Lancaster Colony

380 Polaris Parkway, Suite 400, Westerville, Ohio 43082www.lancastercolony.comGROWTH®OUR Family OF BRANDS2019 ANNUAL REPORTLANCASTER COLONY CORPORATIONInvesting inFINANCIAL HIGHLIGHTSYears Ended June 30Net Sales$1,307,787  $1,222,925Gross Profit$326,198$303,506Income Before Income Taxes$195,542$174,203Taxes Based on Income$44,993$38,889Net Income$150,549$135,314Per Common Share: Net Income – Diluted  $5.46$4.92 Cash Dividends $2.55$2.35 Shareholders’ Equity$26.44$23.73Total Assets$905,399$804,491Shareholders’ Equity$726,873$652,282Weighted Average Common Shares  Outstanding – Diluted27,53727,459(In Thousands, Except Per Share Figures)20192018Marzetti Culinary Team Featured on the Cover  (From left to right): Culinary Specialists Chris Domanik,  Jack Cory and Joe Ciaciura; and Director of Strategic  Product Development, Sandy Bichsel.INNOVATIONIn June 2019, Lancaster Colony Corporation  opened a new state-of-the-art Innovation  Center near our company headquarters  in central Ohio. This 45,000 square foot  facility brings together the best in culinary  arts, food science and technology.  The Innovation Center also enables greater  collaboration and innovation among our  Foodservice and Retail teams to develop  relevant, consumer-centric, on-trend products  that serve to strengthen our existing  customer relationships and build new ones.Note: Financial results for the fiscal year ended June 30, 2019 include the favorable impact on Income Before Income Taxes of a $17.1 million non-cash, pre-tax reduction to the fair value of the acquisition- related contingent consideration for Angelic Bakehouse, Inc. Please refer to the company’s Form 10-K  filing for additional details.OUR BRANDSThe Company’s marquee brands include Marzetti®,  New York BRAND Bakery®, Sister Schubert’s® and Flatout®.  Products sold under the long-established Marzetti brand include  salad dressings, veggie dips, fruit dips and croutons. New York Bakery is the recognized leader in the frozen garlic toast and garlic breadstick segments, while New York Bakery Texas Toast croutons rank among the top retail crouton brands in the United States. Sister Schubert’s offers the top-selling lineup of dinner yeast rolls in the supermarket  frozen section. Flatout is a leading flatbread brand with placement  in the deli department and product offerings that include oval-shaped flatbread wraps, the unique Foldit® line of  flatbreads and Artisan Thin pizza crusts.TO OUR SHAREHOLDERS

Three years ago, we launched our Better Food Company Growth Plan, consisting of three simple pillars:

1.  Accelerate our base business growth;

2.  Simplify our supply chain to reduce costs and grow margins; and

3.  Identify and execute complementary M&A to grow our core.

Since then, we have focused on strengthening our team, implementing our growth plan, and harvesting the results. 

Looking ahead, we will remain true to this strategy which we believe is appropriate, achievable, and will better position 

us to deliver top-quartile performance.

Fiscal year 2019 was a year of continued growth for Lancaster Colony and also marked the 50th anniversary of our  

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website at www.lancastercolony.com. Our company mindset has always been that sustainability and long-term value 

creation go hand in hand, a conviction that has been manifest for decades in the values and behaviors of our founders, 

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to be The Better Food Company. 

Looking Back – Fiscal 2019 Review

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of bakery items sold to the retail and foodservice channels. Notably, Bantam Bagels® are available at Starbucks® cafes 

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a co-packer for our New York (cid:9)(cid:44)(cid:386)(cid:32)(cid:12) Bakery(cid:47)(cid:31)(cid:3)(cid:47)(cid:105)(cid:221)(cid:62)(cid:195)(cid:3)(cid:47)(cid:156)(cid:62)(cid:195)(cid:204)(cid:3)(cid:76)(cid:213)(cid:195)(cid:136)(cid:152)(cid:105)(cid:195)(cid:195)(cid:3)(cid:204)(cid:133)(cid:62)(cid:204)(cid:3)(cid:195)(cid:213)(cid:171)(cid:171)(cid:143)(cid:136)(cid:105)(cid:96)(cid:3)(cid:192)(cid:156)(cid:213)(cid:125)(cid:133)(cid:143)(cid:222)(cid:3)(cid:133)(cid:62)(cid:143)(cid:118)(cid:3)(cid:156)(cid:118)(cid:3)(cid:156)(cid:213)(cid:192)(cid:3)(cid:118)(cid:192)(cid:156)(cid:226)(cid:105)(cid:152)(cid:3)(cid:125)(cid:62)(cid:192)(cid:143)(cid:136)(cid:86)(cid:3)(cid:76)(cid:192)(cid:105)(cid:62)(cid:96)(cid:3)

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the former Omni Baking facility to help ensure it will remain a reliable and scalable source of our bread products 

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believe that both will serve as important contributors to our long-term growth.

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have a reliable and scalable systems infrastructure well into the future.

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years as our Senior Vice President of Foodservice. Tim’s innumerable contributions and leadership have truly served us well 

(cid:136)(cid:152)(cid:3)(cid:156)(cid:213)(cid:192)(cid:3)(cid:141)(cid:156)(cid:213)(cid:192)(cid:152)(cid:105)(cid:222)(cid:3)(cid:204)(cid:156)(cid:3)(cid:76)(cid:105)(cid:86)(cid:156)(cid:147)(cid:105)(cid:3)The Better Food Company.

Looking Ahead - Fiscal 2020 Outlook

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our New York Bakery™(cid:3)(cid:206)(cid:135)(cid:10)(cid:133)(cid:105)(cid:105)(cid:195)(cid:105)(cid:3)(cid:10)(cid:133)(cid:105)(cid:105)(cid:195)(cid:105)(cid:3)(cid:45)(cid:204)(cid:136)(cid:86)(cid:142)(cid:195)(cid:3)(cid:62)(cid:152)(cid:96)(cid:3)(cid:45)(cid:136)(cid:195)(cid:204)(cid:105)(cid:192)(cid:3)(cid:45)(cid:86)(cid:133)(cid:213)(cid:76)(cid:105)(cid:192)(cid:204)(cid:189)(cid:195)®(cid:3)(cid:195)(cid:220)(cid:105)(cid:105)(cid:204)(cid:3)(cid:192)(cid:156)(cid:143)(cid:143)(cid:195)(cid:3)(cid:136)(cid:152)(cid:3)(cid:62)(cid:3)(cid:219)(cid:62)(cid:192)(cid:136)(cid:105)(cid:204)(cid:222)(cid:3)(cid:156)(cid:118)(cid:3)(cid:152)(cid:105)(cid:220)(cid:3)(cid:121)(cid:62)(cid:219)(cid:156)(cid:192)(cid:195)(cid:3)(cid:195)(cid:213)(cid:86)(cid:133)(cid:3)(cid:62)(cid:195)(cid:3)(cid:42)(cid:213)(cid:147)(cid:171)(cid:142)(cid:136)(cid:152)(cid:3)
(cid:45)(cid:171)(cid:136)(cid:86)(cid:105)(cid:3)(cid:62)(cid:152)(cid:96)(cid:3)(cid:29)(cid:105)(cid:147)(cid:156)(cid:152)(cid:3)(cid:9)(cid:143)(cid:213)(cid:105)(cid:76)(cid:105)(cid:192)(cid:192)(cid:222)(cid:176)(cid:3)(cid:34)(cid:213)(cid:192)(cid:3)(cid:31)(cid:62)(cid:192)(cid:226)(cid:105)(cid:204)(cid:204)(cid:136)® refrigerated dip lineup will also be reformulated to offer new great-tasting  

dips with a shorter and cleaner ingredient panel. In addition, we anticipate continued growth from shelf-stable dressings  

and sauces sold under license agreements along with incremental sales from the Bantam Bagels acquisition. In the  

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Innovation Center.

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for Bantam Bagels and increased production capacity for Foodservice dressings and sauces. 

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day in support of our mission to be The Better Food Company.

Sincerely yours,

David A. Ciesinski
(cid:42)(cid:192)(cid:105)(cid:195)(cid:136)(cid:96)(cid:105)(cid:152)(cid:204)(cid:3)(cid:69)(cid:3)(cid:10)(cid:133)(cid:136)(cid:105)(cid:118)(cid:3)(cid:13)(cid:221)(cid:105)(cid:86)(cid:213)(cid:204)(cid:136)(cid:219)(cid:105)(cid:3)(cid:34)(cid:118)(cid:119)(cid:86)(cid:105)(cid:192)
September 27, 2019

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549 

(Mark One)

Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2019 
or 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from 

 to 

Commission file number 000-04065

Lancaster Colony Corporation

(Exact name of registrant as specified in its charter)

Ohio

(State or other jurisdiction of
incorporation or organization)

380 Polaris Parkway, Suite 400
Westerville, Ohio
(Address of principal executive offices)

13-1955943

(I.R.S. Employer
Identification No.)

43082
(Zip Code)

614-224-7141
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: 

Title of each class
Common Stock, without par value

Trading Symbol
LANC

Name of each exchange on which registered
NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act:
None 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities 

Act.    Yes  

    No  

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the 

Act.    Yes  

    No  

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  

    No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be 
submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such 
shorter period that the registrant was required to submit such files).     Yes  

    No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 

smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” 
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Non-accelerated filer

Accelerated filer

Smaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition 

period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the 
Exchange Act.    

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

    Yes  

    No  

The aggregate market value of Common Stock held by non-affiliates of the registrant computed by reference to the price 

at which such Common Stock was last sold as of December 31, 2018 was $3,315.5 million.

As of August 1, 2019, there were approximately 27,492,000 shares of Common Stock, without par value, outstanding.

Portions of the registrant’s definitive proxy statement to be filed for its November 2019 Annual Meeting of Shareholders are 
incorporated by reference into Part III of this Annual Report on Form 10-K.

DOCUMENTS INCORPORATED BY REFERENCE

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS

Business

PART I
Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4. Mine Safety Disclosures

Properties
Legal Proceedings

PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity 

Securities
Selected Financial Data

Item 6.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.
Item 9A. Controls and Procedures
Item 9B. Other Information

Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services

PART IV
Item 15. Exhibits, Financial Statement Schedules
Item 16. Form 10-K Summary
Signatures
Index to Exhibits

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6

12
13
13
13

14
16
17
25
25
57
57

59

59
59
59
59
59

60
60
61
62

PART I

Item 1. Business

GENERAL

Lancaster Colony Corporation, an Ohio corporation, is a manufacturer and marketer of specialty food products for the 

retail and foodservice channels. We began our operations in 1961 as a Delaware corporation. In 1992, we reincorporated as an 
Ohio corporation. Our principal executive offices are located at 380 Polaris Parkway, Suite 400, Westerville, Ohio 43082 and 
our telephone number is 614-224-7141.

As used in this Annual Report on Form 10-K and except as the context otherwise may require, the terms “we,” “us,” 
“our,” “registrant,” or “the Company” mean Lancaster Colony Corporation and its consolidated subsidiaries, except where it is 
clear that the term only means the parent company. Unless otherwise noted, references to “year” pertain to our fiscal year which 
ends on June 30; for example, 2019 refers to fiscal 2019, which is the period from July 1, 2018 to June 30, 2019.

Available Information

Our Internet website address is http://www.lancastercolony.com. Our annual reports on Form 10-K, quarterly reports on 
Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) 
of the Securities Exchange Act of 1934 are available free of charge through our website as soon as reasonably practicable after 
such material is electronically filed with, or furnished to, the Securities and Exchange Commission (the “SEC”). The 
information contained on our website or connected to it is not incorporated into this Annual Report on Form 10-K. 

The SEC also maintains a website, http://www.sec.gov, that contains reports, proxy and information statements, and other 

information regarding issuers that file electronically with the SEC.

DESCRIPTION OF AND FINANCIAL INFORMATION ABOUT BUSINESS SEGMENTS

Our financial results are presented as two reportable segments: Retail and Foodservice. Costs that are directly attributable 

to either Retail or Foodservice are charged directly to the appropriate segment. Costs that are deemed to be indirect, excluding 
corporate expenses and other unusual significant transactions, are allocated to the two reportable segments using a reasonable 
methodology that is consistently applied. The financial information relating to our business segments for the three years ended 
June 30, 2019, 2018 and 2017 is included in Note 10 to the consolidated financial statements, and located in Part II, Item 8 of 
this Annual Report on Form 10-K. Further description of each business segment within which we operate is provided below.

Retail Segment

The following table presents the primary Retail products we manufacture and sell under our brand names: 

Products

Frozen Breads

Brand Names

Frozen garlic breads
Frozen Parkerhouse style yeast rolls and dinner rolls
Frozen mini stuffed bagels

New York BRAND Bakery
Sister Schubert’s
Bantam Bagels

Refrigerated Dressings, Dips and Other

Salad dressings
Vegetable dips and fruit dips
Flatbread wraps and pizza crusts
Sprouted grain bakery products
Shelf-Stable Dressings and Croutons

Salad dressings
Croutons and salad toppings

Marzetti, Simply Dressed, Simply 60
Marzetti
Flatout
Angelic Bakehouse

Marzetti, Cardini’s, Girard’s
New York BRAND Bakery, Chatham Village, Marzetti

We also manufacture and sell other shelf-stable products pursuant to brand license agreements including Olive Garden® 

dressings and Buffalo Wild Wings® sauces. Additionally, a small portion of our Retail sales are products sold under private 
label to retailers.

3

The vast majority of the products we sell in the Retail segment are sold through sales personnel, food brokers and 
distributors in the United States. We have placement of products in grocery produce departments through our refrigerated salad 
dressings, vegetable dips and fruit dips. Our flatbread products and sprouted grain bakery products are generally placed in the 
specialty bakery/deli section of the grocery store. We also have products typically marketed in the shelf-stable section of the 
grocery store, which include salad dressing, slaw dressing and croutons. Within the frozen food section of the grocery store, we 
sell yeast rolls, garlic breads and mini stuffed bagels.

Our top five Retail customers accounted for 56%, 55% and 54% of this segment’s total net sales in 2019, 2018 and 2017, 

respectively.

We continue to rely upon our strong retail brands, innovation expertise, geographic and channel expansion and customer 

relationships for future growth. Our category-leading retail brands and commitment to new product development help drive 
increased consumer demand in our Retail segment. Strategic acquisitions are also part of our future growth plans, with a focus 
on fit and value.

Our quarterly Retail sales are affected by seasonal fluctuations, primarily in the fiscal second quarter and the Easter 
holiday season when sales of certain frozen retail products tend to be most pronounced. Our quarterly Retail sales can also be 
affected by the timing of seasonal shipments of certain fruit dips between the first and second quarters. The resulting impacts 
on working capital are not significant. We do not utilize any franchises or concessions. In addition to the owned and licensed 
trademarked brands discussed above, we also own and operate under innumerable other intellectual property rights, including 
patents, copyrights, formulas, proprietary trade secrets, technologies, know-how processes and other unregistered rights. We 
consider our owned and licensed intellectual property rights to be essential to our Retail business.

Foodservice Segment

The majority of our Foodservice sales are products sold under private label to restaurants. We also manufacture and sell 

various branded Foodservice products to distributors.

The following table presents the primary Foodservice products we manufacture and sell under our brand names:

Products

Dressings and Sauces
Salad dressings

Frozen Breads and Other
Frozen garlic breads
Frozen Parkerhouse style yeast rolls and dinner rolls
Frozen pasta

Brand Names

Marzetti, Simply Dressed

New York BRAND Bakery
Sister Schubert’s
Marzetti Frozen Pasta

The vast majority of the products we sell in the Foodservice segment are sold through sales personnel, food brokers and 
distributors in the United States. Most of the products we sell in the Foodservice segment are custom-formulated and include 
salad dressings, sandwich and dipping sauces, frozen breads and yeast rolls. Finally, within this segment, we sell other roll 
products under a transitional co-packing arrangement resulting from the November 2018 acquisition of Omni Baking Company 
LLC.

Our top five Foodservice direct customers accounted for 59%, 64% and 68% of this segment’s total net sales in 2019, 

2018 and 2017, respectively. Within our Foodservice segment, typically our largest direct customers are distributors that 
distribute our products primarily to foodservice national chain restaurant accounts.

In the Foodservice segment, sales growth results from general volume gains or geographic expansion of our established 

customer base, and we also grow our business with existing and new customers by leveraging our culinary skills and 
experience to support the development of new products and menu offerings.

The operations of this segment are not affected to any material extent by seasonal fluctuations. We do not utilize any 

franchises or concessions. We own and operate under innumerable intellectual property rights, including patents, copyrights, 
formulas, proprietary trade secrets, technologies, know-how processes and other unregistered rights. We consider our owned 
intellectual property rights to be essential to our Foodservice business.

4

NET SALES BY CLASS OF PRODUCTS

The following table sets forth business segment information with respect to the percentage of net sales contributed by 
each class of similar products that account for at least 10% of our consolidated net sales in any year from 2017 through 2019:

Retail Segment:

Frozen breads
Refrigerated dressings, dips and other
Shelf-stable dressings and croutons

Foodservice Segment:

Dressings and sauces
Frozen breads and other

2019

20%
17%
13%

36%
13%

2018

21%
18%
14%

35%
12%

2017

21%
18%
14%

36%
11%

Net sales attributable to Walmart Inc. (“Walmart”) totaled 17% of consolidated net sales for 2019, 2018 and 2017. Net 

sales attributable to McLane Company, Inc. (“McLane”), a wholesale distribution subsidiary of Berkshire Hathaway, Inc., 
totaled 15%, 15% and 16% of consolidated net sales for 2019, 2018 and 2017, respectively. McLane is a large, national 
distributor that sells and distributes our products to several of our foodservice national chain restaurant accounts, principally in 
the quick service, fast casual and casual dining channels. In general, these national chain restaurants have direct relationships 
with us for culinary research and development, menu development and production needs, but choose to buy our products 
through McLane, who acts as their distributor. McLane orders our products on behalf of these national chain restaurants, and 
we invoice McLane for these sales. No other direct customer accounted for more than 10% of consolidated net sales during 
these years.

MANUFACTURING

As of June 30, 2019, the majority of our products were manufactured and packaged at our 17 food plants located 
throughout the United States. Most of these plants produce products for both the Retail and Foodservice segments. Efficient 
and cost-effective production remains a key focus as evidenced by our lean six sigma initiative. Certain items are also 
manufactured and packaged by third parties located in the United States, Canada and Europe.

BACKLOG

Orders are generally filled in five to ten days. We do not view the amount of backlog at any particular point in time as a 

meaningful indicator of longer-term shipments.

COMPETITION

All of the markets in which we sell food products are highly competitive in the areas of price, quality and customer 
service. We face competition from a number of manufacturers of various sizes and capabilities. Our ability to compete depends 
upon a variety of factors, including the position of our branded goods within various categories, product quality, product 
innovation, promotional and marketing activity, pricing and our ability to service customers.

ENVIRONMENTAL MATTERS

Our operations are subject to various federal, state and local environmental protection laws. Based upon available 
information, compliance with these laws and regulations did not have a material effect upon the level of capital expenditures, 
earnings or our competitive position in 2019 and is not expected to have a material impact in 2020.

EMPLOYEES AND LABOR RELATIONS

As of June 30, 2019 we had 3,200 employees, 27% of which are represented under various collective bargaining 
contracts. 5% of our employees are represented under a collective bargaining contract that will expire within one year. While 
we believe that labor relations with all our employees are satisfactory, a prolonged labor dispute or an organizing attempt could 
have a material adverse effect on our business and results of operations.

RAW MATERIALS

During 2019, we obtained adequate supplies of raw materials and packaging. We rely on a variety of raw materials and 

packaging for the day-to-day production of our products, including soybean oil, various sweeteners, eggs, dairy-related 
products, flour, various films and plastic and paper packaging materials.

5

We purchase the majority of these materials on the open market to meet current requirements, but we also have some 

fixed-price contracts with terms generally one year or less. See further discussion in our “Risk Factors” section below and our 
contractual obligations disclosure in Management’s Discussion and Analysis of Financial Condition and Results of Operations 
(“MD&A”). Although the availability and price of certain of these materials are influenced by weather, disease and the level of 
global demand, we anticipate that future sources of supply for 2020 will generally be available and adequate for our needs.

Item 1A. Risk Factors

An investment in our common stock is subject to certain risks inherent in our business. Before making an investment 

decision, investors should carefully consider the risks and uncertainties described below, together with all of the other 
information included or incorporated by reference in this Annual Report on Form 10-K.

If any of the following risks occur, our business, results of operations, financial condition and cash flows could be 

materially and adversely affected. If this were to happen, the value of our common stock could decline significantly.

We may be subject to business disruptions, product recalls or other claims for real or perceived safety issues regarding 

our food products.

We can be impacted by both real and unfounded claims regarding the safety of our operations, or concerns regarding 

mislabeled, adulterated, contaminated or spoiled food products. Any of these circumstances could necessitate a voluntary or 
mandatory recall due to a substantial product hazard, a need to change a product’s labeling or other consumer safety concerns. 
A pervasive product recall may result in significant loss due to the costs of a recall, related legal claims, including claims 
arising from bodily injury or illness caused by our products, the destruction of product inventory, or lost sales due to product 
unavailability. A highly publicized product recall, whether involving us or any related products made by third parties, also 
could result in a loss of customers or an unfavorable change in consumer sentiment regarding our products or any category in 
which we operate. In addition, an allegation of noncompliance with federal or state food laws and regulations could force us to 
cease production, stop selling our products or create significant adverse publicity that could harm our credibility and decrease 
market acceptance of our products. Any of these events could have a material adverse effect on our business, results of 
operations, financial condition and cash flows. While we believe our insurance related to these matters is consistent with 
industry practice, any potential claim under our policies may exceed our insurance coverage, may be subject to certain 
exceptions or may not be honored fully, in a timely manner, or at all.

We may be subject to a loss of sales or increased costs due to adverse publicity or consumer concern regarding the safety, 

quality or healthfulness of food products, whether with our products, competing products or other related food products.

We are highly dependent upon consumers’ perception of the safety, quality and possible dietary attributes of our products. 
As a result, substantial negative publicity concerning one or more of our products, or other foods similar to or in the same food 
group as our products, could lead to lower demand for our products and/or reduced prices and lost sales. Substantial negative 
publicity, even when false or unfounded, could also hurt the image of our brands or cause consumers to choose other products 
or avoid categories in which we operate. Any of these events could have a material adverse effect on our business, results of 
operations, financial condition and cash flows.

Certain negative publicity regarding the food industry or our products could also increase our cost of operations. The food 

industry has been subject to negative publicity concerning the health implications of genetically modified organisms, added 
sugars, trans fat, salt, artificial growth hormones, ingredients sourced from foreign suppliers and other supply chain concerns. 
Consumers may increasingly require that our products and processes meet stricter standards than are required by applicable 
governmental agencies, thereby increasing the cost of manufacturing our products. If we fail to adequately respond to any such 
consumer concerns, we could suffer lost sales and damage our brand image or our reputation. Any of these events could have a 
material adverse effect on our business, results of operations, financial condition and cash flows.

A disruption of production at certain manufacturing facilities could result in an inability to meet our customers’ demands 

for certain products, which could also negatively impact our ability to maintain adequate levels of product placement with 
our customers on a long-term basis.

Because we source certain products from single manufacturing sites and use third party manufacturers for significant 
portions of our production needs for certain products, it is possible that we could experience a production disruption that results 
in a reduction or elimination of the availability of some of our products. If we are not able to obtain alternate production 
capability in a timely manner, or on favorable terms, it could have a negative impact on our business, results of operations, 
financial condition and cash flows, including the potential for long-term loss of product placement with various customers.

We are also subject to risks of other business disruptions associated with our dependence on production facilities and 

distribution systems. Natural disasters, terrorist activity, cyber attacks or other unforeseen events could interrupt production or 

6

distribution and have a material adverse effect on our business, results of operations, financial condition and cash flows, 
including the potential for long-term loss of product placement with our customers.

Competitive conditions within our Retail and Foodservice markets could impact our sales volumes and operating profits.

Competition within all of our markets is expected to remain intense. Numerous competitors exist, many of which are 
larger than us in size. These competitive conditions could lead to significant downward pressure on the prices of our products, 
which could have a material adverse effect on our sales and profitability.

Competitive considerations in the various product categories in which we sell are numerous and include price, product 
innovation, product quality, brand recognition and loyalty, effectiveness of marketing, promotional activity and the ability to 
remain relevant to consumer preferences and trends. In order to maintain our existing market share or capture increased market 
share among our retail and foodservice channels, we may decide to increase our spending on marketing and promotional costs, 
advertising and new product innovation. The success of marketing, advertising and new product innovation is subject to risks, 
including uncertainties about trade and consumer acceptance. As a result, any such increased expenditures may not maintain or 
enhance market share and could result in lower profitability.

Walmart is our largest Retail customer. The loss of, or a significant reduction in, Walmart’s business, or an adverse 

change in the financial condition of Walmart, could result in a material adverse effect on our business, results of 
operations, financial condition and cash flows.

Our net sales to Walmart represented 17% of consolidated net sales for the year ended June 30, 2019. Our accounts 

receivable balance from Walmart as of June 30, 2019 was $20.9 million. While our relationship with Walmart has been long-
standing and is believed to be good, it is important to recognize that we may not be able to maintain this relationship and 
Walmart is not contractually obligated to purchase from us. In addition, changes in Walmart’s general business model, such as 
reducing the shelf space devoted to the branded products we market, or devoting more shelf space to competing products, could 
adversely affect the profitability of our business with Walmart, even if we maintain a good relationship. The loss of, or a 
significant reduction in, this business could have a material adverse effect on our sales and profitability. Unfavorable changes in 
Walmart’s financial condition or other disruptions to Walmart’s business, such as decreased consumer demand or stronger 
competition, could also have a material adverse effect on our business, results of operations, financial condition and cash flows.

McLane is our largest Foodservice customer. An adverse change in the financial condition of McLane could have a 

material adverse effect on our business, results of operations, financial condition and cash flows. 

Our net sales to McLane represented 15% of consolidated net sales for the year ended June 30, 2019. Our accounts 

receivable balance from McLane as of June 30, 2019 was $6.9 million. McLane is a large, national distributor that sells and 
distributes our products to several of our foodservice national chain restaurant accounts, principally in the quick service, fast 
casual and casual dining channels. In general, these national chain restaurants have direct relationships with us for culinary 
research and development, menu development and production needs, but choose to buy our products through McLane, who 
acts as their distributor. McLane orders our products on behalf of these national chain restaurants, and we invoice McLane for 
these sales. Thus, unfavorable changes in the financial condition of McLane could have a material adverse effect on our 
business, results of operations, financial condition and cash flows. In addition, the loss of, or significant reduction in, our 
business with the underlying national chain restaurants, or other disruptions, such as decreased consumer demand or stronger 
competition, could also have a material adverse effect on our business, results of operations, financial condition and cash flows. 
We believe that our relationship with McLane and the underlying national chain restaurants is good, but we cannot ensure that 
we will be able to maintain these relationships. McLane and the underlying national chain restaurants are not typically 
committed to long-term contractual obligations with us, and they may switch to other suppliers that offer lower prices, 
differentiated products or customer service that McLane and/or the underlying national chain restaurants perceive to be more 
favorable. In addition, changes in the general business model of McLane, or the underlying national chain restaurants, could 
have a material adverse effect on our business, results of operations, financial condition and cash flows.

A single indirect national chain restaurant account represents a significant portion of our Foodservice segment sales. 
The loss of, or a significant reduction in, this national chain restaurant’s business, or an adverse change in the financial 
condition of this national chain restaurant, could result in a material adverse effect on our business, results of operations, 
financial condition and cash flows.

Our net sales to a single national chain restaurant account, which are made indirectly through several foodservice 
distributors, represented 14% of consolidated net sales for the year ended June 30, 2019. While our relationship has been long-
standing and is believed to be very good, it is recognized that we may not be able to maintain this relationship in the future. We 
do not have any long-term purchase commitments, and we may be unable to continue to sell our products in the same quantities 
or on the same terms as in the past. The loss of, or a significant reduction in, this business could have a material adverse effect 
on our sales and profitability. Further, unfavorable changes in this national chain restaurant’s financial condition or other 

7

disruptions to its business, such as decreased consumer demand or stronger competition, could also have a material adverse 
effect on our business, results of operations, financial condition and cash flows.

We rely on the performance of major retailers, mass merchants, wholesalers, food brokers, distributors and foodservice 

customers for the success of our business and, should they perform poorly or give higher priority to other brands or 
products, our business could be adversely affected.

Within our Retail and Foodservice segments, we sell our products principally to retail and foodservice channels, 
including traditional supermarkets, mass merchants, warehouse clubs, specialty food distributors, foodservice distributors and 
national chain restaurants. Poor performance by our customers, or our inability to collect accounts receivable from our 
customers, could have a material adverse effect on our business, results of operations, financial condition and cash flows.

In addition, our future growth and profitability may be unfavorably impacted by recent changes in the competitive 
landscape for our Retail segment customers. As consolidation in the retail grocery industry continues and our retail customers 
also grow larger and become more sophisticated, they may demand improved efficiency, lower pricing, increased promotional 
programs, or specifically tailored products. Further, these customers are reducing their inventories and increasing their 
emphasis on private label products and other products holding top market positions. Traditional retail grocers are also being 
pressured by the growing presence of deep discount retailers that emphasize private label product offerings and lower price 
points. If we fail to use our sales and marketing expertise to maintain our category leadership positions to respond to these 
trends, or if we lower our prices or increase promotional support of our products and are unable to increase the volume of our 
products sold, our business, results of operations, financial condition and cash flows could be adversely affected.

Furthermore, within our Retail segment, many of our customers offer competitor branded products and their own store 
branded products that compete directly with our products for shelf space and consumer purchases. Accordingly, there is a risk 
that these customers give higher priority or promotional support to their store branded products or to our competitors’ products 
or discontinue the use of our products in favor of their store branded products or other competing products. Likewise, our 
foodservice distributors often offer their own branded products that compete directly with our products. Failure to maintain our 
retail shelf space or priority with these customers and foodservice distributors could have a material adverse effect on our 
business, results of operations, financial condition and cash flows.

Emerging channels such as online retailers and home meal kit delivery services also continue to evolve and impact both 
the retail and foodservice industries. Our presence in these emerging channels is currently underdeveloped and while we have 
plans to pursue future opportunities in these emerging channels, our ultimate success and the resulting impacts to our financial 
results is uncertain.

We rely on the value of the brands we sell, and the failure to maintain and enhance these brands could adversely affect 

our business.

We rely on the success of our well-recognized brand names. Maintaining and enhancing our brand image and recognition 

is essential to our long-term success, and maintaining license agreements under which we market and sell certain brands is 
important to our business. The failure to do either could have a material adverse effect on our business, financial condition and 
results of operations. We seek to maintain and enhance our brands through a variety of efforts, including the delivery of quality 
products, extending our brands into new markets and new products and investing in marketing and advertising. The costs of 
maintaining and enhancing our brands, including maintaining our rights to brands under license agreements, may increase. 
These increased costs could have a material adverse effect on our business, results of operations, financial condition and cash 
flows.

We manufacture and sell numerous products pursuant to brand license agreements including Olive Garden® dressings and 
Buffalo Wild Wings® sauces. We believe that our relationships with our brand licensors are good, but we cannot ensure that we 
will maintain those relationships. Many of our brand license agreements can be terminated or not renewed at the option of the 
licensor upon short notice to us. The termination of our brand license agreements, the failure to renew our brand license 
agreements on terms favorable to us, or the impairment of our relationship with our brand licensors could have a material 
adverse effect on our business, results of operations, financial condition and cash flows.

In addition, we increasingly rely on electronic marketing, such as social media platforms and the use of online marketing 
strategies, to support and enhance our brands. This “e-commerce” marketplace is growing and evolving quickly and allows for 
the rapid dissemination of information regarding our brands by us and consumers. We may not be able to successfully adapt our 
marketing efforts to this rapidly changing marketplace, which could have a material adverse impact on our business, financial 
condition and results of operations. Further, negative opinions or commentary posted online regarding our brands, regardless of 
their underlying merits or accuracy, could diminish the value of our brands and have a material adverse effect on our business, 
results of operations, financial condition and cash flows.

8

Increases in the costs or limitations to the availability of raw materials we use to produce and package our products 

could adversely affect our business by increasing our costs to produce goods.

Our principal raw-material needs include soybean oil, various sweeteners, eggs, dairy-related products, flour, water and 
various films, plastic and paper packaging materials. Our ability to manufacture and/or sell our products may be impaired by 
damage or disruption to our manufacturing or distribution capabilities, or to the capabilities of our suppliers or contract 
manufacturers, due to factors that are hard to predict or beyond our control, such as adverse weather conditions, natural 
disasters, fire, terrorism, pandemics, strikes or other events. Production of the agricultural commodities used in our business 
may also be adversely affected by drought, water scarcity, temperature extremes, scarcity of suitable agricultural land, 
worldwide demand, changes in international trade arrangements, livestock disease (for example, avian influenza), crop disease 
and/or crop pests.

We purchase a majority of our key raw materials on the open market. Our ability to avoid the adverse effects of a 

pronounced, sustained price increase in our raw materials is limited. We have observed increased volatility in the costs of many 
of these raw materials, including eggs, in recent years. Similarly, fluctuating petroleum prices and transportation capacity have, 
from time to time, impacted our costs of resin-based packaging and our costs of inbound freight on all purchased materials.

We try to limit our exposure to price fluctuations for raw materials by periodically entering into longer-term, fixed-price 

contracts for certain raw materials, but we cannot ensure success in limiting our exposure. We may experience further increases 
in the costs of raw materials, and we may try to offset such cost increases with higher prices or other measures. However, we 
may be unable to successfully implement offsetting measures or unable to do so in a timely manner. Such cost increases, as 
well as an inability to effectively implement additional measures to offset higher costs, could have a material adverse effect on 
our business, results of operations, financial condition and cash flows.

The availability and cost of transportation for our products is vital to our success, and the loss of availability or increase 

in the cost of transportation could have an unfavorable impact on our business, results of operations, financial condition 
and cash flows.

Our ability to obtain adequate and reasonably priced methods of transportation to distribute our products, including 
refrigerated trailers for many of our products, is a key factor to our success. Delays in transportation, including weather-related 
delays, could have a material adverse effect on our business and results of operations. Further, higher fuel costs and increased 
line haul costs due to industry capacity constraints, customer delivery requirements and a more restrictive regulatory 
environment could also negatively impact our financial results. We are often required to pay fuel surcharges that fluctuate with 
the price of diesel fuel to third-party transporters of our products, and such surcharges can be substantial. Any sudden or 
dramatic increases in the price of diesel fuel would serve to increase our fuel surcharges and our cost of goods sold. If we were 
unable to pass higher freight costs to our customers in the form of price increases, those higher costs could have a material 
adverse effect on our business, results of operations, financial condition and cash flows.

We are subject to federal, state and local government regulations that could adversely affect our business and results of 

operations.

Our business operations are subject to regulation by various federal, state and local government entities and agencies. As 

a producer of food products for human consumption, our operations are subject to stringent production, packaging, quality, 
labeling and distribution standards, including regulations promulgated under the Federal Food, Drug and Cosmetic Act and the 
Food Safety Modernization Act. We cannot predict whether future regulation by various federal, state and local government 
entities and agencies would adversely affect our business, results of operations, financial condition and cash flows.

In addition, our business operations and the past and present ownership and operation of our properties, including idle 
properties, are subject to extensive and changing federal, state and local environmental laws and regulations pertaining to the 
discharge of materials into the environment, the handling and disposition of wastes (including solid and hazardous wastes) or 
otherwise relating to protection of the environment. Although most of our properties have been subjected to periodic 
environmental assessments, these assessments may be limited in scope and may not include or identify all potential 
environmental liabilities or risks associated with any particular property. We cannot be certain that our environmental 
assessments have identified all potential environmental liabilities or that we will not incur material environmental liabilities in 
the future.

We cannot be certain that environmental issues relating to presently known matters or identified sites, or to other 
unknown matters or sites, will not require additional, currently unanticipated investigation, assessment or expenditures. If we 
do incur or discover any material environmental liabilities or potential environmental liabilities in the future, we may face 
significant remediation costs and find it difficult to sell or lease any affected properties.

9

We may require significant capital expenditures to maintain, improve or replace aging infrastructure and facilities, 

which could adversely affect our cash flows.

Much of our infrastructure and facilities have been in service for many years, which may result in a higher level of future 

maintenance costs and unscheduled repairs. Further, our infrastructure and facilities may need to be improved or replaced to 
maintain or increase operational efficiency, sustain production capacity, or meet changing regulatory requirements. A 
significant increase in maintenance costs and capital expenditures could adversely affect our financial condition, results of 
operations and cash flows. In addition, a failure to operate our facilities optimally could result in declining customer service 
capabilities, which could have a material adverse effect on our business, results of operations, financial condition and cash 
flows.

Manufacturing capacity constraints may have a material adverse effect on our business, results of operations, financial 

condition and cash flows.

Our current manufacturing resources may be inadequate to meet significantly increased demand for some of our food 
products. Our ability to increase our manufacturing capacity depends on many factors, including the availability of capital, 
steadily increasing consumer demand, equipment delivery, construction lead-times, installation, qualification, regulatory 
permitting and regulatory requirements. Increasing capacity through the use of third party manufacturers depends on our ability 
to develop and maintain such relationships and the ability of such third parties to devote additional capacity to fill our orders.

A lack of sufficient manufacturing capacity to meet demand could cause our customer service levels to decrease, which 
may negatively affect customer demand for our products and customer relations generally, which in turn could have a material 
adverse effect on our business, results of operations, financial condition and cash flows. In addition, operating facilities at or 
near capacity may also increase production and distribution costs and negatively affect relations with our employees or 
contractors, which could result in disruptions in our operations.

We may experience difficulties in designing and implementing our new enterprise resource planning system.

We are in the early stages of a multi-year implementation of a new enterprise resource planning system (“ERP”), which 

will replace our existing financial and operating systems. The ERP will be designed to accurately maintain our financial 
records, enhance our operational functionality and provide timely information to our management team related to the 
operations of the business. The design and implementation of this new ERP requires an investment of significant personnel and 
financial resources, including substantial expenditures for outside consultants, system hardware and software in addition to 
other expenses in connection with the transformation of our organizational structure and financial and operating processes. We 
may not be able to implement the ERP successfully without experiencing delays, increased costs and other difficulties, 
including potential design defects, miscalculations, testing requirements, re-work due to changes in business plans or reporting 
standards, and the diversion of management’s attention from day-to-day business operations. If we are unable to design and 
implement the new ERP as planned, the effectiveness of our internal control over financial reporting could be adversely 
affected, our ability to assess those controls adequately could be delayed, and our business, results of operations, financial 
condition and cash flows could be negatively impacted.

Technology failures could disrupt our operations and negatively impact our business.

We increasingly rely on information technology systems to conduct and manage our business operations, including the 

processing, transmitting, and storing of electronic information. For example, our sales group and our production and 
distribution facilities utilize information technology to increase efficiencies and limit costs. Furthermore, a significant portion 
of the communications between our personnel, customers, and suppliers depends on information technology and an 
uninterrupted and functioning infrastructure, including telecommunications. Our information technology systems may be 
vulnerable to a variety of interruptions due to events beyond our control, including, but not limited to, natural disasters, terrorist 
attacks, telecommunications failures, cyber attacks and other security issues. If we are unable to adequately protect against 
these vulnerabilities, our operations could be disrupted, or we may suffer financial damage or loss because of lost or 
misappropriated information.

Cyber attacks, data breaches or other breaches of our information security systems could have an adverse effect on our 

business, results of operations, financial condition and cash flows.

Cyber attacks, data breaches or other breaches of our information security systems may cause equipment failures or 
disruptions to our operations. Our inability to operate our networks and information security systems as a result of such events, 
even for a limited period of time, may result in significant expenses. Cyber attacks, which include the use of malware, 
computer viruses and other means for disruption or unauthorized access, have increased in frequency, scope and potential harm 
in recent years. While we have been subject to cyber attacks, none of these events has been material to our operations or 
financial condition. While we believe we take reasonable steps to protect the security of our information relative to our 
perceived risks, our preventative actions may be insufficient to defend against a major cyber attack in the future. The costs 

10

associated with a major cyber attack could include increased expenditures on cyber security measures, lost revenues from 
business interruption, litigation, regulatory fines and penalties and damage to our reputation. The cost and effort involved with 
attempting to prevent cyber security attacks and data breaches could also be significant, and our efforts to prevent these attacks 
may not be successful. If we fail to prevent the theft of valuable information such as financial data, sensitive information about 
the Company and intellectual property, or if we fail to protect the privacy of customers’, consumers’ and employees’ 
confidential data against breaches of network or information technology security, it could result in damage to our reputation 
and brand image, which could adversely impact our employee, customer and investor relations. Any of these occurrences could 
have a material adverse effect on our business, results of operations, financial condition and cash flows. While we believe our 
insurance related to these matters is consistent with industry practice, any potential claim under our policies may be subject to 
certain exceptions; may not be honored fully, in a timely manner, or at all; and we may not have purchased sufficient insurance 
to cover all material losses.

We may not be able to successfully consummate proposed acquisitions or divestitures, and integrating acquired 

businesses may present financial, managerial and operational challenges.

We continually evaluate the acquisition of other businesses that would strategically fit within our operations. If we are 
unable to consummate, successfully integrate and grow these acquisitions or realize contemplated revenue growth, synergies 
and cost savings, our financial results could be adversely affected. In addition, we may, from time to time, divest businesses, 
product lines or other operations that are less of a strategic fit within our portfolio or do not meet our growth or profitability 
targets. As a result, our profitability may be adversely affected by losses on the sales of divested assets or lost operating income 
or cash flows from those businesses.

 We may incur asset impairment or restructuring charges related to acquired or divested assets, which may reduce our 

profitability and cash flows. These potential acquisitions or divestitures present financial, managerial and operational 
challenges, including diversion of management attention from ongoing businesses, difficulty with integrating or separating 
personnel and financial and other systems, increased expenses, assumption of unknown liabilities, indemnities and potential 
disputes with the buyers or sellers.

Our inability to successfully renegotiate collective bargaining contracts and any prolonged work stoppages could have an 

adverse effect on our business, results of operations, financial condition and cash flows.

We believe that our labor relations with employees under collective bargaining contracts are satisfactory, but our inability 
to negotiate the renewal of any collective bargaining agreements, including the agreement at our Bedford Heights, Ohio facility, 
which is currently scheduled to expire in April 2020, or any prolonged work stoppages could have a material adverse effect on 
our business, results of operations, financial condition and cash flows.

We may incur liabilities related to multiemployer pension plans which could adversely affect our financial results.

Through 2017, we contributed to two multiemployer pension plans under certain collective bargaining agreements that 

provide pension benefits to employees and retired employees participating in the plans. On January 21, 2017, the employees at 
our Bedford Heights, Ohio plant voted to ratify a new collective bargaining agreement that provided for our complete 
withdrawal from the multiemployer pension plan associated with that facility. At this time, we still contribute to a 
multiemployer pension plan related to our facility in Milpitas, California.   

As a contributor to the multiemployer pension plan associated with our Milpitas, California facility, we are responsible 
for making periodic contributions to this plan. Our required contributions to this plan could increase; however, any increase 
would be dependent upon a number of factors, including our ability to renegotiate the collective bargaining contract 
successfully, current and future regulatory requirements, the performance of the pension plan’s investments, the number of 
participants who are entitled to receive benefits from the plan, the contribution base as a result of the insolvency or withdrawal 
of other companies that currently contribute to this plan, the inability or failure of withdrawing companies to pay their 
withdrawal liability, low interest rates and other funding deficiencies. We may also be required to pay a withdrawal liability if 
we exit from this plan. While we cannot determine whether and to what extent our contributions may increase or what our 
withdrawal liability may be, payments related to this plan could have a material adverse effect on our business, financial 
condition, results of operations or cash flows.

Increases in energy-related costs could negatively affect our business by increasing our costs to produce goods.

We are subject to volatility in energy-related costs that affect the cost of producing and distributing our products, 
including our petroleum-derived packaging materials. Furthermore, any sudden and dramatic increases in electricity or natural 
gas costs could have a material adverse effect on our business, results of operations, financial condition and cash flows.

We limit our exposure to price fluctuations in energy-related costs by periodically entering into longer-term, fixed-price 

contracts for natural gas and electricity supply to some of our manufacturing facilities. However, due to the inherent variability 
of contractual terms and end dates, in addition to the extent to which the energy markets in which we operate have been 

11

deregulated to allow for contracted supply, we will retain some level of exposure to future price fluctuations for our energy-
related costs.

The loss of the services of one or more members of our senior management team could have a material adverse effect on 

our business, results of operations, financial condition and cash flows.

Our operations and prospects depend in large part on the performance of our senior management team, several of which 

are long-serving employees with significant knowledge of our business model and operations. Should we not be able to find 
qualified replacements for any of these individuals if their services were no longer available, our ability to manage our 
operations or successfully execute our business strategy may be materially and adversely affected.

Mr. Gerlach, Executive Chairman of our Board of Directors, has a significant ownership interest in our Company.

As of June 30, 2019, Mr. Gerlach owned or controlled 30% of the outstanding shares of our common stock. Accordingly, 

Mr. Gerlach has significant influence on all matters submitted to a vote of the holders of our common stock, including the 
election of directors. Mr. Gerlach’s voting power may also have the effect of discouraging transactions involving an actual or a 
potential change of control of our Company, regardless of whether a premium is offered over then-current market prices.

The interests of Mr. Gerlach may conflict with the interests of other holders of our common stock. This conflict of 

interest may have an adverse effect on the price of our common stock.

Anti-takeover provisions could make it more difficult for a third party to acquire us.

Certain provisions of our charter documents, including provisions limiting the ability of shareholders to raise matters at a 

meeting of shareholders without giving advance notice and provisions classifying our Board of Directors, may make it more 
difficult for a third party to acquire us or influence our Board of Directors. This may have the effect of delaying or preventing 
changes of control or management, which could have an adverse effect on the market price of our stock.

Additionally, Ohio corporate law contains certain provisions that could have the effect of delaying or preventing a change 

of control. The Ohio Control Share Acquisition Act found in Chapter 1701 of the Ohio Revised Code provides that certain 
notice and informational filings and a special shareholder meeting and voting procedures must be followed prior to 
consummation of a proposed “control share acquisition,” as defined in the Ohio Revised Code. Assuming compliance with the 
prescribed notice and information filings, a proposed control share acquisition may be accomplished only if, at a special 
meeting of shareholders, the acquisition is approved by both a majority of the voting power represented at the meeting and a 
majority of the voting power remaining after excluding the combined voting power of the “interested shares,” as defined in the 
Ohio Revised Code. The Interested Shareholder Transactions Act found in Chapter 1704 of the Ohio Revised Code generally 
prohibits certain transactions, including mergers, majority share acquisitions and certain other control transactions, with an 
“interested shareholder,” as defined in the Ohio Revised Code, for a three-year period after becoming an interested shareholder, 
unless our Board of Directors approved the initial acquisition. After the three-year waiting period, such a transaction may 
require additional approvals under this Act, including approval by two-thirds of our voting shares and a majority of our voting 
shares not owned by the interested shareholder. The application of these provisions of the Ohio Revised Code, or any similar 
anti-takeover law adopted in Ohio, could have the effect of delaying or preventing a change of control, which could have an 
adverse effect on the market price of our stock.

Also, our Board of Directors has the authority to issue up to 1,150,000 shares of Class B Voting Preferred Stock and 

1,150,000 shares of Class C Nonvoting Preferred Stock and to determine the price, rights, preferences, privileges and 
restrictions of those shares without any further vote or action by the shareholders. The rights of the holders of our common 
stock may be subject to, and may be adversely affected by, the rights of the holders of any Class B Voting Preferred Stock and 
Class C Nonvoting Preferred Stock that may be issued in the future. The Company could use these rights to put in place a 
shareholder rights plan, or “poison pill,” that could be used in connection with a bid or proposal of acquisition for an 
inadequate price.

Item 1B. Unresolved Staff Comments

None.

12

Item 2. Properties

We use 2.2 million square feet of space for our operations. Of this space, 0.8 million square feet are leased. These 

amounts exclude facilities operated by third-party service providers.

The following table summarizes our principal manufacturing locations (including aggregation of multiple facilities):

Location

Altoona, IA
Bedford Heights, OH

  Principal Products Produced
  Frozen pasta

  Frozen breads

Columbus, OH

Cudahy, WI
Horse Cave, KY

Luverne, AL

Milpitas, CA

Saline, MI
Vineland, NJ (1)
Wareham, MA (2)

  Sauces, dressings, dips
Sprouted grain bakery products
  Sauces, dressings, frozen rolls

  Frozen rolls

  Sauces and dressings
Flatbread products

Frozen breads
  Croutons

(1)  Fully leased for term expiring in fiscal 2027.
(2)  Fully leased for term expiring in fiscal 2024.

Business Segment(s)

Retail and Foodservice

Retail and Foodservice

Retail and Foodservice
Retail
Retail and Foodservice

Retail and Foodservice

Retail and Foodservice
Retail and Foodservice

Retail and Foodservice
Retail and Foodservice

  Terms of Occupancy
  Owned

  Owned

  Owned
Owned
  Owned

  Owned

  Owned
Owned

Leased
  Leased

The following table summarizes our principal warehouses (including aggregation of multiple facilities), which are used to 

distribute products to our customers:

Location
Altoona, IA (1)
Attalla, AL
Columbus, OH (2)
Grove City, OH

Horse Cave, KY
Milpitas, CA (3)

(1)  Fully leased for term expiring in fiscal 2020.
(2)  Fully leased for term expiring in fiscal 2022.
(3)  Fully leased for term expiring in fiscal 2021.

Item 3. Legal Proceedings

  Business Segment(s)
  Retail and Foodservice

  Terms of Occupancy
  Leased

  Retail and Foodservice
  Retail and Foodservice

  Third-party service
  Leased

  Retail and Foodservice

  Owned

Retail and Foodservice

Owned

  Retail and Foodservice

  Leased

From time to time we are a party to various legal proceedings. While we believe that the ultimate outcome of these 
various proceedings, individually and in the aggregate, will not have a material effect on our consolidated financial statements, 
litigation is always subject to inherent uncertainties, and unfavorable rulings could occur. An unfavorable ruling could include 
monetary damages or an injunction prohibiting us from manufacturing or selling one or more products or could lead to us 
altering the manner in which we manufacture or sell one or more products, which could have a material impact on net income 
for the period in which the ruling occurs and future periods.

Item 4. Mine Safety Disclosures

Not applicable.

13

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock trades on The NASDAQ Global Select Market under the symbol LANC.

The number of shareholders of record as of August 1, 2019 was approximately 740. This is not the actual number of 
beneficial owners of our common stock, as shares are held in “street name” by brokers and others on behalf of individual 
owners.

We have increased our regular cash dividends for 56 consecutive years. Future dividends will depend on our earnings, 

financial condition and other factors.

Issuer Purchases of Equity Securities

In November 2010, our Board of Directors approved a share repurchase authorization of 2,000,000 common shares, of 

which 1,354,423 common shares remained authorized for future repurchases at June 30, 2019. This share repurchase 
authorization does not have a stated expiration date. In the fourth quarter, we made the following repurchases of our common 
stock:

Period
April 1-30, 2019 (1)
May 1-31, 2019 (1)

June 1-30, 2019
Total

Total
Number
of Shares
Purchased

Average
Price Paid
Per Share

927

15,050

$

$

— $
$

15,977

155.25

148.52

—
148.91

Total
Number of
Shares
Purchased
as Part of
Publicly
Announced
Plans

927

15,050

—
15,977

Maximum
Number of
Shares that
May Yet be
Purchased
Under the
Plans

1,369,473

1,354,423

1,354,423
1,354,423

(1)  Includes 927 shares in April 2019 and 50 shares in May 2019 that were repurchased in satisfaction of tax withholding 

obligations arising from the vesting of restricted stock granted to employees under the Lancaster Colony Corporation 2015 
Omnibus Incentive Plan.

14

PERFORMANCE GRAPH

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN
OF LANCASTER COLONY CORPORATION, THE S&P MIDCAP 400 INDEX
AND THE DOW JONES U.S. FOOD PRODUCERS INDEX

The graph set forth below compares the five-year cumulative total return from investing $100 on June 30, 2014 in each of 

our Common Stock, the S&P Midcap 400 Index and the Dow Jones U.S. Food Producers Index. The total return calculation 
assumes that all dividends are reinvested, including any special dividends.

Lancaster Colony Corporation
S&P Midcap 400
Dow Jones U.S. Food Producers

Cumulative Total Return (Dollars)
6/15
97.41
106.40
111.61

6/14
100.00
100.00
100.00

6/16
145.47
107.81
132.65

6/17
142.07
127.83
127.30

6/18
163.42
145.09
124.72

6/19
178.28
147.07
129.37

There can be no assurance that our stock performance will continue into the future with the same or similar trends 

depicted in the above graph.

15

Item 6. Selected Financial Data

LANCASTER COLONY CORPORATION AND SUBSIDIARIES
FIVE YEAR FINANCIAL SUMMARY

(Thousands Except Per Share Figures)
Operations
Net Sales
Gross Profit (1)

Percent of Net Sales

Change in Contingent Consideration
Multiemployer Pension Settlement and
Related Costs
Income Before Income Taxes
Percent of Net Sales
Taxes Based on Income (2)
Net Income (2)

Percent of Net Sales

Diluted Net Income Per Common Share (2)
Cash Dividends Per Common Share -
Regular
Cash Dividends Per Common Share -
Special

Financial Position
Total Assets (3)
Property, Plant and Equipment-Net (4)
Property Additions (5)
Depreciation and Amortization

Long-Term Debt
Shareholders’ Equity (2)
Per Common Share

Weighted Average Common Shares 
Outstanding-Diluted (2)

$

$

$

$

$
$

$

$

$

$

$

$

$
$
$
$

2019

2018

2017

2016

2015

Years Ended June 30,

$ 1,307,787

$ 1,222,925
303,506
$

$ 1,201,842
318,780
$

$ 1,191,109
299,633
$

$ 1,104,514
257,667
$

326,198

24.9%

(16,180)

$

24.8%
2,052

$

26.5%
1,156

25.2%

— $

23.3%
—

— $
$

184,633

—
154,552

15.5%

14.0%

— $
$

195,542

— $
$

174,203

17,635
175,516

15.0%

14.2%

14.6%

44,993
150,549

11.5%

5.46

2.55

$

$

$

$

38,889

135,314

11.1%
4.92

2.35

$

$

$

$

60,202

115,314

9.6%
4.20

2.15

— $

— $

— $

62,869

121,764

10.2%
4.44

1.96

5.00

$

$
$

$

$

$

$

905,399

247,044

70,880

$

$
$

804,491

190,813
31,025

$

$
$

716,405

180,671
27,005

$

$
$

634,732

169,595
16,671

31,848

$
— $
$
$

726,873
26.44

26,896

24,906

24,147

$
— $
$
$

652,282
23.73

$
— $
$
$

575,977
20.98

$
— $
$
$

513,598
18.73

27,537

27,459

27,440

27,373

27,327

$

$

$

$

$

$

$
$

52,866

101,686

9.2%
3.72

1.82

—

702,156

172,311
18,298

21,111
—
580,918
21.23

(1)  Certain prior-year amounts were reclassified in 2019 to reflect the impact of the adoption of new accounting guidance for 

the presentation of net periodic pension cost and net periodic postretirement benefit cost. This adoption resulted in changes 
in classification on the income statement such that net periodic pension cost and net periodic postretirement benefit cost 
are reported outside of income from operations for all periods presented.

(2)  In 2018, we adopted new accounting guidance for stock-based compensation, including the following provisions that were 
applied on a prospective basis: (a) the inclusion of the tax consequences related to stock-based compensation within the 
computation of income tax expense versus equity and (b) assumed proceeds used in the calculation of weighted average 
shares no longer include the amount of excess tax benefits.

(3)  Certain prior-year balances were reclassified in 2016 to reflect the impact of the adoption of new accounting guidance 

about the presentation of deferred tax assets and liabilities. With the adoption, our net deferred tax liability for all periods 
presented has been classified as noncurrent.

(4)  Amount for 2019 includes capital leases of $2.1 million. The related liability is $2.0 million.
(5)  Amounts for 2019, 2017 and 2015 exclude property obtained in acquisitions ($4.8 million in the 2019 acquisition of Omni 
Baking Company; $1.9 million in the 2019 acquisition of Bantam Bagels; $5.1 million in the 2017 acquisition of Angelic 
Bakehouse; and $6.9 million in the 2015 acquisition of Flatout).

16

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

Our fiscal year begins on July 1 and ends on June 30. Unless otherwise noted, references to “year” pertain to our fiscal 

year; for example, 2019 refers to fiscal 2019, which is the period from July 1, 2018 to June 30, 2019.

The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto 

in Item 8 of this Annual Report on Form 10-K. The forward-looking statements in this section and other parts of this report 
involve risks, uncertainties and other factors, including statements regarding our plans, objectives, goals, strategies, and 
financial performance. Our actual results could differ materially from the results anticipated in these forward-looking 
statements as a result of factors set forth under the caption “Forward-Looking Statements” and those set forth in Item 1A of 
this Annual Report on Form 10-K.

Our discussion of results for 2019 compared to 2018 is included herein. For discussion of results for 2018 compared to 

2017, see our 2018 Annual Report on Form 10-K.

OVERVIEW

Business Overview

Lancaster Colony Corporation is a manufacturer and marketer of specialty food products for the retail and foodservice 

channels.

Our financial results are presented as two reportable segments: Retail and Foodservice. Costs that are directly attributable 

to either Retail or Foodservice are charged directly to the appropriate segment. Costs that are deemed to be indirect, excluding 
corporate expenses and other unusual significant transactions, are allocated to the two reportable segments using a reasonable 
methodology that is consistently applied.

Over 95% of our products are sold in the United States. Foreign operations and export sales have not been significant in 

the past and are not expected to be significant in the future based upon existing operations. We do not have any fixed assets 
located outside of the United States.

Our business has the potential to achieve future growth in sales and profitability due to attributes such as:

•
•
•
•
•
•
•

leading Retail market positions in several product categories with a high-quality perception;
recognized innovation in Retail products;
a broad customer base in both Retail and Foodservice accounts;
well-regarded culinary expertise among Foodservice customers;
recognized leadership in Foodservice product development;
experience in integrating complementary business acquisitions; and
historically strong cash flow generation that supports growth opportunities.

Our goal is to grow both Retail and Foodservice segment sales over time by:

•
•
•
•
•

introducing new products and expanding distribution;
leveraging the strength of our Retail brands to increase current product sales;
expanding Retail growth through strategic licensing agreements;
continuing to rely upon the strength of our reputation in Foodservice product development and quality; and
acquiring complementary businesses.

With respect to long-term growth, we continually evaluate the future opportunities and needs for our business specific to 

our plant infrastructure, IT platforms and other initiatives to support and strengthen our operations. Recent examples of 
resulting investments include a significant capacity expansion project for our Sister Schubert’s frozen dinner roll facility in 
Horse Cave, Kentucky that we expect to complete in mid-2020; a new R&D center that was completed near the end of 2019; 
and the establishment of a Transformation Program Office in 2019 that will serve to coordinate our various capital and 
integration efforts, including our enterprise resource planning system (“ERP”) that is now underway.

We also continue to review potential acquisitions that we believe will complement our existing product lines, enhance our 

profitability and/or offer good expansion opportunities in a manner that fits our overall strategic goals. Consistent with this 
acquisition strategy, in November 2018 we acquired, using available cash on hand, substantially all of the assets of Omni 
Baking Company LLC (“Omni”), a long-time supplier of products to our frozen garlic bread operations. In October 2018 we 
acquired, using available cash on hand, all the assets of Bantam Bagels, LLC (“Bantam”), a producer and marketer of frozen 
mini stuffed bagels and mini stuffed pancakes sold to both the retail and foodservice channels. In November 2016 we acquired 
substantially all of the assets of Angelic Bakehouse, Inc. (“Angelic”), a manufacturer and marketer of premium sprouted grain 
bakery products based near Milwaukee, Wisconsin. See further discussion of these acquisitions in Note 2 to the consolidated 
financial statements.

17

RESULTS OF CONSOLIDATED OPERATIONS

(Dollars in thousands,
except per share data)
Net Sales

Cost of Sales
Gross Profit

Gross Margin

Selling, General and
Administrative Expenses

Change in Contingent
Consideration
Restructuring and Impairment
Charges
Multiemployer Pension
Settlement and Related Costs

Operating Income

Operating Margin

Other, Net
Income Before Income Taxes
Taxes Based on Income

Effective Tax Rate

Net Income
Diluted Net Income Per Common
Share

Net Sales

Years Ended June 30,

Change

2019
$1,307,787
981,589
326,198

2018

2017

$ 1,222,925

$ 1,201,842

$

919,419
303,506

883,062
318,780

2019 vs. 2018
84,862
62,170
22,692

2018 vs. 2017

21,083

7% $
7%
36,357
7% (15,274)

2 %

4 %

(5)%

24.9%

24.8%

26.5%

149,811

129,906

125,635

19,905

15%

4,271

3 %

(16,180)

2,052

1,156

(18,232)

N/M

896

78 %

1,643

—

—

—

190,924

171,548

14.6%
4,618

195,542
44,993

14.0%
2,655

174,203
38,889

—

1,643

N/M

—

N/M

17,635

174,354

14.5%

1,162

175,516
60,202

—

19,376

1,963

21,339
6,104

N/M

11%

(17,635)
(2,806)

N/M
(2)%

74%

1,493
(1,313)
12%
16% (21,313)

128 %

(1)%

(35)%

23.0%

22.3%

34.3%

$ 150,549

$ 135,314

$ 115,314

$

5.46

$

4.92

$

4.20

$

$

15,235

11% $

20,000

17 %

0.54

11% $

0.72

17 %

Consolidated net sales for the year ended June 30, 2019 increased 7% to a new record of $1,308 million from the prior-
year record total of $1,223 million. This growth was driven by increases in both Retail and Foodservice net sales. Excluding net 
sales attributed to the acquisitions of Bantam and Omni, consolidated net sales increased 5% for the year.

The relative proportion of sales contributed by each of our business segments can impact a year-to-year comparison of the 

consolidated statements of income. The following table summarizes the sales mix over each of the last three years:

Segment Sales Mix:

Retail
Foodservice

2019

50%
50%

2018

53%
47%

2017

53%
47%

See discussion of net sales by segment following the discussion of “Earnings Per Share” below.

Gross Profit

Consolidated gross profit increased to $326.2 million in 2019 compared to $303.5 million in 2018 driven by increased 

sales volumes in Foodservice, cost savings from our lean six sigma program and improved net price realization. These benefits 
were partially offset by incremental costs, including facility upgrades, associated with the Omni operations, investments to 
support expanding retail distribution of Bantam, and higher warehousing costs.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses increased 15% in 2019. The increase in these costs was driven by 
increased investments in personnel and business initiatives to support future growth, including ERP expenses, and the impact of 
our two acquisitions. ERP expenses are included within Corporate Expenses.

(Dollars in thousands)
SG&A Expenses - Excluding ERP $ 148,031
1,780
ERP Expenses
$ 149,811

Total SG&A Expenses

2019

Year Ended June 30,

Change

2018
$ 129,906
—
$ 129,906

2017
$ 125,635
—
$ 125,635

2019 vs. 2018
18,125
1,780
19,905

14% $
N/M
15% $

$

$

2018 vs. 2017
4,271
—
4,271

3%
N/M
3%

18

Change in Contingent Consideration

The change in contingent consideration resulted in a net benefit of $16.2 million in 2019, which reflects a $17.1 million 
reduction in the fair value of Angelic’s contingent consideration liability as a result of our 2019 fair value measurements. See 
further discussion in Note 3 to the consolidated financial statements.

Given the nature of Angelic’s sales and historical accounting treatment, the entire adjustment related to Angelic’s 

contingent consideration was reflected within the Retail segment.

Restructuring and Impairment Charges

In the fourth quarter of 2019, we committed to a plan to close our frozen bread manufacturing plant located in Saraland, 
Alabama. This decision is intended to provide greater production efficiency by consolidating most of this facility’s operations 
into other existing plants, outsourcing certain requirements and discontinuing less profitable frozen bread products. Production 
at the plant ceased in July 2019. Certain plant clean-up and closure activities are expected to continue into August 2019. The 
Saraland plant is a leased facility with the lease term ending in November 2020. The operations of this plant have not been 
classified as discontinued operations as the closure does not represent a strategic shift that would have a major effect on our 
operations or financial results.

During 2019, we recorded restructuring and impairment charges of $1.6 million, as well as $0.2 million recorded in Cost 
of Sales for the write-down of inventories. The restructuring and impairment charges, which consisted of one-time termination 
benefits, fixed asset impairment charges and other closing costs, were not allocated to our two reportable segments due to their 
unusual nature.

Operating Income

Operating income increased 11% in 2019 driven by gross profit growth and the change in contingent consideration, as 
partially offset by the increase in SG&A expenses and restructuring and impairment charges. See discussion of operating results 
by segment following the discussion of “Earnings Per Share” below.

Taxes Based on Income

Our effective tax rate was 23.0% and 22.3% in 2019 and 2018, respectively. The current-year and prior-year rates were 
favorably impacted by the Tax Cuts and Jobs Act of 2017 (“Tax Act”), which was signed into law on December 22, 2017 with 
an effective date of January 1, 2018. Most notably, the Tax Act reduced the statutory federal income tax rate for corporations 
from 35% to 21%. Since we file our tax return based on our fiscal year, the statutory federal income tax rate for our 2018 tax 
return was a blended rate of 28.1%. In addition to the effect of the lower overall federal tax rate, the Tax Act resulted in a 
$9.5 million one-time benefit for the re-measurement of our net deferred tax liability in 2018. The statutory federal income tax 
rate for our 2019 tax return will be 21%. See Note 9 to the consolidated financial statements for a reconciliation of the statutory 
rate to the effective rate for 2019, 2018 and 2017.

The SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”) on December 22, 2017. SAB 118 allowed for a 

measurement period in which companies could either use provisional estimates for changes resulting from the Tax Act or apply 
the tax laws that were in effect immediately prior to the Tax Act being enacted if estimates could not be determined at the time 
of the preparation of the financial statements until the actual impacts could be determined. We recorded an initial estimate of 
the impact of the Tax Act within our December 31, 2017 financial statements, and the adjustments recorded in the second half 
of 2018 were not material. The measurement period has ended, and we have completed the accounting for all the impacts of the 
Tax Act.

We include the tax consequences related to stock-based compensation within the computation of income tax expense. We 

may experience increased volatility to our income tax expense and resulting net income, dependent upon, among other 
variables, the price of our common stock and the timing and volume of share-based payment award activity such as employee 
exercises of stock-settled stock appreciation rights and vesting of restricted stock awards. For 2019 and 2018, the impact of net 
windfall tax benefits from stock-based compensation reduced our effective tax rate by 0.8% and 0.4%, respectively.

Earnings Per Share

As influenced by the factors discussed above, particularly the impact of the reduction in fair value of Angelic’s contingent 

consideration in 2019 and the Tax Act in 2018, diluted net income per share totaled $5.46 in 2019, an increase from the 2018 
total of $4.92 per diluted share. Diluted weighted average common shares outstanding for each of the years ended June 30, 
2019, 2018 and 2017 have remained relatively stable.

In 2019, the after-tax benefit from the reduction in the fair value of Angelic’s contingent consideration liability was $0.48 

per diluted share while spend for the ERP reduced diluted earnings per share by $0.05 and the restructuring and impairment 
charge had an unfavorable impact of $0.05 per diluted share. In 2018, the Tax Act resulted in a one-time deferred tax benefit of 
$0.35 per diluted share from the re-measurement of our net deferred tax liability.

19

RESULTS OF OPERATIONS - SEGMENTS

Retail Segment

(Dollars in thousands)
Net Sales
Operating Income
Operating Margin

Year Ended June 30,

Change

2019
$ 656,621
$ 135,093

2018
$ 650,234
$ 126,400

2017
$ 641,417
$ 138,489

2019 vs. 2018
6,387
8,693

2018 vs. 2017
1% $
8,817
7% $ (12,089)

1 %
(9)%

$
$

20.6%

19.4%

21.6%

In 2019, net sales for the Retail segment reached $656.6 million, a 1% increase from the prior-year total of 

$650.2 million. Excluding the incremental sales from Bantam, Retail net sales improved 0.5% as influenced by volume gains 
for shelf-stable dressings and sauces sold under license agreements, improved net price realization and lower coupon expense. 
Notable offsets to Retail sales growth included volume declines in flatbread wraps and our decision to selectively exit some 
low-margin private-label business.

In 2019, Retail segment operating income was favorably impacted by the $17.1 million reduction in the fair value of 

Angelic’s contingent consideration liability. Excluding this fair value reduction, Retail segment operating income declined to 
$118.0 million as influenced by incremental costs, including facility upgrades, associated with the Omni operations, 
investments to strengthen the Retail leadership team and incremental spending to expand distribution for Bantam.

Foodservice Segment

(Dollars in thousands)
Net Sales
Operating Income
Operating Margin

Year Ended June 30,

Change

2019
$ 651,166
73,828
$

2018
$ 572,691
58,440
$

2017
$ 560,425
66,234
$

2019 vs. 2018
78,475
15,388

$
$

2018 vs. 2017

14% $ 12,266
26% $ (7,794)

2 %
(12)%

11.3%

10.2%

11.8%

In 2019, Foodservice net sales increased 14% to $651.2 million from the 2018 total of $572.7 million. Excluding 
incremental contributions of $7.3 million from Bantam and $19.4 million from Omni, Foodservice sales growth of 9% was 
widespread throughout the segment with national chain restaurant accounts, branded products and frozen pasta products all 
contributing to growth. The higher level of branded product sales was attributed in part to new product introductions and 
expanded distribution with colleges and universities. Note that all of the Omni sales are due to an interim agreement whereby, 
for a period of up to two years post-closing, we will be a supplier of bread products to an affiliated party of the seller.

In 2019, the increase in Foodservice segment operating income and related margins was driven by increased sales 
volumes, the benefit from continued cost savings in manufacturing and procurement attributed to our lean six sigma program 
and inflationary pricing as partially offset by higher costs for packaging materials and warehousing.

Corporate Expenses

The 2019 corporate expenses totaled $16.4 million as compared to $13.3 million in 2018. The increase was driven by 

ERP expenses, professional fees and increased investments in personnel.

LOOKING FORWARD

For 2020, we expect Retail segment sales will benefit from the incremental Bantam sales and continued growth from 

shelf-stable dressings and sauces sold under license agreements along with several new product introductions planned for 
launch throughout the year. In the Foodservice segment, we anticipate continued volume growth from select national chain 
restaurant accounts and sales of our branded products along with the added sales from the Omni and Bantam acquisitions. We 
expect to incur some incremental costs attributed to the Omni acquisition for ongoing operational improvements and upgrades 
to the facility in Vineland, New Jersey through the first half of the fiscal year as our supply chain team works to fully integrate 
that facility. In addition, SG&A expenses will continue to reflect incremental investments in our strategic initiatives, including 
ERP.

We will continue to consider acquisition opportunities that represent good value and are consistent with our growth 

strategy or otherwise provide significant strategic benefits. 

Among the many factors that may impact our ability to improve sales and operating margins in the coming year are the 
success of our continued investment in innovation and new products, growth from existing product lines, the level of net price 
realization in the Retail segment and the extent of efficiency gains and cost savings resulting from our lean six sigma program 
and other supply chain initiatives.

Based on current market conditions, following a year in which commodity costs were generally flat, we anticipate an 
uptick in commodity costs in 2020. Pricing initiatives, in addition to ongoing savings from our lean six sigma program and 
other cost-out projects planned by our supply chain team, will help to offset these increased costs.

20

Overall, we continue to limit some of our exposure to volatile swings in food commodity costs through a strategic 
forward purchasing program for certain key materials such as soybean oil and flour. For a more-detailed discussion of the effect 
of commodity costs, see the “Impact of Inflation” section of this MD&A below. Changes in other notable recurring costs, such 
as marketing, transportation, production costs and introductory costs for new products, may also impact our overall results.

We will adopt new accounting guidance for leases on July 1, 2019. While the adoption of this guidance will result in a 
significant increase in the balances of right-of-use assets and lease liabilities on our Consolidated Balance Sheet, we do not 
expect the adoption to impact our results of operations or cash flows. See further discussion in Note 1 to the consolidated 
financial statements.

We will continue to periodically reassess our allocation of capital to ensure that we maintain adequate operating 

flexibility while providing appropriate levels of cash returns to our shareholders.

FINANCIAL CONDITION

Liquidity and Capital Resources

We maintain sufficient flexibility in our capital structure to ensure our capitalization is adequate to support our future 

internal growth prospects, acquire food businesses consistent with our strategic goals, and maintain cash returns to our 
shareholders through cash dividends and opportunistic share repurchases. Our balance sheet maintained fundamental financial 
strength during 2019 as we ended the year with $196 million in cash and equivalents, along with shareholders’ equity of 
$727 million and no debt.

Under our unsecured revolving credit facility (“Facility”), we may borrow up to a maximum of $150 million at any one 
time. We had no borrowings outstanding under the Facility at June 30, 2019. At June 30, 2019, we had $5.1 million of standby 
letters of credit outstanding, which reduced the amount available for borrowing on the Facility. The Facility expires in April 
2021, and all outstanding amounts are then due and payable. Interest is variable based upon formulas tied to LIBOR or an 
alternative base rate defined in the Facility, at our option. We must also pay facility fees that are tied to our then-applicable 
consolidated leverage ratio. Loans may be used for general corporate purposes. Due to the nature of its terms, when we have 
outstanding borrowings under the Facility, they will be classified as long-term debt.

The Facility contains certain restrictive covenants, including limitations on indebtedness, asset sales and acquisitions, and 

financial covenants relating to interest coverage and leverage. At June 30, 2019, we were in compliance with all applicable 
provisions and covenants of this facility, and we exceeded the requirements of the financial covenants by substantial margins. 
At June 30, 2019, there were no events that would constitute a default under this facility.

We currently expect to remain in compliance with the Facility’s covenants for the foreseeable future. However, a default 
under the Facility could accelerate the repayment of any then outstanding indebtedness and limit our access to $75 million of 
additional credit available under the Facility. Such an event could require a reduction in or curtailment of cash dividends or 
share repurchases, reduce or delay beneficial expansion or investment plans, or otherwise impact our ability to meet our 
obligations when due.

We believe that cash provided by operating activities and our existing balances in cash and equivalents, in addition to that 

available under the Facility, should be adequate to meet our cash requirements through 2020, including the projected levels of 
capital expenditures and our historic trend of increasing annual dividend payments. Based on our current plans and 
expectations, we believe our capital expenditures for 2020 could total between $80 and $100 million, which includes estimated 
remaining payments of $33 million for a capacity expansion project at our frozen dinner roll facility in Horse Cave, Kentucky 
that we expect to complete in mid-2020. If we were to borrow outside of the Facility under current market terms, our average 
interest rate may increase significantly and have an adverse effect on our results of operations.

Cash Flows

(Dollars in thousands)
Provided By Operating Activities
Used In Investing Activities
Used In Financing Activities

Year Ended June 30,

Change

2018
$ 160,714

2019
$ 36,884
$ 197,598
$(126,861) $ (31,452) $ (60,608) $ (95,409)
$ (80,201) $ (66,614) $ (60,753) $ (13,587)

2017
$ 146,385

23 % $ 14,329
N/M $ 29,156
(20)% $ (5,861)

10 %
48 %
(10)%

2019 vs. 2018

2018 vs. 2017

Cash provided by operating activities remains the primary source for funding our investing and financing activities, as 

well as financing our organic growth initiatives.

Cash provided by operating activities in 2019 totaled $197.6 million, an increase of 23% as compared with the 2018 total 

of $160.7 million. The 2019 increase was due to higher net income, a benefit from the change in deferred income taxes as a 
result of the prior-year impact of the Tax Act, and the year-over-year change in net working capital as offset by the reduction in 
the fair value of Angelic’s contingent consideration liability.

21

Cash used in investing activities totaled $126.9 million in 2019 as compared to $31.5 million in 2018. The 2019 increase 

in cash used in investing activities primarily reflects cash paid for the October 2018 acquisition of Bantam and the November 
2018 acquisition of Omni, as well as a higher level of capital expenditures in 2019. Our 2019 capital expenditures include a 
substantial investment for a capacity expansion project at our frozen dinner roll facility in Horse Cave, Kentucky that we expect 
to complete in mid-2020. We have recently completed a dedicated R&D center in central Ohio that will benefit both the Retail 
and Foodservice segments, and we are also investing in production capacity and increased automation at Angelic to improve 
efficiencies in production. We also continue to invest in projects to expand packaging capacity and end-of-line automation for 
both segments. Payments for property additions totaled $70.9 million in 2019 compared to $31.0 million in 2018. 

Financing activities used net cash totaling $80.2 million and $66.6 million in 2019 and 2018, respectively. In general, 

cash used in financing activities reflects the payment of dividends and share repurchases. The regular dividend payout rate for 
2019 was $2.55 per share, as compared to $2.35 per share in 2018. This past fiscal year marked the 56th consecutive year in 
which our dividend rate was increased.

The future levels of share repurchases and declared dividends are subject to the periodic review of our Board of Directors 

and are generally determined after an assessment is made of various factors, such as anticipated earnings levels, cash flow 
requirements and general business conditions.

Our ongoing business activities continue to be subject to compliance with various laws, rules and regulations as may be 

issued and enforced by various federal, state and local agencies. With respect to environmental matters, costs are incurred 
pertaining to regulatory compliance and, upon occasion, remediation. Such costs have not been, and are not anticipated to 
become, material.

We are contingently liable with respect to lawsuits, taxes and various other matters that routinely arise in the normal 
course of business. We do not have any related party transactions that materially affect our results of operations, cash flows or 
financial condition.

OFF-BALANCE SHEET ARRANGEMENTS, CONTRACTUAL OBLIGATIONS AND COMMITMENTS

We do not have off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other 

persons, also known as “Variable Interest Entities,” that have or are reasonably likely to have a current or future material effect 
on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital 
expenditures.

We have various contractual obligations that are appropriately recorded as liabilities in our consolidated financial 

statements. Certain other contractual obligations are not recognized as liabilities in our consolidated financial statements. 
Examples of such items are commitments to purchase raw materials or packaging inventory that has not yet been received as of 
June 30, 2019 and future minimum lease payments for the use of property and equipment under operating lease agreements.

The following table summarizes our contractual obligations as of June 30, 2019 (dollars in thousands):

Contractual Obligations
Capital Lease Obligations (1)
Operating Lease Obligations (1)
Purchase Obligations (2)
Other Noncurrent Liabilities (as reflected on 
Consolidated Balance Sheet) (3)

Total

Payment Due by Period

Total

Less than 1
Year

1-3 Years

3-5 Years

More than 5
Years

$

2,129

$

505

$

1,010

$

614

$

38,254

239,014

8,261

218,848

13,481

15,238

9,611

4,498

11,317
290,714

$

—
227,614

$

$

2,314
32,043

$

9,003
23,726

$

—

6,901

430

—
7,331

(1)  Capital leases are primarily entered into for certain equipment. Operating leases are primarily entered into for warehouse 
and office facilities and certain equipment. See Note 5 to the consolidated financial statements for further information.
(2)  Purchase obligations represent purchase orders and longer-term purchase arrangements related to the procurement of raw 

materials, supplies, services, and property, plant and equipment.

(3)  This amount does not include $23.1 million of other noncurrent liabilities recorded on the balance sheet, which largely 
consist of the underfunded defined benefit pension liability, other post employment benefit obligations, tax liabilities, 
noncurrent workers compensation obligations, deferred compensation and interest on deferred compensation. These items 
are excluded, as it is not certain when these liabilities will become due. See Notes 9, 12 and 13 to the consolidated 
financial statements for further information.

22

IMPACT OF INFLATION

Our business results can be influenced by significant changes in the costs of our raw materials, packaging and freight. We 
attempt to mitigate the impact of inflation on our raw materials by entering into longer-term fixed-price contracts for a portion 
of our most significant commodities, soybean oil and flour. We also recently implemented a procurement strategy for a portion 
of our egg needs through the use of grain-based pricing contracts to reduce our exposure to egg market spot prices. With regard 
to freight costs, during 2019 we added more dedicated carriers to our overall transportation network to help reduce our 
exposure to spot freight rates. In 2019 we also implemented a transportation management system which improved the 
efficiency of our internal freight management processes and also allowed us to secure more competitive freight rates. 
Nonetheless, we remain exposed to events and trends in the marketplace for our other raw-material, packaging and freight 
costs. While we attempt to pass through sustained increases in raw-material costs, any such price adjustments will often lag the 
changes in the related input costs.

In 2018, we experienced increased commodity costs across many ingredient and packaging materials, most notably for 
eggs. The increase in egg costs was principally due to egg-producing issues in Europe which resulted in significantly higher 
exports from the United States. Additionally, freight costs increased significantly due to capacity constraints in the 
transportation industry. We implemented pricing actions in both our Retail and Foodservice segments in the second half of 
2018. In 2019, commodity cost inflation moderated to nearly flat compared to 2018 while packaging and freight costs were 
modestly inflationary.

Looking ahead to 2020, under current market conditions we foresee inflation in commodities, packaging and freight with 
commodities and packaging imposing the greatest headwind. Net price realization in 2020 will help to offset these inflationary 
costs along with the cost savings from our lean six sigma program, including our strategic procurement initiatives and the 
beneficial impact of our new transportation management system.

Although typically less notable, we are also exposed to the unfavorable effects of general inflation beyond material and 

freight costs, especially in the areas of annual wage adjustments and benefit costs. Over time, we attempt to minimize the 
exposure to such cost increases through ongoing improvements and greater efficiencies throughout our manufacturing 
operations, including benefits gained through our lean six sigma program and strategic investments in plant equipment.

With regard to the impact of commodity and freight costs on Foodservice segment operating income, most of our supply 

contracts with national chain restaurant accounts incorporate pricing adjustments to account for changes in ingredient and 
freight costs. These supply contracts may vary by account with regard to the time lapse between the actual change in ingredient 
and freight costs we incur and the effective date of the associated price increase or decrease. As a result, the reported operating 
margins of the Foodservice segment are subject to increased volatility during periods of rapidly rising or falling ingredient and/
or freight costs because at least some portion of the change in ingredient and/or freight costs is reflected in the segment’s results 
prior to the impact of any associated change in pricing. In addition, the Foodservice segment has an inherently higher degree of 
margin volatility from changes in ingredient costs when compared to the Retail segment due to its overall lower margin profile 
and higher ratio of ingredient pounds to net sales.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

This MD&A discusses our consolidated financial statements, which have been prepared in accordance with U.S. 
generally accepted accounting principles. The preparation of these consolidated financial statements requires that we make 
estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and 
liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the 
reporting period. On an ongoing basis, we evaluate our estimates and judgments, including, but not limited to, those related to 
accounts receivable allowances, distribution costs, asset impairments and self-insurance reserves. We base our estimates and 
judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the 
results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily 
apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. 
Historically, the aggregate differences, if any, between our estimates and actual amounts in any year have not had a significant 
impact on our consolidated financial statements. While a summary of our significant accounting policies can be found in Note 1 
to the consolidated financial statements, we believe the following critical accounting policies reflect those areas in which more 
significant judgments and estimates are used in the preparation of our consolidated financial statements.

Receivables and Related Allowances

We evaluate the adequacy of our allowances for customer deductions considering several factors including historical 

experience, specific trade programs and existing customer relationships.

23

Goodwill and Other Intangible Assets

Goodwill is not amortized. It is evaluated annually at April 30 by applying impairment testing procedures. Other 
intangible assets are amortized on a straight-line basis over their estimated useful lives to Selling, General and Administrative 
Expenses. We evaluate the future economic benefit of the recorded goodwill and other intangible assets when events or 
circumstances indicate potential recoverability concerns. Carrying amounts are adjusted appropriately when determined to have 
been impaired.

RECENT ACCOUNTING PRONOUNCEMENTS

Recent accounting pronouncements and their impact on our consolidated financial statements are disclosed in Note 1 to 

the consolidated financial statements.

FORWARD-LOOKING STATEMENTS

We desire to take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 (the 

“PSLRA”). This Annual Report on Form 10-K contains various “forward-looking statements” within the meaning of the 
PSLRA and other applicable securities laws. Such statements can be identified by the use of the forward-looking words 
“anticipate,” “estimate,” “project,” “believe,” “intend,” “plan,” “expect,” “hope” or similar words. These statements discuss 
future expectations; contain projections regarding future developments, operations or financial conditions; or state other 
forward-looking information. Such statements are based upon assumptions and assessments made by us in light of our 
experience and perception of historical trends, current conditions, expected future developments and other factors we believe to 
be appropriate. These forward-looking statements involve various important risks, uncertainties and other factors that could 
cause our actual results to differ materially from those expressed in the forward-looking statements. Actual results may differ as 
a result of factors over which we have no, or limited, control including, without limitation, the specific influences outlined 
below. Management believes these forward-looking statements to be reasonable; however, one should not place undue reliance 
on such statements that are based on current expectations. Forward-looking statements speak only as of the date they are made, 
and we undertake no obligation to update such forward-looking statements, except as required by law.

Items which could impact these forward-looking statements include, but are not limited to, those risk factors identified in 

Item 1A and:

the ability to successfully grow recently acquired businesses;
the extent to which recent and future business acquisitions are completed and acceptably integrated;
difficulties in designing and implementing our new enterprise resource planning system;
cyber-security incidents, information technology disruptions, and data breaches;
price and product competition;
the reaction of customers or consumers to price increases we may implement;
adverse changes in freight, energy or other costs of producing, distributing or transporting our products;
fluctuations in the cost and availability of ingredients and packaging;
the impact of customer store brands on our branded retail volumes;
dependence on contract manufacturers, distributors and freight transporters;
the success and cost of new product development efforts;
dependence on key personnel and changes in key personnel;
the effect of consolidation of customers within key market channels;
the lack of market acceptance of new products;
the possible occurrence of product recalls or other defective or mislabeled product costs;
the potential for loss of larger programs or key customer relationships;
changes in demand for our products, which may result from loss of brand reputation or customer goodwill;
capacity constraints that may affect our ability to meet demand or may increase our costs;

•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
• maintenance of competitive position with respect to other manufacturers;
•
•

changes in estimates in critical accounting judgments;
the impact of any regulatory matters affecting our food business, including any required labeling changes and
their impact on consumer demand;
the outcome of any litigation or arbitration;
efficiencies in plant operations;
stability of labor relations;
adequate supply of skilled labor;
the impact, if any, of certain contingent liabilities associated with our withdrawal from a multiemployer pension
plan;

•
•
•
•
•

24

•

•

the impact of fluctuations in our pension plan asset values on funding levels, contributions required and benefit
costs; and
certain other risk factors, including those discussed in other filings we have submitted to the Securities and
Exchange Commission.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We have exposure to market risks primarily from changes in raw material prices. In recent years, due to the absence of 

any borrowings, we have not had exposure to changes in interest rates. We also have not had exposure to market risk associated 
with derivative financial instruments or derivative commodity instruments as we do not utilize any such instruments.

RAW MATERIAL PRICE RISK

We purchase a variety of commodities and other raw materials, such as soybean oil, flour, eggs and dairy-based materials, 

which we use to manufacture our products. The market prices for these commodities are subject to fluctuation based upon a 
number of economic factors and may become volatile at times. While we do not use any derivative commodity instruments to 
hedge against commodity price risk, we do actively manage a portion of the risk through a structured forward purchasing 
program for certain key materials such as soybean oil and flour. In addition, we recently implemented a procurement strategy 
for a portion of our egg needs through the use of grain-based pricing contracts to reduce our exposure to egg market spot prices. 
These programs, coupled with short-term fixed price arrangements on other significant raw materials, provide us more 
predictable input costs, which, in addition to the supply contracts with our foodservice customers that allow us to pass along 
price increases for commodities, help to stabilize our margins during periods of significant volatility in the commodity markets.

Item 8. Financial Statements and Supplementary Data

25

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Lancaster Colony Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Lancaster Colony Corporation and subsidiaries (the 

“Company”) as of June 30, 2019 and 2018, the related consolidated statements of income, comprehensive income, 
shareholders’ equity, and cash flows, for each of the three years in the period ended June 30, 2019, and the related notes 
(collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material 
respects, the financial position of the Company as of June 30, 2019 and 2018 and the results of its operations and its cash flows 
for each of the three years in the period ended June 30, 2019, in conformity with accounting principles generally accepted in the 
United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United 
States) (PCAOB), the Company’s internal control over financial reporting as of June 30, 2019, based on criteria established in 
Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway 
Commission and our report dated August 27, 2019, expressed an unqualified opinion on the Company’s internal control over 
financial reporting.

Basis for Opinion 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an 

opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the 
PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws 
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and 
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, 
whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the 
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures 
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also 
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the 
overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements 

that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures 
that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The 
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and 
we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the 
accounts or disclosures to which it relates.

Fair Value - Contingent Consideration (Level 3 Liabilities) - Refer to Note 3 in the Financial Statements

Critical Audit Matter Description

The Company has contingent consideration liabilities whose estimated fair values are based on complex proprietary 
models and unobservable inputs. The contingent consideration liabilities resulted from the earn-out provisions associated with 
the Company’s October 19, 2018, acquisition of Bantam Bagels and November 17, 2016, acquisition of Angelic Bakehouse. 
The terms of these acquisitions specify that the sellers may receive an earn-out payment as part of the overall consideration in 
the transactions based upon a pre-determined contractual formula at a specified future date. Under accounting principles 
generally accepted in the United States of America, these liabilities are generally classified as Level 3 liabilities and are marked 
to fair value on a recurring basis. 

Unlike the fair value of other assets and liabilities with readily observable, and therefore, more independently 

corroborated inputs, the valuation of Level 3 liabilities is inherently subjective, and often involves the use of complex 
proprietary models and unobservable inputs. The contingent consideration of Bantam Bagels is valued using a Monte Carlo 

26

simulation that randomly changes revenue growth, adjusted earnings before interest, taxes, depreciation, and amortization 
(“EBITDA”), and other uncertain variables to estimate fair value using a discount rate. The contingent consideration of Angelic 
Bakehouse is valued using a present value approach that incorporates factors such as a revenue growth rate, discount rate, and 
forecasted adjusted EBITDA projections to estimate fair value. Due to unfavorable events and market conditions in the current 
year, it became probable that previous adjusted EBITDA projections would not be attained thus resulting in a decrease in the 
fair value of the contingent consideration of Angelic Bakehouse.

We identified these Level 3 liabilities as a critical audit matter because of the complex proprietary models and unobservable 
inputs management used to estimate fair value. This required a high degree of auditor judgment and an increased extent of our 
effort, including the need to involve our fair value specialists who possess significant quantitative and modeling expertise to 
audit and evaluate the appropriateness of the models and inputs.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the proprietary models and unobservable inputs used by management to estimate the fair 

value of the Level 3 liabilities included the following, among others:

• We tested the effectiveness of controls over management’s valuation of Level 3 liabilities, including those related to

the complex proprietary models and the significant inputs that are not readily observable.

• We evaluated management’s ability to accurately estimate fair value by comparing management’s historical estimates

to subsequent results, taking into account changes in market conditions.

• We compared management’s assumptions to external sources. These assumptions included the discount rates and

future revenue growth affecting the forecasted adjusted EBITDA used in the valuation models for both Bantam Bagels 
and Angelic Bakehouse.

• With the assistance of our fair value specialists, we developed independent fair value estimates using a Monte Carlo

simulation for Bantam Bagels and a present value approach for Angelic Bakehouse and compared our estimates to the 
Company’s estimates.

/s/ Deloitte & Touche LLP
Deloitte & Touche LLP

Columbus, Ohio
August 27, 2019 

We have served as the Company’s auditor since 1961.

27

LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share data)

ASSETS

June 30,

2019

2018

$

196,288
75,691

$

Current Assets:

Cash and equivalents
Receivables
Inventories:

Raw materials
Finished goods

Total inventories

Other current assets

Total current assets

Property, Plant and Equipment:

Land, buildings and improvements
Machinery and equipment

Total cost

Less accumulated depreciation

Property, plant and equipment-net

Other Assets:
Goodwill
Other intangible assets-net
Other noncurrent assets

Total

LIABILITIES AND SHAREHOLDERS’ EQUITY

$

Current Liabilities:

Accounts payable
Accrued liabilities

Total current liabilities

Other Noncurrent Liabilities
Deferred Income Taxes
Commitments and Contingencies
Shareholders’ Equity:

Preferred stock-authorized 3,050,000 shares; outstanding-none
Common stock-authorized 75,000,000 shares; outstanding-2019-27,491,497
shares; 2018-27,487,989 shares
Retained earnings
Accumulated other comprehensive loss
Common stock in treasury, at cost
Total shareholders’ equity

Total

$

$

See accompanying notes to consolidated financial statements.

28

205,752
72,960

32,673
58,188
90,861
9,304
378,877

132,318
293,409
425,727
234,914
190,813

168,030
56,176
10,595
804,491

57,978
35,789
93,767
41,638
16,804

119,232
1,279,343
(8,259)
(738,034)
652,282
804,491

30,647
55,425
86,072
10,518
368,569

163,094
340,232
503,326
256,282
247,044

208,371
70,277
11,138
905,399

76,670
43,036
119,706
35,938
22,882

122,844
1,359,782
(10,308)
(745,445)
726,873
905,399

$

$

$

LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands, except per share data)
Net Sales
Cost of Sales
Gross Profit
Selling, General and Administrative Expenses
Change in Contingent Consideration
Restructuring and Impairment Charges
Multiemployer Pension Settlement and Related Costs
Operating Income
Other, Net
Income Before Income Taxes
Taxes Based on Income
Net Income
Net Income Per Common Share:

Basic
Diluted

Weighted Average Common Shares Outstanding:

Basic
Diluted

$

$

$
$

Years Ended June 30,

$

$

$
$

2019
1,307,787
981,589
326,198
149,811
(16,180)
1,643
—
190,924
4,618
195,542
44,993
150,549

5.48
5.46

27,438
27,537

$

$

$
$

2018
1,222,925
919,419
303,506
129,906
2,052
—
—
171,548
2,655
174,203
38,889
135,314

4.93
4.92

27,403
27,459

2017
1,201,842
883,062
318,780
125,635
1,156
—
17,635
174,354
1,162
175,516
60,202
115,314

4.21
4.20

27,376
27,440

See accompanying notes to consolidated financial statements.

29

LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)
Net Income
Other Comprehensive (Loss) Income:
Defined Benefit Pension and Postretirement Benefit Plans:
Net (loss) gain arising during the period, before tax
Amortization of loss, before tax
Amortization of prior service credit, before tax
Total Other Comprehensive (Loss) Income, Before Tax
Tax Attributes of Items in Other Comprehensive (Loss) Income:

Net (loss) gain arising during the period, tax
Amortization of loss, tax
Amortization of prior service credit, tax
Total Tax Benefit (Expense)

Other Comprehensive (Loss) Income, Net of Tax
Comprehensive Income

$

Years Ended June 30,

2019

2018

2017

$

150,549

$

135,314

$

115,314

(2,902)
410
(182)
(2,674)

678
(96)
43
625
(2,049)
148,500

$

3,041
536
(182)
3,395

(710)
(180)
61
(829)
2,566
137,880

$

3,334
677
(182)
3,829

(1,231)
(250)
66
(1,415)
2,414
117,728

See accompanying notes to consolidated financial statements.

30

LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)
Cash Flows From Operating Activities:

Net income
Adjustments to reconcile net income to net cash provided by
operating activities:

Impacts of noncash items:

Depreciation and amortization
Change in contingent consideration
Deferred income taxes and other changes
Stock-based compensation expense
Restructuring and impairment charges
Gain on sale of property
Pension plan activity

Changes in operating assets and liabilities:

Receivables
Inventories
Other current assets
Accounts payable and accrued liabilities

Net cash provided by operating activities

Cash Flows From Investing Activities:
Payments for property additions
Cash paid for acquisitions, net of cash acquired
Proceeds from sale of property
Other-net

Net cash used in investing activities

Cash Flows From Financing Activities:

Payment of dividends
Purchase of treasury stock
Tax withholdings for stock-based compensation
Other-net

Net cash used in financing activities

Net change in cash and equivalents
Cash and equivalents at beginning of year
Cash and equivalents at end of year

Years Ended June 30,

2019

2018

2017

$

150,549

$

135,314

$

115,314

31,848
(16,180)
7,336
5,972
1,643
(13)
(749)

(748)
6,282
(3,085)
14,743
197,598

(70,880)
(55,364)
169
(786)
(126,861)

(70,110)
(7,411)
(2,360)
(320)
(80,201)
(9,464)
205,752
196,288

$

26,896
2,052
(8,502)
5,039
—
(10)
(434)

(3,040)
(14,485)
2,164
15,720
160,714

(31,025)
(318)
38
(147)
(31,452)

(64,531)
(1,102)
(981)
—
(66,614)
62,648
143,104
205,752

$

24,906
1,156
2,347
4,248
—
(629)
(244)

(2,598)
150
(2,958)
4,693
146,385

(27,005)
(35,169)
1,475
91
(60,608)

(58,980)
(866)
(907)
—
(60,753)
25,024
118,080
143,104

$

See accompanying notes to consolidated financial statements.

31

LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Amounts in thousands,
except per share data)
Balance, June 30, 2016
Net income
Net pension and postretirement benefit
gains, net of $1,415 tax effect
Cash dividends - common stock ($2.15
per share)
Purchase of treasury stock
Stock-based plans, including excess
tax benefits
Stock-based compensation expense
Balance, June 30, 2017
Net income
Net pension and postretirement benefit
gains, net of $829 tax effect
Tax Cuts and Jobs Act of 2017,
Reclassification from accumulated
other comprehensive loss to retained
earnings

Cash dividends - common stock ($2.35
per share)
Purchase of treasury stock
Stock-based plans
Stock-based compensation expense
Balance, June 30, 2018
Net income
Net pension and postretirement 
benefit losses, net of ($625) tax effect
Cash dividends - common stock 
($2.55 per share)
Purchase of treasury stock
Stock-based plans
Stock-based compensation expense
Balance, June 30, 2019

Common Stock
Outstanding

Retained
Earnings

Accumulated
Other
Comprehensive
Loss

Treasury
Stock

Total
Shareholders’
Equity

Shares

27,424

Amount
$ 110,677

$ 1,150,337
115,314

$

(11,350) $ (736,066) $

2,414

(58,980)

(866)

1,206,671
135,314

(8,936)

(736,932)

2,566

1,889

(1,889)

(64,531)

1,279,343
150,549

(70,110)

(1,102)

(8,259)

(738,034)

(2,049)

(7,411)

$ 1,359,782

$

(10,308) $ (745,445) $

(6)

30

27,448

249
4,248
115,174

(9)
49

27,488

(981)
5,039
119,232

(48)
51

27,491

(2,360)
5,972
$ 122,844

513,598
115,314

2,414

(58,980)
(866)

249
4,248
575,977
135,314

2,566

—

(64,531)
(1,102)
(981)
5,039
652,282
150,549

(2,049)

(70,110)
(7,411)
(2,360)
5,972
726,873

See accompanying notes to consolidated financial statements.

32

LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share data)

Note 1 – Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Lancaster Colony Corporation and our 

wholly-owned subsidiaries, collectively referred to as “we,” “us,” “our,” “registrant,” or the “Company.” Intercompany 
transactions and accounts have been eliminated in consolidation. Our fiscal year begins on July 1 and ends on June 30. Unless 
otherwise noted, references to “year” pertain to our fiscal year; for example, 2019 refers to fiscal 2019, which is the period from 
July 1, 2018 to June 30, 2019.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles 

(“GAAP”) requires that we make estimates and assumptions that affect the amounts reported in the consolidated financial 
statements and accompanying notes. Estimates included in these consolidated financial statements include allowances for 
customer deductions, net realizable value of inventories, useful lives for the calculation of depreciation and amortization, 
distribution accruals, pension and postretirement assumptions and self-insurance accruals. Actual results could differ from these 
estimates.

Cash and Equivalents

We consider all highly liquid investments purchased with original maturities of three months or less to be cash 
equivalents. The carrying amounts of our cash and equivalents approximate fair value due to their short maturities and are 
considered level 1 investments, which have quoted market prices in active markets for identical assets. As a result of our cash 
management system, checks issued but not presented to the banks for payment may create negative book cash balances. When 
such negative balances exist, they are included in Accrued Liabilities.

Receivables and Related Allowances

We evaluate the adequacy of our allowances for customer deductions considering several factors including historical 

experience, specific trade programs and existing customer relationships. We also provide an allowance for doubtful accounts 
based on the aging of accounts receivable balances, historical write-off experience and on-going reviews of our trade 
receivables. Measurement of potential losses requires credit review of existing customer relationships, consideration of 
historical loss experience, including the need to adjust for current conditions, and judgments about the probable effects of 
relevant observable data, including present economic conditions such as delinquency rates and the economic health of 
customers. Our allowance for doubtful accounts was immaterial for all periods presented.

Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and equivalents 

and trade accounts receivable. By policy, we limit the amount of credit exposure to any one institution or issuer. Our 
concentration of credit risk with respect to trade accounts receivable is mitigated by our credit evaluation process and by having 
a large and diverse customer base. However, see Note 10 with respect to our accounts receivable with Walmart Inc. and 
McLane Company, Inc., a wholesale distribution subsidiary of Berkshire Hathaway, Inc.

Inventories

Inventories are valued at the lower of cost or net realizable value and are costed by various methods that approximate 
actual cost on a first-in, first-out basis. Due to the nature of our business, work in process inventory is not a material component 
of inventory. When necessary, we provide allowances to adjust the carrying value of our inventory to the lower of cost or net 
realizable value, including any costs to sell or dispose. The determination of whether inventory items are slow moving, obsolete 
or in excess of needs requires estimates about the future demand for our products. The estimates as to future demand used in the 
valuation of inventory are subject to the ongoing success of our products and may differ from actual due to factors such as 
changes in customer and consumer demand. 

Property, Plant and Equipment

Property, plant and equipment are recorded at cost, except for those acquired as part of a business combination, which are 
recorded at fair value at the time of purchase. We use the straight-line method of computing depreciation for financial reporting 
purposes based on the estimated useful lives of the corresponding assets. Estimated useful lives for buildings and improvements 
range generally from 10 to 40 years, machinery and equipment, excluding technology-related equipment, range generally from 
3 to 15 years and technology-related equipment range generally from 3 to 5 years. For tax purposes, we generally compute 
depreciation using accelerated methods.

33

LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share data)

Purchases of property, plant and equipment included in Accounts Payable and excluded from the property additions and 

the change in accounts payable in the Consolidated Statements of Cash Flows at June 30 were as follows:

Construction in progress in Accounts Payable

2019

2018

2017

$

7,852

$

2,070

$

622

The following table sets forth depreciation expense, including capital lease amortization, in each of the years ended 

June 30:

Depreciation expense

Deferred Software Costs

2019

2018

2017

$

26,751

$

22,168

$

20,430

We capitalize certain costs related to hosting arrangements that are service contracts (cloud computing arrangements). 

Costs incurred during the application development stage are capitalized. Costs related to preliminary project activities and post-
implementation activities are expensed as incurred. Training costs are also expensed as incurred. Capitalized costs are included 
in Other Noncurrent Assets and are amortized on a straight-line basis over the estimated useful life. In 2019, we capitalized 
$1.7 million of deferred software costs related to cloud computing arrangements.

Long-Lived Assets

We monitor the recoverability of the carrying value of our long-lived assets by periodically considering whether 

indicators of impairment are present. If such indicators are present, we determine if the assets are recoverable by comparing the 
sum of the undiscounted future cash flows to the assets’ carrying amounts. Our cash flows are based on historical results 
adjusted to reflect our best estimate of future market and operating conditions. If the carrying amounts are greater, then the 
assets are not recoverable. In that instance, we compare the carrying amounts to the fair value to determine the amount of the 
impairment to be recorded.

Goodwill and Other Intangible Assets

Goodwill is not amortized. It is evaluated annually at April 30 by applying impairment testing procedures. Other 
intangible assets are amortized on a straight-line basis over their estimated useful lives to Selling, General and Administrative 
Expenses. We evaluate the future economic benefit of the recorded goodwill and other intangible assets when events or 
circumstances indicate potential recoverability concerns. Carrying amounts are adjusted appropriately when determined to have 
been impaired. See further discussion regarding goodwill and other intangible assets in Note 7.

Accrued Distribution

We incur various freight and other related costs associated with shipping products to our customers and warehouses. We 

provide accruals for unbilled shipments from carriers utilizing historical or projected freight rates and other relevant 
information. 

Accruals for Self-Insurance

Self-insurance accruals are made for certain claims associated with employee health care, workers’ compensation and 
general liability insurance. These accruals include estimates that are primarily based on historical loss development factors. 

Shareholders’ Equity

We are authorized to issue 3,050,000 shares of preferred stock consisting of 750,000 shares of Class A Participating 
Preferred Stock with $1.00 par value, 1,150,000 shares of Class B Voting Preferred Stock without par value and 1,150,000 
shares of Class C Nonvoting Preferred Stock without par value. Our Board of Directors approved a share repurchase 
authorization of 2,000,000 common shares in November 2010. At June 30, 2019, 1,354,423 common shares remained 
authorized for future purchase.

34

LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share data)

Revenue Recognition

When Performance Obligations Are Satisfied

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of 

account for revenue recognition. A contract’s transaction price is allocated to each distinct performance obligation and 
recognized as revenue when, or as, the performance obligation is satisfied. The singular performance obligation of our customer 
contracts is determined by each individual purchase order and the respective food products ordered, with revenue being 
recognized at a point-in-time when the obligation under the terms of the agreement is satisfied and product control is transferred 
to our customer. Specifically, control transfers to our customers when the product is delivered to or picked up by our customers 
based upon applicable shipping terms, as our customers can direct the use and obtain substantially all of the remaining benefits 
from the asset at this point in time. The performance obligations in our customer contracts are generally satisfied within 30 
days. As such, we have not disclosed the transaction price allocated to remaining performance obligations as of June 30, 2019.

Significant Payment Terms

In general, within our customer contracts, the purchase order identifies the product, quantity, price, pick-up allowances, 

payment terms and final delivery terms. Payment terms usually include early pay discounts. We grant payment terms consistent 
with industry standards. Although some payment terms may be more extended, presently the majority of our payment terms are 
less than 60 days. As a result, we have used the available practical expedient and, consequently, do not adjust our revenues for 
the effects of a significant financing component.

Shipping

All shipping and handling costs associated with outbound freight are accounted for as fulfillment costs and are included in 
our cost of sales; this includes shipping and handling costs incurred after control over a product has transferred to a customer, as 
we have chosen to use the available practical expedient to account for these costs within our cost of sales.

Variable Consideration

In addition to fixed contract consideration, our contracts include some form of variable consideration, including sales 

discounts, returns, trade promotions and certain other sales and consumer incentives, including rebates and coupon 
redemptions. In general, variable consideration is treated as a reduction in revenue when the related revenue is recognized. 
Depending on the specific type of variable consideration, we use either the expected value or most likely amount method to 
determine the variable consideration. We believe there will be no significant changes to our estimates of variable consideration 
when any related uncertainties are resolved with our customers. We review and update our estimates and related accruals of 
variable consideration each period based on historical experience and any recent changes in the market. 

Warranties & Returns

We provide all customers with a standard or assurance type warranty. Either stated or implied, we provide assurance the 

related products will comply with all agreed-upon specifications and other warranties provided under the law. No services 
beyond an assurance warranty are provided to our customers. 

We do not grant a general right of return. However, customers may return defective or non-conforming products. 
Customer remedies may include either a cash refund or an exchange of the product. As a result, the right of return and related 
refund liability is estimated and recorded as a reduction in revenue. This return estimate is reviewed and updated each period 
and is based on historical sales and return experience. 

Contract Balances

We do not have deferred revenue or unbilled receivable balances and thus do not have any related contract asset and 

liability balances as of June 30, 2019.

Contract Costs

We have identified sales commissions as an incremental cost incurred to obtain a customer contract. These costs are 
required to be capitalized under the new revenue recognition standard. We have chosen to use the available practical expedient 
to continue to expense these costs as incurred as the amortization period for such costs is one year or less. We do not incur 
significant fulfillment costs related to customer contracts which would require capitalization.

Disaggregation of Revenue

See Note 10 for disaggregation of our net sales by class of similar product and type of customer.

35

LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share data)

Advertising Expense

We expense advertising as it is incurred. The following table summarizes advertising expense as a percentage of net sales 

in each of the years ended June 30:

Advertising expense as a percentage of net sales

Research and Development Costs

2019

2018

2017

2%

2%

3%

We expense research and development costs as they are incurred. The estimated amount spent during each of the last 

three years on research and development activities was less than 1% of net sales.

Distribution Costs

Distribution fees billed to customers are included in Net Sales, while our distribution costs incurred are included in Cost 

of Sales.

Stock-Based Employee Compensation Plans

We account for our stock-based employee compensation plans in accordance with GAAP for stock-based compensation, 
which requires the measurement and recognition of the cost of employee services received in exchange for an award of equity 
instruments based on the grant-date fair value of the award. The cost of the employee services is recognized as compensation 
expense over the period that an employee provides service in exchange for the award, which is typically the vesting period. See 
further discussion and disclosure in Note 11.

Income Taxes

Our income tax expense, deferred tax assets and liabilities and reserves for unrecognized tax benefits reflect 
management’s best assessment of estimated future taxes to be paid. We are subject to income taxes in numerous domestic 
jurisdictions.

Our annual effective tax rate is determined based on our income, statutory tax rates and the permanent tax impacts of 
items treated differently for tax purposes than for financial reporting purposes. Tax law requires certain items be included in the 
tax return at different times than the items are reflected in the financial statements. Some of these differences are permanent, 
such as expenses that are not deductible in our tax return, and some differences are temporary, reversing over time, such as 
depreciation expense. These temporary differences create deferred tax assets and liabilities. The effect of a change in tax rates 
on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. A change in tax rates 
may result in stranded tax effects when the effect of the change is required to be included in income even when the related 
income tax effects of items in accumulated other comprehensive income/loss were originally recognized in other 
comprehensive income rather than in income. Our accounting policy is to release stranded tax effects from accumulated other 
comprehensive loss.

Realization of certain deferred tax assets is dependent upon generating sufficient taxable income in the appropriate 
jurisdiction prior to the expiration of the carryforward periods. Although realization is not assured, management believes it is 
more likely than not that our deferred tax assets will be realized and thus we have not recorded any valuation allowance for the 
years ended June 30, 2019 or 2018.

In accordance with accounting literature related to uncertainty in income taxes, tax benefits and liabilities from uncertain 

tax positions that are recognized in the financial statements are measured based on the largest attribute that has a greater than 
fifty percent likelihood of being realized upon ultimate settlement.

Changes in tax laws and rates could also affect recorded deferred tax assets and liabilities in the future. Management is 
not aware of any such changes that would have a material effect on our results of operations, cash flows or financial position. 
See further discussion in Note 9.

Earnings Per Share

Earnings per share (“EPS”) is computed based on the weighted average number of shares of common stock and common 
stock equivalents (restricted stock and stock-settled stock appreciation rights) outstanding during each period. Unvested shares 
of restricted stock granted to employees are considered participating securities since employees receive nonforfeitable 
dividends prior to vesting and, therefore, are included in the earnings allocation in computing EPS under the two-class method. 
Basic EPS excludes dilution and is computed by dividing income available to common shareholders by the weighted average 
number of common shares outstanding during the period. Diluted EPS is computed by dividing income available to common 
shareholders by the diluted weighted average number of common shares outstanding during the period, which includes the 
dilutive potential common shares associated with nonparticipating restricted stock and stock-settled stock appreciation rights.

36

LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share data)

Basic and diluted net income per common share were calculated as follows:

Net income
Net income available to participating securities
Net income available to common shareholders

Weighted average common shares outstanding - basic
Incremental share effect from:

Nonparticipating restricted stock
Stock-settled stock appreciation rights

Weighted average common shares outstanding - diluted

Net income per common share - basic
Net income per common share - diluted

2019

2018

2017

150,549
(259)
150,290

$

$

135,314
(271)
135,043

$

$

115,314
(196)
115,118

27,438

27,403

27,376

2
97
27,537

3
53
27,459

5.48
5.46

$
$

4.93
4.92

$
$

3
61
27,440

4.21
4.20

$

$

$
$

Comprehensive Income and Accumulated Other Comprehensive Loss

Comprehensive income includes changes in equity that result from transactions and economic events from non-owner 

sources. Comprehensive income is composed of two subsets – net income and other comprehensive income (loss). Included in 
other comprehensive income (loss) are pension and postretirement benefits adjustments.

The following table presents the amounts reclassified out of accumulated other comprehensive loss by component:

Accumulated other comprehensive loss at beginning of year

Defined Benefit Pension Plan Items:

Net (loss) gain arising during the period
Amortization of unrecognized net loss (1)

Postretirement Benefit Plan Items: (2)

Net (loss) gain arising during the period
Amortization of unrecognized net gain

Amortization of prior service credit

Total other comprehensive (loss) income, before tax
Total tax benefit (expense)

Other comprehensive (loss) income, net of tax
Tax Cuts and Jobs Act of 2017, Reclassification from accumulated other comprehensive
loss to retained earnings
Accumulated other comprehensive loss at end of year

2019

2018

$

(8,259) $

(8,936)

(2,771)
447

(131)
(37)
(182)
(2,674)
625
(2,049)

2,987

572

54
(36)
(182)
3,395
(829)
2,566

—
(10,308) $

$

(1,889)
(8,259)

(1)  Included in the computation of net periodic benefit income/cost. See Note 12 for additional information.
(2)  Additional disclosures for postretirement benefits are not included as they are not considered material.

Recently Issued Accounting Standards

In February 2016, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance to require lessees 

to recognize a right-of-use asset and a lease liability for leases with terms of more than 12 months and issued subsequent 
clarifications of this new guidance. This guidance retains the two classifications of a lease as either an operating or finance 
lease (previously referred to as a capital lease). Both lease classifications require the lessee to record a right-of-use asset and a 
lease liability based upon the present value of the lease payments. Finance leases will reflect the financial arrangement by 
recognizing interest expense on the lease liability separately from the amortization expense of the right-of-use asset. Operating 
leases will recognize lease expense (with no separate recognition of interest expense) on a straight-line basis over the term of 
the lease. The guidance requires expanded qualitative and quantitative disclosures, including additional information about the 
amounts recorded in the consolidated financial statements. In July 2018, the FASB issued guidance that allows for an alternate 

37

LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share data)

transition method whereby companies can recognize a cumulative-effect adjustment to the opening balance of retained earnings 
in the period of adoption rather than restating comparative periods. We will adopt the new guidance on July 1, 2019 using this 
alternate transition method, but we will not record a cumulative-effect adjustment from initially applying the standard. We will 
elect the package of practical expedients that permits us not to reassess our prior conclusions about lease identification, lease 
classification and initial direct costs and will make an accounting policy election to keep short-term leases with an initial term 
of 12 months or less off our Consolidated Balance Sheets. As a result of adoption, we expect to recognize a lease liability and 
related right-of-use asset of $30 million to $40 million. We do not expect the adoption to impact our results of operations or 
cash flows. During the first quarter of 2020, we will have completed the implementation of a lease accounting system to enable 
the preparation of financial information and will have implemented relevant accounting policies and internal controls 
surrounding the lease accounting process. There will be additional required disclosures in the notes to the consolidated financial 
statements upon adoption.

In August 2018, the FASB issued new accounting guidance related to the disclosure requirements for fair value 
measurements. The guidance removes, modifies and adds disclosures related to fair value. The amendments on changes in 
unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair 
value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the 
most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied 
retrospectively to all periods presented upon their effective date. This guidance will be effective for us in fiscal 2021, including 
interim periods. As the guidance only relates to disclosures, there will be no impact on our financial position or results of 
operations.

Recently Adopted Accounting Standards

In May 2014, the FASB issued new accounting guidance for the recognition of revenue and issued subsequent 
clarifications of this new guidance in 2016 and 2017. The core principle of the new guidance states that an entity should 
recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration 
to which the entity expects to be entitled in exchange for those goods or services. This model is based on a control approach. 
We completed a review of customer contracts and evaluated the impact of the new standard on certain common practices 
employed by us. We also finalized our assessment of the impact on our accounting policies, processes, system requirements, 
internal controls and disclosures using internal resources and the assistance of a qualified third party expert. We adopted the 
new guidance on July 1, 2018 using a modified retrospective approach; however, we did not record a cumulative-effect 
adjustment from initially applying the standard as the adoption did not have a material impact on our financial position or 
results of operations. See disclosure of our revenue recognition policies in Note 1.

In March 2017, the FASB issued new accounting guidance to improve the presentation of net periodic pension cost and 
net periodic postretirement benefit cost by disaggregating the service cost component from the other components of net periodic 
benefit cost. The amendments require an employer to present service cost in the same line item(s) as compensation costs for the 
pertinent employees whereas the other components of net periodic benefit cost must be reported separately from service cost 
and outside of income from operations. The amendments also allow only the service cost component to be eligible for 
capitalization. The amendments require retrospective application for the income statement presentation provisions and 
prospective application for the capitalization of the service cost component. However, as a result of prior years’ restructuring 
activities, we no longer have any active employees continuing to accrue service cost. Therefore, the service cost provisions are 
not applicable to us. We adopted the new guidance on July 1, 2018, and this adoption resulted in changes in classification on the 
income statement for all periods presented. The changes were not material.

In August 2018, the FASB issued new accounting guidance to align the requirements for capitalizing implementation costs 
incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred 
to develop or obtain internal-use software. Costs for implementation activities in the application development stage are 
capitalized depending on the nature of the costs, while costs incurred during the preliminary project and postimplementation 
stages are expensed as the activities are performed. The guidance also requires such capitalized implementation costs to be 
expensed over the term of the hosting arrangement and advises on related presentation within the statement of financial 
position, the statement of income and statement of cash flows. The guidance will be effective for fiscal years, and interim 
periods within those years, beginning after December 15, 2019 and should be applied either retrospectively or prospectively to 
all implementation costs incurred after the date of adoption. Early adoption is permitted. We adopted this guidance in the first 
quarter of fiscal 2019 on a prospective basis. The adoption resulted in a change in accounting principle, to capitalize certain 
costs instead of expensing them immediately. The costs capitalized under this new guidance were not material to our 
consolidated financial statements.

38

LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share data)

In August 2018, the FASB issued new accounting guidance related to the disclosure requirements for defined benefit plans. 

The guidance removes, adds and clarifies disclosure requirements related to defined benefit pension or other postretirement 
plans. The guidance will be effective for fiscal years ending after December 15, 2020 and should be applied on a retrospective 
basis to all periods presented. Early adoption is permitted. We adopted this guidance in the first quarter of fiscal 2019. As the 
guidance only relates to disclosures, there was no impact on our financial position or results of operations. See disclosures for 
defined benefit pension plans in Note 12.

Note 2 – Acquisitions

Omni Baking Company LLC

On November 16, 2018, we acquired substantially all of the assets of Omni Baking Company LLC (“Omni”). Omni has 
been a long-time supplier of products to our frozen garlic bread operations and is based in Vineland, New Jersey. The purchase 
price of $22.3 million, which includes the post-closing working capital adjustment, was funded with cash on hand. Omni’s 
results of operations are allocated between our Retail and Foodservice segments in a manner consistent with our current 
segment allocations. These results have been included in our consolidated financial statements from the date of acquisition. 
This acquisition is not significant to our financial position or results of operations.

The following table summarizes the purchase price allocation based on the fair value of the net assets acquired.

Purchase Price Allocation

Inventories

Other current assets

Machinery and equipment

Goodwill (tax deductible)
Current liabilities

Net assets acquired

$

$

809

86

4,777

19,664
(3,083)
22,253

Further adjustments are not expected to the allocation above.

The goodwill recognized above arose because the purchase price for Omni reflects a number of factors including the 
production capabilities of the leased facility and the ability to expand production in the future. Goodwill also resulted from the 
workforce acquired with Omni. Due to the transitional nature of the foodservice operations, which are related to an interim 
supply agreement, no goodwill was allocated to the Foodservice segment.

Due to the unique nature of this acquisition, we did not identify any intangible assets apart from goodwill.

Pro forma results of operations have not been presented herein as the acquisition was not material to our results of 

operations.

Bantam Bagels, LLC

On October 19, 2018, we acquired all the assets of Bantam Bagels, LLC (“Bantam”). Bantam, a producer and marketer of 

frozen mini stuffed bagels and mini stuffed pancakes sold to both the retail and foodservice channels, is based in New York, 
New York. The base purchase price of $33.1 million, which includes the post-closing working capital adjustment, was funded 
with cash on hand. This purchase price excludes contingent consideration relating to an additional earn-out payment which is 
tied to performance-based conditions. In general, the terms of the acquisition specify that the sellers will receive an earn-out 
based upon a pre-determined multiple of the defined adjusted EBITDA of Bantam for the twelve months ending December 31, 
2023. We are unable to provide a range for the amount of this earn-out because it is based on the future adjusted EBITDA of 
Bantam, and the earn-out does not contain a minimum or maximum value. See further discussion of the earn-out in Note 3. 
Bantam’s results of operations are allocated between our Retail and Foodservice segments in a manner consistent with our 
current segment allocations. These results have been included in our consolidated financial statements from the date of 
acquisition. This acquisition is not significant to our financial position or results of operations.

39

LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share data)

The following table summarizes the consideration related to the acquisition and the purchase price allocation based on the 

fair value of the net assets acquired. The initial fair value of the contingent consideration is a noncash investing activity.

Consideration

Cash paid for acquisition

Contingent consideration - fair value of earn-out at date of closing

Fair value of total consideration

Purchase Price Allocation

Receivables

Inventories
Other current assets

Machinery and equipment
Goodwill (tax deductible)

Other intangible assets

Current liabilities

Other noncurrent liabilities

Net assets acquired

$

$

$

$

33,111

8,000
41,111

1,937

684
95

1,896
20,677

18,700
(2,256)
(622)
41,111

Further adjustments are not expected to the allocation above.

The goodwill recognized above arose because the purchase price for Bantam reflects a number of factors including the 

future earnings and cash flow potential of Bantam, as well as the impact of the inclusion of the initial fair value of the earn-out 
associated with the acquisition. Bantam is a fast growing, on-trend business with distribution in traditional grocery, club stores, 
e-commerce and foodservice. Notably, in the foodservice channel, Bantam Bagels® bagel bites are available at corporate-owned 
Starbucks® cafes nationwide. Bantam also provides innovation opportunities within and beyond our present product lines. A 
small amount of goodwill also resulted from the workforce acquired with Bantam.

We have determined values and lives of the other intangible assets listed in the allocation above as: $12.8 million for the 

tradename with a 20-year life; $3.3 million for the customer relationships with a 10-year life and $2.6 million for the 
technology / know-how with a 10-year life.

Pro forma results of operations have not been presented herein as the acquisition was not material to our results of 

operations.

Angelic Bakehouse, Inc.

On November 17, 2016, we acquired substantially all of the assets of Angelic Bakehouse, Inc. (“Angelic”). Angelic, a 

privately owned manufacturer and marketer of premium sprouted grain bakery products, is based near Milwaukee, Wisconsin. 
The purchase price of $35.5 million was funded by cash on hand, but excludes contingent consideration relating to an additional 
earn-out payment which is tied to performance-based conditions. In general, the terms of the acquisition specify the sellers will 
receive an earn-out based upon a pre-determined multiple of the defined adjusted EBITDA of Angelic for fiscal 2021. We are 
unable to provide a range for the amount of this earn-out because it is based on the future adjusted EBITDA of Angelic, and the 
earn-out does not contain a minimum or maximum value. See further discussion of the earn-out in Note 3. Angelic is reported 
in our Retail segment, and its results of operations have been included in our consolidated financial statements from the date of 
acquisition.

Note 3 – Fair Value

Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in 

an orderly transaction between market participants as of the measurement date. GAAP sets forth a three-level fair value 
hierarchy, which prioritizes the inputs used in measuring fair value. The three levels are as follows:

Level 1 – defined as observable inputs, such as quoted market prices in active markets.

Level 2 – defined as inputs other than quoted prices in active markets that are either directly or indirectly 
observable.

Level 3 – defined as unobservable inputs in which little or no market data exists, therefore, requiring an entity to 
develop its own assumptions. 

40

LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share data)

Our financial assets and liabilities subject to the three-level fair value hierarchy consist principally of cash and 

equivalents, accounts receivable, accounts payable, contingent consideration payable and defined benefit pension plan assets. 
The estimated fair value of cash and equivalents, accounts receivable and accounts payable approximates their carrying value. 
See Note 12 for fair value disclosures related to our defined benefit pension plan assets.

Our contingent consideration, which resulted from the earn-outs associated with our acquisitions of Bantam and Angelic, 

is measured at fair value on a recurring basis and is included in Other Noncurrent Liabilities on the Consolidated Balance 
Sheets. The following table summarizes our contingent consideration as of June 30: 

Contingent consideration - Bantam
Contingent consideration - Angelic

Total contingent consideration

Contingent consideration - Angelic

Bantam Contingent Consideration

Fair Value Measurements at June 30, 2019

Level 1

Level 2

Level 3

Total

— $
—

— $

— $
—

— $

8,900
—

8,900

$

$

8,900
—

8,900

Fair Value Measurements at June 30, 2018

Level 1

Level 2

Level 3

Total

— $

— $

17,080

$

17,080

$

$

$

This contingent consideration resulted from the earn-out associated with our October 19, 2018 acquisition of Bantam. In 

general, the terms of the acquisition specify the sellers will receive an earn-out based upon a pre-determined multiple of the 
defined adjusted EBITDA of Bantam for the twelve months ending December 31, 2023. The initial fair value of the contingent 
consideration was determined to be $8.0 million. The fair value is measured on a recurring basis using a Monte Carlo 
simulation that randomly changes revenue growth, forecasted adjusted EBITDA and other uncertain variables to estimate an 
expected value. We record the present value of this amount by applying a discount rate. As this fair value measurement is based 
on significant inputs not observable in the market, it represents a Level 3 measurement within the fair value hierarchy.

The following table represents our Level 3 fair value measurements using significant other unobservable inputs for 

Bantam’s contingent consideration:

Contingent consideration at beginning of year

Initial fair value - additions

Change in contingent consideration included in operating income

Contingent consideration at end of year

Angelic Contingent Consideration

2019

—
8,000

900

8,900

$

$

This contingent consideration resulted from the earn-out associated with our November 17, 2016 acquisition of Angelic. 
In general, the terms of the acquisition specify the sellers will receive an earn-out based upon a pre-determined multiple of the 
defined adjusted EBITDA of Angelic for fiscal 2021. The initial fair value of the contingent consideration was determined to be 
$13.9 million. The fair value is measured on a recurring basis using a present value approach, which incorporates factors such 
as revenue growth and forecasted adjusted EBITDA, to estimate an expected value. We record the present value of this amount 
by applying a discount rate. As this fair value measurement is based on significant inputs not observable in the market, it 
represents a Level 3 measurement within the fair value hierarchy. Our 2019 fair value measurements resulted in a $17.1 million 
reduction in the fair value of Angelic’s contingent consideration based on a change in Angelic’s forecasted adjusted EBITDA 
for fiscal 2021. This adjustment was recorded in our Retail segment.

The following table represents our Level 3 fair value measurements using significant other unobservable inputs for 

Angelic’s contingent consideration: 

Contingent consideration at beginning of year
Change in contingent consideration included in operating income

Contingent consideration at end of year

41

2019

2018

$

$

$

17,080
(17,080)

— $

15,028
2,052

17,080

LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share data)

Note 4 – Long-Term Debt

At June 30, 2019 and 2018, we had an unsecured credit facility (“Facility”) under which we could borrow, on a revolving 

credit basis, up to a maximum of $150 million at any one time, with potential to expand the total credit availability to 
$225 million subject to us obtaining consent of the issuing banks and certain other conditions. The Facility expires on April 8, 
2021, and all outstanding amounts are then due and payable. Interest is variable based upon formulas tied to LIBOR or an 
alternative base rate defined in the Facility, at our option. We must also pay facility fees that are tied to our then-applicable 
consolidated leverage ratio. Loans may be used for general corporate purposes. Due to the nature of its terms, when we have 
outstanding borrowings under the Facility, they will be classified as long-term debt.

At June 30, 2019 and 2018, we had no borrowings outstanding under the Facility. At June 30, 2019 and 2018, we had 
$5.1 million of standby letters of credit outstanding, which reduced the amount available for borrowing on the Facility. We paid 
no interest in 2019 and 2018.

The Facility contains certain restrictive covenants, including limitations on indebtedness, asset sales and acquisitions. 

There are two principal financial covenants: an interest expense test that requires us to maintain an interest coverage ratio not 
less than 2.5 to 1 at the end of each fiscal quarter; and an indebtedness test that requires us to maintain a consolidated leverage 
ratio not greater than 3 to 1 at all times. The interest coverage ratio is calculated by dividing Consolidated EBIT by 
Consolidated Interest Expense, and the leverage ratio is calculated by dividing Consolidated Debt by Consolidated EBITDA. 
All financial terms used in the covenant calculations are defined more specifically in the Facility.

Note 5 – Commitments

We have operating and capital leases with initial noncancelable lease terms in excess of one year covering the rental of 

various facilities and equipment, which expire at various dates through fiscal year 2029. Certain of these leases contain renewal 
options and some provide options to purchase during the lease term. The future minimum rental commitments due under these 
leases are summarized as follows:

2020
2021
2022
2023
2024
Thereafter

Total minimum payments
Less amount representing interest

Present value of capital lease obligations

Operating Leases
8,261
$
7,136
6,345
4,992
4,619
6,901
38,254

$

$

$

$

Capital Leases

505
505
505
493
121
—
2,129
(178)
1,951

Total rent expense, including short-term cancelable leases, during the years ended June 30 is summarized as follows:

Operating leases:

Minimum rentals
Contingent rentals
Short-term cancelable leases

Total

2019

2018

2017

$

$

8,258
—
1,665
9,923

$

$

6,663
—
1,257
7,920

$

$

6,529
4
1,508
8,041

Capital leases, which are included in Property, Plant and Equipment on the Consolidated Balance Sheets, at June 30 were 

composed of:

Machinery and equipment
Less accumulated amortization

Net

2019

2,273
(223)
2,050

$

$

42

LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share data)

Note 6 – Contingencies

In addition to the items discussed below, at June 30, 2019, we were a party to various claims and litigation matters arising 

in the ordinary course of business. Such matters did not have a material effect on the current-year results of operations and, in 
our opinion, their ultimate disposition will not have a material effect on our consolidated financial statements.

Our acquisitions of Angelic and Bantam included provisions for contingent consideration for the earn-outs associated 

with these transactions. See further discussion in Note 3.

27% of our employees are represented under various collective bargaining contracts. The labor contract for our Bedford 
Heights, Ohio plant facility, which produces various garlic bread products, will expire on April 30, 2020. 5% of our employees 
are represented under this collective bargaining contract. None of our other collective bargaining contracts will expire within 
one year.

Note 7 – Goodwill and Other Intangible Assets

Goodwill attributable to the Retail and Foodservice segments was $157.4 million and $51.0 million, respectively, at 

June 30, 2019 compared to $119.3 million and $48.7 million, respectively, at June 30, 2018. The increase in goodwill is the 
result of the acquisitions of Bantam in October 2018 and Omni in November 2018. See further discussion in Note 2.

The following table is a rollforward of goodwill by reportable segment from June 30, 2018 to June 30, 2019:

Goodwill at beginning of year
Goodwill acquired during the year - Bantam

Goodwill acquired during the year - Omni

Goodwill at end of year

Retail

Foodservice

Total

$

$

$

119,301
18,431
19,664

$

48,729
2,246
—

157,396

$

50,975

$

168,030
20,677
19,664

208,371

The following table summarizes our identifiable other intangible assets at June 30. The intangible asset values and lives 

related to the acquisition of Bantam are included in the table below. See further discussion in Note 2.

Tradenames (20 to 30-year life)
Gross carrying value
Accumulated amortization
Net carrying value

Customer Relationships (10 to 15-year life)

Gross carrying value
Accumulated amortization
Net carrying value

Technology / Know-how (10-year life)

Gross carrying value
Accumulated amortization
Net carrying value

Non-compete Agreements (5-year life)

Gross carrying value
Accumulated amortization
Net carrying value

Total net carrying value

2019

2018

$

$

$

$

$

$

$

$
$

63,121
(7,335)
55,786

17,507
(9,641)
7,866

8,950
(2,501)
6,449

791
(615)
176
70,277

$

$

$

$

$

$

$

$
$

50,321
(5,071)
45,250

14,207
(8,283)
5,924

6,350
(1,682)
4,668

791
(457)
334
56,176

Amortization expense for our other intangible assets, which is reflected in Selling, General and Administrative Expenses, 

was as follows in each of the years ended June 30:

Amortization expense

2019

2018

2017

$

4,599

$

3,986

$

3,453

43

LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share data)

Total annual amortization expense for each of the next five years is estimated to be as follows:

2020
2021
2022
2023
2024

Note 8 – Liabilities

Accrued liabilities at June 30 were composed of:

Compensation and employee benefits
Distribution
Other taxes
Marketing
Other

Total accrued liabilities

Other noncurrent liabilities at June 30 were composed of:

Workers compensation
Acquisition-related contingent consideration
Deferred compensation and accrued interest
Pension benefit liability
Postretirement benefit liability
Gross tax contingency reserve
Other

Total other noncurrent liabilities

Note 9 – Income Taxes

$
$
$
$
$

$

$

$

$

5,061
4,976
4,902
4,343
4,343

2018

23,135
8,579
1,306
485
2,284
35,789

2018

12,850
17,080
4,611
1,312
926
1,298
3,561
41,638

2019

28,672
7,730
1,219
561
4,854
43,036

2019

11,732
8,900
4,740
2,043
1,075
942
6,506
35,938

$

$

$

$

The Tax Cuts and Jobs Act of 2017 (“Tax Act”) was signed into law on December 22, 2017 with an effective date of 

January 1, 2018. Most notably, the Tax Act reduced the statutory federal income tax rate for corporations from 35% to 21%. 
Since we file our tax return based on our fiscal year, the statutory federal income tax rate for our 2018 tax return was a blended 
rate of 28.1%. In addition to the effect of the lower overall federal tax rate, the Tax Act resulted in a $9.5 million one-time 
benefit for the re-measurement of our net deferred tax liability in 2018. The statutory federal income tax rate for our 2019 tax 
return will be 21%.

The SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”) on December 22, 2017. SAB 118 allowed for a 

measurement period in which companies could either use provisional estimates for changes resulting from the Tax Act or apply 
the tax laws that were in effect immediately prior to the Tax Act being enacted if estimates could not be determined at the time 
of the preparation of the financial statements until the actual impacts could be determined. We recorded an initial estimate of the 
impact of the Tax Act within our December 31, 2017 financial statements, and the adjustments recorded in the second half of 
2018 were not material. The measurement period has ended, and we have completed the accounting for all the impacts of the 
Tax Act. 

44

LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share data)

We file a consolidated federal income tax return. Taxes based on income for the years ended June 30 have been provided 

as follows:

Currently payable:
Federal
State and local

Total current provision

Deferred federal, state and local provision (benefit)

Total taxes based on income

2019

2018

2017

$

$

30,220
8,070
38,290
6,703
44,993

$

$

40,766
7,355
48,121
(9,232)
38,889

$

$

51,524
6,319
57,843
2,359
60,202

In 2018, we adopted new accounting guidance for stock-based compensation. One of the changes resulting from this new 

guidance is the inclusion of the tax consequences related to stock-based compensation within the computation of income tax 
expense versus equity. We adopted this provision on a prospective basis. Prior to 2018, certain tax benefits were recorded 
directly to common stock, and these amounts totaled $1.1 million for 2017.

For the years ended June 30, our effective tax rate varied from the statutory federal income tax rate as a result of the 

following factors:

Statutory rate
State and local income taxes
Net windfall tax benefits - stock-based compensation
ESOP dividend deduction
One-time benefit on re-measurement of net deferred tax liability
Domestic manufacturing deduction for qualified income
Other

Effective rate

2019

2018

2017

21.0%
3.5
(0.8)
(0.1)
—
—
(0.6)
23.0%

28.1%
3.0
(0.4)
(0.1)
(5.5)
(2.3)
(0.5)
22.3%

35.0%
2.4
—
(0.1)
—
(2.8)
(0.2)
34.3%

Our net deferred tax liability for all periods presented in the Consolidated Balance Sheets has been classified as 
noncurrent. The tax effect of temporary differences that give rise to significant portions of the deferred tax assets and deferred 
tax liabilities at June 30 were comprised of:

Deferred tax assets:

Employee medical and other benefits
Receivables
Inventories
Other accrued liabilities

Total deferred tax assets

Deferred tax liabilities:

Property, plant and equipment
Goodwill
Intangible assets
Other

Total deferred tax liabilities

Net deferred tax liability

2019

2018

$

$

$

7,809
2,332
311
2,069
12,521

(16,993)
(10,037)
(8,295)
(78)
(35,403)
(22,882) $

6,407
3,992
1,112
1,029
12,540

(15,551)
(5,044)
(8,518)
(231)
(29,344)
(16,804)

Prepaid federal income taxes of $5.2 million and $3.6 million were included in Other Current Assets at June 30, 2019 and 
2018, respectively. Prepaid state and local income taxes of $0.1 million and $0.9 million were included in Other Current Assets 
at June 30, 2019 and 2018, respectively.

45

LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share data)

Net cash payments for income taxes for each of the years ended June 30 were as follows:

Net cash payments for income taxes

2019

2018

2017

$

38,644

$

46,198

$

59,008

The gross tax contingency reserve at June 30, 2019 was $1.7 million and consisted of estimated tax liabilities of 
$1.0 million and interest and penalties of $0.7 million. The unrecognized tax benefits recorded as the gross tax contingency 
reserve noted in the following table for June 30, 2019 and 2018 would affect our effective tax rate, if recognized.

The following table sets forth changes in our total gross tax contingency reserve (including interest and penalties):

Balance, beginning of year
Tax positions related to the current year:

Additions
Reductions

Tax positions related to prior years:

Additions
Reductions
Lapse of statute of limitations
Settlements

Balance, end of year

2019

2018

$

1,298

$

1,808

87
—

694
(26)
—
(383)
1,670

$

12
—

86
(41)
(567)
—
1,298

$

We included $0.8 million of the gross tax contingency reserve at June 30, 2019 in Accrued Liabilities as these amounts 

are expected to be resolved within the next 12 months. The remaining liability of $0.9 million was included in Other 
Noncurrent Liabilities. We expect that the amount of these liabilities will change within the next 12 months; however, we do not 
expect the change to have a significant effect on our financial position or results of operations.

We recognize interest and penalties related to these tax liabilities in income tax expense. For each of the years ended 

June 30, we recognized the change in the accrual for net tax-related interest and penalties as follows:

Expense (benefit) recognized for net tax-related interest and penalties

We had accrued interest and penalties at June 30 as follows:

Accrued interest and penalties included in the gross tax contingency reserve

2019

2018

64

$

(78)

2019

2018

669

$

605

$

$

We file federal and various state and local income tax returns in the United States. With limited exceptions, we are no 

longer subject to examination of U.S. federal or state and local income taxes for years prior to 2016.

The American Jobs Creation Act provided a tax deduction calculated as a percentage of qualified income from 
manufacturing in the United States. This deduction was repealed by the Tax Act. Therefore, 2018 was the final year that we 
were able to claim this deduction.

Note 10 – Business Segment Information

Our financial results are presented as two reportable segments: Retail and Foodservice. Costs that are directly attributable 
to either Retail or Foodservice are charged directly to the appropriate segment. Costs that are deemed to be indirect, excluding 
corporate expenses and other unusual significant transactions, are allocated to the two reportable segments using a reasonable 
methodology that is consistently applied. We evaluate our segments based on net sales and operating income.

Retail - The vast majority of the products we sell in the Retail segment are sold through sales personnel, food brokers and 
distributors in the United States. We have placement of products in grocery produce departments through our refrigerated salad 
dressings, vegetable dips and fruit dips. Our flatbread products and sprouted grain bakery products are generally placed in the 
specialty bakery/deli section of the grocery store. We also have products typically marketed in the shelf-stable section of the 
grocery store, which include salad dressing, slaw dressing and croutons. Within the frozen food section of the grocery store, we 
sell yeast rolls, garlic breads and mini stuffed bagels.

46

LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share data)

Foodservice - The vast majority of the products we sell in the Foodservice segment are sold through sales personnel, food 

brokers and distributors in the United States. Most of the products we sell in the Foodservice segment are custom-formulated 
and include salad dressings, sandwich and dipping sauces, frozen breads and yeast rolls. The majority of our Foodservice sales 
are products sold under private label to restaurants. We also manufacture and sell various branded Foodservice products to 
distributors. Finally, within this segment, we sell other roll products under a transitional co-packing arrangement resulting from 
the Omni acquisition.

As many of our products are similar between our two segments, our procurement, manufacturing, warehousing and 
distribution activities are substantially integrated across our operations in order to maximize efficiency and productivity. 
Consequently, we do not prepare, and our Chief Operating Decision Maker does not review, separate balance sheets for the 
reportable segments. As such, our external reporting does not include the presentation of identifiable assets, payments for 
property additions or depreciation and amortization by reportable segment.

The following table sets forth net sales disaggregated by class of similar products for the Retail and Foodservice segments 

in each of the years ended June 30:

Retail

Frozen breads
Refrigerated dressings, dips and other
Shelf-stable dressings and croutons

Total Retail net sales

Foodservice

Dressings and sauces
Frozen breads and other
Other roll products

Total Foodservice net sales

Total net sales

2019

2018

2017

$

$

$

$
$

259,290
219,614
177,717
656,621

467,364
164,438
19,364
651,166
1,307,787

$

$

$

$
$

252,186
226,276
171,772
650,234

430,944
141,747
—
572,691
1,222,925

$

$

$

$
$

253,965
221,422
166,030
641,417

427,017
133,408
—
560,425
1,201,842

The following table provides an additional disaggregation of Foodservice net sales by type of customer:

Foodservice

National accounts
Branded and other
Other roll products

Total Foodservice net sales

2019

2018

2017

$

$

480,249
151,553
19,364
651,166

$

$

430,680
142,011
—
572,691

$

$

421,858
138,567
—
560,425

47

LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share data)

The following sets forth certain additional financial information attributable to our reportable segments, certain amounts 

not allocated among our reportable segments and amounts retained at the corporate level for the years ended June 30:

Net Sales (1) (2)
Retail

Foodservice
Total
Operating Income (2)

Retail
Foodservice
Restructuring and Impairment Charges (3)
Multiemployer Pension Settlement and Related Costs (3)
Corporate Expenses (4)

Total
Identifiable Assets (1) (5)

Retail & Foodservice (6)
Corporate
Total

Payments for Property Additions
Retail & Foodservice (6)
Corporate
Total

Depreciation and Amortization
Retail & Foodservice (6)
Corporate
Total

2019

2018

2017

$

$

$

$

$

$

$

$

$

$

656,621

651,166
1,307,787

135,093
73,828
(1,643)
—
(16,354)
190,924

695,872
209,527
905,399

70,880
—
70,880

31,595
253
31,848

$

$

$

$

$

$

$

$

$

$

650,234

572,691
1,222,925

126,400
58,440
—

—
(13,292)
171,548

589,509
214,982
804,491

31,025
—
31,025

26,685
211
26,896

$

$

$

$

$

$

$

$

$

$

641,417

560,425
1,201,842

138,489
66,234
—
(17,635)
(12,734)
174,354

577,509
138,896
716,405

26,031
974
27,005

24,752
154
24,906

(1)  Net sales and long-lived assets are predominately domestic.
(2)  All intercompany transactions have been eliminated.
(3)  Restructuring and impairment charges and multiemployer pension settlement and related costs were not allocated to our 

two reportable segments due to their unusual nature.

(4)  Our Corporate Expenses include various expenses of a general corporate nature, ERP expenses and costs related to certain 

divested or closed nonfood operations. By their very nature, these costs have not been allocated to the Retail and 
Foodservice segments.

(5)  Retail and Foodservice identifiable assets include those assets used in our operations and other intangible assets allocated 

to purchased businesses. Corporate assets consist principally of cash and equivalents. The increase in Retail and 
Foodservice identifiable assets from June 30, 2018 to June 30, 2019 was due to the acquisitions of Bantam and Omni. The 
increase in Corporate identifiable assets from June 30, 2017 to June 30, 2018 was primarily due to the increase in cash and 
equivalents.

(6)  As discussed above, we do not present identifiable assets, payments for property additions or depreciation and amortization 

by reportable segment.

Retail segment net sales attributable to Walmart Inc. (“Walmart”) and Foodservice segment net sales attributable to 

McLane Company, Inc. (“McLane”), a wholesale distribution subsidiary of Berkshire Hathaway, Inc., for each of the years 
ended June 30 were as follows: 

Net sales to Walmart

As a percentage of consolidated net sales

Net sales to McLane

As a percentage of consolidated net sales

$

$

2019
222,171

17%

195,907

15%

$

$

2018

209,860

17%

185,226

15%

$

$

2017

201,484

17%

198,153

16%

48

LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share data)

Accounts receivable attributable to Walmart and McLane at June 30 as a percentage of consolidated accounts receivable 

were as follows: 

Walmart

McLane

2019

2018

28%
9%

28%

11%

Note 11 – Stock-Based Compensation

Our shareholders previously approved the adoption of and subsequent amendments to the Lancaster Colony Corporation 

2005 Stock Plan (the “2005 Plan”). The 2005 Plan reserved 2,000,000 common shares for issuance to our employees and 
directors. As the 2005 Plan expired in May 2015, we obtained shareholder approval of the Lancaster Colony Corporation 2015 
Omnibus Incentive Plan (the “2015 Plan”) at our November 2015 Annual Meeting of Shareholders. The 2015 Plan did not 
affect any currently outstanding equity awards granted under the 2005 Plan. The 2015 Plan reserved 1,500,000 common shares 
for issuance to our employees and directors. All awards granted under these plans will be exercisable at prices not less than fair 
market value as of the date of the grant. The vesting period for awards granted under these plans varies as to the type of award 
granted, but generally these awards have a maximum term of five years.

We recognize compensation expense over the requisite service period of the grant. Compensation expense is reflected in 
Cost of Sales or Selling, General and Administrative Expenses based on the grantees’ salaries expense classification. We record 
tax benefits and excess tax benefits related to stock-settled stock appreciation rights (“SSSARs”) and restricted stock awards. 
These excess tax benefits are included in the operating section of the Consolidated Statements of Cash Flows. We estimate a 
forfeiture rate for our SSSARs and restricted stock grants based on historical experience.

Stock-Settled Stock Appreciation Rights

We use periodic grants of SSSARs as a vehicle for rewarding certain employees with long-term incentives for their efforts 

in helping to create long-term shareholder value. We calculate the fair value of SSSARs grants using the Black-Scholes option-
pricing model. Our policy is to issue shares upon SSSARs exercise from new shares that had been previously authorized.

In 2019, 2018 and 2017, we granted SSSARs to various employees under the terms of the plans. The following table 

summarizes information relating to these grants:

SSSARs granted
Weighted average grant date fair value per right
Weighted average assumptions used in fair value calculations:

2019

2018

2017

157
23.55

$

185
17.85

$

166
17.59

$

Risk-free interest rate
Dividend yield
Volatility factor of the expected market price of our common stock
Expected life in years

2.43%
1.68%
21.77%
3.04

2.39%
1.98%
22.57%
2.85

1.36%
1.64%
22.41%
2.47

For these grants, the volatility factor was estimated based on actual historical volatility of our stock for a time period 
equal to the term of the SSSARs. The expected average life was determined based on historical exercise experience for this type 
of grant. The SSSARs we grant generally vest one-third on the first anniversary of the grant date, one-third on the second 
anniversary of the grant date and one-third on the third anniversary of the grant date.

The following table summarizes our SSSARs compensation expense and tax benefits recorded for each of the years ended 

June 30:

Compensation expense
Tax benefits
Intrinsic value of exercises

2019

2018

2017

$
$
$

3,074
646
6,008

$
$
$

2,455
690
2,381

$
$
$

1,882
659
2,281

The total fair values of SSSARs vested for each of the years ended June 30 were as follows:

Fair value of vested rights

2019

2018

2017

$

3,143

$

2,330

$

1,916

49

LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share data)

 The following table summarizes the activity relating to SSSARs granted under the plans for the year ended June 30, 

2019:

Number of
Rights

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Life in
Years

Aggregate
Intrinsic
Value

Outstanding at beginning of year

Exercised
Granted
Forfeited

Outstanding at end of year
Exercisable and vested at end of year
Vested and expected to vest at end of year

586
$
(153) $
$
157
(4) $
$
$
$

586
271
558

115.99
108.41
154.62
126.76
128.23
114.83
128.77

3.17
2.19
3.19

$
$
$

12,885
9,163
11,982

The following table summarizes information about the SSSARs outstanding by grant year at June 30, 2019:

Outstanding

Exercisable

Weighted Average

Grant Years
2019
2018
2017
2016
2015

Range of
Exercise Prices
$148.18-$180.60
$117.76-$124.29
$121.54-$138.96
$101.70-$112.62
$91.13

Number
Outstanding
157
156
127
111
35

Remaining
Contractual
Life in
Years
4.67
3.65
2.68
1.72
0.65

Exercise
Price
$154.62
$121.09
$133.83
$106.38
$91.13

Number
Exercisable
—
47
78
111
35

Weighted
Average
Exercise
Price
$—
$121.09
$133.78
$106.38
$91.13

At June 30, 2019, there was $5.1 million of unrecognized compensation expense related to SSSARs that we will 

recognize over a weighted-average period of 2 years.

Restricted Stock

We use periodic grants of restricted stock as a vehicle for rewarding our nonemployee directors and certain employees 

with long-term incentives for their efforts in helping to create long-term shareholder value.

In 2019, 2018 and 2017, we granted shares of restricted stock to various employees under the terms of the plans. The 

following table summarizes information relating to these grants:

Employees
Restricted stock granted
Grant date fair value
Weighted average grant date fair value per award

2019

2018

2017

13
2,030
154.66

$
$

27
3,218
121.09

$
$

12
1,591
134.07

$
$

The restricted stock under these employee grants vests on the third anniversary of the grant date. Under the terms of our 

grants, employees receive dividends on unforfeited restricted stock regardless of their vesting status.

In 2019, 2018 and 2017, we also granted shares of restricted stock to our nonemployee directors under the terms of the 

plans. The following table summarizes information relating to each of these grants:

Nonemployee directors
Restricted stock granted
Grant date fair value
Weighted average grant date fair value per award

2019

2018

2017

4
760
180.16

$
$

6
759
123.11

$
$

5
759
138.96

$
$

The 2019 grant vests over a one-year period, and all of these shares are expected to vest. Dividends earned on the stock 

during the vesting period will be paid to the directors at the time the stock vests.

50

LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share data)

The following table summarizes our restricted stock compensation expense and tax benefits recorded for each of the years 

ended June 30:

Compensation expense
Tax benefits

2019

2018

2017

$
$

2,898
609

$
$

2,584
726

$
$

2,366
828

The total fair values of restricted stock vested for each of the years ended June 30 were as follows:

Fair value of vested shares

2019

2018

2017

$

3,537

$

1,508

$

2,420

The following table summarizes the activity relating to restricted stock granted under the plans for the year ended 

June 30, 2019:

Unvested restricted stock at beginning of year

Granted
Vested
Forfeited

Unvested restricted stock at end of year

Number of
Shares

Weighted
Average Grant
Date Fair Value
116.99
$
68
160.86
17
$
(33) $
108.60
(1) $
118.48
137.17
$
51

At June 30, 2019, there was $3.7 million of unrecognized compensation expense related to restricted stock that we will 

recognize over a weighted-average period of 2 years.

Note 12 – Pension Benefits

Defined Benefit Pension Plans

We sponsor multiple defined benefit pension plans that covered certain workers under collective bargaining contracts. 

However, as a result of prior-years’ restructuring activities, for all periods presented, we no longer have any active employees 
continuing to accrue service cost or otherwise eligible to receive plan benefits. Benefits being paid under the plans are primarily 
based on negotiated rates and years of service. We contribute to these plans at least the minimum amount required by 
regulation.

At the end of the year, we discount our plan liabilities using an assumed discount rate. In estimating this rate, we, along 
with our third-party actuaries, review the timing of future benefit payments, bond indices, consider yield curve analysis results 
and the past history of discount rates.

The actuarial present value of benefit obligations summarized below was based on the following assumption:

Weighted-average assumption as of June 30
Discount rate

2019

2018

3.35%

4.07%

The net periodic benefit costs were determined utilizing the following beginning-of-the-year assumptions:

Discount rate
Expected long-term return on plan assets

2019

2018

2017

4.07%
7.00%

3.68%
7.00%

3.39%
7.00%

In determining the long-term expected return on plan assets, we consider our related investment guidelines, our 
expectations of long-term rates of return by asset category, our target asset allocation weighting and historical rates of return 
and volatility for equity and fixed income investments. The investment strategy for plan assets is to control and manage 
investment risk through diversification among asset classes, investment managers/funds and investment styles. The plans’ 
investment guidelines have been designed to meet the intended objective that plan assets earn at least nominal returns equal to 
or in excess of the plans’ liability growth rate. In consideration of the current average age of the plans’ participants, the 
investment guidelines are based upon an investment horizon of at least 10 years.

51

LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share data)

The target and actual asset allocations for our plans at June 30 by asset category were as follows:

Cash and equivalents
Equity securities
Fixed income
Total

Target Percentage
of Plan Assets at
June 30

2019
0%-10%
30%-70%
30%-70%

Actual Percentage of Plan Assets

2019

2018

2%
53
45
100%

5%
51
44
100%

Our target asset allocations are maintained through ongoing review and periodic rebalancing of equity and fixed income 

investments with assistance from an independent outside investment consultant. Also, the plan assets are diversified among 
asset classes, asset managers or funds and investment styles to avoid concentrations of risk. We expect that a modest allocation 
to cash will exist within the plans because each investment manager is likely to hold limited cash in a portfolio.

We categorize our plan assets within a three-level fair value hierarchy, as previously defined in Note 3. The following 

table summarizes the fair values and levels, within the fair value hierarchy, for our plan assets at June 30:

Asset Category
Cash and equivalents
Money market funds
U.S. government obligations
Municipal obligations
Corporate obligations
Mortgage obligations
Mutual funds fixed income
Mutual funds equity

Total

Asset Category
Cash and equivalents
Money market funds
U.S. government obligations
Municipal obligations
Corporate obligations
Mortgage obligations
Mutual funds fixed income
Mutual funds equity

Total

Level 1

Level 2

Level 3

Total

June 30, 2019

$

$

$

$

559
113
—
—
—
—
6,907
19,359
26,938

Level 1

547
1,331
—
—
—
—
7,044
18,881
27,803

$

$

$

$

— $
—
2,600
37
3,440
3,613
—
—
9,690

$

— $
—
—
—
—
—
—
—
— $

559
113
2,600
37
3,440
3,613
6,907
19,359
36,628

June 30, 2018

Level 2

Level 3

Total

— $
—
3,344
36
3,176
2,354
—
—
8,910

$

— $
—
—
—
—
—
—
—
— $

547
1,331
3,344
36
3,176
2,354
7,044
18,881
36,713

The plan assets classified at Level 1 include money market funds and mutual funds. Quoted market prices in active 

markets for identical assets are available for investments in this category.

The plan assets classified at Level 2 include fixed income securities consisting of government securities, municipal 
obligations, corporate obligations and mortgage obligations. For these types of securities, market prices are observable for 
identical or similar investment securities but not readily accessible for each of those investments individually at the 
measurement date. For these assets, we obtain pricing information from an independent pricing service. The pricing service 
uses various pricing models for each asset class that are consistent with what other market participants would use. The inputs 
and assumptions to the model of the pricing service are derived from market observable sources including as applicable: 
benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers 
and reference data including market research publications.

52

LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share data)

Relevant information with respect to our pension benefits as of June 30 can be summarized as follows:

Change in benefit obligation
Benefit obligation at beginning of year
Interest cost
Actuarial loss (gain)
Benefits paid

Benefit obligation at end of year

Change in plan assets

Fair value of plan assets at beginning of year

Actual return on plan assets
Employer contributions
Benefits paid

Fair value of plan assets at end of year

Funded status - net accrued benefit cost

Amounts recognized in the Consolidated Balance Sheets consist of
Prepaid benefit cost (Other Noncurrent Assets)
Accrued benefit liability (Other Noncurrent Liabilities)

Net amount recognized

Accumulated benefit obligation

2019

2018

36,892
1,453
2,342
(2,305)
38,382

$

$

40,941
1,463
(3,070)
(2,442)
36,892

2019

2018

36,713

$

2,058
162
(2,305)
36,628

$

36,769
2,366
20
(2,442)
36,713

2019

2018

(1,754) $

(179)

2019

2018

$

289
(2,043)
(1,754) $

1,133
(1,312)
(179)

2019

2018

38,382

$

36,892

$

$

$

$

$

$

$

$

The following table discloses, in the aggregate, those plans with benefit obligations in excess of the fair value of plan 

2019

2018

$
$

36,167
34,124

$
$

$

$

6,012
4,700

2018

12,821
(2,996)
9,825

assets at the June 30 measurement date:

Benefit obligations
Fair value of plan assets at end of year

Amounts recognized in accumulated other comprehensive loss at June 30 were as follows:

Net actuarial loss
Income taxes
Total

2019

15,145
(3,539)
11,606

$

$

53

LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share data)

We adopted new accounting guidance for the presentation of net periodic benefit income on July 1, 2018. See further 

discussion in Note 1. The following table summarizes the components of net periodic benefit income for our pension plans at 
June 30:

Components of net periodic benefit income
Interest cost
Expected return on plan assets
Amortization of unrecognized net loss
Settlement charge

Net periodic benefit income

2019

2018

2017

$

$

$

1,453
(2,487)
447
—
(587) $

$

1,463
(2,491)
572
42
(414) $

1,457
(2,416)
715
—
(244)

We have not yet finalized our anticipated funding level for 2020, but based on initial estimates, we do not expect our 2020 

contributions to our pension plans to be material.

Benefit payments estimated for future years are as follows:

2020
2021
2022
2023
2024
2025 - 2029

$
$
$
$
$
$

2,415
2,411
2,401
2,392
2,403
11,747

Note 13 – Defined Contribution and Other Employee Plans

Company-Sponsored Defined Contribution Plans

We sponsor three defined contribution plans established pursuant to Section 401(k) of the Internal Revenue Code. 
Contributions are determined under various formulas, and we contributed to each of these plans in 2019. The employer 
matching contribution percentage for one of these plans was increased effective January 1, 2019. Costs related to such plans for 
each of the years ended June 30 were as follows:

Costs related to company-sponsored defined contribution plans

$

2,637

$

1,352

$

1,111

2019

2018

2017

Multiemployer Plans

In the three years ended June 30, 2019, certain of our subsidiaries participated in multiemployer plans that provide 
pension benefits to retiree workers under collective bargaining contracts at such locations. These plans generally provide for 
retirement, death and/or termination benefits for eligible employees within the applicable collective bargaining contract, based 
on specific eligibility/participation requirements, vesting periods and benefit formulas. The risks of participating in these 
multiemployer plans are different from single-employer plans in the following aspects: (1) assets contributed to the 
multiemployer plan by one employer may be used to provide benefits to employees of other participating employers, (2) if a 
participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining 
participating employers and (3) if a participating employer chooses to stop participating in the multiemployer plan, it may be 
required to pay the plan an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

In 2017 the employees at our Bedford Heights, Ohio plant voted to ratify a new collective bargaining agreement. Among 
other terms, the new agreement provided for our complete withdrawal from the underfunded multiemployer Cleveland Bakers 
and Teamsters Pension Fund. As settlement of our portion of underfunded pension benefits of the multiemployer plan, we paid 
$17.0 million in 2017 for a full withdrawal from the plan.

54

LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share data)

Our participation in multiemployer pension plans for the three years ended June 30, 2019 is reflected in the following 

table. All information in the table is as of December 31 of the relevant year, except contributions which are based on our fiscal 
year, or except as otherwise noted. The EIN-PN column provides the Employer Identification Number (“EIN”) and the Plan 
Number (“PN”). The pension protection act zone status is based on information that we received from the plan. Among other 
factors, generally, plans in critical status (red zone) are less than 65 percent funded, plans in endangered or seriously 
endangered status (yellow zone or orange zone, respectively) are less than 80 percent funded, and plans at least 80 percent 
funded are said to be in the green zone. The FIP/RP status pending/implemented column indicates plans for which a funding 
improvement plan (“FIP”) or a rehabilitation plan (“RP”) is either pending or has been implemented by the trustees of each 
plan. Except as noted below regarding contributions to the Cleveland Bakers and Teamsters Pension Fund, there have been no 
significant changes that affect the comparability of 2019, 2018 or 2017 contributions.

Pension Protection
Act Zone Status

Fiscal Year
Contributions (1)

EIN/PN

2018

2017

FIP/RP Status
Pending /
Implemented

2019

2018

2017

Surcharge
Imposed

Expiration
Date of
Collective
Bargaining
Agreement

34-0904419-
001

Red
12/31/17

Red
12/31/16

Yes,
Implemented

$ — $ — $ 2,098

No

n/a

91-6145047-
001

Green
12/31/17

Green
12/31/16

No

388

356

409

No

12/15/2021

$

388

$

356

$ 2,507

Plan Name
Cleveland Bakers and 
Teamsters Pension 
Fund (2)
Western Conference
of Teamsters Pension
Plan

Total contributions to
multiemployer plans

(1)  Contributions do not include payments related to multiemployer pension withdrawals/settlements.
(2)  As discussed above, we withdrew from this plan in 2017 and did not make any contributions in 2019 and 2018. Our 2017 

contributions included amounts related to a new collective bargaining contract.

Our contributions to the Cleveland Bakers and Teamsters Pension Fund exceeded 5% of the total contributions to the plan 

in the plan year ended December 31, 2017.

Under these two multiemployer plans, we also contribute amounts for health and welfare benefits that are defined by each 

plan. These benefits are not vested. The contributions required by our participation in these plans for each of the years ended 
June 30 were as follows:

Multiemployer health and welfare plan contributions

$

3,189

$

3,167

$

3,570

2019

2018

2017

We also began to make non-elective contributions for the union employees at our Bedford Heights, Ohio plant into a 
union-sponsored multiemployer 401(k) plan following our withdrawal from the underfunded Cleveland Bakers and Teamsters 
Pension Fund in 2017. Our contributions totaled $0.7 million, $0.7 million and $0.8 million in 2019, 2018 and 2017, 
respectively, including $0.6 million to initially fund this 401(k) plan in 2017.

Deferred Compensation Plan

We offer a deferred compensation plan for select employees who may elect to defer a certain percentage of annual 
compensation. We do not match any contributions. Each participant earns interest based upon the prime rate of interest, 
adjusted semi-annually, on their respective deferred compensation balance. Participants are paid out upon retirement or 
termination in accordance with their annual election. 

The following table summarizes our liability for total deferred compensation and accrued interest at June 30:

Liability for deferred compensation and accrued interest

Deferred compensation expense for each of the years ended June 30 was as follows:

2019

2018

$

4,740

$

4,611

Deferred compensation expense

2019

2018

2017

$

239

$

210

$

170

55

LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share data)

Note 14 – Selected Quarterly Financial Data (Unaudited)

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

Fiscal Year

2019

Net Sales
Gross Profit
Net Income (1) (2)
Diluted Net Income Per Common Share (1) (2) (3)

$ 316,654
81,199
$

$ 349,581
91,392
$

$ 317,882
75,397
$

$ 323,670
78,210
$

$ 1,307,787
326,198
$

$
$

39,028
1.42

$
$

47,907
1.73

$
$

30,604
1.11

$
$

33,010
1.20

$
$

150,549
5.46

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

Fiscal Year

2018

Net Sales
Gross Profit
Net Income (4)
Diluted Net Income Per Common Share (3) (4)

$ 298,916
75,475
$
29,386
$

$ 319,665
83,939
$
45,920
$

$ 296,174
67,911
$
27,621
$

$ 308,170
76,181
$
32,387
$

$ 1,222,925
303,506
$
135,314
$

$

1.07

$

1.67

$

1.00

$

1.18

$

4.92

(1)  Included in the second quarter and fourth quarter net income was an after-tax benefit of $7.4 million and $5.7 million, 

respectively, or approximately $0.27 and $0.21 per diluted share, respectively, related to the reduction in the fair value of 
Angelic’s contingent consideration liability. The after-tax benefit for the fiscal year was $13.1 million, or approximately 
$0.48 per diluted share.

(2)  Included in the fourth quarter and fiscal year net income were after-tax ERP expenses of $1.4 million, or approximately 
$0.05 per diluted share, and after-tax restructuring and impairment charges of $1.3 million, or approximately $0.05 per 
diluted share.

(3)  Diluted net income per common share amounts are calculated independently for each of the quarters presented. 
Accordingly, the sum of the quarterly net income per common share amounts may not agree with the fiscal year.
(4)  Included in the second quarter net income was the one-time preliminary deferred tax benefit of $8.9 million, or 

approximately $0.32 per diluted share, resulting from the Tax Act. The fiscal year impact was $9.5 million, or 
approximately $0.35 per diluted share.

56

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 

None.

Item 9A. Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in 
the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported 
within the time periods specified in the Securities and Exchange Commission’s (“SEC”) rules and forms, and that such 
information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial 
Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure 
controls and procedures, management recognizes that any controls and procedures, no matter how well-designed and operated, 
can provide only reasonable assurance of achieving the desired control objectives, and management must apply its judgment in 
evaluating the cost–benefit relationship of possible controls and procedures.

As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our 

management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and 
operation of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. 
Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and 
procedures were effective at the reasonable assurance level as of June 30, 2019.

REPORT OF MANAGEMENT

Internal control over financial reporting refers to the process designed by, or under the supervision of, our management, 

including our Chief Executive Officer and Chief Financial Officer, and effected by our Board of Directors, management and 
other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial 
statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and 
procedures that:

1.

2.

3.

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and
dispositions of our assets;

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that our receipts and expenditures
are being made only in accordance with authorizations of management and our directors; and

Provide reasonable assurance regarding prevention or timely detection of an unauthorized acquisition, use or
disposition of our assets that could have a material effect on the financial statements.

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives 

because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and 
compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial 
reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk 
that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. 
However, these inherent limitations are known features of the financial reporting process. Therefore, it is only possible to 
design into the process safeguards to reduce, though not eliminate, this risk.

Management is responsible for establishing and maintaining adequate internal control over financial reporting. 

Management has used the framework set forth in the report entitled Internal Control – Integrated Framework (2013) published 
by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission to evaluate the effectiveness of our 
internal control over financial reporting. Management has concluded that our internal control over financial reporting was 
effective as of the end of the most recent year. 

Our internal control over financial reporting has been audited by Deloitte & Touche LLP, an independent registered 

public accounting firm. Their opinion, as to the effectiveness of our internal control over financial reporting, is stated in their 
report, which is set forth on the following page.

There has been no change in our internal control over financial reporting during our most recent quarter that has 

materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

57

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Lancaster Colony Corporation

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Lancaster Colony Corporation and subsidiaries (the 

“Company”) as of June 30, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by 
the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, 
in all material respects, effective internal control over financial reporting as of June 30, 2019, based on criteria established in 
Internal Control – Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United 
States) (PCAOB), the consolidated financial statements as of and for the year ended June 30, 2019, of the Company and our 
report dated August 27, 2019, expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its 

assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of 
Management. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on 
our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the 
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and 
Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and 

perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was 
maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, 
assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal 
control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We 
believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the 

reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally 
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures 
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and 
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit 
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and 
expenditures of the company are being made only in accordance with authorizations of management and directors of the 
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or 
disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become 
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP
Deloitte & Touche LLP

Columbus, Ohio
August 27, 2019 

58

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information regarding our directors and executive officers, including the identification of the Audit Committee and 

the Audit Committee financial expert, is incorporated by reference to the information contained in our definitive proxy 
statement for our November 2019 Annual Meeting of Shareholders (“2019 Proxy Statement”) to be filed with the SEC pursuant 
to Regulation 14A promulgated under the Exchange Act.

The information regarding delinquent Section 16(a) reports, if any, is incorporated by reference to the material under the 

heading “Delinquent Section 16(a) Reports” in our 2019 Proxy Statement.

The information regarding changes, if any, in procedures by which shareholders may recommend nominees to our Board 

of Directors is incorporated by reference to the information contained in our 2019 Proxy Statement.

The information regarding our Code of Business Ethics is incorporated by reference to the information contained in our 

2019 Proxy Statement. 

Item 11. Executive Compensation

The information regarding executive officer and director compensation is incorporated by reference to the information 

contained in our 2019 Proxy Statement.

The information regarding Compensation Committee interlocks and insider participation and the Compensation 

Committee Report is incorporated by reference to the information contained in our 2019 Proxy Statement. 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information regarding security ownership of certain beneficial owners and management and securities authorized for 

issuance under our equity compensation plans is incorporated by reference to the information contained in our 2019 Proxy 
Statement. 

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information regarding certain relationships and related transactions and director independence is incorporated by 

reference to the information contained in our 2019 Proxy Statement.

Item 14. Principal Accounting Fees and Services

Information regarding fees paid to and services provided by our independent registered public accounting firm during the 
fiscal years ended June 30, 2019 and 2018 and the pre-approval policies and procedures of the Audit Committee is incorporated 
by reference to the information contained in our 2019 Proxy Statement.

59

PART IV

Item 15. Exhibits, Financial Statement Schedules

(a) (1) Financial Statements. The following consolidated financial statements as of June 30, 2019 and 2018 and for each 

of the three years in the period ended June 30, 2019, together with the report thereon of Deloitte & Touche LLP dated 
August 27, 2019, are included in Item 8 of this report:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of June 30, 2019 and 2018 

Consolidated Statements of Income for the years ended June 30, 2019, 2018 and 2017 

Consolidated Statements of Comprehensive Income for the years ended June 30, 2019, 2018 and 2017 

Consolidated Statements of Cash Flows for the years ended June 30, 2019, 2018 and 2017 

Consolidated Statements of Shareholders’ Equity for the years ended June 30, 2019, 2018 and 2017 

Notes to Consolidated Financial Statements

(a) (2) Financial Statement Schedules. Supplemental schedules not included with the additional financial data have been 

omitted because they are not applicable or the related amounts are immaterial for all periods presented.

(a) (3) Exhibits Required by Item 601 of Regulation S-K and Item 15(b). See Index to Exhibits.

Item 16. Form 10-K Summary

Not applicable.

60

Pursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the registrant has duly 

caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

LANCASTER COLONY CORPORATION
(Registrant)

By:

/s/ DAVID A. CIESINSKI
David A. Ciesinski
President, Chief Executive Officer
and Director

Date:

August 27, 2019

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following 

persons on behalf of the registrant and in the capacities and on the dates indicated.

Signatures

/s/ DAVID A. CIESINSKI
David A. Ciesinski

/s/ JOHN B. GERLACH, JR.
John B. Gerlach, Jr.

/s/ THOMAS K. PIGOTT
Thomas K. Pigott

/s/ NEELI BENDAPUDI
Neeli Bendapudi

/s/ WILLIAM H. CARTER
William H. Carter

/s/ KENNETH L. COOKE
Kenneth L. Cooke

/s/ ROBERT L. FOX
Robert L. Fox

/s/ ALAN F. HARRIS
Alan F. Harris

/s/ MICHAEL H. KEOWN
Michael H. Keown

/s/ ROBERT P. OSTRYNIEC
Robert P. Ostryniec

/s/ ZUHEIR SOFIA
Zuheir Sofia

Title

President, Chief Executive Officer
and Director
(Principal Executive Officer)

Date

August 27, 2019

Executive Chairman of the Board
and Director

August 27, 2019

Chief Financial Officer and Assistant Secretary
(Principal Financial and Accounting Officer)

August 27, 2019

August 21, 2019

August 21, 2019

August 21, 2019

August 20, 2019

August 21, 2019

August 21, 2019

August 21, 2019

August 21, 2019

Director

Director

Director

Director

Director

Director

Director

Director

61

LANCASTER COLONY CORPORATION AND SUBSIDIARIES
FORM 10-K
JUNE 30, 2019 
INDEX TO EXHIBITS

Description

Certificate of Amendment to the Amended and Restated Articles of Incorporation of Lancaster Colony 
Corporation (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (000-04065), filed 
February 3, 2017).

Amended and Restated Regulations of Lancaster Colony Corporation, dated as of April 18, 2016 (incorporated 
by reference to Exhibit 3.1 to the Current Report on Form 8-K (000-04065), filed April 19, 2016).

Specimen Certificate of Common Stock (incorporated by reference to Exhibit 4.1 to the Annual Report on 
Form 10-K (000-04065), filed August 27, 2018).

Description of Common Stock.

Credit Agreement, dated as of April 8, 2016, among Lancaster Colony Corporation, the Lenders, The 
Huntington National Bank as Syndication Agent and JPMorgan Chase Bank, N.A. as Administrative Agent 
(incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (000-04065), filed April 11, 
2016).

Design/Build Agreement between Sister Schubert’s Homemade Rolls, Inc. and Shambaugh & Son, LP 
(incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q (000-04065), filed February 6, 
2019).

Lancaster Colony Corporation Executive Employee Deferred Compensation Plan (incorporated by reference to 
Exhibit 10.9 to the Annual Report on Form 10-K (000-04065), filed September 26, 2000).

2004 Amendment to Lancaster Colony Corporation Executive Employee Deferred Compensation Plan 
(incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (000-04065), filed January 3, 
2005).

Lancaster Colony Corporation 2005 Executive Employee Deferred Compensation Plan (incorporated by 
reference to Exhibit 99.2 to the Current Report on Form 8-K (000-04065), filed February 25, 2005).

Lancaster Colony Corporation 2015 Omnibus Incentive Plan (incorporated by reference to Appendix A to the 
Company’s Definitive Proxy Statement (000-04065), filed October 9, 2015).

Lancaster Colony Corporation Amended and Restated 2005 Stock Plan (incorporated by reference to 
Exhibit 10.1 to the Current Report on Form 8-K (000-04065), filed November 19, 2010).

Form of Restricted Stock Award Agreement for Directors under the Lancaster Colony Corporation 2015 
Omnibus Incentive Plan (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K 
(000-04065), filed November 17, 2015).

Form of Stock Appreciation Rights Agreement for Employees and Consultants under the Lancaster Colony 
Corporation 2015 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.2 to the Quarterly Report 
on Form 10-Q (000-04065), filed May 1, 2018).

Form of Stock Appreciation Rights Agreement for Service Providers under the Lancaster Colony Corporation 
2015 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q 
(000-04065), filed April 30, 2019).

Form of Restricted Stock Award Agreement for Employees and Consultants under the Lancaster Colony 
Corporation 2015 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to the Quarterly Report 
on Form 10-Q (000-04065), filed May 1, 2018).

Description of Executive Bonus Arrangements (incorporated by reference to Exhibit 10.9 to the Annual Report 
on Form 10-K (000-04065), filed September 10, 2004).

Employment Agreement, dated April 18, 2016, between Lancaster Colony Corporation and David A. Ciesinski 
(incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (000-04065), filed April 19, 
2016).

Exhibit
Number

3.1

3.2

4.1

4.2*

10.1

10.2(a)

10.3(b)

10.4(b)

10.5(b)

10.6(b)

10.7(b)

10.8(b)

10.9(b)

10.10

10.11(b)

10.12(b)

10.13(b)

62

  
  
  
  
  
  
  
  
  
  
  
  
  
  
Exhibit
Number

10.14(b)

10.15(b)

10.16(b)

10.17(b)

10.18(b)

21*

23*

31.1*

31.2*

32**

Description

First Amendment to Employment Agreement, dated October 27, 2016, between Lancaster Colony Corporation 
and David A. Ciesinski (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q 
(000-04065), filed October 31, 2016).

Employment Offer Letter to Thomas K. Pigott (incorporated by reference to Exhibit 10.1 to the Current Report 
on Form 8-K (000-04065), filed March 15, 2019).

Confidential Severance Agreement and General Release, effective November 14, 2018, between the Company 
and Joseph M. Tuza (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K 
(000-04065), filed November 20, 2018).
Lancaster Colony Corporation Form of Change in Control Agreement (incorporated by reference to Exhibit 
10.1 to the Quarterly Report on Form 10-Q (000-04065), filed October 31, 2016).

Form of Director and Officer Indemnification Agreement (incorporated by reference to Exhibit 10.1 to the 
Current Report on Form 8-K (000-04065), filed November 15, 2018).

  Subsidiaries of Registrant.

  Consent of Independent Registered Public Accounting Firm.

  Certification of CEO pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.

  Certification of CFO pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.

Certification of CEO and CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the 
Sarbanes-Oxley Act of 2002.

101.INS*

  XBRL Instance Document

101.SCH*

  XBRL Taxonomy Extension Schema Document

101.CAL*

  XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*

  XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*

  XBRL Taxonomy Extension Label Linkbase Document

101.PRE*

  XBRL Taxonomy Extension Presentation Linkbase Document

(a)

(b)

*

**

Portions of this exhibit that have been marked by [***] have been omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.

Indicates a management contract or compensatory plan, contract or arrangement in which any Director or any
Executive Officer participates.

Filed herewith

Furnished herewith

63

  
  
FINANCIAL HIGHLIGHTSYears Ended June 30Net Sales$1,307,787  $1,222,925Gross Profit$326,198$303,506Income Before Income Taxes$195,542$174,203Taxes Based on Income$44,993$38,889Net Income$150,549$135,314Per Common Share: Net Income – Diluted  $5.46$4.92 Cash Dividends $2.55$2.35 Shareholders’ Equity$26.44$23.73Total Assets$905,399$804,491Shareholders’ Equity$726,873$652,282Weighted Average Common Shares  Outstanding – Diluted27,53727,459(In Thousands, Except Per Share Figures)20192018Marzetti Culinary Team Featured on the Cover  (From left to right): Culinary Specialists Chris Domanik,  Jack Cory and Joe Ciaciura; and Director of Strategic  Product Development, Sandy Bichsel.INNOVATIONIn June 2019, Lancaster Colony Corporation  opened a new state-of-the-art Innovation  Center near our company headquarters  in central Ohio. This 45,000 square foot  facility brings together the best in culinary  arts, food science and technology.  The Innovation Center also enables greater  collaboration and innovation among our  Foodservice and Retail teams to develop  relevant, consumer-centric, on-trend products  that serve to strengthen our existing  customer relationships and build new ones.Note: Financial results for the fiscal year ended June 30, 2019 include the favorable impact on Income Before Income Taxes of a $17.1 million non-cash, pre-tax reduction to the fair value of the acquisition- related contingent consideration for Angelic Bakehouse, Inc. Please refer to the company’s Form 10-K  filing for additional details.OUR BRANDSThe Company’s marquee brands include Marzetti®,  New York BRAND Bakery®, Sister Schubert’s® and Flatout®.  Products sold under the long-established Marzetti brand include  salad dressings, veggie dips, fruit dips and croutons. New York Bakery is the recognized leader in the frozen garlic toast and garlic breadstick segments, while New York Bakery Texas Toast croutons rank among the top retail crouton brands in the United States. Sister Schubert’s offers the top-selling lineup of dinner yeast rolls in the supermarket  frozen section. Flatout is a leading flatbread brand with placement  in the deli department and product offerings that include oval-shaped flatbread wraps, the unique Foldit® line of  flatbreads and Artisan Thin pizza crusts.380 Polaris Parkway, Suite 400, Westerville, Ohio 43082www.lancastercolony.comGROWTH®OUR Family OF BRANDS2019 ANNUAL REPORTLANCASTER COLONY CORPORATIONInvesting in