Snyder's-lance (LNCE) 10-Q 2006 Q2 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 quarterly (thirteen week) period ended July 1, 2006

Commission File Number 0-398

LANCE, INC.

(Exact name of registrant as specified in its charter)

North Carolina	56-0292920
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)
8600 South Boulevard
P.O. Box 32368
Charlotte, North Carolina	28232
(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.

Yesþ       Noo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filero Accelerated filerþ Non-accelerated filero

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

Yeso      Noþ

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 July 24, 2006, was 30,787,447 shares.

LANCE, INC. AND SUBSIDIARIES

INDEX

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets – July 1, 2006 (Unaudited) and December 31, 2005		3
Condensed Consolidated Statements of Income (Unaudited) – Thirteen And Twenty-Six Weeks Ended July 1, 2006 and June 25, 2005		4
Condensed Consolidated Statements of Stockholders’ Equity and Comprehensive Income (Unaudited) – Twenty-Six Weeks Ended July 1, 2006 and June 25, 2005		5
Condensed Consolidated Statements of Cash Flows (Unaudited) – Twenty- Six Weeks Ended July 1, 2006 and June 25, 2005		6
Notes to Condensed Consolidated Financial Statements (Unaudited)		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		13
Item 3. Quantitative and Qualitative Disclosures about Market Risk		20
Item 4. Controls and Procedures		21
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		21
Item 1A. Risk Factors		21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		21
Item 4. Submission of Matters to a Vote of Security Holders		22
Item 6. Exhibits		22
SIGNATURE		24

2

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

LANCE, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets
As of July 1, 2006 (Unaudited) and December 31, 2005
(In thousands, except share data)

	July 1,		December 31,
	2006		2005
ASSETS
Current assets
Cash and cash equivalents	$	1,279	$	3,543
Accounts receivable (less allowance for doubtful accounts)		67,598		59,088
Inventories		41,829		36,409
Deferred income tax asset		12,669		10,160
Assets held for sale		—		3,020
Prepaid expenses and other		8,933		7,405
Total current assets		132,308		119,625
Other assets
Property, plant & equipment, net		201,555		186,093
Goodwill, net		50,636		49,169
Other intangible assets, net		10,163		10,704
Other assets		3,485		3,488
Total assets	$	398,147	$	369,079
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt	$	53,791	$	36,000
Accounts payable		27,534		20,378
Accrued compensation		23,075		23,270
Accrued profit-sharing and retirement plan contributions		2,822		3,971
Accrual for medical and casualty insurance claims		7,048		7,500
Other payables and accrued liabilities		25,269		24,931
Total current liabilities		139,539		116,050
Other liabilities and deferred credits
Long-term debt		—		10,215
Deferred income taxes		25,536		26,739
Accrued postretirement health care costs		2,151		2,711
Accrual for casualty insurance claims		8,581		8,227
Other long-term liabilities		3,473		3,428
Total other liabilities and deferred credits		39,741		51,320
Stockholders’ equity
Common stock, $0.83 1/3 par value (authorized: 75,000,000 shares; 30,783,697 and 29,808,705 shares outstanding at July 1, 2006 and December 31, 2005)		25,902		24,964
Preferred stock, $1.00 par value (authorized: 5,000,000 shares; 0 shares outstanding at July 1, 2006 and December 31, 2005)		—		—
Additional paid-in capital		29,056		13,747
Unamortized portion of restricted stock awards		—		(2,490	)
Retained earnings		156,124		160,407
Accumulated other comprehensive income		7,785		5,081
Total stockholders’ equity		218,867		201,709
Total liabilities and stockholders’ equity	$	398,147	$	369,079

See Notes to Condensed Consolidated Financial Statements (Unaudited).

3

LANCE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income (Unaudited)
For the Thirteen and Twenty-Six Weeks Ended July 1, 2006 and June 25, 2005
(In thousands, except share and per share data)

	Thirteen		Thirteen			Twenty-Six		Twenty-Six
	Weeks		Weeks			Weeks		Weeks
	Ended		Ended			Ended		Ended
	July 1,		June 25,			July 1,		June 25,
	2006		2005			2006		2005
Net sales and other operating revenue	$	192,814	$	166,768		$	380,254	$	313,572
Cost of sales and operating expenses/(income):
Cost of sales		106,409		89,748			212,680		169,170
Selling, marketing and delivery		61,834		54,904			129,721		107,337
General and administrative		11,901		11,412			23,540		19,327
Provisions for employees’ retirement plans		1,846		1,381			3,868		2,822
Amortization of intangibles		61		—			99		—
Other, net		237		(82	)		356		(50	)
Total costs and expenses		182,288		157,363			370,264		298,606
Earnings before interest and income taxes		10,526		9,405			9,990		14,966
Interest expense, net		828		550			1,496		1,094
Earnings before income taxes		9,698		8,855			8,494		13,872
Income taxes		3,539		3,219			3,100		4,966
Net income	$	6,159	$	5,636		$	5,394	$	8,906
Earnings per share
Basic	$	0.20	$	0.19		$	0.18	$	0.30
Diluted	$	0.20	$	0.19		$	0.18	$	0.30
Weighted average shares outstanding — basic		30,462,000		29,834,000			30,197,000		29,767,000
Weighted average shares outstanding — diluted		30,935,000		30,146,000			30,622,000		30,076,000

See Notes to Condensed Consolidated Financial Statements (Unaudited).

4

LANCE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity and Comprehensive Income (Unaudited)
For the Twenty-Six Weeks Ended July 1, 2006 and June 25, 2005
(In thousands, except share data)

									Unamortized
									Portion of						Accumulated
						Additional			Restricted						Other
				Common		Paid-in			Stock			Retained			Comprehensive
	Shares			Stock		Capital			Awards			Earnings			Income(Loss)			Total
Balance, December 25, 2004		29,747,596		$	24,788	$	11,500		$	(534	)	$	160,993		$	1,968		$	198,715
Comprehensive income:
Net income		—			—		—			—			8,906			—			8,906
Unrealized gain on interest rate swap, net of tax effect of $(183)		—			—		—			—			—			310			310
Unrealized loss on forward exchange contracts, net of tax effect of $11		—			—		—			—			—			(20	)		(20	)
Foreign currency translation adjustment		—			—		—			—			—			(15	)		(15	)
Total comprehensive income																			9,181
Cash dividends paid to stockholders		—			—		—			—			(9,495	)		—			(9,495	)
Stock options exercised		247,136			206		3,227			—			—			—			3,433
Cancellation and amortization of restricted stock		(18,275	)		110		2,124			(2,113	)		—			—			121
Balance, June 25, 2005		29,976,457		$	25,104	$	16,851		$	(2,647	)	$	160,404		$	2,243		$	201,955
Balance, December 31, 2005		29,808,705		$	24,964	$	13,747		$	(2,490	)	$	160,407		$	5,081		$	201,709
Comprehensive income:
Net income		—			—		—			—			5,394			—			5,394
Foreign currency translation adjustment		—			—		—			—			—			2,565			2,565
Unrealized gain on forward exchange contracts, net of tax effect of $(77)		—			—		—			—			—			139			139
Total comprehensive income																			8,098
Cash dividends paid to stockholders		—			—		—			—			(9,677	)		—			(9,677	)
Stock options exercised		946,567			790		16,246			—			—			—			17,036
Conversion of liability to equity instrument		—			—		634			—			—			—			634
Stock based compensation (FAS 123R)		—			—		(2,097	)		2,490			—			—			393
Cancellation, issuance and amortization of restricted stock		28,425			148		526			—			—			—			674
Balance, July 1, 2006		30,783,697		$	25,902	$	29,056		$	—		$	156,124		$	7,785		$	218,867

     See Notes to Condensed Consolidated Financial Statements (Unaudited).

5

LANCE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)
For the Twenty-Six Weeks Ended July 1, 2006 and June 25, 2005
(In thousands)

	Twenty-Six			Twenty-Six
	Weeks Ended			Weeks Ended
	July 1, 2006			June 25, 2005
Operating activities
Net income	$	5,394		$	8,906
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		13,388			13,889
Loss on sale of property, net		(4	)		(47	)
Deferred income taxes		(3,796	)		(1,598	)
Changes in operating assets and liabilities		(7,894	)		(14,265	)
Net cash from operating activities		7,088			6,885
Investing activities
Purchases of property and equipment		(27,198	)		(15,803	)
Acquisition of business, net of cash acquired		—			(4,829	)
Proceeds from sale of property		2,762			669
Net cash used in investing activities		(24,436	)		(19,963	)
Financing activities
Dividends paid		(9,677	)		(9,495	)
Issuance of common stock		17,036			2,968
Net proceeds from revolving credit facilities		7,505			—
Net cash flow from/(used in) financing activities		14,864			(6,527	)
Effect of exchange rate changes on cash		220			(56	)
Decrease in cash and cash equivalents		(2,264	)		(19,661	)
Cash and cash equivalents at beginning of period		3,543			41,466
Cash and cash equivalents at end of period	$	1,279		$	21,805
Supplemental information:
Cash paid for income taxes, net of refunds of $2 and $424, respectively	$	3,430		$	4,706
Cash paid for interest	$	1,676		$	1,245
Stock option exercise tax benefit included in stockholders’ equity				$	465

See Notes to Condensed Consolidated Financial Statements (Unaudited).

6

LANCE, INC. AND SUBSIDIARIES

Notes to 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 31, 2005 filed with the Securities and Exchange Commission (the “SEC”) on March 9, 2006. 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 July 1, 2006 and December 31, 2005 and the condensed consolidated statements of income for the thirteen and twenty-six weeks ended July 1, 2006 and June 25, 2005 and the condensed consolidated statements of stockholders’ equity and comprehensive income and cash flows for the twenty-six weeks ended July 1, 2006 and July 25, 2005. 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 thirteen and twenty-six weeks ended July 1, 2006 are not necessarily indicative of the results to be expected for the fifty-two week fiscal year ending December 30, 2006.

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. The principal raw materials used in the manufacture of our snack food products are flour, vegetable oil, sugar, potatoes, peanut butter, 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. These raw materials are generally contracted up to a year in advance.

5. We utilize the dollar value last-in, first-out (“LIFO”) method of determining the cost of approximately 40% of our inventories. Because inventory calculations under the LIFO method are based on annual determinations, the determination of interim LIFO valuations requires estimating year-end costs and levels of inventories. The possibility of 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 as finally determined for the full year.

7

LANCE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

Inventories consist of (in thousands):

	July 1,			December 31,
	2006			2005
Finished goods	$	23,936		$	22,658
Raw materials		8,442			7,630
Supplies, etc.		14,157			11,041
Total inventories at FIFO cost		46,535			41,329
Less adjustments to reduce FIFO cost to LIFO cost		(4,706	)		(4,920	)
Total inventories	$	41,829		$	36,409

6. The following tables provide a reconciliation of the common shares used for basic earnings per share and diluted earnings per share for the thirteen and twenty-six weeks ended July 1, 2006 and June 25, 2005 (there are no adjustments to reported net income required when computing diluted earnings per share for the numerator amounts of basic and diluted earnings per share):

	Thirteen Weeks Ended
	July 1,		June 25,
(in thousands)	2006		2005
Weighted average number of common shares used for basic earnings per share		30,462		29,834
Effect of dilutive potential shares		473		312
Weighted average number of common shares and dilutive potential shares used for diluted earnings per share		30,935		30,146
Anti-dilutive shares excluded from the above reconciliation		—		529

	Twenty-Six Weeks
	Ended
	July 1,		June 25,
(in thousands)	2006		2005
Weighted average number of common shares used for basic earnings per share		30,197		29,767
Effect of dilutive potential shares		425		309
Weighted average number of common shares and dilutive potential shares used for diluted earnings per share		30,622		30,076
Anti-dilutive shares excluded from the above reconciliation		—		529

8

LANCE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

7.	During the twenty-six weeks ended July 1, 2006 and June 25, 2005, we included in accumulated other comprehensive income unrealized gains/(losses) of $2.6 million and ($15,000), respectively, due to foreign currency translation. Income taxes on the foreign currency translation adjustment in other comprehensive income were not recognized because the earnings are intended to be reinvested indefinitely in those operations. Also included in accumulated other comprehensive income for the twenty-six weeks ended July 1, 2006 and June 25, 2005, were unrealized gains of $139,000, net of tax effect of $77,000, and $290,000, net tax effect of $172,000, respectively, related to an interest rate swap and forward exchange contracts accounted for in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 133.
8.	In 2002, we adopted SFAS No. 142, “Goodwill and Other Intangible Assets,” which requires that goodwill and intangible assets with indefinite useful lives no longer be amortized but instead tested for impairment at least annually. The criteria provided in SFAS No. 142 require the testing of impairment based on fair value. SFAS No. 142 also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values. We test goodwill and intangible assets for impairment no less than annually as required under the provisions of SFAS No. 142. These tests indicated that there was no impairment of goodwill or intangible assets.
	The change in the carrying amount of goodwill for the twenty six weeks ended July 1, 2006 is as follows:

	Net Carrying
(in thousands)	Amount
Balance as of December 31, 2005	$	49,169
Foreign currency exchange rate changes		1,467
Balance as of July 1, 2006	$	50,636

	As of July 1, 2006, we had trademarks with a carrying value of $9.6 million. Trademarks are deemed to have an indefinite useful life because they are expected to generate cash flows indefinitely. Therefore, under the provisions of SFAS 142, the trademarks are no longer amortized. Other intangible assets are amortized over their useful lives.
9.	Sales to our largest customer, Wal-Mart Stores, Inc., were 19% and 22% of revenue for the thirteen weeks ended July 1, 2006 and June 25, 2005, respectively, and 19% and 21% of revenue for the twenty-six weeks ended July 1, 2006 and June 25, 2005, respectively. Accounts receivable at July 1, 2006 and December 31, 2005 included receivables from Wal-Mart Stores, Inc. totaling $16.8 million and $11.8 million, respectively.
10.	For the thirteen weeks ended July 1, 2006 and June 25, 2005, net bad debt expense/(benefit) was $12,000 and ($74,000), respectively, and for the twenty-six weeks ended July 1, 2006 and June 25, 2005, net bad debt expense/(benefit) was ($0.1 million) and $0.4 million, respectively. Net bad debt expense is included in selling, marketing and delivery expenses.

9

LANCE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

11.	Beginning January 1, 2006, we adopted SFAS No. 123(R), “Share-Based Payment,” which requires the measurement of the cost of employee services received in exchange for an award of an equity instrument based on the grant-date fair value of the award. We elected the modified prospective application method in adopting SFAS 123(R), and prior period amounts have not been restated. In accordance with SFAS 123(R), we have calculated the fair value of our stock options issued to employees using the Black-Scholes model at the time the options were granted. That amount is amortized over the vesting period of the option.
	Prior to the effective date, we followed Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations for stock options granted to employees and directors. Because the exercise price of our stock options equals the fair market value of the underlying stock on the date of grant, no compensation expense was recognized. We had adopted the disclosure-only provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure.”
	The following illustrates the pro-forma information, as required under SFAS 123, determined as if we had applied the fair value method of accounting for stock options, during the thirteen and twenty-six weeks ended June 25, 2005:

	Thirteen		Twenty-Six
	Weeks Ended		Weeks Ended
(in thousands, except per share data)	June 25, 2005		June 25, 2005
Net income as reported	$	5,636	$	8,906
Earnings per share as reported — basic		0.19		0.30
Earnings per share as reported — diluted		0.19		0.30
Additional stock based compensation costs, net of income tax, that would have been included in net income if the fair value method had been applied		42		84
Pro-forma net income		5,594		8,822
Pro-forma earnings per share — basic		0.19		0.30
Pro-forma earnings per share — diluted	$	0.19	$	0.29

There were not any options granted during the thirteen weeks ended July 1, 2006. The following assumptions were used in valuing under SFAS 123(R) our options granted during the twenty-six weeks ended July 1, 2006:

	For the Twenty-Six
	Weeks Ended
	July 1, 2006
Stock option grants		108,652
Weighted average risk-free interest rate		4.54	%
Expected life	6.5 years
Expected volatility		31.2	%
Weighted average dividend yield		3.21	%

10

LANCE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

The weighted-average fair value of stock options granted during the twenty-six weeks ended July 1, 2006 was $5.50 per option granted. The additional stock-based compensation expense, as compared to the prior year, related to the adoption of SFAS 123(R) was $0.4 million and $1.0 million for the thirteen and twenty-six weeks ended July 1, 2006, respectively, which includes both the effects of the issuance of non-qualified stock options and long-term plans with future grant dates.

Prior to the adoption of SFAS 123(R), we presented all tax benefits of deductions resulting from the exercise of stock options as operating cash flows in the condensed consolidated statements of cash flows. SFAS 123(R) requires the cash flows resulting from tax deductions in excess of the compensation cost recognized for those stock options (excess tax benefits) to be classified as financing cash flows. Prior to the adoption of SFAS 123(R), the unamortized portion of restricted stock was presented as a separate item on the condensed consolidated balance sheet. Under FAS 123(R) it is included as a reduction in additional paid-in capital as of January 1, 2006.

12. Net periodic benefit cost/(benefit) for our post-retirement medical benefit plan for the thirteen weeks ended July 1, 2006 and June 25, 2005 consists of the following:

	For the Thirteen Weeks Ended
(in thousands)	July 1, 2006			June 25, 2005
Components of net periodic benefit cost/(benefit):
Service cost	$	1		$	10
Interest cost		12			18
Recognition of prior service costs		—			—
Recognized net gain		(181	)		(173	)
Net periodic benefit	$	(168	)	$	(145	)

	For the Twenty-Six Weeks Ended
(in thousands)	July 1, 2006			June 25, 2005
Components of net periodic benefit cost/(benefit):
Service cost	$	1		$	21
Interest cost		25			36
Recognition of prior service costs		—			—
Recognized net gain		(362	)		(347	)
Net periodic benefit	$	(336	)	$	(290	)

For the thirteen and twenty-six weeks ended July 1, 2006, we paid $0.3 million and $0.4 million in retiree benefit claims and received $0.1 million and $0.2 million in plan participant contributions, respectively. For the thirteen and twenty-six weeks ended June 25, 2005, we paid $0.2 million and $0.4 million in retiree benefit claims and received $0.1 million and $0.2 million in plan participant contributions, respectively.

11

LANCE, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

13. At July 1, 2006 and December 31, 2005, we had the following debt outstanding:

	July 1,		December 31,
(in thousands)	2006		2005
Unsecured revolving credit facility $60 million and Cdn $25 million due February 8, 2007	$	10,791	$	10,215
Unsecured short-term revolving credit facility $50 million due October 20, 2006		43,000		36,000
Total debt		53,791		46,215
Less current portion of long-term debt		53,791		36,000
Total long-term debt	$	—	$	10,215

14. Lance, Inc. was one of nine companies sued in August 2005 in the Superior Court for the State of California for the County of Los Angeles by the Attorney General of the State of California for alleged violations of California Proposition 65. California Proposition 65 is a state law that, in part, requires Companies to warn California residents if a product contains chemicals listed within the statute. The plaintiff seeks injunctive relief and penalties but has made no specific demands. We intend to vigorously defend this suit. A related Complaint filed by the Environmental Law Foundation, as previously disclosed in our Form 10-K for the year ended December 31, 2005, was dismissed in the first quarter of 2006.

15. The Company issued 300,000 restricted stock units in May 2005, of which 150,000 are to be settled in cash and 150,000 were to be settled in stock. During the thirteen weeks ended July 1, 2006, the Compensation Committee of the Board of Directors approved an amendment re-designating the 150,000 units that were to be settled in cash to units settled in stock. Pursuant to SFAS 123(R), these restricted units are now classified as equity as opposed to a liability. Accordingly, there was a $0.6 million increase to additional paid-in capital recorded on the condensed consolidated balance sheet with an offsetting reduction in long-term liabilities during the quarter ended July 1, 2006.

16. At December 31, 2005, we had $3.0 million of assets held for sale primarily related to a plant that was closed subsequent to acquiring substantially all of the assets of Tom’s Foods Inc. During the twenty-six week period ended July 1, 2006, certain assets have been sold; however, the real property related to the plant closure, although actively marketed, is no longer classified as current assets held for sale. Accordingly, as of July 1, 2006 these assets are included in Property, Plant and Equipment.

17. In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting For Uncertainty in Income Taxes – an Interpretation of FASB Statement 109”. It is effective for fiscal years beginning after December 15, 2006. We are still evaluating the impact that it will have on our financial condition, results of operations and cash flows.

12

LANCE, INC. AND SUBSIDIARIES

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

Results of Operations

Thirteen Weeks Ended July 1, 2006 Compared to Thirteen Weeks Ended June 25, 2005

										Variance
	Thirteen Weeks Ended									Favorable/
($ In thousands)	July 1, 2006				June 25, 2005					(Unfavorable)
Revenue	$	192,814	100.0	%	$	166,768		100.0	%	$	26,046			15.6	%
Cost of sales		106,409	55.2	%		89,748		53.8	%		(16,661	)		(18.6	%)
Gross margin		86,405	44.8	%		77,020		46.2	%		9,385			12.2	%
Selling, marketing and delivery expenses		61,834	32.0	%		54,904		32.9	%		(6,930	)		(12.6	%)
General and administrative expenses		11,901	6.2	%		11,412		6.8	%		(489	)		(4.3	%)
Provisions for employees’ retirement plans		1,846	1.0	%		1,381		0.8	%		(465	)		(33.7	%)
Amortization of intangibles		61	0	%		—		0.0	%		(61	)	NM
Other, net		237	0.1	%		(82	)	(0.0	%)		(319	)	NM
Earnings before interest and taxes		10,526	5.5	%		9,405		5.6	%		1,121			11.9	%
Interest expense, net		828	0.4	%		550		0.3	%		(278	)		(50.5	%)
Income taxes		3,539	1.8	%		3,219		1.9	%		(320	)		(9.9	%)
Net income	$	6,159	3.2	%	$	5,636		3.4	%	$	523			9.3	%

Results of operations for the thirteen weeks ended July 1, 2006 were significantly impacted by the acquisition of substantially all of the assets of Tom’s Foods Inc. (“TFI”), which occurred during the fourth quarter of 2005. Integration of the TFI acquisition continued through the second quarter of 2006 and resulted in carrying incremental overhead costs during this stage of the integration plan, which is expected to be completed by the end of 2006. Included in these costs was an expense of approximately $0.4 million related to retention incentives for employees important to the integration process and impairment costs of $0.2 million for equipment related to the Knoxville, Tennessee plant closure that began during the second quarter. For the thirteen weeks ended June 25, 2005, we recorded a $2.5 million charge for executive severance related expenses.

For the thirteen weeks ended July 1, 2006, revenue increased $26.0 million or 16% compared to the thirteen weeks ended June 25, 2005. Our branded product revenue increased $19.9 million or 19% and non-branded product revenue increased $6.1 million or 10%. The branded product revenue growth was driven by increased revenue from salty snacks of $15.6 million, sandwich crackers and cookies of $5.2 million and nuts of $1.4 million, partially offset by declines in cake and food service products. The increase in salty snack revenue reflected the impact of the addition of Tom’s branded products and an approximately 15% increase in Cape Cod product revenue. The $6.1 million increase in non-branded product revenue consisted of a $6.5 million increase in contract manufacturing revenue primarily due to additional volume from the TFI acquisition and a $1.4 million increase in private label revenue, partially offset by a $1.8 million decline in sales of third-party brands.

For the thirteen weeks ended July 1, 2006, branded product revenue represented 64% of total revenue compared to 62% for the thirteen weeks ended June 25, 2005. For the thirteen weeks ended July 1, 2006, non-branded product revenue, as a percent of total revenue consisted of private label sales (26%), contract manufacturing revenue (9%) and sales of third-party brands

13

LANCE, INC. AND SUBSIDIARIES

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

(1%). For the same period last year, non-branded product revenue, as a percent of total revenue, consisted of private label sales (30%), contract manufacturing revenue (6%) and sales of third-party brands (2%).

Gross margin increased $9.4 million compared to the prior year principally due to increased volume but declined 1.4 percentage points as a percentage of net revenue due to higher conversion costs of the acquired TFI facilities, $1.2 million of higher commodity and natural gas prices, and a $0.5 million unfavorable impact of foreign currency. These increases in expenses as compared to the same prior year thirteen-week period were partially offset by net price increases and improved operating efficiencies at the facilities operated prior to the TFI acquisition.

Selling, marketing and delivery expenses increased $6.9 million compared to the prior year, principally due to higher sales volume. As a percentage of net revenue, these costs decreased 90 basis points driven by better efficiencies. The increased expenses compared to the prior year include higher wages, salary and commission expense of approximately $3.6 million and freight expense increases of $2.9 million of which $1.0 million was related to fuel rate increases.

General and administrative expenses increased $0.5 million compared to prior year. During the same period in the prior year a $2.5 million charge was recorded for executive severance. Excluding this charge, general and administrative expenses would have increased $3.0 million compared to the prior year, or an increase of 80 basis points relative to net revenue. The increase was primarily the result of higher salaries and benefits of $1.3 million, an increase in equity incentive compensation of $0.8 million which includes a $0.4 million increase due to the adoption of SFAS 123(R), and costs relating to retention agreements of approximately $0.4 million.

Provisions for employees’ retirement plans increased $0.5 million due to an increase in the number of employees covered under the retirement plans and changes in one of the employee retirement plans.

Other, net expenses increased $0.3 million primarily as a result of a $0.2 million impairment of equipment recorded in the current thirteen week period as compared to gains on property and equipment recorded in the prior year thirteen week period.

Net interest expense increased $0.3 million due mainly to higher interest income from short-term investments in the prior year compared to the current year.

The effective income tax rate increased slightly from 36.4% for the thirteen weeks ended June 25, 2005 to 36.5% for the thirteen weeks ended July 1, 2006.

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LANCE, INC. AND SUBSIDIARIES

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

Twenty-Six Weeks Ended July 1, 2006 Compared to Twenty-Six Weeks Ended June 25, 2005

	Twenty-Six Weeks Ended									Variance
										Favorable/
($ In thousands)	July 1, 2006				June 25, 2005					(Unfavorable)
Revenue	$	380,254	100.0	%	$	313,572		100.0	%	$	66,682			21.3	%
Cost of sales		212,680	55.9	%		169,170		53.9	%		(43,510	)		(25.7	%)
Gross margin		167,574	44.1	%		144,402		46.1	%		23,172			16.0	%
Selling, marketing and delivery expenses		129,721	34.1	%		107,337		34.2	%		(22,384	)		(20.9	%)
General and administrative expenses		23,540	6.2	%		19,327		6.2	%		(4,213	)		(21.8	%)
Provisions for employees’ retirement plans		3,868	1.0	%		2,822		0.9	%		(1,046	)		(37.1	%)
Amortization of intangibles		99	0.0	%		—		0.0	%		(99	)	NM
Other, net		356	0.1	%		(50	)	(0.0	%)		(406	)	NM
Earnings before interest and taxes		9,990	2.6	%		14,966		4.8	%		(4,976	)		(33.2	%)
Interest expense, net		1,496	0.4	%		1,094		0.3	%		(402	)		(36.7	%)
Income taxes		3,100	0.8	%		4,966		1.6	%		1,866			37.6	%
Net income	$	5,394	1.4	%	$	8,906		2.8	%	$	(3,512	)		(39.4	%)

Results of operations for the twenty-six weeks ended July 1, 2006 were significantly impacted by the TFI acquisition, which occurred during the fourth quarter of 2005. Integration of the TFI acquisition continued through the second quarter of 2006 and resulted in carrying incremental overhead costs during this stage of the integration plan, which is expected to be completed by the end of 2006. Included in these costs for the twenty-six week period was an expense of approximately $2.3 million primarily related to retention incentives for employees important to the integration process. For the twenty-six weeks ended June 25, 2005, we recorded a $2.5 million charge for executive severance related expenses.

For the twenty-six weeks ended July 1, 2006, revenue increased $66.7 million or 21% compared to the twenty-six weeks ended June 25, 2006. Our branded product revenue increased $48.2 million or 25% and non-branded product revenue increased $18.5 million or 16%. The branded product revenue growth was driven by increased revenue from salty snacks of $30.1 million, sandwich crackers and cookies of $12.6 million and nuts of $2.6 million, partially offset by declines in cake and food service products. The increase in salty snack revenue reflected the impact of the addition of Tom’s branded products and approximately 15% increase in Cape Cod product revenue. The $18.5 million increase in non-branded product revenue consisted of an $11.4 million increase in contract manufacturing revenue primarily as a result of the TFI acquisition and a $9.9 million increase in private label revenue due to continued revenue growth from new and existing customers partially offset by a $2.8 million decline in sales of third-party brands.

For the twenty-six weeks ended July 1, 2006, branded product revenue represented 64% of total revenue compared to 62% for the twenty-six weeks ended June 25, 2005. For the twenty-six weeks ended July 1, 2006, non-branded product revenue, as a percent of total revenue consisted of private label sales (26%), contract manufacturing revenue (9%) and sales of third-party brands (1%). For the same period last year, non-branded product revenue, as a percent

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LANCE, INC. AND SUBSIDIARIES

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

of total revenue consisted of private label sales (29%), contract manufacturing revenue (7%) and sales of third-party brands (2%).

Gross margin increased $23.2 million principally due to increased volume but declined 2.0 percentage points as a percentage of net revenue due to higher conversion costs of the acquired TFI facilities, $2.8 million higher commodity and natural gas prices, and a $0.9 million unfavorable impact of foreign currency as compared to the prior year. These increased expenses compared to the same prior year twenty-six week period were partially offset by net price increases and improved operational efficiencies at the facilities owned prior to the TFI acquisition.

Selling, marketing and delivery expenses increased $22.4 million compared to the prior year principally due to higher sales volume. As a percentage of net revenue, these costs decreased 10 basis points year over year. The increase in expenses compared to the prior year includes increases in wages, salary and commission expense of approximately $10.3 million, increased freight expenses of $5.9 million, of which approximately $1.7 million related to fuel rate increases. Other increases compared to the prior year include costs related to employee retention agreements of approximately $1.5 million, increased spending for advertising of $1.2 million and various other volume related expenses.

General and administrative expenses increased $4.2 million compared to prior year. During the same period in the prior year a $2.5 million charge was recorded for executive severance. Excluding this charge, general and administrative expenses would have increased $6.7 million compared to the prior year, or an increase of 80 basis points relative to net revenue. The increase was primarily the result of higher salary related costs of $2.7 million, increases in equity incentive compensation of $1.8 million, which includes a $1.0 million increase due to the adoption of SFAS 123(R) and costs relating to retention agreements of approximately $0.8 million. Other increases compared to the prior year include severance costs, relocation expenses and professional fees.

Provisions for employees’ retirement plans increased $1.0 million due to an increase in the number of employees covered under the retirement plans as well as changes in one of the employee retirement plans.

Other, net expenses increased $0.4 million primarily as a result of a $0.2 million impairment of equipment recorded in the current twenty-six week period as compared to gains on property and equipment recorded in the prior year twenty-six week period.

Net interest expense increased $0.4 million due mainly to higher interest income from short-term investments in the prior year.

The effective income tax rate increased slightly from 35.8% for the twenty-six weeks ended June 25, 2005 to 36.5% for the twenty-six weeks ended July 1, 2006. The increase was the result of unfavorable tax differences as compared to the prior year.

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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

For the twenty-six weeks ended July 1, 2006, the principal sources of liquidity for operating needs were provided by financing activities, operating activities and cash on hand. Cash flow from operating activities, cash on hand and existing borrowing facilities are believed to be sufficient for the foreseeable future to enable us to meet our obligations, fund capital expenditures and pay cash dividends. As of July 1, 2006, cash and cash equivalents totaled $1.3 million.

Cash Flow

Net cash flow provided by operating activities was $7.1 million and $6.9 million for the twenty-six weeks ended July 1, 2006 and July 25, 2005, respectively. Working capital other than cash and cash equivalents and current portion of long-term debt increased to $45.3 million from $36.0 million at December 31, 2005.

Net cash flow used in investing activities was $24.4 million for the twenty-six weeks ended July 1, 2006. Cash expenditures for fixed assets, principally manufacturing equipment, step-vans for field sales representatives and sales displays, totaled $27.2 million, partially funded by proceeds from the sale of assets of $2.8 million.

Cash provided by financing activities for the twenty-six weeks ended July 1, 2006 totaled $14.9 million. Cash used in financing activities for the twenty-six weeks ended June 25, 2005 totaled $6.5 million. During the twenty-six weeks ended July 1, 2006 and June 25, 2005, we paid dividends of $0.32 per share totaling $9.7 million and $9.5 million, respectively. In addition, we received cash of $17.0 million and $3.0 million during the twenty-six weeks ended July 1, 2006 and June 25, 2005, respectively, as a result of the exercise of stock options by employees. Net proceeds from our revolving credit facility totaled $7.5 million during the twenty-six weeks ended July 1, 2006.

Stock Repurchases

On February 9, 2006, the Board of Directors authorized the repurchase of up to 1.0 million shares of our common stock through February 2007. For the twenty-six weeks ended July 1, 2006, we did not repurchase any shares of our common stock but we regularly evaluate our share repurchase opportunities.

Dividends

On July 27, 2006, the Board of Directors declared a quarterly cash dividend of $0.16 per share, payable on August 18, 2006 to stockholders of record on August 10, 2006.

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LANCE, INC. AND SUBSIDIARIES

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

Investing Activities

Capital expenditures are expected to continue at a level sufficient to support our strategic and operating needs. Capital expenditures and other investing activities for 2006 are projected to range between $45 and $55 million funded by net cash flow from operating activities, cash on hand and borrowing facilities. Capital expenditures for purchases of property and equipment were $27.6 million for the year ended December 31, 2005.

Debt

Under the unsecured revolving credit facility, as of July 1, 2006 we had the ability to borrow up to $60 million and Canadian (“Cdn”) $25 million through February 8, 2007. Under the unsecured short-term revolving credit facility we had the ability to borrow up to $50 million through October 20, 2006. At July 1, 2006 and December 31, 2005 there was $53.8 million and $46.2 million outstanding, respectively on these revolving credit facilities.

At July 1, 2006 and December 31, 2005, we had the following debt outstanding:

	July 1,		December 31,
(in thousands)	2006		2005
Unsecured revolving credit facility $60 million and Cdn $25 million due February 8, 2007	$	10,791	$	10,215
Unsecured short-term revolving credit facility $50 million due October 20, 2006		43,000		36,000
Total debt		53,791		46,215
Less current portion of long-term debt		53,791		36,000
Total long-term debt	$	—	$	10,215

As of July 1, 2006, cash and cash equivalents totaled $1.3 million. Additional borrowings available under all credit facilities totaled $78.6 million. We have complied with all financial covenants contained in the financing agreements.

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 was $20.6 million as of July 1, 2006.

Commitments and Contingencies

We lease facilities and equipment classified as operating leases. The future minimum lease commitments for operating leases as of July 1, 2006 were $4.3 million.

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LANCE, INC. AND SUBSIDIARIES

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

We have entered into agreements with suppliers for the purchase of certain commodities and packaging materials used in the production process. These agreements arise in the normal course of business and consist of agreements to purchase specific quantities over a period of time. As of July 1, 2006, outstanding purchase commitments totaled approximately $66.2 million. These commitments range in length from a few weeks to 18 months.

Market Risks

The principal market risks that may adversely impact results of operations and financial position are changes in raw material prices, energy and fuel costs, interest and foreign exchange rates and credit risks. We selectively use derivative financial instruments to manage these risks. There are no market risk sensitive instruments held for trading purposes.

At times, we may enter into commodity futures and option contracts to manage fluctuations in prices of anticipated purchases of commodities. Our policy is to use these commodity derivative financial instruments only to the extent necessary to manage these exposures. We do not use these financial instruments for trading purposes. As of July 1, 2006, there were no outstanding commodity futures or option contracts.

Debt obligations and additional borrowings available under our credit facilities incur interest at floating rates, based on changes in U.S. Offshore rate, U.S. base rate, Canadian Bankers’ Acceptance discount rate, and Canadian prime 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. As of July 1, 2006, we had no outstanding interest rate swap agreements. As of July 1, 2006, the weighted average interest rate was 5.62%. A 10% increase in the underlying interest rate would have had an immaterial impact on interest expense for the thirteen and twenty-six weeks ended July 1, 2006 and June 25, 2005.

We are exposed to credit risks related to our accounts receivable. We perform ongoing credit evaluations of our customers to minimize the potential exposure. As of July 1, 2006 and December 31, 2005, we had allowances for doubtful accounts of $3.4 million and $5.3 million, respectively.

Through the operations of our Canadian subsidiary, there is an exposure to foreign exchange rate fluctuations, primarily between U.S. dollars and Canadian dollars. 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 forward contracts to mitigate a portion of this foreign exchange rate exposure. These contracts have maturities through December 2007. As of July 1, 2006, the fair value of liability related to the forward contracts as determined by a third party financial institution was $0.2 million. The impact of foreign exchange on the results of operations was $1.1 million unfavorable as compared to the prior year twenty-six week period.

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LANCE, INC. AND SUBSIDIARIES

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

Due to foreign currency fluctuations during the twenty-six weeks ended July 1, 2006 and June 25, 2005, we recorded a gain of $2.6 million and a loss of $15,000, respectively, in other comprehensive income as a result of the translation of the subsidiary’s financial statements into U.S. dollars.

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 could cause these differences include, but are not limited to, those set forth under Item 1A – Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2005.

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. We undertake no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The principal market risks to which we are exposed that may adversely impact results of operations and financial position include changes in raw material prices, energy and fuel costs, interest and foreign exchange rates and credit risks. 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.”

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LANCE, INC. AND SUBSIDIARIES

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 controls over financial reporting during the quarter ended July 1, 2006 that have materially affected, or that are reasonably likely to materially affect, our internal controls over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Lance, Inc. was one of nine companies sued in August 2005 in the Superior Court for the State of California for the County of Los Angeles by the Attorney General of the State of California for alleged violations of California Proposition 65. California Proposition 65 is a state law that, in part, requires Companies to warn California residents if a product contains chemicals listed within the statute. The plaintiff seeks injunctive relief and penalties but has made no specific demands. We intend to vigorously defend this suit. A related Complaint filed by the Environmental Law Foundation, as previously disclosed in our Form 10-K for the year ended December 31, 2005, was dismissed in the first quarter of 2006.

In addition, we are subject to routine litigation and claims incidental to our business. In the opinion of management, such routine litigation and claims should not have a material adverse effect upon our consolidated financial statements taken as a whole.

Item 1A. Risk Factors

There have been no material changes to the factors disclosed in Item 1A – Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2005.

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

Our Second Amended and Restated Credit Agreement dated February 8, 2002, 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 July 1, 2006, our consolidated stockholders’ equity was approximately $219.0 million.

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LANCE, INC. AND SUBSIDIARIES

Item 4. Submission of Matters to a Vote of Security Holders

At our Annual Meeting of Stockholders held on April 27, 2006, the following proposals were submitted to a vote of the stockholders:

1. Election of nominees to the Board of Directors:

For Term Ending in 2009	Shares Voted in Favor		Shares Withheld
Jeffery A. Atkins		27,807,545		114,768
J.P. Bolduc		27,723,459		198,854
William R. Holland		27,436,003		486,309
Isaiah Tidwell		27,428,382		493,931

2. Ratification of the selection of KPMG LLP as our independent registered public accounting firm for fiscal year 2006; approved by a vote of 27,453,286 shares in favor, 447,237 shares against and 21,788 shares abstaining.

The 2006 Annual Meeting of Stockholders was held on April 27, 2006 and the 2007 Annual Meeting of Stockholders is scheduled for April 26, 2007.

Item 6. Exhibits

          (a) Exhibits

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	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 April 25, 2002, incorporated herein by reference to Exhibit 3.3 to the Registrant’s Quarterly Report on Form 10-Q for the thirteen weeks ended June 29, 2002 (File No. 0-398).
10.1*	Lance, Inc. 2006 Three-Year Incentive Plan for Officers, incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 3, 2006 (File No. 0-398).
10.2*	Lance, Inc. 2006 Annual Performance Incentive Plan for Officers, incorporated herein by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on May 3, 2006 (File No. 0-398).

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LANCE, INC. AND SUBSIDIARIES

10.3*	Restricted Stock Unit Award Agreement Amendment dated April 27, 2006 between the Company and David V. Singer, incorporated herein by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on May 3, 2006 (File No. 0-398).
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a).
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a)
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.

*	Management Contract
	Items 3 and 5 are not applicable and have been omitted.

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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 the 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: July 28, 2006

24

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.

EXHIBITS
Item 6(a)

FORM 10-Q
QUARTERLY REPORT

For the quarterly period ended	Commission File Number
July 1, 2006	0-398

LANCE, INC.

EXHIBIT INDEX

Exhibit
No.	Exhibit Description
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	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 April 25, 2002, incorporated herein by reference to Exhibit 3.3 to the Registrant’s Quarterly Report on Form 10-Q for the thirteen weeks ended June 29, 2002 (File No. 0-398).
10.1*	Lance, Inc. 2006 Three-Year Incentive Plan for Officers, incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 3, 2006 (File No. 0-398).
10.2*	Lance, Inc. 2006 Annual Performance Incentive Plan for Officers, incorporated herein by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on May 3, 2006 (File No. 0-398).
10.3*	Restricted Stock Unit Award Agreement Amendment dated April 27, 2006 between the Company and David V. Singer, incorporated herein by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on May 3, 2006 (File No. 0-398).

Exhibit
No.	Exhibit Description
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a).
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a)
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.

* Management Contract