Lancaster Colony Corporation, an Ohio corporation, is a diversified manufacturer and marketer of consumer products. We focus primarily on specialty foodsfood products for the retail and foodservice markets. We also manufacture and market candles for the food, drug and mass markets. In recent years, our strategy has shifted away from operating businesses in a variety of industries towards emphasizing the growth and success we have achieved in specialty foods.channels. We began our operations in 1961 as a Delaware corporation. In 1992, we reincorporated as an Ohio corporation. Our principal executive offices are located at 37 West Broad Street, Columbus, Ohio 43215 and our telephone number is 614-224-7141.

As used in this Annual Report on Form 10-K and except as the context otherwise may require, the terms “we,” “us,” “our,” “registrant,” or “the Company” mean Lancaster Colony Corporation and its consolidated subsidiaries, except where it is clear that the term only means the parent company. Unless otherwise noted, references to “year” pertain to our fiscal year which ends on June 30; for example, 20132016 refers to fiscal 2013,2016, which is the period from July 1, 20122015 to June 30, 2013.

2016.

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

We operate in twoone business segments–segment – “Specialty Foods” and “Glassware and Candles”– with the sales of these segments accounting for approximately 87% and 13%, respectively, of consolidated net sales for the year ended June 30, 2013.Foods.” The financial information relating to our business segmentssegment for the three years ended June 30, 2013, 20122016, 2015 and 20112014 is included in Note 1210 to the consolidated financial statements, which is includedand located in Part II, Item 8 of this Annual Report on Form 10-K. Further description of eachthe business segment within which we operate is provided below.

The following table presents the primary food products we manufacture and sell under our Specialty Foods segment manufacturesbrand names:

Sales are made to retail and foodservice channels. The dressings, sauces, croutons, fruit glazes, vegetable dips, fruit dips, frozen breadsvast majority of the products we sell in the retail and yeast rollsfoodservice channels are sold primarily through sales personnel, food brokers and distributors throughout the United States. Sales are made to retail, club stores and foodservice markets.distributors. We have strong placement of products in U.S. grocery produce departments through our refrigerated salad dressings, vegetable and fruit dips, and croutons. Our flatbread products are generally placed in the deli section of the grocery store. We also have products typically marketed in grocery aisles involving shelf-stable salad dressing, slaw dressing, dry egg noodles and croutons. Within

the frozen aisles of grocery retailers, we also have prominent market positions of frozen yeast rolls, as well as garlic breads.breads and egg noodles. Products we sell in the foodservice marketschannel are often custom-formulated and include salad dressings, sandwich and dipping sauces, frozen breads and yeast rolls. Similar

Net sales attributable to our retail efforts, we utilize our researchMcLane Company, Inc. (“McLane”), a wholesale distribution subsidiary of Berkshire Hathaway, Inc., totaled 19%, 18% and development resources to accommodate a strong desire for new and differentiated products among our foodservice users. The dry egg noodles, frozen specialty noodles and pasta are sold through sales personnel, food brokers and distributors to retail, foodservice and industrial markets.

In 2013, two customers, each with sales greater than 10%18% of total segmentconsolidated net sales accounted for approximately 30% of this segment’s total net sales. Sales2016, 2015 and 2014, respectively. Net sales attributable to one customer comprised approximatelyWal-Mart Stores, Inc. (“Wal-Mart”) totaled 16%, 16% and 17% of this segment’s totalconsolidated net sales in both 2012for 2016, 2015 and 2011.2014, respectively. No other customer accounted for more than 10% of this segment’sour total net sales during these years. Although we believe we have the leading market share in several product categories, all of the markets in which we sell food products are highly competitive in the areas of price, quality and customer service.

Our

We continue to rely upon our strong retail brands, innovation expertise, geographic and channel expansion and customer relationships for future growth. Our category-leading retail brands and commitment to new product development capabilities continue to be a source of future growth for this segment.helps drive increased consumer demand in our retail channel. In the foodservice markets,channel, we attempt to expand existing customer relationshipsgrow our business with established customers and pursue new opportunities by leveraging our culinary skills and experience to support the development of new products and menu offerings. AcquisitionsStrategic acquisitions are also a componentpart of our future growth plans, with a focus on fit and value.

A significant portion of this segment’sour product lines is manufactured at our 1415 food plants located throughout the United States. However, certainCertain items are also manufactured and packaged by third parties located in the United States, Canada and Europe.

Efficient and cost-effective production remains a key focus of the Specialty Foods segment. Beyond this segment’s ongoing initiatives for cost savings and operational improvements,focus. In 2015 we completed the construction of two new production facilities ina significant processing capacity expansion at our Horse Cave, Kentucky in recent years. dressing facility to help improve throughput and meet demand for our dressing products.

Our salad dressing plant provided us with incremental capacity enabling us to achieve operating efficiencies at both the new and existing dressing plant locations. Our frozen yeast rolls plant, which was significantly expanded in 2011, helped to satisfy increased customer demand and improved operating efficiencies. In 2013, we expanded our crouton manufacturing capacity to satisfy customer demand and improve operating efficiencies as well.

The operations of this segmentsales are not affected to any material extent by seasonal fluctuations, althoughprimarily in the fiscal second quarter and the Easter holiday season when sales of frozen retail products tend to be most pronounced in the fiscal second quarter.pronounced. The impacts on working capital are not significant. We do not utilize any franchises or concessions in this business segment. The trademarks that we utilize are significantconcessions. In addition to the overall success of this segment. Theowned and licensed trademarks discussed above, we also own and operate under innumerable other intellectual property rights, including patents, copyrights, formulas, proprietary trade secrets, technologies, know-how processes and licenses under which we operate, however, are notother unregistered rights. We consider our owned and licensed intellectual property rights to be essential to the overall success of this segment.

Glassware and Candles Segment

We sell candles, candle accessories, and other home fragrance products in a variety of sizes, forms and fragrances in retail markets to mass merchants, supermarkets, drug stores and specialty shops under the “Candle-lite” brand name. A significant portion of our candle business is marketed under private label. While much less significant, we have also sold candles, glassware and various other products to customers in certain commercial markets. These commercial product lines were sold in May 2013. The sales and related operating income were not material to the segment’s results of operations.

All the markets in which we sell candle products are highly competitive in the areas of design, price, quality and customer service. Sales attributable to one customer comprised approximately 57% of this segment’s total net sales in 2013. In 2012, two customers, each with sales greater than 10% of total segment net sales, accounted for approximately 63% of this segment’s total net sales. Sales attributable to one customer comprised approximately 58% of this segment’s total net sales in 2011. No other customer accounted for more than 10% of this segment’s total net sales during these years.

Seasonal retail stocking patterns cause certain products in this segment to experience increased sales in the first half of the fiscal year. We do not use any franchises or concessions in this segment. The patents and licenses under which we operate are not essential to the overall success of this segment. Certain trademarks are important, however, to this segment’s marketing efforts.

business.

The following table sets forth business segment information with respect to the percentage of net sales contributed by each class of similar products that account for at least 10% of our consolidated net sales in any year from 20112014 through 2013:

		2013				2012				2011
Specialty Foods Segment:
Non-frozen			56	%			55	%			53	%
Frozen			31	%			32	%			32	%
Glassware and Candles Segment:
Consumer table and giftware			13	%			12	%			15	%

Net sales attributable to Wal-Mart Stores, Inc. (“Wal-Mart”) totaled approximately 22%, 21% and 22% of consolidated net sales for 2013, 2012 and 2011, respectively. Net sales attributable to McLane Company, Inc., a wholesale distribution subsidiary of Berkshire Hathaway, Inc., totaled approximately 11% of consolidated net sales for 2013.

2016:

The estimated amount spent during each of the last three years on research and development activities determined in accordance with generally accepted accounting principles was less than 1% of net sales.

Orders in our Specialty Foods segment are generally filled in three to seven days. In our Glassware and Candles segment, we receive certain orders in a highly seasonal manner. The timing of these orders can materially impact the amount of the backlog we have at any point in time without being an indication of longer-term sales. Due to these variables, weWe do not view the amount of backlog at any particular point in time as a meaningful indicator of longer-term shipments.

All the markets in which we sell products are highly competitive. Both our Specialty Foods segment and our Glassware and Candles segmentWe face competition from a number of domestic and foreign manufacturers of various sizes and capabilities. We compete with othercompetitor branded products, as well as an increasing presence of private label goods. We also compete with both domestic and foreign manufacturers of various sizes in the United States and internationally.retailers’ store branded products. Our ability to compete depends upon a variety of factors, including the position of our branded goods within various categories, product quality, product innovation, promotional and marketing activity, pricing and our ability to service customers.

Our operations are subject to various Federal,federal, state and local environmental protection laws. Based upon available information, compliance with these laws and regulations isdid not expected to have a material effect upon the level of capital expenditures, earnings or our competitive position for 2014.

in 2016 and is not expected to have a material impact in 2017.

As of June 30, 2013,2016 we had approximately 3,100 employees. Approximately 18%2,700 employees, 21% of which are represented under various collective bargaining contracts. 7% of our employees are represented under variousa collective bargaining agreements. Approximately 11%contract that expired on April 30, 2016. We are currently renegotiating this contract. 9% of our employees are represented under a collective bargaining agreementscontract that will expire within one year. While we believe that labor relations with unionizedall our employees are good,satisfactory, a prolonged labor dispute or an organizing attempt could have a material effect on our business and results of operations.

Over 95% of our products are sold in the United States. Foreign operations and export sales have not been significant in the past and are not expected to be significant in the future based upon existing operations.

We do not have any fixed assets located outside of the United States.

During 2013,2016, we obtained adequate supplies of raw materials for all of our segments.and packaging. We rely on a variety of raw materials and packaging for the day-to-day production of our products, including soybean oil, various sweeteners, eggs, dairy-related products, flour, glass, fragrances and colorant agents, paraffin and other waxes, various films and plastic and paper packaging materials.

We purchase the majority of these materials on the open market to meet current requirements, but we also have some fixed-price contracts with terms generally less than one year.year or less. See further discussion in our “Risk Factors” section below and our contractual obligations disclosure in Management’s Discussion and Analysis of Financial Condition and Results of Operations.Operations (“MD&A”). Although the availability and price of certain of these materials has become moreare influenced by weather, disease and the level of global demand, we anticipate that future sources of supply will generally be available and adequate for our needs.

Item 1A.

Risk Factors

An investment in our common stock is subject to certain risks inherent in our business. The material risks and uncertainties that we believe could or do affect us are described below. Before making an investment decision, you should carefully consider the risks and uncertainties described below, together with all of the other information included or incorporated by reference in this Annual Report on Form 10-K.

If any of the following risks occur, our financial condition and results of operations could be materially and adversely affected. If this were to happen, the value of our common stock could decline significantly.

Wal-Mart

Our net sales to Wal-Mart represented approximately 22%16% of consolidated net sales for the year ended June 30, 2013. We believe that2016. Our accounts receivable balance from Wal-Mart as of June 30, 2016 was $16.6 million. While our relationship with Wal-Mart ishas been long-standing and believed to be good, but we cannot assure that we will be able to maintain this relationship. Wal-Mart is not contractually obligated to purchase from us. In addition, changes in Wal-Mart’s general business model, such as reducing the shelf space devoted to the branded products we market, or devoting more shelf space to private labelcompeting products, could adversely affect the profitability of our business with Wal-Mart, even if we maintain a good relationship. The loss of, or a significant reduction in, this business could have a material adverse effect on our sales and profitability. Unfavorable changes in Wal-Mart’s financial condition or other disruptions to Wal-Mart, such as decreased consumer demand or stronger competition, could also have a material adverse effect on our business and results of operations.

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

Our results of operations could be impacted by both genuinereal and fictitiousunfounded claims regarding our products, our competitors’ products and our suppliers’ products. Under adversecertain circumstances, we may need to recall some of our products if they are, or have the potential to be, mislabeled, adulterated contaminated, or contain a defect.contaminated. Any of these circumstances could necessitate a voluntary or mandatory recall due to a substantial product hazard, a need to change a product’s labeling or out of an abundance of caution to avoid any potential product hazards. In March 2010, we instituted a recall of our salad dressing and dip products as a result of a recall by an ingredient supplier.for consumer safety. A pervasive product recall may have an adverse effect on our results of operations due to the costs of a recall, or the related legal claims, the destruction of product inventory, lost sales due to the unavailability of product for a period of time, or a loss of goodwill.customer and consumer sentiment. In addition, we may also be liable if any of our products causes bodily injury.

injury or illness.

Any claim or product recall could stem from, or result in, noncompliance with regulations of the Food and Drug Administration, the U.S. Consumer Product Safety Commissionfederal or state law.food laws and regulations. Such an action could force us to stop selling our products and create significant adverse publicity that could harm our credibility and decrease market acceptance of our products.

If we are required to defend against a product liability or other claim, whether or not we are found liable under the claim, we could incur substantial costs, our reputation could suffer and our customers might substantially reduce their existing or future orders from us.

In addition, either a significant product recall

We rely on the success of our well-recognized brand names. Maintaining and enhancing our brand image and recognition is essential to our long-term success and themaintaining license agreements under which we market and sell certain brands is important to our business. The failure to do soeither could have a material adverse effect on our business, financial condition and results of operations. We seek to maintain and enhance our brands through a variety of efforts, including the delivery of quality products, extending our brands into new markets and new products and investing in traditional marketing and advertising. The costs of maintaining and enhancing our brands, are increasing, and theseincluding maintaining our rights to brands under license agreements, may increase. These increased costs could have a material adverse impact on our business, financial condition and results of operations.

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

We sell our products principally to retail outlets and wholesale distributors,foodservice channels, including traditional supermarkets, mass merchants, warehouse clubs, wholesalers,specialty food distributors, foodservice distributors and direct accounts, specialty food distributors, nonfood outlets such as drug store chains and dollar stores. The replacementnational restaurant chain accounts. Poor performance by or poor performance of our major wholesalers, retailers or chains, or our foodservice customers, or our inability to collect accounts receivable from our customers, could have a material adverse effect on our results of operations and financial condition.

In addition, many of our retail customers offer competitor branded and private labeltheir own store branded products that compete directly with our products for retail shelf space and consumer purchases. Accordingly, there is a risk that these customers may give higher priority or promotional support to their ownstore branded products or to the products of our competitors or discontinue the use of our products in favor of their ownstore branded products or other competing products. If we are not successful in maintainingFailure to maintain our retail shelf space or priority with these customers this could have a material adverse effect on our business and results of operations.

Increases in the costs or limitations to the availability of raw materials we use to produce our products could adversely affect our business by increasing our costs to produce goods.

We purchase a majority of our key raw materials on the open market. Our ability to avoid the adverse effects of a pronounced, sustained price increase in our raw materials is limited. However, we try to limit our exposure to price fluctuations for raw materials by occasionally entering into longer-term, fixed-price contracts for certain raw materials. Our principal raw-material needs include soybean oil, various dairy-related products, flour, paper and plastic packaging materials, wax and water. We have observed increased volatility in the costs of many of these raw materials in recent years. From 2007 through the first half of 2009, and again in 2011 and 2012, commodity markets for grain-based products, on which our food products depend, including dairy, soybean oil and flour products, rose significantly and were unusually volatile due to market concerns over grain-based fuel sources and worldwide demand. Further, fluctuating petroleum prices have impacted our costs of wax and inbound freight on all purchased materials.

Disruptions in availability and increased prices of raw materials could have a material adverse effect on our business and results of operations. The increase in the costs of raw materials used in our Specialty Foods segment during 2007 through 2009 and 2011 through 2012 had an adverse impact on our operating income. We took measures to offset the impact of these higher costs, including the implementation of higher pricing. However, there is no assurance that we will not experience further increases in the costs of raw materials, and uncertainty exists as to our ability to implement offsetting measures. Such further increases, as well as an inability to effectively implement additional measures to offset higher costs, could have a material adverse effect on our business and results of operations.

We are subject to volatility in energy-related costs that affect the cost of producing and distributing our products. This is true in bothproducts, including our Glassware and Candles segment, in which we use large amounts of wax, and in our Specialty Foods segment, in which we utilize petroleum-derived packaging materials. IncreasesWhile energy costs have generally trended lower over the past several quarters, sudden and dramatic increases in these types of costs could have a material adverse effect on our business and results of operations.

Our current manufacturing facilitiesresources may be inadequate to meet significantly increased demand for some of our food products. Our ability to increase our manufacturing capacity depends on many factors, including the availability of capital, steadily increasing consumer demand, toolequipment delivery, construction lead-times, installation, qualification, regulatory permitting and qualification.

regulatory requirements. Increasing capacity through the use of third party manufacturers depends on our ability to develop and maintain such relationships and the ability of such third parties to devote additional capacity to fill our orders.

A lack of sufficient manufacturing capacity to meet demand could cause our customer order times to increase and our product qualityservice levels to decrease, which may negatively affect customer demand for our products and customer relations generally, and which in turn could have a material adverse effect on us. In addition, operating our facilities at or near capacity may also increase production and distribution costs and negatively affect relations with our employees or contractors, which could result in higher employee turnover, labor disputes, and disruptions in our operations.

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

Our ability to obtain adequate and reasonably priced methods of transportation to distribute our products is a key factor to our success. Our Specialty Foods segmentA substantial portion of our products requires the use of refrigerated trailers to ship a substantial portion of its products.for shipping. Delays in transportation, especially in our Specialty Foods segment, where orders are generally filled in three to seven days following the receipt of the order,including weather-related delays, could have a material adverse effect on our business and results of operations. Further, increased line haul costs due to industry capacity constraints and high fuel costs could also negatively impact our financial results. We are often required to pay fuel surcharges that fluctuate with the price of diesel fuel to third-party transporters of our products due to highproducts. While diesel fuel costs. Theseprices have trended lower over the past several quarters, our fuel surcharges can be substantialsubstantial. Accordingly, any sudden or dramatic increases in the price of diesel fuel would serve to increase our fuel surcharges and would increase our cost of goods sold. If we were unable to pass those highhigher costs to our customers in the form of price increases, those highhigher costs could have a material adverse effect on our business and results of operations.

We believe that our labor relations with unionized employees under collective bargaining contracts are good,satisfactory, but our inability to negotiate the renewal of these contracts could have a material adverse effect on our business and results of operations. Any prolonged work stoppages could also have an adverse effect on our results of operations.

We are also subject to risks of other business disruptions associated withcurrently renegotiating the labor contract for our dependence on our production facilities and our distribution systems. Natural disasters, terrorist activity or other events could interrupt our production or distribution and have a material adverse effect on our business and results of operations, including the potential for long-term loss of product placement withBedford Heights, Ohio plant facility, which produces various customers.

garlic bread products.

We increasingly rely on information technology systems to process, transmit,conduct and storemanage our business operations, including the processing, transmitting, and storing of electronic information. For example, our sales group and our production and distribution facilities utilize information technology to increase efficiencies and limit costs. Furthermore, a significant portion of the communications between our personnel, customers, and suppliers depends on information technology. Like other companies, ourOur information technology systems may be vulnerable to a variety of interruptions due to events beyond our control, including, but not limited to, natural disasters, terrorist attacks, telecommunications failures computer viruses, hackers, cyber-based attacks and other security issues. If we are unable to adequately protect against these vulnerabilities, our operations could be disrupted, or we may suffer financial damage or loss because of lost or misappropriated information.

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

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

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

Increased government regulations to limit carbon dioxide and other greenhouse gas emissions as a result of concern over climate change may result in increased compliance costs, capital expenditures and other financial obligations for us. We use significant amounts of water, natural gas, diesel fuel, and electricity in the manufacture and distribution of our products. Legislation or regulations affecting these inputs could affect our profitability. In addition, climate change legislation or regulations could affect our ability to procure needed commodities at costs and in quantities we currently experience and may require us to make additional unplanned expenditures.

We contribute to two multiemployer pension plans under certain union agreementscollective bargaining contracts that provide pension benefits to employees and retired employees who are part of the plan. Generally, as a contributor, we are responsible for making annualperiodic contributions to these plans. Our required contributions to these plans and, upon termination or withdrawal from a plan, we are responsible for our proportionate share of the plan’s underfunded vested liability. The amount of our share for this liability can vary at any given timecould increase, however, based upon a number of factors, including our ability to renegotiate unioncollective bargaining contracts successfully, current and future regulatory requirements, the performance of the pension plan’s investments, the number of participants who are entitled to receive benefits from the plan, a shrinking contribution base as a result of the insolvency or withdrawal of other companies that currently contribute to these plans, the inability or failure of withdrawing companies to pay their withdrawal liability, low interest rates and other funding deficiencies. An increase in our required contributions to these plans could have a material adverse effect on our business, financial condition, results of operations and cash flows.

In addition, if we choose to voluntarily withdraw from a plan, we would be responsible for our proportionate share of the plan’s underfunded vested liability. We currently estimate that our liability for a complete withdrawal from both plans could exceed $16 million. However, that amount can vary at any given time based upon a number of factors, including current and future regulatory requirements, the performance of the pension plan’s investments, the number of participants who are entitled to receive benefits from the plan, the number of other contributors who participate in or withdraw from the plan.plan and whether the plan is terminated. These factors may cause our required contributionswithdrawal liability to increase, which could have a material adverse impacteffect on our business, financial condition, and results of operations. In addition, should we choose to withdraw from a plan to which we contribute, we may incur withdrawal liabilities that could have a material adverse impact on our financial conditionoperations and results of operations.

cash flows.

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

We may also not be ableincur asset impairment or restructuring charges related to divest businesses, product linesacquired or other operations that are not core businesses ordivested assets, which may not be able to do so on terms that are favorable to us. Further,reduce our profitability and cash flows. Finally, a buyer’s inability to fulfill contractual obligations that were assigned as part of a divestiture, including those relating to customer contracts, could lead to future financial loss on our part. In addition, we may incur asset impairment or restructuring charges related to acquired or divested assets, which may reduce our profitability and cash flows. These potential acquisitions or divestitures present financial, managerial and operational challenges, including diversion of management attention from ongoing businesses, difficulty with integrating or separating personnel and financial and other systems, increased expenses, assumption of unknown liabilities, indemnities and potential disputes with the buyers or sellers.

A future increase in our indebtedness could adversely affect our profitability and operational flexibility.

Although we do not have any outstanding debt at this time, we may incur indebtedness for a variety of reasons, including acquisitions or potential changes in capitalization that might require significant cash expenditures. A consequence of such indebtedness could be a reduction in the level of our profitability due to higher interest expense. Depending on the future extent and availability of our borrowings, we could also become more vulnerable to economic downturns, require curtailment of cash dividends or share repurchases, reduce or delay beneficial expansion or investment plans, or otherwise be unable to meet our obligations

when due. For more information regarding our debt, see the “Liquidity and Capital Resources” section in Item 7 of this Annual Report on Form 10-K.

Restructuring and impairment charges could have a material adverse effect on our financial results.

We did not record any restructuring and impairment charges for the three-year period ended June 30, 2013. Future events may occur though that could adversely affect the reported value of our assets and require impairment charges. Such events may include, but are not limited to, strategic decisions made in response to changes in economic and competitive conditions, the impact of the economic environment on our customer base, or a material adverse change in our relationship with significant customers.

There is no certainty regarding the amount of any future CDSOA distributions.

The Continued Dumping and Subsidy Offset Act of 2000 (“CDSOA”) provides for the distribution of monies collected by U.S. Customs from anti-dumping cases to qualifying domestic producers. Our CDSOA receipts totaled approximately $0.3 million, $2.7 million and $14.4 million in 2013, 2012 and 2011, respectively.

CDSOA remittances relate to certain candles being imported from the People’s Republic of China. CDSOA provisions for remittances apply only to duties collected on products imported prior to October 2007. Accordingly, we may receive some level of annual distributions for an undetermined period of years in the future as the monies collected that relate to entries filed prior to October 2007 are administratively finalized by U.S. Customs. Without further legislative action, we expect these distributions will eventually cease.

Cases have been brought in U.S. courts challenging certain aspects of CDSOA. In two separate cases, the U.S. Court of International Trade (“CIT”) ruled that the procedure for determining recipients eligible to receive CDSOA distributions is unconstitutional. The U.S. Court of Appeals for the Federal Circuit reversed both CIT decisions and the U.S. Supreme Court did not hear either case. This allowed the appellate court decisions to stand, but other legal challenges to CDSOA are still pending.

We are unable to determine, at this time, what the ultimate outcome of the other legal challenges will be, and it is possible that further legal actions, potential additional changes in the law and other factors could affect the amount of funds available for distribution, including funds relating to entries prior to October 2007. Accordingly, we cannot predict the amount of future distributions, if any, we may receive. U.S. Customs has advised affected domestic producers that it is possible that CDSOA distributions could be subject to clawback until the resolution of outstanding litigation. We believe that the likelihood of clawback is remote. Any change in CDSOA distributions could affect our earnings and cash flow.

Our operations and prospects depend in large part on the performance of our senior management team, several of which are long-serving employees with significant knowledge of our business model and operations. Should we not be able to find qualified replacements for any of these individuals if their services were no longer available, our ability to manage our operations or successfully execute our business strategy may be materially and adversely affected.

As of June 30, 2013,2016, Mr. Gerlach owned or controlled approximately 30% of the outstanding shares of our common stock. Accordingly, Mr. Gerlach has significant influence on all matters submitted to a vote of the holders of our common stock, including the election of directors. Mr. Gerlach’s voting power also may have the effect of discouraging transactions involving an actual or a potential change of control of our Company, regardless of whether a premium is offered over then-current market prices.

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

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

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

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

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

None.

Item 2.

Properties

We use approximately 2.61.8 million square feet of space for our operations. Of this space, approximately 0.5 million square feet are leased.

The following table summarizes our locations that in total exceed 75,000 square feet of space (including aggregation of multiple facilities) and that are considered ourthe principal manufacturing and warehousing operations:

operations of our Specialty Foods segment:

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

Lancaster Colony Corporation is a diversified manufacturer and marketer of consumerspecialty food products focusing primarily on specialty foods for the retail and foodservice markets. channels.

We also manufacturepreviously manufactured and marketmarketed candles for the food, drug and mass markets. While much less significant,markets until that business was sold on January 30, 2014. The financial results of these operations for 2014, previously included in our Glassware and Candles segment, are reported as discontinued operations.

In March 2015 we have also sold candles, glasswareacquired all of the issued and various other productsoutstanding capital stock of Flatout Holdings, Inc. (“Flatout”), a privately owned manufacturer and marketer of flatbread wraps and pizza crusts based in Saline, Michigan. The purchase price was $92.2 million, net of cash acquired. This transaction is discussed in further detail in Note 2 to customers in certain commercial markets. These commercialthe consolidated financial statements.

Part of our future growth may result from acquisitions. We continue to review potential acquisitions that we believe will complement our existing product lines, were soldenhance our profitability and/or offer good expansion opportunities in May 2013. a manner that fits our overall strategic goals.

Our operations are organized in twointo one reportable segments:segment: “Specialty Foods” and “Glassware and Candles.Foods.” TheOur sales of each segment are predominately domestic.

In recent years, our strategy

Our business has shifted away from operating businesses in a variety of industries towards emphasizing the growth and success we have achieved in our Specialty Foods segment. For perspective, in 2013, approximately 87% of our consolidated net sales was derived from the Specialty Foods segment, as compared to approximately 55% of our consolidated net sales being derived from the Specialty Foods segment in 2003.

We intend to periodically reassess the strategic fit and contribution of our remaining nonfood operations in light of market conditions, capital needs and other factors. Our current strategy focuses our efforts on the most profitable part of our business and minimizes the amount of financial and management resources devoted to our nonfood operations.

We view our food operations as having the potential to achieve future growth in sales and profitability due to attributes such as:

Our goal is to grow both retail and foodservice sales over time by:

In our retail markets, our Specialty Foods segment utilizeschannel, we utilize numerous branded products to support growth and maintain market competitiveness. We place great emphasis on our product innovation and development efforts so as to enhance growth by providing distinctive new products meetingor extensions of our current product lines to meet the evolving needs and preferences of consumers.

Our foodservice sales primarily consist of products sold to restaurant chains.chains, either directly or through distributors. Over the long-term, we have experienced broad-based growth in our foodservice sales, as we build on our strong reputation for product development and quality.

We expect that part of our future growth in the Specialty Foods segment will result from acquisitions. We continue to review potential acquisitions that we believe will provide good complements to our existing product lines, enhance our gross margins or offer good expansion opportunities in a manner that fits our overall goals.

As has occasionally been required to support future growth opportunities, we have historically made substantial capital investments to support our existing food operations such as the construction ofand future growth opportunities. For example, in 2015 we completed a new frozen yeast roll facility insignificant processing capacity expansion at our Horse Cave, Kentucky that began operations in 2008 and was significantly expanded through a project that was completed in June 2011. Thisdressing facility has helped provide capacityto help meet demand for potential future sales growth and also provided greater manufacturing efficiencies. In 2013, we expanded our crouton manufacturing capacity to provide capacity for potential future sales growth as well as improve operating efficiencies.dressing products. Based on our current plans and expectations, we believe that our total capital expenditures for 20142017 could total $25 million, and perhaps more depending on the timing and approvalapproximately $20 to $22 million. We anticipate we will be able to fund all of certain food-related projects currently being evaluated.

our capital needs in 2017 with cash generated from operations.

Consolidated net sales reached approximately $1,166$1,191 million during 2013,2016, increasing by approximately 3%8% as compared to prior-year net sales of $1,131$1,105 million, driven by growth coming from both operating segments. The Specialty Foods segment’s increase reflected higherincreased retail and foodservice sales, including some benefitvolumes, pricing actions and the contribution from higher pricing. The increase in sales of the Glassware and Candles segment was influenced by the growth of seasonal candle programs.

Flatout.

Gross marginprofit increased 11%16% to approximately $267.1$299.6 million from the prior-year comparable total of $240.1$257.7 million. The increase resulted from higher level of net sales, lower materialreduced commodity costs and a more favorable sales mix contributed to the improved gross margin.

Overall results were also affected by the funds received under CDSOA. In 2013, we received approximately $0.3 million under CDSOA, as compared to approximately $2.7 million in 2012 and approximately $14.4 million in 2011. For a more-detailed discussion of CDSOA, see the subcaption “Other Income – Continued Dumping and Subsidy Offset Act” of this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”).

lower freight costs.

Net income totaled approximately $109.2$121.8 million in 2013,2016, or $3.99$4.44 per diluted share, compared to net income of $95.8$101.7 million, or $3.51$3.72 per diluted share, in 2012.2015. Net income in 20112014 totaled approximately $106.4$75.0 million, or $3.84$2.74 per diluted share.

share, which included an after-tax loss on the sale of our candle manufacturing and marketing operations of $29.1 million.

For 2017, we expect volume-driven growth in our retail sales channel with support from recent and upcoming new product introductions along with increased sales from Flatout. In the first half of 2017, we expect volume-driven growth from continuing customers in our foodservice channel will be largely offset by the influence of lower pricing (due to affect our future performance includelower commodity costs, particularly eggs) and the impact of added volumes from several newer retail and foodservice programs, as well as further market expansionour customer rationalization initiative which began in the third quarter of certain key product lines. 2016.

We will also continue to reviewconsider acquisition opportunities within the Specialty Foods segment that are consistent with our growth strategy and represent good value or otherwise provide significant strategic benefits. However, continued unsettled economic conditions affecting consumer and retailer buying patterns and market acceptance of our new product lines are among

Among the many influencesfactors that may impact our ability to improve sales and operating margins in the coming year.

Withinyear are the success of our Specialty Foods segment for 2014, we anticipate volumecontinued investment in innovation and new products, growth from both retailFlatout and foodservice sales channels. No significant impact is expectedthe level of efficiency gains we ultimately achieve from pricing actions. Additionally, basedour supply chain and other cost-saving initiatives.

Based on current market conditions, we foresee modestly favorable material cost comparisons for 2014. It is possible that future changes in the economy and regulatory environment could cause increases in these costs. To help offset or stabilizefirst half of 2017, due mainly to the impact of such increases,lower egg costs and continued favorable trends in certain other key commodities. However, in the second half of 2017, we have historically pursuedanticipate a more neutral pricing environment as we anniversary many comparisons on various pricing actionskey ingredients. Future changes in ingredient costs, as well as other material costs, will be influenced by the size of agricultural harvests in both the U.S. and operational strategies thatother parts of the world and related global demand, economic conditions and the regulatory environment.

Overall, we believe will aid our future results. We are also continuingcontinue to limit some of our exposure to volatile swings in food commodity costs through a structured forward purchasing program for certain key materials.

With respect to our Glasswarematerials such as soybean oil and Candles segment in 2014, we expect our results to be challenged by weaker demand from several customers, including reduced seasonal sales, as well as by correspondingly lower production levels.

flour. For a more-detailed discussion of the effect of commodity costs, see the “Impact of Inflation” section of this MD&A below.

In order to ensure that Changes in other notable recurring costs, such as marketing, transportation and production costs, may also impact our capitalization is adequate to support future internal growth prospects, acquire food businesses consistent with our strategic goals, and maintain cash returns to our shareholders through cash dividends and share repurchases, we will need to maintain sufficient flexibility in our future capital structure. overall results.

We will continue to periodically reassess our allocation of capital periodically to ensure that we maintain adequate operating flexibility while providing appropriate levels of cash returns to our shareholders, whether through share repurchases or cash dividends, including special dividends, if appropriate.

REVIEWshareholders.