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SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

For the fiscal year ended December 27, 2003

OR

For the transition period from                      to                     

Commission file number 0-398

LANCE, INC.

8600 South Boulevard, Charlotte, North Carolina 28273

Registrant’s telephone number, including area code: (704) 554-1421

Securities Registered Pursuant to Section 12(b) of the Act: NONE

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 [X]  No [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   [  ]

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes [X]  No [  ]

The aggregate market value of shares of the Registrant’s $.83-1/3 par value Common Stock, its only outstanding class of voting stock, held by non-affiliates as of June 28, 2003, the last business day of the Registrant’s most recently completed second fiscal quarter, was approximately $263,077,000.

The number of shares outstanding of the Registrant’s $.83-1/3 par value Common Stock, its only outstanding class of Common Stock, as of February 17, 2004, was 29,300,393 shares.

Document Incorporated by Reference

Portions of the Proxy Statement for the Annual Meeting of Stockholders to be held on April 22, 2004 are incorporated by reference into Part III of this Form 10-K.

PART I

Item 1. Business

General

Lance, Inc. was incorporated as a North Carolina corporation in 1926. Lance, Inc. and its subsidiaries are collectively referred to herein as the Company. The Company operates in one segment, snack food products. The Company’s principal operations are located in Charlotte, North Carolina. In 1979, the Company acquired its Midwest bakery operations which are located in Burlington, Iowa. In 1999, the Company acquired its sugar wafer operations which are located in Ontario Canada and its Cape Cod potato chip operations which are located in Hyannis, Massachusetts.

Products

The Company manufactures, markets and distributes a variety of snack food products. The Company’s manufactured products include sandwich crackers and cookies, crackers, cookies, potato chips, nuts, cakes and other salty snacks. In addition, the Company purchases for resale certain cakes, candy, meat snacks, bread basket items, salty snacks and cookies in order to broaden the Company’s product offerings. The Company also uses third-party manufacturers to produce certain products that are also manufactured by the Company based on production commitments and location of customers. Products are packaged in various individual-size, multi-pack and family-size configurations. Of the products sold by the Company, approximately 80% are manufactured by the Company with the balance purchased for resale.

The Company sells both branded and non-branded products. The Company’s branded products are principally sold under the Lance and Cape Cod brand names and during 2003 represented 64% of total revenues. Non-branded product revenues represented 36% of total 2003 revenues. Non-branded products consist of private label products, products sold to other manufacturers and products sold under third-party brands. Private label products are sold to retailers or distributors using a controlled brand or the customers’ own labels. Third-party brands consist of products distributed for other branded companies and products with branded trade names that the Company has licensed for use.

Intellectual Property

Trademarks important to the Company’s business are protected by registration or otherwise in the United States and most other markets where the related products are sold. The Company owns various registered trademarks for use with its branded products including LANCE, CAPE COD POTATO CHIPS, TOASTCHEE, TOASTY, NEKOT, NIPCHEE, CHOC-O-LUNCH, VAN-O-LUNCH, GOLD-N-CHEES, CAPTAIN’S WAFERS, THUNDER, RJ MUNCHERS, BLOOPS, OUTPOST and a variety of designs. The Company also owns registered trademarks including VISTA and JODAN that are used in connection with the Company’s private label products. During 2003, the Company licensed various trademarks and trade names including PETER PAN and DON PABLO for limited use on certain products and the Company classifies them as third-party brands.

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Distribution

Distribution through the Company’s direct-store delivery (“DSD”) route sales system accounts for approximately 56% of the Company’s revenues. At December 27, 2003, the route sales system consisted of 1,649 sales routes in 25 states. Each sales route is served by one sales representative. The Company uses its own fleet of tractors and trailers to make weekly deliveries of its products to the sales territories. The Company provides its sales representatives with stockroom space for their inventory requirements primarily through individual territory stockrooms as well as seven distribution centers. The sales representatives load step-vans from these stockrooms for delivery to customers. As of December 27, 2003, the Company owned approximately 75% of the step-vans with the balance owned by employees.

Through its route sales system, the Company also operates approximately 35,000 Company-owned vending machines in various customer locations. These vending machines are generally made available to customers on a commission or rental basis. The machines are not designed or manufactured specifically for the Company, and their use is not limited to any particular sales area or class of customer.

During 2003, the Company began a significant realignment of its route sales system. This realignment combined with continued review of accounts reduced the number of territories by 139 and vending machines on location by approximately 4,000 compared to 2002. As of December 27, 2003 the realignment had been completed in four of eighteen sales districts. The reduction of the number of territories and vending machines is expected to continue in 2004 in conjunction with the route sales system realignment.

Approximately 44% of the revenues generated by the Company in 2003 were direct sales. These sales are generally distributed by direct shipments or customer pick-ups. Direct shipments are made through third party carriers and the Company’s own transportation fleet.

The Company’s direct sales are made through Company sales personnel, independent distributors and brokers. Direct sales are currently made throughout most of the United States and parts of Canada and Europe.

Customers

The customer base for the Company’s branded and third-party branded products includes grocery stores, convenience stores, food service brokers and institutions, mass merchandisers, drug stores, vending operators, schools, military and government facilities and “up and down the street” outlets such as recreational facilities, offices, and independent retailers. Private label customers include grocery stores, mass merchandisers, discount stores and distributors. The Company also manufactures for other food manufacturers.

Revenues from the Company’s largest customer (Wal-Mart Stores, Inc.) were approximately 15% of revenues in 2003, 12% in 2002 and 10% in 2001, respectively. While the Company enjoys a continuing business relationship with Wal-Mart Stores, Inc., the loss of this business (or a substantial portion of this business) could have a material adverse effect upon the Company.

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Raw Materials

The principal raw materials used in the manufacture of the Company’s snack food products are flour, vegetable oils, sugar, potatoes, nuts, peanut butter, 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 and are generally contracted up to a year in advance.

Competition and Industry

All of the Company’s products are sold in highly competitive markets in which there are many competitors. In the case of many of its products, the Company competes with manufacturers with greater total revenues and greater resources than the Company. The principal methods of competition are price, service, product quality and product offerings. The methods of competition and the Company’s competitive position vary according to the locality, the particular products and the policies of its competitors. Consolidation in the industry continues. In addition, in January 2004, Bake-Line, a significant private label competitor ceased operations.

Industry factors such as obesity and nutrition concerns, diet trends and the use of trans-fatty acids in food products could also impact the food industry. At this time, the effect of these factors on the Company, if any, is not determinable.

Employees

On December 27, 2003, the Company and its subsidiaries had approximately 4,400 active employees in the United States and Canada, none of whom were covered by a collective bargaining agreement, as compared to approximately 4,600 on December 28, 2002. Additional workforce reductions are expected in 2004 as a result of the realignment of the Company’s route sales system.

Other Matters

The Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to these reports, are available via the Company’s website. The website address is www.lance.com. All required reports are made available on the website as soon as reasonably practicable after they are electronically filed with the Securities and Exchange Commission.

Item 2. Properties

The Company’s principal plant and general offices are located in Charlotte, North Carolina on a 140-acre tract owned by the Company. This approximately 1,000,000 square foot facility consists of office, production and distribution buildings. This plant manufactures both branded and non-branded products. The Company also owns an approximately 313,000 square foot plant and office located on an 18.5-acre tract in Burlington, Iowa that manufactures primarily private label products. Additionally, the Company owns two plants located on two tracts totaling approximately 8 acres in Ontario, Canada. These plants are located in Waterloo and Guelph and have approximately 131,000 total square feet and manufacture both branded and non-branded products. The Company also owns a plant in Hyannis, Massachusetts with approximately 32,000 square feet and located on a 5.4-acre tract that principally manufactures branded products.

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The Company leases office space for administrative support and district sales offices in 12 states. The Company also leases seven distribution/warehouse facilities for periods ranging from two to five years. In addition, the Company leases most of its stockroom space for its route sales representatives in various locations mainly on month-to-month tenancies.

The plants and properties owned and operated by the Company are maintained in good condition and are believed to be suitable and adequate for present needs. The Company believes that it has sufficient production capacity to meet anticipated demand in 2004. In order to support growth beyond 2004, the Company plans to increase capital spending in 2004 by approximately $15 million to expand private label production capacity and increase warehouse space.

Item 3. Legal Proceedings

The Company’s decision to distribute certain of its products through its route sales system resulted in the termination of certain independent distributors. In 2003, one of these distributors filed a civil action for an unspecified amount of damages. Other former distributors have asserted claims against the Company but have not filed a civil action. The pending civil action is in its early stages and the Company cannot estimate its liability, if any. In addition, the Company is subject to routine litigation and claims incidental to its business. In the opinion of management, such routine litigation and claims should not have a material adverse effect upon the Company’s consolidated financial statements taken as a whole.

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

Not applicable.

Separate Item. Executive Officers of the Registrant

Information as to each executive officer of the Company, who is not a director or a nominee named in Item 10 of this Form 10-K, is as follows:

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All the executive officers were appointed to their current positions at the Annual Meeting of the Board of Directors on April 24, 2003. All of the Company’s executive officers’ terms of office extend until the next Annual Meeting of the Board of Directors and until their successors are duly elected and qualified.

PART II

Item 5. Market for the Registrant’s Common Equity and Related Stockholder Matters

The Company had 4,213 stockholders of record as of February 17, 2004.

The $.83-1/3 par value Common Stock of Lance, Inc. is traded in the over-the-counter market under the symbol LNCE and transactions in the Common Stock are reported on The Nasdaq Stock Market. The following table sets forth the high and low sales prices and dividends paid during the interim periods in fiscal years 2003 and 2002.

On January 29, 2004, the Board of Directors of Lance, Inc. declared a quarterly cash dividend of $0.16 per share payable on February 20, 2004 to stockholders of record on February 10, 2004. The Board of Directors of Lance, Inc. will consider the amount of future cash dividends on a quarterly basis.

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The Company’s Second Amended and Restated Credit Agreement dated February 8, 2002, restricts payment of cash dividends and repurchases of its common stock by the Company if, after payment of any such dividends or any such repurchases of its common stock, the Company’s consolidated stockholders’ equity would be less than $125,000,000. At December 27, 2003, the Company’s consolidated stockholders’ equity was $182,600,000.

Item 6. Selected Financial Data

The following table sets forth selected historical financial data of the Company for the five-year period ended December 27, 2003. The selected financial data have been derived from, and are qualified by reference to, the audited financial statements of the Company included elsewhere herein. The selected financial data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the audited financial statements, including the notes thereto. Amounts are in thousands, except per share data.

In 1999, the Company acquired Tamming Foods, Ltd. and Cape Cod Potato Chip Company, Inc.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion provides an assessment of the Company’s financial condition, results of operations and liquidity and capital resources and should be read in conjunction with the accompanying consolidated financial statements and notes thereto included elsewhere herein.

Executive Summary

During 2003, several important factors impacted the results of operations. In 2003, the Company commenced a significant realignment of its route sales system. This realignment is intended to improve route economics and overall profitability by increasing the average customer drop size in the Company’s route sales system. This is expected to improve the route sales system’s overall effectiveness by removing less-profitable customers, allowing additional time to better serve remaining customers and reducing infrastructure costs. During 2003, the Company completed the realignment of four of its eighteen sales districts. Realignment of the remaining districts is expected to be completed in 2004. The Company expects that additional costs of implementing this realignment will be incurred in 2004. In addition, as a result of the realignment, route sales revenues are expected to be adversely impacted in 2004.

In February 2003, the Company discontinued distribution of its mini-sandwich cracker line through its route sales system. The discontinuation resulted in pre-tax charges of approximately $7.4 million for the fifty-two weeks ended December 27, 2003. These charges include a fixed asset impairment of $6.4 million. In addition, provisions for inventory-related items of $1.1 million were included in cost of sales, provisions for sales returns of $0.3 million were included in net sales and other operating revenues, and provisions for selling and marketing expenses of $0.1 million were included in selling, marketing and delivery expenses partially offset by a $0.5 million reduction in profit-sharing retirement expense.

Also in February 2003, the Company announced plans to reduce its workforce by 6%. Much of the workforce reduction was achieved by not filling vacant positions. During the fifty-two weeks ended December 27, 2003, the Company recorded severance charges of $1.2 million related to this workforce reduction. These severance costs resulted from the elimination of 67 positions where severance benefits were paid. Severance charges are included in general and administrative expenses ($0.7 million), costs of goods sold ($0.2 million) and selling, marketing and delivery expenses ($0.3 million).

Non-branded product revenues were favorably impacted in 2003 by a 15.1% increase in private label sales due to significant revenue growth through a major customer, as well as growth through existing customers, new product offerings and new customers. Branded product revenues increased slightly due to additional distribution of the Cape Cod brand through the Company’s route sales system as well as certain price increases, partially offset by discontinuing distribution of mini-sandwich crackers through the route sales system and lower vending and food service revenues. Many of the smaller accounts eliminated through the route realignment were vending and food service customers and the Company expects this trend to continue in 2004.

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Overall, commodity costs increased in 2003 compared to 2002 by $4.3 million primarily as a result of increases in the price of vegetable oil. Increases in commodity costs are expected to continue through the first half of 2004. In addition, foreign exchange fluctuations negatively impacted earnings before interest and income taxes by approximately $2.6 million. The Company is evaluating hedging strategies to mitigate the risks of currency fluctuations. These costs were partially offset by improved manufacturing efficiencies resulting from increased production yields and labor productivity.

Other factors impacting results of operations in 2003 compared to the prior year include increased incentive provisions of $4.2 million for hourly, sales and salaried employees offset somewhat by reduced salaries and wages. Incentive provisions are based on various performance measures. Many of these measures were not achieved in 2002 which accounts for the increase in 2003 compared to 2002. The reduction in salaries and wages resulted primarily from the workforce reduction that occurred in February 2003.

During 2003, the Company’s cash increased by $22.5 million after purchasing $17.8 million in capital assets and paying $18.6 million in dividends. The Company plans to increase capital spending in 2004 by approximately $15 million. Major projects planned for 2004 include expansion of private label production capacity and increased warehouse space. The Company also plans to reduce debt by retiring approximately $5.6 million of deferred notes due in April 2004.

Critical Accounting Policies

The Company’s discussion and analysis of its financial condition and results of operations are based upon the Company’s 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 the Company 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 various factors, including historical experience, current and expected economic conditions and other factors believed to be reasonable under the circumstances. The Company routinely evaluates its estimates, including those related to customer programs, customer returns and promotions, bad debts, inventories, fixed assets, hedge transactions, supplemental retirement benefits, investments, intangible assets, incentive compensation, income taxes, insurance, other post-retirement benefits, contingencies and litigation. Actual results may differ from these estimates.

The Company believes the following to be critical accounting policies. That is, they are both important to the portrayal of the Company’s financial condition and results, and they require management to make judgments and estimates about matters that are inherently uncertain.

Revenue Recognition

The Company recognizes operating revenues upon shipment of products to customers when title and risk of loss pass to its customers. Provisions and allowances for sales returns, stale products,

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promotional allowances and discounts are also recorded as a reduction of revenues in the Company’s consolidated financial statements. The Company’s policy on revenue recognition varies based on the types of product sold and the distribution method.

Revenue for products sold through the Company’s route sales system is recognized when the product is delivered to the retail customer and an invoice is created. The Company’s sales representative creates the invoice at the time of delivery via a handheld computer. The invoice is transmitted electronically each day and the sales revenue is recognized. Customers purchasing products through the route sales system have the right to return product if it is not sold by the expiration date on the product label. The Company has recorded, based on historical information, an estimated allowance for product that may be returned. The Company estimates the number of days until product is sold through the customer’s location and the percent of sales returns using historical information. This information is reviewed on a quarterly basis for significant changes and updated no less than annually. This allowance is recorded as an offset to revenue. The allowance for sales returns as of the end of 2003 and 2002 were $0.5 million and $0.6 million, respectively.

A 50% change in the estimated number of days until product is sold through the customer’s location would result in a $0.2 million change in sales returns. A one percentage point change in the estimated percent of sales returns would result in a $0.2 million change in sales returns.

Revenue for products shipped directly to the customer from the Company’s warehouse is recognized based on the shipping terms listed on the shipping documentation. Products shipped with terms FOB-shipping point are recognized as revenue at the time the shipment leaves the Company’s docks. Products shipped with terms FOB-destination are recognized as revenue based on the expected receipt date by the customer.

The Company sells products through Company-owned vending machines using two methods. The first method is the wholesale method with the customer managing the vending machine and purchasing product from the Company. Under this method, revenue is recognized when product is delivered. The second method is the full-service method with the Company’s sales representatives managing the vending machines and commissions being paid to the customers based on sales. Revenue is recognized under this method when inventory is restocked and cash is collected from the machine. Revenue is recorded net of commissions and sales tax.

The Company records certain offsets to revenue for promotional allowances. There are several different types of promotional allowances such as off-invoice, rebates and shelf space allowances. An off-invoice allowance is a reduction of the sales price that is directly deducted from the invoice amount. The Company records the amount of the deduction as an offset to revenue when the transaction occurs. Rebates are offered to customers based on the quantity of product purchased over a period of time. Based on the nature of these allowances, the exact amount of the rebate is not known at the time the product is sold to the customer. An estimate of the expected rebate amount is recorded as an offset to revenue and an accrued liability at the time the sale is recorded. The accrued liability is monitored throughout the time period covered by the promotion. The accrual is based on historical information and the progress of the customer against the target amount. The allowance for rebates as of the end of 2003 and 2002 were $0.9 million and $0.7 million, respectively. Shelf space allowances are capitalized and amortized over

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the lesser of the life of the agreement or one year and are recorded as an offset to revenue. Capitalized shelf space allowances are evaluated for impairment on an ongoing basis.

Insurance Reserves

The Company maintains reserves for the self-funded portion of employee medical insurance and for post-retiree medical benefits. In addition, the Company maintains insurance reserves for workers’ compensation, auto, product and general liability insurance. The Company utilizes estimates and assumptions in determining the appropriate liability.

The Company provides medical insurance benefits to its employees. Beginning in 2003, the Company increased the self-insured plan to cover approximately 97% of its employees in the United States for medical insurance benefits. In 2002, approximately 66% of medical insurance benefits were covered under a self-insurance plan. Accordingly, the Company is required to reserve for the incurred but not reported claims. The Company estimates the amount of outstanding claims by reviewing historical average weekly claims and applying a weekly lag projection based on information provided by the plan administrator. The Company updates these estimates on a quarterly basis. As of December 27, 2003 and December 28, 2002, the Company’s reserve for incurred but not reported medical claims was $2.7 million and $1.9 million, respectively. The $0.8 million increase is primarily related to the additional employees covered under self-insured plans.

A 25% change in the weekly lag projection would increase or decrease the reserve as of December 27, 2003 by $0.6 million.

The Company provides medical insurance benefits to qualifying retirees. Based on the retiree medical plan as of December 27, 2003, employees who were age 55 or older or disabled at June 30, 2001 and have 10 years service at age 60 qualify for retiree medical plan benefits. The Company uses a third-party actuary to estimate the postretirement medical plan obligation on an annual basis. This calculation requires assumptions regarding participation percentage, health care cost trends, employee contributions, turnover, mortality and discount rates. This plan was amended on July 1, 2001 effectively terminating the plan no later than 2011. This amendment generated a benefit that is being amortized over the average active participation period. As of December 27, 2003 and December 28, 2002, the Company had an unrecognized net actuarial gain and prior service cost credit of $2.9 million and $3.8 million, respectively, and a post-retirement health care liability of $5.4 million and $6.9 million, respectively. The plan benefits, assumptions and sensitivity analysis are described in further detail in the Post-Retirement Benefits Other Than Pensions footnote in the consolidated financial statements.

An annual one percentage point decrease or increase in the health care cost trend rates has an immaterial impact to the accumulated postretirement benefit obligation and the aggregate of the service and interest components of postretirement expense.

For casualty insurance obligations, the Company maintains self-insurance reserves for workers’ compensation and auto liability for individual losses up to $0.5 million. In addition, general and product liability claims are self-funded for individual losses up to $0.1 million. The Company uses a third-party actuary to calculate the casualty insurance obligation on an annual basis. In determining the ultimate loss and reserve requirements the third-party actuary uses various

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actuarial assumptions including compensation trends, health care cost trends and discount rates. The third-party actuary also uses historical information for claims frequency and severity in order to establish loss development factors.

Included in the actuarial calculation is a margin of error to account for changes in inflation, health care costs, compensation and litigation cost trends as well as estimated future incurred claims. This calculation, as has been the Company’s practice, utilized a 75% confidence level for estimating the ultimate outstanding casualty liability. Under this approach, approximately 75% of each claim should be equal to or less than the ultimate liability recorded based on the historical trends experienced by the Company. Had the Company utilized a 50% confidence level, the liability would have been reduced by approximately $2.9 million. However, had the Company used a 90% confidence level the liability would have increased by $1.5 million.

In addition, the Company used a 4.5% investment rate to discount the estimated claims based on the historical payout pattern. A 1% change in the discount rate would have impacted the liability by approximately $0.3 million.

Accordingly, based on the sensitivity discussed above, actual ultimate losses could be different than those estimated by the third-party actuary. The Company believes the reserves established are prudent and reasonable estimates of the ultimate liability based on historical trends. As of December 27, 2003 and December 28, 2002, the Company’s casualty reserve was $12.5 million and $11.9 million, respectively. The increase in the liability is the result of claims payout trends.

Accounts Receivable

The Company records accounts receivable at the time revenue is recognized. Amounts for bad debt expense are recorded in general and administrative expenses or selling, marketing and delivery expenses on the consolidated statements of income. The determination of the allowance for doubtful accounts is based on management’s estimate of the accounts receivable amount that is uncollectible. Management records a general reserve based on analysis of historical data. In addition, management records specific reserves for receivable balances that are considered high-risk due to known facts regarding the customer. The Company has a formal policy for determining the allowance for doubtful accounts. The assumptions for this calculation are reviewed quarterly to ensure that business conditions or other circumstances do not warrant a change in the assumptions. Failure of a major customer to pay the Company amounts owed could have a material impact on the financial statements of the Company. The Company’s total bad debt expense for the fiscal years 2003, 2002 and 2001 amounted to $1.4 million, $2.0 million and $2.3 million, respectively. At December 27, 2003 and December 28, 2002, the Company had accounts receivables of $42.7 million and $38.2 million, net of an allowance for doubtful accounts of $1.8 million and $1.7 million, respectively.

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The following table summarizes the Company’s customer accounts receivable profile as of December 27, 2003:

Goodwill Valuation

The Company implemented Statement of Financial Accounting Standards (“SFAS”) No. 142 beginning on December 30, 2001. SFAS No. 142 requires that existing goodwill be tested annually for impairment. In accordance with SFAS No. 142, the Company determines the estimated fair value of the net assets for each reporting unit that includes goodwill on its balance sheet. This is a two step process. As required by SFAS No. 142, the first step compares the fair value of each reporting unit’s net assets to the carrying value of each reporting unit’s net assets. Based on valuations performed by the Company, the fair value of each reporting unit exceeds its carrying value. Accordingly, no additional test of impairment was required. The Company has two reporting units with goodwill. The total amount of goodwill as of December 27, 2003 and December 28, 2002 was $45.1 million and $39.7 million, respectively. The change in the value of goodwill of $5.4 million reflects the adjustment for foreign exchange rate fluctuations.

In 2003, the Company implemented a process of consolidating its operations and operating units to streamline production, sales and distribution. This resulted in a significant merging of the reporting unit operations. Beginning with 2003, the Company used the projected financial results of these combined reporting units for SFAS No. 142 goodwill impairment analysis.

The valuation process requires the Company to project future financial performance, including revenue and profit growth, fixed asset and working capital investments, tax rates and cost of capital. These projections rely upon historical performance, anticipated market conditions and forward-looking business plans.

Given the change in the reporting units as compared to 2002, the Company utilized an independent third-party to evaluate and calculate the fair value of the net assets of each reporting unit. Based on these valuations, the fair value is approximately $177 million and $68 million above the carrying value of the net assets of each reporting unit, respectively.

The valuations as of December 27, 2003 assume combined average annual revenue growth for the two reporting units of approximately 4% during the valuation period. Significant investments in fixed assets and working capital to support this growth are factored into the analysis. If the forecasted revenue growth is not achieved, the required investments in fixed assets and working capital could be reduced. This would tend to offset the negative valuation implications of lower

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revenue growth. Even with the significant excess fair value over carrying value, significant changes in assumptions could result in a goodwill impairment charge.

New Accounting Standards

Effective January 1, 2002, the Company adopted SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” which replaces SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of.” SFAS No. 144 provides updated guidance concerning the recognition and measurement of an impairment loss for certain types of long-lived assets, expands the scope of a discontinued operation to include a component of an entity and eliminates the exemption to consolidation when control over a subsidiary is likely to be temporary. The adoption of this new standard did not have a material impact on the Company’s financial position, results of operations or cash flows.

In June 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 143, “Accounting for Asset Retirement Obligations,” which addresses financial accounting and reporting obligations associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development or normal use of the asset. The Company adopted SFAS No. 143 on January 1, 2003 and the adoption did not have a material impact on the Company’s consolidated financial statements.

In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS No. 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Costs covered by SFAS No. 146 include lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operation, plant closing or other exit or disposal activity. SFAS No. 146 is effective for exit or disposal activities initiated after December 31, 2002. The adoption of this new standard did not have a material impact on the Company’s financial position, results of operations or cash flows.

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure.” SFAS No. 148 amends SFAS No. 123, “Accounting for Stock-Based Compensation,” to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS No. 148 is effective for financial statements for fiscal years ending after December 15, 2002. In 2003, the Company has included the required interim disclosures in Forms 10-Q and annual disclosures in Form 10-K.

In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” This Statement amends and clarifies the accounting and reporting for derivative instruments, including embedded derivatives, and for hedging activities under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” SFAS No. 149 amends SFAS No. 133 to reflect the decisions made as part of the Derivatives Implementation Group (DIG) and in other FASB projects or deliberations. SFAS No. 149 is

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effective for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003. The Company’s accounting for derivative instruments is in compliance with SFAS No. 149 and SFAS No. 133. Therefore, the adoption of SFAS No. 149 did not have an impact on the Company’s consolidated financial statements.

In January 2003, the FASB issued Financial Interpretation No. (“FIN”) 46, “Consolidation of Variable Interest Entities.” This interpretation clarifies the application of Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 became effective February 1, 2003 for variable interest entities created after January 31, 2003, and July 1, 2003 for variable interest entities created prior to February 1, 2003. In December 2003, the FASB issued a revised FIN 46. The revised standard, FIN 46R, modifies or clarifies various provisions of FIN 46 and incorporates many FASB Staff Positions previously issued by the FASB. This standard replaces the original FIN 46 that was issued in January 2003. The adoption of these new standards did not have an impact on the Company’s financial position, results of operations or cash flows.

In December 2003, the FASB issued a revised SFAS No. 132, “Employers’ Disclosures about Pensions and Other Postretirement Benefits.” The revised SFAS No. 132 revised employers’ disclosures about pension plans and other postretirement benefit plans. It did not change the measurement or recognition of those plans required by SFAS No. 87, “Employers’Accounting for Pensions”, SFAS No. 88, “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits”, and SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions”. The revised SFAS No. 132 retains the disclosure requirements contained in the original SFAS No. 132. It requires additional disclosures to those in the original SFAS No. 132 about the assets, obligations, cash flows, and net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans. The adoption of this new standard did not have an impact on the Company’s financial position, results of operations or cash flows.

In December 2003, the SEC released Staff Accounting Bulletin (“SAB”) 104. SAB 104 revises or rescinds portions of the interpretative guidance included in SEC Topic 13, “Revenue Recognition,” in order to make this interpretive guidance consistent with current authoritative accounting and auditing guidance and SEC rules and regulations. The principal revisions relate to the rescission of material no longer necessary because of private sector developments in U.S. generally accepted accounting principles. SAB 104 also rescinds the Revenue Recognition in Financial Statements Frequently Asked Questions and Answers document issued in conjunction with Topic 13. Selected portions of that document have been incorporated into Topic 13. The adoption of this new standard did not have an impact on the Company’s financial position, results of operations or cash flows.

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Results of Operations

Revenues in the 52-week fiscal year 2003 increased $19.7 million or 3.6% compared to the 52-week fiscal year 2002. The Company’s non-branded product revenues increased $18.6 million and branded product revenues increased $1.1 million. The non-branded increase was due to increased revenues from private label sales (up $20.7 million) partially offset by reduction in revenues from sales to other manufacturers (down $1.5 million) and revenues from third-party brands (down $0.6 million). Approximately 50% of the private label increase was due to increased sales to a major customer as a result of new product introductions and customer expansion. The branded product increase was due primarily to increased sales of nut products (up $6.7 million), salty snacks (up $5.6 million) and traditional sandwich crackers (up $1.0 million) somewhat offset by declines in mini-sandwich crackers and cookies (down $5.4 million), cakes (down $3.2 million), crackers and other bread basket items (down $2.1 million) and candy and mints (down $1.5 million). Revenues from the Cape Cod brand increased 20% compared to the prior year mainly due to the transfer of distribution to the Company’s route sales system in certain areas. Revenues from the Lance brand declined by 2% compared to prior year primarily due to reduced revenues from the Company’s vending operations and food service customers and the discontinuation of mini-sandwich cracker sales through the route sales system. The Company anticipates that in 2004 vending and food service revenues will continue to be negatively impacted by the route realignment.

In 2003 and 2002, the Company’s branded products represented 64% and 66% of total revenues, respectively. Private label sales represented 24% and 22% of revenues in 2003 and 2002, respectively. Sales of other non-branded products represented 12% of revenues in 2003 and 2002

Gross margin increased $4.8 million compared to prior year as a result of increased volume ($6.3 million), operating efficiencies ($6.2 million), increased prices ($5.0 million) partially offset by unfavorable mix ($5.7 million), increased commodity costs ($4.3 million), impact of foreign currency ($1.6 million) and the costs associated with discontinuation of distribution of mini-sandwich crackers ($1.1 million). Gross margin as a percent of revenues declined 0.8 points primarily because of unfavorable product and customer mix and increased commodity costs.

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Selling, marketing and delivery costs increased $0.4 million compared to 2002. This increase is primarily due to spending in support of the route sales system and the route realignment efforts during 2003. Additional sales route truck expenses of $3.5 million were partially offset by reductions in volume-based sales commissions, salaries, benefits and other insurance costs resulting in a net increase in route sales expenses of $1.2 million. Freight expenses also increased $1.3 million as a result of increased volumes. These increases were partially offset by reductions in compensation related expenses ($0.9 million), marketing expenditures ($0.6 million), communication costs ($0.5 million) and bad debt expense ($0.1 million).

General and administrative expenses increased $1.5 million compared to 2002 primarily as a result of increased incentive compensation expense ($2.2 million), increased professional fees, including legal fees related to trade-name registrations and other legal matters as well as increased accounting fees ($0.7 million) and increased severance provisions due to work-force reduction ($0.5 million). These increases were partially offset by reductions in salaries and benefits due to work force reductions ($1.2 million), decreases in bad debt expense compared to the prior year which included several bankruptcies ($0.5 million), and various other expenses as a part of cost containment initiatives ($0.2 million). The provision for employees’ retirement plans was $0.3 million greater than 2002 due to safe-harbor provisions under the profit sharing plan.

During the first quarter of 2003, the Company recognized a $6.4 million impairment on fixed assets related to the discontinuation of distribution of mini-sandwich crackers through its route sales system.

Other expense primarily includes gains and losses resulting from fixed asset dispositions and foreign currency transactions. In 2003, other expense represents foreign currency losses ($0.7 million). In 2002, the Company recognized a net loss on asset dispositions of $1.2 million and a $0.5 million write-off of an investment.

Net interest expense of $3.1 million in 2003 declined from $3.2 million in 2002. The decrease was primarily the result of lower debt levels during the year. See discussion in “Liquidity and Capital Resources” below.

The effective income tax rate decreased from 36.5% in 2002 to 36.1% in 2003 due to lower earnings and changes in the composition of earnings among the consolidated entities. Several factors impact income tax, including rate changes, legislative changes and the mix and level of earnings at each legal reporting entity.

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Revenues in the 52-week fiscal year 2002 decreased $14.0 million or 2.5% compared to the 52-week fiscal year 2001. The Company’s branded product revenues declined $8.8 million and non-branded product revenues declined $5.2 million. The branded product decline was due primarily to reduced sales of cakes (down $5.1 million), traditional sandwich crackers (down $2.6 million), bread basket items (down $3.9 million), salty snacks (down $2.4 million) and nuts (down $0.3 million), somewhat offset by increased sales of mini-sandwich crackers (up $5.8 million). The non-branded decline was due to reduced sales of third party brands (down $8.2 million) and sales to other manufacturers (down $1.0 million), partially offset by an increase in private label sales (up $4.0 million).

In 2002 and 2001, the Company’s branded products represented 66% of total revenues. Private label sales represented 22% and 20% of revenues in 2002 and 2001, respectively. Sales of other non-branded products represented 12% and 14% of revenues in 2002 and 2001, respectively.

Gross margin decreased $8.1 million (0.3 percentage points) compared to 2001. This decrease is primarily due to the impact of lower volume and vending revenues ($6.7 million), increased commodity and packaging costs ($2.2 million) and increases in sales allowances ($1.8 million), partially offset by improved manufacturing efficiencies ($1.5 million) and decreased employee incentive expense ($0.9 million).

Selling, marketing and delivery costs increased $1.8 million compared to 2001. This increase is primarily due to increased medical and casualty expenses ($2.0 million). In addition, the Company continued to increase spending in support of its route sales system during 2002. Additional sales route truck expenses and recruiting costs of $3.3 million were partially offset by reductions in volume based sales commissions, resulting in a net increase in route sales expenses of $0.9 million. These increases were partially offset by decreases in bad debt expense ($0.6 million) and other miscellaneous expenses ($0.4 million).

General and administrative expenses decreased $2.7 million compared to 2001 primarily as a result of decreased incentive compensation provisions ($4.0 million) and reductions in information technology expenses ($0.7 million). These reductions were partially offset by increases in bad debt expense ($0.5 million), other compensation related expenses ($0.5 million), professional fees ($0.4 million) and various other expenses ($0.6 million). The provision for

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employees’ retirement plans was lower due to the profitability-based formula for these contributions.

Other expense primarily includes gains and losses resulting from fixed asset dispositions and foreign currency transactions. In 2002, the Company recognized a net loss on asset dispositions of $1.2 million. Also included in other expense in 2002 is a $0.5 million write-off of an investment. Other income in 2001 included a $0.9 million gain related to the curtailment of the Company’s post-retirement benefit plan offset by losses on fixed asset dispositions.

Net interest expense of $3.2 million in 2002 declined from $3.7 million in 2001. The decrease was the result of lower debt levels and interest rates during the year. See discussion in “Liquidity and Capital Resources” below.

The effective income tax rate decreased from 36.8% in 2001 to 36.5% in 2002 due to changes in the composition of earnings among the consolidated entities.

Liquidity and Capital Resources

Liquidity

During 2003, the principal sources of liquidity for the Company’s operating needs were provided from operating activities. Cash flows from operating activities are believed to be sufficient for the foreseeable future to enable the Company to meet the Company’s obligations, to fund capital expenditures and to pay dividends to the Company’s stockholders. As of December 27, 2003, cash and cash equivalents totaled $25.5 million.

Contractual obligations as of December 27, 2003 were:

Cash Flow

Net cash provided by operating activities was $57.4 million for 2003. This compares to $55.6 million in 2002 and $63.6 million in 2001. The $1.8 million increase is primarily due to changes in working capital and an increase in impairment charges more than offsetting changes in deferred taxes and reduction in net income. Working capital (other than cash and cash equivalents) decreased to $23.8 million from $31.6 million in 2002. Earnings before interest and income taxes was $31.7 million for 2003. The difference between earnings before interest and income taxes of $31.7 million and cash flow provided by operating activities of $57.4 million is primarily due to depreciation and amortization charges of $29.4 million.

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Cash flow used in investing activities, principally capital expenditures, was $17.0 million in 2003. Cash expenditures for fixed assets totaled $17.8 million in 2003. Capital expenditures in 2003 included manufacturing equipment, step-vans for its field sales representatives, sales displays and tractor-trailers. During 2003, proceeds from the sale of real and personal property provided approximately $0.8 million of cash to fund investing activities.

Cash used in financing activities for 2003 totaled $18.5 million compared to $32.2 million in 2002. During 2003 and 2002 the Company paid dividends of $0.64 per share totaling $18.6 million each year.

Stock Repurchases

On January 29, 2004, the Board of Directors authorized the repurchase of up to 1.0 million shares of the Company’s common stock. During 2003, the Company did not repurchase any shares of its common stock and currently has no active program for the repurchase of shares of its common stock.

Dividends

On January 29, 2004 the Board of Directors declared a $0.16 quarterly cash dividend payable on February 20, 2004 to stockholders of record on February 10, 2004.

Capital Expenditures

The Company’s capital expenditures are expected to continue at a level sufficient to support its strategic and operating needs. Projected capital expenditures for 2004 are projected to range between $30 and $35 million, funded primarily by net cash flow from operating activities and cash on hand. There were no material long-term commitments for capital expenditures as of December 27, 2003.

Debt

In February 2002, the Company’s unsecured revolving credit agreement, first entered into in 1999, was amended giving the Company the ability to borrow up to $60 million and Canadian (“Cdn”) $25 million through February 2007. At December 27, 2003, there were no amounts outstanding on these revolving credit facilities. Borrowing and repayments under these revolving credit facilities are similar in nature to short-term credit lines; however, due to the nature and terms of the agreements allowing repayment through February 2007, all borrowings under these facilities are classified as long-term debt.

At December 27, 2003 and December 28, 2002, the Company had the following debt outstanding:

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As of December 27, 2003, cash and cash equivalents totaled $25.5 million. Additional borrowings available under all credit facilities totaled $79.6 million. The Company has complied with all financial covenants contained in the financing agreements. Available cash and available credit under the credit facilities are expected to be sufficient to pay the deferred notes due in April 2004.

The carrying amount of the long-term debt, which is primarily denominated in Canadian dollars, increased by $7.6 million from December 28, 2002 due to changes in the US dollar – Canadian dollar foreign exchange rate of $7.1 million and imputed interest on the deferred notes of $0.5 million.

The Company also maintains standby letters of credit in connection with its self-insurance reserves for casualty claims. The total amount of these letters of credit was $11.6 million as of December 27, 2003.

Commitments and Contingencies

The Company leases certain facilities and equipment classified as operating leases. The future minimum lease commitments for operating leases as of December 27, 2003 were $3.1 million.

The Company has entered into agreements with suppliers for the purchase of certain commodities and packaging materials used in the production process. These agreements are entered into in the normal course of business and consist of agreements to purchase a certain quantity over a certain period of time. As of December 27, 2003, the Company had outstanding purchase commitments totaling approximately $33.8 million. These commitments range in length from a few weeks to 12 months.

Off-Balance Sheet Arrangements

The Company entered into a long-term guaranteed payment commitment during 1999 with a supplier. Under the terms of this agreement, to the extent the Company’s purchases exceed an agreed upon amount, no additional amount is due from the Company. However, if purchases are below this amount, the Company is required to compensate the supplier. In addition, the Company has provided a guarantee to a third party for fixed asset financing for the supplier. The maximum annual payment guarantees to both the supplier and third party are $0.8 million per year through 2007 and $0.2 million in 2008. The total amount outstanding under these guarantees was $3.6 million as of December 27, 2003. For the years ended December 27, 2003, December 28, 2002 and December 29, 2001, the Company paid $0.4 million, $0.2 million and $0.2 million, respectively, related to the minimum guarantees under this commitment.

Forward-Looking Statements

Lance, Inc. (the Company), from time to time, makes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements, which may be written or oral, reflect expectations of management of the Company at the time such statements

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are made. The Company is filing this cautionary statement to identify certain important factors that could cause the Company’s actual results to differ materially from those in any forward-looking statements made by or on behalf of the Company.

Price Competition and Industry Consolidation

The sales of most of the Company’s products are subject to intense competition primarily through discounting and other price cutting techniques by competitors, many of whom are significantly larger and have greater resources than the Company. In addition, there is a continuing consolidation by the major companies in the food industry, which could increase competition. The intense competition increases the possibility that the Company could lose one or more major customers, which could have an adverse impact on the Company’s results.

Raw Material Costs

The Company’s cost of sales can be adversely impacted by changes in the cost of raw materials, principally flour, vegetable oils, sugar, potatoes, nuts, peanut butter, cheese and seasonings. While the Company obtains substantial commitments for the future delivery of certain of its raw materials and engages in limited hedging to reduce the price risk of these raw materials, continuing long-term increases in the costs of raw materials could adversely impact the Company’s cost of sales.

Food Industry Factors

Food industry factors including obesity and nutritional concerns, diet trends and the use of trans-fatty acids in food products could adversely affect the Company’s revenues and cost of sales.

Effectiveness of Sales and Marketing Activities

The Company’s plans for long-term profitable sales growth depend on the ability of the Company to improve the effectiveness of its distribution systems, to develop and execute effective marketing strategies, to develop and introduce successful new products and to obtain increased distribution through significant trade channels such as mass merchandisers, convenience and grocery stores. During the third quarter of 2003, the Company began the implementation of a sales route realignment plan to improve the overall effectiveness of its route sales system by improving route sales averages through account rationalization and reducing the overall costs of operating the route sales system. This implementation is in the early stages and there is no assurance that targeted results will be achieved. Also, distribution of the Company’s products through vending machines remains a significant outlet for its products and a continued decline in revenue from this source could have an adverse effect upon the Company’s results.

Interest Rate, Foreign Exchange Rate and Credit Risks

The Company is exposed to interest rate volatility with regard to variable rate debt facilities. The Company is exposed to foreign exchange rate volatility primarily through the operations of its Canadian subsidiary. In addition, the Company is exposed to certain credit risks related to the collection of its accounts receivable.

There are other important factors not described above that could also cause actual results to differ materially from those in any forward-looking statement made by or on behalf of the Company.

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Item 7A. Quantitative and Qualitative Disclosure About Market Risk

The principal market risks to which the Company is exposed that may adversely impact results of operations and financial position are changes in certain raw material prices, interest and foreign exchange rates and credit risks. The Company selectively uses derivative financial instruments to enhance its ability to manage these risks. The Company has no market risk sensitive instruments held for trading purposes.

The Company is exposed to the impact of changing commodity prices for raw materials. At times, the Company enters into commodity futures and option contracts to manage fluctuations in prices of anticipated purchases of certain raw materials. The Company’s policy is to use such commodity derivative financial instruments only to the extent necessary to manage these exposures. The Company does not use these financial instruments for trading purposes. As of December 27, 2003 and December 28, 2002, the Company had no outstanding commodity futures or option contracts.

Most of the Company’s long-term debt obligations incur interest at floating rates, based on changes in U.S. Dollar LIBOR, Canadian Dollar LIBOR and prime rate interest. To manage exposure to changing interest rates, the Company selectively enters into interest rate swap agreements to maintain a desirable proportion of fixed to variable rate debt. In September 2001, the Company entered into an interest rate swap agreement in order to manage the risk associated with variable interest rates. The variable-to-fixed interest rate swap is accounted for as a cash flow hedge, with effectiveness assessed based on changes in the present value of interest payments on the underlying debt. The notional amount, interest payment and maturity dates of the swap match the principal, interest payment and maturity dates of the related debt. The interest rate on the swap was 5.9%, including applicable margin. The underlying notional amount of the swap agreement is Cdn $50 million. The fair value, determined by a third party financial institution, of the interest rate swap was $1.4 million as of December 27, 2003 and December 28, 2002, respectively, and is included in other long-term liabilities.

At December 27, 2003 the Company’s total debt was $43.7 million with interest rates ranging from 5.90% to 7.00%, and a weighted average interest rate of 6.04%. At December 28, 2002, the Company’s total debt was $36.2 million with interest rates ranging from 5.90% to 7.00%, and a weighted average interest rate of 6.03%. The $43.7 million in outstanding debt at December 27, 2003 is fixed rate debt or was effectively fixed through an interest rate swap agreement. A 10% increase in U.S. LIBOR and Canadian LIBOR would have had an immaterial impact on interest expense for 2003.

The Company is exposed to certain credit risks related to its accounts receivable. The Company performs ongoing credit evaluations of its customers to minimize the potential exposure. As of December 27, 2003 and December 28, 2002, the Company had allowances for doubtful accounts of $1.8 million and $1.7 million, respectively.

Through the operations of its Canadian subsidiary, the Company has an exposure to foreign exchange rate fluctuations, primarily between U.S. and Canadian dollars. In 2003, foreign exchange rate fluctuations impacted the earnings of the Company. The US dollar – Canadian

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dollar exchange rate increased approximately 20% since December 28, 2002. The following table shows the rate change:

A majority of the sales of its Canadian operations are denominated in U.S. dollars and a substantial portion of their costs, such as raw materials and direct labor, are denominated in Canadian dollars. In 2003, the impact of foreign exchange rate changes had an approximate $2.6 million reduction to earnings before interest and income taxes as compared to 2002.

The indebtedness used to finance the acquisition of its Canadian subsidiary is denominated in Canadian dollars and serves as an economic hedge of the net asset investment in the subsidiary. Due to foreign currency fluctuations in 2003, the Company recorded a $2.1 million gain in other comprehensive income as a result of the translation of the subsidiary’s financial statement into U.S. dollars.

Inflation and changing prices have not had a material impact on the Company’s net sales and income for the last three years, except for the increase in commodity costs during 2003. During 2003, commodity costs were up approximately $4.3 million compared to 2002.

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Item 8. Financial Statements and Supplementary Data

Consolidated Statements of Income

LANCE, INC. AND SUBSIDIARIES
For the Fiscal Years Ended December 27, 2003, December 28, 2002, and December 29, 2001
(In thousands, except share and per share data)

See Notes to Consolidated Financial Statements.

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Consolidated Balance Sheets

LANCE, INC. AND SUBSIDIARIES
December 27, 2003 and December 28, 2002
(In thousands, except share data)

See Notes to Consolidated Financial Statements.

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Consolidated Statements of Stockholders’ Equity and Comprehensive Income

LANCE, INC. AND SUBSIDIARIES
For the Fiscal Years Ended December 27, 2003, December 28, 2002, and December 29,2001
(In thousands, except share data)