ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Sunday, April 21, 1996 TAG: 9604190083
SECTION: BUSINESS PAGE: 3 EDITION: METRO
DATELINE: CHARLOTTE, N.C.
SOURCE: PAUL NOWELL ASSOCIATED PRESS
Lance Inc. long had the reputation of a snack-food maker with a lot of bite, and many investors looked at the Charlotte company as one to buy.
But stiff competition in the snack-food market hurt Lance in recent years, forcing it to undergo a major restructuring that closed two of its plants and put more than 500 people out of work.
Now Lance chief executive Paul Stroup III is on a mission to try to woo back those investors who fled when profits were down and business was dismal, and convince them that Lance management is serious about turning the company around.
``We need to take responsibility for our future. If we can't, how can we continue to be a successful company?'' Stroup said.
For most of its 83 years, Lance has been a highly successful and profitable company, selling millions of its popular Toastchee sandwich crackers, chips and wide variety of other snacks.
It was also known for its handsome dividends each quarter while its stock price advanced.
But times got tougher for Lance in the late 1980s, when competition in the already fiercely competitive snack-food industry intensified.
``We always were able to pass along our price increases [to the consumer], but that stopped around 1990,'' said Stroup, who has worked for Lance since graduating from Furman University 23 years ago.
When Lance's margins tightened, Stroup was among the majority at the company who believed retail prices - and profits - would soon start to rise again.
They were wrong.
``Most successful companies find it hard to accept change,'' he said. ``We've been looked at as a conservative company, which really isn't such a bad thing if you balance sheet is OK.
``It is bad if it means you're slow to recognize change.''
From 1970, Lance's profits rose steadily each year from less than $6 million to a record $45.7 million in 1990.
But its earnings started to slip in recent years when well-heeled rivals like Frito-Lay and Nabisco began to invade its markets. In 1994, it posted a $26.9 million profit, but then saw a $6.9 million loss last year, mostly due to a $40 million in restructuring charges.
In December, the snack-food company announced it was laying off 507 workers, or about 9 percent of its 5,600-employee work force. The cuts were made at its Vista Bakery in Columbia, S.C., and a production facility in Greenville, Texas.
The cutbacks are expected to generate $10 million a year in pre-tax savings.
Industry analyst David Leibowitz, managing director of Burnham Securities in New York, called the restructuring an ``ambitious program.''
``If it works out the shareholders will have a lot to smile about,'' he said. ``At this point, it's too premature to issue a report card.''
And he added that Lance has a lot of things going for it that may entice investors, including no long-term debt, strong brand name recognition, a solid customer base and a well organized distribution network.
Despite its problems, Lance has not cut its generous dividend policy, which is currently 24 cents per share of common stock per quarter.
Others, too, in the snack-food business have had to deal with troubled times. Last year, Britain's United Biscuits Holdings PLC sold its Keebler subsidiary after years of weak results and St. Louis-based Anheuser-Busch Cos. has said it would try to sell its Eagle Snacks business.
So far, Lance's stock price has not responded positively to the changes. It remains locked in the $15 to $16 range after trading as high as $25 per share in 1992.
``Industry observers are taking a wait-and-see approach before investing,'' said Leibowitz.
LENGTH: Medium: 77 lines ILLUSTRATION: PHOTO: AP. CEO Paul Stroup III, who's spearheading a majorby CNBrestructuring at Lance Inc., stands by as crackers come down the
line at the Charlotte plant.