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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 March 21, 1998
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.
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(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
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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 -
29,972,354 shares outstanding as of May 1, 1998
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LANCE, INC. AND SUBSIDIARIES
INDEX
Page
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PART I. FINANCIAL INFORMATION:
Financial Statements:
Condensed Consolidated Balance Sheets - March 21, 1998
(Unaudited) and December 27, 1997.............................. 3
Condensed Consolidated Statements of Income (Unaudited) - Twelve
Weeks Ended March 21, 1998 and March 22, 1997.................. 4
Condensed Consolidated Statements of Changes in Stockholders'
Equity (Unaudited) - Twelve Weeks Ended March 21, 1998 and
March 22, 1997................................................. 5
Condensed Consolidated Statements of Cash Flows (Unaudited)
Twelve Weeks Ended March 21, 1998 and March 22, 1997........... 6
Notes to Condensed Consolidated Financial Statements (Unaudited).. 7 - 8
Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................... 9 - 10
PART II. OTHER INFORMATION:
Exhibits and Reports on Form 8-K.................................. 11
SIGNATURES............................................................... 11
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LANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 21, 1998 (UNAUDITED) AND DECEMBER 27, 1997
(In thousands, except share and per share data)
MARCH 21, DECEMBER 27,
ASSETS: 1998 1997
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CURRENT ASSETS:
Cash and cash equivalents $ 33,276 $ 34,040
Marketable securities 20,640 25,430
Accounts receivable (less allowance for doubtful accounts) 35,078 34,057
Inventories (Notes 3 and 4) 17,333 17,882
Deferred income tax benefit 7,008 6,913
Prepaid expenses and other 1,953 1,275
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Total current assets 115,288 119,597
PROPERTY, NET 133,521 130,264
OTHER ASSETS 2,818 2,879
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TOTAL $ 251,627 $ 252,740
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LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable $ 8,324 $ 5,821
Accrued liabilities 28,894 31,457
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Total current liabilities 37,218 37,278
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OTHER LIABILITIES AND DEFERRED CREDITS:
Deferred income taxes 9,785 10,005
Accrued postretirement health care costs 11,557 11,180
Accrual for insurance claims 3,894 4,449
Supplemental retirement benefits 3,244 3,306
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Total other liabilities and deferred credits 28,480 28,940
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STOCKHOLDERS' EQUITY (NOTE 7):
Common stock $.83 1/3 par value (authorized: 75,000,000 shares;
issued 29,940,353 shares in 1998; 29,923,287 in 1997) 24,950 24,936
Additional paid-in capital 1,187 999
Unamortized portion of restricted stock awards (393) (488)
Retained earnings 160,014 160,682
Net unrealized gain on marketable securities 171 393
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Total stockholders' equity 185,929 186,522
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TOTAL $ 251,627 $ 252,740
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See notes to condensed consolidated financial statements (unaudited).
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LANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE TWELVE WEEKS ENDED MARCH 21, 1998 AND MARCH 22, 1997
(In thousands, except share and per share data)
TWELVE WEEKS ENDED
MARCH 21, MARCH 22,
1998 1997
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NET SALES AND OTHER OPERATING REVENUE $ 110,226 $ 112,803
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COST OF SALES AND OPERATING EXPENSES:
Cost of sales (Note 3) 50,816 54,543
Selling and delivery expenses 44,222 43,329
General and administrative expenses 4,508 4,533
Contributions to employees' profit sharing
retirement fund 1,431 1,122
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Total 100,977 103,527
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PROFIT FROM OPERATIONS 9,249 9,276
OTHER INCOME, NET 1,218 730
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INCOME BEFORE INCOME TAXES 10,467 10,006
INCOME TAXES 3,953 3,858
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NET INCOME $ 6,514 $ 6,148
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PER SHARE AMOUNTS (NOTE 5)
Net income - basic $ .22 $ .21
=========== ===========
Net income - diluted $ .22 $ .20
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Cash dividends $ .24 $ .24
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Weighted average shares of common stock
outstanding - basic 29,900,000 29,873,000
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Weighted average shares of common stock
outstanding - diluted 30,073,000 30,131,000
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See notes to condensed consolidated financial statements (unaudited)
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LANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
FOR THE TWELVE WEEKS ENDED MARCH 21, 1998 AND MARCH 22, 1997
(In thousands, except share data)
Unamortized Net
Portion of Unrealized
Additional Restricted Gain on
Common Paid-in Stock Retained Marketable
Shares Stock Capital Awards Earnings Securities Total
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BALANCE, DECEMBER 28, 1996 29,888,265 $24,907 $ - $ - $159,700 $255 $184,862
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COMPREHENSIVE INCOME:
Net income - - - - 6,148 - 6,148
Unrealized gains on securities, net - - - - - 112 112
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Total comprehensive income - - - - 6,148 112 6,260
CASH DIVIDENDS PAID - - - - (7,170) - (7,170)
STOCK OPTIONS EXERCISED 2,500 2 - - 37 - 39
PURCHASE OF COMMON STOCK (25,000) (21) - - (412) - (433)
=========================================================================================
BALANCE, MARCH 22, 1997 29,865,765 $24,888 $ - $ - $158,303 $367 $183,558
=========================================================================================
BALANCE, DECEMBER 27, 1997 29,923,287 $24,936 $999 ($488) $160,682 $393 $186,522
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COMPREHENSIVE INCOME:
Net income - - - - 6,514 - 6,514
Unrealized losses on securities, net - - - - - (222) (222)
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Total comprehensive income - - - - 6,514 (222) 6,292
CASH DIVIDENDS PAID - - - - (7,182) - (7,182)
STOCK OPTIONS EXERCISED 22,425 19 399 - - - 418
PURCHASE OF COMMON STOCK (5,359) (5) (139) - - - (144)
RECOGNITION OF RESTRICTED
STOCK AWARDS - - (72) 95 - - 23
=========================================================================================
BALANCE, MARCH 21, 1998 29,940,353 $24,950 $1,187 ($393) $160,014 $171 $185,929
=========================================================================================
See notes to condensed consolidated financial statements (unaudited).
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LANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE TWELVE WEEKS ENDED MARCH 21, 1998 AND MARCH 22, 1997
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(In thousands)
TWELVE WEEKS ENDED
MARCH 21, MARCH 22,
1998 1997
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OPERATING ACTIVITIES:
Net income $ 6,514 $ 6,148
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation 4,799 4,735
(Gain) loss on sale and impairment of property, net (76) 1,730
Deferred income taxes (209) (1,614)
Other, net (378) 1,409
Changes in operating assets and liabilities (1,389) (3,985)
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Net cash flow from operating activities 9,261 8,423
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INVESTING ACTIVITIES:
Purchases of property (8,187) (5,368)
Proceeds from sale of property 207 5,901
Purchases of marketable securities (276) (5,847)
Sales of marketable securities 499 1,566
Maturities of marketable securities 4,701 2,924
Other, net (61) 112
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Net cash used in investing activities (3,117) (712)
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FINANCING ACTIVITIES:
Dividends paid (7,182) (7,170)
Issuance (purchase) of Company stock, net 274 (394)
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Net cash used in financing activities (6,908) (7,564)
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(DECREASE)/INCREASE IN CASH (764) 147
CASH AT BEGINNING OF PERIOD 34,040 29,764
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CASH AT END OF PERIOD $33,276 $29,911
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SUPPLEMENTAL INFORMATION:
Cash paid for income taxes $ 450 $ 360
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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
March 21, 1998 and December 27, 1997, the consolidated results of
operations for the twelve weeks ended March 21, 1998 and March 22, 1997 and
the consolidated cash flows for the twelve weeks ended March 21, 1998 and
March 22, 1997. All 1997 amounts have been reclassified to conform with
the 1998 presentation.
2. The consolidated results of operations for the twelve weeks ended March
21, 1998 and March 22, 1997 are not necessarily indicative of the results
to be expected for a full year.
3. The Company's primary raw materials include peanuts, peanut butter, flour
and other similar grain products. The Company enters into various forward
purchase agreements and derivative financial instruments to reduce the
impact of volatility in raw materials ingredients prices. The Company has
only limited involvement with derivative financial instruments and does
not use them for trading purposes. Amounts payable or receivable under the
agreements, which qualify as hedges, are recognized as deferred gains or
losses and included in other assets or other liabilities. These deferred
amounts are charged or credited to cost of sales as the related raw
materials costs are charged to operations.
4. 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 March 21, 1998 and December 27, 1997 consisted of (in
thousands):
1998 1997
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Finished goods $14,852 $15,047
Raw materials 3,630 4,133
Supplies, etc. 3,985 3,986
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Total inventories at FIFO cost 22,467 23,166
Less: Adjustment to reduce FIFO costs to LIFO (5,134) (5,284)
Total inventories at LIFO cost $17,333 $17,882
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LANCE, INC. AND SUBSIDIARIES
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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(CONTINUED)
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5. The following table provides a reconciliation of the denominator used in
computing basic earnings per share to the denominator used in computing
diluted earnings per share at March 21, 1998 and March 22, 1997 (there were
no reconciling items for the numerator amounts of basic and diluted
earnings per share):
1998 1997
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Weighted average number of common shares used
in computing basic earnings per share 29,900,000 29,873,000
Effect of dilutive stock options 173,000 258,000
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Weighted average number of common shares and
dilutive potential common stock used in
computing diluted earnings per share 30,073,000 30,131,000
========== ==========
Stock options excluded from the above reconciliation
because they are anti-dilutive 44,000 223,000
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6. On December 28, 1997, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income".
SFAS No. 130 requires an entity to disclose its 'comprehensive income'
which is defined as changes in equity that arise from non-owner sources.
The Company's comprehensive income consists of net income plus other
comprehensive income, which consists only of changes in stockholders'
equity due to unrealized gains or losses from its investment in marketable
securities. The Company's comprehensive income is included in the
accompanying condensed consolidated statements of changes in stockholders'
equity.
During the twelve weeks ended March 21, 1998, other comprehensive income
consisted of a $222,000 loss, net of taxes. Holding gains arising during
the period were $62,000, net of taxes, while the reclassification
adjustment for gains included in net income totaled $284,000, net of taxes.
7. At the Annual Meeting of Stockholders held April 17, 1998, two resolutions
were approved affecting the Company's authorized shares. The stockholders
approved an amendment to the Restated Charter to create a class of
5,000,000 shares of Preferred Stock, par value $1 per share, to be issued
in such series and with such preferences, limitations and relative rights
as the Board of Directors may determine from time to time. The stockholders
also approved an amendment to the 1995 Nonqualified Stock Option Plan for
Non-employee Directors to increase the number of shares of Common Stock
authorized from 100,000 to 300,000.
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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 decreased $5.6 million from
December 27, 1997. Net cash flow from operating activities and proceeds from
maturities of investments were mostly offset by cash used for payment of
dividends and increased purchases of property.
Accounts receivable, net increased by $1.0 million from December 27, 1997 as a
result of the timing of shipments. Inventories decreased $0.5 million due to
lower quantities of raw materials and finished goods.
Property, net increased by $3.3 million from December 27, 1997. Purchases of
property amounted to $8.2 million while depreciation totaled $4.8 million. Some
of the larger expenditures in the quarter were for vending machines, automated
packaging equipment, information technology projects and point-of-sale displays.
Prepaid expenses and other current assets increased $0.7 million due to a timing
of payments for insurance premiums and promotional costs.
Accounts payable increased $2.5 million due to the timing of disbursements and
increased purchases of property. Accrued liabilities decreased $2.6 million from
December 27, 1997 primarily due to payments of accrued profit sharing
contributions and other employee benefits.
Other liabilities and deferred credits decreased $0.5 million from December 27,
1997 due primarily to a reduction of self-insurance reserves resulting from
improved claims activity and payments made.
Current commitments for capital expenditures total approximately $27.8 million.
Quarter (12 Weeks) Ended March 21, 1998 Compared to Quarter (12 Weeks)
Ended March 22, 1997
Net sales and other operating revenues were $2.6 million, or 2.3%, below last
year due to strong competitive activity and the timing of promotional efforts.
Cost of sales as a percentage of sales declined due to improved manufacturing
efficiencies and lower raw material costs, principally flour.
Selling and delivery expenses increased $0.9 million from last year due to a
planned higher level of promotional and other sales and marketing support.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
General and administrative expenses were essentially equal to 1997. The
provision for profit sharing contributions increased by $0.3 million compared to
last year due to the increased profitability.
Other income increased $0.5 million from last year due primarily to realized
gains on investment securities dispositions.
As a result of the factors discussed above, net income for the twelve weeks
ended March 21, 1998 increased by $0.4 million compared to last year.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10 1998 Annual Corporate Performance Incentive Plan
for Officers.
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
March 21, 1998.
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 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: May 4, 1998
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