UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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 27, 2003 |
LANCE, INC.
| 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 [ ]
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). 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 20, 2003, was 29,134,557 shares.
LANCE, INC. AND SUBSIDIARIES
INDEX
| Page | ||||||
PART I. FINANCIAL INFORMATION |
||||||
Item 1. Financial Statements |
||||||
Condensed Consolidated Balance Sheets – September 27, 2003 (Unaudited)
and December 28, 2002 |
3 | |||||
Condensed Consolidated Statements of Income (Unaudited) – Thirteen and
Thirty-Nine Weeks Ended September 27, 2003 and September 28, 2002 |
4 | |||||
Condensed Consolidated Statements of Stockholders’ Equity and Comprehensive
Income (Unaudited) – Thirty-Nine Weeks Ended September 27, 2003 and September 28, 2002 |
5 | |||||
Condensed Consolidated Statements of Cash Flows (Unaudited) – Thirty-Nine
Weeks Ended September 27, 2003 and September 28, 2002 |
6 | |||||
Notes to Condensed Consolidated Financial Statements (Unaudited) |
7 | |||||
Item 2. Management’s Discussion and Analysis of Financial Condition and
Results of Operations |
13 | |||||
Item 3. Quantitative and Qualitative Disclosures about Market Risk |
19 | |||||
Item 4. Controls and Procedures |
19 | |||||
PART II. OTHER INFORMATION |
||||||
Item 2. Changes in Securities and Use of Proceeds |
20 | |||||
Item 6. Exhibits and Reports on Form 8-K |
20 | |||||
SIGNATURES |
22 | |||||
2
LANCE, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
As of September 27, 2003 (Unaudited) and December 28, 2002
(In thousands, except share data)
| September 27, | December 28, | ||||||||||
| 2003 | 2002 | ||||||||||
ASSETS |
|||||||||||
Current assets |
|||||||||||
Cash and cash equivalents |
$ | 16,489 | $ | 3,023 | |||||||
Accounts receivable (less allowance for doubtful accounts) |
49,546 | 38,205 | |||||||||
Inventories |
25,429 | 26,777 | |||||||||
Deferred income tax benefit |
9,108 | 7,196 | |||||||||
Prepaid expenses and other |
4,513 | 4,709 | |||||||||
Total current assets |
105,085 | 79,910 | |||||||||
| |
|||||||||||
Other assets |
|||||||||||
Property, plant & equipment, net |
164,123 | 175,722 | |||||||||
Goodwill, net |
44,118 | 39,749 | |||||||||
Other intangible assets, net |
7,878 | 8,400 | |||||||||
Other assets |
1,813 | 2,084 | |||||||||
Total assets |
$ | 323,017 | $ | 305,865 | |||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|||||||||||
Current liabilities |
|||||||||||
Current portion of long-term debt |
$ | 5,315 | $ | 63 | |||||||
Accounts payable |
14,375 | 11,976 | |||||||||
Accrued compensation |
14,515 | 11,186 | |||||||||
Accrued profit-sharing retirement plan |
2,803 | 3,605 | |||||||||
Accrued liability insurance claims |
6,376 | 6,899 | |||||||||
Accrued medical insurance claims |
3,990 | 1,613 | |||||||||
Other payables and accrued liabilities |
15,308 | 9,988 | |||||||||
Total current liabilities |
62,682 | 45,330 | |||||||||
Other liabilities and deferred credits |
|||||||||||
Long-term debt |
37,037 | 36,089 | |||||||||
Deferred income taxes |
26,548 | 27,942 | |||||||||
Accrued postretirement health care costs |
5,815 | 6,893 | |||||||||
Accrual for insurance claims |
6,511 | 5,300 | |||||||||
Other long-term liabilities |
3,800 | 3,770 | |||||||||
Total other liabilities and deferred credits |
79,711 | 79,994 | |||||||||
Stockholders’ equity |
|||||||||||
Common stock, $0.83 1/3 par value (authorized: 75,000,000
shares; 29,134,557 and 29,098,582 shares outstanding at
September 27, 2003 and December 28, 2002) |
24,279 | 24,248 | |||||||||
Preferred stock, $1.00 par value (authorized: 5,000,000 shares;
0 shares outstanding at September 27, 2003 and December 28, 2002) |
— | — | |||||||||
Additional paid-in capital |
3,178 | 3,025 | |||||||||
Unamortized portion of restricted stock awards |
(925 | ) | (693 | ) | |||||||
Retained earnings |
153,769 | 155,372 | |||||||||
Accumulated other comprehensive income (loss) |
323 | (1,411 | ) | ||||||||
Total stockholders’ equity |
180,624 | 180,541 | |||||||||
Total liabilities and stockholders’ equity |
$ | 323,017 | $ | 305,865 | |||||||
See notes to condensed consolidated financial statements (unaudited).
3
LANCE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income (Unaudited)
For the Thirteen and Thirty-Nine Weeks Ended September 27, 2003 and September 28, 2002
(In thousands, except share and per share data)
| Thirteen | Thirteen | Thirty-Nine | Thirty-Nine | ||||||||||||||
| Weeks Ended | Weeks Ended | Weeks Ended | Weeks Ended | ||||||||||||||
| Sept 27, 2003 | Sept 28, 2002 | Sept 27, 2003 | Sept 28, 2002 | ||||||||||||||
Net sales and other operating
revenue |
$ | 145,006 | $ | 135,753 | $ | 421,512 | $ | 414,451 | |||||||||
Cost of sales and operating
expenses: |
|||||||||||||||||
Cost of sales |
74,917 | 69,818 | 219,548 | 210,647 | |||||||||||||
Selling, marketing and delivery |
48,684 | 49,070 | 148,144 | 148,209 | |||||||||||||
General and administrative |
7,294 | 5,759 | 21,731 | 20,705 | |||||||||||||
Provisions for employees’
retirement plans |
911 | 978 | 3,022 | 3,311 | |||||||||||||
Amortization of intangibles |
195 | 173 | 565 | 516 | |||||||||||||
Loss on asset impairment |
— | — | 6,354 | — | |||||||||||||
Other expense, net |
155 | 1,097 | 533 | 1,175 | |||||||||||||
Total costs and expenses |
132,156 | 126,895 | 399,897 | 384,563 | |||||||||||||
Earnings before interest and
income taxes |
12,850 | 8,858 | 21,615 | 29,888 | |||||||||||||
Interest expense, net |
766 | 760 | 2,298 | 2,528 | |||||||||||||
Earnings before income taxes |
12,084 | 8,098 | 19,317 | 27,360 | |||||||||||||
Income taxes |
4,460 | 2,960 | 6,938 | 9,986 | |||||||||||||
Net income |
$ | 7,624 | $ | 5,138 | $ | 12,379 | $ | 17,374 | |||||||||
Earnings per share |
|||||||||||||||||
Basic |
$ | 0.26 | $ | 0.18 | $ | 0.43 | $ | 0.60 | |||||||||
Diluted |
$ | 0.26 | $ | 0.18 | $ | 0.42 | $ | 0.59 | |||||||||
Weighted average shares
outstanding - basic |
29,011,000 | 29,009,000 | 29,011,000 | 28,971,000 | |||||||||||||
Weighted average shares
outstanding - diluted |
29,195,000 | 29,273,000 | 29,164,000 | 29,261,000 | |||||||||||||
See notes to condensed consolidated financial statements (unaudited).
4
LANCE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders’ Equity and Comprehensive Income
(Unaudited)
For the Thirty-Nine Weeks Ended September 27, 2003 and September 28, 2002
(In thousands, except share data)
| Unamortized | |||||||||||||||||||||||||||||
| Portion of | Accumulated | ||||||||||||||||||||||||||||
| Additional | Restricted | Other | |||||||||||||||||||||||||||
| Paid-in | Stock | Retained | Comprehensive | ||||||||||||||||||||||||||
| Shares | Common Stock | Capital | Awards | Earnings | Income(Loss) | Total | |||||||||||||||||||||||
| |
|||||||||||||||||||||||||||||
Balance, December 29, 2001 |
28,995,172 | $ | 24,163 | $ | 1,865 | $ | (826 | ) | $ | 154,075 | $ | (1,358 | ) | $ | 177,919 | ||||||||||||||
Comprehensive income: |
|||||||||||||||||||||||||||||
Net income |
— | — | — | — | 17,374 | — | 17,374 | ||||||||||||||||||||||
Unrealized loss on interest
rate swap, net of tax effect of
$(41) |
— | — | — | — | — | (70 | ) | (70 | ) | ||||||||||||||||||||
Foreign currency translation
adjustment |
— | — | — | — | — | 109 | 109 | ||||||||||||||||||||||
Total comprehensive income |
17,413 | ||||||||||||||||||||||||||||
Cash dividends paid to stockholders |
— | — | — | — | (13,947 | ) | — | (13,947 | ) | ||||||||||||||||||||
Stock options exercised |
84,800 | 70 | 1,054 | — | — | — | 1,124 | ||||||||||||||||||||||
Issuance of restricted stock, net
of cancellations |
18,772 | 15 | 132 | 235 | — | — | 382 | ||||||||||||||||||||||
Balance, September 28, 2002 |
29,098,744 | $ | 24,248 | $ | 3,051 | $ | (591 | ) | $ | 157,502 | $ | (1,319 | ) | $ | 182,891 | ||||||||||||||
Balance, December 28, 2002 |
29,098,582 | $ | 24,248 | $ | 3,025 | $ | (693 | ) | $ | 155,372 | $ | (1,411 | ) | $ | 180,541 | ||||||||||||||
Comprehensive income: |
|||||||||||||||||||||||||||||
Net income |
— | — | — | — | 12,379 | — | 12,379 | ||||||||||||||||||||||
Unrealized loss on interest
rate swap, net of tax effect of
$(39) |
— | — | — | — | — | (65 | ) | (65 | ) | ||||||||||||||||||||
Foreign currency translation
adjustment |
— | — | — | — | — | 1,799 | 1,799 | ||||||||||||||||||||||
Total comprehensive income |
14,113 | ||||||||||||||||||||||||||||
Cash dividends paid to stockholders |
— | — | — | — | (13,982 | ) | — | (13,982 | ) | ||||||||||||||||||||
Stock options exercised |
875 | 1 | 8 | — | — | — | 9 | ||||||||||||||||||||||
Issuance of restricted stock, net
of cancellations |
35,100 | 30 | 145 | (232 | ) | — | — | (57 | ) | ||||||||||||||||||||
Balance, September 27, 2003 |
29,134,557 | $ | 24,279 | $ | 3,178 | $ | (925 | ) | $ | 153,769 | $ | 323 | $ | 180,624 | |||||||||||||||
See notes to condensed consolidated financial statements (unaudited).
5
LANCE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
For the Thirty-Nine Weeks Ended September 27, 2003 and September 28, 2002
(In thousands)
| Thirty-Nine | Thirty-Nine | ||||||||||
| Weeks Ended | Weeks Ended | ||||||||||
| Sept 27, 2003 | Sept 28, 2002 | ||||||||||
Operating Activities |
|||||||||||
Net income |
$ | 12,379 | $ | 17,374 | |||||||
Adjustments to reconcile net income to cash
provided by operating activities: |
|||||||||||
Depreciation and amortization |
21,897 | 21,695 | |||||||||
Loss on asset impairment |
6,354 | — | |||||||||
(Gain)/loss on sale of property, net |
(124 | ) | 939 | ||||||||
Deferred income taxes |
(3,688 | ) | 1,995 | ||||||||
Changes in operating assets and liabilities |
3,096 | (3,737 | ) | ||||||||