##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
 For the quarter ended June 28, 2008
 Commission File Number 0-398
 LANCE, INC.
 (Exact name of registrant as specified in its charter)
 North Carolina(State or other jurisdiction of 
incorporation or organization)
    
    56-0292920(I.R.S. Employer Identification No.)14120 Ballantyne Corporate Place 
Suite 350
Charlotte, North Carolina(Address of principal executive offices)
    
    28277(Zip Code)
 (Registrants telephone number, including area code)
  þ o
  Large accelerated filer þAccelerated filer oNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company o  o þ




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LANCE, INC. AND SUBSIDIARIES
 INDEX
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Statements of Income (Unaudited) Quarters and Six Months Ended June
28, 2008 and June 30, 2007
    
    
    3Condensed Consolidated Balance Sheets  June 28, 2008 (Unaudited) and December 29, 2007
    
    
    4Condensed Consolidated Statements of Stockholders Equity and Comprehensive Income
(Unaudited)  Six Months Ended June 28, 2008 and June 30, 2007
    
    
    5Condensed Consolidated Statements of Cash Flows (Unaudited)  Six Months Ended June 28, 2008
and June 30, 2007
    
    
    6Notes to the Condensed Consolidated Financial Statements (Unaudited)
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    10Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    14Item 4. Controls and Procedures
    
    
    14PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    15Item 1A. Risk Factors
    
    
    15Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    15Item 4. Submission of Matters to a Vote of Security Holders
    
    
    15Item 6. Exhibits
    
    
    16SIGNATURE
    
    
    17Exhibit 10.2Exhibit 10.3Exhibit 10.4Exhibit 10.5Exhibit 10.6Exhibit 31.1Exhibit 31.2Exhibit 32
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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 LANCE, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Income (Unaudited)
For the Quarters and Six Months Ended June 28, 2008 and June 30, 2007
 Quarter Ended
    
    
    Six Months EndedJune 28,
    
    
    June 30,
    
    
    June 28,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net sales and other operating revenue
    
    $
    213,614
    
    
    $
    197,036
    
    
    $
    411,582
    
    
    $
    379,463Cost of sales and operating expenses:Cost of sales
    
    
    133,691
    
    
    
    109,435
    
    
    
    257,152
    
    
    
    212,412Selling, general and administrative
    
    
    74,568
    
    
    
    71,467
    
    
    
    147,425
    
    
    
    141,082Other expense, net
    
    
    161
    
    
    
    973
    
    
    
    157
    
    
    
    884Total costs and expenses
    
    
    208,420
    
    
    
    181,875
    
    
    
    404,734
    
    
    
    354,378Income from continuing operations
before interest and income taxes
    
    
    5,194
    
    
    
    15,161
    
    
    
    6,848
    
    
    
    25,085Interest expense, net
    
    
    860
    
    
    
    615
    
    
    
    1,465
    
    
    
    1,219Income from continuing operations
before income taxes
    
    
    4,334
    
    
    
    14,546
    
    
    
    5,383
    
    
    
    23,866Income tax expense
    
    
    1,626
    
    
    
    5,277
    
    
    
    2,030
    
    
    
    8,725Net income from continuing operations
    
    
    2,708
    
    
    
    9,269
    
    
    
    3,353
    
    
    
    15,141(Loss)/income from discontinued operations
    
    
    
    
    
    
    (346
    )
    
    
    
    
    
    
    190Income tax (benefit)/expense
    
    
    
    
    
    
    (129
    )
    
    
    
    
    
    
    69Net (loss)/income from discontinued operations
    
    
    
    
    
    
    (217
    )
    
    
    
    
    
    
    121Net income
    
    $
    2,708
    
    
    $
    9,052
    
    
    $
    3,353
    
    
    $
    15,262Basic earnings/(loss) per share:From continuing operations
    
    $
    0.09
    
    
    $
    0.30
    
    
    $
    0.11
    
    
    $
    0.49From discontinued operations
    
    
    
    
    
    $
    (0.01
    )
    
    
    
    
    
    $
    Basic earnings per share
    
    $
    0.09
    
    
    $
    0.29
    
    
    $
    0.11
    
    
    $
    0.49Weighted average shares outstanding  basic
    
    
    31,181,000
    
    
    
    30,927,000
    
    
    
    31,142,000
    
    
    
    30,866,000Diluted earnings/(loss) per share:From continuing operations
    
    $
    0.09
    
    
    $
    0.30
    
    
    $
    0.11
    
    
    $
    0.49From discontinued operations
    
    
    
    
    
    $
    (0.01
    )
    
    
    
    
    
    $
    Diluted earnings per share
    
    $
    0.09
    
    
    $
    0.29
    
    
    $
    0.11
    
    
    $
    0.49Weighted average shares outstanding  diluted
    
    
    31,807,000
    
    
    
    31,414,000
    
    
    
    31,701,000
    
    
    
    31,308,000
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LANCE, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Balance Sheets
As of June 28, 2008 (Unaudited) and December 29, 2007
 June 28,
    
    
    December 29,2008
    
    
    2007ASSETSCurrent assetsCash and cash equivalents
    
    $
    1,086
    
    
    $
    8,647Accounts receivable, net
    
    
    77,127
    
    
    
    64,081Inventories
    
    
    45,048
    
    
    
    38,659Deferred income taxes
    
    
    10,184
    
    
    
    9,335Prepaid expenses and other current assets
    
    
    14,415
    
    
    
    12,367Total current assets
    
    
    147,860
    
    
    
    133,089Other assetsFixed assets, net
    
    
    211,879
    
    
    
    205,075Goodwill and other intangible assets, net
    
    
    87,549
    
    
    
    69,127Other noncurrent assets
    
    
    6,058
    
    
    
    5,712Total assets
    
    $
    453,346
    
    
    $
    413,003LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    29,030
    
    
    $
    21,169Other payables and accrued liabilities
    
    
    53,379
    
    
    
    53,468Short-term debt
    
    
    13,958
    
    
    
    Total current liabilities
    
    
    96,367
    
    
    
    74,637Other liabilitiesLong-term debt
    
    
    74,000
    
    
    
    50,000Deferred income taxes
    
    
    26,296
    
    
    
    26,874Other noncurrent liabilities
    
    
    14,223
    
    
    
    14,395Total liabilities
    
    
    210,886
    
    
    
    165,906Commitments and contingenciesStockholders equityCommon stock, 31,474,662 and 31,214,743 shares outstanding, respectively
    
    
    26,228
    
    
    
    26,011Preferred stock, no shares outstanding
    
    
    
    
    
    
    Additional paid-in capital
    
    
    45,933
    
    
    
    41,430Retained earnings
    
    
    156,665
    
    
    
    163,356Accumulated other comprehensive income
    
    
    13,634
    
    
    
    16,300Total stockholders equity
    
    
    242,460
    
    
    
    247,097Total liabilities and stockholders equity
    
    $
    453,346
    
    
    $
    413,003
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##### Table of Contents



LANCE, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Stockholders Equity and Comprehensive Income (Unaudited)
For the Quarters Ended June 28, 2008 and June 30, 2007
 Additional
    
    
    
    
    
    Accumulated OtherPaid-in
    
    Retained
    
    ComprehensiveShares
    

Common Stock
    

Capital
    

Earnings
    

Income
    

TotalBalance, December 30, 2006
    
    
    30,855,891
    
    
    $
    25,714
    
    
    $
    32,129
    
    
    $
    159,329
    
    
    $
    5,228
    
    
    $
    222,400Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,262
    
    
    
    
    
    
    
    15,262Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,678
    
    
    
    5,678Net unrealized losses on derivatives, net of $401
tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    710
    
    
    
    710Actuarial gains recognized in net income, net of $45
tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (105
    )
    
    
    (105
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,545Cash dividends paid to stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,900
    )
    
    
    
    
    
    
    (9,900
    )Stock options exercised, including $517 excess tax
benefit
    
    
    162,025
    
    
    
    133
    
    
    
    2,636
    
    
    
    
    
    
    
    
    
    
    
    2,769Cumulative adjustment from adoption of FIN 48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61
    
    
    
    
    
    
    
    61Equity-based incentive expense previously recognized
under a liability plan
    
    
    54,900
    
    
    
    46
    
    
    
    1,220
    
    
    
    
    
    
    
    
    
    
    
    1,266Amortization of nonqualified stock options
    
    
    
    
    
    
    
    
    
    
    303
    
    
    
    
    
    
    
    
    
    
    
    303Issuances and amortization of restricted stock and units,
net of forfeitures
    
    
    28,100
    
    
    
    23
    
    
    
    1,440
    
    
    
    
    
    
    
    
    
    
    
    1,463Balance, June 30, 2007
    
    
    31,100,916
    
    
    $
    25,916
    
    
    $
    37,728
    
    
    $
    164,752
    
    
    $
    11,511
    
    
    $
    239,907Balance, December 29, 2007
    
    
    31,214,743
    
    
    $
    26,011
    
    
    $
    41,430
    
    
    $
    163,356
    
    
    $
    16,300
    
    
    $
    247,097Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,353
    
    
    
    
    
    
    
    3,353Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,246
    )
    
    
    (2,246
    )Net unrealized losses on derivatives, net of $198
tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (366
    )
    
    
    (366
    )Actuarial gains recognized in net income, net of $32
tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (54
    )
    
    
    (54
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    687Cash dividends paid to stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,044
    )
    
    
    
    
    
    
    (10,044
    )Stock options exercised, including $267 excess tax
benefit
    
    
    98,638
    
    
    
    82
    
    
    
    1,559
    
    
    
    
    
    
    
    
    
    
    
    1,641Equity-based incentive expense previously recognized
under a liability plan
    
    
    39,250
    
    
    
    33
    
    
    
    876
    
    
    
    
    
    
    
    
    
    
    
    909Amortization of nonqualified stock options
    
    
    
    
    
    
    
    
    
    
    542
    
    
    
    
    
    
    
    
    
    
    
    542Issuances and amortization of restricted stock and units,
net of forfeitures
    
    
    122,031
    
    
    
    102
    
    
    
    1,526
    
    
    
    
    
    
    
    
    
    
    
    1,628Balance, June 28, 2008
    
    
    31,474,662
    
    
    $
    26,228
    
    
    $
    45,933
    
    
    $
    156,665
    
    
    $
    13,634
    
    
    $
    242,460
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LANCE, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Cash Flows (Unaudited)
For the Six Months Ended June 28, 2008 and June 30, 2007
 Six Months EndedJune 28, 2008
    
    
    June 30, 2007Operating activitiesNet income
    
    $
    3,353
    
    
    $
    15,262Adjustments to reconcile net income to cash from operating activities:Depreciation and amortization
    
    
    16,105
    
    
    
    14,461Stock-based compensation expense
    
    
    2,170
    
    
    
    1,767Loss on sale of fixed assets
    
    
    195
    
    
    
    518Changes in operating assets and liabilities, excluding business acquisition
    
    
    (11,503
    )
    
    
    (3,057
    )Net cash from operating activities
    
    
    10,320
    
    
    
    28,951Investing activitiesPurchases of fixed assets
    
    
    (21,603
    )
    
    
    (22,608
    )Proceeds from sale of fixed assets
    
    
    321
    
    
    
    3,319Business acquisition, net of cash acquired
    
    
    (23,931
    )
    
    
    Purchase of investment
    
    
    
    
    
    
    (2,090
    )Net cash used in investing activities
    
    
    (45,213
    )
    
    
    (21,379
    )Financing activitiesDividends paid
    
    
    (10,044
    )
    
    
    (9,900
    )Issuance of common stock
    
    
    1,641
    
    
    
    2,769Proceeds from debt
    
    
    38,014
    
    
    
    Repayments of acquired debt from business acquisition
    
    
    (2,239
    )
    
    
    Net cash from/(used in) financing activities
    
    
    27,372
    
    
    
    (7,131
    )Effect of exchange rate changes on cash
    
    
    (40
    )
    
    
    87(Decrease)/increase in cash and cash equivalents
    
    
    (7,561
    )
    
    
    528Cash and cash equivalents at beginning of period
    
    
    8,647
    
    
    
    5,504Cash and cash equivalents at end of period
    
    $
    1,086
    
    
    $
    6,032Supplemental information:Cash paid for income taxes
    
    $
    1,371
    
    
    $
    5,389Cash paid for interest
    
    $
    1,500
    
    
    $
    1,442
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LANCE, INC. AND SUBSIDIARIES
 
 Notes to the Condensed Consolidated Financial Statements (Unaudited)
 1.
    
    The accompanying unaudited condensed consolidated financial statements of Lance, Inc. have
been prepared in accordance with generally accepted accounting principles in the United States
of America for interim financial information and the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial statements. These
condensed financial statements should be read in conjunction with the audited financial
statements and notes included in our Form 10-K for the year ended December 29, 2007 filed with
the Securities and Exchange Commission (the SEC) on February 22, 2008. In our opinion,
these condensed consolidated financial statements reflect all adjustments (consisting of only
normal, recurring accruals) necessary to present fairly our condensed consolidated financial
position as of June 28, 2008 and December 29, 2007 and the condensed consolidated statements
of income for the quarters and six months ended June 28, 2008 and June 30, 2007 and the
condensed consolidated statements of stockholders equity and comprehensive income and cash
flows for the six months ended June 28, 2008 and June 30, 2007. Prior year amounts shown in
the accompanying condensed consolidated financial statements have been reclassified for
consistent presentation.2.
    
    The consolidated results of operations for the quarter and six months ended June 28, 2008 are
not necessarily indicative of the results to be expected for the year ending December 27,
2008.3.
    
    Preparing financial statements requires management to make estimates and judgments about
future events that affect the reported amounts of assets, liabilities, revenues and expenses
and the related disclosure of contingent assets and liabilities. Examples include customer
returns and promotions, provisions for bad debts, inventory valuations, useful lives of fixed
assets, hedge transactions, supplemental retirement benefits, intangible asset valuations,
incentive compensation, income taxes, insurance, post-retirement benefits, contingencies and
legal proceedings. Actual results may differ from these estimates under different assumptions
or conditions.4.
    
    On March 14, 2008, we acquired 100% of the outstanding common stock of Brent & Sams, Inc.
Brent & Sams is a producer of branded and private brand premium gourmet cookies with
operations in North Little Rock, Arkansas. This acquisition enhances our portfolio of branded
products and extends our product offering into the premium private brand category. We paid
$24.1 million to acquire Brent & Sams, mostly funded from borrowings under our existing
Credit Agreement. Since the acquisition date, we have repaid all of the $2.2 million assumed
debt. Approximately $19.9 million of the acquisition price was assigned to goodwill and other
intangible assets.5.
    
    We own a non-controlling equity interest in Late July Snacks, LLC, an organic snack food
company. We also manufacture products for Late July. During the first six months of 2008,
non-branded sales to Late July were approximately $2.0 million. As of June 28, 2008, accounts
receivable due from Late July totaled $0.7 million.6.
    
    The following tables provide a reconciliation of the common shares used for basic earnings
per share and diluted earnings per share:
 Quarter Ended
    
    Six Months EndedJune 28,
    
    June 30,
    
    June 28,
    
    June 30,(in thousands)
    
    2008
    
    2007
    
    2008
    
    2007Weighted average number of common
shares used for basic earnings per share
    
    
    31,181
    
    
    
    30,927
    
    
    
    31,142
    
    
    
    30,866Effect of potential dilutive shares
    
    
    626
    
    
    
    487
    
    
    
    559
    
    
    
    442Weighted average number of common
shares and potential dilutive shares used
for diluted earnings per share
    
    
    31,807
    
    
    
    31,414
    
    
    
    31,701
    
    
    
    31,308Anti-dilutive shares excluded from the
above reconciliation
    
    
    95
    
    
    
    
    
    
    
    867
    
    
    
    19
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LANCE, INC. AND SUBSIDIARIES
 Notes to the Condensed Consolidated Financial Statements (Unaudited)
 7.
    
    During the first quarter of 2008, we granted approximately 175,000 vested nonqualified stock
options, 19,500 restricted shares and 19,750 shares of common stock related to a long-term
incentive plan for key employees that were previously accounted for as a liability. This
resulted in an increase in equity and a decrease in accrued liabilities of $0.9 million during
the first quarter of 2008. During the first quarter of 2007, we granted 114,000 vested
nonqualified stock options, 27,450 restricted shares and 27,450 of common stock related to a
long-term incentive plan for key employees that were previously accounted for as a liability.
This resulted in an increase in equity and a decrease in accrued liabilities of $1.3 million
during the first quarter of 2007.8.
    
    Sales to our largest customer, Wal-Mart Stores, Inc., were 20% of revenue for both quarters
and six months ended June 28, 2008 and June 30, 2007. Accounts receivable at June 28, 2008
and December 29, 2007 included receivables from Wal-Mart Stores, Inc. totaling $20.6 million
and $14.7 million, respectively.9.
    
    In accordance with FIN 48, Accounting for Uncertainty in Income Taxes  an Interpretation
of FASB Statement 109, we have recorded gross unrecognized tax benefits as of June 28, 2008
totaling $1.5 million and related interest and penalties of $0.5 million in other noncurrent
liabilities of the condensed consolidated balance sheet. Of this amount, $1.7 million would
affect the effective tax rate if subsequently recognized. Various taxing authorities
statutes of limitations related to the computation of our unrecognized tax benefits will
expire within twelve months of our prior year-end resulting in a potential $0.5 million
reduction of the unrecognized tax benefit amount. We classify interest and penalties
associated with income tax positions within income tax expense. The interest and penalty
component of the unrecognized tax benefits as of June 28, 2008 was $0.5 million.We have open years for income tax audit purposes in our major taxing jurisdictions according to
statutes as follows:
 Jurisdiction
    
    Open yearsUS federal
    
    2004 and forwardCanada federal
    
    2003 and forwardOntario provincial
    
    2001 and forwardMassachusetts
    
    2001 and forwardNorth Carolina
    
    2004 and forwardIowa
    
    2004 and forward
 10.
    
    At June 28, 2008 and December 29, 2007, we had $2.3 million and $0.5 million, respectively,
of assets held for sale included in other current assets on the condensed consolidated balance
sheets. The assets at June 28, 2008 primarily consist of land and buildings to be sold
related to the consolidation of sugar wafer facilities in Ontario, Canada, and certain
properties in Columbus, Georgia.
 8




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LANCE, INC. AND SUBSIDIARIES
 Notes to the Condensed Consolidated Financial Statements (Unaudited)
 11.
    
    The principal raw materials used in the manufacture of our products are flour, vegetable oil,
sugar, potatoes, peanuts, other nuts, cheese and seasonings. The principal supplies used are
flexible film, cartons, trays, boxes, and bags. These raw materials and supplies are generally
available in adequate quantities in the open market either from sources in the United States or
from other countries.We utilize the dollar value last-in, first-out (LIFO) method of determining the cost of
approximately one third of our inventories. Because inventory valuations under the LIFO method
are based on annual determinations, the interim LIFO valuations require management to estimate
year-end costs and levels of inventories. The variation between estimated year-end costs and
levels of LIFO inventories compared to the actual year-end amounts may materially affect the
results of operations for the full year. During the second quarter of 2008, we recorded a
favorable valuation adjustment of $0.8 million ($0.4 million after tax) related to LIFO layers
generated in prior periods. Inventories consist of:
 June 28,
    
    
    December 29,(in thousands)
    
    2008
    
    
    2007Finished goods
    
    $
    25,307
    
    
    $
    21,910Raw materials
    
    
    8,981
    
    
    
    7,701Supplies, etc.
    
    
    15,854
    
    
    
    14,297Total inventories at FIFO cost
    
    
    50,142
    
    
    
    43,908Less adjustments to reduce FIFO cost to LIFO cost
    
    
    (5,094
    )
    
    
    (5,249
    )Total inventories
    
    $
    45,048
    
    
    $
    38,659
 12.
    
    Our Board of Directors adopted a Preferred Shares Rights Agreement on July 14, 1998. The
rights granted under this agreement were designed to protect all of our stockholders and
ensure they receive fair and equal treatment in the event of an attempted takeover or certain
takeover tactics. None of these rights were redeemed and all expired on July 14, 2008 in
accordance with the terms of the Rights Agreement.
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##### Table of Contents



LANCE, INC. AND SUBSIDIARIES
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward-Looking Statements and Risk Factors
   Results of Operations
  Quarter Ended June 28, 2008 Compared to Quarter Ended June 30, 2007
 Favorable/Quarter Ended
    
    (Unfavorable)(dollars in thousands)
    
    June 28, 2008
    
    June 30, 2007
    
    VarianceRevenue
    
    $
    213,614
    
    
    
    100.0
    %
    
    $
    197,036
    
    
    
    100.0
    %
    
    $
    16,578
    
    
    
    8.4
    %Cost of sales
    
    
    133,691
    
    
    
    62.6
    %
    
    
    109,435
    
    
    
    55.5
    %
    
    
    (24,256
    )
    
    
    (22.2
    %)Gross margin
    
    
    79,923
    
    
    
    37.4
    %
    
    
    87,601
    
    
    
    44.5
    %
    
    
    (7,678
    )
    
    
    (8.8
    %)Selling, general and administrative
    
    
    74,568
    
    
    
    34.9
    %
    
    
    71,467
    
    
    
    36.3
    %
    
    
    (3,101
    )
    
    
    (4.3
    %)Other expense/(income), net
    
    
    161
    
    
    
    0.1
    %
    
    
    973
    
    
    
    0.5
    %
    
    
    812
    
    
    
    83.5
    %Earnings before interest and taxes
    
    
    5,194
    
    
    
    2.4
    %
    
    
    15,161
    
    
    
    7.7
    %
    
    
    (9,967
    )
    
    
    (65.7
    %Interest expense, net
    
    
    860
    
    
    
    0.4
    %
    
    
    615
    
    
    
    0.3
    %
    
    
    (245
    )
    
    
    (39.8
    %)Income tax expense
    
    
    1,626
    
    
    
    0.8
    %
    
    
    5,277
    
    
    
    2.7
    %
    
    
    3,651
    
    
    
    69.2
    %Income from continuing operations
    
    $
    2,708
    
    
    
    1.3
    %
    
    $
    9,269
    
    
    
    4.7
    %
    
    $
    (6,561
    )
    
    
    (70.8
    %)
  10




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LANCE, INC. AND SUBSIDIARIES
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 ®
      Six Months Ended June 28, 2008 Compared to Six Months Ended June 30, 2007
 Favorable/Six Months Ended
    
    (Unfavorable)(dollars in thousands)
    
    June 28, 2008
    
    June 30, 2007
    
    VarianceRevenue
    
    $
    411,582
    
    
    
    100.0
    %
    
    $
    379,463
    
    
    
    100.0
    %
    
    $
    32,119
    
    
    
    8.5
    %Cost of sales
    
    
    257,152
    
    
    
    62.5
    %
    
    
    212,412
    
    
    
    56.0
    %
    
    
    (44,740
    )
    
    
    (21.1
    %)Gross margin
    
    
    154,430
    
    
    
    37.5
    %
    
    
    167,051
    
    
    
    44.0
    %
    
    
    (12,621
    )
    
    
    (7.6
    %)Selling, general and administrative
    
    
    147,425
    
    
    
    35.8
    %
    
    
    141,082
    
    
    
    37.2
    %
    
    
    (6,343
    )
    
    
    (4.5
    %)Other expense/(income), net
    
    
    157
    
    
    
    
    
    
    
    884
    
    
    
    0.2
    %
    
    
    727
    
    
    
    (82.2
    %)Earnings before interest and taxes
    
    
    6,848
    
    
    
    1.7
    %
    
    
    25,085
    
    
    
    6.6
    %
    
    
    (18,237
    )
    
    
    (72.7
    %)Interest expense, net
    
    
    1,465
    
    
    
    0.4
    %
    
    
    1,219
    
    
    
    0.3
    %
    
    
    (246
    )
    
    
    (20.2
    %)Income tax expense
    
    
    2,030
    
    
    
    0.5
    %
    
    
    8,725
    
    
    
    2.3
    %
    
    
    6,695
    
    
    
    76.7
    %Income from continuing operations
    
    $
    3,353
    
    
    
    0.8
    %
    
    
    15,141
    
    
    
    4.0
    %
    
    $
    (11,788
    )
    
    
    (77.9
    %)
 11




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##### Table of Contents



LANCE, INC. AND SUBSIDIARIES
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  ® ®
      Liquidity and Capital Resources
 Liquidity
  Operating Cash Flows
  12




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LANCE, INC. AND SUBSIDIARIES
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Investing Cash Flows
   Financing Cash Flows
   Debt
  Contractual Obligations
  Market Risks
    13




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LANCE, INC. AND SUBSIDIARIES
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4. Controls and Procedures
  
 14




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##### Table of Contents



LANCE, INC. AND SUBSIDIARIES
 
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
   
 Item 1A. Risk Factors
 
 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 4. Submission of Matters to a Vote of Security Holders
  1.
    
    Election of nominees to the Board of Directors to serve until the Annual Meeting of
Stockholders in 2011:
 Votes For
    
    Votes WithheldWilliam R. Holland
    
    
    28,936,029
    
    
    
    457,605James W. Johnston
    
    
    29,110,950
    
    
    
    282,683W. J. Prezzano
    
    
    28,944,208
    
    
    
    449,425
 2.
    
    Adoption of the Lance, Inc. 2008 Director Stock Plan (22,528,710 for, 3,692,101
against, 117,482 abstaining, 3,055,341 broker non-votes).
 3.
    
    Ratification of the selection of KPMG LLP as independent public accountants for fiscal
2008 (29,211,881 for, 149,270 against, 32,483 abstaining).
 15




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##### Table of Contents



LANCE, INC. AND SUBSIDIARIES
 
 Item 6. Exhibits
 Exhibit Index
 No.
    
    Description3.1
    
    Restated Articles of Incorporation of Lance, Inc. as amended through April 17, 1998, incorporated
herein by reference to Exhibit 3 to the Registrants Quarterly Report on Form 10-Q for the twelve
weeks ended June 13, 1998 (File No. 0-398).3.2
    
    Articles of Amendment of Lance, Inc. dated July, 14 1998 designating rights, preferences and
privileges of the Registrants Series A Junior Participating Preferred Stock, incorporated herein by
reference to Exhibit 3.2 to the Registrants Annual Report on Form 10-K for the fiscal year ended
December 26, 1998 (File No. 0-398).3.3
    
    Bylaws of Lance, Inc., as amended through November 1, 2007, incorporated herein by reference to
Exhibit 3.1 to the Registrants Current Report on Form 8-K filed on November 7, 2007 (File No.
0-398).10.1*
    
    Lance, Inc. 2008 Director Stock Plan, incorporated herein by reference to Exhibit 4.8 to the
Registrants Registration Statement on Form S-8 filed on
May 15, 2008 (File No. 333-150931).10.2*
    
    Executive Employment Agreement Amendment dated April 24, 2008 between the Registrant and David V.
Singer, filed herewith.10.3*
    
    Amended and Restated Compensation and Benefits Assurance Agreement dated April 24, 2008 between the
Registrant and David V. Singer, filed herewith.10.4*
    
    Restricted Stock Unit Award Agreement Amendment Number Two dated April 24, 2008 between the
Registrant and David V. Singer, filed herewith.10.5*
    
    Form of Amended and Restated Compensation and Benefits Assurance Agreement between the Registrant and
each of Rick D. Puckett, Glenn A. Patcha, Blake W. Thompson, Frank I. Lewis and Earl D. Leake, filed
herewith.10.6*
    
    Amended and Restated Executive Severance Agreement dated April 24, 2008 between the Registrant and
Earl D. Leake, filed herewith.31.1
    
    Certification
of Chief Executive Officer pursuant to Rule 13a-14(a) or
Rule 15d-14(a), filed herewith.31.2
    
    Certification
of Chief Financial Officer pursuant to Rule 13a-14(a) or
Rule 15d-14(a), filed herewith.32
    
    Certification pursuant to Rule 13a-14(b), as required by 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, filed
herewith.
 
 *
    
    Management contract.  16




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LANCE, INC. AND SUBSIDIARIES
 
 Signature
  LANCE, INC.By:

/s/
Rick D. PuckettRick D. PuckettExecutive Vice President, Chief Financial Officer,
Treasurer and Secretary  17