1
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 June 15, 1996
------------------------------------
OR
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
--------------------------------------------------------
LANCE, INC.
-----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-0292920
----------------------------------- ----------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
8600 South Boulevard (P. O. Box 32368), Charlotte, North Carolina 28232
-----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(704) 554-1421
-----------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
-----------------------------------------------------------------------------
(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
---- ----
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 - 30,052,265 shares
outstanding as of July 24, 1996.
2
LANCE, INC. AND SUBSIDIARIES
INDEX
Page
----
PART I. FINANCIAL INFORMATION:
Financial Statements:
Condensed Consolidated Balance Sheets -
June 15, 1996 (Unaudited) and December 30, 1995 ............... 3
Condensed Statements of Consolidated Income and
Retained Earnings (Unaudited) - Twelve Weeks and
Twenty-Four Weeks Ended June 15, 1996 and June 17, 1995 ....... 4
Condensed Statements of Consolidated Cash Flows (Unaudited) -
Twenty-Four Weeks Ended June 15, 1996 and June 17, 1995 ....... 5
Notes to Condensed Consolidated Financial Statements (Unaudited) .. 6
Management's Discussion and Analysis of Financial Condition and
Results of Operations ......................................... 7-8
PART II. OTHER INFORMATION:
Submission Of Matters To A Vote Of Security Holders ................ 9
Exhibits and Reports on Form 8-K ................................... 9
SIGNATURES ......................................................... 9
___________________
-2-
3
LANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS, JUNE 15, 1996 (UNAUDITED) AND
DECEMBER 30, 1995
(In thousands, except share data)
ASSETS: 1996 1995 LIABILITIES AND STOCKHOLDERS' EQUITY: 1996 1995
- ------- -------- -------- ------------------------------------- -------- --------
CURRENT ASSETS: CURRENT LIABILITIES:
Cash and cash equivalents $ 23,926 $ 12,585 Accounts payable $ 3,774 $ 6,202
Marketable securities 25,810 31,905 Accrued liabilities 26,144 25,744
Accounts receivable (less ------- --------
allowance for doubtful accounts) 32,859 29,429 Total current liabilities 29,918 31,946
Accrued interest receivable 399 493 ------- --------
Refundable income taxes 4,765
Inventories - (Note 3) 23,092 32,521 OTHER LIABILITIES AND DEFFERED CREDITS:
Deferred income tax benefit 6,770 7,327 Deferred income taxes 3,907 4,133
-------- -------- Accrued postretirement health care costs 9,255 8,808
Total current assets 112,856 119,025 Accrual for insurance claims 8,035 7,989
-------- -------- Supplemental retirement benefits 3,783 3,874
-------- --------
PROPERTY, NET 125,205 126,656 Total other liabilities and deferred credits 24,980 24,804
-------- -------- -------- --------
OTHER ASSETS: STOCKHOLDERS' EQUITY:
Deposits 1,547 2,345 Common stock, $.83-1/3 par value (authorized:
Prepayments, etc. 4,965 5,267 75,000,000 shares; issued 30,107,265
-------- -------- shares in 1996; 30,337,265 shares in 1995) 25,073 25,281
Total other assets 6,512 7,612 Retained earnings 164,475 170,964
-------- -------- Net unrealized gain on marketable securities 127 298
-------- --------
Total stockholders' equity 189,675 196,543
-------- --------
TOTAL $244,573 $253,293 TOTAL $244,573 $253,293
======== ======== ======== ========
See notes to condensed consolidated financial statements (unaudited).
-3-
4
LANCE, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME AND RETAINED EARNINGS (UNAUDITED)
FOR THE TWELVE AND TWENTY-FOUR WEEKS ENDED JUNE 15, 1996 AND JUNE 17, 1995
TWELVE WEEKS ENDED TWENTY-FOUR WEEKS ENDED
(In thousands, except per share data) June 15, 1996 June 17, 1995 June 15, 1996 June 17, 1995
------------- ------------- ------------- -------------
NET SALES AND OTHER OPERATING REVENUE $112,258 $114,249 $222,213 $226,965
-------- -------- -------- --------
COST OF SALES AND OPERATING EXPENSES:
Cost of sales 53,544 56,522 109,063 111,502
Selling and delivery expenses 42,471 44,432 84,786 87,367
General and administrative expenses 5,517 4,926 10,376 9,825
Contributions to employees' profit sharing retirement fund 1,117 1,117 2,120 2,411
-------- -------- -------- --------
Total 102,649 106,997 206,345 211,105
-------- -------- -------- --------
PROFIT FROM OPERATIONS 9,609 7,252 15,868 15,860
OTHER INCOME, NET 1,302 871 3,333 1,990
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 10,911 8,123 19,201 17,850
INCOME TAXES 4,182 3,265 7,381 7,014
-------- -------- -------- --------
NET INCOME 6,729 4,858 11,820 10,836
RETAINED EARNINGS AT BEGINNING OF FISCAL PERIOD 167,787 207,474 170,964 208,800
-------- -------- -------- --------
TOTAL 174,516 212,332 182,784 219,636
LESS:
CASH DIVIDENDS 7,249 7,304 14,514 14,608
RETIREMENT OF COMMON STOCK 2,792 3,795
EXERCISE OF STOCK OPTIONS (76) (76)
-------- -------- -------- --------
RETAINED EARNINGS AT END OF FISCAL PERIOD $164,475 $205,104 $164,475 $205,104
======== ======== ======== ========
PER SHARE AMOUNTS (NOTE 4):
Net income $ .22 $ .16 $ .39 $ .36
======== ======== ======== ========
Cash dividends $ .24 $ .24 $ .48 $ .48
======== ======== ======== ========
-4-
See notes to condensed consolidated financial statements (unaudited).
5
LANCE, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
FOR THE TWENTY-FOUR WEEKS ENDED JUNE 15, 1996 AND JUNE 17, 1995
(In thousands) 1996 1995
-------- --------
OPERATING ACTIVITIES:
Net Income $ 11,820 $ 10,836
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation 10,056 11,768
Deferred income taxes 332 (1,409)
Gain on sale of property (1,246) (70)
Other, net 467 39
Changes in operating assets and liabilities 9,133 3,719
-------- --------
Net cash flow from operating activities 30,562 24,883
-------- --------
INVESTING ACTIVITIES:
Purchases of property (8,520) (4,885)
Proceeds from sale of property 1,959 455
Purchases of marketable securities (4,324) (3,738)
Sales of marketable securities 2,067 3,375
Maturities of marketable securities 8,073 2,984
Other, net 40 14
-------- --------
Net cash used in investing activities (705) (1,795)
-------- --------
FINANCING ACTIVITIES:
Dividends paid (14,514) (14,608)
Sales (purchases) of the Company's common stock (4,002) 82
-------- --------
Net cash used in financing services (18,516) (14,526)
-------- --------
INCREASE IN CASH 11,341 8,562
CASH AT BEGINNING PERIOD 12,585 12,964
-------- --------
CASH AT END OF PERIOD $ 23,926 $ 21,526
======== ========
SUPPLEMENTAL INFORMATION:
Cash paid for income taxes $ 3,442 $ 7,557
======== ========
See notes to condensed consolidated financial statements (unaudited).
-5-
6
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 15, 1996 and December 30, 1995, the consolidated results of
operations for the twelve and twenty-four weeks ended June 15, 1996 and
June 17, 1995, and the consolidated cash flows for the twenty-four weeks
ended June 15, 1996 and June 17, 1995. For purposes of comparability,
certain 1995 amounts shown in the accompanying condensed consolidated
financial statements have been reclassified to conform with the 1996
presentation.
2. The consolidated results of operations for the twelve weeks and
twenty-four weeks ended June 15, 1996 and June 17, 1995 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
determing the cost of substantially all of its inventories. Because
inventory caluations 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 15, 1996 and December 30, 1995 consisted of (in
thousands):
1996 1995
---- ----
Finished goods $13,075 $16,501
Goods in process 47 21
Raw materials 9,824 15,350
Supplies, etc. 6,986 7,128
------- -------
Total inventories at FIFO cost 29,932 39,000
Less: Adjustment to reduce FIFO
cost to LIFO cost 6,840 6,479
------- -------
Total inventories at LIFO cost $23,092 $32,521
======= =======
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 and twenty-four weeks ended June 15, 1996
are computed based on 30,171,491 and 30,223,961 shares of common stock
outstanding, respectively. Per share amounts for the twelve and
twenty-four weeks ended June 17, 1995 are computed based on 30,437,375
and 30,435,391 shares of common stock outstanding, respectively The
dilutive effect of stock options is not material.
-6-
7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Financial Condition
The Company maintains a strong position of liquidity and has sufficient
financial resources to meet its ongoing operating needs, cash dividend
payments, capital expenditures, and stock repurchases through cash flow
generated from current operations and investments.
Marketable securities, cash and cash equivalents increased since December 30,
1995 primarily due to a reduction of inventories and utilization of income tax
refunds, offset by payment of dividends, purchases of equipment, the
repurchase of Company stock and a decrease in accounts payable.
Accounts receivable are $3.4 million higher since December 30, 1995 due to the
timing of the billing cycle. Refundable income taxes available at December 30,
1995 were fully utilized by June 15, 1996.
The lower inventory balances reflect the use of existing peanut inventory, the
closing of the Vista Bakery plant in Columbia, South Carolina and the
Greenville, Texas production facility in February, 1996 and the seasonal
reduction in goods purchased for resale.
Property, net has decreased primarily due to additional depreciation recorded
and the sale of equipment at the Columbia and Greenville locations as part of
the restructuring. The closing of Columbia and Greenville also reduced
depreciation expense for the 12 weeks and 24 weeks ended June 15, 1996.
Accounts payable have decreased since December 30, 1995 reflecting the timing
of purchases.
Current commitments for capital expenditures, including machinery and equipment
and further renovation and expansion of facilities, total approximately $9
million.
Quarter (12 Weeks) Ended June 15, 1996 Compared to Quarter (12 Weeks) Ended
June 17, 1995
Net sales and other operating revenues were $2.0 million lower due to decreased
unit volume attributed to consolidation and elimination of sales territories.
Sales continued to be adversely affected by intense price competition in most
markets. Cost of sales improved due to efficiencies gained through the closure
of production facilities in Columbia and Greenville, and the transfer of
production to operations in Charlotte, North Carolina and Burlington, Iowa. The
savings from these efficiencies were partially offset by increases in the costs
of flour and other raw materials, and by an increase in the costs of goods
purchased for resale.
Selling and delivery expenses decreased in the second quarter, primarily due to
the decline in sales, offset somewhat by higher promotional costs. General and
administrative expenses were higher primarily as a result of the adoption of an
incentive compensation plan and additional professional fees. The increase in
other income reflects gains generated from the sale of equipment at the
Columbia facility.
-7-
8
Sales at Vista Bakery were up due to an increase in unit volume attributed to
saltine products as well as improved pricing. Operations at Vista Bakery were
profitable for the quarter, the result of savings from closing the Columbia
plant in February 1996 and production efficiencies at the Burlington, Iowa
plant. These savings were partially offset by an increase in flour and other
raw materials costs.
The foregoing items contributed to a $1.9 million increase in net income.
24 Weeks Ended June 15, 1996 Compared to 24 Weeks Ended June 17, 1995
Net sales and other operating revenue decreased approximately $4.8 million due
primarily to decreased unit volume attributed to the consolidation and
elimination of sales territories and severe weather in the first quarter.
Sales continued to be adversely affected by intense price competition in most
markets. Cost of sales as a percentage of net sales and other operating
revenues remained stable as the Company offset increases in the cost of flour
and products purchased for resale by improving production efficiencies in the
second quarter.
Selling and delivery costs declined due to lower sales volume. General and
administrative expenses were higher due to the new incentive compensation plan
and additional professional fees. The increase in other income was the result
of gains on the sale of equipment at both the Greenville and Columbia
facilities.
Sales of products produced at Vista Bakery were higher due to a first quarter
price increase on certain products and higher saltine sales. Net income at
Vista was higher primarily due to increased efficiencies gained through the
closure of the Columbia facility and moving production to the Burlington plant.
Net income increased $1.0 million as a result of the foregoing items.
-8-
9
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 19, 1996, the following matters were submitted to a vote of
the stockholders of the Registrant:
1. Election of three nominees to the Board of Directors of the
Registrant for terms ending in 1999:
Shares
Voted in Shares
Favor Withheld
---------- ---------
J.W. Disher 26,896,510 1,161,855
Robert V. Sisk 27,754,593 303,722
Gary E. Costley 27,841,727 216,938
2. Ratification of the selection of KPMG Peat Marwick LLP as
auditors for the fiscal year ending December 28, 1996, which
was approved by a vote of 28,004,112 shares in favor, 144,826
shares against and 40,509 shares abstaining.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.8* 1996 Lance Annual Incentive Plan adopted April 19,
1996.
10.9* Chairman of the Board Compensation Letter dated
April 19, 1996.
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).
* Management contract
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the twelve weeks
ended June 15, 1996.
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 dully authorized.
LANCE, INC.
By: /s/ B. Clyde Preslar
---------------------------
B. Clyde Preslar
Vice President and Principal
Financial Officer
Dated: July 29, 1996
-9-