-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RR1QI0IkTlWQ87b/N2rEK5yo1aaDFnG1198LO8YSfg/5hbVXb/SEFp2d3uQ3DsTO WfEqDdZKoiEb7JerZGYpkA== 0000950144-01-501311.txt : 20010501 0000950144-01-501311.hdr.sgml : 20010501 ACCESSION NUMBER: 0000950144-01-501311 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010430 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LANCE INC CENTRAL INDEX KEY: 0000057528 STANDARD INDUSTRIAL CLASSIFICATION: COOKIES & CRACKERS [2052] IRS NUMBER: 560292920 STATE OF INCORPORATION: NC FISCAL YEAR END: 1226 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-00398 FILM NUMBER: 1615976 BUSINESS ADDRESS: STREET 1: 8600 SOUTH BLVD STREET 2: POST OFFICE BOX 32368 CITY: CHARLOTTE STATE: NC ZIP: 28232 BUSINESS PHONE: 7045541421 MAIL ADDRESS: STREET 1: P O BOX 32368 CITY: CHARLOTTE STATE: NC ZIP: 28232 10-Q 1 g68763e10-q.txt LANCE INC 1 - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q Quarterly Report Filed Pursuant to Section 13 or 15(d) Of the Securities Exchange Act of 1934 FOR THE QUARTERLY (THIRTEEN WEEK) PERIOD ENDED COMMISSION FILE NUMBER 0-398 MARCH 31, 2001 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) 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 ------- ------- The number of shares outstanding of the Registrant's $0.83-1/3 par value Common Stock, its only outstanding class of Common Stock, as of April 26, 2001, was 28,982,174 shares. - -------------------------------------------------------------------------------- 2 LANCE, INC. AND SUBSIDIARIES INDEX
Page PART I. FINANCIAL INFORMATION ---- Item 1. Financial Statements Condensed Consolidated Balance Sheets - March 31, 2001 (Unaudited) and December 30, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Condensed Consolidated Statements of Income (Unaudited) - Thirteen Weeks Ended March 31, 2001 and March 25, 2000 . . . . . . . . . . . . . . . . 4 Condensed Consolidated Statements of Stockholders' Equity and Comprehensive Income (Unaudited) - Thirteen Weeks Ended March 31, 2001 and March 25, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . 5 Condensed Consolidated Statements of Cash Flows (Unaudited) - Thirteen Weeks Ended March 31, 2001 and March 25, 2000 . . . . . . . . .. . . . . . . 6 Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Item 3. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . 12 PART II. OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds . . . . . . . . . . . . . . . . . . 12 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . 13 SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2 3 LANCE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2001 (UNAUDITED) AND DECEMBER 30, 2000 (In thousands, except share data)
March 31, December 30, 2001 2000 --------- --------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 3,277 $ 1,224 Accounts receivable (less allowance for doubtful accounts) 53,204 47,188 Inventories 24,748 23,205 Deferred income tax benefit 5,024 4,161 Prepaid income taxes -- 1,120 Prepaid expenses and other 3,835 5,430 --------- --------- Total current assets 90,088 82,328 Property, plant & equipment, net 181,571 179,283 Goodwill, net 40,346 42,069 Other intangible assets, net 9,931 10,177 Other assets 3,171 3,216 --------- --------- TOTAL ASSETS $ 325,107 $ 317,073 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long-term debt $ 354 $ 395 Accounts payable 17,959 14,718 Accrued income taxes 3,319 -- Accrued liabilities 24,508 24,283 --------- --------- Total current liabilities 46,140 39,396 --------- --------- OTHER LIABILITIES AND DEFERRED CREDITS Long-term debt 65,593 63,536 Deferred income taxes 20,895 21,548 Accrued postretirement health care costs 11,118 11,317 Accrual for insurance claims 4,017 4,083 Supplemental retirement benefits 2,557 2,600 --------- --------- Total other liabilities and deferred credits 104,180 103,084 --------- --------- STOCKHOLDERS' EQUITY Common stock, $0.83 1/3 par value (authorized: 75,000,000 shares; 28,982,172 and 28,947,222 shares outstanding at March 31, 2001 and December 30, 2000) 24,152 24,123 Preferred stock, $1.00 par value (authorized: 5,000,000 shares; 0 shares outstanding at March 31, 2001 and December 30, 2000) -- -- Additional paid-in capital 1,578 1,229 Unamortized portion of restricted stock awards (786) (437) Retained earnings 150,267 149,794 Accumulated other comprehensive loss (424) (116) --------- --------- Total stockholders' equity 174,787 174,593 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 325,107 $ 317,073 ========= =========
See notes to condensed consolidated financial statements (unaudited). 3 4 LANCE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) FOR THE THIRTEEN WEEKS ENDED MARCH 31, 2001 AND MARCH 25, 2000 (In thousands, except share and per share data)
Thirteen Thirteen Weeks Ended Weeks Ended March 31, 2001 March 25, 2000 -------------- -------------- NET SALES AND OTHER OPERATING REVENUE $ 145,410 $ 135,630 ------------ ------------ COST OF SALES AND OPERATING EXPENSES Cost of sales 71,391 64,015 Selling, marketing and delivery 55,558 54,927 General and administrative 7,674 6,071 Provisions for employees' retirement plans 1,036 1,172 Amortization of goodwill and other intangibles 512 467 ------------ ------------ Total costs and expenses 136,171 126,652 ------------ ------------ OPERATING PROFIT 9,239 8,978 Interest income (expense), net (1,092) (1,125) Other income, net 45 1,319 ------------ ------------ INCOME BEFORE INCOME TAXES 8,192 9,172 Income taxes 3,083 3,428 ------------ ------------ NET INCOME $ 5,109 $ 5,744 ============ ============ EARNINGS PER SHARE Basic $ 0.18 $ 0.20 Diluted $ 0.18 $ 0.20 Weighted average shares outstanding - basic 28,901,000 29,173,000 Weighted average shares outstanding - diluted 29,029,000 29,197,000 CASH DIVIDENDS PER SHARE $ 0.16 $ 0.16
See notes to condensed consolidated financial statements (unaudited). 4 5 LANCE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (UNAUDITED) FOR THE THIRTEEN WEEKS ENDED MARCH 31, 2001 AND MARCH 25, 2000 (In thousands, except share data)
Unamortized Portion of Accumulated Additional Restricted Other Common Paid-in Stock Retained Comprehensive Shares Stock Capital Awards Earnings Income Total ---------------------------------------------------------------------------------- BALANCE, DECEMBER 25, 1999 29,950,897 $24,959 $2,552 $(799) $ 154,063 $ 15 $ 180,790 ---------------------------------------------------------------------------------- Comprehensive income: Net income - - - - 5,744 - 5,744 Foreign currency translation adjustment (47) (47) ----------- Total comprehensive income - - - - - - 5,697 ----------- Cash dividends paid to stockholders - - - - (4,666) - (4,666) Cancellations of restricted stock (14,575) (12) (91) 170 - - 67 Purchases of common stock (976,000) (813) (1,139) - (7,718) - (9,670) ---------------------------------------------------------------------------------- BALANCE, MARCH 25, 2000 28,960,322 $24,134 $1,322 $(629) $ 147,423 $ (32) $ 172,218 ================================================================================== BALANCE, DECEMBER 30, 2000 28,947,222 $24,123 $1,229 $(437) $ 149,794 $(116) $ 174,593 ---------------------------------------------------------------------------------- Comprehensive income: Net income - - - - 5,109 - 5,109 Foreign currency translation adjustment - - - - - (308) (308) ----------- Total comprehensive income - - - - - - 4,801 ----------- Cash dividends paid to stockholders - - - - (4,636) - (4,636) Issuance of restricted stock, net of cancellations 34,950 29 349 (349) - - 29 ---------------------------------------------------------------------------------- BALANCE, MARCH 31, 2001 28,982,172 $24,152 $1,578 $(786) $ 150,267 $(424) $ 174,787 ==================================================================================
See notes to condensed consolidated financial statements (unaudited). 5 6 LANCE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE THIRTEEN WEEKS ENDED MARCH 31, 2001 AND MARCH 25, 2000 (In thousands)
Thirteen Weeks Thirteen Weeks Ended Ended March 31, 2001 March 25, 2000 -------------- -------------- OPERATING ACTIVITIES Net income $ 5,109 $ 5,744 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 7,543 7,262 Loss (gain) on sale of property, net 28 (1,337) Deferred income taxes (1,403) (249) Changes in operating assets and liabilities 1,734 (3,682) -------- -------- Net cash flow provided by operating activities 13,011 7,738 -------- -------- INVESTING ACTIVITIES Purchases of property and equipment (10,476) (2,821) Proceeds from sale of property and equipment 320 2,062 -------- -------- Net cash used in investing activities (10,156) (759) -------- -------- FINANCING ACTIVITIES Dividends paid (4,636) (4,666) Issuance (purchase) of common stock, net 29 (9,670) Repayments of debt (133) (92) Borrowings (repayments) under revolving credit facilities, net 4,011 (3,000) -------- -------- Net cash used in financing activities (729) (17,428) -------- -------- Effect of exchange rate changes on cash (73) (47) -------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,053 (10,496) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,224 13,303 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,277 $ 2,807 ======== ======== SUPPLEMENTAL INFORMATION Cash paid for income taxes $ 75 $ 276 Cash paid for interest $ 176 $ 444
See notes to condensed consolidated financial statements (unaudited). 6 7 LANCE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. The accompanying unaudited consolidated financial statements of Lance, Inc. (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of the Company, these financial statements reflect 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 31, 2001 and December 30, 2000, and the consolidated statements of income for the thirteen weeks ended March 31, 2001 and March 25, 2000 and the statements of stockholders' equity and comprehensive income and cash flows for the thirteen weeks ended March 31, 2001 and March 25, 2000. 2. The consolidated results of operations for the thirteen weeks ended March 31, 2001 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, sugar, potatoes and other grain products. 4. The Company utilizes the dollar value last-in, first-out (LIFO) method of determining the cost of the majority 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 consist of (in thousands):
March 31, December 30, 2001 2000 -------- -------- Finished goods $ 16,287 $ 14,869 Raw materials 6,163 5,386 Supplies, etc 7,104 7,720 -------- -------- Total inventories at FIFO cost 29,554 27,975 Less: Adjustments to reduce FIFO cost to LIFO cost (4,806) (4,770) -------- -------- Total inventories $ 24,748 $ 23,205 ======== ========
7 8 LANCE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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 thirteen weeks ended March 31, 2001 and the thirteen weeks ended March 25, 2000 (there were no reconciling items for the numerator amounts of basic and diluted earnings per share):
March 31, 2001 March 25, 2000 -------------- -------------- Weighted average number of common shares used in computing basic earnings per share 28,901,000 29,173,000 Effect of dilutive stock options and non-vested restricted stock 128,000 24,000 ---------- ---------- Weighted average number of common shares and dilutive potential common stock used in computing diluted earnings per share 29,029,000 29,197,000 ========== ========== Stock options excluded from the above reconciliation because they are anti-dilutive 2,004,000 1,183,000 ========== ==========
6. During the thirteen weeks ended March 31, 2001 and March 25, 2000, other comprehensive income consisted of a $308,000 and $47,000 loss, respectively, related to the translation of the financial statements of foreign subsidiaries. 7. For the fiscal year 2001 the Company implemented SFAS 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 establishes accounting and reporting standards requiring that every derivative instrument be recorded in the balance sheet as either an asset or a liability measured at its fair value. It also requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met, and requires that a company must formally document, designate and assess the effectiveness of transactions that receive hedge accounting. At March 31, 2001, the Company has a limited amount of hedging transactions. The impact of these transactions resulted in an immaterial impact to the financial statements. 8 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS THIRTEEN WEEKS ENDED MARCH 31, 2001 COMPARED TO THIRTEEN WEEKS ENDED MARCH 25, 2000
Thirteen weeks ended March 31, March 25, ($ In Thousands) 2001 2000 Difference - ------------------------------------------------------------------------------------------------------------------------- Revenues $145,410 100.0% $135,630 100.0% $9,780 7.2% Cost of sales 71,391 49.1% 64,015 47.2% (7,376) (11.5%) - ------------------------------------------------------------------------------------------------------------------------- Gross margin 74,019 50.9% 71,615 52.8% (2,404) (3.4%) - ------------------------------------------------------------------------------------------------------------------------- Selling, marketing, and delivery expenses 55,558 38.2% 54,927 40.5% (631) (1.1%) General and administrative expenses 7,674 5.3% 6,071 4.5% (1,603) (26.4%) Provision for employees' retirement plans 1,036 0.7% 1,172 0.9% 136 11.6% Amortization of goodwill and intangibles 512 0.3% 467 0.3% (45) (9.6%) - ------------------------------------------------------------------------------------------------------------------------- Total operating expenses 64,780 44.5% 62,637 46.2% (2,143) (3.4%) - ------------------------------------------------------------------------------------------------------------------------- Operating profit 9,239 6.4% 8,978 6.6% 261 2.9% Other income, net 45 0.0% 1,319 0.9% (1,274) (96.6%) Interest income (expense), net (1,092) (0.8%) (1,125) (0.8)% 33 2.9% Income taxes 3,083 2.1% 3,428 2.5% 345 10.1% - ------------------------------------------------------------------------------------------------------------------------- Net income $5,109 3.5% $5,744 4.2% $ (635) (11.1%) =========================================================================================================================
Revenues increased $9.8 million or 7.2% due to continued growth in contract manufactured and private label sales as well as revenue growth in the Company's branded products. Gross margin as a percent of revenues decreased from 52.8% in 2000 to 50.9% in 2001 predominately as a result of changes in the mix of products sold. Selling, marketing and delivery expenses as a percent of sales decreased from 40.5% in 2000 to 38.2% in 2001 due to higher levels of direct shipments and the absence of severance expenses recorded in 2000. However, total expenses increased $0.6 million primarily as a result of additional trade allowance expenditures and additional transportation and distribution related expenses. General and administrative expenses increased $1.6 million primarily as a result of increased incentive, bad debt and relocation expenses. The provision for employees' retirement plan was lower than prior year due to the profitability-based formula for these contributions. Other income primarily includes gains and losses on dispositions of fixed assets. The $1.3 million decrease in other income was due to a significant gain on the disposition of assets that occurred in 2000. Net interest expense was comparable to the prior year. The effective income tax rate increased to 37.6% compared to 37.4%. 9 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES In 2000, the Company amended its unsecured revolving credit agreement, first entered into in 1999, giving the Company the ability to borrow up to $60 million and Cdn $25 million through April 2004. At March 31, 2001, $25.5 million was outstanding on these unsecured revolving credit facilities. Borrowing and repayments under these revolving credit facilities are similar in nature to short-term credit lines; however, due to the nature and terms of the agreements allowing repayment through April 2004, all borrowings under these facilities are classified as long-term debt. Cash flow from operations for the thirteen weeks ended March 31, 2001 totaled $13.0 million. Working capital (other than cash and marketable securities) decreased to $40.7 million at March 31, 2001 from $41.7 million at March 25, 2000 due to an increase in various current liabilities offset by an increase in accounts receivable and other timing differences in the various components of working capital. Cash used in investing activities for the thirteen weeks ended March 31, 2001 totaled $10.2 million. Capital expenditures totaled $10.5 million with the largest expenditures being plant equipment. Proceeds from the sale of property and equipment totaled $0.3 million. Cash used in financing activities for the thirteen weeks ended March 31, 2001 totaled $0.7 million. Cash dividends of $0.16 per share for the thirteen weeks ended March 31, 2001 amounted to $4.6 million. During the first quarter of 2000 the Company repurchased 976,000 shares for $9.6 million. On January 30, 2001, the Board of Directors authorized the repurchase of 1.0 million shares of its common stock. During the first quarter of 2001 the Company did not repurchase any shares of its common stock and currently has no active program to repurchase shares of its common stock. As of March 31, 2001, cash and cash equivalents totaled $3.3 million and total debt outstanding was $65.9 million as compared to $1.2 million in cash and $63.9 million in debt as of December 30, 2000. Additional borrowings available under all credit facilities totaled $48.8 million. The Company has complied with all financial covenants contained in the financing agreements. Available cash, cash from operations and available credit under the credit facilities are expected to be sufficient to meet cash dividend and normal operating requirements for the foreseeable future. MARKET RISK The principal market risks to which the Company is exposed that may adversely impact results of operations and financial position are changes in certain raw material prices, interest rates and fluctuations in foreign exchange rates. The Company has no market risk sensitive instruments held for trading purposes. Raw materials used by the Company are exposed to the impact of changing commodity prices. Accordingly, the Company historically has entered into commodity futures 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. At March 31, 2001, the Company had no open positions on futures contracts. The Company's long-term debt obligations incur interest at floating rates, based on changes in U.S. Dollar LIBOR, Canadian Dollar LIBOR and prime rate interest. Therefore, the Company has an exposure to changes in these interest rates. In 1999, the Board of Directors authorized interest rate exchange agreements to more effectively manage the effects of changing interest rates. However, no such agreements have been entered into. At March 31, 2001, the Company's long term debt totaled $65.9 million, with interest rates ranging from 5.4% to 6.9%, with a weighted average interest rate of 6.3%. A 10 11 10% increase in U.S. LIBOR and Canadian LIBOR would have increased interest expense for the thirteen weeks ended March 31, 2001 by $0.1 million. Through the operations of Tamming Foods Ltd. ("Tamming"), a subsidiary of the Company, the Company has an exposure to foreign exchange rate fluctuations, primarily between the U.S. and Canadian dollars. Foreign exchange rate fluctuations have limited impact on the earnings of the Company as a majority of the sales of Tamming are denominated in U.S. dollars. The indebtedness used to finance the acquisition of Tamming is denominated in Canadian dollars and serves as an effective hedge of the net asset investment in Tamming. A 10% devaluation of the Canadian dollar would result in an immaterial change in the Company's net asset investment in Tamming. 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 and operation of a leveraged business, as described in Exhibit 99.1 to this Form 10-Q. 11 12 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The principal market risks to which the Company is exposed that may adversely impact results of operations and financial position include changes in certain raw material prices, interest rates and foreign exchange rates. Quantitative and qualitative disclosures about these market risks are included under "Market Risks" in Item 2 above, Management's Discussion and Analysis of Financial Condition and Results of Operations. PART II. OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS The Registrant's Amended and Restated Credit Agreement dated May 26, 2000, restricts payment of cash dividends and repurchases of common stock by the Registrant if, after payment of any such dividends or any such repurchases of common stock, the Registrant's consolidated stockholders' equity would be less than $125,000,000. At March 31, 2001, the Registrant's consolidated stockholders' equity was $174,787,000. 12 13 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 3.1 Restated Articles of Incorporation of Lance, Inc. as amended through April 17, 1998, incorporated herein by reference to Exhibit 3 to the Registrant's Quarterly Report on Form 10-Q for the twelve weeks ended June 13, 1998. 3.2 Articles of Amendment of Lance, Inc. dated July 14, 1998 designating rights, preferences and privileges of the Registrant's Series A Junior Participating Preferred Stock, incorporated herein by reference to Exhibit 3.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 26, 1998. 3.3 Bylaws of Lance, Inc., as amended through September 1, 2000, incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the thirteen weeks ended September 23, 2000. 10.1 Lance, Inc. 2001 Annual Performance Incentive Plan for Officers 10.2 Lance, Inc. 2001 Long-Term Incentive Plan for Officers 10.3 Lance, Inc. 1997 Incentive Equity Plan, as amended through January 30, 2001. 99.1 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 thirteen weeks ended March 31, 2001. Items 1, 3, 4 and 5 are not applicable and have been omitted. 13 14 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: April 27, 2001 14 15 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. EXHIBITS ITEM 6(A) FORM 10-Q QUARTERLY REPORT FOR THE QUARTERLY PERIOD ENDED COMMISSION FILE NUMBER MARCH 31, 2001 0-398 LANCE, INC. EXHIBIT INDEX Exhibit No. Exhibit Description - ------- ------------------------ 3.1 Restated Articles of Incorporation of Lance, Inc. as amended through April 17, 1998, incorporated herein by reference to Exhibit 3 to the Registrant's Quarterly Report on Form 10-Q for the twelve weeks ended June 13, 1998. 3.2 Articles of Amendment of Lance, Inc. dated July 14, 1998 designating rights, preferences and privileges of the Registrant's Series A Junior Participating Preferred Stock, incorporated herein by reference to Exhibit 3.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 26, 1998. 3.3 Bylaws of Lance, Inc., as amended through September 1, 2000, incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the thirteen weeks ended September 23, 2000. 10.1 Lance, Inc. 2001 Annual Performance Incentive Plan for Officers 10.2 Lance, Inc. 2001 Long-Term Incentive Plan for Officers 10.3 Lance, Inc. 1997 Incentive Equity Plan, as amended through January 30, 2001. 99.1 Cautionary Statement under Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. EX-10.1 2 g68763ex10-1.txt 2001 ANNUAL PERFORMANCE INCENTIVE PLAN 1 EXHIBIT 10.1 LANCE, INC. 2001 ANNUAL PERFORMANCE INCENTIVE PLAN FOR OFFICERS Purposes and Introduction The primary purposes of the 2001 Annual Performance Incentive Plan for Officers are to: o Motivate behaviors that lead to the successful achievement of specific sales, financial and operations goals that support Lance's stated business strategy. o Emphasize link between participants' performance and rewards for meeting predetermined, specific goals. o Improve the competitiveness of total cash pay opportunities. o Help establish performance orientation at Lance and communicate to employees that greater responsibility carries greater rewards because more pay is "at risk." For 2001, participants will be eligible to earn incentive awards based on Company performance in Earnings Per Share (EPS), Lance Co. operating profit, Subsidiary operating profit and individual performance objectives. 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 2001 Plan is approved by the Compensation 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. Eligibility and Participation Eligibility in the Plan is limited to Officers of Lance and Presidents of its Subsidiaries who are key to Lance's success. The Compensation Committee of the Board of Directors will review and approve participants nominated by the President and CEO. 2 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 2001 participants approved by the Compensation Committee at its January 29, 2001 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 2001 Plan Year. These Awards will be reviewed and adjusted annually by the Compensation 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 and individual performance for the year, as described below). Individual Performance Each Officer (other than those named in the last sentence of this paragraph and the first sentence of the next paragraph) will receive 75% of his or her Incentive Award based on Earnings Per Share. The remaining 25% of each Officer's Incentive Award will be based upon the determination by the Compensation Committee in its discretion as to the individual performance of the Officer in meeting his or her individual goals for the year. Presidents of Subsidiaries will receive 10% of his or her Incentive Award based on Earnings Per Share and 90% of the Incentive Award will be based on the operating profit of his or her Subsidiary. Performance Measures and The 2001 financial performance measure will Weightings be Earnings Per Share except that for the Vice President/President of Lance Co. the financial performance measures will be 10% Earnings Per Share and 65% Lance Co. operating profit and for the Vice President - Sales for Lance Co. the financial performance measure will be 75% Lance Co. operating profit. Specific goals and related payouts are shown below. 2 3
2001 Goals and Related Payouts --------------------------- ------------------------------ Payout as Percent Performance Measure Goal of Target Award -------------------------- --------------------------- ------------------------------ [*Targets not required to be disclosed.] 3 4 Percent of payout will be determined on a straight line basis between minimum and maximum. There will be no payouts based on EPS or operating profit unless the minimum EPS or operating profit is reached. The performance measures, 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 2001 and determined the performance level achieved. Minimum, Target and Maximum levels will be defined at the beginning of each year for each performance measure. The following definitions for the terms Maximum, Target and Minimum should help Lance set the goals for each year, as well as evaluate the payouts: o Maximum: Excellent; deserves an above-market bonus o Target: Normal or expected performance; deserves market level bonus o Minimum: Lowest level of performance deserving payment above base salary; deserves below market bonus o Below minimum: Deserves no additional pay beyond base salary Form and Timing of Final award payments will be made in cash Payments as soon as practicable after award amounts are approved by the Compensation 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. 4 5 Certain Terminations of In the event a participant voluntarily Employment terminates employment or is terminated involuntarily before the end of the year, any award will be forfeited. In the event of death, permanent disability, or normal or early retirement, the award will be paid on a pro rata basis after the end of the plan year. Awards otherwise will be calculated on the same basis as for other participants, except that any adjustment for individual performance will be based on performance prior to the termination of employment. Change In Control In the event of a Change in Control, pro rata payouts will be made at the greater of (1) Target or (2) actual results for the year-to-date, based on the number of days in the plan year preceding the Change in Control. Payouts will be made within 30 days after the relevant transaction has been completed. For this purpose, a Change in Control is defined as when any person, corporation or other entity and its affiliates (excluding members of the Van Every Family and any trust, custodian or fiduciary for the benefit of any one or more members of the Van Every Family) acquires or contracts to acquire or otherwise controls in excess of 35% of the then outstanding equity securities of the Company. For the purposes of this 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 Committee. Governance The Compensation 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 6 ATTACHMENT A
Name Title Award Target ---- ----- ----- ------ P. A. Stroup, III President & CEO *% $* R. G. Tucker Vice President and *% $* President, Lance Co. L. R. Gragnani, Jr. Vice President *% $* - Information Technology/CIO E. D. Leake Vice President *% $* - Human Resources F. I. Lewis Vice President *% $* - Sales B. C. Preslar Vice President *% $* - Finance/CFO R. S. Carles Secretary/Counsel *% $* D. R. Perzinski Treasurer *% $* M. E. Wicklund Controller and *% $* Assistant Secretary H. D. Fields President, Vista Bakery, Inc. *% $* A. C. Cusano President, Cape Cod Potato *% $* Chip Company, Inc. J. D. Blair President, Tamming Foods, Ltd. *% $*
[Target awards omitted for participants as targets not required to be disclosed.] EX-10.2 3 g68763ex10-2.txt 2001 LONG-TERM INCENTIVE PLAN 1 EXHIBIT 10.2 LANCE, INC. 2001 LONG-TERM INCENTIVE PLAN FOR OFFICERS Purposes and Introduction The primary purposes of the 2001 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 managers who are critical to Lance's future success. o Increase total pay for executives and 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 2001 Plan is approved by the Stock Award 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, four and 10 year periods after the date of grant of awards. Eligibility and Participation Eligibility in the Plan is limited to Executive Officers and managers who are key to Lance's success. The Stock Award 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 2001 participants approved by the Stock Award Committee on January 30, 2001. Initial awards will be made as soon as possible after the approval of the 2001 Plan by the Stock Award Committee. 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 2 appropriate. Attachment A lists the Awards for each participant for the 2001 Plan Year as granted by the Stock Award 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 2001 Awards ---------------- --------------- 1 *% 2 *% 3 *% 4 *%
o For 2001, 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 *% *% *% *% 4** *% *% *% *% --------------
*Target Awards not required to be disclosed. **Only specified Tier 4 employees receive restricted stock awards. 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 adviser's model, subject to certain adjustments. 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 regular restricted stock and 25% in economic value in performance restricted stock. 2 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 2001, 2002 and 2003 equal or exceed $* per share. [*Target not required to be disclosed.] Form and Timing of Awards will be made as soon as practicable Awards after awards are approved by the Stock Award 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 In the event a participant voluntarily Employment 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. 3 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 Stock Award Committee. Governance The Stock Award 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 5 ATTACHMENT A [Target Awards omitted for participants as target levels not required to be disclosed.] EX-10.3 4 g68763ex10-3.txt 1997 INCENTIVE EQUITY PLAN 1 EXHIBIT 10.3 LANCE, INC. 1997 INCENTIVE EQUITY PLAN (As amended through January 30, 2001) TABLE OF CONTENTS SECTION 1. PURPOSE.........................................................1 SECTION 2. DEFINITIONS.....................................................1 SECTION 3. ADMINISTRATION..................................................3 SECTION 4. DURATION OF AND COMMON STOCK SUBJECT TO PLAN....................4 SECTION 5. ELIGIBILITY.....................................................4 SECTION 6. STOCK OPTIONS...................................................4 SECTION 7. STOCK APPRECIATION RIGHTS.......................................5 SECTION 8. RESTRICTED AWARDS...............................................6 SECTION 9. PERFORMANCE AWARDS..............................................8 SECTION 10. OTHER STOCK-BASED AND COMBINATION AWARDS........................9 SECTION 11. DEFERRAL ELECTIONS..............................................9 SECTION 12. TERMINATION OF EMPLOYMENT.......................................9 SECTION 13. NON-TRANSFERABILITY OF AWARDS..................................10 SECTION 14. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, ETC................10 SECTION 15. CHANGE IN CONTROL..............................................11 SECTION 16. AMENDMENT AND TERMINATION......................................11 SECTION 17. MISCELLANEOUS..................................................11 2 LANCE, INC. 1997 INCENTIVE EQUITY PLAN (As amended through January 30, 2001) SECTION 1. PURPOSE. The purpose of the Lance, Inc. 1997 Incentive Equity Plan (the "Plan") is to attract and retain managerial and other key employees, and to reward such employees for making major contributions to the success of Lance, Inc. (the "Company"). The Plan is designed to meet these objectives by offering performance-based stock and cash incentives and other equity-based incentive awards, thereby providing such employees a proprietary interest in the long term growth and performance of the Company. SECTION 2. DEFINITIONS. For purposes of the Plan, unless the context clearly indicates otherwise, the following terms shall have the meanings set forth below: (a) "Award" (collectively, "Awards") means an award or grant made to a Participant under Sections 6 through 10, inclusive, of the Plan. (b) "Board" means the Board of Directors of the Company. (c) "Code" means the Internal Revenue Code of 1986, as in effect from time to time, or any successor thereto, together with rules, regulations and interpretations promulgated thereunder. (d) "Common Stock" means the $.83 1/3 par value Common Stock of the Company or any security of the Company issued in substitution, exchange or lieu thereof pursuant to Section 14 hereof. (e) "Company" means Lance, Inc., a North Carolina corporation, and any subsidiary corporations within the meaning of Section 424(f) of the Code, as well as any successor corporation or corporations thereto. (f) "Stock Award Committee" means the committee of the Board constituted as provided in Section 3 of the Plan. (g) "Disability" means the inability, by reason of physical or mental infirmity or both, of an individual to perform satisfactorily the duties then assigned to such individual or any other duties the Company is willing to assign to such individual for which compensation is payable. Disability shall be determined by the Stock Award Committee based upon such evidence as the Stock Award Committee shall deem sufficient and, upon medical evidence, if available, and, in the discretion of the Stock Award Committee, upon certification of such Disability by an independent qualified physician. 3 (h) "Exchange Act" means the Securities Exchange Act of 1934, as amended and in effect from time to time, or any successor statute. (i) "Fair Market Value," with respect to a share of the Common Stock at a particular time, shall be that value as determined by the Stock Award Committee which shall be (i) if such Common Stock is listed on a national securities exchange or traded on the National Market System, the mean between the highest price and the lowest price at which the Common Stock shall have been sold regular way on a national securities exchange or the National Market System on said date, or, if no sales occur on said date, then on the next preceding date on which there were such sales of Common Stock, (ii) if the Common Stock shall not be listed on a national securities exchange or traded on the National Market System, the mean between the bid and asked prices last reported by the National Association of Securities Dealers, Inc. for the over-the-counter market on said date or, if no bid and asked prices are reported on said date, then on the next preceding date on which there were such quotations, or (iii) if at any time quotations for the Common Stock shall not be reported by the National Association of Securities Dealers, Inc. for the over-the-counter market and the Common Stock shall not be listed on any national securities exchange or traded on the National Market System, the fair market value determined by the Stock Award Committee in such manner as it may deem reasonable. (j) "Incentive Stock Option" means any Stock Option granted pursuant to the provisions of Section 6 of the Plan that is intended to be and is specifically designated as an "incentive stock option" within the meaning of Section 422 of the Code. (k) "Non-Qualified Stock Option" means any Stock Option granted pursuant to the provisions of Section 6 of the Plan that is not an Incentive Stock Option. (l) "Participant" means an employee of the Company who is granted an Award under the Plan. (m) "Performance Award" means an Award granted pursuant to the provisions of Section 9 of the Plan the vesting of which is contingent on performance attainment. (n) "Performance Equity Grant" means an Award of units representing shares of Common Stock granted pursuant to the provisions of Section 9 of the Plan. (o) "Performance Unit Grant" means an Award of monetary units granted pursuant to the provisions of Section 9 of the Plan. 2 4 (p) "Plan" means the Lance, Inc. 1997 Incentive Equity Plan as set forth herein, as the same may be hereafter amended and from time to time in effect. (q) "Restricted Award" means an Award granted pursuant to the provisions of Section 8 of the Plan. (r) "Restricted Stock Grant" means an Award of shares of Common Stock granted pursuant to the provisions of Section 8 of the Plan. (s) "Restricted Unit Grant" means an Award of units representing shares of Common Stock granted pursuant to the provisions of Section 8 of the Plan. (t) "Retirement" means the termination of an employee's employment with the Company at any time after the last day of the calendar month immediately preceding the calendar month in which the employee attains the age of 60 years. (u) "Stock Appreciation Right" means an Award to benefit from the appreciation of Common Stock granted pursuant to the provisions of Section 7 of the Plan. (v) "Stock Option" means an Award to purchase shares of Common Stock granted pursuant to the provisions of Section 6 of the Plan. (w) "First Effective Amendment Date" means that date on which the stockholders of the Company approve the amendment to the Plan to increase the number of shares of Common Stock reserved for grants of Awards under the Plan by an additional 1,500,000 shares of Common Stock. SECTION 3. ADMINISTRATION. (a) The Plan shall be administered by those members of the Stock Award Committee of the Board who are "nonemployee directors" for purposes of Rule 16b-3 under the Exchange Act. (b) The Stock Award Committee is authorized to grant Awards under the Plan, to construe and interpret the Plan, to promulgate, amend and rescind rules and regulations relating to the implementation of the Plan, and to make all other determinations necessary or advisable for the administration of the Plan. Any determination, decision or action of the Stock Award Committee in connection with the construction, interpretation, administration or application of the Plan shall be final, conclusive and binding upon all persons participating in the Plan and any person validly claiming under or through persons participating in the Plan. The Company shall effect the granting of Awards under the Plan in accordance with the determinations made by the 3 5 Stock Award Committee, by execution of instruments in writing in such form as are approved by the Stock Award Committee. SECTION 4. DURATION OF AND COMMON STOCK SUBJECT TO PLAN. (a) Term. The Plan shall be effective on April 18, 1997, subject to approval by a plurality of the shares voting on approval of the Plan at the Annual Meeting of Stockholders held on said date or any adjournment thereof. The Plan shall terminate on March 31, 2007. (b) Shares of Common Stock Subject to Plan. The maximum number of shares of Common Stock with respect to which Awards may be granted under the Plan, subject to adjustment as provided in Section 14 of the Plan, shall be 1,500,000 shares of the total authorized shares of the Common Stock. Beginning on the First Effective Amendment Date, there is hereby reserved for grants of Awards under the Plan, subject to adjustment as provided in Section 14 of the Plan, an additional 1,500,000 shares of Common Stock. For the purpose of computing the total number of shares of Common Stock available for Awards under the Plan, there shall be counted against the foregoing limitation the number of shares of Common Stock subject to issuance upon exercise or settlement of Awards and the number of shares of Common Stock which equal the value of Restricted Unit Grants and Performance Equity Grants and other stock-based Awards in each case determined as of the dates on which such Awards are granted. If any Awards are forfeited, terminated, settled in cash in lieu of stock, exchanged for other Awards, or expire unexercised, the shares of Common Stock which were theretofore subject to such Awards shall again be available for Awards under the Plan to the extent of such forfeiture, termination, settlement, exchange or expiration. Further, any shares of Common Stock which are used as full or partial payment to the Company by a Participant of the purchase price of shares of Common Stock upon exercise of Stock Options shall again be available for Awards under the Plan, as shall any shares covered by Stock Appreciation Rights which are not issued as payment upon exercise. Common Stock which may be issued under the Plan may be either authorized and unissued shares or issued shares which have been reacquired by the Company. No fractional shares of Common Stock shall be issued under the Plan. (c) Individual Award Limit. In no event shall a Participant receive an Award or Awards during any one calendar year covering in the aggregate more than 150,000 shares of Common Stock. SECTION 5. ELIGIBILITY. Only managerial and other key employees shall be eligible to be granted Awards under the Plan. The Stock Award Committee shall, from time to time, (i) determine those managerial and other key employees to whom Awards shall be granted and the conditions of each such Award or issue and sale and (ii) grant such Awards. No member of the Stock Award Committee while serving as such shall be eligible to receive any Award hereunder. SECTION 6. STOCK OPTIONS. Stock Options may be granted under the Plan in the form of Incentive Stock Options or Non-Qualified Stock Options; and such Stock Options shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the express provisions of the Plan, as the Stock Award Committee shall determine: 4 6 (a) Grant. Stock Options may be granted under the Plan on such terms and conditions not inconsistent with the provisions of the Plan and in such form as the Stock Award Committee may from time to time approve. Stock Options may be granted alone, in addition to or in combination with other Awards under the Plan. (b) Stock Option Price. The option exercise price per share of Common Stock purchasable under a Stock Option shall be determined by the Stock Award Committee at the time of grant, but in no event shall the exercise price of an Incentive Stock Option be less than 100% of the Fair Market Value of the Common Stock on the date of the grant of such Incentive Stock Option. (c) Option Term. The term of each Stock Option shall be fixed by the Stock Award Committee; except that the term of Incentive Stock Options shall not exceed 10 years after the date the Incentive Stock Option is granted. (d) Exercisability. A Stock Option shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Stock Award Committee at the date of grant. (e) Method of Exercise. A Stock Option may be exercised, in whole or in part, by a Participant's giving written notice of exercise to the Company specifying the number of shares to be purchased. Such notice shall be accompanied by payment in full of the purchase price in cash or, if acceptable to the Stock Award Committee in its sole discretion, in shares of Common Stock already owned by the Participant, or by surrendering outstanding Awards denominated in stock or stock units. (f) Special Rule for Incentive Stock Options. With respect to Incentive Stock Options granted under the Plan, the aggregate Fair Market Value (determined as of the date the Incentive Stock Option is granted) of the number of shares with respect to which Incentive Stock Options are exercisable for the first time by a Participant during any calendar year shall not exceed $100,000 or such other limit as may be required by the Code. SECTION 7. STOCK APPRECIATION RIGHTS. Stock Appreciation Rights may be granted under the Plan subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the express terms of the Plan, as the Stock Award Committee shall determine: (a) Stock Appreciation Rights. A Stock Appreciation Right is an Award entitling a Participant to receive an amount equal to (or if the Stock Award Committee shall so determine at the time of grant, less than) the excess of the Fair Market Value of a share of Common Stock on the date of exercise over the Fair Market Value of a share of Common Stock on the date of grant of the Stock 5 7 Appreciation Right, or such other price as is set by the Stock Award Committee, multiplied by the number of shares of Common Stock with respect to which the Stock Appreciation Right shall have been exercised. (b) Grant. A Stock Appreciation Right may be granted in combination with, in addition to or completely independent of a Stock Option or any other Award under the Plan. (c) Exercise. A Stock Appreciation Right may be exercised by a Participant in accordance with procedures established by the Stock Award Committee, except that in no event shall a Stock Appreciation Right be exercisable within the first six months after the date of grant. The Stock Award Committee may also provide that a Stock Appreciation Right shall be automatically exercised on one or more specified dates. (d) Form of Payment. Payment upon exercise of a Stock Appreciation Right may be made in cash, in shares of Common Stock, or any combination thereof, as the Stock Award Committee shall determine; provided, however, that any Stock Appreciation Right exercised upon or subsequent to the occurrence of a Change in Control (as defined in Section 15) shall be paid in cash. SECTION 8. RESTRICTED AWARDS. Restricted Awards may be granted under the Plan in the form of either Restricted Stock Grants or Restricted Unit Grants. Restricted Awards shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the express provisions of the Plan, as the Stock Award Committee shall determine: (a) Restricted Stock Grants. A Restricted Stock Grant is an Award of shares of Common Stock to a Participant subject to such terms and conditions as the Stock Award Committee deems appropriate, including, without limitation, restrictions on the sale, assignment, transfer or other disposition of such shares and the requirement that the Participant forfeit such shares back to the Company upon termination of employment prior to vesting. (b) Restricted Unit Grants. A Restricted Unit Grant is an Award of units to be paid in cash upon vesting (with each unit having a value equivalent to the Fair Market Value of one share of Common Stock) granted to a Participant subject to such terms and conditions as the Stock Award Committee deems appropriate, including, without limitation, the requirement that the Participant forfeit such units upon termination of employment prior to vesting. (c) Grants of Awards. Restricted Awards may be granted under the Plan in such form and on such terms and conditions as the Stock Award Committee may from time to time approve. Restricted Awards may be granted alone, in addition to or in combination with other Awards under the Plan. Subject to the terms of the Plan, the Stock Award Committee shall determine the number 6 8 of Restricted Awards to be granted to a Participant and the Stock Award Committee may impose different terms and conditions on any particular Restricted Award made to any Participant. Each Participant receiving a Restricted Stock Grant shall be issued a stock certificate in respect of such shares of Common Stock. Such certificate shall be registered in the name of such Participant, shall be accompanied by a stock power duly executed by such Participant, and shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Award; which certificate evidencing such shares shall be held in custody by the Company until the restrictions thereon shall have lapsed. (d) Restriction Period. Restricted Awards shall provide that in order for a Participant's rights to vest in such Awards, the Participant must remain in the employment of the Company, subject to relief for specified reasons, for a period of time commencing on the date of the Award and ending on such later date or dates as the Stock Award Committee may designate at the time of the Award ("Restriction Period"). During the Restriction Period, a Participant may not sell, assign, transfer, pledge, encumber or otherwise dispose of shares of Common Stock received under a Restricted Stock Grant. The Stock Award Committee, in its sole discretion, may provide for the lapse of restrictions in installments during the Restriction Period. Upon expiration of the applicable Restriction Period (or lapse of restrictions during the Restriction Period where the restrictions lapse in installments), the Participant shall be entitled to receive his or her Restricted Award or portion thereof, as the case may be. (e) Payment of Awards. A Participant shall be entitled to receive payment for a Restricted Unit Grant (or portion thereof) upon expiration of the applicable Restriction Period. Payment in settlement of a Restricted Unit Grant shall be made as soon as practicable following the expiration of the Restriction Period in cash, in shares of Common Stock equal to the number of units granted under the Restricted Unit Grant with respect to which such payment is made, or in any combination thereof, as the Stock Award Committee in its sole discretion shall determine. The Stock Award Committee may also, in its discretion, permit a Participant to elect to receive, in lieu of shares of unrestricted stock at the conclusion of a Restriction Period, a cash payment equal to the Fair Market Value of the Restricted Stock vesting on the date the restrictions expire. (f) Rights as a Stockholder. A Participant shall have, with respect to the shares of Common Stock received under a Restricted Stock Grant, all of the rights of a Stockholder of the Company, including the right to vote the shares, and the right to receive any cash dividends. Stock dividends issued with respect to the shares covered by a Restricted Stock Grant shall be treated as additional shares under the Restricted Stock Grant and shall be subject to the same restrictions and other terms and conditions that apply to shares under the Restricted Stock Grant with respect to which such dividends are issued. 7 9 SECTION 9. PERFORMANCE AWARDS. Performance Awards may be granted under the Plan in the form of either Performance Equity Grants or Performance Unit Grants. Performance Awards may be subject to the following terms and conditions and may contain such additional terms and conditions, not inconsistent with the express provisions of the Plan, as the Stock Award Committee shall determine: (a) Performance Equity Grants. A Performance Equity Grant is an Award of units (with each unit equivalent in value to one share of Common Stock as it varies throughout the term of the designated performance period) to a Participant and may be subject to such terms and conditions as the Stock Award Committee deems appropriate, including, without limitation, the requirement that the Participant forfeit such units or a portion of such units in the event certain performance criteria are not met within a designated period of time. (b) Performance Unit Grants. A Performance Unit Grant is an Award of units to be paid in cash upon vesting (with each unit representing such monetary amount as designated by the Stock Award Committee) to a Participant subject to such terms and conditions as the Stock Award Committee deems appropriate, including, without limitation, the requirement that the Participant forfeit such units or a portion of such units in the event certain performance criteria are not met within a designated period of time. (c) Grants of Awards. Performance Awards may be granted under the Plan in such form as the Stock Award Committee may from time to time approve. Performance Awards may be granted alone, in addition to or in combination with other Awards under the Plan. Subject to the terms of the Plan, the Stock Award Committee shall determine the number of Performance Awards to be granted to a Participant and the Stock Award Committee may impose different terms and conditions on any particular Performance Award made to any Participant. (d) Performance Goals and Performance Periods. Performance Awards shall provide that in order for a Participant's rights to vest in such Awards the Company or the Participant, or a combination thereof, must achieve certain performance goals ("Performance Goals") over a designated performance period ("Performance Period"). The Performance Goals and Performance Period shall be established by the Stock Award Committee, in its sole discretion. The Stock Award Committee shall establish Performance Goals for each Performance Period before, or as soon as practicable after, the commencement of the Performance Period. The Stock Award Committee may also establish a schedule or formula for such Performance Period setting forth the portion of the Performance Award which will be earned or forfeited based on the degree of achievement of the Performance Goals actually achieved or exceeded. In setting Performance Goals, the Stock Award Committee may use such measures of performance as it deems appropriate. 8 10 (e) Payment of Awards. In the case of a Performance Equity Grant, the Participant shall be entitled to receive payment for each unit earned in an amount equal to the Fair Market Value of a share of Common Stock on the date on which the Stock Award Committee determines the number of units earned by the Participant. In the case of a Performance Unit Grant, the Participant shall be entitled to receive payment for each unit earned in an amount equal to the dollar value of each unit times the number of units earned. Payment in settlement of a Performance Award shall be made as soon as practicable following the conclusion of the respective Performance Period in cash, in shares of Common Stock, or in any combination thereof, as the Stock Award Committee in its sole discretion shall determine. SECTION 10. OTHER STOCK-BASED AND COMBINATION AWARDS. (a) The Stock Award Committee may grant other Awards under the Plan pursuant to which Common Stock is or may in the future be acquired, or Awards denominated in stock units, including ones valued using measures other than market value. Such other stock-based Awards may be granted either alone, in addition to or in combination with any other type of Award granted under the Plan. (b) The Stock Award Committee may also grant Awards under the Plan in combination with other Awards or in exchange of Awards, or in combination with or as alternatives to grants or rights under any other employee plan of the Company, including the plan of any acquired entity. (c) Subject to the provisions of the Plan, the Stock Award Committee shall have authority to determine the individuals to whom and the time or times at which such Awards shall be made, the number of shares of Common Stock to be granted or covered pursuant to such Awards, and any and all other conditions and/or terms of the Awards. SECTION 11. DEFERRAL ELECTIONS. The Stock Award Committee may permit a Participant to elect to defer his or her receipt of the payment of cash or the delivery of shares of Common Stock that would otherwise be due to such Participant by virtue of the exercise or earn out of an Award made under the Plan. If any such election is permitted, the Stock Award Committee may establish rules and procedures for such payment deferrals, including the possible (a) payment or crediting of reasonable interest on such deferred amounts credited in cash, and (b) the payment or crediting dividend equivalents in respect of deferrals credited in units of Common Stock. SECTION 12. TERMINATION OF EMPLOYMENT. The terms and conditions under which an Award may be exercised after a Participant's termination of employment shall be determined by the Stock Award Committee. SECTION 13. NON-TRANSFERABILITY OF AWARDS. No Award under the Plan, and no rights or interests therein, shall be assignable or transferable by a Participant except by will or the laws of descent and distribution. During the lifetime of a Participant, Stock Options and Stock 9 11 Appreciation Rights are exercisable only by, and payments in settlement of Awards will be payable only to, the Participant or his or her legal representative. SECTION 14. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, ETC. (a) The existence of the Plan and the Awards granted hereunder shall not affect or restrict in any way the right or power of the Board or the Stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company's capital structure or its business, any merger or consolidation of the Company, any issue of bonds, other debentures, preferred or prior preference stocks, the dissolution or liquidation of the Company or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding. (b) In the event that a dividend shall be declared upon the Common Stock payable in shares of Common Stock, the number of shares of Common Stock then subject to any Award and the number of shares reserved for issuance pursuant to the Plan but not yet covered by an Award shall be adjusted by adding to each such share the number of shares which would be distributable thereon if such share had been outstanding on the date fixed for determining the Stockholders entitled to receive such stock dividend. In the event that the outstanding shares of Common Stock shall be changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or of another corporation, whether through reorganization, recapitalization, stock split-up, combination of shares, merger or consolidation, then there shall be substituted for each share of Common Stock subject to any Award and for each share of Common Stock reserved for issuance pursuant to the Plan but not yet covered by an Award, the number and kind of shares of stock or other securities into which each outstanding share of Common Stock shall be so changed or for which each such share shall be exchanged. In the event there shall be any change other than as specified above in this Section 14, in the number or kind of outstanding shares of Common Stock or of any stock or other securities into which such Common Stock shall have been changed or for which it shall have been exchanged, then if the Stock Award Committee shall in its sole discretion determine that such change equitably requires an adjustment in the number or kind of shares theretofore reserved for issuance pursuant to the Plan but not yet covered by an Award and of the shares then subject to an Award or Awards, such adjustment shall be made by the Stock Award Committee and shall be effective and binding for all purposes of the Plan and each agreement entered into with a Participant under the Plan. In the case of any such substitution or adjustment as provided for in this Section 14, the Award price for each share covered thereby prior to such substitution or adjustment will be the Award price for all shares of stock or other securities which shall have been substituted for such share or to which such share shall have been adjusted pursuant to this Section 14. No adjustment or substitution provided for in this Section 14 shall require the Company in any agreement with a Participant to issue a fractional share and the total substitution or adjustment with respect to each agreement with a Participant shall be limited accordingly. In the event that the number of shares of Common Stock subject to an Award is adjusted pursuant to the provisions of this Section 14, then any Stock Appreciation Rights related to such Award shall be appropriately and equitably adjusted. 10 12 SECTION 15. CHANGE IN CONTROL. (a) In the event of a Change in Control (as defined below) of the Company, (i) all Stock Options or Stock Appreciation Rights then outstanding shall become fully exercisable as of the date of the Change in Control, whether or not then exercisable, (ii) all restrictions and conditions of all Restricted Stock Grants and Restricted Unit Grants then outstanding shall be deemed satisfied as of the date of the Change in Control, and (iii) all Performance Equity Grants and Performance Unit Grants shall be deemed to have been fully earned as of the date of the Change in Control. (b) "Change in Control" means the acquisition or contracting to acquire or otherwise control beneficial ownership of in excess of thirty-five percent (35%) of the then outstanding voting securities of the Company by any person, corporation or other entity and its "affiliates" (as defined in Rule 13d-5(b)(1) promulgated under the Exchange Act, as amended from time to time) excluding, however, for purposes of determining such ownership (but not the number of shares outstanding) voting securities beneficially owned by members of the Van Every Family and any trust, custodian or fiduciary account for the benefit of any one or more members of the Van Every Family. Van Every Family means the lineal descendants of Salem A. Van Every, Sr. (whether by blood or adoption) and their spouses. SECTION 16. AMENDMENT AND TERMINATION. Without further approval of the Stockholders, the Board may at any time terminate the Plan, or may amend it from time to time in such respects as the Board may deem advisable, except that the Board may not, without approval of the Stockholders, make any amendment which would (i) require Stockholder approval for Incentive Stock Options granted or to be granted under the Plan to qualify as incentive stock options within the meaning of Section 422 of the Code or (ii) require Stockholder approval under applicable law or the rules of any national securities exchange upon which the Common Stock is listed at the time such amendment is proposed. SECTION 17. MISCELLANEOUS. (a) Tax Withholding. The Company shall have the right to deduct from any settlement, including the delivery or vesting of shares, made under the Plan any federal, state or local taxes of any kind required by law to be withheld with respect to such payments or to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such taxes. If Common Stock is used to satisfy tax withholding, such stock shall be valued based on the Fair Market Value when the tax withholding is required to be made. (b) No Right To Employment. Neither the adoption of the Plan nor the granting of any Award hereunder shall confer upon any employee of the Company any right to continued employment with the Company, nor shall it interfere in any way with the right of the Company to terminate the employment of any of its employees at any time, with or without cause. (c) Unfunded Plan. The Plan shall be unfunded and the Company shall not be required to segregate any assets that may at any time be represented by Awards under the Plan. Any liability of the Company to any person with respect to any Award under the Plan shall be 11 13 based solely upon any contractual obligations that may be effected pursuant to the Plan. No such obligation of the Company shall be deemed to be secured by any pledge of, or other encumbrance on, any property of the Company. (d) Payments to Trust. The Stock Award Committee is authorized to cause to be established a trust agreement or several trust agreements whereunder the Company may make payments of amounts due or to become due to Participants in the Plan. (e) Engaging in Competition With Company. In the event a Participant's employment with the Company is terminated for any reason whatsoever, and within 18 months after the date thereof such Participant accepts employment with any competitor of, or otherwise engages in competition with, the Company, the Stock Award Committee, in its sole discretion, may require such Participant to return to the Company the economic value of any Award which is realized or obtained (measured at the date of exercise, vesting or payment) by such Participant at any time during the period beginning on that date which is six months prior to the date of such Participant's termination of employment with the Company. (f) Securities Law Restrictions. No shares of Common Stock shall be issued under the Plan unless counsel for the Company shall be satisfied that such issuance will be in compliance with applicable Federal and state securities laws. Certificates for shares of Common Stock delivered under the Plan may be subject to such stop-transfer orders and other restrictions as the Stock Award Committee may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Common Stock is then listed, and any applicable federal or state securities law. The Stock Award Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. (g) Award Agreement. Each Participant receiving an Award under the Plan shall enter into an agreement with the Company in a form specified by the Stock Award Committee agreeing to the terms and conditions of the Award and such related matters as the Stock Award Committee shall, in its sole discretion, determine. (h) Costs of Plan. The costs and expenses of administering the Plan shall be borne by the Company. (i) Governing Law. The Plan and all actions taken thereunder shall be governed by and construed in accordance with the laws of the State of North Carolina. 12 EX-99.1 5 g68763ex99-1.txt CAUTIONARY STATEMENT 1 EXHIBIT 99.1 CAUTIONARY STATEMENT UNDER THE 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 INDUSTRY 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 MATERIAL COSTS The Company's cost of sales can be adversely impacted by changes in the cost of raw materials, including, but not limited to, 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. EFFECTIVENESS OF SALES AND MARKETING ACTIVITIES 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 and to revitalize its direct-store-delivery (DSD) system. Because a majority of the Company's products are marketed and distributed through the DSD system, the revitalization of the DSD system as a cost effective sales and distribution system is essential to profitable sales growth. Efforts to generate profitable sales growth and to revitalize the DSD system have resulted in increases in selling, marketing and delivery costs. There is no assurance that these investments in sales, marketing and delivery efforts and the DSD system will generate profitable sales growth. OPERATION OF A LEVERAGED BUSINESS 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. -----END PRIVACY-ENHANCED MESSAGE-----