UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DCD.C. 20549



Form			10-Q

(Mark One)



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

For the quarterly period ended ~~December 31, 2017~~September 30, 2023



¨☐			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~~	~~13-1955943~~
Ohio			13-1955943
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

380 Polaris Parkway		Suite 400 ~~Westerville, Ohio~~	~~43082~~
Westerville		Ohio	43082
(Address of principal executive offices)			(Zip Code)



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

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


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, without par value	LANC	NASDAQ Global Select Market

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 ý No ¨

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files). Yes ý 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

Accelerated filer

¨☐

Non-accelerated filer

o ~~(Do not check if a smaller reporting company)~~

☐

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 Exchange Act). Yes ¨☐ No ý

As of ~~January 18, 2018,~~October 13, 2023, there were ~~27,451,989~~approximately 27,517,000 shares of Common Stock, without par value, outstanding.

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS





PART I – FINANCIAL INFORMATION		3

Item 1.	Condensed Consolidated Financial Statements (unaudited):

	Condensed Consolidated Balance Sheets – ~~December 31, 2017~~S e ptember 3 0 , 2023 and June 30, ~~2017~~2023	3

	Condensed Consolidated Statements of Income – Three ~~and Six~~ Months Ended ~~December 31, 2017~~September 3 0 , 2023 and ~~2016~~2022	4

	Condensed Consolidated Statements of Comprehensive Income – Three ~~and Six~~ Months Ended ~~December 31, 2017~~September 30 , 2023 and ~~2016~~2022	5

	Condensed Consolidated Statements of Cash Flows – ~~Six~~Three Months Ended ~~December 31, 2017~~September 3 0 , 2023 and ~~2016~~2022	6

	Condensed Consolidated Statements of Shareholders’ Equity – Three Months Ended September 3 0 , 2023 and 2022	7

	Notes to Condensed Consolidated Financial Statements	78

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1413

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2019

Item 4.	Controls and Procedures	2019

PART II – OTHER INFORMATION		2120

Item 1.	Legal Proceedings	20

Item 1A.	Risk Factors	2120

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2120



Item 6.	Exhibits	2120

SIGNATURES		22

~~INDEX TO EXHIBITS~~	23

PART I – FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


(Amounts in thousands, except share data)	December 31, 2017			June 30, 2017			(Amounts in thousands, except share data)	September 30, 2023		June 30, 2023
ASSETS	ASSETS						ASSETS
Current Assets:							Current Assets:
Cash and equivalents	$	178,767		$	143,104		Cash and equivalents	$	73,746	$	88,473
Receivables	68,360			69,922			Receivables	120,076		114,967
Inventories:							Inventories:
Raw materials	34,679			28,447			Raw materials	47,659		40,761
Finished goods	42,980			47,929			Finished goods	130,149		117,504
Total inventories	77,659			76,376			Total inventories	177,808		158,265
Other current assets	18,311			11,744			Other current assets	14,628		12,758
Total current assets	343,097			301,146			Total current assets	386,258		374,463
Property, Plant and Equipment:							Property, Plant and Equipment:
Land, buildings and improvements	127,419			124,673
Machinery and equipment	282,294			272,582
Total cost	409,713			397,255

Property, plant and equipment-gross							Property, plant and equipment-gross	871,290		853,709
Less accumulated depreciation	224,695			216,584			Less accumulated depreciation	382,195		371,503
Property, plant and equipment-net	185,018			180,671			Property, plant and equipment-net	489,095		482,206
Other Assets:							Other Assets:
Goodwill	168,030			168,030			Goodwill	208,371		208,371
Other intangible assets-net	58,189			60,162			Other intangible assets-net	4,708		4,840
Operating lease right-of-use assets							Operating lease right-of-use assets	23,073		24,743
Other noncurrent assets	10,142			6,396			Other noncurrent assets	18,797		18,371
Total	$	764,476		$	716,405		Total	$	1,130,302	$	1,112,994
LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY						LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:							Current Liabilities:
Accounts payable	$	52,579		$	41,353		Accounts payable	$	120,337	$	111,758
Accrued liabilities	32,490			35,270			Accrued liabilities	46,871		56,994
Total current liabilities	85,069			76,623			Total current liabilities	167,208		168,752
Noncurrent Operating Lease Liabilities							Noncurrent Operating Lease Liabilities	15,286		16,967
Other Noncurrent Liabilities	43,531			38,598			Other Noncurrent Liabilities	16,312		17,683
Deferred Income Taxes	14,867			25,207			Deferred Income Taxes	52,728		47,325
Commitments and Contingencies							Commitments and Contingencies
Shareholders’ Equity:							Shareholders’ Equity:
Preferred stock-authorized 3,050,000 shares; outstanding-none							Preferred stock-authorized 3,050,000 shares; outstanding-none
Common stock-authorized 75,000,000 shares; outstanding-December-27,450,957 shares; June-27,448,424 shares	117,203			115,174
Common stock-authorized 75,000,000 shares; outstanding-September-27,517,313 shares; June-27,527,550 shares							Common stock-authorized 75,000,000 shares; outstanding-September-27,517,313 shares; June-27,527,550 shares	146,439		143,870
Retained earnings	1,250,416			1,206,671			Retained earnings	1,524,469		1,503,963
Accumulated other comprehensive loss	(8,825		)	(8,936		)	Accumulated other comprehensive loss	(9,289)		(9,365)
Common stock in treasury, at cost	(737,785		)	(736,932		)	Common stock in treasury, at cost	(782,851)		(776,201)
Total shareholders’ equity	621,009			575,977			Total shareholders’ equity	878,768		862,267
Total	$	764,476		$	716,405		Total	$	1,130,302	$	1,112,994

See accompanying notes to condensed consolidated financial statements.

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)


	Three Months Ended December 31,				Six Months Ended December 31,					Three Months Ended September 30,
(Amounts in thousands, except per share data)	2017		2016		2017		2016		(Amounts in thousands, except per share data)		2023		2022
Net Sales	$	319,665	$	326,773	$	618,581	$	618,134	Net Sales		$	461,572	$	425,537
Cost of Sales	235,724		233,034		459,163		443,761		Cost of Sales		352,850		326,482
Gross Profit	83,941		93,739		159,418		174,373		Gross Profit		108,722		99,055
Selling, General and Administrative Expenses	36,676		34,381		67,827		64,261		Selling, General and Administrative Expenses		51,947		49,757

Operating Income	47,265		59,358		91,591		110,112		Operating Income		56,775		49,298
Other, Net	412		206		770		293		Other, Net		857		(270)
Income Before Income Taxes	47,677		59,564		92,361		110,405		Income Before Income Taxes		57,632		49,028
Taxes Based on Income	1,757		20,608		17,055		38,049		Taxes Based on Income		13,681		11,436

Net Income	$	45,920	$	38,956	$	75,306	$	72,356	Net Income		$	43,951	$	37,592

Net Income Per Common Share:									Net Income Per Common Share:
Basic	$	1.67	$	1.42	$	2.74	$	2.64	Basic		$	1.60	$	1.37
Diluted	$	1.67	$	1.42	$	2.74	$	2.63	Diluted		$	1.59	$	1.36

Cash Dividends Per Common Share	$	0.60	$	0.55	$	1.15	$	1.05


Weighted Average Common Shares Outstanding:									Weighted Average Common Shares Outstanding:
Basic	27,396		27,366		27,396		27,364		Basic		27,449		27,450
Diluted	27,460		27,441		27,456		27,435		Diluted		27,473		27,458

See accompanying notes to condensed consolidated financial statements.

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)


	Three Months Ended December 31,						Six Months Ended December 31,							Three Months Ended September 30,
(Amounts in thousands)	2017			2016			2017			2016			(Amounts in thousands)		2023		2022
Net Income	$	45,920		$	38,956		$	75,306		$	72,356		Net Income		$	43,951	$	37,592
Other Comprehensive Income:													Other Comprehensive Income:
Defined Benefit Pension and Postretirement Benefit Plans:													Defined Benefit Pension and Postretirement Benefit Plans:
Amortization of loss, before tax	134			168			268			338			Amortization of loss, before tax		144		169
Amortization of prior service credit, before tax	(46		)	(45		)	(91		)	(90		)	Amortization of prior service credit, before tax		(45)		(45)
Total Other Comprehensive Income, Before Tax	88			123			177			248			Total Other Comprehensive Income, Before Tax		99		124
Tax Attributes of Items in Other Comprehensive Income:													Tax Attributes of Items in Other Comprehensive Income:
Amortization of loss, tax	(50		)	(62		)	(99		)	(125		)	Amortization of loss, tax		(34)		(40)
Amortization of prior service credit, tax	17			17			33			33			Amortization of prior service credit, tax		11		11
Total Tax Expense	(33		)	(45		)	(66		)	(92		)	Total Tax Expense		(23)		(29)
Other Comprehensive Income, Net of Tax	55			78			111			156			Other Comprehensive Income, Net of Tax		76		95
Comprehensive Income	$	45,975		$	39,034		$	75,417		$	72,512		Comprehensive Income		$	44,027	$	37,687

See accompanying notes to condensed consolidated financial statements.

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Six Months Ended December 31,							Three Months Ended September 30,
(Amounts in thousands)	2017			2016			(Amounts in thousands)	2023		2022
Cash Flows From Operating Activities:							Cash Flows From Operating Activities:
Net income	$	75,306		$	72,356		Net income	$	43,951	$	37,592
Adjustments to reconcile net income to net cash provided by operating activities:							Adjustments to reconcile net income to net cash provided by operating activities:
Impacts of noncash items:							Impacts of noncash items:
Depreciation and amortization	13,030			11,943			Depreciation and amortization	13,592		11,203
Change in acquisition-related contingent consideration	993			224

Deferred income taxes and other changes	(9,732		)	(153		)	Deferred income taxes and other changes	5,765		195
Stock-based compensation expense	2,313			2,155			Stock-based compensation expense	2,569		2,465

Pension plan activity	(248		)	(122		)	Pension plan activity	(64)		(493)
Changes in operating assets and liabilities:							Changes in operating assets and liabilities:
Receivables	1,561			(3,931		)	Receivables	(5,109)		(745)
Inventories	(1,283		)	(3,589		)	Inventories	(19,543)		(21,237)
Other current assets	(6,705		)	918			Other current assets	(1,870)		(102)
Accounts payable and accrued liabilities	8,720			(3,679		)	Accounts payable and accrued liabilities	(3,676)		21,986
Net cash provided by operating activities	83,955			76,122			Net cash provided by operating activities	35,615		50,864
Cash Flows From Investing Activities:							Cash Flows From Investing Activities:
Cash paid for acquisitions, net of cash acquired	(318		)	(34,997		)
Payments for property additions	(15,287		)	(11,838		)	Payments for property additions	(18,331)		(24,585)

Proceeds from sale of property							Proceeds from sale of property	—		1,159

Other-net	11			94			Other-net	(1,412)		(55)
Net cash used in investing activities	(15,594		)	(46,741		)	Net cash used in investing activities	(19,743)		(23,481)
Cash Flows From Financing Activities:							Cash Flows From Financing Activities:
Payment of dividends	(31,561		)	(28,794		)	Payment of dividends	(23,445)		(22,067)
Purchase of treasury stock	(853		)	(8		)	Purchase of treasury stock	(6,650)		(84)
Tax withholdings for stock-based compensation	(284		)	(152		)	Tax withholdings for stock-based compensation	—		(617)

Principal payments for finance leases							Principal payments for finance leases	(504)		(679)
Net cash used in financing activities	(32,698		)	(28,954		)	Net cash used in financing activities	(30,599)		(23,447)

Net change in cash and equivalents	35,663			427			Net change in cash and equivalents	(14,727)		3,936
Cash and equivalents at beginning of year	143,104			118,080			Cash and equivalents at beginning of year	88,473		60,283
Cash and equivalents at end of period	$	178,767		$	118,507		Cash and equivalents at end of period	$	73,746	$	64,219
Supplemental Disclosure of Operating Cash Flows:							Supplemental Disclosure of Operating Cash Flows:
Net cash payments for income taxes	$	32,457		$	37,383		Net cash payments for income taxes	$	6,231	$	7,544

See accompanying notes to condensed consolidated financial statements.

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(UNAUDITED)


	Three Months Ended September 30, 2023
(Amounts in thousands, except per share data)	Common Stock Outstanding			Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total Shareholders’ Equity
	Shares	Amount
Balance, June 30, 2023	27,528	$	143,870	$	1,503,963	$	(9,365)	$	(776,201)	$	862,267
Net income				43,951						43,951
Net pension and postretirement benefit gains, net of $23 tax effect						76				76
Cash dividends - common stock ($0.85 per share)				(23,445)						(23,445)
Purchase of treasury stock	(40)							(6,650)		(6,650)
Stock-based plans	29	—								—
Stock-based compensation expense		2,569								2,569
Balance, September 30, 2023	27,517	$	146,439	$	1,524,469	$	(9,289)	$	(782,851)	$	878,768


	Three Months Ended September 30, 2022
(Amounts in thousands, except per share data)	Common Stock Outstanding			Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total Shareholders’ Equity
	Shares	Amount
Balance, June 30, 2022	27,520	$	137,814	$	1,485,045	$	(11,172)	$	(767,000)	$	844,687
Net income				37,592						37,592
Net pension and postretirement benefit gains, net of $29 tax effect						95				95
Cash dividends - common stock ($0.80 per share)				(22,067)						(22,067)
Purchase of treasury stock	—							(84)		(84)
Stock-based plans	34	(617)								(617)
Stock-based compensation expense		2,465								2,465
Balance, September 30, 2022	27,554	$	139,662	$	1,500,570	$	(11,077)	$	(767,084)	$	862,071

See accompanying notes to condensed consolidated financial statements.

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

Note 1 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed 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” and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and SEC Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In our opinion, the interim condensed consolidated financial statements reflect all adjustments necessary for a fair presentation of the results of operations and financial position for such periods. All such adjustments reflected in the interim condensed consolidated financial statements are considered to be of a normal recurring nature. Intercompany transactions and accounts have been eliminated in consolidation. The results of operations for any interim period are not necessarily indicative of results for the full year. Accordingly, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in our ~~2017~~2023 Annual Report on Form 10-K. Unless otherwise noted, the term “year” and references to a particular year pertain to our fiscal year, which begins on July 1 and ends on June 30; for example, ~~2018~~2024 refers to fiscal ~~2018~~,2024, which is the period from July 1, ~~2017~~2023 to June 30, ~~2018~~.

Effective July 1, 2017, David A. Ciesinski, our President and Chief Operating Officer, succeeded John B. Gerlach, Jr. as 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 modifications to the CODM’s approach to managing the business, assessing performance and allocating resources. Consequently, beginning on July 1, 2017, our segment reporting structure was amended to align with these changes, and our financial results are now presented as two reportable segments: Retail and Foodservice. See Note 8 for additional details. All historical information was retroactively conformed to the current presentation.2024.

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. Purchases of property, plant and equipment included in Accounts Payable and excluded from the property additions and the change in accounts payable in the Condensed Consolidated Statements of Cash Flows were as follows:

December 31,
2017 2016
Construction in progress in Accounts Payable $ 446
$ 1,298


	September 30,
	2023		2022
Construction in progress in Accounts Payable	$	10,165	$	22,864

Accrued ~~Workers~~ Compensation ~~- Noncurrent~~and Employee Benefits

Accrued ~~workers~~ compensation and employee benefits included in ~~Other Noncurrent~~Accrued Liabilities was ~~$12.6~~$16.3 million and ~~$8.5~~$26.3 million at ~~December 31, 2017~~September 30, 2023 and June 30, ~~2017~~,2023, respectively.

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)~~rights and performance units) 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.~~rights and performance units.

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

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


	Three Months Ended September 30,
		2023		2022
Net income		$	43,951	$	37,592
Net income available to participating securities		(136)		(118)
Net income available to common shareholders		$	43,815	$	37,474

Weighted average common shares outstanding – basic		27,449		27,450
Incremental share effect from:
Nonparticipating restricted stock		3		4
Stock-settled stock appreciation rights (1)		11		—
Performance units		10		4
Weighted average common shares outstanding – diluted		27,473		27,458

Net income per common share – basic		$	1.60	$	1.37
Net income per common share – diluted		$	1.59	$	1.36

Three Months Ended
December 31, Six Months Ended
December 31,
2017 2016 2017 2016
Net income $ 45,920
$ 38,956
$ 75,306
$ 72,356
Net income available to participating securities (73 ) (77 ) (119 ) (142 )
Net income available to common shareholders $ 45,847
$ 38,879
$ 75,187
$ 72,214

Weighted average common shares outstanding – basic 27,396
27,366
27,396
27,364
Incremental share effect from:
Nonparticipating restricted stock 3
3
4
4
Stock-settled stock appreciation rights 61
72
56
67
Weighted average common shares outstanding – diluted 27,460
27,441
27,456
27,435

Net income per common share – basic $ 1.67
$ 1.42
$ 2.74
$ 2.64
Net income per common share – diluted $ 1.67
$ 1.42
$ 2.74
$ 2.63
(1)Excludes the impact of the following weighted average stock-settled stock appreciation rights outstanding with an antidilutive effect: 0.1 million and 0.3 million for the three months ended September 30, 2023 and 2022, respectively.

Accumulated Other Comprehensive Loss

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


	Three Months Ended December 31,						Six Months Ended December 31,							Three Months Ended September 30,
	2017			2016			2017			2016					2023		2022
Accumulated other comprehensive loss at beginning of period	$	(8,880	)	$	(11,272	)	$	(8,936	)	$	(11,350	)	Accumulated other comprehensive loss at beginning of period		$	(9,365)	$	(11,172)
Defined Benefit Pension Plan Items:													Defined Benefit Pension Plan Items:
Amortization of unrecognized net loss	143			178			286			357			Amortization of unrecognized net loss		159		181
Postretirement Benefit Plan Items:													Postretirement Benefit Plan Items:
Amortization of unrecognized net gain	(9		)	(10		)	(18		)	(19		)	Amortization of unrecognized net gain		(15)		(12)
Amortization of prior service credit	(46		)	(45		)	(91		)	(90		)	Amortization of prior service credit		(45)		(45)
Total other comprehensive income, before tax	88			123			177			248			Total other comprehensive income, before tax		99		124
Total tax expense	(33		)	(45		)	(66		)	(92		)	Total tax expense		(23)		(29)
Other comprehensive income, net of tax	55			78			111			156			Other comprehensive income, net of tax		76		95

Accumulated other comprehensive loss at end of period	$	(8,825	)	$	(11,194	)	$	(8,825	)	$	(11,194	)	Accumulated other comprehensive loss at end of period		$	(9,289)	$	(11,077)

Significant Accounting Policies

There were no changes to our Significant Accounting Policies from those disclosed in our ~~2017~~2023 Annual Report on Form 10-K.

~~Recently Issued~~Recent Accounting Standards

~~In March 2017, the Financial Accounting Standards Board (“FASB”)~~There are no recently issued ~~new~~or adopted 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, and we expect only changes in classification on the income statement. The guidancestandards that will ~~be effective for us in fiscal 2019 including interim periods.~~impact our consolidated financial statements.

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

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 is 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 rather than the current risks and rewards model. The new guidance would also require expanded disclosures. Since we do not plan to early adopt this standard, the guidance will be effective for us in fiscal 2019 including interim periods and will require either retrospective application to each prior period presented or modified retrospective application with the cumulative effect of initially applying the standard recognized at the date of adoption. We are currently evaluating the method of adoption but believe that we will apply the modified retrospective approach. We are currently assessing the impact that this standard will have on our accounting policies, processes, system requirements, internal controls and disclosures using internal resources and the assistance of a third party. We have established a project plan, completed an initial review of selected customer contracts and are evaluating the impact of the new standard on certain common practices currently employed by us and by other manufacturers of consumer products. We have not yet determined the impact that this standard will have on our financial position, results of operations and the related notes to the consolidated financial statements.

In February 2016, the 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. The updated 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 updated guidance requires expanded qualitative and quantitative disclosures, including additional information about the amounts recorded in the consolidated financial statements. The guidance will be effective for us in fiscal 2020 including interim periods using a modified retrospective approach. We are currently evaluating the impact of this guidance.

~~Recently Adopted Accounting Standards~~

In March 2016, the FASB issued new accounting guidance to simplify the accounting for stock-based compensation. The amendments include changes to the accounting for share-based payment transactions, including: the inclusion of the tax consequences related to stock-based compensation within the computation of income tax expense versus equity; the classification of awards as either equity or liabilities; and the classification of share-based activity on the statement of cash flows. The adoption may result in increased volatility to our income tax expense and resulting net income in future periods 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. We adopted the new guidance on July 1, 2017 and elected to continue to estimate forfeitures. The adoption of this guidance resulted in 1) the prospective recognition of windfall tax benefits and shortfall tax deficiencies in income tax expense; 2) the retrospective reclassification of windfall tax benefits on the Condensed Consolidated Statements of Cash Flows from financing activities to operating activities; and 3) the retrospective reclassification of employee tax withholdings on the Condensed Consolidated Statements of Cash Flows from operating activities to financing activities. There was no material impact on our condensed consolidated financial statements as a result of this adoption.

Note 2 – ~~Acquisition~~

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 and includes immaterial post-closing adjustments, which were paid in April 2017 and July 2017, 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 that 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 condensed consolidated financial statements from the date of acquisition.

~~LANCASTER COLONY CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Tabular amounts in thousands, except per share data)~~

~~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.~~

Our financial assets and liabilities consist principally of cash, accounts receivable, accounts payable and contingent consideration payable. The estimated fair value of cash, accounts receivable and accounts payable approximates their carrying value.

Our contingent consideration, which is measured at fair value on a recurring basis, is included in Other Noncurrent Liabilities on the Condensed Consolidated Balance Sheets. The following table summarizes our contingent consideration:

Fair Value Measurements at December 31, 2017
Level 1 Level 2 Level 3 Total
Acquisition-related contingent consideration $ —
$ —
$ 16,021
$ 16,021

Fair Value Measurements at June 30, 2017
Level 1 Level 2 Level 3 Total
Acquisition-related contingent consideration $ —
$ —
$ 15,028
$ 15,028

The contingent consideration resulted from the earn-out associated with our November 17, 2016 acquisition of Angelic. The purchase price did not include the future 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 Angelic for fiscal 2021. The fair value of the contingent consideration was estimated using a present value approach, which incorporates factors such as business risks and projections, to estimate an expected value. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy. Using this valuation technique, the fair value of the contingent consideration was determined to be $13.9 million at November 17, 2016.

~~The following table represents our Level 3 fair value measurements using significant other unobservable inputs for acquisition-related contingent consideration:~~

Three Months Ended
December 31, Six Months Ended
December 31,
2017 2016 2017 2016
Acquisition-related contingent consideration at beginning of period $ 15,516
$ —
$ 15,028
$ —
Additions —
13,872
—
13,872
Changes in fair value included in Selling, General and Administrative Expenses 505
224
993
224
Acquisition-related contingent consideration at end of period $ 16,021
$ 14,096
$ 16,021
$ 14,096

~~Note 4 –~~ Long-Term Debt

At ~~December 31, 2017~~September 30, 2023 and June 30, ~~2017,~~2023, we had an unsecured credit facility (“Facility”) under which we could borrow, on a revolving credit basis, up to a maximum of ~~$150~~$150 million at any one time, with potential to expand the total credit availability to ~~$225~~$225 million ~~subject to us obtaining~~ based on consent of the issuing banks and certain other conditions. The Facility expires on ~~April 8, 2021,~~March 19, 2025, and all outstanding amounts are then due and payable. Interest is variable based upon formulas tied to ~~LIBOR~~SOFR or an ~~alternative~~alternate base rate defined in the ~~Facility, at our option.~~Facility. 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.

~~LANCASTER COLONY CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Tabular amounts in thousands, except per share data)~~

~~At December 31, 2017 and June 30, 2017, we had~~ no ~~borrowings outstanding under the Facility. At December 31, 2017, 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 for the three and six months ended December 31, 2017 and 2016.~~

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 33.5 to 1, ~~at all times.~~subject to certain exceptions. The interest coverage ratio is calculated by dividing Consolidated EBIT by Consolidated Interest Expense, and the leverage ratio is calculated by dividing Consolidated Net Debt by Consolidated EBITDA. All financial terms used in the covenant calculations are defined more specifically in the Facility.

At September 30, 2023 and June 30, 2023, we had no borrowings outstanding under the Facility. At September 30, 2023 and June 30, 2023, we had $2.2 million and $2.8 million, respectively, of standby letters of credit outstanding, which reduced the amount available for borrowing under the Facility. We paid no interest for the three months ended September 30, 2023 and 2022.

Note 53 – Commitments and Contingencies

At ~~December 31, 2017~~,September 30, 2023, 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~~is not expected to have a material effect on our consolidated financial statements.

~~With our acquisition of Angelic, we have a contingent liability recorded for the earn-out associated with the transaction. See further discussion in Note 3.~~

Note 64 – Goodwill and Other Intangible Assets

As described in Notes 1 and 8, we changed our reportable segments as of July 1, 2017 when our organizational structure changed. Using a relative fair value approach, we reassigned our existing goodwill balance to the two new reporting units that directly align with our new Retail and Foodservice reportable segments. Based on this approach, goodwillGoodwill attributable to the Retail and Foodservice segments was ~~$119.3~~$157.4 million and ~~$48.7~~$51.0 million, respectively, at ~~December 31, 2017~~September 30, 2023 and June 30, ~~2017.~~

2023.

The following table summarizes our identifiable other intangible ~~assets.~~assets:


	September 30, 2023		June 30, 2023


Tradenames (20 to 30-year life)
Gross carrying value	$	4,100	$	4,100
Accumulated amortization	(244)		(181)
Net carrying value	$	3,856	$	3,919




Customer Relationships (10-year life)
Gross carrying value	$	287	$	287
Accumulated amortization	(198)		(190)
Net carrying value	$	89	$	97
Technology / Know-how (10-year life)
Gross carrying value	$	2,450	$	2,450
Accumulated amortization	(1,687)		(1,626)
Net carrying value	$	763	$	824




Total net carrying value	$	4,708	$	4,840

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


	Three Months Ended September 30,
		2023		2022
Amortization expense		$	132	$	629

December 31,
2017 June 30,
2017
Tradenames (20 to 30-year life)
Gross carrying value $ 50,321
$ 50,321
Accumulated amortization (4,100 ) (3,130 )
Net carrying value $ 46,221
$ 47,191
Trademarks (27-year life)
Gross carrying value $ 370
$ 370
Accumulated amortization (286 ) (241 )
Net carrying value $ 84
$ 129
Customer Relationships (10 to 15-year life)
Gross carrying value $ 14,207
$ 14,207
Accumulated amortization (7,722 ) (7,160 )
Net carrying value $ 6,485
$ 7,047
Technology / Know-how (10-year life)
Gross carrying value $ 6,350
$ 6,350
Accumulated amortization (1,364 ) (1,047 )
Net carrying value $ 4,986
$ 5,303
Non-compete Agreements (5-year life)
Gross carrying value $ 791
$ 791
Accumulated amortization (378 ) (299 )
Net carrying value $ 413
$ 492
Total net carrying value $ 58,189
$ 60,162

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

~~Amortization expense for our other intangible assets, which is reflected in Selling, General and Administrative Expenses, was as follows:~~

Three Months Ended
December 31, Six Months Ended
December 31,
2017 2016 2017 2016
Amortization expense $ 1,006
$ 846
$ 1,973
$ 1,537

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



2025	$	527
2026	$	527
2027	$	343
2028	$	251
2029	$	251

2019 $ 3,858
2020 $ 3,823
2021 $ 3,738
2022 $ 3,664
2023 $ 3,105

Note 75 – Income Taxes

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 tax rate for our 2018 tax return will be a blended rate of approximately 28.1%. In addition to the effect of the lower overall federal tax rate, the Tax Act resulted in a $9 million one-time benefit for the preliminary re-measurement of our net deferred tax liability in the quarter ended December 31, 2017.

The SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”) on December 22, 2017. SAB 118 allows for a measurement period in which companies can 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 cannot be determined at the time of the preparation of the financial statements until the actual impacts can be determined. We have recorded an estimate of the impact of the Tax Act within our December 31, 2017 financial statements, including the impact of items recorded within accumulated other comprehensive loss and do not expect material changes to the amounts initially recorded. However, we will continue to evaluate the impacts of the Tax Act and record adjustments, as needed, based on changes to our estimates. The FASB has proposed new accounting guidance regarding the treatment of the impact of the Tax Act on those items recorded within accumulated other comprehensive loss, but this guidance has not been finalized.

Prepaid federal income taxes of ~~$10.9~~$2.5 million and ~~$6.1~~$3.3 million were included in Other Current Assets at ~~December 31, 2017~~September 30, 2023 and June 30, ~~2017,~~2023, respectively. Accrued state and local income taxes of $0.4 million were included in Accrued Liabilities at September 30, 2023. Prepaid state and local income taxes of ~~$1.1 million and $0.9~~$0.8 million were included in Other Current Assets at ~~December 31, 2017 and~~ June 30, ~~2017, respectively.~~2023.

Note 86 – Business Segment Information

Effective July 1, 2017, David A. Ciesinski, our President and Chief Operating Officer, succeeded John B. Gerlach, Jr. as CEO. As President and CEO, Mr. Ciesinski became our principal executive officer and CODM. This change resulted in modifications to the CODM’s approach to managing the business, assessing performance and allocating resources. Consequently, beginning on July 1, 2017, our segment reporting structure was amended to align with these changes, and ourOur 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.

Retail - The vast majority of the products we sell in the Retail segment are sold through sales personnel, food brokers and ~~distributors.~~distributors in the United States. We have placement of products in ~~U.S.~~ grocery produce departments through our refrigerated salad dressings, vegetable dips and fruit ~~dips, and croutons.~~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,~~dressings, slaw dressing, ~~dry egg noodles~~sauces and croutons. Within the frozen food section of the grocery store, we ~~also have prominent market positions of frozen~~sell yeast rolls and garlic ~~breads and egg noodles.~~

~~LANCASTER COLONY CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Tabular amounts in thousands, except per share data)~~

breads.

Foodservice - The vast majority of the products we sell in the Foodservice segment are sold through sales personnel, food brokers and ~~distributors. Products~~distributors in the United States. Most of the products we sell in the Foodservice segment are ~~often~~ 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 ~~branded and~~ private label to ~~distributors~~restaurants. We also manufacture and ~~restaurants primarily in the United States. Additionally, a portion~~sell various branded Foodservice products to distributors.

As many of our ~~sales~~products are ~~dressing packets, frozen specialty noodles, pasta and flatbreads sold to industrial customers for use as ingredients or components in their products.~~

~~Within~~similar between our ~~organization,~~two segments, our procurement, manufacturing, warehousing and distribution activities are substantially integrated across our operations in order to maximize efficiency and ~~productivity, as many of our products are similar between the two segments.~~productivity. Consequently, we do not prepare, and ~~the CODM~~our Chief Operating Decision Maker does not review, separate balance sheets for the reportable segments. As such, our external reporting ~~will~~does not include the presentation of identifiable assets by reportable segment. The composition of our identifiable assets at ~~December 31, 2017~~September 30, 2023 is generally consistent with that of June 30, ~~2017.~~2023.

We ~~continue to~~ evaluate our Retail and Foodservice segments based on net sales and operating ~~income.~~ income which follow:


	Three Months Ended September 30,
		2023		2022
Net Sales
Retail		$	242,184	$	223,216
Foodservice		219,388		202,321
Total		$	461,572	$	425,537
Operating Income
Retail		$	53,124	$	42,900
Foodservice		26,633		31,929

Corporate Expenses		(22,982)		(25,531)
Total		$	56,775	$	49,298

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

The following ~~summary~~table sets forth net sales disaggregated by class of ~~financial information reflects the results of~~similar products for the Retail and Foodservice segments:


	Three Months Ended September 30,
		2023		2022
Retail
Shelf-stable dressings, sauces and croutons		$	98,581	$	91,038
Frozen breads		79,630		72,858
Refrigerated dressings, dips and other		63,973		59,320
Total Retail net sales		$	242,184	$	223,216
Foodservice
Dressings and sauces		$	165,271	$	151,060
Frozen breads and other		54,117		51,261

Total Foodservice net sales		$	219,388	$	202,321
Total net sales		$	461,572	$	425,537

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


	Three Months Ended September 30,
		2023		2022
Foodservice
National accounts		$	171,586	$	160,192
Branded and other		47,802		42,129

Total Foodservice net sales		$	219,388	$	202,321

Three Months Ended
December 31, Six Months Ended
December 31,
2017 2016 2017 2016
Net Sales
Retail $ 179,286
$ 182,794
$ 341,430
$ 335,456
Foodservice 140,379
143,979
277,151
282,678
Total $ 319,665
$ 326,773
$ 618,581
$ 618,134
Operating Income
Retail $ 37,316
$ 42,905
$ 70,183
$ 77,711
Foodservice 13,409
19,147
28,097
39,166
Corporate Expenses (3,460 ) (2,694 ) (6,689 ) (6,765 )
Total $ 47,265
$ 59,358
$ 91,591
$ 110,112

Note 97 – Stock-Based Compensation

There have been no changes to our stock-based compensation ~~plans from those~~plan as disclosed in our ~~2017~~2023 Annual Report on Form 10-K.

Our stock-settled stock appreciation rights (“SSSARs”) compensation expense was ~~$0.5~~$0.3 million and ~~$0.4~~$0.7 million for the three months ended ~~December 31, 2017~~September 30, 2023 and ~~2016,~~2022, respectively. ~~Year-to-date SSSARs compensation expense was $1.1 million for the current-year period compared to $0.9 million for the prior-year period.~~ At ~~December 31, 2017,~~September 30, 2023, there was ~~$3.0~~$0.5 million of unrecognized compensation expense related to SSSARs that we will recognize over a weighted-average period of ~~2 years.~~1 year.

Our restricted stock compensation expense was ~~$0.6~~$1.2 million and $1.3 million for the three months ended ~~December 31, 2017~~September 30, 2023 and ~~2016 and $1.2 million for the six months ended December 31, 2017 and 2016.~~2022, respectively. At ~~December 31, 2017,~~September 30, 2023, there was ~~$2.9~~$8.8 million of unrecognized compensation expense related to restricted stock that we will recognize over a weighted-average period of 2 years.

Our performance units compensation expense was $1.1 million and $0.5 million for the three months ended September 30, 2023 and 2022, respectively. At September 30, 2023, there was $7.5 million of unrecognized compensation expense related to performance units that we will recognize over a weighted-average period of 2 years.

Item 2. 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, ~~2018~~2024 refers to fiscal ~~2018~~,2024, which is the period from July 1, ~~2017~~2023 to June 30, ~~2018~~.2024.

The following discussion should be read in conjunction with our condensed consolidated financial statements and the notes thereto, all included elsewhere in this ~~report.~~report, and our 2023 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 due to these factors. For more information, see the section below entitled “Forward-Looking Statements.”

OVERVIEW

Business Overview

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

Effective 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 modifications to the CODM’s approach to managing the business, assessing performance and allocating resources. Consequently, beginning on July 1, 2017, our segment reporting structure was amended to align with these changes, and ourOur 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~~

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 ~~current presentation. These segment changes had no effect on previously reported consolidated net sales, operating income, net income or earnings per share. See Note 8 to~~future based upon existing operations. We do not have any fixed assets located outside of the ~~condensed consolidated financial statements for further information about our segments.~~

~~Our sales are predominately domestic.~~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;

•long-standing Foodservice customer relationships that help to support strategic licensing opportunities in Retail;

•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;

~~introducing new products and~~ •expanding ~~distribution; and~~Retail growth through strategic licensing agreements;

•continuing to rely upon the strength of our reputation in Foodservice product development and ~~quality.~~quality; and

~~Part~~•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 Marzetti dressing and sauce facility in Horse Cave, Kentucky that reached substantial completion in March 2023;

•a capacity expansion project for one of our ~~future growth may result from acquisitions. We continue to review potential acquisitions~~Marzetti dressing and sauce facilities in Columbus, Ohio that ~~we believe will complement~~was completed in January 2022;

•a significant infrastructure improvement and capacity expansion project for our ~~existing product lines, enhance~~ frozen pasta facility in Altoona, Iowa that was completed in March 2022; and

•our ~~profitability and/or offer good expansion opportunities in a manner~~enterprise resource planning system (“ERP”) project and related initiatives, Project Ascent, that ~~fits our overall strategic goals.~~

~~Consistent with this acquisition strategy, in November 2016 we acquired substantially all~~reached completion of the ~~assets~~implementation phase in August 2023.

Project Ascent entailed the replacement of ~~Angelic Bakehouse, Inc. (“Angelic”), a manufacturer~~our primary customer and ~~marketer~~manufacturing transactional systems, warehousing systems, and financial systems with an integrated SAP S/4HANA system. Implementation of ~~premium sprouted grain bakery~~this system began in July 2022 and continued throughout fiscal 2023. Customer fulfillment levels remained strong before and after the initial system cutover with no unplanned disruptions in receiving orders, producing products ~~based near Milwaukee, Wisconsin. This transaction is discussed~~or shipping orders. During fiscal 2023, we progressed through our ERP implementation with no major disruptions. We completed the final wave of the implementation phase in ~~further detail in Note 2~~August 2023 as planned and have shifted our focus towards leveraging the capabilities of our new ERP system.

BUSINESS TRENDS

Dating back to the ~~condensed consolidated financial statements.~~

Weonset of the COVID-19 pandemic in 2020, the effects of COVID-19 on consumer behavior have made substantial capital investments to support our existing food operations and future growth opportunities. For example, we recently started a project to expand processing and warehousing capacity at Angelic to help meet anticipated growth inimpacted the relative demand for our ~~sprouted grain bakery~~Retail and Foodservice products. ~~Based~~More specifically, beginning in March 2020, consumer demand shifted towards increased at-home food consumption and away from in-restaurant dining. Over the course of the following two years, while this shift in demand was inconsistent and volatile, on balance it positively impacted our ~~current plans~~Retail segment sales volumes and ~~expectations,~~negatively impacted our Foodservice segment sales volumes. From an operations standpoint, the shift in demand over the two-year period, combined with other COVID-19-related issues, unfavorably impacted the operating results of both our segments. Beginning near the end of 2022, the volatility and shifts in demand between our Retail and Foodservice products subsided and our operating environment became more predictable and stable.

The inflationary cost environment we ~~believe~~experienced during 2022 resulted in significantly higher input costs for our ~~capital expenditures~~business. During 2022, we endured unprecedented inflationary costs for ~~2018 could approximate $30 million.~~ commodities, particularly soybean oil and flour, in addition to notably higher costs for packaging, freight and warehousing, and labor. This cost inflation was attributed to numerous factors such as the impacts of the COVID-19 pandemic, the war in Ukraine, climate and weather conditions, supply chain disruptions, including some raw material and packaging shortages, a tight labor market, and government policy decisions.

We ~~anticipate~~continued to experience significant cost inflation through 2023, particularly for soybean oil, eggs and flour. However, our pricing actions served to offset these inflationary costs. In addition, the operating environment stabilized as we ~~will be able~~did not experience the supply chain disruptions and demand swings of the preceding years.

Near the end of 2023, cost inflation began to ~~fund all~~diminish notably, and we completed the first quarter of 2024 with our ~~capital needs~~input costs, in ~~2018 with cash generated from operations.~~

aggregate, at levels similar to the prior year.

RESULTS OF CONSOLIDATED OPERATIONS


(Dollars in thousands, except per share data)	Three Months Ended September 30,
	2023	2022			Change
Net Sales		$	461,572		$	425,537		$	36,035	8.5	%
Cost of Sales		352,850			326,482			26,368		8.1	%
Gross Profit		108,722			99,055			9,667		9.8	%
Gross Margin		23.6		%	23.3		%
Selling, General and Administrative Expenses		51,947			49,757			2,190		4.4	%


Operating Income		56,775			49,298			7,477		15.2	%
Operating Margin		12.3		%	11.6		%
Other, Net		857			(270)			1,127		417.4	%
Income Before Income Taxes		57,632			49,028			8,604		17.5	%
Taxes Based on Income		13,681			11,436			2,245		19.6	%
Effective Tax Rate		23.7		%	23.3		%
Net Income		$	43,951		$	37,592		$	6,359	16.9	%
Diluted Net Income Per Common Share		$	1.59		$	1.36		$	0.23	16.9	%

Net Sales ~~and Gross Profit~~

Three Months Ended
December 31, Six Months Ended
December 31,
(Dollars in thousands) 2017 2016 Change 2017 2016 Change
Net Sales

Retail $ 179,286
$ 182,794
$ (3,508 ) (2 )% $ 341,430
$ 335,456
$ 5,974
2 %
Foodservice 140,379
143,979
(3,600 ) (3 )% 277,151
282,678
(5,527 ) (2 )%
Total $ 319,665
$ 326,773
$ (7,108 ) (2 )% $ 618,581
$ 618,134
$ 447
— %
Gross Profit $ 83,941
$ 93,739
$ (9,798 ) (10 )% $ 159,418
$ 174,373
$ (14,955 ) (9 )%
Gross Margin 26.3 % 28.7 % 25.8 % 28.2 %

~~In November 2016, we acquired Angelic and its results of operations have been included in our condensed consolidated financial statements from the date of acquisition in the Retail segment.~~

Consolidated net sales for the three months ended ~~December 31, 2017 decreased 2% as~~September 30, 2023 increased 8.5% to a first quarter record $461.6 million versus $425.5 million last year, reflecting higher net sales for both the Retail and Foodservice segments ~~experienced~~driven primarily by volume gains. Sales in the prior-year first quarter were unfavorably impacted by an estimated $25 million in net sales ~~declines.~~attributed to advance ordering that occurred near the end of fiscal 2022 ahead of our ERP go-live that commenced on July 1, 2022. Consolidated ~~net~~ sales ~~for the six months ended December 31, 2017 were flat as compared to the prior year-to-date period as higher Retail segment net sales were largely offset by a decline~~volumes, measured in ~~Foodservice segment net sales.~~

~~Consolidated gross profit and related margins declined~~pounds shipped, increased 8.0% for the three ~~and six~~ months ended ~~December 31, 2017,~~ driven by the impact of increased commodity costs, most notably eggs, soybean oil, dairy ingredients and garlic, in addition to higher freight costs and the lower second quarter sales volume. These costs were partially offset by supply chain savings realized from our lean six sigma program and modest inflationary pricing in our Foodservice segment.September 30, 2023. Excluding the impact of ~~pricing, total raw-material costs were estimated~~last year’s shift in sales due to ~~have negatively affected~~ our ~~gross margins by 2% and less than 2%~~ERP go-live, consolidated sales volumes increased 1.4%. See discussion of ~~consolidated~~ net sales by segment following the discussion of “Earnings Per Share” below.

Gross Profit

Consolidated gross profit for the three ~~and six~~ months ended ~~December 31, 2017, respectively. Higher freight~~September 30, 2023 increased $9.7 million to $108.7 million driven by the higher sales volumes, some continued favorability in pricing net of commodity costs, and our cost savings programs. Partial offsets to these positive factors included higher labor costs and increased depreciation expense. In aggregate, the input costs for our commodity basket were generally consistent with last year’s level. In last year’s first quarter, gross profit was unfavorably impacted by an estimated $5 million due to ~~have negatively affected our gross margins by less than 1%~~the aforementioned shift of net sales ~~for both the three and six months ended December 31, 2017. The prior-year results for both~~into the quarter ~~and year-to-date periods reflected a notable benefit from significantly lower ingredient costs with only a modest offset~~ended June 30, 2022 ahead of ~~deflationary pricing.~~our ERP go-live.

Selling, General and Administrative Expenses

Three Months Ended
December 31, Six Months Ended
December 31,
(Dollars in thousands) 2017 2016 Change 2017 2016 Change
SG&A Expenses $ 36,676
$ 34,381
$ 2,295
7 % $ 67,827
$ 64,261
$ 3,566
6 %
SG&A Expenses as a Percentage of Net Sales 11.5 % 10.5 % 11.0 % 10.4 %


	Three Months Ended September 30,
(Dollars in thousands)	2023	2022		Change
SG&A Expenses - Excluding Project Ascent		$	48,114	$	40,538	$	7,576	18.7	%
Project Ascent Expenses		3,833		9,219		(5,386)		(58.4)	%
Total SG&A Expenses		$	51,947	$	49,757	$	2,190	4.4	%

Selling, general and administrative (“SG&A”) expenses ~~increased 7% and 6%~~ for the three ~~and six~~ months ended ~~December 31, 2017, respectively. The~~September 30, 2023 increased 4.4% to $51.9 million compared to $49.8 million in the prior-year period. This increase ~~in these costs reflected~~reflects higher expenditures to support the continued growth of our business, including a more normalized level of consumer promotions, investments in personnel and ~~strategic business initiatives to support our future growth and incremental amortization expense and other recurring noncash charges attributed to Angelic.~~higher brokerage costs associated with the increased sales. These ~~increases~~higher costs were partially offset by a lower ~~level~~expenditures for Project Ascent, our ERP initiative. Project Ascent expenses totaled $3.8 million in the current-year quarter versus $9.2 million last year.

Project Ascent expenses are included within Corporate Expenses. A portion of ~~promotional spending. Additionally,~~ the ~~prior-year’s second quarter corporate~~costs that have been classified as Project Ascent expenses ~~included a favorable non-recurring item related~~represent ongoing costs that will continue subsequent to ~~closed business operations.~~

the completion of our ERP implementation.

Operating Income

~~The foregoing factors contributed~~Operating income increased $7.5 million to ~~consolidated operating income totaling $47.3 million and $91.6~~$56.8 million for the three ~~and six~~ months ended ~~December 31, 2017, respectively. Our operating income can be summarized~~September 30, 2023 driven by the increase in gross profit, as ~~follows:~~

Three Months Ended
December 31, Six Months Ended
December 31,
(Dollars in thousands) 2017 2016 Change 2017 2016 Change
Operating Income
Retail $ 37,316
$ 42,905
$ (5,589 ) (13 )% $ 70,183
$ 77,711
$ (7,528 ) (10 )%
Foodservice 13,409
19,147
(5,738 ) (30 )% 28,097
39,166
(11,069 ) (28 )%
Corporate Expenses (3,460 ) (2,694 ) (766 ) 28 % (6,689 ) (6,765 ) 76
(1 )%
Total $ 47,265
$ 59,358
$ (12,093 ) (20 )% $ 91,591
$ 110,112
$ (18,521 ) (17 )%
Operating Margin
Retail 20.8 % 23.5 % 20.6 % 23.2 %
Foodservice 9.6 % 13.3 % 10.1 % 13.9 %
Total 14.8 % 18.2 % 14.8 % 17.8 %

partially offset by the increase in SG&A expenses. See discussion of operating results by segment following the discussion of ~~“Net Income”~~“Earnings Per Share” below.

~~Income Before Income Taxes~~

As impacted by the factors discussed above, income before income taxes for the three months ended December 31, 2017 decreased by $11.9 million to $47.7 million from the prior-year total of $59.6 million. Income before income taxes for the six months ended December 31, 2017 and 2016 was $92.4 million and $110.4 million, respectively.

Taxes Based on Income

Our effective tax rate was ~~18.5%~~23.7% and ~~34.5%~~23.3% for the ~~six~~three months ended ~~December 31, 2017~~September 30, 2023 and ~~2016,~~2022, respectively. ~~The current-year~~For the three months ended September 30, 2023 and 2022, our effective tax rate ~~was 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~~varied from 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 tax rate for our 2018 tax return will be~~as a blended rate of approximately 28.1%. In addition to the effect of the lower overall federal tax rate, the Tax Act resulted in a $9 million one-time benefit for the preliminary re-measurement of our net deferred tax liability in the quarter ended December 31, 2017. Excluding the impact of this one-time benefit, our effective tax rate was 28.3% for the six months ended December 31, 2017, and we expect our effective tax rate to remain at approximately 28.3% for the remainder of our fiscal year. Looking ahead to 2019, we expect an effective tax rate of approximately 24%.

~~Our taxes based on income for the current year consist~~result of the following ~~components:~~factors:


	Three Months Ended September 30,
	2023		2022
Statutory rate	21.0	%	21.0	%
State and local income taxes	2.6		2.5
Net windfall tax benefits - stock-based compensation	—		—
Other	0.1		(0.2)
Effective rate	23.7	%	23.3	%

(Dollars in thousands) Three Months Ended
December 31, 2017 Six Months Ended
December 31, 2017
One-time benefit on preliminary re-measurement of net deferred tax liability $ (8,878 ) (18.6 )% $ (8,878 ) (9.6 )%
Net windfall tax benefits - stock-based compensation (101 ) (0.2 )% (180 ) (0.2 )%
Federal, state and local provision 10,736
22.5 % 26,113
28.3 %
Taxes Based on Income $ 1,757
3.7 % $ 17,055
18.5 %

The SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”) on December 22, 2017. SAB 118 allows for a measurement period in which companies can either use provisional estimates for changes resulting from the Tax Act or applyWe include the tax ~~laws that were in effect immediately prior~~consequences related to the Tax Act being enacted if estimates cannot be determined at the time of the preparation of the financial statements until the actual impacts can be determined. We have recorded an estimate of the impact of the Tax Act within our December 31, 2017 financial statements, including the impact of items recorded within accumulated other comprehensive loss and do not expect material changes to the amounts initially recorded. However, we will continue to evaluate the impacts of the Tax Act and record adjustments, as needed, based on changes to our estimates. The Financial Accounting Standards Board has proposed new accounting guidance regarding the treatment of the impact of the Tax Act on those items recorded within accumulated other comprehensive loss, but this guidance has not been finalized.

~~On July 1, 2017, we adopted new accounting guidance for~~ stock-based compensation ~~that, among other things, requires~~within the ~~recognition~~computation of ~~windfall tax benefits and shortfall tax deficiencies in our~~ income tax ~~expense, instead of equity. For the six months ended December 31, 2017, the impact of net windfall tax benefits reduced our effective tax rate by 0.2%. Going forward, this adoption~~expense. We may ~~result in~~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. ~~This adoption is discussed in further detail in Note 1 to~~For the ~~condensed consolidated financial statements.~~three months ended September 30, 2023 and 2022, the impact of net windfall tax benefits from stock-based compensation reduced our effective tax rate by less than 0.1%.

~~Net Income~~Earnings Per Share

As influenced by the factors ~~noted~~discussed above, ~~particularly the impact of the Tax Act, second quarter~~diluted net income ~~for 2018 of $45.9 million increased from the preceding year’s net income~~per share for the first quarter of ~~$39.0 million and year-to-date net income of $75.3 million was higher than~~2024 totaled $1.59, as compared to $1.36 per diluted share in the prior ~~year-to-date total of $72.4 million.~~year. Expenditures for Project Ascent reduced diluted earnings per share by $0.11 and $0.26 for the three months ended September 30, 2023 and 2022, respectively. Diluted weighted average common shares outstanding have remained relatively stable for the current and prior-year periods ended December 31. As a result, and due to the change in net income for each year, net income per share for the second quarter of 2018 totaled $1.67 per diluted share, as compared to net income of $1.42 per diluted share in the prior year. Year-to-date net income per share was $2.74 per diluted share, as compared to $2.63 per diluted share for the prior-year period. The estimated favorable impact of the Tax Act on second quarter and year-to-date net income was $14.5 million, or $.53 per diluted share, which includes the cumulative effect of a lower federal income tax rate and a $9 million one-time benefit from the preliminary re-measurement of our net deferred tax liability.September 30.

RESULTS OF OPERATIONS - SEGMENTS

Retail Segment


	Three Months Ended September 30,
(Dollars in thousands)	2023	2022			Change
Net Sales		$	242,184		$	223,216		$	18,968	8.5	%
Operating Income		$	53,124		$	42,900		$	10,224	23.8	%
Operating Margin		21.9		%	19.2		%

Three Months Ended
December 31, Six Months Ended
December 31,
(Dollars in thousands) 2017 2016 Change 2017 2016 Change
Net Sales $ 179,286
$ 182,794
$ (3,508 ) (2 )% $ 341,430
$ 335,456
$ 5,974
2 %
Operating Income $ 37,316
$ 42,905
$ (5,589 ) (13 )% $ 70,183
$ 77,711
$ (7,528 ) (10 )%
Operating Margin 20.8 % 23.5 % 20.6 % 23.2 %

For the three months ended ~~December 31, 2017,~~September 30, 2023, Retail segment net sales ~~decreased 2% as growth~~increased 8.5% to $242.2 million from ~~Olive Garden~~^® ~~dressings,~~the prior-year total of $223.2 million, including the favorable impact of higher sales volumes and, to a ~~full quarter contribution from Angelic, reduced trade spending and lower coupon redemptions were more than offset by disruptions~~lesser extent, our 2023 pricing actions that have not fully lapped. Sales in the ~~production and supply~~prior-year first quarter were unfavorably impacted by advance orders accounting for an estimated $11 million in Retail net sales that were made near the end of fiscal 2022 ahead of our ERP go-live, which commenced on July 1, 2022. Retail segment sales volumes, measured in pounds shipped, increased 7.1%. Retail sales volume growth was driven by the continued success of our program for licensed dressings and sauces. Our New York BRAND^® Bakery frozen garlic bread products ~~and a slowdown~~also contributed to the increase in ~~late-December outbound shipments~~the Retail sales volumes. Excluding the impact of last year’s shift in sales due to ~~insufficient freight capacity. The impact of pricing on Retail net sales was minimal.~~

~~Year-to-date net sales for the~~our ERP go-live, Retail segment ~~reached $341.4 million, a 2% increase from the prior-year total of $335.5 million driven by growth from our Olive Garden~~^® ~~dressings and Sister Schubert’s~~^®~~frozen dinner rolls and incremental~~ sales ~~from Angelic.~~volumes increased 1.4%.

For the three ~~and six~~ months ended ~~December 31, 2017,~~September 30, 2023, Retail segment operating income ~~and related margins decreased~~increased 23.8% to $53.1 million due to our previous pricing actions, our cost savings programs and the favorable impact of ~~lower second quarter~~higher sales increased commodity and freight costs, recent investments in personnel and business growth initiatives and incremental amortization expense and other recurring noncash charges attributed to Angelic. These higher costs were partially offset by supply chain savings realized from our lean six sigma program and lower consumer promotional spending. The prior-year operating income and related margins reflected a significant benefit from lower ingredient costs.volumes.

Foodservice Segment


	Three Months Ended December 31,											Six Months Ended December 31,												Three Months Ended September 30,
(Dollars in thousands)	2017			2016			Change					2017			2016			Change					(Dollars in thousands)	2023	2022			Change
Net Sales	$	140,379		$	143,979		$	(3,600	)	(3	)%	$	277,151		$	282,678		$	(5,527	)	(2	)%	Net Sales		$	219,388		$	202,321		$	17,067	8.4	%
Operating Income	$	13,409		$	19,147		$	(5,738	)	(30	)%	$	28,097		$	39,166		$	(11,069	)	(28	)%	Operating Income		$	26,633		$	31,929		$	(5,296)	(16.6)	%
Operating Margin	9.6		%	13.3		%						10.1		%	13.9		%						Operating Margin		12.1		%	15.8		%

For the three ~~and six~~ months ended ~~December 31, 2017,~~September 30, 2023, Foodservice segment net sales ~~decreased 3% and 2%, respectively, reflecting continued overall softness~~grew 8.4% to $219.4 million compared to $202.3 million in the ~~restaurant industry resulting in a decline in sales to~~prior-year period driven by increased demand from several of our national chain restaurant ~~accounts, including limited-time-offer programs, as compared to the prior year. As discussed~~account customers and growth for our branded Foodservice products. Sales in the ~~Retail~~prior-year first quarter were unfavorably impacted by the advance ordering that occurred near the end of fiscal 2022 ahead of our ERP go-live, which reduced Foodservice net sales in the prior-year period by an estimated $14 million. Foodservice segment ~~a slowdown~~sales volumes, measured in ~~late-December outbound shipments~~pounds shipped, increased 8.6%. Excluding the impact of last year’s shift in sales due to ~~insufficient freight capacity also hindered sales. These declines were~~

~~partially offset by a modest level of inflationary pricing totaling less than 1% of net~~our ERP go-live, Foodservice segment sales ~~for both the three and six months ended December 31, 2017.~~volumes increased 1.4%.

For the three ~~and six~~ months ended ~~December 31, 2017, the declines in~~September 30, 2023, Foodservice segment operating income ~~and related margins were~~decreased 16.6% to $26.6 million driven by ~~the impact of lower sales volumes, increased commodity and freight~~higher supply chain costs, ~~and recent investments in personnel and business growth initiatives. These higher costs were~~as partially offset by ~~supply chain savings realized from our lean six sigma program~~the benefit of increased sales volumes and ~~inflationary pricing.~~a more favorable sales mix. The Foodservice segment’s operating margin compares to strong results in the prior-year ~~operating income~~period.

Corporate Expenses

For the three months ended September 30, 2023 and ~~related margins reflected~~2022, corporate expenses totaled $23.0 million and $25.5 million, respectively. This decrease primarily reflects a ~~significant benefit from lower ingredient costs that was only~~decline in Project Ascent expenses, as partially offset by ~~deflationary pricing.~~

~~With regard to~~increased investments in personnel. Expenditures for Project Ascent totaled $3.8 million and $9.2 million for the impact of commodity 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 costs. These supply contracts may vary by customer with regard to the time lapse between the actual change in ingredient costs we incurthree months ended September 30, 2023 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 costs because at least some portion of the change in ingredient 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.2022, respectively.

LOOKING FORWARD

Looking forward ~~we expect~~to our fiscal ~~third~~second quarter, ~~net~~we anticipate Retail sales will continue to ~~be favorably impacted by~~benefit from our expanding licensing program, including incremental growth from the ~~earlier Easter holiday~~new products, flavors and sizes we introduced in the current year. We expect volume-driven growth in our Retail segment with support from recent and upcoming new product introductions. Price increases were taken in the Retail segment early in the third quarter as we try to recover the increases in commodity and freight costs we have seen in the first half of the year. To address the disruptions in the production and supply of our frozen garlic bread products, we are implementing corrective actions to recover and meet demand, but expect these sales to remain constrained through the third quarter.fiscal 2023. In the Foodservice segment, we ~~anticipate sales growth will remain challenged by~~expect continued ~~sluggish sales throughout the restaurant industry. However, projected~~ volume growth from select customers in our mix of national chain restaurant ~~accounts,~~accounts. Regarding inflation, while our input costs remain high, in total we do not anticipate a ~~modest level of~~significant impact from inflationary ~~pricing and additional Foodservice segment price increases implemented early~~costs in the ~~third~~upcoming quarter versus the prior-year period. External factors, including U.S. economic performance and potential changes in ~~response~~consumer sentiment, may impact demand.

With respect to ~~higher commodity and freight costs should help to overcome industry headwinds.~~

~~Based on current market conditions,~~Project Ascent, we ~~foresee some abatement in commodity and freight costs starting in~~completed the ~~third quarter, but still expect these costs to remain above last year’s level for the balance~~final wave of the ~~fiscal year. Supply chain efficiency gains, cost savings from~~implementation phase in August 2023 as planned and have shifted towards leveraging the capabilities of our ~~lean six sigma program and~~new ERP system to improve execution.

We will continue to periodically reassess our ~~pricing actions will help offset these higher costs.~~allocation of capital to ensure that we maintain adequate operating flexibility while providing appropriate levels of cash returns to our shareholders.

FINANCIAL CONDITION

Cash Flows

For the ~~six~~three months ended ~~December 31, 2017,~~September 30, 2023, net cash provided by operating activities totaled ~~$84.0~~$35.6 million, as compared to ~~$76.1~~$50.9 million in the prior-year period. This ~~increase~~decrease was primarily due to ~~higher~~the year-over-year changes in net ~~income, increases in noncash charges for depreciation~~working capital, particularly accrued liabilities and ~~amortization, an increase~~accounts payable. Accrued liabilities reflect the unfavorable cash flow impact of a current-year decrease in the ~~noncash acquisition-related contingent consideration~~accruals for compensation and ~~lower~~employee benefits. The favorable cash flow impact of higher accounts payable, as adjusted to exclude construction in progress amounts, was more pronounced in the prior year due to increased commodity costs as well as the timing of payments. These changes in net working capital ~~requirements,~~were partially offset by the decrease in deferred income taxes as a result of the Tax Act. The lower level of working capital requirements occurred primarily within accounts payable and accrued liabilities, due to extended payment terms, and receivables, as a result of the timing of shipments and related payment terms to major customers, offset somewhat by other current assets due to the timing of estimated tax payments and the favorable impact of the Tax Act.higher net income.

Cash used in investing activities for the ~~six~~three months ended ~~December 31, 2017~~September 30, 2023 was ~~$15.6~~$19.7 million, as compared to ~~$46.7~~$23.5 million in the prior year. This decrease primarily reflects ~~cash paid for the acquisition of Angelic in November 2016, as partially offset by~~ a ~~higher~~lower level of ~~capital expenditures~~payments for property additions in ~~2018, with~~ the ~~largest amounts spent on new equipment to increase~~current year as the capacity ~~and/or improve operational efficiencies.~~expansion project at our dressing and sauce facility in Horse Cave, Kentucky reached substantial completion in March 2023.

Cash used in financing activities for the ~~six~~three months ended ~~December 31, 2017~~September 30, 2023 of ~~$32.7~~$30.6 million increased from the prior-year total of ~~$29.0~~$23.4 million. This increase ~~was primarily due to~~reflects higher ~~dividend payments in the current year. There was also an increase in~~levels of share repurchases ~~of $0.8 million in the six months ended December 31, 2017. At December 31, 2017, 1,404,289 shares remained authorized for future buyback under the existing share repurchase program.~~and dividend payments.

Liquidity and Capital Resources

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 ~~December 31, 2017.~~September 30, 2023. At ~~December 31, 2017,~~September 30, 2023, we had ~~$5.1~~$2.2 million of standby letters of credit outstanding, which reduced the amount available for borrowing onunder the Facility. The Facility expires in ~~April 2021,~~March 2025, and all outstanding amounts are then due and payable. Interest is variable based upon formulas tied to ~~LIBOR~~SOFR or an ~~alternative~~alternate base rate defined in the ~~Facility, at our option.~~Facility. 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 ~~December 31, 2017,~~September 30, 2023, 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 ~~December 31, 2017, we~~September 30, 2023, there were ~~not aware of any event~~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 2018.~~liquidity needs over the next 12 months, including the projected levels of capital expenditures and dividend payments. 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. Based on our current plans and expectations, we believe our capital expenditures for 2024 could total between $70 and $80 million.

~~CONTRACTUAL OBLIGATIONS~~Beyond the next 12 months, we expect that cash provided by operating activities will be the primary source of liquidity. This source, combined with our existing balances in cash and equivalents and amounts available under the Facility, is expected to be sufficient to meet our overall cash requirements.

We have various contractual and other obligations that are appropriately recorded as liabilities in our condensed consolidated financial statements. Certain other contractual obligations are not recognized as liabilities in our condensed consolidated financial statements. Examples of such ~~items~~obligations are commitments to purchase raw materials or packaging inventory that has not yet been received as of ~~December 31, 2017~~September 30, 2023, as well as purchase orders and future minimum lease payments for the use of property and equipment under operating lease agreements. Aside from expected changes in raw-material costs associated with changes in product demand or pricing, there have been no significant changeslonger-term purchase arrangements related to the ~~contractual~~procurement of services, including IT service agreements, and property, plant and equipment. The majority of these obligations ~~disclosed in our 2017 Annual Report on Form 10-K.~~is expected to be due within one year.

CRITICAL ACCOUNTING POLICIES

There have been no changes in critical accounting policies from those policies disclosed in our ~~2017~~2023 Annual Report on Form 10-K.

RECENT ACCOUNTING PRONOUNCEMENTS

Recent accounting pronouncements and their impact on our consolidated financial statements are disclosed in Note 1 to the condensed 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 Quarterly Report on Form 10-Q 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:

•efficiencies in plant operations and our overall supply chain network;

•the reaction of customers or consumers to pricing actions we take to offset inflationary costs;

•price ~~increases we may implement;~~and product competition;

•the impact of customer store brands on our branded retail volumes;

•adequate supply of labor for our manufacturing facilities;

•adverse changes in freight, energy or other costs of producing, distributing or transporting our products;

•inflationary pressures resulting in higher input costs;

•fluctuations in the cost and availability of ingredients and packaging;

•dependence on contract manufacturers, distributors and freight transporters, including their operational capacity and financial strength in continuing to support our business;

•stability of labor relations;

•dependence on key personnel and changes in key personnel;

•cyber-security incidents, information technology disruptions, and data breaches;

•capacity constraints that may affect our ability to meet demand or may increase our costs;

~~dependence on contract manufacturers, distributors~~•geopolitical events, such as Russia’s invasion of Ukraine, that could create unforeseen business disruptions and ~~freight transporters;~~

~~fluctuations in~~impact the cost ~~and~~or availability of ~~ingredients~~raw materials and ~~packaging;~~energy;

~~adverse changes in freight, energy or other costs of producing, distributing or transporting our products;~~

~~price and product competition;~~

~~the impact of customer store brands on our branded retail volumes;~~

~~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 ability to successfully grow recently acquired businesses;~~

~~the extent to which future business acquisitions are completed and acceptably integrated;~~

~~the possible occurrence of product recalls or other defective or mislabeled product costs;~~

•the potential for loss of larger programs or key customer relationships;

•failure to maintain or renew license agreements;

•significant shifts in consumer demand and disruptions to our employees, communities, customers, supply chains, production planning, operations, and production processes resulting from the impacts of epidemics, pandemics or similar widespread public health concerns and disease outbreaks;

•changes in demand for our products, which may result from loss of brand reputation or customer goodwill;

•the possible occurrence of product recalls or other defective or mislabeled product costs;

•the success and cost of new product development efforts;

•the lack of market acceptance of new products;

•the extent to which business acquisitions are completed and acceptably integrated;

•the ability to successfully grow acquired businesses;

•the effect of consolidation of customers within key market channels;

•maintenance of competitive position with respect to other manufacturers;

~~efficiencies~~•the outcome of any litigation or arbitration;

•changes in ~~plant operations;~~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;

~~stability of labor relations;~~

~~the outcome of any litigation or arbitration;~~

~~the impact, if any, of certain contingent liabilities associated with our withdrawal from a multiemployer pension plan;~~

•the impact of fluctuations in our pension plan asset values on funding levels, contributions required and benefit costs; and

~~changes in estimates in critical accounting judgments; and~~

•certain other factors, including the information disclosed in our discussion of risk factors under Item 1A of our ~~2017~~2023 Annual Report on Form 10-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our market risks have not changed materially from those disclosed in our ~~2017~~2023 Annual Report on Form 10-K.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this Quarterly Report on Form 10-Q, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of ~~December 31, 2017~~September 30, 2023 to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is 1) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and 2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, in a manner that allows timely decisions regarding required disclosure.

(b) Changes in Internal Control Over Financial Reporting. No changes were made to our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are required to disclose certain environmental matters when a governmental authority is a party to the proceedings and such proceedings involve potential monetary sanctions that we reasonably believe will be in excess of an applied threshold not to exceed $1 million. We are using a threshold of $1 million as we believe this amount is reasonably designed to result in disclosure of such proceedings that are material to our business or financial condition. Applying this threshold, there are no environmental matters to disclose in this Form 10-Q.

Item 1A. Risk Factors

There have been no material changes to the risk factors disclosed under Item 1A in our ~~2017~~2023 Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(c) In November 2010, our Board of Directors approved a share repurchase authorization of 2,000,000 common shares, of which ~~1,404,289~~1,136,608 common shares remained authorized for future repurchases at ~~December 31, 2017~~.September 30, 2023. This share repurchase authorization does not have a stated expiration date. In the ~~second~~first quarter, we made the following repurchases of our common stock:


Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans	Maximum Number of Shares that May Yet be Purchased Under the Plans
July 1-31, 2023	—	$	—	—	1,176,739
August 1-31, 2023 (1)	16,057	$	166.22	16,057	1,160,682
September 1-30, 2023 (1)	24,074	$	165.35	24,074	1,136,608
Total	40,131	$	165.70	40,131	1,136,608

(1)Includes 57 shares in August 2023 and 74 shares in September 2023 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.

Period
Total
Number of
Shares
Purchased

Average
Price Paid
Per Share

Total Number
of Shares
Purchased as
Part of
Publicly
Announced
Plans

Maximum
Number of
Shares that
May Yet be
Purchased
Under the
Plans
October 1-31, 2017 —
$ —
—
1,404,320
November 1-30, 2017 —
$ —
—
1,404,320
December 1-31, 2017 ⁽¹⁾
31
$ 133.37
31
1,404,289
Total 31
$ 133.37
31
1,404,289


~~(1)~~	Represents shares 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.

Item 6. Exhibits

See Index to Exhibits ~~following Signatures.~~below.

INDEX TO EXHIBITS


Exhibit Number						Description

10.1(a),(c)						Form of Restricted Stock Award Agreement for Employees and Consultants under the Lancaster Colony Corporation 2015 Omnibus Incentive Plan

10.2(a),(c)						Form of Performance Unit Award Agreement for Employees and Consultants under the Lancaster Colony Corporation 2015 Omnibus Incentive Plan

10.3(a),(c)						Lancaster Colony Corporation Form of Change in Control Agreement

31.1(a)						Certification of CEO under Section 302 of the Sarbanes-Oxley Act of 2002

31.2(a)						Certification of CFO under Section 302 of the Sarbanes-Oxley Act of 2002

32(b)						Certification of CEO and CFO under Section 906 of the Sarbanes-Oxley Act of 2002

101.INS(a)						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH(a)						Inline XBRL Taxonomy Extension Schema Document

101.CAL(a)						Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF(a)						Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB(a)						Inline XBRL Taxonomy Extension Label Linkbase Document


Exhibit Number						Description

101.PRE(a)						Inline XBRL Taxonomy Extension Presentation Linkbase Document

104(a)						The cover page of Lancaster Colony Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, formatted in Inline XBRL (included within Exhibit 101 attachments)

(a)						Filed herewith

(b)						Furnished herewith

(c)						Indicates a management contract or compensatory plan, contract or arrangement in which any Director or any Executive Officer participates.

SIGNATURES

Pursuant to the requirements 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.

LANCASTER COLONY CORPORATION

~~(Registrant)~~

~~Date:~~

~~January 30, 2018~~

~~By:~~

~~/s/ DAVID A. CIESINSKI~~

~~David A. Ciesinski~~

~~President, Chief Executive Officer~~

~~and Director~~

~~(Principal Executive Officer)~~

~~Date:~~

~~January 30, 2018~~

~~By:~~

~~/s/ DOUGLAS A. FELL~~

~~Douglas A. Fell~~

~~Treasurer, Vice President,~~

~~Assistant Secretary and~~

~~Chief Financial Officer~~

~~(Principal Financial and Accounting Officer)~~

~~LANCASTER COLONY CORPORATION AND SUBSIDIARIES~~

~~FORM 10-Q~~

~~DECEMBER 31, 2017~~

~~INDEX TO EXHIBITS~~

(Registrant)

~~Exhibit~~

~~Number~~

Date:

November 2, 2023

~~Description~~

By:

~~Located at~~

/s/ DAVID A. CIESINSKI

David A. Ciesinski

~~31.1~~

~~Certification of CEO under Section 302 of the Sarbanes-Oxley Act of 2002~~

~~Filed herewith~~

President, Chief Executive Officer

and Director

~~31.2~~

~~Certification of CFO under Section 302 of the Sarbanes-Oxley Act of 2002~~

~~Filed herewith~~

(Principal Executive Officer)

Date:

November 2, 2023

~~Certification of CEO and CFO under Section 906 of the Sarbanes-Oxley Act of 2002~~

By:

~~Furnished herewith~~

/s/ THOMAS K. PIGOTT

Thomas K. Pigott

~~101.INS~~

~~XBRL Instance Document~~

~~Filed herewith~~

Vice President, Chief Financial Officer

and Assistant Secretary

~~101.SCH~~

~~XBRL Taxonomy Extension Schema Document~~

~~Filed herewith~~

~~101.CAL~~

~~XBRL Taxonomy Extension Calculation Linkbase Document~~

~~Filed herewith~~

~~101.DEF~~

~~XBRL Taxonomy Extension Definition Linkbase Document~~

~~Filed herewith~~

~~101.LAB~~

~~XBRL Taxonomy Extension Label Linkbase Document~~

~~Filed herewith~~

~~101.PRE~~

~~XBRL Taxonomy Extension Presentation Linkbase Document~~

~~Filed herewith~~(Principal Financial and Accounting Officer)



	December 31,
	2017		2016
Construction in progress in Accounts Payable	$	446	$	1,298



	Fair Value Measurements at December 31, 2017
	Level 1		Level 2		Level 3		Total
Acquisition-related contingent consideration	$	—	$	—	$	16,021	$	16,021

	Fair Value Measurements at June 30, 2017
	Level 1		Level 2		Level 3		Total
Acquisition-related contingent consideration	$	—	$	—	$	15,028	$	15,028



(Dollars in thousands)	Three Months Ended December 31, 2017					Six Months Ended December 31, 2017
One-time benefit on preliminary re-measurement of net deferred tax liability	$	(8,878	)	(18.6	)%	$	(8,878	)	(9.6	)%
Net windfall tax benefits - stock-based compensation	(101		)	(0.2	)%	(180		)	(0.2	)%
Federal, state and local provision	10,736			22.5	%	26,113			28.3	%
Taxes Based on Income	$	1,757		3.7	%	$	17,055		18.5	%