UPDATE 1-Lance Q3 profit, 2008 outlook hit by higher costs

* Q3 profit falls

* Higher ingredient prices, energy costs bite

* Cuts 2008 outlook

Oct 31 (Reuters) - Snack-food maker Lance Inc (LNCE.O) reported a fall in quarterly earnings and cut its full-year earnings outlook as it was hit by an increase in the cost of ingredients and higher energy costs.

"The majority of the ingredient cost increase was due to the escalation in flour and vegetable oil prices," the company said in a statement. Lance was also affected by higher costs for potatoes and peanuts.

During the first two months of the third quarter, the company, due largely to unusual weather conditions, temporarily purchased potatoes and peanuts on the open market at prices that were significantly higher than its contracted prices, which hurt earnings by about 5 cents a share, Lance said.

Lance, maker of the Toastchee, Thunder and Captain's Wafers brands of snacks, has raised product-prices throughout the year to combat the spike in costs. But the latest round of increases did not offset the higher input costs experienced in July and August, the company said.

The Charlotte, North Carolina-based company posted third-quarter net income of $6.8 million, a fall of more than 9 percent from a year earlier.

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Lance's shares closed at $20.37 Thursday on Nasdaq. (Reporting by Nivedita Bhattacharjee in Bangalore; Editing by Pratish Narayanan)