<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark one)
X
- ----
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter (Twelve Weeks) Ended June 15, 1996
------------------------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
- ---- THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------------------- ----------------------
Commission file number 0-398
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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
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year, if changed since last
report).
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 the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, $.83-1/3 par value - 30,052,265 shares
outstanding as of July 24, 1996.
<PAGE> 2
LANCE, INC. AND SUBSIDIARIES
INDEX
Page
----
PART I. FINANCIAL INFORMATION:
Financial Statements:
<TABLE>
<CAPTION>
<S> <C>
Condensed Consolidated Balance Sheets -
June 15, 1996 (Unaudited) and December 30, 1995 ............... 3
Condensed Statements of Consolidated Income and
Retained Earnings (Unaudited) - Twelve Weeks and
Twenty-Four Weeks Ended June 15, 1996 and June 17, 1995 ....... 4
Condensed Statements of Consolidated Cash Flows (Unaudited) -
Twenty-Four Weeks Ended June 15, 1996 and June 17, 1995 ....... 5
Notes to Condensed Consolidated Financial Statements (Unaudited) .. 6
Management's Discussion and Analysis of Financial Condition and
Results of Operations ......................................... 7-8
</TABLE>
PART II. OTHER INFORMATION:
<TABLE>
<CAPTION>
<S> <C>
Submission Of Matters To A Vote Of Security Holders ................ 9
Exhibits and Reports on Form 8-K ................................... 9
SIGNATURES ......................................................... 9
</TABLE>
___________________
-2-
<PAGE> 3
LANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS, JUNE 15, 1996 (UNAUDITED) AND
DECEMBER 30, 1995
(In thousands, except share data)
<TABLE>
<CAPTION>
ASSETS: 1996 1995 LIABILITIES AND STOCKHOLDERS' EQUITY: 1996 1995
- ------- -------- -------- ------------------------------------- -------- --------
<S> <C> <C> <S> <C> <C>
CURRENT ASSETS: CURRENT LIABILITIES:
Cash and cash equivalents $ 23,926 $ 12,585 Accounts payable $ 3,774 $ 6,202
Marketable securities 25,810 31,905 Accrued liabilities 26,144 25,744
Accounts receivable (less ------- --------
allowance for doubtful accounts) 32,859 29,429 Total current liabilities 29,918 31,946
Accrued interest receivable 399 493 ------- --------
Refundable income taxes 4,765
Inventories - (Note 3) 23,092 32,521 OTHER LIABILITIES AND DEFFERED CREDITS:
Deferred income tax benefit 6,770 7,327 Deferred income taxes 3,907 4,133
-------- -------- Accrued postretirement health care costs 9,255 8,808
Total current assets 112,856 119,025 Accrual for insurance claims 8,035 7,989
-------- -------- Supplemental retirement benefits 3,783 3,874
-------- --------
PROPERTY, NET 125,205 126,656 Total other liabilities and deferred credits 24,980 24,804
-------- -------- -------- --------
OTHER ASSETS: STOCKHOLDERS' EQUITY:
Deposits 1,547 2,345 Common stock, $.83-1/3 par value (authorized:
Prepayments, etc. 4,965 5,267 75,000,000 shares; issued 30,107,265
-------- -------- shares in 1996; 30,337,265 shares in 1995) 25,073 25,281
Total other assets 6,512 7,612 Retained earnings 164,475 170,964
-------- -------- Net unrealized gain on marketable securities 127 298
-------- --------
Total stockholders' equity 189,675 196,543
-------- --------
TOTAL $244,573 $253,293 TOTAL $244,573 $253,293
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements (unaudited).
-3-
<PAGE> 4
LANCE, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME AND RETAINED EARNINGS (UNAUDITED)
FOR THE TWELVE AND TWENTY-FOUR WEEKS ENDED JUNE 15, 1996 AND JUNE 17, 1995
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED TWENTY-FOUR WEEKS ENDED
(In thousands, except per share data) June 15, 1996 June 17, 1995 June 15, 1996 June 17, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET SALES AND OTHER OPERATING REVENUE $112,258 $114,249 $222,213 $226,965
-------- -------- -------- --------
COST OF SALES AND OPERATING EXPENSES:
Cost of sales 53,544 56,522 109,063 111,502
Selling and delivery expenses 42,471 44,432 84,786 87,367
General and administrative expenses 5,517 4,926 10,376 9,825
Contributions to employees' profit sharing retirement fund 1,117 1,117 2,120 2,411
-------- -------- -------- --------
Total 102,649 106,997 206,345 211,105
-------- -------- -------- --------
PROFIT FROM OPERATIONS 9,609 7,252 15,868 15,860
OTHER INCOME, NET 1,302 871 3,333 1,990
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 10,911 8,123 19,201 17,850
INCOME TAXES 4,182 3,265 7,381 7,014
-------- -------- -------- --------
NET INCOME 6,729 4,858 11,820 10,836
RETAINED EARNINGS AT BEGINNING OF FISCAL PERIOD 167,787 207,474 170,964 208,800
-------- -------- -------- --------
TOTAL 174,516 212,332 182,784 219,636
LESS:
CASH DIVIDENDS 7,249 7,304 14,514 14,608
RETIREMENT OF COMMON STOCK 2,792 3,795
EXERCISE OF STOCK OPTIONS (76) (76)
-------- -------- -------- --------
RETAINED EARNINGS AT END OF FISCAL PERIOD $164,475 $205,104 $164,475 $205,104
======== ======== ======== ========
PER SHARE AMOUNTS (NOTE 4):
Net income $ .22 $ .16 $ .39 $ .36
======== ======== ======== ========
Cash dividends $ .24 $ .24 $ .48 $ .48
======== ======== ======== ========
</TABLE>
-4-
See notes to condensed consolidated financial statements (unaudited).
<PAGE> 5
LANCE, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
FOR THE TWENTY-FOUR WEEKS ENDED JUNE 15, 1996 AND JUNE 17, 1995
<TABLE>
<CAPTION>
(In thousands) 1996 1995
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 11,820 $ 10,836
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation 10,056 11,768
Deferred income taxes 332 (1,409)
Gain on sale of property (1,246) (70)
Other, net 467 39
Changes in operating assets and liabilities 9,133 3,719
-------- --------
Net cash flow from operating activities 30,562 24,883
-------- --------
INVESTING ACTIVITIES:
Purchases of property (8,520) (4,885)
Proceeds from sale of property 1,959 455
Purchases of marketable securities (4,324) (3,738)
Sales of marketable securities 2,067 3,375
Maturities of marketable securities 8,073 2,984
Other, net 40 14
-------- --------
Net cash used in investing activities (705) (1,795)
-------- --------
FINANCING ACTIVITIES:
Dividends paid (14,514) (14,608)
Sales (purchases) of the Company's common stock (4,002) 82
-------- --------
Net cash used in financing services (18,516) (14,526)
-------- --------
INCREASE IN CASH 11,341 8,562
CASH AT BEGINNING PERIOD 12,585 12,964
-------- --------
CASH AT END OF PERIOD $ 23,926 $ 21,526
======== ========
SUPPLEMENTAL INFORMATION:
Cash paid for income taxes $ 3,442 $ 7,557
======== ========
</TABLE>
See notes to condensed consolidated financial statements (unaudited).
-5-
<PAGE> 6
LANCE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain 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 15, 1996 and December 30, 1995, the consolidated results of
operations for the twelve and twenty-four weeks ended June 15, 1996 and
June 17, 1995, and the consolidated cash flows for the twenty-four weeks
ended June 15, 1996 and June 17, 1995. For purposes of comparability,
certain 1995 amounts shown in the accompanying condensed consolidated
financial statements have been reclassified to conform with the 1996
presentation.
2. The consolidated results of operations for the twelve weeks and
twenty-four weeks ended June 15, 1996 and June 17, 1995 are not
necessarily indicative of the results to be expected for a full year.
3. The Company utilizes the dollar value last-in, first-out (LIFO) method of
determing the cost of substantially all of its inventories. Because
inventory caluations 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 at June 15, 1996 and December 30, 1995 consisted of (in
thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Finished goods $13,075 $16,501
Goods in process 47 21
Raw materials 9,824 15,350
Supplies, etc. 6,986 7,128
------- -------
Total inventories at FIFO cost 29,932 39,000
Less: Adjustment to reduce FIFO
cost to LIFO cost 6,840 6,479
------- -------
Total inventories at LIFO cost $23,092 $32,521
======= =======
</TABLE>
Use of the dollar value LIFO method with natural business unit method of
pooling makes presentation of inventory components on a LIFO basis
impractical.
4. Per share amounts for the twelve and twenty-four weeks ended June 15, 1996
are computed based on 30,171,491 and 30,223,961 shares of common stock
outstanding, respectively. Per share amounts for the twelve and
twenty-four weeks ended June 17, 1995 are computed based on 30,437,375
and 30,435,391 shares of common stock outstanding, respectively The
dilutive effect of stock options is not material.
-6-
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Financial Condition
The Company maintains a strong position of liquidity and has sufficient
financial resources to meet its ongoing operating needs, cash dividend
payments, capital expenditures, and stock repurchases through cash flow
generated from current operations and investments.
Marketable securities, cash and cash equivalents increased since December 30,
1995 primarily due to a reduction of inventories and utilization of income tax
refunds, offset by payment of dividends, purchases of equipment, the
repurchase of Company stock and a decrease in accounts payable.
Accounts receivable are $3.4 million higher since December 30, 1995 due to the
timing of the billing cycle. Refundable income taxes available at December 30,
1995 were fully utilized by June 15, 1996.
The lower inventory balances reflect the use of existing peanut inventory, the
closing of the Vista Bakery plant in Columbia, South Carolina and the
Greenville, Texas production facility in February, 1996 and the seasonal
reduction in goods purchased for resale.
Property, net has decreased primarily due to additional depreciation recorded
and the sale of equipment at the Columbia and Greenville locations as part of
the restructuring. The closing of Columbia and Greenville also reduced
depreciation expense for the 12 weeks and 24 weeks ended June 15, 1996.
Accounts payable have decreased since December 30, 1995 reflecting the timing
of purchases.
Current commitments for capital expenditures, including machinery and equipment
and further renovation and expansion of facilities, total approximately $9
million.
Quarter (12 Weeks) Ended June 15, 1996 Compared to Quarter (12 Weeks) Ended
June 17, 1995
Net sales and other operating revenues were $2.0 million lower due to decreased
unit volume attributed to consolidation and elimination of sales territories.
Sales continued to be adversely affected by intense price competition in most
markets. Cost of sales improved due to efficiencies gained through the closure
of production facilities in Columbia and Greenville, and the transfer of
production to operations in Charlotte, North Carolina and Burlington, Iowa. The
savings from these efficiencies were partially offset by increases in the costs
of flour and other raw materials, and by an increase in the costs of goods
purchased for resale.
Selling and delivery expenses decreased in the second quarter, primarily due to
the decline in sales, offset somewhat by higher promotional costs. General and
administrative expenses were higher primarily as a result of the adoption of an
incentive compensation plan and additional professional fees. The increase in
other income reflects gains generated from the sale of equipment at the
Columbia facility.
-7-
<PAGE> 8
Sales at Vista Bakery were up due to an increase in unit volume attributed to
saltine products as well as improved pricing. Operations at Vista Bakery were
profitable for the quarter, the result of savings from closing the Columbia
plant in February 1996 and production efficiencies at the Burlington, Iowa
plant. These savings were partially offset by an increase in flour and other
raw materials costs.
The foregoing items contributed to a $1.9 million increase in net income.
24 Weeks Ended June 15, 1996 Compared to 24 Weeks Ended June 17, 1995
Net sales and other operating revenue decreased approximately $4.8 million due
primarily to decreased unit volume attributed to the consolidation and
elimination of sales territories and severe weather in the first quarter.
Sales continued to be adversely affected by intense price competition in most
markets. Cost of sales as a percentage of net sales and other operating
revenues remained stable as the Company offset increases in the cost of flour
and products purchased for resale by improving production efficiencies in the
second quarter.
Selling and delivery costs declined due to lower sales volume. General and
administrative expenses were higher due to the new incentive compensation plan
and additional professional fees. The increase in other income was the result
of gains on the sale of equipment at both the Greenville and Columbia
facilities.
Sales of products produced at Vista Bakery were higher due to a first quarter
price increase on certain products and higher saltine sales. Net income at
Vista was higher primarily due to increased efficiencies gained through the
closure of the Columbia facility and moving production to the Burlington plant.
Net income increased $1.0 million as a result of the foregoing items.
-8-
<PAGE> 9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Registrant's Annual Meeting of Stockholders held on
April 19, 1996, the following matters were submitted to a vote of
the stockholders of the Registrant:
1. Election of three nominees to the Board of Directors of the
Registrant for terms ending in 1999:
<TABLE>
<CAPTION>
Shares
Voted in Shares
Favor Withheld
---------- ---------
<S> <C> <C>
J.W. Disher 26,896,510 1,161,855
Robert V. Sisk 27,754,593 303,722
Gary E. Costley 27,841,727 216,938
</TABLE>
2. Ratification of the selection of KPMG Peat Marwick LLP as
auditors for the fiscal year ending December 28, 1996, which
was approved by a vote of 28,004,112 shares in favor, 144,826
shares against and 40,509 shares abstaining.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.8* 1996 Lance Annual Incentive Plan adopted April 19,
1996.
10.9* Chairman of the Board Compensation Letter dated
April 19, 1996.
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).
* Management contract
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the twelve weeks
ended June 15, 1996.
Items 1 through 3 and 5 are inapplicable and have been omitted.
SIGNATURES
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 dully authorized.
LANCE, INC.
By: /s/ B. Clyde Preslar
---------------------------
B. Clyde Preslar
Vice President and Principal
Financial Officer
Dated: July 29, 1996
-9-
<PAGE> 1
EXHIBIT 10.8
1996 LANCE ANNUAL INCENTIVE PLAN
The primary purposes of the 1996 Lance Annual Incentive Plan are to:
- Foster within the Company a
discipline of setting goals and
measuring performance against them,
- Emphasize a "pay-for performance"
philosophy and clarify the link
between performance and pay,
- Clearly communicate to all
participants the Company's key goals
and strategies, and the rewards they
will receive when these goals are
achieved,
- Encourage teamwork across
departmental lines by measuring
performance that each participant
can influence but not directly
control,
- Broaden each participant's sense of
ownership of all Lance activities
and results, and
- Improve the competitive
opportunities of Lance's pay program
for executives and middle managers.
For 1996, participants will be eligible to
earn incentive awards based on Company per-
formance in Earnings per Share (EPS).
To achieve the maximum motivational impact,
plan goals and the rewards that will be
received for meeting those goals will be
communicated to participants as soon as
practical after the 1996 plan is approved by
the Compensation/Stock Option Committee of
the Board of Directors.
Each participant will be assigned a Target
Incentive Award, stated as a percent of Base
Salary. The Target Incentive Award, or a
greater or lesser amount based on Attachment
B, will be earned at the end of the plan year
based on the attainment of predetermined
goals.
Following year-end, 100% of the awards earned
will be paid to participants in cash.
<PAGE> 2
Plan Year The period over which performance will be
measured is the Company's fiscal year.
Eligibility and Eligibility in the Plan is limited to
Participation employees who are key to Lance's success.
The Compensation/Stock Option Committee
of the Board of Directors will review and
approve participants nominated by the
President and CEO. Participation in one year
does not guarantee participation in a
following year, but instead will be
reevaluated and determined on an annual basis.
Participants in the Plan may not participate
in any other annual incentive plan (e.g.,
sales incentives, etc.) offered by Lance or
its affiliates.
Attachment A includes the list of 1996
participants approved by the
Compensation/Stock Option Committee at its
April 19, 1996 meeting.
Target Incentive Each participant will be assigned a "Target
Awards Incentive Award" expressed as a percentage
of his or her Base Salary. Participants may
be assigned Target Incentive Awards by
position by salary level or based on other
factors as determined by the President and
CEO.
Target Incentive Awards will be reevaluated
at least every other year, if not annually.
If the job duties of a position change during
the year, or base salary is increased
significantly, the Target Incentive Award
shall be revised as appropriate.
Attachment A lists the Target Incentive Award
for each participant for the 1996 plan year.
These Awards will be reviewed and adjusted
annually by the Compensation/Stock Option
Committee. Target Incentive Awards will be
communicated to each participant as close to
the beginning of the year as practicable, in
writing. Final awards will be calculated by
multiplying each participant's Target
Incentive Award by the appropriate percentage
(based on financial performance for the year,
as described below).
2
<PAGE> 3
Performance Measures The 1996 financial performance measure will
and Weightings be Earnings Per Share. Specific goals and
related possible payouts are shown below.
<TABLE>
<CAPTION>
1996 Goals and Related Payouts
-----------------------------------------------------
Payout as Percent
Performance Measure Goal of Target Award
- -------------------------------------------------------------------------------------
<S> <C> <C>
Financial: Corporate EPS
Threshold * 50% (if both goals met at threshold)
If neither goal met, or if only one goal
met, no payouts will be earned
Target * 100% (if both goals met at target)
Maximum * 150% (if both goals met at maximum)
- -------------------------------------------------------------------------------------
</TABLE>
[*Target level goals not required to be
disclosed.]
The matrix for determining payouts for 1996
is Attachment B, showing all levels of
percent of payout.
The performance measure, specific numerical
goals, and role of individual performance
(when and if applicable) in determining final
payouts will be communicated to each
participant at the beginning of the year.
Final performance awards will be calculated
after the Committee has reviewed the
Company's audited financial statements for
1996 and determined the performance level
achieved.
Threshold, Target and Maximum performance
levels will be defined at the beginning of
each year for each performance measure.
The following definitions for the terms
Maximum, Target and Threshold should help
Lance set the goals for each year, as well as
evaluate the payouts:
- Maximum: Excellent; deserves an
above-market bonus
- Target: "Normal" or expected
performance; deserves market
level bonus
3
<PAGE> 4
- Threshold: Lowest level of
performance deserving payment above
base salary; deserves below market
bonus
- Below threshold: Deserves no
additional pay beyond base salary
Form and Timing of Final award payments will be made in cash as
Payments soon as practicable after award amounts are
approved by the Compensation/Stock Option
Committee of the Board of Directors. All
awards will be rounded to the nearest $100.
Change In Status In the event that a participant changes
positions during the plan year, whether due
to promotion, demotion or lateral move, at
the discretion of the President and CEO,
awards may be prorated for the year based on
the length of time in each position.
An employee hired into an eligible position
during the year may participate in the plan
for the balance of the year on a pro rata
basis.
Certain Terminations of In the event a participant voluntarily
Employment terminates employment or is terminated
involuntarily before the end of the year,
any award will be forfeited. In the event
of death, permanent disability, or normal
or early retirement, the award will be
paid on a pro rata basis after the end of the
plan year. Awards otherwise will be
calculated on the same basis as for other
participants, except that any adjustment for
individual performance will be based on
performance prior to the termination of
employment.
Change In Control In the event of a Change in Control, pro rata
payouts will be made at the greater of (1)
Target or (2) actual results for the
year-to-date, based on the number of days in
the plan year preceding the Change in
Control. Payouts will be made within 30 days
after the relevant transaction has been
completed.
For this purpose, a Change in Control is
defined as when any person, corporation or
other entity and its affiliates (excluding
members of the Van Every Family and any
trust, custodian or fiduciary for the benefit
of any one or more members of the Van Every
Family) acquires or contracts to acquire or
otherwise controls in excess of 35% of the
then outstanding equity securities of the
Company. For the purposes of this
4
<PAGE> 5
plan, the Van Every Family shall mean the
lineal descendants of Salem A. Van Every,
Sr., whether by blood or adoption, and their
spouses.
Withholding The Company shall withhold from award
payments any Federal, foreign, state, or
local income or other taxes required to be
withheld.
Communications Progress reports, should be made to
participants quarterly, showing the
year-to-date performance results, and the
percentage of target awards that would be
earned if results remain at that level for
the entire year.
Executive Officers Notwithstanding any provisions to the
contrary above, participation, Target
Incentive Awards and prorations for executive
officers, including the President and CEO,
shall be approved by the Compensation/Stock
Option Committee.
Governance The Compensation/Stock Option Committee of
the Board of Directors of Lance, Inc. is
ultimately responsible for the administration
and governance of the Plan. Actions
requiring Committee approval include final
determination of plan eligibility and
participation, identification of performance
goals and final award determination. The
decisions of the Committee shall be
conclusive and binding on all participants.
5
<PAGE> 6
Attachment A
[Target Incentive Awards omitted for participants as target levels not required
to be disclosed.]
Attachment B
1996 Lance Annual Incentive Plan
1996 Performance Matrix
Percent of Target Award Earned
<TABLE>
<S> <C> <C> <C> <C>
* 0% 100% 125% 150%
0% 75% 100% 125%
0% 50% 75% 100%
0% 0% 0% 0%
</TABLE>
*
_________________________
[*Target levels not required to be disclosed.]
6
<PAGE> 1
EXHIBIT 10.9
LANCE, INC.
QUALITY SNACK FOODS SINCE 1913
P.O. BOX 32368
CHARLOTTE, NC 28232-2368 USA
PHONE (704) 554-1421
April 19, 1996
Mr. Scott C. Lea
Charlotte, North Carolina
Re: Chairman of the Board
Dear Scott:
This is to formally confirm our understanding with respect to your
position as Chairman of the Board of Lance, Inc. as approved by the Board of
Directors at its meeting on April 19, 1996.
As Chairman, your compensation and tenure will be as set forth in the
memorandum attached to this letter. Your monthly compensation begins with
April 1996. As we have discussed, in addition to serving as Chairman of the
Board you will provide Lance with general business consulting services, with
emphasis on overall strategic planning, management development, creation of
stockholder value and major policy matters. In this connection, it is
contemplated that you will work closely with me and will devote such time as is
reasonably necessary; however, it is not anticipated that you will necessarily
be involved on a day-to-day basis, that you will be required to devote more
than 30 hours per week or that these services will interfere with your normal
vacation and civic and charitable pursuits.
For the purposes of your incentive compensation, the mean price of
Lance Common Stock is $15.8125 per share.
If you concur that this letter, together with the attachment,
correctly describes our arrangement, please so indicate in the space provided
below on the enclosed copy of this letter and return it to me.
On behalf of myself and the Directors and stockholders of Lance, Inc.,
we appreciate very much your agreeing to serve in this capacity, and I
personally look forward to working with you over the next several years.
Very truly yours,
/s/ Paul A. Stroup III
----------------------
Paul A. Stroup III
President
Agreed:
/s/ Scott C. Lea
- ---------------------
Scott C. Lea
<PAGE> 2
LANCE, INC.
Chairman of the Board Compensation
1. The Chairman of the Board of Directors (a non-executive
chairman) of Lance, Inc. (the Company) will be paid a fee at the rate of
$16,500 per month for service as Chairman of the Board of Directors. This will
be paid to the Chairman of the Board as a consulting fee and will be in lieu of
any other fees payable to non-employee Directors. The Chairman of the Board
will be an independent contractor, so no tax or other amounts will be withheld
from the monthly fee. The Chairman of the Board will participate in the
Company's 1995 Nonqualified Stock Option Plan for Non-Employee Directors but as
an independent contractor will not participate in any of the Company's employee
benefit plans. In the event of the death of the Chairman of the Board while
serving as such or onset of disability such that the Chairman of the Board
cannot function as such, the Chairman of the Board's term shall terminate upon
death or onset of disability but the monthly fee will be continued for 12
months after the death or onset of disability of the Chairman of the Board.
2. The Chairman of the Board will be paid an initial amount of
$49,500 for consulting prior to election as Chairman of the Board and an
additional amount of $49,500 to encourage and facilitate the acquisition and
holding by the Chairman of the Board of additional shares of the Common Stock
of the Company (the Common Stock), all as recommended by the Compensation
Committee. The Chairman of the Board will agree to invest these initial
amounts in shares of the Common Stock of the Company promptly, consistent with
applicable securities laws. The Chairman of the Board will agree to retain
such shares of Common Stock while serving as Chairman of the Board.
3. Unless sooner terminated upon death or onset of disability,
the Chairman of the Board will serve for three years subject to annual renewal
upon the mutual agreement of the Chairman of the Board and the President of the
Company at the beginning of the second and third years of the three-year term.
4. As incentive compensation, the Chairman of the Board will be
paid $10,000 for each 1% that the Highest Average Sales Price (as defined
below) of the Company's Common Stock exceeds the mean of the high and low
prices of the Common Stock on the NASDAQ Stock Market on April 19, 1996. Such
incentive compensation shall be paid in one lump sum upon the earlier of (a)
two years after completion of service as Chairman of the Board or (b) a Change
of Control (as defined below). For example, if the price is $16 and the
Highest Average Sales Price is $32, this would result in a 100% increase and
incentive compensation of $1,000,000.
<PAGE> 3
5. For purposes of determining incentive compensation, the
Highest Average Sales Price means the average of the highest sales price of the
Company's Common Stock on the NASDAQ Stock Market (or a national securities
exchange if the Common Stock is so listed) during four consecutive interim
(quarterly accounting) periods of the Company which have the highest average
sales price for the Common Stock of the Company beginning with the interim
period which began on March 24, 1996 and ending with the interim period in
March which is 23 months or more after the termination of service as Chairman
of the Board. For example, if the Chairman of the Board served for only one
year, the calculation period would run from March 24, 1996 until the end of the
first interim accounting period in March 1999 with incentive compensation
payable in April 1999.
6. In the event of a Change of Control as defined in the
Company's Executive Employment Agreements, the Highest Average Sales Price
shall be deemed to be the highest per share consideration paid or payable for
the Company's Common Stock in connection with the transaction that results in a
Change of Control. In the event the Company or its stockholders receive a bona
fide, adequately financed offer or tender offer for a transaction, which could
result in a Change of Control, and such offer or tender offer is or becomes
available to the Company's stockholders, the Highest Average Sales Price shall
be the higher of the per share consideration payable for the Company's Common
Stock in connection with such offer or tender offer or the Highest Average
Sales Price determined in accordance with Section 5 above.
4/19/96
2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF LANCE, INC. FOR THE TWENTY-FOUR WEEKS ENDED JUNE 15,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> JUN-15-1996
<CASH> 23,926
<SECURITIES> 25,810
<RECEIVABLES> 33,759
<ALLOWANCES> 900
<INVENTORY> 23,092
<CURRENT-ASSETS> 112,856
<PP&E> 337,904
<DEPRECIATION> 212,699
<TOTAL-ASSETS> 244,573
<CURRENT-LIABILITIES> 29,918
<BONDS> 0
0
0
<COMMON> 25,073
<OTHER-SE> 164,602
<TOTAL-LIABILITY-AND-EQUITY> 189,675
<SALES> 222,213
<TOTAL-REVENUES> 222,213
<CGS> 109,063
<TOTAL-COSTS> 206,345
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 19,201
<INCOME-TAX> 7,381
<INCOME-CONTINUING> 11,820
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,820
<EPS-PRIMARY> .39
<EPS-DILUTED> .39
</TABLE>
