UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
Quarterly Report Filed Pursuant to Section 13 or 15(d)
Of the Securities Exchange Act of 1934

For the quarterly (thirteen week) period ended	Commission File Number 0-398
September 29, 2001

LANCE, INC.
(Exact name of registrant as specified in its charter)

North Carolina	56-0292920
(State or other jurisdiction of Incorporation or organization)	(I.R.S. Employer Identification No.)
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.

Yes [X]     No [  ]

     The number of shares outstanding of the Registrant’s $0.83-1/3 par value Common Stock, its only outstanding class of Common Stock, as of October 23, 2001, was 28,986,673 shares.

LANCE, INC. AND SUBSIDIARIES

INDEX

			Page
PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements
		Condensed Consolidated Balance Sheets – September 29, 2001 (Unaudited) and December 30, 2000		3
		Condensed Consolidated Statements of Income (Unaudited) – Thirteen and Thirty-Nine Weeks Ended September 29, 2001 and September 23, 2000		4
		Condensed Consolidated Statements of Stockholders’ Equity and Comprehensive Income (Unaudited) – Thirty-Nine Weeks Ended September 29, 2001 and September 23, 2000		5
		Condensed Consolidated Statements of Cash Flows (Unaudited) – Thirty-Nine Weeks Ended September 29, 2001 and September 23, 2000		6
		Notes to Condensed Consolidated Financial Statements		7
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			11
	Item 3. Quantitative and Qualitative Disclosures about Market Risk			14
PART II. OTHER INFORMATION
	Item 2. Changes in Securities and Use of Proceeds			15
	Item 5. Other Information			15
	Item 6. Exhibits and Reports on Form 8-K			16
SIGNATURES				17

2

LANCE, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets
As of September 29, 2001 (Unaudited) and December 30, 2000
(In thousands, except share data)

					September 29,			December 30,
					2001			2000
				ASSETS
Current assets
	Cash and cash equivalents				$	3,929		$	1,224
	Accounts receivable (less allowance for doubtful accounts)					51,299			47,188
	Inventories					26,542			23,205
	Deferred income tax benefit					5,702			4,161
	Prepaid income taxes					—			1,120
	Prepaid expenses and other					4,296			5,430
			Total current assets			91,768			82,328
	Property, plant & equipment, net					179,513			179,283
	Goodwill, net					39,830			42,069
	Other intangible assets, net					9,476			10,177
	Other assets					3,140			3,216
			Total assets		$	323,727		$	317,073
				LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
	Current portion of long-term debt				$	354		$	395
	Accounts payable					13,268			14,718
	Accrued income taxes					688			—
	Accrued liabilities					33,959			24,283
			Total current liabilities			48,269			39,396
Other liabilities and deferred credits
	Long-term debt					56,551			63,536
	Deferred income taxes					23,718			21,548
	Accrued postretirement health care costs					9,589			11,317
	Accrual for insurance claims					4,083			4,083
	Other long-term liabilities					3,288			2,600
			Total other liabilities and deferred credits			97,229			103,084
Stockholders’ equity
	Common stock, $0.83 1/3 par value (authorized: 75,000,000 shares; 28,985,422 and 28,947,222 shares outstanding at September 29, 2001 and December 30, 2000)					24,154			24,123
	Preferred stock, $1.00 par value (authorized: 5,000,000 shares; 0 shares outstanding at September 29, 2001 and December 30, 2000)					—			—
	Additional paid-in capital					1,699			1,229
	Unamortized portion of restricted stock awards					(805	)		(437	)
	Retained earnings					154,242			149,794
	Accumulated other comprehensive loss					(1,061	)		(116	)
		Total stockholders’ equity				178,229			174,593
		Total liabilities and stockholders’ equity			$	323,727		$	317,073

See notes to condensed consolidated financial statements (unaudited).

3

LANCE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income (Unaudited)
For the Thirteen and Thirty-Nine Weeks Ended September 29, 2001 and September 23, 2000
(In thousands, except share and per share data)

		Thirteen			Thirteen			Thirty-Nine			Thirty-Nine
		Weeks Ended			Weeks Ended			Weeks Ended			Weeks Ended
		Sept 29, 2001			Sept 23, 2000			Sept 29, 2001			Sept 23, 2000
Net sales and other operating revenue		$	148,954		$	147,978		$	445,332		$	428,736
Cost of sales and operating expenses
Cost of sales			72,174			74,820			217,115			209,149
Selling, marketing and delivery			55,947			56,028			167,873			167,732
General and administrative			7,655			6,355			22,823			18,157
Provisions for employees’ retirement plans			1,265			1,035			3,462			3,257
Amortization of goodwill and other intangibles			510			424			1,549			1,314
	Total costs and expenses		137,551			138,662			412,822			399,609
Operating profit			11,403			9,316			32,510			29,127
Interest expense, net			(872	)		(1,079	)		(2,964	)		(3,285	)
Other income (expense), net			16			685			(341	)		2,258
Income before income taxes			10,547			8,922			29,205			28,100
Income taxes			3,913			3,254			10,842			10,391
Net income		$	6,634		$	5,668		$	18,363		$	17,709
Earnings per share
	Basic	$	0.23		$	0.20		$	0.64		$	0.61
	Diluted	$	0.23		$	0.20		$	0.63		$	0.61
	Weighted average shares outstanding — basic		28,912,000			28,890,000			28,907,000			28,894,000
	Weighted average shares outstanding — diluted		29,129,000			28,908,000			29,039,000			28,914,000
Cash dividends per share		$	0.16		$	0.16		$	0.48		$	0.48

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 Thirty-Nine Weeks Ended September 29, 2001 and September 23, 2000

(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, 1999			29,950,897		$	24,959		$	2,552		$	(799	)	$	154,063		$	15		$	180,790
Comprehensive income:
	Net income		—			—			—			—			17,709			—			17,709
	Foreign currency translation adjustment																	(89	)		(89	)
	Total comprehensive income		—			—			—			—			—			—			17,620
Cash dividends paid to stockholders			—			—			—			—			(13,948	)		—			(13,948	)
Cancellations of restricted stock			(24,775	)		(21	)		(249	)		401			—			—			131
Purchases of common stock			(976,000	)		(813	)		(1,139	)		—			(7,658	)		—			(9,610	)
Balance, September 23, 2000			28,950,122		$	24,125		$	1,164		$	(398	)	$	150,166		$	(74	)	$	174,983
Balance, December 30, 2000			28,947,222		$	24,123		$	1,229		$	(437	)	$	149,794		$	(116	)	$	174,593
Comprehensive income:
	Net income		—			—			—			—			18,363			—			18,363
	Unrealized loss on interest rate swap																	(508	)		(508	)
	Foreign currency translation adjustment		—			—			—			—			—			(437	)		(437	)
	Total comprehensive income		—			—			—			—			—			—			17,418
Cash dividends paid to stockholders			—			—			—			—			(13,915	)		—			(13,915	)
Stock options exercised			3,250			2			30			—			—			—			32
Issuance of restricted stock, net of cancellations			34,950			29			440			(368	)		—			—			101
Balance, September 29, 2001			28,985,422		$	24,154		$	1,699		$	(805	)	$	154,242		$	(1,061	)	$	178,229

See notes to condensed consolidated financial statements (unaudited).

5

LANCE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)
For the Thirty-Nine Weeks Ended September 29, 2001 and September 23, 2000
(In thousands)

			Thirty-Nine			Thirty-Nine
			Weeks Ended			Weeks Ended
			Sept 29, 2001			Sept 23, 2000
Operating Activities
	Net income		$	18,363		$	17,709
	Adjustments to reconcile net income to cash provided by operating activities:
		Depreciation and amortization		23,763			22,089
		Loss (gain) on sale of property, net		(710	)		(2,122	)
		Deferred income taxes		1,053			229
		Changes in operating assets and liabilities		1,873			(2,915	)
	Net cash flow provided by operating activities			44,342			34,990
Investing Activities
	Purchases of property and equipment			(22,946	)		(15,024	)
	Proceeds from sale of property and equipment			534			3,330
Net cash used in investing activities				(22,412	)		(11,694	)
Financing Activities
	Dividends paid			(13,915	)		(13,948	)
	Issuance (Purchase) of common stock, net			32			(9,610	)
	Repayments of debt			(331	)		(252	)
	Borrowings (repayments) under revolving credit facilities, net			(4,827	)		(10,594	)
Net cash used in financing activities				(19,041	)		(34,404	)
Effect of exchange rate changes on cash				(184	)		(71	)
Increase (decrease) in cash and cash equivalents				2,705			(11,179	)
Cash and cash equivalents at beginning of period				1,224			13,303
Cash and cash equivalents at end of period			$	3,929		$	2,124
Supplemental information
Cash paid for income taxes			$	7,756		$	8,734
Cash paid for interest			$	1,999		$	1,961

See notes to condensed consolidated financial statements (unaudited).

6

LANCE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

1.	The accompanying unaudited consolidated financial statements of Lance, Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted 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 accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of the Company, these financial statements reflect all adjustments (consisting of only normal, recurring accruals) necessary to present fairly the consolidated financial position of the Company and its subsidiaries as of September 29, 2001 and December 30, 2000, and the consolidated statements of income for the thirteen and thirty-nine weeks ended September 29, 2001 and September 23, 2000 and the statements of stockholders’ equity and comprehensive income and cash flows for the thirty-nine weeks ended September 29, 2001 and September 23, 2000.
2.	The consolidated results of operations for the thirty-nine weeks ended September 29, 2001 are not necessarily indicative of the results to be expected for a full year.
3.	The Company’s primary raw materials include peanuts, peanut butter, flour, sugar, potatoes and other grain products.
4.	The Company utilizes the dollar value last-in, first-out (LIFO) method of determining the cost of the majority of its inventories. Because inventory calculations under the LIFO method are based on annual determinations, the determination of interim LIFO valuations requires that estimates be made of year-end costs and levels of inventories. The possibility of variation between estimated year-end costs and levels of LIFO inventories and the actual year-end amounts may materially affect the results of operations as finally determined for the full year.
	Inventories consist of (in thousands):

	September 29,			December 30,
	2001			2000
Finished goods	$	18,043		$	14,869
Raw materials		5,989			5,386
Supplies, etc.		6,931			7,720
Total inventories at FIFO cost		30,963			27,975
Less: Adjustments to reduce FIFO cost to LIFO cost		(4,421	)		(4,770	)
Total inventories	$	26,542		$	23,205

5. Included in accumulated other comprehensive loss during the thirty-nine weeks ended September 29, 2001 and September 23, 2000, was a $0.4 million and $0.1 million loss, respectively, related to the translation of the financial statements of foreign subsidiaries. Also included in accumulated other comprehensive loss as of September 29, 2001 was a $0.5 million unrealized loss related to interest rate swaps accounted for in accordance with SFAS 133.

7

LANCE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

6. The following table provides a reconciliation of the denominator used in computing basic earnings per share to the denominator used in computing diluted earnings per share for the thirteen weeks ended September 29, 2001 and September 23, 2000 (there were no reconciling items for the numerator amounts of basic and diluted earnings per share):

	Sept 29, 2001		Sept 23, 2000
Weighted average number of common shares used in computing basic earnings per share		28,912,000		28,890,000
Effect of dilutive stock options and non-vested restricted stock		217,000		18,000
Weighted average number of common shares and dilutive potential common stock used in computing diluted earnings per share		29,129,000		28,908,000
Stock options excluded from the above reconciliation because they are anti-dilutive		1,384,000		2,187,000

7. Derivatives and Hedging

For the fiscal year 2001 the Company implemented SFAS 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 establishes accounting and reporting standards requiring that every derivative instrument be recorded in the balance sheet as either an asset or a liability measured at its fair value. It also requires that changes in the derivative’s fair value be recognized currently in earnings unless specific hedge accounting criteria are met, and requires that a company must formally document, designate and assess the effectiveness of transactions that receive hedge accounting.

The Company is exposed to certain market risks as part of its ongoing business operations and uses derivative financial instruments, where appropriate, to manage these risks. The derivative instruments must be effective at reducing the risk associated with the exposure being hedged and must be designated as a hedge at the inception of the contract.

With the adoption of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, the Company currently records the fair value of all outstanding derivatives in long-term assets and other long-term liabilities. Gains and losses related to the ineffective portion of any hedge are recorded in expenses based on the nature of the derivative. The ineffective portion of all hedges as of September 29, 2001 resulted in an immaterial loss.

Qualifying derivatives are reported as part of hedge arrangements as follows:

CASH FLOW HEDGES

Cash flow hedges involve hedging the risks relating to variable rates or prices that affect future cash payments by the Company. Gains and losses on these instruments are recorded in Other Comprehensive Income until the underlying transaction is recorded in earnings. When the hedged item is realized, gains or losses are reclassified from Accumulated Other Comprehensive Income to the Consolidated Statement of Earnings on the same line item as the underlying transaction risk.

8

LANCE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

•	Foreign Exchange Risk — The Company is exposed to fluctuations in foreign currency cash flows related primarily to third-party purchases and inter-company product shipments. Forward contracts of generally less than twelve months duration are used to hedge some of these risks. Effectiveness is assessed based on changes in spot rates. The Company currently has no open foreign exchange contracts that qualify as cash flow hedges.
•	Interest Rate Risk — The Company is exposed to interest rate volatility with regard to existing variable rate debt obligations. The Company uses interest rate exchange agreements to reduce interest rate volatility, and to achieve a desired proportion of variable versus fixed rate debt, based on current and projected market conditions.
	Variable-to-fixed interest rate swaps are accounted for as cash flow hedges, with effectiveness assessed based on changes in the present value of interest payments on the underlying debt. In the third quarter 2001, the Company entered into an interest rate swap agreement in order to manage the risk associated with variable interest rates. The notional amount, interest payment and maturity dates of the swaps match the principal, interest payment and maturity dates of the related debt. The underlying notional amount of the swap agreement is Cdn $50 million.
•	Price Risk — The Company is exposed to price fluctuations primarily as a result of anticipated purchases of raw and packaging materials. The Company will consider the use of futures and options contracts to reduce price fluctuations; however, the Company currently has no open futures or options contracts related to raw and packaging materials.

Unrealized losses from cash flow hedges recorded in accumulated other comprehensive income at September 29, 2001 was $0.5 million, net of tax, related to interest rate swaps, which will be reclassified into interest expense over the life of the interest rate hedge.

If an interest rate swap were to be terminated, the gain or loss realized upon termination would be deferred and amortized to interest expense over the remaining term of the underlying debt instrument it was intended to modify. However, if the underlying debt instrument were to be settled prior to maturity, the gain or loss realized upon termination would be recognized immediately.

FAIR VALUE HEDGES

Fair value hedges involve recognized assets, liabilities or firm commitments as the hedge risks.

• Foreign Exchange Translation – The Company is exposed to fluctuations in earnings related to foreign currency transactions. Forward contracts, for durations generally less than twelve months, are used to hedge some of this risk. Effectiveness is assessed based on changes in the spot rates. The Company has entered into forward contracts for capital asset purchases denominated in a foreign currency.

9

LANCE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

8.	Emerging Issues Task Force Issue 00-14, Accounting for Certain Sales Incentives, and Emerging Issues Task Force Issue 00-25, Accounting for Consideration from a Vendor to a Retailer in Connection with the Purchase or Promotion of the Vendor’s Products, will be effective beginning in the Company’s quarter ending March 30, 2002. These Issues address the recognition, measurement and income statement classification for certain sales incentives. Had the Company implemented these new accounting policies certain expenses would have been reclassified in the income statement to reduce net sales and selling, marketing and delivery expenses. The effects of these reclassifications would have been $7.3 million for the thirteen weeks ended September 29, 2001 and $6.1 million for the thirteen weeks ended September 23, 2000. For the thirty-nine weeks ended September 29, 2001 and September 23, 2000, approximately $20.6 million and $16.9 million, respectively, would have been reclassified between revenue and selling, marketing and delivery expenses. There would be no net income impact.
9.	On July 20, 2001, the Financial Accounting Standards Board issued Statement No. 142, Goodwill and Other Intangible Assets, which requires that goodwill no longer be amortized to earnings, but instead be reviewed for impairment. The effective date of this Statement is January 1, 2002. Historically, the Company has recorded goodwill amortization expense of approximately $1.2 million. Therefore, for fiscal years beginning after 2001, the exclusion of goodwill amortization will result in an increase in the Company’s operating profit of approximately $1.2 million on an annualized basis. However, the Company has not yet evaluated the negative impact, if any, on operating profit relating to the potential impairment of goodwill.
10.	Effective July 1, 2001, the Company began the phase out of its postretirement healthcare plan. This plan currently provides postretirement medical benefits for retirees and their spouses to age 65. The postretirement healthcare plan will be phased-out over the next ten years. Present participants and those employees age 55 and older will continue to be covered under the plan.

10

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

Results of Operations

Thirteen Weeks Ended September 29, 2001 Compared to Thirteen Weeks Ended September 23, 2000

	Thirteen weeks ended
	September 29,					September 23,
($ In Thousands)	2001					2000					Difference
Revenues	$	148,954		100.0	%	$	147,978		100.0	%	$	976		0.7	%
Cost of sales		72,174		48.5	%		74,820		50.6	%		2,646		3.5	%
Gross margin		76,780		51.5	%		73,158		49.4	%		3,622		5.0	%
Selling, marketing, and delivery expenses		55,947		37.6	%		56,028		37.9	%		81		0.1	%
General and administrative expenses		7,655		5.1	%		6,355		4.3	%		(1,300	)	(20.5	)%
Provision for employees’ retirement plans		1,265		0.8	%		1,035		0.7	%		(230	)	(22.2	)%
Amortization of goodwill and intangibles		510		0.3	%		424		0.3	%		(86	)	(20.3	)%
Total operating expenses		65,377		43.9	%		63,842		43.1	%		(1,535	)	(2.4	)%
Operating profit		11,403		7.7	%		9,316		6.3	%		2,087		22.4	%
Other income (expense), net		16		0.0	%		685		0.5	%		(669	)	(97.7	)%
Interest expense, net		(872	)	(0.6	)%		(1,079	)	(0.7	)%		207		19.2	%
Income taxes		3,913		2.6	%		3,254		2.2	%		659		20.3	%
Net income	$	6,634		4.5	%	$	5,668		3.8	%	$	966		17.0	%

Revenues increased $1.0 million or 0.7% due to growth in contract manufactured sales and the Company’s branded salty snack products.

Gross margin as a percent of revenues increased to 51.5% compared to 49.4% in the prior year. The increase in gross margin was primarily a result of stronger manufacturing performance driven by reduced material waste and improved line efficiencies which were partially offset by changes in product mix.

Selling, marketing and delivery expenses decreased as a percent of sales and in total as compared to prior year. The decrease was primarily due to a higher proportion of direct shipments, which require less selling and delivery expense. The expense reductions were partially offset by increased incentive provisions and additional investments in the Company’s route distribution system. General and administrative expenses increased $1.3 million primarily as a result of increased incentive provisions, which were partially offset by reductions in professional fees and reserves for bad debts. The provision for employees’ retirement plan was higher than the prior year due to the profitability-based formula for these contributions.

Other income decreased $0.7 million primarily due to gains on fixed assets reported in the prior year. Other income also includes gains and losses on foreign currency transactions. Net interest expense decreased $0.2 million from the prior year due to lower rates and lower average debt outstanding. The effective income tax rate increased slightly to 37.1% compared to 36.5% in the prior year.

Net income includes several transactions resulting in a minimal net gain. Included is a one-time gain of $0.9 million related to the curtailment of the post retirement healthcare plan. The curtailment resulted from the change in plan terms as discussed in footnote 10. This gain was offset by a $0.9 million reserve for fixed asset impairments related to the Company’s ongoing manufacturing modernization projects.

11

Thirty-Nine Weeks Ended September 29, 2001 Compared to Thirty-Nine Weeks Ended September 23, 2000

	Thirty-Nine weeks ended
	September 29,					September 23,
($ In Thousands)	2001					2000					Difference
Revenues	$	445,332		100.0	%	$	428,736		100.0	%	$	16,596		3.9	%
Cost of sales		217,115		48.8	%		209,149		48.8	%		(7,966	)	(3.8	)%
Gross margin		228,217		51.2	%		219,587		51.2	%		8,630		3.9	%
Selling, marketing, and delivery expenses		167,873		37.7	%		167,732		39.1	%		(141	)	(0.1	)%
General and administrative expenses		22,823		5.1	%		18,157		4.2	%		(4,666	)	(25.7	)%
Provision for employees’ retirement plans		3,462		0.8	%		3,257		0.8	%		(205	)	(6.3	)%
Amortization of goodwill and intangibles		1,549		0.3	%		1,314		0.3	%		(235	)	(17.9	)%
Total operating expenses		195,707		43.9	%		190,460		44.4	%		(5,247	)	(2.8	)%
Operating profit		32,510		7.3	%		29,127		6.8	%		3,383		11.6	%
Other income (expense), net		(341	)	(0.1	)%		2,258		0.5	%		(2,599	)	(115.1	)%
Interest expense, net		(2,964	)	(0.7	)%		(3,285	)	(0.8	)%		321		9.8	%
Income taxes		10,842		2.4	%		10,391		2.4	%		451		4.3	%
Net income	$	18,363		4.1	%	$	17,709		4.1	%	$	654		3.7	%

Revenues increased $16.6 million or 3.9% due to growth in contract manufactured and private label sales as well as revenue growth in the Company’s branded salty snack products.

Gross margin as a percent of revenues was comparable to the prior year. Decreases in gross margin as a result of changes in product mix were offset by improved operating efficiencies.

Selling, marketing and delivery expenses as a percent of sales decreased from 39.1% in 2000 to 37.7% in 2001 due to increased direct shipments, which require less selling and delivery expense and the absence of severance expenses recorded in 2000. These decreases were offset somewhat by increased promotional spending, increased incentive provisions and continued investments in the Company’s route distribution system. General and administrative expenses increased $4.7 million largely as a result of increased incentive provisions. The provision for employees’ retirement plan was $0.2 million higher than the prior year due to the profitability-based formula for these contributions.

Other income primarily includes gains and losses on dispositions of fixed assets. The $2.6 million decrease in other income was due predominately to gains on the disposition of assets that occurred in 2000. Net interest expense and the effective income tax rate were comparable to the prior year.

12

LIQUIDITY AND CAPITAL RESOURCES

In 2000, the Company amended its unsecured revolving credit agreement allowing the Company the ability to borrow up to $60 million and Cdn $25 million through April 2004. At September 29, 2001, $16.5 million was outstanding on these unsecured 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 April 2004, all borrowings under these facilities are classified as long-term debt.

Cash flow from operations for the thirty-nine weeks ended September 29, 2001 totaled $44.3 million. Working capital (other than cash and marketable securities) decreased to $39.6 million at September 29, 2001 from $41.7 million at December 30, 2000. The decrease is due primarily to temporary increases in accrued liabilities and accrued income taxes, which were partially offset by seasonal increases in inventories and accounts receivables.

Cash used in investing activities for the thirty-nine weeks ended September 29, 2001 totaled $22.4 million. Capital expenditures totaled $22.9 million with the largest expenditures being plant equipment. Proceeds from the sale of property and equipment totaled $0.5 million.

Cash used in financing activities for the thirty-nine weeks ended September 29, 2001 totaled $19.0 million. Cash dividends of $0.48 per share for the thirty-nine weeks ended September 29, 2001 totaled $13.9 million. During the first quarter of 2000 the Company repurchased 976,000 shares of its common stock for $9.6 million. On January 30, 2001, the Board of Directors authorized the repurchase of 1.0 million shares of its common stock. During the third quarter of 2001 the Company did not repurchase any shares of its common stock and currently has no active program to repurchase shares of its common stock.

As of September 29, 2001, cash and cash equivalents totaled $3.9 million and total debt outstanding was $56.9 million as compared to $1.2 million in cash and $63.9 million in debt as of December 30, 2000. The decrease in total debt outstanding is primarily due to cash flows provided by operating activities exceeding cash requirements for capital expenditures and dividends. Additional borrowings available under all credit facilities totaled $61.8 million. The Company has complied with all financial covenants contained in the financing agreements. Available cash, cash from operations and available credit under the credit facilities are expected to be sufficient to meet cash dividend and normal operating requirements for the foreseeable future.

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 rates and fluctuations in foreign exchange rates. The Company has no market risk sensitive instruments held for trading purposes.

Raw materials used by the Company are exposed to the impact of changing commodity prices. Accordingly, the Company historically has entered into commodity futures and option contracts to manage fluctuations in prices of anticipated purchases of certain raw materials. The Company’s Board-approved 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. At September 29, 2001, the Company had no open positions on commodity futures contracts.

The Company’s long-term debt obligations incur interest at floating rates, based on changes in U.S. Dollar LIBOR, Canadian Dollar LIBOR and the prime rate of interest. Therefore, the Company has an exposure

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to changes in these interest rates. In the third quarter 2001, the Company entered into an interest rate swap agreement in order to manage the risk associated with variable interest rates. The notional amount, interest payment and maturity dates of the swaps match the principal, interest payment and maturity dates of the related debt. Accordingly, any market risk or opportunity associated with these swaps is offset by the opposite market impact on the related debt. At September 29, 2001, the Company’s long term debt totaled $56.6 million, with interest rates ranging from 3.9% to 7.0%, with a weighted average interest rate of 5.1%. A 10% increase in U.S. LIBOR and Canadian LIBOR would have increased interest expense for the thirteen weeks ended September 29, 2001 by $0.1 million.

Through the operations of Tamming Foods Ltd. (“Tamming”), a Canadian subsidiary of the Company, the Company has an exposure to foreign exchange rate fluctuations, primarily between the U.S. and Canadian dollars. Foreign exchange rate fluctuations have limited impact on the earnings of the Company as a majority of the sales of Tamming are denominated in U.S. dollars. The indebtedness used to finance the acquisition of Tamming is denominated in Canadian dollars and serves as an effective hedge of the net asset investment in Tamming. A 10% devaluation of the Canadian dollar would result in an immaterial change in the Company’s net asset investment in Tamming.

Forward-Looking Statements

This discussion contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those forward-looking statements. Factors that may cause actual results to differ materially include price competition, industry consolidation, raw material costs, effectiveness of sales and marketing activities and operation of a leveraged business, as described in Exhibit 99.1 to this Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The principal market risks to which the Company is exposed that may adversely impact results of operations and financial position include changes in certain raw material prices, interest rates and foreign exchange rates. 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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PART II. OTHER INFORMATION

Item 2. Changes in Securities and Use of Proceeds

The Registrant’s Amended and Restated Credit Agreement dated May 26, 2000, restricts payment of cash dividends and repurchases of its common stock by the Registrant if, after payment of any such dividends or any such repurchases of its common stock, the Registrant’s consolidated stockholders’ equity would be less than $125,000,000. At September 29, 2001, the Registrant’s consolidated stockholders’ equity was $178,229,000.

Item 5. Other Information

Subject to the declaration by the Board of Directors of the Registrant, the Registrant has determined a schedule of projected record and payment dates for quarterly cash dividends in 2002. Those dates are projected to be as follows:

Record Date	Payment Date
February 11, 2002	February 20, 2002
May 10, 2002	May 20, 2002
August 12, 2002	August 20, 2002
November 11, 2002	November 20, 2002

Several weeks prior to each projected record date, the Board of Directors will consider the financial results and condition of the Registrant prior to the declaration of a dividend. There is no assurance that the Board of Directors will declare any dividend.

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Item 6. Exhibits and Reports on Form 8-K

(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.
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.
3.3	Bylaws of Lance, Inc., as amended through April 26, 2001, incorporated herein by reference to Exhibit 3.3 of the Registrant’s Quarterly Report on Form 10-Q for the thirteen weeks ended June 30, 2001.
10.1*	Amendment to Executive Severance Agreement dated July 26, 2001 between Lance, Inc. and Paul A. Stroup, III.
10.2*	Amendment to Executive Severance Agreement dated July 26, 2001 between Lance, Inc. and Earl D. Leake.
99.1	Cautionary Statement under Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.

(b) Reports on Form 8-K

     No reports on Form 8-K were filed during the thirteen weeks ended September 29, 2001.

* Management Contract

Items 1, 3, and 4 are not applicable and have been omitted.

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Signatures

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/ B. Clyde Preslar
		B. Clyde Preslar Vice President and Principal Financial Officer
Dated: October 23, 2001

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.

EXHIBITS
Item 6(a)

FORM 10-Q
QUARTERLY REPORT

For the quarterly period ended	Commission File Number
September 29, 2001	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.
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.
3.3	Bylaws of Lance, Inc., as amended through April 26, 2001, incorporated herein by reference to Exhibit 3.3 of the Registrant’s Quarterly Report on Form 10-Q for the thirteen weeks ended June 30, 2001.
10.1*	Amendment to Executive Severance Agreement dated July 26, 2001 between Lance, Inc. and Paul A. Stroup, III.
10.2*	Amendment to Executive Severance Agreement dated July 26, 2001 between Lance, Inc. and Earl D. Leake.
99.1	Cautionary Statement under Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.

* Management Contract