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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(Mark One)
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter (Twelve Weeks) Ended September 9, 1995
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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 - 30,347,265 shares
outstanding as of October 16, 1995.
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LANCE, INC. AND SUBSIDIARIES
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INDEX
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Page
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PART I. FINANCIAL INFORMATION:
Financial Statements:
Condensed Consolidated Balance Sheets -
September 9, 1995 (Unaudited) and December 31, 1994 3
Condensed Statements of Consolidated Income and
Retained Earnings (Unaudited) - Twelve Weeks and
Thirty-Six Weeks Ended September 9, 1995 and
September 3, 1994 4
Condensed Statements of Consolidated Cash Flows
(Unaudited) - Thirty-Six Weeks Ended September 9, 1995
and September 3, 1994 5
Notes to Condensed Consolidated Financial Statements
(Unaudited) 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION 8
SIGNATURES 8
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LANCE, INC. AND SUBSIDIARIES
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CONDENSED CONSOLIDATED BALANCE SHEETS, September 9, 1995 (UNAUDITED) AND DECEMBER 31, 1994
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(In thousands, except share data)
ASSETS: 1995 1994 LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
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CURRENT ASSETS: CURRENT LIABILITIES:
Cash and cash equivalents $ 22,850 $ 12,964 Accounts payable $ 4,554 $ 8,572
Marketable securities 31,213 32,946 Accrued liabilities 31,602 24,287
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Accounts receivable (less Total current liabilities 36,156 32,859
allowance for doubtful accounts) 33,747 30,155 -------- --------
Accrued interest receivable 394 599 OTHER LIABILITIES AND DEFERRED CREDITS:
Refundable income taxes 1,959 Deferred income taxes 17,861 19,243
Inventories - Finished goods, goods Accrued postretirement health
in process, materials, etc. (Note 3) 29,295 38,952 care costs 8,796 8,078
Deferred income tax benefit 6,962 5,800 Supplemental retirement benefits 3,332 3,322
-------- -------- -------- --------
Total current assets 124,461 123,375 Total other liabilities and deferred credits 29,989 30,643
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PROPERTY, NET 156,993 165,390 STOCKHOLDERS' EQUITY:
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Common stock, $.83-1/3 par value (authorized:
OTHER ASSETS: 75,000,000 shares; issued 30,357,265
Deposits 1,580 335 shares in 1995; 30,433,407 shares in 1994) 25,298 25,361
Prepayments, etc. 9,146 7,896 Retained earnings 200,488 208,800
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Total other assets 10,726 8,231 Net unrealized gain (loss) on
-------- -------- marketable securities 249 (667)
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Total stockholders' equity 226,035 233,494
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TOTAL $292,180 $296,996 TOTAL $292,180 $296,996
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See notes to condensed consolidated financial statements (unaudited).
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LANCE, INC. AND SUBSIDIARIES
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CONDENSED STATEMENTS OF CONSOLIDATED INCOME AND RETAINED EARNINGS (UNAUDITED)
FOR THE TWELVE WEEKS AND THIRTY-SIX WEEKS ENDED September 9, 1995 AND SEPTEMBER 3, 1994
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...........TWELVE WEEKS ENDED.......... ..........THIRTY-SIX WEEKS ENDED.........
(In thousands, except per share data) September 9, 1995 SEPTEMBER 3, 1994 September 9, 1995 SEPTEMBER 3, 1994
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NET SALES AND OTHER OPERATING REVENUE $107,174 $107,643 $334,139 $333,317
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COST OF SALES AND OPERATING EXPENSES:
Cost of sales 53,808 52,746 165,310 160,888
Selling and delivery expenses 42,039 40,884 129,406 125,039
General and administrative expenses 4,619 4,910 14,444 14,193
Contributions to employees' profit-
sharing retirement fund 1,039 1,255 3,450 4,310
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Total 101,505 99,795 312,610 304,430
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PROFIT FROM OPERATIONS 5,669 7,848 21,529 28,887
OTHER INCOME, NET 1,112 1,097 3,102 3,098
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INCOME BEFORE INCOME TAXES 6,781 8,945 24,631 31,985
INCOME TAXES 2,648 3,512 9,662 12,315
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NET INCOME 4,133 5,433 14,969 19,670
RETAINED EARNINGS AT BEGINNING OF
FISCAL PERIOD 205,104 217,613 208,800 221,205
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TOTAL 209,237 223,046 223,769 240,875
LESS:
CASH DIVIDENDS 7,294 7,376 21,902 22,249
RETIREMENT OF COMMON STOCK 1,523 2,811 1,523 5,765
EXERCISE OF STOCK OPTIONS (68) (144) 2
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RETAINED EARNINGS AT END OF
FISCAL PERIOD $200,488 $212,859 $200,488 $212,859
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PER SHARE AMOUNTS (NOTE 4):
Net income $ .14 $ .18 $ .49 $ .64
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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
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CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
FOR THE THIRTY-SIX WEEKS ENDED September 9, 1995 AND SEPTEMBER 3, 1994
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1995 1994
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(In thousands)
OPERATING ACTIVITIES:
Net income $ 14,969 $ 19,670
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation 17,030 16,756
Deferred income taxes (2,544) (906)
Other, net 1,244
Changes in operating assets and liabilities 11,190 7,221
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Net cash flow from operating activities 40,645 43,985
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INVESTING ACTIVITIES:
Purchases of property (10,484) (10,819)
Proceeds from sale of property 678 688
Purchases of marketable securities (5,733) (23,197)
Sales of marketable securities 4,830 13,187
Maturities of marketable securities 3,274 6,540
Other, net 20 115
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Net cash used in investing activities (7,415) (13,486)
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FINANCING ACTIVITIES:
Dividends paid (21,902) (22,249)
Sales (purchases) of the Company's
common stock, net (1,442) (6,043)
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Net cash used in financing activities (23,344) (28,292)
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INCREASE (DECREASE) IN CASH 9,886 2,207
CASH AT BEGINNING OF PERIOD 12,964 20,328
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CASH AT END OF PERIOD $ 22,850 $ 22,535
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SUPPLEMENTAL INFORMATION:
Cash paid for income taxes $ 7,889 $ 8,452
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See notes to condensed consolidated financial statements (unaudited)
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LANCE, INC. AND SUBSIDIARIES
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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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 9, 1995 and December 31, 1994, the consolidated results of
operations for the twelve weeks and thirty-six weeks ended September 9,
1995 and September 3, 1994, and the consolidated cash flows for the
thirty-six weeks ended September 9, 1995 and September 3, 1994.
2. The consolidated results of operations for the twelve weeks and
thirty-six weeks ended September 9, 1995 and September 3, 1994 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 9, 1995 and December 31, 1994 consisted of (in
thousands):
1995 1994
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Finished goods $12,596 $16,979
Goods in process 64 11
Raw materials 13,991 19,679
Supplies, etc. 9,052 9,058
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Total inventories at FIFO cost 35,703 45,727
Less: Adjustment to reduce FIFO
cost to LIFO cost 6,408 6,775
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Total inventories at LIFO cost $29,295 $38,952
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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 9, 1995 are computed based on 30,403,228 and 30,424,670 shares
of common stock outstanding, respectively. Per share amounts for the
twelve weeks and thirty-six weeks ended September 3, 1994 were computed
based on 30,725,883 and 30,884,290 shares of common stock outstanding,
respectively. The dilutive effect of stock options is not material.
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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 operations
and investments.
Current commitments for capital expenditures, including machinery and equipment
and further renovation and expansion of facilities, total approximately $9
million.
Marketable securities, cash and cash equivalents increased from December 31,
1994 largely as a result of lower inventory balances, the purchase of Company
stock during the fourth quarter of 1994 and an increase in accrued liabilities.
The lower inventory balances reflect the use of the 1994 peanut inventory,
decreased finished goods at the Vista Bakery plants in Iowa and South Carolina
and the seasonal reduction in goods purchased for resale.
Accounts receivable are $3.6 million higher since year end due to the timing of
the billing cycle.
Property, net decreased due to fewer property additions. Depreciation expense
has exceeded capital spending for the year to date by approximately $6.5
million.
Deposits and prepayments related to vans, computer systems and manufacturing
equipment account for the increase of approximately $2.5 million in other
assets since year end 1994.
Accounts payable have decreased by approximately $4.0 million since year end
1994 reflecting the timing of purchases, especially inventory purchases.
Accrued liabilities increased by approximately $7.3 million since year end 1994
due to the timing of estimated income tax payments and higher insurance and
property tax reserves.
Net sales and other operating revenue decreased $469,000 in the third quarter
compared with third quarter 1994 due primarily to decreased unit volume at the
Vista Bakery plants. Sales revenues continue to be affected by intense price
competition in most markets.
Net sales and other operating revenue increased $822,000 year to date compared
with the same period of 1994 due to increased unit volume. More favorable
sales conditions, including better weather, in the first quarter 1995 compared
with first quarter 1994 positively impacted sales.
Sales of products produced at the Vista Bakery plants were down for the quarter
and year to date; however, results of operations at Vista Bakery have improved
compared to 1994. Production inefficiencies and high overhead continue to
negatively impact Vista Bakery operations.
For both the third quarter and year to date, cost of sales increased in dollars
and as a percentage of sales. Higher packaging costs, including corrugated
boxes and packaging film; higher raw material costs, including fruit filling,
peanuts and flour; lower production efficiencies and higher insurance expense
adversely affected cost of sales for both periods.
Selling and delivery expenses increased $1.2 million and $4.4 million for the
third quarter and year to date, respectively, compared with the same periods of
1994. The increases are primarily attributable to higher insurance expense and
costs associated with stale products.
General and administrative expenses decreased $291,000 or 5.9% for the third
quarter of 1995 compared with the third quarter of 1994 while expense increased
$251,000 or 1.8% for the year to date. The quarterly decrease reflects lower
telephone and rent expense offset by higher insurance expense.
Other income was relatively unchanged for both the quarter and the year
compared with the same periods in 1994.
The higher effective income tax rate for the current year to date reflects an
increase in the Company's effective state income tax rates.
Net income decreased $1.3 million and $4.7 million, respectively, for the third
quarter and year to date compared with the same periods in 1994 as a result of
the foregoing factors.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule (Filed in electronic format only. Pursuant
to Rule 402 of Regulation S-T, this schedule shall not be deemed filed for
purposes of Section 11 of the Securities Act of 1933 or Section 18 of the
Securities Exchange Act of 1934).
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the 12 weeks ended
September 9, 1995.
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 /s/ E. D. Leake
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E. D. Leake
Vice President and Principal
Financial Officer
Dated: October 23, 1995
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