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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 September 3, 1994
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OR
- - -----
- - ----- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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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 - 30,585,907 shares
outstanding as of October 10, 1994.
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LANCE, INC. AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION:
Financial Statements:
Condensed Consolidated Balance Sheets -
September 3, 1994 (Unaudited) and December 25, 1993 3
Condensed Statements of Consolidated Income and
Retained Earnings (Unaudited) - Twelve Weeks and
Thirty-Six Weeks Ended September 3, 1994 and
September 4, 1993 4
Condensed Statements of Consolidated Cash Flows
(Unaudited) - Thirty-Six Weeks Ended September 3, 1994
and September 4, 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
SIGNATURES 10
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LANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS, SEPTEMBER 3, 1994 (UNAUDITED) AND
DECEMBER 25, 1993
ASSETS: 1994 1993
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(In thousands, except share data)
CURRENT ASSETS:
Cash and cash equivalents $ 22,535 $ 20,328
Marketable securities (Note 6) 16,960 19,228
Accounts receivable (less
allowance for doubtful accounts) 32,015 28,906
Accrued interest receivable 468 724
Refundable income taxes 1,750
Inventories - Finished goods, goods
in process, materials, etc. (Note 3) 26,216 33,673
Deferred income tax benefit (Note 8) 5,968 5,333
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Total current assets 104,162 109,942
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PROPERTY, NET 168,357 173,639
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OTHER ASSETS:
Marketable securities (Note 6) 19,800 14,452
Deposits 801 2,296
Prepayments, etc. 8,031 8,145
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Total other assets 28,632 24,893
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TOTAL $301,151 $308,474
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LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES:
Accounts payable $ 3,421 $ 6,907
Accrued liabilities 28,953 24,583
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Total current liabilities 32,374 31,490
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OTHER LIABILITIES AND DEFERRED CREDITS:
Deferred income taxes (Note 8) 19,254 19,525
Accrued postretirement health
care costs (Note 7) 7,780 7,096
Supplemental retirement benefits 3,325 3,323
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Total other liabilities and deferred credits 30,359 29,944
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STOCKHOLDERS' EQUITY:
Common stock, $.83-1/3 par value (authorized:
75,000,000 shares; issued 30,670,907
shares in 1994; 31,001,185 shares in 1993) 25,559 25,835
Retained earnings 212,859 221,205
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Total stockholders' equity 238,418 247,040
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TOTAL $301,151 $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 THIRTY-SIX WEEKS ENDED SEPTEMBER 3, 1994 AND SEPTEMBER
4, 1993
...........TWELVE WEEKS ENDED.......... ........THIRTY-SIX WEEKS ENDED.......
(In thousands, except per share data) SEPTEMBER 3, 1994 SEPTEMBER 4, 1993 SEPTEMBER 3, 1994 SEPTEMBER 4, 1993
----------------- ----------------- ----------------- -----------------
NET SALES AND OTHER OPERATING REVENUE $107,643 $106,140 $333,317 $325,747
-------- -------- -------- --------
COST OF SALES AND OPERATING EXPENSES:
Cost of sales 52,746 50,384 160,888 151,619
Selling and delivery expenses 40,884 41,308 125,039 124,496
General and administrative expenses 4,910 4,710 14,193 13,960
Contributions to employees' profit-
sharing retirement fund 1,255 1,323 4,310 4,525
-------- -------- -------- --------
Total 99,795 97,725 304,430 294,600
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PROFIT FROM OPERATIONS 7,848 8,415 28,887 31,147
OTHER INCOME, NET 1,097 1,409 3,098 3,912
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INCOME BEFORE INCOME TAXES 8,945 9,824 31,985 35,059
INCOME TAXES 3,512 4,186 12,315 13,543
-------- -------- -------- --------
NET INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING PRINCIPLE CHANGES 5,433 5,638 19,670 21,516
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 5,433 5,638 19,670 21,138
RETAINED EARNINGS AT BEGINNING OF
FISCAL PERIOD 217,613 226,697 221,205 226,060
-------- -------- -------- -------
TOTAL 223,046 232,335 240,875 247,198
LESS:
CASH DIVIDENDS 7,376 7,511 22,249 22,531
RETIREMENT OF COMMON STOCK 2,811 5,765
EXERCISE OF STOCK OPTIONS 1 2 (156)
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RETAINED EARNINGS AT END OF
FISCAL PERIOD $212,859 $224,823 $212,859 $224,823
======== ======== ======== ========
PER SHARE AMOUNTS (NOTE 4):
Net Income before cumulative effect
of accounting principle changes $.18 $.18 $.64 $.69
Cumulative effect on prior years of
changes in accounting principles (.01)
---- ---- ---- ----
Net income $.18 $.18 $.64 $.68
==== ==== ---- ====
Cash dividends $.24 $.24 $.72 $.72
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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 THIRTY-SIX WEEKS ENDED SEPTEMBER 3, 1994 AND SEPTEMBER 4,
1993
1994 1993
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(In thousands)
OPERATING ACTIVITIES:
Net income $19,670 $21,138
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation 16,756 17,059
Deferred income taxes (906) (6,602)
Cumulative effect of change in accounting
principles for postretirement health care costs 6,309
Other, net 1,244 666
Changes in operating assets and liabilities 7,221 4,159
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Net cash flow from operating activities 43,985 42,729
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INVESTING ACTIVITIES:
Purchases of property (10,819) (14,940)
Proceeds from sale of property 688 1,219
Purchases of marketable securities (23,197) (23,152)
Sales of marketable securities 13,187 15,550
Maturities of marketable securities 6,540 7,525
Other, net 115 139
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Net cash used in investing activities (13,486) (13,659)
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FINANCING ACTIVITIES:
Dividends paid (22,249) (22,531)
Sales (purchases) of the Company's
common stock, net (6,043) 169
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Net cash used in financing activities (28,292) (22,362)
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INCREASE (DECREASE) IN CASH 2,207 6,708
CASH AT BEGINNING OF PERIOD 20,328 21,323
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CASH AT END OF PERIOD $22,535 $28,031
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SUPPLEMENTAL INFORMATION:
Cash paid for income taxes $ 8,452 $ 9,135
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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 September 3, 1994 and December 25, 1993, the consolidated results of
operations for the twelve weeks and thirty-six weeks ended September 3,
1994 and September 4, 1993, and the consolidated cash flows for the
thirty-six weeks ended September 3, 1994 and September 4, 1993.
2. The consolidated results of operations for the twelve weeks and
thirty-six weeks ended September 3, 1994 and September 4, 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 September 3, 1994 and December 25, 1993 consisted of (in
thousands):
1994 1993
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Finished goods $15,265 $15,653
Goods in process 42 22
Raw materials 8,444 14,932
Supplies, etc. 8,021 8,222
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Total inventories at FIFO cost 31,772 38,829
Less: Adjustment to reduce FIFO
cost to LIFO cost 5,556 5,156
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Total inventories at LIFO cost $26,216 $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 thirty-six weeks ended
September 3, 1994 are computed based on 30,725,883 and 30,884,290 shares
of common stock outstanding, respectively. Per share amounts for the
twelve weeks and thirty-six weeks ended September 4, 1993 were computed
based on 31,295,391 and 31,293,378 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.
Securities 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 September 3, 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 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.
Marketable securities at September 3, 1994 are reported at amortized
cost and consisted of (in thousands):
Available-for-sale $14,916
Held-to-maturity 21,844
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$36,760
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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 September 3, 1994 were as follows (in thousands):
Gross
Unrealized
Amortized Holding
Cost Losses Fair Value
---- ------ ----------
Available-for-sale:
Municipal securities $14,916 $(172) $14,744
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Held-to-maturity:
U. S. Treasury securities 4,525 (118) 4,407
Municipal securities 16,678 (51) 16,627
Other securities 641 181 822
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$21,844 $ 12 $21,856
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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 thirty-six weeks ended September 4, 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 was determined as of the beginning of fiscal 1993 and
is reported separately in the Company's consolidated statement of
income for the thirty-six weeks ended September 4, 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 $10
million.
Cash and marketable securities increased, net of purchases of the Company's
common stock, mainly due to increased cash flow from operations and decreased
capital expenditures. 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 decreased due to
the delivery to the Company of vans and machinery on order at year end.
Accounts payable are down since year end 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 $1.5 million (1.4%) for the
quarter and $7.6 million (2.3%) 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 down $205,000 for the quarter and was
down $1.5 million year to date ($.04 per share) compared to 1993. Net income
for the quarter and year to date 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 a decrease in insurance expense. Net income
for the third quarter of 1993 was impacted by the enactment of the new federal
tax act which increased the corporate income tax rate to 35%. Net income year
to date 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 earned
in 1994 and due to a gain on sale of marketable securities which was included
in the third 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 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule (For SEC use only)
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the 12 weeks ended
September 3, 1994.
Items 1 through 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 (T. B. Horack)
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T. B. Horack
Vice President and Principal
Financial Officer
Dated: October 18, 1994
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EXHIBIT INDEX
Exhibit
Number Description
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27 Financial Data Schedule (For SEC use only)