<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 (Thirteen Weeks) Ended March 27, 1999
---------------------------------------------
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, $0.83-1/3 par value -
29,957,997 shares outstanding as of May 4, 1999
<PAGE> 2
LANCE, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
----
PART I. FINANCIAL INFORMATION:
<S> <C>
Financial Statements:
Condensed Consolidated Balance Sheets - March 27, 1999
(Unaudited) and December 26, 1998 .......................................................... 3
Condensed Consolidated Statements of Income (Unaudited) - Thirteen Weeks
Ended March 27, 1999 and Twelve Weeks Ended March 21, 1998 ................................ 4
Condensed Consolidated Statements of Stockholders' Equity (Unaudited) -
Thirteen Weeks Ended March 27, 1999 and Twelve Weeks Ended
March 21, 1998 .............................................................................
Condensed Consolidated Statements of Cash Flows (Unaudited) - Thirteen
Weeks Ended March 27, 1999 and Twelve Weeks Ended March 21, 1998 ........................... 6
Notes to Condensed Consolidated Financial Statements ............................................ 7
Management's Discussion and Analysis of Financial Condition and
Results of Operations ...................................................................... 10
PART II. OTHER INFORMATION:
Exhibits and Reports on Form 8-K ................................................................ 13
SIGNATURES.............................................................................................. 14
</TABLE>
2
<PAGE> 3
LANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 27, 1999 (UNAUDITED) AND December 26, 1998
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
March 27, December 26,
1999 1998
--------- ------------
<S> <C> <C>
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents $ 5,439 $ 7,856
Marketable securities -- 9,126
Accounts receivable (less allowance for doubtful accounts) 42,131 39,616
Inventories (Notes 3 and 4) 21,478 20,331
Deferred income tax benefit 6,881 5,808
Income tax receivable -- 2,800
Prepaid expenses and other 2,774 1,943
--------- ---------
Total current assets 78,703 87,480
PROPERTY, NET 160,400 161,683
OTHER ASSETS 2,424 2,240
--------- ---------
TOTAL ASSETS $ 241,527 $ 251,403
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable $ 7,595 $ 9,231
Accrued liabilities 18,683 25,160
--------- ---------
Total current liabilities 26,278 34,391
=========== =========
OTHER LIABILITIES AND DEFERRED CREDITS:
Deferred income taxes 13,274 12,122
Accrued postretirement health care costs 12,504 12,350
Accrual for insurance claims 3,292 3,529
Supplemental retirement benefits 2,873 2,927
--------- ---------
Total other liabilities and deferred credits 31,943 30,928
========= =========
STOCKHOLDERS' EQUITY:
Common stock, $0.83 1/3 par value (authorized: 75,000,000 shares;
issued 29,957,997 shares in 1999; 29,989,210 in 1998) 24,964 24,991
Preferred stock, $1.00 par value (authorized: 5,000,000 shares;
none issued) -- --
Additional paid in capital 2,973 1,981
Unamortized portion of restricted stock awards (1,483) (502)
Retained earnings 156,852 159,524
Net unrealized gain on marketable securities -- 90
--------- ---------
Total stockholders' equity 183,306 186,084
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 241,527 $ 251,403
========= =========
</TABLE>
See notes to condensed consolidated financial statements (unaudited).
3
<PAGE> 4
LANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the THIRTEEN WEEKS ENDED March 27, 1999 AND THE TWELVE WEEKS
ENDED March 21, 1998 (Note 2)
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
(See Note 2)
----------------------------------------------
Thirteen Weeks Ended Twelve Weeks Ended
March 27, 1999 March 21, 1998
-------------------- ------------------
<S> <C> <C>
NET SALES AND OTHER OPERATING REVENUE $ 120,789 $ 110,226
----------- -----------
COST OF SALES AND OPERATING EXPENSES:
Cost of sales (Note 3) 54,024 50,816
Selling, marketing and delivery 51,036 44,222
General and administrative 5,362 4,508
Provision for profit-sharing retirement plan 1,238 1,431
----------- -----------
Total 116,660 100,977
----------- -----------
PROFIT FROM OPERATIONS 9,129 9,249
OTHER INCOME, NET 251 1,218
----------- -----------
INCOME BEFORE INCOME TAXES 9,380 10,467
INCOME TAXES 3,506 3,953
----------- -----------
NET INCOME $ 5,874 $ 6,514
=========== ===========
SHARE AND PER SHARE AMOUNTS (Note 5)
Net Income:
Basic $ 0.20 $ 0.22
=========== ===========
Diluted $ 0.20 $ 0.22
=========== ===========
Cash dividends $ 0.24 $ 0.24
=========== ===========
Weighted average shares of common stock outstanding:
Basic 29,940,000 29,900,000
=========== ===========
Diluted 30,030,000 30,073,000
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements (unaudited).
4
<PAGE> 5
LANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
FOR THE THIRTEEN WEEKS ENDED MARCH 27, 1999 AND THE TWELVE WEEKS ENDED
MARCH 21, 1998
- ------------------------------------------------------------------------------
(In thousands, except share data)
<TABLE>
<CAPTION>
Net
Unamortized Unrealized
Additional Portion of Gain on
Common Paid-in Restricted Retained Marketable
Shares Stock Capital Stock Awards Earnings Securities Total
------ ----- ------- ------------ -------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 27, 1997 29,923,287 $ 24,936 $ 999 $( 488) $ 160,682 $ 393 $ 186,522
----------- -------- ------- ------- --------- ----- ---------
COMPREHENSIVE INCOME:
Net Income -- -- -- -- 6,514 -- 6,514
Net change in unrealized gain on
marketable securities -- -- -- -- -- (222) (222)
----------- -------- ------- ------- --------- ----- ---------
Total comprehensive income -- -- -- -- 6,514 (222) 6,292
----------- -------- ------- ------- --------- ----- ---------
CASH DIVIDENDS PAID -- -- -- -- (7,182) -- (7,182)
RECOGNITION OF RESTRICTED
STOCK AWARDS -- -- (72) 95 -- -- 23
STOCK OPTIONS EXERCISED 22,425 19 399 -- -- -- 418
PURCHASE OF COMMON STOCK (5,359) (5) (139) -- -- -- (144)
----------- -------- ------- ------- --------- ----- ---------
BALANCE, MARCH 21, 1998 29,940,353 $ 24,950 $ 1,187 $ (393) $ 160,014 $ 171 $ 185,929
----------- -------- ------- ------- --------- ----- ---------
BALANCE, DECEMBER 26, 1998 29,989,210 $ 24,991 $ 1,981 $ (502) $ 159,524 $ 90 $ 186,084
----------- -------- ------- ------- --------- ----- ---------
COMPREHENSIVE INCOME:
Net Income -- -- -- -- 5,874 -- 5,874
Net change in unrealized gain on
marketable securities -- -- -- -- -- (90) (90)
----------- -------- ------- ------- --------- ----- ---------
Total comprehensive income -- -- -- -- 5,874 (90) 5,784
----------- -------- ------- ------- --------- ----- ---------
CASH DIVIDENDS PAID -- -- -- -- (7,134) -- (7,134)
ISSUANCE OF RESTRICTED STOCK 65,300 54 1,081 (1,135) -- -- --
RECOGNITION OF RESTRICTED
STOCK AWARDS -- -- (146) 154 -- -- 8
STOCK OPTIONS EXERCISED 3,487 3 57 -- -- -- 60
PURCHASE OF COMMON STOCK (100,000) (84) -- -- (1,412) -- (1,496)
----------- -------- ------- ------- --------- ----- ---------
BALANCE, MARCH 27, 1999 29,957,997 $ 24,964 $ 2,973 $(1,483) $ 156,852 $ -- $ 183,306
----------- -------- ------- ------- --------- ----- ---------
</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 THIRTEEN WEEKS ENDED March 27, 1999 AND THE TWELVE WEEKS
ENDED March 21, 1998 (Note 2)
- ------------------------------------------------------------------------------
(In thousands)
<TABLE>
<CAPTION>
Thirteen Weeks Twelve Weeks
Ended Ended
March 27, 1999 March 21, 1998
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 5,874 $ 6,514
Adjustments to reconcile net income to cash
provided by operating activities
Depreciation 6,510 4,799
Gain on sale of property, net (29) (76)
Deferred income taxes 79 (209)
Other, net 9 (378)
Changes in operating assets and liabilities (10,218) (1,389)
-------- --------
Net cash flow from operating activities 2,225 9,261
-------- --------
INVESTING ACTIVITIES:
Purchases of property (5,276) (8,187)
Proceeds from sale of property 78 207
Purchases of marketable securities (556) (276)
Sales of marketable securities 7,733 499
Maturities of marketable securities 1,886 4,701
Other, net 63 (61)
-------- --------
Net cash provided by (used in) investing activities 3,928 (3,117)
-------- --------
FINANCING ACTIVITIES:
Dividends paid (7,134) (7,182)
Issuance (purchase) of common stock, net (1,436) 274
-------- --------
Net cash used in financing activities (8,570) (6,908)
-------- --------
DECREASE IN CASH (2,417) (764)
CASH, BEGINNING OF PERIOD 7,856 34,040
-------- --------
CASH, END OF PERIOD $ 5,439 $ 33,276
======== ========
SUPPLEMENTAL INFORMATION:
Cash paid for income taxes $ 226 $ 450
======== ========
</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 March 27, 1999 and December 26, 1998, the consolidated results of
operations for the thirteen weeks ended March 27, 1999 and the twelve
weeks ended March 21, 1998 and the consolidated cash flows for the
thirteen weeks ended March 27, 1999 and the twelve weeks ended March
21, 1998.
2. Effective for fiscal 1999, the Company has adopted a quarterly
reporting calendar based on four 13-week quarters. Historically, the
Company has reported interim results on the basis of three 12-week
quarters and one 16-week quarter. Management believes the new quarterly
reporting provides more useful, comparative information.
The table below summarizes revenues, operating profit, net income and
earnings per share as filed with the Securities and Exchange Commission
for 1998 on the basis of three 12-week quarters and one 16-week quarter:
<TABLE>
<CAPTION>
Quarter Ended
------------------------------------------------------------------------- Year Ended
March 21 June 13 September 5 December 26 December 26
(12 wks) (12 wks) (12 wks) (16 wks) (52 wks)
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 110,226 $ 118,264 $ 112,098 $ 145,844 $ 486,432
Operating Profit 9,249 11,660 10,017 9,149 40,075
Net Income 6,514 7,959 6,868 6,267 27,608
Earnings per share:
Basic $ 0.22 $ 0.27 $ 0.23 $ 0.21 $ 0.92
Diluted $ 0.22 $ 0.27 $ 0.23 $ 0.21 $ 0.92
Weighted average shares outstanding:
Basic 29,900,000 29,916,000 29,935,000 29,942,000 29,925,000
Diluted 30,073,000 30,030,000 30,043,000 30,018,000 30,043,000
</TABLE>
In order to better compare 1999 results with 1998, the table below
summarizes estimated revenues, operating profit, net income and earnings
per share for 1998 on the basis of four 13-week quarters:
<TABLE>
<CAPTION>
Quarter Ended
------------------------------------------------------------------------- Year Ended
March 28 June 27 September 26 December 26 December 26
(13 wks) (13 wks) (13 wks) (13 wks) (52 wks)
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 119,955 $ 126,313 $ 121,259 $ 118,905 $ 486,432
Operating Profit 9,968 12,268 10,377 7,462 40,075
Net Income 6,991 8,346 7,102 5,169 27,608
Earnings per share:
Basic $ 0.23 $ 0.28 $ 0.24 $ 0.17 $ 0.92
Diluted $ 0.23 $ 0.28 $ 0.24 $ 0.17 $ 0.92
Weighted average shares outstanding:
Basic 29,901,000 29,918,000 29,937,000 29,943,000 29,925,000
Diluted 30,073,000 30,021,000 30,028,000 30,018,000 30,043,000
</TABLE>
7
<PAGE> 8
LANCE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The consolidated results of operations for the thirteen weeks ended
March 27, 1999 and the twelve weeks ended March 21, 1998 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 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 March 27, 1999 and December 26, 1998 consisted of (in
thousands):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Finished goods $ 17,026 $ 16,627
Raw materials 4,793 3,653
Supplies, etc 4,061 4,437
-------- --------
Total inventories at FIFO cost 25,880 24,717
Less: Adjustment to reduce FIFO costs to LIFO (4,402) (4,386)
-------- --------
Total inventories at LIFO cost $ 21,478 $ 20,331
======== ========
</TABLE>
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 at March 27, 1999 and March 21,
1998 (there were no reconciling items for the numerator amounts of
basic and diluted earnings per share):
<TABLE>
<CAPTION>
March 27, 1999 March 21, 1998
-------------- --------------
<S> <C> <C>
Weighted average number of common shares used in
computing basic earnings per share 29,940,000 29,900,000
Effect of dilutive stock options 90,000 173,000
----------- -----------
Weighted average number of common shares and
dilutive potential common stock used in computing
diluted earnings per share 30,030,000 30,073,000
----------- -----------
Stock options excluded from the above reconciliation
because they are anti-dilutive 749,000 44,000
=========== ===========
</TABLE>
8
<PAGE> 9
LANCE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
6. During the thirteen weeks ended March 27, 1999, other comprehensive
income consisted of a $90,000 reclassification adjustment, net of
taxes, for realized gains included in net income.
7. On April 14, 1999, the Registrant acquired 100% of the stock of Tamming
Foods Ltd., a corporation organized under the laws of Ontario, Canada
("Tamming") pursuant to the terms of an Agreement of Purchase and Sale
dated as of March 31, 1999. Tamming manufactures high quality sugar
wafer products that are sold under private label in the United States,
Canada and Mexico. Annual sales of Tamming are approximately $20
million.
Pursuant to the terms of the Agreement of Purchase and Sale, a
subsidiary of the Company purchased all of the outstanding stock of
Tamming for the aggregate purchase price of $45.0 million of which $14.1
million was paid by delivery of Deferred Notes due April 2, 2004. The
funds for the acquisition were obtained from a short term borrowing
agreement with a bank consisting of a 180 day unsecured term loan in the
amount of $30.9 million and an existing unsecured line of credit with a
bank in the amount of $5.0 million. The Deferred Notes, which are
non-interest bearing, were issued pursuant to a Deferred Notes
Agreement.
On April 16, 1999, the Company entered into an agreement to acquire Cape
Cod Potato Chip Company, Inc. ("Cape Cod") headquartered in Hyannis,
Massachusetts. Cape Cod manufactures premium, kettle-cooked potato chips
and other salty snacks which are distributed in the United States,
Canada, Spain and England. Annual sales of Cape Cod are approximately
$30 million. Completion of the acquisition is subject to regulatory
approval and is expected to be completed by June 1999. Funds for this
acquisition are to be obtained from a revolving bank credit facility
expected to be in place in May 1999.
9
<PAGE> 10
LANCE, INC AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CHANGE IN INTERIM REPORTING PERIODS
Effective for the fiscal year ending December 25, 1999, the Company has revised
its interim quarterly reporting periods to 13-week fiscal quarters. A summary of
estimated 1998 quarterly operating results on a 13-week basis is presented in
Note 2 of the accompanying condensed consolidated financial statements. For
purposes of discussion and analysis of the Company's results of operations for
the quarter (13 weeks) ended March 27, 1999, the operating results for 1998
shown below are presented on a 13-week basis to improve comparability. Cash
flows for 1998 have not been presented on the basis of a 13-week quarter.
Management does not believe cash flows would be significantly different between
a 12-week period and a 13-week period for purposes of understanding financial
condition and liquidity.
RESULTS OF OPERATIONS
THIRTEEN WEEKS ENDED MARCH 27, 1999 COMPARED TO THE THIRTEEN WEEKS
ENDED MARCH 28, 1998
<TABLE>
<CAPTION>
($ In Thousands) 1999 1998 Change
---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Revenues $120,789 100.0% $119,955 100.0% $ 834 0.7%
Cost of sales 54,024 44.7% 55,120 45.9% 1,096 -2.0%
-------- ----- -------- ----- -------- -----
Gross margin 66,765 55.3% 64,835 54.1% 1,930 3.0%
-------- ----- -------- ----- -------- -----
Selling, marketing, and delivery expenses 51,036 42.3% 48,376 40.3% (2,660) 5.5%
General and administrative expenses 5,362 4.4% 4,964 4.1% ( 398) 8.0%
Provisions for employees' retirement plans 1,238 1.0% 1,527 1.3% 289 -18.9%
-------- ----- -------- ----- -------- -----
Total operating expenses 57,636 47.7% 54,867 45.7% (2,769) 5.0%
-------- ----- -------- ----- -------- -----
Operating profit 9,129 7.6% 9,968 8.3% ( 839) -8.4%
Other income, net 251 0.2% 1,265 1.1% (1,014) -80.2%
Income taxes 3,506 2.9% 4,242 3.5% 736 -17.4%
-------- ----- -------- ----- -------- -----
Net income $ 5,874 4.9% $ 6,991 5.8% $ (1,117) -16.0%
-------- ----- -------- ----- -------- -----
</TABLE>
Revenues increased $0.8 million, or 0.7%, due to sales volume increases through
grocery accounts from both branded and private label products. These increases
were offset by lower sales volume through "up and down the street", convenience
and food service accounts.
Gross margin improved by 1.2 percentage points to 55.3% primarily as a result of
manufacturing efficiencies and favorable commodity costs.
The $2.7 million increase in selling, marketing and delivery costs relate to
infrastructure costs for sales and vending as well as higher than expected costs
related to information system implementations.
Other income includes interest and dividend income on cash and marketable
securities and gains/losses on dispositions of assets. The $1.0 million decrease
in other income was due to the absence of $0.5 million in securities gains from
1998 and a decline in interest income from lower amounts of marketable
securities.
10
<PAGE> 11
LANCE, INC AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Traditionally, the Company has met its liquidity needs for capital expenditures,
cash dividends and stock repurchases through cash from operations and
investments. In addition, the Company has historically maintained relatively
high liquidity and no outstanding debt. During 1998, cash and marketable
securities were reduced to $17.0 million as the Company's capital expenditures
peaked at $55 million. Cash and marketable securities were further reduced
during the thirteen weeks ended March 27, 1999 by $11.5 million primarily as a
result of increased working capital.
Working capital (other than cash and marketable securities) as of March 27, 1999
increased to $47.0 million from $36.1 million at December 28, 1998. This
increase of $10.9 million along with reduced profitability resulted in net cash
flow from operating activities of $2.2 million as compared to $9.3 million for
the 12-week period in 1998. The working capital increase came primarily from
higher levels of receivables and inventories, as well as annual payments for
profit-sharing contributions and employee benefits. Receivables increased due to
increases in sales on credit terms for private label accounts and due to
accommodations during the information systems implementations. Inventories
increased in the DSD field sales organization due to planned promotional
activities.
On February 16, 1999, the Board of Directors authorized the repurchase of up to
100,000 shares on the open market. During the first quarter of 1999, 100,000
shares were purchased at a cost of $1.5 million.
In connection with the acquisition of Tamming Foods Ltd. on April 14, 1999, the
Company utilized its existing unsecured credit line in the amount of $5.0
million and entered into a short-term borrowing agreement consisting of a
180-day term loan in the amount of $30.9 million. The Company is presently
arranging longer term credit arrangements to repay the short-term borrowing for
the Tamming acquisition, to fund the recently announced acquisition of Cape Cod
Potato Chip Company, Inc. and for general corporate purposes.
MARKET RISK
Raw materials used by the Company are exposed to the impact of changing
commodity prices, particularly the price of wheat used for flour. Accordingly,
the Company enters into commodity future and option contracts to manage
fluctuations in prices of anticipated purchases of certain raw materials. The
Company's Board-approved policy is to use such commodity derivative financial
instruments only to the extent necessary to manage these exposures. The Company
does not use these financial instruments for trading purposes.
Since the Company uses commodity price-sensitive instruments to hedge a certain
portion of its existing and anticipated transactions, any loss in value for
these instruments generally would be offset by increases in the value for the
hedged transactions. At March 27, 1999, the Company's position included futures
contracts for 700,000 bushels of wheat maturing during 1999 with contract and
fair market values each totaling $2.1 million. A 10% decrease in the cost of
wheat futures at the time of offset or maturity would result in a $0.21 million
realized loss.
YEAR 2000 READINESS
The Company has organized its activities to address Year 2000 issues in four
phases: (1) initial assessment and project organization; (2) remediation and
testing; (3) assessment of third-party readiness
11
<PAGE> 12
LANCE, INC AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
and impacts and (4) contingency planning. The timing of each of these phases
overlap each other. The Company has completed the first phase, which included an
assessment of 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 second phase consists of remediation and testing. All critical internal
hardware and software applications (commonly referred to as "IT systems") have
been remediated and tested. A comprehensive, integrated test of all applications
is planned for the second quarter of 1999. Other applications not internal to
the Company (commonly referred to as "non-IT systems") include applications such
as energy supply, telecommunications, facility operation and security, automated
production controllers and financial services such as banking and benefit plan
administration. In addition, the Company has non-IT systems included in its
vending machine operations and DSD system. Remediation and testing for non-IT
systems has begun and is expected to be completed for all critical applications
by the end of the second quarter of 1999.
The third phase, assessment of third party readiness and impacts, has also begun
and is expected to be completed by mid-1999. The Company has received a majority
of responses to initial inquiries of material third party relationships. The
Company plans to validate readiness responses for its key relationships as it
assesses its contingency planning requirements. The Company's key relationships
include suppliers of flour, peanuts, peanut butter, energy and production and
distribution equipment. The fourth phase, contingency planning, began in the
fourth quarter of 1998 and is expected to be completed early in the fourth
quarter of 1999.
Year 2000 compliance costs are expected to range from $0.7 million to $1.0
million of external costs, of which approximately $0.6 million have been
incurred. In addition, the Company is using internal resources for a
cross-functional steering committee and three project co-managers. The estimated
compliance costs do not include costs for system replacements. Essentially all
of the Company's IT systems have been replaced during the last three years as
part of an integrated information systems project initiated in late 1995.
At this stage of the Company's Year 2000 readiness activities, the Company's
assessment is that the failure of non-IT systems and lack of readiness by third
parties would not have a material adverse effect on revenues since a majority of
sales are to a large number and wide variety of customers. While such failures
would likely cause increased operating expenses, the Company does not expect a
material effect on the results of operations, liquidity or financial condition.
The Company will continue to assess possible increased operating expenses as the
Company's Year 2000 readiness activities continue.
FORWARD-LOOKING STATEMENTS
This discussion contains certain forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. Actual results could
differ materially from those forward-looking statements. Factors that may cause
actual results to differ materially include, price competition, industry
consolidation, raw material costs, effectiveness of sales and marketing
activities, effectiveness of Year 2000 readiness activities and effects of a
leveraged business, as described in the Company's filings with the Securities
and Exchange Commission.
12
<PAGE> 13
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<S> <C> <C>
10.1 1999 Annual Corporate Performance Incentive Plan for
Officers
10.2 1999 Long-Term Incentive Plan for Officers
10.3 Chairman of the Board Compensation Letter dated
February 16, 1999
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).
99.1 Cautionary Statement under Safe Harbor Provisions of
the Private Securities Litigation Reform Act of 1995
99.2 1998 Statements of Income for the Quarters (13 Weeks)
Ended March 28, 1998, June 27, 1998, September 26,
1998 and December 26, 1998
</TABLE>
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the 13 weeks ended
March 27, 1999.
Items 1 through 5 are not applicable and have been omitted.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused the Report to be signed on its behalf by the
undersigned thereunto duly authorized.
LANCE, INC.
By: /s/ B. Clyde Preslar
--------------------------------------
B. Clyde Preslar
Vice President and Principal Financial
Officer
Dated: May 7, 1999
13
<PAGE> 1
Exhibit 10.1
LANCE, INC.
1999 Annual Corporate Performance Incentive Plan for Officers
Purposes and Introduction
The primary purposes of the 1999 Annual Corporate Performance
Incentive Plan for Officers are to:
-- Motivate behaviors that lead to the successful achievement of
specific financial and operations goals that support Lance's
stated business strategy.
-- Emphasize link between participants' performance and rewards
for meeting predetermined, specific goals.
-- Improve the competitiveness of total cash pay opportunities.
-- Help establish performance orientation at Lance and
communicate to employees that greater responsibility carries
greater rewards because more pay is "at risk."
For 1999, participants will be eligible to earn incentive awards based
on Company performance in Earnings Per Share (EPS).
To achieve the maximum motivational impact, plan goals and the rewards
that will be received for meeting those goals will be communicated to
participants as soon as practical after the 1999 Plan is approved by
the Compensation/Stock Option Committee of the Board of Directors.
Each participant will be assigned a Target Incentive Award, stated as
a percent of Base Salary. The Target Incentive Award, or a greater or
lesser amount, will be earned at the end of the plan year based on the
attainment of predetermined goals.
Following year-end, 100% of the awards earned will be paid to
participants in cash.
Plan Year
The period over which performance will be measured is the Company's
fiscal year.
1
<PAGE> 2
Eligibility and Participation
Eligibility in the Plan is limited to Officers who are key to Lance's
success. The Compensation/Stock Option Committee of the Board of
Directors will review and approve participants nominated by the
President and CEO. Participation in one year does not guarantee
participation in a following year, but instead will be reevaluated and
determined on an annual basis.
Participants in the Plan may not participate in any other annual
incentive plan (e.g., sales incentives, etc.) offered by Lance or its
affiliates.
Attachment A includes the list of 1999 participants approved by the
Compensation/Stock Option Committee at its February 15, 1999 meeting.
Target Incentive Awards
Each participant will be assigned a Target Incentive Award expressed
as a percentage of his or her Base Salary. Participants may be
assigned Target Incentive Awards by position by salary level or based
on other factors as determined by the President and CEO.
Target Incentive Awards will be reevaluated at least every other year,
if not annually. If the job duties of a position change during the
year, or Base Salary is increased significantly, the Target Incentive
Award shall be revised as appropriate.
Attachment A lists the Target Incentive Award for each participant for
the 1999 Plan Year. These Awards will be reviewed and adjusted
annually by the Compensation/Stock Option Committee. Target Incentive
Awards will be communicated to each participant as close to the
beginning of the year as practicable, in writing. Final awards will be
calculated by multiplying each participant's Target Incentive Award by
the appropriate percentage (based on financial performance for the
year, as described below).
Individual Performance
Each Officer will receive 75% of his or her Incentive Award based on
the Target Incentive Award calculations based on Earnings Per Share.
The remaining 25% of each Officer's Incentive Award will be placed in
a pool for all of the Officers with the amount to be received by each
Officer based upon the determination by the Compensation/Stock Option
Committee in its discretion as to the individual performance of the
Officer in meeting his or her individual goals for the year. Thus,
each Officer could receive none, a portion or all of the pool composed
of 25% of the Incentive Awards of each Officer, based on individual
performance.
2
<PAGE> 3
Performance Measures and Weightings
The 1999 financial performance measure will be Earnings Per Share.
Specific goals and related payouts are shown below.
<TABLE>
<CAPTION>
1999 Goals and Related Payouts
----------------------------------------------------
Payout as Percent
Performance Measure Goal of Target Award
-------------------------------------------------------------------------------------
<S> <C> <C>
Financial: Corporate EPS
Minimum 1999 Annual EPS: $* 50% (if met at minimum)
If minimum is not met, no
payouts will be earned
Target 1999 Annual EPS: $* 100% (if met at target)
Maximum 1999 Annual EPS: $* 150% (if met at maximum)
-------------------------------------------------------------------------------------
</TABLE>
Percent of payout will be determined on a straight line basis between
minimum and maximum. There will be no payouts if 1999 Annual EPS is
less than $*.
Extraordinary Performance
For each full $* of Annual EPS in excess of $* Annual EPS, the
percentage of Target Incentive Award payout for each participant will
increase 5%, provided that total payout shall not exceed 200% of
Target Incentive Award. The extraordinary payout of 5% of Target
Incentive Award will be earned only when the full additional $* per
share is earned; extraordinary payouts will be determined on a "stair
step" basis.
The performance measure, specific numerical goals and the role of
individual performance in determining final payouts will be
communicated to each participant at the beginning of the year. Final
performance awards will be calculated after the Committee has reviewed
the Company's audited financial statements for 1999 and determined the
performance level achieved.
[*Targets not required to be disclosed.]
3
<PAGE> 4
Minimum, Target, Maximum and Extraordinary performance levels will be
defined at the beginning of each year for each performance measure.
The following definitions for the terms Extraordinary, Maximum, Target
and Minimum should help Lance set the goals for each year, as well as
evaluate the payouts:
-- Extraordinary: Exceeds excellence; deserves extraordinary
bonus
-- Maximum: Excellent; deserves an above-market bonus
-- Target: Normal or expected performance; deserves market level
bonus
-- Minimum: Lowest level of performance deserving payment above
base salary; deserves below market bonus
-- Below minimum: Deserves no additional pay beyond base salary
Form and Timing of Payments
Final award payments will be made in cash as soon as practicable after
award amounts are approved by the Compensation/Stock Option Committee
of the Board of Directors. All awards will be rounded to the nearest
$100.
Change In Status
In the event that a participant changes positions during the plan
year, whether due to promotion, demotion or lateral move, at the
discretion of the President and CEO, awards may be prorated for the
year based on the length of time in each position.
An employee hired into an eligible position during the year may
participate in the plan for the balance of the year on a pro rata
basis.
Certain Terminations of Employment
In the event a participant voluntarily terminates employment or is
terminated involuntarily before the end of the year, any award will be
forfeited. In the event of death, permanent disability, or normal or
early retirement, the award will be paid on a pro rata basis after the
end of the plan year. Awards otherwise will be calculated on the same
basis as for other participants, except that any adjustment for
individual performance will be based on performance prior to the
termination of employment.
4
<PAGE> 5
Change In Control
In the event of a Change in Control, pro rata payouts will be made at
the greater of (1) Target or (2) actual results for the year-to-date,
based on the number of days in the plan year preceding the Change in
Control. Payouts will be made within 30 days after the relevant
transaction has been completed.
For this purpose, a Change in Control is defined as when any person,
corporation or other entity and its affiliates (excluding members of
the Van Every Family and any trust, custodian or fiduciary for the
benefit of any one or more members of the Van Every Family) acquires
or contracts to acquire or otherwise controls in excess of 35% of the
then outstanding equity securities of the Company. For the purposes of
this plan, the Van Every Family shall mean the lineal descendants of
Salem A. Van Every, Sr., whether by blood or adoption, and their
spouses.
Withholding
The Company shall withhold from award payments any Federal, foreign,
state, or local income or other taxes required to be withheld.
Communications
Progress reports, should be made to participants quarterly, showing
the year-to-date performance results, and the percentage of target
awards that would be earned if results remain at that level for the
entire year.
Executive Officers
Notwithstanding any provisions to the contrary above, participation,
Target Incentive Awards and prorations for executive officers,
including the President and CEO, shall be approved by the
Compensation/Stock Option Committee.
Governance
The Compensation/Stock Option Committee of the Board of Directors of
Lance, Inc. is ultimately responsible for the administration and
governance of the Plan. Actions requiring Committee approval include
final determination of plan eligibility and participation,
identification of performance goals and final award determination. The
decisions of the Committee shall be conclusive and binding on all
participants.
5
<PAGE> 6
Attachment A
[Target awards omitted for participants as targets not required to be
disclosed.]
<PAGE> 1
Exhibit 10.2
LANCE, INC.
1999 Long-Term Incentive Plan for Officers
Purposes and Introduction
The primary purposes of the 1999 Long-Term Incentive Plan for Officers
are to:
-- Align executives' interests with those of stockholders by
linking a substantial portion of pay to the price of Lance
Common Stock.
-- Provide a way to attract and retain key executives and senior
managers who are critical to Lance's future success.
-- Increase total pay for executives and senior managers to
competitive levels.
To achieve the maximum motivational impact, plan goals and the rewards
that will be received for meeting those goals will be communicated to
participants as soon as practical after the 1999 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.
Attachment A includes the list of 1999 participants approved by the
Compensation/Stock Option Committee at its February 15, 1999 meeting.
Initial awards will be made as soon as possible after the approval of
the 1999 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.
Attachment A lists the Awards for each participant for the 1999 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.
-- Awards shall be calculated as follows:
Percentage of Base Salary
Performance Tier for 1999 Awards
---------------- -------------------------
1 *%
2 *%
3 *%
-- For 1999, Awards will be allocated as follows:
As a Percentage of Base Salary
Restricted Stock
-----------------------
Performance 100% of Stock
Tier of Target Options Regular Performance
----------- --------- ------- ------- -----------
1 *% *% *% *%
2 *% *% *% *%
3 *% *% *% *%
-- To determine the number of shares of stock issued pursuant to
each stock option, restricted stock grant and performance
restricted stock grant, the value of each option is
calculated using the Black-Scholes model and each restricted
stock grant using compensation counsel's model.
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.
[*Targets not required to be disclosed.]
2
<PAGE> 3
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 1999, 2000 and 2001 equal or exceed $*
per share.
Form and Timing of Awards
Awards will be made as soon as practicable after awards are approved
by the Compensation/Stock Option Committee of the Board of Directors.
All awards will be rounded up to the nearest multiple of 50 shares.
Change In Status
An employee hired into an eligible position during the year may
participate in the plan for the balance of the year on a pro rata
basis.
Certain Terminations of Employment
In the event a participant voluntarily terminates employment any award
which has not vested will terminate and be forfeited. In the event a
participant is terminated involuntarily, any award which has not
vested will terminate and be forfeited except that stock options which
have vested prior to involuntary termination may be exercised within
30 days of termination. In the event of death, stock options shall
become fully vested and may be exercised within one year of death. In
the event of permanent disability, stock options shall become fully
vested and remain exercisable in accordance with the terms of the
award. In the event of normal retirement, stock options which have or
will vest within six months of normal retirement will vest and become
exercisable in accordance with the terms of the award and may be
exercised within three years of normal retirement. In the event of
death, disability or normal retirement, restricted stock and
performance restricted stock awards which are not vested 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.
[*Target not required to be disclosed.]
3
<PAGE> 4
Change In Control
In the event of a Change in Control, the vesting of awards will be
accelerated to fully vest upon the effective date of a Change in
Control.
For this purpose, a Change in Control is defined as when any person,
corporation or other entity and its affiliates (excluding members of
the Van Every Family and any trust, custodian or fiduciary for the
benefit of any one or more members of the Van Every Family) acquires
or contracts to acquire or otherwise controls in excess of 35% of the
then outstanding equity securities of the Company. For the purposes of
this plan, the Van Every Family shall mean the lineal descendants of
Salem A. Van Every, Sr., whether by blood or adoption, and their
spouses.
Withholding
The Company shall withhold from awards any Federal, foreign, state, or
local income or other taxes required to be withheld.
Communications
Progress reports should be made to participants annually, showing
performance results.
Executive Officers
Notwithstanding any provisions to the contrary above, participation,
Awards and prorations for executive officers, including the President
and CEO, shall be approved by the Compensation/Stock Option Committee.
Governance
The Compensation/Stock Option Committee of the Board of Directors of
Lance, Inc. is ultimately responsible for the administration and
governance of the Plan. Actions requiring Committee approval include
final determination of plan eligibility and participation,
identification of performance goals and final award determination. The
decisions of the Committee shall be conclusive and binding on all
participants.
4
<PAGE> 5
Attachment A
[Target awards omitted for participants as targets not required to be
disclosed.]
<PAGE> 1
Exhibit 10.3
Lance, Inc.
P.O. Box 32368
[LANCE LOGO] Charlotte, NC 28232 2368 USA
Phone 704 554 1421
February 16, 1999
Mr. Scott C. Lea
Charlotte, North Carolina
Re: Chairman of the Board
Dear Scott:
This letter is to confirm the amendments approved today by the Board
of Directors to the incentive compensation arrangements described in the
attachments to our letter agreements dated April 19,1996 and October 6, 1998.
Both agreements are hereby amended to provide that the period of time
for determining the Highest Average Sales Price (as defined) to be four years
after completion of service as Chairman of the Board and the April 19, 1996
agreement is amended to provide for the determination of the Highest Average
Sales Price to be the higher of that contained in the existing provision (four
consecutive interim quarterly accounting periods) or 10 consecutive trading
days.
To effect the foregoing amendments, attached to this letter as
Attachment 1 is the attachment to the April 19,1996 letter agreement as amended
hereby and attached to this letter as Attachment 2 is the attachment to the
October 6, 1998 letter agreement as amended hereby.
If you concur that this letter, together with the attachments,
correctly describes our arrangement, please so indicate in the space provided
below on the enclosed copy of this letter and return it to me.
On behalf of the Directors, stockholders and employees of Lance, Inc.,
we appreciate and are grateful for your service as Chairman of the Board.
Very truly yours,
s/ Paul A. Stroup, III
Paul A. Stroup, III
President
Agreed:
s/ Scott C. Lea
- ------------------------------
Scott C. Lea
<PAGE> 2
Attachment 1
Lance, Inc.
Chairman of the Board Compensation
Amended Attachment to Letter Agreement dated April 19,1996
1. The Chairman of the Board of Directors (as non-executive chairman)
of Lance, Inc. (the Company) will be paid a fee at the rate of $16,500 per
month for service as Chairman of the Board of Directors. This will be paid to
the Chairman of the Board as a consulting fee and will be in lieu of any other
fees payable to non-employee Directors. The Chairman of the Board will be an
independent contractor, so no tax or other amounts will be withheld from the
monthly fee. The Chairman of the Board will participate in the Company's 1995
Nonqualified Stock Option Plan for Non-Employee Directors but as an independent
contractor will not participate in any of the Company's employee benefit plans.
In the event of the death of the Chairman of the Board while serving as such or
onset of disability such that the Chairman of the Board cannot function as
such, the monthly fee will be continued for 12 months after the death or onset
of disability of the Chairman of the Board.
2. The Chairman of the Board will be paid an initial amount of $49,500
for consulting prior to election as Chairman of the Board and an additional
amount of $49,500 to encourage and facilitate the acquisition and holding by
the Chairman of the Board of additional shares of the Common Stock of the
Company (the Common Stock), all as recommended by the Compensation Committee.
The Chairman of the Board will agree to invest these initial amounts in shares
of the Common Stock of the Company promptly, consistent with applicable
securities laws. The Chairman of the Board will agree to retain such shares of
Common Stock while serving as Chairman of the Board.
3. Unless sooner terminated upon death or onset of disability, the
Chairman of the Board will serve for three years subject to annual renewal upon
the mutual agreement of the Chairman of the Board and the President of the
Company at the beginning of the second and third years of the three-year term.
4. As incentive compensation, the Chairman of the Board will be paid
$10,000 for each 1% that the Highest Average Sales Price (as defined below) of
the Company's Common Stock exceeds the mean of the high and low prices of the
Common Stock on the NASDAQ Stock Market on April 19, 1996. Such incentive
compensation shall be paid in one lump sum upon the earlier of (a) four years
after completion of service as Chairman of the Board or (b) a Change of Control
(as defined below). For example, as the price is $15.8125 and if the Highest
Average Sales Price is $31.625, this would result in a 100% increase and
incentive compensation of $1,000,000.
5. For purposes of determining incentive compensation, the Highest
Average Sales Price means the higher of (i) the average of the highest sales
price of the Company's Common Stock on the NASDAQ Stock Market (or a national
securities exchange if the Common Stock is so listed) during four consecutive
interim (quarterly accounting) periods of the Company which
<PAGE> 3
have the highest average sales price for the Common Stock of the Company
beginning with the interim period which began on March 24, 1996 and ending with
the interim period which ends in March or April and which is approximately four
years after completion of service as Chairman of the Board or (ii) the average
of the highest sales price of the Company's Common Stock on the NASDAQ Stock
Market (or a national securities exchange if the Common Stock is so listed) for
any 10 consecutive trading days during the period from April 19, 1996 until
four years after completion of service as Chairman of the Board.
6. In the event of a Change of Control as defined in the Company's
Executive Employment Agreements, the Highest Average Sales Price shall be
deemed to be the highest per share consideration paid or payable for the
Company's Common Stock in connection with the transaction that results in a
Change of Control. In the event the Company or its stockholders receive a bona
fide, adequately financed offer or tender offer for a transaction, which could
result in a Change of Control, and such offer or tender offer is or becomes
available to the Company's stockholders, the Highest Average Sales Price shall
be the higher of the per share consideration payable for the Company's Common
Stock in connection with such offer or tender offer or the Highest Average
Sales Price determined in accordance with Section 5 above.
2
<PAGE> 4
Attachment 2
Lance, Inc.
Chairman of the Board Compensation
Amended Attachment to Letter Agreement dated October 6, 1998
1. The Chairman of the Board of Directors (as non-executive chairman)
of Lance, Inc. (the Company) will continue to receive the fee and incentive
compensation on the terms and conditions set forth in the letter agreement
dated April 16, 1996 and the attachment thereto.
2. Upon completion of the three year term as Chairman of the Board,
the Chairman of the Board will be paid a cash bonus of $162,000.
3. As additional incentive compensation, the Chairman of the Board
will be paid $25,000 for each 1% that the Highest Average Sales Price (as
defined below) of the Company's Common Stock exceeds the mean of the high and
low prices of the Common Stock on the NASDAQ Stock Market on April 17, 1998.
Such incentive compensation shall be paid in one lump sum upon the earlier of
(a) four years after completion of service as Chairman of the Board or (b) a
Change of Control (as defined below). For example, as the price is $20.875 and
if the Highest Average Sales Price is $31.625, this would result in a 51.5%
increase and additional incentive compensation of $1,287,500.
4. For purposes of determining additional incentive compensation, the
Highest Average Sales Price means the higher of (i) the average of the highest
sales price of the Company's Common Stock on the NASDAQ Stock Market (or a
national securities exchange if the Common Stock is so listed) during four
consecutive interim (quarterly accounting) periods of the Company which have
the highest average sales price for the Common Stock of the Company beginning
with the interim period which began on March 22, 1998 and ending with the
interim period which ends in March or April and which is approximately four
years after completion of service as Chairman of the Board or (ii) the average
of the highest sales price of the Company's Common Stock on the NASDAQ Stock
Market (or a national securities exchange if the Common Stock is so listed) for
any 10 consecutive trading days during the period from April 17, 1998 until
four years after completion of service as Chairman of the Board.
5. In the event of a Change of Control as defined in the Company's
former Executive Employment Agreements, the Highest Average Sales Price shall
be deemed to be the highest per share consideration paid or payable for the
Company's Common Stock in connection with the transaction that results in a
Change of Control. In the event the Company or its stockholders receive a bona
fide, adequately financed offer or tender offer for a transaction, which could
result in a Change of Control, and such offer or tender offer is or becomes
available to the Company's stockholders, the Highest Average Sales Price shall
be the higher of the per share consideration payable for the Company's Common
Stock in connection with such offer or tender offer or the Highest Average
Sales Price determined in accordance with Section 4 above.
6. In the event that the Company through its Compensation/Stock Option
Committee and its Board of Directors determines that a new agreement for
service as Chairman of the Board after April 1999 is necessary and appropriate,
the Company will enter into such agreement with the Chairman of the Board prior
to March 1, 1999.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF LANCE, INC. FOR THE THREE MONTHS ENDED MARCH 27, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-25-1999
<PERIOD-START> DEC-27-1998
<PERIOD-END> MAR-27-1999
<CASH> 5,439
<SECURITIES> 0
<RECEIVABLES> 44,591
<ALLOWANCES> 2,460
<INVENTORY> 21,478
<CURRENT-ASSETS> 78,703
<PP&E> 360,386
<DEPRECIATION> 199,986
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 26,278
<BONDS> 0
0
0
<COMMON> 24,964
<OTHER-SE> 158,342
<TOTAL-LIABILITY-AND-EQUITY> 241,527
<SALES> 120,789
<TOTAL-REVENUES> 120,789
<CGS> 54,024
<TOTAL-COSTS> 111,660
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 9,380
<INCOME-TAX> 3,506
<INCOME-CONTINUING> 5,874
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,874
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0.20
</TABLE>
<PAGE> 1
EXHIBIT 99.1
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. Efforts to generate profitable sales growth have resulted in
increases in selling, marketing and delivery costs. There is no assurance that
these investments in sales, marketing and delivery efforts will generate
profitable sales growth.
YEAR 2000 READINESS
The Company's efforts to ensure its operations are not materially
impacted by the arrival of the year 2000 depend upon the completeness and
accuracy of its remediation assessments and activities. In addition, the Company
could be adversely impacted by the failures of material third parties for which
the contingency plans are inadequate. Furthermore, the Company's efforts are
dependent upon the continued availability of qualified personnel.
LEVERAGED BUSINESS
Until April 1999, the Company had funded its needs for capital
expenditures, cash dividends and stock repurchases through cash from operations
and investments. As a result of acquisitions and continuing capital expenditure
requirements, future liquidity needs will be funded through operations and,
possibly, increased borrowings. The effects of a leveraged business could have
an adverse impact upon the Company's financial condition and results of
operations.
There are other important factors not described above that could also
cause actual results to differ materially from those in any forward-looking
statement made by or on behalf of the Company.
<PAGE> 1
EXHIBIT 99.2
1998 STATEMENTS OF INCOME FOR THE QUARTERS (13 WEEKS) ENDED
MARCH 28, 1998, JUNE 27, 1998, SEPTEMBER 26, 1998 AND DECEMBER 26, 1998
($ 000'S, EXCEPT PER SHARE AMOUNTS)
(Unaudited)
<TABLE>
<CAPTION>
---------------------------------------------------
Thirteen Weeks Ended
---------------------------------------------------
Mar 28, Jun 27, Sep 26, Dec. 26,
1998 1998 1998 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET SALES AND OTHER OPERATING REVENUE $119,955 $126,313 $121,259 $118,905
-------- -------- -------- --------
COST OF SALES AND OPERATING EXPENSES
Cost of sales 55,120 56,442 55,097 55,569
Selling, marketing and delivery 48,376 51,337 49,859 49,562
General and administrative 4,964 4,664 4,540 5,314
Provisions for employees' retirement plans 1,527 1,602 1,386 998
-------- -------- -------- --------
Total 109,987 114,045 110,882 111,443
-------- -------- -------- --------
Operating profit 9,968 12,268 10,377 7,462
Other income, net 1,265 1,010 973 420
-------- -------- -------- --------
Income before taxes 11,233 13,278 11,350 7,882
Income taxes 4,242 4,932 4,248 2,713
-------- -------- -------- --------
Net income $ 6,991 $ 8,346 $ 7,102 $ 5,169
======== ======== ======== ========
Earnings per share:
Basic $ 0.23 $ 0.28 $ 0.24 $ 0.17
Diluted $ 0.23 $ 0.28 $ 0.24 $ 0.17
Weighted average shares outstanding (000's):
Basic 29,901 29,918 29,937 29,943
Diluted 30,073 30,021 30,028 30,018
======== ======== ======== ========
</TABLE>
See Note 2 to Condensed Consolidated Financial Statements (Unaudited)
