<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 Quarter (Twelve Weeks) Ended March 22, 1997
[ ] 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.
- --------------------------------------------------------------------------------
(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 - 29,895,215 shares outstanding as of
May 5, 1997
<PAGE> 2
LANCE, INC. AND SUBSIDIARIES
INDEX
Page
----
PART I. FINANCIAL INFORMATION:
Financial Statements:
Condensed Consolidated Balance Sheets
March 22, 1997 (Unaudited ) and December 28, 1996..................... 3
Condensed Statements of Consolidated Income and
Retained Earnings (Unaudited) - Twelve Weeks
Ended March 22, 1997 and March 23, 1996............................... 4
Condensed Statements of Consolidated Cash Flows (Unaudited)
Twelve Weeks Ended March 22, 1997 and March 23, 1996 ................. 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................................................. 8
SIGNATURES................................................................. 8
2
<PAGE> 3
- --------------------------------------------------------------------------------
LANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS, MARCH 22, 1997 (UNAUDITED) AND
DECEMBER 28, 1996
- --------------------------------------------------------------------------------
(In thousands, except per share data)
<TABLE>
<CAPTION>
ASSETS: 1997 1996
- -------------------------------------------- -------- --------
CURRENT ASSETS:
Cash and cash equivalents $ 31,211 $ 32,272
Marketable securities 26,839 25,482
Accounts receivable (less
allowance for doubtful accounts) 32,055 29,542
Accrued interest receivable 655 468
Inventories - (Note 3) 22,387 22,175
Deferred income tax benefit 8,380 7,099
-------- --------
Total current assets 121,527 117,038
-------- --------
PROPERTY, NET 118,677 124,124
-------- --------
OTHER ASSETS:
Deposits 2,463 2,069
Prepayments, etc. 3,777 3,974
-------- --------
Total other assets 6,240 6,043
-------- --------
TOTAL $246,444 $247,205
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
- -------------------------------------------- -------- --------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 8,259 $ 7,050
Accrued liabilities 24,460 28,698
-------- --------
Total current liabilities 32,719 35,748
-------- --------
OTHER LIABILITIES AND DEFERRED CREDITS:
Deferred income taxes 9,564 6,553
Accrued postretirement health care costs 10,247 10,034
Accrual for insurance claims 6,880 6,458
Supplemental retirement benefits 3,476 3,550
-------- --------
Total other liabilities and deferred credits 30,167 26,595
-------- --------
STOCKHOLDERS' EQUITY:
Common stock, $.83-1/3 par value (authorized:
75,000,000 shares; issued 29,865,765
shares in 1997; 29,888,265 shares in 1996) 24,888 24,907
Retained earnings 158,303 159,700
Net unrealized gain on marketable securities 367 255
-------- --------
Total stockholders' equity 183,558 184,862
-------- --------
TOTAL $246,444 $247,205
======== ========
</TABLE>
See notes to condensed consolidated financial statements (unaudited).
- --------------------------------------------------------------------------------
3
<PAGE> 4
- --------------------------------------------------------------------------------
LANCE, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME AND RETAINED EARNINGS (UNAUDITED)
FOR THE TWELVE WEEKS ENDED MARCH 22, 1997 AND MARCH 23, 1996
- --------------------------------------------------------------------------------
(In thousands, except per share data)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
NET SALES AND OTHER OPERATING REVENUE $112,093 $109,758
-------- --------
COST OF SALES AND OPERATING EXPENSES:
Cost of sales 54,543 55,523
Selling and delivery expenses 42,619 42,114
General and administrative expenses 4,533 4,299
Contributions to employees' profit sharing retirement fund 1,122 1,003
-------- --------
Total 102,817 102,939
-------- --------
PROFIT FROM OPERATIONS 9,276 6,819
OTHER INCOME, NET 730 1,471
-------- --------
INCOME BEFORE INCOME TAXES 10,006 8,290
INCOME TAXES 3,858 3,199
-------- --------
NET INCOME 6,148 5,091
RETAINED EARNINGS AT BEGINNING OF FISCAL PERIOD 159,700 170,964
-------- --------
TOTAL 165,848 176,055
LESS:
CASH DIVIDENDS 7,170 7,265
RETIREMENT OF COMMON STOCK, NET 375 1,003
-------- --------
RETAINED EARNINGS AT END OF FISCAL PERIOD $158,303 $167,787
======== ========
PER SHARE AMOUNTS (NOTE 4):
Net income $ .21 $ .17
======== ========
Cash dividends $ .24 $ .24
======== ========
</TABLE>
See notes to condensed consolidated financial statements (unaudited).
- --------------------------------------------------------------------------------
4
<PAGE> 5
LANCE, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
FOR THE TWELVE WEEKS ENDED MARCH 22, 1997 AND MARCH 23, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In thousands) 1997 1996
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 6,148 $ 5,091
Adjustments to reconcile net income
to cash provided by operation activities:
Depreciation 4,735 5,095
Deferred income taxes 1,730 47
Gain on sale of property (1,614) (965)
Other, net 1,409 542
Changes in operating assets and liabilities (5,193) 88
-------- --------
Net cash flow from operating activities 7,215 9,898
-------- --------
INVESTING ACTIVITIES:
Purchases of property (5,368) (4,606)
Proceeds from sale of property 5,901 1,160
Purchases of marketable securities (5,847) (1,143)
Sales of marketable securities 1,566 1,967
Maturities of marketable securities 2,924 4,108
Other, net 112 18
-------- --------
Net cash (used in) provided by investing activities (712) 1,504
-------- --------
FINANCING ACTIVITIES:
Dividends paid (7,170) (7,265)
Purchases of the Company's common stock, net (394) (1,058)
-------- --------
Net cash used in financing activities (7,564) (8,323)
-------- --------
(DECREASE) INCREASE IN CASH (1,061) 3,079
CASH AT BEGINNING OF PERIOD 32,272 12,585
-------- --------
CASH AT END OF PERIOD $ 31,211 $ 15,664
======== ========
SUPPLEMENTAL INFORMATION:
Cash paid for income taxes $ 360 $ 113
======== ========
</TABLE>
See notes to consolidated financial statement (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
March 22, 1997 and December 28, 1996, the consolidated results of
operations for the twelve weeks ended March 22, 1997 and March 23, 1996,
and the consolidated cash flows for the twelve weeks ended March 22, 1997
and March 23, 1996. For purposes of comparability, certain 1996 amounts
have been reclassified to conform with the 1997 presentation.
2. The consolidated results of operations for the twelve weeks ended March 22,
1997 and March 23, 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 March 22, 1997 and December 28, 1996 consisted of (in
thousands):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Finished goods $14,622 $14,600
Goods in process 52 52
Raw materials 6,819 6,784
Supplies, etc. 6,868 6,926
------- -------
Total inventories at FIFO cost 28,358 28,362
Less: Adjustment to reduce FIFO
cost to LIFO 5,971 6,187
------- -------
Total inventories at LIFO cost $22,387 $22,175
======= =======
</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 22, 1997 and March 23,
1996 are computed based on 29,873,057 and 30,276,432 shares of common stock
outstanding, respectively. The dilutive effect of stock options is not
material.
6
<PAGE> 7
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 remained relatively unchanged
from December 28,1996. Cash generated from operating activities and proceeds
from the sale of the closed production facility in Columbia, South Carolina were
offset by cash used for payment for dividends, purchases of equipment, and a
reduction of accrued liabilities.
Accounts receivable increased $2.5 million to $32.1 million since December 28,
1996 due to the timing of the billing cycle.
Property has decreased primarily due to additional depreciation, the sale of the
Columbia facility and additional valuation reserves taken on the Greenville,
Texas production facility which was closed in February, 1996. These additional
reserves were necessary based on updated estimates of realizable values for
these assets.
Accounts payable increased due to the timing of expenditures. Accrued
liabilities decreased from December 1996 due to payments for incentive and
severance compensation and profit sharing contribution.
Deferred income taxes, net increased due to utilization of deferred tax assets
arising from the sale of the Columbia property.
Current commitments for capital expenditures total approximately $21.3 million.
Quarter (12 Weeks) Ended March 22, 1997 Compared to Quarter (12 Weeks) Ended
March 23, 1996
Net sales and other operating revenues were $2.3 million higher than last year
reflecting improvements in sales in core markets and new distribution efforts.
Sales at the Vista Bakery subsidiary increased both in volume and pricing. Cost
of sales as a percentage of sales declined due to operating efficiencies and a
decrease in LIFO reserves.
Selling and delivery costs increased 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 increased from
last year primarily due to the addition of incentive compensation provisions.
During the quarter ended March 22, 1997, the Company sold its closed production
facility in Columbia, South Carolina realizing a net pretax gain of
approximately $1.4 million. Largely offsetting this gain was a provision for
additional valuation reserves on the closed production facility in Greenville,
Texas. 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 increased revenues, reduced manufacturing costs and reduced sales
route costs, net income increased by $1.1 million for the quarter ended March
22,1997.
7
<PAGE> 8
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).
99. Cautionary Statement under the 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 22, 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: May 5, 1997
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF LANCE, INC. FOR THE FISCAL YEAR ENDED DECEMBER 27, 1997,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-START> DEC-29-1996
<PERIOD-END> MAR-22-1997
<CASH> 31,211
<SECURITIES> 26,839
<RECEIVABLES> 32,662
<ALLOWANCES> 607
<INVENTORY> 22,387
<CURRENT-ASSETS> 121,527
<PP&E> 315,474
<DEPRECIATION> 196,797
<TOTAL-ASSETS> 246,444
<CURRENT-LIABILITIES> 32,719
<BONDS> 0
0
0
<COMMON> 24,888
<OTHER-SE> 158,670
<TOTAL-LIABILITY-AND-EQUITY> 183,558
<SALES> 112,096
<TOTAL-REVENUES> 112,096
<CGS> 54,543
<TOTAL-COSTS> 102,817
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 10,006
<INCOME-TAX> 3,858
<INCOME-CONTINUING> 6,148
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,148
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</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 whom 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 the future delivery of certain of
its raw materials and engages in limited hedging to reduce the price risk of
these raw materials and engages in limited hedging to reduce the price risk of
these raw materials, continuing long-term increases in the costs 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.
