<PAGE> 1
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 the Quarter (Twelve Weeks) Ended June 14, 1997
------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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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
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(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 -
29,898,204 shares outstanding as of July 25, 1997
<PAGE> 2
LANCE, INC. AND SUBSIDIARIES
INDEX
Page
----
PART I. FINANCIAL INFORMATION:
Financial Statements:
Condensed Consolidated Balance Sheets -
June 14, 1997 (Unaudited) and December 28, 1996.................. 3
Condensed Statements of Consolidated Income and
Retained Earnings (Unaudited) - Twelve Weeks and
Twenty-Four Weeks Ended June 14, 1997 and June 15, 1996.......... 4
Condensed Statements of Consolidated Cash Flows (Unaudited)
Twenty-Four Weeks Ended June 14, 1997 and June 15, 1996.......... 5
Notes to Condensed Consolidated Financial Statements (Unaudited)....6-7
Management's Discussion and Analysis of Financial Condition and
Results of Operations ...........................................8-9
PART II. OTHER INFORMATION:
Submission Of Matters To A Vote Of Security Holders.................10
Exhibits and Reports on Form 8-K....................................11
SIGNATURES.............................................................11
----------
2
<PAGE> 3
LANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS, JUNE 14, 1997, (UNAUDITED) AND
DECEMBER 28, 1996
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
ASSETS: 1997 1996
--------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 33,395 $ 32,272
Marketable securities 26,433 25,482
Accounts receivable (less
allowance for doubtful accounts) 34,069 29,542
Accrued interest receivable 401 468
Inventories - (Note 3) 19,873 22,175
Deferred income tax benefit 8,333 7,099
--------- --------
Total current assets 122,504 117,038
--------- --------
PROPERTY, NET 125,167 124,124
--------- --------
OTHER ASSETS:
Deposits 1,300 2,069
Prepayments, etc 4,152 3,974
--------- --------
Total other assets 5,452 6,043
--------- --------
TOTAL $ 253,123 $247,205
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable $ 8,457 $ 7,050
Accrued liabilities 31,167 28,698
--------- --------
Total current liabilities 39,624 35,748
--------- --------
OTHER LIABILITIES AND DEFERRED CREDITS
Deferred income taxes 8,885 6,553
Accrued postretirement health care costs 10,466 10,034
Accrual for insurance claims 6,518 6,458
Supplemental retirement benefits 3,427 3,550
--------- --------
Total other liabilities and deferred credits 29,296 26,595
--------- --------
STOCKHOLDERS' EQUITY:
Common stock $.83 1/3 par value (authorized:
75,000,000 shares; issued 29,897,015
shares in 1997; 29,888,265 in 1996) 24,914 24,907
Additional paid in capital 537 --
Unamortized portion of restricted stock awards (522) --
Retained earnings 159,074 159,700
Net unrealized gain on marketable securities 200 255
--------- --------
Total stockholders' equity 184,203 184,862
--------- --------
TOTAL $ 253,123 $247,205
========= ========
</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 14, 1997 AND JUNE 15, 1996
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED TWENTY-FOUR WEEKS ENDED
June 14, 1997 June 15, 1996 June 14, 1997 June 15, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET SALES AND OTHER OPERATING REVENUE $ 118,107 $112,639 $230,910 $223,243
--------- -------- -------- --------
COST OF SALES AND OPERATING EXPENSES:
Cost of sales 55,428 53,544 109,971 109,063
Selling and delivery expenses 44,785 42,852 88,114 85,816
General and administrative expenses 4,702 4,952 9,235 9,252
Contributions to employees' profit sharing
retirement fund 1,446 1,117 2,568 2,120
--------- -------- -------- --------
Total 106,361 102,465 209,888 206,251
--------- -------- -------- --------
PROFIT FROM OPERATIONS 11,746 10,174 21,022 16,992
OTHER INCOME, NET 1,108 737 1,838 2,209
--------- -------- -------- --------
INCOME BEFORE INCOME TAXES 12,854 10,911 22,860 19,201
INCOME TAXES 4,919 4,182 8,777 7,381
--------- -------- -------- --------
NET INCOME 7,935 6,729 14,083 11,820
RETAINED EARNINGS AT BEGINNING OF FISCAL
PERIOD 158,303 167,787 159,700 170,964
--------- -------- -------- --------
TOTAL 166,238 174,516 173,783 182,784
LESS:
CASH DIVIDENDS 7,175 7,249 14,345 14,514
RETIREMENT OF COMMON STOCK, NET (11) 2,792 364 3,795
--------- -------- -------- --------
RETAINED EARNINGS AT END OF FISCAL PERIOD $ 159,074 $164,475 $159,074 $164,475
========= ======== ======== ========
PER SHARE AMOUNTS (NOTE 4)
Net income $ 0.27 $ 0.22 $ 0.47 $ 0.39
========= ======== ======== ========
Cash dividends $ 0.24 $ 0.24 $ 0.48 $ 0.48
========= ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements (unaudited).
4
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LANCE, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
FOR THE TWENTY-FOUR WEEKS ENDED JUNE 14, 1997 AND JUNE 15, 1996
(In thousands)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 14,083 $ 11,820
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation 9,586 10,056
Deferred income taxes 1,061 332
Gain on sale of property (2,004) (1,246)
Other, net 1,241 467
Changes in operating assets and liabilities 2,089 9,133
-------- --------
Net cash flow from operating activities 26,056 30,562
-------- --------
INVESTING ACTIVITIES:
Purchases of property (15,975) (8,520)
Proceeds from sale of property 6,720 1,959
Purchases of marketable securities (10,524) (4,324)
Sales of marketable securities 1,721 2,067
Maturities of marketable securities 7,665 8,073
Other, net 187 40
-------- --------
Net cash used in investing activities (10,206) (705)
-------- --------
FINANCING ACTIVITIES:
Dividends paid (14,345) (14,514)
Purchases of Company's stock, net (382) (4,002)
-------- --------
Net cash used in financing activities (14,727) (18,516)
-------- --------
INCREASE IN CASH 1,123 11,341
CASH AT BEGINNING OF PERIOD 32,272 12,585
-------- --------
CASH AT END OF PERIOD $ 33,395 $ 23,926
======== ========
SUPPLEMENTAL INFORMATION:
Cash paid for income taxes $ 3,915 $ 3,442
======== ========
</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 14, 1997 and December 28, 1996, the consolidated results of operations
for the twelve weeks and twenty-four weeks ended June 14, 1997 and June 15,
1996 and the consolidated cash flows for the twenty-four weeks ended June
14, 1997 and June 15, 1996. All 1996 amounts have been reclassified to
conform with the 1997 presentation.
2. The consolidated results of operations for the twelve and twenty-four weeks
ended June 14, 1997 and June 15, 1996 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
determining the cost of substantially all of its inventories. Because
inventory calculations under the LIFO method are based on annual
determinations, the determination of interim LIFO valuations requires that
estimates be made of year-end costs and levels of inventories. The
possibility of variation between estimated year-end costs and levels of
LIFO inventories and the actual year-end amounts may materially affect the
results of operations as finally determined for the full year.
Inventories at June 14, 1997 and December 28, 1996 consisted of (in
thousands):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Finished goods $14,535 $14,600
Goods in process 51 52
Raw materials 6,424 6,784
Supplies, etc 4,691 6,926
------- -------
Total inventories at FIFO cost 25,701 28,362
Less: Adjustment to reduce FIFO costs to LIFO 5,828 6,187
------- -------
Total inventories at LIFO cost $19,873 $22,175
======= =======
</TABLE>
4. Per share amounts for the twelve and twenty-four weeks ended June 14, 1997
are computed based on 29,886,544 and 29,879,800 shares of common stock
outstanding, respectively. 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. The dilutive effect of
stock options is not material.
6
<PAGE> 7
LANCE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
5. The 1997 Incentive Equity Plan (the "Plan") was approved by stockholders of
the Company on April 18, 1997. The Plan provides for the granting of stock
options, with or without stock appreciation rights, the award of shares of
restricted stock and other incentive awards to managerial and other key
employees of the Company and its subsidiaries up to a maximum of 1,500,000
shares.
Common Stock Options
Options may be granted in the form of incentive stock options or
non-qualified stock options. The terms and conditions of each option and of
any stock appreciation right are to be determined by the Compensation/Stock
Option Committee ("the Committee") of the Board of Directors at the time of
grant.
During the twelve weeks ended June 14, 1997, the Committee granted 299,400
non-qualified options at the fair market value as of the date of grant. The
options vest 25% each year for four years subsequent to the date of grant.
Restricted Stock Awards
The Plan provides for the issuance of restricted stock on terms and
conditions determined by the Committee, including applicable restrictions.
Such restrictions may include the continued service of the participant for
specified periods, the attainment of specified performance goals or any
other conditions determined by the Committee. During the period of
restriction, the participant may exercise full voting rights and receive
cash dividends; however, the participant cannot sell, transfer, pledge,
assign or hypothecate the restricted shares until the restrictions have
been satisfied.
During the twelve weeks ended June 14, 1997, the Committee awarded 11,700
shares of restricted stock which vest 50% after two years and the balance
after four years. The fair value as of the date of award was credited to
Common Stock and Additional Paid In Capital with a corresponding amount
charged to Unamortized Portion of Restricted Stock Awards.
The Committee also awarded 18,500 shares of restricted stock which vest at
the end of fiscal 1999 subject to attainment of specified performance
goals. In the case of this performance restricted stock, Additional Paid In
Capital and Unamortized Portion of Restricted Stock Awards are adjusted
based on changes in the market value of the stock and the number of shares
subject to the performance restrictions.
The Unamortized Portion of Restricted Stock Awards is charged to General
and Administrative expenses over the respective vesting periods and
amounted to $40,000 during the twelve weeks ended June 14, 1997.
7
<PAGE> 8
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 $2.1 million from
December 28, 1996. Net cash flow from operating activities and the proceeds from
the sale of property (primarily the closed production facility in Columbia,
South Carolina) were mostly offset by cash used for payment of dividends and
capital expenditures.
Accounts receivable increased $4.5 million from December 28, 1996 due to the
timing of the billing cycle and higher sales volume. Inventories decreased $2.3
million primarily due to lower quantities of packaging and supplies.
Property, net has increased by $1.0 million from December 28, 1996 due to
purchases of $16.0 million offset by depreciation, the sale of property and
additional valuation reserves taken during the Company's first quarter on the
Greenville, Texas production facility which was closed in February 1996.
Accounts payable increased $1.4 million due to the timing of expenditures and
increased purchases of property. Accrued liabilities increased $2.5 million from
December 28, 1996 primarily due to an increase in current taxes payable.
Current commitments for capital expenditures total approximately $15.3 million.
Quarter (12 Weeks ) Ended June 14, 1997 Compared to Quarter (12 Weeks) Ended
June 15, 1996
Net sales and other operating revenues were $5.5 million, or 4.9%, higher than
last year. Improving sales force effectiveness and increased penetration of key
distribution channels produced stronger sales for Lance branded products. Vista
Bakery benefited from volume increases as well as improved pricing. Cost of
sales as a percentage of sales declined due to improved efficiencies in raw
material and labor utilization and lower flour costs.
Selling and delivery expenses increased $1.9 million from last year due to an
increase in trade promotional allowances, advertising and other marketing
support. This support included costs associated with a new media campaign.
Increases in promotional selling costs were partially offset by improved
efficiencies throughout the sales and vending routes. General and administrative
expenses decreased $0.3 million from last
8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
year primarily due to lower professional and consulting fees. The provision for
contributions to the profit sharing retirement fund increased by $0.3 million
compared to last year due to the increased profitability.
Other income increased $0.3 million from last year due to higher interest income
on higher balances of marketable securities, cash and cash equivalents and due
to net gains on asset dispositions.
As a result of the factors discussed above, net income for the twelve weeks
ended June 14, 1997 increased by $1.2 million compared to last year.
24 Weeks Ended June 14, 1997 Compared to 24 Weeks Ended June 15, 1996
Net sales and other operating revenues were $7.7 million, or 3.4%, higher than
last year reflecting improvements in sales in core markets and new distribution
efforts. Sales at Vista Bakery increased both in volume and pricing. Cost of
sales as a percentage of sales declined due to improved efficiencies in raw
material and labor utilization and lower flour costs.
Selling and delivery expenses increased $2.3 million from last year due to an
increase in marketing support. The provision for contributions to the profit
sharing retirement fund increased by $0.4 million compared to last year due to
the increased profitability.
Other income decreased $0.4 million from last year due primarily to lower net
gains on asset dispositions. During the quarter ended March 23, 1996, a pretax
gain of $0.9 million was realized on the sale of equipment from the Greenville,
Texas facility.
As a result of the factors discussed above, net income for the twenty-four weeks
ended June 14, 1997 increased by $2.3 million compared to last year.
9
<PAGE> 10
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 18,
1997, the following matters were submitted to a vote of the
stockholders of the Registrant:
1. Election of nominees to the Board of Directors of the Registrant:
<TABLE>
<CAPTION>
Shares
Voted Shares
In Favor Withheld
---------- ----------
<S> <C> <C>
For term ending in 1999:
Scott C. Lea 26,446,700 281,794
For terms ending in 2000:
Paul A. Stroup, III 26,422,282 306,212
William R. Holland 26,456,380 272,114
Richard A. Zimmerman 26,455,905 272,589
Isaiah Tidwell 26,455,580 272,914
</TABLE>
2. Approval of the Lance, Inc. 1997 Incentive Equity Plan by a vote
of 22,710,533 shares in favor, 1,353,440 shares against, and
186,741 shares abstaining. There were 2,588,457 shares of broker
non-votes.
3. Ratification of the selection of KPMG Peat Marwick LLP as
auditors for the fiscal year ending December 27, 1997 which was
approved by a vote of 26,635,829 shares in favor, 33,628 shares
against and 59,037 shares abstaining.
10
<PAGE> 11
PART II. OTHER INFORMATION (continued):
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Lance, Inc. 1995 Nonqualified Stock Option Plan for
Non-Employee Directors, as amended on April 18, 1997.
10.2 Lance, Inc. 1997 Incentive Equity Plan, incorporated herein
by reference to Exhibit 4 to the Registrant's Registration
Statement on Form S-8, File No. 333-25539.
10.3 Lance, Inc. Annual Corporate Performance Incentive Plan -
Officers - 1997.
10.4 Lance, Inc. Long-Term Incentive Plan - Officers - 1997.
27 Financial Data Schedule (Filed in electronic format only.
Pursuant to Rule 402 of Regulation S-T, this schedule shall
not be deemed filed for purposes of Section 11 of the
Securities Act of 1933 or Section 18 of the Securities
Exchange Act of 1934).
99 Cautionary Statement under Safe Harbor Provisions of the
Private Securities Litigation Reform Act of 1995.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the 12 weeks ended June
14, 1997.
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 the Report to be signed on its behalf by the
undersigned thereunto duly authorized.
LANCE, INC.
By: /s/ B. Clyde Preslar
-----------------------------
B. Clyde Preslar
Vice President and Principal
Financial Officer
Dated: July 28, 1997
11
<PAGE> 1
Exhibit 10.1
LANCE, INC.
1995 NONQUALIFIED STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
1. PURPOSE. This Plan is intended to provide Directors who are not
employees of the Company a sense of proprietorship and personal involvement in
the development and financial success of the Company and to encourage such
Directors to remain with and to devote their best efforts to the Company.
2. DEFINITIONS. Whenever used in the Plan, unless the context clearly
indicates otherwise, the following terms shall have the following meanings:
(a) "Act" means the Securities Exchange Act of 1934, as amended.
(b) "Board" or "Board of Directors" means the Board of Directors of
the Company.
(c) "Common Stock" means the Common Stock, $.83-1/3 par value, of the
Company and any other stock or securities resulting from the adjustment
thereof or substitution therefor as described in Section 8 below.
(d) "Company" means Lance, Inc., a North Carolina corporation, and any
corporation succeeding to the Company's rights and obligations hereunder.
(e) "Director" means a member of the Board of Directors of the Company
who is not a regular employee of the Company or its subsidiaries.
(f) "Disability" means the condition which results when an individual
has become permanently and totally disabled within the meaning of Section
105(d)(4) of the Internal Revenue Code of 1986.
(g) "Fair Market Value", with respect to a share of the Common Stock
on a particular date, shall be (i) if such Common Stock is listed on a
national securities exchange or a foreign securities exchange or traded on
the National Market System, the closing sale price of the Common Stock on
said date on the national securities exchange, the foreign securities
exchange or the National Market System on which the Common Stock is
principally traded, or, if no sales occur on said date, then on the next
preceding date on which there were such sales of Common Stock, or (ii) if
the Common Stock shall not be listed on a national securities exchange or a
foreign securities exchange or traded on the National Market System, the
mean between the closing bid and asked prices last reported by the National
Association of Securities Dealers, Inc. for the over-the-counter market on
said date or, if no bid and asked prices are reported on said date, then on
the
<PAGE> 2
next preceding date on which there were such quotations, or (iii) if at any
time quotations for the Common Stock shall not be reported by the National
Association of Securities Dealers, Inc. for the over-the-counter market and
the Common Stock shall not be listed on any national securities exchange or
any foreign securities exchange or traded on the National Market System,
the fair market value based on quotations for the Common Stock by market
makers or other securities dealers as determined by the Board of Directors
in such manner as the Board may deem reasonable.
(h) "Option" means a stock option granted pursuant to this Plan.
(i) "Optionee" means the person to whom an Option is granted.
(j) "Option Price" is defined in Section 6.
(k) "Plan" means this 1995 Nonqualified Stock Option Plan for
Non-Employee Directors, as in effect from time to time.
(l) "Stock Option Agreement" means the written agreement between an
Optionee and the Company evidencing the grant of an Option under the Plan
and setting forth or incorporating the terms and conditions thereof.
3. ADMINISTRATION. The Plan shall be administered by the Board of
Directors. The Board shall have all of the powers necessary to enable it
properly to carry out its duties under the Plan, including but not limited to
the power and duty to construe and interpret the Plan and to determine all
questions that shall arise under the Plan, which interpretations and
determinations shall be conclusive and binding upon all persons. Subject to the
express provisions of the Plan, the Board may establish from time to time such
regulations, provisions and procedures which in its opinion may be advisable in
the administration of the Plan.
Notwithstanding the foregoing or any other provision of this Plan to the
contrary, no discretion concerning decisions regarding the Plan shall be
afforded to a person who is not a "disinterested person" (as defined in the
rules and regulations of the Securities and Exchange Commission under Section 16
of the Act, as in effect from time to time). In the event that it is necessary
for the proper administration of the Plan to exercise any such discretion, and
the Board is so precluded from exercising such discretion, the Board may
delegate any authority to exercise such discretion to a person or committee of
persons, each of whom is a "disinterested person" as so defined.
4. ELIGIBILITY; OPTION GRANTS. Each Director serving on May 1 of each
calendar year beginning May 1, 1995 shall automatically be granted an option to
purchase shares of the Common Stock on May 1 of such calendar year. The first
such Option for a Director shall be for 2,500 shares and each subsequent Option
shall be for 4,000 shares with the number of shares being subject to adjustment
or substitution as provided in Section 8 hereof; provided, however,
2
<PAGE> 3
that such automatic grants shall be made pro rata to all Directors if on the
date of a grant there shall not be a sufficient number of shares of Common Stock
available under the Plan to make all such grants.
5. SHARES AVAILABLE FOR OPTION. The Board of Directors shall reserve for
the purposes of the Plan, and by adoption of the Plan does hereby reserve, out
of the authorized but unissued Common Stock, a total of 100,000 shares of Common
Stock of the Company, subject to adjustment or substitution as provided in
Section 8 hereof. In the event that an Option expires or is terminated
unexercised as to any shares covered thereby, such shares shall not thereafter
be available for the granting of Options under the Plan and the reserve for such
shares shall be terminated.
6. OPTION PRICE. The price at which each share of Common Stock, subject to
adjustment as provided in Section 8 hereof, may be purchased upon the exercise
of an Option (the "Option Price") shall be the Fair Market Value of the shares
of Common Stock subject to the Option on the date such Option is granted.
7. EXERCISE OF OPTIONS.
(a) Each Option by its terms shall require the Optionee granted such
Option to remain available to serve as a Director of the Company for one
year from the date of the grant of such Option before the right to exercise
any part of such Option will accrue; provided, however, the first such
Option granted to a Director by its terms shall require the Optionee to
remain available to serve as a Director of the Company for only six months
from the date of grant of such Option before the right to exercise any part
of such Option will accrue. The Optionee may thereafter exercise any or all
of such option until the expiration or termination of the option; provided,
that not less than 100 shares may be purchased at any one time unless the
number of shares purchased is the total number at such time purchasable
under the Option. Subject to earlier termination as provided herein, all
Options granted shall expire ten years from the date of grant thereof.
(b) If an Optionee shall cease to be a Director otherwise than by such
Optionee's death or Disability, then, subject to Subsection 7(a) hereof,
the Option shall be exercisable at any time prior to the earlier of (i) the
expiration date of such Option or (ii) that date which is three months from
the date such Optionee ceases to be a Director, such three month period to
include the date on which such termination occurs. If an Optionee ceases to
be a Director as a result of such Optionee's death or Disability, then,
subject to Subsection 7(a) hereof, the Option shall be exercisable at any
time prior to the earlier of (i) the expiration date of such option or (ii)
that date which is one year from the date such Optionee ceases to be a
Director.
(c) Each Option by its terms shall not be transferable by the Optionee
otherwise than by will, or if the Optionee dies intestate, by the laws of
descent and
3
<PAGE> 4
distribution, and such Option shall be exercisable during such Optionee's
lifetime only by such Optionee. In the event of the death of an Optionee,
then such Optionee's Options shall be exercisable to the extent herein
provided by the executor or personal representative of the Optionee's
estate or by any person who acquired the right to exercise such Option by
bequest under the Optionee's will or by inheritance.
(d) Each Option shall be confirmed by a Stock Option Agreement.
(e) The Option Price for each share of Common Stock purchased pursuant
to the exercise of each Option shall, at the time of the exercise of the
Option, be paid in full in cash or equivalent. An Option shall be deemed
exercised only when written notice of such exercise, together with payment
of the Option Price, is received from the Optionee by the Company at its
principal office. No Optionee shall have any rights as a shareholder of the
Company with respect to Common Stock issuable pursuant to such Optionee's
Option until such Option is duly exercised.
(f) To the extent that an Option is not exercised within the period of
time prescribed therefor as set forth in the Plan, the Option shall lapse
and all rights of the Optionee thereunder shall terminate.
8. ADJUSTMENT OF NUMBER OF SHARES. In the event that a dividend shall be
declared on the Common Stock payable in shares of the Common Stock, the number
of shares of Common Stock subject to grant to each Director each calendar year,
the number of shares then subject to any Option and the number of shares
reserved for issuance pursuant to the Plan shall be adjusted by adding to each
such share the number of shares which would be distributable thereon if such
share had been outstanding on the date fixed for determining the shareholders
entitled to receive such stock dividend. In the event that the outstanding
shares of Common Stock generally shall be changed into or exchanged for a
different number or kind of shares of stock or other securities of the Company
or of another corporation, or changed into or exchanged for cash or property or
the right to receive cash or property (but not including any dividend payable in
cash or property other than a liquidating distribution), whether through
reorganization, recapitalization, stock split-up, combination of shares, merger
or consolidation, then there shall be substituted for each share of Common Stock
subject to grant to each Director each calendar year and subject to any Option,
and for each share of Common Stock reserved for issuance pursuant to the Plan,
the number and kind of shares of stock or other securities or cash or property
or right to receive cash or property into which each outstanding share of Common
Stock shall be so changed or for which each such share shall be exchanged. In
the case of any such substitution or adjustment as provided for in this Section
8, the Option Price for each share covered thereby prior to such substitution or
adjustment shall be the Option Price for all shares of stock or other securities
or cash or property or right to receive cash or property which shall have been
substituted for such share or to which such share shall have been adjusted
pursuant to this Section 8. No adjustment or substitution provided for in this
Section 8 shall require the Company in any Stock Option Agreement to issue a
fractional share and the total substitution or adjustment with respect to each
Stock Option Agreement shall be limited accordingly.
4
<PAGE> 5
9. AMENDMENT OF PLAN. The Board of Directors shall have the right to amend,
suspend or terminate the Plan at any time; provided that, except as and to the
extent authorized and permitted by Section 8 above, (a) no amendment, suspension
or termination shall adversely affect the rights of any Optionee as to any
outstanding Option without the consent of such Optionee, subject to any
limitation on such rights set forth in the Plan or such Optionee's Stock Option
Agreement except for any amendment the Board deems necessary to preserve or
provide exemptions from the applicability of Section 16(b) of the Act to the
grant, lapse, disposition, cancellation or exercise of Options; and (b) no
amendment relating to the determination of the Optionees or of the grant dates
or of the number of Options granted to any Optionee, or of the requirement that
no discretion concerning decisions regarding the Plan shall be afforded to a
person who is not a "disinterested person," shall be made more than once every
six months, other than to comport with changes in the Internal Revenue Code of
1986 or the rules thereunder.
10. RESALES OF SHARES. The Company may impose such restrictions on the sale
or other disposition of shares issued pursuant to the exercise of Options as the
Board deems necessary to comply with applicable securities laws. Certificates
for shares issued upon the exercise of Options may bear such legends as the
Company deems necessary to give notice of such restrictions.
11. COMPLIANCE WITH LAW AND OTHER CONDITIONS. No shares shall be issued
pursuant to the exercise of any Option prior to compliance by the Company, to
the satisfaction of its counsel, with any applicable laws. The Company shall not
be obligated to (but may in its discretion) take any action under applicable
federal or state securities laws (including registration or qualification of the
Plan, the Options or the Common Stock) necessary for compliance therewith in
order to permit the issuance of shares upon the exercise of Options or the
immediate resale thereof by Optionees, except for actions (other than
registration or qualification) that may be taken by the Company without
unreasonable effort or expense and without the incurrence of any material
exposure to liability.
12. NONQUALIFIED OPTIONS. Options granted under the Plan will not be
treated as "incentive stock options" under Section 422 of the Internal Revenue
Code of 1986.
13. EFFECTIVE DATE. The Plan shall be effective on February 21, 1995,
subject to approval of the Plan by a plurality of the shares voting on the
approval of the Plan at the 1995 Annual Meeting of Stockholders. Until such
approval shall be obtained, no Options shall be exercisable and if such approval
shall not be obtained prior to the completion of the 1995 Annual Meeting of
Stockholders, this Plan and all Options granted hereunder shall be void.
5
<PAGE> 1
Exhibit 10.3
LANCE, INC.
ANNUAL CORPORATE PERFORMANCE INCENTIVE PLAN
OFFICERS
Purposes and Introduction
The primary purposes of the Annual Corporate Performance Incentive Plan for
Officers for 1997 are to:
- Motivate behaviors that lead to the successful achievement of
specific financial and operations goals that support Lance's
stated business strategy.
- Emphasize link between participants' performance and rewards for
meeting predetermined, specific goals.
- Improve the competitiveness of total cash pay opportunities.
- Help establish performance orientation at Lance and communicate
to employees that greater responsibility carries greater rewards
because more pay is "at risk."
For 1997, participants will be eligible to earn incentive awards based on
Company performance 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 1997 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, 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.
Plan Year
The period over which performance will be measured is the Company's fiscal
year.
<PAGE> 2
Eligibility and Participation
Eligibility in the Plan is limited to Officers 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 1997 participants approved by the
Compensation/Stock Option Committee at its January 13, 1997 meeting.
Target Incentive Awards
Each participant will be assigned a Target 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
1997 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
Individual Performance
Each Officer will receive 75% of his or her Incentive Award based on the
Target Incentive Award calculations including Earnings Per Share and the
Profitable Revenue Growth Multiplier. The remaining 25% of each Officer's
Incentive Award will be placed in a pool for all of the Officers with the amount
to be received by each Officer based upon the determination by the
Compensation/Stock Option Committee in its discretion as to the individual
performance of the Officer in meeting his or her individual goals for the year.
Thus, each Officer could receive none, a portion or all of the pool composed of
25% of the Incentive Awards of each Officer, based on individual performance.
Performance Measures and Weightings
The 1997 financial performance measure will be Earnings Per Share, plus a
Profitable Revenue Growth Multiplier. Specific goals and related payouts are
shown below.
1997 Goals and Related Payouts
-----------------------------------------------
Payout as Percent
Performance Measure Goal of Target Award
- -------------------------------------------------------------------------------
Financial: Corporate EPS
Minimum * 50% (if met at minimum)
If minimum is not met, no
payouts will be earned
Target * 100% (if met at target)
Maximum * 150% (if met at
maximum)
- -------------------------------------------------------------------------------
[*Target level goals not required to be disclosed.]
Percent of payout will be determined on a straight line basis between
minimum and maximum.
The performance measure, specific numerical goals, and role of individual
performance 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 1997 and determined the performance level achieved.
3
<PAGE> 4
Minimum, 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 Minimum 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
- Minimum: Lowest level of performance deserving payment above base
salary; deserves below market bonus
- Below minimum: Deserves no additional pay beyond base salary
Profitable Revenue Growth Multiplier
For 1997, there will be a Profitable Revenue Growth Multiplier which will
increase the amount of Incentive Awards for exceeding the 1997 Incentive Plan
revenue growth with Revenues at or above planned operating profit margin as
follows:
Revenue in excess of Profitable Revenue
1997 Incentive Plan Growth Multiplier
------------------- -----------------
* % 120%
* % 115%
* % 110%
* % 105%
* % 100%
Revenues are defined as net sales plus vending income.
[* Target levels not required to be disclosed.]
Form and Timing of Payments
Final award payments will be made in cash as 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.
4
<PAGE> 5
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 Employment
In the event a participant voluntarily 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 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.
5
<PAGE> 6
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.
6
<PAGE> 7
Attachment A
[Target Incentive Awards omitted for participants as
target levels not required to be disclosed.]
7
<PAGE> 1
Exhibit 10.4
LANCE, INC.
LONG-TERM INCENTIVE PLAN
OFFICERS
Purposes and Introduction
The primary purposes of the Long-Term Incentive Plan for Officers for 1997
are to:
- Align executives' interests with those of stockholders by linking
substantial portion of pay to the price of Lance Common Stock.
- Provide a way to attract and retain key executives and senior
managers who are critical to Lance's future success.
- Increase total pay for executives and senior managers to
competitive levels.
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 1997 Incentive Equity Plan is approved by the
Stockholders.
Each participant will be assigned a Target Award, stated as a percent of
Base Salary. The Target Award, or a greater or lesser amount, will be earned
based on the attainment of predetermined goals.
Plan Years
The period over which performance will be measured is the Company's fiscal
year and the two, three and four year periods after the date of grant of awards.
Eligibility and Participation
Eligibility in the Plan is limited to Executive Officers and senior
managers 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 will be reevaluated and determined on an
annual basis.
Attachment A includes the list of 1997 participants approved by the
Compensation/Stock Option Committee at its January 13, 1997 meeting. Initial
awards will be made as soon as possible after the approval by the stockholders
of the Lance, Inc. 1997 Incentive Equity Plan.
<PAGE> 2
Target Awards
Each participant will be assigned a Target Award expressed as an economic
value equal to a percentage of his or her Base Salary. Participants may be
assigned Target Awards by position by salary level or based on other factors as
determined by the President and CEO.
Target 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 Award shall be revised as appropriate.
Attachment A lists the Target Award for each participant for the 1997 plan
year. These Awards will be reviewed and adjusted annually by the
Compensation/Stock Option Committee. Target Awards will be communicated to each
participant as close to the beginning of the year as practicable, in writing.
Awards will be calculated by multiplying each participant's Target Award by the
appropriate percentages, as described below.
- Target Awards shall be calculated as follows:
Percentage of Base Salary for
Performance Tier 1997 Target Awards
1 *%
2 *%
3 *%
- For 1997, Target Awards will be allocated as follows:
As a Percentage of Base Salary
Restricted Stock
----------------
Performance 100% of Stock
Tier of Target Options Regular Performance
---- --------- ------- ------- -----------
1 *% *% *% *%
2 *% *% *% *%
3 *% *% *% *%
- To determine the number of shares of stock issued pursuant to
each stock option, restricted stock grant and performance
restricted stock grant, the value of each option is calculated
using the Black-Scholes model and each restricted stock grant
using compensation counsel's model.
[*Target Awards not required to be disclosed.]
2
<PAGE> 3
Long-Term Incentives
Each Participant shall receive stock options equal to 50% in economic value
of his or her Target Award, 25% in economic value will be in restricted stock
and 25% in economic value in performance restricted stock.
Stock options will be nonqualified and will vest in four equal annual
installments beginning one year after the date of grant and shall be exercisable
for 10 years after the date of grant.
Restricted stock will vest as to 50% two years after the date of grant and
the balance four years after the date of grant.
Performance restricted stock will vest three years after the date of grant,
if the cumulative consolidated earnings per share of Lance, Inc. for the three
fiscal years 1997, 1998 and 1999 equal or exceed $* per share.
[*Target not required to be disclosed.]
Form and Timing of Awards
Awards will be made as soon as practicable after awards are approved by the
Compensation/Stock Option Committee of the Board of Directors. All awards will
be rounded up to the nearest multiple of 50 shares.
Change In Status
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 Employment
In the event a participant voluntarily terminates employment any award
which has not vested will terminate and be forfeited. In the event a participant
is terminated involuntarily, any award which has not vested will terminate and
be forfeited except that stock options which have vested prior to involuntary
termination may be exercised within 30 days of termination. In the event of
death, stock options shall become fully vested and may be exercised within one
year of death. In the event of permanent disability, stock options shall become
fully vested and remain exercisable in accordance with the terms of the award.
In the event of normal retirement, stock options which have or will vest within
six months of normal retirement will vest and become exercisable in accordance
with the terms of the award and may be exercised within three years of normal
retirement. In the event of death, disability or normal retirement, restricted
stock and performance restricted stock awards which are not vested
3
<PAGE> 4
will be vested pro rata based on the number of full months elapsed since the
date of the award. In the event of early retirement, restricted stock awards
which are not vested will be vested pro rata based on the number of full months
elapsed since the date of the award. In all other cases, awards which have not
vested upon termination of employment will terminate and be forfeited.
Change In Control
In the event of a Change in Control, the vesting of awards will be
accelerated to fully vest upon the effective date of a Change in Control.
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 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 awards any Federal, foreign, state, or
local income or other taxes required to be withheld.
Communications
Progress reports should be made to participants annually, showing
performance results.
Executive Officers
Notwithstanding any provisions to the contrary above, participation, Target
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.
4
<PAGE> 5
Attachment A
[Target Awards omitted for participants as
target levels not required to be disclosed.]
5
<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 14,
1997 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-27-1997
<PERIOD-START> DEC-29-1996
<PERIOD-END> JUN-14-1997
<CASH> 33,395
<SECURITIES> 26,433
<RECEIVABLES> 35,527
<ALLOWANCES> 1,057
<INVENTORY> 19,873
<CURRENT-ASSETS> 122,504
<PP&E> 321,216
<DEPRECIATION> 196,049
<TOTAL-ASSETS> 253,123
<CURRENT-LIABILITIES> 39,624
<BONDS> 0
0
0
<COMMON> 24,914
<OTHER-SE> 159,289
<TOTAL-LIABILITY-AND-EQUITY> 253,123
<SALES> 230,910
<TOTAL-REVENUES> 230,910
<CGS> 109,971
<TOTAL-COSTS> 209,888
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 22,860
<INCOME-TAX> 8,777
<INCOME-CONTINUING> 14,083
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,083
<EPS-PRIMARY> .47
<EPS-DILUTED> .47
</TABLE>
<PAGE> 1
Exhibit 99
CAUTIONARY STATEMENT UNDER SAFE HARBOR PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Lance, Inc. (the Company), from time to time, makes "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such statements, which may be written or oral, reflect expectations of
management of the Company at the time such statements are made. The Company is
filing this cautionary statement to identify certain important factors that
could cause the Company's actual results to differ materially from those in any
forward-looking statements made by or on behalf of the Company.
PRICE COMPETITION AND CONSOLIDATION
The sales of most of the Company's products are subject to intense
competition primarily through discounting and other price cutting techniques by
competitors, many of whom are significantly larger and have greater resources
than the Company. In addition, there is a continuing consolidation by the major
companies in the snack food industry which could increase competition.
RAW MATERIALS
The Company's cost of sales can be adversely impacted by changes in the
cost of raw materials, principally flour, peanuts and peanut butter. While the
Company obtains substantial commitments for the future delivery of certain of
its raw materials and engages in limited hedging to reduce the price risk of
these raw materials, continuing long-term increases in the costs of raw
materials could adversely impact the Company's cost of sales.
SALES GROWTH
The Company's plans for profitable sales growth depend upon the ability
of the Company to develop and execute effective marketing and sales strategies
for its products.
There are other important factors not described above which could also
cause actual results to differ materially from those in any forward-looking
statement made by or on behalf of the Company.
