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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 the Quarter (Twelve Weeks) Ended June 14, 1997
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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 Identification No.)
incorporation or organization)
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
--- ---
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 -
29,898,204 shares outstanding as of July 25, 1997
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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 14, 1997 (Unaudited) and December 28, 1996.................. 3
Condensed Statements of Consolidated Income and
Retained Earnings (Unaudited) - Twelve Weeks and
Twenty-Four Weeks Ended June 14, 1997 and June 15, 1996.......... 4
Condensed Statements of Consolidated Cash Flows (Unaudited)
Twenty-Four Weeks Ended June 14, 1997 and June 15, 1996.......... 5
Notes to Condensed Consolidated Financial Statements (Unaudited)....6-7
Management's Discussion and Analysis of Financial Condition and
Results of Operations ...........................................8-9
PART II. OTHER INFORMATION:
Submission Of Matters To A Vote Of Security Holders.................10
Exhibits and Reports on Form 8-K....................................11
SIGNATURES.............................................................11
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LANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS, JUNE 14, 1997, (UNAUDITED) AND
DECEMBER 28, 1996
(In thousands, except share and per share data)
ASSETS: 1997 1996
--------- --------
CURRENT ASSETS:
Cash and cash equivalents $ 33,395 $ 32,272
Marketable securities 26,433 25,482
Accounts receivable (less
allowance for doubtful accounts) 34,069 29,542
Accrued interest receivable 401 468
Inventories - (Note 3) 19,873 22,175
Deferred income tax benefit 8,333 7,099
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Total current assets 122,504 117,038
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PROPERTY, NET 125,167 124,124
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OTHER ASSETS:
Deposits 1,300 2,069
Prepayments, etc 4,152 3,974
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Total other assets 5,452 6,043
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TOTAL $ 253,123 $247,205
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable $ 8,457 $ 7,050
Accrued liabilities 31,167 28,698
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Total current liabilities 39,624 35,748
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OTHER LIABILITIES AND DEFERRED CREDITS
Deferred income taxes 8,885 6,553
Accrued postretirement health care costs 10,466 10,034
Accrual for insurance claims 6,518 6,458
Supplemental retirement benefits 3,427 3,550
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Total other liabilities and deferred credits 29,296 26,595
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STOCKHOLDERS' EQUITY:
Common stock $.83 1/3 par value (authorized:
75,000,000 shares; issued 29,897,015
shares in 1997; 29,888,265 in 1996) 24,914 24,907
Additional paid in capital 537 --
Unamortized portion of restricted stock awards (522) --
Retained earnings 159,074 159,700
Net unrealized gain on marketable securities 200 255
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Total stockholders' equity 184,203 184,862
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TOTAL $ 253,123 $247,205
========= ========
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 AND TWENTY-FOUR WEEKS ENDED JUNE 14, 1997 AND JUNE 15, 1996
(In thousands, except share and per share data)
TWELVE WEEKS ENDED TWENTY-FOUR WEEKS ENDED
June 14, 1997 June 15, 1996 June 14, 1997 June 15, 1996
------------- ------------- ------------- -------------
NET SALES AND OTHER OPERATING REVENUE $ 118,107 $112,639 $230,910 $223,243
--------- -------- -------- --------
COST OF SALES AND OPERATING EXPENSES:
Cost of sales 55,428 53,544 109,971 109,063
Selling and delivery expenses 44,785 42,852 88,114 85,816
General and administrative expenses 4,702 4,952 9,235 9,252
Contributions to employees' profit sharing
retirement fund 1,446 1,117 2,568 2,120
--------- -------- -------- --------
Total 106,361 102,465 209,888 206,251
--------- -------- -------- --------
PROFIT FROM OPERATIONS 11,746 10,174 21,022 16,992
OTHER INCOME, NET 1,108 737 1,838 2,209
--------- -------- -------- --------
INCOME BEFORE INCOME TAXES 12,854 10,911 22,860 19,201
INCOME TAXES 4,919 4,182 8,777 7,381
--------- -------- -------- --------
NET INCOME 7,935 6,729 14,083 11,820
RETAINED EARNINGS AT BEGINNING OF FISCAL
PERIOD 158,303 167,787 159,700 170,964
--------- -------- -------- --------
TOTAL 166,238 174,516 173,783 182,784
LESS:
CASH DIVIDENDS 7,175 7,249 14,345 14,514
RETIREMENT OF COMMON STOCK, NET (11) 2,792 364 3,795
--------- -------- -------- --------
RETAINED EARNINGS AT END OF FISCAL PERIOD $ 159,074 $164,475 $159,074 $164,475
========= ======== ======== ========
PER SHARE AMOUNTS (NOTE 4)
Net income $ 0.27 $ 0.22 $ 0.47 $ 0.39
========= ======== ======== ========
Cash dividends $ 0.24 $ 0.24 $ 0.48 $ 0.48
========= ======== ======== ========
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 14, 1997 AND JUNE 15, 1996
(In thousands)
1997 1996
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OPERATING ACTIVITIES:
Net income $ 14,083 $ 11,820
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation 9,586 10,056
Deferred income taxes 1,061 332
Gain on sale of property (2,004) (1,246)
Other, net 1,241 467
Changes in operating assets and liabilities 2,089 9,133
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Net cash flow from operating activities 26,056 30,562
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INVESTING ACTIVITIES:
Purchases of property (15,975) (8,520)
Proceeds from sale of property 6,720 1,959
Purchases of marketable securities (10,524) (4,324)
Sales of marketable securities 1,721 2,067
Maturities of marketable securities 7,665 8,073
Other, net 187 40
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Net cash used in investing activities (10,206) (705)
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FINANCING ACTIVITIES:
Dividends paid (14,345) (14,514)
Purchases of Company's stock, net (382) (4,002)
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Net cash used in financing activities (14,727) (18,516)
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INCREASE IN CASH 1,123 11,341
CASH AT BEGINNING OF PERIOD 32,272 12,585
-------- --------
CASH AT END OF PERIOD $ 33,395 $ 23,926
======== ========
SUPPLEMENTAL INFORMATION:
Cash paid for income taxes $ 3,915 $ 3,442
======== ========
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 14, 1997 and December 28, 1996, the consolidated results of operations
for the twelve weeks and twenty-four weeks ended June 14, 1997 and June 15,
1996 and the consolidated cash flows for the twenty-four weeks ended June
14, 1997 and June 15, 1996. All 1996 amounts have been reclassified to
conform with the 1997 presentation.
2. The consolidated results of operations for the twelve and twenty-four weeks
ended June 14, 1997 and June 15, 1996 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 calculations 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 14, 1997 and December 28, 1996 consisted of (in
thousands):
1997 1996
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Finished goods $14,535 $14,600
Goods in process 51 52
Raw materials 6,424 6,784
Supplies, etc 4,691 6,926
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Total inventories at FIFO cost 25,701 28,362
Less: Adjustment to reduce FIFO costs to LIFO 5,828 6,187
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Total inventories at LIFO cost $19,873 $22,175
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4. Per share amounts for the twelve and twenty-four weeks ended June 14, 1997
are computed based on 29,886,544 and 29,879,800 shares of common stock
outstanding, respectively. 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. The dilutive effect of
stock options is not material.
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LANCE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
5. The 1997 Incentive Equity Plan (the "Plan") was approved by stockholders of
the Company on April 18, 1997. The Plan provides for the granting of stock
options, with or without stock appreciation rights, the award of shares of
restricted stock and other incentive awards to managerial and other key
employees of the Company and its subsidiaries up to a maximum of 1,500,000
shares.
Common Stock Options
Options may be granted in the form of incentive stock options or
non-qualified stock options. The terms and conditions of each option and of
any stock appreciation right are to be determined by the Compensation/Stock
Option Committee ("the Committee") of the Board of Directors at the time of
grant.
During the twelve weeks ended June 14, 1997, the Committee granted 299,400
non-qualified options at the fair market value as of the date of grant. The
options vest 25% each year for four years subsequent to the date of grant.
Restricted Stock Awards
The Plan provides for the issuance of restricted stock on terms and
conditions determined by the Committee, including applicable restrictions.
Such restrictions may include the continued service of the participant for
specified periods, the attainment of specified performance goals or any
other conditions determined by the Committee. During the period of
restriction, the participant may exercise full voting rights and receive
cash dividends; however, the participant cannot sell, transfer, pledge,
assign or hypothecate the restricted shares until the restrictions have
been satisfied.
During the twelve weeks ended June 14, 1997, the Committee awarded 11,700
shares of restricted stock which vest 50% after two years and the balance
after four years. The fair value as of the date of award was credited to
Common Stock and Additional Paid In Capital with a corresponding amount
charged to Unamortized Portion of Restricted Stock Awards.
The Committee also awarded 18,500 shares of restricted stock which vest at
the end of fiscal 1999 subject to attainment of specified performance
goals. In the case of this performance restricted stock, Additional Paid In
Capital and Unamortized Portion of Restricted Stock Awards are adjusted
based on changes in the market value of the stock and the number of shares
subject to the performance restrictions.
The Unamortized Portion of Restricted Stock Awards is charged to General
and Administrative expenses over the respective vesting periods and
amounted to $40,000 during the twelve weeks ended June 14, 1997.
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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 $2.1 million from
December 28, 1996. Net cash flow from operating activities and the proceeds from
the sale of property (primarily the closed production facility in Columbia,
South Carolina) were mostly offset by cash used for payment of dividends and
capital expenditures.
Accounts receivable increased $4.5 million from December 28, 1996 due to the
timing of the billing cycle and higher sales volume. Inventories decreased $2.3
million primarily due to lower quantities of packaging and supplies.
Property, net has increased by $1.0 million from December 28, 1996 due to
purchases of $16.0 million offset by depreciation, the sale of property and
additional valuation reserves taken during the Company's first quarter on the
Greenville, Texas production facility which was closed in February 1996.
Accounts payable increased $1.4 million due to the timing of expenditures and
increased purchases of property. Accrued liabilities increased $2.5 million from
December 28, 1996 primarily due to an increase in current taxes payable.
Current commitments for capital expenditures total approximately $15.3 million.
Quarter (12 Weeks ) Ended June 14, 1997 Compared to Quarter (12 Weeks) Ended
June 15, 1996
Net sales and other operating revenues were $5.5 million, or 4.9%, higher than
last year. Improving sales force effectiveness and increased penetration of key
distribution channels produced stronger sales for Lance branded products. Vista
Bakery benefited from volume increases as well as improved pricing. Cost of
sales as a percentage of sales declined due to improved efficiencies in raw
material and labor utilization and lower flour costs.
Selling and delivery expenses increased $1.9 million from last year due to an
increase in trade promotional allowances, advertising and other marketing
support. This support included costs associated with a new media campaign.
Increases in promotional selling costs were partially offset by improved
efficiencies throughout the sales and vending routes. General and administrative
expenses decreased $0.3 million from last
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
year primarily due to lower professional and consulting fees. The provision for
contributions to the profit sharing retirement fund increased by $0.3 million
compared to last year due to the increased profitability.
Other income increased $0.3 million from last year due to higher interest income
on higher balances of marketable securities, cash and cash equivalents and due
to net gains on asset dispositions.
As a result of the factors discussed above, net income for the twelve weeks
ended June 14, 1997 increased by $1.2 million compared to last year.
24 Weeks Ended June 14, 1997 Compared to 24 Weeks Ended June 15, 1996
Net sales and other operating revenues were $7.7 million, or 3.4%, higher than
last year reflecting improvements in sales in core markets and new distribution
efforts. Sales at Vista Bakery increased both in volume and pricing. Cost of
sales as a percentage of sales declined due to improved efficiencies in raw
material and labor utilization and lower flour costs.
Selling and delivery expenses increased $2.3 million from last year due to an
increase in marketing support. The provision for contributions to the profit
sharing retirement fund increased by $0.4 million compared to last year due to
the increased profitability.
Other income decreased $0.4 million from last year due primarily to lower net
gains on asset dispositions. During the quarter ended March 23, 1996, a pretax
gain of $0.9 million was realized on the sale of equipment from the Greenville,
Texas facility.
As a result of the factors discussed above, net income for the twenty-four weeks
ended June 14, 1997 increased by $2.3 million compared to last year.
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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 18,
1997, the following matters were submitted to a vote of the
stockholders of the Registrant:
1. Election of nominees to the Board of Directors of the Registrant:
Shares
Voted Shares
In Favor Withheld
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For term ending in 1999:
Scott C. Lea 26,446,700 281,794
For terms ending in 2000:
Paul A. Stroup, III 26,422,282 306,212
William R. Holland 26,456,380 272,114
Richard A. Zimmerman 26,455,905 272,589
Isaiah Tidwell 26,455,580 272,914
2. Approval of the Lance, Inc. 1997 Incentive Equity Plan by a vote
of 22,710,533 shares in favor, 1,353,440 shares against, and
186,741 shares abstaining. There were 2,588,457 shares of broker
non-votes.
3. Ratification of the selection of KPMG Peat Marwick LLP as
auditors for the fiscal year ending December 27, 1997 which was
approved by a vote of 26,635,829 shares in favor, 33,628 shares
against and 59,037 shares abstaining.
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PART II. OTHER INFORMATION (continued):
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Lance, Inc. 1995 Nonqualified Stock Option Plan for
Non-Employee Directors, as amended on April 18, 1997.
10.2 Lance, Inc. 1997 Incentive Equity Plan, incorporated herein
by reference to Exhibit 4 to the Registrant's Registration
Statement on Form S-8, File No. 333-25539.
10.3 Lance, Inc. Annual Corporate Performance Incentive Plan -
Officers - 1997.
10.4 Lance, Inc. Long-Term Incentive Plan - Officers - 1997.
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).
99 Cautionary Statement under Safe Harbor Provisions of the
Private Securities Litigation Reform Act of 1995.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the 12 weeks ended June
14, 1997.
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 the Report to be signed on its behalf by the
undersigned thereunto duly authorized.
LANCE, INC.
By: /s/ B. Clyde Preslar
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B. Clyde Preslar
Vice President and Principal
Financial Officer
Dated: July 28, 1997
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