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Article by DailyStocks_admin    (03-16-12 01:47 AM)

Description

Snyders-Lance. MICHAEL A WAREHIME bought 18541 shares on 3-09-2012 at $ 22.53

BUSINESS OVERVIEW

General

On December 6, 2010, Lance, Inc. (“Lance”) and Snyder’s of Hanover, Inc. (“Snyder’s”) completed a merger (“Merger”) to form Snyder’s-Lance, Inc., a North Carolina corporation. The Merger created a national snack food company with well-recognized brands, an expanded branded product portfolio, complementary manufacturing capabilities and a nationwide distribution network. Both companies have a successful history which dates back to the early 1900’s. Snyder’s-Lance, Inc. is headquartered in Charlotte, North Carolina. References to “Snyder’s-Lance,” the “Company,” “we,” “us” or “our” refer to Snyder’s-Lance, Inc. and its subsidiaries, as the context requires.

Products

We manufacture, market and distribute a variety of snack food products, including pretzels, sandwich crackers, kettle chips, cookies, potato chips, tortilla chips, other salty snacks, sugar wafers, nuts, and restaurant style crackers. Additionally, we purchase certain cakes, meat snacks, and candy sold under our brands and partner brand products for resale in order to broaden our product offerings. Partner brands consist of other third-party brands that we sell through our distribution network. Products are packaged in various single-serve, multi-pack and family-size configurations.

We sell and distribute branded and partner brand products to customers through our nationwide distribution network. Our branded products are principally sold under the Snyder’s of Hanover ® , Lance ® , Cape Cod ® , Krunchers! ® , Jays ® , Tom’s ® , Archway ® , Grande ® , Stella D’oro ® , O-Ke-Doke ® , EatSmart ® and Padrinos ® brands. Non-branded products include private brand (private label), partner brands, and contract manufacturing. Private brand products are sold to retailers and distributors using store brands or our own control brands, such as Brent & Sam’s ® , Vista ® , and Delicious ® . We also contract with other branded food manufacturers to produce their products. For all years from 2009 to 2011, branded products have represented approximately 58% of total revenue and non-branded products have represented approximately 42%.

Intellectual Property

Trademarks that are important to our business are protected by registration or other means in the United States and most other markets where the related products are sold. We own various registered trademarks for use with our branded products including LANCE, SNYDER’S OF HANOVER, CAPE COD POTATO CHIPS, KRUNCHERS!, TOM’S, JAYS, ARCHWAY, STELLA D’ORO, GRANDE, O-KE-DOKE, EATSMART, PADRINOS, TOASTCHEE, TOASTY, NEKOT, NIPCHEE, CHOC-O-LUNCH, VAN-O-LUNCH, GOLD-N-CHEES, CAPTAIN’S WAFERS and a variety of other marks and designs. We license trademarks, including HERSHEY’S, BUGLES, BASS PRO SHOP and TEXAS PETE, for limited use on certain products that are classified as branded products. We also own registered trademarks including VISTA, BRENT & SAM’S, and DELICIOUS that are used in connection with our private brand products.

Distribution

We distribute snack food products throughout the United States using a direct-store-delivery (“DSD”) network of approximately 3,000 distribution routes, many of which are serviced by independent business operators and others that are company-owned. During 2011, we began the process of converting the vast majority of our company-owned routes to an independent business operator structure in order to better position our distribution network to serve customers. Substantial progress has been made in the conversion and it is expected to be completed by the middle of 2012. We also ship products directly to customers using third-party carriers or our own transportation fleet predominantly throughout North America.

Customers

The customer base for our branded and partner brand products sold through our DSD network, distributors, and direct sales includes grocery/mass merchandisers, convenience stores, club stores, discount stores, food service establishments and various other customers including drug stores, schools, military and government facilities and “up and down the street” outlets such as recreational facilities, offices and other independent retailers. Private brand customers include grocery/mass merchandisers and discount stores. We also contract with other branded food manufacturers to manufacture their products.

Substantially all of our revenues are from sales to customers in the United States. Revenue from our largest customer, Wal-Mart Stores, Inc. and subsidiaries, was approximately 18% of our net revenue in 2011. The loss of this customer or a substantial portion of business with this customer could have a material adverse effect on our business and results of operations.

Raw Materials

The principal raw materials used to manufacture our products are flour, vegetable oil, sugar, potatoes, peanuts, other nuts, cheese, cocoa and seasonings. The principal packaging supplies used are flexible film, cartons, trays, boxes and bags. These raw materials and supplies are normally available in adequate quantities in the commercial market and are currently contracted up to twelve months in advance, depending on market conditions.

Competition and Industry

Our products are sold in highly competitive markets. Generally, we compete with manufacturers, some of whom have greater total revenues and resources than we do. The principal methods of competition are price, service, product quality, product offerings and distribution. The methods of competition and our competitive position vary according to the geographic location, the particular products and the activities of our competitors.

Environmental Matters

Our operations in the United States and Canada are subject to various federal, state (or provincial) and local laws and regulations with respect to environmental matters. However, the Company was not a party to any material proceedings arising under these laws or regulations for the periods covered by this Form 10-K. We believe the Company is in compliance with all material environmental regulations affecting our facilities and operations and that continued compliance will not have a material impact on our capital expenditures, earnings or competitive position.

Employees

At the beginning of February 2012, we had approximately 6,100 active employees in the United States and Canada. At the beginning of February 2011, we had approximately 7,000 active employees in the United States and Canada. The decrease in the number of employees was primarily due to the conversion to an independent business operator distribution network. None of our employees are covered by a collective bargaining agreement.

Other Matters

Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to these reports, are available on our website free of charge. The website address is www.snyderslance.com. All required reports are made available on the website as soon as reasonably practicable after they are filed with the Securities and Exchange Commission.

CEO BACKGROUND

Jeffrey A. Atkins served as the Executive Vice President and Chief Financial Officer of ACH Food Companies, Inc., a Memphis, TN food manufacturer, distributor and marketer, from 2003 until his retirement in 2010. He worked as a private investor from 2001 until 2003; Chief Financial Officer of Springs Industries, Inc., a Fort Mill, SC manufacturer and distributor of textile home furnishings from 1999 until 2001; and Chief Executive Officer and Chief Financial Officer of Pete’s Brewing Company, a Palo Alto, CA craft-beer brewer and marketer from 1997 until 1998. He held various positions including Vice President of Corporate Planning (1995-1996) at The Quaker Oats Co., a Chicago, Illinois food and beverage marketer and manufacturer, from 1977 to 1996. He serves as Chairman of the board of directors of Stratus Foods, Inc., a manufacturer and distributor of edible oils. Mr. Atkins brings to the board of directors a valuable understanding of the food industry gained through his many years of experience with several companies in the industry, including almost 20 years with The Quaker Oats Company. He also provides a unique perspective to the board of directors because of his experience as the chief financial officer for multiple companies.
Peter P. Brubaker has been the President of Hammer Creek Enterprises LLC, a private investment and financial advisory firm, since 2005. From 1995 until 2005, Mr. Brubaker was the President and Chief Executive Officer of Susquehanna Media Company, a radio broadcasting and cable television company. He served as the Vice President and Chief Financial Officer of Susquehanna Pfaltzgraff Company from 1980 until 2004. He is on the board of directors of FEC Technologies. Mr. Brubaker served as a member of the board of directors of Snyder’s until December 2010 when he was elected to the Company’s board of directors in connection with the merger. Mr. Brubaker is qualified to be a director because of the valuable combination of financial expertise and executive and managerial experience that he brings to the board of directors.
C. Peter Carlucci, Jr. has been a member of the law firm of Eckert Seamans Cherin & Mellott, LLC since 1989. From 2005 until 2007, he served as a director of Sigma Coatings USA, Inc. and a managing director of Sigma Coatings USA, B.V., producers of industrial coatings. Mr. Carlucci was a director of Snyder’s from June 1980 until December 2010 when he was appointed to the Company’s board of directors in connection with the merger. Mr. Carlucci provides a valuable perspective to the board of directors from his experience in the legal profession. He also brings an appreciation of the role of a board of directors which was acquired through his service on Snyder’s and other boards.
John E. Denton works as a private investor. From 2004 until 2009, Mr. Denton was a partner at Maloney, Mitchell and Denton, a commercial real estate firm specializing in planned unit developments and mixed use communities. He has worked as a Division Manager at Proctor and Gamble Food Products, President of Hanover Foods, and Chairman and Chief Executive Officer of New World Pasta. Mr. Denton has also served as President and Chief Executive Officer of Snyder’s. Mr. Denton served as a member of the board of directors of Snyder’s until December 2010 when he was elected to the Company’s board of directors in connection with the merger. Mr. Denton is qualified for service on the board of directors because of his extensive knowledge of the food industry acquired through his experience with numerous companies in the industry, including Snyder’s. His understanding and appreciation of Snyder’s business is valuable to the board of directors.
James W. Johnston has served as the President and Chief Executive Officer of Stonemarker Enterprises, Inc., a Mooresville, NC consulting and investment company, since 1996. He was the Vice Chairman of RJR Nabisco, Inc., a Winston-Salem, NC diversified manufacturer of consumer products from 1995 until 1996; Chairman of R. J. Reynolds Tobacco Worldwide from 1993 until 1996; and Chairman and Chief Executive Officer of R. J. Reynolds Tobacco Co. from 1989 until 1996. He is a director of Sealy Incorporated. Mr. Johnston provides the board of directors with a valuable perspective acquired through his significant leadership and executive experience. He also brings an important understanding of the role of a board of directors because of his previous board experience.
Carl E. Lee, Jr . has served as President and Chief Operating Officer of Snyder’s-Lance since December 2010. He served as the President and Chief Executive Officer of Snyder’s of Hanover, Inc. from 2005 until December 2010. From 1986 until 1997, Mr. Lee held various sales and marketing positions with Frito-Lay, including Vice President and General Manager for Frito-Lay Southeast Region and managing sales for Frito-Lay Europe. In 1997, Mr. Lee began working for Nabisco where he led their South American business, served as President of their Caricam Region and their Southern Cone Region. Mr. Lee also led Nabisco’s Global Export business which covered 95 countries. Mr. Lee has served on the Board of Directors of Welch’s Foods since 2009. Mr. Lee served as a member of the board of directors of Snyder’s until December 2010 when he was elected to the Company’s board of directors in connection with the merger. Mr. Lee brings to the board of directors his significant understanding of Snyder’s business and operations acquired through his service as the President and CEO of Snyder’s. His extensive experience in the snack food industry provides the board with a valuable perspective.
W. J. Prezzano served as the Chairman of the Board of Lance from 2005 until 2010 and has worked as a private investor since 1997. He was elected as Lead Independent Director of the Company in December 2010 in connection with the merger. He was the Vice Chairman of Eastman Kodak, Inc. in Rochester, NY from 1996 until 1997. During his 32-year career, Mr. Prezzano’s responsibilities included managing Kodak’s extensive consumer products and brands globally. He is a director of TD Bank Financial Group (Toronto, Canada), TD Ameritrade Holding Corporation, Roper Industries, Inc. and EnPro Industries, Inc. and former Chairman of Medical University of South Carolina Foundation. He is also a member of the Board of Trustees of Charleston Day School. Mr. Prezzano brings to the board of directors his significant managerial and executive experience as well as extensive experience serving on multiple boards of directors. His years of dedicated service as a member of the Company’s board of directors also qualify him to serve as a member of the board of directors.
David V. Singer has served as the Chief Executive Officer of the Company since 2005. He served as the President and Chief Executive Officer of Lance from 2005 until the merger with Snyder’s in 2010. He was the Executive Vice President and Chief Financial Officer of Coca-Cola Bottling Co. Consolidated, Charlotte, NC, beverage manufacturing and distribution, from 2001 until 2005 and Vice President and Chief Financial Officer of Coca-Cola Bottling Co. Consolidated from 1986 until 2001. He is a director of Flowers Foods, Inc. and has been a director of Snyder’s-Lance since 2003. In addition, Mr. Singer earned a BS is Marketing and an MBA from Pennsylvania State University. Mr. Singer provides the board of directors with a vital understanding and appreciation of the Company’s business which he developed while serving as its President and CEO and as a member of its board of directors for the past eight years. He brings extensive management and financial experience to the board of directors as well as significant knowledge of the food and beverage industries.
Dan C. Swander has been the Operating Partner of Swander Pace Capital, an equity investment firm specializing in consumer products and related industries in San Francisco, CA since 2006. He was the Chief Executive Officer of Method Products, Inc., a San Francisco, CA marketer of household cleaning and personal care products, from 2008 until 2009; Executive Vice President of Basic American Foods, Inc., a Walnut Creek, CA food manufacturing company from 2004 until 2005; President and Chief Operating Officer of International Multifoods Corporation, a Minnetonka, MN food manufacturing company, from 2001 until 2004; and Chairman and Director of Swander Pace & Company, a strategy consulting firm specializing in the food, beverage and packaged goods industries in San Francisco, CA, from 1987 until 2001. Mr. Swander’s significant executive experience, which includes experience in the food and packaged goods industries, particularly qualifies him to serve on the board of directors. Mr. Swander brings his knowledge of the finance sector to the board of directors acquired through his experience with an equity investment firm.
Isaiah Tidwell has worked as a private investor since 2005. He was the Georgia Wealth Management, Director, Executive Vice President – Wachovia Bank, N.A. in Atlanta, GA from 2001 until 2005; President of Georgia Banking – Wachovia Bank, N.A. in Atlanta, GA from 1999 until 2001; and Executive Vice President and Southern/Western Regional Executive of Wachovia Bank, N.A. from 1996 until 1999. He is a Director of Ruddick Corporation and Lincoln National Corporation. Mr. Tidwell’s years of dedicated service as a member of Lance, Inc.’s board of directors qualify him for service on the board of directors of Snyder’s-Lance. His experience in the banking industry also provides a valuable perspective to the board of directors.
Michael A. Warehime has served as the Chairman of the Company’s Board of Directors since December 2010. He was the Chairman of the Board of Directors of Snyder’s before the merger with Lance. From 1973 until 1992, he served as the Chairman and a Director of Farmers Bank & Trust Company. Mr. Warehime is also the President of Warehime Enterprise, ARWCO Corporation and MAW Associates, LP, and the Co-Chairman and Chief Executive Officer of Seafood America. Mr. Warehime, who owns a significant equity interest in the Company, is uniquely qualified to serve on the board of directors because of his deep knowledge of Snyder’s business and his many years of experience in the food industry. In addition, he brings to the Board of Directors his expertise in the areas of marketing, sales and finance. Mr. Warehime is married to Patricia A. Warehime.
Patricia A. Warehime worked as an occupational therapist at the Lincoln Intermediate Unit Preschool Program in New Oxford, Pennsylvania. She currently serves on the board of directors of Capital Blue Cross Insurance Company and is a member of the board of trustees of Elizabethtown College in Elizabethtown, Pennsylvania. Ms. Warehime served as a member of the board of directors of Snyder’s until December 2010 when she was appointed to the Company’s board of directors in connection with the merger. Ms. Warehime brings to the board of directors an appreciation for the role of a board of directors acquired through her diverse board experience. Ms. Warehime is married to Michael A. Warehime.
William R. Holland and Sally W. Yelland will retire from the board of directors in accordance with the age guidelines for membership on the board when their terms expire at the 2011 annual meeting of stockholders.

MANAGEMENT DISCUSSION FROM LATEST 10K

Executive Summary

Lance, Inc. (“Lance”) and Snyder’s of Hanover, Inc. (“Snyder’s”) completed their merger (“Merger”) on December 6, 2010, and Lance’s name was changed to Snyder’s-Lance, Inc. Fiscal 2011 reflects the results of operations of the combined company. Fiscal 2010 reflects the full fiscal year results of operations for Lance, but the operations of Snyder’s are included only from December 6, 2010 to January 1, 2011.

Selling, General and Administrative

Selling, general and administrative expenses increased $49.0 million as compared to 2009 and increased 2.9% as a percentage of revenue. The majority of the increase related to $35.2 million of Merger costs, including change in control expenses, investment advisory costs, severance charges, legal and professional fees, as well as $14.0 million of incremental selling, general and administrative costs of Snyder’s. In addition, there was approximately $1.9 million in severance costs related to the workforce reduction that occurred during the second quarter, increased fuel costs of $1.8 million, and $1.7 million of additional bad debt expense due predominantly to a customer bankruptcy. Partially offsetting these increased expenses were lower advertising costs and lower selling expenses as a result of the implementation of Lance’s DSD transformation strategy.

Other Expense, Net

During 2010, other expense of $7.1 million consisted mostly of financing commitment fees in the first quarter of 2010 of $2.7 million associated with an unsuccessful bid for a targeted acquisition, $2.1 million of insurance settlement charges which occurred during the fourth quarter, foreign currency transaction losses due to the unfavorable impact of exchange rates in 2010, as well as losses on the sale of fixed assets. During 2009, other expense of $1.8 million consisted primarily of foreign currency transaction losses due to the unfavorable impact of exchange rates in 2009 and losses on the sale of fixed assets.

Interest Expense, Net

Net interest expense increased $0.5 million primarily due to higher average debt in 2010 resulting from acquisitions made late in 2009 and the Merger in 2010, offset slightly by lower weighted average interest rates.

Income Tax Expense

Our effective income tax rate was 69.0% in 2010 as compared to 34.3% in 2009. The increase in the income tax rate was primarily due to Merger related expenses that are not deductible for tax purposes, limitations on the ability to utilize tax credits and deductions as a result of lower taxable income and deduction limitations for certain executive compensation.

Liquidity and Capital Resources

Liquidity

Liquidity represents our ability to generate sufficient cash flows from operating activities to meet our obligations as well as our ability to obtain appropriate financing. Therefore, liquidity should not be considered separately from capital resources that consist primarily of current and potentially available funds for use in achieving our objectives. Currently, our liquidity needs arise primarily from working capital requirements, capital expenditures for fixed assets, route businesses, acquisitions, and dividends. We believe we have sufficient liquidity available to enable us to meet these demands.

We have a universal shelf registration statement that, subject to our ability to consummate a transaction on acceptable terms, provides the flexibility to sell up to $250 million of debt or equity securities, which is effective through March 26, 2012. We expect to file a replacement shelf registration statement prior to March 26, 2012.

Operating Cash Flows

Net cash from operating activities was $111.5 million in 2011 and $44.4 million in 2010. Cash provided by net changes in operating assets and liabilities was $13.3 million, a significant increase from cash used by net changes in operating assets and liabilities of $39.9 million in 2010, which was mostly due to a large increase in income tax receivables in 2010 as well as incentive payments made prior to the end of fiscal 2010 as part of the change in control related to the Merger. The increase in cash provided by operating activities was also due to the significant increase in net income over 2010, which included an additional $15.2 million in depreciation and amortization as a result of additional assets gained primarily through the Merger.

Investing Cash Flows

Cash used in investing activities in 2011 totaled $52.7 million compared with cash provided by investing activities of $65.7 million in 2010. Capital expenditures increased from $33.3 million in 2010 to $57.7 million in 2011 primarily due to the Merger. In 2011, these expenditures were partially offset by cash received from the sale of fixed assets of $4.4 million and cash received from a government grant for the establishment of our solar farm in Hanover, Pennsylvania, of $4.2 million. Capital expenditures are expected to continue at a level sufficient to support our strategic and operating needs. In 2012, capital expenditures are projected to be between $80 and $85 million.

Proceeds from the sale of route businesses generated cash flows of $42.3 million in 2011; however, these proceeds were largely offset by purchases of route businesses of $31.4 million. The purchases and sales of route businesses are expected to continue into the first half of 2012 with anticipated net proceeds of $50 to $60 million, exclusive of taxes to be paid on the associated gains.

During the third quarter of 2011, we acquired the George Greer Co., Inc. for $15.0 million. In the fourth quarter of 2010, $96.3 million in cash was acquired in connection with the Merger.

Financing Cash Flows

Net cash used in financing activities decreased from $88.1 million in 2010 to $65.7 million in 2011 primarily due to changes in dividends paid. In 2010, we paid a special cash dividend as part of the Merger of $3.75 per share totaling $121.7 million. We also paid cash dividends of $0.64 per share totaling $42.9 million and $20.8 million during 2011 and 2010, respectively. The increase in 2011 was due to additional shares issued as part of the Merger. As a result of the exercise of stock options by employees, we received cash and tax benefits of $8.2 million in 2011 and $13.1 million in 2010. Repayments of debt, net of proceeds, during 2011 were $27.2 million, funded primarily by cash provided by operating activities. During 2010, proceeds from debt, net of repayments, were $47.8 million. These proceeds from debt were primarily used to pay for Merger-related costs or fund acquisitions.

During 2011, we acquired the remaining ownership interest in Melisi Snacks, Inc. for $3.5 million, increasing our total ownership to 100%.

In December 2008, the Board of Directors approved the repurchase of up to 100,000 shares of common stock from employees. On July 21, 2010, the Board of Directors approved the repurchase of up to an additional 100,000 shares of common stock from employees. Both of these authorizations expired by December 2011. In November 2011, the Board of Directors authorized the repurchase of up to 200,000 shares of common stock from employees, which expires in February 2014. The purpose of the repurchase program is to permit the Company to acquire shares of common stock from employees to cover withholding taxes payable by employees upon the vesting of shares of restricted stock. During 2009, we repurchased 6,741 shares of common stock. During 2010, we repurchased 135,879 shares of common stock. We did not repurchase any shares of common stock during 2011. The remaining number of shares authorized for repurchase is 200,000.

On February 9, 2012, our Board of Directors declared a quarterly cash dividend of $0.16 per share payable on March 7, 2012 to stockholders of record on February 29, 2012.

Debt

In December 2010, we amended our existing credit agreement and entered into a new credit agreement, which allows us to make revolving credit borrowings of up to $265.0 million through December 2015. As of December 31, 2011, and January 1, 2011, we had $145.0 million and $111.0 million outstanding under the revolving credit agreement, respectively. The additional borrowings outstanding are primarily due to amounts necessary for the repayment of the $50.0 million U.S. term loan in the fourth quarter of 2011.

Unused and available borrowings were $120.0 million under our existing credit facilities at December 31, 2011. Under certain circumstances and subject to certain conditions, we have the option to increase available credit under the credit agreement by up to $100.0 million during the life of the facility.

The credit agreement requires us to comply with certain defined covenants, such as a maximum ratio of debt to EBITDA (as defined in the credit agreement) of 3.25, or 3.50 for four consecutive periods following a material acquisition, and a minimum interest coverage ratio of 2.5. At December 31, 2011, our debt to EBITDA ratio as defined by the credit agreement was 1.90, and our interest coverage ratio as defined by the credit agreement was 8.4. In addition, our revolving credit agreement restricts payment of cash dividends and repurchases of our common stock if, after payment of any such dividends or any such repurchases of our common stock, our consolidated stockholders’ equity would be less than $200.0 million. At December 31, 2011, our consolidated stockholders’ equity was $838.6 million. We were in compliance with these covenants at December 31, 2011 and expect to remain in compliance throughout all of 2012. Total interest expense under all credit agreements for 2011, 2010, and 2009 was $10.7 million, $3.9 million, and $3.4 million, respectively.

Contractual Obligations

We lease certain facilities and equipment classified as operating leases. We also have entered into agreements with suppliers for the purchase of certain ingredients, packaging materials and energy used in the production process. These agreements are entered into in the normal course of business and consist of agreements to purchase a certain quantity over a certain period of time. These purchase commitments range in length from a few weeks to twelve months. Additionally, we provide supplemental retirement benefits to certain retired officers.

Critical Accounting Estimates

Preparing the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. We believe the following estimates and assumptions to be critical accounting estimates. These assumptions and estimates may be material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and may have a material impact on the financial condition or operating performance. Actual results may differ from these estimates under different assumptions or conditions.

Revenue Recognition

Our policy on revenue recognition varies based on the types of products sold and the distribution method. We recognize operating revenue when title and risk of loss passes to our customers. Allowances for sales returns, stale products, promotions and discounts are also recorded as reductions of revenue in the consolidated financial statements.

Revenue for products sold to our independent business operators in our DSD network is recognized when the independent business operator purchases the inventory from our warehouses.

Revenue for products sold to customers through our company-owned DSD network is recognized when the product is delivered to the customer. Our sales representatives create an invoice at time of delivery using a handheld computer. These invoices are transmitted electronically each day and sales revenue is recognized.

Revenue for products shipped directly to the customer from our warehouse is recognized based on the shipping terms listed on the shipping documentation. Products shipped with terms FOB-shipping point are recognized as revenue at the time the shipment leaves our warehouses. Products shipped with terms FOB-destination are recognized as revenue based on the anticipated receipt date by the customer.

We allow certain customers to return products under agreed upon circumstances. We record a returns allowance for damaged products and other products not sold by the expiration date on the product label. This allowance is estimated based on a percentage of sales returns using historical and current market information.

We record certain reductions to revenue for promotional allowances. There are several different types of promotional allowances such as off-invoice allowances, rebates and shelf space allowances. An off-invoice allowance is a reduction of the sales price that is directly deducted from the invoice amount. We record the amount of the deduction as a reduction to revenue when the transaction occurs. Rebates are offered to customers based on the quantity of product purchased over a period of time. Based on the nature of these allowances, the exact amount of the rebate is not known at the time the product is sold to the customer. An estimate of the expected rebate amount is recorded as a reduction to revenue at the time of the sale and a corresponding accrued liability is recorded. The accrued liability is monitored throughout the time period covered by the promotion. The accrued liability is based on historical information and the progress of the customer against the target amount. Shelf space allowances are capitalized and amortized over the lesser of the life of the agreement or up to a maximum of three years and recorded as a reduction to revenue. Capitalized shelf space allowances are evaluated for impairment on an ongoing basis.

We also record certain allowances for coupon redemptions, scan-back promotions and other promotional activities as a reduction to revenue. The accrued liabilities for these allowances are monitored throughout the time period covered by the coupon or promotion.

Total allowances for sales returns, rebates, coupons, scan-backs and other promotional activities included in accrued selling costs on the Consolidated Balance Sheets increased from $15.5 million at the end of 2010 to $21.5 million at the end of 2011 due to more aggressive marketing efforts to drive sales growth.

Allowance for Doubtful Accounts

The determination of the allowance for doubtful accounts is based on management’s estimate of uncollectible accounts receivable. We record a general reserve based on analysis of historical data and aging of accounts receivable. In addition, management records specific reserves for receivable balances that are considered at higher risk due to known facts regarding the customer. The assumptions for this determination are reviewed quarterly to ensure that business conditions or other circumstances are consistent with the assumptions. Allowances for doubtful accounts decreased from $2.9 million at the end of 2010 to $1.9 million at the end of 2011 primarily due to the write-off of a bankruptcy which remained outstanding at the end of 2010.

Self-Insurance Reserves

We maintain reserves for the self-funded portions of employee medical insurance benefits. The employer’s portion of employee medical claims is limited by stop-loss insurance coverage each year to $0.3 million per person. As of December 31, 2011 and January 1, 2011, the accruals for our portion of medical insurance benefits were $4.5 million and $5.0 million, respectively. The decrease in liability is primarily due to the overall reduction in our workforce.

We maintain self-insurance reserves for workers’ compensation and auto liability for individual losses up to the deductible which ranges from $0.3 to $0.5 million per individual loss. In addition, certain general and product liability claims are self-funded for individual losses up to the $0.1 million insurance deductible. Claims in excess of the deductible are fully insured up to $100 million per individual claim. We evaluate input from a third-party actuary in the estimation of the casualty insurance obligation on an annual basis. In determining the ultimate loss and reserve requirements, we use various actuarial assumptions including compensation trends, healthcare cost trends and discount rates. We also use historical information for claims frequency and severity in order to establish loss development factors. The estimate of discounted loss reserves ranged from $14.2 million to $17.9 million in 2011. In 2010, the estimate of discounted loss reserves ranged from $14.3 million to $19.3 million.

During 2011 and 2010, we determined that the best estimate of our outstanding liability was the midpoint in the range. Accordingly, we selected the midpoint of the range as our estimated liability. In addition, we lowered the discount rate from 2.5% in 2010 to 1.5% in 2011 based on projected investment returns over the estimated future payout period, which increased the estimated claims liability by approximately $0.3 million.

In December 2010, we assumed a liability for workers’ compensation relating to claims that had originated prior to 1992 and been insured by a third-party insurance company. Due to the uncertainty of that insurer’s ability to continue paying claims, we entered into an agreement where we assumed the full liability of approximately $3.6 million of insurance claims under the pre-existing workers’ compensation policies and received $1.5 million in cash consideration to be placed in an escrow account to pay these specific claims. The net liability for these claims was $2.1 million for both 2011 and 2010.

Impairment Analysis of Goodwill and Other Indefinite-Lived Intangible Assets

The annual impairment analysis of goodwill and other indefinite-lived intangible assets requires us to project future financial performance, including revenue and profit growth, fixed asset and working capital investments, income tax rates and cost of capital. During 2011, the FASB issued an ASU regarding testing for goodwill impairment. Although we adopted this standard during 2011, we elected to perform a quantitative analysis of goodwill rather than support the balance qualitatively as the new standard allows. The analysis of goodwill and other indefinite-lived intangible assets as of December 31, 2011 assumes combined average annual revenue growth of approximately 2.37% during the valuation period. These projections rely upon historical performance, anticipated market conditions and forward-looking business plans.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

Overview

On December 6, 2010, Lance, Inc. (“Lance”) and Snyder’s of Hanover, Inc. (“Snyder’s”) completed a merger (“Merger”) to create Snyder’s-Lance, Inc. The third quarter and first nine months of 2011 reflect the results of operations of the combined company, while the respective periods for 2010 only reflect the results of operations for Lance.

As a result of the Merger, we are integrating our business and business processes to eliminate duplication of costs, and as a result, have recorded severance charges, asset impairments and increased professional fees, which we expect will continue throughout 2011.

In February 2011, we announced a plan to convert approximately 1,300 company-owned employee-based direct-store-delivery (“DSD”) routes to an independent business operator structure to better position our distribution network to serve customers. The conversion is expected to be complete by the middle of 2012 and is expected to materially impact our financial results in several areas, as follows:


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Revenue – Although total revenue will increase as a result of the Merger, we expect to have lower revenue per unit sold as we shift from a company-owned to an independent business operator DSD network.


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Gross margin – Lower revenue per unit sold will also drive lower gross margin as a percentage of net revenue.


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Selling, general, and administrative expenses – As we shift to an independent business operator DSD network, we believe our distribution-related expenses will decline more than the decline in gross margin dollars.


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Severance – We recorded an estimate of the severance charges related to converting our company-owned routes to an independent business operator structure.


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Impairment of fixed assets – During the second quarter, we recorded an impairment of route trucks reflecting a fair value estimate that is significantly lower than the current book value of these assets. We may have additional impairments of distribution equipment as we evaluate the impacts of the conversion.


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Gains on the sale of route businesses – We expect to record net gains on the sale of route businesses to independent business operators that will mitigate a portion of the integration-related expenses and provide significant cash inflows. The basis of the route businesses will include an allocation of goodwill, which will reduce the overall gain recorded in the Condensed Consolidated Statements of Income. As of October 1, 2011, we had sold approximately 200 routes associated with the DSD independent business operator conversion.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $48.4 million during the third quarter of 2011 compared to the third quarter of 2010 but decreased 2.9% as a percentage of revenue. The dollar increase was primarily driven by incremental expenses assumed as part of the Merger. Additionally, we recognized $3.4 million of severance charges and professional fees associated with the independent business operator conversion and other Merger integration activities. This amount was compared to $2.9 million in expenses recognized in the third quarter of 2010 associated with the Merger. We also introduced several media campaigns during the quarter as an investment in our core brands, which resulted in a $7.9 million increase in advertising costs over the third quarter of 2010 or a 3.2% increase as a percentage of branded revenue. In addition, during the third quarter, we continued to experience duplicate costs as a result of the Merger, which we expect to be addressed as a part of the integration and DSD conversion to independent business operators.

Other Income/Expense, Net

During the third quarter of 2011, we recognized approximately $3.2 million of gains on the sale of route businesses associated with the DSD independent business operator conversion. As we continue to convert the company-owned routes to an independent business operator DSD network, additional gains on the sale of assets are expected. In addition, we experienced foreign currency gains of $1.0 million during the third quarter of 2011. Other income/expense, net was not significant in the third quarter of 2010.

Interest Expense

Interest expense increased $2.2 million during the third quarter of 2011 compared to the third quarter of 2010 as a result of higher debt levels and higher average interest rates due to the Merger.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $148.3 million during the first nine months of 2011 compared to the first nine months of 2010, but decreased 2.5% as a percentage of revenue. The dollar increase was primarily driven by incremental expenses assumed as part of the Merger. Additionally, in the first nine months of 2011, we recognized $15.8 million of severance expenses and $2.4 million of professional fee expenses associated with the Merger and independent business operator conversion. During the first nine months of 2010, selling and general expenses were unfavorably impacted by $3.2 million of expenses associated with the Merger and $1.9 million of costs incurred in connection with a workforce reduction. In the first nine months of 2011, we increased our investment in advertising for our core brands over the first nine months of 2010 by $13.1 million or a 1.4% increase as a percentage of branded revenue. During 2011, we also experienced duplicate costs as a result of the Merger, which we expect to be addressed as a part of the integration and DSD conversion to independent business operators.

Other Expense, Net

During the second quarter of 2011, we recognized asset impairment charges of $10.1 million on our fleet of route trucks expected to be sold as a result of the independent business operator conversion. During the third quarter of 2011, we recognized approximately $3.2 million of gains on the sale of route businesses associated with the DSD independent business operator conversion. As we continue to convert the company-owned routes to an independent business operator DSD network, additional gains on the sale of assets are expected.

During the first nine months of 2010, we recorded financing commitment fees of $2.7 million associated with an unsuccessful bid for a targeted acquisition and an impairment charge of $0.6 million related to the assets in Little Rock, Arkansas.

Interest Expense

Interest expense increased $5.5 million during the first nine months of 2011 compared to the first nine months of 2010 from higher debt levels and higher average interest rates due to the Merger.

Income Tax Expense

Our effective income tax rate was 40.2% in the first nine months of 2011 compared to 33.3% in the first nine months of 2010. The increase in the effective tax rate was due to higher non-tax deductible expenses, primarily related to the goodwill associated with the sale of route businesses.

Liquidity and Capital Resources

Liquidity

Liquidity represents our ability to generate sufficient cash flows from operating activities to meet our obligations as well as our ability to obtain appropriate financing. Therefore, liquidity should not be considered separately from capital resources that consist primarily of current and potentially available funds for use in achieving our objectives. Currently, our liquidity needs arise primarily from working capital requirements, capital expenditures for fixed assets, route businesses, acquisitions, and dividends. We believe we have sufficient liquidity available to enable us to meet these demands.

We have a universal shelf registration statement that, subject to our ability to consummate a transaction on acceptable terms, provides the flexibility to sell up to $250 million of debt or equity securities, which is effective through March 26, 2012.

Operating Cash Flows

Net cash provided by operating activities was $72.8 million during the first nine months of 2011 and $52.0 million during the first nine months of 2010. Cash provided by changes in operating assets and liabilities was $6.7 million during the first nine months of 2011, an increase from cash used by changes in operating assets and liabilities of $5.0 million in the first nine months of 2010. The increases in accounts receivable and inventory during the first nine months of 2011 were more than offset by increases in accounts payable, accrued compensation and reductions in prepaid expenses and other current assets.

Investing Cash Flows

Net cash used in investing activities was $55.2 million for the first nine months of 2011. Capital expenditures for fixed assets, principally manufacturing equipment, totaled $43.4 million during the first nine months of 2011, partially offset by proceeds from the sale of fixed and intangible assets of $2.7 million. Capital expenditures are expected to continue at a level sufficient to support our strategic and operating needs. Capital expenditures for 2011 are projected to be between $55 million and $60 million and funded by net cash flow from operating activities, proceeds from the sale of route businesses, cash on hand, and our existing credit facilities. Expenditures for the purchase of route businesses were $19.7 million in the first nine months of 2011, offset by proceeds from the sale of route businesses of $19.6 million. The purchases and sales of route businesses are expected to continue increasing over the remainder of the year and into 2012 as we convert to an independent business operator structure. During the third quarter of 2011, we acquired the George Greer Company, Inc. for $15.0 million in addition to another distributor.

Net cash used in investing activities during the first nine months of 2010 represented capital expenditures of $21.2 million, partially offset by proceeds from the sale of fixed and intangible assets of $2.2 million. Capital expenditures for purchases of fixed assets were $33.3 million for the year ended January 1, 2011.

Financing Cash Flows

Net cash used in financing activities was $30.2 million for the first nine months of 2011 compared with $24.6 million in the first nine months of 2010. During both of the first nine months of 2011 and 2010, we paid dividends of $0.48 per common share totaling $32.1 million and $15.5 million, respectively, with the increase due to the change in the number of shares outstanding. We received cash and related tax benefits of $8.2 million and $2.6 million during the first nine months of 2011 and 2010, respectively, as a result of stock option exercises. Repayments on our existing credit facilities totaling $2.5 million and $7.0 million, respectively, for the first nine months of 2011 and 2010, were primarily funded by cash on hand and cash provided by operating activities.

During the first nine months of 2011, we acquired the remaining ownership interest in Melisi Snacks, Inc. for $3.5 million, increasing our total ownership to 100%.

During the first nine months of 2010, we repurchased 56,152 shares of common stock from employees and net-settled 172,650 of the 300,000 restricted stock units that vested in May 2010, to cover $3.8 million of withholding taxes payable by employees upon the vesting of restricted stock and restricted stock units. We also paid $0.9 million of accrued dividends on restricted stock units.

On November 1, 2011, the Board of Directors declared a quarterly cash dividend of $0.16 per share, payable on November 22, 2011, to stockholders of record on November 14, 2011.

Other Cash Flow Considerations

In February 2011, we announced a plan to convert approximately 1,300 company-owned routes to an independent business operator structure to better position our distribution network to serve customers. The conversion is expected to be complete by the middle of 2012. We continue to expect significant cash inflows and outflows from the independent business operator conversion and other integration activities. We expect to generate after-tax proceeds of approximately $40 to $50 million from the sale of route businesses and route trucks by the middle of 2012.

Debt

Additional borrowings available under our existing credit facility totaled $153.0 million as of October 1, 2011. We have complied with all financial covenants contained in the credit agreement. Under a separate existing credit agreement, a $50.0 million loan was due in October 2011. The repayment of this loan was made on October 20, 2011, and was funded with borrowings from the existing revolving credit facility. We also maintain standby letters of credit in connection with our self-insurance reserves for casualty claims. The total amount of these letters of credit was $16.1 million as of October 1, 2011.

Contractual Obligations

In order to mitigate the risks of volatility in commodity markets to which we are exposed, we have entered into forward purchase agreements with certain suppliers based on market prices, forward price projections, and expected usage levels. Purchase commitments for inventory increased from $169.6 million as of January 1, 2011, to $204.2 million as of October 1, 2011, due to the increased volume of purchase agreements compared to the end of 2010. We currently contract from approximately three to eighteen months in advance for all major ingredients and packaging.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, results of operations or cash flows.

Market Risks

The principal market risks that may adversely impact results of operations and financial position relate to ingredient, packaging and energy costs, interest and foreign exchange rates, and credit risks.

See the “ Contractual Obligations” section above for a discussion of market risks associated with ingredient, packaging and energy costs.

Our variable-rate debt obligations incur interest at floating rates based on changes in the Eurodollar rate and U.S. base rate interest. To manage exposure to changing interest rates, we selectively enter into interest rate swap agreements to maintain a desirable proportion of fixed to variable-rate debt. While these interest rate swap agreements fixed a portion of the interest rate at a predictable level, pre-tax interest expense would have been $2.0 million lower without these agreements during the first nine months of 2011.

We are exposed to foreign exchange rate fluctuations through the operations of our Canadian subsidiary. A majority of the revenue of our Canadian operations is denominated in U.S. dollars and a substantial portion of the operations’ costs, such as raw materials and direct labor, are denominated in Canadian dollars. We have entered into a series of derivative forward contracts to mitigate a portion of this foreign exchange rate exposure. These contracts have maturities through December 2012. The effect of foreign exchange rate fluctuations, net of the effect of derivative forward contracts, was unfavorable by $0.4 million for the first nine months of 2011 compared to the first nine months of 2010.

Other than immaterial investments acquired in the Merger, we do not have or use market risk sensitive instruments for trading or speculative purposes. See Note 13 to our Condensed Consolidated Financial Statements for additional information about our derivative instruments.

We are exposed to credit risks related to our accounts receivable. We perform ongoing credit evaluations of our customers to minimize the potential exposure. For the first nine months of 2011 and 2010, net bad debt expense was $0.7 million and $0.9 million, respectively. Allowances for doubtful accounts were $2.4 million at October 1, 2011 and $2.9 million at January 1, 2011.

CONF CALL

Russell Allen

Thank you, Stephanie and good morning everyone. With me today are Dave Singer, President and Chief Executive Officer and Rick Puckett, Executive Vice President and Chief Financial Officer.

In today's call Dave and Rick will discuss our 2008 fourth quarter and full year results as well as the outlook for the full year 2009. As a reminder we're webcasting this conference call including the supporting slide presentation on our website at www.lance.com.

Before we begin I would like to point out that during today's presentation management may make forward-looking statements about our company's performance. Actual results could differ materially from those projected in such forward-looking statements. Information concerning certain factors that could cause results to differ materially from those projected and forward-looking statements is contained in the company's recent forms 10-K and 10-Q filed with the Securities and Exchange Commission.

I'll now turn the call over to Rick Puckett, Executive Vice President and Chief Financial Officer to begin management comments.

Rick D. Puckett

Thank you, Russell and good morning everyone. Welcome to our call. Our results for the fourth quarter reflects continued strong revenue growth across our entire business. There was a 16% increase year-over-year, fiber brands grew exceptionally well, and much improved margins were reported as well. Consistent with our strategy we had solid revenue growth in our core product lines as well as our major channels of grocery and mass.

Cost of key ingredients were less variable as a result of our buying strategies. Fuel costs were at normalized levels. We also experienced significant improvement in operating margins. Continued improvement in supply chain and DSD operating efficiencies were still apparent in our results.

As you probably read in December we acquired substantially all the assets of Archway. We closed this transaction on December '08 of 2008, and if you will remember that had been closed since the beginning of October and we actually were producing products by December 16th, only about eight days after we closed the deal. So our supply chain team really came through and started producing very quickly there and lot of kudos to that team.

There was also an enhancement to employee vacation policy which I will describe in a few minutes. If we go to page 5 or slide 5 in your deck, lets go through some of the key financial summary data for the quarter as it relates to last year's fourth quarter.

As I mentioned net sales of 215.3 million was actually 16% above last year's net sale. Gross margin improved 220 basis points quarter-to-quarter and the SG&A expense percent improved 260 basis points as well. So the operating profit include -- inclusive of those things improved close to 500 basis points from quarter four to quarter four of '08. Net income of 8.8 million translates into a $0.28 per share excluding special items.

Our special items, I mentioned the vacation change, we've called that as a special item as a result of a change in our vacation policy that was $0.025 in terms of EPS. And then the cost associated with Archway was another $0.015 relative to EPS. So total of $0.04 in special items was recorded in the fourth quarter of '08. You could see the footnote at the bottom on the page and there is also a reconciliation at the back of this deck as it relates to GAAP measures.

On page 6; if we breakdown our sales, we can see the branded at $122.6 million in the fourth quarter of '08 was almost 8% above last year. Pricing on that was around 6.5% to 7%. On the non-branded side; we have strong volume growth in our private brands; 29.5% increase year-over-year, pricing at 18% of that or pricing was 18% of that growth. So, in total 16% growth year-over-year and pricing accounted for about 12% of that.

On page 7, looking at the full year we had $852.5 million in 2008 representing 12% growth over last year. Gross margin was down 390 basis points all due to commodities as we have been talking over the last 3 to 4 quarters. The SG&A expense actually improved 230 basis points from year-to-year and the operating profit margin largely a result of the gross profit shortfall was reduced by 180 basis points. The tax rate for 2008 was basically the same as it was for 2007.

So on a net income basis $19 million was reported in 2008, again excluding special items and 2007 was $23.8 million, for an earnings per share of $0.60 for 2008 compared to $0.76 for last year.

On page 8, if you look at the sale summary between branded and non-branded, branded products represent $513 million in 2008 which was a 7% increase over year 2007. Pricing there was about 4%. On the non-branded side $339.5 million of revenue in 2008 was a 20% increase over last year, and the price component there was about 13%. So, overall 12% increase in sales of which about 7.5% of that was pricing.

On page 9, looking at some other key statistics, our EBITDA was lower slightly than last year. As well as on the percentage basis net debt was increased year-over-year. And actually the net debt increased about $56 million and as a matter of fact that happened to equal exactly what we paid for the two acquisitions that we made in 2008. So the rest of the cash requirements were paid out of our cash from operations and working capital. So actually a pretty good year as it relates to cash.

You can see also that the leverage on our debt is still quite low at 1.5 times and that's compared to a market of about 2.4. But it is higher than last year, as a result of the acquisitions that we made.

Looking at the charts, starting on page 10, you can see the great trend on our net revenue growth and as I mentioned, 16.2% in the fourth quarter of which 12 points was price, is very amazing kind of growth for a snack-food company. So I think that we continued to see strong growth there as we mentioned before.

On page 11, we start to see a turnaround in the decline of the gross margin trend; not only in terms of the quarter-over-quarter but also in terms of a rolling 12 which is represented by the red line. So it's a good turn upward; our goal here is somewhere between 40% and 41%, with the current mix and that's incorporated in our guidance that I'll talk about in a few minutes.

As it relates to SG&A percent of the net sales, we continue the downward trend here. If you look at comparisons just quarter four of 2008 versus quarter four of 2007, there is a 260 basis point improvement year-over-year. If you look at it over two years; it's 450 basis points over two years. So, again very good progress on the SG&A front.

From an operating profit margin trend perspective, this was really the best quarter four that we've had for a very long time as it relates to operating margin at 6.4%. And this excludes special items again. The supply-chain and the infrastructure investments are really paying for... they're paying off their investments as we go forward and continue to realize good savings out of those initiatives. So, 6.4% in the fourth quarter, if you look back over this chart, you don't see another 6.4%. So we feel very comfortable that we are recovering our margins.

If we look at page 14, the certain selected cash flow items and again, before I go to this, if you'll notice on the balance sheet on the press release, most of the changes on the balance sheet are related to the acquisitions. So, all of the intangibles are pretty much related to the acquisitions and the increases in AR and inventory are all pretty much associated with the acquisitions that we've made during the year.

On page 14, cash flow from operating activities at 54.9 million was actually greater than it was last year and CapEx was about the same and we'll talk about guidance in a few minutes. So the free cash flow before dividends was about $3 million better than it was last year, still not a positive free cash flow at the end of 2008, when you consider dividend.

On page 15, there is the guidance for 2009. We're expecting our range of sales to be $900 million to $920 million. We expect the diluted earnings per share to be between $1 and $1.15. It's important to note that due to the current economic climate, our range is wider than normal. External influences continue to be uncertain as we go into 2009. Our guidance also includes incremental investment in marketing and advertising as we have talked in the past.

So our range for EPS is $1 to $1.15. You can see also our capital spending guidance is reduced from previous year's CapEx levels. We're looking at $36 million to $41 million. This is largely a result of the fact that we have completed a large number of the infrastructural investments that we had to make over the last two or three years.

We do also expect a positive free cash flow after dividends in 2009 and our dividend projection is consistent with that, that we paid in 2008. So we have not changed that. So a very positive outlook as it relates to 2009. I'll now turn it over to Dave Singer for further comments.

David V. Singer

Thanks, Rick. Now that Rick's taken you through the details on the quarter, I'd like to spend a couple of minutes talking about my perspective of 2008 and give you my perspective on our outlook for 2009.

Like a lot of food companies, most of the significant issues we faced in 2008 related to the unprecedented run-up in the cost of ingredients and energy. We raised selling prices on several occasions during 2008 to offset these escalating costs but our profit margins were really squeezed during the first three quarters.

As we anticipated our pricing actions have restored our margins in the fourth quarter and although commodity costs and pricing actions were really a large part of the focus for investors this year, in my mind 2008 was a lot more than that. It was really a pivotal year for Lance and in our transformation into what I consider a truly effective competitor in the snack food market.

We've affectively completed the operational turnaround in our business. As we discussed previously, our key priorities around this turnaround have been organizational development, focused sales growth and then the development of a solid foundation to support profitable growth in the future. And we really made great progress on these priorities in 2008.

From an organizational development perspective, during the year we enhanced and re-aligned our sales teams to help improve our focus on key customers and drive profitable growth. We enhanced our vacation policy to be more competitive. We continued to build a more team oriented performance driven and adaptive culture where innovation and continuous improvement becomes second nature. I really believe this culture will be a cornerstone of our ability to execute our strategies going forward.

Our initiatives around focused sales growth resulted in double-digit growth in our key branded product lines which include Lance home pack sandwich crackers and Cape Cod potato chips.

We also delivered growth in our private brand sales of more than 20%, which included both solid volume growth and a significant price increase to cover the cost of ingredients that really jumped this year.

While we drove these sales gains, we developed a pipeline of new branded products that will be launched in 2009. We also updated our Lance brand logo and updated packaging for Lance and Tom's product-line to really freshen our look and appeal more to our target customers.

We created new advertising campaigns for Lance branded sandwich crackers that we'll launch in the second quarter of 2009 and this represents a significant investment in our brand relative to the past year's... the amount of money we spend on advertising. We also added a new brand to our portfolio with the acquisition of Archway. This will help strengthen our relationship with customers and really provide a great platform for growth.

We grew our product brands cookie and cracker business, which historically is consisted largely of value oriented products. In 2008, we broadened our private brands product offerings with the acquisitions of Brent & Sam which adds an established premium private label cookie-line to our product portfolio.

We also developed an excellent line of mid-tier or main stream private label cookies and crackers that are being launched in 2009. And with this broadened line-up of value mainstream and premium products, we're very well positioned to profitably meet our private label customers need.

Our initiatives to improve our operational foundation were really successful in 2008 and that'll play a very important role in our ability to drive margin improvement in the future.

In our supply chain, we increase the operating leverage of our sugar wafer plants in Ontario with a consolidation of three plants down to two, and we increased the efficiency of our distribution network more than enough to offset the increase in diesel fuel during the year.

Our ERP implementation continued to move along nicely through 2008 with a successful implementation of our finance, manufacturing, shipping, and procurement modules of our oracle system. In early 2009, we implemented the modules that directly touch our customers without any problem. We're on track with the timeline that will have us completing the rollout to all of our locations with this oracle system by the end of 2009.

We drove improvements in our DSD operations with solid gains in sales per route, which we believe will continue to improve as we move through 2009 and beyond. Our Archway acquisition will play an important role in driving sales gains and margin expansion beyond 2008.

In addition to the Archway branded products, we intend to leverage the Ashland, Ohio facility to support growth for our private brands and our contract manufacturing products. Furthermore, the Ashland, Ohio location is ideal for a cost effective logistic center for our private brands business.

Despite the decline in earnings in 2008 which was driven primarily by the temporary margin squeeze which related to input cost, our many accomplishments in 2008 position us really well for the future.

Earlier I mentioned the next phase of transformation for Lance. If you look at slide number 20, I'll explain what I mean. From 2006 to 2008 we've been focused on developing strategies and improving the foundation of our company. So, we're having a solid base that we can grow both top-line and expand our margin.

In the next stage which really begins in 2009, we'll be focused on the continued execution of those strategies, continuous improvement in our base operation and strategic sales growth. From an organizational development standpoint, our focus will shift from reshaping the corporate structure and culture to driving a high performance adaptive culture with a continuous improvement mindset. Our focus on operational efficiencies will begin to shift from fixing the foundation to driving continuous improvements and leveraging the existing assets to improve our returns. Our focused sales growth will now expand beyond our existing core products to include a focus on strategic growth through both innovation and acquisition.

As we enter 2009, we remained focused on our goals of sales growth, margin expansion, and earnings per share growth as evidenced by our guidance. With our prices not aligned with our input cost and a solid foundation for growth and margin expansion in place, we are confident that 2009 will be a successful year. However, there are certainly risks in the near term. The current economic conditions as worrisome as it relates to top-line growth. Commodity and energy markets are uncertain and we have exposure on some of our ingredients for later in 2009.

In addition there is also uncertainty around how this peanut butter recall will ultimately impact our sandwich crackers there. Although our sandwich crackers are not part of the recall with all the media coverage of this situation consumers remained confused.

Recent news reports suggest that consumers are pulling back on their purchases of all peanut butter products. We've seen some impact and we're working very aggressively to correct this misconception and we're using a variety of means including posting information on our website, direct advertising, communication with media outlet, radio and TV interviews, an email campaign, an YouTube video, and we are also putting up point of sale information.

On guidance incorporates the expected cost of this informational campaign as well as some modest volume softness in the first quarter. We are assuming that most of this softness will be behind us by the second quarter.

Now I'll turn the call over to our moderator to start the Q&A.

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