CHARLOTTE, N.C. — Net income at Lance, Inc. for the year ended Dec. 30, 2006, eked out a small gain on the strength of a 12% improvement in sales. Net income was $18,478,000, equal to 61c per share on the common stock, up from $18,470,000, or 62c, in fiscal 2005. The 2006 results included $1,795,000 in charges related to the acquisition of Tom’s Foods, Inc., which compared with $3,891,000 in charges related to the acquisition of Tom’s and severance costs related to the departure of former chief executive officer Paul Stroup III during fiscal 2005.
Net sales for the year were $730,116,000, up 12% from $651,437,000. Excluding the impact of the extra week in 2005, the sales increase in 2006 was approximately 11% over last year, with branded sales up 14% and non-branded sales up 7%.
Net income in the fourth quarter ended Dec. 30 was $5,605,000, or 18c per share, up sharply from $1,540,000, or 5c per share, in the same year-ago period. Sales in the fourth quarter were $172,402,000, down 8% from $186,840,000 a year ago. Excluding the impact of the extra week in the quarter, the total sales decline was approximately 5% over last year. Lance said a sharp rise in the price of flour during the fourth quarter impacted pre-tax earnings by approximately $1.4 million. Private label sales in cookies and crackers also were soft in the fourth quarter, the company said.
"I am extremely pleased with the ground work that was accomplished during 2006, which positions our company for improved operating results in the future," said David V. Singer, president and chief executive officer. "Lance implemented a significant number of initiatives during 2006 focused on improving our operational efficiency and developing a solid foundation for profitable growth. During the year we strengthened our management team, integrated the Tom’s acquisition into our manufacturing, distribution and administrative infrastructure, identified and began implementing enhancements to our supply chain and began the design and implementation of a new enterprise-resource-planning solution.
"We also achieved record sales for the company in 2006, reflecting the incremental impact of the Tom’s acquisition along with continued growth in our core Lance and Cape Cod branded products. While the impact of our efforts to date is not fully demonstrated in our current financial results, we continue to make progress on operational initiatives that we are confident will support significant improvements in our growth and profitability over the next several years."
Going forward, Lance said it expects higher commodity prices and sluggish sales during the first half of fiscal 2007 to hurt its financial performance.
The company said it expects earnings from continuing operations in 2007 of between 80c per share and 88c per share. Revenue from continuing operations is expected to fall within the range of $750 million to $775 million, the company said.
Mr. Singer said 2007 should be "another year of transition" for the company, as it focuses on the most profitable sales and tries to improve the efficiency of its supply chain and direct-store delivery system.
In addition to its financials, Lance announced its intent to exit the company-owned and operated vending business.
"The decision to exit the business is consistent with strategic plans to improve overall operational efficiencies and profitability, allowing the company to reallocate resources to channels of business with stronger growth and profit potential," Lance said. In 2006, company-owned and operated vending business operations accounted for approximately 2% of Lance’s total sales. The company expects the discontinuation of the operations to be "neutral to slightly dilutive to earnings per share during 2007."