<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter (Twelve Weeks) Ended June 13, 1998
--------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------------------------------------------------
Commission file number 0-398
---------------------------------------------------------
LANCE, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-0292920
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
8600 South Boulevard (P.O. Box 32368), Charlotte, North Carolina 28232
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
704-554-1421
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
--------------- ---------------
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, $.83-1/3 par value -
29,991,314 shares outstanding as of July 10, 1998
----------
<PAGE> 2
LANCE, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION:
Financial Statements:
Condensed Consolidated Balance Sheets - June 13, 1998
(Unaudited) and December 27, 1997.............................................. 3
Condensed Consolidated Statements of Income (Unaudited) - Twelve and
Twenty-four Weeks Ended June 13, 1998 and June 14, 1997........................ 4
Condensed Consolidated Statements of Changes in Stockholders'
Equity (Unaudited) - Twenty-four Weeks Ended June 13, 1998 and
June 14, 1997.................................................................. 5
Condensed Consolidated Statements of Cash Flows (Unaudited)
Twenty-four Weeks Ended June 13, 1998 and June 14, 1997........................ 6
Notes to Condensed Consolidated Financial Statements (Unaudited)................. 7 - 8
Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................................... 9 - 10
PART II. OTHER INFORMATION:
Submission of Matters to a Vote of Security Holders.............................. 11
Exhibits and Reports on Form 8-K................................................. 12
SIGNATURES........................................................................... 12
</TABLE>
2
<PAGE> 3
LANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 13, 1998 (UNAUDITED) AND DECEMBER 27, 1997
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
JUNE 13, DECEMBER 27,
ASSETS: 1998 1997
- ------- ---------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 25,398 $ 34,040
Marketable securities 17,809 25,430
Accounts receivable (less allowance for doubtful accounts) 38,876 34,057
Inventories (Notes 3 and 4) 17,658 17,882
Deferred income tax benefit 6,862 6,913
Prepaid expenses and other 1,952 1,275
---------- ----------
Total current assets 108,555 119,597
PROPERTY, NET 138,261 130,264
OTHER ASSETS 2,734 2,879
---------- ----------
TOTAL $ 249,550 $ 252,740
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
- -------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 7,480 $ 5,821
Accrued liabilities 25,755 31,457
---------- ----------
Total current liabilities 33,235 37,278
---------- ----------
OTHER LIABILITIES AND DEFERRED CREDITS:
Deferred income taxes 10,560 10,005
Accrued postretirement health care costs 11,952 11,180
Accrual for insurance claims 3,787 4,449
Supplemental retirement benefits 3,174 3,306
---------- ----------
Total other liabilities and deferred credits 29,473 28,940
---------- ----------
STOCKHOLDERS' EQUITY (NOTE 7):
Common stock, $.83 1/3 par value (authorized: 75,000,000 shares;
issued 29,978,129 shares in 1998; 29,923,287 in 1997) 24,982 24,936
Preferred stock, $1.00 par value, (authorized: 5,000,000 shares;
none issued) -- --
Additional paid-in capital 1,835 999
Unamortized portion of restricted stock awards (768) (488)
Retained earnings 160,786 160,682
Net unrealized gain on marketable securities 7 393
---------- ----------
Total stockholders' equity 186,842 186,522
---------- ----------
TOTAL $ 249,550 $ 252,740
========== ==========
</TABLE>
See notes to condensed consolidated financial statements (unaudited).
3
<PAGE> 4
LANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE TWELVE AND TWENTY-FOUR WEEKS ENDED JUNE 13, 1998 AND JUNE 14, 1997
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED TWENTY-FOUR WEEKS ENDED
JUNE 13, JUNE 14, JUNE 13, JUNE 14,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES AND OTHER OPERATING REVENUE $ 118,264 $ 118,107 $ 228,490 $ 230,910
------------ ------------ ------------ ------------
COST OF SALES AND OPERATING EXPENSES:
Cost of sales (Note 3) 52,745 55,428 103,561 109,971
Selling and delivery 47,915 44,785 92,137 88,114
General and administrative 4,422 4,702 8,930 9,235
Provision for profit-sharing retirement plan 1,522 1,446 2,953 2,568
------------ ------------ ------------ ------------
Total 106,604 106,361 207,581 209,888
------------ ------------ ------------ ------------
PROFIT FROM OPERATIONS 11,660 11,746 20,909 21,022
OTHER INCOME, NET 998 1,108 2,216 1,838
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 12,658 12,854 23,125 22,860
INCOME TAXES 4,699 4,919 8,652 8,777
------------ ------------ ------------ ------------
NET INCOME $ 7,959 $ 7,935 $ 14,473 $ 14,083
============ ============ ============ ============
SHARE AND PER SHARE AMOUNTS (NOTE 5)
Net income:
Basic $ .27 $ .27 $ .48 $ .47
============ ============ ============ ============
Diluted $ .27 $ .26 $ .48 $ .47
============ ============ ============ ============
Cash dividends $ .24 $ .24 $ .48 $ .48
============ ============ ============ ============
Weighted average shares of common stock outstanding:
Basic 29,916,000 29,887,000 29,908,000 29,870,000
============ ============ ============ ============
Diluted 30,030,000 30,088,000 30,069,000 30,062,000
============ ============ ============ ============
</TABLE>
See notes to condensed consolidated financial statements (unaudited)
4
<PAGE> 5
LANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
FOR THE TWENTY-FOUR WEEKS ENDED JUNE 13, 1998 AND JUNE 14, 1997
(In thousands, except share data)
<TABLE>
<CAPTION>
Unamortized Net
Portion of Unrealized
Additional Restricted Gain on
Common Paid-in Stock Retained Marketable
Shares Stock Capital Awards Earnings Securities Total
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 28, 1996 29,888,265 $ 24,907 $ -- $ -- $ 159,700 $255 $ 184,862
----------------------------------------------------------------------------------------
COMPREHENSIVE INCOME:
Net income -- -- -- -- 14,083 -- 14,083
Net change in unrealized gain on
marketable securities -- -- -- -- -- (55) (55)
----------------------------------------------------------------------------------------
Total comprehensive income -- -- -- -- 14,083 (55) 14,028
CASH DIVIDENDS PAID -- -- -- -- (14,345) -- (14,345)
ISSUANCE OF RESTRICTED STOCK 30,200 25 530 (555) -- -- --
RECOGNITION OF RESTRICTED
STOCK AWARDS -- -- 7 33 -- -- 40
STOCK OPTIONS EXERCISED 3,550 3 -- -- 53 -- 56
PURCHASE OF COMMON STOCK (25,000) (21) -- -- (417) -- (438)
----------------------------------------------------------------------------------------
BALANCE, JUNE 14, 1997 29,897,015 $ 24,914 $ 537 $(522) $ 159,074 $200 $ 184,203
========================================================================================
BALANCE, DECEMBER 27, 1997 29,923,287 $ 24,936 $ 999 ($488) $ 160,682 $393 $ 186,522
----------------------------------------------------------------------------------------
COMPREHENSIVE INCOME:
Net income -- -- -- -- 14,473 -- 14,473
Net change in unrealized gain on
marketable securities -- -- -- -- -- (386) (386)
----------------------------------------------------------------------------------------
Total comprehensive income -- -- -- -- 14,473 (386) 14,087
CASH DIVIDENDS PAID -- -- -- -- (14,369) -- (14,369)
ISSUANCE OF RESTRICTED STOCK 24,450 20 491 (511) -- -- --
RECOGNITION OF RESTRICTED
STOCK AWARDS -- -- (112) 231 -- -- 119
STOCK OPTIONS EXERCISED 39,751 33 679 -- -- -- 712
PURCHASE OF COMMON STOCK (9,359) (7) (222) -- -- -- (229)
----------------------------------------------------------------------------------------
BALANCE, JUNE 13, 1998 29,978,129 $ 24,982 $1,835 $(768) $ 160,786 $ 7 $ 186,842
========================================================================================
</TABLE>
See notes to condensed consolidated financial statements (unaudited).
5
<PAGE> 6
LANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE TWENTY-FOUR WEEKS ENDED JUNE 13, 1998 AND JUNE 14, 1997
(In thousands)
<TABLE>
<CAPTION>
TWENTY-FOUR WEEKS ENDED
JUNE 13, JUNE 14,
1998 1997
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 14,473 $ 14,083
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation 9,698 9,586
Gain on sale of property (443) (2,004)
Deferred income taxes 818 1,061
Other, net (460) 1,241
Changes in operating assets and liabilities (9,192) 4,597
-------- --------
Net cash flow from operating activities 14,894 28,564
-------- --------
INVESTING ACTIVITIES:
Purchases of property (18,188) (15,975)
Proceeds from sale of property 936 6,720
Purchases of marketable securities (688) (10,524)
Sales of marketable securities 3,630 1,721
Maturities of marketable securities 4,701 7,665
Other, net (41) 187
-------- --------
Net cash used in investing activities (9,650) (10,206)
-------- --------
FINANCING ACTIVITIES:
Dividends paid (14,369) (14,345)
Issuance (purchase) of Company stock, net 483 (382)
-------- --------
Net cash used in financing activities (13,886) (14,727)
-------- --------
(DECREASE)/INCREASE IN CASH (8,642) 3,631
CASH AT BEGINNING OF PERIOD 34,040 29,764
-------- --------
CASH AT END OF PERIOD $ 25,398 $ 33,395
======== ========
SUPPLEMENTAL INFORMATION:
Cash paid for income taxes $ 7,804 $ 3,915
======== ========
</TABLE>
See notes to condensed consolidated financial statements (unaudited).
6
<PAGE> 7
LANCE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting of
only normal, recurring accruals) necessary to present fairly the
consolidated financial position of the Company and its subsidiaries as of
June 13, 1998 and December 27, 1997, the consolidated results of operations
for the twelve weeks and twenty-four weeks ended June 13, 1998 and
June 14, 1997 and the consolidated cash flows for the twenty-four weeks
ended June 13, 1998 and June 14, 1997. All 1997 amounts have been
reclassified to conform with the 1998 presentation.
2. The consolidated results of operations for the twelve and twenty-four weeks
ended June 13, 1998 and June 14, 1997 are not necessarily indicative of the
results to be expected for a full year.
3. The Company's primary raw materials include peanuts, peanut butter, flour
and other similar grain products. The Company enters into various forward
purchase agreements and derivative financial instruments to reduce the
impact of volatility in raw material prices. The Company has only limited
involvement with derivative financial instruments and does not use them for
trading purposes. Amounts payable or receivable under the agreements, which
qualify as hedges, are recognized as deferred gains or losses and included
in other assets or other liabilities. These deferred amounts are charged or
credited to cost of sales as the related raw materials costs are charged to
operations.
4. The Company utilizes the dollar value last-in, first-out (LIFO) method of
determining the cost of substantially all of its inventories. Because
inventory calculations under the LIFO method are based on annual
determinations, the determination of interim LIFO valuations requires that
estimates be made of year-end costs and levels of inventories. The
possibility of variation between estimated year-end costs and levels of
LIFO inventories and the actual year-end amounts may materially affect the
results of operations as finally determined for the full year.
Inventories at June 13, 1998 and December 27, 1997 consisted of (in
thousands):
<TABLE>
<CAPTION>
1998 1997
-----------------------------------
<S> <C> <C>
Finished goods $14,220 $15,047
Raw materials 4,011 4,133
Supplies, etc. 4,371 3,986
-----------------------------------
Total inventories at FIFO cost 22,602 23,166
Less: Adjustment to reduce FIFO costs to LIFO (4,944) (5,284)
===================================
Total inventories at LIFO cost $17,658 $17,882
===================================
</TABLE>
7
<PAGE> 8
LANCE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
5. The following table provides a reconciliation of the denominator used in
computing basic earnings per share to the denominator used in computing
diluted earnings per share for the twelve weeks ended June 13, 1998 and
June 14, 1997 (there were no reconciling items for the numerator amounts of
basic and diluted earnings per share):
<TABLE>
<CAPTION>
1998 1997
-----------------------------------
<S> <C> <C>
Weighted average number of common shares used
in computing basic earnings per share 29,916,000 29,887,000
Effect of dilutive stock options 114,000 201,000
-----------------------------------
Weighted average number of common shares and
dilutive potential common stock used in computing
diluted earnings per share 30,030,000 30,088,000
===================================
Stock options excluded from the above reconciliation
because they are anti-dilutive 119,000 147,000
===================================
</TABLE>
6. On December 28, 1997, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income". SFAS No. 130
requires an entity to disclose its 'comprehensive income' which is defined
as changes in equity that arise from non-owner sources. The Company's
comprehensive income consists of net income plus other comprehensive
income, which consists only of changes in stockholders' equity due to
unrealized gains or losses from its investment in marketable securities.
The Company's comprehensive income is included in the accompanying
condensed consolidated statements of changes in stockholders' equity.
During the twenty-four weeks ended June 13, 1998, other comprehensive
income consisted of a $386,000 loss, net of taxes. Holding gains arising
during the period were $14,000, net of taxes, while the reclassification
adjustment for gains included in net income totaled $400,000, net of taxes.
7. On July 14, 1998, the Board of Directors adopted a stockholder rights plan
intended to provide an appropriate and reasonable means of safeguarding the
interests of all Company stockholders in the event of an attempted takeover
of the Company or certain takeover tactics. Pursuant to the Preferred
Shares Rights Agreement dated July 14, 1998, each common stockholder at the
close of business on August 3, 1998 will automatically receive a dividend
distribution of one Right for each share of Common Stock held. In addition,
one Right will be delivered with each share of Common Stock issued after
August 3, 1998. The Rights will expire on July 14, 2008 unless redeemed
earlier.
8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financial Condition
The Company maintains a strong position of liquidity and has sufficient
financial resources to meet its ongoing operating needs, cash dividend payments,
capital expenditures, and stock repurchases through cash flow generated from
current operations and investments.
Marketable securities, cash and cash equivalents decreased $16.3 million from
December 27, 1997. Net cash flow from operating activities and proceeds from
maturities of investments were used for payment of dividends and increased
purchases of property.
Accounts receivable, net increased by $4.8 million from December 27, 1997 as a
result of the timing of shipments. Inventories decreased $0.2 million due
primarily to lower quantities of finished goods.
Property, net increased by $8.0 million from December 27, 1997. Purchases of
property amounted to $18.2 million while depreciation totaled $9.7 million.
Purchases of property included expenditures for vending machines, automated
packaging equipment, information technology projects and point-of-sale displays.
Prepaid expenses and other current assets increased $0.7 million due to the
timing of payments for insurance premiums and promotional costs.
Accounts payable increased $1.7 million due to the timing of disbursements and
increased purchases of property. Accrued liabilities decreased $5.7 million from
December 27, 1997 primarily due to payments of accrued profit sharing
contributions and other employee benefits.
Other liabilities and deferred credits increased $0.5 million from December 27,
1997 due primarily to provisions for postretirement health care costs.
Current commitments for capital expenditures total approximately $27.8 million.
Quarter (12 Weeks ) Ended June 14, 1998 Compared to Quarter (12 Weeks)
Ended June 13, 1997
Net sales and other operating revenues were $0.2 million, or 0.1%, above last
year. While competitive activity remained strong in the quarter, revenues from
grocery, vending and private label improved. Cost of sales as a percentage of
sales declined due to improved manufacturing efficiencies and lower raw
material costs, principally flour.
Selling and delivery expenses increased $3.1 million from last year due to a
higher level of promotional and other sales and marketing support.
General and administrative expenses were $0.3 million lower due to the timing of
certain expenses.
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
As a result of the factors discussed above, net income for the twelve weeks
ended June 13, 1998 equaled $7.96 million compared to $7.94 million for the same
period last year.
24 Weeks Ended June 14, 1998 Compared to 24 Weeks Ended June 13, 1997
Net sales and other operating revenues were $2.4 million, or 1.0%, below last
year due to strong competitive activity and the timing of promotional efforts,
particularly during the first quarter. Cost of sales as a percentage of sales
declined due to improved manufacturing efficiencies and lower raw material
costs, principally flour.
Selling and delivery expenses increased $4.0 million from last year due to a
planned higher level of promotional and other sales and marketing support.
General and administrative expenses were $0.3 million lower due to productivity
improvements and the timing of certain expenses, which have offset increased
investments in information systems. The provision for profit sharing
contributions increased by $0.4 million compared to last year due to the
increased profitability.
Other income increased $0.4 million from last year due primarily to realized
gains on investment securities dispositions.
As a result of the factors discussed above, net income for the twenty-four weeks
ended June 13, 1998 increased by $0.4 million compared to last year.
Year 2000 Compliance
The Company has completed the first phase of its multi-year effort to prepare
for the arrival of year 2000. The first phase included an assessment of its
hardware and software applications; implementation of a vendor management
program; awareness training throughout the Company; establishment of compliance
testing principles and standards; and, development of the project master plan.
The project master plan provides for completion of all major compliance
activities in early 1999, although continuing assessment is planned up to and
after the arrival of the millenium. Non-compliance by key vendors, customers and
other third parties could materially impact the Company's ability to operate.
The vendor management program has assessed these material relationships and the
Company will monitor their compliance activities.
Year 2000 compliance costs are expected to range from $0.5 million to $1.0
million of external costs. In addition, the Company is redeploying certain
internal resources. Approximately $0.3 million of external costs have been
incurred.
10
<PAGE> 11
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Registrant's Annual Meeting of Stockholders held on April 17,
1998, the following matters were submitted to a vote of the
stockholders of the Registrant:
1. Election of nominees to the Board of Directors of the
Registrant:
<TABLE>
<CAPTION>
Shares
Voted Shares
In Favor Withheld
------------ --------------
<S> <C> <C>
For term ending in 2000:
Weldon H. Johnson 22,153,314 531,242
For terms ending in 2001:
Alan T. Dickson 22,154,299 530,257
James H. Hance, Jr. 22,154,512 530,044
Nancy Van Every McLaurin 22,153,910 530,646
S. Lance Van Every 22,152,812 531,744
</TABLE>
2. Approval of an amendment to the 1995 Nonqualified Stock Option
Plan for Non-Employee Directors to increase the number of
shares of Common Stock authorized from 100,000 to 300,000
which was approved by a vote of 21,906,357 shares in favor,
667,371 shares against and 110,224 shares abstaining. There
were 602 shares of broker non-votes.
3. Approval of an amendment to the Restated Charter to create a
class of 5,000,000 shares of Preferred Stock, par value $1 per
share, to be issued in such series and with such preferences,
limitations and relative rights as the Board of Directors may
determine from time to time which was approved by a vote of
13,386,049 shares in favor, 6,103,429 shares against and
143,299 shares abstaining. There were 3,051,779 shares of
broker non-votes.
4. Ratification of the selection of KPMG Peat Marwick LLP as
independent public accountants for fiscal year 1998 which was
approved by a vote of 22,603,962 shares in favor, 37,281
shares against and 42,713 shares abstaining. There were 600
shares of broker non-votes.
11
<PAGE> 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3 Restated Articles of Incorporation of Lance, Inc. as
amended through April 17, 1998.
10.1 Lance, Inc. 1995 Nonqualified Stock Option Plan for
Non-Employee Directors, as amended, incorporated
herein by reference to Exhibit 4 to the Registrant's
Registration Statement on Form S-8, File No.
33-58839, as amended by Post Effective Amendment No.
1.
10.2 Lance, Inc. 1998 Long-Term Incentive Plan for
Officers.
27 Financial Data Schedule (Filed in electronic format
only. Pursuant to Rule 402 of Regulation S-T, this
schedule shall not be deemed filed for purposes of
Section 11 of the Securities Act of 1933 or Section
18 of the Securities Exchange Act of 1934).
99 Cautionary Statement under Safe Harbor Provisions of
the Private Securities Litigation Reform Act of 1995.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the 12 weeks ended June
13, 1998.
Items 1 through 3 and 5 are inapplicable and have been omitted.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused the Report to be signed on its behalf by the
undersigned thereunto duly authorized.
LANCE, INC.
By: /s/ B. Clyde Preslar
-------------------------
B. Clyde Preslar
Dated: July 14, 1998
12
<PAGE> 1
EXHIBIT 3
RESTATED ARTICLES OF INCORPORATION
OF
LANCE, INC.
(As amended through April 17, 1998)
1. The name of this Corporation is LANCE, INC.
2. The address of the registered office of the Corporation in the State
of North Carolina is 8600 South Boulevard, Charlotte, North Carolina,
Mecklenburg County, North Carolina and the mailing address is Post Office Box
32368, Charlotte, North Carolina 28232 and the name of its registered agent at
such address is B. C. Preslar.
3. The purposes for which the Corporation is organized are:
(a) To manufacture, process, pack, purchase, distribute and
sell, both at wholesale and retail, and generally trade and deal in and
with peanuts, peanut products, crackers, sandwiches, cracker
sandwiches, candies, cookies, confectioneries, cakes, potato and corn
chips, snacks, goods, commodities, wares, merchandise and food products
of every kind, nature and description,
(b) To sell, merchandise and otherwise distribute food
products of every kind, nature and description with mechanical,
electronic, automatic and automated vending machines, devices and
equipment of every kind, nature and description,
(c) To purchase, own, lease, maintain and operate a fleet of
motor vehicles to transport, distribute and deliver food products,
equipment, raw materials, supplies, machinery, goods, commodities,
wares and merchandise,
(d) To buy, sell, own, lease as lessor or lessee, develop,
improve and deal in and with real estate of all kinds and for all
purposes, and to engage in any business directly or indirectly related
thereto,
(e) To engage in any other lawful activity, including but not
limited to, (i) buying, selling, leasing as lessor or lessee,
brokering, factoring, and dealing in or with real, personal and mixed
property of all kinds and for all uses and purposes; (ii) constructing,
manufacturing, raising or otherwise producing and repairing, servicing,
storing or otherwise caring for any type of building, structure,
product, commodity or livestock whatsoever; (iii) extracting and
processing natural resources; (iv) transporting freight or passengers
by land, sea or air; (v) collecting and disseminating information,
opinion or advertisement through any medium whatsoever; (vi) performing
personal services of any nature; and (vii) entering into or serving in
any type of management, investigative, advisory, promotional,
<PAGE> 2
protective, insurance, guarantyship, suretyship, fiduciary or
representative capacity or relationship for or with any persons, firms
or corporations whatsoever,
(f) To carry out all or any part of the foregoing objects and
purposes in any part of the world or universe as principal, agent,
contractor, or otherwise, either alone or in conjunction with any
entity or entities, and either directly or indirectly through one or
more subsidiaries or controlled entities organized or utilized for the
purpose; and in carrying on its business and for the purpose of
attaining or furthering any of its objects or purposes, to make and
perform such contracts, to do such acts and things, and to exercise
such powers, as a natural person could lawfully make, perform, do or
exercise, all in the manner and to the extent, now or hereafter
authorized or permitted by law, and
(g) To carry on all or any of its operations or business in
the State of North Carolina and/or in any or all other territories,
states, possessions, colonies and dependencies of the United States of
America, and in the District of Columbia, in any or all foreign
countries and in any other jurisdiction throughout the world or
universe; to have one or more offices within or without the State of
North Carolina; to do any and all things necessary, suitable,
convenient or proper for, or in connection with, or incidental to, the
accomplishment of any of the purposes or the attainment of any one or
more of the objects herein enumerated, or designed directly or
indirectly to promote the interests of the Corporation; and in general
to do any and all things and exercise any and all powers which it may
now or hereafter be lawful for the Corporation to do or exercise under
the laws of the State of North Carolina; provided, however, that the
Corporation shall not in any possession, country or other jurisdiction
carry on any business or exercise any powers except such as the
Corporation may be entitled to carry on or exercise under the laws of
said possession, country or other jurisdiction.
4. The number of shares the Corporation is authorized to issue is
80,000,000 divided into shares as follows:
(a) 5,000,000 shares of Preferred Stock with a par value of $1
per share, with the Preferred Stock to be issued in such series and
with such preferences, limitations and relative rights as shall be
determined from time to time by the Board of Directors; and
(b) 75,000,000 shares of Common Stock with a par value of
$.83-1/3 per share.
5. Except as provided in the North Carolina Business Corporation Act,
the Board of Directors of this Corporation shall have the power, without the
assent or vote of the shareholders, to make, alter, amend and rescind the Bylaws
of this Corporation.
6. The period of duration of the Corporation is perpetual.
2
<PAGE> 3
7. No holder of shares of the Corporation of any class, now or
hereafter authorized, shall have any preferential or preemptive right to
subscribe for, purchase or receive any shares of the Corporation of any class,
now or hereafter authorized, or any options or warrants for such shares, or any
rights to subscribe to or purchase such shares, or any securities convertible
into or exchangeable for such shares, which may at any time be issued, sold or
offered for sale by the Corporation.
8. The affirmative vote of the holders of at least seventy-five percent
(75%) of the outstanding shares of the Corporation entitled to vote shall be
necessary for the following corporate actions:
(a) Merger or consolidation of the Corporation;
(b) Sale, lease or exchange of all or substantially all of the
property or assets of the Corporation; or
(c) Dissolution of the Corporation.
This paragraph shall not require approval of the shareholders of the
Corporation on any of the above corporate actions for which shareholder approval
is not required under the North Carolina Business Corporation Act.
9. To the fullest extent permitted by applicable law, no director of
the Corporation shall have any personal liability arising out of any action
whether by or in the right of the Corporation or otherwise for monetary damages
for breach of his or her duty as a director. This Paragraph shall not impair any
right to indemnity from the Corporation which any director may now or hereafter
have. Any repeal or modification of this Paragraph shall be prospective only and
shall not adversely affect any limitation hereunder on the personal liability of
a director with respect to acts or omissions occurring prior to such repeal or
modification.
3
<PAGE> 1
EXHIBIT 10.2
LANCE, INC.
1998 Long-Term Incentive Plan for Officers
Purposes and Introduction
The primary purposes of the 1998 Long-Term Incentive Plan for Officers
are to:
o Align executives' interests with those of stockholders by
linking a substantial portion of pay to the price of Lance
Common Stock.
o Provide a way to attract and retain key executives and senior
managers who are critical to Lance's future success.
o Increase total pay for executives and senior managers to
competitive levels.
To achieve the maximum motivational impact, plan goals and the rewards
that will be received for meeting those goals will be communicated to
participants as soon as practical after the 1998 Plan is approved by the
Compensation/Stock Option Committee.
Each participant will be granted one or more Awards. Awards will be
earned to the extent predetermined goals are attained.
Plan Years
The period over which performance will be measured is the Company's
fiscal year and the two, three and four year periods after the date of grant of
awards.
Eligibility and Participation
Eligibility in the Plan is limited to Executive Officers and senior
managers who are key to Lance's success. The Compensation/Stock Option
Committee of the Board of Directors will review and approve participants
nominated by the President and CEO. Participation in one year does not guarantee
participation in a following year but will be reevaluated and determined on an
annual basis.
Exhibit A includes the list of 1998 participants approved by the
Compensation/Stock Option Committee at its April 16, 1998 meeting. Initial
awards will be made as soon as possible after the approval of the 1998 Plan by
the Compensation/Stock Option Committee.
<PAGE> 2
Awards
Each participant will be granted Awards expressed as an economic value
equal to a percentage of his or her Base Salary. Participants may be assigned to
a Performance Tier by position by salary level or based on other factors as
determined by the President and CEO. If the job duties of a position change
during the year, or Base Salary is increased significantly, the Award shall be
revised as appropriate.
Exhibit A lists the Awards for each participant for the 1998 Plan Year
as granted by the Compensation/Stock Option Committee. Awards will be
communicated to each participant as close to the beginning of the year as
practicable, in writing. Awards will be calculated by multiplying each
participant's Base Salary by the appropriate percentages, as described below.
o Awards shall be calculated as follows:
Percentage of Base Salary
Performance Tier for 1998 Awards
---------------- ---------------
1 *%
2 *%
3 *%
o For 1998, Awards will be allocated as follows:
As a Percentage of Base Salary
Restricted Stock
----------------
Performance 100% Stock
Tier of Target Options Regular Performance
---- --------- ------- ------- -----------
1 *% *% *% *%
2 *% *% *% *%
3 *% *% *% *%
o To determine the number of shares of stock issued pursuant to
each stock option, restricted stock grant and performance
restricted stock grant, the value of each option is calculated
using the Black-Scholes model and each restricted stock grant
using compensation counsel's model.
[*Target Awards not required to be disclosed.]
2
<PAGE> 3
Long-Term Incentives
Each Participant shall receive stock options equal to 50% in economic
value of his or her Award, 25% in economic value will be in restricted stock and
25% in economic value in performance restricted stock.
Stock options will be nonqualified and will vest in four equal annual
installments beginning one year after the date of grant and shall be exercisable
for 10 years after the date of grant.
Restricted stock will vest as to 50% two years after the date of grant
and the balance four years after the date of grant.
Performance restricted stock will vest three years after the date of
grant, if the cumulative consolidated earnings per share of Lance, Inc. for the
three fiscal years 1998, 1999 and 2000 equal or exceed $* per share.
[*Target not required to be disclosed.]
Form and Timing of Awards
Awards will be made as soon as practicable after awards are approved by
the Compensation/Stock Option Committee of the Board of Directors. All awards
will be rounded up to the nearest multiple of 50 shares.
Change In Status
An employee hired into an eligible position during the year may
participate in the plan for the balance of the year on a pro rata basis.
3
<PAGE> 4
Certain Terminations of Employment
In the event a participant voluntarily terminates employment any award
which has not vested will terminate and be forfeited. In the event a participant
is terminated involuntarily, any award which has not vested will terminate and
be forfeited except that stock options which have vested prior to involuntary
termination may be exercised within 30 days of termination. In the event of
death, stock options shall become fully vested and may be exercised within one
year of death. In the event of permanent disability, stock options shall become
fully vested and remain exercisable in accordance with the terms of the award.
In the event of normal retirement, stock options which have or will vest within
six months of normal retirement will vest and become exercisable in accordance
with the terms of the award and may be exercised within three years of normal
retirement. In the event of death, disability or normal retirement, restricted
stock and performance restricted stock awards which are not vested will be
vested pro rata based on the number of full months elapsed since the date of the
award. In the event of early retirement, restricted stock awards which are not
vested will be vested pro rata based on the number of full months elapsed since
the date of the award. In all other cases, awards which have not vested upon
termination of employment will terminate and be forfeited.
Change In Control
In the event of a Change in Control, the vesting of awards will be
accelerated to fully vest upon the effective date of a Change in Control.
For this purpose, a Change in Control is defined as when any person,
corporation or other entity and its affiliates (excluding members of the Van
Every Family and any trust, custodian or fiduciary for the benefit of any one or
more members of the Van Every Family) acquires or contracts to acquire or
otherwise controls in excess of 35% of the then outstanding equity securities of
the Company. For the purposes of this plan, the Van Every Family shall mean the
lineal descendants of Salem A. Van Every, Sr., whether by blood or adoption, and
their spouses.
Withholding
The Company shall withhold from awards any Federal, foreign, state, or
local income or other taxes required to be withheld.
Communications
Progress reports should be made to participants annually, showing
performance results.
4
<PAGE> 5
Executive Officers
Notwithstanding any provisions to the contrary above, participation,
Awards and prorations for executive officers, including the President and CEO,
shall be approved by the Compensation/Stock Option Committee.
Governance
The Compensation/Stock Option Committee of the Board of Directors of
Lance, Inc. is ultimately responsible for the administration and governance of
the Plan. Actions requiring Committee approval include final determination of
plan eligibility and participation, identification of performance goals and
final award determination. The decisions of the Committee shall be conclusive
and binding on all participants.
5
<PAGE> 6
Attachment A
[Target Awards omitted for participants as target levels not required to be
disclosed.]
6
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF LANCE, INC. FOR THE SIX MONTH PERIOD ENDED
JUNE 13, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-26-1998
<PERIOD-START> DEC-28-1997
<PERIOD-END> JUN-13-1998
<CASH> 25,398
<SECURITIES> 17,809
<RECEIVABLES> 40,164
<ALLOWANCES> 1,288
<INVENTORY> 17,658
<CURRENT-ASSETS> 108,555
<PP&E> 337,828
<DEPRECIATION> 199,567
<TOTAL-ASSETS> 249,550
<CURRENT-LIABILITIES> 33,235
<BONDS> 0
0
0
<COMMON> 24,982
<OTHER-SE> 161,860
<TOTAL-LIABILITY-AND-EQUITY> 249,550
<SALES> 228,490
<TOTAL-REVENUES> 228,490
<CGS> 103,561
<TOTAL-COSTS> 207,581
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 23,125
<INCOME-TAX> 8,652
<INCOME-CONTINUING> 14,473
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,473
<EPS-PRIMARY> .48
<EPS-DILUTED> .48
</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 which 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 future delivery of certain of its
raw materials and engages in limited hedging to reduce the price risk of these
raw materials, increases in the cost 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.
