Attached files
file | filename |
---|---|
EX-32 - EX-32 - SNYDER'S-LANCE, INC. | g20995exv32.htm |
EX-31.1 - EX-31.1 - SNYDER'S-LANCE, INC. | g20995exv31w1.htm |
EX-31.2 - EX-31.2 - SNYDER'S-LANCE, INC. | g20995exv31w2.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
of the Securities Exchange Act of 1934
For the quarter ended September 26, 2009
Commission File Number 0-398
LANCE, INC.
(Exact name of registrant as specified in its charter)
North Carolina (State or other jurisdiction of incorporation or organization) |
56-0292920 (I.R.S. Employer Identification No.) |
|
13024 Ballantyne Corporate Place Suite 900 Charlotte, North Carolina (Address of principal executive offices) |
28277 (Zip Code) |
704-554-1421
(Registrants telephone number, including area code)
(Registrants 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 þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files).
Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o (Do not check if a smaller reporting company) |
Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act).
Yes o No þ
The number of shares outstanding of the registrants $0.83-1/3 par value Common Stock, its only
outstanding class of Common Stock as of October 26, 2009, was 32,066,113 shares.
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LANCE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income (Unaudited)
For the Quarters and Nine Months Ended September 26, 2009 and September 27, 2008
(in thousands, except share and per share data)
Quarter Ended | Nine Months Ended | |||||||||||||||
September 26, | September 27, | September 26, | September 27, | |||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Net revenue |
$ | 234,902 | $ | 225,587 | $ | 687,065 | $ | 637,169 | ||||||||
Cost of sales |
140,129 | 143,040 | 411,171 | 400,192 | ||||||||||||
Gross margin |
94,773 | 82,547 | 275,894 | 236,977 | ||||||||||||
Selling, general and administrative |
80,019 | 72,337 | 233,996 | 219,762 | ||||||||||||
Other expense/(income), net |
644 | (536 | ) | 1,252 | (379 | ) | ||||||||||
Earnings before interest and income taxes |
14,110 | 10,746 | 40,646 | 17,594 | ||||||||||||
Interest expense, net |
796 | 708 | 2,518 | 2,173 | ||||||||||||
Income before income taxes |
13,314 | 10,038 | 38,128 | 15,421 | ||||||||||||
Income tax expense |
4,511 | 3,229 | 13,345 | 5,258 | ||||||||||||
Net income |
$ | 8,803 | $ | 6,809 | $ | 24,783 | $ | 10,163 | ||||||||
Basic earnings per share |
$ | 0.28 | $ | 0.22 | $ | 0.79 | $ | 0.33 | ||||||||
Weighted average shares outstanding basic |
31,622,000 | 31,243,000 | 31,526,000 | 31,176,000 | ||||||||||||
Diluted earnings per share |
$ | 0.27 | $ | 0.21 | $ | 0.77 | $ | 0.32 | ||||||||
Weighted average shares outstanding diluted |
32,519,000 | 31,911,000 | 32,286,000 | 31,765,000 |
See Notes to the Condensed Consolidated Financial Statements (Unaudited).
3
Table of Contents
LANCE, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
As of September 26, 2009 (Unaudited) and December 27, 2008
(in thousands, except share data)
September 26, | December 27, | |||||||
2009 | 2008 | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 8,629 | $ | 807 | ||||
Accounts receivable, net of allowances of $1,111 and $863, respectively |
87,422 | 74,406 | ||||||
Inventories |
53,940 | 43,112 | ||||||
Deferred income taxes |
7,641 | 9,778 | ||||||
Prepaid expenses and other current assets |
14,501 | 12,933 | ||||||
Total current assets |
172,133 | 141,036 | ||||||
Other assets: |
||||||||
Fixed assets, net of accumulated depreciation of $272,939 and $267,456,
respectively |
217,618 | 216,085 | ||||||
Goodwill, net |
83,598 | 80,110 | ||||||
Other intangible assets, net |
23,574 | 23,966 | ||||||
Other noncurrent assets |
5,555 | 4,949 | ||||||
Total assets |
$ | 502,478 | $ | 466,146 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 29,379 | $ | 25,939 | ||||
Other payables and accrued liabilities |
62,346 | 58,630 | ||||||
Short-term debt |
| 7,000 | ||||||
Total current liabilities |
91,725 | 91,569 | ||||||
Other liabilities: |
||||||||
Long-term debt |
100,000 | 91,000 | ||||||
Deferred income taxes |
30,500 | 31,241 | ||||||
Other noncurrent liabilities |
16,406 | 16,829 | ||||||
Total liabilities |
238,631 | 230,639 | ||||||
Commitments and contingencies |
| | ||||||
Stockholders equity: |
||||||||
Common stock, 32,054,562 and 31,522,953 shares outstanding, respectively |
26,711 | 26,268 | ||||||
Preferred stock, no shares outstanding |
| | ||||||
Additional paid-in capital |
58,675 | 49,138 | ||||||
Retained earnings |
170,441 | 160,938 | ||||||
Accumulated other comprehensive income/(loss) |
8,020 | (837 | ) | |||||
Total stockholders equity |
263,847 | 235,507 | ||||||
Total liabilities and stockholders equity |
$ | 502,478 | $ | 466,146 | ||||
See Notes to the Condensed Consolidated Financial Statements (Unaudited).
4
Table of Contents
LANCE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders Equity and Comprehensive Income (Unaudited)
For the Nine Months Ended September 26, 2009 and September 27, 2008
(in thousands, except share data)
For the Nine Months Ended September 26, 2009 and September 27, 2008
(in thousands, except share data)
Additional | Accumulated Other | |||||||||||||||||||||||
Common | Paid-in | Retained | Comprehensive | |||||||||||||||||||||
Shares | Stock | Capital | Earnings | Income/(Loss) | Total | |||||||||||||||||||
Balance, December 29, 2007 |
31,214,743 | $ | 26,011 | $ | 41,430 | $ | 163,356 | $ | 16,300 | $ | 247,097 | |||||||||||||
Comprehensive income/(loss): |
||||||||||||||||||||||||
Net income |
| | | 10,163 | | 10,163 | ||||||||||||||||||
Foreign currency translation adjustment |
| | | | (3,558 | ) | (3,558 | ) | ||||||||||||||||
Net unrealized losses on derivatives, net of $136
tax effect |
| | | | (209 | ) | (209 | ) | ||||||||||||||||
Actuarial loss recognized in net income, net of $48
tax effect |
| | | | (82 | ) | (82 | ) | ||||||||||||||||
Total comprehensive income |
6,314 | |||||||||||||||||||||||
Cash dividends paid to stockholders |
| | | (15,083 | ) | | (15,083 | ) | ||||||||||||||||
Stock options exercised, including $360 excess tax
benefit |
135,567 | 113 | 2,179 | | | 2,292 | ||||||||||||||||||
Equity-based incentive expense previously recognized
under a liability plan |
39,250 | 33 | 876 | | | 909 | ||||||||||||||||||
Amortization of nonqualified stock options |
| | 829 | | | 829 | ||||||||||||||||||
Issuances and amortization of restricted stock and units,
net of forfeitures |
120,872 | 101 | 2,418 | | | 2,519 | ||||||||||||||||||
Balance, September 27, 2008 |
31,510,432 | $ | 26,258 | $ | 47,732 | $ | 158,436 | $ | 12,451 | $ | 244,877 | |||||||||||||
Balance, December 27, 2008 |
31,522,953 | $ | 26,268 | $ | 49,138 | $ | 160,938 | $ | (837 | ) | $ | 235,507 | ||||||||||||
Comprehensive income/(loss): |
||||||||||||||||||||||||
Net income |
| | | 24,783 | | 24,783 | ||||||||||||||||||
Foreign currency translation adjustment |
| | | | 6,649 | 6,649 | ||||||||||||||||||
Net unrealized gains on derivatives, net of $1,042
tax effect |
| | | | 2,317 | 2,317 | ||||||||||||||||||
Actuarial loss recognized in net income, net of $62
tax effect |
| | | | (109 | ) | (109 | ) | ||||||||||||||||
Total comprehensive income |
33,640 | |||||||||||||||||||||||
Cash dividends paid to stockholders |
| | | (15,280 | ) | | (15,280 | ) | ||||||||||||||||
Stock options exercised, including $830 excess tax
benefit |
201,560 | 168 | 3,638 | | | 3,806 | ||||||||||||||||||
Equity-based incentive expense previously recognized
under a liability plan |
73,356 | 61 | 1,531 | | | 1,592 | ||||||||||||||||||
Amortization of nonqualified stock options |
| | 951 | | | 951 | ||||||||||||||||||
Issuances and amortization of restricted stock and units,
net of forfeitures |
263,434 | 220 | 3,538 | | | 3,758 | ||||||||||||||||||
Repurchase of common stock |
(6,741 | ) | (6 | ) | (121 | ) | | | (127 | ) | ||||||||||||||
Balance, September 26, 2009 |
32,054,562 | $ | 26,711 | $ | 58,675 | $ | 170,441 | $ | 8,020 | $ | 263,847 | |||||||||||||
See Notes to the Condensed Consolidated Financial Statements (Unaudited).
5
Table of Contents
LANCE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
For the Nine Months Ended September 26, 2009 and September 27, 2008
(in thousands)
For the Nine Months Ended September 26, 2009 and September 27, 2008
(in thousands)
Nine Months Ended | ||||||||
September 26, | September 27, | |||||||
2009 | 2008 | |||||||
Operating activities |
||||||||
Net income |
$ | 24,783 | $ | 10,163 | ||||
Adjustments to reconcile net income to cash from operating activities: |
||||||||
Depreciation and amortization |
25,945 | 23,917 | ||||||
Stock-based compensation expense |
4,709 | 3,348 | ||||||
Loss/(gain) on sale of fixed assets |
529 | (333 | ) | |||||
Changes in operating assets and liabilities, excluding business acquisition |
(10,871 | ) | (9,994 | ) | ||||
Net cash provided by operating activities |
45,095 | 27,101 | ||||||
Investing activities |
||||||||
Purchases of fixed assets |
(28,667 | ) | (30,616 | ) | ||||
Proceeds from sale of fixed assets |
667 | 2,737 | ||||||
Business acquisition, net of cash acquired |
| (23,931 | ) | |||||
Net cash used in investing activities |
(28,000 | ) | (51,810 | ) | ||||
Financing activities |
||||||||
Dividends paid |
(15,280 | ) | (15,083 | ) | ||||
Issuance and repurchase of common stock |
3,679 | 2,292 | ||||||
Net proceeds from existing credit facilities |
2,000 | 32,131 | ||||||
Repayments of debt from business acquisition |
| (2,239 | ) | |||||
Net cash (used in)/provided by financing activities |
(9,601 | ) | 17,101 | |||||
Effect of exchange rate changes on cash |
328 | (58 | ) | |||||
Increase/(decrease) in cash and cash equivalents |
7,822 | (7,666 | ) | |||||
Cash and cash equivalents at beginning of period |
807 | 8,647 | ||||||
Cash and cash equivalents at end of period |
$ | 8,629 | $ | 981 | ||||
Supplemental information: |
||||||||
Cash paid for income taxes, net of refunds of $154 and $58, respectively |
$ | 9,911 | $ | 1,982 | ||||
Cash paid for interest |
$ | 2,699 | $ | 2,307 |
See Notes to the Condensed Consolidated Financial Statements (Unaudited).
6
Table of Contents
LANCE, INC. AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of Lance, Inc. have been
prepared in accordance with generally accepted accounting principles in the United States of
America 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. These condensed
financial statements should be read in conjunction with the audited financial statements and notes
included in our Form 10-K for the year ended December 27, 2008, filed with the Securities and
Exchange Commission (the SEC) on February 24, 2009. In our opinion, these condensed consolidated
financial statements reflect all adjustments, consisting of only normal, recurring accruals,
necessary to present fairly our condensed consolidated financial statements for the interim periods
presented herein. The consolidated results of operations for the quarter and nine months ended
September 26, 2009, are not necessarily indicative of the results to be expected for the full year.
Preparing financial statements requires management to make estimates and assumptions about future
events that affect the reported amounts of assets, liabilities, revenues and expenses and the
related disclosure of contingent assets and liabilities. Examples include customer returns and
promotional activity, allowances for doubtful accounts, self-insurance reserves, impairment
analysis of goodwill and other intangible assets, useful lives and impairment of fixed assets,
incentive compensation, and income taxes. Actual results may differ from our estimates.
Prior year amounts shown in the accompanying condensed consolidated financial statements have been
reclassified for consistent presentation.
2. NEW ACCOUNTING STANDARDS
On June 16, 2009, the Financial Accounting Standards Board (FASB) announced the FASB Accounting
Standards Codification (the Codification), the online research system representing the single
source of authoritative non-governmental U.S. GAAP, was available to use. All previous levels of
the U.S. GAAP hierarchy are superseded and all other accounting literature not included in the
Codification is non-authoritative. This Codification was effective for Lance beginning in the
third quarter of 2009.
3. EARNINGS PER SHARE
The following tables provide a reconciliation of the common shares used for basic earnings per
share and diluted earnings per share:
Quarter Ended | Nine Months Ended | |||||||||||||||
September 26, | September 27, | September 26, | September 27, | |||||||||||||
(in thousands) | 2009 | 2008 | 2009 | 2008 | ||||||||||||
Weighted average number of common
shares used for basic earnings per share |
31,622 | 31,243 | 31,526 | 31,176 | ||||||||||||
Effect of potential dilutive shares |
897 | 668 | 760 | 589 | ||||||||||||
Weighted average number of common
shares and potential dilutive shares used
for diluted earnings per share |
32,519 | 31,911 | 32,286 | 31,765 | ||||||||||||
Anti-dilutive shares excluded from the
above reconciliation |
25 | 100 | 30 | 367 | ||||||||||||
4. EQUITY-BASED INCENTIVE
During the first quarter of 2009, we granted 73,356 restricted shares related to a long-term
incentive plan for key employees that were previously accounted for as a liability. This resulted
in an increase in equity and a decrease in accrued liabilities of $1.6 million during the first
quarter of 2009. During the same period last year, we granted approximately 175,000 vested
nonqualified stock options, 19,500 restricted shares and 19,750 shares of common stock related to a
long-term incentive plan for key employees that were previously accounted for as a liability. This
resulted in an increase in equity and a decrease in accrued liabilities of $0.9 million during the
first quarter of 2008. There were no reclassifications from liability to equity in the second and
third quarters of 2009 and 2008.
7
Table of Contents
LANCE, INC. AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
5. INVENTORIES
September 26, | December 27, | |||||||
(in thousands) | 2009 | 2008 | ||||||
Finished goods |
$ | 32,646 | $ | 23,227 | ||||
Raw materials |
10,697 | 11,556 | ||||||
Supplies, etc. |
17,753 | 15,293 | ||||||
Total inventories at FIFO cost |
61,096 | 50,076 | ||||||
Less adjustments to reduce FIFO cost to LIFO cost |
(7,156 | ) | (6,964 | ) | ||||
Total inventories |
$ | 53,940 | $ | 43,112 | ||||
6. ACQUISITIONS
On December 8, 2008, we acquired substantially all of the assets of Archway Cookies, LLC. In the
third quarter of 2009, we completed the purchase price allocation of the assets acquired, which
resulted in an increase in Inventories and a decrease in Goodwill of $0.5 million.
7. EQUITY INVESTMENT
We own a non-controlling equity interest in Late July Snacks LLC (Late July), an organic snack
food company. Equity losses, which are not material, are included in other expense. We also
manufacture products for Late July. Contract manufacturing revenue from Late July was
approximately $3.3 million for both the first nine months ending 2009 and 2008. As of September
26, 2009, and December 27, 2008, accounts receivable due from Late July totaled $0.7 million and
$0.4 million, respectively.
8. INCOME TAXES
We have recorded gross unrecognized tax benefits as of September 26, 2009 totaling $0.9 million and
related interest and penalties of $0.3 million in other noncurrent liabilities on the condensed
consolidated balance sheet. Of this amount, $0.9 million would affect the effective tax rate if
subsequently recognized. Various taxing authorities statutes of limitations related to the
computation of our unrecognized tax benefits have expired since the beginning of 2009 and reduced
the unrecognized tax benefit amount by $0.3 million. We expect that certain income tax audits will
be settled, and additional statutes of limitations will likely expire before the end of 2009 and
may result in a potential $0.4 million reduction in the unrecognized tax benefit amount. We
classify interest and penalties associated with income tax positions within income tax expense.
We have open years for income tax audit purposes in our major taxing jurisdictions according to
statutes as follows:
Jurisdiction | Open years | |
US federal
|
2007 and forward | |
Canada federal
|
2005 and forward | |
Ontario provincial
|
2003 and forward | |
Massachusetts
|
2001 and forward | |
North Carolina
|
2005 and forward | |
Iowa
|
2005 and forward |
9. FAIR VALUE MEASUREMENTS
We have classified assets and liabilities required to be measured at fair value into the fair value
hierarchy as set forth below:
Level 1 quoted prices in active markets for identical assets and liabilities.
Level 2 observable inputs other than quoted prices for identical assets and liabilities.
Level 3 unobservable inputs in which there is little or no market data available,
which requires us to develop our own assumptions.
We measure our derivative instruments at fair value using Level 2 inputs.
8
Table of Contents
LANCE, INC. AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
The carrying amount of cash and cash equivalents, receivables and accounts payable approximates
fair value due to their short-term nature. The carrying amount of debt approximates fair value
since its variable interest rate is based on current market rates and interest payments are made
monthly.
10. DERIVATIVE INSTRUMENTS
We are exposed to certain risks relating to our ongoing business operations. We use derivative
instruments to manage interest rate and foreign exchange rate risks.
Interest Rate Swaps
Our variable-rate debt obligations incur interest at floating rates based on changes in the
Eurodollar rate, Canadian Bankers Acceptance discount rate, Canadian prime rate and U.S. base rate
interest. Interest rate swaps are entered into to manage interest rate risk associated with our
variable-rate debt, and to maintain a desirable proportion of fixed to variable-rate debt. In
February 2009, we entered into an interest rate swap agreement on an additional $15 million of
debt. The notional amount of interest rate swaps increased from $50 million at December 27, 2008,
to $65 million at September 26, 2009.
Foreign Currency Forwards
We are exposed to foreign exchange rate fluctuations through the operations of our Canadian
subsidiary. A majority of the revenue of our Canadian operations is denominated in U.S. dollars
and a substantial portion of the operations costs, such as raw materials and direct labor, are
denominated in Canadian dollars. We have entered into a series of forward currency contracts to
mitigate a portion of this foreign exchange rate exposure. The notional amount for foreign
currency forwards decreased from $18.8 million at December 27, 2008, to $6.7 million at September
26, 2009.
All of our derivative instruments are accounted for as cash flow hedges. The effective portion of
the change in fair value is included in Accumulated other comprehensive income/(loss), net of
related tax effects, with the corresponding asset or liability recorded in the Condensed
Consolidated Balance Sheets.
The pre-tax income/(expense) effect of derivative instruments on the Condensed Consolidated
Statements of Income is as follows:
Quarter Ended | Nine Months Ended | |||||||||||||||
(in thousands) | September 26, 2009 | September 27, 2008 | September 26, 2009 | September 27, 2008 | ||||||||||||
Interest rate swaps (included in Interest
expense, net) |
$ | (605 | ) | $ | (241 | ) | $ | (1,737 | ) | $ | (553 | ) | ||||
Foreign currency forwards (included in Net
revenue) |
93 | (96 | ) | (1,169 | ) | (7 | ) | |||||||||
Foreign currency forwards (included in
Other
expense, net) |
1 | 29 | (52 | ) | 38 | |||||||||||
Total net pre-tax expense from
derivative instruments |
$ | (511 | ) | $ | (308 | ) | $ | (2,958 | ) | $ | (522 | ) | ||||
The fair value of derivative instruments in the condensed consolidated balance sheets using Level 2
inputs is as follows:
Fair Value of Asset/(Liability) at | ||||||||
September 26, | December 27, | |||||||
(in thousands) | 2009 | 2008 | ||||||
Interest rate swaps (included in Other noncurrent liabilities) |
$ | (3,645 | ) | $ | (4,272 | ) | ||
Foreign currency forwards (included in Other payables and accrued liabilities) |
| (2,094 | ) | |||||
Foreign currency forwards (included in Prepaid expenses and other current assets) |
638 | | ||||||
Total fair value of derivative instruments |
$ | (3,007 | ) | $ | (6,366 | ) | ||
9
Table of Contents
LANCE, INC. AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
The change in unrealized pre-tax gains/(losses) included in other comprehensive income due to
fluctuations in interest rates and foreign exchange rates were as follows:
Quarter Ended | Nine Months Ended | |||||||||||||||
(in thousands) | September 26, 2009 | September 27, 2008 | September 26, 2009 | September 27, 2008 | ||||||||||||
Interest rate swaps |
$ | 42 | $ | (162 | ) | $ | 627 | $ | (170 | ) | ||||||
Foreign currency forwards |
596 | 381 | 2,732 | (175 | ) | |||||||||||
Total change in unrealized pre-tax
gains/(losses) from derivative instruments
(effective portion) |
$ | 638 | $ | 219 | $ | 3,359 | $ | (345 | ) | |||||||
The counter party risk associated with our derivative instruments is considered minimal because the
fair values of these instruments either are in a liability position or are not material at
September 26, 2009.
11. COMMITMENTS AND CONTINGENCIES
Lease Obligations
In the third quarter of 2009, we entered into a 10-year operating lease agreement for a corporate
office located in Charlotte, North Carolina. No payments are due under the lease in 2009. Future
minimum payments are approximately $1.6 million in 2010, $2.0 million in 2011, $2.0 million in
2012, $2.1 million in 2013 and $14.8 million in years thereafter. The new space allows for the
consolidation of two leased administrative office locations.
Contractual Obligations
In order to mitigate the risks of volatility in commodity markets to which we are exposed, we have
entered into forward purchase agreements with certain suppliers based on market prices, forward
price projections, and expected usage levels. Purchase commitments for inventory decreased from
$95.2 million as of December 27, 2008, to $85.6 million as of September 26, 2009, due to varying
contractual obligations. Our practice is to contract at least six months in advance for all major
ingredients and packaging.
Customer Concentration
Sales to our largest customer, Wal-Mart Stores, Inc., were 22% and 21% of revenue for the quarter
and nine months ended September 26, 2009, respectively, and 20% of revenue for both the quarter and
the nine months ended September 27, 2008. Accounts receivable at September 26, 2009 and December
27, 2008, included receivables from Wal-Mart Stores, Inc. totaling $24.9 million and $18.0 million,
respectively.
12. SUBSEQUENT EVENTS
Subsequent events have been evaluated for recognition and disclosure through the date these
financial statements were filed with the SEC.
On October 13, 2009, we completed the purchase of the Stella Doro® brand and certain manufacturing
equipment from Stella Doro Biscuit Co., Inc. for approximately $21 million. Stella Doro® is a
leading brand in the specialty cookie market. Stella Doro® products include shelf stable cookies,
breakfast treats, breadsticks and biscotti that are sold in grocery stores and mass merchants
throughout the United States, with a high concentration in the Northeast and Southeast regions of
the country. The Stella Doro® brand will enhance our portfolio of niche snack food offerings to
our customers. We will manufacture the majority of the products in our Ashland, Ohio facility.
The initial purchase price allocation and valuation of the assets acquired is in process.
10
Table of Contents
LANCE, INC. AND SUBSIDIARIES
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements and Risk Factors
We, from time to time, make forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements include statements about our
estimates, expectations, beliefs, intentions, or strategies for the future, and the assumptions
underlying such statements. We use the words anticipates, believes, estimates, expects,
intends, forecasts, may, will, should, and similar expressions to identify our
forward-looking statements. Forward-looking statements involve risks and uncertainties that could
cause actual results to differ materially from historical experience or our present expectations.
Factors that could cause these differences include, but are not limited to, those set forth under
Item 1A Risk Factors in our Annual Report on Form 10-K for the year ended December 27, 2008.
Caution should be taken not to place undue reliance on our forward-looking statements, which
reflect our managements expectations only as of the time such statements are made. Except as
required by law, we undertake no obligation to update publicly or revise any forward-looking
statement, whether as a result of new information, future events or otherwise.
Results of Operations
Managements discussion and analysis of our financial condition and results of operations are based
upon the condensed consolidated financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States. The preparation of these financial
statements requires us to make estimates and judgments about future events that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. Future events and their effects cannot be determined with absolute certainty.
Therefore, managements determination of estimates and judgments about the carrying values of
assets and liabilities requires the exercise of judgment in the selection and application of
assumptions based on various factors, including historical experience, current and expected
economic conditions and other factors believed to be reasonable under the circumstances. We
routinely evaluate our estimates, including those related to customer returns and promotional
activity, provisions for bad debts, inventory valuations, useful lives of fixed assets, hedge
transactions, supplemental retirement benefits, intangible asset valuations, incentive
compensation, income taxes, insurance, post-retirement benefits, contingencies and legal
proceedings. Actual results may differ from these estimates.
Quarter Ended September 26, 2009 Compared to Quarter Ended September 27, 2008
Favorable/ | ||||||||||||||||||||||||
Quarter Ended | (Unfavorable) | |||||||||||||||||||||||
(dollars in thousands) | September 26, 2009 | September 27, 2008 | Variance | |||||||||||||||||||||
Revenue |
$ | 234,902 | 100.0 | % | $ | 225,587 | 100.0 | % | $ | 9,315 | 4.1 | % | ||||||||||||
Cost of sales |
140,129 | 59.7 | % | 143,040 | 63.4 | % | 2,911 | 2.0 | % | |||||||||||||||
Gross margin |
94,773 | 40.3 | % | 82,547 | 36.6 | % | 12,226 | 14.8 | % | |||||||||||||||
Selling, general and administrative |
80,019 | 34.1 | % | 72,337 | 32.1 | % | (7,682 | ) | -10.6 | % | ||||||||||||||
Other expense/(income), net |
644 | 0.3 | % | (536 | ) | -0.2 | % | (1,180 | ) | -220.1 | % | |||||||||||||
Earnings before interest and taxes |
14,110 | 6.0 | % | 10,746 | 4.8 | % | 3,364 | 31.3 | % | |||||||||||||||
Interest expense, net |
796 | 0.3 | % | 708 | 0.3 | % | (88 | ) | -12.4 | % | ||||||||||||||
Income tax expense |
4,511 | 1.9 | % | 3,229 | 1.4 | % | (1,282 | ) | -39.7 | % | ||||||||||||||
Net income |
$ | 8,803 | 3.7 | % | $ | 6,809 | 3.0 | % | $ | 1,994 | 29.3 | % | ||||||||||||
11
Table of Contents
LANCE, INC. AND SUBSIDIARIES
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Third Quarter Summary
Net income increased $2.0 million, or approximately 29%, compared to the third quarter of 2008.
The major factors that favorably influenced results of operations were:
| lower energy, ingredient and packaging costs; | ||
| higher selling prices aimed at offsetting the escalation in ingredient costs that occurred throughout 2008; | ||
| net income generated by Archway products acquired in December 2008; | ||
| introductions of innovative new products in both our private brand and branded categories; | ||
| improvements in supply chain efficiencies, such as lower shipping costs; and | ||
| improved efficiencies in our direct store delivery (DSD) route system, which resulted in improvements in weekly average sales per route and lower route costs. |
These factors were partially offset by:
| increased advertising expenses primarily as a result of the launch of our first national television campaign; | ||
| increased employee-related costs, such as compensation, incentives, and insurance-related expenses, due to recent acquisitions, strong operational performance, and additional employees to support company objectives; | ||
| lower sales in the convenience store and food service channels, due to the economic downturn and impact of our DSD transformation initiative; | ||
| the closure of our Brent & Sams Little Rock, Arkansas facility and the subsequent relocation of the manufacturing equipment and production to Charlotte, North Carolina; | ||
| transaction costs related to the purchase of the Stella Doro® brand and certain related machinery and equipment; and | ||
| costs related to the implementation of our ERP application system. |
Revenue
Total revenue increased $9.3 million, or approximately 4%, from the third quarter of 2008 and was
affected by the following factors:
Favorable/ | ||||
(Unfavorable) | ||||
Acquisition |
3 | % | ||
Pricing, net of allowances |
2 | % | ||
Volume/Mix, net |
-1 | % | ||
Total percentage change in revenue |
4 | % | ||
As a percentage of total revenue, revenue by product category is as follows:
Quarter Ended | ||||||||
September 26, 2009 | September 27, 2008 | |||||||
Branded Products |
58 | % | 60 | % | ||||
Private Brand Products |
32 | % | 30 | % | ||||
Contract Manufacturing |
10 | % | 10 | % | ||||
Total Revenue |
100 | % | 100 | % | ||||
Compared to the third quarter of 2008, revenue from branded products increased $0.7 million or 1%.
Sales of branded products to grocery stores, distributors and discount stores generated significant
revenue growth compared to the same quarter last year due to acquisitions, new products offerings
and increased selling prices. These increases were significantly offset by double-digit revenue
declines from certain customers, including up-and-down the street, convenience store and food
service establishments resulting from the impact of lower consumer spending in these channels and
our planned DSD transformation initiative. In addition, branded product revenue from mass
merchandisers was down slightly due to changes in store formats, which reduced the number of
opportunities for promotional displays compared to the third quarter of 2008.
Private
brand revenue increased approximately $7.7 million or 11% compared to the third quarter of
2008, primarily related to growth from new products and increased selling prices. Growth in this
category is also being driven by increased demand from consumers for store brands, which is
believed to be the result of the economic downturn.
12
Table of Contents
LANCE, INC. AND SUBSIDIARIES
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Revenue from contract manufacturing increased $0.9 million or 4% compared to the third quarter of
2008 due to volume and selling price increases.
Gross Margin
Gross margin increased $12.2 million, or 3.7% as a percentage of revenue, compared to the third
quarter of 2008. The increase in gross margin was mostly due to lower ingredient, natural gas and
packaging costs, as well as the favorable impact of higher selling prices aimed at offsetting the
escalation in ingredient costs that occurred throughout 2008. Partially offsetting these
improvements was a higher mix of private brand product sales that have a lower gross margin
percentage than sales of branded products.
Selling, General and Administrative Expenses
Selling, general, and administrative expenses increased $7.7 million, or 2.0% as a percentage of
revenue, as compared to the third quarter of 2008. Advertising and marketing costs increased $2.6
million and $0.7 million, respectively, to support the Lance and Cape Cod brands, which includes
the costs associated with our first national television campaign that was completed during the
third quarter of 2009. Compensation related expenses increased
$2.5 million due to additional employees and higher incentive expense, as well as higher medical and casualty costs, which
increased $1.1 million compared to the third quarter of 2008. Merchandising costs increased $0.7
million due to a higher number of format changes at our customers locations. In addition,
there were incremental expenses related to our ERP application system implementation.
Partially offsetting these increased expenses were favorable fuel rates, as well as distribution
and DSD efficiencies.
Other Expense, Net
Other expense, net increased $1.2 million due to losses on the sale of fixed assets during the
third quarter of 2009 compared to gains in the third quarter of 2008. In addition, we incurred
higher foreign currency transaction losses during the third quarter of 2009.
Income Tax Expense
Our effective income tax rate was 33.9% in the third quarter of 2009 compared to 32.2% in the third
quarter of 2008. The effective income tax rate increase was the result of higher pre-tax net
income, which reduced the utilization of favorable permanent difference tax deductions, and
reductions in long-term tax contingencies.
Nine Months Ended September 26, 2009 Compared to Nine Months Ended September 27, 2008
Favorable/ | ||||||||||||||||||||||||
Nine Months Ended | (Unfavorable) | |||||||||||||||||||||||
(dollars in thousands) | September 26, 2009 | September 27, 2008 | Variance | |||||||||||||||||||||
Revenue |
$ | 687,065 | 100.0 | % | $ | 637,169 | 100.0 | % | $ | 49,896 | 7.8 | % | ||||||||||||
Cost of sales |
411,171 | 59.8 | % | 400,192 | 62.8 | % | (10,979 | ) | -2.7 | % | ||||||||||||||
Gross margin |
275,894 | 40.2 | % | 236,977 | 37.2 | % | 38,917 | 16.4 | % | |||||||||||||||
Selling, general and administrative |
233,996 | 34.1 | % | 219,762 | 34.5 | % | (14,234 | ) | -6.5 | % | ||||||||||||||
Other expense/(income), net |
1,252 | 0.2 | % | (379 | ) | -0.1 | % | (1,631 | ) | -430.3 | % | |||||||||||||
Earnings before interest and taxes |
40,646 | 5.9 | % | 17,594 | 2.8 | % | 23,052 | 131.0 | % | |||||||||||||||
Interest expense, net |
2,518 | 0.4 | % | 2,173 | 0.3 | % | (345 | ) | -15.9 | % | ||||||||||||||
Income tax expense |
13,345 | 1.9 | % | 5,258 | 0.8 | % | (8,087 | ) | -153.8 | % | ||||||||||||||
Net income |
$ | 24,783 | 3.6 | % | $ | 10,163 | 1.6 | % | $ | 14,620 | 143.9 | % | ||||||||||||
Nine Months Summary
Net income increased $14.6 million, or approximately 144%, compared to the first nine months of
2008. The major factors that favorably influenced results of operations were:
| higher selling prices aimed at offsetting the escalation in ingredient costs that occurred throughout 2008; | ||
| lower energy, ingredient and packaging costs; | ||
| introductions of innovative new products in both our private brand and branded categories; | ||
| net income generated by Archway products acquired in December 2008 and Brent and Sams products acquired in March 2008; |
13
Table of Contents
LANCE, INC. AND SUBSIDIARIES
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
| improvements in supply chain efficiencies, such as increased labor efficiencies and lower shipping costs; and | ||
| improved efficiencies in our DSD route system, which resulted in improvements in weekly average sales per route and lower route costs. |
These factors were partially offset by:
| increased advertising expenses primarily as a result of the launch of our first national television campaign; | ||
| incremental promotional and marketing expenditures in order to reestablish the Archway® brand, and to drive consumer demand for peanut butter sandwich crackers due to the recall of other manufacturers peanut butter products; | ||
| the closure of our Brent & Sams Little Rock, Arkansas facility and the subsequent relocation of the manufacturing equipment and production to Charlotte, North Carolina; | ||
| acquisition costs related to the purchase of the Stella Doro® brand and certain related machinery and equipment; and | ||
| costs related to the implementation of our ERP application system. |
Revenue
Total revenue increased $49.9 million, or approximately 8%, from the first nine months of 2008.
The increase in revenue was the result of:
Favorable/ | ||||
(Unfavorable) | ||||
Pricing, net of allowances |
4 | % | ||
Acquisitions |
3 | % | ||
Volume/Mix, net |
1 | % | ||
Total percentage change in revenue |
8 | % | ||
As a percentage of total revenue, revenue by product category is shown below:
Nine Months Ended | ||||||||
September 26, 2009 | September 27, 2008 | |||||||
Branded Products |
59 | % | 61 | % | ||||
Private Brand Products |
31 | % | 29 | % | ||||
Contract Manufacturing |
10 | % | 10 | % | ||||
Total Revenue |
100 | % | 100 | % | ||||
Compared to the first nine months of 2008, revenue from branded products increased $13.0 million or
3%. This increase was significantly impacted by the acquisition of Archway as well as price
increases to offset higher ingredient costs that occurred in 2008. Lance® home pack sandwich
crackers experienced growth during the first nine months of 2009 despite the impact of the peanut
butter recall that occurred during the first quarter of 2009 and the incremental promotional
spending as compared to the first nine months of 2008. Cape Cod® potato chips experienced modest
revenue growth despite economic pressures and increased competition in the kettle chip market.
Overall sales of branded products to grocery stores, distributors, discount stores, and club stores
continued to grow compared to the first nine months of 2008. These increases were partially offset
by revenue declines for certain customers, including up-and-down the street, convenience store and
food service establishments, resulting from our DSD transformation initiative and the impact of
lower consumer spending at these customers.
Private brand revenue increased approximately $30.0 million or 16% compared to the first nine
months of 2008. The major drivers for the increase in revenue were new product offerings, selling
price increases and incremental revenue as a result of the acquisition of Brent & Sams that
occurred during the first quarter of 2008. Growth in this category is also being driven by
increased demand from consumers for store brands, which is believed to be the result of the
economic downturn.
Revenue from contract manufacturing increased $6.9 million or 11% as compared to the first nine
months of 2008. Approximately $5.5 million of the revenue increase was due to increased volume
from a short-term manufacturing contract for a new customer. The remainder of the revenue increase
was due to higher selling prices and volume increases.
14
Table of Contents
LANCE, INC. AND SUBSIDIARIES
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Gross Margin
Gross margin increased $38.9 million, or 3.0% as a percentage of revenue, compared to the first
nine months of 2008. This increase in gross margin was mostly due to higher selling prices aimed
at offsetting the escalation in ingredient costs that occurred throughout 2008, lower ingredient
and packaging costs, increased sales volume, improved manufacturing efficiencies, lower natural gas
costs and the favorable foreign currency impact of a weakening Canadian dollar on our
Canadian operations. These improvements were somewhat offset by the higher mix of private brand
product sales that generally carry a lower gross margin percentage than sales of branded products.
Overall, we expect ingredient costs to be slightly lower in the last quarter of 2009 compared to
the first nine months of 2009, and the overall gross margin percentage is expected to increase in
the fourth quarter of 2009.
Selling, General and Administrative Expenses
Selling, general, and administrative costs increased $14.2 million, but decreased 0.4% as a
percentage of revenue, compared to the first nine months of 2008. Advertising and marketing costs
increased $8.8 million to support the Lance and Cape Cod brands, which includes the costs
associated with our first national television campaign. While we do not anticipate advertising
costs to be significant in the fourth quarter of 2009, we plan to continue to invest in advertising
in 2010. In addition, we spent $1.3 million to reestablish the Archway® brand in the marketplace
and mitigate the negative impact of the peanut butter recall. Compensation related expenses
increased $6.4 million due to additional employees and higher incentive expense. Information
technology expenditures also increased due to the continuation of our ERP application system
implementation. Somewhat offsetting these increased expenses were favorable fuel rates, lower
shipping expenses and lower route costs, because of the DSD transformation initiatives compared to
the first nine months of 2008.
Other Expense, Net
Other expense, net increased $1.6 million compared to the first nine months of 2008 due to losses
on the sale of fixed assets, as well as foreign currency transaction losses during the first nine
months of 2009 compared to gains during the first nine months of 2008.
Income Tax Expense
Compared to the first nine months of 2008, the effective income tax rate increased from 34.1% to
35.0%. The effective income tax rate increase was the result of lower utilization of favorable
permanent difference tax deductions partially offset by increased business incentives and a lesser
reduction in long-term tax contingencies compared to the same period
in the prior year. We expect the 2009 full
year income tax rate to be approximately 35% as compared to 34.6% for full year 2008.
Liquidity and Capital Resources
Liquidity
Liquidity represents our ability to generate sufficient cash flows from operating activities to
meet our obligations as well as our ability to obtain appropriate financing. Therefore, liquidity
cannot be considered separately from capital resources that consist primarily of current and
potentially available funds for use in achieving our objectives. Currently, our liquidity needs
arise primarily from working capital requirements, capital expenditures and dividends. Sufficient
liquidity is expected to be available to enable us to meet these demands.
We have a universal shelf registration statement that, subject to our ability to consummate a
transaction on acceptable terms, provides the flexibility to sell up to $250 million of debt or
equity securities. While we have no specific plans to offer securities at this time, it could
position us to expedite financing for business opportunities that support our growth strategy.
Operating Cash Flows
Net cash provided by operating activities was $45.1 million during the first nine months of 2009
and $27.1 million during the first nine months of 2008. Uses of cash as reflected in changes in
operating assets and liabilities increased from $10.0 million during the first nine months of 2008
to $10.9 million in the first nine months of 2009, due primarily to higher inventory levels as a
result of acquisitions and introductions of new products.
15
Table of Contents
LANCE, INC. AND SUBSIDIARIES
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Investing Cash Flows
Net cash used in investing activities was $28.0 million for the first nine months of 2009. Capital
expenditures for fixed assets, principally information systems and manufacturing equipment, totaled
$28.7 million during the first nine months of 2009, partially funded by proceeds from the sale of
assets of $0.7 million. Capital expenditures are expected to continue at a level sufficient to
support our strategic and operating needs. Capital expenditures for fiscal 2009 are projected to
be between $43 million and $45 million and funded by net cash flow from operating activities, cash
on hand, and our existing credit facilities.
Net cash used in investing activities during the first nine months of 2008 represented capital
expenditures of $30.6 million, partially offset by proceeds from the sale of fixed assets of $2.7
million. On March 14, 2008, we acquired Brent & Sams, Inc. for approximately $23.9 million.
Capital expenditures for purchases of fixed assets were $39.1 million for the full year ended
December 27, 2008.
On October 13, 2009, we completed the purchase of the Stella Doro® brand as well as certain
manufacturing equipment from Stella Doro Biscuit Co., Inc. for a purchase price of approximately
$21 million. Available cash on hand and funds available under our existing credit facilities were
used to fund this acquisition.
Financing Cash Flows
During both of the first nine months of 2009 and 2008, we paid dividends of $0.48 per share
totaling $15.3 million and $15.1 million, respectively. In addition, we received cash and related
tax benefits of $3.7 million and $2.3 million during the first nine months of 2009 and 2008,
respectively, as a result of stock option exercises, net of stock repurchases. Proceeds from our
existing credit facilities were used to partially fund purchases of fixed assets during the first
nine months of 2009. On October 29, 2009, the Board of Directors declared a quarterly cash
dividend of $0.16 per share, payable on November 20, 2009, to stockholders of record on November
10, 2009.
During the first nine months of 2008, net cash from financing activities was impacted by $24.0
million of additional borrowings under our existing credit facilities for the acquisition of Brent
& Sams. Shortly after completing this acquisition, we repaid $2.2 million of Brent & Sams
existing debt with cash from operations. We also made net short-term borrowings of $8.1 million
during the first nine months of 2008 to fund increases in working capital.
Debt
Additional borrowings available under our existing U.S. and Canadian credit facilities totaled
$48.0 million as of September 26, 2009. We have complied with all financial covenants contained in
the credit agreement. We also maintain standby letters of credit in connection with our
self-insurance reserves for casualty claims. The total amount of these letters of credit was $15.7
million as of September 26, 2009.
Contractual Obligations
In order to fix a portion of our ingredient and packaging costs, we have entered into forward
purchase agreements with certain suppliers based on market prices, forward price projections and
expected usage levels. Purchase commitments for inventory decreased from $95.2 million as of
December 27, 2008, to $85.6 million as of September 26, 2009, due to varying contractual
obligations. We are currently contracted at least six months in advance for all major ingredients
and packaging.
During the third quarter of 2009, we entered into a 10-year operating lease agreement for a
corporate office located in Charlotte, North Carolina, commencing September 1, 2009 and terminating
on February 29, 2020. No payments are due under the lease in 2009. Future minimum payments are
approximately $1.6 million in 2010, $2.0 million in 2011, $2.0 million in 2012, $2.1 million in
2013 and $14.8 million in years thereafter. The new space allows for the consolidation of two
leased administrative office locations and will allow for greater efficiency within functional
areas as well as across functional departments.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a
current or future material effect on our financial condition, results of operations or cash flows.
16
Table of Contents
LANCE, INC. AND SUBSIDIARIES
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Market Risks
The principal market risks that may adversely impact results of operations and financial position
are changes in raw material prices, energy and fuel costs, interest and foreign exchange rates and
credit risks. Our variable-rate debt obligations incur interest at floating rates based on changes
in the Eurodollar rate, Canadian Bankers Acceptance discount rate, Canadian prime rate and U.S.
base rate interest. To manage exposure to changing interest rates, we selectively enter into
interest rate swap agreements to maintain a desirable proportion of fixed to variable-rate debt.
In November 2006, we entered into an interest rate swap agreement on $35 million of debt in order
to fix the interest rate at 4.99%, plus applicable margin. The applicable margin on September 26,
2009, was 0.40%. In July 2008, we entered into an interest rate swap agreement on an additional
$15 million of debt in order to fix the interest rate at 3.87%, plus applicable margin. The
applicable margin on this agreement on September 26, 2009, was 0.40%. In February 2009, we entered
into an interest rate swap agreement on an additional $15 million of debt in order to fix the
interest rate at 1.68%, plus applicable margin. The applicable margin on this agreement on
September 26, 2009, was 0.32%. While these swaps fixed a portion of the interest rate at a
predictable level, pre-tax interest expense would have been $0.6 million and $1.7 million lower
without these swaps during the third quarter and the first nine months of 2009, respectively.
We are exposed to foreign exchange rate fluctuations through the operations of our Canadian
subsidiary. A majority of the revenue of our Canadian operations is denominated in U.S. dollars
and a substantial portion of the operations costs, such as raw materials and direct labor, are
denominated in Canadian dollars. We have entered into a series of derivative forward contracts to
mitigate a portion of this foreign exchange rate exposure. These contracts have maturities through
June 2010. During the first nine months of 2009, foreign currency fluctuations favorably impacted
pre-tax earnings by $2.4 million compared to the first nine months of 2008. However, this increase
in pre-tax earnings was offset by the unfavorable effect of derivative forward contracts of $1.2
million during the first nine months of 2009 compared to the first nine months of 2008, resulting
in a net favorable impact of foreign currency of $1.2 million in 2009.
Due to foreign currency fluctuations during the first nine months of 2009 and 2008, we recorded
gains of $6.6 million and losses of $3.6 million, respectively, in other comprehensive income
because of the translation of the subsidiarys financial statements into U.S. dollars.
We are exposed to credit risks related to our accounts receivable. We perform ongoing credit
evaluations of our customers to minimize the potential exposure. For the first nine months of
2009, net bad debt expense was $1.0 million primarily due to increased accounts receivable,
customer bankruptcies and general economic conditions. Net bad debt expense was $0.4 million for
the first nine months of 2008. Allowances for doubtful accounts were $1.1 million at September 26,
2009 and $0.9 million at December 27, 2008.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The principal market risks that may adversely impact our results of operations and financial
position are changes in raw material and packaging prices, energy and fuel costs, interest rates,
foreign exchange rates and credit risks. Quantitative and qualitative disclosures about these
market risks are included under Market Risks in Item 2 above, Managements Discussion and
Analysis of Financial Condition and Results of Operations.
Item 4. Controls and Procedures
As of the end of the period covered by this report, we carried out an evaluation, under the
supervision and with the participation of our management, including our Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures pursuant to Rule 13a-15(b) of the Securities and Exchange Act of 1934 (the
Exchange Act). Based upon that evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures are effective for the purpose of
providing reasonable assurance that the information required to be disclosed in the reports we file
or submit under the Exchange Act (1) is recorded, processed, summarized and reported within the
time periods specified in the SECs rules and forms and (2) is accumulated and
communicated to our management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosures.
There have been no changes in our internal control over financial reporting during the quarter
ended September 26, 2009, that have materially affected, or that are reasonably likely to
materially affect, our internal controls over financial reporting.
17
Table of Contents
LANCE, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are currently subject to various routine legal proceedings and claims incidental to our
business. In our opinion, such routine litigation and claims should not have a material adverse
effect upon our consolidated financial statements taken as a whole.
Item 1A. Risk Factors
There have been no material changes to the factors disclosed in Item 1A Risk Factors in our
Annual Report on Form 10-K for the year ended December 27, 2008.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Our Credit Agreement dated October 20, 2006, restricts our payment of cash dividends and
repurchases of common stock if, after payment of any dividends or any repurchases of common stock,
our consolidated stockholders equity would be less than $125.0 million. At September 26, 2009,
our consolidated stockholders equity was $263.8 million.
In December 2008, the Board of Directors approved the repurchase of up to 100,000 shares of common
stock for the purpose of acquiring shares of common stock from employees to cover withholding taxes
payable by employees upon the vesting of shares of restricted stock when sales of common stock by
employees are not permitted. There were no repurchases of common shares during the third quarter
of 2009. The maximum number of shares that could be purchased under the plans or programs at
September 26, 2009 was 93,259.
Item 6. Exhibits
Exhibit Index
No. | 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 Registrants Quarterly Report on Form 10-Q for the twelve weeks ended June 13, 1998 (File No. 0-398). | |
3.2
|
Articles of Amendment of Lance, Inc. dated July, 14 1998 designating rights, preferences and privileges of the Registrants Series A Junior Participating Preferred Stock, incorporated herein by reference to Exhibit 3.2 to the Registrants Annual Report on Form 10-K for the fiscal year ended December 26, 1998 (File No. 0-398). | |
3.3
|
Articles of Amendment of Lance, Inc., as filed on October 30, 2008, eliminating the Registrants Series A Junior Participating Preferred Stock, incorporated herein by reference to Exhibit 3.1 to the Registrants Current Report on Form 8-K filed on October 31, 2008 (File No. 0-398). | |
3.4
|
Bylaws of Lance, Inc., as amended through November 1, 2007, incorporated herein by reference to Exhibit 3.1 to the Registrants Current Report on Form 8-K filed on November 7, 2007 (File No. 0-398). | |
31.1
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a), filed herewith. | |
31.2
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a), filed herewith. | |
32
|
Certification pursuant to Rule 13a-14(b), as required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith. |
Items 3, 4 and 5 are not applicable and have been omitted.
18
Table of Contents
LANCE, INC. AND SUBSIDIARIES
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
LANCE, INC. |
||||
By: | /s/ Rick D. Puckett | |||
Rick D. Puckett | ||||
Executive Vice President, Chief Financial Officer, Treasurer and Secretary |
||||
Dated: October 30, 2009
19