<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Filed Pursuant to Section 13 or 15(d)
Of the Securities Exchange Act of 1934
FOR THE QUARTERLY (THIRTEEN WEEK) PERIOD ENDED COMMISSION FILE NUMBER 0-398
SEPTEMBER 23, 2000
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)
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
----------------- -----------------
The number of shares outstanding of the Registrant's $0.83-1/3 par value
Common Stock, its only outstanding class of Common Stock, as of October 17,
2000, was 28,947,224 shares.
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<PAGE> 2
LANCE, INC. AND SUBSIDIARIES
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - September 23, 2000
(Unaudited) and December 25, 1999 ............................ 3
Condensed Consolidated Statements of Income (Unaudited) -
Thirteen and Thirty-Nine Weeks Ended September 23, 2000
and September 25, 1999 ....................................... 4
Condensed Consolidated Statements of Stockholders' Equity
and Comprehensive Income (Unaudited) - Thirty-Nine Weeks
Ended September 23, 2000 and September 25, 1999............... 5
Condensed Consolidated Statements of Cash Flows
(Unaudited) - Thirty-Nine Weeks Ended September 23, 2000
and September 25, 1999........................................ 6
Notes to Condensed Consolidated Financial Statements............ 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 9
Item 3. Quantitative and Qualitative Disclosures about Market Risk.. 13
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds................... 13
Item 6. Exhibits and Reports on Form 8-K ........................... 14
SIGNATURES.............................................................. 15
2
<PAGE> 3
LANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 23, 2000 (UNAUDITED) AND DECEMBER 25, 1999
(In thousands, except share data)
<TABLE>
<CAPTION>
September 23, December 25,
2000 1999
------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,124 $ 13,303
Accounts receivable (less allowance for doubtful accounts) 53,865 49,106
Inventories 24,456 26,244
Deferred income tax benefit 4,412 4,487
Prepaid income taxes -- 888
Prepaid expenses and other 3,964 3,010
--------- ---------
Total current assets 88,821 97,038
Property, plant & equipment, net 176,690 183,782
Goodwill, net 34,200 35,451
Other intangible assets, net 10,357 11,064
Other assets 3,123 3,327
--------- ---------
TOTAL ASSETS $ 313,191 $ 330,662
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 354 $ 354
Accounts payable 13,888 15,597
Accrued liabilities 25,686 23,929
--------- ---------
Total current liabilities 39,928 39,880
--------- ---------
OTHER LIABILITIES AND DEFERRED CREDITS
Long-term debt 59,086 70,852
Deferred income taxes 21,265 21,167
Accrued postretirement health care costs 11,212 11,410
Accrual for insurance claims 4,102 3,808
Supplemental retirement benefits 2,615 2,755
--------- ---------
Total other liabilities and deferred credits 98,280 109,992
--------- ---------
STOCKHOLDERS' EQUITY
Common stock, $0.83 1/3 par value (authorized: 75,000,000
shares; 28,950,122 and 29,950,897 shares outstanding at September 23,
2000 and December 25, 1999) 24,125 24,959
Preferred stock, $1.00 par value (authorized: 5,000,000 shares;
0 shares outstanding at September 23, 2000 and December 25, 1999) -- --
Additional paid-in capital 1,164 2,552
Unamortized portion of restricted stock awards (398) (799)
Retained earnings 150,166 154,063
Accumulated other comprehensive income (loss) (74) 15
--------- ---------
Total stockholders' equity 174,983 180,790
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 313,191 $ 330,662
========= =========
</TABLE>
See notes to condensed consolidated financial statements (unaudited).
3
<PAGE> 4
LANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE THIRTEEN AND THIRTY-NINE WEEKS ENDED SEPTEMBER 23, 2000 AND
SEPTEMBER 25, 1999
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
Thirteen Thirteen Thirty-Nine Thirty-Nine
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
Sept 23, 2000 Sept 25, 1999 Sept 23, 2000 Sept 25, 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET SALES AND OTHER OPERATING REVENUE $ 147,978 $ 139,694 $ 428,736 $ 394,628
------------- ------------- ------------- -------------
COST OF SALES AND OPERATING EXPENSES
Cost of sales 74,820 66,584 209,149 181,305
Selling, marketing and delivery 56,028 54,667 167,732 159,731
General and administrative 6,355 6,354 18,157 17,977
Provisions for employees' retirement
plans 1,035 1,247 3,257 3,765
Amortization of goodwill and other
intangibles 424 433 1,314 779
------------- ------------- ------------- -------------
Total costs and expenses 138,662 129,285 399,609 363,557
------------- ------------- ------------- -------------
OPERATING PROFIT 9,316 10,409 29,127 31,071
Interest income (expense), net (1,079) (858) (3,285) (1,338)
Other income, net 685 363 2,258 593
------------- ------------- ------------- -------------
INCOME BEFORE INCOME TAXES 8,922 9,914 28,100 30,326
Income taxes 3,254 3,918 10,391 11,615
------------- ------------- ------------- -------------
NET INCOME $ 5,668 $ 5,996 $ 17,709 $ 18,711
============= ============= ============= =============
EARNINGS PER SHARE
Basic $ 0.20 $ 0.20 $ 0.61 $ 0.63
Diluted $ 0.20 $ 0.20 $ 0.61 $ 0.63
Weighted average shares
outstanding - basic 28,890,000 29,852,000 28,894,000 29,881,000
Weighted average shares
outstanding - diluted 28,908,000 29,884,000 28,914,000 29,922,000
CASH DIVIDENDS PER SHARE $ 0.16 $ 0.24 $ 0.48 $ 0.72
</TABLE>
See notes to condensed consolidated financial statements (unaudited).
4
<PAGE> 5
LANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND
COMPREHENSIVE INCOME (UNAUDITED)
FOR THE THIRTY-NINE WEEKS ENDED SEPTEMBER 23, 2000 AND SEPTEMBER 25, 1999
(In thousands, except share data)
<TABLE>
<CAPTION>
Unamortized
Portion of Accumulated
Additional Restricted Other
Common Paid-in Stock Retained Comprehensive
Shares Stock Capital Awards Earnings Income Total
-----------------------------------------------------------------------------------
BALANCE, DECEMBER 26, 1998 29,989,210 $ 24,991 $ 1,981 $ (502) $ 159,524 $ 90 $ 186,084
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Comprehensive income:
Net income -- -- -- -- 18,711 -- 18,711
Net change in unrealized gains
on marketable securities -- -- -- -- -- (90) (90)
Foreign currency translation
adjustment 18 18
----------
Total comprehensive income -- -- -- -- -- -- 18,639
----------
Cash dividends paid to stockholders -- -- -- -- (21,639) -- (21,639)
Issuance of restricted stock, net
of cancellations 65,300 54 1,081 (1,135) -- -- --
Recognition of restricted stock
awards (214) 604 390
Stock options exercised 3,487 3 57 -- -- -- 60
Purchases of common stock (100,000) (84) -- -- (1,412) -- (1,496)
-----------------------------------------------------------------------------------
BALANCE, SEPTEMBER 25, 1999 29,957,997 $ 24,964 $ 2,905 $ (1,033) $ 155,184 $ 18 $ 182,038
===================================================================================
BALANCE, DECEMBER 25, 1999 29,950,897 $ 24,959 $ 2,552 $ (799) $ 154,063 $ 15 $ 180,790
-----------------------------------------------------------------------------------
Comprehensive income:
Net income -- -- -- -- 17,709 -- 17,709
Foreign currency translation
adjustment -- -- -- -- -- (89) (89)
----------
Total comprehensive income -- -- -- -- -- -- 17,620
----------
Cash dividends paid to stockholders -- -- -- -- (13,948) -- (13,948)
Cancellations of restricted stock (24,775) (21) (249) 401 -- -- 131
Purchases of common stock (976,000) (813) (1,139) -- (7,658) -- (9,610)
-----------------------------------------------------------------------------------
BALANCE, SEPTEMBER 23, 2000 28,950,122 $ 24,125 $ 1,164 $ (398) $ 150,166 $ (74) $ 174,983
===================================================================================
</TABLE>
See notes to condensed consolidated financial statements (unaudited).
5
<PAGE> 6
LANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THIRTY-NINE WEEKS ENDED SEPTEMBER 23, 2000 AND SEPTEMBER 25, 1999
(In thousands)
<TABLE>
<CAPTION>
Thirty-Nine Weeks Thirty-Nine Weeks
Ended Ended
Sept 23, 2000 Sept 25, 1999
----------------- -----------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 17,709 $ 18,711
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization 22,089 20,419
Gain on sale of property, net (2,122) (484)
Deferred income taxes 229 640
Changes in operating assets and liabilities (2,915) (8,646)
-------- --------
Net cash flow provided by operating activities 34,990 30,640
-------- --------
INVESTING ACTIVITIES
Purchases of property and equipment (15,024) (23,227)
Proceeds from sale of property and equipment 3,330 1,013
Acquisition of businesses, net of cash acquired -- (53,311)
Purchases of marketable securities -- (556)
Sales of marketable securities -- 7,643
Maturities of marketable securities -- 1,886
Other, net -- 63
-------- --------
Net cash used in investing activities (11,694) (66,489)
-------- --------
FINANCING ACTIVITIES
Dividends paid (13,948) (21,639)
Purchase of common stock, net (9,610) (1,437)
Proceeds from debt issued, net of acquisition costs -- 82,793
Repayments of debt (252) (36,110)
Borrowings (repayments) under revolving credit
facilities, net (10,594) 8,500
-------- --------
Net cash (used in) provided by financing activities (34,404) 32,107
-------- --------
Effect of exchange rate changes on cash (71) 39
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS (11,179) (3,703)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 13,303 7,856
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,124 $ 4,153
======== ========
SUPPLEMENTAL INFORMATION
Cash paid for income taxes, net of refunds of $0 and
$3,043, respectively $ 8,734 $ 5,209
Cash paid for interest $ 1,961 $ 1,286
</TABLE>
See notes to condensed consolidated financial statements (unaudited).
6
<PAGE> 7
LANCE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. The accompanying unaudited consolidated financial statements of Lance,
Inc. (the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and
the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of the Company, these financial
statements reflect 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
23, 2000 and December 25, 1999, and the consolidated statements of
income for the thirteen and thirty-nine weeks ended September 23, 2000
and September 25, 1999 and the statements of stockholders' equity and
comprehensive income and cash flows for the thirty-nine weeks ended
September 23, 2000 and September 25, 1999.
2. The consolidated results of operations for the thirty-nine weeks ended
September 23, 2000 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, sugar and other grain products.
4. The Company utilizes the dollar value last-in, first-out (LIFO) method
of determining the cost of the majority 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 consist of (in thousands):
September 23, December 25,
2000 1999
------------- ------------
Finished goods $ 17,011 $ 20,415
Raw materials 4,800 3,962
Supplies, etc 6,988 6,391
-------- --------
Total inventories at FIFO cost 28,799 30,768
Less: Adjustments to reduce FIFO cost
to LIFO cost (4,343) (4,524)
-------- --------
Total inventories $ 24,456 $ 26,244
======== ========
7
<PAGE> 8
LANCE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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 for the thirteen weeks ended
September 23, 2000 and the thirteen weeks ended September 25, 1999
(there were no reconciling items for the numerator amounts of basic and
diluted earnings per share):
September 23, September 25,
2000 1999
------------- -------------
Weighted average number of common shares
used in computing basic earnings
per share 28,890,000 29,852,000
Effect of dilutive stock options 18,000 32,000
------------- -------------
Weighted average number of common shares
and dilutive potential common stock
used in computing diluted earnings
per share 29,884,000 28,908,000
============= =============
Stock options excluded from the above
reconciliation because they are
anti-dilutive 2,187,000 1,598,000
============= =============
6. During the thirty-nine weeks ended September 23, 2000 and September 25,
1999, other comprehensive income consisted of an $89 thousand loss and
an $18 thousand gain, respectively, related to the translation of the
financial statements of foreign subsidiaries.
7. Effective April 2, 1999, the Company acquired Tamming Foods Ltd.
("Tamming"), headquartered in Waterloo, Ontario, Canada. Tamming
manufactures high quality sugar wafer products that are sold under
private label in the United States, Canada and Mexico.
Effective May 24, 1999, the Company acquired Cape Cod Potato Chip
Company, Inc. ("Cape Cod"), headquartered in Hyannis, Massachusetts.
Cape Cod manufactures premium, kettle-cooked potato chips and other
salty snacks, which are distributed throughout the U.S., Canada and
England under the Cape Cod brand.
The acquisitions described above were accounted for using the purchase
method of accounting for business combinations as of the date of the
acquisitions. The aggregate purchase price of the acquisitions was
$53.6 million, which includes the costs of acquisition. The terms of
the Tamming acquisition also provide for additional consideration to be
paid if Tamming's earnings exceed certain targeted levels through the
year 2002. The maximum amount of remaining contingent consideration is
$15.6 million Canadian dollars (U.S. $10.5 million at September 23,
2000). The additional consideration is payable in cash in 2004 and will
result in additional goodwill if earned. The Company has not recorded
this liability as of September 23, 2000 as the outcome of the
contingency is not determinable beyond a reasonable doubt.
8
<PAGE> 9
LANCE, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THIRTEEN WEEKS ENDED SEPTEMBER 23, 2000 COMPARED TO THIRTEEN WEEKS ENDED
SEPTEMBER 25, 1999
<TABLE>
<CAPTION>
Thirteen weeks ended
September 23, September 25,
($ In Thousands) 2000 1999 Difference
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $147,978 100.0% $139,694 100.0% $8,284 5.9%
Cost of sales 74,820 50.6% 66,584 47.7% (8,236) (12.4%)
-----------------------------------------------------------------------------------------------------------------------
Gross margin 73,158 49.4% 73,110 52.3% 48 0.1%
-----------------------------------------------------------------------------------------------------------------------
Selling, marketing, and delivery expenses 56,028 37.9% 54,667 39.1% (1,361) (2.5%)
General and administrative expenses 6,355 4.3% 6,354 4.5% (1) (0.0%)
Provision for employees' retirement plans 1,035 0.7% 1,247 0.9% 212 17.0%
Amortization of goodwill and intangibles 424 0.3% 433 0.3% 9 2.1%
-----------------------------------------------------------------------------------------------------------------------
Total operating expenses 63,842 43.1% 62,701 44.9% (1,141) (1.8%)
-----------------------------------------------------------------------------------------------------------------------
Operating profit 9,316 6.3% 10,409 7.4% (1,093) (10.5%)
Other income, net 685 0.5% 363 0.3% 322 88.7%
Interest income (expense), net (1,079) (0.7%) (858) (0.6)% (221) (25.8%)
Income taxes 3,254 2.2% 3,918 2.8% 664 16.9%
-----------------------------------------------------------------------------------------------------------------------
Net income $5,668 3.8% $5,996 4.3% $(328) (5.5%)
=======================================================================================================================
</TABLE>
Revenues increased $8.3 million, or 5.9%, due to continued growth in private
label and contract manufacturing sales as well as increased revenues from the
sales of Cape Cod products.
Gross margin as a percentage of revenues decreased from 52.3% in 1999 to 49.4%
in 2000 predominately as a result of changes in the mix of products sold.
Manufacturing inefficiencies and pricing pressures also negatively impacted
gross margin.
Selling, marketing and delivery expenses as a percent of sales decreased to
37.9% in 2000 from 39.1% in 1999 due to higher levels of direct shipments.
However, total expenses increased $1.4 million primarily as a result of
additional transportation and distribution related expenses. General and
administrative expenses were comparable to the prior year but decreased as a
percent of sales. The provision for employees' retirement plan was $0.2 million
lower than prior year due to the profitability-based formula for these
contributions.
Other income primarily includes gains and losses on dispositions of fixed
assets. Net interest expense amounted to $1.1 million in 2000 compared to $0.9
million in 1999 due to increases in interest rates over the last year.
The effective income tax rate decreased to 36.5% compared to 39.5% in 1999 due
to changes in the composition of earnings among the consolidated entities.
9
<PAGE> 10
LANCE, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THIRTY-NINE WEEKS ENDED SEPTEMBER 23, 2000 COMPARED TO THIRTY-NINE WEEKS ENDED
SEPTEMBER 25, 1999
<TABLE>
<CAPTION>
Thirty-nine weeks ended
September 23, September 25,
($ In Thousands) 2000 1999 Difference
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $428,736 100.0% $394,628 100.0% $34,108 8.6%
Cost of sales 209,149 48.8% 181,305 45.9% (27,844) (15.4%)
-------------------------------------------------------------------------------------------------------------------------
Gross margin 219,587 51.2% 213,323 54.1% 6,264 2.9%
-------------------------------------------------------------------------------------------------------------------------
Selling, marketing, and delivery expenses 167,732 39.1% 159,731 40.5% (8,001) (5.0%)
General and administrative expenses 18,157 4.2% 17,977 4.6% (180) (1.0%)
Provision for employees' retirement plans 3,257 0.8% 3,765 0.9% 508 13.5%
Amortization of goodwill and intangibles 1,314 0.3% 779 0.2% (535) (68.7%)
-------------------------------------------------------------------------------------------------------------------------
Total operating expenses 190,460 44.4% 182,252 46.2% (8,208) (4.5%)
-------------------------------------------------------------------------------------------------------------------------
Operating profit 29,127 6.8% 31,071 7.9% (1,944) (6.3%)
Other income, net 2,258 0.5% 593 0.1% 1,665 280.8%
Interest income (expense), net (3,285) (0.8%) (1,338) (0.3%) (1,947) (145.6%)
Income taxes 10,391 2.4% 11,615 2.9% 1,224 10.5%
-------------------------------------------------------------------------------------------------------------------------
Net income $17,709 4.1% $18,711 4.7% $(1,002) (5.4%)
=========================================================================================================================
</TABLE>
Revenues increased $34.1 million, or 8.6%, due primarily to the acquisitions of
Tamming and Cape Cod in the second quarter of 1999 and increased private label
and contract manufacturing sales.
Gross margin as a percent of revenues decreased from 54.1% in 1999 to 51.2% in
2000 due primarily to the mix of products sold and the lower gross margins of
the acquired businesses.
The $8.0 million increase in selling, marketing and delivery costs were
primarily a result of the addition of the acquired businesses as well as
severance costs related to organizational realignment. General and
administrative expenses increased $0.2 million due primarily to the acquired
businesses. The provision for employees' retirement plan was $0.5 million lower
than prior year due to the profitability-based formula for these contributions.
The increase in amortization of goodwill and intangibles is a result of the
acquisitions of Tamming and Cape Cod in the second quarter of 1999.
Other income increased $0.7 million primarily as a result of gains on the
disposition of fixed assets in 2000. Net interest expense amounted to $3.3
million in 2000 compared to $1.3 million in 1999 due to reductions in cash and
marketable securities and indebtedness incurred to fund capital expenditures and
acquisitions.
The effective income tax rate decreased to 37.0% compared to 38.3% in 1999 due
to changes in the composition of earnings among the consolidated entities.
10
<PAGE> 11
LANCE, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Traditionally, the Company met its liquidity needs for capital expenditures,
cash dividends and stock repurchases through cash from operations and
investments. In addition, the Company has historically maintained relatively
high liquidity and no outstanding debt. During the second quarter of 1999, the
Company changed its capital structure by liquidating its marketable securities
and incurring indebtedness available under new credit agreements, primarily to
fund the acquisitions of Tamming and Cape Cod.
Cash flow from operations for the thirty-nine weeks ended September 23, 2000
totaled $35.0 million. Working capital (other than cash and marketable
securities) increased to $46.8 million from $43.9 million at December 25, 1999,
due to an increase in accounts receivable and other timing differences in the
various components of working capital.
Cash used in investing activities for the thirty-nine weeks ended September 23,
2000 totaled $11.7 million. Purchases of property totaled $15.0 million with the
largest expenditures being plant equipment. Proceeds from the sale of property
and equipment totaled $3.3 million.
Cash flow used in financing activities for the thirty-nine weeks ended September
23, 2000 totaled $34.4 million. Cash dividends of $0.48 per share for the
thirty-nine weeks ended amounted to $13.9 million, as compared to a $0.72 per
share dividend in 1999. On January 14, 2000, the Board of Directors authorized
the repurchase of 1.5 million shares of its common stock. To date, the Company
has repurchased 976,000 shares for $9.6 million, all of which occurred during
the first quarter.
As of September 23, 2000, cash and cash equivalents totaled $2.1 million and
total debt outstanding was $59.4 million as compared to $13.3 million in cash
and $71.2 million in debt as of December 25, 1999. The decrease in cash and debt
over the prior year is due to improved cash management and timing differences.
Additional amounts available for borrowings under all credit facilities are
$51.8 million. The Company has met all financial covenants contained in the
financing agreements. Available cash, cash from operations and available credit
under the credit facilities are expected to be sufficient to meet normal
operating requirements for the foreseeable future.
MARKET RISK
The principal market risks to which the Company is exposed that may adversely
impact results of operations and financial position are changes in certain raw
material prices, interest rates and foreign exchange rates. The Company has no
market risk sensitive instruments held for trading purposes.
Raw materials used by the Company are exposed to the impact of changing
commodity prices, particularly the price of wheat used for flour. Accordingly,
the Company historically has entered into commodity futures and option contracts
to manage fluctuations in prices of anticipated purchases of certain raw
materials. The Company's Board-approved policy is to use such commodity
derivative financial instruments only to the extent necessary to manage these
exposures. The Company does not use these financial instruments for trading
purposes. At September 23, 2000, the Company had no open positions on futures
contracts.
The Company's long-term debt obligations incur interest at floating rates, based
on changes in U.S. Dollar LIBOR and Canadian Dollar LIBOR. Therefore, the
Company has an exposure to changes in these interest rates. On July 22, 1999,
the Board of Directors authorized interest rate exchange agreements to more
effectively manage the effects of changing interest rates. However, no such
agreements have been entered into. At September 23, 2000, the Company's long
term debt totaled $59.1 million, with interest
11
<PAGE> 12
LANCE, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
rates ranging from 6.87% to 7.4%, with a weighted average interest rate of
7.07%. A 10% increase in U.S. LIBOR and Canadian LIBOR would have increased
interest expense for the thirteen weeks ended September 23, 2000 by $0.1
million.
Through the operations of Tamming, the Company has an exposure to foreign
exchange rate fluctuations, primarily between the U.S. and Canadian dollars.
Foreign exchange rate fluctuations have limited impact on the earnings of the
Company as a majority of the sales of Tamming are denominated in U.S. dollars.
The indebtedness used to finance the acquisition of Tamming is denominated in
Canadian dollars and serves as an effective hedge of the net asset investment in
Tamming. A 10% devaluation of the Canadian dollar would result in an immaterial
change in the Company's net asset investment in Tamming.
FORWARD-LOOKING STATEMENTS
This discussion contains certain forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. Actual results could
differ materially from those forward-looking statements. Factors that may cause
actual results to differ materially include price competition, industry
consolidation, raw material costs, effectiveness of sales and marketing
activities and operation of a leveraged business, as described in Exhibit 99.1
to this Form 10-Q.
12
<PAGE> 13
LANCE, INC AND SUBSIDIARIES
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The principal market risks to which the Company is exposed that may adversely
impact results of operations and financial position include changes in certain
raw material prices, interest rates and foreign exchange rates. Quantitative and
qualitative disclosures about these market risks are included under "Market
Risks" in Item 2 above, Management's Discussion and Analysis of Financial
Condition and Results of Operations.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Section 8.10 of the Registrant's Amended and Restated Credit Agreement dated May
26, 2000, restricts payment of cash dividends and repurchases of common stock by
the Registrant if, after payment of any such dividends or any such repurchases
of common stock, the Registrant's consolidated stockholders' equity would be
less than $125,000,000. At September 23, 2000, the Registrant's consolidated
stockholders' equity was $174,983,000.
13
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Restated Articles of Incorporation of Lance, Inc. as
amended through April 17, 1998, incorporated herein
by reference to Exhibit 3 to the Registrant's
Quarterly Report on Form 10-Q for the twelve weeks
ended June 13, 1998.
3.2 Articles of Amendment of Lance, Inc. dated July 14,
1998 designating rights, preferences and privileges
of the Registrant's Series A Junior Participating
Preferred Stock, incorporated herein by reference to
Exhibit 3.2 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 26, 1998.
3.3 Bylaws of Lance, Inc., as amended through September 1,
2000.
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).
99.1 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 thirteen weeks
ended September 23, 2000.
Items 1, 3, 4 and 5 are not applicable and have been omitted.
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<PAGE> 15
LANCE, INC. AND SUBSIDIARIES
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 19, 2000
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<PAGE> 16
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
EXHIBITS
ITEM 6(a)
FORM 10-Q
QUARTERLY REPORT
FOR THE QUARTERLY PERIOD ENDED COMMISSION FILE NUMBER
SEPTEMBER 23, 2000 0-398
LANCE, INC.
EXHIBIT INDEX
Exhibit
No. Exhibit Description
------- -------------------
3.1 Restated Articles of Incorporation of Lance, Inc. as amended through
April 17, 1998, incorporated herein by reference to Exhibit 3 to
the Registrant's Quarterly Report on Form 10-Q for the twelve
weeks ended June 13, 1998.
3.2 Articles of Amendment of Lance, Inc. dated July 14, 1998 designating
rights, preferences and privileges of the Registrant's Series A
Junior Participating Preferred Stock, incorporated herein by
reference to Exhibit 3.2 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 26, 1998.
3.3 Bylaws of Lance, Inc., as amended through September 1, 2000.
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).
99.1 Cautionary Statement under Safe Harbor Provisions of the Private
Securities Litigation Reform Act of 1995.
