<PAGE> 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 September 7, 1996
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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 - 29,950,934 shares
outstanding as of October 18, 1996.
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LANCE, INC. AND SUBSIDIARIES
INDEX
Page
----
PART I. FINANCIAL INFORMATION:
<TABLE>
<S> <C>
Financial Statements:
Condensed Consolidated Balance Sheets
September 7, 1996 (Unaudited) and December 30, 1995 ............. 3
Condensed Statements of Consolidated Income and
Retained Earnings (Unaudited) - Twelve Weeks and
Thirty-Six Weeks Ended September 7, 1996 and September 9, 1995 .. 4
Condensed Statements of Consolidated Cash Flows (Unaudited) -
Thirty-Six Weeks Ended September 7, 1996 and September 9, 1995 .. 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
SIGNATURES ........................................................... 9
</TABLE>
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LANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS, SEPTEMBER 7, 1996 (UNAUDITED) AND
DECEMBER 30, 1995
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(In thousands, except share data)
<TABLE>
<CAPTION>
ASSETS: 1996 1995
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<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 34,804 $ 12,585
Marketable securities 26,548 31,905
Accounts receivable (less
allowance for doubtful accounts) 33,914 29,429
Accrued interest receivable 434 493
Refundable income taxes 4,765
Inventories - Finished goods, goods
in process, materials, etc. (Note 3) 20,650 32,521
Deferred income tax benefit 6,742 7,327
-------- --------
Total current assets 123,092 119,025
-------- --------
PROPERTY, NET 124,984 126,656
-------- --------
OTHER ASSETS:
Deposits 1,280 2,345
Prepayments, etc. 2,835 5,267
-------- --------
Total other assets 4,116 7,612
-------- --------
TOTAL $252,192 $253,293
======== ========
</TABLE>
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<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
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<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 9,584 $ 6,202
Accrued liabilities 32,209 25,744
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Total current liabilities 41,793 31,946
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OTHER LIABILITIES AND DEFERRED CREDITS:
Deferred income taxes 4,857 4,133
Accrued postretirement health care costs 9,475 8,808
Accrual for insurance claims 6,387 7,989
Supplemental retirement benefits 3,740 3,874
-------- --------
Total other liabilities and deferred credits 24,459 24,804
-------- --------
STOCKHOLDERS' EQUITY:
Common stock, $.83-1/3 par value (authorized:
75,000,000 shares; issued 29,977,065
shares in 1996; 30,337,265 shares in 1995) 24,981 25,281
Retained earnings 160,768 170,964
Net unrealized gain on marketable securities 191 298
-------- --------
Total stockholders' equity 185,940 196,543
-------- --------
TOTAL $252,192 $253,293
======== ========
</TABLE>
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 WEEKS AND THIRTY-SIX WEEKS ENDED SEPTEMBER 7, 1996 AND SEPTEMBER
9, 1995
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<TABLE>
<CAPTION>
......... TWELVE WEEKS ENDED .........
(In thousands, except per share data) September 7, 1996 September 9, 1995
----------------- -----------------
<S> <C> <C>
NET SALES AND OTHER OPERATING REVENUE $ 107,438 $ 107,174
----------------- -----------------
COST OF SALES AND OPERATING EXPENSES:
Cost of sales 52,823 53,808
Selling and delivery expenses 40,716 42,039
General and administrative expenses 5,523 4,619
Contributions to employees' profit sharing retirement fund 1,013 1,039
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Total 100,075 101,505
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PROFIT FROM OPERATIONS 7,363 5,669
OTHER INCOME, NET 1,825 1,112
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INCOME BEFORE INCOME TAXES 9,188 6,781
INCOME TAXES 3,951 2,648
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NET INCOME 5,237 4,133
RETAINED EARNINGS AT BEGINNING OF FISCAL PERIOD 164,475 205,104
----------------- -----------------
TOTAL 169,712 209,237
LESS:
CASH DIVIDENDS 7,201 7,294
RETIREMENT OF COMMON STOCK 1,743 1,523
EXERCISE OF STOCK OPTIONS (68)
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RETAINED EARNINGS AT END OF FISCAL PERIOD $ 160,768 $ 200,488
================= =================
PER SHARE AMOUNTS (NOTE 4):
Net income $ .17 $ .14
================= =================
Cash dividends $ .24 $ .24
================= =================
<CAPTION>
.........THIRTY-SIX WEEKS ENDED.........
(In thousands, except per share data) September 7, 1996 September 9, 1995
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<S> <C> <C>
NET SALES AND OTHER OPERATING REVENUE $ 329,651 $ 334,139
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COST OF SALES AND OPERATING EXPENSES:
Cost of sales 161,886 165,310
Selling and delivery expenses 125,502 129,406
General and administrative expenses 15,899 14,444
Contributions to employees' profit sharing retirement fund 3,133 3,450
----------------- -----------------
Total 306,420 312,610
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PROFIT FROM OPERATIONS 23,231 21,529
OTHER INCOME, NET 5,158 3,102
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INCOME BEFORE INCOME TAXES 28,389 24,631
INCOME TAXES 11,332 9,662
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NET INCOME 17,057 14,969
RETAINED EARNINGS AT BEGINNING OF FISCAL PERIOD 170,964 208,800
----------------- -----------------
TOTAL 188,021 223,769
LESS:
CASH DIVIDENDS 21,716 21,902
RETIREMENT OF COMMON STOCK 5,537 1,523
EXERCISE OF STOCK OPTIONS (144)
----------------- ----------------
RETAINED EARNINGS AT END OF FISCAL PERIOD $ 160,768 $ 200,488
================= ================
PER SHARE AMOUNTS (NOTE 4):
Net income $ .57 $ .49
================= ================
Cash dividends $ .72 $ .72
================= ================
</TABLE>
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 THIRTY-SIX WEEKS ENDED SEPTEMBER 7, 1996 AND SEPTEMBER 9, 1995
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<TABLE>
<CAPTION>
(In thousands) 1996 1995
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<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 17,057 $ 14,969
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation 14,316 17,030
Deferred income taxes 1,309 (2,544)
Other, net (1,535)
Changes in operating assets and liabilities 23,337 11,190
-------- --------
Net cash flow from operating activities 54,484 40,645
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INVESTING ACTIVITIES:
Purchases of property (12,929) (10,484)
Proceeds from sale of property 2,921 678
Purchases of marketable securities (8,631) (5,733)
Sales of marketable securities 2,067 4,830
Maturities of marketable securities 11,778 3,274
Other, net 82 20
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Net cash used in investing activities (4,712) (7,415)
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FINANCING ACTIVITIES:
Dividends paid (21,716) (21,902)
Purchases of the Company's common stock (5,837) (1,442)
-------- --------
Net cash used in financing activities (27,553) (23,344)
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INCREASE IN CASH 22,219 9,886
CASH AT BEGINNING PERIOD 12,585 12,964
-------- --------
CASH AT END OF PERIOD $ 34,804 $ 22,850
======== ========
SUPPLEMENTAL INFORMATION:
Cash paid for income taxes $ 3,630 $ 7,889
======== ========
</TABLE>
See notes to condensed consolidated financial statements (unaudited)
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LANCE, INC. AND SUBSIDIARIES
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 7, 1996 and December 30, 1995, the consolidated results of
operations for the twelve weeks and thirty-six weeks ended September 7,
1996 and September 9, 1995, and the consolidated cash flows for the
thirty-six weeks ended September 7, 1996 and September 9, 1995. For
purposes of comparability, certain 1995 amounts have been reclassified to
conform with the 1996 presentation.
2. The consolidated results of operations for the twelve weeks and
thirty-six weeks ended September 7, 1996 and September 9, 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
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 September 7, 1996 and December 30, 1995 consisted of (in
thousands):
<TABLE>
<CAPTION>
1996 1995
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<S> <C> <C>
Finished goods $12,766 $16,501
Goods in process 52 21
Raw materials 8,091 15,350
Supplies, etc. 6,792 7,128
------- -------
Total inventories at FIFO cost 27,701 39,000
Less: Adjustment to reduce FIFO
cost to LIFO cost 7,051 6,479
------- -------
Total inventories at LIFO cost $20,650 $32,521
======= =======
</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 and thirty-six weeks ended
September 7, 1996 are computed based on 30,007,822 and 30,151,915 shares
of common stock outstanding, respectively. Per share amounts for the
twelve weeks and thirty-six weeks ended September 9, 1995 were computed
based on 30,403,228 and 30,424,670 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
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.
The combined increase in marketable securities, cash and cash equivalents
since December 30, 1995 was primarily due to a reduction of inventories,
realization of income tax refunds and improved management of trade payables
offset by payment of dividends in excess of net income, purchases of equipment
and repurchases of Company stock.
Accounts receivable increased $4.5 million to $33.9 million since December 30,
1995 due to the timing of the billing cycle. Refundable income taxes available
at December 30, 1995 have been fully utilized during 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, the sale
of certain equipment at the Columbia and Greenville locations as part of the
restructuring and the write-off of certain vending assets. The closing of
Columbia and Greenville also reduced depreciation expense for the 12 weeks and
36 weeks ended September 7, 1996.
Accounts payable have increased since December 30, 1995 reflecting the timing
of purchases and a lengthening of the disbursements cycle. Accrued liabilities
increased due to accruals for income taxes, profit sharing contributions and
the incentive compensation plan.
Current commitments for capital expenditures, including machinery and equipment
and further renovation and expansion of facilities, total approximately $7
million.
QUARTER (12 WEEKS) ENDED SEPTEMBER 7, 1996 COMPARED TO QUARTER (12 WEEKS) ENDED
SEPTEMBER 9, 1995
Net sales and other operating revenues were $.3 million higher reflecting
higher unit volume due to increased marketing and promotions. These increases
were partially offset by continued intense price competition in most markets.
Cost of sales as a percentage of sales declined 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
higher commodity costs, higher costs of goods purchased for resale and an
increase in the LIFO reserve.
Selling and delivery expenses decreased during the third quarter, primarily due
to lower salaries, wages and benefits resulting from the elimination of sales
territories. These cost savings were offset somewhat by an increase in trade
allowances and higher promotional costs. General and administrative expenses
were higher primarily as a result of severance costs incurred on terminated
employees, accruals for the new incentive compensation plan and
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<PAGE> 8
increased professional fees. The increase in other income reflects gains
generated from the sale of assets from the peanut buying facility closed
earlier in the year, partially offset by the write-off of certain vending
assets.
Sales at Vista Bakery were up due to an increase in unit volume of certain
product lines 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 improved production efficiencies at the Burlington,
Iowa plant. These savings were partially offset by an increase in sugar, flour
and other raw materials costs.
The foregoing items contributed to a $1.1 million increase in net income for
the period.
36 WEEKS ENDED SEPTEMBER 7, 1996 COMPARED TO 36 WEEKS ENDED SEPTEMBER 9, 1995
Net sales and other operating revenue decreased approximately $4.4 million due
primarily to lower unit volume attributed to the consolidation and elimination
of sales territories and severe weather during 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 improved as the Company offset increases in the cost of raw materials
and products purchased for resale by improving production efficiencies in the
second and third quarters.
Selling and delivery costs declined due to lower personnel costs. General and
administrative expenses were higher due to accruals for severance, the new
incentive compensation plan and increased professional fees. The increase in
other income was the result of gains on the sale of certain equipment at both
the Greenville and Columbia facilities, gains from the sale of assets at the
peanut buying facility, partially offset by the write-off of certain vending
assets.
Sales of products produced at Vista Bakery were higher due to a first quarter
price increase and increased volume. Vista's earnings increased primarily due
to improved efficiencies gained through the closure of the Columbia facility
and moving production to the Burlington plant, partially offset by higher raw
materials costs.
Net income increased $2.0 million for the period as a result of the foregoing
items.
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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 7, 1996.
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 dully authorized.
LANCE, INC.
By /s/ B. Clyde Preslar
-----------------------------
B. Clyde Preslar
Vice President and Principal
Financial Officer
Dated: October 21, 1996
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF LANCE, INC. FOR THE THIRTY-SIX WEEKS ENDED SEPTEMBER 7,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> SEP-07-1996
<CASH> 34,804
<SECURITIES> 26,548
<RECEIVABLES> 34,725
<ALLOWANCES> 811
<INVENTORY> 20,650
<CURRENT-ASSETS> 123,092
<PP&E> 323,104
<DEPRECIATION> 198,120
<TOTAL-ASSETS> 252,192
<CURRENT-LIABILITIES> 41,793
<BONDS> 0
0
0
<COMMON> 24,981
<OTHER-SE> 160,959
<TOTAL-LIABILITY-AND-EQUITY> 252,192
<SALES> 329,651
<TOTAL-REVENUES> 329,651
<CGS> 161,886
<TOTAL-COSTS> 306,420
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 28,389
<INCOME-TAX> 11,332
<INCOME-CONTINUING> 17,057
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,057
<EPS-PRIMARY> .57
<EPS-DILUTED> .57
</TABLE>
