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 37 West Broad Street, Columbus,380 Polaris Parkway, Suite 400, Westerville, Ohio 4321543082 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, 20162018 refers to fiscal 2016,2018, which is the period from July 1, 20152017 to June 30, 2016.2018.

Our Internet web site 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 information contained on our web site or connected to it is not incorporated into this Annual Report on Form 10-K.

We operateEffective July 1, 2017, David A. Ciesinski, our President and Chief Operating Officer, succeeded John B. Gerlach, Jr. as our Chief Executive Officer (“CEO”). As President and CEO, Mr. Ciesinski became our principal executive officer and chief operating decision maker (“CODM”). This change resulted in onemodifications to the CODM’s approach to managing the business, assessing performance and allocating resources. Consequently, beginning on July 1, 2017, our segment – “Specialty Foods.”reporting structure was amended to align with these changes, and our financial results are now 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. All historical information was retroactively conformed to the current presentation. These segment changes had no effect on previously reported consolidated net sales, operating income, net income or earnings per share. The financial information relating to our business segmentsegments for the three years ended June 30, 2016, 20152018, 2017 and 20142016 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 theeach business segment within which we operate is provided below.

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

Sales are made to retail and foodservice channels. The vast majority of the products we sell in the retail and foodservice channelsRetail segment are sold primarily through sales personnel, food brokers and distributors.distributors in the United States. We have strong placement of products in U.S. grocery produce departments through our refrigerated salad dressings, vegetable dips and fruit dips,dips. Our flatbread products and croutons. Our flatbreadsprouted 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 aisles involving shelf-stablestore, which include salad dressing, slaw dressing dry egg noodles and croutons. Within the frozen aislesfood section of the grocery retailers,store, we also have prominent market positions of frozen yeast rolls and garlic breads and egg noodles. Products we sell in the foodservice channel are often custom-formulated and include salad dressings, sandwich and dipping sauces, frozen breads and yeast rolls.breads.

Net sales attributable to McLane Company, Inc. (“McLane”), a wholesale distribution subsidiary of Berkshire Hathaway, Inc., totaled 19%, 18% and 18% of consolidated net sales for 2016, 2015 and 2014, respectively. Net sales attributable to Wal-Mart Stores, Inc. (“Wal-Mart”) totaled 16%, 16% and 17% of consolidated net sales for 2016, 2015 and 2014, respectively. No other customerOur top five Retail customers accounted for more than 10%55%, 54% and 54% of ourthis segment’s total net sales during these years. Although we have the leading market share in several product categories, all of the markets in which we sell food products are highly competitive in the areas of price, quality2018, 2017 and customer service.2016, 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 helpshelp drive increased consumer demand in our retail channel. In the foodservice channel, we grow our business with established customers and pursue new opportunities by leveraging our culinary skills and experience to support the development of new products and menu offerings.Retail segment. Strategic acquisitions are also part of our future growth plans, with a focus on fit and value.

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 20142016 through 2016:2018:

Orders are generally filled in threefive to seventen days. We do not view the amount of backlog at any particular point in time as a meaningful indicator of longer-term shipments.

All of the markets in which we sell food products are highly competitive.competitive in the areas of price, quality and customer service. We face competition from a number of domestic and foreign manufacturers of various sizes and capabilities. We compete with competitor branded products, as well as an increasing presence of retailers’ store branded products. 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.

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 20162018 and is not expected to have a material impact in 2017.2019.

As of June 30, 20162018 we had 2,7002,900 employees, 21%20% of which are represented under various collective bargaining contracts. 7% of our employees are represented under a collective bargaining contract that expired on April 30, 2016. We are currently renegotiating this contract. 9%4% 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.

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.

During 2016,2018, 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.

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 2019 will generally be available and adequate for our needs.

An investment in our common stock is subject to certain risks inherent in our business. Before making an investment decision, youinvestors 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 results of operationscash flows could be materially and adversely affected. If this were to happen, the value of our common stock could decline significantly.

Because we source certain products from single manufacturing sites and use third party manufacturers for significant portions of our relationship with McLane and the underlying foodservice customersproduction needs for certain products, it is good, but we cannot assurepossible that we will becould 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 maintain these relationships. McLane and the underlying foodservice customers are not typically committed to long-term contractual obligations with us, and they may switch to other suppliers that offer lower prices, differentiated productsobtain alternate production capability in a timely manner, or customer service that McLane and/or the underlying foodservice customers perceive to be more favorable. In addition, changes in the general business model of McLane, or the underlying foodservice customers,on favorable terms, it could have ana 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 or other unforeseen events could interrupt production or distribution and have a material adverse effect on our business, results of operations, and financial condition.

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 identify and satisfyremain relevant to consumer preferences and trends. In order to protectmaintain 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 we make may not maintain or enhance market share and could result in lower profitability.

Our net sales to Walmart represented 17% of consolidated net sales for the year ended June 30, 2018. Our accounts receivable balance from Walmart as of June 30, 2018 was $20.1 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 costsbranded 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 recall, related legal claims, the destructiongood relationship. The loss of, product inventory, lost sales due to the unavailability of product for a period of time, or a loss of customersignificant reduction in, this business could have a material adverse effect on our sales and consumer sentiment. In addition, we may also be liable if any of our products causes bodily injury or illness.

If we conduct operationsOur net sales to McLane represented 15% of consolidated net sales for the year ended June 30, 2018. Our accounts receivable balance from McLane as of June 30, 2018 was $7.8 million. McLane is a large, national distributor that sells and distributes our products to several of our foodservice national chain restaurant accounts, principally in a market channel that suffers a loss in consumer confidencethe 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 to the safety and quality of foodtheir distributor. McLane orders our products our business could be materially affected. The food industry has recently been subject to negative publicity concerning the health implications of GMOs, obesity, trans fat, diacetyl, artificial growth hormones, and bacterial contamination, such as salmonella and listeria. Consumers may increasingly require that foods meet stricter standards than are required by applicable governmental agencies, thereby increasing the cost of manufacturing such foods and ingredients. Developments in anyon behalf of these areas, including, but not limited to, a negative perception about our formulationsnational chain restaurants, and we invoice McLane for these sales. Thus, unfavorable changes in the financial condition of McLane could cause our operating results to differ materially from expected results. Any of these events could materially reduce our sales, materially increase our costs and 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.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.

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 impacteffect on our business, results of operations, financial condition and results of operations.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.

In addition,Our ability to obtain adequate and reasonably priced methods of transportation to distribute our products, including refrigerated trailers for many of our retail customers offer competitor branded 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 may give higher priority or promotional supportkey factor to their store branded products or to the products of our competitors or discontinue the use of our productssuccess. Delays in favor of their store branded products or other competing products. Failure to maintain our retail shelf space or priority with these customerstransportation, including weather-related delays, could have a material adverse effect on 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 limitcannot predict whether future regulation by various federal, state and local governmental entities and agencies would adversely affect our exposure to price fluctuations in energy-related costs by periodically entering into longer-term, fixed-price contracts for natural gasbusiness, results of operations, financial condition and electricity supply to somecash flows.

In addition, our business operations and the past and present ownership and operation of our manufacturing facilities, but there canproperties, 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 no assurancelimited 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 successfulcertain that environmental issues relating to presently known matters or identified sites, or to other 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 fully limitingthe future, we may face significant remediation costs and find it difficult to sell or lease any affected properties.

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 future price fluctuations.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.

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 us.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 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.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 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.

We continually evaluate acquiringthe acquisition of other businesses that would strategically fit within our operations. If we are unable to consummate, successfully integrate and grow these acquisitions and to 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 impactedadversely affected by either gains or 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. Finally, a buyer’s inability to fulfill contractual obligations that were assigned as part of a divestiture, including those relating to customer contracts, could lead to future financial loss on our part. 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 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.

As of June 30, 2016,2018, 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 may 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.

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.

None.

We use 1.81.9 million square feet of space for our operations. Of this space, 0.50.6 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) that:

The following table summarizes our principal warehouses, which are considered the principal manufacturing and warehousing operations ofused to distribute products to our Specialty Foods segment:customers:

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.

Not applicable.

Our common stock trades on The NASDAQ Global Select Market under the symbol LANC. The following table sets forth the high and low prices for Lancaster Colony Corporation common sharesstock and the dividends paid for each quarter of 20162018 and 2015.2017. Stock prices were provided by The NASDAQ Stock Market LLC.

We have increased our regular cash dividends for 5355 consecutive years. Future dividends will depend on our earnings, financial condition and other factors.

In November 2010, our Board of Directors approved a share repurchase authorization of 2,000,000 common shares, of which 1,418,1521,402,219 common shares remained authorized for future repurchases at June 30, 2016.2018. This share repurchase authorization does not have a stated expiration date. In the fourth quarter, we did not repurchase any of our common stock.

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

We previously manufacturedEffective July 1, 2017, David A. Ciesinski, our President and marketed candles forChief Operating Officer, succeeded John B. Gerlach, Jr. as our CEO. As President and CEO, Mr. Ciesinski became our principal executive officer and CODM. This change resulted in modifications to the food, drugCODM’s approach to managing the business, assessing performance and mass markets until that businessallocating resources. Consequently, beginning on July 1, 2017, our segment reporting structure was sold on January 30, 2014. Theamended to align with these changes, and our financial results of these operations for 2014,are now 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. All historical information was retroactively conformed to the current presentation. These segment changes had no effect on previously included in our Glassware and Candles segment, are reported as discontinued operations.

Part of our future growth may result from acquisitions. We 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.

We have made substantial capital investments to support our existing food operations and future growth opportunities. For example, in 2015 we completed a significant processingrecently expanded our warehousing capacity expansion at our Horse Cave, Kentucky dressing facilityAngelic to help meet anticipated growth in demand for our dressingsprouted grain bakery products. Based on our current plans and expectations, we believe our capital expenditures for 20172019 could total approximately $20between $60 and $80 million, which includes a substantial investment for a frozen dinner roll capacity expansion project that we expect to $22 million.complete in mid-2020. We anticipate we will be able to fund all of our capital needs in 20172019 with cash generated from operations.operations and cash on hand.

Consolidated net sales reached $1,191a record $1,223 million during 2016,2018, increasing by 8%2% as compared to prior-year net sales of $1,105$1,202 million, driven by increased retailwith both the Retail and foodservice volumes, pricing actions and the contribution from Flatout.

Gross profit increased 16%decreased 5% to $299.6$303.5 million from the prior-year total of $257.7$318.8 million. The increaseThis decline resulted from considerably higher sales, reduced commodity and freight costs, partially offset by supply chain savings realized from our lean six sigma program and pricing actions taken beginning in the third quarter of 2018 in response to the cost increases. The prior-year results reflected a notable benefit from significantly lower freight costs.ingredient costs in the first half of 2017 with only a modest offset from deflationary pricing.

NetIn 2018, net income totaled $135.3 million, or $4.92 per diluted share, including a one-time benefit of $9.5 million, or $0.35 per diluted share, for the re-measurement of our net deferred tax liability due to the Tax Cuts and Jobs Act of 2017 (“Tax Act”). In 2017, net income totaled $115.3 million, or $4.20 per diluted share, including the multiemployer pension after-tax charge of $11.5 million, or $0.42 per diluted share, compared to $121.8 million, in 2016, or $4.44 per diluted share, compared to net income of $101.7 million, or $3.72 per diluted share, in 2015. Net income in 2014 totaled $75.0 million, or $2.74 per diluted share, which included an after-tax loss on the sale of our candle manufacturing and marketing operations of $29.1 million.2016.

For 2017,2019, we expect volume-driven growth in our retail sales channelRetail segment with support from recent and upcoming new product introductions alongintroductions. We also anticipate continued progress with increased salesnet price realization from Flatout.the price increases that began in the second half of 2018 and better-optimized trade spending in the Retail segment. In the first half of 2017,Foodservice segment, we expect volume-drivenanticipate volume growth from continuing customers in our foodservice channel will be largely offset by the influence of lower pricing (due to lower commodity costs, particularly eggs)select national chain restaurant accounts and the impactdistributors of our customer rationalization initiative which beganbranded products, as well as continued benefits from Foodservice segment price increases that were implemented early in the third quarter of 2016.2018.

We will also continue to consider acquisition opportunities that are consistent with our growth strategy and represent good value 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 Flatout andexisting product lines, the level of net price realization in the Retail segment and the extent of efficiency gains we ultimately achieveand cost savings resulting from our supply chainlean six sigma program and other cost-savingsupply chain initiatives.

Based on current market conditions, commodity costs are projected to remain unfavorable in fiscal 2019, although to a lesser extent than we foresee modestly favorable material cost comparisonsexperienced in fiscal 2018. Freight costs are also expected to persist as a headwind through the first half of 2017, due mainlythe fiscal year. We have initiatives in place or planned for both the short- and long-term to the impact of lower eggaddress these higher freight and commodity costs and continued favorable trends in certain other key commodities. However, in the second half of 2017, we anticipateincluding pricing actions, a more neutral pricing environment as we anniversary many comparisons on various key ingredients.optimized distribution network and tactical procurement. Future changes in ingredient costs, as well as other material costs, will be influenced by the size of agricultural harvests in both the U.S.United States and other parts of the world and related global demand, economic conditions, tariffs and the regulatory environment.

Overall, we continue to limit some of our exposure to volatile swings in food commodity costs through a structured 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, and production costs and introductory costs for new products, may also impact our overall results.

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.

In March 2015November 2016, we acquired FlatoutAngelic and its results of operations have been included in the Retail segment within our consolidated financial statements from the date of acquisition. Flatout contributed approximately $42 million in net sales