s of Hanover® and Lance® brands, and are beginning to bear fruit in our Emerald® and Pop Secret® brands. We have accelerated core branded growth, while expanding our operating margin to nearly 9 percent in our continuing operations for the year, and almost 10 percent for the quarter. Our focus on better-for-you snacking continued to be a driver of growth and now represents 33 percent of sales as we close out 2016. Lastly, our enhanced portfolio, national distribution footprint, multi-channel go-to-market model, and combined sales organization, are already realizing revenue synergies that we will build upon in coming years».
Lee continued, «During 2017, we will continue to change the way the world snacks with better ingredients, quality and taste, as we introduce new products and enter new categories, in order to reach more consumers and broaden our customer penetration. We are particularly excited about the innovation we plan to showcase early in 2017, including Wholey Cheese! crackers, Cape Cod thins potato chips, and our new better snacks variety packs. All of these introductions will drive increased scale in our better-for-you categories, and serve as a springboard for expanded brand reach and growth. As we grow, we will remain focused on delivering margin expansion, through both the attainment of expected cost synergies and the ongoing enterprise wide cost-reduction efforts. We will be implementing Zero-based budgeting in 2017 to drive greater efficiency and effectiveness across our entire organization. All of our recent success and disciplined execution of our strategic plan is a function of our dedicated team, and I want to thank all of our associates for their partnership, passion and dedication to achieving our goals».
Summary of Financial Results
| Fourth Quarter and Full-Year 2016 Financial Summary* | ||||||||||||||||||
| (in thousands, except for earnings per share amounts) | Q4 2016 | Q4 2015 | Change | FY16 | FY15 | Change | ||||||||||||
| Net Revenue from Continuing Operations | USD | 556’163 | USD | 405’857 | 37.0 | % | USD | 2’109’227 | USD | 1’656’399 | 27.3 | % | ||||||
| Net Revenue from Discontinued Operations | 96’441 | – | – | 204’443 | – | – | ||||||||||||
| Total Net Revenue from Continuing and Discontinued Operations | 652’604 | 405’857 | 60.8 | % | 2’313’670 | 1’656’399 | 39.7 | % | ||||||||||
| Snyder’s-Lance Legacy Net Revenue | 420’658 | 405’857 | 3.6 | % | 1’665’759 | 1’656’399 | 0.6 | % | ||||||||||
| Snyder’s-Lance Legacy Branded Net Revenue** | 312’247 | 297’757 | 4.9 | % | 1’208’110 | 1’190’191 | 1.5 | % | ||||||||||
| Operating Margin from Continuing Operations | 8.5 | % | 7.3 | % | 120 bps | 4.9 | % | 6.1 | % | (120 bps) | ||||||||
| Operating Margin from Continuing Operations, Excluding Special Items | 9.5 | % | 9.5 | % | – | 8.8 | % | 7.2 | % | 160 bps | ||||||||
| Operating Margin from Cont. and Disc. Operations, Excluding Special Items | 10.5 | % | 9.5 | % | 100 bps | 9.0 | % | 7.2 | % | 180 bps | ||||||||
| GAAP EPS from Continuing Operations | USD | 0.19 | USD | 0.10 | 90.0 | % | USD | 0.45 | USD | 0.71 | (36.6 | )% | ||||||
| EPS from Continued Operations, Excluding Special Items | USD | 0.27 | USD | 0.31 | (12.9 | )% | USD | 1.11 | USD | 1.01 | 9.9 | % | ||||||
| EPS from Cont. and Disc. Operations, Excluding Special Items | USD | 0.38 | USD | 0.31 | 22.6 | % | USD | 1.27 | USD | 1.01 | 25.7 | % | ||||||
| Adjusted Ebitda from Continuing Operations | 77’110 | 55’279 | 39.5 | % | 284’110 | 191’125 | 48.7 | % | ||||||||||
| % of net revenue | 13.9 | % | 13.6 | % | 30 bps | 13.5 | % | 11.5 | % | 200 bps | ||||||||
| Adjusted Ebitda from Cont. and Disc. Operations | 94’562 | 55’279 | 71.1 | % | 310’660 | 191’125 | 62.5 | % | ||||||||||
| % of net revenue | 14.5 | % | 13.6 | % | 90 bps | 13.4 | % | 11.5 | % | 190 bps | ||||||||
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*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. **Due to the acquisition of Diamond, prior year Partner brand revenues from the sale of Kettle Brand® potato chips are now classified as Branded revenues. For the fourth quarter and full-year 2015, the Company has reclassified 8.4 million USD and 34.8 million USD, respectively, of Partner brand revenue associated with Kettle Brand® potato chips to Branded revenue to be consistent with current year presentation. |
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Fourth Quarter 2016 Results
| Fourth Quarter Net Revenue by Product Category* | ||||||||||||||||||||||||
| (in thousands) | Q4 2016 Net Revenue | Q4 2015 Net revenue | Change | Q4 2016 Net Revenue | Incremental Diamond Net Revenue | Q4 2016 Snyder’s-Lance Legacy Net Revenue | Q4 2015 Net Revenue | Change | ||||||||||||||||
| Branded | USD | 443’006 | USD | 297’757 | 48.8 | % | USD | 443’006 | USD | 130’759 | USD | 312’247 | USD | 297’757 | 4.9 | % | ||||||||
| Partner Brand | 70’830 | 70’353 | 0.7 | % | 70’830 | – | 70’830 | 70’353 | 0.7 | % | ||||||||||||||
| Other | 42’327 | 37’747 | 12.1 | % | 42’327 | 4’746 | 37’581 | 37’747 | (0.4 | )% | ||||||||||||||
| Total Continuing Operations | 556’163 | 405’857 | 37.0 | % | 556’163 | 135’505 | 420’658 | 405’857 | 3.6 | % | ||||||||||||||
| Discontinued Operations | 96’441 | – | – | 96’441 | 96’441 | – | – | – | ||||||||||||||||
| Total Cont. and Disc. Operations | 652’604 | 405’857 | 60.8 | % | 652’604 | 231’946 | 420’658 | 405’857 | 3.6 | % | ||||||||||||||
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*The non-GAAP measure and related comparisons in the table above should be considered in addition to, not as a substitute for, our net revenue 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. Company management believes the presentation of 2016 Net Revenue Excluding Diamond Foods is useful for providing increased transparency and assisting investors in understanding our ongoing operating performance. Note: Due to the acquisition of Diamond, prior year Partner brand revenues from the sale of Kettle Brand® potato chips are now classified as Branded revenues. For the fourth quarter of 2015 the Company has reclassified 8.4 million USD of Partner brand revenue associated with Kettle Brand® potato chips to Branded revenue to be consistent with current year presentation. |
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Net revenue from continuing operations in the fourth quarter of 2016 was 556.2 million USD, an increase of 37.0 percent compared to 405.9 million USD in the fourth quarter of 2015. Total net revenue in the fourth quarter of 2016, including both continuing and discontinued operations, was 652.6 million USD, an increase of 60.8 percent compared to net revenue of 405.9 million USD in the fourth quarter of 2015. Snyder’s-Lance legacy net revenue in the fourth quarter of 2016 increased 3.6 percent compared to the fourth quarter of 2015. This included Branded category net revenue growth of 4.9 percent driven by an approximately 8 percent increase in volume. In addition, during the fourth quarter, net revenue from the Partner Brands category increased 0.7 percent while net revenue from the Other category declined 0.4 percent.
Operating income from continuing operations in the fourth quarter of 2016 increased 59.2 percent to 47.1 million USD, as compared to 29.6 million USD in the fourth quarter of 2015. Adjusted operating income in the fourth quarter of 2016 increased 78.8 percent to 68.8 million USD, or 10.5 percent as a percentage of net revenue, as compared to 38.5 million USD, or 9.5 percent as a percentage of net revenue, in the fourth quarter of 2015. The improvement in operating margin was due to strong gross margin performance and operating expense leverage. The gross margin improvements were driven by synergy realization from the Diamond Foods acquisition, in addition to lower inputs costs, improved productivity and a greater mix of branded sales, partially offset by lower net price realization. Operating expenses, as a percent of sales, declined as a result of synergy realization from the Diamond foods acquisition, partially offset by the planned higher marketing and advertising expenses to support growth of the Company’s core brands, higher incentive compensation expense due to improved operational performance as compared to the prior year, and incremental amortization expense resulting from the Diamond Foods acquisition.
Net interest expense in the fourth quarter of 2016 increased to 9.3 million USD compared to 2.9 million USD in the fourth quarter of 2015. The increase in net interest expense was the result of additional debt utilized to finance the acquisition of Diamond Foods.
The adjusted effective tax rate was 37.0 percent in the fourth quarter of 2016 as compared to 35.8 percent in the fourth quarter of 2015. The adjusted effective tax rate in the quarter was slightly higher than expected due to the Company’s inability to use certain manufacturing tax credits resulting from the utilization of the acquired net operating losses from the Diamonds Foods acquisition.
GAAP net income from continuing operations attributable to Snyder’s-Lance Inc. in the fourth quarter of 2016 increased to 18.7 million USD, or 0.19 USD per diluted share, as compared to 7.0 million USD, or 0.10 USD per diluted share, in the fourth quarter of 2015. The GAAP net loss from discontinued operations in the fourth quarter of 2016 was 27.4 million USD, or 0.28 USD per diluted share and was due to a loss on the sale of Diamond of California of 32.6 million USD due to the required incremental allocation of approximately 39 million USD in enterprise goodwill in accordance with GAAP.
Net income from discontinued operations, excluding special items, was 10.6 million USD or 0.11 USD per diluted share. Adjusted net income attributable to Snyder’s-Lance Inc. in the fourth quarter of 2016, increased 66.2 percent to 37.0 million USD, as compared to 22.3 million USD in the fourth quarter of 2015. Adjusted earnings per diluted share increased 22.6 percent to 0.38 USD in the fourth quarter of 2016 compared to 0.31 USD in the fourth quarter of 2015.
Adjusted Ebitda from continuing operations for the fourth quarter of 2016 increased 39.5 percent to 77.1 million USD, or 13.9 percent of net revenue, as compared to adjusted Ebitda of 55.3 million USD or 13.6 percent of net revenue, in the fourth quarter of 2015. Total adjusted Ebitda, including both continuing and discontinued operations, in the fourth quarter of 2016, increased 71.1 percent to 94.6 million USD, or 14.5 percent of net revenue, compared to adjusted Ebitda of 55.3 million USD, or 13.6 percent of net revenue, in the fourth 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.
Full-Year 2016 Results
| Full-Year Net Revenue by Product Category | ||||||||||||||||||||||||
| (in thousands) | FY 2016 Net Revenue | FY 2015 Net revenue | Change | FY 2016 Net Revenue | Incremental Diamond Net Revenue | FY 2016 Snyder’s- Lance Legacy Net Revenue | FY 2015 Net Revenue | Change | ||||||||||||||||
| Branded | USD | 1’638’296 | USD | 1’190’191 | 37.6 | % | USD | 1’638’296 | USD | 430’186 | USD | 1’208’110 | USD | 1’190’191 | 1.5 | % | ||||||||
| Partner Brand | 300’436 | 300’480 | – | 300’436 | – | 300’436 | 300’480 | – | ||||||||||||||||
| Other | 170’495 | 165’728 | 2.9 | % | 170’495 | 13’282 | 157’213 | 165’728 | (5.1 | )% | ||||||||||||||
| Total Continuing Operations | 2’109’227 | 1’656’399 | 27.3 | % | 2’109’227 | 443’468 | 1’665’759 | 1’656’399 | 0.6 | % | ||||||||||||||
| Discontinued Operations | 204’443 | – | – | 204’443 | 204’443 | – | – | – | ||||||||||||||||
| Total Cont. and Disc. Operations | 2’313’670 | 1’656’399 | 39.7 | % | 2’313’670 | 647’911 | 1’665’759 | 1’656’399 | 0.6 | % | ||||||||||||||
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*The non-GAAP measure and related comparisons in the table above should be considered in addition to, not as a substitute for, our net revenue 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. Company management believes the presentation of 2016 Net Revenue Excluding Diamond Foods is useful for providing increased transparency and assisting investors in understanding our ongoing operating performance. Note: Due to the acquisition of Diamond, prior year Partner brand revenues from the sale of Kettle Brand® potato chips are now classified as Branded revenues. For the full-year 2015 the Company has reclassified 34.8 million USD of Partner brand revenue associated with Kettle Brand® potato chips to Branded revenue to be consistent with current year presentation. |
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Net revenue from continuing operations for the full-year 2016 was 2’109.2 million USD, an increase of 27.3 percent compared to 1’656.4 million USD in 2015. Total net revenue in 2016, including continuing and discontinued operations, was 2’313.7 million USD, an increase of 39.7 percent compared to net revenue of 1’656.4 million USD in 2015. Snyder’s-Lance legacy net revenue for the full-year 2016 increased 0.6 percent compared to 2015 including Branded category net revenue growth of 1.5 percent driven by an approximately 6 percent increase in volume. For the full-year 2016, net revenue from the Partner Brands category was relatively flat while net revenue from the Other category declined 5.1 percent.
Operating income from continuing operations for the full-year 2016 was 103.6 million USD, compared to 101.4 million USD in 2015. Adjusted operating income in 2016 increased 74.0 percent to 207.8 million USD, or 9.0 percent of net revenue, as compared to 119.5 million USD, or 7.2 percent percent of net revenue, in 2015.
Net interest expense for the full-year 2016 increased to 32.6 million USD compared to 10.9 million USD in 2015. The increase in net interest expense was the result of additional debt utilized to finance the acquisition of Diamond Foods. The adjusted effective tax rate for the full-year 2016 was 34.1 percent as compared to 34.5 percent in 2015.
GAAP net income from continuing operations attributable to Snyder’s-Lance Inc. for the full-year 2016 was 42.0 million USD, or 0.45 USD per diluted share, as compared to 50.7 million USD, or 0.71 USD per diluted share, in 2015. The GAAP net loss from discontinued operations for the full-year 2016 was 27.1 million USD, or 0.29 USD per diluted share, and was due to a loss on the sale of Diamond of California of 32.6 million USD, which was due to the incremental allocation of approximately 39 million USD in enterprise goodwill in accordance with GAAP. Net income from discontinued operations, excluding special items, was 14.5 million USD or 0.16 USD per diluted share. Adjusted net income attributable to Snyder’s-Lance Inc. for the full-year 2016, increased 64.0 percent to 118.0 million USD, as compared to 71.9 million USD in 2015. Adjusted earnings per diluted share increased 25.7 percent to 1.27 USD for the full-year 2016 compared to 1.01 USD in 2015.
Adjusted Ebitda from continuing operations for the full-year 2016 increased 48.7 percent to 284.1 million USD or 13.5 percent of net revenue, as compared to adjusted Ebitda of 191.1 million USD, or 11.5 percent of net revenue, in 2015. Total adjusted Ebitda, including both continuing and discontinued operations, for the full-year 2016, increased 62.5 percent to 310.7 million USD, or 13.4 percent of net revenue, as compared to adjusted Ebitda of 191.1 million USD, or 11.5 percent of net revenue, in 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.
Outlook*
For the full-year of fiscal 2017, the Company expects net revenue to be between 2’250 million USD and 2’290 million USD, adjusted Ebitda to be between 330 million USD and 345 million USD, and earnings per diluted share, excluding special items, to be between 1.32 USD and 1.42 USD.
The Company’s 2017 full-year outlook also includes the following assumptions:
- Capital expenditures of 90 million USD to 100 million USD;
- Net interest expense of 32 million USD to 35 million USD;
- Effective tax rate of 33.5 percent to 34.5 percent; and
- Weighted average diluted share count of approximately 98 million shares.
*Full-year 2017 GAAP guidance are 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 and integration related costs associated with the divestiture of Diamond of California, 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.
