##### 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 September 27, 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 PlaceSuite 350Charlotte, North Carolina
    
    28277(Address of principal executive offices)
    
    (Zip Code)
 (Registrants telephone number, including area code)
 þ o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 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 Nine Months Ended September 27, 2008 and September 29, 2007
    
    
    3Condensed Consolidated Balance Sheets  September 27, 2008 (Unaudited) and December 29, 2007
    
    
    4Condensed Consolidated Statements of Stockholders Equity and Comprehensive Income (Unaudited)  Nine Months Ended September 27, 2008 and September 29, 2007
    
    
    5Condensed Consolidated Statements of Cash Flows (Unaudited)  Nine Months Ended September 27, 2008 and September 29, 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 6. Exhibits
    
    
    15SIGNATURE
    
    
    16EX-31.1EX-31.2EX-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 Nine Months Ended September 27, 2008 and September 29, 2007
 Quarter Ended
    
    
    Nine Months EndedSeptember 27,
    
    
    September 29,
    
    
    September 27,
    
    
    September 29,2008
    
    
    2007
    
    
    2008
    
    
    2007Net sales and other operating revenue
    
    $
    225,587
    
    
    $
    198,052
    
    
    $
    637,169
    
    
    $
    577,515Cost of sales and operating expenses:Cost of sales
    
    
    143,040
    
    
    
    115,692
    
    
    
    400,192
    
    
    
    328,104Selling, general and administrative
    
    
    72,337
    
    
    
    70,253
    
    
    
    219,762
    
    
    
    211,336Other (income)/expense, net
    
    
    (536
    )
    
    
    522
    
    
    
    (379
    )
    
    
    1,405Total costs and expenses
    
    
    214,841
    
    
    
    186,467
    
    
    
    619,575
    
    
    
    540,845Income from continuing operations
before interest and income taxes
    
    
    10,746
    
    
    
    11,585
    
    
    
    17,594
    
    
    
    36,670Interest expense, net
    
    
    708
    
    
    
    550
    
    
    
    2,173
    
    
    
    1,768Income from continuing operations
before income taxes
    
    
    10,038
    
    
    
    11,035
    
    
    
    15,421
    
    
    
    34,902Income tax expense
    
    
    3,229
    
    
    
    3,448
    
    
    
    5,258
    
    
    
    12,174Net income from continuing operations
    
    
    6,809
    
    
    
    7,587
    
    
    
    10,163
    
    
    
    22,728(Loss)/income from discontinued operations
    
    
    
    
    
    
    (146
    )
    
    
    
    
    
    
    45Income tax (benefit)/expense
    
    
    
    
    
    
    (54
    )
    
    
    
    
    
    
    16Net (loss)/income from discontinued operations
    
    
    
    
    
    
    (92
    )
    
    
    
    
    
    
    29Net income
    
    $
    6,809
    
    
    $
    7,495
    
    
    $
    10,163
    
    
    $
    22,757Basic earnings per share:From continuing operations
    
    $
    0.22
    
    
    $
    0.24
    
    
    $
    0.33
    
    
    $
    0.74From discontinued operations
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Basic earnings per share
    
    $
    0.22
    
    
    $
    0.24
    
    
    $
    0.33
    
    
    $
    0.74Weighted average shares outstanding  basic
    
    
    31,243,000
    
    
    
    31,034,000
    
    
    
    31,176,000
    
    
    
    30,921,000Diluted earnings per share:From continuing operations
    
    $
    0.21
    
    
    $
    0.24
    
    
    $
    0.32
    
    
    $
    0.72From discontinued operations
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Diluted earnings per share
    
    $
    0.21
    
    
    $
    0.24
    
    
    $
    0.32
    
    
    $
    0.72Weighted average shares outstanding  diluted
    
    
    31,911,000
    
    
    
    31,693,000
    
    
    
    31,765,000
    
    
    
    31,506,000
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LANCE, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Balance Sheets
As of September 27, 2008 (Unaudited) and December 29, 2007
 September 27,
    
    
    December 29,2008
    
    
    2007ASSETSCurrent assetsCash and cash equivalents
    
    $
    981
    
    
    $
    8,647Accounts receivable, net
    
    
    79,006
    
    
    
    64,081Inventories
    
    
    45,277
    
    
    
    38,659Deferred income taxes
    
    
    9,158
    
    
    
    9,335Prepaid expenses and other current assets
    
    
    11,500
    
    
    
    12,367Total current assets
    
    
    145,922
    
    
    
    133,089Other assetsFixed assets, net
    
    
    212,733
    
    
    
    205,075Goodwill and other intangible assets, net
    
    
    86,619
    
    
    
    69,127Other noncurrent assets
    
    
    5,594
    
    
    
    5,712Total assets
    
    $
    450,868
    
    
    $
    413,003LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    26,649
    
    
    $
    21,169Other payables and accrued liabilities
    
    
    55,434
    
    
    
    53,468Short-term debt
    
    
    7,938
    
    
    
    Total current liabilities
    
    
    90,021
    
    
    
    74,637Other liabilitiesLong-term debt
    
    
    74,000
    
    
    
    50,000Deferred income taxes
    
    
    28,718
    
    
    
    26,874Other noncurrent liabilities
    
    
    13,252
    
    
    
    14,395Total liabilities
    
    
    205,991
    
    
    
    165,906Commitments and contingenciesStockholders equityCommon stock, 31,510,432 and 31,214,743 shares outstanding, respectively
    
    
    26,258
    
    
    
    26,011Preferred stock, no shares outstanding
    
    
    
    
    
    
    Additional paid-in capital
    
    
    47,732
    
    
    
    41,430Retained earnings
    
    
    158,436
    
    
    
    163,356Accumulated other comprehensive income
    
    
    12,451
    
    
    
    16,300Total stockholders equity
    
    
    244,877
    
    
    
    247,097Total liabilities and stockholders equity
    
    $
    450,868
    
    
    $
    413,003
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LANCE, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Stockholders Equity and Comprehensive Income (Unaudited)
For the Nine Months Ended September 27, 2008 and September 29, 2007
 Additional
    
    
    
    
    
    Accumulated OtherShares
    
    Common Stock
    
    Paid-in Capital
    
    Retained Earnings
    
    Comprehensive Income
    
    TotalBalance, December 30, 2006
    
    
    30,855,891
    
    
    $
    25,714
    
    
    $
    32,129
    
    
    $
    159,329
    
    
    $
    5,228
    
    
    $
    222,400Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,757
    
    
    
    
    
    
    
    22,757Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,315
    
    
    
    10,315Net unrealized gains on derivatives, net of $101
tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    203
    
    
    
    203Actuarial gains recognized in net income, net of $73
tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (152
    )
    
    
    (152
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,123Cash dividends paid to stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,878
    )
    
    
    
    
    
    
    (14,878
    )Stock options exercised, including $997 excess tax
benefit
    
    
    262,316
    
    
    
    216
    
    
    
    4,384
    
    
    
    
    
    
    
    
    
    
    
    4,600Cumulative 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
    
    
    
    
    
    
    
    
    
    
    507
    
    
    
    
    
    
    
    
    
    
    
    507Issuances and amortization of restricted stock and units,
net of forfeitures
    
    
    28,100
    
    
    
    23
    
    
    
    2,149
    
    
    
    
    
    
    
    
    
    
    
    2,172Balance, September 29, 2007
    
    
    31,201,207
    
    
    $
    25,999
    
    
    $
    40,389
    
    
    $
    167,269
    
    
    $
    15,594
    
    
    $
    249,251Balance, December 29, 2007
    
    
    31,214,743
    
    
    $
    26,011
    
    
    $
    41,430
    
    
    $
    163,356
    
    
    $
    16,300
    
    
    $
    247,097Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,163
    
    
    
    
    
    
    
    10,163Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,558
    )
    
    
    (3,558
    )Net unrealized losses on derivatives, net of $136
tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (209
    )
    
    
    (209
    )Actuarial gains recognized in net income, net of $48
tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (82
    )
    
    
    (82
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,314Cash dividends paid to stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,083
    )
    
    
    
    
    
    
    (15,083
    )Stock options exercised, including $360 excess tax
benefit
    
    
    135,567
    
    
    
    113
    
    
    
    2,179
    
    
    
    
    
    
    
    
    
    
    
    2,292Equity-based incentive expense previously recognized
under a liability plan
    
    
    39,250
    
    
    
    33
    
    
    
    876
    
    
    
    
    
    
    
    
    
    
    
    909Amortization of nonqualified stock options
    
    
    
    
    
    
    
    
    
    
    829
    
    
    
    
    
    
    
    
    
    
    
    829Issuances and amortization of restricted stock and units,
net of forfeitures
    
    
    120,872
    
    
    
    101
    
    
    
    2,418
    
    
    
    
    
    
    
    
    
    
    
    2,519Balance, September 27, 2008
    
    
    31,510,432
    
    
    $
    26,258
    
    
    $
    47,732
    
    
    $
    158,436
    
    
    $
    12,451
    
    
    $
    244,877
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LANCE, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Cash Flows (Unaudited)
For the Nine Months Ended September 27, 2008 and September 29, 2007
 Nine Months EndedSeptember 27, 2008
    
    
    September 29, 2007Operating activitiesNet income
    
    $
    10,163
    
    
    $
    22,757Adjustments to reconcile net income to cash from operating activities:Depreciation and amortization
    
    
    23,917
    
    
    
    21,839Stock-based compensation expense
    
    
    3,348
    
    
    
    2,680Gain on sale of fixed assets
    
    
    (333
    )
    
    
    (839
    )Changes in operating assets and liabilities, excluding business acquisition:Accounts receivable
    
    
    (14,201
    )
    
    
    (6,625
    )Inventory
    
    
    (5,708
    )
    
    
    (2,615
    )Accounts payable
    
    
    5,046
    
    
    
    3,527Other assets and liabilities
    
    
    4,869
    
    
    
    1,722Net cash from operating activities
    
    
    27,101
    
    
    
    42,446Investing activitiesPurchases of fixed assets
    
    
    (30,616
    )
    
    
    (28,299
    )Proceeds from sale of fixed assets
    
    
    2,737
    
    
    
    6,895Business acquisition, net of cash acquired
    
    
    (23,931
    )
    
    
    Purchase of investment
    
    
    
    
    
    
    (2,090
    )Net cash used in investing activities
    
    
    (51,810
    )
    
    
    (23,494
    )Financing activitiesDividends paid
    
    
    (15,083
    )
    
    
    (14,878
    )Issuance of common stock
    
    
    2,292
    
    
    
    4,600Net proceeds from debt
    
    
    32,131
    
    
    
    Repayments of acquired debt from business acquisition
    
    
    (2,239
    )
    
    
    Net cash from/(used in) financing activities
    
    
    17,101
    
    
    
    (10,278
    )Effect of exchange rate changes on cash
    
    
    (58
    )
    
    
    135(Decrease)/increase in cash and cash equivalents
    
    
    (7,666
    )
    
    
    8,809Cash and cash equivalents at beginning of period
    
    
    8,647
    
    
    
    5,504Cash and cash equivalents at end of period
    
    $
    981
    
    
    $
    14,313Supplemental information:Cash paid for income taxes, net of refunds of $58 and $7, respectively
    
    $
    1,982
    
    
    $
    10,397Cash paid for interest
    
    $
    2,307
    
    
    $
    2,193
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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
September 27, 2008 and December 29, 2007 and the condensed consolidated statements of income for
the quarters and nine months ended September 27, 2008 and September 29, 2007 and the condensed
consolidated statements of stockholders equity and comprehensive income and cash flows for the
nine months ended September 27, 2008 and September 29, 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 nine months ended September 27,
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 private brand premium gourmet cookies with operations in North
Little Rock, Arkansas. This acquisition enhances our product portfolio and extends our
product offering into the premium private brand category. We paid approximately $23.9 million
to acquire Brent & Sams, net of cash acquired of $0.2 million, 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 nine months of 2008,
non-branded sales to Late July were approximately $3.3 million. As of September 27, 2008,
accounts receivable due from Late July totaled $0.9 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
    
    
    Nine Months EndedSeptember 27,
    
    
    September 29,
    
    
    September 27,
    
    
    September 29,(in thousands)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Weighted average number of common
shares used for basic earnings per share
    
    
    31,243
    
    
    
    31,034
    
    
    
    31,176
    
    
    
    30,921Effect of potential dilutive shares
    
    
    668
    
    
    
    659
    
    
    
    589
    
    
    
    585Weighted average number of common
shares and potential dilutive shares used
for diluted earnings per share
    
    
    31,911
    
    
    
    31,693
    
    
    
    31,765
    
    
    
    31,506Anti-dilutive shares excluded from the
above reconciliation
    
    
    100
    
    
    
    
    
    
    
    367
    
    
    
    15
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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 nine months ended September 27, 2008 and September 29, 2007. Accounts receivable at
September 27, 2008 and December 29, 2007 included receivables from Wal-Mart Stores, Inc.
totaling $19.9 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 September 27, 2008
totaling $1.1 million and related interest and penalties of $0.3 million in other noncurrent
liabilities of the condensed consolidated balance sheet. Of this amount, $1.2 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 have
expired since the beginning of 2008 and reduced the unrecognized tax benefit amount by $0.4
million. Additional statutes of limitations will likely expire before the end of 2008 and may
result in a potential $0.1 reduction in 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 September 27, 2008 was
$0.3 million.We have open years for income tax audit purposes in our major taxing jurisdictions according to
statutes as follows:
 Jurisdiction
    
    Open yearsUS federal
    
    2005 and forwardCanada federal
    
    2003 and forwardOntario provincial
    
    2003 and forwardMassachusetts
    
    2001 and forwardNorth Carolina
    
    2005 and forwardIowa
    
    2005 and forward
 10.
    
    At September 27, 2008 and December 29, 2007, we had $0.4 million and $0.5 million,
respectively, of assets held for sale included in other current assets on the condensed
consolidated balance sheets. During the third quarter of 2008, we sold a facility in Ontario,
Canada, related to the previously announced consolidation of Canadian sugar wafer facilities.
 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. Inventories consist of:
 September 27,
    
    
    December 29,(in thousands)
    
    2008
    
    
    2007Finished goods
    
    $
    22,626
    
    
    $
    21,910Raw materials
    
    
    12,426
    
    
    
    7,701Supplies, etc.
    
    
    15,848
    
    
    
    14,297Total inventories at FIFO cost
    
    
    50,900
    
    
    
    43,908Less adjustments to reduce FIFO cost to LIFO cost
    
    
    (5,623
    )
    
    
    (5,249
    )Total inventories
    
    $
    45,277
    
    
    $
    38,659
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LANCE, INC. AND SUBSIDIARIES
 Notes to the Condensed Consolidated Financial Statements (Unaudited)
 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.
 9




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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 September 27, 2008 Compared to Quarter Ended September 29, 2007
 Favorable/Quarter Ended
    
    (Unfavorable)(dollars in thousands)
    
    September 27, 2008
    
    September 29, 2007
    
    VarianceRevenue
    
    $
    225,587
    
    
    
    100.0
    %
    
    $
    198,052
    
    
    
    100.0
    %
    
    $
    27,535
    
    
    
    13.9
    %Cost of sales
    
    
    143,040
    
    
    
    63.4
    %
    
    
    115,692
    
    
    
    58.4
    %
    
    
    (27,348
    )
    
    
    (23.6
    %)Gross margin
    
    
    82,547
    
    
    
    36.6
    %
    
    
    82,360
    
    
    
    41.6
    %
    
    
    187
    
    
    
    0.2
    %Selling, general and administrative
    
    
    72,337
    
    
    
    32.1
    %
    
    
    70,253
    
    
    
    35.5
    %
    
    
    (2,084
    )
    
    
    (3.0
    %)Other (income)/expense, net
    
    
    (536
    )
    
    
    (0.2
    %)
    
    
    522
    
    
    
    0.3
    %
    
    
    1,058
    
    
    
    202.7
    %Earnings before interest and taxes
    
    
    10,746
    
    
    
    4.8
    %
    
    
    11,585
    
    
    
    5.8
    %
    
    
    (839
    )
    
    
    (7.2
    %)Interest expense, net
    
    
    708
    
    
    
    0.3
    %
    
    
    550
    
    
    
    0.3
    %
    
    
    (158
    )
    
    
    (28.7
    %)Income tax expense
    
    
    3,229
    
    
    
    1.4
    %
    
    
    3,448
    
    
    
    1.7
    %
    
    
    219
    
    
    
    6.4
    %Income from continuing operations
    
    $
    6,809
    
    
    
    3.0
    %
    
    $
    7,587
    
    
    
    3.8
    %
    
    $
    (778
    )
    
    
    (10.3
    %)
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LANCE, INC. AND SUBSIDIARIES
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 ® ®
       Nine Months Ended September 27, 2008 Compared to Nine Months Ended September 29, 2007
 Favorable/Nine Months Ended
    
    (Unfavorable)(dollars in thousands)
    
    September 27, 2008
    
    September 29, 2007
    
    VarianceRevenue
    
    $
    637,169
    
    
    
    100.0
    %
    
    $
    577,515
    
    
    
    100.0
    %
    
    $
    59,654
    
    
    
    10.3
    %Cost of sales
    
    
    400,192
    
    
    
    62.8
    %
    
    
    328,104
    
    
    
    56.8
    %
    
    
    (72,088
    )
    
    
    (22.0
    %)Gross margin
    
    
    236,977
    
    
    
    37.2
    %
    
    
    249,411
    
    
    
    43.2
    %
    
    
    (12,434
    )
    
    
    (5.0
    %)Selling, general and administrative
    
    
    219,762
    
    
    
    34.5
    %
    
    
    211,336
    
    
    
    36.6
    %
    
    
    (8,426
    )
    
    
    (4.0
    %)Other (income)/expense, net
    
    
    (379
    )
    
    
    (0.1
    %)
    
    
    1,405
    
    
    
    0.2
    %
    
    
    1,784
    
    
    
    127.0
    %Earnings before interest and taxes
    
    
    17,594
    
    
    
    2.8
    %
    
    
    36,670
    
    
    
    6.3
    %
    
    
    (19,076
    )
    
    
    (52.0
    %)Interest expense, net
    
    
    2,173
    
    
    
    0.3
    %
    
    
    1,768
    
    
    
    0.3
    %
    
    
    (405
    )
    
    
    (22.9
    %)Income tax expense
    
    
    5,258
    
    
    
    0.8
    %
    
    
    12,174
    
    
    
    2.1
    %
    
    
    6,916
    
    
    
    56.8
    %Income from continuing operations
    
    $
    10,163
    
    
    
    1.6
    %
    
    
    22,728
    
    
    
    3.9
    %
    
    $
    (12,565
    )
    
    
    (55.3
    %)
 11




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LANCE, INC. AND SUBSIDIARIES
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  ® ®
        12




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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
  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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LANCE, INC. AND SUBSIDIARIES
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
   
 Item 1A. Risk Factors
  Current economic conditions could adversely impact our business and results of operations.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 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).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.
  15




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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  16