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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 the quarterly period ended March 19, 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 (I.R.S. Employer
of 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 - 30,970,407 shares outstanding
as of April 25, 1994.
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LANCE, INC. AND SUBSIDIARIES
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<TABLE>
<CAPTION>
INDEX
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PAGE
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<S> <C>
PART I. FINANCIAL INFORMATION
Financial Statements:
Condensed Consolidated Balance Sheets -
March 19, 1994 (Unaudited) and December 25, 1993 3
Condensed Statements of Consolidated Income and
Retained Earnings (Unaudited) - Twelve Weeks Ended
March 19, 1994 and March 20, 1993 4
Condensed Statements of Consolidated Cash Flows
(Unaudited) - Twelve Weeks Ended
March 19, 1994 and March 20, 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
Exhibits and Reports on Form 8-K 10
SIGNATURES 10
</TABLE>
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<TABLE>
<CAPTION>
LANCE, INC. AND SUBSIDIARIES
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CONDENSED CONSOLIDATED BALANCE SHEETS, MARCH 19, 1994 (UNAUDITED) AND DECEMBER 25, 1993
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ASSETS 1994 1993
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(In thousands, except share data)
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 21,626 $ 20,328
Marketable securities (Note 6) 20,758 19,228
Accounts receivable (less
allowance for doubtful accounts) 31,474 28,906
Accrued interest receivable 469 724
Refundable income taxes 1,750 1,750
Inventories - Finished goods, goods
in process, materials, etc. (Note 3) 31,635 33,673
Deferred income tax benefit (Note 8) 6,136 5,333
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Total current assets 113,848 109,942
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PROPERTY, NET 171,074 173,639
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OTHER ASSETS:
Marketable securities (Note 6) 14,835 14,452
Deposits 2,221 2,296
Prepayments, etc. 7,707 8,145
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Total other assets 24,763 24,893
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TOTAL $309,685 $308,474
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<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1993
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CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable $ 4,696 $ 6,907
Accrued liabilities 30,019 24,583
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Total current liabilities 34,715 31,490
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OTHER LIABILITIES AND DEFERRED CREDITS:
Deferred income taxes (Note 8) 19,213 19,525
Accrued postretirement health care costs (Note 7) 7,331 7,096
Supplemental retirement benefits 3,333 3,323
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Total other liabilities and deferred credits 29,877 29,944
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STOCKHOLDERS' EQUITY:
Common stock, $.83-1/3 par value (authorized:
75,000,000, shares; issued: 30,990,407
shares in 1994; 31,001,185 shares in 1993) 25,826 25,835
Retained earnings 219,267 221,205
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Total stockholders' equity 245,093 247,040
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TOTAL $309,685 $308,474
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See notes to condensed consolidated financial statements (unaudited).
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</TABLE>
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<TABLE>
<CAPTION>
LANCE, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME AND RETAINED
EARNINGS (UNAUDITED)
FOR THE TWELVE WEEKS ENDED MARCH 19, 1994 AND MARCH 20, 1993
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1994 1993
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(In thousands, except per share data)
<S> <C> <C>
NET SALES AND OTHER OPERATING REVENUE $108,133 $106,423
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COST OF SALES AND OPERATING EXPENSES:
Cost of sales 52,438 48,948
Selling and delivery expenses 41,297 40,669
General and administrative expenses 4,826 4,625
Contributions to employees' profit-
sharing retirement fund 1,282 1,503
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Total 99,843 95,745
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PROFIT FROM OPERATIONS 8,290 10,678
OTHER INCOME, NET 966 1,101
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INCOME BEFORE INCOME TAXES 9,256 11,779
INCOME TAXES 3,465 4,343
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NET INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING PRINCIPLE CHANGES 5,791 7,436
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)
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NET INCOME 5,791 7,058
RETAINED EARNINGS AT BEGINNING OF
FISCAL PERIOD 221,205 226,060
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TOTAL 226,996 233,118
LESS:
CASH DIVIDENDS 7,440 7,510
RETIREMENT OF COMMON STOCK 287
EXERCISE OF STOCK OPTIONS 2 (157)
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RETAINED EARNINGS AT END OF FISCAL
PERIOD $219,267 $225,765
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PER SHARE AMOUNTS (Note 4):
Net income before cumulative effect
of accounting principle changes $ .19 $ .24
Cumulative effect on prior years of
changes in accounting principles (.01)
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Net income $ .19 $ .23
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Cash dividends $ .24 $ .24
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</TABLE>
See notes to condensed consolidated financial statements (unaudited).
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<TABLE>
<CAPTION>
LANCE, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
FOR THE TWELVE WEEKS ENDED MARCH 19, 1994 AND MARCH 20, 1993
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1994 1993
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(In thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 5,791 $ 7,058
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation 5,688 5,845
Deferred income taxes (1,115) (6,250)
Other, net 206
Changes in operating assets and liabilities 3,602 7,689
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Net cash flow from operating activities 14,172 14,342
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INVESTING ACTIVITIES:
Purchases of property (3,269) (5,378)
Proceeds from sale of property 166 160
Purchases of marketable securities (8,837) (1,080)
Sales of marketable securities 6,103
Maturities of marketable securities 685 2,175
Other, net 16 (111)
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Net cash used in investing activities (5,136) (4,234)
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FINANCING ACTIVITIES:
Dividends paid (7,440) (7,510)
Sales (purchase) of Lance common stock, net (298) 157
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Net cash used in financing activities (7,738) (7,353)
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INCREASE IN CASH 1,298 2,755
CASH AT BEGINNING OF PERIOD 20,328 22,886
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CASH AT END OF PERIOD $21,626 $25,641
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SUPPLEMENTAL INFORMATION:
Cash paid for income taxes $ 138 $ 441
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See notes to condensed consolidated financial statements (unaudited).
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</TABLE>
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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
March 19, 1994 and December 25, 1993, the consolidated results of
operations for the twelve weeks ended March 19, 1994 and March 20, 1993,
and the consolidated cash flows for the twelve weeks ended March 19, 1994
and March 20, 1993.
2. The results of consolidated operations for the twelve weeks ended March
19, 1994 and March 20, 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 inventory. 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 level 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 19, 1994 and December 25, 1993 consisted of (in
thousands):
<TABLE>
<CAPTION>
1994 1993
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<S> <C> <C>
Finished goods $14,536 $15,653
Goods in process 89 22
Raw materials 14,213 14,932
Supplies, etc. 8,074 8,222
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Total inventories at FIFO cost 36,912 38,829
Less: Adjustment to reduce FIFO
cost to LIFO cost 5,277 5,156
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Total inventories at LIFO cost $31,635 $33,673
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</TABLE>
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 ended March 19, 1994 and March 20,
1993 were computed based on 31,000,360 and 31,291,893 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.
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
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securities with readily determinable fair values and to all investments
in debt securities. Securties 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. SFAS 115 is effective for fiscal years beginning after December
15, 1993, with the initial adoption reflectd prospectively. Due to
the nature of the Company's investment portfolio, adoption of SFAS 115
does not have a material effect on the consolidated financial statements.
Marketable securities at March 19, 1994 consist of:
<TABLE>
<S> <C>
Available-for-sale, at fair value $14,970
Held-to-maturity, at amortized cost 20,561
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$35,531
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</TABLE>
The amortized cost, gross unrealized holding losses and fair value for
available-for-sale and held-to-maturity securities by major security type
at March 19, 1994 were as follows:
<TABLE>
<CAPTION>
Gross
Unrealized
Amortized Holding
Cost Losses Fair Value
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<S> <C> <C> <C>
Available-for-sale:
Municipal securities $15,032 $ (62) $14,970
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Held-to-maturity:
U. S. Treasury securities 4,063 (47) 4,016
Municipal securities 15,882 (80) 15,802
Other securities 616 616
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$20,561 $ (127) $20,434
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</TABLE>
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 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
twelve weeks ended March 20, 1993.
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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 is determined as of the beginning of fiscal 1993 and is
reported separately in the Company's consolidated statement of income for
the twelve weeks ended March 20, 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 $7
million.
Accounts receivable are up since December 25, 1993 due to the timing of sales
and the timing of collections of receivables. Accounts payable are down since
December 25, 1993 due to the timing of purchases. Accrued liabilities are up
due to the timing of income tax payments, an increase in accrued wages and
related payroll taxes and an increase in the accrual for insurance claims.
Net sales and other operating revenue were up $1.7 million (1.6%) compared to
the first quarter of 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 sales. Net income was down $1.3
million for the quarter ($.04 per share) compared to the first quarter of 1993.
This decrease resulted primarily from a shift in sales mix to lower margin
products, increased delivery expenses and high production costs at the Vista
Bakery plant. Net income 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.
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, adoption of SFAS 115 did 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
None
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the 12 weeks ended March 19,
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.
Dated: April 28, 1994
LANCE, INC.
By /s/ T. B. Horack
---------------------------------
T. B. Horack
Vice President, and Principal
Financial Officer
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