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Lance Inc. Reports Operating Results (10-Q)

November 03, 2010 | About:
10qk

10qk

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Lance Inc. (LNCE) filed Quarterly Report for the period ended 2010-09-25.

Lance Inc. has a market cap of $728.4 million; its shares were traded at around $22.42 with a P/E ratio of 19.6 and P/S ratio of 0.8. The dividend yield of Lance Inc. stocks is 2.7%. Lance Inc. had an annual average earning growth of 1.6% over the past 5 years.LNCE is in the portfolios of John Keeley of Keeley Fund Management, Diamond Hill Capital of Diamond Hill Capital Management Inc, Paul Tudor Jones of The Tudor Group, Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

During both of the first nine months of 2010 and 2009, we paid dividends of $0.48 per common share totaling $15.5 million and $15.3 million, respectively. We received cash and related tax benefits of $2.6 million and $3.8 million during the first nine months of 2010 and 2009, respectively, as a result of stock option exercises. During the first nine months of 2010, we repurchased 56,152 shares of common stock from employees and net-settled 172,650 of the 300,000 restricted stock units that vested in May 2010, to cover $3.8 million of withholding taxes payable by employees upon the vesting of restricted stock and restricted stock units. We also paid $0.9 million of accrued dividends on restricted stock units. Net repayments on our existing credit facilities were $7.0 million. On November 2, 2010, the Board of Directors declared a quarterly cash dividend of $0.16 per share, payable on November 23, 2010, to stockholders of record on November 15, 2010.

Additional borrowings available under our existing U.S. and Canadian credit facilities totaled $58.6 million as of September 25, 2010. 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, which was $15.7 million as of September 25, 2010, no longer reduces our available borrowings under our credit facilities because they were transferred to another banking institution outside of our credit group.

In order to fix a portion of our ingredient, packaging and energy costs, we have entered into forward purchase agreements with certain suppliers based on market prices, forward price projections and expected usage levels. Purchase commitments increased from $88.2 million as of December 26, 2009, to $116.0 million as of September 25, 2010, due to varying contractual obligations. We are currently contracted at least six months in advance for all major ingredients and packaging.

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 25, 2010 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 25, 2010, 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 25, 2010, was 0.32%.

During the first nine months of 2010, foreign currency fluctuations unfavorably impacted pre-tax earnings by $2.2 million compared to the first nine months of 2009. However, the decrease in pre-tax earnings was more than offset by the favorable effect of derivative forward contracts of $2.3 million during the first nine months of 2010 compared to the first nine months of 2009, resulting in a net favorable impact of foreign currency of $0.1 million. Due to foreign currency fluctuations during the first nine months of 2010 and 2009, we recorded gains of $1.7 million and $6.6 million, respectively, in other comprehensive income because of the translation of the subsidiary s 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 2010 and 2009, net bad debt expense was $0.9 million and $1.0 million, respectively. Allowances for doubtful accounts were $1.4 million at September 25, 2010 and $1.0 million at December 26, 2009.

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