What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2020-08-27 compared with 2019-08-27 · 211 added, 237 removed, 791 unchanged (36% of the section changed)

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We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of June 30, 2020 , based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August 27, 2020 , expressed an unqualified opinion on the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 1 to the financial statements, the Company has changed its method of accounting for leases effective July 1, 2019, due to the adoption of Accounting Standards Update (“ASU”) No.

2016-02, Leases (Topic 842).

Basis for Opinion

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Critical Audit Matter Description

The Company has contingent consideration liabilities whose estimated fair values are based on complex proprietary models and unobservable inputs.

The Company has contingent consideration liabilities whose fair values are based on complex models and unobservable inputs.

The contingent consideration liabilities resulted from the earn-out provisions associated with the Company’s October 19, 2018 acquisition of Bantam Bagels and November 17, 2016 acquisition of Angelic Bakehouse.

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Under accounting principles generally accepted in the United States of America, these liabilities are generally classified as Level 3 liabilities and are marked to fair value on a recurring basis.

Unlike the fair value of other assets and liabilities with readily observable, and therefore, more independently corroborated inputs, the valuation of Level 3 liabilities is inherently subjective, and often involves the use of complex proprietary models and unobservable inputs.

The contingent consideration of Bantam Bagels is valued using a Monte Carlo

simulation that randomly changes revenue growth, adjusted earnings before interest, taxes, depreciation, and amortization (“EBITDA”), and other uncertain variables to estimate fair value using a discount rate.

The contingent consideration of Angelic Bakehouse is valued using a present value approach that incorporates factors such as a revenue growth rate, discount rate, and forecasted adjusted EBITDA projections to estimate fair value.

Due to unfavorable events and market conditions in the current year, it became probable that previous adjusted EBITDA projections would not be attained thus resulting in a decrease in the fair value of the contingent consideration of Angelic Bakehouse.

We identified these Level 3 liabilities as a critical audit matter because of the complex proprietary models and unobservable inputs management used to estimate fair value.

This required a high degree of auditor judgment and an increased extent of our effort, including the need to involve our fair value specialists who possess significant quantitative and modeling expertise to audit and evaluate the appropriateness of the models and inputs.

Unlike the fair value of other assets and liabilities that are readily observable, and therefore, more easily independently corroborated, the valuation of Level 3 liabilities is inherently subjective, and often involves the use of complex models and unobservable inputs.

The contingent consideration of Bantam Bagels is valued using a Monte Carlo simulation that randomly changes revenue growth, forecasted adjusted earnings before interest, taxes, depreciation, and amortization (“EBITDA”), as defined in the related acquisition agreement, and other uncertain variables to estimate fair value using a discount rate.

We identified these Level 3 liabilities as a critical audit matter because of the complex models and unobservable inputs management uses to estimate fair value.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists who possess significant quantitative and modeling expertise, to audit and evaluate the appropriateness of the models and inputs.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the proprietary models and unobservable inputs used by management to estimate the fair value of the Level 3 liabilities included the following, among others:

We tested the effectiveness of controls over management’s valuation of Level 3 liabilities, including those related to the complex proprietary models and the significant inputs that are not readily observable.

Our audit procedures related to the complex models and unobservable inputs used by management to estimate the fair value of the Level 3 liabilities included the following, among others:

We tested the effectiveness of controls over management’s valuation of Level 3 liabilities, including those related to the complex models and the significant inputs that are not readily observable.

We evaluated management’s ability to accurately estimate fair value by comparing management’s historical estimates to subsequent results, taking into account changes in market conditions.

We compared management’s assumptions to external sources.

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

With the assistance of our fair value specialists, we developed independent fair value estimates using a Monte Carlo simulation for Bantam Bagels and a present value approach for Angelic Bakehouse and compared our estimates to the Company’s estimates.

These assumptions included the discount rates and future revenue growth affecting the forecasted adjusted EBITDA used in the valuation models.

With the assistance of our fair value specialists, we developed independent fair value estimates and compared our results to the Company’s estimates.

/s/ Deloitte & Touche LLP

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Other intangible assets-net

Operating lease right-of-use assets

Other noncurrent assets

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Total current liabilities

Noncurrent Operating Lease Liabilities

Other Noncurrent Liabilities

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Restructuring and Impairment Charges

Multiemployer Pension Settlement and Related Costs

Operating Income

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Restructuring and impairment charges

Gain on sale of property

Loss (gain) on sale of property

Pension plan activity

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Net pension and postretirement benefit gains, net of $829 tax effect

Tax Cuts and Jobs Act of 2017, Reclassification from accumulated other comprehensive loss to retained earnings

Cash dividends - common stock ($2.35 per share)

Purchase of treasury stock

Stock-based plans, including excess tax benefits

Stock-based plans

Stock-based compensation expense

Balance, June 30, 2018

Net pension and postretirement benefit gains, net of $829 tax effect

Tax Cuts and Jobs Act of 2017, Reclassification from accumulated other comprehensive loss to retained earnings

Net pension and postretirement benefit losses, net of ($625) tax effect

Cash dividends - common stock ($2.55 per share)

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Construction in progress in Accounts Payable

The following table sets forth depreciation expense, including capital lease amortization, in each of the years ended June 30:

The following table sets forth depreciation expense, including finance lease amortization, in each of the years ended June 30:

Depreciation expense

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

Costs incurred during the application development stage are capitalized.

Costs related to preliminary project activities and post-implementation activities are expensed as incurred.

Training costs are also expensed as incurred.

Capitalized costs are included in Other Noncurrent Assets and are amortized on a straight-line basis over the estimated useful life.

In 2019 , we capitalized $1.7 million of deferred software costs related to cloud computing arrangements.

Capitalized costs are included in Other Current Assets or Other Noncurrent Assets and are amortized on a straight-line basis over the estimated useful life.

In 2020 and 2019 , we capitalized $ 10.3 million and $ 1.7 million , respectively, of deferred software costs related to cloud computing arrangements.

Long-Lived Assets

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As a result, we have used the available practical expedient and, consequently, do not adjust our revenues for the effects of a significant financing component.

All shipping and handling costs associated with outbound freight are accounted for as fulfillment costs and are included in our cost of sales;

this includes shipping and handling costs incurred after control over a product has transferred to a customer, as we have chosen to use the available practical expedient to account for these costs within our cost of sales.

Distribution fees billed to customers are included in Net Sales.

All distribution costs associated with outbound freight are accounted for as fulfillment costs and are included in Cost of Sales;

this includes distribution costs incurred after control over a product has transferred to a customer, as we have chosen to use the available practical expedient to account for these costs within our cost of sales.

Variable Consideration

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The estimated amount spent during each of the last three years on research and development activities was less than 1% of net sales.

Distribution Costs

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

Stock-Based Employee Compensation Plans

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Defined Benefit Pension Plan Items:

Net (loss) gain arising during the period

Net loss arising during the period

Amortization of unrecognized net loss (1)

Postretirement Benefit Plan Items:

Net (loss) gain arising during the period

Net loss arising during the period

Amortization of unrecognized net gain

Amortization of prior service credit

Total other comprehensive (loss) income, before tax

Total tax benefit (expense)

Other comprehensive (loss) income, net of tax

Tax Cuts and Jobs Act of 2017, Reclassification from accumulated other comprehensive loss to retained earnings

Total other comprehensive loss, before tax

Total tax benefit

Other comprehensive loss, net of tax

Accumulated other comprehensive loss at end of year

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Recently Issued Accounting Standards

In February 2016, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance to require lessees to recognize a right-of-use asset and a lease liability for leases with terms of more than 12 months and issued subsequent clarifications of this new guidance.

This guidance retains the two classifications of a lease as either an operating or finance lease (previously referred to as a capital lease).

Both lease classifications require the lessee to record a right-of-use asset and a lease liability based upon the present value of the lease payments.

Finance leases will reflect the financial arrangement by recognizing interest expense on the lease liability separately from the amortization expense of the right-of-use asset.

Operating leases will recognize lease expense (with no separate recognition of interest expense) on a straight-line basis over the term of the lease.

The guidance requires expanded qualitative and quantitative disclosures, including additional information about the amounts recorded in the consolidated financial statements.

In July 2018, the FASB issued guidance that allows for an alternate

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

transition method whereby companies can recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption rather than restating comparative periods.

We will adopt the new guidance on July 1, 2019 using this alternate transition method, but we will not record a cumulative-effect adjustment from initially applying the standard.

We will elect the package of practical expedients that permits us not to reassess our prior conclusions about lease identification, lease classification and initial direct costs and will make an accounting policy election to keep short-term leases with an initial term of 12 months or less off our Consolidated Balance Sheets.

As a result of adoption, we expect to recognize a lease liability and related right-of-use asset of $30 million to $40 million .

We do not expect the adoption to impact our results of operations or cash flows.

During the first quarter of 2020, we will have completed the implementation of a lease accounting system to enable the preparation of financial information and will have implemented relevant accounting policies and internal controls surrounding the lease accounting process.

There will be additional required disclosures in the notes to the consolidated financial statements upon adoption.

In August 2018, the FASB issued new accounting guidance related to the disclosure requirements for fair value measurements.

In August 2018, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance related to the disclosure requirements for fair value measurements.

The guidance removes, modifies and adds disclosures related to fair value.

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As the guidance only relates to disclosures, there will be no impact on our financial position or results of operations.

Recently Adopted Accounting Standards

In May 2014, the FASB issued new accounting guidance for the recognition of revenue and issued subsequent clarifications of this new guidance in 2016 and 2017.

The core principle of the new guidance states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

This model is based on a control approach.

We completed a review of customer contracts and evaluated the impact of the new standard on certain common practices employed by us.

We also finalized our assessment of the impact on our accounting policies, processes, system requirements, internal controls and disclosures using internal resources and the assistance of a qualified third party expert.

We adopted the new guidance on July 1, 2018 using a modified retrospective approach;

however, we did not record a cumulative-effect adjustment from initially applying the standard as the adoption did not have a material impact on our financial position or results of operations.

See disclosure of our revenue recognition policies in Note 1.

In March 2017, the FASB issued new accounting guidance to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost by disaggregating the service cost component from the other components of net periodic benefit cost.

The amendments require an employer to present service cost in the same line item(s) as compensation costs for the pertinent employees whereas the other components of net periodic benefit cost must be reported separately from service cost and outside of income from operations.

The amendments also allow only the service cost component to be eligible for capitalization.

The amendments require retrospective application for the income statement presentation provisions and prospective application for the capitalization of the service cost component.

However, as a result of prior years’ restructuring activities, we no longer have any active employees continuing to accrue service cost.

Therefore, the service cost provisions are not applicable to us.

We adopted the new guidance on July 1, 2018, and this adoption resulted in changes in classification on the income statement for all periods presented.

The changes were not material.

In August 2018, the FASB issued new accounting guidance to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

Costs for implementation activities in the application development stage are capitalized depending on the nature of the costs, while costs incurred during the preliminary project and postimplementation stages are expensed as the activities are performed.

The guidance also requires such capitalized implementation costs to be expensed over the term of the hosting arrangement and advises on related presentation within the statement of financial position, the statement of income and statement of cash flows.

The guidance will be effective for fiscal years, and interim periods within those years, beginning after December 15, 2019 and should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption.

Early adoption is permitted.

We adopted this guidance in the first quarter of fiscal 2019 on a prospective basis.

The adoption resulted in a change in accounting principle, to capitalize certain costs instead of expensing them immediately.

The costs capitalized under this new guidance were not material to our consolidated financial statements.

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

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(Tabular amounts in thousands, except per share data)

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

The guidance removes, adds and clarifies disclosure requirements related to defined benefit pension or other postretirement plans.

The guidance will be effective for fiscal years ending after December 15, 2020 and should be applied on a retrospective basis to all periods presented.

Early adoption is permitted.

We adopted this guidance in the first quarter of fiscal 2019.

As the guidance only relates to disclosures, there was no impact on our financial position or results of operations.

See disclosures for defined benefit pension plans in Note 12.

Recently Adopted Accounting Standards

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 and issued subsequent clarifications of this new guidance.

This guidance retains the two classifications of a lease as either an operating or finance lease (previously referred to as a capital lease).

Both lease classifications require the lessee to record a right-of-use asset and a lease liability based upon the present value of the lease payments.

Finance leases will reflect the financial arrangement by recognizing interest expense on the lease liability separately from the amortization expense of the right-of-use asset.

Operating leases will recognize lease expense (with no separate recognition of interest expense) on a straight-line basis over the term of the lease.

The guidance requires expanded qualitative and quantitative disclosures, including additional information about the amounts recorded in the consolidated financial statements.

In July 2018, the FASB issued guidance that allows for an alternate transition method whereby companies can recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption rather than restating comparative periods.

We adopted the new guidance on July 1, 2019 using this alternate transition method, but we did not record a cumulative-effect adjustment from initially applying the standard.

We elected the package of practical expedients that permits us not to reassess our prior conclusions about lease identification, lease classification and initial direct costs and made an accounting policy election to exclude short-term leases with an initial term of 12 months or less from our Consolidated Balance Sheets.

We have completed the implementation of a lease accounting system to enable the preparation of financial information and have implemented relevant accounting policies and internal controls surrounding the lease accounting process.

As a result of adoption, we recognized a lease liability and right-of-use asset of $ 33.5 million and $ 31.7 million , respectively.

The right-of-use asset balance reflects the reclassification of deferred rent and prepaid rent against the initial asset.

The adoption did not impact our results of operations or cash flows.

See additional lease disclosures in Note 5.

Note 2 – Acquisitions

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These results have been included in our consolidated financial statements from the date of acquisition.

This acquisition is not significant to our financial position or results of operations.

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

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Net assets acquired

Further adjustments are not expected to the allocation above.

The goodwill recognized above arose because the purchase price for Omni reflects a number of factors including the production capabilities of the leased facility and the ability to expand production in the future.

Goodwill also resulted from the workforce acquired with Omni.

Due to the transitional nature of the foodservice operations, which are related to an interim supply agreement, no goodwill was allocated to the Foodservice segment.

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

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

Bantam Bagels, LLC

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

Bantam, a producer and marketer of frozen mini stuffed bagels and mini stuffed pancakes sold to both the retail and foodservice channels, is based in New York, New York.

Bantam, a producer and marketer of frozen mini stuffed bagels and other frozen bread products sold to both the retail and foodservice channels, is based in New York, New York.

The base purchase price of $ 33.1 million , which includes the post-closing working capital adjustment, was funded with cash on hand.

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These results have been included in our consolidated financial statements from the date of acquisition.

This acquisition is not significant to our financial position or results of operations.

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

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The following table summarizes the consideration related to the acquisition and the purchase price allocation based on the fair value of the net assets acquired:

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

Consideration

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Net assets acquired

Further adjustments are not expected to the allocation above.

The goodwill recognized above arose because the purchase price for Bantam reflects a number of factors including the future earnings and cash flow potential of Bantam, as well as the impact of the inclusion of the initial fair value of the earn-out associated with the acquisition.

Bantam is a fast growing, on-trend business with distribution in traditional grocery, club stores, e-commerce and foodservice.

Notably, in the foodservice channel, Bantam Bagels ® bagel bites are available at corporate-owned Starbucks ® cafes nationwide.

Bantam also provides innovation opportunities within and beyond our present product lines.

A small amount of goodwill also resulted from the workforce acquired with Bantam.

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

$12.8 million for the tradename with a 20 -year life;

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

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

Angelic Bakehouse, Inc.

On November 17, 2016, we acquired substantially all of the assets of Angelic Bakehouse, Inc.

Angelic, a privately owned manufacturer and marketer of premium sprouted grain bakery products, is based near Milwaukee, Wisconsin.

The purchase price of $35.5 million was funded by cash on hand, but excludes contingent consideration relating to an additional earn-out payment which is tied to performance-based conditions.

In general, the terms of the acquisition specify the sellers will receive an earn-out based upon a pre-determined multiple of the defined adjusted EBITDA of Angelic for fiscal 2021.

We are unable to provide a range for the amount of this earn-out because it is based on the future adjusted EBITDA of Angelic, and the earn-out does not contain a minimum or maximum value.

See further discussion of the earn-out in Note 3.

Angelic is reported in our Retail segment, and its results of operations have been included in our consolidated financial statements from the date of acquisition.

Note 3 – Fair Value

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

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

Our financial assets and liabilities subject to the three-level fair value hierarchy consist principally of cash and equivalents, accounts receivable, accounts payable, contingent consideration payable and defined benefit pension plan assets.

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See Note 12 for fair value disclosures related to our defined benefit pension plan assets.

Our contingent consideration, which resulted from the earn-outs associated with our acquisitions of Bantam and Angelic, is measured at fair value on a recurring basis and is included in Other Noncurrent Liabilities on the Consolidated Balance Sheets.

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

(“Angelic”), is measured at fair value on a recurring basis and is included in Other Noncurrent Liabilities on the Consolidated Balance Sheets.

The following table summarizes our contingent consideration as of June 30:

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Fair Value Measurements at June 30, 2019

Contingent consideration - Bantam

Contingent consideration - Angelic

Total contingent consideration

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

Bantam Contingent Consideration

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This adjustment was recorded in our Retail segment.

Our 2020 fair value measurements indicated no change to Angelic’s contingent consideration based on Angelic’s forecasted adjusted EBITDA for fiscal 2021, and no fair value adjustments were made.

The following table represents our Level 3 fair value measurements using significant other unobservable inputs for Angelic’s contingent consideration:

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Contingent consideration at end of year

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

Note 4 – Long-Term Debt

At June 30, 2019 and 2018 , we had an unsecured credit facility (“Facility”) under which we could borrow, on a revolving credit basis, up to a maximum of $150 million at any one time, with potential to expand the total credit availability to $225 million subject to us obtaining consent of the issuing banks and certain other conditions.

The Facility expires on April 8, 2021 , and all outstanding amounts are then due and payable.

Interest is variable based upon formulas tied to LIBOR or an alternative base rate defined in the Facility, at our option.

On March 19, 2020, in the ordinary course of business, we entered into a new unsecured revolving credit facility (“New Credit Facility”), replacing the previous facility discussed below which was to expire in April 2021.

The material terms and covenants of the New Credit Facility are substantially similar to our previous credit facility.

The New Credit Facility provides that we may borrow, on a revolving credit basis, up to a maximum of $ 150 million at any one time, with potential to expand the total credit availability to $ 225 million based on consent of the issuing banks and certain other conditions.

The New Credit Facility expires on March 19, 2025 , and all outstanding amounts are then due and payable.

Interest is variable based upon formulas tied to LIBOR or an alternate base rate defined in the New Credit Facility.

In the event that LIBOR becomes unavailable or is no longer deemed an appropriate reference rate, the New Credit Facility allows for the use of a benchmark replacement rate.

We must also pay facility fees that are tied to our then-applicable consolidated leverage ratio.

Loans may be used for general corporate purposes.

Due to the nature of its terms, when we have outstanding borrowings under the Facility, they will be classified as long-term debt.

At June 30, 2019 and 2018 , we had no borrowings outstanding under the Facility.

At June 30, 2019 and 2018 , we had $5.1 million of standby letters of credit outstanding, which reduced the amount available for borrowing on the Facility.

We paid no interest in 2019 and 2018 .

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

Due to the nature of its terms, when we have outstanding borrowings under the New Credit Facility, they will be classified as long-term debt.

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

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

There are two principal financial covenants:

an interest expense test that requires us to maintain an interest coverage ratio not less than 2.5 to 1 at the end of each fiscal quarter;

and an indebtedness test that requires us to maintain a consolidated leverage ratio not greater than 3 to 1 at all times.

The interest coverage ratio is calculated by dividing Consolidated EBIT by Consolidated Interest Expense, and the leverage ratio is calculated by dividing Consolidated Debt by Consolidated EBITDA.

All financial terms used in the covenant calculations are defined more specifically in the Facility.

Note 5 – Commitments

We have operating and capital leases with initial noncancelable lease terms in excess of one year covering the rental of various facilities and equipment, which expire at various dates through fiscal year 2029 .

and an indebtedness test that requires us to maintain a consolidated leverage ratio not greater than 3.5 to 1, 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 New Credit Facility.

At June 30, 2019 , we had an unsecured credit facility under which we could borrow, on a revolving credit basis, up to a maximum of $ 150 million at any one time, with potential to expand the total credit availability to $ 225 million subject to us obtaining consent of the issuing banks and certain other conditions.

At June 30, 2020 and 2019 , we had no borrowings outstanding under these facilities.

At June 30, 2020 and 2019 , we had $ 2.8 million and $ 5.1 million , respectively, of standby letters of credit outstanding, which reduced the amount available for borrowing under these facilities.

We paid no interest in 2020 and 2019 .

Note 5 – Leases

General Lease Description

We have operating leases with initial noncancelable lease terms in excess of one year covering the rental of various facilities and equipment.

Certain of these leases contain renewal options and some provide options to purchase during the lease term.

The future minimum rental commitments due under these leases are summarized as follows:

Our operating leases include leases for real estate for some of our office and manufacturing facilities as well as manufacturing and non-manufacturing equipment used in our business.

The remaining lease terms for these operating leases range from 1 year to 8 years .

We have finance leases with initial noncancelable lease terms in excess of one year covering the rental of various facilities and equipment.

These leases are generally for manufacturing and non-manufacturing equipment used in our business and warehouse facilities.

The remaining lease terms for these finance leases range from 3 years to 5 years .

Significant Assumptions and Judgments

Contract Contains a Lease

In evaluating our contracts to determine whether a contract is or contains a lease, we considered the following:

Whether explicitly or implicitly identified assets have been deployed in the contract;

Whether we obtain substantially all of the economic benefits from the use of that underlying asset, and we can direct how and for what purpose the asset is used during the term of the contract.

Allocation of Consideration

In determining how to allocate consideration between lease and non-lease components in a contract that was deemed to contain a lease, we used judgment and consistent application of assumptions to reasonably allocate the consideration.

Options to Extend or Terminate Leases

We have leases which contain options to extend or terminate the leases.

On a lease-by-lease basis, we have determined if the extension should be considered reasonably certain to be exercised and thus a right-of-use asset and a lease liability should be recorded.

Discount Rate

The discount rate for leases, if not explicitly stated in the lease, is the incremental borrowing rate, which is the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

We used a discount rate to calculate the present value of the lease liability at the date of adoption.

In the development of the discount rate, we considered our internal borrowing rate, treasury security rates, collateral and credit risk specific to us, and our lease portfolio characteristics.

As of June 30, 2020 , the weighted-average discount rate of our operating and finance leases was 3.0 % and 3.6 % , respectively.

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

Practical Expedients and Accounting Policy Elections

Amounts Recognized in the Financial Statements

The components of lease expense for the year ended June 30 have been provided as follows:

Operating lease cost in Cost of Sales and Selling, General and Administrative Expenses

Finance lease cost:

Amortization of assets in Cost of Sales

Interest on lease liabilities in Other, Net

Total finance lease cost

Short-term lease cost in Cost of Sales and Selling, General and Administrative Expenses

Total net lease cost

Supplemental balance sheet information related to leases at June 30 is as follows:

Operating Leases

Operating Lease Right-Of-Use Assets

Current operating lease liabilities in Accrued Liabilities

Noncurrent Operating Lease Liabilities

Total operating lease liabilities

Finance Leases

Finance lease right-of-use assets in Property, Plant and Equipment-Net

Current finance lease liabilities in Accrued Liabilities

Noncurrent finance lease liabilities in Other Noncurrent Liabilities

Total finance lease liabilities

Supplemental cash flow information related to leases for the year ended June 30 is as follows:

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

Operating cash flows from finance leases

Financing cash flows from finance leases

Supplemental noncash information on lease liabilities arising from obtaining right-of-use assets

Supplemental noncash information on lease liabilities removed due to purchase of leased asset

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

As of June 30, 2020 , the maturities of lease liabilities were as follows:

Operating Leases

Finance Leases

Total minimum payments

Less amount representing interest

Present value of lease obligations

As of June 30, 2020 , the weighted-average remaining term of our operating and finance leases was 4.7 years and 3.8 years , respectively.

As previously disclosed in our 2019 Annual Report on Form 10-K and under the previous lease accounting standard (Topic 840), as of June 30, 2019, future minimum lease payments under noncancelable leases with initial lease terms in excess of one year were as follows:

Operating Leases

Capital Leases

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Present value of capital lease obligations

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

Operating leases:

Minimum rentals

Contingent rentals

Short-term cancelable leases

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

Machinery and equipment

Less accumulated amortization

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

Note 6 – Contingencies

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

A novel strain of coronavirus (“COVID-19”) was first identified in Wuhan, China in December 2019.

On March 11, 2020, the World Health Organization designated COVID-19 as a global pandemic.

In the U.S., state and local governments recommended or mandated actions to slow the transmission of COVID-19.

We are monitoring the evolving situation and guidance from authorities, including federal, state and local public health departments.

We continue to review the carrying value of our assets and, as needed, have recorded additional reserves for inventory and receivables related to the impact of COVID-19 on our Foodservice segment.

The future impact of COVID-19 on our results of operations, financial condition, and cash flows is contingent upon the duration and severity of the outbreak.

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

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25 % of our employees are represented under various collective bargaining contracts.

The labor contract for our Bedford Heights, Ohio plant facility, which produces various garlic bread products, will expire on April 30, 2020.

The labor contract for our Bedford Heights, Ohio plant facility, which produces various garlic bread products, will expire on October 31, 2020.

6 % of our employees are represented under this collective bargaining contract.

None of our other collective bargaining contracts will expire within one year.

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

Note 7 – Goodwill and Other Intangible Assets

Goodwill attributable to the Retail and Foodservice segments was $157.4 million and $51.0 million , respectively, at June 30, 2019 compared to $119.3 million and $48.7 million , respectively, at June 30, 2018 .

The increase in goodwill is the result of the acquisitions of Bantam in October 2018 and Omni in November 2018.

See further discussion in Note 2.

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

Goodwill at beginning of year

Goodwill acquired during the year - Bantam

Goodwill acquired during the year - Omni

Goodwill at end of year

Goodwill attributable to the Retail and Foodservice segments was $ 157.4 million and $ 51.0 million , respectively, at June 30, 2020 and 2019 .

The following table summarizes our identifiable other intangible assets at June 30:

The intangible asset values and lives related to the acquisition of Bantam are included in the table below.

See further discussion in Note 2.

Tradenames (20 to 30-year life)

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Amortization expense

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

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

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Compensation and employee benefits

Operating leases

Total accrued liabilities

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

Other noncurrent liabilities at June 30 were composed of:

Workers compensation

Acquisition-related contingent consideration

Contingent consideration

Deferred compensation and accrued interest

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In addition to the effect of the lower overall federal tax rate, the Tax Act resulted in a $ 9.5 million one-time benefit for the re-measurement of our net deferred tax liability in 2018.

The statutory federal income tax rate for our 2019 tax return will be 21% .

The SEC issued Staff Accounting Bulletin No.

118 (“SAB 118”) on December 22, 2017.

SAB 118 allowed for a measurement period in which companies could either use provisional estimates for changes resulting from the Tax Act or apply the tax laws that were in effect immediately prior to the Tax Act being enacted if estimates could not be determined at the time of the preparation of the financial statements until the actual impacts could be determined.

We recorded an initial estimate of the impact of the Tax Act within our December 31, 2017 financial statements, and the adjustments recorded in the second half of 2018 were not material .

The measurement period has ended, and we have completed the accounting for all the impacts of the Tax Act.

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

We file a consolidated federal income tax return.

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Total taxes based on income

In 2018, we adopted new accounting guidance for stock-based compensation.

One of the changes resulting from this new guidance is the inclusion of the tax consequences related to stock-based compensation within the computation of income tax expense versus equity.

We adopted this provision on a prospective basis.

Prior to 2018, certain tax benefits were recorded directly to common stock, and these amounts totaled $1.1 million for 2017.

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

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Effective rate

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

Our net deferred tax liability for all periods presented in the Consolidated Balance Sheets has been classified as noncurrent.

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Employee medical and other benefits

Operating lease liabilities

Other accrued liabilities

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Intangible assets

Operating lease right-of-use assets

Total deferred tax liabilities

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Prepaid federal income taxes of $ 5.3 million and $ 5.2 million were included in Other Current Assets at June 30, 2020 and 2019 , respectively.

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

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

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

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Tax positions related to prior years:

Lapse of statute of limitations

Balance, end of year

We included $0.8 million of the gross tax contingency reserve at June 30, 2019 in Accrued Liabilities as these amounts are expected to be resolved within the next 12 months.

The remaining liability of $0.9 million was included in Other Noncurrent Liabilities.

We have not classified any of the gross tax contingency reserve at June 30, 2020 in Accrued Liabilities as none of these amounts are expected to be resolved within the next 12 months.

Consequently, the entire liability of $ 1.0 million was included in Other Noncurrent Liabilities.

We expect that the amount of these liabilities will change within the next 12 months;

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

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

(Benefit) expense recognized for net tax-related interest and penalties

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

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

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Within the frozen food section of the grocery store, we sell yeast rolls, garlic breads and mini stuffed bagels.

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

Foodservice - The vast majority of the products we sell in the Foodservice segment are sold through sales personnel, food brokers and distributors in the United States.

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Total net sales

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

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

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Total Foodservice net sales

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

The following sets forth certain additional financial information attributable to our reportable segments, certain amounts not allocated among our reportable segments and amounts retained at the corporate level for the years ended June 30:

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Restructuring and Impairment Charges (3)

Multiemployer Pension Settlement and Related Costs (3)

Corporate Expenses (4)

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All intercompany transactions have been eliminated.

Restructuring and impairment charges and multiemployer pension settlement and related costs were not allocated to our two reportable segments due to their unusual nature.

Our Corporate Expenses include various expenses of a general corporate nature, ERP expenses and costs related to certain divested or closed nonfood operations.

Restructuring and impairment charges were not allocated to our two reportable segments due to their unusual nature.

Our Corporate Expenses include various expenses of a general corporate nature, expenditures for Project Ascent and costs related to certain divested or closed nonfood operations.

By their very nature, these costs have not been allocated to the Retail and Foodservice segments.

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Corporate assets consist principally of cash and equivalents.

The increase in Retail and Foodservice identifiable assets from June 30, 2019 to June 30, 2020 reflected property additions, notably a capacity expansion project at our frozen dinner roll facility in Horse Cave, Kentucky, as well as operating lease right-of-use assets recorded in 2020 due to the adoption of new accounting guidance.

The increase in Retail and Foodservice identifiable assets from June 30, 2018 to June 30, 2019 was due to the acquisitions of Bantam and Omni.

The increase in Corporate identifiable assets from June 30, 2017 to June 30, 2018 was primarily due to the increase in cash and equivalents.

As discussed above, we do not present identifiable assets, payments for property additions or depreciation and amortization by reportable segment.

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

Retail segment net sales attributable to Walmart Inc.

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As a percentage of consolidated net sales

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

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

Note 11 – Stock-Based Compensation

Our shareholders previously approved the adoption of and subsequent amendments to the Lancaster Colony Corporation 2005 Stock Plan (the “2005 Plan”).

The 2005 Plan reserved 2,000,000 common shares for issuance to our employees and directors.

As the 2005 Plan expired in May 2015, we obtained shareholder approval of the Lancaster Colony Corporation 2015 Omnibus Incentive Plan (the “2015 Plan”) at our November 2015 Annual Meeting of Shareholders.

The 2015 Plan did not affect any currently outstanding equity awards granted under the 2005 Plan.

Our shareholders previously approved the Lancaster Colony Corporation 2015 Omnibus Incentive Plan (the “2015 Plan”).

The 2015 Plan reserved 1,500,000 common shares for issuance to our employees and directors.

All awards granted under these plans will be exercisable at prices not less than fair market value as of the date of the grant.

The vesting period for awards granted under these plans varies as to the type of award granted, but generally these awards have a maximum term of five years .

All awards granted under this plan will be exercisable at prices not less than fair market value as of the date of the grant.

The vesting period for awards granted under this plan varies as to the type of award granted, and the maximum term of these awards is seven years .

We recognize compensation expense over the requisite service period of the grant.

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The SSSARs we grant generally vest one-third on the first anniversary of the grant date, one-third on the second anniversary of the grant date and one-third on the third anniversary of the grant date.

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

The following table summarizes our SSSARs compensation expense and tax benefits recorded for each of the years ended June 30:

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Fair value of vested rights

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

The following table summarizes the activity relating to SSSARs granted under the plans for the year ended June 30, 2020 :

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Weighted average grant date fair value per award

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

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

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

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

The following table summarizes our restricted stock compensation expense and tax benefits recorded for each of the years ended June 30:

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Discount rate

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

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

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In consideration of the current average age of the plans’ participants, the investment guidelines are based upon an investment horizon of at least 10 years.

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

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

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Actual Percentage of Plan Assets

Cash and equivalents

Equity securities

Fixed income, including cash

Our target asset allocations are maintained through ongoing review and periodic rebalancing of equity and fixed income investments with assistance from an independent outside investment consultant.

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Mutual funds equity

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

The plan assets classified at Level 1 include money market funds and mutual funds.

6 unchanged sentences

benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data including market research publications.

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

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

2 unchanged sentences

Interest cost

Actuarial loss (gain)

Actuarial loss

Benefits paid

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(Tabular amounts in thousands, except per share data)

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

See further discussion in Note 1.

The following table summarizes the components of net periodic benefit income for our pension plans at June 30:

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Multiemployer Plans

In the three years ended June 30, 2019 , certain of our subsidiaries participated in multiemployer plans that provide pension benefits to retiree workers under collective bargaining contracts at such locations.

These plans generally provide for retirement, death and/or termination benefits for eligible employees within the applicable collective bargaining contract, based on specific eligibility/participation requirements, vesting periods and benefit formulas.

The risks of participating in these multiemployer plans are different from single-employer plans in the following aspects:

In the three years ended June 30, 2020 , one of our subsidiaries participated in a multiemployer plan that provides pension benefits to retiree workers under a collective bargaining contract.

This plan generally provides for retirement, death and/or termination benefits for eligible employees within the collective bargaining contract, based on specific eligibility/participation requirements, vesting periods and benefit formulas.

The risks of participating in a multiemployer plan are different from single-employer plans in the following aspects:

(1) assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers, (2) if a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers and (3) if a participating employer chooses to stop participating in the multiemployer plan, it may be required to pay the plan an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

In 2017 the employees at our Bedford Heights, Ohio plant voted to ratify a new collective bargaining agreement.

Among other terms, the new agreement provided for our complete withdrawal from the underfunded multiemployer Cleveland Bakers and Teamsters Pension Fund.

As settlement of our portion of underfunded pension benefits of the multiemployer plan, we paid $17.0 million in 2017 for a full withdrawal from the plan.

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

1 unchanged sentence

(Tabular amounts in thousands, except per share data)

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

Our participation in this multiemployer pension plan for the three years ended June 30, 2020 is reflected in the following table.

All information in the table is as of December 31 of the relevant year, except contributions which are based on our fiscal year, or except as otherwise noted.

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The FIP/RP status pending/implemented column indicates plans for which a funding improvement plan (“FIP”) or a rehabilitation plan (“RP”) is either pending or has been implemented by the trustees of each plan.

Except as noted below regarding contributions to the Cleveland Bakers and Teamsters Pension Fund, there have been no significant changes that affect the comparability of 2019 , 2018 or 2017 contributions.

There have been no significant changes that affect the comparability of 2020 , 2019 or 2018 contributions.

Pension Protection

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FIP/RP Status

Cleveland Bakers and Teamsters Pension Fund (2)

34-0904419-001

Western Conference of Teamsters Pension Plan

91-6145047-001

Total contributions to multiemployer plans

Contributions do not include payments related to multiemployer pension withdrawals/settlements.

As discussed above, we withdrew from this plan in 2017 and did not make any contributions in 2019 and 2018.

Our 2017 contributions included amounts related to a new collective bargaining contract.

Our contributions to the Cleveland Bakers and Teamsters Pension Fund exceeded 5% of the total contributions to the plan in the plan year ended December 31, 2017 .

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

Under this multiemployer plan and one additional multiemployer plan, we also contribute amounts for health and welfare benefits that are defined by each plan.

These benefits are not vested.

1 unchanged sentence

Multiemployer health and welfare plan contributions

We also began to make non-elective contributions for the union employees at our Bedford Heights, Ohio plant into a union-sponsored multiemployer 401(k) plan following our withdrawal from the underfunded Cleveland Bakers and Teamsters Pension Fund in 2017.

Our contributions totaled $0.7 million , $0.7 million and $0.8 million in 2019 , 2018 and 2017 , respectively, including $0.6 million to initially fund this 401(k) plan in 2017.

We also make non-elective contributions for the union employees at our Bedford Heights, Ohio plant into a union-sponsored multiemployer 401(k) plan.

Our contributions totaled $ 0.7 million in 2020 , 2019 and 2018 .

Deferred Compensation Plan

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Diluted Net Income Per Common Share (4) (5) (6)

Included in the second quarter and fourth quarter net income was an after-tax benefit of $7.4 million and $5.7 million , respectively, or approximately $0.27 and $0.21 per diluted share, respectively, related to the reduction in the fair value of Angelic’s contingent consideration liability.

The after-tax benefit for the fiscal year was $13.1 million , or approximately $0.48 per diluted share.

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

Included in net income were after-tax expenditures for Project Ascent of $ 2.1 million in the first quarter, or approximately $ 0.08 per diluted share;

$ 3.7 million in the second quarter, or approximately $ 0.14 per diluted share;

$ 3.7 million in the third quarter, or approximately $ 0.13 per diluted share;

and $ 4.2 million in the fourth quarter, or approximately $ 0.15 per diluted share.

The after-tax expense for the fiscal year was $ 13.7 million , or approximately $ 0.50 per diluted share.

Included in the third quarter and fourth quarter net income were after-tax expenses totaling $ 4.2 million and $ 3.5 million , respectively, or approximately $ 0.15 and $ 0.13 per diluted share, respectively, related to certain costs attributed to the impacts of COVID-19, including the temporary increase in pay for our front-line employees, the fourth quarter write-off of engineering costs for a canceled dressing plant expansion project and changes in the Foodservice inventory reserve.

The after-tax expense for the fiscal year was $ 7.7 million , or approximately $ 0.28 per diluted share.

Included in the first quarter and fiscal year net income were after-tax restructuring and impairment charges of $ 0.7 million , or approximately $ 0.02 per diluted share.

Diluted net income per common share amounts are calculated independently for each of the quarters presented.

Accordingly, the sum of the quarterly net income per common share amounts may not agree with the fiscal year.

Included in the second quarter net income was the one-time preliminary deferred tax benefit of $8.9 million , or approximately $0.32 per diluted share, resulting from the Tax Act.

The fiscal year impact was $9.5 million , or approximately $0.35 per diluted share.

Included in the second quarter and fourth quarter net income was an after-tax benefit of $ 7.4 million and $ 5.7 million , respectively, or approximately $ 0.27 and $ 0.21 per diluted share, respectively, related to the reduction in the fair value of Angelic’s contingent consideration liability.

The after-tax benefit for the fiscal year was $ 13.1 million , or approximately $ 0.48 per diluted share.

Included in the fourth quarter and fiscal year net income were after-tax expenditures for Project Ascent of $ 1.4 million , or approximately $ 0.05 per diluted share, and after-tax restructuring and impairment charges of $ 1.3 million , or approximately $ 0.05 per diluted share.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data