##### 



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 30, 2006
 OR
 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)
 8600 South Boulevard, Charlotte, North Carolina 28273
 Post Office Box 32368, Charlotte, North Carolina 28232
 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 LLCRights to Purchase $1 Par Value Series
A Junior Participating Preferred Stock
    
    The NASDAQ Stock Market LLC
 NONE
 Yes o No þ
 Yes o No þ
 Yes þ No o
 þ
 o þ o
 o o




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Documents Incorporated by Reference




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##### 



PART I
 Item 1. Business
 General
  Products
   Intellectual Property
   1




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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 performance
  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
  3




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Future product recalls or safety concerns could adversely impact our results of operations
  Any business disruption due to natural disasters catastrophic events could adversely impact our
financial performance
  Increases in prices of primary ingredients and other commodities could cause our costs to increase
  Food industry and regulatory factors could adversely affect our revenues and costs
  We are exposed to risks resulting from several large customers
  We are exposed to interest rate volatility, foreign exchange rate volatility and credit risks
  4




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##### 



Acquisitions and divestitures may result in financial results that are different than
expected
   Item 1B. Unresolved Staff Comments
  Item 2. Properties
    Item 3. Legal Proceedings
   5




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##### 



Item 4. Submission of Matters to a Vote of Security Holders
  Separate Item. Executive Officers of the Registrant
  Name
    
    Age
    
    Information About OfficerH. Dean Fields
    
    
    65
    
    
    Vice President of Lance, Inc. since 2002;
President of Vista Bakery, Inc. (subsidiary
of Lance, Inc.) since 1996Earl D. Leake
    
    
    55
    
    
    Senior Vice
President  Human Resources of
Lance, Inc. since February 2007; Vice
President  Human Resources of Lance, Inc.
since 1995Frank I. Lewis
    
    
    54
    
    
    Senior Vice
President  Sales of Lance,
Inc. since February 2007; Vice President 
Sales of Lance, Inc. since 2000Glenn A. Patcha
    
    
    43
    
    
    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 2003Rick D. Puckett
    
    
    53
    
    
    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; Vice President,
Chief Financial Officer and Treasurer of
United Natural Foods, Inc. from 2003 to
2005; and various executive positions at
Suntory Water Group, Inc, a bottled water
distribution company, including Chief
Financial Officer, Chief Information
Officer, Vice President, Corporate
Controller and Vice President Business
Development and Planning from 1998 to 2002David V. Singer
    
    
    51
    
    
    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 2005Blake W. Thompson
    
    
    51
    
    
    Senior Vice
President  Supply Chain of
Lance, Inc. since February 2007; Vice
President  Supply Chain of Lance, Inc.
since 2005; 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 2004Margaret E. Wicklund
    
    
    46
    
    
    Corporate Controller, Principal Accounting
Officer and Assistant Secretary of Lance,
Inc. since 1999
 6




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##### 



PART II
 Item 5. Market for the Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
   High
    
    Low
    
    Dividend2006 Interim Periods
    
    Price
    
    Price
    
    PaidFirst quarter (13 weeks ended April 1, 2006)
    
    $
    22.66
    
    
    $
    17.91
    
    
    $
    0.16Second quarter (13 weeks ended July 1, 2006)
    
    
    26.40
    
    
    
    21.22
    
    
    
    0.16Third quarter (13 weeks ended September 30, 2006)
    
    
    24.00
    
    
    
    20.50
    
    
    
    0.16Fourth quarter (13 weeks ended December 30, 2006)
    
    
    22.95
    
    
    
    18.35
    
    
    
    0.16
 High
    
    Low
    
    Dividend2005 Interim Periods
    
    Price
    
    Price
    
    PaidFirst quarter (13 weeks ended March 26, 2005)
    
    $
    19.53
    
    
    $
    14.02
    
    
    $
    0.16Second quarter (13 weeks ended June 25, 2005)
    
    
    19.00
    
    
    
    15.33
    
    
    
    0.16Third quarter (13 weeks ended September 24, 2005)
    
    
    18.94
    
    
    
    15.45
    
    
    
    0.16Fourth quarter (14 weeks ended December 31, 2005)
    
    
    19.12
    
    
    
    16.62
    
    
    
    0.16
   7




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##### 



Item 6. Selected Financial Data
  2006
    
    2005
    
    2004
    
    2003
    
    2002Results of Operations (in thousands):Net sales and other operating revenue
    
    $
    730,116
    
    
    $
    651,437
    
    
    $
    564,734
    
    
    $
    516,994
    
    
    $
    488,771Income from continuing operations
before income taxes
    
    
    28,187
    
    
    
    26,499
    
    
    
    33,298
    
    
    
    21,977
    
    
    
    23,813Net income from continuing operations
    
    
    18,378
    
    
    
    17,476
    
    
    
    22,627
    
    
    
    14,049
    
    
    
    15,126Income from discontinued operations
before income taxes
    
    
    153
    
    
    
    1,506
    
    
    
    3,276
    
    
    
    6,607
    
    
    
    7,535Net income from discontinued operations
    
    
    100
    
    
    
    994
    
    
    
    2,228
    
    
    
    4,229
    
    
    
    4,787Net income
    
    $
    18,478
    
    
    $
    18,470
    
    
    $
    24,855
    
    
    $
    18,278
    
    
    $
    19,913Average Number of Common
Shares Outstanding
(in thousands):Basic
    
    
    30,467
    
    
    
    29,807
    
    
    
    29,419
    
    
    
    29,015
    
    
    
    28,981Diluted
    
    
    30,844
    
    
    
    30,099
    
    
    
    29,732
    
    
    
    29,207
    
    
    
    29,231Per Share of Common Stock:Earnings per share from continuing
operations  basic
    
    $
    0.61
    
    
    $
    0.59
    
    
    $
    0.77
    
    
    $
    0.48
    
    
    $
    0.52Earnings per share from discontinued
operations  basic
    
    
    
    
    
    
    0.03
    
    
    
    0.07
    
    
    
    0.15
    
    
    
    0.17Earnings per share from continuing
operations  diluted
    
    
    0.60
    
    
    
    0.58
    
    
    
    0.77
    
    
    
    0.48
    
    
    
    0.52Earnings per share from discontinued
operations  diluted
    
    
    
    
    
    
    0.03
    
    
    
    0.07
    
    
    
    0.15
    
    
    
    0.16Cash dividends declared
    
    $
    0.64
    
    
    $
    0.64
    
    
    $
    0.64
    
    
    $
    0.64
    
    
    $
    0.64Financial Status at Year-end (in thousands):Total assets
    
    $
    385,452
    
    
    $
    369,079
    
    
    $
    341,740
    
    
    $
    323,647
    
    
    $
    305,865Long-term debt, net of current portion
    
    $
    50,000
    
    
    $
    10,215
    
    
    $
    
    
    
    $
    38,168
    
    
    $
    36,089Total debt
    
    $
    50,000
    
    
    $
    46,215
    
    
    $
    40,650
    
    
    $
    43,738
    
    
    $
    36,152
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
  8




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##### 



Executive Summary
   
    
    Consolidated Toms products and customers into our DSD system,
    
    Secured relationships with independent distributors outside of our DSD geography,
    
    Rationalized product offerings,
    
    Closed the Knoxville manufacturing operation and consolidated production at our other
manufacturing facilities,
    
    Established a cost effective distribution footprint that is closer to our customers by
installing kettle chip capacity in our Florida and Texas facilities and bringing production
of previously outsourced Don Pablos brand tortilla chips into existing facilities,
    
    Integrated the new facilities onto our existing computer systems, and
    
    Eliminated redundant functions within the combined entity.
  9




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##### 




    
    Organizational alignment,
    
    Supply chain efficiencies,
    
    Improved information technology systems, and
    
    Enhanced DSD operations.
      10




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Critical Accounting Policies
  Revenue Recognition
    11




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Insurance Reserves
  th
 12




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##### 



Accounts Receivable
    Accounts Receivable Balance
    
    # of CustomersLess than $1,000
    
    
    8,791$1,001 - $10,000
    
    
    1,922$10,001 - $100,000
    
    
    476$100,001 - $500,000
    
    
    58$500,001 - $1,000,000
    
    
    11$1,000,001 - $2,500,000
    
    
    7Greater than $2,500,000
    
    
    2
 13




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##### 



Goodwill and Other Intangible Assets
    Depreciation and Impairment of Property, Plant and Equipment
    14




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##### 



New Accounting Standards
     15




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##### 



Results of Operations
 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
    
    
    
    11.5Selling, marketing and delivery expenses
    
    
    240.1
    
    
    
    32.9
    
    
    
    216.1
    
    
    
    33.2
    
    
    
    (24.0
    )
    
    
    (11.1
    )General and administrative expenses
    
    
    42.9
    
    
    
    5.9
    
    
    
    37.6
    
    
    
    5.8
    
    
    
    (5.3
    )
    
    
    (14.1
    )Other expense/(income), net
    
    
    0.2
    
    
    
    
    
    
    
    (0.1
    )
    
    
    
    
    
    
    (0.3
    )
    
    
    (300.0
    )Earnings before interest and taxes
    
    
    31.3
    
    
    
    4.3
    
    
    
    28.5
    
    
    
    4.4
    
    
    
    2.8
    
    
    
    9.8Interest 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
    
    
    
    5.1Income from discontinued operations
    
    
    0.2
    
    
    
    
    
    
    
    1.5
    
    
    
    0.2
    
    
    
    (1.3
    )
    
    
    (86.7
    )Income tax expense
    
    
    0.1
    
    
    
    
    
    
    
    0.5
    
    
    
    0.1
    
    
    
    0.4
    
    
    
    80.0Net income from discontinued operations
    
    
    0.1
    
    
    
    
    
    
    
    1.0
    
    
    
    0.2
    
    
    
    (0.9
    )
    
    
    (90.0
    )Net income
    
    $
    18.5
    
    
    
    2.5
    %
    
    $
    18.5
    
    
    
    2.8
    %
    
    $
    
    
    
    
    
     16




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17




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##### 



Favorable/2005 Compared to 2004 (in millions)
    
    2005
    
    2004
    
    (Unfavorable)Revenue
    
    $
    651.4
    
    
    
    100.0
    %
    
    $
    564.7
    
    
    
    100.0
    %
    
    $
    86.7
    
    
    
    15.4
    %Cost of sales
    
    
    369.3
    
    
    
    56.7
    
    
    
    314.3
    
    
    
    55.7
    
    
    
    (55.0
    )
    
    
    (17.5
    )Gross margin
    
    
    282.1
    
    
    
    43.3
    
    
    
    250.4
    
    
    
    44.3
    
    
    
    31.7
    
    
    
    12.7Selling, marketing and delivery expenses
    
    
    216.1
    
    
    
    33.2
    
    
    
    184.4
    
    
    
    32.7
    
    
    
    (31.7
    )
    
    
    (17.2
    )General and administrative expenses
    
    
    37.6
    
    
    
    5.8
    
    
    
    30.8
    
    
    
    5.5
    
    
    
    (6.8
    )
    
    
    (22.1
    )Other income, net
    
    
    (0.1
    )
    
    
    
    
    
    
    (0.6
    )
    
    
    (0.1
    )
    
    
    (0.5
    )
    
    
    (83.3
    )Earnings before interest and taxes
    
    
    28.5
    
    
    
    4.4
    
    
    
    35.8
    
    
    
    6.3
    
    
    
    (7.3
    )
    
    
    (20.4
    )Interest expense, net
    
    
    2.0
    
    
    
    0.3
    
    
    
    2.5
    
    
    
    0.4
    
    
    
    0.5
    
    
    
    20.0Income tax expense
    
    
    9.0
    
    
    
    1.4
    
    
    
    10.7
    
    
    
    1.9
    
    
    
    1.7
    
    
    
    15.9Net income from continuing operations
    
    
    17.5
    
    
    
    2.7
    
    
    
    22.6
    
    
    
    4.0
    
    
    
    (5.1
    )
    
    
    (22.6
    )Income from discontinued operations
    
    
    1.5
    
    
    
    0.2
    
    
    
    3.3
    
    
    
    0.6
    
    
    
    (1.8
    )
    
    
    (54.5
    )Income tax expense
    
    
    0.5
    
    
    
    0.1
    
    
    
    1.0
    
    
    
    0.2
    
    
    
    0.5
    
    
    
    50.0Net income from discontinued operations
    
    
    1.0
    
    
    
    0.2
    
    
    
    2.3
    
    
    
    0.4
    
    
    
    (1.3
    )
    
    
    (56.5
    )Net income
    
    $
    18.5
    
    
    
    2.8
    %
    
    $
    24.9
    
    
    
    4.4
    %
    
    $
    (6.4
    )
    
    
    (25.7
    %)
      18




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Liquidity and Capital Resources
 Liquidity
  Cash Flow
   19




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##### 



Stock Repurchases
  Dividends
  Investing Activities
   Debt
   (in thousands)
    
    2006
    
    2005Unsecured revolving credit facility
    
    $
    
    
    
    $
    10,215Unsecured short-term revolving credit facility
    
    
    
    
    
    
    36,000Unsecured term loan due October 2011
    
    
    50,000
    
    
    
    Total debt
    
    
    50,000
    
    
    
    46,215Less current portion of long-term debt
    
    
    
    
    
    
    36,000Total long-term debt
    
    $
    50,000
    
    
    $
    10,215
  20




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##### 



Commitments and Contingencies
     Payments Due by Period(in thousands)
    
    Total
    
    < 1 year
    
    1-3 years
    
    3-5 years
    
    ThereafterDebt, including interest payable*
    
    $
    64,388
    
    
    $
    2,973
    
    
    $
    5,946
    
    
    $
    55,469
    
    
    $
    Operating lease obligations
    
    
    3,918
    
    
    
    2,116
    
    
    
    1,766
    
    
    
    36
    
    
    
    Purchase commitments
    
    
    52,722
    
    
    
    52,722
    
    
    
    
    
    
    
    
    
    
    
    Benefit obligations
    
    
    1,422
    
    
    
    191
    
    
    
    298
    
    
    
    183
    
    
    
    750Total contractual obligations
    
    $
    122,450
    
    
    $
    58,002
    
    
    $
    8,010
    
    
    $
    55,688
    
    
    $
    750
 *
    
    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.
 Forward-Looking Statements
   Item 7A.
    
    Quantitative and Qualitative Disclosure About Market Risk
  21




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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 30, 2006, December 31, 2005 and December 25, 2004
(in thousands, except share and per share data)
 2006
    
    2005
    
    2004Net sales and other operating revenue
    
    $
    730,116
    
    
    $
    651,437
    
    
    $
    564,734Cost of sales and operating expenses/(income):Cost of sales
    
    
    415,576
    
    
    
    369,331
    
    
    
    314,314Selling, marketing and delivery
    
    
    240,092
    
    
    
    216,054
    
    
    
    184,387General and administrative
    
    
    42,914
    
    
    
    37,605
    
    
    
    30,767Other expense/(income), net
    
    
    191
    
    
    
    (37
    )
    
    
    (546
    )Total cost and expenses
    
    
    698,773
    
    
    
    622,953
    
    
    
    528,922Income from continuing operations before interest
and income taxes
    
    
    31,343
    
    
    
    28,484
    
    
    
    35,812Interest expense, net
    
    
    3,156
    
    
    
    1,985
    
    
    
    2,514Income from continuing operations before income taxes
    
    
    28,187
    
    
    
    26,499
    
    
    
    33,298Income tax expense
    
    
    9,809
    
    
    
    9,023
    
    
    
    10,671Net income from continuing operations
    
    
    18,378
    
    
    
    17,476
    
    
    
    22,627Income from discontinued operations
    
    
    153
    
    
    
    1,506
    
    
    
    3,276Income tax expense
    
    
    53
    
    
    
    512
    
    
    
    1,048Net income from discontinued operations
    
    
    100
    
    
    
    994
    
    
    
    2,228Net income
    
    $
    18,478
    
    
    $
    18,470
    
    
    $
    24,855Basic earnings per share:Earnings per share from continuing operations
    
    $
    0.61
    
    
    $
    0.59
    
    
    $
    0.77Earnings per share from discontinued operations
    
    
    
    
    
    
    0.03
    
    
    
    0.07Basic earnings per share
    
    $
    0.61
    
    
    $
    0.62
    
    
    $
    0.84Weighted average shares outstanding  basic
    
    
    30,467,000
    
    
    
    29,807,000
    
    
    
    29,419,000Diluted earnings per share:Earnings per share from continuing operations
    
    $
    0.60
    
    
    $
    0.58
    
    
    $
    0.77Earnings per share from discontinued operations
    
    
    
    
    
    
    0.03
    
    
    
    0.07Diluted earnings per share
    
    $
    0.60
    
    
    $
    0.61
    
    
    $
    0.84Weighted average shares outstanding  diluted
    
    
    30,844,000
    
    
    
    30,099,000
    
    
    
    29,732,000
  24




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##### 



Consolidated Balance Sheets
 LANCE, INC. AND SUBSIDIARIES
December 30, 2006 and December 31, 2005
(in thousands, except share data)
 2006
    
    
    2005AssetsCurrent assetsCash and cash equivalents
    
    $
    5,504
    
    
    $
    3,543Accounts receivable (less allowance for doubtful accounts of $994 and $5,337, respectively)
    
    
    61,690
    
    
    
    59,088Inventories
    
    
    36,838
    
    
    
    36,409Deferred income taxes
    
    
    8,811
    
    
    
    10,160Assets held for sale
    
    
    6,552
    
    
    
    3,020Prepaid expenses and other current assets
    
    
    6,298
    
    
    
    7,405Total current assets
    
    
    125,693
    
    
    
    119,625Property, plant and equipment, net
    
    
    193,009
    
    
    
    186,093Goodwill, net
    
    
    49,091
    
    
    
    49,169Other intangible assets, net
    
    
    13,209
    
    
    
    10,704Other assets
    
    
    4,450
    
    
    
    3,488Total assets
    
    $
    385,452
    
    
    $
    369,079Liabilities and Stockholders EquityCurrent liabilitiesCurrent portion of long-term debt
    
    $
    
    
    
    $
    36,000Accounts payable
    
    
    18,194
    
    
    
    20,378Accrued compensation
    
    
    22,299
    
    
    
    23,270Accrued profit-sharing retirement plan
    
    
    5,192
    
    
    
    3,971Accrual for casualty insurance claims
    
    
    6,783
    
    
    
    7,500Accrual for medical insurance claims
    
    
    3,488
    
    
    
    4,190Accrued selling costs
    
    
    4,522
    
    
    
    4,628Other payables and accrued liabilities
    
    
    12,970
    
    
    
    16,113Total current liabilities
    
    
    73,448
    
    
    
    116,050Long-term debt
    
    
    50,000
    
    
    
    10,215Deferred income taxes
    
    
    26,562
    
    
    
    26,739Accrual for casualty insurance claims
    
    
    9,418
    
    
    
    8,227Other long-term liabilities
    
    
    3,624
    
    
    
    6,139Total liabilities
    
    
    163,052
    
    
    
    167,370Commitments and contingencies
Stockholders equityCommon stock, 30,855,891 and 29,808,705 shares outstanding,
respectively
    
    
    25,714
    
    
    
    24,841Preferred stock, no shares outstanding
    
    
    
    
    
    
    Additional paid-in capital
    
    
    32,129
    
    
    
    13,870Unamortized portion of restricted stock awards
    
    
    
    
    
    
    (2,490
    )Retained earnings
    
    
    159,329
    
    
    
    160,407Accumulated other comprehensive income
    
    
    5,228
    
    
    
    5,081Total stockholders equity
    
    
    222,400
    
    
    
    201,709Total liabilities and stockholders equity
    
    $
    385,452
    
    
    $
    369,079
  25




---



##### 



Consolidated Statements of Stockholders Equity and Comprehensive Income
 LANCE, INC. AND SUBSIDIARIES
For the Fiscal Years Ended December 30, 2006, December 31, 2005, and December 25, 2004
(in thousands, except share data)
 Unamortized
    
    
    
    
    
    AccumulatedAdditional
    
    Portion of
    
    
    
    
    
    OtherCommon
    
    Paid-in
    
    Restricted
    
    Retained
    
    ComprehensiveShares
    
    Stock
    
    Capital
    
    Stock Awards
    
    Earnings
    
    Income
    
    TotalBalance, December 27, 2003
    
    
    29,156,957
    
    
    $
    24,296
    
    
    $
    3,690
    
    
    $
    (1,116
    )
    
    $
    155,007
    
    
    $
    723
    
    
    $
    182,600Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,855
    
    
    
    
    
    
    
    24,855Unrealized gain on interest rate
swap, net of tax effect of $269
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    456
    
    
    
    456Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    789
    
    
    
    789Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,100Cash dividends paid to stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,869
    )
    
    
    
    
    
    
    (18,869
    )Stock options exercised
    
    
    601,889
    
    
    
    501
    
    
    
    7,856
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,357Cancellation, issuance and
amortization of restricted stock
    
    
    (11,250
    )
    
    
    (9
    )
    
    
    (46
    )
    
    
    582
    
    
    
    
    
    
    
    
    
    
    
    527Balance, December 25, 2004
    
    
    29,747,596
    
    
    $
    24,788
    
    
    $
    11,500
    
    
    $
    (534
    )
    
    $
    160,993
    
    
    $
    1,968
    
    
    $
    198,715Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,470
    
    
    
    
    
    
    
    18,470Unrealized gain on interest rate
swap, net of tax effect of $232
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    394
    
    
    
    394Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,719
    
    
    
    2,719Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,583Cash dividends paid to stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,056
    )
    
    
    
    
    
    
    (19,056
    )Repurchase of common stock
    
    
    (304,236
    )
    
    
    (253
    )
    
    
    (4,907
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,160
    )Stock options exercised
    
    
    373,970
    
    
    
    311
    
    
    
    4,825
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,136Cancellation, issuance and
amortization of restricted stock
    
    
    (8,625
    )
    
    
    (5
    )
    
    
    2,452
    
    
    
    (1,956
    )
    
    
    
    
    
    
    
    
    
    
    491Balance, December 31, 2005
    
    
    29,808,705
    
    
    $
    24,841
    
    
    $
    13,870
    
    
    $
    (2,490
    )
    
    $
    160,407
    
    
    $
    5,081
    
    
    $
    201,709Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,478
    
    
    
    
    
    
    
    18,478Net unrealized losses on
derivative instruments, net
of tax effect of $106
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (193
    )
    
    
    (193
    )Adoption of SFAS 158, net of
tax effect of $167
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    313
    
    
    
    313Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27
    
    
    
    27Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,625Cash dividends paid to
Stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,556
    )
    
    
    
    
    
    
    (19,556
    )Stock based compensation
expense
    
    
    
    
    
    
    
    
    
    
    (1,159
    )
    
    
    2,490
    
    
    
    
    
    
    
    
    
    
    
    1,331Conversion of liability to equity
instrument
    
    
    
    
    
    
    
    
    
    
    634
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    634Stock options exercised, including
tax benefit of $3,223
    
    
    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
    
    
    $
    222,400
  26




---



##### 



Consolidated Statements of Cash Flows
 LANCE, INC. AND SUBSIDIARIES
For the Fiscal Years Ended December 30, 2006, December 31, 2005 and December 25, 2004
(in thousands)
 2006
    
    
    2005
    
    
    2004Operating activities:Net income
    
    $
    18,478
    
    
    $
    18,470
    
    
    $
    24,855Adjustments to reconcile net income to cash
from operating activities:Depreciation and amortization
    
    
    26,897
    
    
    
    28,539
    
    
    
    28,641Stock based compensation expense
    
    
    1,331
    
    
    
    
    
    
    
    Loss (gain) on sale of property, net
    
    
    591
    
    
    
    467
    
    
    
    (812
    )Deferred income taxes
    
    
    1,182
    
    
    
    (3,518
    )
    
    
    1,438Imputed interest on deferred notes
    
    
    
    
    
    
    
    
    
    
    97Changes in assets and liabilities, excluding the effects of
business acquisitions:Accounts receivable
    
    
    (2,683
    )
    
    
    (1,450
    )
    
    
    (4,369
    )Inventory
    
    
    246
    
    
    
    (4,371
    )
    
    
    541Prepaid expenses and other current assets
    
    
    1,695
    
    
    
    869
    
    
    
    712Accounts payable
    
    
    (2,108
    )
    
    
    748
    
    
    
    4,262Accrued income taxes
    
    
    (1,311
    )
    
    
    (74
    )
    
    
    2,240Accrued compensation
    
    
    (611
    )
    
    
    2,377
    
    
    
    2,550Accrued insurance claims
    
    
    474
    
    
    
    1,241
    
    
    
    430Other payables and accrued liabilities
    
    
    (1,727
    )
    
    
    5,343
    
    
    
    (545
    )Other noncurrent assets
    
    
    (963
    )
    
    
    (436
    )
    
    
    Other noncurrent liabilities
    
    
    (2,394
    )
    
    
    (1,088
    )
    
    
    527Net cash flow from operating activities
    
    
    39,097
    
    
    
    47,117
    
    
    
    60,567Investing activities:Purchases of property and equipment
    
    
    (46,965
    )
    
    
    (27,624
    )
    
    
    (28,961
    )Acquisitions of businesses, net of cash acquired
    
    
    
    
    
    
    (43,797
    )
    
    
    Proceeds from sale of property
    
    
    7,340
    
    
    
    1,449
    
    
    
    1,591Net cash used in investing activities
    
    
    (39,625
    )
    
    
    (69,972
    )
    
    
    (27,370
    )Financing activities:Dividends paid
    
    
    (19,556
    )
    
    
    (19,056
    )
    
    
    (18,869
    )Issuances of common stock
    
    
    18,128
    
    
    
    4,353
    
    
    
    7,380Repayments of debt
    
    
    
    
    
    
    (41,237
    )
    
    
    (5,649
    )Net repayments under revolving credit facilities
    
    
    (46,238
    )
    
    
    (7,500
    )
    
    
    Proceeds from debt
    
    
    50,000
    
    
    
    53,715
    
    
    
    Repurchase of common stock
    
    
    
    
    
    
    (5,160
    )
    
    
    Net cash from (used in) financing activities
    
    
    2,334
    
    
    
    (14,885
    )
    
    
    (17,138
    )Effect of exchange rate changes on cash
    
    
    155
    
    
    
    (183
    )
    
    
    (72
    )Increase (decrease) in cash and cash equivalents
    
    
    1,961
    
    
    
    (37,923
    )
    
    
    15,987Cash and cash equivalents at beginning of fiscal year
    
    
    3,543
    
    
    
    41,466
    
    
    
    25,479Cash and cash equivalents at end of fiscal year
    
    $
    5,504
    
    
    $
    3,543
    
    
    $
    41,466Supplemental information:Cash paid
for income taxes, net of refunds of $165, $611 and $1,564, respectively
    
    $
    6,679
    
    
    $
    13,581
    
    
    $
    8,120Cash paid for interest
    
    $
    3,471
    
    
    $
    2,018
    
    
    $
    2,419Stock option exercise tax benefit included in operating activities
    
    
    
    
    
    $
    783
    
    
    $
    977
  27




---



##### 



Notes to Consolidated Financial Statements
 LANCE, INC. AND SUBSIDIARIES
December 30, 2006 and December 31, 2005
 
 NOTE 1. OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Operations
  Principles of Consolidation
  Reclassifications
  Revenue Recognition
  Fiscal Year
  28




---



##### 



Use of Estimates
  Fair Value of Financial Instruments
  Cash and Cash Equivalents
   Inventories
   Property, Plant and Equipment
  29




---



##### 



Useful LifeBuildings
    
    45 yearsLand and building improvements
    
    20-45 yearsMachinery and equipment
    
    3-20 yearsFurniture and fixtures
    
    5-12 yearsVending machines
    
    8-12 yearsTrucks and automobiles
    
    3-10 years
  Goodwill and Other Intangible Assets
    Income Taxes
  30




---



##### 



Insurance Reserves
   th
 Derivative Financial Instruments
  Foreign Currency Translation
  31




---



##### 



Stock Compensation Plans
    (in thousands, except per share data)
    
    2005
    
    2004Net income as reported
    
    $
    18,470
    
    
    $
    24,855Earnings per share as reported  basic
    
    
    0.62
    
    
    
    0.84Earnings per share as reported  diluted
    
    
    0.61
    
    
    
    0.84Additional stock based compensation costs, net of
income tax, that would have been included in net
income if the fair value method had been applied
    
    
    160
    
    
    
    320Pro-forma net income
    
    
    18,310
    
    
    
    24,535Pro-forma earnings per share  basic
    
    
    0.61
    
    
    
    0.83Pro-forma earnings per share  diluted
    
    $
    0.61
    
    
    $
    0.83
  32




---



##### 



Earnings Per Share
   Advertising and Consumer Promotion Costs
  Shipping and Handling Costs
  Concentration of Credit Risk
  Other Charges
  33




---



##### 



New Accounting Standards
     NOTE 2. DISCONTINUED OPERATIONS
  34




---



##### 



(in millions)
    
    2006
    
    2005
    
    2004Revenue
    
    $
    17.8
    
    
    $
    27.8
    
    
    $
    35.7Pre-tax income
    
    $
    0.2
    
    
    $
    1.5
    
    
    $
    3.3
 NOTE 3. ACQUISITIONS
     Final Purchase(in millions)
    
    PriceCash
    
    $
    1.3Current assets, including assets held for sale
    
    
    30.9Property, plant and equipment
    
    
    15.4Intangible assets
    
    
    5.7Current liabilities
    
    
    (12.2
    )Purchase price
    
    
    41.1Cash acquired
    
    
    (1.3
    )Purchase price, net of cash acquired
    
    $
    39.8
  35




---



##### 



NOTE 4. INVENTORIES
  (in thousands)
    
    2006
    
    2005Finished goods
    
    $
    18,630
    
    
    $
    22,658Raw materials
    
    
    7,968
    
    
    
    7,630Supplies, etc.
    
    
    14,077
    
    
    
    11,041Total inventories at FIFO cost
    
    
    40,675
    
    
    
    41,329Less: adjustment to reduce FIFO cost to LIFO cost
    
    
    (3,837
    )
    
    
    (4,920
    )Total inventories
    
    $
    36,838
    
    
    $
    36,409
 NOTE 5. PROPERTY, PLANT AND EQUIPMENT
  (in thousands)
    
    2006
    
    2005Land and land improvements
    
    $
    14,764
    
    
    $
    15,199Buildings
    
    
    83,409
    
    
    
    85,061Machinery, equipment and systems
    
    
    278,444
    
    
    
    263,175Vending machines
    
    
    19,167
    
    
    
    40,853Trucks and automobiles
    
    
    58,198
    
    
    
    50,734Furniture and fixtures
    
    
    2,065
    
    
    
    2,479Construction in progress
    
    
    8,870
    
    
    
    3,712464,917
    
    
    
    461,213Accumulated depreciation and amortization
    
    
    (265,356
    )
    
    
    (272,100
    )$
    199,561
    
    
    $
    189,113Assets held for sale
    
    
    (6,552
    )
    
    
    (3,020
    )Property, plant and equipment, net
    
    $
    193,009
    
    
    $
    186,093
    36




---



##### 



NOTE 6. GOODWILL AND OTHER INTANGIBLE ASSETS
  (in thousands)
    
    Carrying AmountBalance as of December 31, 2005
    
    $
    49,169Changes in foreign currency exchange rates
    
    
    (78
    )Balance as of December 30, 2006
    
    $
    49,091
  GrossCarrying
    
    Accumulated
    
    Net(in thousands)
    
    Amount
    
    Amortization
    
    Carrying AmountAs of December 30, 2006:Customer relationships  amortized
    
    $
    378
    
    
    $
    (44
    )
    
    $
    334Trademarks  unamortized
    
    
    12,875
    
    
    
    
    
    
    
    12,875Total other intangible assets as of December 30, 2006
    
    $
    13,253
    
    
    $
    (44
    )
    
    $
    13,209As of December 31, 2005:Customer relationships  amortized
    
    $
    790
    
    
    $
    (26
    )
    
    $
    764Trademarks  unamortized
    
    
    9,940
    
    
    
    
    
    
    
    9,940Total other intangible assets as of December 31, 2005
    
    $
    10,730
    
    
    $
    (26
    )
    
    $
    10,704
   NOTE 7. LONG-TERM DEBT
  (in thousands)
    
    2006
    
    2005Unsecured revolving credit facility
    
    $
    
    
    
    $
    10,215Unsecured short-term revolving credit facility
    
    
    
    
    
    
    36,000Unsecured term loan due October 2011
    
    
    50,000
    
    
    
    Total debt
    
    
    50,000
    
    
    
    46,215Less current portion of long-term debt
    
    
    
    
    
    
    36,000Total long-term debt
    
    $
    50,000
    
    
    $
    10,215
 37




---



##### 



NOTE 8. DERIVATIVE INSTRUMENTS
   38




---



##### 



NOTE 9. INCOME TAXES
  (in thousands)
    
    2006
    
    2005
    
    2004Current:Federal
    
    $
    8,517
    
    
    $
    12,833
    
    
    $
    9,770State and other
    
    
    671
    
    
    
    855
    
    
    
    512Foreign
    
    
    (523
    )
    
    
    (512
    )
    
    
    (160
    )8,665
    
    
    
    13,176
    
    
    
    10,122Deferred:Federal
    
    
    838
    
    
    
    (3,957
    )
    
    
    2,546State and other
    
    
    112
    
    
    
    90
    
    
    
    (477
    )Foreign
    
    
    247
    
    
    
    226
    
    
    
    (472
    )1,197
    
    
    
    (3,641
    )
    
    
    1,597Total income tax expense
    
    $
    9,862
    
    
    $
    9,535
    
    
    $
    11,719
  2006
    
    2005
    
    2004Statutory income tax rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %State and local income taxes, net of federal
income tax benefit
    
    
    2.0
    
    
    
    1.2
    
    
    
    1.2Net favorable foreign income taxes as a result
of tax adjustments and tax rate differences
    
    
    (2.5
    )
    
    
    (2.6
    )
    
    
    (1.4
    )Resolution of foreign and state income tax claims
    
    
    
    
    
    
    
    
    
    
    (1.8
    )Changes in deferred taxes for effective state rate changes
    
    
    (0.1
    )
    
    
    1.1
    
    
    
    (0.4
    )Miscellaneous items, net
    
    
    0.4
    
    
    
    (0.7
    )
    
    
    (0.6
    )Effective income tax rate
    
    
    34.8
    %
    
    
    34.0
    %
    
    
    32.0
    %
 39




---



##### 



(in thousands)
    
    2006
    
    2005Deferred tax assets:Reserves for employee compensation, deductible when paid for
income tax purposes, accrued for financial reporting purposes
    
    $
    5,380
    
    
    $
    5,199Reserves for insurance claims, deductible when paid for income tax
purposes, accrued for financial reporting purposes
    
    
    5,885
    
    
    
    6,392Other reserves deductible when paid for income tax purposes,
accrued for financial reporting purposes
    
    
    2,810
    
    
    
    4,291Unrealized losses deductible when realized for income tax purposes,
included in other comprehensive income
    
    
    106
    
    
    
    Inventories, principally due to additional costs capitalized for
income tax purposes
    
    
    1,400
    
    
    
    983Unrealized capital loss deductible when realized for income taxes,
accrued for financial reporting purposes
    
    
    192
    
    
    
    192Net state and foreign operating loss carryforwards (expiring
beginning 2011)
    
    
    1,145
    
    
    
    341Total gross deferred tax assets
    
    
    16,918
    
    
    
    17,398Less valuation allowance
    
    
    (417
    )
    
    
    (460
    )Net deferred tax assets
    
    
    16,501
    
    
    
    16,938Deferred tax liabilities:Property, plant and equipment, principally due to
differences in depreciation, net of impairment reserves
    
    
    (29,847
    )
    
    
    (29,098
    )Trademark amortization
    
    
    (2,885
    )
    
    
    (2,971
    )Unrealized gains includible when realized for income tax purposes,
included in other comprehensive income
    
    
    (167
    )
    
    
    Prepaid expenses and other costs deductible for tax, amortized
for financial statement purposes.
    
    
    (1,353
    )
    
    
    (1,448
    )Total gross deferred tax liabilities
    
    
    (34,252
    )
    
    
    (33,517
    )Total net deferred tax liabilities
    
    $
    (17,751
    )
    
    $
    (16,579
    )
   40




---



##### 



NOTE 10. POST-RETIREMENT BENEFITS PLANS
    (in thousands)
    
    2006
    
    2005
    
    2004Change in benefit obligation:Benefit obligation at beginning of year
    
    $
    1,189
    
    
    $
    2,123
    
    
    $
    2,471Service cost
    
    
    
    
    
    
    42
    
    
    
    92Interest cost
    
    
    18
    
    
    
    72
    
    
    
    136Plan participants contributions
    
    
    386
    
    
    
    400
    
    
    
    389Actuarial gain
    
    
    (290
    )
    
    
    (464
    )
    
    
    (131
    )Benefits paid
    
    
    (871
    )
    
    
    (984
    )
    
    
    (834
    )Benefit obligation at end of year
    
    
    432
    
    
    
    1,189
    
    
    
    2,123Funded status
    
    
    (432
    )
    
    
    (1,189
    )
    
    
    (2,123
    )Unrecognized net actuarial gain
    
    
    
    
    
    
    (1,522
    )
    
    
    (1,751
    )Net amount recognized
    
    $
    (432
    )
    
    
    (2,711
    )
    
    
    (3,874
    )Unrecognized net actuarial gain included
in accumulated other comprehensive income
    
    $
    480
    
    
    
    
    
    
    
    Components of net periodic benefit cost:Service cost
    
    
    
    
    
    
    42
    
    
    
    92Interest cost
    
    
    18
    
    
    
    72
    
    
    
    136Recognition of prior service costs
    
    
    
    
    
    
    
    
    
    
    (250
    )Recognized net gain
    
    
    (1,331
    )
    
    
    (693
    )
    
    
    (915
    )Net periodic benefit
    
    $
    (1,313
    )
    
    $
    (579
    )
    
    $
    (937
    )Weighted average discount rates used in
determining accumulated post-retirement
benefit obligation:Beginning of year
    
    
    4.95
    %
    
    
    3.75
    %
    
    
    6.00
    %End of year
    
    
    5.30
    %
    
    
    4.95
    %
    
    
    3.75
    %
 41




---



##### 



Expected(in thousands)
    
    Benefit Payments2007
    
    $
    2412008
    
    $
    1422009
    
    $
    502010
    
    $
    272011 and thereafter
    
    $
    
  NOTE 11. STOCK-BASED COMPENSATION
  42




---



##### 



Employee
Stock Purchase Plan
  Employee
Stock Options
  43




---



##### 



OutstandingOptions
    
    Weighted Average
    
    OptionsOutstanding
    
    Exercise Price
    
    ExercisableBalance at December 27, 2003
    
    
    2,959,800
    
    
    $
    13.20
    
    
    
    1,695,038Granted
    
    
    161,850
    
    
    
    17.15Exercised
    
    
    (570,389
    )
    
    
    12.23Expired/Forfeited
    
    
    (212,974
    )
    
    
    14.02Balance at December 25, 2004
    
    
    2,338,287
    
    
    
    13.61
    
    
    
    1,472,298Granted
    
    
    18,800
    
    
    
    15.84Exercised
    
    
    (390,794
    )
    
    
    11.86Expired/Forfeited
    
    
    (136,001
    )
    
    
    13.78Balance at December 31, 2005
    
    
    1,830,292
    
    
    
    13.99
    
    
    
    1,396,698Granted
    
    
    108,652
    
    
    
    19.97Exercised
    
    
    (1,006,261
    )
    
    
    14.59Expired/Forfeited
    
    
    (15,199
    )
    
    
    11.59Balance at December 30, 2006
    
    
    917,484
    
    
    $
    14.08
    
    
    
    629,300Weighted average contractual term
    
    5.2 years
    
    
    
    
    
    4.0 yearsAggregate
intrinsic value
    
    $5.5 million
    
    
    
    
    
    $4.0 million
  2006
    
    2005
    
    2004Assumptions used in Black Scholes pricing model:Expected dividend yield
    
    
    3.21
    %
    
    
    3.52
    %
    
    
    5.19
    %Risk-free interest rate
    
    
    4.54
    %
    
    
    4.39
    %
    
    
    3.86
    %Weighted average expected life
    
    6.5 years
    
    6.5 years
    
    6.5 yearsExpected volatility
    
    
    31.20
    %
    
    
    31.20
    %
    
    
    33.45
    %Weighted average fair value per share of options granted
    
    $
    5.50
    
    
    $
    4.75
    
    
    $
    3.69
 Employee
Restricted Stock and Restricted Stock Unit Awards
   44




---



##### 



Weighted AverageRestricted Stock
    
    Grant Date FairAwards Outstanding
    
    ValueBalance at December 31, 2005
    
    
    184,875
    
    
    
    16.77Granted
    
    
    331,000
    
    
    
    15.18Re-designated
    
    
    150,000
    
    
    
    24.41Exercised
    
    
    (14,750
    )
    
    
    7.65Expired/Forfeited
    
    
    (575
    )
    
    
    7.65Balance at December 30, 2006
    
    
    650,550
    
    
    $
    17.69
  Non-Employee Director Stock Option Plan
  Options
    
    Weighted Average
    
    OptionsOutstanding
    
    Exercise Price
    
    ExercisableBalance at December 27, 2003
    
    
    201,500
    
    
    $
    15.56
    
    
    
    201,500Granted
    
    
    
    
    
    
    Exercised
    
    
    (31,500
    )
    
    
    13.05Expired/Forfeited
    
    
    (15,500
    )
    
    
    18.15Balance at December 25, 2004
    
    
    154,500
    
    
    
    15.81
    
    
    
    154,500Granted
    
    
    
    
    
    
    Exercised
    
    
    (2,000
    )
    
    
    15.76Expired/Forfeited
    
    
    (12,500
    )
    
    
    17.50Balance at December 31, 2005
    
    
    140,000
    
    
    
    15.67
    
    
    
    140,000Granted
    
    
    
    
    
    
    Exercised
    
    
    (12,500
    )
    
    
    17.66Expired/Forfeited
    
    
    (33,000
    )
    
    
    16.37Balance at December 30, 2006
    
    
    94,500
    
    
    $
    15.16
    
    
    
    94,500
 Non-Employee Director Restricted Stock Awards
  45




---



##### 



Long Term Incentive Plans
    NOTE 12. OTHER COMMITMENTS AND CONTINGENCIES
    (in thousands)
    
    Amount2007
    
    $
    2,1162008
    
    
    1,7662009
    
    
    36Total operating lease commitments
    
    $
    3,918
 46




---



##### 



NOTE 13. STOCKHOLDERS EQUITY
 Capital Stock
  Stockholder Rights Plan
   47




---



##### 



Other Comprehensive Income
  (in thousand)
    
    2006
    
    2005Foreign currency translation adjustment
    
    $
    5,108
    
    
    $
    5,081Adoption of SFAS 158, net of tax
    
    
    313
    
    
    
    Net unrealized losses on derivative instruments, net of tax
    
    
    (193
    )
    
    
    Total accumulated other comprehensive income
    
    $
    5,228
    
    
    $
    5,081
  48




---



##### 



NOTE 14. INTERIM FINANCIAL INFORMATION (UNAUDITED)
  2006 Interim Period EndedApril 1
    
    July 1
    
    September 30
    
    December 30(13 Weeks)
    
    (13 Weeks)
    
    (13 Weeks)
    
    (13 Weeks)Net sales and other operating revenues
    
    $
    180,745
    
    
    $
    188,341
    
    
    $
    188,628
    
    
    $
    172,402Cost of sales
    
    
    104,866
    
    
    
    105,660
    
    
    
    106,768
    
    
    
    98,282Selling, marketing and delivery
    
    
    65,045
    
    
    
    60,285
    
    
    
    60,571
    
    
    
    54,191General and administrative
    
    
    11,458
    
    
    
    11,771
    
    
    
    9,296
    
    
    
    10,389Other expense/(income), net
    
    
    162
    
    
    
    517
    
    
    
    (243
    )
    
    
    (245
    )(Loss)/income from continuing operations
before interest and taxes
    
    
    (786
    )
    
    
    10,108
    
    
    
    12,236
    
    
    
    9,785Interest expense, net
    
    
    669
    
    
    
    828
    
    
    
    901
    
    
    
    758(Loss)/income from continuing operations before taxes
    
    
    (1,455
    )
    
    
    9,280
    
    
    
    11,335
    
    
    
    9,027Income tax (benefit)/expense
    
    
    (531
    )
    
    
    3,386
    
    
    
    3,940
    
    
    
    3,014Net (loss)/income from continuing operations
    
    
    (924
    )
    
    
    5,894
    
    
    
    7,395
    
    
    
    6,013Income/(loss) from discontinued operations
    
    
    250
    
    
    
    418
    
    
    
    129
    
    
    
    (644
    )Income tax expense/(benefit)
    
    
    91
    
    
    
    153
    
    
    
    45
    
    
    
    (236
    )Net income/(loss) from discontinued operations
    
    
    159
    
    
    
    265
    
    
    
    84
    
    
    
    (408
    )Net (loss)/income
    
    $
    (765
    )
    
    $
    6,159
    
    
    $
    7,479
    
    
    $
    5,605From continuing operations:Net (loss)/income per common share  basic
    
    $
    (0.03
    )
    
    $
    0.19
    
    
    $
    0.24
    
    
    $
    0.19Net (loss)/income per common share  diluted
    
    
    (0.03
    )
    
    
    0.19
    
    
    
    0.24
    
    
    
    0.19From 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
 2005 Interim Period EndedMarch 26
    
    June 25
    
    September 24
    
    December 31(13 Weeks)
    
    (13 Weeks)
    
    (13 Weeks)
    
    (14 Weeks)Net sales and other operating revenues
    
    $
    138,592
    
    
    $
    159,832
    
    
    $
    166,173
    
    
    $
    186,840Cost of sales
    
    
    77,311
    
    
    
    88,029
    
    
    
    94,632
    
    
    
    109,359Selling, marketing and delivery
    
    
    48,415
    
    
    
    51,602
    
    
    
    52,138
    
    
    
    63,899General and administrative
    
    
    7,872
    
    
    
    11,384
    
    
    
    7,668
    
    
    
    10,681Other expense/(income), net
    
    
    14
    
    
    
    66
    
    
    
    (246
    )
    
    
    129Income from continuing operations before
interest and taxes
    
    
    4,980
    
    
    
    8,751
    
    
    
    11,981
    
    
    
    2,772Interest expense, net
    
    
    543
    
    
    
    550
    
    
    
    358
    
    
    
    534Income from continuing operations before taxes
    
    
    4,437
    
    
    
    8,201
    
    
    
    11,623
    
    
    
    2,238Income tax expense
    
    
    1,545
    
    
    
    2,981
    
    
    
    3,917
    
    
    
    580Net income from continuing operations
    
    
    2,892
    
    
    
    5,220
    
    
    
    7,706
    
    
    
    1,658Income/(loss) from discontinued operations
    
    
    580
    
    
    
    654
    
    
    
    480
    
    
    
    (208
    )Income tax expense/(benefit)
    
    
    202
    
    
    
    238
    
    
    
    162
    
    
    
    (90
    )Net income/(loss) from discontinued operations
    
    
    378
    
    
    
    416
    
    
    
    318
    
    
    
    (118
    )Net Income
    
    $
    3,270
    
    
    $
    5,636
    
    
    $
    8,024
    
    
    $
    1,540From continuing operations:Net income per common share  basic
    
    $
    0.10
    
    
    $
    0.18
    
    
    $
    0.26
    
    
    $
    0.05Net income per common share  diluted
    
    
    0.10
    
    
    
    0.18
    
    
    
    0.26
    
    
    
    0.05From discontinued operations:Net income per common share  basic
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01
    
    
    
    Net income per common share  diluted
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01
    
    
    
    Dividends declared per common share
    
    $
    0.16
    
    
    $
    0.16
    
    
    $
    0.16
    
    
    $
    0.16
 49




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      
 
 50




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      51




---



##### 



52




---



##### 



MANAGEMENTS REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING
        53




---



##### 



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  Item 9A. Controls and Procedures
    Item 9B. Other Information
  PART III
  54




---



##### 



Item 10. Directors and Executive Officers of the Registrant
   55




---



##### 



PART IV
 Item 15. Exhibits and Financial Statement Schedules
 (a) 1.
    
    Financial Statements.The following financial statements are filed as part of this report:
 PageConsolidated Statements of Income for the Fiscal Years Ended December 30,
2006, December 31, 2005 and December 25, 2004
    
    
    24Consolidated Balance Sheets as of December 30, 2006 and December 31, 2005
    
    
    25Consolidated Statements of Stockholders Equity and Comprehensive Income
for the Fiscal Years Ended December 30, 2006, December 31, 2005 and
December 25, 2004
    
    
    26Consolidated Statements of Cash Flows for the Fiscal Years Ended December 30,
2006, December 31, 2005 and December 25, 2004
    
    
    27Notes to Consolidated Financial Statements
    
    
    28Reports of Independent Registered Public Accounting Firm
    
    
    50
 56




---



##### 



57




---



##### 



58




---



##### 



59




---



##### 



*
    
    Management contract. 60




---



##### 



LANCE, INC.Dated: March 8, 2007
    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)
    
    March 8, 2007/s/
Rick D. Puckett 

Rick D. Puckett
    
    Executive Vice President, Chief
Financial Officer, Treasurer and
Secretary (Principal Financial
Officer)
    
    March 8, 2007/s/
Margaret E. Wicklund 

Margaret E. Wicklund
    
    Corporate Controller and Assistant
Secretary (Principal Accounting
Officer)
    
    March 8, 2007/s/
W. J. Prezzano 

W. J. Prezzano
    
    Chairman of the Board of Directors
    
    March 8, 2007/s/
Barbara R. Allen 

Barbara R. Allen
    
    Director
    
    March 8, 2007/s/
Jeffrey A. Atkins 

Jeffrey A. Atkins
    
    Director
    
    March 8, 2007
 61




---



##### 



Signature
    
    Capacity
    
    Date/s/
J.P. Bolduc
J.P. Bolduc
    
    Director
    
    March 8, 2007/s/
William R. Holland
William R. Holland
    
    Director
    
    March 8, 2007/s/
Robert V. Sisk
Robert V. Sisk
    
    Director
    
    March 8, 2007/s/
Dan C. Swander
Dan C. Swander
    
    Director
    
    March 8, 2007/s/
Isaiah Tidwell
Isaiah Tidwell
    
    Director
    
    March 8, 2007S. Lance Van Every
    
    Director
 62