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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(Mark One)
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X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
- - --- THE SECURITIES EXCHANGE ACT OF 1934
For Quarter (Twelve Weeks) Ended June 11, 1994
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OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
- - --- THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to _______________________
Commission file number 0-398
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LANCE, INC.
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(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-0292920
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8600 South Boulevard (P. O. Box 32368), Charlotte, North Carolina 28232
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(Address of principal executive offices) (Zip Code)
(704) 554-1421
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report).
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X . No .
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Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable date.
Common Stock, $.83-1/3 par value - 30,707,907 shares
outstanding as of July 19, 1994.
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LANCE, INC. AND SUBSIDIARIES
INDEX
Page
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PART I. FINANCIAL INFORMATION
Financial Statements:
Condensed Consolidated Balance Sheets -
June 11, 1994 (Unaudited) and December 25, 1993 3
Condensed Statements of Consolidated Income and
Retained Earnings (Unaudited) - Twelve Weeks and
Twenty-Four Weeks Ended June 11, 1994 and June 12, 1993 4
Condensed Statements of Consolidated Cash Flows
(Unaudited) - Twenty-Four Weeks
Ended June 11, 1994 and June 12, 1993 5
Notes to Condensed Consolidated Financial Statements
(Unaudited) 6-8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION 10
Submission of Matters to a Vote of Security Holders 10
Exhibits and Reports on Form 8-K 10
SIGNATURES 10
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LANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS, JUNE 11, 1994 (UNAUDITED) AND
DECEMBER 25, 1993
ASSETS 1994 1993
- - ------ ---- ----
(In thousands, except share data)
CURRENT ASSETS:
Cash and cash equivalents $ 25,116 $ 20,328
Marketable securities (Note 6) 18,638 19,228
Accounts receivable (less
allowance for doubtful accounts) 31,976 28,906
Accrued interest receivable 679 724
Refundable income taxes 1,750
Inventories - Finished goods, goods
in process, materials, etc. (Note 3) 29,131 33,673
Deferred income tax benefit (Note 8) 5,953 5,333
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Total current assets 111,493 109,942
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PROPERTY, NET 169,458 173,639
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OTHER ASSETS:
Marketable securities (Note 6) 18,126 14,452
Deposits 1,436 2,296
Prepayments, etc. 8,073 8,145
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Total other assets 27,635 24,893
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TOTAL $308,586 $308,474
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LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1993
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CURRENT LIABILITIES:
Accounts payable $ 3,505 $ 6,907
Accrued liabilities 31,586 24,583
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Total current liabilities 35,091 31,490
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OTHER LIABILITIES AND DEFERRED CREDITS:
Deferred income taxes (Note 8) 19,298 19,525
Accrued postretirement health care costs (Note 7) 7,556 7,096
Supplemental retirement benefits 3,330 3,323
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Total other liabilities and deferred credits 30,184 29,944
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STOCKHOLDERS' EQUITY:
Common stock, $.83-1/3 par value (authorized:
75,000,000, shares; issued: 30,837,907
shares in 1994; 31,001,185 shares in 1993) 25,698 25,835
Retained earnings 217,613 221,205
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Total stockholders' equity 243,311 247,040
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TOTAL $308,586 $308,474
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See notes to condensed consolidated financial statements (unaudited).
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LANCE, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME AND RETAINED EARNINGS (UNAUDITED)
FOR THE TWELVE WEEKS AND TWENTY-FOUR WEEKS ENDED JUNE 11, 1994 AND
JUNE 12, 1993
......TWELVE WEEKS ENDED...... ....TWENTY-FOUR WEEKS ENDED...
(In thousands, except per share data)
JUNE 11, 1994 JUNE 12, 1993 JUNE 11, 1994 JUNE 12, 1993
------------- ------------- ------------- -------------
NET SALES AND OTHER OPERATING REVENUE $117,541 $113,184 $225,674 $219,607
-------- -------- -------- --------
COST OF SALES AND OPERATING EXPENSES:
Cost of sales 55,704 52,287 108,142 101,235
Selling and delivery expenses 42,858 42,519 84,155 83,188
General and administrative expenses 4,457 4,625 9,283 9,250
Contributions to employees' profit-
sharing retirement fund 1,773 1,699 3,055 3,202
-------- -------- -------- --------
Total 104,792 101,130 204,635 196,875
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PROFIT FROM OPERATIONS 12,749 12,054 21,039 22,732
OTHER INCOME, NET 1,035 1,402 2,001 2,503
-------- -------- -------- -------
INCOME BEFORE INCOME TAXES 13,784 13,456 23,040 25,235
INCOME TAXES 5,338 5,014 8,803 9,357
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NET INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING PRINCIPLE CHANGES 8,446 8,442 14,237 15,878
CUMULATIVE EFFECT ON PRIOR YEARS OF
CHANGES IN ACCOUNTING PRINCIPLES FOR:
INCOME TAXES (Note 8) 3,538
POSTRETIREMENT HEALTH CARE COSTS (Note 7) (3,916)
-------- -------- ------- --------
NET INCOME 8,446 8,442 14,237 15,500
RETAINED EARNINGS AT BEGINNING OF
FISCAL PERIOD 219,267 225,765 221,205 226,060
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TOTAL 227,713 234,207 235,442 241,560
LESS:
CASH DIVIDENDS 7,433 7,510 14,873 15,020
RETIREMENT OF COMMON STOCK 2,667 2,954
EXERCISE OF STOCK OPTIONS 2 (157)
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RETAINED EARNINGS AT END OF
FISCAL PERIOD $217,613 $226,697 $217,613 $226,697
======== ======== ======== ========
PER SHARE AMOUNTS (NOTE 4):
Net Income before cumulative effect
of accounting principle changes $.27 $.27 $.46 $.51
Cumulative effect on prior years of
changes in accounting principles (.01)
---- ---- ---- ----
Net income $.27 $.27 $.46 $.50
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Cash dividends $.24 $.24 $.48 $.48
==== ==== ==== ====
See notes to condensed consolidated financial statements (unaudited).
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LANCE, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
FOR THE TWENTY-FOUR WEEKS ENDED JUNE 11, 1994 AND JUNE 12, 1993
1994 1993
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(In thousands)
OPERATING ACTIVITIES:
Net income $14,237 $15,500
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation 11,421 11,830
Deferred income taxes (847) (6,647)
Other, net 810
Changes in operating assets and liabilities 6,841 7,361
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Net cash flow from operating activities 32,462 28,044
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INVESTING ACTIVITIES:
Purchases of property (7,420) (10,559)
Proceeds from sale of property 974 459
Purchases of marketable securities (18,491) (7,380)
Sales of marketable securities 10,838
Maturities of marketable securities 4,310 7,525
Other, net 81 (280)
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Net cash used in investing activities (9,708) (10,235)
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FINANCING ACTIVITIES:
Dividends paid (14,873) (15,020)
Sales (purchases) of Lance common stock, net (3,093) 157
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Net cash used in financing activities (17,966) (14,863)
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INCREASE IN CASH 4,788 2,946
CASH AT BEGINNING OF PERIOD 20,328 21,323
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CASH AT END OF PERIOD $25,116 $24,269
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SUPPLEMENTAL INFORMATION:
Cash paid for income taxes $ 3,448 $ 4,080
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See notes to condensed consolidated financial statements (unaudited).
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LANCE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. In the opinion of the Company, the accompanying unaudited
condensed consolidated financial statements contain all
adjustments (consisting of only normal recurring accruals)
necessary to present fairly the consolidated financial
position of the Company and its subsidiaries as of June 11,
1994 and December 25, 1993, the consolidated results of
operations for the twelve weeks and twenty-four weeks ended
June 11, 1994 and June 12, 1993, and the consolidated cash
flows for the twenty-four weeks ended June 11, 1994 and June
12, 1993.
2. The consolidated results of operations for the twelve weeks
and twenty-four weeks ended June 11, 1994 and June 12, 1993
are not necessarily indicative of the results to be expected
for a full year.
3. The Company utilizes the dollar value last-in, first-out
(LIFO) method of determining the cost of substantially all of
its inventories. Because inventory valuations under the LIFO
method are based on annual determinations, the determination
of interim LIFO valuations requires that estimates be made of
year-end costs and levels of inventories. The possibility of
variation between estimated year-end costs and levels of LIFO
inventories and the actual year-end amounts may materially
affect the results of operations as finally determined for the
full year.
Inventories at June 11, 1994 and December 25, 1993 consisted
of (in thousands):
1994 1993
---- ----
Finished goods $14,875 $15,653
Goods in process 48 22
Raw materials 11,052 14,932
Supplies, etc. 8,554 8,222
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Total inventories at FIFO cost 34,529 38,829
Less: Adjustment to reduce FIFO
cost to LIFO cost 5,398 5,156
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Total inventories at LIFO cost $29,131 $33,673
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Use of the dollar value LIFO method with natural business unit
method of pooling makes presentation of inventory components on a
LIFO basis impractical.
4. Per share amounts for the twelve weeks and twenty-four weeks ended
June 11, 1994 were computed based on 30,926,627 and 30,963,494
shares of common stock outstanding, respectively. Per share amounts
for the twelve weeks and twenty-four weeks ended June 12, 1993 were
computed based on 31,292,851 and 31,292,372 shares of common stock
outstanding, respectively. The dilutive effect of stock options is
not material.
5. For comparative purposes certain 1993 amounts shown in the
accompanying unaudited condensed consolidated financial statements
have been reclassified to conform with 1994 classifications.
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6. MARKETABLE SECURITIES
Effective at the beginning of fiscal 1994, the Company adopted
Statement of Financial Accounting Standards (SFAS) 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS 115
applies to investments in equity securities with readily
determinable fair values and to all investments in debt securities.
Securties are classified into three categories and are accounted for
as follows. Debt securities that the Company has the positive
intent and ability to hold to maturity are classified as
held-to-maturity securities and are reported at amortized cost.
Debt and equity securities that are bought and held principally for
the purpose of selling them in the near term, generally
characterized by active and frequent buying and selling with the
objective of generating profits on short-term differences in price,
are classified as trading securities and are reported at fair value,
with unrealized gains and losses included in earnings. Debt and
equity securities not classified as either held-to-maturity or
trading securities are classified as available-for-sale and are
reported at fair value, with unrealized gains and losses excluded
from earnings and reported in a separate component of stockholders'
equity. On June 11, 1994 fair value and amortized cost of
securities available-for-sale were not materially different. SFAS
115 is effective for fiscal years beginning after December 15, 1993,
with the initial adoption reflectd prospectively. Due to the nature
of the Company's investment portfolio, SFAS 115 does not have a
material effect on the consolidated financial statements.
Marketable securities at June 11, 1994 are reported at amortized
cost and consist of:
Available-for-sale $14,647
Held-to-maturity 22,117
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$36,764
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The amortized cost, gross unrealized holding losses and fair value
for available-for-sale and held-to-maturity securities by major
security type at June 11, 1994 were as follows:
Gross
Unrealized
Amortized Holding
Cost Losses Fair Value
---- ------ ----------
Available-for-sale:
Municipal securities $14,647 $ (114) $14,533
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Held-to-maturity:
U. S. Treasury securities 4,530 (101) 4,429
Municipal securities 16,951 (49) 16,902
Other securities 636 157 793
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$22,117 $ 7 $22,124
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7. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Effective at the beginning of fiscal 1993, the Company adopted SFAS
106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." SFAS 106 requires the Company to accrue the estimated
cost of retiree benefit payments during the years the employee
provides services. The Company previously expensed the cost of
these benefits, which are principally health care, as claims were
incurred. SFAS 106 allows recognition of the cumulative
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effect of the liability in the year of adoption or the amortization
of the obligation over a period of up to twenty years. The Company
has elected to recognize the cumulative effect of this obligation on
the immediate recognition basis. The cumulative effects of adopting
SFAS 106 as of the beginning of fiscal 1993 were an increase in
accrued postretirement health care costs of $6,309,000 and a
decrease in net income of $3,916,000 ($.125 per share), which is
reported separately in the Company's consolidated statement of
income for the twenty-four weeks ended June 12, 1993.
8. INCOME TAXES
Effective at the beginning of fiscal 1993, the Company adopted SFAS
109, "Accounting for Income Taxes," and has reported the cumulative
effect of that change in the method of accounting for income taxes
in the first quarter 1993 consolidated statement of earnings.
SFAS 109 requires a change from the deferred method of accounting
for income taxes of APB Opinion 11 to the asset and liability method
of accounting for income taxes. Under the asset and liability
method of SFAS 109, deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax
rates in effect for the year in which those temporary differences
are expected to be recovered or settled. Under SFAS 109, the effect
on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
The cumulative effect of the change in accounting for income taxes
of $3,538,000 is determined as of the beginning of fiscal 1993 and
is reported separately in the Company's consolidated statement of
income for the twenty-four weeks ended June 12, 1993. Prior years'
financial statements have not been restated to apply the provisions
of SFAS 109.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company continues to maintain the financial strength and liquidity to meet
its regular operating needs, cash dividend payments, capital investment
program, and stock repurchase program through cash flow from current and prior
years' operations.
Current commitments for capital expenditures, including machinery and equipment
and further renovation and expansion of facilities, total approximately $5
million.
Cash and marketable securities increased due mainly to increased cash flow from
operations and decreased capital expenditures but was reduced by purchases of
Lance common stock. Accounts receivable are up since December 25, 1993 due to
increased sales, the timing of sales and the timing of collections on
receivables. Inventories are down due to the purchase of fewer peanuts because
of a poor 1993 peanut crop. Property, net is down due to fewer property
additions and continued high depreciation expense. Deposits are down due to
the delivery to the Company of vans and machinery on order at year end.
Accounts payable are down since December 25, 1993 due to the timing of invoice
payments. Accrued liabilities are up due to the timing of income tax payments
and an increase in accrued wages and related payroll taxes.
Net sales and other operating revenue were up $4.4 million (3.8%) for the
quarter and $6.1 million (2.8%) year to date compared with 1993 due primarily
to increased unit volume. Sales revenues continued to be affected by intense
price competition in most markets. Also, bad weather throughout most of the
Company's sales territories in the first quarter of 1994 had a negative impact
on year to date sales. Net income was flat for the quarter and was down $1.3
million year to date ($.04 per share) compared to 1993. Net income was
primarily affected by a shift in sales mix to lower margin products, high
production costs at the Vista Bakery plant, increased delivery expenses and an
increase in the federal income tax rate from 34% to 35%. Net income for 1993
was affected by the cumulative effect on prior years of changes in accounting
principles for income taxes and retiree health care benefits. The increase in
cost of sales was due primarily to a shift in product mix to higher cost items
and continued high production costs at the Vista Bakery plant. Other income
decreased due to lower interest income and the loss on sale of fixed assets
recorded in the second quarter of 1993.
Effective at the beginning of fiscal 1994, the Company adopted SFAS 115,
"Accounting for Certain Investments in Debt and Equity Securities". The
provisions of SFAS 115 apply to investments in equity securities with readily
determinable fair values and to all investments in debt securities. Initial
adoption of SFAS 115 is reflected prospectively. Due to the nature of the
Company's investment portfolio, SFAS 115 does not have a material effect on the
consolidated financial statements.
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PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Registrant's Annual Meeting of Stockholders held on
April 15, 1994, the following matters were submitted to a
vote of the stockholders of the Registrant:
1. Election of five nominees to the Board of Directors
of the Registrant for terms ending in 1997:
Shares
Voted Shares
Nominee in Favor Withheld
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A. F. Sloan 26,811,183 36,941
Paul A. Stroup, III 26,801,997 49,952
Stephen H. Van Every, Jr. 26,805,567 42,157
William R. Holland 26,787,750 64,499
Scott C. Lea 26,755,699 96,550
2. Ratification of the selection of KPMG Peat Marwick as
auditors for the fiscal year ending December 31,
1994, which was approved by a vote of 26,837,500
shares in favor and 25,147 shares against, with
63,810 shares abstaining.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10(vi). Lance, Inc. Benefit Restoration Plan dated
April 15, 1994.
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the 12 weeks
ended June 11, 1994.
Items 1 through 3 and 5 are inapplicable and have been omitted.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned thereunto duly authorized.
LANCE, INC.
By s/T. B. Horack
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T. B. Horack
Vice President, and Principal
Financial Officer
Dated: July 25, 1994
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