$LNCE – “DRIVING FOR $10”

Are you all familar with the term milquetoast? A wonderful descriptor. Less timid soul and more wimp. Still inaccurate. Pussy is not quite the right term either (no offense to G. Steinem & Co). The best way to comprehend this term would be to actually hear a milquetoast in action. So, I present to you dear friends, excerpts from the LNCE preliminary 2015 results originally broadcast on January 27, 2016 from Charlotte, North Carolina. Mind you, who we have on the mic is Carl Lee, CEO of America’s second largest “salty-snack” company known as the illustrious Snyder’s Lance.

Before you listen to said excerpts, a few things to know:

This here heap of meconium was created by merging a pretzel-maker and a purveyor of crackers and cracker sandwiches. Soon they are adding a nut-processor -cum- chip purveyor, known as Diamond Foods. Yes, the same Diamond Foods that bungled the deal to buy Pringles and had a Director off himself in 2011.

One will also hear the company use “three” excuses for the revenue miss. A key customer. Plant shutdown. Industry trends.

No surprise, that one of the outfit’s main distribution channels happens to be America’s General Store, with its “fanatical insistence on low prices.”

When management avoided calling the entity by name during the entire call, and used the honorific phrase “very large customer” instead, my ears perked up. Just for the record, said honorific reference was made no less than 8 times during the obligatory call.

At some juncture, a rogue gent from BMO Capital Markets unabashedly said it :

Hi, good evening, everyone. A couple of questions here. So just to continue to on the Walmart issue, it looks like you’re doing what you can to improve but expectations are that it wouldn’t impact 4Q or certainly not 2016 but it looks like it’s going to.

Let it be known that both DMND and LNCE have 15-20% “Walmart Exposure” — and shit is fucked up over there.

Quoting Lanchester:

“. . . when Wal-Mart decides something, it has real effects. In the early 1990s (this example is from Fishman) Wal-Mart decided to do away with cardboard cartons for containers of anti-perspirant, and behold, they are no more – with the result that a billion cardboard packets no longer go into landfill every year. As Hegel used to say after his fourth stein of lager, quantity changes quality. If Wal-Mart instituted, say, a zero-tolerance policy against developing-world factories abusing their workforces, and simultaneously brought in a regime of unannounced factory inspections combined with anonymous, off-site interviews with workers, it would probably do more to change the working conditions in Third World sweatshops than any government on the planet.”

On a contradictory note. Listen to the call, and you will hear several mentions of the stellar top line. While at the same time, blatant admission that Walmart was a huge “drag” on the topline in 4Q15 and will continue to weigh on the company for the duration of 2016.

Quoting the eloquent Carl Lee, CEO of LNCE:

Then we continue to face something that most all of our peers are facing. We’ve had some strategic changes at a very large customer that continues to impact our overall revenue. Our customers impacted both their space and display support. They’ve also been watching store level inventories very carefully and that’s impacted our branded business. We’re working with that very diligently and very carefully with that customer in particular. We’re also working with other customers to begin to try to make up that revenue, but we do foresee that this will continue into 2016.

He continues . . .

It is primarily just the volume headwind. It’s the — as I mentioned earlier it’s the space, displays and inventory challenges so it’s harder to get the right volume in and get it on display like you normally would and then get it to sell through. So it’s not so much pricing, it’s more strictly volume-related and the merchandising that drives the volume.

Next we have the plant shutdown. 8 days for a laughable “$6 to 8 million” in lost revenues. For more milquetoastery, fast-forward to the Q+A (audio below).

——————————————————————————–
Brett Hundley, BB&T Capital Markets – Analyst [4] ——————————————————————————–
Thank you. Rick, I had a couple questions for you to start. Could you quantify the bakery shut down at all in the quarter, whether that’s in absolute EPS terms or just percentage of negative impact relative to your original expectations?

——————————————————————————–
Rick Puckett, Snyder’s-Lance Inc. – EVP, CFO, & Chief Administrative Officer [5] ——————————————————————————–
Yes. We were actually shut down for about eight days, I think, Brett, so it was pretty significant impact. We have — it impacted the branded and the contract manufacturing business, more the contract than the branded business. And it’s — I don’t have the percentage off the top of my head, but it’s $8 million or so, $6 million to $8 million of impact.

That is really all, dear readers. Do not look for a bargain here in this here dung-heap. There’s probably more bad news to come. Errr, I mean, errr, challenges with a large customer.

Carl and Rick, please do us all a favor and join your local Rotary Club. Get some public speaking on, would ya? Please also spare us from the notion that converting your shitty products to “non-GMO” changes the demand landscape. Puhhlease. Lastly, on an administrative note: number your fucking slides correctly. Advise the stooges in your investor relations department to do so, stat. When dealing in matters financial, the investment community is automatically suspicious of inaccuracies regarding seemingly trivial matters. The devil is in the details, so to speak.

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