<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 COMMISSION FILE NUMBER 0-398
ENDED JUNE 24, 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 July 18, 2000,
was 28,950,547 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 - June 24, 2000 (Unaudited)
and December 25, 1999 .......................................... 3
Condensed Consolidated Statements of Income (Unaudited) - Thirteen
and Twenty-Six Weeks Ended June 24, 2000 and June 26, 1999...... 4
Condensed Consolidated Statements of Stockholders' Equity and
Comprehensive Income (Unaudited) - Twenty-Six Weeks Ended
June 24, 2000 and June 26, 1999................................. 5
Condensed Consolidated Statements of Cash Flows (Unaudited) -
Twenty-Six Weeks Ended June 24, 2000 and June 26, 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 4. Submission of Matters to a Vote of Security Holders........... 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 JUNE 24, 2000 (UNAUDITED) AND DECEMBER 25, 1999
(In thousands, except share data)
<TABLE>
<CAPTION>
June 24, December 25,
2000 1999
--------- ---------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS
Cash and cash equivalents $ 4,534 $ 13,303
Accounts receivable (less allowance for doubtful accounts) 52,504 49,106
Inventories 25,226 26,244
Deferred income tax benefit 4,153 4,487
Prepaid income taxes 324 888
Prepaid expenses and other 3,363 3,010
--------- ---------
Total current assets 90,104 97,038
Property, plant & equipment, net 176,173 183,782
Goodwill, net 34,568 35,451
Other intangible assets, net 10,584 11,064
Other assets 2,738 3,327
--------- ---------
TOTAL ASSETS $ 314,167 $ 330,662
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Current portion of long-term debt $ 354 $ 354
Accounts payable 13,331 15,597
Accrued liabilities 22,273 23,929
--------- ---------
Total current liabilities 35,958 39,880
--------- ---------
OTHER LIABILITIES AND DEFERRED CREDITS
Long-term debt 64,969 70,852
Deferred income taxes 21,178 21,167
Accrued postretirement health care costs 11,458 11,410
Accrual for insurance claims 4,047 3,808
Supplemental retirement benefits 2,645 2,755
--------- ---------
Total other liabilities and deferred credits 104,297 109,992
--------- ---------
STOCKHOLDERS' EQUITY
Common stock, $0.83 1/3 par value (authorized: 75,000,000
shares; 28,950,547 and 29,950,897 shares outstanding at
June 24, 2000 and December 25, 1999) 24,125 24,959
Preferred stock, $1.00 par value (authorized: 5,000,000 shares;
0 shares outstanding at June 24, 2000 and December 25, 1999) -- --
Additional paid-in capital 1,180 2,552
Unamortized portion of restricted stock awards (466) (799)
Retained earnings 149,130 154,063
Accumulated other comprehensive income (57) 15
--------- ---------
Total stockholders' equity 173,912 180,790
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 314,167 $ 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 TWENTY-SIX WEEKS ENDED JUNE 24, 2000 AND JUNE 26, 1999
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
Thirteen Thirteen Twenty-Six Twenty-Six
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
June 24, 2000 June 26, 1999 June 24, 2000 June 26, 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET SALES AND OTHER OPERATING REVENUE $ 145,128 $ 134,145 $ 280,757 $ 254,934
------------- ------------- ------------- -------------
COST OF SALES AND OPERATING EXPENSES
Cost of sales (Note 3) 70,314 60,697 134,329 114,721
Selling, marketing and delivery 56,777 54,028 111,702 105,064
General and administrative 5,731 6,261 11,802 11,623
Provisions for employees' retirement
plans 1,050 1,280 2,221 2,518
Amortization of goodwill and other
intangibles 423 346 890 346
------------- ------------- ------------- -------------
Total costs and expenses 134,295 122,612 260,944 234,272
------------- ------------- ------------- -------------
OPERATING PROFIT 10,833 11,533 19,813 20,662
Interest income (expense), net (1,081) (638) (2,206) (480)
Other income, net 254 137 1,573 230
------------- ------------- ------------- -------------
INCOME BEFORE INCOME TAXES 10,006 11,032 19,180 20,412
Income taxes 3,709 4,191 7,137 7,697
------------- ------------- ------------- -------------
NET INCOME $ 6,297 $ 6,841 $ 12,043 $ 12,715
============= ============= ============= =============
EARNINGS PER SHARE
Basic $ 0.22 $ 0.23 $ 0.41 $ 0.43
Diluted $ 0.22 $ 0.23 $ 0.41 $ 0.42
Weighted average shares
outstanding - basic 28,889,000 29,851,000 29,031,000 29,896,000
Weighted average shares
outstanding - diluted 28,913,000 29,871,000 29,056,000 29,927,000
CASH DIVIDENDS PER SHARE $ 0.16 $ 0.24 $ 0.32 $ 0.48
</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 TWENTY-SIX
WEEKS ENDED JUNE 24, 2000 AND JUNE 26, 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
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 26, 1998 29,989,210 $ 24,991 $ 1,981 $ (502) $ 159,524 $ 90 $ 186,084
----------------------------------------------------------------------------------
Comprehensive income:
Net income -- -- -- -- 12,715 -- 12,715
Net change in unrealized gains on
marketable securities -- -- -- -- -- (90) (90)
Foreign currency translation
adjustment 25 25
-----------
Total comprehensive income -- -- -- -- -- -- 12,650
-----------
Cash dividends paid to stockholders -- -- -- -- (14,425) -- (14,425)
Issuance of restricted stock, net
of cancellations 65,300 54 1,081 (1,135) -- -- --
Recognition of restricted stock
awards (115) 372 257
Stock options exercised 3,487 3 57 -- -- -- 60
Purchases of common stock (100,000) (84) -- -- (1,412) -- (1,496)
----------------------------------------------------------------------------------
BALANCE, JUNE 26, 1999 29,957,997 $ 24,964 $ 3,004 $ (1,265) $ 156,402 $ 25 $ 183,130
==================================================================================
BALANCE, DECEMBER 25, 1999 29,950,897 $ 24,959 $ 2,552 $ (799) $ 154,063 $ 15 $ 180,790
----------------------------------------------------------------------------------
Comprehensive income:
Net income -- -- -- -- 12,043 -- 12,043
Foreign currency translation
adjustment -- -- -- -- -- (72) (72)
-----------
Total comprehensive income -- -- -- -- -- -- 11,971
-----------
Cash dividends paid to stockholders -- -- -- -- (9,318) -- (9,318)
Cancellations of restricted stock (24,350) (21) (233) 333 -- -- 79
Purchases of common stock (976,000) (813) (1,139) -- (7,658) -- (9,610)
-----------------------------------------------------------------------------------
BALANCE, JUNE 24, 2000 28,950,547 $ 24,125 $ 1,180 $ (466) $ 149,130 $ (57) $ 173,912
==================================================================================
</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 TWENTY-SIX WEEKS ENDED JUNE 24, 2000 AND JUNE 26, 1999
(In thousands)
<TABLE>
<CAPTION>
Twenty-Six Weeks Twenty-Six Weeks
Ended Ended
June 24, 2000 June 26, 1999
---------------- ----------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 12,043 $ 12,715
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization 14,937 13,640
Gain on sale of property, net (1,593) (161)
Deferred income taxes 387 2,391
Changes in operating assets and liabilities (5,351) (8,345)
-------- --------
Net cash flow provided by operating activities 20,423 20,240
-------- --------
INVESTING ACTIVITIES
Purchases of property and equipment (7,417) (16,341)
Proceeds from sale of property and equipment 2,408 259
Acquisition of businesses, net of cash acquired -- (53,647)
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 (5,009) (60,693)
-------- --------
FINANCING ACTIVITIES
Dividends paid (9,318) (14,425)
Purchase of common stock, net (9,610) (1,436)
Proceeds from debt issued, net of acquisition costs -- 66,187
Repayments of debt (183) (4,644)
Repayments under revolving credit facilities, net (5,000) --
-------- --------
Net cash (used in) provided by financing activities (24,111) 45,682
-------- --------
Effect of exchange rate changes on cash (72) 26
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (8,769) 5,255
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 13,303 7,856
======== ========
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,534 $ 13,111
======== ========
SUPPLEMENTAL INFORMATION
Cash paid for income taxes, net of refunds of $0 and
$3,043, respectively $ 6,131 $ 1,637
Cash paid for interest $ 1,652 $ 538
</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 June 24,
2000 and December 25, 1999, and the consolidated statements of income
for the thirteen and twenty-six weeks ended June 24, 2000 and June 26,
1999 and the statements of stockholders' equity and comprehensive
income and cash flows for the twenty-six weeks ended June 24, 2000 and
June 26, 1999.
2. The consolidated results of operations for the twenty-six weeks ended
June 24, 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 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 consist of (in thousands):
June 24, December 25,
2000 1999
-------- ------------
Finished goods $ 16,968 $ 20,415
Raw materials 4,661 3,962
Supplies, etc. 8,000 6,391
-------- --------
Total inventories at FIFO cost 29,629 30,768
Less: Adjustments to reduce FIFO cost to
LIFO cost (4,403) (4,524)
-------- --------
Total inventories $ 25,226 $ 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 June 24, 2000
and the thirteen weeks ended June 26, 1999 (there were no reconciling
items for the numerator amounts of basic and diluted earnings per
share):
June 24, 2000 June 26, 1999
------------- -------------
Weighted average number of common shares
used in computing basic earnings per
share 28,889,000 29,851,000
Effect of dilutive stock options 24,000 20,000
---------- ----------
Weighted average number of common shares
and dilutive potential common stock used
in computing diluted earnings per share 28,913,000 29,871,000
========== ==========
Stock options excluded from the above
reconciliation because they are
anti-dilutive 1,554,000 1,690,000
========== ==========
6. During the twenty-six weeks ended June 24, 2000, other comprehensive
income consisted of a $72 thousand translation adjustment 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, Spain
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
Canadian dollars $15.6 million (U.S. $10.5 million at June 24, 2000).
The additional consideration is payable in cash in 2004 and will result
in additional goodwill if earned. The Company has not recorded this
liability as of June 24, 2000 as the outcome of the contingency is not
determinable beyond a reasonable doubt.
8
<PAGE> 9
LANCE, INC AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THIRTEEN WEEKS ENDED JUNE 24, 2000 COMPARED TO THIRTEEN WEEKS ENDED
JUNE 26, 1999
<TABLE>
<CAPTION>
Thirteen weeks ended
June 24, June 26,
($ In Thousands) 2000 1999 Difference
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $145,128 100.0% $134,145 100.0% $10,983 8.2%
Cost of sales 70,314 48.4% 60,697 45.2% (9,617) (15.8%)
-------------------------------------------------------------------------------------------------------------------------
Gross margin 74,814 51.6% 73,448 54.8% 1,366 1.9%
-------------------------------------------------------------------------------------------------------------------------
Selling, marketing, and delivery expenses 56,777 39.1% 54,028 40.3% (2,749) (5.1%)
General and administrative expenses 5,731 3.9% 6,261 4.7% 530 8.5%
Provision for employees' retirement plans 1,050 0.7% 1,280 1.0% 230 18.0%
Amortization of goodwill and intangibles 423 0.3% 346 0.3% (77) (22.3%)
-------------------------------------------------------------------------------------------------------------------------
Total operating expenses 63,981 44.1% 61,915 46.2% (2,066) (3.3%)
-------------------------------------------------------------------------------------------------------------------------
Operating profit 10,833 7.5% 11,533 8.6% (700) (6.1%)
Other income, net 254 0.2% 137 0.1% 117 85.4%
Interest income (expense), net (1,081) (0.7%) (638) (0.5)% (443) (69.4%)
Income taxes 3,709 2.6% 4,191 3.1% 460 11.0%
-------------------------------------------------------------------------------------------------------------------------
Net income $ 6,297 4.3% $ 6,841 5.1% $ (566) (8.3%)
=========================================================================================================================
</TABLE>
Revenues increased $11.0 million, or 8.2%, due to the acquisitions of Tamming
and Cape Cod in the second quarter of 1999 and growth in private label and
contract manufacturing sales.
Gross margin as a percentage of revenue decreased from 54.8% in 1999 to 51.6% in
2000 as a result of changes in the mix of products sold and manufacturing
inefficiencies related to new customers.
The $2.7 million increase in selling, marketing and delivery costs were
primarily a result of the addition of the acquired businesses. General and
administrative expenses decreased $0.5 million due primarily to the reduction of
temporary labor costs. The provision for employees' retirement plan was $0.2
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 during the second quarter of
1999.
Other income includes gains and losses on dispositions of fixed assets. Net
interest expense amounted to $1.1 million in 2000 compared to $0.6 million in
1999 due to reductions in cash and marketable securities and indebtedness
incurred to fund capital expenditures and acquisitions.
The effective income tax rate decreased to 37.1% compared to 38.0% in 1999 due
to changes in the composition of earnings.
9
<PAGE> 10
LANCE, INC AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
TWENTY-SIX WEEKS ENDED JUNE 24, 2000 COMPARED TO TWENTY-SIX WEEKS ENDED
JUNE 26, 1999
<TABLE>
<CAPTION>
Twenty-six weeks ended
June 24, June 26,
($ In Thousands) 2000 1999 Difference
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $280,757 100.0% $254,934 100.0% $ 25,823 10.1%
Cost of sales 134,329 47.8% 114,721 45.0% (19,608) (17.1%)
-------------------------------------------------------------------------------------------------------------------------
Gross margin 146,428 52.2% 140,213 55.0% 6,215 4.4%)
-------------------------------------------------------------------------------------------------------------------------
Selling, marketing, and delivery expenses 111,702 39.8% 105,064 41.2% (6,638) (6.3%)
General and administrative expenses 11,802 4.2% 11,623 4.6% (179) (1.5%)
Provision for employees' retirement plans 2,221 0.8% 2,518 1.0% 297 11.8%
Amortization of goodwill and intangibles 890 0.3% 346 0.1% (544) (157.2%)
-------------------------------------------------------------------------------------------------------------------------
Total operating expenses 126,615 45.1% 119,551 46.9% (7,064) (5.9%)
-------------------------------------------------------------------------------------------------------------------------
Operating profit 19,813 7.1% 20,662 8.1% (849) (4.1%)
Other income, net 1,573 0.6% 230 0.1% 1,343 583.9%
Interest income (expense), net (2,206) (0.8%) (480) (0.2)% (1,726) (359.6%)
Income taxes 7,137 2.5% 7,697 3.0% 538 7.0%
-------------------------------------------------------------------------------------------------------------------------
Net income $ 12,043 4.3% $ 12,715 5.0% $ (694) (5.5%)
==========================================================================================================================
</TABLE>
Revenues increased $25.8 million, or 10.1%, due primarily to the acquisitions of
Tamming and Cape Cod in the second quarter of 1999 as well as increased private
label and contract manufacturing sales.
Gross margin as a percent of revenues decreased from 55.0% in 1999 to 52.2% in
2000 due primarily to the lower gross margins of the acquired businesses as well
as changes in the mix of products sold.
The $6.6 million increase in selling, marketing and delivery costs were 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 $0.3 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 includes gains and losses on dispositions of fixed assets. Net
interest expense amounted to $2.2 million in 2000 compared to $0.5 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 37.2% compared to 37.7% in 1999 due
to changes in the composition of earnings.
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 twenty-six weeks ended June 24, 2000 totaled
$20.4 million. Working capital (other than cash and marketable securities)
increased to $49.6 million from $43.9 million at December 25, 1999, due to
timing differences in the various components of working capital.
10
<PAGE> 11
LANCE, INC AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Cash used in investing activities for the twenty-six weeks ended June 24, 2000
totaled $5.0 million. Purchases of property totaled $7.4 million with the
largest expenditures being plant equipment. Proceeds from the sale of property
and equipment totaled $2.4 million. During the twenty-six weeks ended June 26,
1999, the Company liquidated its investments in marketable securities providing
approximately $9.0 million of cash to be used for property purchases and the
second quarter acquisitions.
Cash flow used in financing activities for the twenty-six weeks ended June 24,
2000 totaled $24.1 million. Cash dividends of $0.32 per share for the twenty-six
weeks ended amounted to $9.3 million, as compared to a $0.48 per share dividend
in 1999. On January 14, 2000, the Board of Directors authorized the repurchase
of 1.5 million shares. To date, the Company has repurchased 976,000 shares for
$9.6 million, all of which occurred during the first quarter.
As of June 24, 2000, cash and cash equivalents totaled $4.6 million and total
debt outstanding was $65.3 million. Additional amounts available for borrowings
under all credit facilities are $45.9 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 future 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 June 24, 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 June 24, 2000, the Company's long term
debt totaled $65.0 million, with interest rates ranging from 6.05% to 9.5%, with
a weighted average interest rate of 6.71%. A 10% increase in U.S. LIBOR and
Canadian LIBOR would have increased interest expense for the thirteen weeks
ended June 24, 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.
11
<PAGE> 12
LANCE, INC AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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, filed as Exhibit 10.1 to this Form 10-Q, restricts
payment of cash dividends by the Registrant if, after payment of any
such dividends, the Registrant's consolidated stockholders' equity
would be less than $125,000,000. At June 24, 2000, the Registrant's
consolidated stockholders' equity was $173,912,000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Registrant's Annual Meeting of Stockholders held on April 20,
2000, the following matters were submitted to a vote of the
stockholders of the Registrant:
1. Election of nominees to the Board of Directors of
the Registrant:
Shares Voted
For Term Ending in 2003: in Favor Shares Withheld
------------------------ ------------ ---------------
William R. Holland 23,240,991 807,071
Weldon H. Johnson 23,262,959 785,354
Paul A. Stroup, III 22,804,870 1,243,443
Isaiah Tidwell 23,234,064 814,249
2. Ratification of the selection of KPMG LLP as
independent public accountants for fiscal year 2000
which was approved by a vote of 23,772,020 shares in
favor, 204,052 shares against and 71,441 shares
abstaining. There were zero shares of broker non-votes.
3. Approval of an amendment to the Registrant's 1997
Incentive Equity Plan increasing the number of shares of
Common Stock authorized by 1,500,000 to 3,000,000 was
approved by a vote of 16,101,030 votes in favor,
2,686,513 shares against and 174,979 shares abstaining.
There were 4,176,863 shares of broker non-votes.
13
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LANCE, INC AND SUBSIDIARIES
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 January
11, 2000, incorporated herein by reference to
Exhibit 3.1 to the Registrant's Quarterly Report on
Form 10-Q for the thirteen weeks ended March 25,
2000.
10.1 Amended and Restated Credit Agreement dated May 26,
2000 among the Registrant, Lanfin Investments, Inc.,
Bank of America, N.A., First Union National Bank,
Wachovia Bank, N.A., and Bank of America Canada
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 June 24, 2000.
Items 1, 3 and 5 are not applicable and have been omitted.
14
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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: July 20, 2000
15
