<PAGE> 1
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 September 6, 1997
------------------------------------------
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
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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 -
29,906,510 shares outstanding as of October 17, 1997
<PAGE> 2
LANCE, INC. AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION: ----
Financial Statements:
Condensed Consolidated Balance Sheets - September 6, 1997
(Unaudited) and December 28, 1996............................... 3
Condensed Statements of Consolidated Income and Retained
Earnings (Unaudited) - Twelve Weeks and Thirty-Six Weeks Ended
September 6, 1997 and September 7, 1996......................... 4
Condensed Statements of Consolidated Cash Flows (Unaudited)
Thirty-Six Weeks Ended September 6, 1997 and September 7, 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:
Exhibits and Reports on Form 8-K................................... 10
SIGNATURES................................................................ 10
--------------------------------------------------------
2
<PAGE> 3
<TABLE>
<CAPTION>
LANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS, SEPTEMBER 6, 1997, (UNAUDITED) AND DECEMBER 28, 1996
---------------------------------------------------------------------------------------------
(In thousands, except share and per share data)
ASSETS: 1997 1996
------- ----------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $34,262 $32,272
Marketable securities 27,154 25,482
Accounts receivable (less
allowance for doubtful accounts) 37,508 29,542
Accrued interest receivable 429 468
Inventories (Notes 3 and 4) 20,667 22,175
Deferred income tax benefit 7,419 7,099
----------- ------------
Total current assets 127,439 117,038
PROPERTY, NET 127,640 124,124
OTHER ASSETS 4,510 6,043
----------- ------------
TOTAL $259,589 $247,205
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY: 1997 1996
------------------------------------- ------------ ------------
CURRENT LIABILITIES:
Accounts payable $9,390 $7,050
Accrued liabilities 36,166 28,698
------------ ------------
Total current liabilities 45,556 35,748
------------ ------------
OTHER LIABILITIES AND DEFERRED CREDITS:
Deferred income taxes 9,433 6,553
Accrued postretirement health care costs 10,678 10,034
Accrual for insurance claims 6,446 6,458
Supplemental retirement benefits 3,382 3,550
------------ ------------
Total other liabilities and deferred credits 29,939 26,595
------------ ------------
STOCKHOLDERS' EQUITY (NOTE 6):
Common stock $.83 1/3 par value (authorized:
75,000,000 shares; issued 29,898,610
shares in 1997; 29,888,265 in 1996) 24,916 24,907
Additional paid in capital 599 -
Unamortized portion of restricted stock awards (502) -
Retained earnings 158,822 159,700
Net unrealized gain on marketable securities 259 255
------------ ------------
Total stockholders' equity 184,094 184,862
------------ ------------
TOTAL $259,589 $247,205
============ ============
</TABLE>
See notes to condensed consolidated financial statements (unaudited).
3
<PAGE> 4
LANCE, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF CONSOLIDATED INCOME AND RETAINED EARNINGS (UNAUDITED)
FOR THE TWELVE AND THIRTY-SIX WEEKS ENDED SEPTEMBER 6, 1997 AND SEPTEMBER 7, 1996
----------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data) TWELVE WEEKS ENDED THIRTY-SIX WEEKS ENDED
September 6, 1997 September 7, 1996 September 6, 1997 September 7, 1996
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
NET SALES AND OTHER OPERATING REVENUE $110,341 $107,718 $341,251 $330,961
------------- -------------- -------------- --------------
COST OF SALES AND OPERATING EXPENSES:
Cost of sales (Note 3) 51,288 52,823 161,259 161,886
Selling and delivery expenses 43,112 40,996 131,226 126,812
General and administrative expenses 4,366 4,945 13,601 14,197
Contributions to employees' profit sharing
retirement fund 1,247 1,013 3,815 3,133
------------- -------------- -------------- --------------
Total 100,013 99,777 309,901 306,028
------------- -------------- -------------- --------------
PROFIT FROM OPERATIONS 10,328 7,941 31,350 24,933
OTHER INCOME, NET 780 1,247 2,620 3,456
------------- -------------- -------------- --------------
INCOME BEFORE INCOME TAXES 11,108 9,188 33,970 28,389
INCOME TAXES 4,202 3,951 12,979 11,332
------------- -------------- -------------- --------------
NET INCOME 6,906 5,237 20,991 17,057
RETAINED EARNINGS AT BEGINNING OF FISCAL
PERIOD 159,073 164,475 159,700 170,964
------------- -------------- -------------- --------------
TOTAL 165,979 169,712 180,691 188,021
LESS:
CASH DIVIDENDS 7,176 7,201 21,521 21,716
(ISSUANCE) RETIREMENT OF COMMON STOCK, NET (19) 1,743 348 5,537
------------- -------------- -------------- --------------
RETAINED EARNINGS AT END OF FISCAL PERIOD $158,822 $160,768 $158,822 $160,768
============= ============== ============== ==============
PER SHARE AMOUNTS (NOTE 5)
Net income $.23 $.17 $.70 $.57
============= ============== ============== ==============
Cash dividends $.24 $.24 $.72 $.72
============= ============== ============== ==============
</TABLE>
See notes to condensed consolidated financial statements (unaudited)
4
<PAGE> 5
LANCE, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
FOR THE THIRTY-SIX WEEKS ENDED SEPTEMBER 6, 1997 AND SEPTEMBER 7, 1996
-----------------------------------------------------------------------------------------------------------------------------
(In thousands) 1997 1996
--------------- ----------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $20,991 $17,057
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation 13,690 14,316
Deferred income taxes 2,557 1,309
Other, net (1,235) (1,535)
Changes in operating assets and liabilities 3,852 23,337
--------------- ----------------
Net cash flow from operating activities 39,855 54,484
--------------- ----------------
INVESTING ACTIVITIES:
Purchases of property (24,606) (12,929)
Proceeds from sale of property 10,268 2,921
Purchases of marketable securities (12,753) (8,631)
Sales of marketable securities 2,872 2,067
Maturities of marketable securities 8,125 11,778
Other, net 84 82
--------------- ----------------
Net cash used in investing activities (16,010) (4,712)
--------------- ----------------
FINANCING ACTIVITIES:
Dividends paid (21,521) (21,716)
Purchases of Company's stock, net (334) (5,837)
--------------- ----------------
Net cash used in financing activities (21,855) (27,553)
--------------- ----------------
INCREASE IN CASH 1,990 22,219
CASH AT BEGINNING OF PERIOD 32,272 12,585
-------------- ---------------
CASH AT END OF PERIOD $34,262 $34,804
=============== ================
SUPPLEMENTAL INFORMATION:
Cash paid for income taxes $3,955 $3,630
=============== ================
</TABLE>
See notes to condensed consolidated financial statements (unaudited).
5
<PAGE> 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 September 6,
1997 and December 28, 1996, the consolidated results of operations for the
twelve weeks and thirty-six weeks ended September 6, 1997 and September 7,
1996 and the consolidated cash flows for the thirty-six weeks ended
September 6, 1997 and September 7, 1996. All 1996 amounts have been
reclassified to conform with the 1997 presentation.
2. The consolidated results of operations for the twelve and thirty-six weeks
ended September 6, 1997 and September 7, 1996 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 September 6, 1997 and December 28, 1996 consisted of (in
thousands):
<TABLE>
<CAPTION>
1997 1996
--------- ----------
<S> <C> <C>
Finished goods $15,391 $14,600
Goods in process 51 52
Raw materials 6,048 6,784
Supplies, etc. 4,786 6,926
--------- ----------
Total inventories at FIFO cost 26,276 28,362
Less: Adjustment to reduce
FIFO costs to LIFO 5,609 6,187
--------- ----------
Total inventories at LIFO cost $20,667 $22,175
========= ==========
</TABLE>
5. Per share amounts for the twelve and thirty-six weeks ended September 6, 1997
are computed based on 29,897,806 and 29,885,802 shares of common stock
outstanding, respectively. Per share amounts for the twelve 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. The dilutive effect of
stock options is not material.
6
<PAGE> 7
LANCE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
6. The 1997 Incentive Equity Plan (the "Plan") was approved by the 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 of common stock.
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 thirty-six weeks ended September 6, 1997, the Committee granted
299,400 non-qualified stock options at 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 thirty-six weeks ended September 6, 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
$123,000 during the thirty-six weeks ended September 6, 1997.
7
<PAGE> 8
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 $3.7 million from
December 28, 1996. Net cash flow from operating activities and the proceeds from
the sales of property (primarily closed production facilities in Columbia, South
Carolina and Greenville, Texas) were mostly offset by cash used for payment of
dividends and purchases of property.
Accounts receivable, net increased by $8.0 million from December 28, 1996 as a
result of increased sales volume and the timing of billing cycles. Inventories
decreased $1.5 million due to lower quantities of raw materials, packaging
materials and supplies.
Property, net increased by $3.5 million from December 28, 1996 due to purchases
of property of $24.6 million offset by depreciation and sales of property.
Other assets decreased $1.5 million due to a reduction of deposits on property
purchased.
Accounts payable increased $2.3 million due to the timing of expenditures and
increased purchases of property. Accrued liabilities increased $7.5 million from
December 28, 1996 primarily due to an increase in current taxes payable and
profit sharing contributions payable.
Deferred income taxes increased $2.8 million due to realization of tax benefits
resulting from the sale of the Greenville, Texas property.
Current commitments for capital expenditures total approximately $14.1 million.
Quarter (12 Weeks) Ended September 6, 1997 Compared to Quarter (12 Weeks)
Ended September 7, 1996
Net sales and other operating revenues were $2.6 million, or 2.4%, higher than
last year as marketing initiatives for Lance snacks were implemented, even
though private label sales were down slightly due to timing of promotional
programs by major customers. 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 $2.1 million from last year due to an
increase in trade promotional allowances, advertising and other marketing
support. Increases in promotional selling costs were partially offset by
8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
improved efficiencies throughout the sales and delivery system. General and
administrative expenses decreased $0.6 million from last year primarily due to
lower professional and consulting fees. The provision for profit sharing
contributions increased by $0.2 million compared to last year due to the
increased profitability.
Other income decreased $0.5 million from last year due primarily to lower net
gains on asset dispositions.
As a result of the factors discussed above, net income for the twelve weeks
ended September 6, 1997 increased by $1.7 million compared to last year.
36 Weeks Ended September 6, 1997 Compared to 36 Weeks Ended September 7, 1996
Net sales and other operating revenues were $10.3 million, or 3.1%, higher than
last year reflecting improvements in sales in core markets and new distribution
efforts. 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 $4.4 million from last year due to an
increase in marketing support. General and administrative expenses decreased
$0.6 million from last year primarily due to lower professional and consulting
fees. The provision for profit sharing contributions increased by $0.7 million
compared to last year due to the increased profitability.
Other income decreased $0.8 million from last year due primarily to lower net
gains on asset dispositions.
As a result of the factors discussed above, net income for the thirty-six weeks
ended September 6, 1997 increased by $3.9 million compared to last year.
9
<PAGE> 10
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
Securities Exchange Act of 1934) (for SEC
use only).
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 September 6, 1997.
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
---------------------------------
B. Clyde Preslar
Vice President and Principal
Financial Officer
Dated: October 17, 1997
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF LANCE, INC. FOR THE THIRTY-SIX WEEKS ENDED SEPTEMBER 6,
1997 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-27-1997
<PERIOD-START> DEC-29-1996
<PERIOD-END> SEP-06-1997
<CASH> 34,262
<SECURITIES> 27,154
<RECEIVABLES> 38,626
<ALLOWANCES> 1,118
<INVENTORY> 20,667
<CURRENT-ASSETS> 127,439
<PP&E> 318,301
<DEPRECIATION> 190,661
<TOTAL-ASSETS> 259,589
<CURRENT-LIABILITIES> 45,556
<BONDS> 0
0
0
<COMMON> 24,916
<OTHER-SE> 159,178
<TOTAL-LIABILITY-AND-EQUITY> 269,589
<SALES> 341,251
<TOTAL-REVENUES> 341,251
<CGS> 161,259
<TOTAL-COSTS> 309,901
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 33,970
<INCOME-TAX> 12,979
<INCOME-CONTINUING> 20,991
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,991
<EPS-PRIMARY> .70
<EPS-DILUTED> .70
</TABLE>
<PAGE> 1
EXHIBIT 99
CAUTIONARY STATEMENT UNDER SAFE HARBOR PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Lance, Inc. (the "Company"), from time to time, makes "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such statements, which may be written or oral, reflect expectations of
management of the Company at the time such statements are made. The Company is
filing this cautionary statement to identify certain important factors that
could cause the Company's actual results to differ materially from those in any
forward-looking statements made by or on behalf of the Company.
PRICE COMPETITION AND CONSOLIDATION
The sales of most of the Company's products are subject to intense
competition primarily through discounting and other price cutting techniques by
competitors, many of which are significantly larger and have greater resources
than the Company. In addition, there is a continuing consolidation by the major
companies in the snack food industry which could increase competition.
RAW MATERIALS
The Company's cost of sales can be adversely impacted by changes in the
cost of raw materials, principally flour, peanuts and peanut butter. While the
Company obtains substantial commitments for future delivery of certain of its
raw materials and engages in limited hedging to reduce the price risk of these
raw materials, continuing long-term increases in the cost of raw materials could
adversely impact the Company's cost of sales.
SALES GROWTH
The Company's plans for profitable sales growth depend upon the ability
of the Company to develop and execute effective marketing and sales strategies
for its products.
There are other important factors not described above which could also
cause actual results to differ materially from those in any forward-looking
statement made by or on behalf of the Company.
