UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


Form			10-Q

(Mark One)


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

For the quarterly period ended March 31, ~~2022~~2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-04065



Lancaster Colony Corporation
(Exact name of registrant as specified in its charter)


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

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


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

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


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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No ý

As of April ~~15, 2022,~~14, 2023, there were approximately 27,522,000 shares of Common Stock, without par value, outstanding.

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS




PART I – FINANCIAL INFORMATION		3

Item 1.	Condensed Consolidated Financial Statements (unaudited):

	Condensed Consolidated Balance Sheets – March 31, ~~2022~~2023 and June 30, ~~2021~~2022	3

	Condensed Consolidated Statements of Income – Three and Nine Months Ended March 31, ~~2022~~2023 and ~~2021~~2022	4

	Condensed Consolidated Statements of Comprehensive Income – Three and Nine Months Ended March 31, ~~2022~~2023 and ~~2021~~2022	5

	Condensed Consolidated Statements of Cash Flows – Nine Months Ended March 31, ~~2022~~2023 and ~~2021~~2022	6

	Condensed Consolidated Statements of Shareholders’ Equity – Nine Months Ended March 31, ~~2022~~2023 and ~~2021~~2022	7

	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1715

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2523

Item 4.	Controls and Procedures	2523

PART II – OTHER INFORMATION		2624

Item 1.	Legal Proceedings	2624

Item 1A.	Risk Factors	2624

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2624



Item 6.	Exhibits	2624

SIGNATURES		2726

~~INDEX TO EXHIBITS~~	28

PART I – FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


(Amounts in thousands, except share data)	(Amounts in thousands, except share data)	March 31, 2022		June 30, 2021		(Amounts in thousands, except share data)	March 31, 2023		June 30, 2022
ASSETS	ASSETS					ASSETS
Current Assets:	Current Assets:					Current Assets:
Cash and equivalents	Cash and equivalents	$	67,085	$	188,055	Cash and equivalents	$	82,861	$	60,283
Receivables	Receivables	110,131		97,897		Receivables	130,506		135,496
Inventories:	Inventories:					Inventories:
Raw materials	Raw materials	61,165		48,895		Raw materials	49,352		56,460
Finished goods	Finished goods	104,857		72,980		Finished goods	105,401		88,242
Total inventories	Total inventories	166,022		121,875		Total inventories	154,753		144,702
Other current assets	Other current assets	18,341		15,654		Other current assets	23,440		11,300
Total current assets	Total current assets	361,579		423,481		Total current assets	391,560		351,781
Property, Plant and Equipment:	Property, Plant and Equipment:					Property, Plant and Equipment:
Land, buildings and improvements		311,280		252,174
Machinery and equipment		463,661		424,015
Total cost		774,941		676,189

Property, plant and equipment-gross						Property, plant and equipment-gross	846,937		785,629
Less accumulated depreciation	Less accumulated depreciation	336,652		311,567		Less accumulated depreciation	361,899		334,261
Property, plant and equipment-net	Property, plant and equipment-net	438,289		364,622		Property, plant and equipment-net	485,038		451,368
Other Assets:	Other Assets:					Other Assets:
Goodwill	Goodwill	208,371		208,371		Goodwill	208,371		208,371
Other intangible assets-net	Other intangible assets-net	41,969		58,766		Other intangible assets-net	30,437		32,323
Operating lease right-of-use assets	Operating lease right-of-use assets	29,879		22,455		Operating lease right-of-use assets	24,808		28,177
Other noncurrent assets	Other noncurrent assets	23,537		23,590		Other noncurrent assets	17,543		18,354
Total	Total	$	1,103,624	$	1,101,285	Total	$	1,157,757	$	1,090,374
LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:	Current Liabilities:					Current Liabilities:
Accounts payable	Accounts payable	$	127,361	$	110,338	Accounts payable	$	138,450	$	114,972
Accrued liabilities	Accrued liabilities	52,116		63,585		Accrued liabilities	58,001		50,613
Total current liabilities	Total current liabilities	179,477		173,923		Total current liabilities	196,451		165,585
Noncurrent Operating Lease Liabilities	Noncurrent Operating Lease Liabilities	23,111		17,228		Noncurrent Operating Lease Liabilities	17,465		20,494
Other Noncurrent Liabilities	Other Noncurrent Liabilities	22,564		28,285		Other Noncurrent Liabilities	18,889		20,719
Deferred Income Taxes	Deferred Income Taxes	39,850		38,702		Deferred Income Taxes	51,768		38,889
Commitments and Contingencies	Commitments and Contingencies	0		0		Commitments and Contingencies
Shareholders’ Equity:	Shareholders’ Equity:					Shareholders’ Equity:
Preferred stock-authorized 3,050,000 shares; outstanding-none	Preferred stock-authorized 3,050,000 shares; outstanding-none	0		0		Preferred stock-authorized 3,050,000 shares; outstanding-none
Common stock-authorized 75,000,000 shares; outstanding-March-27,523,562 shares; June-27,531,040 shares		135,645		128,617
Common stock-authorized 75,000,000 shares; outstanding-March-27,522,603 shares; June-27,520,237 shares						Common stock-authorized 75,000,000 shares; outstanding-March-27,522,603 shares; June-27,520,237 shares	142,038		137,814
Retained earnings	Retained earnings	1,478,026		1,482,220		Retained earnings	1,518,219		1,485,045
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(8,127)		(8,253)		Accumulated other comprehensive loss	(10,885)		(11,172)
Common stock in treasury, at cost	Common stock in treasury, at cost	(766,922)		(759,437)		Common stock in treasury, at cost	(776,188)		(767,000)
Total shareholders’ equity	Total shareholders’ equity	838,622		843,147		Total shareholders’ equity	873,184		844,687
Total	Total	$	1,103,624	$	1,101,285	Total	$	1,157,757	$	1,090,374

See accompanying notes to condensed consolidated financial statements.

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)


		Three Months Ended March 31,				Nine Months Ended March 31,					Three Months Ended March 31,				Nine Months Ended March 31,
(Amounts in thousands, except per share data)	(Amounts in thousands, except per share data)	2022		2021		2022		2021		(Amounts in thousands, except per share data)	2023		2022		2023		2022
Net Sales	Net Sales	$	403,494	$	357,249	$	1,223,977	$	1,081,501	Net Sales	$	464,935	$	403,494	$	1,367,866	$	1,223,977
Cost of Sales	Cost of Sales	335,162		266,699		966,676		791,452		Cost of Sales	370,698		335,162		1,072,472		966,676
Gross Profit	Gross Profit	68,332		90,550		257,301		290,049		Gross Profit	94,237		68,332		295,394		257,301
Selling, General and Administrative Expenses	Selling, General and Administrative Expenses	54,526		53,162		157,920		149,607		Selling, General and Administrative Expenses	64,829		54,526		165,361		157,920
Change in Contingent Consideration	Change in Contingent Consideration	(1,300)		—		(3,470)		(5,687)		Change in Contingent Consideration	—		(1,300)		—		(3,470)
Restructuring and Impairment Charges	Restructuring and Impairment Charges	22,723		—		24,651		1,195		Restructuring and Impairment Charges	—		22,723		—		24,651
Operating (Loss) Income		(7,617)		37,388		78,200		144,934
Operating Income (Loss)										Operating Income (Loss)	29,408		(7,617)		130,033		78,200
Other, Net	Other, Net	119		(44)		250		(67)		Other, Net	607		119		815		250
(Loss) Income Before Income Taxes		(7,498)		37,344		78,450		144,867
Taxes Based on (Loss) Income		(3,015)		8,447		17,908		34,261
Income (Loss) Before Income Taxes										Income (Loss) Before Income Taxes	30,015		(7,498)		130,848		78,450
Taxes Based on Income (Loss)										Taxes Based on Income (Loss)	5,460		(3,015)		28,728		17,908

Net (Loss) Income		$	(4,483)	$	28,897	$	60,542	$	110,606
Net Income (Loss)										Net Income (Loss)	$	24,555	$	(4,483)	$	102,120	$	60,542

Net (Loss) Income Per Common Share:
Basic		$	(0.17)	$	1.05	$	2.20	$	4.02
Diluted		$	(0.17)	$	1.05	$	2.20	$	4.01
Net Income (Loss) Per Common Share:										Net Income (Loss) Per Common Share:
Basic and Diluted										Basic and Diluted	$	0.89	$	(0.17)	$	3.71	$	2.20

Weighted Average Common Shares Outstanding:	Weighted Average Common Shares Outstanding:									Weighted Average Common Shares Outstanding:
Basic	Basic	27,442		27,483		27,448		27,474		Basic	27,465		27,442		27,462		27,448
Diluted	Diluted	27,442		27,526		27,478		27,513		Diluted	27,487		27,442		27,479		27,478

See accompanying notes to condensed consolidated financial statements.

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)


		Three Months Ended March 31,				Nine Months Ended March 31,					Three Months Ended March 31,				Nine Months Ended March 31,
(Amounts in thousands)	(Amounts in thousands)	2022		2021		2022		2021		(Amounts in thousands)	2023		2022		2023		2022
Net (Loss) Income		$	(4,483)	$	28,897	$	60,542	$	110,606
Net Income (Loss)										Net Income (Loss)	$	24,555	$	(4,483)	$	102,120	$	60,542
Other Comprehensive Income:	Other Comprehensive Income:									Other Comprehensive Income:
Defined Benefit Pension and Postretirement Benefit Plans:	Defined Benefit Pension and Postretirement Benefit Plans:									Defined Benefit Pension and Postretirement Benefit Plans:
Amortization of loss, before tax	Amortization of loss, before tax	101		167		301		503		Amortization of loss, before tax	170		101		510		301
Amortization of prior service credit, before tax	Amortization of prior service credit, before tax	(45)		(45)		(136)		(136)		Amortization of prior service credit, before tax	(45)		(45)		(136)		(136)
Total Other Comprehensive Income, Before Tax	Total Other Comprehensive Income, Before Tax	56		122		165		367		Total Other Comprehensive Income, Before Tax	125		56		374		165
Tax Attributes of Items in Other Comprehensive Income:	Tax Attributes of Items in Other Comprehensive Income:									Tax Attributes of Items in Other Comprehensive Income:
Amortization of loss, tax	Amortization of loss, tax	(24)		(39)		(71)		(117)		Amortization of loss, tax	(39)		(24)		(119)		(71)
Amortization of prior service credit, tax	Amortization of prior service credit, tax	11		11		32		32		Amortization of prior service credit, tax	11		11		32		32
Total Tax Expense	Total Tax Expense	(13)		(28)		(39)		(85)		Total Tax Expense	(28)		(13)		(87)		(39)
Other Comprehensive Income, Net of Tax	Other Comprehensive Income, Net of Tax	43		94		126		282		Other Comprehensive Income, Net of Tax	97		43		287		126
Comprehensive (Loss) Income		$	(4,440)	$	28,991	$	60,668	$	110,888
Comprehensive Income (Loss)										Comprehensive Income (Loss)	$	24,652	$	(4,440)	$	102,407	$	60,668

See accompanying notes to condensed consolidated financial statements.

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


		Nine Months Ended March 31,					Nine Months Ended March 31,
(Amounts in thousands)	(Amounts in thousands)	2022		2021		(Amounts in thousands)	2023		2022
Cash Flows From Operating Activities:	Cash Flows From Operating Activities:					Cash Flows From Operating Activities:
Net income	Net income	$	60,542	$	110,606	Net income	$	102,120	$	60,542
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Impacts of noncash items:	Impacts of noncash items:					Impacts of noncash items:
Depreciation and amortization	Depreciation and amortization	34,417		32,569		Depreciation and amortization	36,665		34,417
Change in contingent consideration	Change in contingent consideration	(3,470)		(5,687)		Change in contingent consideration	—		(3,470)
Deferred income taxes and other changes	Deferred income taxes and other changes	1,587		4,305		Deferred income taxes and other changes	13,714		1,587
Stock-based compensation expense	Stock-based compensation expense	7,384		5,234		Stock-based compensation expense	6,924		7,384
Restructuring and impairment charges	Restructuring and impairment charges	24,435		1,195		Restructuring and impairment charges	—		24,435

Pension plan activity	Pension plan activity	(411)		(118)		Pension plan activity	(166)		(411)
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Receivables	Receivables	(12,234)		(11,273)		Receivables	5,490		(12,234)
Inventories	Inventories	(44,147)		(17,998)		Inventories	(10,051)		(44,147)
Other current assets	Other current assets	(4,240)		(2,968)		Other current assets	(11,511)		(4,240)
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	(5,212)		22,834		Accounts payable and accrued liabilities	40,966		(5,212)
Net cash provided by operating activities	Net cash provided by operating activities	58,651		138,699		Net cash provided by operating activities	184,151		58,651
Cash Flows From Investing Activities:	Cash Flows From Investing Activities:					Cash Flows From Investing Activities:
Payments for property additions	Payments for property additions	(104,888)		(55,601)		Payments for property additions	(78,847)		(104,888)

Proceeds from sale of property						Proceeds from sale of property	1,209		276

Other-net	Other-net	(177)		(561)		Other-net	(1,283)		(453)
Net cash used in investing activities	Net cash used in investing activities	(105,065)		(56,162)		Net cash used in investing activities	(78,921)		(105,065)
Cash Flows From Financing Activities:	Cash Flows From Financing Activities:					Cash Flows From Financing Activities:
Payment of dividends	Payment of dividends	(64,736)		(60,576)		Payment of dividends	(68,946)		(64,736)
Purchase of treasury stock	Purchase of treasury stock	(7,485)		(4,623)		Purchase of treasury stock	(9,188)		(7,485)
Tax withholdings for stock-based compensation	Tax withholdings for stock-based compensation	(356)		(3,110)		Tax withholdings for stock-based compensation	(2,700)		(356)

Other-net		(1,979)		(1,380)
Principal payments for finance leases						Principal payments for finance leases	(1,818)		(1,979)
Net cash used in financing activities	Net cash used in financing activities	(74,556)		(69,689)		Net cash used in financing activities	(82,652)		(74,556)

Net change in cash and equivalents	Net change in cash and equivalents	(120,970)		12,848		Net change in cash and equivalents	22,578		(120,970)
Cash and equivalents at beginning of year	Cash and equivalents at beginning of year	188,055		198,273		Cash and equivalents at beginning of year	60,283		188,055
Cash and equivalents at end of period	Cash and equivalents at end of period	$	67,085	$	211,121	Cash and equivalents at end of period	$	82,861	$	67,085
Supplemental Disclosure of Operating Cash Flows:	Supplemental Disclosure of Operating Cash Flows:					Supplemental Disclosure of Operating Cash Flows:
Net cash payments for income taxes	Net cash payments for income taxes	$	18,775	$	29,855	Net cash payments for income taxes	$	26,371	$	18,775

See accompanying notes to condensed consolidated financial statements.

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(UNAUDITED)


		Nine Months Ended March 31, 2022												Nine Months Ended March 31, 2023
(Amounts in thousands, except per share data)	(Amounts in thousands, except per share data)	Common Stock Outstanding			Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total 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											Shares	Amount
Balance, June 30, 2021		27,531	$	128,617	$	1,482,220	$	(8,253)	$	(759,437)	$	843,147
Balance, June 30, 2022													Balance, June 30, 2022	27,520	$	137,814	$	1,485,045	$	(11,172)	$	(767,000)	$	844,687
Net income	Net income				30,655						30,655		Net income				37,592						37,592
Net pension and postretirement benefit gains, net of $13 tax effect							42				42
Cash dividends - common stock ($0.75 per share)					(20,675)						(20,675)
Purchase of treasury stock		(30)							(5,329)		(5,329)
Stock-based plans		29	(59)								(59)
Stock-based compensation expense			2,274								2,274
Balance, September 30, 2021		27,530	$	130,832	$	1,492,200	$	(8,211)	$	(764,766)	$	850,055
Net income					34,370						34,370
Net pension and postretirement benefit gains, net of $13 tax effect							41				41
Net pension and postretirement benefit gains, net of $29 tax effect													Net pension and postretirement benefit gains, net of $29 tax effect						95				95
Cash dividends - common stock ($0.80 per share)	Cash dividends - common stock ($0.80 per share)				(22,035)						(22,035)		Cash dividends - common stock ($0.80 per share)				(22,067)						(22,067)
Purchase of treasury stock	Purchase of treasury stock	—							(9)		(9)		Purchase of treasury stock	—							(84)		(84)
Stock-based plans	Stock-based plans	4	(2)								(2)		Stock-based plans	34	(617)								(617)
Stock-based compensation expense	Stock-based compensation expense		2,589								2,589		Stock-based compensation expense		2,465								2,465
Balance, December 31, 2021		27,534	$	133,419	$	1,504,535	$	(8,170)	$	(764,775)	$	865,009
Net loss					(4,483)						(4,483)
Net pension and postretirement benefit gains, net of $13 tax effect							43				43
Cash dividends - common stock ($0.80 per share)					(22,026)						(22,026)
Balance, September 30, 2022													Balance, September 30, 2022	27,554	$	139,662	$	1,500,570	$	(11,077)	$	(767,084)	$	862,071
Net income													Net income				39,973						39,973
Net pension and postretirement benefit gains, net of $30 tax effect													Net pension and postretirement benefit gains, net of $30 tax effect						95				95
Cash dividends - common stock ($0.85 per share)													Cash dividends - common stock ($0.85 per share)				(23,462)						(23,462)
Purchase of treasury stock	Purchase of treasury stock	(14)							(2,147)		(2,147)		Purchase of treasury stock	(1)							(125)		(125)
Stock-based plans	Stock-based plans	4	(295)								(295)		Stock-based plans	18	(1,801)								(1,801)
Stock-based compensation expense	Stock-based compensation expense		2,521								2,521		Stock-based compensation expense		2,799								2,799
Balance, March 31, 2022		27,524	$	135,645	$	1,478,026	$	(8,127)	$	(766,922)	$	838,622
Balance, December 31, 2022													Balance, December 31, 2022	27,571	$	140,660	$	1,517,081	$	(10,982)	$	(767,209)	$	879,550
Net income													Net income				24,555						24,555
Net pension and postretirement benefit gains, net of $28 tax effect													Net pension and postretirement benefit gains, net of $28 tax effect						97				97
Cash dividends - common stock ($0.85 per share)													Cash dividends - common stock ($0.85 per share)				(23,417)						(23,417)
Purchase of treasury stock													Purchase of treasury stock	(47)							(8,979)		(8,979)
Stock-based plans													Stock-based plans	(1)	(282)								(282)
Stock-based compensation expense													Stock-based compensation expense		1,660								1,660
Balance, March 31, 2023													Balance, March 31, 2023	27,523	$	142,038	$	1,518,219	$	(10,885)	$	(776,188)	$	873,184

See accompanying notes to condensed consolidated financial statements.

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (continued)

(UNAUDITED)


		Nine Months Ended March 31, 2021												Nine Months Ended March 31, 2022
(Amounts in thousands, except per share data)	(Amounts in thousands, except per share data)	Common Stock Outstanding			Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total 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											Shares	Amount
Balance, June 30, 2020		27,524	$	125,153	$	1,421,121	$	(12,070)	$	(750,904)	$	783,300
Balance, June 30, 2021													Balance, June 30, 2021	27,531	$	128,617	$	1,482,220	$	(8,253)	$	(759,437)	$	843,147
Net income	Net income				37,079						37,079		Net income				30,655						30,655
Net pension and postretirement benefit gains, net of $29 tax effect							94				94
Cash dividends - common stock ($0.70 per share)					(19,270)						(19,270)
Purchase of treasury stock		—							(15)		(15)
Stock-based plans		16	(1,854)								(1,854)
Stock-based compensation expense			1,772								1,772
Balance, September 30, 2020		27,540	$	125,071	$	1,438,930	$	(11,976)	$	(750,919)	$	801,106
Net income					44,630						44,630
Net pension and postretirement benefit gains, net of $28 tax effect							94				94
Net pension and postretirement benefit gains, net of $13 tax effect													Net pension and postretirement benefit gains, net of $13 tax effect						42				42
Cash dividends - common stock ($0.75 per share)	Cash dividends - common stock ($0.75 per share)				(20,655)						(20,655)		Cash dividends - common stock ($0.75 per share)				(20,675)						(20,675)
Purchase of treasury stock	Purchase of treasury stock	—							(4)		(4)		Purchase of treasury stock	(30)							(5,329)		(5,329)
Stock-based plans	Stock-based plans	7	(581)								(581)		Stock-based plans	29	(59)								(59)
Stock-based compensation expense	Stock-based compensation expense		1,770								1,770		Stock-based compensation expense		2,274								2,274
Balance, December 31, 2020		27,547	$	126,260	$	1,462,905	$	(11,882)	$	(750,923)	$	826,360
Balance, September 30, 2021													Balance, September 30, 2021	27,530	$	130,832	$	1,492,200	$	(8,211)	$	(764,766)	$	850,055
Net income	Net income				28,897						28,897		Net income				34,370						34,370
Net pension and postretirement benefit gains, net of $28 tax effect							94				94

Cash dividends - common stock ($0.75 per share)					(20,651)						(20,651)
Net pension and postretirement benefit gains, net of $13 tax effect													Net pension and postretirement benefit gains, net of $13 tax effect						41				41
Cash dividends - common stock ($0.80 per share)													Cash dividends - common stock ($0.80 per share)				(22,035)						(22,035)
Purchase of treasury stock	Purchase of treasury stock	(26)							(4,604)		(4,604)		Purchase of treasury stock	—							(9)		(9)
Stock-based plans	Stock-based plans	24	(675)								(675)		Stock-based plans	4	(2)								(2)
Stock-based compensation expense	Stock-based compensation expense		1,692								1,692		Stock-based compensation expense		2,589								2,589
Balance, March 31, 2021		27,545	$	127,277	$	1,471,151	$	(11,788)	$	(755,527)	$	831,113
Balance, December 31, 2021													Balance, December 31, 2021	27,534	$	133,419	$	1,504,535	$	(8,170)	$	(764,775)	$	865,009
Net loss													Net loss				(4,483)						(4,483)
Net pension and postretirement benefit gains, net of $13 tax effect													Net pension and postretirement benefit gains, net of $13 tax effect						43				43

Cash dividends - common stock ($0.80 per share)													Cash dividends - common stock ($0.80 per share)				(22,026)						(22,026)
Purchase of treasury stock													Purchase of treasury stock	(14)							(2,147)		(2,147)
Stock-based plans													Stock-based plans	4	(295)								(295)
Stock-based compensation expense													Stock-based compensation expense		2,521								2,521
Balance, March 31, 2022													Balance, March 31, 2022	27,524	$	135,645	$	1,478,026	$	(8,127)	$	(766,922)	$	838,622

See accompanying notes to condensed consolidated financial statements.

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

Note 1 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Lancaster Colony Corporation and our wholly-owned subsidiaries, collectively referred to as “we,” “us,” “our,” “registrant” or the “Company” and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and SEC Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In our opinion, the interim condensed consolidated financial statements reflect all adjustments necessary for a fair presentation of the results of operations and financial position for such periods. All such adjustments reflected in the interim condensed consolidated financial statements are considered to be of a normal recurring nature. Intercompany transactions and accounts have been eliminated in consolidation. The results of operations for any interim period are not necessarily indicative of results for the full year. Accordingly, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in our ~~2021~~2022 Annual Report on Form 10-K. Unless otherwise noted, the term “year” and references to a particular year pertain to our fiscal year, which begins on July 1 and ends on June 30; for example, ~~2022~~2023 refers to fiscal ~~2022,~~2023, which is the period from July 1, ~~2021~~2022 to June 30, ~~2022.~~

~~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. For the nine months ended March 31, 2022 and 2021, we capitalized $1.6 million and $3.2 million, respectively, of deferred software costs related to cloud computing arrangements.2023.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost, except for those acquired as part of a business combination, which are recorded at fair value at the time of purchase. We use the straight-line method of computing depreciation for financial reporting purposes based on the estimated useful lives of the corresponding assets. Purchases of property, plant and equipment included in Accounts Payable and excluded from the property additions and the change in accounts payable in the Condensed Consolidated Statements of Cash Flows were as follows:

March 31,
2022 2021
Construction in progress in Accounts Payable $ 21,256 $ 3,791


	March 31,
	2023		2022
Construction in progress in Accounts Payable	$	9,281	$	21,256

In the three months ended March 31, 2022, we recorded an impairment charge of $6.8 million for certain property, plant and equipment related to the Bantam Bagels, LLC (“Bantam”) business. This charge resulted from our decision to explore strategic alternatives for this business, which triggered impairment testing, and ~~represents~~represented the excess of the carrying value over the fair value. The fair value was based on estimated selling prices for these assets, which ~~represents~~represented a Level 3 measurement within the fair value hierarchy. The impairment charge iswas reflected in Restructuring and Impairment Charges and was not allocated to our two reportable segments due to its unusual nature.

Accrued Compensation and Employee Benefits

Accrued compensation and employee benefits included in Accrued Liabilities was ~~$18.6~~$27.2 million and ~~$32.5~~$16.3 million at March 31, ~~2022~~2023 and June 30, ~~2021,~~2022, respectively.

~~Current Operating Lease Liabilities~~Accrued Distribution

~~Current operating lease liabilities~~Accrued distribution included in Accrued Liabilities ~~were $9.4~~was $8.4 million and ~~$6.9~~$11.9 million at March 31, ~~2022~~2023 and June 30, ~~2021,~~2022, respectively.

~~LANCASTER COLONY CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

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, stock-settled stock appreciation rights and performance units) outstanding during each period. Unvested shares of restricted stock granted to employees are considered participating securities since employees receive nonforfeitable dividends prior to vesting and, therefore, are included in the earnings allocation in computing EPS under the two-class method. Basic EPS excludes dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted EPS is computed by dividing income available to common shareholders by the diluted weighted average number of common shares outstanding during the period, which includes the dilutive potential common shares associated with nonparticipating restricted stock, stock-settled stock appreciation rights and performance units.

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

Three Months Ended
March 31, Nine Months Ended
March 31,
2022 2021 2022 2021
Net (loss) income $ (4,483) $ 28,897 $ 60,542 $ 110,606
Net income available to participating securities (52) (56) (168) (223)
Net (loss) income available to common shareholders $ (4,535) $ 28,841 $ 60,374 $ 110,383
Weighted average common shares outstanding – basic 27,442 27,483 27,448 27,474
Incremental share effect from:
Nonparticipating restricted stock — 2 3 2
Stock-settled stock appreciation rights — 41 26 37
Performance units — — 1 —
Weighted average common shares outstanding – diluted 27,442 27,526 27,478 27,513
Net (loss) income per common share – basic $ (0.17) $ 1.05 $ 2.20 $ 4.02
Net (loss) income per common share – diluted $ (0.17) $ 1.05 $ 2.20 $ 4.01

~~Accumulated Other Comprehensive Loss~~

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

Three Months Ended
March 31, Nine Months Ended
March 31,
2022 2021 2022 2021
Accumulated other comprehensive loss at beginning of period $ (8,170) $ (11,882) $ (8,253) $ (12,070)
Defined Benefit Pension Plan Items:
Amortization of unrecognized net loss 107 172 321 518
Postretirement Benefit Plan Items:
Amortization of unrecognized net gain (6) (5) (20) (15)
Amortization of prior service credit (45) (45) (136) (136)
Total other comprehensive income, before tax 56 122 165 367
Total tax expense (13) (28) (39) (85)
Other comprehensive income, net of tax 43 94 126 282
Accumulated other comprehensive loss at end of period $ (8,127) $ (11,788) $ (8,127) $ (11,788)

109

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

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


	Three Months Ended March 31,				Nine Months Ended March 31,
	2023		2022		2023		2022
Net income (loss)	$	24,555	$	(4,483)	$	102,120	$	60,542
Net income available to participating securities	(43)		(52)		(246)		(168)
Net income (loss) available to common shareholders	$	24,512	$	(4,535)	$	101,874	$	60,374

Weighted average common shares outstanding – basic	27,465		27,442		27,462		27,448
Incremental share effect from:
Nonparticipating restricted stock	1		—		2		3
Stock-settled stock appreciation rights (1)	19		—		12		26
Performance units	2		—		3		1
Weighted average common shares outstanding – diluted	27,487		27,442		27,479		27,478

Net income (loss) per common share – basic and diluted	$	0.89	$	(0.17)	$	3.71	$	2.20

(1)Excludes the impact of the following weighted average stock-settled stock appreciation rights outstanding with an antidilutive effect: 0.3 million for the three months ended March 31, 2022; and 0.1 million and 0.2 million for the nine months ended March 31, 2023 and 2022, respectively.

Accumulated Other Comprehensive Loss

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


	Three Months Ended March 31,				Nine Months Ended March 31,
	2023		2022		2023		2022
Accumulated other comprehensive loss at beginning of period	$	(10,982)	$	(8,170)	$	(11,172)	$	(8,253)
Defined Benefit Pension Plan Items:
Amortization of unrecognized net loss	181		107		544		321
Postretirement Benefit Plan Items:
Amortization of unrecognized net gain	(11)		(6)		(34)		(20)
Amortization of prior service credit	(45)		(45)		(136)		(136)
Total other comprehensive income, before tax	125		56		374		165
Total tax expense	(28)		(13)		(87)		(39)
Other comprehensive income, net of tax	97		43		287		126

Accumulated other comprehensive loss at end of period	$	(10,885)	$	(8,127)	$	(10,885)	$	(8,127)

Significant Accounting Policies

There were no changes to our Significant Accounting Policies from those disclosed in our ~~2021~~2022 Annual Report on Form 10-K.

Recent Accounting Standards

There are no recently issued or adopted accounting standards that will impact our consolidated financial statements.

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

Note 2 – 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.

Impairment charges for property, plant and equipment and intangible assets resulted from nonrecurring fair value ~~measurements.~~measurements in the prior year. See further discussion in Note 1 and Note 5.

Our contingent consideration, which resulted from the earn-out associated with our acquisition of Bantam, is measured at fair value on a recurring basis and is included in Other Noncurrent Liabilities. The following table summarizes our contingent consideration:

Fair Value Measurements at March 31, 2022
Level 1 Level 2 Level 3 Total
Contingent consideration - Bantam $ — $ — $ — $ —
Fair Value Measurements at June 30, 2021
Level 1 Level 2 Level 3 Total
Contingent consideration - Bantam $ — $ — $ 3,470 $ 3,470

Bantam Contingent Consideration

~~This contingent~~Contingent consideration resulted from the earn-out associated with our October 19, 2018 acquisition of Bantam. In general, the terms of the acquisition ~~specify~~specified the sellers ~~will~~could 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~~Prior to exiting the Bantam business near the end of fiscal 2022, the fair value iswas measured on a recurring basis using a Monte Carlo simulation that randomly ~~changes~~changed revenue growth, forecasted adjusted EBITDA and other uncertain variables to estimate an expected value. We ~~record~~recorded the present value of ~~this amount~~these amounts by applying a discount rate. As ~~this~~these fair value ~~measurement is~~measurements were based on significant inputs not observable in the market, ~~it represents a~~they represented Level 3 ~~measurement~~measurements within the fair value hierarchy.

~~Our~~ Based on our 2022 fair value ~~measurement at March 31, 2022 resulted in a $1.3 million reduction~~measurements, we recorded reductions in the fair value of Bantam’s contingent consideration ~~based on changes in Bantam’s forecasted adjusted EBITDA~~of $1.3 million and $3.5 million for the ~~twelve~~three and nine months ~~ending December~~ended March 31, ~~2023. The changes in forecasted adjusted EBITDA primarily reflected lower projected sales levels for Bantam’s Foodservice business. This adjustment was recorded in our Foodservice segment.~~

~~Our fair value measurement at December 31, 2021 resulted~~2022, respectively, resulting in a ~~$2.2 million reduction in the fair value of Bantam’s contingent consideration based on changes in Bantam’s forecasted adjusted EBITDA for the twelve months ending December~~zero balance at March 31, 2023, as well as a refinement to the estimated probabilities applied to our forecast scenarios. The changes in forecasted adjusted EBITDA primarily reflected lower projected sales levels for Bantam’s Retail business while the changes in estimated probabilities reflected a lower likelihood of attaining certain Foodservice business. We recorded $1.3 million of this adjustment in our Foodservice segment and $0.9 million in our Retail segment.

~~LANCASTER COLONY CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

Our fair value measurement at September 30, 2020 resulted in a $5.7 million reduction in the fair value of Bantam’s contingent consideration based on changes in Bantam’s forecasted adjusted EBITDA for the twelve months ending December 31, 2023. The changes in forecasted adjusted EBITDA primarily reflected the impact of a SKU rationalization by a Foodservice customer resulting in the loss of sales to that customer after November 30, 2020. This adjustment was recorded in our Foodservice segment.2022.

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


		Three Months Ended March 31,				Nine Months Ended March 31,					Three Months Ended March 31,				Nine Months Ended March 31,
		2022		2021		2022		2021			2023		2022		2023		2022
Contingent consideration at beginning of period	Contingent consideration at beginning of period	$	1,300	$	3,470	$	3,470	$	9,157	Contingent consideration at beginning of period	$	—	$	1,300	$	—	$	3,470

Change in contingent consideration included in operating income	Change in contingent consideration included in operating income	(1,300)		—		(3,470)		(5,687)		Change in contingent consideration included in operating income	—		(1,300)		—		(3,470)
Contingent consideration at end of period	Contingent consideration at end of period	$	—	$	3,470	$	—	$	3,470	Contingent consideration at end of period	$	—	$	—	$	—	$	—

Note 3 – Long-Term Debt

At March 31, ~~2022~~2023 and June 30, ~~2021,~~2022, we had an unsecured credit facility (“Facility”) under which we could borrow, on a revolving credit basis, up to a maximum of $150 million at any one time, with potential to expand the total credit availability to $225 million based on consent of the issuing banks and certain other conditions. The Facility expires on March 19, 2025, and all outstanding amounts are then due and payable. ~~Interest is~~The Facility was amended on December 13, 2022 to reflect a change in the calculation of the variable ~~based upon~~interest rate from formulas tied to LIBOR to formulas tied to SOFR or an alternate base rate as defined in the Facility. In the event ~~that LIBOR~~SOFR becomes unavailable or is no longer deemed an appropriate reference rate, the Facility allows for the use of a benchmark replacement rate. We must also pay facility fees that are tied to our then-applicable consolidated leverage ratio. Loans may be used for general corporate purposes. Due to the nature of its terms, when we have outstanding borrowings under the Facility, they will be classified as long-term debt.

The Facility contains certain restrictive covenants, including limitations on indebtedness, asset sales and acquisitions. There are two principal financial covenants: an interest expense test that requires us to maintain an interest coverage ratio not less than 2.5 to 1 at the end of each fiscal quarter; and an indebtedness test that requires us to maintain a consolidated leverage ratio not greater than 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 Facility.

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

At March 31, ~~2022~~2023 and June 30, ~~2021,~~2022, we had no borrowings outstanding under the Facility. At March 31, ~~2022~~2023 and June 30, ~~2021,~~2022, we had $2.8 million of standby letters of credit outstanding, which reduced the amount available for borrowing under the Facility. We paid no interest for the three and nine months ended March 31, ~~2022~~2023 and ~~2021.~~2022.

Note 4 – Commitments and Contingencies

At March 31, ~~2022,~~2023, we were a party to various claims and litigation matters arising in the ordinary course of business. Such matters did not have a material effect on the current-year results of operations and, in our opinion, their ultimate disposition ~~will~~is not expected to have a material effect on our consolidated financial statements.

~~We have a significant remaining commitment of approximately $46 million related to a capacity expansion project at our dressing and sauce facility in Horse Cave, Kentucky.~~

~~Our acquisition of Bantam included a provision for contingent consideration for the earn-out associated with this transaction. See further discussion in Note 2.~~

~~LANCASTER COLONY CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

Note 5 – Goodwill and Other Intangible Assets

Goodwill attributable to the Retail and Foodservice segments was $157.4 million and $51.0 million, respectively, at March 31, ~~2022~~2023 and June 30, ~~2021.~~2022.

The following table summarizes our identifiable other intangible assets:


		March 31, 2022		June 30, 2021			March 31, 2023		June 30, 2022

Tradenames (20 to 30-year life)	Tradenames (20 to 30-year life)					Tradenames (20 to 30-year life)
Gross carrying value	Gross carrying value	$	50,321	$	62,531	Gross carrying value	$	37,100	$	37,100
Accumulated amortization	Accumulated amortization	(12,350)		(12,421)		Accumulated amortization	(9,386)		(8,385)
Net carrying value	Net carrying value	$	37,971	$	50,110	Net carrying value	$	27,714	$	28,715

Customer Relationships (2 to 15-year life)
Customer Relationships (10 to 15-year life)						Customer Relationships (10 to 15-year life)
Gross carrying value	Gross carrying value	$	14,207	$	17,507	Gross carrying value	$	5,287	$	14,207
Accumulated amortization	Accumulated amortization	(12,496)		(12,912)		Accumulated amortization	(4,210)		(12,727)
Net carrying value	Net carrying value	$	1,711	$	4,595	Net carrying value	$	1,077	$	1,480
Technology / Know-how (10-year life)	Technology / Know-how (10-year life)					Technology / Know-how (10-year life)
Gross carrying value	Gross carrying value	$	6,350	$	8,020	Gross carrying value	$	6,350	$	6,350
Accumulated amortization	Accumulated amortization	(4,063)		(3,973)		Accumulated amortization	(4,704)		(4,222)
Net carrying value	Net carrying value	$	2,287	$	4,047	Net carrying value	$	1,646	$	2,128
Non-compete Agreements (5-year life)
Gross carrying value		$	191	$	191
Accumulated amortization		(191)		(177)
Net carrying value		$	—	$	14

Total net carrying value	Total net carrying value	$	41,969	$	58,766	Total net carrying value	$	30,437	$	32,323

In the three months ended March 31, 2022, we recorded an impairment charge of $12.3 million to write off the net carrying value of Bantam’s tradename, customer relationships and technology / know-how intangible assets based on our decision to explore strategic alternatives for this business. The impairment charge ~~represents the excess of the carrying value over the fair value of estimated discounted cash flows for the remaining useful life of the intangible assets. The impairment charge is~~was reflected in Restructuring and Impairment Charges and was not allocated to our two reportable segments due to its unusual nature.

In the three months ended December 31, 2021, we recorded an impairment charge of $0.9 million related to Bantam’s Retail customer relationships intangible asset, which ~~reflects~~reflected lower projected cash flows for Bantam’s Retail business. The impairment charge ~~represents~~was reflected in Restructuring and Impairment Charges and was recorded in our Retail segment.

The impairment charges discussed above represented the excess of the carrying value over the fair value of estimated discounted cash flows ~~for the remaining useful life of the intangible asset. The impairment charge is reflected in Restructuring and Impairment Charges and was recorded in our Retail segment.~~

~~In the three months ended September 30, 2020, we recorded impairment charges of $1.2 million related~~specific to certain tradename and technology / know-how intangible assets for Bantam, which reflected the impact of a SKU rationalization by a Foodservice customer resulting in the loss of sales to that customer after November 30, 2020. The impairment charges represent the excess of the carrying value over the fair value of estimated discounted cash flows for the remaining useful lives of the related intangible assets. The impairment charges are reflected in Restructuring and Impairment Charges and were recorded in our Foodservice segment. We also reduced the remaining useful life for Bantam’s Foodservice customer relationship and have recorded accelerated amortization expense.

As the fair value measurements ~~used above~~ were based on significant inputs not observable in the market, they ~~represent~~represented Level 3 measurements within the fair value hierarchy.

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


	Three Months Ended March 31,				Nine Months Ended March 31,
	2023		2022		2023		2022
Amortization expense	$	629	$	1,161	$	1,886	$	3,562

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

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

Three Months Ended
March 31, Nine Months Ended
March 31,
2022 2021 2022 2021
Amortization expense $ 1,161 $ 1,203 $ 3,562 $ 4,052

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


2023		$	3,105
2024	2024	$	3,105	2024	$	2,514
2025	2025	$	2,845	2025	$	2,212
2026	2026	$	2,215	2026	$	1,610
2027	2027	$	2,044	2027	$	1,426
2028				2028	$	1,334

Note 6 – Income Taxes

Prepaid federal income taxes of ~~$6.5 million and $5.1~~$10.2 million were included in Other Current Assets at March 31, ~~2022 and June 30, 2021, respectively.~~2023. Prepaid state and local income taxes of ~~$1.7~~$2.2 million and ~~$1.1~~$1.9 million were included in Other Current Assets at March 31, ~~2022~~2023 and June 30, ~~2021,~~2022, respectively.

Note 7 – 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.

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 dressings, slaw dressing, sauces and croutons. Within the frozen food section of the grocery store, we sell yeast rolls and garlic ~~breads and mini stuffed bagels.~~breads.

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 sold other roll products under a temporary supply agreement resulting from the acquisition of Omni Baking Company LLC. The temporary supply agreement was terminated effective October 31, 2020.

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 by reportable segment. The composition of our identifiable assets at March 31, ~~2022~~2023 is generally consistent with that of June 30, ~~2021. However, due to the decrease in cash and equivalents, the amount of Corporate assets has decreased as compared to June 30, 2021.~~

~~LANCASTER COLONY CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

2022.

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


		Three Months Ended March 31,				Nine Months Ended March 31,					Three Months Ended March 31,				Nine Months Ended March 31,
		2022		2021		2022		2021			2023		2022		2023		2022
Net Sales	Net Sales									Net Sales
Retail	Retail	$	213,128	$	198,358	$	682,102	$	614,653	Retail	$	247,208	$	213,128	$	729,187	$	682,102
Foodservice	Foodservice	190,366		158,891		541,875		466,848		Foodservice	217,727		190,366		638,679		541,875
Total	Total	$	403,494	$	357,249	$	1,223,977	$	1,081,501	Total	$	464,935	$	403,494	$	1,367,866	$	1,223,977
Operating Income	Operating Income									Operating Income
Retail	Retail	$	22,213	$	41,179	$	119,997	$	144,557	Retail	$	36,943	$	22,213	$	129,195	$	119,997
Foodservice	Foodservice	18,556		21,088		52,690		66,845		Foodservice	22,405		18,556		81,030		52,690
Nonallocated Restructuring and Impairment Charges (1)	Nonallocated Restructuring and Impairment Charges (1)	(22,723)		—		(23,749)		—		Nonallocated Restructuring and Impairment Charges (1)	—		(22,723)		—		(23,749)
Corporate Expenses	Corporate Expenses	(25,663)		(24,879)		(70,738)		(66,468)		Corporate Expenses	(29,940)		(25,663)		(80,192)		(70,738)
Total	Total	$	(7,617)	$	37,388	$	78,200	$	144,934	Total	$	29,408	$	(7,617)	$	130,033	$	78,200

(1)Reflects restructuring and impairment charges related to the Bantam business and a facility closure, which were not allocated to our two reportable segments due to their unusual nature.

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

Three Months Ended
March 31, Nine Months Ended
March 31,
2022 2021 2022 2021
Retail
Shelf-stable dressings, sauces and croutons $ 94,578 $ 75,773 $ 272,439 $ 199,292
Frozen breads 73,328 73,628 258,426 250,157
Refrigerated dressings, dips and other 45,222 48,957 151,237 165,204
Total Retail net sales $ 213,128 $ 198,358 $ 682,102 $ 614,653
Foodservice
Dressings and sauces $ 143,156 $ 120,925 $ 403,953 $ 347,101
Frozen breads and other 47,210 37,966 137,922 116,040
Other roll products — — — 3,707
Total Foodservice net sales $ 190,366 $ 158,891 $ 541,875 $ 466,848
Total net sales $ 403,494 $ 357,249 $ 1,223,977 $ 1,081,501

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

Three Months Ended
March 31, Nine Months Ended
March 31,
2022 2021 2022 2021
Foodservice
National accounts $ 146,959 $ 124,323 $ 414,840 $ 359,228
Branded and other 43,407 34,568 127,035 103,913
Other roll products — — — 3,707
Total Foodservice net sales $ 190,366 $ 158,891 $ 541,875 $ 466,848

1513

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share data)

The following table sets forth net sales disaggregated by class of similar products for the Retail and Foodservice segments:


	Three Months Ended March 31,				Nine Months Ended March 31,
	2023		2022		2023		2022
Retail
Shelf-stable dressings, sauces and croutons	$	116,246	$	94,578	$	301,995	$	272,439
Frozen breads	85,165		73,328		275,447		258,426
Refrigerated dressings, dips and other	45,797		45,222		151,745		151,237
Total Retail net sales	$	247,208	$	213,128	$	729,187	$	682,102
Foodservice
Dressings and sauces	$	163,851	$	143,156	$	475,766	$	403,953
Frozen breads and other	53,876		47,210		162,913		137,922

Total Foodservice net sales	$	217,727	$	190,366	$	638,679	$	541,875
Total net sales	$	464,935	$	403,494	$	1,367,866	$	1,223,977

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


	Three Months Ended March 31,				Nine Months Ended March 31,
	2023		2022		2023		2022
Foodservice
National accounts	$	172,304	$	146,959	$	504,310	$	414,840
Branded and other	45,423		43,407		134,369		127,035

Total Foodservice net sales	$	217,727	$	190,366	$	638,679	$	541,875

Note 8 – Stock-Based Compensation

There have been no changes to our stock-based compensation plan as disclosed in our ~~2021~~2022 Annual Report on Form 10-K. However, as permitted under this plan, we made an initial grant of performance units in August 2021. These performance units have either a market condition or a performance condition and will vest 3 years after the grant date. Dividend equivalents earned during the vesting period will be paid at the time the awards vest.

Our stock-settled stock appreciation rights (“SSSARs”) compensation expense was $0.3 million and $0.9 million for the three months ended March 31, 2023 and 2022, ~~and 2021.~~respectively. Year-to-date SSSARs compensation expense was ~~$2.9~~$1.7 million for the current-year period compared to ~~$2.6~~$2.9 million for the prior-year period. At March 31, ~~2022,~~2023, there was ~~$3.9~~$1.2 million of unrecognized compensation expense related to SSSARs that we will recognize over a weighted-average period of ~~2 years.~~1 year.

Our restricted stock compensation expense was ~~$1.3~~$0.4 million and ~~$0.8~~$1.3 million for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively. Year-to-date restricted stock compensation expense was ~~$3.7~~$3.2 million for the current-year period compared to ~~$2.6~~$3.7 million for the prior-year period. At March 31, ~~2022,~~2023, there was ~~$7.3~~$5.8 million of unrecognized compensation expense related to restricted stock that we will recognize over a weighted-average period of 2 years.

Our performance units compensation expense was $0.9 million and $0.3 million for the three months ended March 31, ~~2022.~~2023 and 2022, respectively. Year-to-date performance units compensation expense was $2.0 million for the current-year period compared to $0.8 million for the ~~current-year~~prior-year period. At March 31, ~~2022,~~2023, there was ~~$2.9~~$4.9 million of unrecognized compensation expense related to performance units that we will recognize over a weighted-average period of 2 years.

1614

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

Our fiscal year begins on July 1 and ends on June 30. Unless otherwise noted, references to “year” pertain to our fiscal year; for example, ~~2022~~2023 refers to fiscal ~~2022,~~2023, which is the period from July 1, ~~2021~~2022 to June 30, ~~2022.~~2023.

The following discussion should be read in conjunction with our condensed consolidated financial statements and the notes thereto, all included elsewhere in this report, and our ~~2021~~2022 Annual Report on Form 10-K. The forward-looking statements in this section and other parts of this report involve risks, uncertainties and other factors, including statements regarding our plans, objectives, goals, strategies, and financial performance. Our actual results could differ materially from the results anticipated in these forward-looking statements due to these factors. For more information, see the section below entitled “Forward-Looking Statements.”

OVERVIEW

Business Overview

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

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.

Our business has the potential to achieve future growth in sales and profitability due to attributes such as:

•leading Retail market positions in several product categories with a high-quality perception;

•recognized innovation in Retail products;

•a broad customer base in both Retail and Foodservice accounts;

•well-regarded culinary expertise among Foodservice customers;

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

•recognized leadership in Foodservice product development;

•experience in integrating complementary business acquisitions; and

•historically strong cash flow generation that supports growth opportunities.

Our goal is to grow both Retail and Foodservice segment sales over time by:

•introducing new products and expanding distribution;

•leveraging the strength of our Retail brands to increase current product sales;

•expanding Retail growth through strategic licensing agreements;

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

•acquiring complementary businesses.

With respect to long-term growth, we continually evaluate the future opportunities and needs for our business specific to our plant infrastructure, IT platforms and other initiatives to support and strengthen our operations. Recent examples of resulting investments include:

•a significant capacity expansion project for our Marzetti dressing and sauce facility in Horse Cave, Kentucky that ~~we expect to complete~~reached substantial completion in ~~the first half of fiscal~~March 2023;

•a capacity expansion project for one of our Marzetti dressing and sauce facilities in Columbus, Ohio that was completed in January 2022;

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

•~~a significant capacity expansion project for our Sister Schubert’s frozen dinner roll facility in Horse Cave, Kentucky that was completed in January 2020;~~ and

•the establishment of a Transformation Program Office in 2019 that serves to coordinate our various capital and integration efforts, including our enterprise resource planning system (“ERP”) project and related initiatives, Project Ascent, that is currently ~~underway.~~in the implementation phase.

Project Ascent commenced in late 2019 and entails the replacement of our primary customer and manufacturing transactional systems, warehousing systems, and financial systems with an integrated SAP S/4HANA system. Implementation of this system began in July 2022 and will continue throughout fiscal 2023. Customer fulfillment levels remained strong before and after the initial system cutover with no unplanned disruptions in receiving orders, producing products or shipping orders. We remain on schedule to complete the planned implementation of Project Ascent in fiscal 2024.

Post implementation, Project Ascent will evolve into an on-going Center of Excellence (“COE”) that will provide oversight for all future upgrades of the S/4HANA environment, evaluation of future software needs to support the business, acquisition integration support and master

data standards. Most of the on-going COE costs are expected to consist of ~~annual software maintenance and support,~~ consulting and professional fees, ~~and~~as well as wages and benefits.

We also continue to review potential acquisitions that we believe will complement our existing product lines, enhance our profitability and/or offer good expansion opportunities in a manner that fits our overall strategic goals.BUSINESS TRENDS

~~RECENT EVENTS~~

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. COVID-19 has surfaced in all regions around the world and resulted in business slowdowns or shutdowns. In the U.S., state and local governments recommended or mandated actions intended to slow the transmission of COVID-19. These measures included limitations on public gatherings, social distancing requirements, travel restrictions, closures of bars and dine-in restaurants, stay-at-home orders, quarantines and restrictions that prohibited many non-essential employees from going to work.

~~We have two major priorities while navigating through this period of volatility and uncertainty:~~

1.~~to ensure the health, safety and welfare of our employees; and~~

2.~~to continue to play our part in the vital food supply chain by adequately supplying our customers while maintaining the financial strength of our business.~~

With respect to our efforts to ensure the health, safety and welfare of our employees, we continue to monitor the latest guidance from authorities, including the Centers for Disease Control and Prevention and other federal, state and local public health departments, regarding COVID-19 and adopt the appropriate measures to ensure we continue to operate safely and support our employees. We also engaged a pulmonology and critical care physician to advise us on our employee safety protocols. Based on the advice of these experts and our commitmentDating back to the ~~health, safety and welfare~~onset of ~~our employees, we implemented some policy changes and put~~the COVID-19 pandemic in ~~place a range of safety modifications and guidelines in our factories, distribution centers and offices, including but not limited to:~~

•~~conducted extensive cleaning and sanitation of workstations and common areas before, during, and after each shift;~~

•~~employed social distancing guidelines and modifications at workspaces and in break areas;~~

•~~staggered~~2020, the ~~timing of shift changes and breaks;~~

•~~adjusted our attendance requirements and paid leave policy; and~~

•~~provided every employee an extra vacation day in 2021 to allow flexibility with scheduling COVID-19 vaccination appointments.~~

~~After 16 months and once the vaccine became broadly available, we discontinued our temporary incentive pay compensation (“hero pay”) to our front-line employees at the end of fiscal 2021.~~

With respect to our second priority, we have experienced some disruptions to our shipping and warehousing operations and our sourcing of raw materials and packaging. We have secured additional second-sourcing options to help limit the risk of supply disruptions and have also secured additional warehousing space to accommodate higher inventory levels needed to service our customers.

~~The~~ effects of COVID-19 on consumer behavior have impacted the relative demand for our Retail and Foodservice products. ~~Specifically, since the onset of the COVID-19 pandemic near the end of our fiscal~~More specifically, beginning in March 2020, ~~third quarter, there has been an overall shift in~~ consumer demand shifted towards increased at-home food consumption and away from in-restaurant dining. ~~While~~Over the course of the following two years, while this shift in demand ~~has been~~was inconsistent and volatile, on balance it ~~has~~ positively impacted our Retail segment sales volumes and negatively impacted our Foodservice segment ~~sales.~~sales volumes. From an operations standpoint, the shift in demand over the two-year period, combined with other COVID-19-related issues, ~~has~~ unfavorably impacted the operating results of both our segments. These issues ~~include~~included higher hourly wage rates paid to our front-line employees, increased costs for personal protective equipment, higher expenditures attributed to incremental co-manufacturing volumes, increased complexity and uncertainty in production planning and forecasting, and overall lower levels of efficiency in our production and distribution network. Beginning near the end of 2022, the volatility and shifts in demand between our Retail and Foodservice products subsided and our operating environment became more predictable and stable.

The inflationary cost environment we experienced during 2022 resulted in significantly higher input costs for our business. During 2022, we endured unprecedented inflationary costs for commodities, particularly soybean oil and flour, in addition to notably higher costs for packaging, freight and warehousing, and labor. This cost inflation was attributed to numerous factors such as the impacts of the COVID-19 pandemic, the war in Ukraine, climate and weather conditions, supply chain disruptions, including some raw material and packaging shortages, a tight labor market, and government policy decisions. We continued to experience significant cost inflation through the first nine months of 2023, particularly for soybean oil, eggs and flour.

RESULTS OF CONSOLIDATED OPERATIONS


(Dollars in thousands, except per share data)	Three Months Ended March 31,										Nine Months Ended March 31,
	2023			2022			Change				2023			2022			Change
Net Sales	$	464,935		$	403,494		$	61,441	15	%	$	1,367,866		$	1,223,977		$	143,889	12	%
Cost of Sales	370,698			335,162			35,536		11	%	1,072,472			966,676			105,796		11	%
Gross Profit	94,237			68,332			25,905		38	%	295,394			257,301			38,093		15	%
Gross Margin	20.3		%	16.9		%					21.6		%	21.0		%
Selling, General and Administrative Expenses	64,829			54,526			10,303		19	%	165,361			157,920			7,441		5	%
Change in Contingent Consideration	—			(1,300)			1,300		(100)	%	—			(3,470)			3,470		(100)	%
Restructuring and Impairment Charges	—			22,723			(22,723)		(100)	%	—			24,651			(24,651)		(100)	%
Operating Income (Loss)	29,408			(7,617)			37,025		486	%	130,033			78,200			51,833		66	%
Operating Margin	6.3		%	(1.9)		%					9.5		%	6.4		%
Other, Net	607			119			488		410	%	815			250			565		226	%
Income (Loss) Before Income Taxes	30,015			(7,498)			37,513		500	%	130,848			78,450			52,398		67	%
Taxes Based on Income (Loss)	5,460			(3,015)			8,475		281	%	28,728			17,908			10,820		60	%
Effective Tax Rate	18.2		%	40.2		%					22.0		%	22.8		%
Net Income (Loss)	$	24,555		$	(4,483)		$	29,038	648	%	$	102,120		$	60,542		$	41,578	69	%
Diluted Net Income (Loss) Per Common Share	$	0.89		$	(0.17)		$	1.06	624	%	$	3.71		$	2.20		$	1.51	69	%

1816

~~RESULTS OF CONSOLIDATED OPERATIONS~~

(Dollars in thousands,
except per share data)
Three Months Ended
March 31, Nine Months Ended
March 31,
2022 2021 Change 2022 2021 Change
Net Sales $ 403,494 $ 357,249 $ 46,245 13 % $ 1,223,977 $ 1,081,501 $ 142,476 13 %
Cost of Sales 335,162 266,699 68,463 26 % 966,676 791,452 175,224 22 %
Gross Profit 68,332 90,550 (22,218) (25) % 257,301 290,049 (32,748) (11) %
Gross Margin 16.9 % 25.3 % 21.0 % 26.8 %
Selling, General and Administrative Expenses 54,526 53,162 1,364 3 % 157,920 149,607 8,313 6 %
Change in Contingent Consideration (1,300) — (1,300) N/M (3,470) (5,687) 2,217 (39) %
Restructuring and Impairment Charges 22,723 — 22,723 N/M 24,651 1,195 23,456 N/M
Operating (Loss) Income (7,617) 37,388 (45,005) (120) % 78,200 144,934 (66,734) (46) %
Operating Margin (1.9) % 10.5 % 6.4 % 13.4 %
Other, Net 119 (44) 163 370 % 250 (67) 317 473 %
(Loss) Income Before Income Taxes (7,498) 37,344 (44,842) (120) % 78,450 144,867 (66,417) (46) %
Taxes Based on (Loss) Income (3,015) 8,447 (11,462) (136) % 17,908 34,261 (16,353) (48) %
Effective Tax Rate 40.2 % 22.6 % 22.8 % 23.6 %
Net (Loss) Income $ (4,483) $ 28,897 $ (33,380) (116) % $ 60,542 $ 110,606 $ (50,064) (45) %
Diluted Net (Loss) Income Per Common Share $ (0.17) $ 1.05 $ (1.22) (116) % $ 2.20 $ 4.01 $ (1.81) (45) %

Net Sales

Consolidated net sales for the three months ended March 31, ~~2022~~2023 increased ~~13%~~15% to a third quarter record ~~$403.5~~$464.9 million versus ~~$357.2~~$403.5 million last year, reflecting higher net sales for both the Retail and Foodservice segments driven by pricing ~~actions.~~to offset inflationary costs in addition to volume growth. Consolidated sales volumes, measured in pounds shipped, ~~decreased 2%~~increased 3% for the three months ended March 31, ~~2022.~~2023. In the ~~prior year,~~prior-year quarter ended March 31, 2022, consolidated sales volumes ~~increased 5%~~decreased 2%.

Consolidated net sales for the nine months ended March 31, ~~2022~~2023 increased ~~13%~~12% to ~~$1,224.0~~$1,367.9 million versus ~~$1,081.5~~$1,224.0 million last year, reflecting higher net sales for both the Retail and Foodservice segments ~~including~~driven by pricing to offset inflationary costs. Sales in the ~~favorable impact~~current year were unfavorably impacted by the advance ordering that occurred near the end of ~~pricing actions.~~fiscal 2022 ahead of our ERP go-live that commenced on July 1. Consolidated sales volumes, measured in pounds shipped, decreased 4% for the nine months ended March 31, 2023. In the prior year, consolidated sales volumes increased 3% for the nine months ended March 31, 2022. ~~In the prior year, consolidated sales volumes decreased 2%.~~

See discussion of net sales by segment following the discussion of “Earnings Per Share” below.

Gross Profit

Consolidated gross profit for the three months ended March 31, ~~2022 decreased $22.2~~2023 increased $25.9 million to ~~$68.3~~$94.2 million as ~~we continued to experience unprecedented~~our pricing actions effectively offset the significant inflationary costs we have experienced for commodities, packaging, ~~freight~~labor and ~~warehousing,~~warehousing. The higher gross profit also reflects improved manufacturing efficiencies, cost savings initiatives and ~~labor. We also incurred incremental expenditures attributed~~a more stable operating environment, as partially offset by the impact of the Wave 3 implementation phase of Project Ascent as our dressing and sauce production facility in Horse Cave, Kentucky transitioned to our ~~increased reliance upon co-manufacturers to help satisfy demand. While our pricing actions helped to offset the impacts of inflation, the~~new ERP system in early February as planned. The current-year gross profit ~~decline reflects an extremely~~compares to a very challenging ~~operating environment that, beyond inflation, includes the unfavorable effects of~~prior-year quarter characterized by escalating inflationary costs across our entire supply chain, ~~disruptions, demand volatility and uncertainty, suboptimal capacity utilization, and overall lower productivity resulting in substantially higher~~increased costs to ~~produce~~service the shifting demands of our ~~products~~business, and ~~service our customers.~~shortages of select ingredients and packaging supplies.

Consolidated gross profit for the nine months ended March 31, ~~2022 decreased $32.7~~2023 increased $38.1 million to ~~$257.3~~$295.4 million as influenced by the pricing actions we have taken to offset significant inflationary ~~costs, supply chain challenges~~costs. Gross profit also benefited from a more stable operating environment, improved manufacturing efficiencies, cost savings initiatives and ~~other operational headwinds referenced above for the three months ended March 31, 2022.~~

our actions taken to exit less profitable product lines and reduce headcount.

Selling, General and Administrative Expenses


		Three Months Ended March 31,								Nine Months Ended March 31,									Three Months Ended March 31,								Nine Months Ended March 31,
(Dollars in thousands)	(Dollars in thousands)	2022		2021		Change				2022		2021		Change				(Dollars in thousands)	2023		2022		Change				2023		2022		Change
SG&A Expenses - Excluding Project Ascent	SG&A Expenses - Excluding Project Ascent	$	44,227	$	42,367	$	1,860	4	%	$	129,599	$	122,020	$	7,579	6	%	SG&A Expenses - Excluding Project Ascent	$	57,214	$	44,227	$	12,987	29	%	$	141,076	$	129,599	$	11,477	9	%
Project Ascent Expenses	Project Ascent Expenses	10,299		10,795		(496)		(5)	%	28,321		27,587		734		3	%	Project Ascent Expenses	7,615		10,299		(2,684)		(26)	%	24,285		28,321		(4,036)		(14)	%
Total SG&A Expenses	Total SG&A Expenses	$	54,526	$	53,162	$	1,364	3	%	$	157,920	$	149,607	$	8,313	6	%	Total SG&A Expenses	$	64,829	$	54,526	$	10,303	19	%	$	165,361	$	157,920	$	7,441	5	%

Selling, general and administrative (“SG&A”) expenses for the three months ended March 31, ~~2022~~2023 increased 3%19% to ~~$54.5~~$64.8 million compared to ~~$53.2~~$54.5 million in the prior-year period. This increase ~~was driven by a~~reflects higher ~~level of investments~~expenditures to support the continued growth of our business, including investments in personnel and ~~IT infrastructure improvements~~consumer promotions in addition to higher brokerage costs ~~attributed to~~associated with the increased sales. ~~Expenditures~~SG&A expenses also include some nonrecurring legal charges for closed operations. These higher costs were partially offset by lower expenditures for Project Ascent, our ERP ~~initiative,~~initiative. Project Ascent expenses totaled ~~$10.3~~$7.6 million in the current-year quarter versus ~~$10.8~~$10.3 million last year.

SG&A expenses for the nine months ended March 31, ~~2022~~2023 increased 6%5% to ~~$157.9~~$165.4 million compared to ~~$149.6~~$157.9 million in the prior ~~year, reflecting~~year. This increase reflects increased investments in ~~a supply chain optimization study,~~ personnel, ~~and IT infrastructure improvements, as well as~~ higher brokerage costs, ~~attributed to the~~some nonrecurring legal charges for closed operations and increased ~~sales.~~travel expenses. Project Ascent expenses ~~increased $0.7~~decreased $4.0 million to ~~$28.3 million.~~$24.3 million for the nine months ended March 31, 2023.

Project Ascent expenses are included within Corporate Expenses. A portion of the costs that have been classified as Project Ascent expenses represent ongoing costs that will continue subsequent to the completion of our ERP implementation.

Change in Contingent Consideration

~~For~~In the ~~three and nine months ended March 31, 2022,~~prior year, the change in contingent consideration resulted in a benefit of $1.3 million and $3.5 million for the three and nine months ended March 31, 2022, respectively. ~~These changes were~~This benefit was attributed to a reduction in the fair value of the contingent consideration liability for Bantam Bagels, LLC (“Bantam”) based on our fair value measurements, resulting in a zero balance at March 31, 2022 and December 31, 2021 fair value measurements. The fair value adjustments were based on changes in Bantam’s forecasted adjusted EBITDA for the twelve months ending December 31, 2023, as well as refinements to the estimated probabilities applied to our forecast scenarios.2022. We recorded the third quarter adjustment of $1.3 million in our Foodservice segment. For the year-to-date adjustment, we recorded $2.6 million in our Foodservice segment and $0.9 million in our Retail segment.

~~There was no change in contingent consideration for~~ We ultimately exited the ~~three months ended March 31, 2021. For~~Bantam business near the ~~nine months ended March 31, 2021, the change in contingent consideration resulted in a benefit~~end of $5.7 million. This benefit was attributed to a reduction in the fair value of the contingent consideration liability for Bantam based on our September 30, 2020 fair value measurement. The fair value adjustment resulted from the impact of a SKU rationalization by a Foodservice customer, and therefore the entire adjustment was reflected within the Foodservice segment.

fiscal 2022. See further discussion ~~of these adjustments~~ in Note 2 to the condensed consolidated financial statements.

Restructuring and Impairment Charges

~~For~~In the ~~three and nine months~~prior-year quarter ended March 31, 2022, we recorded restructuring and impairment charges of $22.7 million related to Bantam. Impairment testing was triggered for the related long-lived assets of the asset group based on our decision to explore strategic alternatives for this business. The restructuring and impairment charges consisted of impairment charges for intangible assets, fixed assets and an operating lease right-of-use asset, as well as restructuring charges related to a contractual obligation. Due to their unusual nature, these ~~restructuring and impairment~~ charges were not allocated to our two reportable segments. ~~On May 3, 2022, our Board of Directors approved a plan to exit~~As noted above, we ultimately exited the Bantam ~~business.~~business near the end of fiscal 2022.

~~For~~In the ~~nine months ended March 31, 2022,~~prior year, we also recorded an impairment charge of $0.9 million for the nine months ended March 31, 2022 related to Bantam’s Retail customer relationships intangible asset, which reflected lower projected cash flows for Bantam’s Retail business. ~~The~~This impairment charge ~~represented the excess of the carrying value over the fair value of estimated discounted cash flows for the remaining useful life of the intangible asset and~~ was reflected in our Retail ~~segment for~~segment.

In the ~~three months~~prior-year quarter ended December 31, ~~2021.~~

~~In the second quarter of 2022,~~2021, we committed to a plan to close our frozen garlic bread facility in Baldwin Park, California in support of our ongoing efforts to better optimize our manufacturing network. ~~Production at the facility ceased in January 2022, and the Mamma Bella~~® ~~brand frozen garlic bread product line was discontinued based on its small size and low profitability. The Baldwin Park facility is a leased building with the lease term ending in June 2023.~~ The operations of this facility ~~have~~were not ~~been~~ classified as discontinued operations as the closure ~~does~~did not represent a strategic shift that would have a major effect on our operations or financial results. WeFor the nine months ended March 31, 2022, we recorded restructuring and impairment charges of $1.0 million, ~~related to this closure for the nine months ended March 31, 2022. The restructuring and impairment charges,~~ which consisted of one-time termination benefits and impairment charges for fixed assets and ~~the~~an operating lease right-of-use ~~asset,~~asset. These charges were not allocated to our two reportable segments due to their unusual nature.

For the nine months ended March 31, 2021, we recorded impairment charges of $1.2 million related to certain tradename and technology / know-how intangible assets for Bantam as a result of the impact of the above-referenced SKU rationalization by a Foodservice customer. The impairment charges represent the excess of the carrying value over the fair value of estimated discounted cash flows for the remaining useful lives of the intangible assets and were reflected within our Foodservice segment for the three months ended September 30, 2020.

Operating Income (Loss) ~~Income~~

Operating income ~~decreased $45.0~~increased $37.0 million to ~~a loss of $7.6~~$29.4 million for the three months ended March 31, ~~2022, including~~2023 driven by the ~~unfavorable~~increase in gross profit as our pricing actions served to offset the significant inflationary costs we have experienced for commodities, packaging, labor and warehousing, as well as the impact of the ~~$22.7 million in~~prior-year restructuring and impairment charges for the Bantam business. Beyond those charges, operating results for the current-year quarter were negatively affected by significant inflationary costs for commodities, packaging, freight and warehousing, and labor in addition to increased co-manufacturing costs. We also experienced the unfavorable impacts of an extremely challenging operating environment characterized by supply chain disruptions, demand volatility and uncertainty, and reduced operating efficiencies. Our pricing actions helped to offset the inflationary costs. The decline in operatingcharges. Operating income also ~~reflects the higher level of~~benefited from improved manufacturing efficiencies and a more stable operating environment. The increase in SG&A ~~expenditures.~~expenses partially offset these positive factors.

Operating income ~~decreased $66.7~~increased $51.8 million to ~~$78.2~~$130.0 million for the nine months ended March 31, ~~2022, including the unfavorable impact of the $24.7 million in restructuring and impairment charges. Beyond those charges, operating results were negatively impacted~~2023 driven by the same factors ~~referenced above~~noted for the three months ended March 31, ~~2022.~~2023.

See discussion of operating results by segment following the discussion of “Earnings Per Share” below.

Taxes Based on Income (Loss) ~~Income~~

Our effective tax rate was ~~22.8%~~22.0% and ~~23.6%~~22.8% for the nine months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively. For the nine months ended March 31, ~~2022~~2023 and ~~2021,~~2022, our effective tax rate varied from the statutory federal income tax rate as a result of the following factors:


		Nine Months Ended March 31,					Nine Months Ended March 31,
		2022		2021			2023		2022
Statutory rate	Statutory rate	21.0	%	21.0	%	Statutory rate	21.0	%	21.0	%
State and local income taxes	State and local income taxes	3.6		3.6		State and local income taxes	2.1		3.6
Net windfall tax benefits - stock-based compensation	Net windfall tax benefits - stock-based compensation	(0.2)		(0.6)		Net windfall tax benefits - stock-based compensation	(0.4)		(0.2)
Other	Other	(1.6)		(0.4)		Other	(0.7)		(1.6)
Effective rate	Effective rate	22.8	%	23.6	%	Effective rate	22.0	%	22.8	%

We include the tax consequences related to stock-based compensation within the computation of income tax expense. We may experience increased volatility to our income tax expense and resulting net income dependent upon, among other variables, the price of our common stock and the timing and volume of share-based payment award activity such as employee exercises of stock-settled stock appreciation rights and vesting of restricted stock awards. For the nine months ended March 31, ~~2022~~2023 and ~~2021,~~2022, the impact of net windfall tax benefits from stock-based compensation reduced our effective tax rate by ~~0.2%~~0.4% and ~~0.6%~~0.2%, respectively.

Earnings Per Share

~~Diluted~~As influenced by the factors discussed above, diluted net income per share for the third quarter of ~~2022 was~~2023 totaled $0.89, as compared to a loss of $0.17 ~~as compared to income of $1.05~~ per diluted share in the prior year. Expenditures for Project Ascent reduced diluted earnings per share by $0.21 and $0.29 for the three months ended March 31, 2023 and 2022, respectively. For the three months ended March 31, 2022, restructuring and impairment charges had an unfavorable impact of $0.63 per diluted share while the adjustment to Bantam’s contingent consideration increased diluted earnings per share by $0.04. ~~Expenditures for Project Ascent reduced diluted~~Diluted earnings per share ~~by $0.29 and $0.30~~in the current year benefited from final adjustments related to the filing of tax returns for ~~the three months ended March 31,~~fiscal 2022, ~~and 2021, respectively.~~including a favorable adjustment related to closed operations.

For the nine months ended March 31, ~~2022,~~2023, diluted net income per share totaled ~~$2.20,~~$3.71, as compared to ~~$4.01~~$2.20 per diluted share in the prior year. For the nine months ended March 31, ~~2022~~2023 and ~~2021,~~2022, expenditures for Project Ascent reduced diluted earnings per share by $0.68 and $0.79, ~~and $0.76, respectively;~~respectively. For the nine months ended March 31, 2022, restructuring and impairment charges ~~reduced~~had an unfavorable impact of $0.68 per diluted ~~earnings per~~ share ~~by $0.68 and $0.03, respectively; and~~while the ~~adjustments~~adjustment to Bantam’s contingent consideration increased diluted earnings per share by ~~$0.10 and $0.16, respectively.~~$0.10.

Diluted weighted average common shares outstanding have remained relatively stable for the current and prior-year periods ended March 31.

RESULTS OF OPERATIONS - SEGMENTS

Retail Segment


		Three Months Ended March 31,										Nine Months Ended March 31,											Three Months Ended March 31,										Nine Months Ended March 31,
(Dollars in thousands)	(Dollars in thousands)	2022			2021			Change				2022			2021			Change				(Dollars in thousands)	2023			2022			Change				2023			2022			Change
Net Sales	Net Sales	$	213,128		$	198,358		$	14,770	7	%	$	682,102		$	614,653		$	67,449	11	%	Net Sales	$	247,208		$	213,128		$	34,080	16	%	$	729,187		$	682,102		$	47,085	7	%
Operating Income	Operating Income	$	22,213		$	41,179		$	(18,966)	(46)	%	$	119,997		$	144,557		$	(24,560)	(17)	%	Operating Income	$	36,943		$	22,213		$	14,730	66	%	$	129,195		$	119,997		$	9,198	8	%
Operating Margin	Operating Margin	10.4		%	20.8		%					17.6		%	23.5		%					Operating Margin	14.9		%	10.4		%					17.7		%	17.6		%

For the three months ended March 31, ~~2022,~~2023, Retail segment net sales ~~reached $213.1~~increased 16% to $247.2 million ~~a 7% increase~~ from the prior-year total of ~~$198.4 million. In addition to~~$213.1 million, including the ~~benefit of pricing actions, Retail segment sales were driven by volume gains for Chick-fil-A~~® ~~sauces and Buffalo Wild Wings~~® ~~sauces, both of which are sold under exclusive licensing agreements, and higher sales~~favorable impact of our ~~Sister Schubert’s~~® ~~frozen dinner rolls.~~pricing actions. Retail segment sales volumes, measured in pounds shipped, ~~decreased 2%, including the impact of some planned product line rationalizations. In the prior-year quarter, retail segment~~increased 6%. Retail sales ~~volumes increased 12%.~~

For the nine months ended March 31, 2022, Retail segment net sales increased 11% to $682.1 million compared to the prior-year total of $614.7 million. In addition to the benefit of pricing actions, the increase in Retail salesvolume growth was driven by ~~volume gains~~the continued success of our program for ~~Chick-fil-A~~® ~~sauces~~licensed dressings and ~~Buffalo Wild Wings~~® ~~sauces as well as higher sales of our~~sauces. Our New York BRAND Bakery® frozen garlic bread ~~and Sister Schubert’s~~products also contributed to the increase in the Retail sales volume. In the prior-year quarter ended March 31, 2022, Retail sales volumes decreased 2%.® ~~frozen dinner rolls.~~

For the nine months ended March 31, 2023, Retail segment net sales increased 7% to $729.2 million compared to the prior-year total of $682.1 million, including the favorable impact of our pricing actions. Sales in the current year were unfavorably impacted by advance orders accounting for an estimated $11 million in Retail net sales that were made near the end of fiscal 2022 ahead of our ERP go-live, which commenced on July 1. Retail segment sales volumes, measured in pounds shipped, declined 4%. Sales volumes were unfavorably impacted by the advance ordering ahead of our ERP go-live, price elasticity and product line rationalizations that were implemented during fiscal 2022. In the nine months ended March 31, 2022, Retail sales volumes increased 4% ~~in the current-year period compared to an increase of 12% last year.~~.

For the three months ended March 31, ~~2022,~~2023, Retail segment operating income ~~decreased 46%~~increased 66% to ~~$22.2~~$36.9 million ~~due~~as our pricing actions served to offset significant cost inflation, in addition to the ~~unfavorable~~favorable impacts of ~~increased commodity and packaging costs, significantly~~ higher ~~freight and warehousing costs, increased co-manufacturing costs, higher labor costs and broad-based supply chain challenges. The~~sales volumes. In the prior-year quarter, the net impact of our pricing actions lagged the extraordinary levels of cost ~~inflation.~~inflation, and operating income was also unfavorably impacted by an unstable operating environment that resulted in increased costs to manufacture products and service the business.

For the nine months ended March 31, ~~2022,~~2023, Retail segment operating income ~~decreased 17%~~increased 8% to ~~$120.0~~$129.2 million ~~due~~as our pricing actions served to offset significant cost inflation. In the ~~unfavorable impacts of~~prior-year period, the ~~higher costs and broad-based supply chain challenges detailed above. The~~ net impact of our pricing actions lagged the extraordinary levels of cost ~~inflation.~~inflation, and operating income was also unfavorably impacted by an unstable operating environment that resulted in increased costs to manufacture products and service the business.

Foodservice Segment


		Three Months Ended March 31,										Nine Months Ended March 31,											Three Months Ended March 31,										Nine Months Ended March 31,
(Dollars in thousands)	(Dollars in thousands)	2022			2021			Change				2022			2021			Change				(Dollars in thousands)	2023			2022			Change				2023			2022			Change
Net Sales	Net Sales	$	190,366		$	158,891		$	31,475	20	%	$	541,875		$	466,848		$	75,027	16	%	Net Sales	$	217,727		$	190,366		$	27,361	14	%	$	638,679		$	541,875		$	96,804	18	%
Operating Income	Operating Income	$	18,556		$	21,088		$	(2,532)	(12)	%	$	52,690		$	66,845		$	(14,155)	(21)	%	Operating Income	$	22,405		$	18,556		$	3,849	21	%	$	81,030		$	52,690		$	28,340	54	%
Operating Margin	Operating Margin	9.7		%	13.3		%					9.7		%	14.3		%					Operating Margin	10.3		%	9.7		%					12.7		%	9.7		%

For the three months ended March 31, ~~2022,~~2023, Foodservice segment net sales grew ~~20%~~14% to ~~$190.4~~$217.7 million compared to ~~$158.9~~$190.4 million in the prior-year period driven by inflationary pricing ~~and~~combined with increased demand from several of our national chain restaurant account customers and growth for our branded Foodservice products. Foodservice segment sales volume, measured in pounds shipped, decreased 2% as total demand for the segment was unfavorably influenced by the industry-wide challenges of heightened cost pressures, a weakening consumer environment, and a tight labor market along with some periods of severe winter weather in some locations.increased less than 1%. In the prior-year quarter ended March 31, 2022, Foodservice sales ~~volume was essentially flat.~~volumes decreased 2%.

For the nine months ended March 31, ~~2022,~~2023, Foodservice segment net sales increased ~~16%~~18% to ~~$541.9~~$638.7 million from the prior-year total of ~~$466.8~~$541.9 million driven by inflationary pricing and volume gains ~~for~~from certain quick-service restaurant customers in our ~~branded~~mix of national chain restaurant accounts. Sales in the current year were unfavorably impacted by the advance ordering that occurred near the end of fiscal 2022 ahead of our ERP go-live, which reduced Foodservice ~~products.~~net sales in the current-year period by an estimated $14 million. Foodservice segment sales ~~volume,~~volumes, measured in pounds shipped, decreased 4%. Sales volumes were unfavorably impacted by the advance ordering ahead of our ERP go-live and our decision to exit some less profitable SKUs during fiscal 2022. In the nine months ended March 31, 2022, Foodservice sales volumes increased 2% ~~compared to a decline of 9% last year. Excluding all sales resulting from the November 2018 acquisition of Omni Baking Company LLC, Foodservice segment net sales increased 17%~~. Omni sales attributed to a temporary supply agreement totaled $3.7 million in the prior-year period. There were no such sales in the current year as the temporary supply agreement was terminated effective October 31, 2020.

For the three months ended March 31, ~~2022,~~2023, Foodservice segment operating income ~~decreased 12%~~increased 21% to ~~$18.6~~$22.4 million ~~reflecting increased commodity~~driven by cost savings initiatives and ~~packaging costs, higher freight and warehousing expenses, higher labor costs and~~improved manufacturing efficiencies. Our pricing actions effectively offset inflationary costs. Foodservice segment operating income in the ~~unfavorable impacts of broad-based supply chain challenges as partially offset by~~prior-year quarter included the $1.3 million benefit ~~of pricing actions.~~recorded to Foodservice from the adjustment to Bantam’s contingent consideration.

For the nine months ended March 31, ~~2022,~~2023, Foodservice segment operating income ~~decreased 21%~~increased 54% to ~~$52.7~~$81.0 million as our pricing actions effectively offset inflationary costs, including last year’s shortfall. Operating income in the ~~unfavorable impacts of~~current year also benefited from a more favorable sales mix, our decision to discontinue some less profitable SKUs and a more stable operating environment. Prior-year operating income reflected a lag in pricing relative to inflationary costs, as partially offset by the ~~higher costs and broad-based supply chain challenges detailed above more than offset the benefit of pricing actions.~~

adjustments to Bantam’s contingent consideration.

Corporate Expenses

For the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, corporate expenses totaled ~~$25.7~~$29.9 million and ~~$24.9~~$25.7 million, respectively. This increase primarily reflects increased investments in ~~personnel.~~personnel and some nonrecurring legal charges for closed operations, as partially offset by a decline in Project Ascent ~~expenses~~expenses. Expenditures for Project Ascent totaled ~~$10.3~~$7.6 million and ~~$10.8~~$10.3 million for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively.

For the nine months ended March 31, ~~2022~~2023 and ~~2021,~~2022, corporate expenses totaled ~~$70.7~~$80.2 million and ~~$66.5~~$70.7 million, respectively. This increase reflects ~~increased investments in personnel and higher expenditures~~the same factors noted for the three months ended March 31, 2023. Expenditures for Project Ascent ~~which~~ totaled ~~$28.3~~$24.3 million and ~~$27.6~~$28.3 million for the nine months ended March 31, 2023 and 2022, ~~and 2021,~~ respectively. For the nine months ended March 31, 2022 and 2021, we also capitalized an additional $1.6 million and $3.2 million, respectively, of ERP-related expenditures for application development stage activities.

LOOKING FORWARD

Looking forward to our fiscal fourth quarter, we anticipate our ~~net~~Retail sales will continue to benefit from ~~pricing actions~~our licensing program, including incremental volume growth from the new products, flavors and sizes we have introduced this fiscal year. In Foodservice, we expect sustained volume growth from select customers in ~~both~~our mix of national chain restaurant accounts. Consolidated net sales and operating income will compare to last year’s fourth quarter that benefited from an estimated $25 million in incremental net sales and $5 million in operating income attributed to advance customer orders ahead of our July 1, 2022 ERP go-live date for Wave 1. Both our Retail and Foodservice segments while sales volumes, measured in pounds shipped, will compare to strong growth of 9% in Retail and 29% in Foodservice. In the Retail segment, we implemented an additional round of pricing actions for our frozen bread and pasta products that took effect in late April and are evaluating further actions for the segment. Our Foodservice segment sales will also continue to ~~reflect contractual-based inflationary~~benefit from our pricing ~~tied~~actions.

Cost inflation will remain a headwind to ~~higher commodity and freight costs. Note that we may realize some incremental sales during the month of June as~~ our ~~customers adjust their order patterns for~~financial results in our products to build inventory in advance of our ERP implementation go-live date in early July. We anticipate the inflationary environment and the broad-based supply chain challenges that have resulted in increased costs to produce our products and service our customers to continue in the coming quarter.

~~Our~~ fiscal fourth quarter, ~~financial results will continue~~but we do foresee some moderation in the rate of inflationary costs compared to ~~be impacted by~~recent quarters. The pricing actions we have implemented along with our cost savings initiatives are expected to offset the ~~COVID-19 pandemic, which has caused shifts~~inflationary costs.

We remain on schedule to complete the planned implementation of Project Ascent in consumer demand between the retail and foodservice channels, complicated our production planning and resulted in higher costs to produce our products and service our customers. The extent of this impact on our financial results is difficult to forecast due to ongoing regional ebbs and flows of COVID-19 cases and the associated changes to the COVID-19 guidelines provided by or mandates imposed by health authorities and government agencies, which creates uncertainty for the restaurant industry and consumer behavior over an unpredictable timeline.fiscal 2024.

FINANCIAL CONDITION

Cash Flows

For the nine months ended March 31, ~~2022,~~2023, net cash provided by operating activities totaled ~~$58.7~~$184.2 million, as compared to ~~$138.7~~$58.7 million in the prior-year period. This ~~decrease~~increase was primarily due to the year-over-year changes in net working capital, particularly inventories, accounts payable, ~~and~~ accrued liabilities ~~as well as inventories.~~and receivables. Inventories primarily reflect the favorable comparison against a larger prior-year increase in inventories, which resulted from higher commodity costs and overall elevated quantities on-hand to help service a less predictable demand environment. The favorable cash flow impact of higher accounts payable, as adjusted to exclude construction in progress amounts, was more pronounced in the ~~prior~~current year, ~~due to fluctuations~~reflecting continued increases in ~~production levels for~~commodity costs as well as the ~~comparative periods. The changes in accrued~~timing of payments. Accrued liabilities ~~are primarily related to larger~~reflect the favorable impacts of a current-year ~~declines~~increase in the accruals for compensation and employee ~~benefits. The larger~~benefits as well as a prior-year decline in these balances. Receivables reflect the favorable impacts of a current-year decrease in receivables as well as a prior-year increase in ~~inventories reflects~~receivables. The current-year decrease in receivables was due in part to an elevated level of receivables at the end of fiscal 2022 resulting from the advance ordering by our customers ahead of our ERP go-live. The prior-year increase in receivables resulted from higher ~~commodity costs and overall elevated quantities on-hand to better service our customers. Lower~~sales levels. Higher net income, as partially offset by the year-over-year change in noncash restructuring and impairment charges, also contributed to the ~~reduced level of~~increase in cash provided by operating activities.

Cash used in investing activities for the nine months ended March 31, ~~2022~~2023 was ~~$105.1~~$78.9 million, as compared to ~~$56.2~~$105.1 million in the prior year. This ~~increase~~decrease primarily reflects a ~~higher~~lower level of payments for property additions in the current year. ~~Notable current-year~~Current-year capital expenditures include spending ~~on:~~on a capacity expansion project at our dressing and sauce facility in Horse Cave, Kentucky that ~~we expect to complete~~reached substantial completion in March 2023. Notable prior-year capital expenditures included spending on: the ~~first half of fiscal 2023;~~Horse Cave capacity expansion project; a capacity expansion project for one of our Marzetti dressing and sauce facilities in Columbus, Ohio that was completed in January 2022; and infrastructure improvements and capacity expansion investments at our frozen pasta facility in Altoona, Iowa that ~~was~~were completed in March 2022.

Cash used in financing activities for the nine months ended March 31, ~~2022~~2023 of ~~$74.6~~$82.7 million increased from the prior-year total of ~~$69.7~~$74.6 million. This increase ~~was primarily due to~~reflects higher levels of dividend ~~payments.~~payments, tax withholdings for stock-based compensation and share repurchases.

Liquidity and Capital Resources

Under our unsecured revolving credit facility (“Facility”), we may borrow up to a maximum of $150 million at any one time. We had no borrowings outstanding under the Facility at March 31, ~~2022.~~2023. At March 31, ~~2022,~~2023, we had $2.8 million of standby letters of credit outstanding, which reduced the amount available for borrowing under the Facility. The Facility expires in March 2025, and all outstanding amounts are then due and payable. Interest is variable based upon formulas tied to ~~LIBOR~~SOFR or an alternate base rate defined in the Facility. We must also pay facility fees that are tied to our then-applicable consolidated leverage ratio. Loans may be used for general corporate purposes. Due to the nature of its terms, when we have outstanding borrowings under the Facility, they will be classified as long-term debt.

The Facility contains certain restrictive covenants, including limitations on indebtedness, asset sales and acquisitions, and financial covenants relating to interest coverage and leverage. At March 31, ~~2022,~~2023, we were in compliance with all applicable provisions and covenants of this facility, and we exceeded the requirements of the financial covenants by substantial margins. At March 31, ~~2022,~~2023, there were no events that would constitute a default under this facility.

We currently expect to remain in compliance with the Facility’s covenants for the foreseeable future. However, a default under the Facility could accelerate the repayment of any then outstanding indebtedness and limit our access to $75 million of additional credit available under the Facility. Such an event could require a reduction in or curtailment of cash dividends or share repurchases, reduce or delay beneficial expansion or investment plans, or otherwise impact our ability to meet our obligations when due.

We believe that cash provided by operating activities and our existing balances in cash and equivalents, in addition to that available under the Facility, should be adequate to meet our liquidity needs over the next 12 months, including the projected levels of capital expenditures and dividend payments. If we were to borrow outside of the Facility under current market terms, our average interest rate may increase and have an adverse effect on our results of operations. Based on our current plans and expectations, we believe our capital expenditures for ~~2022~~2023 will total ~~approximately $150~~an estimated $100 million, which includes ~~an estimated $90~~approximately $55 million in expenditures attributed to ~~a substantial investment for a~~the capacity expansion project at our dressing and sauce facility in Horse Cave, ~~Kentucky that we expect to complete in the first half of fiscal 2023.~~Kentucky.

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

We have various contractual and other obligations that are appropriately recorded as liabilities in our condensed consolidated financial statements. Certain other contractual obligations are not recognized as liabilities in our condensed consolidated financial statements. Examples of such obligations are commitments to purchase raw materials or packaging inventory that has not yet been received as of March 31, ~~2022,~~2023, as well as purchase orders and longer-term purchase arrangements related to the procurement of services, including IT service agreements, and property, plant and equipment. The majority of these obligations is expected to be due within one year. ~~See further discussion below of our obligation related to the capacity expansion project at our dressing and sauce facility in Horse Cave, Kentucky.~~

In November 2020, T. Marzetti Company (“T. Marzetti”), a wholly-owned subsidiary of ours, entered into a Design/Build Agreement (the “Agreement”) with Gray Construction, Inc. (“Gray”) under which Gray will design, coordinate and build additional dressing and sauce manufacturing and warehousing capacity for the T. Marzetti facility in Hart County, Kentucky (the “Project”). The Project will result in an expansion of the current facility footprint. Subject to certain conditions in the Agreement, T. Marzetti will pay Gray no more than the guaranteed maximum price of approximately $113 million for the Project. The Agreement contains other terms and conditions that are customary for this type of project. Expected to be completed in the first half of fiscal 2023, we have a remaining commitment of approximately $46 million for the Project.

CRITICAL ACCOUNTING POLICIES

There have been no changes in critical accounting policies from those policies disclosed in our ~~2021~~2022 Annual Report on Form 10-K.

RECENT ACCOUNTING PRONOUNCEMENTS

Recent accounting pronouncements and their impact on our consolidated financial statements are disclosed in Note 1 to the condensed consolidated financial statements.

FORWARD-LOOKING STATEMENTS

We desire to take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 (the “PSLRA”). This Quarterly Report on Form 10-Q contains various “forward-looking statements” within the meaning of the PSLRA and other applicable securities laws. Such statements can be identified by the use of the forward-looking words “anticipate,” “estimate,” “project,” “believe,” “intend,” “plan,” “expect,” “hope” or similar words. These statements discuss future expectations; contain projections regarding future developments, operations or financial conditions; or state other forward-looking information. Such statements are based upon assumptions and assessments made by us in light of our experience and perception of historical trends, current conditions, expected future developments and other factors we believe to be appropriate. These forward-looking statements involve various important risks, uncertainties and other factors that could cause our actual results to differ materially from those expressed in the forward-looking statements. Actual results may differ as a result of factors over which we have no, or limited, control including, without limitation, the specific influences outlined ~~below, many of which could be amplified by the COVID-19 pandemic.~~below. Management believes these forward-looking statements to be reasonable; however, one should not place undue reliance on such statements that are based on current expectations.

Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update such forward-looking statements, except as required by law.

Items which could impact these forward-looking statements include, but are not limited to:

•significant shifts in consumer demand and disruptions to our employees, communities, customers, supply chains, production planning, operations, and production processes resulting from the impacts of COVID-19 and other epidemics, pandemics or similar widespread public health concerns and disease outbreaks;

•inflationary pressures resulting in higher input costs;

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

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

•complexities related to the implementation of our new enterprise resource planning system;

•adequate supply of labor for our manufacturing facilities;

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

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

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

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

•price and product competition;

•stability of labor relations;

•dependence on key personnel and changes in key personnel;

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

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

•~~adequate supply of labor for our manufacturing facilities;~~

•~~the reaction of customers or consumers to price increases we may implement;~~

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

•~~complexities related to the design and implementation of our new enterprise resource planning system;~~

•geopolitical events, such as Russia’s ~~recent~~ invasion of Ukraine, that could create unforeseen business disruptions and impact the cost or availability of raw materials and energy;

•the potential for loss of larger programs, including licensing agreements, or key customer relationships;

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

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

•~~price and product competition;~~

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

•the success and cost of new product development efforts;

•the lack of market acceptance of new products;

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

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

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

•~~dependence on key personnel and changes in key personnel;~~

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

•maintenance of competitive position with respect to other manufacturers;

•~~stability~~the outcome of ~~labor relations;~~any litigation or arbitration;

•changes in estimates in critical accounting judgments;

•the impact of any regulatory matters affecting our food business, including any required labeling changes and their impact on consumer demand;

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

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

•certain other factors, including the information disclosed in our discussion of risk factors under Item 1A of our ~~2021~~2022 Annual Report on Form 10-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our market risks have not changed materially from those disclosed in our ~~2021~~2022 Annual Report on Form 10-K.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this Quarterly Report on Form 10-Q, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, ~~2022~~2023 to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is 1) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and 2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, in a manner that allows timely decisions regarding required disclosure.

(b) Changes in Internal Control Over Financial Reporting. NoDuring the first quarter of fiscal 2023, we began the implementation phase of Project Ascent, which entails the replacement of our primary customer and manufacturing transactional systems, warehousing systems, and financial systems with an integrated SAP S/4HANA ERP system. Implementation will continue throughout fiscal 2023 as we integrate additional plants and warehouses into our new ERP network. We remain on schedule to complete the planned implementation of Project Ascent in fiscal 2024. We updated our internal controls, as necessary, to reflect the related changes ~~were made to~~in business processes. We do not expect this implementation will have an adverse effect on our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). There were no changes to our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

2523

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

There have been no material changes to the risk factors disclosed under Item 1A in our ~~2021~~2022 Annual Report on Form 10-K.

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

(c) In November 2010, our Board of Directors approved a share repurchase authorization of 2,000,000 common shares, of which ~~1,226,096~~1,176,804 common shares remained authorized for future repurchases at March 31, ~~2022.~~2023. This share repurchase authorization does not have a stated expiration date. In the third quarter, we made the following repurchases of our common stock:

Period Total
Number of
Shares
Purchased Average
Price Paid
Per Share Total Number
of Shares
Purchased as
Part of
Publicly
Announced
Plans Maximum
Number of
Shares that
May Yet be
Purchased
Under the
Plans
January 1-31, 2022 — $ — — 1,239,482
February 1-28, 2022 (1)
13,386 $ 160.38 13,386 1,226,096
March 1-31, 2022 — $ — — 1,226,096
Total 13,386 $ 160.38 13,386 1,226,096


Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans	Maximum Number of Shares that May Yet be Purchased Under the Plans
January 1-31, 2023	—	$	—	—	1,224,364
February 1-28, 2023 (1)	31,563	$	188.62	31,563	1,192,801
March 1-31, 2023	15,997	$	189.17	15,997	1,176,804
Total	47,560	$	188.80	47,560	1,176,804

(1)Includes ~~3,386~~7,560 shares that were repurchased in satisfaction of tax withholding obligations arising from the vesting of restricted stock granted to employees under the Lancaster Colony Corporation 2015 Omnibus Incentive Plan.

Item 6. Exhibits

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

~~SIGNATURES~~

~~Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.~~

~~LANCASTER COLONY CORPORATION~~

~~(Registrant)~~

~~Date:~~

~~May 5, 2022~~

~~By:~~

~~/s/ DAVID A. CIESINSKI~~

~~David A. Ciesinski~~

~~President, Chief Executive Officer~~

~~and Director~~

~~(Principal Executive Officer)~~

~~Date:~~

~~May 5, 2022~~

~~By:~~

~~/s/ THOMAS K. PIGOTT~~

~~Thomas K. Pigott~~

~~Vice President, Chief Financial Officer~~

~~and Assistant Secretary~~

~~(Principal Financial and Accounting Officer)~~

~~LANCASTER COLONY CORPORATION AND SUBSIDIARIES~~

~~FORM 10-Q~~

~~MARCH 31, 2022~~

INDEX TO EXHIBITS



Exhibit Number						Description

10.1						Agreement for Severance and Release, effective February 1, 2023, between the Company and Dave Nagle (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (000-04065), filed February 3, 2023)

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

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

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

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

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

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

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

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

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


Exhibit Number						Description

104(a)						The cover page of Lancaster Colony Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, ~~2022,~~2023, formatted in Inline XBRL (included within Exhibit 101 attachments)

(a)						Filed herewith

(b)						Furnished herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

LANCASTER COLONY CORPORATION

(Registrant)

Date:

May 4, 2023

By:

/s/ DAVID A. CIESINSKI

David A. Ciesinski

President, Chief Executive Officer

and Director

(Principal Executive Officer)

Date:

May 4, 2023

By:

/s/ THOMAS K. PIGOTT

Thomas K. Pigott

Vice President, Chief Financial Officer

and Assistant Secretary

(Principal Financial and Accounting Officer)

2826


	Fair Value Measurements at March 31, 2022
	Level 1		Level 2		Level 3		Total
Contingent consideration - Bantam	$	—	$	—	$	—	$	—



	Fair Value Measurements at June 30, 2021
	Level 1		Level 2		Level 3		Total
Contingent consideration - Bantam	$	—	$	—	$	3,470	$	3,470