MZTI filing — read by section

Item 8. Financial Statements and Supplementary Data

Item 8. Financial Statements and Supplementary Data 
 
 27 

 Table of Contents 

 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 
 To the shareholders and the Board of Directors of Lancaster Colony Corporation 
 
 Opinion on the Financial Statements 
 We have audited the accompanying consolidated balance sheets of Lancaster Colony Corporation and subsidiaries (the “Company”) as of June 30, 2020 and 2019 , the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows, for each of the three years in the period ended June 30, 2020 , and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2020 and 2019 and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2020 , in conformity with accounting principles generally accepted in the United States of America. 
 We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of June 30, 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 
 
 These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. 
 We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. 
 
 Critical Audit Matter 
 
 The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 
 
 Fair Value - Contingent Consideration (Level 3 Liabilities) - Refer to Note 3 in the Financial Statements 
 
 Critical Audit Matter Description 
 
 The Company has contingent consideration liabilities whose 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. The terms of these acquisitions specify that the sellers may receive an earn-out payment as part of the overall consideration in the transactions based upon a pre-determined contractual formula at a specified future date. Under accounting principles generally accepted in the United States of America, these liabilities are generally classified as Level 3 liabilities and are marked to fair value on a recurring basis. 
 
 28 

 Table of Contents 

 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. 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, as defined in the related acquisition agreement, to estimate fair value. 
 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 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. 
 
 • 
 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 
 
 Deloitte & Touche LLP 
 
 Columbus, Ohio 
 August 27, 2020 
 
 We have served as the Company’s auditor since 1961. 
 
 29 

 Table of Contents 

 LANCASTER COLONY CORPORATION AND SUBSIDIARIES 
 CONSOLIDATED BALANCE SHEETS 
 
 June 30, 
 
 (Amounts in thousands, except share data) 
 2020 
 
 2019 
 
 ASSETS 
 
 Current Assets: 
 
 Cash and equivalents 
 $ 
 198,273 
 
 $ 
 196,288 
 
 Receivables 
 86,604 
 
 75,691 
 
 Inventories: 
 
 Raw materials 
 34,374 
 
 30,647 
 
 Finished goods 
 50,674 
 
 55,425 
 
 Total inventories 
 85,048 
 
 86,072 
 
 Other current assets 
 15,687 
 
 10,518 
 
 Total current assets 
 385,612 
 
 368,569 
 
 Property, Plant and Equipment: 
 
 Land, buildings and improvements 
 186,542 
 
 163,094 
 
 Machinery and equipment 
 388,929 
 
 340,232 
 
 Total cost 
 575,471 
 
 503,326 
 
 Less accumulated depreciation 
 282,183 
 
 256,282 
 
 Property, plant and equipment-net 
 293,288 
 
 247,044 
 
 Other Assets: 
 
 Goodwill 
 208,371 
 
 208,371 
 
 Other intangible assets-net 
 65,216 
 
 70,277 
 
 Operating lease right-of-use assets 
 22,977 
 
 — 
 
 Other noncurrent assets 
 17,889 
 
 11,138 
 
 Total 
 $ 
 993,353 
 
 $ 
 905,399 
 
 LIABILITIES AND SHAREHOLDERS’ EQUITY 
 
 Current Liabilities: 
 
 Accounts payable 
 $ 
 71,433 
 
 $ 
 76,670 
 
 Accrued liabilities 
 54,826 
 
 43,036 
 
 Total current liabilities 
 126,259 
 
 119,706 
 
 Noncurrent Operating Lease Liabilities 
 17,893 
 
 — 
 
 Other Noncurrent Liabilities 
 31,661 
 
 35,938 
 
 Deferred Income Taxes 
 34,240 
 
 22,882 
 
 Commitments and Contingencies 
 
 Shareholders’ Equity: 
 
 Preferred stock-authorized 3,050,000 shares; outstanding-none 
 
 Common stock-authorized 75,000,000 shares; outstanding-2020-27,523,935 shares; 2019-27,491,497 shares 
 125,153 
 
 122,844 
 
 Retained earnings 
 1,421,121 
 
 1,359,782 
 
 Accumulated other comprehensive loss 
 ( 12,070 
 ) 
 
 ( 10,308 
 ) 
 
 Common stock in treasury, at cost 
 ( 750,904 
 ) 
 
 ( 745,445 
 ) 
 
 Total shareholders’ equity 
 783,300 
 
 726,873 
 
 Total 
 $ 
 993,353 
 
 $ 
 905,399 
 
 See accompanying notes to consolidated financial statements. 
 
 30 

 Table of Contents 

 LANCASTER COLONY CORPORATION AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF INCOME 
 
 Years Ended June 30, 
 
 (Amounts in thousands, except per share data) 
 2020 
 
 2019 
 
 2018 
 
 Net Sales 
 $ 
 1,334,388 
 
 $ 
 1,307,787 
 
 $ 
 1,222,925 
 
 Cost of Sales 
 976,352 
 
 981,589 
 
 919,419 
 
 Gross Profit 
 358,036 
 
 326,198 
 
 303,506 
 
 Selling, General and Administrative Expenses 
 180,945 
 
 149,811 
 
 129,906 
 
 Change in Contingent Consideration 
 257 
 
 ( 16,180 
 ) 
 
 2,052 
 
 Restructuring and Impairment Charges 
 886 
 
 1,643 
 
 — 
 
 Operating Income 
 175,948 
 
 190,924 
 
 171,548 
 
 Other, Net 
 3,129 
 
 4,618 
 
 2,655 
 
 Income Before Income Taxes 
 179,077 
 
 195,542 
 
 174,203 
 
 Taxes Based on Income 
 42,094 
 
 44,993 
 
 38,889 
 
 Net Income 
 $ 
 136,983 
 
 $ 
 150,549 
 
 $ 
 135,314 
 
 Net Income Per Common Share: 
 
 Basic 
 $ 
 4.98 
 
 $ 
 5.48 
 
 $ 
 4.93 
 
 Diluted 
 $ 
 4.97 
 
 $ 
 5.46 
 
 $ 
 4.92 
 
 Weighted Average Common Shares Outstanding: 
 
 Basic 
 27,448 
 
 27,438 
 
 27,403 
 
 Diluted 
 27,496 
 
 27,537 
 
 27,459 
 
 See accompanying notes to consolidated financial statements. 
 
 31 

 Table of Contents 

 LANCASTER COLONY CORPORATION AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 
 
 Years Ended June 30, 
 
 (Amounts in thousands) 
 2020 
 
 2019 
 
 2018 
 
 Net Income 
 $ 
 136,983 
 
 $ 
 150,549 
 
 $ 
 135,314 
 
 Other Comprehensive (Loss) Income: 
 
 Defined Benefit Pension and Postretirement Benefit Plans: 
 
 Net (loss) gain arising during the period, before tax 
 ( 2,662 
 ) 
 
 ( 2,902 
 ) 
 
 3,041 
 
 Amortization of loss, before tax 
 546 
 
 410 
 
 536 
 
 Amortization of prior service credit, before tax 
 ( 182 
 ) 
 
 ( 182 
 ) 
 
 ( 182 
 ) 
 
 Total Other Comprehensive (Loss) Income, Before Tax 
 ( 2,298 
 ) 
 
 ( 2,674 
 ) 
 
 3,395 
 
 Tax Attributes of Items in Other Comprehensive (Loss) Income: 
 
 Net (loss) gain arising during the period, tax 
 622 
 
 678 
 
 ( 710 
 ) 
 
 Amortization of loss, tax 
 ( 128 
 ) 
 
 ( 96 
 ) 
 
 ( 180 
 ) 
 
 Amortization of prior service credit, tax 
 42 
 
 43 
 
 61 
 
 Total Tax Benefit (Expense) 
 536 
 
 625 
 
 ( 829 
 ) 
 
 Other Comprehensive (Loss) Income, Net of Tax 
 ( 1,762 
 ) 
 
 ( 2,049 
 ) 
 
 2,566 
 
 Comprehensive Income 
 $ 
 135,221 
 
 $ 
 148,500 
 
 $ 
 137,880 
 
 See accompanying notes to consolidated financial statements. 
 
 32 

 Table of Contents 

 LANCASTER COLONY CORPORATION AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF CASH FLOWS 
 
 Years Ended June 30, 
 
 (Amounts in thousands) 
 2020 
 
 2019 
 
 2018 
 
 Cash Flows From Operating Activities: 
 
 Net income 
 $ 
 136,983 
 
 $ 
 150,549 
 
 $ 
 135,314 
 
 Adjustments to reconcile net income to net cash provided by operating activities: 
 
 Impacts of noncash items: 
 
 Depreciation and amortization 
 37,963 
 
 31,848 
 
 26,896 
 
 Change in contingent consideration 
 257 
 
 ( 16,180 
 ) 
 
 2,052 
 
 Deferred income taxes and other changes 
 11,402 
 
 7,336 
 
 ( 8,502 
 ) 
 
 Stock-based compensation expense 
 6,115 
 
 5,972 
 
 5,039 
 
 Restructuring and impairment charges 
 ( 268 
 ) 
 
 1,643 
 
 — 
 
 Loss (gain) on sale of property 
 315 
 
 ( 13 
 ) 
 
 ( 10 
 ) 
 
 Pension plan activity 
 ( 578 
 ) 
 
 ( 749 
 ) 
 
 ( 434 
 ) 
 
 Changes in operating assets and liabilities: 
 
 Receivables 
 ( 10,913 
 ) 
 
 ( 748 
 ) 
 
 ( 3,040 
 ) 
 
 Inventories 
 1,024 
 
 6,282 
 
 ( 14,485 
 ) 
 
 Other current assets 
 ( 14,267 
 ) 
 
 ( 3,085 
 ) 
 
 2,164 
 
 Accounts payable and accrued liabilities 
 2,736 
 
 14,743 
 
 15,720 
 
 Net cash provided by operating activities 
 170,769 
 
 197,598 
 
 160,714 
 
 Cash Flows From Investing Activities: 
 
 Payments for property additions 
 ( 82,642 
 ) 
 
 ( 70,880 
 ) 
 
 ( 31,025 
 ) 
 
 Cash paid for acquisitions, net of cash acquired 
 — 
 
 ( 55,364 
 ) 
 
 ( 318 
 ) 
 
 Proceeds from sale of property 
 129 
 
 169 
 
 38 
 
 Other-net 
 ( 752 
 ) 
 
 ( 786 
 ) 
 
 ( 147 
 ) 
 
 Net cash used in investing activities 
 ( 83,265 
 ) 
 
 ( 126,861 
 ) 
 
 ( 31,452 
 ) 
 
 Cash Flows From Financing Activities: 
 
 Payment of dividends 
 ( 75,644 
 ) 
 
 ( 70,110 
 ) 
 
 ( 64,531 
 ) 
 
 Purchase of treasury stock 
 ( 5,459 
 ) 
 
 ( 7,411 
 ) 
 
 ( 1,102 
 ) 
 
 Tax withholdings for stock-based compensation 
 ( 3,806 
 ) 
 
 ( 2,360 
 ) 
 
 ( 981 
 ) 
 
 Other-net 
 ( 610 
 ) 
 
 ( 320 
 ) 
 
 — 
 
 Net cash used in financing activities 
 ( 85,519 
 ) 
 
 ( 80,201 
 ) 
 
 ( 66,614 
 ) 
 
 Net change in cash and equivalents 
 1,985 
 
 ( 9,464 
 ) 
 
 62,648 
 
 Cash and equivalents at beginning of year 
 196,288 
 
 205,752 
 
 143,104 
 
 Cash and equivalents at end of year 
 $ 
 198,273 
 
 $ 
 196,288 
 
 $ 
 205,752 
 
 See accompanying notes to consolidated financial statements. 
 
 33 

 Table of Contents 

 LANCASTER COLONY CORPORATION AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY 
 
 (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, 2017 
 
 27,448 
 
 $ 
 115,174 
 
 $ 
 1,206,671 
 
 $ 
 ( 8,936 
 ) 
 
 $ 
 ( 736,932 
 ) 
 
 $ 
 575,977 
 
 Net income 
 
 135,314 
 
 135,314 
 
 Net pension and postretirement benefit gains, net of $829 tax effect 
 
 2,566 
 
 2,566 
 
 Tax Cuts and Jobs Act of 2017, Reclassification from accumulated other comprehensive loss to retained earnings 
 
 1,889 
 
 ( 1,889 
 ) 
 
 — 
 
 Cash dividends - common stock ($2.35 per share) 
 
 ( 64,531 
 ) 
 
 ( 64,531 
 ) 
 
 Purchase of treasury stock 
 
 ( 9 
 ) 
 
 ( 1,102 
 ) 
 
 ( 1,102 
 ) 
 
 Stock-based plans 
 
 49 
 
 ( 981 
 ) 
 
 ( 981 
 ) 
 
 Stock-based compensation expense 
 
 5,039 
 
 5,039 
 
 Balance, June 30, 2018 
 
 27,488 
 
 119,232 
 
 1,279,343 
 
 ( 8,259 
 ) 
 
 ( 738,034 
 ) 
 
 652,282 
 
 Net income 
 
 150,549 
 
 150,549 
 
 Net pension and postretirement benefit losses, net of ($625) tax effect 
 
 ( 2,049 
 ) 
 
 ( 2,049 
 ) 
 
 Cash dividends - common stock ($2.55 per share) 
 
 ( 70,110 
 ) 
 
 ( 70,110 
 ) 
 
 Purchase of treasury stock 
 
 ( 48 
 ) 
 
 ( 7,411 
 ) 
 
 ( 7,411 
 ) 
 
 Stock-based plans 
 
 51 
 
 ( 2,360 
 ) 
 
 ( 2,360 
 ) 
 
 Stock-based compensation expense 
 
 5,972 
 
 5,972 
 
 Balance, June 30, 2019 
 
 27,491 
 
 122,844 
 
 1,359,782 
 
 ( 10,308 
 ) 
 
 ( 745,445 
 ) 
 
 726,873 
 
 Net income 
 
 136,983 
 
 136,983 
 
 Net pension and postretirement benefit losses, net of ($536) tax effect 
 
 ( 1,762 
 ) 
 
 ( 1,762 
 ) 
 
 Cash dividends - common stock ($2.75 per share) 
 
 ( 75,644 
 ) 
 
 ( 75,644 
 ) 
 
 Purchase of treasury stock 
 
 ( 38 
 ) 
 
 ( 5,459 
 ) 
 
 ( 5,459 
 ) 
 
 Stock-based plans 
 
 71 
 
 ( 3,806 
 ) 
 
 ( 3,806 
 ) 
 
 Stock-based compensation expense 
 
 6,115 
 
 6,115 
 
 Balance, June 30, 2020 
 
 27,524 
 
 $ 
 125,153 
 
 $ 
 1,421,121 
 
 $ 
 ( 12,070 
 ) 
 
 $ 
 ( 750,904 
 ) 
 
 $ 
 783,300 
 
 See accompanying notes to consolidated financial statements. 
 
 34 

 Table of Contents 

 LANCASTER COLONY CORPORATION AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 (Tabular amounts in thousands, except per share data) 
 
 Note 1 – Summary of Significant Accounting Policies 
 Principles of Consolidation 
 The accompanying consolidated financial statements include the accounts of Lancaster Colony Corporation and our wholly-owned subsidiaries, collectively referred to as “we,” “us,” “our,” “registrant,” or the “Company.” Intercompany transactions and accounts have been eliminated in consolidation. Our fiscal year begins on July 1 and ends on June 30. Unless otherwise noted, references to “year” pertain to our fiscal year; for example, 2020 refers to fiscal 2020 , which is the period from July 1, 2019 to June 30, 2020 . 
 Use of Estimates 
 The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires that we make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Estimates included in these consolidated financial statements include allowances for customer deductions, net realizable value of inventories, useful lives for the calculation of depreciation and amortization, distribution accruals, pension and postretirement assumptions and self-insurance accruals. Actual results could differ from these estimates. 
 Cash and Equivalents 
 We consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. The carrying amounts of our cash and equivalents approximate fair value due to their short maturities and are considered level 1 investments, which have quoted market prices in active markets for identical assets. As a result of our cash management system, checks issued but not presented to the banks for payment may create negative book cash balances. When such negative balances exist, they are included in Accrued Liabilities. 
 Receivables and Related Allowances 
 We evaluate the adequacy of our allowances for customer deductions considering several factors including historical experience, specific trade programs and existing customer relationships. We also provide an allowance for doubtful accounts based on the aging of accounts receivable balances, historical write-off experience and on-going reviews of our trade receivables. Measurement of potential losses requires credit review of existing customer relationships, consideration of historical loss experience, including the need to adjust for current conditions, and judgments about the probable effects of relevant observable data, including present economic conditions such as delinquency rates and the economic health of customers. Our allowance for doubtful accounts was immaterial for all periods presented. 
 Credit Risk 
 Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and equivalents and trade accounts receivable. By policy, we limit the amount of credit exposure to any one institution or issuer. Our concentration of credit risk with respect to trade accounts receivable is mitigated by our credit evaluation process and by having a large and diverse customer base. However, see Note 10 with respect to our accounts receivable with Walmart Inc. and McLane Company, Inc., a wholesale distribution subsidiary of Berkshire Hathaway, Inc. 
 Inventories 
 Inventories are valued at the lower of cost or net realizable value and are costed by various methods that approximate actual cost on a first-in, first-out basis. Due to the nature of our business, work in process inventory is not a material component of inventory. When necessary, we provide allowances to adjust the carrying value of our inventory to the lower of cost or net realizable value, including any costs to sell or dispose. The determination of whether inventory items are slow moving, obsolete or in excess of needs requires estimates about the future demand for our products. The estimates as to future demand used in the valuation of inventory are subject to the ongoing success of our products and may differ from actual due to factors such as changes in customer and consumer demand. 
 Property, Plant and Equipment 
 Property, plant and equipment are recorded at cost, except for those acquired as part of a business combination, which are recorded at fair value at the time of purchase. We use the straight-line method of computing depreciation for financial reporting purposes based on the estimated useful lives of the corresponding assets. Estimated useful lives for buildings and improvements range generally from 10 to 40 years, machinery and equipment, excluding technology-related equipment, range generally from 3 to 15 years and technology-related equipment range generally from 3 to 5 years. For tax purposes, we generally compute depreciation using accelerated methods. 
 
 35 

 Table of Contents 
 LANCASTER COLONY CORPORATION AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 (Tabular amounts in thousands, except per share data) 
 
 Purchases of property, plant and equipment included in Accounts Payable and excluded from the property additions and the change in accounts payable in the Consolidated Statements of Cash Flows at June 30 were as follows: 
 
 2020 
 
 2019 
 
 2018 
 
 Construction in progress in Accounts Payable 
 $ 
 2,909 
 
 $ 
 7,852 
 
 $ 
 2,070 
 
 The following table sets forth depreciation expense, including finance lease amortization, in each of the years ended June 30: 
 
 2020 
 
 2019 
 
 2018 
 
 Depreciation expense 
 $ 
 31,604 
 
 $ 
 26,751 
 
 $ 
 22,168 
 
 Deferred Software Costs 
 We capitalize certain costs related to hosting arrangements that are service contracts (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 
 We monitor the recoverability of the carrying value of our long-lived assets by periodically considering whether indicators of impairment are present. If such indicators are present, we determine if the assets are recoverable by comparing the sum of the undiscounted future cash flows to the assets’ carrying amounts. Our cash flows are based on historical results adjusted to reflect our best estimate of future market and operating conditions. If the carrying amounts are greater, then the assets are not recoverable. In that instance, we compare the carrying amounts to the fair value to determine the amount of the impairment to be recorded. 
 Goodwill and Other Intangible Assets 
 Goodwill is not amortized. It is evaluated annually at April 30 by applying impairment testing procedures. Other intangible assets are amortized on a straight-line basis over their estimated useful lives to Selling, General and Administrative Expenses. We evaluate the future economic benefit of the recorded goodwill and other intangible assets when events or circumstances indicate potential recoverability concerns. Carrying amounts are adjusted appropriately when determined to have been impaired. See further discussion regarding goodwill and other intangible assets in Note 7. 
 Accrued Distribution 
 We incur various freight and other related costs associated with shipping products to our customers and warehouses. We provide accruals for unbilled shipments from carriers utilizing historical or projected freight rates and other relevant information. 
 Accruals for Self-Insurance 
 Self-insurance accruals are made for certain claims associated with employee health care, workers’ compensation and general liability insurance. These accruals include estimates that are primarily based on historical loss development factors. 
 Shareholders’ Equity 
 We are authorized to issue 3,050,000 shares of preferred stock consisting of 750,000 shares of Class A Participating Preferred Stock with $ 1.00 par value, 1,150,000 shares of Class B Voting Preferred Stock without par value and 1,150,000 shares of Class C Nonvoting Preferred Stock without par value. Our Board of Directors approved a share repurchase authorization of 2,000,000 common shares in November 2010. At June 30, 2020 , 1,315,911 common shares remained authorized for future purchase. 
 
 36 

 Table of Contents 
 LANCASTER COLONY CORPORATION AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 (Tabular amounts in thousands, except per share data) 
 
 Revenue Recognition 
 When Performance Obligations Are Satisfied 
 A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account for revenue recognition. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The singular performance obligation of our customer contracts is determined by each individual purchase order and the respective food products ordered, with revenue being recognized at a point-in-time when the obligation under the terms of the agreement is satisfied and product control is transferred to our customer. Specifically, control transfers to our customers when the product is delivered to or picked up by our customers based upon applicable shipping terms, as our customers can direct the use and obtain substantially all of the remaining benefits from the asset at this point in time. The performance obligations in our customer contracts are generally satisfied within 30 days. As such, we have not disclosed the transaction price allocated to remaining performance obligations as of June 30, 2020 . 
 Significant Payment Terms 
 In general, within our customer contracts, the purchase order identifies the product, quantity, price, pick-up allowances, payment terms and final delivery terms. Payment terms usually include early pay discounts. We grant payment terms consistent with industry standards. Although some payment terms may be more extended, presently the majority of our payment terms are less than 60 days. As a result, we have used the available practical expedient and, consequently, do not adjust our revenues for the effects of a significant financing component. 
 Distribution 
 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 
 In addition to fixed contract consideration, our contracts include some form of variable consideration, including sales discounts, returns, trade promotions and certain other sales and consumer incentives, including rebates and coupon redemptions. In general, variable consideration is treated as a reduction in revenue when the related revenue is recognized. Depending on the specific type of variable consideration, we use either the expected value or most likely amount method to determine the variable consideration. We believe there will be no significant changes to our estimates of variable consideration when any related uncertainties are resolved with our customers. We review and update our estimates and related accruals of variable consideration each period based on historical experience and any recent changes in the market. 
 Warranties & Returns 
 We provide all customers with a standard or assurance type warranty. Either stated or implied, we provide assurance the related products will comply with all agreed-upon specifications and other warranties provided under the law. No services beyond an assurance warranty are provided to our customers. 
 We do not grant a general right of return. However, customers may return defective or non-conforming products. Customer remedies may include either a cash refund or an exchange of the product. As a result, the right of return and related refund liability is estimated and recorded as a reduction in revenue. This return estimate is reviewed and updated each period and is based on historical sales and return experience. 
 Contract Balances 
 We do not have deferred revenue or unbilled receivable balances and thus do not have any related contract asset and liability balances as of June 30, 2020 . 
 Contract Costs 
 We have identified sales commissions as an incremental cost incurred to obtain a customer contract. These costs are required to be capitalized under the new revenue recognition standard. We have chosen to use the available practical expedient to continue to expense these costs as incurred as the amortization period for such costs is one year or less. We do not incur significant fulfillment costs related to customer contracts which would require capitalization. 
 Disaggregation of Revenue 
 See Note 10 for disaggregation of our net sales by class of similar product and type of customer. 
 
 37 

 Table of Contents 
 LANCASTER COLONY CORPORATION AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 (Tabular amounts in thousands, except per share data) 
 
 Advertising Expense 
 We expense advertising as it is incurred. The following table summarizes advertising expense as a percentage of net sales in each of the years ended June 30: 
 
 2020 
 
 2019 
 
 2018 
 
 Advertising expense as a percentage of net sales 
 2 
 % 
 
 2 
 % 
 
 2 
 % 
 
 Research and Development Costs 
 We expense research and development costs as they are incurred. The estimated amount spent during each of the last three years on research and development activities was less than 1% of net sales. 
 Stock-Based Employee Compensation Plans 
 We account for our stock-based employee compensation plans in accordance with GAAP for stock-based compensation, which requires the measurement and recognition of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The cost of the employee services is recognized as compensation expense over the period that an employee provides service in exchange for the award, which is typically the vesting period. See further discussion and disclosure in Note 11. 
 Income Taxes 
 Our income tax expense, deferred tax assets and liabilities and reserves for unrecognized tax benefits reflect management’s best assessment of estimated future taxes to be paid. We are subject to income taxes in numerous domestic jurisdictions. 
 Our annual effective tax rate is determined based on our income, statutory tax rates and the permanent tax impacts of items treated differently for tax purposes than for financial reporting purposes. Tax law requires certain items be included in the tax return at different times than the items are reflected in the financial statements. Some of these differences are permanent, such as expenses that are not deductible in our tax return, and some differences are temporary, reversing over time, such as depreciation expense. These temporary differences create deferred tax assets and liabilities. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. A change in tax rates may result in stranded tax effects when the effect of the change is required to be included in income even when the related income tax effects of items in accumulated other comprehensive income/loss were originally recognized in other comprehensive income rather than in income. Our accounting policy is to release stranded tax effects from accumulated other comprehensive loss. 
 Realization of certain deferred tax assets is dependent upon generating sufficient taxable income in the appropriate jurisdiction prior to the expiration of the carryforward periods. Although realization is not assured, management believes it is more likely than not that our deferred tax assets will be realized and thus we have not recorded any valuation allowance for the years ended June 30, 2020 or 2019 . 
 In accordance with accounting literature related to uncertainty in income taxes, tax benefits and liabilities from uncertain tax positions that are recognized in the financial statements are measured based on the largest attribute that has a greater than fifty percent likelihood of being realized upon ultimate settlement. 
 Changes in tax laws and rates could also affect recorded deferred tax assets and liabilities in the future. Management is not aware of any such changes that would have a material effect on our results of operations, cash flows or financial position. See further discussion in Note 9. 
 Earnings Per Share 
 Earnings per share (“EPS”) is computed based on the weighted average number of shares of common stock and common stock equivalents (restricted stock and stock-settled stock appreciation rights) outstanding during each period. Unvested shares of restricted stock granted to employees are considered participating securities since employees receive nonforfeitable dividends prior to vesting and, therefore, are included in the earnings allocation in computing EPS under the two-class method. Basic EPS excludes dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted EPS is computed by dividing income available to common shareholders by the diluted weighted average number of common shares outstanding during the period, which includes the dilutive potential common shares associated with nonparticipating restricted stock and stock-settled stock appreciation rights. 
 
 38 

 Table of Contents 
 LANCASTER COLONY CORPORATION AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 (Tabular amounts in thousands, except per share data) 
 
 Basic and diluted net income per common share were calculated as follows: 
 
 2020 
 
 2019 
 
 2018 
 
 Net income 
 $ 
 136,983 
 
 $ 
 150,549 
 
 $ 
 135,314 
 
 Net income available to participating securities 
 ( 278 
 ) 
 
 ( 259 
 ) 
 
 ( 271 
 ) 
 
 Net income available to common shareholders 
 $ 
 136,705 
 
 $ 
 150,290 
 
 $ 
 135,043 
 
 Weighted average common shares outstanding - basic 
 27,448 
 
 27,438 
 
 27,403 
 
 Incremental share effect from: 
 
 Nonparticipating restricted stock 
 2 
 
 2 
 
 3 
 
 Stock-settled stock appreciation rights 
 46 
 
 97 
 
 53 
 
 Weighted average common shares outstanding - diluted 
 27,496 
 
 27,537 
 
 27,459 
 
 Net income per common share - basic 
 $ 
 4.98 
 
 $ 
 5.48 
 
 $ 
 4.93 
 
 Net income per common share - diluted 
 $ 
 4.97 
 
 $ 
 5.46 
 
 $ 
 4.92 
 
 Comprehensive Income and Accumulated Other Comprehensive Loss 
 Comprehensive income includes changes in equity that result from transactions and economic events from non-owner sources. Comprehensive income is composed of two subsets – net income and other comprehensive income (loss). Included in other comprehensive income (loss) are pension and postretirement benefits adjustments. 
 The following table presents the amounts reclassified out of accumulated other comprehensive loss by component: 
 
 2020 
 
 2019 
 
 Accumulated other comprehensive loss at beginning of year 
 $ 
 ( 10,308 
 ) 
 
 $ 
 ( 8,259 
 ) 
 
 Defined Benefit Pension Plan Items: 
 
 Net loss arising during the period 
 ( 2,597 
 ) 
 
 ( 2,771 
 ) 
 
 Amortization of unrecognized net loss (1) 
 572 
 
 447 
 
 Postretirement Benefit Plan Items: (2) 
 
 Net loss arising during the period 
 ( 65 
 ) 
 
 ( 131 
 ) 
 
 Amortization of unrecognized net gain 
 ( 26 
 ) 
 
 ( 37 
 ) 
 
 Amortization of prior service credit 
 ( 182 
 ) 
 
 ( 182 
 ) 
 
 Total other comprehensive loss, before tax 
 ( 2,298 
 ) 
 
 ( 2,674 
 ) 
 
 Total tax benefit 
 536 
 
 625 
 
 Other comprehensive loss, net of tax 
 ( 1,762 
 ) 
 
 ( 2,049 
 ) 
 
 Accumulated other comprehensive loss at end of year 
 $ 
 ( 12,070 
 ) 
 
 $ 
 ( 10,308 
 ) 
 
 (1) 
 Included in the computation of net periodic benefit income/cost. See Note 12 for additional information. 
 
 (2) 
 Additional disclosures for postretirement benefits are not included as they are not considered material. 
 
 Recently Issued Accounting Standards 
 In 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. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. This guidance will be effective for us in fiscal 2021, including interim periods. As the guidance only relates to disclosures, there will be no impact on our financial position or results of operations. 
 
 39 

 Table of Contents 
 LANCASTER COLONY CORPORATION AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 (Tabular amounts in thousands, except per share data) 
 
 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 
 Omni Baking Company LLC 
 On November 16, 2018, we acquired substantially all of the assets of Omni Baking Company LLC (“Omni”). Omni has been a long-time supplier of products to our frozen garlic bread operations and is based in Vineland, New Jersey. The purchase price of $ 22.3 million , which includes the post-closing working capital adjustment, was funded with cash on hand. Omni’s results of operations are allocated between our Retail and Foodservice segments in a manner consistent with our current segment allocations. These results have been included in our consolidated financial statements from the date of acquisition. 
 The following table summarizes the purchase price allocation based on the fair value of the net assets acquired: 
 
 Purchase Price Allocation 
 
 Inventories 
 $ 
 809 
 
 Other current assets 
 86 
 
 Machinery and equipment 
 4,777 
 
 Goodwill (tax deductible) 
 19,664 
 
 Current liabilities 
 ( 3,083 
 ) 
 
 Net assets acquired 
 $ 
 22,253 
 
 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 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. This purchase price excludes contingent consideration relating to an additional earn-out payment which is tied to performance-based conditions. In general, the terms of the acquisition specify that the sellers will receive an earn-out based upon a pre-determined multiple of the defined adjusted EBITDA of Bantam for the twelve months ending December 31, 2023. We are unable to provide a range for the amount of this earn-out because it is based on the future adjusted EBITDA of Bantam, and the earn-out does not contain a minimum or maximum value. See further discussion of the earn-out in Note 3. Bantam’s results of operations are allocated between our Retail and Foodservice segments in a manner consistent with our current segment allocations. These results have been included in our consolidated financial statements from the date of acquisition. 
 
 40 

 Table of Contents 
 LANCASTER COLONY CORPORATION AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 (Tabular amounts in thousands, except per share data) 
 
 The following table summarizes the consideration related to the acquisition and the purchase price allocation based on the fair value of the net assets acquired: 
 
 Consideration 
 
 Cash paid for acquisition 
 $ 
 33,111 
 
 Contingent consideration - fair value of earn-out at date of closing 
 8,000 
 
 Fair value of total consideration 
 $ 
 41,111 
 
 Purchase Price Allocation 
 
 Receivables 
 $ 
 1,937 
 
 Inventories 
 684 
 
 Other current assets 
 95 
 
 Machinery and equipment 
 1,896 
 
 Goodwill (tax deductible) 
 20,677 
 
 Other intangible assets 
 18,700 
 
 Current liabilities 
 ( 2,256 
 ) 
 
 Other noncurrent liabilities 
 ( 622 
 ) 
 
 Net assets acquired 
 $ 
 41,111 
 
 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 subject to the three-level fair value hierarchy consist principally of cash and equivalents, accounts receivable, accounts payable, contingent consideration payable and defined benefit pension plan assets. The estimated fair value of cash and equivalents, accounts receivable and accounts payable approximates their carrying value. See Note 12 for fair value disclosures related to our defined benefit pension plan assets. 
 Our contingent consideration, which resulted from the earn-outs associated with our acquisitions of Bantam and Angelic 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: 
 
 Fair Value Measurements at June 30, 2020 
 
 Level 1 
 
 Level 2 
 
 Level 3 
 
 Total 
 
 Contingent consideration - Bantam 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 9,157 
 
 $ 
 9,157 
 
 Contingent consideration - Angelic 
 — 
 
 — 
 
 — 
 
 — 
 
 Total contingent consideration 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 9,157 
 
 $ 
 9,157 
 
 Fair Value Measurements at June 30, 2019 
 
 Level 1 
 
 Level 2 
 
 Level 3 
 
 Total 
 
 Contingent consideration - Bantam 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 8,900 
 
 $ 
 8,900 
 
 Contingent consideration - Angelic 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 — 
 
 Total contingent consideration 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 8,900 
 
 $ 
 8,900 
 
 41 

 Table of Contents 
 LANCASTER COLONY CORPORATION AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 (Tabular amounts in thousands, except per share data) 
 
 Bantam Contingent Consideration 
 This contingent consideration resulted from the earn-out associated with our October 19, 2018 acquisition of Bantam. In general, the terms of the acquisition specify the sellers will receive an earn-out based upon a pre-determined multiple of the defined adjusted EBITDA of Bantam for the twelve months ending December 31, 2023. The initial fair value of the contingent consideration was determined to be $ 8.0 million . The fair value is measured on a recurring basis using a Monte Carlo simulation that randomly changes revenue growth, forecasted adjusted EBITDA and other uncertain variables to estimate an expected value. We record the present value of this amount by applying a discount rate. As this fair value measurement is based on significant inputs not observable in the market, it represents a Level 3 measurement within the fair value hierarchy. 
 The following table represents our Level 3 fair value measurements using significant other unobservable inputs for Bantam’s contingent consideration: 
 
 2020 
 
 2019 
 
 Contingent consideration at beginning of year 
 $ 
 8,900 
 
 $ 
 — 
 
 Initial fair value - additions 
 — 
 
 8,000 
 
 Change in contingent consideration included in operating income 
 257 
 
 900 
 
 Contingent consideration at end of year 
 $ 
 9,157 
 
 $ 
 8,900 
 
 Angelic Contingent Consideration 
 This contingent consideration resulted from the earn-out associated with our November 17, 2016 acquisition of Angelic. In general, the terms of the acquisition specify the sellers will receive an earn-out based upon a pre-determined multiple of the defined adjusted EBITDA of Angelic for fiscal 2021. The initial fair value of the contingent consideration was determined to be $ 13.9 million . The fair value is measured on a recurring basis using a present value approach, which incorporates factors such as revenue growth and forecasted adjusted EBITDA, to estimate an expected value. We record the present value of this amount by applying a discount rate. As this fair value measurement is based on significant inputs not observable in the market, it represents a Level 3 measurement within the fair value hierarchy. Our 2019 fair value measurements resulted in a $ 17.1 million reduction in the fair value of Angelic’s contingent consideration based on a change in Angelic’s forecasted adjusted EBITDA for fiscal 2021. This adjustment was recorded in our Retail segment. 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: 
 
 2020 
 
 2019 
 
 Contingent consideration at beginning of year 
 $ 
 — 
 
 $ 
 17,080 
 
 Change in contingent consideration included in operating income 
 — 
 
 ( 17,080 
 ) 
 
 Contingent consideration at end of year 
 $ 
 — 
 
 $ 
 — 
 
 Note 4 – Long-Term Debt 
 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 New Credit Facility, they will be classified as long-term debt. 
 
 42 

 Table of Contents 
 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 3.5 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. 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; and 
 
 • 
 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. 
 
 43 

 Table of Contents 
 LANCASTER COLONY CORPORATION AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 (Tabular amounts in thousands, except per share data) 
 
 Practical Expedients and Accounting Policy Elections 
 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. 
 Amounts Recognized in the Financial Statements 
 The components of lease expense for the year ended June 30 have been provided as follows: 
 
 2020 
 
 Operating lease cost in Cost of Sales and Selling, General and Administrative Expenses 
 $ 
 8,726 
 
 Finance lease cost: 
 
 Amortization of assets in Cost of Sales 
 $ 
 335 
 
 Interest on lease liabilities in Other, Net 
 73 
 
 Total finance lease cost 
 $ 
 408 
 
 Short-term lease cost in Cost of Sales and Selling, General and Administrative Expenses 
 2,405 
 
 Total net lease cost 
 $ 
 11,539 
 
 Supplemental balance sheet information related to leases at June 30 is as follows: 
 
 2020 
 
 Operating Leases 
 
 Operating Lease Right-Of-Use Assets 
 $ 
 22,977 
 
 Current operating lease liabilities in Accrued Liabilities 
 $ 
 6,766 
 
 Noncurrent Operating Lease Liabilities 
 17,893 
 
 Total operating lease liabilities 
 $ 
 24,659 
 
 Finance Leases 
 
 Finance lease right-of-use assets in Property, Plant and Equipment-Net 
 $ 
 2,346 
 
 Current finance lease liabilities in Accrued Liabilities 
 $ 
 571 
 
 Noncurrent finance lease liabilities in Other Noncurrent Liabilities 
 1,580 
 
 Total finance lease liabilities 
 $ 
 2,151 
 
 Supplemental cash flow information related to leases for the year ended June 30 is as follows: 
 
 2020 
 
 Cash paid for amounts included in the measurement of lease liabilities: 
 
 Operating cash flows from operating leases 
 $ 
 8,923 
 
 Operating cash flows from finance leases 
 $ 
 73 
 
 Financing cash flows from finance leases 
 $ 
 432 
 
 Supplemental noncash information on lease liabilities arising from obtaining right-of-use assets 
 $ 
 5,611 
 
 Supplemental noncash information on lease liabilities removed due to purchase of leased asset 
 $ 
 5,765 
 
 44 

 Table of Contents 
 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 
 
 2021 
 $ 
 7,404 
 
 $ 
 638 
 
 2022 
 5,982 
 
 638 
 
 2023 
 4,609 
 
 627 
 
 2024 
 3,791 
 
 256 
 
 2025 
 1,778 
 
 134 
 
 Thereafter 
 2,906 
 
 — 
 
 Total minimum payments 
 $ 
 26,470 
 
 $ 
 2,293 
 
 Less amount representing interest 
 ( 1,811 
 ) 
 
 ( 142 
 ) 
 
 Present value of lease obligations 
 $ 
 24,659 
 
 $ 
 2,151 
 
 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 
 
 2020 
 $ 
 8,261 
 
 $ 
 505 
 
 2021 
 7,136 
 
 505 
 
 2022 
 6,345 
 
 505 
 
 2023 
 4,992 
 
 493 
 
 2024 
 4,619 
 
 121 
 
 Thereafter 
 6,901 
 
 — 
 
 Total minimum payments 
 $ 
 38,254 
 
 $ 
 2,129 
 
 Less amount representing interest 
 
 ( 178 
 ) 
 
 Present value of capital lease obligations 
 
 $ 
 1,951 
 
 Note 6 – Contingencies 
 In addition to the items discussed below, at June 30, 2020 , we were a party to various claims and litigation matters arising in the ordinary course of business. Such matters did not have a material effect on the current-year results of operations and, in our opinion, their ultimate disposition will not have a material effect on our consolidated financial statements. 
 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. See further discussion in Note 3. 
 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 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. 
 
 45 

 Table of Contents 
 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, 2020 and 2019 . 
 
 The following table summarizes our identifiable other intangible assets at June 30: 
 
 2020 
 
 2019 
 
 Tradenames (20 to 30-year life) 
 
 Gross carrying value 
 $ 
 63,121 
 
 $ 
 63,121 
 
 Accumulated amortization 
 ( 9,925 
 ) 
 
 ( 7,335 
 ) 
 
 Net carrying value 
 $ 
 53,196 
 
 $ 
 55,786 
 
 Customer Relationships (10 to 15-year life) 
 
 Gross carrying value 
 $ 
 17,507 
 
 $ 
 17,507 
 
 Accumulated amortization 
 ( 11,094 
 ) 
 
 ( 9,641 
 ) 
 
 Net carrying value 
 $ 
 6,413 
 
 $ 
 7,866 
 
 Technology / Know-how (10-year life) 
 
 Gross carrying value 
 $ 
 8,950 
 
 $ 
 8,950 
 
 Accumulated amortization 
 ( 3,396 
 ) 
 
 ( 2,501 
 ) 
 
 Net carrying value 
 $ 
 5,554 
 
 $ 
 6,449 
 
 Non-compete Agreements (5-year life) 
 
 Gross carrying value 
 $ 
 791 
 
 $ 
 791 
 
 Accumulated amortization 
 ( 738 
 ) 
 
 ( 615 
 ) 
 
 Net carrying value 
 $ 
 53 
 
 $ 
 176 
 
 Total net carrying value 
 $ 
 65,216 
 
 $ 
 70,277 
 
 Amortization expense for our other intangible assets, which is reflected in Selling, General and Administrative Expenses, was as follows in each of the years ended June 30: 
 
 2020 
 
 2019 
 
 2018 
 
 Amortization expense 
 $ 
 5,061 
 
 $ 
 4,599 
 
 $ 
 3,986 
 
 Total annual amortization expense for each of the next five years is estimated to be as follows: 
 
 2021 
 $ 
 4,976 
 
 2022 
 $ 
 4,902 
 
 2023 
 $ 
 4,343 
 
 2024 
 $ 
 4,343 
 
 2025 
 $ 
 4,083 
 
 Note 8 – Liabilities 
 Accrued liabilities at June 30 were composed of: 
 
 2020 
 
 2019 
 
 Compensation and employee benefits 
 $ 
 32,818 
 
 $ 
 28,672 
 
 Distribution 
 7,148 
 
 7,730 
 
 Operating leases 
 6,766 
 
 — 
 
 Marketing 
 1,525 
 
 561 
 
 Other taxes 
 1,392 
 
 1,219 
 
 Other 
 5,177 
 
 4,854 
 
 Total accrued liabilities 
 $ 
 54,826 
 
 $ 
 43,036 
 
 46 

 Table of Contents 
 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: 
 
 2020 
 
 2019 
 
 Workers compensation 
 $ 
 9,701 
 
 $ 
 11,732 
 
 Contingent consideration 
 9,157 
 
 8,900 
 
 Deferred compensation and accrued interest 
 4,390 
 
 4,740 
 
 Pension benefit liability 
 3,540 
 
 2,043 
 
 Postretirement benefit liability 
 1,207 
 
 1,075 
 
 Gross tax contingency reserve 
 968 
 
 942 
 
 Other 
 2,698 
 
 6,506 
 
 Total other noncurrent liabilities 
 $ 
 31,661 
 
 $ 
 35,938 
 
 Note 9 – 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 federal income tax rate for our 2018 tax return was a blended rate of 28.1 % . In addition to the effect of the lower overall federal tax rate, the Tax Act resulted in a $ 9.5 million one-time benefit for the re-measurement of our net deferred tax liability in 2018. 
 We file a consolidated federal income tax return. Taxes based on income for the years ended June 30 have been provided as follows: 
 
 2020 
 
 2019 
 
 2018 
 
 Currently payable: 
 
 Federal 
 $ 
 23,392 
 
 $ 
 30,220 
 
 $ 
 40,766 
 
 State and local 
 6,808 
 
 8,070 
 
 7,355 
 
 Total current provision 
 30,200 
 
 38,290 
 
 48,121 
 
 Deferred federal, state and local provision (benefit) 
 11,894 
 
 6,703 
 
 ( 9,232 
 ) 
 
 Total taxes based on income 
 $ 
 42,094 
 
 $ 
 44,993 
 
 $ 
 38,889 
 
 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: 
 
 2020 
 
 2019 
 
 2018 
 
 Statutory rate 
 21.0 
 % 
 
 21.0 
 % 
 
 28.1 
 % 
 
 State and local income taxes 
 3.1 
 
 3.5 
 
 3.0 
 
 Net windfall tax benefits - stock-based compensation 
 ( 0.8 
 ) 
 
 ( 0.8 
 ) 
 
 ( 0.4 
 ) 
 
 ESOP dividend deduction 
 ( 0.1 
 ) 
 
 ( 0.1 
 ) 
 
 ( 0.1 
 ) 
 
 One-time benefit on re-measurement of net deferred tax liability 
 — 
 
 — 
 
 ( 5.5 
 ) 
 
 Domestic manufacturing deduction for qualified income 
 — 
 
 — 
 
 ( 2.3 
 ) 
 
 Other 
 0.3 
 
 ( 0.6 
 ) 
 
 ( 0.5 
 ) 
 
 Effective rate 
 23.5 
 % 
 
 23.0 
 % 
 
 22.3 
 % 
 
 47 

 Table of Contents 
 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. The tax effect of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at June 30 were comprised of: 
 
 2020 
 
 2019 
 
 Deferred tax assets: 
 
 Employee medical and other benefits 
 $ 
 8,384 
 
 $ 
 7,809 
 
 Operating lease liabilities 
 5,713 
 
 — 
 
 Inventories 
 2,382 
 
 311 
 
 Receivables 
 2,371 
 
 2,332 
 
 Other accrued liabilities 
 1,938 
 
 2,069 
 
 Total deferred tax assets 
 20,788 
 
 12,521 
 
 Deferred tax liabilities: 
 
 Property, plant and equipment 
 ( 30,036 
 ) 
 
 ( 16,993 
 ) 
 
 Goodwill 
 ( 11,390 
 ) 
 
 ( 10,037 
 ) 
 
 Intangible assets 
 ( 7,848 
 ) 
 
 ( 8,295 
 ) 
 
 Operating lease right-of-use assets 
 ( 5,333 
 ) 
 
 — 
 
 Other 
 ( 421 
 ) 
 
 ( 78 
 ) 
 
 Total deferred tax liabilities 
 ( 55,028 
 ) 
 
 ( 35,403 
 ) 
 
 Net deferred tax liability 
 $ 
 ( 34,240 
 ) 
 
 $ 
 ( 22,882 
 ) 
 
 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. 
 Net cash payments for income taxes for each of the years ended June 30 were as follows: 
 
 2020 
 
 2019 
 
 2018 
 
 Net cash payments for income taxes 
 $ 
 30,958 
 
 $ 
 38,644 
 
 $ 
 46,198 
 
 The gross tax contingency reserve at June 30, 2020 was $ 1.0 million and consisted of estimated tax liabilities of $ 0.5 million and interest and penalties of $ 0.5 million . The unrecognized tax benefits recorded as the gross tax contingency reserve noted in the following table for June 30, 2020 and 2019 would affect our effective tax rate, if recognized. 
 The following table sets forth changes in our total gross tax contingency reserve (including interest and penalties): 
 
 2020 
 
 2019 
 
 Balance, beginning of year 
 $ 
 1,670 
 
 $ 
 1,298 
 
 Tax positions related to the current year: 
 
 Additions 
 — 
 
 87 
 
 Reductions 
 — 
 
 — 
 
 Tax positions related to prior years: 
 
 Additions 
 51 
 
 694 
 
 Reductions 
 ( 25 
 ) 
 
 ( 26 
 ) 
 
 Settlements 
 ( 728 
 ) 
 
 ( 383 
 ) 
 
 Balance, end of year 
 $ 
 968 
 
 $ 
 1,670 
 
 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; however, we do not expect the change to have a significant effect on our financial position or results of operations. 
 We recognize interest and penalties related to these tax liabilities in income tax expense. For each of the years ended June 30, we recognized the change in the accrual for net tax-related interest and penalties as follows: 
 
 2020 
 
 2019 
 
 (Benefit) expense recognized for net tax-related interest and penalties 
 $ 
 ( 188 
 ) 
 
 $ 
 64 
 
 48 

 Table of Contents 
 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: 
 
 2020 
 
 2019 
 
 Accrued interest and penalties included in the gross tax contingency reserve 
 $ 
 481 
 
 $ 
 669 
 
 We file federal and various state and local income tax returns in the United States. With limited exceptions, we are no longer subject to examination of U.S. federal or state and local income taxes for years prior to 2017 . 
 The American Jobs Creation Act provided a tax deduction calculated as a percentage of qualified income from manufacturing in the United States. This deduction was repealed by the Tax Act. Therefore, 2018 was the final year that we were able to claim this deduction. 
 
 Note 10 – Business Segment Information 
 Our financial results are presented as two reportable segments: Retail and Foodservice. Costs that are directly attributable to either Retail or Foodservice are charged directly to the appropriate segment. Costs that are deemed to be indirect, excluding corporate expenses and other unusual significant transactions, are allocated to the two reportable segments using a reasonable methodology that is consistently applied. We evaluate our segments based on net sales and operating income. 
 Retail - The vast majority of the products we sell in the Retail segment are sold through sales personnel, food brokers and distributors in the United States. We have placement of products in grocery produce departments through our refrigerated salad dressings, vegetable dips and fruit dips. Our flatbread products and sprouted grain bakery products are generally placed in the specialty bakery/deli section of the grocery store. We also have products typically marketed in the shelf-stable section of the grocery store, which include salad dressing, slaw dressing and croutons. Within the frozen food section of the grocery store, we sell yeast rolls, garlic breads and mini stuffed bagels. 
 Foodservice - The vast majority of the products we sell in the Foodservice segment are sold through sales personnel, food brokers and distributors in the United States. Most of the products we sell in the Foodservice segment are custom-formulated and include salad dressings, sandwich and dipping sauces, frozen breads and yeast rolls. The majority of our Foodservice sales are products sold under private label to restaurants. We also manufacture and sell various branded Foodservice products to distributors. Finally, within this segment, we sell other roll products under a transitional co-packing arrangement resulting from the Omni acquisition. 
 As many of our products are similar between our two segments, our procurement, manufacturing, warehousing and distribution activities are substantially integrated across our operations in order to maximize efficiency and productivity. Consequently, we do not prepare, and our Chief Operating Decision Maker does not review, separate balance sheets for the reportable segments. As such, our external reporting does not include the presentation of identifiable assets, payments for property additions or depreciation and amortization by reportable segment. 
 The following table sets forth net sales disaggregated by class of similar products for the Retail and Foodservice segments in each of the years ended June 30: 
 
 2020 
 
 2019 
 
 2018 
 
 Retail 
 
 Frozen breads 
 $ 
 290,940 
 
 $ 
 259,290 
 
 $ 
 252,186 
 
 Refrigerated dressings, dips and other 
 218,125 
 
 219,614 
 
 226,276 
 
 Shelf-stable dressings and croutons 
 205,062 
 
 177,717 
 
 171,772 
 
 Total Retail net sales 
 $ 
 714,127 
 
 $ 
 656,621 
 
 $ 
 650,234 
 
 Foodservice 
 
 Dressings and sauces 
 $ 
 436,909 
 
 $ 
 467,364 
 
 $ 
 430,944 
 
 Frozen breads and other 
 161,093 
 
 164,438 
 
 141,747 
 
 Other roll products 
 22,259 
 
 19,364 
 
 — 
 
 Total Foodservice net sales 
 $ 
 620,261 
 
 $ 
 651,166 
 
 $ 
 572,691 
 
 Total net sales 
 $ 
 1,334,388 
 
 $ 
 1,307,787 
 
 $ 
 1,222,925 
 
 49 

 Table of Contents 
 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: 
 
 2020 
 
 2019 
 
 2018 
 
 Foodservice 
 
 National accounts 
 $ 
 459,880 
 
 $ 
 480,249 
 
 $ 
 430,680 
 
 Branded and other 
 138,122 
 
 151,553 
 
 142,011 
 
 Other roll products 
 22,259 
 
 19,364 
 
 — 
 
 Total Foodservice net sales 
 $ 
 620,261 
 
 $ 
 651,166 
 
 $ 
 572,691 
 
 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: 
 
 2020 
 
 2019 
 
 2018 
 
 Net Sales (1) (2) 
 
 Retail 
 $ 
 714,127 
 
 $ 
 656,621 
 
 $ 
 650,234 
 
 Foodservice 
 620,261 
 
 651,166 
 
 572,691 
 
 Total 
 $ 
 1,334,388 
 
 $ 
 1,307,787 
 
 $ 
 1,222,925 
 
 Operating Income (2) 
 
 Retail 
 $ 
 142,822 
 
 $ 
 135,093 
 
 $ 
 126,400 
 
 Foodservice 
 66,480 
 
 73,828 
 
 58,440 
 
 Restructuring and Impairment Charges (3) 
 ( 886 
 ) 
 
 ( 1,643 
 ) 
 
 — 
 
 Corporate Expenses (4) 
 ( 32,468 
 ) 
 
 ( 16,354 
 ) 
 
 ( 13,292 
 ) 
 
 Total 
 $ 
 175,948 
 
 $ 
 190,924 
 
 $ 
 171,548 
 
 Identifiable Assets (1) (5) 
 
 Retail & Foodservice (6) 
 $ 
 771,270 
 
 $ 
 695,872 
 
 $ 
 589,509 
 
 Corporate 
 222,083 
 
 209,527 
 
 214,982 
 
 Total 
 $ 
 993,353 
 
 $ 
 905,399 
 
 $ 
 804,491 
 
 Payments for Property Additions 
 
 Retail & Foodservice (6) 
 $ 
 82,579 
 
 $ 
 70,880 
 
 $ 
 31,025 
 
 Corporate 
 63 
 
 — 
 
 — 
 
 Total 
 $ 
 82,642 
 
 $ 
 70,880 
 
 $ 
 31,025 
 
 Depreciation and Amortization 
 
 Retail & Foodservice (6) 
 $ 
 37,708 
 
 $ 
 31,595 
 
 $ 
 26,685 
 
 Corporate 
 255 
 
 253 
 
 211 
 
 Total 
 $ 
 37,963 
 
 $ 
 31,848 
 
 $ 
 26,896 
 
 (1) 
 Net sales and long-lived assets are predominately domestic. 
 
 (2) 
 All intercompany transactions have been eliminated. 
 
 (3) 
 Restructuring and impairment charges were not allocated to our two reportable segments due to their unusual nature. 
 
 (4) 
 Our Corporate Expenses include various expenses of a general corporate nature, 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. 
 
 (5) 
 Retail and Foodservice identifiable assets include those assets used in our operations and other intangible assets allocated to purchased businesses. Corporate assets consist principally of cash and equivalents. The increase in Retail and Foodservice identifiable assets from June 30, 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. 
 
 (6) 
 As discussed above, we do not present identifiable assets, payments for property additions or depreciation and amortization by reportable segment. 
 
 50 

 Table of Contents 
 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. (“Walmart”) and Foodservice segment net sales attributable to McLane Company, Inc. (“McLane”), a wholesale distribution subsidiary of Berkshire Hathaway, Inc., for each of the years ended June 30 were as follows: 
 
 2020 
 
 2019 
 
 2018 
 
 Net sales to Walmart 
 $ 
 241,699 
 
 $ 
 222,171 
 
 $ 
 209,860 
 
 As a percentage of consolidated net sales 
 18 
 % 
 
 17 
 % 
 
 17 
 % 
 
 Net sales to McLane 
 $ 
 174,242 
 
 $ 
 195,907 
 
 $ 
 185,226 
 
 As a percentage of consolidated net sales 
 13 
 % 
 
 15 
 % 
 
 15 
 % 
 
 Accounts receivable attributable to Walmart and McLane at June 30 as a percentage of consolidated accounts receivable were as follows: 
 
 2020 
 
 2019 
 
 Walmart 
 30 
 % 
 
 28 
 % 
 
 McLane 
 10 
 % 
 
 9 
 % 
 
 Note 11 – Stock-Based Compensation 
 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 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. Compensation expense is reflected in Cost of Sales or Selling, General and Administrative Expenses based on the grantees’ salaries expense classification. We record tax benefits and excess tax benefits related to stock-settled stock appreciation rights (“SSSARs”) and restricted stock awards. These excess tax benefits are included in the operating section of the Consolidated Statements of Cash Flows. We estimate a forfeiture rate for our SSSARs and restricted stock grants based on historical experience. 
 Stock-Settled Stock Appreciation Rights 
 We use periodic grants of SSSARs as a vehicle for rewarding certain employees with long-term incentives for their efforts in helping to create long-term shareholder value. We calculate the fair value of SSSARs grants using the Black-Scholes option-pricing model. Our policy is to issue shares upon SSSARs exercise from new shares that had been previously authorized. 
 In 2020 , 2019 and 2018 , we granted SSSARs to various employees under the terms of the plans. The following table summarizes information relating to these grants: 
 
 2020 
 
 2019 
 
 2018 
 
 SSSARs granted 
 180 
 
 157 
 
 185 
 
 Weighted average grant date fair value per right 
 $ 
 24.06 
 
 $ 
 23.55 
 
 $ 
 17.85 
 
 Weighted average assumptions used in fair value calculations: 
 
 Risk-free interest rate 
 1.17 
 % 
 
 2.43 
 % 
 
 2.39 
 % 
 
 Dividend yield 
 1.81 
 % 
 
 1.68 
 % 
 
 1.98 
 % 
 
 Volatility factor of the expected market price of our common stock 
 22.57 
 % 
 
 21.77 
 % 
 
 22.57 
 % 
 
 Expected life in years 
 4.01 
 
 3.04 
 
 2.85 
 
 For these grants, the volatility factor was estimated based on actual historical volatility of our stock for a time period equal to the term of the SSSARs. The expected average life was determined based on historical exercise experience for this type of grant. The SSSARs we grant generally vest one-third on the first anniversary of the grant date, one-third on the second anniversary of the grant date and one-third on the third anniversary of the grant date. 
 
 51 

 Table of Contents 
 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: 
 
 2020 
 
 2019 
 
 2018 
 
 Compensation expense 
 $ 
 3,049 
 
 $ 
 3,074 
 
 $ 
 2,455 
 
 Tax benefits 
 $ 
 640 
 
 $ 
 646 
 
 $ 
 690 
 
 Intrinsic value of exercises 
 $ 
 6,693 
 
 $ 
 6,008 
 
 $ 
 2,381 
 
 The total fair values of SSSARs vested for each of the years ended June 30 were as follows: 
 
 2020 
 
 2019 
 
 2018 
 
 Fair value of vested rights 
 $ 
 2,972 
 
 $ 
 3,143 
 
 $ 
 2,330 
 
 The following table summarizes the activity relating to SSSARs granted under the plans for the year ended June 30, 2020 : 
 
 Number of 
 Rights 
 
 Weighted 
 Average 
 Exercise 
 Price 
 
 Weighted 
 Average 
 Remaining 
 Contractual 
 Life in 
 Years 
 
 Aggregate 
 Intrinsic 
 Value 
 
 Outstanding at beginning of year 
 586 
 
 $ 
 128.23 
 
 Exercised 
 ( 215 
 ) 
 
 $ 
 113.89 
 
 Granted 
 180 
 
 $ 
 153.73 
 
 Forfeited 
 ( 12 
 ) 
 
 $ 
 140.29 
 
 Outstanding at end of year 
 539 
 
 $ 
 142.16 
 
 3.40 
 
 $ 
 6,976 
 
 Exercisable and vested at end of year 
 208 
 
 $ 
 131.21 
 
 2.39 
 
 $ 
 4,973 
 
 Vested and expected to vest at end of year 
 511 
 
 $ 
 143.23 
 
 3.47 
 
 $ 
 6,072 
 
 The following table summarizes information about the SSSARs outstanding by grant year at June 30, 2020 : 
 
 Outstanding 
 
 Exercisable 
 
 Weighted Average 
 
 Grant Years 
 
 Range of 
 Exercise Prices 
 
 Number 
 Outstanding 
 
 Remaining 
 Contractual 
 Life in 
 Years 
 
 Exercise 
 Price 
 
 Number 
 Exercisable 
 
 Weighted 
 Average 
 Exercise 
 Price 
 
 2020 
 
 $153.71-$154.44 
 
 180 
 
 4.64 
 
 $ 153.73 
 
 — 
 
 $ — 
 
 2019 
 
 $148.18-$180.60 
 
 148 
 
 3.67 
 
 $ 154.62 
 
 48 
 
 $ 154.63 
 
 2018 
 
 $117.76-$124.29 
 
 126 
 
 2.65 
 
 $ 121.12 
 
 75 
 
 $ 121.15 
 
 2017 
 
 $121.54-$138.96 
 
 66 
 
 1.66 
 
 $ 134.27 
 
 66 
 
 $ 134.27 
 
 2016 
 
 $ 101.70 
 
 19 
 
 0.65 
 
 $ 101.70 
 
 19 
 
 $ 101.70 
 
 At June 30, 2020 , there was $ 6.1 million of unrecognized compensation expense related to SSSARs that we will recognize over a weighted-average period of 2 years. 
 Restricted Stock 
 We use periodic grants of restricted stock as a vehicle for rewarding our nonemployee directors and certain employees with long-term incentives for their efforts in helping to create long-term shareholder value. 
 In 2020 , 2019 and 2018 , we granted shares of restricted stock to various employees under the terms of the plans. The following table summarizes information relating to these grants: 
 
 2020 
 
 2019 
 
 2018 
 
 Employees 
 
 Restricted stock granted 
 31 
 
 13 
 
 27 
 
 Grant date fair value 
 $ 
 4,813 
 
 $ 
 2,030 
 
 $ 
 3,218 
 
 Weighted average grant date fair value per award 
 $ 
 153.72 
 
 $ 
 154.66 
 
 $ 
 121.09 
 
 52 

 Table of Contents 
 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. Under the terms of our grants, employees receive dividends on unforfeited restricted stock regardless of their vesting status. 
 In 2020 , 2019 and 2018 , we also granted shares of restricted stock to our nonemployee directors under the terms of the plans. The following table summarizes information relating to each of these grants: 
 
 2020 
 
 2019 
 
 2018 
 
 Nonemployee directors 
 
 Restricted stock granted 
 5 
 
 4 
 
 6 
 
 Grant date fair value 
 $ 
 760 
 
 $ 
 760 
 
 $ 
 759 
 
 Weighted average grant date fair value per award 
 $ 
 155.70 
 
 $ 
 180.16 
 
 $ 
 123.11 
 
 The 2020 grant vests over a one -year period, and all of these shares are expected to vest. Dividends earned on the stock during the vesting period will be paid to the directors at the time the stock vests. 
 The following table summarizes our restricted stock compensation expense and tax benefits recorded for each of the years ended June 30: 
 
 2020 
 
 2019 
 
 2018 
 
 Compensation expense 
 $ 
 3,066 
 
 $ 
 2,898 
 
 $ 
 2,584 
 
 Tax benefits 
 $ 
 644 
 
 $ 
 609 
 
 $ 
 726 
 
 The total fair values of restricted stock vested for each of the years ended June 30 were as follows: 
 
 2020 
 
 2019 
 
 2018 
 
 Fair value of vested shares 
 $ 
 2,284 
 
 $ 
 3,537 
 
 $ 
 1,508 
 
 The following table summarizes the activity relating to restricted stock granted under the plans for the year ended June 30, 2020 : 
 
 Number of 
 Shares 
 
 Weighted 
 Average Grant 
 Date Fair Value 
 
 Unvested restricted stock at beginning of year 
 51 
 
 $ 
 137.17 
 
 Granted 
 36 
 
 $ 
 153.99 
 
 Vested 
 ( 16 
 ) 
 
 $ 
 145.28 
 
 Forfeited 
 ( 2 
 ) 
 
 $ 
 133.79 
 
 Unvested restricted stock at end of year 
 69 
 
 $ 
 144.27 
 
 At June 30, 2020 , there was $ 5.5 million of unrecognized compensation expense related to restricted stock that we will recognize over a weighted-average period of 2 years. 
 
 Note 12 – Pension Benefits 
 Defined Benefit Pension Plans 
 We sponsor multiple defined benefit pension plans that covered certain workers under collective bargaining contracts. However, as a result of prior-years’ restructuring activities, for all periods presented, we no longer have any active employees continuing to accrue service cost or otherwise eligible to receive plan benefits. Benefits being paid under the plans are primarily based on negotiated rates and years of service. We contribute to these plans at least the minimum amount required by regulation. 
 At the end of the year, we discount our plan liabilities using an assumed discount rate. In estimating this rate, we, along with our third-party actuaries, review the timing of future benefit payments, bond indices, consider yield curve analysis results and the past history of discount rates. 
 The actuarial present value of benefit obligations summarized below was based on the following assumption: 
 
 2020 
 
 2019 
 
 Weighted-average assumption as of June 30 
 
 Discount rate 
 2.49 
 % 
 
 3.35 
 % 
 
 53 

 Table of Contents 
 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: 
 
 2020 
 
 2019 
 
 2018 
 
 Discount rate 
 3.35 
 % 
 
 4.07 
 % 
 
 3.68 
 % 
 
 Expected long-term return on plan assets 
 6.50 
 % 
 
 7.00 
 % 
 
 7.00 
 % 
 
 In determining the long-term expected return on plan assets, we consider our related investment guidelines, our expectations of long-term rates of return by asset category, our target asset allocation weighting and historical rates of return and volatility for equity and fixed income investments. The investment strategy for plan assets is to control and manage investment risk through diversification among asset classes, investment managers/funds and investment styles. The plans’ investment guidelines have been designed to meet the intended objective that plan assets earn at least nominal returns equal to or in excess of the plans’ liability growth rate. In consideration of the current average age of the plans’ participants, the investment guidelines are based upon an investment horizon of at least 10 years. 
 The target and actual asset allocations for our plans at June 30 by asset category were as follows: 
 
 Target Percentage 
 of Plan Assets at 
 June 30 
 
 Actual Percentage of Plan Assets 
 
 2020 
 
 2020 
 
 2019 
 
 Equity securities 
 20%-80% 
 
 36 
 
 53 
 
 Fixed income, including cash 
 20%-80% 
 
 64 
 
 47 
 
 Total 
 
 100 
 % 
 
 100 
 % 
 
 Our target asset allocations are maintained through ongoing review and periodic rebalancing of equity and fixed income investments with assistance from an independent outside investment consultant. Also, the plan assets are diversified among asset classes, asset managers or funds and investment styles to avoid concentrations of risk. We expect that a modest allocation to cash will exist within the plans because each investment manager is likely to hold limited cash in a portfolio. 
 We categorize our plan assets within a three-level fair value hierarchy, as previously defined in Note 3. The following table summarizes the fair values and levels, within the fair value hierarchy, for our plan assets at June 30: 
 
 June 30, 2020 
 
 Asset Category 
 Level 1 
 
 Level 2 
 
 Level 3 
 
 Total 
 
 Cash and equivalents 
 $ 
 367 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 367 
 
 Money market funds 
 1,046 
 
 — 
 
 — 
 
 1,046 
 
 U.S. government obligations 
 — 
 
 1,261 
 
 — 
 
 1,261 
 
 Municipal obligations 
 — 
 
 264 
 
 — 
 
 264 
 
 Corporate obligations 
 — 
 
 1,303 
 
 — 
 
 1,303 
 
 Mortgage obligations 
 — 
 
 1,836 
 
 — 
 
 1,836 
 
 Mutual funds fixed income 
 17,326 
 
 — 
 
 — 
 
 17,326 
 
 Mutual funds equity 
 13,365 
 
 — 
 
 — 
 
 13,365 
 
 Total 
 $ 
 32,104 
 
 $ 
 4,664 
 
 $ 
 — 
 
 $ 
 36,768 
 
 June 30, 2019 
 
 Asset Category 
 Level 1 
 
 Level 2 
 
 Level 3 
 
 Total 
 
 Cash and equivalents 
 $ 
 559 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 559 
 
 Money market funds 
 113 
 
 — 
 
 — 
 
 113 
 
 U.S. government obligations 
 — 
 
 2,600 
 
 — 
 
 2,600 
 
 Municipal obligations 
 — 
 
 37 
 
 — 
 
 37 
 
 Corporate obligations 
 — 
 
 3,440 
 
 — 
 
 3,440 
 
 Mortgage obligations 
 — 
 
 3,613 
 
 — 
 
 3,613 
 
 Mutual funds fixed income 
 6,907 
 
 — 
 
 — 
 
 6,907 
 
 Mutual funds equity 
 19,359 
 
 — 
 
 — 
 
 19,359 
 
 Total 
 $ 
 26,938 
 
 $ 
 9,690 
 
 $ 
 — 
 
 $ 
 36,628 
 
 54 

 Table of Contents 
 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. Quoted market prices in active markets for identical assets are available for investments in this category. 
 The plan assets classified at Level 2 include fixed income securities consisting of government securities, municipal obligations, corporate obligations and mortgage obligations. For these types of securities, market prices are observable for identical or similar investment securities but not readily accessible for each of those investments individually at the measurement date. For these assets, we obtain pricing information from an independent pricing service. The pricing service uses various pricing models for each asset class that are consistent with what other market participants would use. The inputs and assumptions to the model of the pricing service are derived from market observable sources including as applicable: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data including market research publications. 
 Relevant information with respect to our pension benefits as of June 30 can be summarized as follows: 
 
 2020 
 
 2019 
 
 Change in benefit obligation 
 
 Benefit obligation at beginning of year 
 $ 
 38,382 
 
 $ 
 36,892 
 
 Interest cost 
 1,246 
 
 1,453 
 
 Actuarial loss 
 2,639 
 
 2,342 
 
 Benefits paid 
 ( 2,298 
 ) 
 
 ( 2,305 
 ) 
 
 Benefit obligation at end of year 
 $ 
 39,969 
 
 $ 
 38,382 
 
 2020 
 
 2019 
 
 Change in plan assets 
 
 Fair value of plan assets at beginning of year 
 $ 
 36,628 
 
 $ 
 36,713 
 
 Actual return on plan assets 
 2,344 
 
 2,058 
 
 Employer contributions 
 94 
 
 162 
 
 Benefits paid 
 ( 2,298 
 ) 
 
 ( 2,305 
 ) 
 
 Fair value of plan assets at end of year 
 $ 
 36,768 
 
 $ 
 36,628 
 
 2020 
 
 2019 
 
 Funded status - net accrued benefit cost 
 $ 
 ( 3,201 
 ) 
 
 $ 
 ( 1,754 
 ) 
 
 2020 
 
 2019 
 
 Amounts recognized in the Consolidated Balance Sheets consist of 
 
 Prepaid benefit cost (Other Noncurrent Assets) 
 $ 
 339 
 
 $ 
 289 
 
 Accrued benefit liability (Other Noncurrent Liabilities) 
 ( 3,540 
 ) 
 
 ( 2,043 
 ) 
 
 Net amount recognized 
 $ 
 ( 3,201 
 ) 
 
 $ 
 ( 1,754 
 ) 
 
 2020 
 
 2019 
 
 Accumulated benefit obligation 
 $ 
 39,969 
 
 $ 
 38,382 
 
 The following table discloses, in the aggregate, those plans with benefit obligations in excess of the fair value of plan assets at the June 30 measurement date: 
 
 2020 
 
 2019 
 
 Benefit obligations 
 $ 
 37,883 
 
 $ 
 36,167 
 
 Fair value of plan assets at end of year 
 $ 
 34,343 
 
 $ 
 34,124 
 
 Amounts recognized in accumulated other comprehensive loss at June 30 were as follows: 
 
 2020 
 
 2019 
 
 Net actuarial loss 
 $ 
 17,170 
 
 $ 
 15,145 
 
 Income taxes 
 ( 4,013 
 ) 
 
 ( 3,539 
 ) 
 
 Total 
 $ 
 13,157 
 
 $ 
 11,606 
 
 55 

 Table of Contents 
 LANCASTER COLONY CORPORATION AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 (Tabular amounts in thousands, except per share data) 
 
 The following table summarizes the components of net periodic benefit income for our pension plans at June 30: 
 
 2020 
 
 2019 
 
 2018 
 
 Components of net periodic benefit income 
 
 Interest cost 
 $ 
 1,246 
 
 $ 
 1,453 
 
 $ 
 1,463 
 
 Expected return on plan assets 
 ( 2,302 
 ) 
 
 ( 2,487 
 ) 
 
 ( 2,491 
 ) 
 
 Amortization of unrecognized net loss 
 572 
 
 447 
 
 572 
 
 Settlement charge 
 — 
 
 — 
 
 42 
 
 Net periodic benefit income 
 $ 
 ( 484 
 ) 
 
 $ 
 ( 587 
 ) 
 
 $ 
 ( 414 
 ) 
 
 We have not yet finalized our anticipated funding level for 2021 , but based on initial estimates, we do not expect our 2021 contributions to our pension plans to be material. 
 Benefit payments estimated for future years are as follows: 
 
 2021 
 $ 
 2,425 
 
 2022 
 $ 
 2,418 
 
 2023 
 $ 
 2,386 
 
 2024 
 $ 
 2,390 
 
 2025 
 $ 
 2,382 
 
 2026 - 2030 
 $ 
 11,361 
 
 Note 13 – Defined Contribution and Other Employee Plans 
 Company-Sponsored Defined Contribution Plans 
 We sponsor three defined contribution plans established pursuant to Section 401(k) of the Internal Revenue Code. Contributions are determined under various formulas, and we contributed to each of these plans in 2020 . The employer matching contribution percentage for one of these plans was increased effective January 1, 2019. Costs related to such plans for each of the years ended June 30 were as follows: 
 
 2020 
 
 2019 
 
 2018 
 
 Costs related to company-sponsored defined contribution plans 
 $ 
 4,170 
 
 $ 
 2,637 
 
 $ 
 1,352 
 
 Multiemployer Plans 
 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. 
 
 56 

 Table of Contents 
 LANCASTER COLONY CORPORATION AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 (Tabular amounts in thousands, except per share data) 
 
 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. The EIN-PN column provides the Employer Identification Number (“EIN”) and the Plan Number (“PN”). The pension protection act zone status is based on information that we received from the plan. Among other factors, generally, plans in critical status (red zone) are less than 65 percent funded, plans in endangered or seriously endangered status (yellow zone or orange zone, respectively) are less than 80 percent funded, and plans at least 80 percent funded are said to be in the green zone. The FIP/RP status pending/implemented column indicates plans for which a funding improvement plan (“FIP”) or a rehabilitation plan (“RP”) is either pending or has been implemented by the trustees of each plan. There have been no significant changes that affect the comparability of 2020 , 2019 or 2018 contributions. 
 
 Pension Protection 
 Act Zone Status 
 
 Fiscal Year 
 Contributions 
 
 Plan Name 
 
 EIN/PN 
 
 2019 
 
 2018 
 
 FIP/RP Status 
 Pending / 
 Implemented 
 
 2020 
 
 2019 
 
 2018 
 
 Surcharge 
 Imposed 
 
 Expiration 
 Date of 
 Collective 
 Bargaining 
 Agreement 
 
 Western Conference of Teamsters Pension Plan 
 
 91-6145047-001 
 
 Green
12/31/18 
 
 Green
12/31/17 
 
 No 
 
 $ 
 327 
 
 $ 
 388 
 
 $ 
 356 
 
 No 
 
 12/15/2021 
 
 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. The contributions required by our participation in these plans for each of the years ended June 30 were as follows: 
 
 2020 
 
 2019 
 
 2018 
 
 Multiemployer health and welfare plan contributions 
 $ 
 3,242 
 
 $ 
 3,189 
 
 $ 
 3,167 
 
 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 
 We offer a deferred compensation plan for select employees who may elect to defer a certain percentage of annual compensation. We do not match any contributions. Each participant earns interest based upon the prime rate of interest, adjusted semi-annually, on their respective deferred compensation balance. Participants are paid out upon retirement or termination in accordance with their annual election. 
 The following table summarizes our liability for total deferred compensation and accrued interest at June 30: 
 
 2020 
 
 2019 
 
 Liability for deferred compensation and accrued interest 
 $ 
 4,390 
 
 $ 
 4,740 
 
 Deferred compensation expense for each of the years ended June 30 was as follows: 
 
 2020 
 
 2019 
 
 2018 
 
 Deferred compensation expense 
 $ 
 239 
 
 $ 
 239 
 
 $ 
 210 
 
 57 

 Table of Contents 
 LANCASTER COLONY CORPORATION AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 (Tabular amounts in thousands, except per share data) 
 
 Note 14 – Selected Quarterly Financial Data (Unaudited) 
 
 First 
 Quarter 
 
 Second 
 Quarter 
 
 Third 
 Quarter 
 
 Fourth 
 Quarter 
 
 Fiscal Year 
 
 2020 
 
 Net Sales 
 $ 
 337,054 
 
 $ 
 355,117 
 
 $ 
 321,363 
 
 $ 
 320,854 
 
 $ 
 1,334,388 
 
 Gross Profit 
 $ 
 92,108 
 
 $ 
 99,889 
 
 $ 
 76,962 
 
 $ 
 89,077 
 
 $ 
 358,036 
 
 Net Income (1) (2) (3) 
 $ 
 40,745 
 
 $ 
 43,424 
 
 $ 
 22,429 
 
 $ 
 30,385 
 
 $ 
 136,983 
 
 Diluted Net Income Per Common Share (1) (2) (3) (4) 
 $ 
 1.48 
 
 $ 
 1.58 
 
 $ 
 0.81 
 
 $ 
 1.10 
 
 $ 
 4.97 
 
 First 
 Quarter 
 
 Second 
 Quarter 
 
 Third 
 Quarter 
 
 Fourth 
 Quarter 
 
 Fiscal Year 
 
 2019 
 
 Net Sales 
 $ 
 316,654 
 
 $ 
 349,581 
 
 $ 
 317,882 
 
 $ 
 323,670 
 
 $ 
 1,307,787 
 
 Gross Profit 
 $ 
 81,199 
 
 $ 
 91,392 
 
 $ 
 75,397 
 
 $ 
 78,210 
 
 $ 
 326,198 
 
 Net Income (5) (6) 
 $ 
 39,028 
 
 $ 
 47,907 
 
 $ 
 30,604 
 
 $ 
 33,010 
 
 $ 
 150,549 
 
 Diluted Net Income Per Common Share (4) (5) (6) 
 $ 
 1.42 
 
 $ 
 1.73 
 
 $ 
 1.11 
 
 $ 
 1.20 
 
 $ 
 5.46 
 
 (1) 
 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. 
 
 (2) 
 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. 
 
 (3) 
 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. 
 
 (4) 
 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. 
 
 (5) 
 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. 
 
 (6) 
 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. 
 
 58 

 Table of Contents 

 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 
 None.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.
MARZETTI CO 10-K

Item 8. Financial Statements and Supplementary Data
