<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996]
For the fiscal year ended December 28, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ______________ to _____________
Commission file number 0-398
LANCE, INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
NORTH CAROLINA 56-0292920
- --------------------------------------------------------------------------------
(State of Incorporation) (I.R.S. Employer Identification Number)
8600 SOUTH BOULEVARD, CHARLOTTE, NORTH CAROLINA
- --------------------------------------------------------------------------------
(Address of principal executive offices)
POST OFFICE BOX 32368, CHARLOTTE, NORTH CAROLINA 28232
- --------------------------------------------------------------------------------
(Mailing address of principal executive offices)
Registrant's telephone number, including area code: (704) 554-1421
Securities Registered Pursuant to Section 12(b) of the Act: NONE
Securities Registered Pursuant to Section 12(g) of the Act: $.83-1/3 PAR
VALUE COMMON STOCK
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of shares of the Registrant's $.83-1/3 par value
Common Stock, its only outstanding class of voting stock, held by non-affiliates
as of February 20, 1997 was $457,228,000.
The number of shares outstanding of the Registrant's $.83-1/3 par value Common
Stock, its only outstanding class of Common Stock, as of February 20, 1997, was
29,874,904 shares.
<PAGE> 2
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following annual report to security holders and proxy statement
are incorporated by reference into the indicated parts of this Annual Report on
Form 10-K:
Incorporated Documents Parts into which Incorporated
---------------------- -----------------------------
Proxy Statement for Annual Meeting of Parts I and III
Stockholders to be held April 18, 1997
Annual Report to Stockholders for the Part II
fiscal year ended December 28, 1996
2
<PAGE> 3
PART I
ITEM 1. BUSINESS
The Registrant manufactures and sells snack foods and bakery products
directly and through its subsidiary, Vista Bakery, Inc.
In December 1995, the Registrant began the restructuring of its
operations to concentrate on its core snack food business. Under the
restructuring, the Registrant's facilities in Greenville, Texas and Columbia,
South Carolina were closed in February 1996. The Registrant's peanut buying
facility in Boykins, Virginia has been sold. To focus its efforts on the sales
of higher margin products, the Registrant has re-examined its product lines and
has eliminated over 100 stock keeping units and ten products. During 1996, the
Registrant's distribution operations were restructured as described below. As a
result of all of these restructuring efforts, the number of employees was
reduced by approximately 900.
Additional information concerning the restructuring is included in the
Registrant's consolidated financial statements, the notes thereto and
management's discussion and analysis of financial position and results of
operations contained in the Registrant's 1996 Annual Report to Stockholders
incorporated by reference in this Report.
The Registrant manufactures, distributes and sells packaged snack and
bread basket items primarily under the LANCE label. The principal snack items
are cracker sandwiches, cookie sandwiches, peanuts, potato chips, corn chips,
popcorn, cakes, cookies, candies, chewing gum, beef snacks and sausages. The
principal new snack items introduced in 1996 include Honey Peanut Butter on
CAPTAIN'S WAFERS, Cheddar Cheese on CAPTAIN'S WAFERS, Salsa and Cheese on
LANCHEE and Oatmeal and Chocolate Mini Cookies. The principal snack items
discontinued were Wheat Wafers, Gum Ball Pops, Nacho Mini Rounds, Reduced Fat
GOLD-N-CHEES and Fat Free Fig Bar. The principal bread basket items are wafers,
crackers, melba toast and bread sticks, individually packaged and sold to
restaurants and similar institutions.
The Registrant's products are sold under various trade names and
registered trademarks that it owns, including TOASTCHEE, LANCHEE, RYE CHEE,
CHOC-O-LUNCH, VAN-O-LUNCH, NEKOT, GOLD-N-CHEES, BIG TOWN and CAPTAIN'S WAFERS.
The Registrant packages several of its most popular snack and bread
basket items in convenience packs and distributes them to grocers, supermarkets
and discount stores. In addition, the Registrant distributes large bags of
potato chips and large size bags and boxes of its snack and bread basket items
to grocers and supermarkets. Various items that are purchased from others and
resold by the Registrant accounted for 24% of net sales and other operating
revenue.
3
<PAGE> 4
Vista Bakery, Inc. manufactures and sells cookies and crackers, through
its own sales representatives and brokers, to wholesale grocers, supermarkets
and distributors throughout the United States and portions of Canada, under
customer private labels and the VISTA label.
The following table shows the approximate percentages of the
Registrant's net sales and other operating revenue for 1996, 1995 and 1994
contributed by snack items and bread basket items:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Snack items 89% 89% 89%
Bread basket items 9% 8% 8%
</TABLE>
The principal raw materials and supplies used in the manufacture of
snack foods and bakery products are flour, peanuts, peanut butter, oils and
shortenings, potatoes, shelled corn and popcorn, cornmeal, pork skins, tree
nuts, starch, sugar, cheese, corn syrup, cocoa, fig paste, seasonings and
packaging materials. These raw materials and supplies are generally available in
adequate quantities in the open market either from sources in the United States
or from other countries and are generally contracted for a season in advance.
The principal supplies of energy used in the manufacture of these
products are electricity, natural and propane gas, fuel oil and diesel fuel, all
of which are currently available in adequate quantities.
The Registrant sells most of its products through its own sales
organization to convenience stores, independent and chain supermarkets, discount
stores, restaurants, military commissaries and exchanges, schools, hospitals,
caterers, industrial, recreational and commercial establishments, and similar
customers in 35 states and the District of Columbia. Under the restructuring,
the Registrant reduced its sales territories in 1996. In certain instances,
distributors or brokers have been added to cover sales territories that have
been eliminated. The Registrant's distribution operations are administered
through 22 sales districts which are divided into 271 sales branches, each under
the direction of a branch manager. During 1996, two sales districts were
consolidated, 14 sales branches were closed and 40 sales branches were
consolidated. There are 2,016 sales territories, each serviced by one sales
representative. In 1996, the Registrant continued the development of its
distributor and broker network, principally in perimeter territories.
The Registrant owns a fleet of tractors and trailers, which make weekly
deliveries of its products to the sales territories. The Registrant provides
sales representatives with stockroom space for their inventory requirements. The
sales representatives load their own trucks from these stockrooms for delivery
to their customers.
4
<PAGE> 5
A significant portion of the Registrant's sales is through its vending
machines at approximately 60,000 locations. These vending machines are made
available to the Registrant's customers on a rental, commission or sales basis.
The machines are not designed or manufactured specifically for the Registrant,
and their use is not limited to any particular sales area or class of customer.
All of the Registrant's products are sold in highly competitive markets
in which there are many competitors. In the case of many of its products, the
Registrant competes with manufacturers with greater total revenues and greater
resources than the Registrant. The principal methods of competition are price,
delivery, service and product quality. Generally, the Registrant believes that
it is competitive in these methods as a whole. The methods of competition and
the Registrant's competitive position varies according to the locality, the
particular products and the policies of its competitors. Although reliable
statistics are unavailable as to production and sales by others in the industry,
the Registrant believes that in its areas of distribution it is one of the
largest producers of peanut butter filled cracker sandwiches.
On December 28, 1996, the Registrant and its subsidiaries had 4,684
employees.
ITEM 2. PROPERTIES
The Registrant's principal plant and general offices are located in
Charlotte, North Carolina on a 288 acre tract owned by the Registrant. The main
facility is an air-conditioned and sprinklered plant, office building and
cafeteria of brick and steel containing approximately 670,000 square feet. The
manufacturing plant houses seven oven lines and is equipped with storage
facilities to handle many of the Registrant's raw materials in bulk. Adjacent to
the main facility is an air-conditioned and sprinklered plant of brick and steel
used for the processing of potato chips, corn chips and similar products
containing approximately 140,000 square feet. Both plants are being converted to
a continuous three-shift basis. Also adjacent to the main facility are a 70,400
square foot precast concrete building, which houses a vending machine repair and
maintenance facility, an 11,000 square foot brick and steel building, which
houses vehicle maintenance operations, 40,000 square foot and 13,000 square foot
metal warehouse buildings and a 5,500 square foot brick veneer office building.
These facilities are used to produce both snack and bread basket items.
The Registrant owns a plant located on a 105 acre tract in Greenville,
Texas. The plant is an air-conditioned and sprinklered building of brick and
steel containing approximately 290,000 square feet. The Company closed its
operations at this facility in 1996 and it is being offered for sale. The
Registrant has leased a building in Greenville, Texas containing approximately
6,150 square feet to serve as a distribution and vending maintenance center.
The Registrant leases office space and most of its stockroom space in
various towns and cities, mainly on month-to-month tenancies. The Registrant
currently owns 190
5
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stockroom locations with steel frame buildings, which range in size from 400 to
6,400 square feet and contain an aggregate of 998 stockroom spaces.
Vista Bakery, Inc. owns a plant located on an 18.5 acre tract in
Burlington, Iowa. The plant is of masonry and steel and contains approximately
230,000 square feet. This plant houses six oven lines and is being converted to
a continuous three-shift basis. The Company intends to add one additional oven
line at this facility during 1997. Adjacent to the plant is a steel storage
building of approximately 10,000 square feet.
Vista Bakery, Inc. also owns a 243,000 square foot plant on a 137 acre
tract in Columbia, South Carolina. The Company closed this facility in 1996 and
completed its sale in March 1997 for approximately $6.4 million.
The Registrant believes that it has sufficient production capacity to
meet foreseeable demand in 1997.
SEPARATE ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT
Information as to executive officers of the Registrant who are
directors or nominees of the Registrant is incorporated herein by reference to
the section captioned Election of Directors in the Registrant's Proxy Statement
for the Annual Meeting of Stockholders to be held April 18, 1997. Information as
to each executive officer of the Registrant who is not a director or a nominee
is as follows:
<TABLE>
<CAPTION>
Name Age Information About Officer
- ---- --- -------------------------
<S> <C> <C>
Peter M. Duggan 56 Senior Vice President of the Company since 1995, Vice
President 1994-1995 and a Group Vice President for the
Snacks and International Consumer Products Division of
Borden, Inc. (consumer products company) 1985-1993
G. R. Melvin 60 Senior Vice President of the Company since 1996 and Vice
President 1978 - 1996
R. Gerald Swain 60 Vice President of the Company since 1991, Assistant Vice
President 1989-1991 and District Sales Manager 1969-1989
E. D. Leake 45 Vice President of the Company since 1995 and Treasurer
and Assistant Secretary 1988-1995
B. Clyde Preslar 42 Vice President and Chief Financial Officer of the Company
since 1996; Director, Financial Services of Worldwide
</TABLE>
6
<PAGE> 7
<TABLE>
<S> <C> <C>
Power Tools Group (a consumer products division of The
Black and Decker Corporation) 1993-1996 and Director,
Corporate Business Planning and Analysis of The Black
and Decker Corporation, 1991-1993.
Richard G. Tucker 42 Vice President of the Company since 1996; Plant Manager
(bakery division) of RJR Nabisco Holdings Corporation
(consumer products company) 1989-1996.
James W. Helms, Jr. 50 Secretary of the Company since 1988, Treasurer since 1995
and Assistant Treasurer 1988-1995
</TABLE>
All the Company's executive officers were appointed to their current
positions at the Annual Meeting of the Board of Directors effective April 19,
1996, except Mr. Preslar was appointed on April 29, 1996 and Mr. Tucker was
appointed June 28, 1996. All of the Registrant's executive officers' terms of
office extend until the next Annual Meeting of the Board of Directors and until
their successors shall have been duly elected and qualified.
Items 3 and 4 are inapplicable and have been omitted.
PART II
Items 5 through 8 are incorporated herein by reference to pages 13
through 31 of the Registrant's 1996 Annual Report to Stockholders.
Item 9 is inapplicable and has been omitted.
PART III
Items 10 through 13 are incorporated herein by reference to the
sections captioned Principal Stockholders and Holdings of Management, Election
of Directors, Compensation/Stock Option Committee Interlocks and Insider
Participation, Director Compensation, Executive Officer Compensation and
Compliance with Section 16(a) of the Securities Exchange Act of 1934 in the
Registrant's Proxy Statement for the Annual Meeting of Stockholders to be held
April 18, 1997 and to the Separate Item in Part I of this Annual Report
captioned Executive Officers of the Registrant.
7
<PAGE> 8
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)1. Financial Statements.
See Table of Contents to Financial Statements filed
herewith as a separate part of this Annual Report.
2. Financial Schedules.
Schedules have been omitted because of the absence of
conditions under which they are required or because
information required is included in financial statements
or the notes thereto.
3. Exhibits.
3.1 Restated Charter of Lance, Inc. incorporated herein
by reference to Exhibit 3(a) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 26, 1992.
3.2 Bylaws of Lance, Inc., as amended through April 21,
1995, incorporated herein by reference to Exhibit 3.2
to the Registrant's Quarterly Report on Form 10-Q for
the twelve weeks ended June 17, 1995.
4 See 3.1 and 3.2 above.
10.1 Lance, Inc. 1991 Stock Option Plan incorporated
herein by reference to Exhibit 4.1 to the
Registrant's Registration Statement on Form S-8,
Registration No. 33-41866.
10.2* The Lance, Inc. Key Executive Employee Benefit Plan
incorporated herein by reference to Exhibit 10 to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1983.
- ----------
* Management contract.
8
<PAGE> 9
10.3* Form of Executive Employment Agreement between Lance,
Inc. and the Key Executives incorporated herein by
reference to Exhibit 10(c) to the Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 26, 1992.
10.4 Lance, Inc. 1983 Incentive Stock Option Plan
incorporated herein by reference to Exhibit 10.1 to
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 26, 1987.
10.5* Lance, Inc. Key Executive Employee Benefit Plan
Trust, dated December 3, 1993, between Lance, Inc.
and First Union National Bank of North Carolina
incorporated herein by reference to Exhibit 10(v) to
the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 25, 1993.
10.6 Lance, Inc. 1995 Nonqualified Stock Option Plan for
Non-Employee Directors incorporated herein by
reference to Exhibit 10 to the Registrant's
Registration Statement on Form S-8, Registration No.
33-58839.
10.7* Lance, Inc. Benefit Restoration Plan incorporated
herein by reference to Exhibit 10(vi) to the
Registrant's Quarterly Report on Form 10-Q for the
twelve weeks ended June 11, 1994.
10.8* 1996 Lance Annual Incentive Plan incorporated herein
by reference to Exhibit 10.8 to the Registrant's
Quarterly Report on Form 10-Q for the twelve weeks
ended June 15, 1996.
10.9* Chairman of the Board Compensation Letter dated April
19, 1996 incorporated herein by reference to Exhibit
10.9 to the Registrant's Quarterly Report on Form
10-Q for the twelve weeks ended June 15, 1996.
10.10* Salary Continuation Agreement, dated as of April 29,
1996, between the Registrant and B. Clyde Preslar.
(Page ____ of the sequentially numbered pages.)
10.11* Early Retirement Agreement, dated as of November 22,
1996, between the Registrant and Thomas B. Horack.
(Page ___ of the sequentially numbered pages.)
- ----------
* Management contract.
9
<PAGE> 10
13 The Registrant's 1996 Annual Report to Stockholders.
This Annual Report to Stockholders is furnished for
the information of the Commission only and, except
for the parts thereof incorporated by reference in
this Report on Form 10-K, is not to be deemed "filed"
as a part of this filing. (Page ___ of the
sequentially numbered pages.)
21 List of the Subsidiaries of the Registrant. (Page
____ of the sequentially numbered pages.)
23 Consent of KPMG Peat Marwick LLP. (Page ____ of the
sequentially numbered pages.)
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 for Purposes of the Safe Harbor
Provisions of the Private Securities Litigation
Reform Act of 1995.
- ----------
* Management contract.
(b) Reports on Form 8-K
There were no reports on Form 8-K required to be filed
by the Registrant during the 16 weeks ended December 28,
1996.
10
<PAGE> 11
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Annual Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
LANCE, INC.
Dated: March 27, 1997
By: /s/ B. Clyde Preslar
----------------------------
B. Clyde Preslar
Vice President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Annual Report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
Signature Capacity Date
- --------- -------- ----
/s/ Scott C. Lea Chairman of the Board March 27, 1997
- ----------------------------- and Director
Scott C. Lea
/s/ P. A. Stroup, III President, Chief Executive March 27, 1997
- ----------------------------- Officer and Director
P. A. Stroup, III (Principal Executive Officer)
/s/ B. Clyde Preslar Vice President (Principal March 27, 1997
- ----------------------------- Financial Officer)
B. Clyde Preslar
/s/ James W. Helms, Jr. Secretary and March 27, 1997
- ----------------------------- Treasurer (Principal
James W. Helms, Jr. Accounting Officer)
/s/ Alan T. Dickson Director March 27, 1997
- -----------------------------
Alan T. Dickson
/s/ J. W. Disher Director March 27, 1997
- -----------------------------
J. W. Disher
/s/ James H. Hance, Jr. Director March 27, 1997
- -----------------------------
James H. Hance, Jr.
11
<PAGE> 12
/s/ William R. Holland Director March 27, 1997
- ------------------------------------
William R. Holland
/s/ Nancy Van Every McLaurin Director March 27, 1997
- ------------------------------------
Nancy Van Every McLaurin
/s/ Robert V. Sisk Director March 27, 1997
- ------------------------------------
Robert V. Sisk
/s/ Isaiah Tidwell Director March 27, 1997
- ------------------------------------
Isaiah Tidwell
/s/ S. Lance Van Every Director March 27, 1997
- ------------------------------------
S. Lance Van Every
/s/ Richard A. Zimmerman Director March 27, 1997
- ------------------------------------
Richard A. Zimmerman
12
<PAGE> 13
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C.
FORM 10-K
FOR CORPORATIONS
ITEM 14(a) - FINANCIAL STATEMENTS
13
<PAGE> 14
TABLE OF CONTENTS
Annual Report
to Stockholders
Page
Data incorporated by reference from the 1996
Annual Report to Stockholders of Lance, Inc.
and Subsidiaries:
Independent Auditors' Report 13
Consolidated Balance Sheets, December 28,
1996 and December 30, 1995 14
For the Fiscal Years Ended December 28,
1996, December 30, 1995 and December 31, 1994:
Statements of Consolidated Income and
Retained Earnings 15
Statements of Consolidated Cash Flows 16
Notes to Consolidated Financial Statements 17
FINANCIAL STATEMENTS AND SCHEDULES OMITTED
The above listed financial statements are presented on only a consolidated basis
since the Company is primarily an operating company and its subsidiaries
included for the periods presented in the consolidated financial statements are
totally-held subsidiaries. Schedules have been omitted because of the absence of
conditions under which they are required or because information required is
included in financial statements or the notes thereto.
14
<PAGE> 15
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
EXHIBITS
Item 14(a)(3)
FORM 10-K
ANNUAL REPORT
For the fiscal year ended Commission File Number
December 28, 1996 0-398
LANCE, INC.
EXHIBIT INDEX
Exhibit
No. Exhibit Description
3.1 Restated Charter of Lance, Inc. incorporated herein by
reference to Exhibit 3(a) to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 26, 1992.
3.2 Bylaws of Lance, Inc., as amended through April 21, 1995,
incorporated herein by reference to Exhibit 3.2 to the
Registrant's Quarterly Report on Form 10-Q for the twelve
weeks ended June 17, 1995.
4 See 3.1 and 3.2 above.
10.1 Lance, Inc. 1991 Stock Option Plan incorporated herein by
reference to Exhibit 4.1 to the Registrant's Registration
Statement on Form S-8, Registration No. 33-41866.
10.2* The Lance, Inc. Key Executive Employee Benefit Plan
incorporated herein by reference to Exhibit 10 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1983.
- ----------
* Management contract.
15
<PAGE> 16
10.3* Form of Executive Employment Agreement between Lance, Inc. and
the Key Executives incorporated herein by reference to Exhibit
10(c) to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 26, 1992.
10.4 Lance, Inc. 1983 Incentive Stock Option Plan incorporated
herein by reference to Exhibit 10.1 to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 26,
1987.
10.5* Lance, Inc. Key Executive Employee Benefit Plan Trust, dated
December 3, 1993, between Lance, Inc. and First Union National
Bank of North Carolina incorporated herein by reference to
Exhibit 10(v) to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 25, 1993.
10.6 Lance, Inc. 1995 Nonqualified Stock Option Plan for
Non-Employee Directors incorporated herein by reference to
Exhibit 10 to the Registrant's Registration Statement on Form
S-8, Registration No. 33-58839.
10.7* Lance, Inc. Benefit Restoration Plan incorporated herein by
reference to Exhibit 10(vi) to the Registrant's Quarterly
Report on Form 10-Q for the twelve weeks ended June 11, 1994.
10.8* 1996 Lance Annual Incentive Plan incorporated herein by
reference to Exhibit 10.8 to the Registrant's Quarterly Report
on Form 10-Q for the twelve weeks ended June 15, 1996.
10.9* Chairman of the Board Compensation Letter dated April 19, 1996
incorporated herein by reference to Exhibit 10.9 to the
Registrant's Quarterly Report on Form 10-Q for the twelve
weeks ended June 15, 1996.
10.10* Salary Continuation Agreement, dated as of April 29, 1996,
between the Registrant and B. Clyde Preslar. (Page ____ of the
sequentially numbered pages.)
10.11* Early Retirement Agreement, dated as of November 22, 1996,
between the Registrant and Thomas B. Horack. (Page ___ of the
sequentially numbered pages.)
- ----------
* Management contract.
16
<PAGE> 17
13 The Registrant's 1996 Annual Report to Stockholders. This
Annual Report to Stockholders is furnished for the information
of the Commission only and, except for the parts thereof
incorporated by reference in this Report on Form 10-K, is not
to be deemed "filed" as a part of this filing. (Page ___ of
the sequentially numbered pages.)
21 List of the Subsidiaries of the Registrant. (Page ____ of the
sequentially numbered pages.)
23 Consent of KPMG Peat Marwick LLP. (Page ____ of the
sequentially numbered pages.)
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 for Purposes of the Safe Harbor
Provisions of the Private Securities Litigation Reform Act of
1995.
- ----------
* Management contract.
17
<PAGE> 1
EXHIBIT 10.10
SALARY CONTINUATION AGREEMENT
THIS AGREEMENT made as of April 29, 1996 by and between B. Clyde Preslar
(Preslar) and Lance, Inc. (Lance).
STATEMENT OF PURPOSE
In connection with Preslar's employment by Lance as its Vice President
and Chief Financial Officer, he has relocated to Charlotte, North Carolina.
Preslar and Lance have agreed that in the event that Preslar is terminated
without cause, Preslar shall receive salary continuation payments as provided
in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, the parties hereto agree as follows:
1. Salary Continuation. In the event that Preslar's employment with
Lance is terminated without cause by Lance, Preslar's base salary in effect at
the date of such termination shall be continued for a period of 18 months. Such
salary continuation benefit shall be in lieu of payments or benefits under any
other Lance plan or policy with respect to salary continuation or severance
pay.
2. Miscellaneous. This Agreement shall be binding upon the parties
hereto, their heirs and assigns; this Agreement may not be amended or modified
except by written amendment signed by the parties hereto and this Agreement
shall be construed and interpreted under the laws of the State of North
Carolina.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
/s/ B. Clyde Preslar
---------------------------------
B. Clyde Preslar
LANCE, INC.
By /s/ Paul A. Stroup, III
------------------------------
President
<PAGE> 1
EXHIBIT 10.11
STATE OF NORTH CAROLINA
EARLY RETIREMENT AGREEMENT
COUNTY OF MECKLENBURG
THIS EARLY RETIREMENT AGREEMENT (this "Agreement") is entered
into on November 22, 1996 by and between LANCE, INC., a North
Carolina corporation (the "Company"), and THOMAS B. HORACK
("Horack").
STATEMENT OF PURPOSE
Horack has been employed by the Company for many years in various
capacities. On the 17th day of April, 1992, the Company and Horack entered into
an Executive Employment Agreement, a copy of which is attached hereto as Exhibit
A and hereby made a part hereof (the "Employment Agreement"), whereby the
Company continued Horack's employment as a Vice President of the Company and
provided Horack with certain benefits under the Lance, Inc. Key Executive
Employee Benefit Plan (the "Key Executive Plan"). Horack currently holds the
title of Executive Vice President, is a member of the Company's Board of
Directors and holds various other positions with the Company and its Affiliates.
The Company and Horack have been engaged in discussions regarding
Horack's early retirement, and in such connection the Company and Horack have
engaged counsel and entered into negotiations with a view toward resolving all
issues relating to Horack's employment with the Company and its Affiliates and
the termination of that employment including all issues relating to the
Employment Agreement and all other plans and benefits in connection with that
employment.
As a result of these negotiations, Horack and the Company have agreed
that Horack will retire and that Horack and the Company will terminate their
relationship on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the Statement of Purpose and the
terms and provisions of this Agreement, the parties hereto mutually agree as
follows:
1. DEFINITIONS. Capitalized terms used in this Agreement
that are not expressly defined herein but are defined in the
Employment Agreement have the respective meanings given those terms
in the Employment Agreement. In addition, as used herein, the
following terms shall have the following meanings:
(a) "Affiliate" with reference to the Company means any
Person that directly or indirectly is controlled
by, or is under common control with, the Company
<PAGE> 2
and expressly includes, without limitation, the Lance
Foundation and the Philip L. Van Every "control" means
the possession, directly or indirectly, of the power to
direct or cause the direction of the management and
policies of a Person, whether through ownership of voting
securities, by contract or otherwise.
(b) "Person" means any individual, corporation, association,
partnership, business trust, joint stock company,
limited liability company, foundation, trust, estate or
other entity or organization of whatever nature.
(c) "Effective Date" with reference to this Agreement means
the eighth (8th) day following the execution of this
Agreement, if not a Saturday, Sunday or legal holiday, and
if such day is a Saturday, Sunday or legal holiday, then
the first business day following such eighth (8th) day.
(d) "Agreed Values" with respect to the Stock Options means
the agreed values as set forth on Exhibit B attached
hereto and hereby made a part hereof.
(e) "Stock Options" means Horack's unexercised vested
incentive stock options on the date hereof as described
on Exhibit B hereto.
2. RESIGNATION. Horack hereby resigns from all offices, committees and
positions he holds with the Company and its Affiliates, including but not
limited to the following: (a) a member of the Company's Board of Directors, (b)
Executive Vice President and Chief Information Officer of the Company, (c)
President and a member of the Board of Directors of Caronuts, Inc., (d) a member
of the Board of Directors of Vista Bakery, Inc., (e) a member of the Board of
Administrators of the Philip L. Van Every Foundation and (f) a member of the
Board of Administrators of the Lance Foundation. Horack will remain an employee
of the Company through December 28, 1996, the end of the Company's current
fiscal year and in such connection (i) shall perform only such duties and work
only such hours as shall be authorized or requested by the President of the
Company and (ii) shall be entitled to use the office he presently occupies and
reasonable secretarial assistance. Horack hereby resigns from employment with
the Company and its Affiliates effective December 28, 1996. If requested by the
Company, Horack will execute any additional resignation letters, forms or other
documents which acknowledge his resignation from such employment, positions,
committees and offices.
3. PAYMENTS BY THE COMPANY. Horack acknowledges that the Company has
paid or provided to him all compensation and benefits
2
<PAGE> 3
to which he was entitled through the date hereof. In addition, the
Company agrees to pay or provide Horack with the following:
(a) Compensation and benefits to which Horack is otherwise
entitled as an employee of the Company at Horack's
current rate and status through December 28, 1996, in
accordance with the Company's generally applicable
policies and procedures;
(b) Payment in 1997 of any award otherwise due Horack as a
participant in the Company's 1996 Annual Incentive Plan
at the "earned level" in accordance with the said plan;
(c) Fourteen Thousand Three Hundred Sixteen Dollars ($14,316)
in lieu of four (4) weeks vacation payable in cash or
equivalent on January 7, 1997;
(d) One Million Five Hundred Thirteen Thousand Five Hundred
Sixty-three Dollars and 41/100 ($1,513,563.41), payable
in cash or equivalent on January 7, 1997;
(e) Possession of the Company automobile used by Horack in
connection with his employment through January 7, 1997
together with conveyance of title to said automobile on
said date or such earlier date following the Effective
Date upon election of Horack with reasonable prior notice
to the Company;
(f) The Agreed Values of the Stock Options, which remain
unexercised at the expiration of such Stock Options,
payment of said Agreed Values to be made upon the
expiration of such Stock Options (the date of which is
March 28, 1997);
(g) Medical insurance coverage for Horack until Horack
reaches age 60 (August 19, 2006) or his earlier death
under such terms and conditions as are most closely
comparable to the "Plan B" or HMO coverage option that is
currently provided Horack under the Company's group
medical plan and as shall be customarily provided by the
Company to the Company's executives from time to time
during such period. During this period, Horack will be
entitled to obtain at his expense such optional coverages,
such as dental coverage and family/dependent medical
coverage, under the Company's employee insurance program
as are available for employees generally. After age 60
Horack may elect to obtain at his expense coverage as a
"retiree" under such program, if any, as may then be
available to the Company's retired executives;
3
<PAGE> 4
(h) Life insurance, accidental death and dismemberment
insurance and disability insurance for Horack until
Horack reaches age 60 (August 19, 2006) or his earlier
death under such terms and conditions that are reasonably
comparable to the coverages currently provided Horack
under the Company's plans for such insurance and as shall
be customarily provided by the Company to the Company's
executives from time to time during such period;
(i) Horack has vested interests under Company sponsored
Profit-Sharing and 401-K plans. Horack's vested
interest in these plans shall be paid when and as provided
in, and otherwise subject to, the terms, provisions and
conditions of said plans, and nothing in this Agreement
shall modify or override the terms, provisions or
conditions;
(j) The Company will provide Horack, at no expense to him,
outplacement services through Schwab-Carrese Associates
for a minimum period of three (3) months during 1997.
Horack will have the option of determining when he wishes
to utilize such outplacement services during 1997.
Moreover, upon expiration of the three month period, if
the Company determines that further outplacement services
would be appropriate, the Company will consider extending
payment for such services for an additional three to six
months;
(k) Title and possession of the lap top computer used by
Horack in connection with his employment together with
all operating software and software packages such as
Microsoft Office Suite, Lotus and similar programs,
delivery to be on December 28, 1996;
(l) The Company will reimburse Horack during 1997 for up
to One Thousand Dollars ($1,000) of reasonable out of
pocket expenses incurred by him for accounting services
related to tax planning upon submission to the Company of
reasonable documentation of such expenses;
(m) The Company will reimburse Horack annually until he
reaches age 60 (August 19, 2006) or his earlier death
for up to Three Hundred Dollars ($300) per year of
uninsured out of pocket expenses incurred by him for
physical medical examinations for him upon submission to
the Company of reasonable documentation of such expenses;
and
(n) The Company agrees to Indemnify and hold Horack
harmless from any claims asserted against him
4
<PAGE> 5
arising out of the prior performance of his duties with
the Company or its Affiliates to the same extent as the
Company indemnifies retired officers or directors of the
Company.
3. CREDIT UNION LOANS. On or before December 28, 1996 Horack
will repay any amounts due from him to the Company's credit union.
4. TERMINATION OF THE EMPLOYMENT AGREEMENT AND ALL OTHER BENEFITS.
Except as and to the extent expressly provided in this Agreement to the
contrary, the Employment Agreement is hereby terminated, and without limiting
the generality of the foregoing, the restrictions of Paragraph 3 of the
Employment Agreement shall be null and void. The Company and Horack acknowledge
and agree that all other benefits and perquisites related to or resulting from
Horack's employment and positions with the Company and its Affiliates, which are
not described and provided for in this Agreement, terminate on the Effective
Date, and that the Company has no further obligations with respect thereto.
5. CONFIDENTIAL INFORMATION AND COMPANY PROPERTY. Horack acknowledges
that by reason of Horack's employment by the Company, Horack has had access to
certain Company "Trade Secrets" (as defined in the North Carolina Trade Secrets
Protection Act, N.C.G.S. ss.66-152) and confidential product formulations
(collectively "Confidential Information"). Horack agrees that he shall not
directly or indirectly use, reveal, disclose or remove from the Company's
premises Confidential Information or material containing Confidential
Information, without the prior written consent of the Company. In addition,
Horack agrees that he will turn over and return to the Company no later than
December 28, 1996 all property whatsoever of the Company now in his possession
(including keys and credit cards).
6. EMPLOYMENT TAXES AND WITHHOLDINGS.
(a) Horack acknowledges and agrees that the Company shall
withhold from the payments and benefits described in
this Agreement all taxes, including income and employment
taxes, required to be so deducted or withheld under
applicable law.
(b) The Company will not withhold any Federal or State
income taxes from or with respect to the payments and
transfers described in Paragraphs 3(d), (e), (f), (g),
(h), (j), (k), (l) and (m) (the "Settlement Payments")
which are being expressly and directly made in settlement
of the Company's contractual obligations to Horack under
the terms of the Executive Employment Agreement. Horack
will report all of the Settlement Payments as ordinary
income for Federal and State income tax purposes for the
calendar year in which he receives the Settlement
Payments, and Horack will pay all
5
<PAGE> 6
appropriate income tax liabilities (including estimated
taxes, if any) due with respect thereto on timely returns
filed for such years.
(c) Neither Horack nor the Company shall withhold or pay
any Federal Insurance Contributions Act taxes ("FICA")
or other employment taxes from or with respect to the
Settlement Payments. In the event that the Company later
reasonably determines that any such taxes should have been
withheld or were otherwise due with respect to the
Settlement Payments, then Horack agrees that he will pay
or reimburse to the Company the "employee's" share of such
taxes when such taxes are paid by the Company.
(d) The Company and Horack agree to notify each other with
respect to any inquiries or controversies relating to
withholding or employment taxes with respect to the
Settlement Payments and to cooperate with each other in
the defense and/or resolution of any issues which may be
raised with respect to their positions on these matters as
set forth in this Agreement.
7. RELEASE OF THE COMPANY. Horack, on behalf of himself and his heirs,
personal representatives, successors and assigns, hereby releases and forever
discharges the Company and its Affiliates, and each and every one of their
respective present and former shareholders, directors, officers, employees and
agents, and each of their respective successors and assigns, from and against
any and all claims, demands, actions, causes of action, damages, costs and
expenses, including without limitation all "Employment-Related Claims," which
Horack now has or may have by reason of any thing occurring, done or omitted to
be done to the date of this Agreement; provided, however, this release shall not
apply to any claims which Horack may have for the payments or benefits expressly
provided for Horack in this Agreement. For purposes of this Agreement,
"Employment-Related Claims" means all rights and claims Horack has or may have:
(i) related to his employment by or status as an employee of the
Company or any of its Affiliates or the termination of that
employment or status or to any employment practices and
policies of the Company, or its Affiliates; or
(ii) under the federal Age Discrimination in Employment Act of
1967, as amended ("ADEA").
8. SPECIAL ADEA WAIVER ACKNOWLEDGEMENTS. HORACK ACKNOWLEDGES AND
AGREES THAT HE HAS READ THIS AGREEMENT IN ITS ENTIRETY AND THAT THIS
AGREEMENT CONTAINS A GENERAL RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS, INCLUDING
RIGHTS AND CLAIMS ARISING UNDER
6
<PAGE> 7
THE FEDERAL AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED ("ADEA").
HORACK FURTHER ACKNOWLEDGES AND AGREES THAT:
(a) THIS AGREEMENT DOES NOT RELEASE, WAIVE OR DISCHARGE
ANY RIGHTS OR CLAIMS THAT MAY ARISE AFTER THE DATE OF
THIS AGREEMENT;
(b) HE IS ENTERING INTO THIS AGREEMENT AND RELEASING,
WAIVING AND DISCHARGING RIGHTS OR CLAIMS ONLY IN
EXCHANGE FOR CONSIDERATION WHICH HE IS NOT ALREADY
ENTITLED TO RECEIVE;
(c) HE HAS BEEN ADVISED, AND IS BEING ADVISED IN THIS
AGREEMENT, TO CONSULT WITH AN ATTORNEY BEFORE EXECUTING
THIS AGREEMENT AND IS EXECUTING THIS AGREEMENT WITH THE
ADVICE OF COUNSEL;
(d) HE HAS BEEN ADVISED, AND IS BEING ADVISED IN THIS
AGREEMENT, THAT HE HAS UP TO TWENTY-ONE DAYS (21) DAYS
WITHIN WHICH TO CONSIDER THIS AGREEMENT AND THAT IF HE
EXECUTES THIS AGREEMENT PRIOR TO THE EXPIRATION OF THE
TWENTY-ONE (21) DAY PERIOD, THEN HE EXPRESSLY WAIVES HIS
RIGHTS WITH RESPECT TO THE REMAINING TIME AND THAT THE
AGREEMENT WILL BECOME EFFECTIVE FOLLOWING THE EXPIRATION
OF THE SEVEN (7) DAY PERIOD REFERRED TO IN PARAGRAPH 8 (e)
BELOW; AND
(e) HE IS AWARE THAT THIS AGREEMENT WILL NOT BECOME
EFFECTIVE OR ENFORCEABLE UNTIL SEVEN (7) DAYS FOLLOWING
HIS EXECUTION OF THIS AGREEMENT AND THAT HE MAY REVOKE
THIS AGREEMENT AT ANY TIME DURING SUCH PERIOD BY
DELIVERING (OR CAUSING TO BE DELIVERED) TO THE PRINCIPAL
OFFICE OF THE COMPANY NOTICE OF HIS REVOCATION OF THIS
AGREEMENT NO LATER THAN 5:00 P.M. EASTERN TIME ON THE
SEVENTH (7TH) FULL DAY FOLLOWING HIS EXECUTION OF THIS
AGREEMENT.
9. CONFIDENTIALITY OF THIS AGREEMENT; EMPLOYMENT REFERENCE. Horack
shall not at any time, directly or indirectly, discuss with or disclose to
anyone (other than to members of his immediate family, his attorney, his tax
advisors and the appropriate taxing authorities or as otherwise required by law
[hereinafter "Qualified Persons"]) the terms of this Agreement, including the
amounts payable hereunder. Horack further agrees that he shall not discuss with
anyone other than Qualified Persons the circumstances surrounding the
termination of his employment. If any person asks Horack about the above
matters, he will simply say that he elected early retirement and resigned from
the Company and all issues relating to his employment have been resolved. Horack
further agrees that for a period of five (5) years from the Effective Date, he
will refrain from making derogatory comments about the Company or its agents or
affiliates to the Company's customers, suppliers or employees. The Company
agrees that for a period of five (5)
7
<PAGE> 8
years from the Effective Date, the Company and its officers will likewise
refrain from making derogatory comments about Horack to the Company's
customers, suppliers or employees. The Company further agrees that if any
person makes inquiry concerning Horack, the Company will advise such person
only as to the dates of Horack's employment with the Company, the positions
held and that he elected early retirement and voluntarily resigned from the
Company.
10. APPLICABLE LAW. This Agreement is made and executed with the
intention that the construction, interpretation and validity hereof shall be
determined in accordance with and governed by the laws of the State of North
Carolina.
11. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the Company, its successors and assigns. This Agreement shall
be binding upon and inure to the benefit of Horack, his heirs, executors and
administrators.
12. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes
and cancels all prior or contemporaneous oral or written agreements and
understandings between them with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed
by its duly authorized officers and its corporate seal to be hereunto affixed,
and Horack has hereunto set his hand and seal, all as of the day and year first
above written.
LANCE, INC.
[CORPORATE SEAL]
ATTEST: By: /s/ Paul A. Stroup, III
----------------------------------
Paul A. Stroup, III
/s/ James W. Helms, Jr. President
- ------------------------------
Secretary
/s/ Thomas B. Horack [SEAL]
-----------------------------
Thomas B. Horack
8
<PAGE> 9
EXHIBIT B
TO
RETIREMENT AGREEMENT
<PAGE> 1
EXHIBIT 13
[KPMG PEAT MARWICK LLP LETTERHEAD]
Suite 2800
Two First Union Center
Charlotte, NC 28282-8290
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Lance, Inc.:
We have audited the accompanying consolidated balance sheets of Lance, Inc. and
subsidiaries as of December 28, 1996 and December 30, 1995 and the related
statements of consolidated income and retained earnings and consolidated cash
flows for each of the fiscal years in the three-year period ended December 28,
1996. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Lance, Inc. and its
subsidiaries as of December 28, 1996 and December 30, 1995, and the results of
their operations and their cash flows for each of the fiscal years in the
three-year period ended December 28, 1996 in conformity with generally accepted
accounting principles.
As discussed in Notes 1 and 3 to the consolidated financial statements, the
Company adopted the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
during the fiscal year ended December 30, 1995.
As discussed in Notes 1 and 4 to the consolidated financial statements, the
Company adopted the provisions of the American Institute of Certified Public
Accountants' Statement of Position 93-7, "Reporting on Advertising Costs," and
the provisions of the Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," during the fiscal year ended December 31, 1994.
February 18, 1997 /s/
KPMG PEAT MARWICK LLP
<PAGE> 2
CONSOLIDATED BALANCE SHEETS
December 28, 1996 and December 30, 1995
(In thousands, except share data)
<TABLE>
<CAPTION>
ASSETS NOTES 1996 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $32,272 $12,585
Marketable securities 4 25,482 31,909
Accounts receivable (less allowance for doubtful accounts
of $867 in 1996 and $727 in 1995, respectively) 29,542 28,585
Inventories 2 22,175 32,521
Accrued interest receivable 468 493
Refundable income taxes 4,765 4,765
Deferred income tax benefit 7 7,099 7,327
- -----------------------------------------------------------------------------------------------------------------
Total current assets 117,038 118,185
- -----------------------------------------------------------------------------------------------------------------
PROPERTY, NET 3 124,124 126,656
- -----------------------------------------------------------------------------------------------------------------
OTHER ASSETS:
Deposits 2,069 2,345
Notes receivable, prepayments, etc. 3,974 4,159
- -----------------------------------------------------------------------------------------------------------------
Total other assets 6,043 6,504
- -----------------------------------------------------------------------------------------------------------------
TOTAL $247,205 $251,345
- -----------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY 5
- -----------------------------------------------------------------------------------------------------------------
CURRENT LIABILITIES:
Accounts payable $7,050 $6,432
Accrued compensation 10 14,636 14,218
Accrued profit-sharing retirement plan 9 4,543 1,351
Accrued income taxes 7 129
Accrual for insurance claims 1 3,899 4,302
Other payables and accrued liabilities 5,491 4,564
- -----------------------------------------------------------------------------------------------------------------
Total current liabilities 35,748 30,867
- -----------------------------------------------------------------------------------------------------------------
OTHER LIABILITIES AND DEFERRED CREDITS:
Deferred income taxes 7 6,553 4,133
Accrued postretirement health care costs 8 10,034 8,808
Accrual for insurance claims 1 6,458 7,120
Supplemental retirement benefits 3,550 3,874
- -----------------------------------------------------------------------------------------------------------------
Total other liabilities and deferred credits 26,595 23,935
- -----------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY: 6,9
Common stock, $.83 1/3 par value (authorized: 75,000,000
shares; issued and outstanding: 29,888,265 shares in 1996,
30,337,265 shares in 1995) 24,907 25,281
Retained earnings 159,700 170,964
Net unrealized gain on marketable securities 4 255 298
- -----------------------------------------------------------------------------------------------------------------
Total stockholders' equity 184,862 196,543
- -----------------------------------------------------------------------------------------------------------------
TOTAL $247,205 $251,345
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE> 3
STATEMENTS OF CONSOLIDATED INCOME AND
RETAINED EARNINGS
For the Fiscal Years Ended December 28, 1996, December 30, 1995 and December
31, 1994
(In thousands, except per share data)
<TABLE>
<CAPTION>
1996 1995 1994
NOTES (52 WEEKS) (52 Weeks) (53 Weeks)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET SALES AND OTHER OPERATING REVENUE $ 474,872 $ 477,468 $ 487,982
- -----------------------------------------------------------------------------------------------------------------
COST OF SALES AND OPERATING EXPENSES:
Cost of sales 2 232,715 240,624 238,127
Selling and delivery 179,637 187,857 183,164
General and administrative 24,507 21,367 20,722
Provisions for employees' profit-sharing
retirement plan 9 4,477 4,849 5,975
Loss from restructuring and impairment 3, 10 35,897
- -----------------------------------------------------------------------------------------------------------------
Total 441,336 490,594 447,988
- -----------------------------------------------------------------------------------------------------------------
PROFIT (LOSS) FROM OPERATIONS 33,536 (13,126) 39,994
OTHER INCOME, NET (INCLUDING INTEREST INCOME OF
$2,221 IN 1996, $2,036 IN 1995,
and $2,054 in 1994) 7,244 3,026 4,333
- -----------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES 40,780 (10,100) 44,327
- -----------------------------------------------------------------------------------------------------------------
INCOME TAX EXPENSE (BENEFIT): 7
Current 13,703 13,477 18,092
Deferred 2,485 (16,638) (749)
- -----------------------------------------------------------------------------------------------------------------
Total 16,188 (3,161) 17,343
- -----------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) 24,592 (6,939) 26,984
RETAINED EARNINGS AT BEGINNING OF FISCAL YEAR 170,964 208,800 221,205
- -----------------------------------------------------------------------------------------------------------------
Total 195,556 201,861 248,189
- -----------------------------------------------------------------------------------------------------------------
Cash dividends (28,879) (29,183) (29,583)
Retirement of common stock 6 (6,977) (1,858) (9,802)
Stock options exercised 6, 9 144 (4)
- -----------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS AT END OF FISCAL YEAR $ 159,700 $ 170,964 $ 208,800
- -----------------------------------------------------------------------------------------------------------------
PER SHARE AMOUNTS: 1
Net income (loss) $ 0.82 $ (0.23) $ 0.88
==== ====== ====
Cash dividends $ 0.96 $ 0.96 $ 0.96
==== ====== ====
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE> 4
STATEMENTS OF CONSOLIDATED CASH FLOWS
For the Fiscal Years Ended December 28, 1996, December 30, 1995 and December
31, 1994
(In thousands)
<TABLE>
<CAPTION>
1996 1995 1994
(52 WEEKS) (52 Weeks) (53 Weeks)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $24,592 $(6,939) $26,984
Adjustments to reconcile net income (loss) to cash provided
by operating activities:
Depreciation 20,295 24,626 24,544
Impairment of fixed assets 29,368
(Gain) loss on sale of property (1,953) 1,505 397
Deferred income taxes 2,485 (16,637) (749)
Other, net 32 4,387 750
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (932) 1,676 (1,249)
Decrease (increase) in refundable income taxes 4,765 (2,806) (209)
Decrease (increase) in inventory 10,346 6,431 (5,279)
Increase (decrease) in accounts payable 618 (2,140) 1,665
Increase (decrease) in accrued income taxes 129 (461) 323
Increase in other payables and accrued liabilities 4,374 9,011 362
- ------------------------------------------------------------------------------------------------------------------
Net cash flow from operating activities 64,751 48,021 47,539
- ------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchases of property and equipment (19,499) (17,974) (17,941)
Machinery deposits 276 (2,010) 1,961
Proceeds from sale of property 3,689 1,209 1,249
Purchases of marketable securities (10,276) (9,156) (25,849)
Maturities of marketable securities 11,917 3,274 8,161
Sales of marketable securities 4,747 7,436 17,130
Other, net 312 (202) 249
- ------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (8,834) (17,423) (15,040)
- ------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Dividends paid (28,879) (29,183) (29,583)
Purchases of common stock, net (7,351) (1,794) (10,280)
- ------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (36,230) (30,977) (39,863)
- ------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 19,687 (379) (7,364)
CASH AND CASH EQUIVALENTS AT BEGINNING OF FISCAL YEAR 12,585 12,964 20,328
- ------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF FISCAL YEAR $32,272 $12,585 $12,964
- ------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL INFORMATION:
Cash paid for income taxes $10,829 $16,743 $17,978
- ------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
</TABLE>
<PAGE> 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include in consolidation the accounts of
Lance, Inc. and its wholly-owned subsidiaries (the Company). All material
intercompany items have been eliminated. For purposes of comparability, certain
1995 and 1994 amounts shown in the accompanying consolidated financial
statements have been reclassified to conform with the 1996 presentation.
OPERATIONS
The Company manufactures and purchases snack foods and bakery products which
are sold and distributed through the Company's own sales organization to
convenience stores, supermarkets, discount stores, restaurants, wholesale
grocery distributors, and similar establishments, and also in schools, office
buildings, manufacturing plants, and similar locations through the operation of
Company vending machines. Sales are concentrated primarily in the Southeastern
and Midwestern United States. The Company's policy is to recognize a sale at
the time the product is delivered to the customer.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
CASH, MARKETABLE SECURITIES, ACCOUNTS AND
NOTES RECEIVABLE AND ACCOUNTS PAYABLE
The carrying amount of cash, accounts and notes receivable and accounts payable
approximate fair value.
Marketable securities at December 28, 1996 are principally instruments of the
U.S. government and its agencies, of state governments, and of municipalities.
Debt and marketable equity securities are classified in one of three
categories: trading, available-for-sale, or held-to-maturity. Trading
securities are bought and held principally for the purpose of selling them in
the near term. Held-to-maturity securities are those securities which the
Company has the ability and intent to hold until maturity. All other securities
not included in trading or held-to-maturity are classified as
available-for-sale. The Company did not have any securities classified as
trading or held-to-maturity at December 28, 1996 and December 30, 1995.
Available-for-sale securities are recorded at fair value. Unrealized holding
gains and losses, net of the related income tax effect, on available-for-sale
securities are excluded from earnings and are reported as a separate component
of stockholders' equity until realized.
Dividend and interest income are recognized when earned. Realized gains and
losses for securities classified as available-for-sale are included in earnings
and are derived using the specific identification method for determining the
cost of securities sold.
A decline in the market value of any marketable security below cost that is
deemed other than temporary is charged to earnings, resulting in the
establishment of a new cost basis for the security.
<PAGE> 6
INVENTORIES
Inventories are valued at the lower of cost or market; 77% of the cost of the
inventories in 1996 and 79% in 1995 was determined using the last-in, first-out
(LIFO) method and the remainder was determined using the first-in, first-out
(FIFO) method.
DEPRECIATION AND PROPERTY
Depreciation is computed over estimated useful lives of depreciable property,
using the straight-line method, generally as follows:
<TABLE>
<S> <C>
Land improvements 20 years
Buildings 20-50 years
Machinery and equipment 5-12 years
Vending machines on location 8 years
Trucks and automobiles 3-9 years
Furniture and fixtures 10 years
</TABLE>
Property is recorded at cost less accumulated depreciation with the exception
of assets held for disposal which are recorded at their estimated fair value.
Upon retirement or disposal of any item of property, the cost is removed from
the property account and the accumulated depreciation applicable to such item
is removed from accumulated depreciation. Major renewals and betterments are
capitalized, maintenance and repairs are expensed as incurred, and gains and
losses on dispositions are reflected in income.
The Company adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of," during the fiscal year ended
December 30, 1995. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired,
the impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
cost to sell.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements, which include supplemental
retirement benefits, with certain officers. Provision for these benefits, made
over the period of employment of such officers, was $278,000 in 1996, $364,000
in 1995, and $296,000 in 1994.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company has only limited involvement with derivative financial instruments
and does not use them for trading purposes. The Company uses futures contracts
to hedge the effects of fluctuations in the price of flour. These transactions
meet the requirements for hedge accounting, including designation to specific
inventory amounts and probable future purchases, and high correlation. Gains
or losses on futures contracts are recognized in the measurement of the
transaction being hedged. The amount of futures contracts and related gains
and losses outstanding at December 28, 1996 and December 30, 1995 was not
material.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to the taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rate is recognized in income in the
period that includes the enactment date. Refundable income taxes result from an
overpayment of estimated taxes.
<PAGE> 7
INSURANCE CLAIMS
The accrual for insurance claims represents the estimated liability outstanding
on actual claims reported and an estimate of claims incurred but not yet
reported. During the year ended December 30, 1995, the Company modified its
assumptions for future cost increases of incurred but unpaid workers'
compensation, auto, general and product liability insurance claims. The result
was a change in accounting estimate which increased insurance expense by
$2,958,000 and reduced net income and net income per share by $1,923,000 and
$.06 respectively, in 1995.
POSTRETIREMENT PLAN
The Company has a defined benefit health care plan for substantially all
retirees and employees. The Company measures the costs of its obligation based
on its best estimate. The net periodic costs are recognized as employees
perform the services necessary to earn the postretirement benefits.
EARNINGS PER SHARE
Earnings per share amounts for the fiscal years ended December 28, 1996,
December 30, 1995 and December 31, 1994 were computed based on 30,075,166;
30,399,534; and 30,774,472 weighted average shares of common stock outstanding,
respectively. The dilutive effect of stock options is not material.
ADVERTISING COSTS
Effective at the beginning of fiscal 1994, the Company changed its method of
accounting for advertising costs to comply with the American Institute of
Certified Public Accountants' Statement of Position (SOP) 93-7, "Reporting on
Advertising Costs." SOP 93-7 requires that the Company report the costs of all
advertising in the periods in which the costs are incurred or the first time
the advertising takes place, except for certain direct-response advertising
that results in probable and measurable future economic benefits.
Direct-response advertising is to be capitalized and amortized over its
expected period of future benefit.
Previously, the Company capitalized all advertising costs and amortized them
over a period of one to three years. The majority of the Company's advertising
costs do not qualify as direct-response advertising. The Company has elected,
under SOP 93-7, to expense non-qualifying costs as they are incurred. The
effect of the change in accounting method increased advertising expense by
$753,000 and reduced net income and net income per share by $490,000 and $.02
respectively, in 1994.
Advertising expense was $6,382,000, $6,577,000 and $4,646,000 for the fiscal
years 1996, 1995 and 1994, respectively.
STOCK OPTION PLAN
Prior to December 31, 1995, the Company accounted for its stock option plan in
accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, "Accounting for Stock Issued to Employees," and related
interpretations. As such, compensation expense would be recorded on the date
of grant only if the current market price of the underlying stock exceeded the
exercise price. On December 31, 1995, the Company adopted SFAS No. 123,
"Accounting for Stock-Based Compensation," which permits entities to recognize
as expense over the vesting period the fair value of all stock-based awards on
the date of grant. Alternatively, SFAS No. 123 also allows entities to
continue to apply the provisions of APB Opinion No. 25 and provide pro forma
net income and pro forma earnings per share disclosures for employee stock
option grants made in 1995 and future years as if the fair-value-based method
defined in SFAS No. 123 had been applied. The Company has elected to continue
to apply the provisions of APB Opinion No. 25 and provide the pro forma
disclosure provisions of SFAS No. 123.
USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
<PAGE> 8
2. INVENTORIES
Inventories at December 28, 1996 and December 30, 1995 consisted of (in
thousands):
<TABLE>
<CAPTION>
1996 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Finished goods $14,600 $16,501
Goods in process 52 21
Raw materials 6,784 15,350
Supplies, etc. 6,926 7,128
- --------------------------------------------------------------------------------------------------------------
Total inventories at FIFO cost 28,362 39,000
Less: Adjustment to reduce FIFO cost to LIFO cost (6,187) (6,479)
- --------------------------------------------------------------------------------------------------------------
Total inventories $22,175 $32,521
- --------------------------------------------------------------------------------------------------------------
3. PROPERTY
Property at December 28, 1996 and December 30, 1995 consisted of (in thousands):
1996 1995
- --------------------------------------------------------------------------------------------------------------
Land and land improvements $11,312 $11,287
Buildings 60,905 60,834
Machinery and equipment 98,735 99,346
Vending machines on location 83,981 95,164
Trucks and automobiles 28,101 28,633
Furniture and fixtures 3,409 3,427
Assets held for disposal 10,425 11,256
Construction in progress 7,185 1,834
- --------------------------------------------------------------------------------------------------------------
Total 304,053 311,781
Accumulated depreciation (179,929) (185,125)
- --------------------------------------------------------------------------------------------------------------
Property, net $124,124 $126,656
- --------------------------------------------------------------------------------------------------------------
</TABLE>
During 1995, the Company determined that certain fixed assets at its Columbia,
South Carolina and Greenville, Texas manufacturing facilities were impaired.
The impairment was the result of a restructuring of the Company's operations
(note 10) which included the closing of the Columbia and Greenville facilities.
Fair value of the impaired assets was determined through third-party
appraisals.
The total amount of the impairment losses for the year ended December 30, 1995
was $29,368,000. These losses are included as a component of restructuring and
impairment expense in the accompanying 1995 statement of consolidated income
and retained earnings. During 1996, the Company sold impaired assets with a
carrying value of $260,000 which resulted in a gain of approximately $957,000.
The remaining impaired assets have a carrying value of approximately
$10,425,000 and $11,256,000 at December 28, 1996 and December 30, 1995 and are
included in property as assets held for disposal. Subsequent to December 28,
1996 the Company entered into a contract to sell the Columbia facility for
approximately $6,400,000, which exceeds the carrying value of the assets. The
expected disposal date of the remaining assets is not presently determinable.
The amounts the Company will ultimately realize through sale or abandonment of
these assets held for disposal could differ materially in the near term from
amounts assumed in arriving at the carrying value of these assets.
<PAGE> 9
4. MARKETABLE SECURITIES
At December 28, 1996 and December 30, 1995, the Company has classified all
investments as available-for-sale.
The amortized cost, gross unrealized holding gains, gross unrealized holding
losses and fair value of the available-for- sale securities by major security
type at December 28, 1996 and December 30, 1995 were as follows (in thousands):
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized
Amortized Holding Holding
Cost Gains Losses Fair Value
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
At December 28, 1996:
U.S. government agencies $ 6,981 $ 11 $ (11) $ 6,981
Municipal obligations 18,023 84 (9) 18,098
Equity securities 58 349 (4) 403
- ---------------------------------------------------------------------------------------------------------------
Total $ 25,062 $ 444 $ (24) $ 25,482
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
At December 30, 1995:
U.S. government agencies $ 5,975 $ 12 $ (5) $ 5,982
Municipal obligations 25,578 168 (44) 25,702
Equity securities 58 167 225
- ---------------------------------------------------------------------------------------------------------------
Total $ 31,611 $ 347 $ (49) $ 31,909
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Maturities of investment securities classified as available-for-sale were as
follows at December 28, 1996 (in thousands):
<TABLE>
Amortized Fair
Cost Value
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Due within one year $ 8,482 $ 8,484
Due after one year through five years 16,522 16,595
Equity securities 58 403
- ---------------------------------------------------------------------------------------------------------------
Total $25,062 $25,482
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Proceeds from sales of marketable securities were $4,747,000 and $7,436,000 in
1996 and 1995, respectively and related net realized gains (losses) included in
income were $61,000 and ($30,000) in 1996 and 1995, respectively. The net
change in the unrealized gain on marketable securities classified as
available-for-sale included as a component of equity was a (decrease) increase
of ($43,000) and $965,000 for the years ended December 28, 1996 and December
30, 1995 respectively.
5. COMMITMENTS AND CONTINGENCIES
At December 28, 1996 the Company had an unsecured bank line of credit of
$5,000,000 against which there have been no borrowings.
The Company and its subsidiaries lease certain facilities and equipment under
contracts classified as operating leases. Commitments under leases with terms
extending beyond one year are not material. Rental expense was $4,426,000 in
1996, $4,481,000 in 1995 and $4,711,000 in 1994.
The Company and its subsidiaries have sundry claims and other lawsuits pending
against them and also have certain guarantees which were made in the ordinary
course of business. It is not possible to determine with any certainty the
ultimate liability, if any, of the Company in any of these matters, but in the
opinion of management, their outcome should have no material adverse effect
upon the financial condition of the Company.
<PAGE> 10
6. STOCKHOLDERS' EQUITY
Common stock outstanding at year-end was as follows:
<TABLE>
<CAPTION>
PAR VALUE
SHARES (IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common stock outstanding at December 25, 1993 31,001,185 $25,835
Exercise of stock options 4,222 3
Retirement of common stock (572,000) (477)
- --------------------------------------------------------------------------------------------------------------
Common stock outstanding at December 31, 1994 30,433,407 25,361
Exercise of stock options 13,858 12
Retirement of common stock (110,000) (92)
- --------------------------------------------------------------------------------------------------------------
Common stock outstanding at December 30, 1995 30,337,265 25,281
Exercise of stock options
Retirement of common stock (449,000) (374)
- --------------------------------------------------------------------------------------------------------------
Common stock outstanding at December 28, 1996 29,888,265 $24,907
- --------------------------------------------------------------------------------------------------------------
</TABLE>
7. INCOME TAXES
Income tax expense (benefit) consists of the following (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $11,133 $11,024 $14,545
State and local 2,570 2,453 3,547
- --------------------------------------------------------------------------------------------------------------
Total current 13,703 13,477 18,092
- --------------------------------------------------------------------------------------------------------------
Deferred:
Federal 2,162 (14,644) (584)
State and local 323 (1,994) (165)
- --------------------------------------------------------------------------------------------------------------
Total deferred 2,485 (16,638) (749)
- --------------------------------------------------------------------------------------------------------------
Total income tax expense (benefit) $16,188 $(3,161) $17,343
- --------------------------------------------------------------------------------------------------------------
</TABLE>
A reconciliation of income taxes computed using the statutory rates to income
tax (benefit) expense follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory income tax rate 35% 35% 35%
Income taxes at statutory tax rate $14,273 $ (3,535) $15,515
Increase (decrease) in taxes resulting from:
State and local income taxes,
net of federal income tax benefit 1,945 298 2,198
Tax exempt interest (373) (339)
Miscellaneous items, net 343 415 (370)
- --------------------------------------------------------------------------------------------------------------
Income tax (benefit) expense $16,188 $ (3,161) $17,343
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 11
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 28, 1996
and December 30, 1995 are presented below (in thousands):
<TABLE>
<CAPTION>
1996 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Accrued postretirement costs $ 3,948 $ 3,466
Insurance, principally due to accrual for financial statement
purposes 3,314 3,903
Compensated absences, principally due to accrual for financial
statement purposes 2,257 2,034
Deferred compensation, principally due to
accrual for financial statement purposes 1,399 1,527
Amounts deductible when paid for tax purposes, accrued for
financial reporting purposes 1,297 379
Inventories, principally due to additional costs capitalized for tax
purposes 1,194 1,903
Net state operating loss carryforwards 670 676
Accounts receivable, principally due to allowance for
doubtful accounts 306 254
Restructuring charges, deductible when paid for tax purposes,
accrued for financial statement purposes 292 1,880
Other payroll costs, principally due to accrual for financial
statement purposes 112 116
Other 25
- -----------------------------------------------------------------------------------------------------------
Total gross deferred tax assets 14,789 16,163
Less valuation allowance (670) (676)
- -----------------------------------------------------------------------------------------------------------
Net deferred tax assets 14,119 15,487
Deferred tax liabilities:
Plant and equipment, principally due to differences in
depreciation, net of impairment (13,411) (12,020)
Other (162) (273)
- -----------------------------------------------------------------------------------------------------------
Total gross deferred tax liabilities (13,573) (12,293)
- -----------------------------------------------------------------------------------------------------------
Total net deferred tax assets $ 546 $ 3,194
- -----------------------------------------------------------------------------------------------------------
</TABLE>
The net deferred tax assets at December 28, 1996 and December 30, 1995 are
shown on the accompanying financial statements as follows:
<TABLE>
<CAPTION>
1996 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current deferred tax assets $ 7,099 $ 7,327
Noncurrent deferred tax liabilities (6,553) (4,133)
- ---------------------------------------------------------------------------------------------------------------
Total net deferred tax assets $ 546 $ 3,194
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
The decrease in the total valuation allowance for the years ended December 28,
1996 and December 30, 1995 was $6,000 and $8,000, respectively. These
decreases represent the net utilization of the net state operating loss
carryforwards in 1996 and 1995. Based on the Company's historical and current
earnings, management believes it is more likely than not that the Company will
realize the benefit of the remaining deferred tax assets that are not covered
by the valuation allowance.
At December 28, 1996, the Company has net operating loss carryforwards for
state income tax purposes which are available to offset future state taxable
income, if any. These net operating losses begin expiring in 2007.
<PAGE> 12
8. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides postretirement medical benefits for retirees and their
spouses to age 65. Retirees pay contributions toward medical coverage based on
the medical plan and coverage they select. The Company's postretirement health
care plan currently is not funded.
The following table presents the plan's accumulated postretirement benefit
obligation reconciled with amounts recognized in the Company's consolidated
balance sheet as of December 28, 1996 and December 30, 1995 (in thousands):
<TABLE>
<CAPTION>
1996 1995
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ (1,424) $ (845)
Fully eligible active plan participants (1,508) (1,538)
Other active plan participants (8,229) (7,732)
- -----------------------------------------------------------------------------------------------------------
Total (11,161) (10,115)
Net unrecognized loss from past experience
different from that assumed 1,024 1,196
Unrecognized prior service cost 103 111
- -----------------------------------------------------------------------------------------------------------
Accrued postretirement health care costs $(10,034) $ (8,808)
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Net periodic postretirement benefit cost for the years ended December 28, 1996
and December 30, 1995 consisted of the following components (in thousands):
<TABLE>
<CAPTION>
1996 1995
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Service cost - benefits attributed to service during the year $ 714 $ 604
Interest cost on accumulated postretirement benefit obligation 647 619
Amortization of unrecognized loss 1
Amortization of prior service cost 8
- -----------------------------------------------------------------------------------------------------------
Net periodic postretirement benefit cost $ 1,370 $ 1,223
- -----------------------------------------------------------------------------------------------------------
</TABLE>
For measurement purposes, an 11.38% annual rate of increase in the per capital
cost of covered health care benefits was assumed for 1996; the rate was assumed
to decrease gradually to 5.75% at 2017 and remain at that level thereafter. The
health care cost trend rate assumption has a significant effect on the amounts
reported. Increasing the assumed health care cost trend rates by one percentage
point in each year would increase the accumulated postretirement benefit
obligation as of December 28, 1996 by $983,000 and the aggregate of the service
and interest cost components of postretirement expense for the year ended
December 28, 1996 by $178,000. The weighted-average discount rate used in
determining the accumulated postretirement benefit obligation was 7.00% at the
beginning of the 1996 fiscal year and 7.25% at the end of the 1996 fiscal year
and was 8.00% at the beginning of the 1995 fiscal year and 7.00% at the end of
the 1995 fiscal year.
<PAGE> 13
9. EMPLOYEE BENEFIT PLANS
The Company has a retirement plan covering substantially all of its employees.
This plan is a defined contribution plan providing for contributions based on
income before income taxes, as defined. Contributions are made in accordance
with the provisions of the plan.
The Company also has an employee stock purchase plan under which shares of
common stock are purchased on the open market with employee and Company
contributions. The plan provides for the Company to contribute an amount equal
to 10% of the employees' contributions. A total of 800,000 shares of common
stock has been registered under the Securities Act of 1933 for purchase under
the plan. Company contributions amounted to $106,000 in 1996, $122,000 in 1995
and $129,000 in 1994.
In addition, the Company has stock option plans under which 1,466,666 shares of
common stock may be issued to key employees of the Company, as defined in the
plans. The plans authorize the grant of incentive stock options, non-qualified
stock options and stock appreciation rights. The plans require, among other
things, that before the stock options and stock appreciation rights may be
exercised, such key employees must remain in continuous employment of the
Company not less than six months from the date of grant. Exercised stock
options are accounted for through the issuance of previously retired stock.
Options have been granted that generally become exercisable in three or four
installments from six to forty-eight months after date of grant. The option
price, which equals the fair market value of the Company's common stock at the
date of grant, ranges from $15.81 to $24.13 per share.
Activity under the plan for each of the fiscal years in the three-year period
ended December 28, 1996 is as follows:
<TABLE>
<CAPTION>
Weighted
Number of Average
Shares Exercise Price
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance at December 25, 1993 434,790 $20.76
Granted 85,900 19.63
Exercised (13,047) 14.8
Expired
- ---------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 507,643 20.72
Granted
Exercised (25,086) 14.81
Expired (8,300) 19.88
- ---------------------------------------------------------------------------------------------------------------
Balance at December 30, 1995 474,257 21.04
Granted 248,480 15.81
Exercised
Expired (188,931) 20.45
- ---------------------------------------------------------------------------------------------------------------
Balance at December 28, 1996 533,806 $18.82
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
In 1995, the Company adopted a Nonqualified Stock Option Plan for Non-Employee
Directors (the Director Plan). The Company has 100,000 shares of common stock
which may be issued to non-employee directors under this plan. The Director
Plan requires among other things that the options are not exercisable unless
the optionee remains available to serve as a director of the Company until the
first anniversary of the date of grant, except that the initial option shall be
exercisable after six months. Options granted under the Director Plan shall
expire ten years from the date of grant. There were 12,500 and 25,000 options
granted during the year and outstanding at December 28,1996 and December 30,
1995 respectively. The option price, which equals the fair market value of the
Company's stock at the date of grant, was $15.63 and $17.50 at December 28,
1996 and December 30, 1995.
<PAGE> 14
There were 397,586 options exercisable under all stock option plans at December
28, 1996. The per share weighted- average fair value of stock options granted
during 1996 and 1995 was $3.07 and $3.38 on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions: 1996 - expected dividend yield 5.3%, risk-free interest rate of
6.5%, and an expected life of 8 years; 1995 - expected dividend yield 5.3%,
risk-free interest rate of 6.4%, and an expected life of 8 years. The Company
applies APB Opinion No. 25 in accounting for its Plan and, accordingly, no
compensation cost has been recognized for its stock options in the financial
statements. Had the Company determined compensation cost based on the fair
value at the grant date for its stock options under SFAS No. 123, the effect
on the Company's 1996 and 1995 net income would not have been material.
10. RESTRUCTURING
During 1996, the Company completed a restructuring of its operations designed
to improve the Company's profitability and make it more competitive in the
marketplace. The restructuring plan included the closing of the Company's
Columbia, South Carolina and Greenville, Texas facilities resulting in
workforce reductions of approximately 500 employees. Termination benefits,
shut-down related items and other restructuring expenses were charged to
restructuring and impairment expense and totaled approximately $6,496,000 for
the year ended December 30, 1995. Termination benefits included in accrued
compensation totaled approximately $966,000 and $5,142,000 at December 28, 1996
and December 30, 1995, respectively. Other shut-down related items accrued in
other payables totaled approximately $80,000 and $334,000 at December 28, 1996
and December 30, 1995, respectively.
Additions to and reductions of amounts arising from the restructuring for the
years ended December 28, 1996 and December 30, 1995 are summarized below:
<TABLE>
<CAPTION>
1996 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Restructuring reserves, beginning balance $5,476
Additions 5,476
Reductions:
Severance (4,176)
Other (254)
- ---------------------------------------------------------------------------------------------------------------
Restructuring reserves, ending balance $1,046 $ 5,476
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 15
11. UNAUDITED INTERIM FINANCIAL INFORMATION
A summary of certain interim financial information follows (in thousands,
except per share data):
<TABLE>
<CAPTION>
1996 Interim Period Ended
--------------------------------------------------------------
March 23 June 15 September 7 December 28
(12 Weeks) (12 Weeks) (12 Weeks) (16 Weeks)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales and other operating revenues $109,959 $112,253 $107,438 $145,222
- ---------------------------------------------------------------------------------------------------------------
Cost of sales 55,523 53,540 52,823 70,829
- ---------------------------------------------------------------------------------------------------------------
Profit from operations 6,259 9,608 7,363 10,306
- ---------------------------------------------------------------------------------------------------------------
Net income 5,091 6,729 5,237 7,535
- ---------------------------------------------------------------------------------------------------------------
Net income per common share $ 0.17 $ 0.22 $ 0.17 $ 0.25
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1995 Interim Period Ended
--------------------------------------------------------------
March 25 June 17 September 9 December 30
(12 Weeks) (12 Weeks) (12 Weeks) (16 Weeks)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales and other operating revenues $112,716 $114,249 $107,174 $143,329
- ---------------------------------------------------------------------------------------------------------------
Cost of sales 54,980 56,522 53,808 75,314
- ---------------------------------------------------------------------------------------------------------------
Profit (loss) from operations 8,608 7,252 5,669 (34,655)
- ---------------------------------------------------------------------------------------------------------------
Net income (loss) 5,978 4,858 4,133 (21,908)
- ---------------------------------------------------------------------------------------------------------------
Net income (loss) per common share $ 0.20 $ 0.16 $ 0.14 $ (0.72)
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL POSITION
OVERVIEW
During 1996, the Company began implementing its strategic plan designed to
improve profitability and become more competitive through strengthening and
growing its core snack food business. In December 1995, the Company announced
a restructuring plan designed to significantly reduce costs. The restructuring
plan led to a $43 million pre-tax charge in 1995 for impairment of fixed
assets, employee severance and other one-time charges.
The restructuring of operations announced in December 1995 was completed during
1996. The restructuring included closing the facilities in Columbia, South
Carolina and Greenville, Texas. The production at these facilities was moved
to existing production facilities in Burlington, Iowa and Charlotte, North
Carolina. The restructuring actions also included evaluating the profitability
of sales territories and product lines. This evaluation led to consolidating
or eliminating 54 branch locations and eliminating over 100 low-volume or
unprofitable stockkeeping units. As a result of these and other actions,
employment during 1996 decreased by approximately 900 employees.
RESULTS OF OPERATIONS, 1996 COMPARED TO 1995
Net sales and other operating revenue declined $2.6 million, 0.5%, from $477.5
million to $474.9 million. The decline was primarily a result of the route
profitability improvement efforts. Severe weather during the first quarter of
1996 also contributed to the decline. These effects were partially offset
through higher unit sales of Vista private label products and a price increase
for selected Vista products. The decline in revenues in 1996 occurred during
the Company's first and second quarters. Revenues during the Company's third
and fourth quarters of 1996 reflected modest increases as compared to the
corresponding periods in 1995.
Cost of sales of $232.7 million decreased to 49.0% of revenues in 1996 from
$240.6 million, or 50.4%, in 1995. The reduction in cost of sales was achieved
even though flour costs were approximately $4.9 million higher in 1996. As
expected, the closing of the facilities in South Carolina and Texas resulted in
lower labor and overhead costs. The cost of sales percentage was also
favorably impacted by improved production efficiencies at the Iowa and North
Carolina facilities and from a price increase on selected products at Vista.
Selling and delivery expenses in 1996 were $179.6 million or 37.8% of revenues
compared to $187.9 million or 39.3% in 1995, a reduction of $8.3 million. This
reduction came primarily through improving the cost effectiveness of the sales
route and vending systems.
General and administrative expenses totaled $24.5 million in 1996 as compared
to $21.4 million in 1995. As a result, general and administrative expenses
increased as a percentage of revenues from 4.5% in 1995 to 5.2% in 1996. Of
the $3.1 million increase, $2.1 million was due to severance and early
retirement programs initiated in 1996. An increase in costs related to
information systems and provisions under the 1996 incentive program were
partially offset by costs eliminated through the restructuring efforts.
The provision for profit sharing contributions declined from $4.8 million in
1995 to $4.5 million in 1996. The 1995 provision excluded the impact of
restructuring and other one-time charges in determining profit and also
provided for discretionary contributions for Vista. The 1996 provision was
determined under the plan formula.
Other income increased from $3.0 million in 1995 to $7.2 million in 1996. The
increase of $4.2 million was due primarily to gains on assets sold in 1996 and
the absence in 1996 of certain one-time charges recorded in 1995.
<PAGE> 17
Net income increased $31.5 million to $24.6 million in 1996. The increase
resulted primarily from the absence of the restructuring, impairment and other
one-time charges; reduced labor and overhead costs and improved cost
effectiveness of the Company's selling and delivery processes. Net income was
also favorably impacted by a price increase on selected products and gains on
asset sales. These increases were partially offset by higher flour costs and
provisions for severance and early retirement.
RESULTS OF OPERATIONS, 1995 COMPARED TO 1994
Net sales and other operating revenue for 1995 (52 weeks) decreased by $10.5
million (2.2%) from 1994 (53 weeks) primarily as a result of an additional week
of sales in 1994. The Company also reduced the amount of promotional
activities during the fourth quarter of 1995. Unit volume at Vista decreased,
but was partially offset through sales price increases. Sales continued to be
affected by intense price competition in most markets.
Cost of sales increased to $240.6 million in 1995 from $238.1 million in 1994.
As a result, cost of sales increased as a percentage of revenues to 50.4% in
1995 from 48.8% in 1994. This increase was principally a result of increased
packaging material costs, increased insurance costs, the write-off of inventory
and packaging design costs, and the continuing shift in composition of sales
mix to lower margin products, including products purchased for resale and
products sold to supermarket chains and discount stores.
Selling and delivery expenses in 1995 were $187.9 million or 39.3% of revenues
as compared to $183.2 million or 37.5% of revenues in 1994. This increase in
expenses was due primarily to higher insurance costs, higher subsidies paid to
sales representatives in low volume territories, increased stales and
additional marketing expenses associated with sponsoring the Lance race car in
the Busch Series, Grand National Division of professional motorsports. These
increases in selling and delivery expenses were offset somewhat by improvements
in the distribution costs of Vista products.
General and administrative expenses were $21.4 million in 1995 as compared to
$20.7 million in 1994 primarily due to higher insurance costs and higher
supplemental retirement costs. As a percentage of revenues, general and
administrative expenses were 4.5% in 1995 and 4.2% in 1994. Profit sharing
contributions were lower in 1995 due to decreased earnings.
Net income decreased $33.9 million ($1.11 per share) due primarily to losses on
restructuring and impairment, a change in the estimate for unpaid and incurred
but not reported insurance claims and for unfavorable claims experience in
1995, write-offs of inventory and packaging design costs and a decrease in
sales volume.
IMPACT OF INFLATION AND CHANGING PRICES
The impact of inflation on the Company has lessened in recent years as the rate
of inflation has declined. The effects of rising costs cannot always be passed
along to customers through price increases because of competitive conditions.
The Company attempts to minimize the effects of inflation on its operations
through improvements in operating efficiencies.
FINANCIAL POSITION
In 1996, the Company increased its liquidity by generating an additional $13.3
million of cash and marketable securities. The Company continues its ability
to meet regular operating needs, capital investment program, cash dividends and
stock repurchases through its cash flow from operations and investments. A
conservative investment strategy of investing in bank paper and government
securities provides ready funds to meet operating, capital and other
requirements. The Company also has a $5 million bank line of credit, which was
unused in 1996. There are no immediate plans for its use in 1997.
<PAGE> 18
Net cash flow from operations provided $64.8 million in 1996, an increase of
$16.7 million over 1995. This increase came primarily from increased
profitability and a reduction in inventories, mainly peanuts. The peanut
inventory reduction resulted from a change in the Company's method of buying
this raw material. Overall, inventories were also reduced as a result of
closing the South Carolina and Texas facilities. Accrued liabilities increased
in 1996, in part, due to an increase in employee benefit-related liabilities.
Incentive compensation payments of $1.7 million and a profit sharing
contribution payment of $4.5 million will be made in the first quarter of 1997.
The Company's capital spending amounted to $19.2 million in 1996 for
production, information systems, transportation, vending and other equipment
compared to $20.0 million in 1995. Sales of miscellaneous equipment, including
assets from the closed South Carolina and Texas facilities, provided proceeds
of $3.7 million in 1996. Subsequent to year end, the Company sold the real
estate of its South Carolina facility for approximately $6.4 million which
exceeded the carrying value of the assets. The Company plans to increase its
capital investment program in 1997. At the end of 1996, commitments for
capital expenditures totaled approximately $8 million with an additional $25
million planned for 1997. Planned expenditures include expanding the number of
vending machines, increasing investments in modern production equipment,
upgrading merchandising fixtures and adding selected equipment to support new
product introductions.
The Company continued its cash dividend at $0.96 per share, which amounted to
$28.9 million in 1996 compared to $29.2 million in 1995. During 1996, the
Company repurchased 449,000 shares of stock at an average price of $16.37
pursuant to a resolution of the Board of Directors on February 20, 1996. On
February 18, 1997, the Board of Directors authorized the purchase of an
additional 100,000 shares.
<PAGE> 19
FIVE YEAR SUMMARY
Consolidated Financial Highlights
For the Five Fiscal Years Ended December 28, 1996
(In thousands, except per share data)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
(52 WEEKS) (52 Weeks) (53 Weeks) (52 Weeks) (52 Weeks)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net sales and other operating
revenue $474,872 $477,468 $ 487,982 $472,786 $461,449
Loss from restructuring and
impairment (35,897)
Profit (loss) from operations 33,536 (13,126) 39,994 45,192 54,366
Income (loss) before income taxes 40,780 (10,100) 44,327 50,707 60,162
Income taxes (benefit) 16,188 (3,161) 17,343 19,531 21,018
Net income (loss) 24,592 (6,939) 26,984 30,798 39,144
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 30,075 30,400 30,774 31,236 31,299
PER SHARE OF COMMON STOCK:
Profit (loss) from operations $ 1.12 ($0.43) $1.30 $1.45 $1.74
Net income (loss) 0.82 (0.23) 0.88 0.99 1.25
Cash dividends 0.96 0.96 0.96 0.96 0.92
FINANCIAL STATUS AT YEAR-END:
Total assets $247,205 $251,345 $296,996 $308,474 $313,446
</TABLE>
MARKET AND DIVIDEND INFORMATION
The Company had 5,303 stockholders of record as of February 20, 1997.
The $.83-1/3 par value Common Stock of Lance, Inc. is traded in the
over-the-counter market under the symbol LNCE and transactions in the Common
Stock are reported on The Nasdaq Stock Market. The following table sets forth
the high and low sales prices and dividends paid during the interim periods in
fiscal years 1995 and 1996.
<TABLE>
<CAPTION>
1995 INTERIM HIGH LOW DIVIDENDS
PERIODS PRICE PRICE PAID
-------
<S> <C> <C> <C>
First . . . . . . . . . . . . . $18 1/2 $16 1/4 $ 0.24
Second . . . . . . . . . . . . $20 3/4 $16 1/4 $ 0.24
Third . . . . . . . . . . . . . $19 1/2 $17 1/4 $ 0.24
Fourth . . . . . . . . . . . . $18 1/8 $15 3/4 $ 0.24
1996 INTERIM HIGH LOW DIVIDENDS
PERIODS PRICE PRICE PAID
-------
First . . . . . . . . . . . . $18 1/8 $15 3/8 $ 0.24
Second . . . . . . . . . . . $17 1/4 $15 3/16 $ 0.24
Third . . . . . . . . . . . . $17 1/2 $16 1/8 $ 0.24
Fourth . . . . . . . . . . . $18 7/8 $17 $ 0.24
</TABLE>
<PAGE> 1
EXHIBIT 21
LIST OF THE SUBSIDIARIES OF THE REGISTRANT
Name of Subsidiary (1) State of Incorporation
- ------------------ ----------------------
Caronuts, Inc. North Carolina
Vista Bakery, Inc. North Carolina
- --------------------------
(1) Each subsidiary does business under only its corporate name.
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Lance, Inc.:
We consent to incorporation by reference in Registration Statements No. 2-77150,
No. 2-88540, No. 33-41866 and No. 33-58839 of Lance, Inc. on Form S-8 of our
report dated February 18, 1997 relating to the consolidated balance sheets of
Lance, Inc. and subsidiaries as of December 28, 1996 and December 30, 1995, and
the related consolidated statements of income and retained earnings and cash
flows for the three-year period ended December 28, 1996, which report is
incorporated by reference in the December 28, 1996 annual report on Form 10-K of
Lance, Inc.
Our report refers to the adoption of the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards (SFAS) No. 121
"Accounting for the Impairment of Long-lived Assets and Long-lived Assets to be
Disposed Of" during the fiscal year ended December 30, 1995. Our report also
refers to the adoption of the provisions of the American Institute of Certified
Public Accountants' Statement of Position 93-7, "Reporting on Advertising Costs"
and the provisions of the SFAS No. 115 "Accounting for Certain Investments in
Debt and Equity Securities," during the fiscal year ended December 31, 1994.
KPMG PEAT MARWICK LLP
Charlotte, North Carolina
March 27, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF LANCE, INC. FOR THE FISCAL YEAR ENDED DECEMBER 28,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> DEC-28-1996
<CASH> 32,272
<SECURITIES> 25,482
<RECEIVABLES> 30,409
<ALLOWANCES> 867
<INVENTORY> 22,175
<CURRENT-ASSETS> 117,038
<PP&E> 304,053
<DEPRECIATION> 179,929
<TOTAL-ASSETS> 247,205
<CURRENT-LIABILITIES> 35,748
<BONDS> 0
0
0
<COMMON> 24,907
<OTHER-SE> 159,955
<TOTAL-LIABILITY-AND-EQUITY> 184,862
<SALES> 474,872
<TOTAL-REVENUES> 474,872
<CGS> 232,715
<TOTAL-COSTS> 441,336
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 40,780
<INCOME-TAX> 16,188
<INCOME-CONTINUING> 24,592
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,592
<EPS-PRIMARY> .82
<EPS-DILUTED> .82
</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.