Snyder's-lance (LNCE) 10-Q 2010 Q3 Quarterly report

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 25, 2010

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.)
13024 Ballantyne Corporate Place
Suite 900
Charlotte, North Carolina	28277
(Address of principal executive offices)	(Zip Code)

704-554-1421

 (Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ       No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ       No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ             Accelerated filer ¨             Non-accelerated filer ¨             Smaller reporting company ¨

             (Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o       No þ

The number of shares outstanding of the registrant’s $0.83-1/3 par value Common Stock, its only outstanding class of Common Stock as of October 29, 2010, was 32,474,995 shares.

LANCE, INC. AND SUBSIDIARIES
INDEX
		Page
PART I.  FINANCIAL INFORMATION
	Item 1.  Financial Statements
	Condensed Consolidated Statements of Income (Unaudited) – Quarters and Nine Months Ended September 25, 2010 and September 26, 2009		3
	Condensed Consolidated Balance Sheets – As of September 25, 2010 (Unaudited) and December 26, 2009		4
	Condensed Consolidated Statements of Cash Flows (Unaudited) – Nine Months Ended September 25, 2010 and September 26, 2009		5
	Notes to the Condensed Consolidated Financial Statements (Unaudited)	6
	Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations		11
	Item 3.  Quantitative and Qualitative Disclosures about Market Risk	17
	Item 4.  Controls and Procedures	17
PART II.  OTHER INFORMATION
	Item 1.  Legal Proceedings	18
	Item 1A.  Risk Factors	18
	Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds	19
	Item 3.  Defaults Upon Senior Securities	19
	Item 5.  Other Information	19
	Item 6.  Exhibits	20
SIGNATURE		21

2

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 25, 2010 and September 26, 2009

(in thousands, except share and per share data)

	Quarter Ended				Nine Months Ended
	September 25, 2010		September 26, 2009		September 25, 2010		September 26, 2009
Net revenue	$	237,683	$	234,902	$	694,717	$	687,065
Cost of sales		142,764		140,129		418,812		411,171
Gross margin		94,919		94,773		275,905		275,894
Selling, general and administrative		78,416		80,019		236,517		233,996
Other expense, net		221		644		4,006		1,252
Earnings before interest and income taxes		16,282		14,110		35,382		40,646
Interest expense, net		841		796		2,563		2,518
Income before income taxes		15,441		13,314		32,819		38,128
Income tax expense		5,055		4,511		10,929		13,345
Net income	$	10,386	$	8,803	$	21,890	$	24,783
Basic earnings per share	$	0.32	$	0.28	$	0.68	$	0.79
Weighted average shares outstanding – basic		32,140,000		31,622,000		31,962,000		31,526,000
Diluted earnings per share	$	0.32	$	0.27	$	0.67	$	0.77
Weighted average shares outstanding – diluted		32,672,000		32,519,000		32,462,000		32,286,000
Cash dividends declared per share	$	0.16	$	0.16	$	0.48	$	0.48

See Notes to the Condensed Consolidated Financial Statements (Unaudited).

3

LANCE, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

As of September 25, 2010 (Unaudited) and December 26, 2009

(in thousands, except share data)

	September 25, 2010		December 26, 2009
ASSETS
Current assets:
Cash and cash equivalents	$	14,040	$	5,418
Accounts receivable, net of allowances of $1,353 and $972, respectively		90,414		87,172
Inventories		58,811		58,037
Prepaid income taxes		1,032		238
Deferred income taxes		6,475		9,790
Prepaid expenses and other current assets		12,457		18,227
Total current assets		183,229		178,882
Other assets:
Fixed assets, net of accumulated depreciation of $296,124 and $281,191, respectively		218,855		225,981
Goodwill, net		91,911		90,909
Other intangible assets, net		34,619		35,154
Other noncurrent assets		5,611		5,365
Total assets	$	534,225	$	536,291
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	33,230	$	29,777
Other payables and accrued liabilities		59,559		66,589
Total current liabilities		92,789		96,366
Other liabilities:
Long-term debt		106,000		113,000
Deferred income taxes		36,624		35,515
Other noncurrent liabilities		13,355		16,723
Total liabilities		248,768		261,604
Commitments and contingencies		-		-
Stockholders’ equity:
Common stock, 32,459,835 and 32,093,193 shares outstanding, respectively		27,049		26,743
Preferred stock, no shares outstanding		-		-
Additional paid-in capital		63,092		60,829
Retained earnings		182,702		176,322
Accumulated other comprehensive income		12,614		10,793
Total stockholders' equity		285,457		274,687
Total liabilities and stockholders’ equity	$	534,225	$	536,291

See Notes to the Condensed Consolidated Financial Statements (Unaudited).

4

LANCE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

For the Nine Months Ended September 25, 2010 and September 26, 2009

(in thousands)

	Nine Months Ended
	September 25, 2010			September 26, 2009
Operating activities
Net income	$	21,890		$	24,783
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		28,629			25,945
Stock-based compensation expense		5,635			5,490
Provision for doubtful accounts		872			1,012
Loss on sale of fixed assets		214			529
Impairment of long-lived assets		584			-
Changes in operating assets and liabilities		(5,834	)		(12,664	)
Net cash provided by operating activities		51,990			45,095
Investing activities
Purchases of fixed assets		(21,163	)		(28,667	)
Proceeds from sale of fixed and intangible assets		389			667
Proceeds from sale of assets held for sale		1,843			-
Net cash used in investing activities		(18,931	)		(28,000	)
Financing activities
Dividends paid		(15,510	)		(15,280	)
Issuances of common stock		2,551			3,806
Repurchases of common stock and net-settlement of restricted stock units		(4,668	)		(127	)
Net (repayments)/proceeds on existing credit facilities		(7,000	)		2,000
Net cash used in financing activities		(24,627	)		(9,601	)
Effect of exchange rate changes on cash		190			328
Increase in cash and cash equivalents		8,622			7,822
Cash and cash equivalents at beginning of period		5,418			807
Cash and cash equivalents at end of period	$	14,040		$	8,629
Supplemental information:
Cash paid for income taxes, net of refunds of $23 and $154, respectively	$	7,042		$	9,911
Cash paid for interest	$	2,552		$	2,699

See Notes to the Condensed Consolidated Financial Statements (Unaudited).

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LANCE, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

1.   BASIS OF PRESENTATION

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 26, 2009, filed with the Securities and Exchange Commission (the “SEC”) on February 23, 2010.  In ou r opinion, these condensed consolidated financial statements reflect all adjustments, consisting of only normal, recurring accruals, necessary to present fairly our condensed consolidated financial statements for the interim periods presented herein.  The consolidated results of operations for the quarter and nine months ended September 25, 2010, are not necessarily indicative of the results to be expected for the full year.

On September 30, 2010, the Board of Directors approved a change in our fiscal year end from the last Saturday of December to the Saturday nearest to December 31.  The results of this change will be reported in our Annual Report on Form 10-K for the fiscal year ending January 1, 2011, which will be a 53-week year.

Preparing financial statements requires management to make estimates and assumptions 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 promotional activity, allowances for doubtful accounts, inventory valuations, self-insurance reserves, impairment analysis of goodwill and other intangible assets, useful lives and impairment of fixed assets, incentive compensation, and income taxes.  Actual results may differ from our estimates.

Prior year amounts shown in the accompanying condensed consolidated financial statements have been reclassified for consistent presentation.

2.   NEW ACCOUNTING PRONOUNCEMENT

In January 2010, the Financial Accounting Standards Board issued Accounting Standards Update (ASC) No. 2010-06, “Improving Disclosures about Fair Value Measurements,” which amends the Accounting Standards Codification (ASC) Topic 820, “Fair Value Measurements and Disclosures.”  ASU No. 2010-06 amends the ASC to require disclosure of transfers into and out of Level 1 and Level 2 fair value measurements, and requires more detailed disclosure about the activity within Level 3 fair value measurements.  We adopted the guidance in ASU No. 2010-06 on December 27, 2009, except for the requirements related to Level 3 disclosures, which will be effective for our annual and interim reporting periods beginning after January 2, 2011.  The guidance requires expanded disclosures only, and wil l not have any impact on our consolidated financial statements.

3.   EARNINGS PER SHARE

The following table provides a reconciliation of the common shares used for basic earnings per share and diluted earnings per share:

	Quarter Ended				Nine Months Ended
(in thousands)	September 25, 2010		September 26, 2009		September 25, 2010		September 26, 2009
Weighted average number of common   shares used for basic earnings per share		32,140		31,622		31,962		31,526
Effect of potential dilutive shares		532		897		500		760
Weighted average number of common   shares and potential dilutive shares used   for diluted earnings per share		32,672		32,519		32,462		32,286
Anti-dilutive shares excluded from the   above reconciliation		776		25		716		30

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LANCE, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

4.   EQUITY-BASED INCENTIVES

Compensation expense related to equity-based incentive plans of $2.0 million was recognized for both the third quarters of 2010 and 2009.  Compensation expense related to equity-based incentive plans of $5.6 million and $5.5 million was recognized for the nine months of 2010 and 2009, respectively.  During the first quarter of 2009, we granted 73,356 restricted shares 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 $1.6 million during the first quarter of 2009.

During the second quarter of 2010, 300,000 restricted stock units vested, which were originally granted in 2005.  We net-settled 172,650 of these units as common stock shares and withheld the remaining 127,350 units to cover the payment of $2.5 million of employee withholding taxes.  Accrued dividends on these restricted stock units of $0.9 million were settled in cash.

During the first quarter of 2010, we repurchased 56,152 shares of common stock from employees to cover withholding taxes payable by employees upon the vesting of restricted stock.  No repurchases were made during the second and third quarters of 2010.

5.   INVENTORIES

(in thousands)	September 25, 2010			December 26, 2009
Finished goods	$	34,868		$	33,060
Raw materials		12,123			11,732
Supplies, etc.		17,682			19,081
Total inventories at FIFO cost.		64,673			63,873
Less adjustments to reduce FIFO cost to LIFO cost		(5,862	)		(5,836	)
Total inventories	$	58,811		$	58,037

6.   EQUITY INVESTMENT

We own a non-controlling equity interest in Late July Snacks LLC (“Late July”), an organic snack food company.  Equity losses, which are not material, are included in Other expense, net.  We also manufacture products for Late July.  Contract manufacturing revenue from Late July was approximately $1.0 million and $1.2 million during the third quarters of 2010 and 2009, respectively, and $2.8 and $3.3 during the first nine months of 2010 and 2009, respectively.  Accounts receivable due from Late July totaled $0.5 million at both September 25, 2010 and December 26, 2009.

7.   INCOME TAXES

We have recorded gross unrecognized tax benefits as of September 25, 2010 totaling $0.7 million and related interest and penalties of $0.3 million in Other noncurrent liabilities on the Condensed Consolidated Balance Sheet.  Of this amount, $0.7 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 have expired since the beginning of 2010 and reduced the unrecognized tax benefits amount by $0.2 million.  We classify interest and penalties associated with income tax positions within income tax expense.

We have open years for income tax audit purposes in our major taxing jurisdictions according to statutes as follows:

Jurisdiction	Open Years
US federal	2007 and forward
Canada federal	2006 and forward
Ontario provincial	2005 and forward
Massachusetts	2001 and forward
North Carolina	2006 and forward
Iowa	2006 and forward

7

LANCE, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

8.   FAIR VALUE MEASUREMENTS

We have classified assets and liabilities required to be measured at fair value into the fair value hierarchy as set forth below:

Level 1	-quoted prices in active markets for identical assets and liabilities.
Level 2	-observable inputs other than quoted prices for identical assets and liabilities.
Level 3	-unobservable inputs in which there is little or no market data available, which requires us to develop our own assumptions.

We measure our derivative instruments at fair value using Level 2 inputs.  There were no changes among the levels during the first nine months of 2010.

The carrying amount of cash and cash equivalents, receivables and accounts payable approximates fair value due to their short-term nature.  The carrying amount of debt approximates fair value since its variable interest rate is based on current market rates and interest payments are made monthly.

During the first quarter of 2010, recent market value declines for commercial real estate resulted in an impairment charge of $0.6 million related to assets held for sale in Little Rock, Arkansas.  This property was sold in the second quarter of 2010 for net proceeds of $1.8 million.

9.   DERIVATIVE INSTRUMENTS

We are exposed to certain risks relating to our ongoing business operations.  We use derivative instruments to manage interest rate and foreign exchange rate risks.

Interest Rate Swaps

Our variable-rate debt obligations incur interest at floating rates based on changes in the Eurodollar rate, Canadian Bankers’ Acceptance discount rate, Canadian prime rate and U.S. base rate interest.  To manage exposure to changing interest rates, we selectively enter into interest rate swap agreements to maintain a desirable proportion of fixed to variable-rate debt.  The notional amount of interest rate swaps as of both September 25, 2010 and December 26, 2009, was $65.0 million.

Foreign Currency Forwards

We are exposed to foreign exchange rate fluctuations through the operations of our Canadian subsidiary.  A majority of the revenue of our Canadian operations is denominated in U.S. dollars and a substantial portion of the operations’ costs, such as raw materials and direct labor, are denominated in Canadian dollars.  We have entered into a series of derivative forward contracts to mitigate a portion of this foreign exchange rate exposure.  These contracts have maturities through December 2010.  The notional amount for foreign currency forwards increased from $7.2 million at December 26, 2009, to $9.3 million at September 25, 2010.

All of our derivative instruments are accounted for as cash flow hedges.  The effective portion of the change in fair value is included in Accumulated other comprehensive income, net of related tax effects, with the corresponding asset or liability recorded in the Condensed Consolidated Balance Sheets.

The pre-tax income/(expense) effect of derivative instruments on the Condensed Consolidated Statements of Income is as follows:

	Quarter Ended						Nine Months Ended
(in thousands)	September 25, 2010			September 26, 2009			September 25, 2010			September 26, 2009
Interest rate swaps (included in Interest    expense, net)	$	(600	)	$	(605	)	$	(1,818	)	$	(1,737	)
Foreign currency forwards (included in Net     revenue)		88			93			1,191			(1,169	)
Foreign currency forwards (included in Other    expense, net)		(8	)		1			(110	)		(52	)
Total net pre-tax expense from         derivative instruments	$	(520	)	$	(511	)	$	(737	)	$	(2,958	)

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LANCE, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

The fair value of derivative instruments in the Condensed Consolidated Balance Sheets using Level 2 inputs is as follows:

	Fair Value of Asset/(Liability) at
(in thousands)	September 25, 2010			December 26, 2009
Interest rate swaps (included in Other noncurrent liabilities)	$	(2,535	)	$	(3,461	)
Foreign currency forwards (included in Prepaid expenses and other current assets)		201			839
Total fair value of derivative instruments	$	(2,334	)	$	(2,622	)

The change in unrealized pre-tax gains/(losses) included in other comprehensive income due to fluctuations in interest rates and foreign exchange rates were as follows:

	Quarter Ended				Nine Months Ended
(in thousands)	September 25, 2010		September 26, 2009		September 25, 2010			September 26, 2009
Interest rate swaps	$	330	$	42	$	926		$	627
Foreign currency forwards		79		596		(638	)		2,732
Total change in unrealized pre-tax    gains from derivative instruments    (effective portion)	$	409	$	638	$	288		$	3,359

The counterparty risk associated with our derivative instruments in an asset position is considered to be low, because we limit our exposure to strong, creditworthy counterparties.

10.   COMMITMENTS AND CONTINGENCIES

Contractual Obligations

In order to mitigate the risks of volatility in commodity markets to which we are exposed, we have entered into forward purchase agreements with certain suppliers based on market prices, forward price projections, and expected usage levels.  Purchase commitments for inventory increased from $88.2 million as of December 26, 2009, to $116.0 million as of September 25, 2010, due to varying contractual obligations.  Our practice is to contract at least six months in advance for all major ingredients and packaging.

Customer Concentration

Sales to our largest customer, Wal-Mart Stores, Inc., were 25% and 22% of revenue for quarters ended September 25, 2010 and September 26, 2009, respectively, and 24% and 21% of revenue for the nine months ended September 25, 2010 and September 26, 2009, respectively.  Accounts receivable at September 25, 2010 and December 26, 2009, included receivables from Wal-Mart Stores, Inc. totaling $26.6 million and $22.6 million, respectively.

Contingencies

On July 21, 2010, Lance, Inc. (“Lance”) entered into a merger agreement with Snyder’s of Hanover, Inc. (“Snyder’s”), as discussed in Note 12.  The merger agreement, as amended, contains certain termination rights for both Lance and Snyder’s, including termination rights if the merger is not consummated on or before April 1, 2011 and if the approval of the stockholders of either Lance or Snyder’s is not obtained.  The merger agreement further provides that, upon termination of the merger agreement under specified circumstances, including termination of the merger agreement by Lance or Snyder’s as a result of an adverse change in the recommendation of the other party’s board of directors, Lance may be required to pay to Snyder’s, or Snyder’s may be required to pay to Lance, a termination fee of $25 million.

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LANCE, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

11.   COMPREHENSIVE INCOME

Comprehensive income consisted of the following:

	Quarter Ended					Nine Months Ended
(in thousands)	September 25, 2010		September 26, 2009			September 25, 2010		September 26, 2009
Net income	$	10,386	$	8,803		$	21,890	$	24,783
Foreign currency translation adjustment		790		3,322			1,691		6,649
Net unrealized gain on derivatives, net of tax		257		436			130		2,317
Actuarial loss recognized in net income, net of tax		-		(36	)		-		(109	)
Total comprehensive income	$	11,433	$	12,525		$	23,711	$	33,640

12.   MERGER AGREEMENT WITH SNYDER'S

On July 21, 2010, Lance entered into a merger agreement with Snyder’s, a privately-held company that is currently one of our customers and distributors, providing for a “merger of equals” business combination of Lance and Snyder’s.  The merger agreement, as amended, provides that, upon the terms and subject to the conditions set forth in the merger agreement, Snyder’s will merge with and into a wholly-owned subsidiary of Lance, and each outstanding share of capital stock of Snyder’s will be converted into the right to receive 108.25 shares of Lance common stock.  The merger is expected to result in Snyder’s stockholders and Lance stockholders holding approximately 50.1% and 49.9%, respectively, of the combined company.  In connection with the merger, Lance will cha nge its name to Snyder’s-Lance, Inc.

Under the terms of the merger agreement, if the merger is completed, Lance stockholders prior to the merger will receive a special cash dividend of $3.75 per share, and Lance will issue approximately 32.7 million shares to the holders of outstanding common stock of Snyder’s.  The transaction, which is intended to be structured as a tax-free exchange of shares, is expected to close during the fourth quarter of 2010, and is subject to customary closing conditions, including obtaining certain regulatory approvals and approvals from the stockholders of both companies.

In August 2010, we received clearance from the U.S. Federal Trade Commission under the Hart-Scott-Rodino Antitrust Improvements Act.  In connection with the merger, Lance filed a registration statement, which includes a joint proxy statement/prospectus, with the Securities and Exchange Commission.  The registration statement became effective on October 29, 2010, and a special meeting of the stockholders of Lance is scheduled for December 2, 2010 for the consideration by the stockholders of approvals required for the merger.

We expect to incur significant expenses in connection with the merger.  While we have assumed that a certain level of expenses will be incurred, there are many factors that could affect the total amount or the timing of the expenses, and many of the expenses that will be incurred are, by their nature, difficult to estimate.  These expenses could result in the combined company taking significant charges against earnings following the completion of the merger.  The amount and timing of such charges are uncertain at the present time.  The shareholder approval of the issuance of shares necessary to effect the merger will result in a “change in control” for purposes of outstanding awards under our equity and incentive plans, which would result in accelerated vesting of all outstanding equi ty-based awards granted under the our equity and incentive plans and pro rata cash payouts of outstanding annual and long-term incentive awards assuming target performance under such awards.  We incurred $3.2 million in professional fees associated with the proposed merger during the second and third quarters of 2010.

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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

We, from time to time, make “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements include statements about our estimates, expectations, beliefs, intentions, or strategies for the future, and the assumptions underlying such statements.  We use the words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “forecasts,” “may,” “will,” “should,” and similar expressions to identify our forward-looking statements.  Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or our present expectations.  Factors that coul d cause these differences include, but are not limited to, the risk and uncertainties set forth in Part II, “Item 1A Risk Factors” and elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 26, 2009, and those described from time to time in our other reports filed with the Securities and Exchange Commission.

Caution should be taken not to place undue reliance on our forward-looking statements, which reflect our management’s expectations only as of the time such statements are made.  Except as required by law, we undertake no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Proposed Merger with Snyder’s of Hanover, Inc.

On July 21, 2010, Lance, Inc. (“Lance”) entered into a definitive merger agreement with Snyder’s of Hanover, Inc. (“Snyder’s”), a privately-held company, providing for a “merger of equals” business combination of Lance and Snyder’s.  The merger agreement, as amended, provides that, upon the terms and subject to the conditions set forth in the merger agreement, a wholly-owned subsidiary of Lance will merge with and into Snyder’s, with Snyder’s surviving as a wholly-owned subsidiary of Lance.  Upon completion of the merger, Lance’s name will be changed to Snyder’s-Lance, Inc.  Subject to the terms and conditions of the merger agreement which was approved by the boards of directors of Lance and Snyder’s, each outstanding share of Snyder’s common stock will be converted into the right to receive 108.25 shares of Lance common stock, if the merger is completed.  See Note 12, “Merger Agreement with Snyder’s,” to the Condensed Consolidated Financial Statements for additional information.

Results of Operations

Management’s discussion and analysis of our financial condition and results of operations are based upon the condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.  The preparation of these financial statements requires us to make estimates and judgments about future events that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.  Future events and their effects cannot be determined with absolute certainty.  Therefore, management’s determination of estimates and judgments about the carrying values of assets and liabilities requires the exercise of judgment in the selection and application of assumptions based on vari ous factors, including historical experience, current and expected economic conditions and other factors believed to be reasonable under the circumstances.  We routinely evaluate our estimates, including those related to customer returns and promotional activity, allowance for doubtful accounts, inventory valuations, self-insurance reserves, impairment analysis of goodwill and other intangible assets, useful lives and impairment of fixed assets, incentive compensation, and income taxes.  Actual results may differ from these estimates.

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LANCE, INC. AND SUBSIDIARIES

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Quarter Ended September 25, 2010 Compared to Quarter Ended September 26, 2009

	Quarter Ended
(In thousands)	September 25, 2010				September 26, 2009				Favorable/ (Unfavorable) Variance
Net revenue	$	237,683	100.0	%	$	234,902	100.0	%	$	2,781		1.2	%
Cost of sales		142,764	60.1	%		140,129	59.7	%		(2,635	)	-1.9	%
Gross margin		94,919	39.9	%		94,773	40.3	%		146		0.2	%
Selling, general and administrative		78,416	33.0	%		80,019	34.1	%		1,603		2.0	%
Other expense, net		221	0.1	%		644	0.3	%		423		65.7	%
Earnings before interest and taxes		16,282	6.9	%		14,110	6.0	%		2,172		15.4	%
Interest expense, net		841	0.4	%		796	0.3	%		(45	)	-5.7	%
Income tax expense		5,055	2.1	%		4,511	1.9	%		(544	)	-12.1	%
Net income	$	10,386	4.4	%	$	8,803	3.7	%	$	1,583		18.0	%

Third Quarter Summary

During the third quarter of 2010, net revenue increased $2.8 million or 1% over the third quarter of 2009 due to higher sales volume in both branded and private brands, which was partially offset by significantly higher promotional pricing activity.  Given the economic environment, more consumers are demanding value offerings, which is driving the industry to provide deeper and more frequent promotions.  In addition, our non-branded product categories continue to experience pressure from increased and deeper promotions from competitive branded companies.  These pressures have created a highly competitive environment requiring increases in our own promotional pricing activity to maintain market share in the branded product category, which is expected to continue for the remainder of 2010.

During the third quarter of 2010, net income increased $1.6 million, or 18%, compared to the third quarter of 2009.  These results reflect lower advertising and other controllable operating expenses, lower ingredient costs, and increased efficiencies from our direct store delivery (“DSD”) system transformation initiative, partially offset by higher promotional costs.  In addition, we incurred $2.9 million of pre-tax expenses related to the recently announced proposed merger with Snyder’s.

Revenue

Total revenue increased $2.8 million, or 1%, from the third quarter of 2009 as follows:

(dollars in millions)	Quarter Ended September 25, 2010		Change from Quarter Ended September 26, 2009
Branded Products	$	138.0		1	%
Non-Branded Products		99.7		1	%
Total Revenue	$	237.7		1	%

As a percentage of total revenue, revenue by product category was as follows:

	Quarter Ended
	September 25, 2010			September 26, 2009
Branded Products		58	%		58	%
Non-Branded Products		42	%		42	%
Total Revenue		100	%		100	%

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LANCE, INC. AND SUBSIDIARIES

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Compared to the third quarter of 2009, revenue from branded products increased 1%.  Sales of certain branded products to distributors, mass merchandisers and dollar stores increased compared to the same quarter of last year due to acquisitions, new product offerings and growth with new and existing customers.  These increases were partially offset by revenue declines from certain channels, including up-and-down the street and food service establishments resulting from our DSD transformation initiative, as well as revenue declines in convenience store and grocery stores resulting from the impact of lower consumer spending and competitive pressures in these channels.  Sales of branded products were also significantly impacted by increased promotional pricing for certain core product categories during the thi rd quarter of 2010.

Non-branded products consist of private brands and contract manufacturing.  Revenue from private brand products increased approximately 4% compared to the third quarter of 2009.  Growth in this category was driven by new product offerings and new customers.  We continued to experience competitive pressures from higher promotional pricing from branded competitors, especially where branded competitor’s products closely compete with our premium private brand products.  Contract manufacturing revenue decreased compared to the third quarter of 2009 primarily due to the expected completion of a short-term manufacturing contract in the first quarter of 2010.

Gross Margin

Gross margin increased $0.1 million, but decreased 0.4% as a percentage of revenue, compared to the third quarter of 2009.  The decrease in gross margin as a percentage of sales was due to increased promotional spending for branded products and an unfavorable distribution channel mix.  These unfavorable impacts were partially offset by lower commodity prices and improved manufacturing efficiencies.

Selling, General and Administrative Expenses

Selling, general, and administrative expenses decreased $1.6 million, or 1.1% as a percentage of revenue, as compared to the third quarter of 2009.  Lower discretionary advertising expenses of approximately $2.6 million favorably impacted our results, as well as reduced employee salary, incentive and benefit costs and cost reduction efforts from our DSD transformation initiative.  Higher shipping and distribution costs partially offset these favorable impacts.  In addition, we incurred $2.9 million of costs related to the proposed merger with Snyder’s during the third quarter of 2010.

Other Expense, Net

Other expense, net decreased $0.4 million due to losses on fixed assets and higher foreign currency losses experienced during the third quarter of 2009 as compared to the third quarter of 2010.

Income Tax Expense

Our effective income tax rate was 32.7% in the third quarter of 2010 compared to 33.9% in the third quarter of 2009.  The decrease in the effective income tax rate was the result of the increased utilization of tax credits and domestic manufacturing deductions.

Nine Months Ended September 25, 2010 Compared to Nine Months Ended September 26, 2009

	Nine Months Ended
(In thousands)	September 25, 2010				September 26, 2009				Favorable/ (Unfavorable) Variance
Net revenue	$	694,717	100.0	%	$	687,065	100.0	%	$	7,652		1.1	%
Cost of sales		418,812	60.3	%		411,171	59.8	%		(7,641	)	-1.9	%
Gross margin		275,905	39.7	%		275,894	40.2	%		11		0.0	%
Selling, general and administrative		236,517	34.0	%		233,996	34.1	%		(2,521	)	-1.1	%
Other expense, net		4,006	0.6	%		1,252	0.2	%		(2,754	)	-220	%
Earnings before interest and taxes		35,382	5.1	%		40,646	5.9	%		(5,264	)	-13.0	%
Interest expense, net		2,563	0.4	%		2,518	0.4	%		(45	)	-1.8	%
Income tax expense		10,929	1.6	%		13,345	1.9	%		2,416		18.1	%
Net income	$	21,890	3.2	%	$	24,783	3.6	%	$	(2,893	)	-11.7	%

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LANCE, INC. AND SUBSIDIARIES

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Nine Months Summary

During the first nine months of 2010, net income decreased $2.9 million, or 12%.  Significant drivers included pre-tax expenses of $3.2 million related to the proposed merger with Snyder’s, $3.0 million related to workforce reductions announced during the second quarter of 2010, and $2.9 million related to an unsuccessful bid for a targeted acquisition during the first quarter of 2010.  Additional significant drivers included higher shipping and distribution costs from higher fuel rates and higher infrastructure costs as compared to the first nine months of last year, offset by lower advertising spending and improved DSD efficiencies.

Furthermore, economic pressures continued to negatively impact our net revenues across many channels and product categories.  The geographic regions hit the hardest by unemployment overlap significantly with our core markets.  This drove revenue softness in our convenience store channel.  In addition, as more retailers drive value offerings to consumers, our promotional pricing activity increased significantly as compared to the first nine months of 2009.  Our non-branded product categories continued to experience pressure from increased and deeper promotions from competitive branded companies.  These pressures created a highly competitive environment requiring increases in our own promotional pricing activity to maintain market share in the branded product category.

Revenue

Total revenue increased $7.7 million, or approximately 1%, from the first nine months of 2009 as follows:

(dollars in millions)	Nine Months Ended September 25, 2010		Change from Nine Months Ended September 26, 2009
Branded Products	$	404.9		0	%
Non-Branded Products		289.8		2	%
Total Revenue	$	694.7		1	%

As a percentage of total revenue, revenue by product category was as follows:

	Nine Months Ended
	September 25, 2010			September 26, 2009
Branded Products		58	%		59	%
Non-Branded Products		42	%		41	%
Total Revenue		100	%		100	%

Compared to the first nine months of 2009, revenues from branded products increased slightly.  Net sales of branded products were significantly impacted by increased promotional pricing for certain core product categories during the first nine months of  2010.  Sales of branded products to distributors, dollar stores and mass merchandisers increased compared to the first nine months of 2009 due to acquisitions, new product offerings and growth with new and existing customers.  These increases were largely offset by revenue declines from certain channels, including convenience stores, up-and-down the street customers and food service establishments, resulting from the impact of lower consumer spending in these channels as well as the planned impact of our DSD transformation initiative.   We also experienced higher sales to club stores in the first six months of 2009 due to the impact of the peanut butter recall on our competitors’ products.

Non-branded products consist of private brands and contract manufacturing.  Net sales from private brand products increased approximately 5% compared to the first nine months of 2009.  Growth in this category was driven by new product offerings but has experienced competitive pressures from higher promotional pricing from branded competitors, especially where branded competitor’s products closely compete with our premium private brand products.  Contract manufacturing revenue was lower than the first nine months of 2009 primarily due to the expected completion of a short-term manufacturing contract.

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LANCE, INC. AND SUBSIDIARIES

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Gross Margin

Gross margin decreased 0.5% as a percentage of revenue, compared to the first nine months of 2009.  The decrease was largely due to higher promotional spending, a higher mix of non-branded revenue and $1.1 million of costs related to workforce reductions announced during the second quarter of 2010, partially offset by lower ingredient costs compared to the first nine months of 2009.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $2.5 million, but decreased 0.1% as a percentage of revenue, as compared to the first nine months of 2009.  Shipping and distribution expenses increased due to increases in fuel costs.  Additionally, certain fixed infrastructure costs, such as rent and depreciation, as well as medical costs, increased compared to the first nine months of 2009.  Approximately $3.2 million of costs were incurred in the second and third quarters 2010 related to the recently announced proposed merger with Snyder’s and $1.9 million of costs were incurred in the second quarter 2010 related to workforce reductions.  Offsetting these costs was $3.4 million less of advertising spending as compared to the first nine months of 2009, as well as lower salaries and i ncentives.

Other Expense, Net

Other expense, net increased $2.8 million primarily due to financing commitment fees in the first quarter of 2010 of $2.7 million associated with an unsuccessful bid for a targeted acquisition.  Additionally, we recorded an impairment charge of $0.6 million in the first quarter of 2010 related to assets in Little Rock, Arkansas.

Income Tax Expense

Our effective income tax rate was 33.3% in the first nine months of 2010 compared to 35.0% in the first nine months of 2009.  The decrease in the effective income tax rate was the result of the increased utilization of tax credits and domestic manufacturing deductions.

Liquidity and Capital Resources

Liquidity

Liquidity represents our ability to generate sufficient cash flows from operating activities to meet our obligations as well as our ability to obtain appropriate financing.  Therefore, liquidity cannot be considered separately from capital resources that consist primarily of current and potentially available funds for use in achieving our objectives.  Currently, our liquidity needs arise primarily from working capital requirements, capital expenditures and dividends.  Sufficient liquidity is expected to be available to enable us to meet these demands.

We have a universal shelf registration statement that, subject to our ability to consummate a transaction on acceptable terms, provides the flexibility to sell up to $250 million of debt or equity securities.

Operating Cash Flows

Net cash provided by operating activities was $52.0 million during the first nine months of 2010 and $45.1 million during the first nine months of 2009.  Cash used from changes in operating assets and liabilities decreased from $12.7 million during the first nine months of 2009 to $5.8 million in the first nine months of 2010, mostly due to a larger increase in accounts receivable in the first nine months of 2009.

Investing Cash Flows

Net cash used in investing activities was $18.9 million for the first nine months of 2010.  Capital expenditures for fixed assets, principally manufacturing equipment and building improvements, totaled $21.2 million during the first nine months of 2010, partially funded by proceeds from the sale of fixed assets and assets held for sale of $2.2 million.  Capital expenditures are expected to continue at a level sufficient to support our strategic and operating needs.  Capital expenditures for 2010 are projected to be between $28 million and $31 million and funded by net cash flow from operating activities, cash on hand, and our existing credit facilities.

Net cash used in investing activities during the first nine months of 2009 represented capital expenditures of $28.7 million, partially offset by proceeds from the sale of fixed assets of $0.7 million.  Capital expenditures for purchases of fixed assets were $40.7 million for the year ended December 26, 2009.

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LANCE, INC. AND SUBSIDIARIES

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Financing Cash Flows

During both of the first nine months of 2010 and 2009, we paid dividends of $0.48 per common share totaling $15.5 million and $15.3 million, respectively.  We received cash and related tax benefits of $2.6 million and $3.8 million during the first nine months of 2010 and 2009, respectively, as a result of stock option exercises.  During the first nine months of 2010, we repurchased 56,152 shares of common stock from employees and net-settled 172,650 of the 300,000 restricted stock units that vested in May 2010, to cover $3.8 million of withholding taxes payable by employees upon the vesting of restricted stock and restricted stock units.  We also paid $0.9 million of accrued dividends on restricted stock units.  Net repayments on our existing credit facilities were $7.0 million.  On Nov ember 2, 2010, the Board of Directors declared a quarterly cash dividend of $0.16 per share, payable on November 23, 2010, to stockholders of record on November 15, 2010.

Debt

Additional borrowings available under our existing U.S. and Canadian credit facilities totaled $58.6 million as of September 25, 2010.  We have complied with all financial covenants contained in the credit agreement.  We also maintain standby letters of credit in connection with our self-insurance reserves for casualty claims.  The total amount of these letters of credit, which was $15.7 million as of September 25, 2010, no longer reduces our available borrowings under our credit facilities because they were transferred to another banking institution outside of our credit group.

Contractual Obligations

In order to fix a portion of our ingredient, packaging and energy costs, we have entered into forward purchase agreements with certain suppliers based on market prices, forward price projections and expected usage levels.  Purchase commitments increased from $88.2 million as of December 26, 2009, to $116.0 million as of September 25, 2010, due to varying contractual obligations.  We are currently contracted at least six months in advance for all major ingredients and packaging.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, results of operations or cash flows.

Market Risks

The principal market risks that may adversely impact results of operations and financial position relate to ingredient, packaging and energy costs, interest and foreign exchange rates, and credit risks.

See the “Contractual Obligations” section above for a discussion of market risks associated with ingredient, packaging and energy costs.

Our variable-rate debt obligations incur interest at floating rates based on changes in the Eurodollar rate, Canadian Bankers’ Acceptance discount rate, Canadian prime rate and U.S. base rate interest.  To manage exposure to changing interest rates, we selectively enter into interest rate swap agreements to maintain a desirable proportion of fixed to variable-rate debt.

In November 2006, we entered into an interest rate swap agreement on $35 million of debt in order to fix the interest rate at 4.99%, plus applicable margin.  The applicable margin on September 25, 2010 was 0.40%.  In July 2008, we entered into an interest rate swap agreement on an additional $15 million of debt in order to fix the interest rate at 3.87%, plus applicable margin.  The applicable margin on this agreement on September 25, 2010, was 0.40%.  In February 2009, we entered into an interest rate swap agreement on an additional $15 million of debt in order to fix the interest rate at 1.68%, plus applicable margin.  The applicable margin on this agreement on September 25, 2010, was 0.32%.

While these interest rate swap agreements fixed a portion of the interest rate at a predictable level, pre-tax interest expense would have been $1.8 million lower without these agreements during the first nine months of 2010.

We are exposed to foreign exchange rate fluctuations through the operations of our Canadian subsidiary.  A majority of the revenue of our Canadian operations is denominated in U.S. dollars and a substantial portion of the operations’ costs, such as raw materials and direct labor, are denominated in Canadian dollars.  We have entered into a series of derivative forward contracts to mitigate a portion of this foreign exchange rate exposure.  These contracts have maturities through June 2011.

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LANCE, INC. AND SUBSIDIARIES

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

During the first nine months of 2010, foreign currency fluctuations unfavorably impacted pre-tax earnings by $2.2 million compared to the first nine months of 2009.  However, the decrease in pre-tax earnings was more than offset by the favorable effect of derivative forward contracts of $2.3 million during the first nine months of 2010 compared to the first nine months of 2009, resulting in a net favorable impact of foreign currency of $0.1 million.  Due to foreign currency fluctuations during the first nine months of 2010 and 2009, we recorded gains of $1.7 million and $6.6 million, respectively, in other comprehensive income because of the translation of the subsidiary’s financial statements into U.S. dollars.

We are exposed to credit risks related to our accounts receivable.  We perform ongoing credit evaluations of our customers to minimize the potential exposure.  For the first nine months of 2010 and 2009, net bad debt expense was $0.9 million and $1.0 million, respectively.  Allowances for doubtful accounts were $1.4 million at September 25, 2010 and $1.0 million at December 26, 2009.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

Quantitative and qualitative disclosures about these market risks are included under “Market Risks” in Item 2 above, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Item 4.  Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(b) of the Securities and Exchange Act of 1934 (the “Exchange Act”).  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective for the purpose of providing reasonable assurance that the information required to be disclosed in the reports we file or submit under the Exchange Act (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

There have been no changes in our internal control over financial reporting during the quarter ended September 25, 2010, that have materially affected, or that are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

We are currently subject to various routine legal proceedings and claims incidental to our business.  In our opinion, such routine litigation and claims should not have a material adverse effect upon our consolidated financial statements taken as a whole.

We are also subject to two purported class action petitions related to the proposed merger with Snyder’s.  On August 5, 2010, Albert A. Ward filed a class action complaint on behalf of Lance’s stockholders against Lance, the members of Lance’s board of directors and Snyder’s in the Superior Court of Mecklenburg County, North Carolina, which is referred to as the “Ward suit.” The Ward suit generally alleges that the valuation of the proposed merger unfairly overvalues the relative contribution of Snyder’s and that the defendants breached their fiduciary duties by failing to maximize stockholder value in connection with the proposed merger and their duty of candor by distributing an offering document related to the proposed merger that was incomplete or incorrect. The Ward suit see ks: (i) injunctive relief preventing consummation of the proposed merger, unless and until Lance adopts and implements a procedure or process to obtain a transaction that provides the best possible terms for stockholders; (ii) injunctive relief preventing consummation of the proposed merger, unless and until Lance’s disclosure of all material facts concerning the proposed merger, its terms, and valuation; (iii) a directive to the individual defendants to exercise their fiduciary duties to obtain a transaction which is in the best interests of Lance stockholders; and (iv) rescission of, to the extent already implemented, the proposed merger agreement and any of the terms thereof. The lawsuit is in a preliminary stage and has been removed to the North Carolina Business Court. Lance, the Lance board of directors and Snyder’s believe that the lawsuit is without merit and intend to defend it vigorously.

On September 3, 2010, David Shaev filed a class action complaint on behalf of Lance’s stockholders in the United States District Court for the Western District of North Carolina, Charlotte Division, against Lance, the members of Lance’s board of directors and Snyder’s, which is referred to as the “Shaev complaint.” The Shaev complaint generally alleges that (i) the preliminary joint proxy statement/prospectus filed with the SEC on August 13, 2010 by Lance contained material omissions and misrepresentations and (ii) the board of directors of Lance, aided and abetted by Lance and Snyder’s, breached its state-law fiduciary duties to Lance stockholders by failing to maximize shareholder value by agreeing to sell Lance for inadequate consideration and disseminating an inadequate joint proxy statement/prospectus. The Shaev complaint seeks, among other things: (i) injunctive relief to prevent proceeding with, consummating or closing the proposed merger, unless and until the disclosures requested in the Shaev complaint are made and, (ii) in the event the proposed merger is consummated, rescission of the proposed merger or the award of rescissory damages. The lawsuit is in a preliminary stage. Lance, the Lance board of directors and Snyder’s believe that the lawsuit is without merit and intend to defend it vigorously.

Item 1A.  Risk Factors

In addition to the risk factors disclosed in Item 1A – Risk Factors in our Annual Report on Form 10-K for the year ended December 26, 2009, the following additional risks related to the proposed merger with Snyder’s should be carefully considered.

The merger may present certain risks to our business prior to the closing of the merger, including, among other things, risks that:

·   employees may experience uncertainty, which might adversely affect our ability to retain, recruit and motivate key personnel;

·   management’s attention and other company resources may be directed toward the completion of the merger and may be diverted from day-to-day business operations, including pursuing other opportunities beneficial to Lance;

·   vendors, suppliers, customers and other third parties with business relationships with us may seek to terminate and/or renegotiate their relationships as a result of the merger;

·   the outcomes of any legal proceedings to the extent initiated against Lance or Snyder’s or its respective directors or officers following the announcement of the merger are uncertain; and

·   failure to complete the merger may require us to pay a termination fee or negatively impact our stock price.

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LANCE, INC. AND SUBSIDIARIES

In addition, certain risks may continue to exist after the closing of the merger, including, among other things, risks that:

·   we may not be able to fully realize the anticipated synergies and benefits of the merger;

·   we may incur significant expenses or charges in connection with the closing of the merger, including expenses under our employee incentive plans if a change in control is deemed to occur under those plans;

·   we may be unable to integrate our businesses and workforce successfully;

·   the completion of the merger will require us to obtain a waiver under or refinance our existing credit facilities, and we may be forced to raise funds in an alternative manner which could be more costly or unavailable;

·   the merger will result in changes to our board of directors and management that may affect the combined company’s strategy; and

·   we may not be able to retain key employees after the merger.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

Our Credit Agreement dated October 20, 2006, restricts our payment of cash dividends and repurchases of common stock if, after payment of any dividends or any repurchases of common stock, our consolidated stockholders’ equity would be less than $125.0 million.  At September 25, 2010, our consolidated stockholders’ equity was $285.5 million.

In December 2008, the Board of Directors approved the repurchase of up to 100,000 shares of common stock from employees.  On July 21, 2010, the Board of Directors approved the repurchase of up to an additional 100,000 shares, or up to $2.4 million, of common stock from employees.  The purpose of the repurchase is to acquire shares of common stock from employees to cover withholding taxes payable by employees upon the vesting of shares of restricted stock.  There were no repurchases of common shares during the third quarter of 2010.  The maximum number of shares remaining to be purchased at September 25, 2010 was 137,107.

Item 3.  Defaults Upon Senior Securities

None.

Item 5.  Other Information

None.

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LANCE, INC. AND SUBSIDIARIES

Item 6.  Exhibits

Exhibit Index

No.	Description
2.1	Agreement and Plan of Merger, dated as of July 21, 2010 among Lance, Inc., Lima Merger Corp. and Snyder’s, Inc., incorporated herein by reference to Exhibit 2.1 to Amendment No. 2 of the Registrant’s Registration Statement on Form S-4 filed on October 21, 2010 (File No. 333-168849).
2.2	Amendment No. 1 to Agreement and Plan of Merger among Lance, Inc., Lima Merger Corp. and Snyder’s of Hanover, Inc., dated as of September 30, 2010, incorporated herein by reference to Exhibit 2.2 to Amendment No. 2 of the Registrant’s Registration Statement on Form S-4 filed on October 21, 2010 (File No. 333-168849).
3.1	Restated Articles of Incorporation of Lance, Inc. as amended through April 17, 1998, incorporated herein by reference to Exhibit 3 to the Registrant's Quarterly Report on Form 10-Q for the twelve weeks ended June 13, 1998 (File No. 0-398).
3.2	Bylaws of Lance, Inc., as amended through September 30, 2010, incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on October 6, 2010 (File No. 0-398).
10.1	Voting Agreement, dated as of July 21, 2010, among Lance, Inc., Michael A. Warehime, Patricia A. Warehime and Charles E. Good, incorporated herein by reference to Exhibit 10.1 to Amendment No. 2 of the Registrant’s Registration Statement on Form S-4 filed on October 21, 2010 (File No. 333-168849).
10.2	Standstill Agreement, dated as of July 21, 2010, among Lance, Inc., Michael A. Warehime and Patricia A. Warehime, incorporated herein by reference to Exhibit 10.2 to Amendment No. 2 of the Registrant’s Registration Statement on Form S-4 filed on October 21, 2010 (File No. 333-168849).
10.3	Amendment No. 1 to Standstill Agreement among Lance, Inc., Michael A. Warehime and Patricia A. Warehime, effective as of September 30, 2010, incorporated herein by reference to Exhibit 10.3 to Amendment No. 2 of the Registrant’s Registration Statement on Form S-4 filed on October 21, 2010 (File No. 333-168849).
10.4	Lance Inc. 1995 Nonqualified Stock Option Plan for Non-Employee Directors, as amended through September 30, 2010, 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.
101	Financial Statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 25, 2010, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Cash Flows, and (iv) the Notes to the Condensed Consolidated Financial Statements.

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LANCE, INC. AND SUBSIDIARIES

Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
	LANCE, INC.
	By:	/s/ Rick D. Puckett
		Rick D. Puckett
		Executive Vice President, Chief Financial Officer,
		Treasurer and Secretary
Dated:  November 3, 2010

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