##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 27, 2008
 o
    
    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.
  North Carolina
    
    56-0292920(State of Incorporation)
    
    (I.R.S. Employer Identification Number)
 14120 Ballantyne Corporate Place, Suite 350, Charlotte, North Carolina 28277
 
  Post Office Box 32395, Charlotte, North Carolina 28232-2395
 
  (704) 554-1421
  Title of Each Class
    
    Name of Each Exchange on Which Registered$0.83-1/3 Par Value Common Stock
    
    The NASDAQ Stock Market LLC
 NONE
 Yes o No þ
 Yes o No þ
 Yes þ No o
 o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 Yes o No þ
   Documents Incorporated by Reference




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##### 



LANCE, INC.
 FORM 10-K
TABLE OF CONTENTS
 PagePART 1Item 1 Business
    
    
    1Item 1A Risk Factors
    
    
    3Item 1B Unresolved Staff Comments
    
    
    6Item 2 Properties
    
    
    6Item 3 Legal Proceedings
    
    
    6Item 4 Submission of Matters to a Vote of Security Holders
    
    
    6Separate Item Executive Officers of the Registrant
    
    
    7PART IIItem 5 Market for Registrants Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
    
    
    8Item 6 Selected Financial Data
    
    
    9Item 7 Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    10Item 7A Quantitative and Qualitative Disclosures about Market Risk
    
    
    22Item 8 Financial Statements and Supplementary Data
    
    
    24Schedule II  Valuation and Qualifying Accounts
    
    
    48Report of Independent Registered Public Accounting Firm
    
    
    49Managements Report on Internal Control Over Financial Reporting
    
    
    51Item 9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
    
    
    52Item 9A Disclosure Controls and Procedures
    
    
    52Item 9B Other Information
    
    
    52PART IIIItem 10 Directors, Executive Officers and Corporate Governance
    
    
    53PART IVItem 15 Exhibits and Financial Statement Schedules
    
    
    53Signatures
    
    
    58Exhibit 10.15
Lance, Inc. 2008 Three-Year Performance Incentive Plan for Officers
and Key Managers, as amendedExhibit 21
Subsidiaries of Lance, Inc.Exhibit 23
Consent of Independent Registered Public Accounting FirmExhibit 31.1
Section 302 Certification of the CEOExhibit 31.2
Section 302 Certification of the CFOExhibit 32
Section 906 Certification of the CEO and CFONote: Items 10-14 are incorporated by reference to the Proxy Statement and the Separate Item in Part I.




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PART I
 
 Item 1. Business
 General
    Products
   1




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Intellectual Property
   Distribution
   Customers
  Raw Materials
  2




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Competition and Industry
  Employees
  Other Matters
  
 Item 1A. Risk Factors
  Price competition and industry consolidation could adversely impact our results.
  3




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Increases in cost or availability of ingredients and other market driven costs could negatively
impact our results.
  Product price increases may negatively impact total revenue.
  We are exposed to risks resulting from several large customers.
  Inability to anticipate changes in consumer preferences may result in decreased demand for
products, which could have an adverse impact on our future growth and operating results.
  Implementation of an Enterprise Resource Planning (ERP) system could cause interruption to
business operations or inability to account for business transactions.
  4




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Future product recalls or safety concerns could adversely impact our results of
operations.
  Food industry and regulatory factors could adversely affect our revenues and costs.
  Acquisitions and divestitures may result in financial results that are different than
expected.
  Our ability to execute our strategic initiatives could adversely affect our financial
performance.
  We are exposed to interest rate volatility, foreign exchange rate volatility and credit
risks.
  Any business disruption due to natural disasters or catastrophic events could adversely impact
our financial performance.
  5




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##### Table of Contents



Current economic conditions could adversely impact our business and results of operations.
   
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
    
 Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  6




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##### Table of Contents



Separate Item. Executive Officers of the Registrant
  Name
    
    Age
    
    Information About OfficerDavid V. Singer
    
    
    53
    
    
    President and Chief Executive Officer of
Lance, Inc. since 2005; Executive Vice
President and Chief Financial Officer of
Coca-Cola Bottling Co. Consolidated, a
beverage manufacturer and distributor, from
2001 to 2005.Rick D. Puckett
    
    
    55
    
    
    Executive Vice President, Chief Financial
Officer and Secretary of Lance, Inc. since
January 2006 and Treasurer of Lance, Inc.
since April 2006; Executive Vice President,
Chief Financial Officer and Treasurer of
United Natural Foods, Inc., a wholesale
distributor of natural and organic products
from 2005 to January 2006; and Senior Vice
President, Chief Financial Officer and
Treasurer of United Natural Foods, Inc. from
2003 to 2005.Glenn A. Patcha
    
    
    45
    
    
    Senior Vice President  Sales and Marketing
of Lance, Inc. since January 2007; Senior
Vice President of Marketing ConAgra Grocery
Products Division, a packaged foods company,
2003 to June 2006; various executive
positions with Eastman Kodak including, VP
of Marketing for Kodaks North American
Consumer Imaging Division from 1998 to 2003.Blake W. Thompson
    
    
    53
    
    
    Senior Vice President  Supply Chain of
Lance, Inc. since February 2007; Vice
President  Supply Chain of Lance, Inc. from
2005 to 2006; Senior Vice President, Supply
Chain of Tasty Baking, a snack food
manufacturer and distributor, from 2004 to
2005; Region Vice President of Operations,
Northeast Region of Frito Lay (a division of
PepsiCo, Inc.) a snack food manufacturer and
distributor, from 2001 to 2004.Earl D. Leake
    
    
    57
    
    
    Senior Vice President  Human Resources of
Lance, Inc. since February 2007; Vice
President  Human Resources of Lance, Inc.
from 1995 to 2006.Margaret E. Wicklund
    
    
    48
    
    
    Vice President, Corporate Controller,
Principal Accounting Officer and Assistant
Secretary of Lance, Inc. since 2007;
Corporate Controller, Principal Accounting
Officer and Assistant Secretary of Lance,
Inc. from 1999 to 2006.
  7




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##### Table of Contents



PART II
 
 Item 5. Market for the Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
   High
    
    Low
    
    Dividend2008 Interim Periods
    
    Price
    
    Price
    
    PaidFirst quarter (13 weeks ended March 29, 2008)
    
    $
    20.98
    
    
    $
    16.39
    
    
    $
    0.16Second quarter (13 weeks ended June 28, 2008)
    
    
    22.42
    
    
    
    17.48
    
    
    
    0.16Third quarter (13 weeks ended September 27, 2008)
    
    
    25.18
    
    
    
    17.05
    
    
    
    0.16Fourth quarter (13 weeks ended December 27, 2008)
    
    
    23.58
    
    
    
    17.11
    
    
    
    0.16
 High
    
    Low
    
    Dividend2007 Interim Periods
    
    Price
    
    Price
    
    PaidFirst quarter (13 weeks ended March 31, 2007)
    
    $
    22.06
    
    
    $
    19.12
    
    
    $
    0.16Second quarter (13 weeks ended June 30, 2007)
    
    
    25.45
    
    
    
    19.90
    
    
    
    0.16Third quarter (13 weeks ended September 29, 2007)
    
    
    27.04
    
    
    
    21.75
    
    
    
    0.16Fourth quarter (13 weeks ended December 29, 2007)
    
    
    23.99
    
    
    
    17.67
    
    
    
    0.16
   8




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##### Table of Contents



Item 6. Selected Financial Data
 Managements Discussion and Analysis of Financial Condition and Results of Operations
 2008
    
    2007
    
    2006
    
    2005
    
    2004Results of Operations (in thousands):Net sales and other operating revenue (1) (2) (3)
    
    $
    852,468
    
    
    $
    762,736
    
    
    $
    730,116
    
    
    $
    651,437
    
    
    $
    564,734Income from continuing operations before income taxes
(4) (5) (6)
    
    
    27,073
    
    
    
    36,320
    
    
    
    28,187
    
    
    
    26,499
    
    
    
    33,298Net income from continuing operations
    
    
    17,706
    
    
    
    23,809
    
    
    
    18,378
    
    
    
    17,476
    
    
    
    22,627Income from discontinued operations before income
taxes(7)
    
    
    
    
    
    
    44
    
    
    
    153
    
    
    
    1,506
    
    
    
    3,276Net income from discontinued operations
    
    
    
    
    
    
    29
    
    
    
    100
    
    
    
    994
    
    
    
    2,228Net income
    
    $
    17,706
    
    
    $
    23,838
    
    
    $
    18,478
    
    
    $
    18,470
    
    
    $
    24,855Average Number of Common Shares Outstanding (in thousands):Basic
    
    
    31,202
    
    
    
    30,961
    
    
    
    30,467
    
    
    
    29,807
    
    
    
    29,419Diluted
    
    
    31,803
    
    
    
    31,373
    
    
    
    30,844
    
    
    
    30,099
    
    
    
    29,732Per Share of Common Stock:From continuing operations  basic
    
    $
    0.57
    
    
    $
    0.77
    
    
    $
    0.61
    
    
    $
    0.59
    
    
    $
    0.77From discontinued operations  basic
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.03
    
    
    
    0.07From continuing operations  diluted
    
    
    0.56
    
    
    
    0.76
    
    
    
    0.60
    
    
    
    0.58
    
    
    
    0.77From discontinued operations  diluted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.03
    
    
    
    0.07Cash dividends declared
    
    $
    0.64
    
    
    $
    0.64
    
    
    $
    0.64
    
    
    $
    0.64
    
    
    $
    0.64Financial Status at Year-end (in thousands):Total assets
    
    $
    466,146
    
    
    $
    413,003
    
    
    $
    385,452
    
    
    $
    369,079
    
    
    $
    341,740Long-term debt, net of current portion
    
    $
    91,000
    
    
    $
    50,000
    
    
    $
    50,000
    
    
    $
    10,215
    
    
    $
    Total debt
    
    $
    98,000
    
    
    $
    50,000
    
    
    $
    50,000
    
    
    $
    46,215
    
    
    $
    40,650
 Footnotes:(1)
    
    2008 revenue included approximately $15 million from Brent & Sams (acquired in March 2008).
Also, a significant amount of price increases were initiated in response to unprecedented
ingredient costs increases, such as flour and vegetable oil.(2)
    
    2006 revenue included incremental revenues from Toms (acquired in October 2005).(3)
    
    2005 represented a 53-week year, which accounted for $8.1 million in incremental revenue.
2005 revenue was also impacted by two months of revenue from the Toms acquisition.(4)
    
    2008 pre-tax income was significantly impacted by unprecedented ingredient costs increases,
such as flour and vegetable oil, not fully offset by price increases during the year.(5)
    
    Compared to previous years, pre-tax income in 2006 was impacted by $1.3 million of expenses
related stock options as required by the adoption of SFAS 123R. Incremental severance and
integration costs during 2006 related to the Toms acquisition were $2.8 million.(6)
    
    2005 pre-tax income was negatively impacted by $3.4 million of Toms integration costs and
$2.5 million of severance charges for the prior CEO.(7)
    
    During 2006, we committed to a plan to discontinue our vending operations. 9




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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Cautionary Information About Forward-Looking Statements
     10




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Executive Summary
   1.
    
    Organizational development and effectiveness in order to align our organization to
achieve our goals;2.
    
    Operational efficiencies in our DSD operations, supply chain process, and information
technology systems;3.
    
    Focused growth in core channels and product lines while we simplify our business and
create new platforms for growth.
   
    
    Two acquisitions  The acquisition of Brent & Sams, Inc. and substantially all of the
assets of Archway Cookies, LLC:
 o
    
    Brent & Sams was acquired in March of 2008, added approximately
$15 million in revenue in 2008 and expanded our premium private brand product
offerings to our customers.o
    
    The Archway assets were acquired in December of 2008. The
acquisition of the Archway brand provides a strong brand with a long history of
quality home-style cookies that we believe we can grow through product innovation
and improved customer service through our DSD and distributor network. The
Archway facility also provides additional production capacity. In addition,
based on the location of the facility we plan to improve our supply chain
operations efficiency through a centralized location to service our customers in
the Midwest and Northeast.
 
    
    Continued DSD organizational improvements:
 o
    
    We continued to realign our DSD sales organization by rationalizing
our customer stops based on profitability and operating efficiency needed to
service our customers. During 2008, we increased the weekly net revenue per
route by 11%.o
    
    We have also implemented improved processes in our DSD organization
to improve the efficiency of the time it takes to service our customers at each
stop.
 11




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
    
    We continued to focus on sales growth:
 o
    
    Revenue from both Lance brand home-pack products and Cape Cod
Potato Chip products increased more than 10% over last year.o
    
    Private brand revenue increased approximately 26%, of which
approximately 7% was the result of the acquisition of Brent &
Sams.o
    
    During 2008, we introduced a mainstream private brand line of
products that is a more premium product than our value line private brands and
provides consumers additional options from traditional branded
products.o
    
    We increased our focus on innovation to provide a constant stream
of new product introductions for our customers.
 
    
    We continued to build a foundation for growth:
 o
    
    We continued to improve our supply chain efficiency by
consolidating our Canadian operations from three plants to two and increased the
volume of products transported per mile through the use of larger trailers, which
minimized the effect of increases in diesel fuel rates.o
    
    In 2008, we implemented a portion of our ERP solution and expect to
have the ERP system implemented at all locations by the end of
2009.
   Critical Accounting Estimates
  Revenue Recognition
  12




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Allowance for Doubtful Accounts
  13




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Self-Insurance Reserves
  th
 Impairment
Analysis of Goodwill and Other Indefinite-Lived Intangible
Assets
  Depreciation and Impairment of Fixed Assets
   14




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Equity Incentive Expense
  Provision for Income Taxes
  New Accounting Standards
  Results of Operations
 Favorable/2008 Compared to 2007 (in millions)
    
    2008
    
    2007
    
    (Unfavorable)Revenue
    
    $
    852.4
    
    
    
    100.0
    %
    
    $
    762.7
    
    
    
    100.0
    %
    
    $
    89.7
    
    
    
    11.8
    %Cost of sales
    
    
    531.5
    
    
    
    62.4
    %
    
    
    444.5
    
    
    
    58.3
    %
    
    
    (87.0
    )
    
    
    (19.6
    %)Gross margin
    
    
    320.9
    
    
    
    37.6
    %
    
    
    318.2
    
    
    
    41.7
    %
    
    
    2.7
    
    
    
    0.8
    %Selling, general and administrative
    
    
    291.7
    
    
    
    34.2
    %
    
    
    277.3
    
    
    
    36.4
    %
    
    
    (14.4
    )
    
    
    (5.2
    %)Other (income)/expense, net
    
    
    (0.9
    )
    
    
    (0.1
    %)
    
    
    2.4
    
    
    
    0.3
    %
    
    
    3.3
    
    
    nmEarnings before interest and taxes
    
    
    30.1
    
    
    
    3.5
    %
    
    
    38.5
    
    
    
    5.0
    %
    
    
    (8.4
    )
    
    
    (21.8
    )%Interest expense, net
    
    
    3.0
    
    
    
    0.4
    %
    
    
    2.2
    
    
    
    0.3
    %
    
    
    (0.8
    )
    
    
    (36.4
    %)Income tax expense
    
    
    9.4
    
    
    
    1.1
    %
    
    
    12.5
    
    
    
    1.6
    %
    
    
    3.1
    
    
    
    24.8
    %Net income from continuing operations
    
    
    17.7
    
    
    
    2.1
    %
    
    
    23.8
    
    
    
    3.1
    %
    
    
    (6.1
    )
    
    
    (25.6
    )%
 nm =
    
    not meaningful. 15




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16




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Favorable/2007 Compared to 2006 (in millions)
    
    2007
    
    2006
    
    (Unfavorable)Revenue
    
    $
    762.7
    
    
    
    100.0
    %
    
    $
    730.1
    
    
    
    100.0
    %
    
    $
    32.6
    
    
    
    4.5
    %Cost of sales
    
    
    444.5
    
    
    
    58.3
    %
    
    
    415.6
    
    
    
    56.9
    %
    
    
    (28.9
    )
    
    
    (7.0
    %)Gross margin
    
    
    318.2
    
    
    
    41.7
    %
    
    
    314.5
    
    
    
    43.1
    %
    
    
    3.7
    
    
    
    1.2
    %Selling, general and administrative
    
    
    277.3
    
    
    
    36.4
    %
    
    
    283.0
    
    
    
    38.8
    %
    
    
    5.7
    
    
    
    2.0
    %Other expense/(income), net
    
    
    2.4
    
    
    
    0.3
    %
    
    
    0.2
    
    
    
    
    
    
    
    (2.2
    )
    
    
    (1,100.0
    %)Earnings before interest and taxes
    
    
    38.5
    
    
    
    5.0
    %
    
    
    31.3
    
    
    
    4.3
    %
    
    
    7.2
    
    
    
    23.0
    %Interest expense, net
    
    
    2.2
    
    
    
    0.3
    %
    
    
    3.1
    
    
    
    0.4
    %
    
    
    0.9
    
    
    
    29.0
    %Income tax expense
    
    
    12.5
    
    
    
    1.6
    %
    
    
    9.8
    
    
    
    1.3
    %
    
    
    (2.7
    )
    
    
    (27.6
    %)Net income from continuing operations
    
    
    23.8
    
    
    
    3.1
    %
    
    
    18.4
    
    
    
    2.5
    %
    
    
    5.4
    
    
    
    29.3
    %
  17




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18




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Favorable/2006 Compared to 2005 (in millions)
    
    2006
    
    2005
    
    (Unfavorable)Revenue
    
    $
    730.1
    
    
    
    100.0
    %
    
    $
    651.4
    
    
    
    100.0
    %
    
    $
    78.7
    
    
    
    12.1
    %Cost of sales
    
    
    415.6
    
    
    
    56.9
    %
    
    
    369.3
    
    
    
    56.7
    %
    
    
    (46.3
    )
    
    
    (12.5
    %)Gross margin
    
    
    314.5
    
    
    
    43.1
    %
    
    
    282.1
    
    
    
    43.3
    %
    
    
    32.4
    
    
    
    11.5
    %Selling, general and administrative
    
    
    283.0
    
    
    
    38.8
    %
    
    
    253.7
    
    
    
    38.9
    %
    
    
    (29.3
    )
    
    
    (11.5
    %)Other expense/( income), net
    
    
    0.2
    
    
    
    
    
    
    
    (0.1
    )
    
    
    
    
    
    
    (0.3
    )
    
    nmEarnings before interest and taxes
    
    
    31.3
    
    
    
    4.3
    %
    
    
    28.5
    
    
    
    4.4
    %
    
    
    2.8
    
    
    
    9.8
    %Interest expense, net
    
    
    3.1
    
    
    
    0.4
    %
    
    
    2.0
    
    
    
    0.3
    %
    
    
    (1.1
    )
    
    
    (55.0
    %)Income tax expense
    
    
    9.8
    
    
    
    1.3
    %
    
    
    9.0
    
    
    
    1.4
    %
    
    
    (0.8
    )
    
    
    (8.9
    %)Net income from continuing operations
    
    
    18.4
    
    
    
    2.5
    %
    
    
    17.5
    
    
    
    2.7
    %
    
    
    0.9
    
    
    
    5.1
    %nm = not meaningful.
        19




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Liquidity and Capital Resources
 Liquidity
  Operating Cash Flows
  Investing Cash Flows
   20




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Financing Cash Flows
   Debt
    21




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Commitments and Contingencies
   Payments Due by Period(in thousands)
    
    Total
    
    < 1 year
    
    1-3 years
    
    3-5 years
    
    ThereafterPurchase commitments for inventory
    
    $
    95,245
    
    
    $
    95,245
    
    
    $
    
    
    
    $
    
    
    
    $
    Debt, including interest payable*
    
    
    108,326
    
    
    
    3,605
    
    
    
    104,721
    
    
    
    
    
    
    
    Operating lease obligations
    
    
    2,562
    
    
    
    1,790
    
    
    
    544
    
    
    
    204
    
    
    
    24Unrecognized tax benefits**
    
    
    1,052
    
    
    
    
    **
    
    
    
    **
    
    
    
    **
    
    
    
    **Benefit obligations
    
    
    1,689
    
    
    
    191
    
    
    
    250
    
    
    
    228
    
    
    
    1,020Total contractual obligations
    
    $
    208,874
    
    
    $
    100,831
    
    
    $
    105,515
    
    
    $
    432
    
    
    $
    1,044
 *
    
    Variable interest will be paid in future periods based on the outstanding balance at that time. The amounts due include the
estimated interest payable on debt instruments through October 2011.**
    
    The timing of payment, if any, for unrecognized tax benefits cannot be estimated. However, we believe that $0.4 million
related to an uncertain tax position is reasonably likely to be paid within the next 3 years. 
 Item 7A. Quantitative and Qualitative Disclosure About Market Risk
   22




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23




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Item 8. Financial Statements and Supplementary Data
 
 Consolidated Statements of Income
 LANCE, INC. AND SUBSIDIARIES
For the Fiscal Years Ended December 27, 2008, December 29, 2007, and December 30, 2006
(in thousands, except share and per share data)
 2008
    
    2007
    
    2006Net sales and other operating revenue
    
    $
    852,468
    
    
    $
    762,736
    
    
    $
    730,116Cost of sales
    
    
    531,528
    
    
    
    444,487
    
    
    
    415,576Gross margin
    
    
    320,940
    
    
    
    318,249
    
    
    
    314,540Selling, general and administrative
    
    
    291,680
    
    
    
    277,317
    
    
    
    283,006Other (income)/expense, net
    
    
    (854
    )
    
    
    2,390
    
    
    
    191Income from continuing operations before interest
and income taxes
    
    
    30,114
    
    
    
    38,542
    
    
    
    31,343Interest expense, net
    
    
    3,041
    
    
    
    2,222
    
    
    
    3,156Income from continuing operations before income taxes
    
    
    27,073
    
    
    
    36,320
    
    
    
    28,187Income tax expense
    
    
    9,367
    
    
    
    12,511
    
    
    
    9,809Net income from continuing operations
    
    
    17,706
    
    
    
    23,809
    
    
    
    18,378Income from discontinued operations, before income taxes
    
    
    
    
    
    
    44
    
    
    
    153Income tax expense
    
    
    
    
    
    
    15
    
    
    
    53Net income from discontinued operations
    
    
    
    
    
    
    29
    
    
    
    100Net income
    
    $
    17,706
    
    
    $
    23,838
    
    
    $
    18,478Basic earnings per share:From continuing operations
    
    $
    0.57
    
    
    $
    0.77
    
    
    $
    0.61From discontinued operations
    
    
    
    
    
    
    
    
    
    
    Basic earnings per share
    
    $
    0.57
    
    
    $
    0.77
    
    
    $
    0.61Weighted average shares outstanding  basic
    
    
    31,202,000
    
    
    
    30,961,000
    
    
    
    30,467,000Diluted earnings per share:From continuing operations
    
    $
    0.56
    
    
    $
    0.76
    
    
    $
    0.60From discontinued operations
    
    
    
    
    
    
    
    
    
    
    Diluted earnings per share
    
    $
    0.56
    
    
    $
    0.76
    
    
    $
    0.60Weighted average shares outstanding  diluted
    
    
    31,803,000
    
    
    
    31,373,000
    
    
    
    30,844,000
  24




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##### Table of Contents



Consolidated Balance Sheets
 LANCE, INC. AND SUBSIDIARIES
December 27, 2008 and December 29, 2007
(in thousands, except share data)
 2008
    
    2007AssetsCurrent assetsCash and cash equivalents
    
    $
    807
    
    
    $
    8,647Accounts receivable
    
    
    74,406
    
    
    
    64,081Inventories
    
    
    43,112
    
    
    
    38,659Deferred income taxes
    
    
    9,778
    
    
    
    9,335Prepaid expenses and other current assets
    
    
    12,933
    
    
    
    12,367Total current assets
    
    
    141,036
    
    
    
    133,089Fixed assets, net
    
    
    216,085
    
    
    
    205,075Goodwill, net
    
    
    80,110
    
    
    
    55,956Other intangible assets, net
    
    
    23,966
    
    
    
    13,171Other assets
    
    
    4,949
    
    
    
    5,712Total assets
    
    $
    466,146
    
    
    $
    413,003Liabilities and Stockholders EquityCurrent liabilitiesAccounts payable
    
    $
    25,939
    
    
    $
    21,169Accrued compensation
    
    
    26,312
    
    
    
    20,564Accrued profit-sharing retirement plan
    
    
    5,592
    
    
    
    5,383Accrual for casualty insurance claims
    
    
    5,581
    
    
    
    8,163Accrued selling costs
    
    
    5,162
    
    
    
    4,511Other payables and accrued liabilities
    
    
    15,983
    
    
    
    14,847Short-term debt
    
    
    7,000
    
    
    
    Total current liabilities
    
    
    91,569
    
    
    
    74,637Long-term debt
    
    
    91,000
    
    
    
    50,000Deferred income taxes
    
    
    31,241
    
    
    
    26,874Accrual for casualty insurance claims
    
    
    8,459
    
    
    
    7,428Other long-term liabilities
    
    
    8,370
    
    
    
    6,967Total liabilities
    
    
    230,639
    
    
    
    165,906Commitments and contingenciesStockholders equityCommon stock, 31,522,953 and 31,214,743
shares outstanding, respectively
    
    
    26,268
    
    
    
    26,011Preferred stock, no shares outstanding
    
    
    
    
    
    
    Additional paid-in capital
    
    
    49,138
    
    
    
    41,430Retained earnings
    
    
    160,938
    
    
    
    163,356Accumulated other comprehensive income
    
    
    (837
    )
    
    
    16,300Total stockholders equity
    
    
    235,507
    
    
    
    247,097Total liabilities and stockholders equity
    
    $
    466,146
    
    
    $
    413,003
  25




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##### Table of Contents



Consolidated Statements of Stockholders Equity and Comprehensive Income
 LANCE, INC. AND SUBSIDIARIES
For the Fiscal Years Ended December 27, 2008, December 29, 2007, and December 30, 2006
(in thousands, except share data)
 Additional
    
    
    
    
    
    AccumulatedOtherCommon
    
    Paid-in
    
    Retained
    
    ComprehensiveShares
    
    Stock
    
    Capital
    
    Earnings
    
    Income
    
    TotalBalance, December 31, 2005
    
    
    29,808,705
    
    
    $
    24,841
    
    
    $
    11,380
    
    
    $
    160,407
    
    
    $
    5,081
    
    
    $
    201,709Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,478
    
    
    
    
    
    
    
    18,478Net unrealized losses on derivative instruments,
net of $106 tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (193
    )
    
    
    (193
    )Adoption of SFAS No. 158, net of $167 tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    313
    
    
    
    313Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27
    
    
    
    27Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,625Cash dividends paid to stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,556
    )
    
    
    
    
    
    
    (19,556
    )Amortization of nonqualified stock options
    
    
    
    
    
    
    
    
    
    
    1,331
    
    
    
    
    
    
    
    
    
    
    
    1,331Equity-based incentive expense previously
recognized under a liability plan
    
    
    
    
    
    
    
    
    
    
    634
    
    
    
    
    
    
    
    
    
    
    
    634Stock options exercised, including $3,223 tax
benefit
    
    
    1,018,761
    
    
    
    850
    
    
    
    17,278
    
    
    
    
    
    
    
    
    
    
    
    18,128Issuance and amortization of
restricted stock, net of cancellations
    
    
    28,425
    
    
    
    23
    
    
    
    1,506
    
    
    
    
    
    
    
    
    
    
    
    1,529Balance, December 30, 2006
    
    
    30,855,891
    
    
    $
    25,714
    
    
    $
    32,129
    
    
    $
    159,329
    
    
    $
    5,228
    
    
    $
    222,400Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,838
    
    
    
    
    
    
    
    23,838Net unrealized losses on derivative instruments,
net of $179 tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (254
    )
    
    
    (254
    )Actuarial gains recognized in net income, net of
$68 tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (142
    )
    
    
    (142
    )Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,468
    
    
    
    11,468Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34,910Cash dividends paid to stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,872
    )
    
    
    
    
    
    
    (19,872
    )Cumulative adjustment from adoption of FIN 48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61
    
    
    
    
    
    
    
    61Amortization of nonqualified stock options
    
    
    
    
    
    
    
    
    
    
    1,658
    
    
    
    
    
    
    
    
    
    
    
    1,658Equity-based incentive expense previously
recognized under a liability plan
    
    
    
    
    
    
    
    
    
    
    316
    
    
    
    
    
    
    
    
    
    
    
    316Stock options exercised, including $1,026 tax
benefit
    
    
    270,852
    
    
    
    224
    
    
    
    4,508
    
    
    
    
    
    
    
    
    
    
    
    4,732Issuance and amortization of
restricted stock, net of cancellations
    
    
    88,000
    
    
    
    73
    
    
    
    2,819
    
    
    
    
    
    
    
    
    
    
    
    2,892Balance, December 29, 2007
    
    
    31,214,743
    
    
    $
    26,011
    
    
    $
    41,430
    
    
    $
    163,356
    
    
    $
    16,300
    
    
    $
    247,097Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,706
    
    
    
    
    
    
    
    17,706Net unrealized losses on derivative instruments,
net of $1,923 tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,593
    )
    
    
    (3,593
    )Actuarial gains recognized in net income, net of
$5 tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    9Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,553
    )
    
    
    (13,553
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    569Cash dividends paid to stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,124
    )
    
    
    
    
    
    
    (20,124
    )Amortization of nonqualified stock options
    
    
    
    
    
    
    
    
    
    
    1,124
    
    
    
    
    
    
    
    
    
    
    
    1,124Equity-based incentive expense previously
recognized under a liability plan
    
    
    39,250
    
    
    
    33
    
    
    
    876
    
    
    
    
    
    
    
    
    
    
    
    909Stock options exercised, including $395 tax benefit
    
    
    149,825
    
    
    
    125
    
    
    
    2,414
    
    
    
    
    
    
    
    
    
    
    
    2,539Issuance and amortization of
restricted stock, net of cancellations
    
    
    119,135
    
    
    
    99
    
    
    
    3,294
    
    
    
    
    
    
    
    
    
    
    
    3,393Balance, December 27, 2008
    
    
    31,522,953
    
    
    $
    26,268
    
    
    $
    49,138
    
    
    $
    160,938
    
    
    $
    (837
    )
    
    $
    235,507
  26




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##### Table of Contents



Consolidated Statements of Cash Flows
 LANCE, INC. AND SUBSIDIARIES
For the Fiscal Years Ended December 27, 2008, December 29, 2007, and December 30, 2006
(in thousands)
 2008
    
    2007
    
    2006Operating activities:Net income
    
    $
    17,706
    
    
    $
    23,838
    
    
    $
    18,478Adjustments to reconcile net income to cash from operating activities:Fixed asset depreciation and intangible amortization
    
    
    32,217
    
    
    
    29,307
    
    
    
    26,897Equity-based incentive compensation expense
    
    
    5,967
    
    
    
    3,294
    
    
    
    4,896(Gain)/loss on sale of fixed assets, net
    
    
    (339
    )
    
    
    818
    
    
    
    591Deferred income taxes
    
    
    6,275
    
    
    
    (419
    )
    
    
    1,182LIFO reserve adjustment
    
    
    1,715
    
    
    
    1,412
    
    
    
    (1,083
    )Provisions for doubtful accounts
    
    
    763
    
    
    
    (166
    )
    
    
    (838
    )Changes in assets and liabilities, excluding business acquisitions,
and foreign currency translation adjustments:Accounts receivable
    
    
    (10,635
    )
    
    
    (1,551
    )
    
    
    (1,845
    )Inventory
    
    
    (4,762
    )
    
    
    (2,806
    )
    
    
    1,329Other current assets
    
    
    (970
    )
    
    
    (1,776
    )
    
    
    1,695Accounts payable
    
    
    4,724
    
    
    
    2,620
    
    
    
    (2,108
    )Other accrued liabilities
    
    
    2,150
    
    
    
    (2,727
    )
    
    
    (6,740
    )Other noncurrent assets
    
    
    952
    
    
    
    828
    
    
    
    (963
    )Other noncurrent liabilities
    
    
    (853
    )
    
    
    (322
    )
    
    
    (2,394
    )Net cash flow from operating activities
    
    
    54,910
    
    
    
    52,350
    
    
    
    39,097Investing activities:Purchases of fixed assets
    
    
    (39,064
    )
    
    
    (39,476
    )
    
    
    (46,965
    )Business acquisitions, net of cash acquired
    
    
    (54,984
    )
    
    
    
    
    
    
    Purchase of investment
    
    
    (190
    )
    
    
    (2,090
    )
    
    
    Proceeds from sale of fixed assets
    
    
    2,958
    
    
    
    7,277
    
    
    
    7,340Net cash used in investing activities
    
    
    (91,280
    )
    
    
    (34,289
    )
    
    
    (39,625
    )Financing activities:Dividends paid
    
    
    (20,124
    )
    
    
    (19,872
    )
    
    
    (19,556
    )Issuances of common stock under employee stock plans
    
    
    2,539
    
    
    
    4,732
    
    
    
    18,128Net repayments of previous revolving credit agreement
    
    
    
    
    
    
    
    
    
    
    (46,238
    )Net proceeds from long-term debt
    
    
    48,435
    
    
    
    
    
    
    
    50,000Repayments of long-term debt from business acquisitions
    
    
    (2,239
    )
    
    
    
    
    
    
    Net cash (used in)/from financing activities
    
    
    28,611
    
    
    
    (15,140
    )
    
    
    2,334Effect of exchange rate changes on cash
    
    
    (81
    )
    
    
    222
    
    
    
    155Increase (decrease) in cash and cash equivalents
    
    
    (7,840
    )
    
    
    3,143
    
    
    
    1,961Cash and cash equivalents at beginning of fiscal year
    
    
    8,647
    
    
    
    5,504
    
    
    
    3,543Cash and cash equivalents at end of fiscal year
    
    $
    807
    
    
    $
    8,647
    
    
    $
    5,504Supplemental information:Cash paid for income taxes, net of refunds of $209, $211, and
$165, respectively
    
    $
    2,145
    
    
    $
    12,594
    
    
    $
    6,679Cash paid for interest
    
    $
    3,231
    
    
    $
    2,878
    
    
    $
    3,471
  27




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##### Table of Contents



Notes to Consolidated Financial Statements
 LANCE, INC. AND SUBSIDIARIES
December 27, 2008 and December 29, 2007
 NOTE 1. OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Operations
    Principles of Consolidation
  Reclassifications
  Revenue Recognition
   28




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##### Table of Contents



Fiscal Year
  Use of Estimates
  Allowance for Doubtful Accounts
  Fair Value of Financial Instruments
  29




---



##### Table of Contents



Cash and Cash Equivalents
  Inventories
   Fixed
Assets
  Useful LifeBuildings and building improvements
    
    10-45 yearsLand improvements
    
    10-15 yearsMachinery, equipment and computer systems
    
    3-20 yearsFurniture and fixtures
    
    3-12 yearsTrucks and automobiles
    
    3-10 years
  Goodwill and Other Intangible Assets
  30




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##### Table of Contents



Income
Taxes
   Self-Insurance Reserves
  31




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##### Table of Contents



th
 Derivative Financial Instruments
  Earnings Per Share
   Advertising and Consumer Promotion Costs
  Shipping and Handling Costs
  32




---



##### Table of Contents



Concentration of Credit Risk
  Vacation Policy Change
  New Accounting Standards
 Accounting for Uncertainty in Income Taxes 
an Interpretation of FASB Statement 109 Accounting for Income Taxes
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities: Including an amendment of FASB Statement No. 115
 Business Combinations.
 33




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##### Table of Contents



Noncontrolling Interests in Consolidated
Financial Statements  an amendment of ARB No. 51
 Disclosures about Derivative Instruments and Hedging
Activities  an amendment of FASB Statement No. 133
 NOTE 2. DISCONTINUED OPERATIONS
   (in thousands)
    
    2008
    
    2007
    
    2006Revenue
    
    $
    
    
    
    $
    5,224
    
    
    $
    17,833Pre-tax income
    
    $
    
    
    
    $
    44
    
    
    $
    153
 NOTE 3. ACQUISITIONS & INVESTMENTS
  34




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##### Table of Contents



NOTE 4. INVENTORIES
  (in thousands)
    
    2008
    
    2007Finished goods
    
    $
    23,227
    
    
    $
    21,910Raw materials
    
    
    11,556
    
    
    
    7,701Supplies, etc.
    
    
    15,293
    
    
    
    14,297Total inventories at FIFO cost
    
    
    50,076
    
    
    
    43,908Less: adjustment to reduce FIFO cost to LIFO cost
    
    
    (6,964
    )
    
    
    (5,249
    )Total inventories
    
    $
    43,112
    
    
    $
    38,659
   35




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##### Table of Contents



NOTE 5. FIXED ASSETS
  (in thousands)
    
    2008
    
    2007Land and land improvements
    
    $
    15,209
    
    
    $
    14,670Buildings and building improvements
    
    
    87,067
    
    
    
    84,118Machinery, equipment and computer systems
    
    
    305,007
    
    
    
    287,821Trucks and automobiles
    
    
    61,967
    
    
    
    59,490Furniture and fixtures
    
    
    2,334
    
    
    
    2,304Construction in progress
    
    
    12,341
    
    
    
    10,909483,925
    
    
    
    459,312Accumulated depreciation and amortization
    
    
    (267,456
    )
    
    
    (253,732
    )$
    216,469
    
    
    $
    205,580Assets held for sale
    
    
    (384
    )
    
    
    (505
    )Fixed assets, net
    
    $
    216,085
    
    
    $
    205,075
      NOTE 6. GOODWILL AND OTHER INTANGIBLE ASSETS
  Carrying(in thousands)
    
    AmountBalance as of December 29, 2007
    
    $
    55,956Business acquisitions
    
    
    32,722Changes in foreign currency exchange rates
    
    
    (8,568
    )Balance as of December 27, 2008
    
    $
    80,110
 36




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##### Table of Contents



Gross
    
    
    
    
    
    NetCarrying
    
    Accumulated
    
    Carrying(in thousands)
    
    Amount
    
    Amortization
    
    AmountAs of December 27, 2008:Customer relationships  amortized
    
    $
    4,678
    
    
    $
    (315
    )
    
    $
    4,363Non-compete agreement  amortized
    
    
    500
    
    
    $
    
    
    
    
    500Trademarks  unamortized
    
    
    19,103
    
    
    
    
    
    
    
    19,103Total other intangible assets as of December 27, 2008
    
    $
    24,281
    
    
    $
    (315
    )
    
    $
    23,966As of December 29, 2007:Customer relationships  amortized
    
    $
    378
    
    
    $
    (82
    )
    
    $
    296Trademarks  unamortized
    
    
    12,875
    
    
    
    
    
    
    
    12,875Total other intangible assets as of December 29, 2007
    
    $
    13,253
    
    
    $
    (82
    )
    
    $
    13,171
     NOTE 7. LONG-TERM DEBT
  (in thousands)
    
    2008
    
    2007Unsecured U.S. term loan due October 2011, interest payable based on the
30-day LIBOR, plus applicable margin of 0.50% (1.94% at December 27, 2008,
including applicable margin)
    
    $
    50,000
    
    
    $
    50,000Unsecured U.S. Dollar-denominated revolving credit facility, interest payable
based on the weighted-average 30-day LIBOR, plus applicable margin of 0.40%
(1.94% at December 27, 2008, including applicable margin)
    
    
    48,000
    
    
    
    Unsecured Canadian Dollar  denominated revolving credit facility, interest
payable based on Canadian Bankers Acceptance discount rate or Canadian
Prime rate, plus the applicable margin and an additional 0.13% fee
    
    
    
    
    
    
    Total Debt
    
    
    98,000
    
    
    
    50,000Less current portion of long-term debt
    
    
    (7,000
    )
    
    
    Total long-term debt
    
    $
    91,000
    
    
    $
    50,000
 37




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##### Table of Contents



NOTE 8. DERIVATIVE INSTRUMENTS
  38




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##### Table of Contents



NOTE 9. INCOME TAXES
  (in thousands)
    
    2008
    
    2007
    
    
    
    
    
    2006Current:Federal
    
    $
    3,140
    
    
    $
    11,744
    
    
    
    
    
    
    $
    8,517State and other
    
    
    240
    
    
    
    888
    
    
    
    
    
    
    
    671Foreign
    
    
    102
    
    
    
    (52
    )
    
    
    
    
    
    
    (523
    )3,482
    
    
    
    12,580
    
    
    
    
    
    
    
    8,665Deferred:Federal
    
    
    5,860
    
    
    
    560
    
    
    
    
    
    
    
    838State and other
    
    
    720
    
    
    
    240
    
    
    
    
    
    
    
    112Foreign
    
    
    (695
    )
    
    
    (854
    )
    
    
    
    
    
    
    2475,885
    
    
    
    (54
    )
    
    
    
    
    
    
    1,197Total income tax expense
    
    $
    9,367
    
    
    $
    12,526
    
    
    
    
    
    
    $
    9,862
  2008
    
    2007
    
    2006Statutory income tax rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %State and local income taxes, net of federal income tax benefit
    
    
    1.3
    
    
    
    1.7
    
    
    
    2.0Net favorable foreign income taxes as a result of tax
adjustments
and tax rate differences
    
    
    (1.0
    )
    
    
    (1.3
    )
    
    
    (2.5
    )Changes in deferred taxes for effective state rate changes
    
    
    (0.1
    )
    
    
    0.2
    
    
    
    (0.1
    )Miscellaneous items, net
    
    
    (0.6
    )
    
    
    (1.2
    )
    
    
    0.4Effective income tax rate
    
    
    34.6
    %
    
    
    34.4
    %
    
    
    34.8
    %
 39




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##### Table of Contents



(in thousands)
    
    2008
    
    2007Deferred tax assets:Reserves for employee compensation, deductible when paid for
income tax purposes, accrued for financial reporting purposes
    
    $
    7,739
    
    
    $
    5,916Reserves for insurance claims, deductible when paid for income tax
purposes, accrued for financial reporting purposes
    
    
    4,620
    
    
    
    5,488Other reserves, deductible when paid for income tax purposes,
accrued for financial reporting purposes
    
    
    1,884
    
    
    
    2,639Unrealized losses, deductible when realized for income tax purposes,
included in other comprehensive income
    
    
    2,244
    
    
    
    278Inventories, principally due to additional costs capitalized for
income tax purposes
    
    
    1,523
    
    
    
    1,764Net state and foreign operating loss and tax credit carryforwards
    
    
    702
    
    
    
    1,182Total gross deferred tax assets
    
    
    18,712
    
    
    
    17,267Less valuation allowance
    
    
    (199
    )
    
    
    (224
    )Net deferred tax assets
    
    
    18,513
    
    
    
    17,043Deferred tax liabilities:Fixed assets, principally due to
differences in depreciation, net of impairment reserves
    
    
    (35,155
    )
    
    
    (30,089
    )Trademark amortization
    
    
    (2,887
    )
    
    
    (2,905
    )Unrealized gains includible when realized for income tax purposes,
included in other comprehensive income
    
    
    (104
    )
    
    
    (98
    )Prepaid expenses and other costs deductible for tax, amortized
for financial statement purposes
    
    
    (1,830
    )
    
    
    (1,490
    )Total gross deferred tax liabilities
    
    
    (39,976
    )
    
    
    (34,582
    )Total net deferred tax liabilities
    
    $
    (21,463
    )
    
    $
    (17,539
    )
     40




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##### Table of Contents



Jurisdiction
    
    Open YearsUS federal
    
    2005 and forwardCanada federal
    
    2004 and forwardOntario provincial
    
    2003 and forwardMassachusetts
    
    2001 and forwardNorth Carolina
    
    2005 and forwardIowa
    
    2005 and forward
  (in thousands)
    
    2008Balance at December 30, 2007 (first day of fiscal 2008)
    
    $
    1,499Additions for tax positions taken during the current period
    
    
    89Reductions resulting from a lapse of the statute of limitations
    
    
    (536
    )Balance at December 27, 2008
    
    $
    1,052
 NOTE 10. POSTRETIREMENT BENEFITS PLANS
    NOTE 11. EQUITY BASED INCENTIVE COMPENSATION
  41




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Key Employee Incentive Plans
  Long-term Incentive Plans
  Employee Stock Options
   OutstandingOptions
    
    Weighted Average
    
    OptionsOutstanding
    
    Exercise Price
    
    ExercisableBalance at December 29, 2007
    
    
    1,213,090
    
    
    $
    16.91
    
    
    
    657,024Granted
    
    
    490,305
    
    
    
    16.89Exercised
    
    
    (133,825
    )
    
    
    14.47Expired/Forfeited
    
    
    (42,000
    )
    
    
    20.98Balance at December 27, 2008
    
    
    1,527,570
    
    
    $
    17.01
    
    
    
    1,197,627Weighted average contractual term
    
    6.3 years
    
    
    
    
    
    
    5.9 yearsAggregate intrinsic value
    
    $7.7 million
    
    
    
    
    
    
    $6.9 million
 42




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##### Table of Contents



2008
    
    2007
    
    2006Assumptions used in Black Scholes pricing model:Expected dividend yield
    
    
    3.79
    %
    
    
    3.13
    %
    
    
    3.21
    %Risk-free interest rate
    
    
    2.71
    %
    
    
    4.23
    %
    
    
    4.54
    %Weighted average expected life (simplified method)
    
    4.8 years
    
    5.0 years
    
    6.5 yearsExpected volatility
    
    
    26.76
    %
    
    
    29.47
    %
    
    
    31.20
    %Weighted average fair value per share of options granted
    
    $
    3.00
    
    
    $
    4.56
    
    
    $
    5.50
 Employee Restricted Stock and Restricted Stock Unit Awards
    Restricted Stockand Restricted Unit
    
    Weighted AverageAwards Outstanding
    
    Grant Date Fair ValueBalance at December 29, 2007
    
    
    722,800
    
    
    $
    17.68Granted
    
    
    151,473
    
    
    
    16.70Exercised
    
    
    (61,301
    )
    
    
    18.41Expired/Forfeited
    
    
    (27,021
    )
    
    
    14.89Balance at December 27, 2008
    
    
    785,951
    
    
    $
    17.53
  43




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##### Table of Contents



Non-Employee Director Stock Option Plan
  Options
    
    Weighted Average
    
    OptionsOutstanding
    
    Exercise Price
    
    ExercisableBalance at December 29, 2007
    
    
    98,500
    
    
    $
    14.60
    
    
    
    98,500Granted
    
    
    
    
    
    
    Exercised
    
    
    (16,000
    )
    
    
    12.98Expired/Forfeited
    
    
    (18,500
    )
    
    
    21.63Balance at December 27, 2008
    
    
    64,000
    
    
    $
    12.98
    
    
    
    64,000
 Non-Employee Director Restricted Stock Awards
   Employee Stock Purchase Plan
  44




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NOTE 12. OTHER COMMITMENTS AND CONTINGENCIES
    (in thousands)
    
    Amount2009
    
    $
    1,7902010
    
    
    3392011
    
    
    2052012
    
    
    1182013
    
    
    86Thereafter
    
    
    24Total operating lease commitments
    
    $
    2,562
    NOTE 13. STOCKHOLDERS EQUITY
 Capital Stock
  45




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##### Table of Contents



Stockholder Rights Plan
  Other Comprehensive Income
  (in thousands)
    
    2008
    
    
    2007Foreign currency translation adjustment
    
    $
    3,023
    
    
    $
    16,576Postretirement actuarial gains recognized in net income, net of tax
    
    
    180
    
    
    
    171Net unrealized losses on derivative instruments, net of tax
    
    
    (4,040
    )
    
    
    (447
    )Total accumulated other comprehensive income
    
    $
    (837
    )
    
    $
    16,300
  46




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##### Table of Contents



NOTE 14. INTERIM FINANCIAL INFORMATION (UNAUDITED)
  2008 Interim Period EndedMarch 29
    
    June 28
    
    September 27
    
    December 27(13 Weeks)
    
    (13 Weeks)
    
    (13 Weeks)
    
    (13 Weeks)Net sales and other operating revenue
    
    $
    197,968
    
    
    $
    213,614
    
    
    $
    225,587
    
    
    $
    215,298Cost of sales
    
    
    123,460
    
    
    
    133,691
    
    
    
    143,040
    
    
    
    131,336Gross margin
    
    
    74,508
    
    
    
    79,923
    
    
    
    82,547
    
    
    
    83,962Selling, general and administrative
    
    
    72,857
    
    
    
    74,568
    
    
    
    72,337
    
    
    
    71,918Other (income)/expense, net
    
    
    (4
    )
    
    
    161
    
    
    
    (536
    )
    
    
    (476
    )Income from continuing operations before interest and
income taxes
    
    
    1,655
    
    
    
    5,194
    
    
    
    10,746
    
    
    
    12,520Interest expense, net
    
    
    606
    
    
    
    860
    
    
    
    708
    
    
    
    867Income from continuing operations before income taxes
    
    
    1,049
    
    
    
    4,334
    
    
    
    10,038
    
    
    
    11,653Income tax expense
    
    
    404
    
    
    
    1,626
    
    
    
    3,229
    
    
    
    4,109Net income from continuing operations
    
    
    645
    
    
    
    2,708
    
    
    
    6,809
    
    
    
    7,544Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    $
    645
    
    
    $
    2,708
    
    
    $
    6,809
    
    
    $
    7,544From continuing operations:Net income per common share  basic
    
    $
    0.02
    
    
    $
    0.09
    
    
    $
    0.22
    
    
    $
    0.24Net income per common share  diluted
    
    
    0.02
    
    
    
    0.09
    
    
    
    0.21
    
    
    
    0.24From discontinued operations:Net income per common share  basic
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income per common share  diluted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Dividends declared per common share
    
    $
    0.16
    
    
    $
    0.16
    
    
    $
    0.16
    
    
    $
    0.16
 2007 Interim Period EndedMarch 31
    
    June 30
    
    September 29
    
    December 29(13 Weeks)
    
    (13 Weeks)
    
    (13 Weeks)
    
    (13 Weeks)Net sales and other operating revenue
    
    $
    182,426
    
    
    $
    197,036
    
    
    $
    198,052
    
    
    $
    185,222Cost of sales
    
    
    102,976
    
    
    
    109,435
    
    
    
    115,692
    
    
    
    116,384Gross margin
    
    
    79,450
    
    
    
    87,601
    
    
    
    82,360
    
    
    
    68,838Selling, general and administrative
    
    
    69,616
    
    
    
    71,467
    
    
    
    70,253
    
    
    
    65,981Other (income)/expense, net
    
    
    (90
    )
    
    
    973
    
    
    
    522
    
    
    
    985Income from continuing operations before interest and
income taxes
    
    
    9,924
    
    
    
    15,161
    
    
    
    11,585
    
    
    
    1,872Interest expense, net
    
    
    604
    
    
    
    615
    
    
    
    550
    
    
    
    454Income from continuing operations before income taxes
    
    
    9,320
    
    
    
    14,546
    
    
    
    11,035
    
    
    
    1,418Income tax expense
    
    
    3,448
    
    
    
    5,277
    
    
    
    3,448
    
    
    
    337Net income from continuing operations
    
    
    5,872
    
    
    
    9,269
    
    
    
    7,587
    
    
    
    1,081Income/(loss) from discontinued operations
    
    
    537
    
    
    
    (346
    )
    
    
    (146
    )
    
    
    Income tax expense/(benefit)
    
    
    199
    
    
    
    (129
    )
    
    
    (54
    )
    
    
    Net income/(loss) from discontinued operations
    
    
    338
    
    
    
    (217
    )
    
    
    (92
    )
    
    
    Net income
    
    $
    6,210
    
    
    $
    9,052
    
    
    $
    7,495
    
    
    $
    1,081From continuing operations:Net income per common share  basic
    
    $
    0.19
    
    
    $
    0.30
    
    
    $
    0.24
    
    
    $
    0.03Net income per common share  diluted
    
    
    0.19
    
    
    
    0.30
    
    
    
    0.24
    
    
    
    0.03From discontinued operations:Net income/(loss) per common share  basic
    
    
    0.01
    
    
    
    (0.01
    )
    
    
    
    
    
    
    Net income/(loss) per common share  diluted
    
    
    0.01
    
    
    
    (0.01
    )
    
    
    
    
    
    
    Dividends declared per common share
    
    $
    0.16
    
    
    $
    0.16
    
    
    $
    0.16
    
    
    $
    0.16
 47




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SCHEDULE II  VALUATION & QUALIFYING ACCOUNTS
 For Fiscal Years ended December 27, 2008, December 29, 2007, and December 30, 2006
 (in thousands)
 AdditionsBeginning
    
    (Reductions)
    
    
    
    
    
    EndingBalance
    
    to Expense
    
    Deductions
    
    BalanceFiscal year ended December 27, 2008:Allowance for doubtful accounts
    
    $
    506
    
    
    
    763
    
    
    
    (406
    )
    
    $
    863LIFO inventory reserves
    
    $
    5,249
    
    
    
    1,715
    
    
    
    
    
    
    $
    6,964Deferred tax asset valuation allowance
    
    $
    224
    
    
    
    (25
    )
    
    
    
    
    
    $
    199Fiscal year ended December 29, 2007:Allowance for doubtful accounts
    
    $
    994
    
    
    
    (165
    )
    
    
    (323
    )
    
    $
    506LIFO inventory reserves
    
    $
    3,837
    
    
    
    1,412
    
    
    
    
    
    
    $
    5,249Deferred tax asset valuation allowance
    
    $
    417
    
    
    
    (193
    )
    
    
    
    
    
    $
    224Fiscal year ended December 30, 2006:Allowance for doubtful accounts
    
    $
    5,337
    
    
    
    (838
    )
    
    
    (3,505
    )
    
    $
    994LIFO inventory reserves
    
    $
    4,920
    
    
    
    (1,083
    )
    
    
    
    
    
    $
    3,837Deferred tax asset valuation allowance
    
    $
    460
    
    
    
    (43
    )
    
    
    
    
    
    $
    417
 48




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Internal Control  Integrated
Framework Managements Report on Internal Control over Financial Reporting.
    49




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Internal Control  Integrated Framework
 Accounting for Uncertainty in Income Taxes -
an Interpretation of FASB Statement 109, Share-Based Payment Employers Accounting for Defined Benefit Pension and Other Postretirement Plans
  
 50




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MANAGEMENTS REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING
       51




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##### Table of Contents



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
  Managements Report on Internal Control over Financial
Reporting
  
 Item 9B. Other Information
  
 PART III
  52




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Item 10. Directors, Executive Officers and Corporate Governance
 Code of Ethics
  
 PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
   PageConsolidated Statements of Income for the Fiscal Years Ended December 27, 2008,
December 29, 2007, and December 30, 2006
    
    
    24Consolidated Balance Sheets as of December 27, 2008 and December 29, 2007
    
    
    25Consolidated Statements of Stockholders Equity and Comprehensive Income for the
Fiscal Years Ended December 27, 2008, December 29, 2007, and December 30, 2006
    
    
    26Consolidated Statements of Cash Flows for the Fiscal Years Ended December 27, 2008,
December 29, 2007, and December 30, 2006
    
    
    27Notes to Consolidated Financial Statements
    
    
    28
      53




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*
    
    Management contract. 57




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SIGNATURES
  LANCE, INC.Dated:  February 23, 2009
    By:
    /s/ David V. SingerDavid V. SingerPresident and Chief Executive Officer  Signature
    
    Capacity
    
    Date/s/ David V. Singer

David V. Singer
    
    President and Chief Executive Officer
(Principal Executive
Officer)
    
    February 23, 2009/s/ Rick D. Puckett

Rick D. Puckett
    
    Executive Vice President, Chief Financial
Officer, Treasurer and
Secretary (Principal Financial
Officer)
    
    February 23, 2009/s/ Margaret E. Wicklund

Margaret E. Wicklund
    
    Vice President, Corporate Controller and
Assistant Secretary (Principal
Accounting Officer)
    
    February 23, 2009/s/ W. J. Prezzano

W. J. Prezzano
    
    Chairman of the Board of Directors
    
    February 23, 2009/s/ Jeffrey A. Atkins

Jeffrey A. Atkins
    
    Director
    
    February 23, 2009/s/ J.P. Bolduc

J.P. Bolduc
    
    Director
    
    February 23, 2009
 58




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##### Table of Contents



Signature
    
    Capacity
    
    Date/s/ William R. Holland

William R. Holland
    
    Director
    
    February 23, 2009/s/ James W. Johnston

James W. Johnston
    
    Director
    
    February 23, 2009/s/ Dan C. Swander

Dan C. Swander
    
    Director
    
    February 23, 2009/s/ Isaiah Tidwell

Isaiah Tidwell
    
    Director
    
    February 23, 2009/s/ S. Lance Van Every

S. Lance Van Every
    
    Director
    
    February 23, 2009
 59