UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-K

(Mark One)

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

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

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		(I.R.S. Employer
incorporation or organization)		Identification No.)
37 West Broad Street		43215
Columbus, Ohio		(Zip Code)
(Address of principal executive offices)

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

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ* No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

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

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

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

The aggregate market value of Common Stock held by non-affiliates on December 31, 2010 was approximately $1,074,883,000, based on the closing price of these shares on that day.

As of August 17, 2011, there were approximately 27,341,000 shares of Common Stock, without par value, outstanding.

Portions of the registrant’s definitive proxy statement to be filed for its November 2011 Annual Meeting of Shareholders are incorporated by reference into Part III of this Annual Report on Form 10-K.

 

 

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS

PART I
Item 1. Business			3
Item 1A. Risk Factors			6
Item 1B. Unresolved Staff Comments			11
Item 2. Properties			12
Item 3. Legal Proceedings			12
Item 4. [Removed and Reserved]			12
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			13
Item 6. Selected Financial Data			15
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			16
Item 7A. Quantitative and Qualitative Disclosures About Market Risk			28
Item 8. Financial Statements and Supplementary Data			29
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure			57
Item 9A. Controls and Procedures			57
Item 9B. Other Information			59
PART III
Item 10. Directors, Executive Officers and Corporate Governance			59
Item 11. Executive Compensation			59
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			59
Item 13. Certain Relationships and Related Transactions, and Director Independence			59
Item 14. Principal Accounting Fees and Services			59
PART IV
Item 15. Exhibits, Financial Statement Schedules			60
Signatures			61
Index to Exhibits			63
EX-21
EX-23
EX-31.1
EX-31.2
EX-32

PART I

Item 1.		Business

GENERAL

Lancaster Colony Corporation, an Ohio corporation (reincorporated in 1992, successor to a Delaware corporation originally incorporated in 1961), is a diversified manufacturer and marketer of consumer products focusing primarily on specialty foods for the retail and foodservice markets. We also manufacture and market candles for the food, drug and mass markets. Although not material to our consolidated operations, we are also engaged in the distribution of various products, including glassware and candles, to commercial markets. In recent years, our strategy has shifted away from operating businesses in a variety of industries towards emphasizing the growth and success we have achieved in our Specialty Foods segment. Our principal executive offices are located at 37 West Broad Street, Columbus, Ohio 43215 and our telephone number is 614-224-7141.

As used in this Annual Report on Form 10-K and except as the context otherwise may require, the terms “we,” “us,” “our,” “registrant,” or “the Company” mean Lancaster Colony Corporation and all entities owned or controlled by Lancaster Colony Corporation except where it is clear that the term only means the parent company. Unless otherwise noted, references to “year” pertain to our fiscal year; for example, 2011 refers to fiscal 2011, which is the period from July 1, 2010 to June 30, 2011.

Available Information

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

DESCRIPTION OF AND FINANCIAL INFORMATION ABOUT BUSINESS SEGMENTS

We operate in two business segments — “Specialty Foods” and “Glassware and Candles” — with the sales of these segments accounting for approximately 85% and 15%, respectively, of consolidated net sales for the year ended June 30, 2011. The financial information relating to business segments for the three years ended June 30, 2011, 2010 and 2009 is included in Note 13 to the consolidated financial statements, which is included in Part II, Item 8 of this Annual Report on Form 10-K. Further description of each business segment within which we operate is provided below.

Specialty Foods

The food products we manufacture and sell include salad dressings and sauces marketed under the brand names “Marzetti,” “T. Marzetti,” “Cardini’s,” “Pfeiffer,” “Simply Dressed” and “Girard’s”; fruit glazes, vegetable dips and fruit dips marketed under the brand name “T. Marzetti”; Greek yogurt vegetable dips marketed under the brand name “Otria”; frozen breads marketed under the brand names “New York BRAND” and “Mamma Bella”; frozen Parkerhouse style yeast dinner rolls and sweet rolls, as well as biscuits, marketed under the brand names “Sister Schubert’s,” “Marshall’s” and “Mary B’s”; premium dry egg noodles marketed under the brand names “Inn Maid” and “Amish Kitchen”; frozen specialty noodles and pastas marketed under the brand names “Reames” and “Aunt Vi’s”; croutons and related products marketed under the brand names “New York BRAND,” “Texas Toast,” “Chatham Village,” “Cardini’s” and “T. Marzetti” and caviar marketed under the brand name “Romanoff.” A portion of our sales in this segment relates to products sold under private label to retailers, distributors and restaurants primarily in the United States. Additionally, a portion of our sales relates to frozen specialty noodles and pastas sold to industrial customers for use as ingredients in their products.

The dressings, sauces, croutons, fruit glazes, vegetable dips, fruit dips, frozen breads and yeast rolls are sold primarily through sales personnel, food brokers and distributors in various geographic areas in the United States, with sales being made to retail, club stores and foodservice markets. We have strong

placement of products in U.S. grocery produce departments through our refrigerated salad dressings, vegetable and fruit dips, and croutons. Within the frozen aisles of grocery retailers, we also have prominent market positions of frozen yeast rolls, as well as garlic breads. Products we sell in the foodservice markets are often custom-formulated and include salad dressings, sandwich and dipping sauces, frozen breads and yeast rolls. Similar to our retail efforts, we utilize our research and development resources to accommodate a strong desire for new and differentiated products among our foodservice users. The dry egg noodles, frozen specialty noodles and pasta are sold through sales personnel, food brokers and distributors to retail, foodservice and industrial markets.

Sales attributable to one customer comprised approximately 16%, 17% and 15% of this segment’s total net sales in 2011, 2010 and 2009, respectively. No other customer accounted for more than 10% of this segment’s total net sales during these years. Although we have the leading market share in several product categories, all of the markets in which we sell food products are highly competitive in the areas of price, quality and customer service.

Our strong retail brands and product development capabilities continue to be a source of future growth for this segment. In foodservice markets, we attempt to expand existing customer relationships and pursue new opportunities by leveraging our culinary skills and experience to support the development of new menu offerings. Acquisitions are also a component of our future growth plans, with a focus on fit and value.

A significant portion of this segment’s product lines is manufactured at our 14 food plants located throughout the United States. However, certain items are also manufactured and packaged by third parties located in the United States, Canada and Europe.

Efficient and cost-effective production remains a key focus of the Specialty Foods segment. In 2010, we consolidated most of the operations of our dressings and sauces manufacturing operation located in Wilson, New York into other existing plants, outsourced certain requirements and exited less profitable dressing lines to achieve greater efficiency in our Specialty Foods segment. In 2009, we also consolidated our Atlanta, Georgia dressing operation into our other existing food facilities as part of our cost-reduction efforts within this segment. Beyond this segment’s ongoing initiatives for cost savings and operational improvements, in recent years we completed the construction of two new production facilities in Horse Cave, Kentucky. Our salad dressing plant provided us with incremental capacity enabling us to achieve operating efficiencies at both the new and existing dressing plant locations. Our frozen yeast rolls plant, which was significantly expanded in 2011, helped to satisfy increased customer demand and improved operating efficiencies.

The operations of this segment are not affected to any material extent by seasonal fluctuations, although sales of frozen retail products tend to be most pronounced in the fiscal second quarter. We do not utilize any franchises or concessions in this business segment. The trademarks that we utilize are significant to the overall success of this segment. The patents and licenses under which we operate, however, are not essential to the overall success of this segment.

Glassware and Candles

We sell candles, candle accessories, and other home fragrance products in a variety of sizes, forms and fragrances in retail markets to mass merchants, supermarkets, drug stores and specialty shops under the “Candle-lite” brand name. A significant portion of our candle business is marketed under private label. While less significant, we also sell candles, glassware and various other products to customers in certain commercial markets, including restaurants, hotels, hospitals and schools.

All the markets in which we sell candle products are highly competitive in the areas of design, price, quality and customer service. Sales attributable to one customer comprised approximately 58%, 61% and 49% of this segment’s total net sales in 2011, 2010 and 2009, respectively. No other customer accounted for more than 10% of this segment’s total net sales during these years.

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

NET SALES BY CLASS OF PRODUCTS

The following table sets forth business segment information with respect to the percentage of net sales contributed by each class of similar products that account for at least 10% of our consolidated net sales in any year from 2009 through 2011:

		2011				2010				2009
Specialty Foods:
Non-frozen			53	%			52	%			54	%
Frozen			32	%			33	%			33	%
Glassware and Candles:
Consumer table and giftware			15	%			15	%			13	%

Net sales attributable to Wal-Mart Stores, Inc. (“Wal-Mart”) totaled approximately 22%, 23% and 20% of consolidated net sales for 2011, 2010 and 2009, respectively.

RESEARCH AND DEVELOPMENT

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

BACKLOG

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

ENVIRONMENTAL MATTERS

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

EMPLOYEES AND LABOR RELATIONS

As of June 30, 2011, we had approximately 3,100 employees. Approximately 20% of these employees are represented under various collective bargaining agreements, which expire at various times through calendar year 2013. While we believe that labor relations with unionized employees are good, a prolonged labor dispute could have a material effect on our business and results of operations.

FOREIGN OPERATIONS AND EXPORT SALES

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.

RAW MATERIALS

During 2011, we obtained adequate supplies of raw materials for all of our segments. We rely on a variety of raw materials for the day-to-day production of our products, including soybean oil, certain dairy-related products, flour, glass, fragrances and colorant agents, paraffin and other waxes and plastic and paper packaging materials.

We purchase the majority of these materials on the open market to meet current requirements, but we also have some longer-term, fixed-price contracts. See further discussion in our contractual obligations disclosure in Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Although the availability of certain of these materials has become more influenced by the level of global demand, we anticipate that future sources of supply will generally be adequate for our needs.

Item 1A.		Risk Factors

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

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

Competitive conditions within our markets could impact our sales volumes and operating margins.

Competition within all of our markets is intense and is expected to remain so. Numerous competitors exist, many of which are larger than us in size. Global production overcapacity has also had an impact on operations within our Glassware and Candles segment. These competitive conditions could lead to significant downward pressure on the prices of our products, which could have a material adverse effect on our revenues and profitability.

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

Wal-Mart is our largest customer and the loss of, or a significant reduction in, its business could cause our sales and net income to decrease.

Our net sales to Wal-Mart represented approximately 22% of consolidated net sales for the year ended June 30, 2011. We believe that our relationship with Wal-Mart is good, but we cannot assure that we will be able to maintain this relationship. In addition, changes in Wal-Mart’s general business model, such as reducing branded products or devoting more shelf space to private label products, could affect the profitability of our business with Wal-Mart even if we maintain a good relationship. The loss of, or a significant reduction in, this business could have a material adverse effect on our sales and profitability. Unfavorable changes in Wal-Mart’s financial condition or other disruptions to Wal-Mart, such as decreased consumer demand, could also have a material adverse effect on our business and results of operations.

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

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

We anticipate that future sources of supply will generally be adequate for our needs, but disruptions in availability and increased prices could have a material adverse effect on our business and results of operations. The increase in the costs of raw materials used in our Specialty Foods segment during 2007 to

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

A disruption of production at certain manufacturing facilities could result in an inability to provide adequate levels of customer service.

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

Manufacturing capacity constraints may have a material adverse effect on us.

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

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

We may be subject to product recalls or other claims for mislabeled, adulterated, contaminated, defective or spoiled food products or consumer products.

Our operations could be impacted by both genuine and fictitious claims regarding our products and our competitors’ products. Under adverse circumstances, we may need to recall some of our products if they are, or have the potential to be, mislabeled, adulterated, contaminated, or contain a defect. Any of these circumstances could necessitate a recall due to a substantial product hazard, a need to change a product’s labeling or out of an abundance of caution to avoid any potential product hazards. A pervasive product recall may result in significant losses due to the costs of a recall or related legal claims, the destruction of product inventory, lost sales due to the unavailability of product for a period of time and a loss of goodwill and, therefore, may have an adverse effect on our results of operations. In addition, we may also be liable if any of our products causes injury.

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

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

In addition, either a significant product recall or a product liability claim involving a competitor’s products or products in markets related to those in which we compete could result in a loss of consumer confidence in our products or our markets generally and could have a material impact on consumer demand, which could have an adverse effect on our business results and the value of our brands.

Increases in energy-related costs could negatively affect our business by increasing our costs to produce goods.

We are subject to volatility in energy-related costs that affect the cost of producing our products. This is true in both our Glassware and Candles segment, in which we use large amounts of wax, and in our Specialty Foods segment, in which we utilize petroleum-derived packaging materials. Increases in these types of costs could have a material adverse effect on our business and results of operations.

The availability and cost of transportation for our products is vital to our success, and the loss of availability or increase in the cost of transportation could have an unfavorable impact on our business and results of operations.

Our ability to obtain adequate and reasonably-priced methods of transportation to distribute our products is a key factor to our success. Our Specialty Foods segment requires the use of refrigerated trailers to ship a substantial portion of its products. Delays in transportation, especially in our Specialty Foods segment, where orders are generally filled in three to seven days following the receipt of the order, could have a material adverse effect on our business and results of operations. Further, high fuel costs also negatively impact our financial results. We are often required to pay fuel surcharges to third-party transporters of our products due to high fuel costs. These fuel surcharges can be substantial and would increase our cost of goods sold. If we were unable to pass those high costs to our customers in the form of price increases, those high costs could have a material adverse effect on our business and results of operations.

Our inability to successfully renegotiate union contracts and any prolonged work stoppages or other business disruptions could have an adverse effect on our business and results of operations.

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

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

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

The Continued Dumping and Subsidy Offset Act of 2000 (“CDSOA”) provides for the distribution of monies collected by U.S. Customs from antidumping cases to qualifying domestic producers. Our reported CDSOA receipts totaled approximately $14.4 million, $0.9 million and $8.7 million in 2011, 2010 and 2009, respectively. CDSOA remittances have related to certain candles being imported from the People’s Republic of China.

Legislation was enacted in February 2006 to repeal the applicability of CDSOA to duties collected on products imported after September 2007. Accordingly, we may receive some level of annual distributions for an undetermined period of years in the future as the monies collected that relate to entries filed prior to October 2007 are administratively finalized by U.S. Customs. Without further legislative action, we expect these distributions will eventually cease.

In addition to this legislative development, cases have been brought in U.S. courts challenging CDSOA. In two separate cases, the U.S. Court of International Trade (“CIT”) ruled that the procedure for determining recipients eligible to receive CDSOA distributions is unconstitutional. The U.S. Court of Appeals for the Federal Circuit reversed both CIT decisions and the U.S. Supreme Court did not hear either case. This effectively ended the constitutional challenges brought in these cases, but other cases challenging CDSOA remain active.

We are unable to determine, at this time, what the ultimate outcome of other litigation will be, and it is possible that further legal action, potential additional changes in the law and other factors could affect the amount of funds available for distribution, including funds relating to entries prior to October 2007.

Accordingly, we cannot predict the amount of future distributions we may receive. Any change in CDSOA distributions could affect our earnings and cash flow.

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

We did not record any restructuring and impairment charges for the year ended June 30, 2011, but we did record such charges totaling approximately $2.5 million and $1.6 million in 2010 and 2009, respectively. Likewise, future events may occur that could adversely affect the reported value of our assets and require impairment charges. Such events may include, but are not limited to, strategic decisions made in response to changes in economic and competitive conditions, the impact of the economic environment on our customer base, or a material adverse change in our relationship with significant customers.

We may not be able to successfully consummate proposed acquisitions or divestitures or integrate acquired businesses.

From time to time, we evaluate acquiring other businesses that would strategically fit within our various operations. If we are unable to consummate, successfully integrate and grow these acquisitions and to realize contemplated revenue growth, synergies and cost savings, our financial results could be adversely affected. In addition, we may, from time to time, divest businesses that are less of a strategic fit within our portfolio or do not meet our growth or profitability targets. As a result, our profitability may be impacted by either gains or losses on the sales of those businesses or lost operating income or cash flows from those businesses. We may also not be able to divest businesses that are not core businesses or may not be able to do so on terms that are favorable to us. Further, a buyer’s inability to fulfill contractual obligations that were assigned as part of a business divestiture, including those relating to customer contracts, could lead to future financial loss on our part. In addition, we may be required to incur asset impairment or restructuring charges related to acquired or divested businesses, which may reduce our profitability and cash flows. These potential acquisitions or divestitures present financial, managerial and operational challenges, including diversion of management attention from existing businesses, difficulty with integrating or separating personnel and financial and other systems, increased expenses, assumption of unknown liabilities, indemnities and potential disputes with the buyers or sellers.

Potential indemnification costs relating to business divestitures could have a material adverse effect on our business and results of operations.

We made several business divestitures in 2008 and 2007. These divestitures were made pursuant to agreements that contain customary indemnification provisions, some of which run in favor of the purchasers. In the future, if any of these indemnification provisions are triggered, we may be required to make indemnification payments to these purchasers or other parties. Any potential payments that we may be required to make under our divestiture agreements could have a material adverse effect on our business and results of operations.

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

Although we do not have any outstanding debt at this time, we may incur indebtedness in 2012 or beyond for a variety of reasons, including acquisitions or potential changes in capitalization that might require significant cash expenditure. A consequence of such indebtedness could be a reduction in the level of our profitability due to higher interest expense. Depending on the future extent and availability of our borrowings, we could also become more vulnerable to economic downturns, require curtailment of cash dividends or share repurchases, reduce or delay beneficial expansion or investment plans, or otherwise be unable to meet our obligations when due. For more information regarding our debt, see the “Liquidity and Capital Resources” section in Item 7 of this Annual Report on Form 10-K.

We are subject to Federal, state and local government regulations that could adversely affect our business and results of operations.

Certain of our business operations are subject to regulation by various Federal, state and local government entities and agencies. As a producer of food products for human consumption, our operations are subject to stringent production, packaging, quality, labeling and distribution standards, including regulations mandated by the Federal Food, Drug and Cosmetic Act. We cannot predict if future regulation by various

Federal, state and local governmental entities and agencies would adversely affect our business and results of operations.

In addition, our business operations and the past and present ownership and operation of our properties are subject to extensive and changing Federal, state and local environmental laws and regulations pertaining to the discharge of materials into the environment, the handling and disposition of wastes (including solid and hazardous wastes) or otherwise relating to protection of the environment. We cannot assure that environmental issues relating to presently known matters or identified sites or to other matters or sites will not require additional, currently unanticipated investigation, assessment or expenditures.

We rely on the value of our brands, and the costs of maintaining and enhancing the awareness of our brands are increasing, which could have an adverse impact on our revenues and profitability.

We rely on the success of our well-recognized brand names. If we are not successful in maintaining our brand recognition, this could have a material adverse effect on our business and results of operations. We intend to maintain our strong brand recognition by continuing to devote resources to advertising, marketing and other brand-building efforts. The costs of maintaining our brands are increasing, and these increased costs could have a material adverse impact on our financial results.

We rely on the performance of major retailers, wholesalers, food brokers, distributors, foodservice customers and mass merchants for the success of our business, and should they perform poorly or give higher priority to other brands or products, our business could be adversely affected.

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

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

Inherent risks associated with our idle real property, such as our inability to sell it in a reasonable time period, could have an adverse effect on our business and results of operations.

As a result of recent strategic alternative activities, we currently hold various parcels of real property that are not currently used in our operations. These facilities have a net book value at June 30, 2011 of approximately $2.8 million. In addition, we may make further specific determinations in the future with respect to additional facilities or sell other operations while retaining the associated real property. These determinations could be announced at any time. Possible adverse consequences resulting from or related to these properties may include various accounting charges, disposition costs related to the potential sale of a property, costs associated with leasing obligations, and other normal or attendant risks and uncertainties associated with holding, leasing or selling real property.

Although most of our properties have been subjected to periodic environmental assessments, these assessments may be limited in scope and may not include or identify all potential environmental liabilities or risks associated with any particular property. We cannot be certain that our environmental assessments have identified all potential environmental liabilities or that we will not incur material environmental liabilities in the future. If we do incur or discover any material environmental liabilities or potential environmental liabilities in the future, we may face significant remediation costs and find it difficult to sell or lease any affected properties.

In addition, it may take months and possibly longer to sell these properties at a suitable price. The real estate market is affected by many factors, such as general economic conditions, availability of financing,

interest rates and other factors, including supply and demand, that are beyond our control. We cannot predict whether we will be able to sell a property for the price or on the terms set by us or whether any price or other terms offered by a prospective purchaser would be acceptable to us. We cannot predict the length of time needed to find a willing purchaser and to close the sale of any property. If we are unable to sell a property when we determine to do so, it could have an adverse effect on our cash flow and results of operations.

The loss of the services of one or more members of our senior management team could have a material adverse effect on our business, financial condition and results of operations.

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

Mr. Gerlach, our Chief Executive Officer and Chairman of our board of directors, has a significant ownership interest in our Company.

As of June 30, 2011, Mr. Gerlach owned or controlled approximately 30% of the outstanding shares of our common stock. Accordingly, Mr. Gerlach has significant influence on all matters submitted to a vote of the holders of our common stock, including the election of directors. Mr. Gerlach’s voting power also may have the effect of discouraging transactions involving an actual or a potential change of control of our Company, regardless of whether a premium is offered over then-current market prices.

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

Anti-takeover provisions could make it more difficult for a third party to acquire us.

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

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

Item 1B.		Unresolved Staff Comments

None.

Item 2.		Properties

We use approximately 2.7 million square feet of space for our operations. Of this space, approximately 0.5 million square feet are leased.

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

				Approximate				Terms of
Location		Business Segment		Square Feet				Occupancy
Altoona, IA (2)		Specialty Foods			120,000			Owned/Leased
Bedford Heights, OH (1)		Specialty Foods			98,000			Owned/Leased
Columbus, OH (2)		Specialty Foods			386,000			Owned/Leased
Grove City, OH		Specialty Foods			195,000			Owned
Horse Cave, KY		Specialty Foods			382,000			Owned
Luverne, AL		Specialty Foods			91,000			Owned
Milpitas, CA (3)		Specialty Foods			130,000			Owned/Leased
Leesburg, OH		Glassware and Candles			860,000			Owned
Jackson, OH		Glassware and Candles			122,000			Owned

We have recently completed the expansion of our frozen yeast roll manufacturing facility in Horse Cave, Kentucky. The expansion added approximately 49,000 square feet to the original facility and is included in the table above.

As a result of our past strategic alternative activities, we also hold various parcels of real property that we do not currently use in our operations. The related facilities contain in excess of 1.5 million square feet.

Item 3.		Legal Proceedings

We currently are a party to various legal proceedings. Such matters did not have a material effect on the current-year results of operations. While we believe that the ultimate outcome of these various proceedings, individually and in the aggregate, will not have a material effect on our financial position or future results of operations, litigation is always subject to inherent uncertainties, and unfavorable rulings could occur. An unfavorable ruling could include monetary damages or an injunction prohibiting us from manufacturing or selling one or more products or could lead to us altering the manner in which we manufacture or sell one or more products, which could have a material impact on net income for the period in which the ruling occurs and future periods.

Item 4.		Removed and Reserved

PART II

Item 5.		Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock trades on The NASDAQ Global Select Market under the symbol LANC. The following table sets forth the high and low prices for Lancaster Colony Corporation common shares and the dividends paid for each quarter of 2011 and 2010. Stock prices were provided by The NASDAQ Stock Market LLC.

										Dividends
		Stock Prices								Paid
		High				Low				Per Share
2011
First quarter		$	54.99			$	43.28			$	.300
Second quarter		$	58.59			$	46.95				.330
Third quarter		$	60.80			$	51.96				.330
Fourth quarter		$	64.72			$	56.53				.330
Year										$	1.290
2010
First quarter		$	53.41			$	41.52			$	.285
Second quarter		$	51.96			$	47.01				.300
Third quarter		$	60.07			$	49.30				.300
Fourth quarter		$	61.60			$	51.77				.300
Year										$	1.185

The number of shareholders as of August 17, 2011 was approximately 8,500. The highest and lowest prices for our common stock from July 1, 2011 to August 17, 2011 were $64.15 and $53.91.

We have paid dividends for 192 consecutive quarters. Future dividends will depend on our earnings, financial condition and other factors.

Issuer Purchases of Equity Securities

Our Board of Directors (“Board”) approved a share repurchase authorization of 2,000,000 shares in November 2010. Approximately 1,618,000 shares from this authorization remained authorized for future purchase at June 30, 2011. In the fourth quarter, we made the following repurchases of our common stock:

										Total Number
		Total				Average				of Shares				Maximum Number
		Number				Price				Purchased as				of Shares That May
		of Shares				Paid Per				Part of Publicly				Yet be Purchased
Period		Purchased				Share				Announced Plans				Under the Plans
April 1-30, 2011			—			$	—				—				1,678,544
May 1-31, 2011			—			$	—				—				1,678,544
June 1-30, 2011			60,194			$	58.81				60,194				1,618,350
Total			60,194			$	58.81				60,194				1,618,350

This share repurchase authorization does not have a stated expiration date.

PERFORMANCE GRAPH

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN
OF LANCASTER COLONY CORPORATION, THE S&P MIDCAP 400 INDEX
AND THE DOW JONES U.S. FOOD PRODUCERS INDEX

The graph set forth below compares the five-year cumulative total return from investing $100 on June 30, 2006 in each of our Common Stock, the S&P Midcap 400 Index and the Dow Jones U.S. Food Producers Index. It is assumed that all dividends are reinvested.

Cumulative Total Return (Dollars)

		6/06				6/07				6/08				6/09				6/10				6/11
Lancaster Colony Corporation			100.00				108.81				81.05				121.58				150.55				175.78
S&P Midcap 400			100.00				118.51				109.81				79.04				98.74				137.63
Dow Jones U.S. Food Producers			100.00				117.13				106.46				89.64				97.21				131.53

There can be no assurance that our stock performance will continue into the future with the same or similar trends depicted in the above graph.

Item 6.		Selected Financial Data

LANCASTER COLONY CORPORATION AND SUBSIDIARIES
FIVE YEAR FINANCIAL SUMMARY

(Thousands Except		Years Ended June 30
Per Share Figures)		2011				2010				2009				2008				2007
Operations
Net Sales(1)		$	1,089,946			$	1,056,608			$	1,051,491			$	980,915			$	945,810
Gross Margin(1)		$	242,429			$	270,332			$	215,492			$	157,341			$	181,740
Percent of Sales			22.2	%			25.6	%			20.5	%			16.0	%			19.2	%
Interest Expense		$	—			$	—			$	(1,217	)		$	(3,076	)		$	(150	)
Percent of Sales			0.0	%			0.0	%			0.1	%			0.3	%			0.0	%
Other Income — Continued Dumping and Subsidy Offset Act		$	14,388			$	893			$	8,696			$	2,533			$	699
Income from Continuing Operations
Before Income Taxes(1)		$	161,506			$	175,138			$	137,006			$	75,668			$	101,260
Percent of Sales			14.8	%			16.6	%			13.0	%			7.7	%			10.7	%
Taxes Based on Income(1)		$	55,142			$	60,169			$	47,920			$	27,229			$	36,981
Income from Continuing Operations(1)		$	106,364			$	114,969			$	89,086			$	48,439			$	64,279
Percent of Sales			9.8	%			10.9	%			8.5	%			4.9	%			6.8	%
Continuing Operations Diluted Income per Common Share(1)(2)		$	3.84			$	4.07			$	3.17			$	1.64			$	2.03
Cash Dividends per Common Share		$	1.29			$	1.185			$	1.135			$	1.11			$	1.07
Financial Position
Cash and Equivalents(1)		$	132,266			$	100,890			$	38,484			$	19,417			$	8,316
Total Assets		$	622,089			$	586,453			$	498,481			$	520,178			$	598,497
Working Capital		$	257,040			$	239,446			$	148,233			$	144,925			$	137,121
Property, Plant and Equipment—Net(1)		$	185,282			$	166,097			$	170,900			$	179,573			$	194,589
Long-Term Debt		$	—			$	—			$	—			$	55,000			$	—
Property Additions(1)		$	35,343			$	12,833			$	11,336			$	16,832			$	53,589
Depreciation and Amortization(1)		$	18,940			$	20,533			$	21,870			$	24,138			$	24,081
Shareholders’ Equity		$	517,539			$	484,908			$	402,556			$	359,218			$	444,309
Per Common Share		$	18.90			$	17.21			$	14.32			$	12.63			$	14.45
Weighted Average Common Shares Outstanding—Diluted(2)			27,689				28,174				28,044				29,496				31,603

Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) describes the matters that we consider to be important in understanding the results of our operations for the three years ended June 30, 2011, 2010 and 2009 and our liquidity and capital resources as of June 30, 2011 and 2010. 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, 2011 refers to fiscal 2011, which is the period from July 1, 2010 to June 30, 2011. In the discussion that follows, we analyze the results of our operations for the last three years, including the trends in our overall business, followed by a discussion of our cash flows and liquidity and contractual obligations. We then provide a review of the critical accounting policies and estimates that we believe are most important to an understanding of our MD&A and our consolidated financial statements. We conclude our MD&A with information on recently issued accounting pronouncements.

The following discussion should be read in conjunction with the “Selected Financial Data” and our consolidated financial statements and the notes thereto, all included elsewhere in this Annual Report on Form 10-K. The forward-looking statements in this section and other parts of this report involve risks and uncertainties 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 as a result of factors set forth under the caption “Forward-Looking Statements.”

EXECUTIVE SUMMARY

Business Overview

Lancaster Colony Corporation is a diversified manufacturer and marketer of consumer products focusing primarily on specialty foods for the retail and foodservice markets. We also manufacture and market candles for the food, drug and mass markets. Although not material to our consolidated operations, we are also engaged in the distribution of various products, including glassware and candles, to commercial markets. Our operations are organized in two reportable segments: “Specialty Foods” and “Glassware and Candles.” Over 90% of the sales of each segment are made to customers in the United States.

In recent years, our strategy has shifted away from operating businesses in a variety of industries towards emphasizing the growth and success we have achieved in our Specialty Foods segment. Fiscal years prior to 2009 were significant years in implementing this strategy as we divested various nonfood operations and focused our capital investment in the Specialty Foods segment. These strategic dispositions and investments resulted in transforming our company into a predominately food-focused business. In 2011, approximately 85% of our consolidated net sales and effectively all of our operating income were derived from the Specialty Foods segment. For perspective, in 2001, our Specialty Foods segment comprised approximately 47% and 72% of our reported consolidated net sales and operating income, respectively.

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

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

	•		leading retail market positions in several branded products with a high-quality perception;
	•		a broad customer base in both retail and foodservice accounts;
	•		well-regarded culinary expertise among foodservice accounts;
	•		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 our specialty foods retail and foodservice business over time by:

•

leveraging the strength of our retail brands to increase current product sales and introduce new products;

•

growing our foodservice sales through the strength of our reputation in product development and quality; and

•

pursuing acquisitions that meet our strategic criteria.

Within retail markets, our Specialty Foods segment utilizes numerous branded products to support growth and maintain market competitiveness. We place great emphasis on our product innovation and development efforts so as to enhance growth by providing distinctive new products meeting the evolving needs and preferences of consumers.

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

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

As has occasionally been required to support future growth opportunities, we have historically made substantial capital investments to support our existing food operations, such as the construction of a new frozen yeast roll facility in Horse Cave, Kentucky that began operations in 2008 and was significantly expanded through a project that was completed in June 2011. At an adjoining location, we began production activities at a newly-constructed dressing facility in 2007. Both facilities helped accommodate potential future sales growth and also provided greater manufacturing efficiencies. Based on our current plans and expectations, we believe that our total capital expenditures for 2012 will be approximately $25 million.

Summary of 2011 Results

The following is an overview of our consolidated operating results for the year ended June 30, 2011.

Consolidated net sales reached approximately $1,090 million during 2011, increasing by approximately 3% as compared to prior-year net sales of $1,057 million, driven by growth coming from both operating segments. The Specialty Foods segment’s increase reflected higher foodservice sales, which were partially offset by lower retail sales. The increase in sales of the Glassware and Candles segment primarily reflected higher candle sales volumes from product placement into new accounts that began in the fourth quarter of 2010.

Gross margin decreased 10% to approximately $242.4 million from the prior-year comparable total of $270.3 million. Increasing raw-material costs, as well as a less favorable sales mix and higher freight costs within the Specialty Foods segment, contributed to the lower gross margin.

Overall results were also affected by the funds received under CDSOA. In 2011, we received approximately $14.4 million under CDSOA, as compared to approximately $0.9 million in 2010 and approximately $8.7 million in 2009. For a more-detailed discussion of CDSOA, see the subcaption “Other Income — Continued Dumping and Subsidy Offset Act” of this MD&A.

Net income totaled approximately $106.4 million in 2011, or $3.84 per diluted share, compared to net income of $115.0 million, or $4.07 per diluted share, in 2010. Net income in 2009 totaled approximately $89.1 million, or $3.17 per diluted share.

Looking Forward

We are anticipating continued growth in consolidated sales during 2012. Factors that we believe should contribute to our growth include the incremental impact of several recently-introduced retail food products, the implementation of higher pricing among various product lines, as well as the expansion of existing

product lines with current customers or into new geographic markets. We will also continue to review acquisition opportunities within the Specialty Foods segment that are consistent with our growth strategy and represent good value or otherwise provide significant strategic benefits. However, unsettled economic conditions affecting consumer and retailer buying patterns are among the many influences that may impact sales improvement and our ability to improve operating margins in the coming year.

Within our Specialty Foods segment, with respect to material input and freight costs, we enter 2012 experiencing an elevation of such costs over 2011 levels. It is possible that future changes in the economy and regulatory environment could cause further increases in these costs. To help offset or stabilize the impact of such increases, we have pursued other operational strategies that we believe will aid our future results. For example, as part of our cost reduction efforts, we consolidated our Wilson, New York and Atlanta, Georgia production operations into our other existing facilities in the second quarter of 2010 and early 2009, respectively. Further, the 2011 expansion of our frozen roll capacity is expected to improve production throughput and reduce third party warehouse costs. We are also continuing to limit some of our exposure to volatile swings in food commodity costs through a structured purchasing program for certain future requirements. We do expect to realize higher pricing in 2012, but we believe that the related income may ultimately be less than the total increase in material and freight costs.

With respect to our Glassware and Candles segment, we expect lower 2012 sales levels, especially for holiday products, as some lower-margin business was not retained. Higher wax costs will continue to negatively impact the segment’s operating results, and it will be challenging to maintain operating efficiencies with the expected lower production levels. Accordingly, we currently expect this segment’s 2012 operating income will be challenged to reach the level of 2011.

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

In order to ensure that our capitalization is adequate to support our future internal growth prospects, acquire food businesses consistent with our strategic goals, and maintain cash returns to our shareholders through cash dividends and share repurchases, we will need to maintain sufficient flexibility in our future capital structure. We will continue to reassess our allocation of capital periodically to ensure that we maintain adequate operating flexibility while providing appropriate levels of cash returns to our shareholders, whether through share repurchases or cash dividends, including special dividends, if appropriate.

REVIEW OF CONSOLIDATED OPERATIONS

Segment Sales Mix

The relative proportion of sales contributed by each of our business segments can impact a year-to-year comparison of the consolidated statements of income. The following table summarizes the sales mix over each of the last three years:

		2011				2010				2009
Segment Sales Mix:
Specialty Foods			85	%			85	%			87	%
Glassware and Candles			15	%			15	%			13	%

Net Sales and Gross Margin

		Year Ended
		June 30												Change
(Dollars in thousands)		2011				2010				2009				2011 vs. 2010								2010 vs. 2009
Net Sales
Specialty Foods		$	922,856			$	893,256			$	909,897			$	29,600				3	%		$	(16,641	)			(2	)%
Glassware and Candles			167,090				163,352				141,594				3,738				2	%			21,758				15	%
Total		$	1,089,946			$	1,056,608			$	1,051,491			$	33,338				3	%		$	5,117				0	%
Gross Margin		$	242,429			$	270,332			$	215,492			$	(27,903	)			(10	)%		$	54,840				25	%
Gross Margin as a Percentage of Sales			22.2	%			25.6	%			20.5	%

Consolidated net sales for the year ended June 30, 2011 increased by approximately 3% to approximately $1,090 million from the prior-year total of approximately $1,057 million. This sales growth reflected improved results in both operating segments. The Specialty Foods segment’s increase reflected higher foodservice sales, which were partially offset by lower retail sales. The foodservice sales increase resulted from both higher pricing and new programs with some large restaurant chains. The decline in retail sales was influenced by the exiting of less profitable dressing lines midway through 2010, the loss of product placement for certain produce dips at one customer and generally weak retail market conditions. The increase in sales of the Glassware and Candles segment primarily reflected higher candle volumes from product placement into new accounts that began in the fourth quarter of 2010. Consolidated net sales for the year ended June 30, 2010 increased by less than 1% over the 2009 total of approximately $1,051 million. In 2010, increased sales within the Glassware and Candles segment were partially offset by lower sales within the Specialty Foods segment. The Specialty Foods segment’s sales decline reflected moderately lower foodservice sales, as partially offset by higher retail sales. The increase in net sales of the Glassware and Candles segment reflected higher unit volume on improved consumer demand for high-quality, value-priced candles and the introduction and success of various new products.

Our gross margin as a percentage of net sales was approximately 22.2% in 2011 compared with 25.6% in 2010 and 20.5% in 2009. As a percentage of net sales, higher material costs in 2011 are estimated to have impacted gross margin comparisons by approximately 3%. In the Specialty Foods segment, gross margin percentages declined in 2011, reflecting broadly-higher ingredient and freight costs and a less favorable sales mix. Gross margin percentages in the Glassware and Candles segment declined in 2011 due to higher wax costs and, to a lesser extent, lower production volumes. As a percentage of net sales, lower material costs in 2010 are estimated to have benefited gross margin comparisons to 2009 by over 4%. In 2010, the Specialty Foods segment’s gross margin percentages improved as a result of lower commodity costs, a stronger retail mix and operating efficiency improvements. Gross margin percentages in the Glassware and Candles segment improved in 2010 due to lower material costs, especially for paraffin wax, and higher sales and production levels.

Selling, General and Administrative Expenses

		Year Ended
		June 30												Change
(Dollars in thousands)		2011				2010				2009				2011 vs. 2010								2010 vs. 2009
Selling, General and Administrative Expenses		$	95,425			$	93,821			$	84,238			$	1,604				2	%		$	9,583				11	%
SG&A Expense as a Percentage of Sales			8.8	%			8.9	%			8.0	%

Selling, general and administrative expenses for 2011 totaled approximately $95.4 million and increased 2% as compared with the 2010 total of $93.8 million, while the 2010 total had increased 11% from the 2009 total of $84.2 million. Higher sales-based expenses, increased compensation expense and greater consumer-directed marketing costs contributed to the overall increase for 2011, although as a percentage of sales the 2011 expenses were comparable to 2010. In 2010, increased costs in consumer-directed marketing initiatives to support retail sales and increased professional fees within the Specialty Foods segment contributed to the overall increase.

Restructuring and Impairment Charges

Specialty Foods Segment

In 2010, we closed our dressings and sauces manufacturing operation located in Wilson, New York. During 2010, we recorded restructuring charges of approximately $2.3 million ($1.5 million after taxes). This closure was essentially complete at December 31, 2009. We do not expect any other costs or cash expenditures related to this closure.

In 2009, we consolidated our Atlanta, Georgia dressing operation into our other existing food facilities. During 2009, we recorded restructuring and impairment charges of approximately $0.8 million ($0.5 million after taxes). This closure was essentially complete at September 30, 2008, and the disposition of the

associated real estate occurred in December 2008. We do not expect any other costs or cash expenditures related to this closure.

Other

In 2007, we closed our industrial glass operation that was located in Lancaster, Ohio. The majority of the total $5.7 million restructuring and impairment charge related to this closure was recorded in 2007, but we did incur approximately $0.8 million ($0.5 million after taxes) during the year ended June 30, 2009. The 2009 charge was recorded in Corporate expenses. We do not currently expect other significant restructuring costs related to this closure.

Operating Income (Loss)

		Year Ended
		June 30												Change
(Dollars in thousands)		2011				2010				2009				2011 vs. 2010								2010 vs. 2009
Operating Income (Loss)
Specialty Foods		$	155,218			$	176,194			$	145,848			$	(20,976	)			(12	)%		$	30,346				21	%
Glassware and Candles			3,764				9,445				(5,671	)			(5,681	)			(60	)%			15,116				267	%
Corporate Expenses			(11,978	)			(11,440	)			(10,529	)			(538	)			5	%			(911	)			9	%
Total		$	147,004			$	174,199			$	129,648			$	(27,195	)			(16	)%		$	44,551				34	%
Operating Income (Loss) as a Percentage of Sales
Specialty Foods			16.8	%			19.7	%			16.0	%
Glassware and Candles			2.3	%			5.8	%			(4.0	)%
Consolidated			13.5	%			16.5	%			12.3	%

Due to the factors discussed above, consolidated operating income for 2011 totaled approximately $147.0 million, a 16% decrease from 2010 operating income of $174.2 million. The 2010 total had increased 34% from 2009 operating income totaling approximately $129.6 million. See further discussion of operating results by segment following the discussion of “Net Income” below.

Interest Expense

We incurred no interest expense in 2011 and 2010 as there were no borrowings outstanding during these years. Interest expense of approximately $1.2 million recorded in 2009 related to long-term borrowings. We had no outstanding borrowings at June 30, 2011 and 2010.

Other Income — Continued Dumping and Subsidy Offset Act

CDSOA provides for the distribution of monies collected by U.S. Customs from antidumping cases to qualifying domestic producers. Our reported CDSOA receipts totaled approximately $14.4 million, $0.9 million and $8.7 million in 2011, 2010 and 2009, respectively. CDSOA remittances have related to certain candles being imported from the People’s Republic of China.

Legislation was enacted in February 2006 to repeal the applicability of CDSOA to duties collected on products imported after September 2007. Accordingly, we may receive some level of annual distributions for an undetermined period of years in the future as the monies collected that relate to entries filed prior to October 2007 are administratively finalized by U.S. Customs. Without further legislative action, we expect these distributions will eventually cease.

In addition to this legislative development, cases have been brought in U.S. courts challenging CDSOA. In two separate cases, the U.S. Court of International Trade (“CIT”) ruled that the procedure for determining recipients eligible to receive CDSOA distributions is unconstitutional. The U.S. Court of Appeals for the Federal Circuit reversed both CIT decisions and the U.S. Supreme Court did not hear either case. This effectively ended the constitutional challenges brought in these cases, but other cases challenging CDSOA remain active.

We are unable to determine, at this time, what the ultimate outcome of other litigation will be, and it is possible that further legal action, potential additional changes in the law and other factors could affect the amount of funds available for distribution, including funds relating to entries prior to October 2007. Accordingly, we cannot predict the amount of future distributions we may receive. Any change in CDSOA distributions could affect our earnings and cash flow.

Interest Income and Other — Net

Interest income and other was income of approximately $0.1 million, income of less than $0.1 million and expense of approximately $0.1 million in 2011, 2010 and 2009, respectively.

Income Before Income Taxes

As affected by the factors discussed above, our income before income taxes for 2011 of approximately $161.5 million decreased 8% from the 2010 total of $175.1 million. The 2009 total income before income taxes was approximately $137.0 million. Our effective tax rate was 34.1%, 34.4% and 35.0% in 2011, 2010 and 2009, respectively. The 2011 rate was primarily impacted by the domestic manufacturing deduction, for which there was a rate increase in the current year. As compared to 2009, the lower rate in 2010 reflected, in part, a favorable resolution of certain previously-reserved state and local tax matters in 2010, as further discussed in Note 5 to the consolidated financial statements.

Net Income

Net income for 2011 of approximately $106.4 million decreased from 2010 net income of $115.0 million. Net income was approximately $89.1 million in 2009. Diluted net income per share totaled approximately $3.84 in 2011, a 6% decrease from the prior-year total of $4.07. The latter amount was 28% higher than 2009 diluted earnings per share of $3.17. Income per share in each of the last three years has been beneficially affected by share repurchases, which have totaled approximately $64.4 million over the three-year period ended June 30, 2011.

SEGMENT REVIEW — SPECIALTY FOODS

During 2011, net sales of the Specialty Foods segment set a new record level, surpassing the previous record set in 2009, while operating income of approximately $155.2 million decreased 12% from the 2010 level of $176.2 million. Increasing material and freight costs, as well as a less favorable sales mix, contributed to the lower level of operating income. Net sales during 2011 totaled approximately $922.9 million, an increase from the prior-year total of $893.3 million. Sales for 2010 decreased 2% from the 2009 total of approximately $909.9 million. The percentage of retail customer sales within the segment was approximately 52% during 2011, as compared to 53% in 2010 and 51% in 2009.

In 2011, net sales of the Specialty Foods segment increased by approximately 3%. Contribution from higher pricing was approximately 1% of net sales. The segment’s foodservice net sales rose approximately 9% on increased volumes, particularly from new programs with existing large chain restaurants, and higher pricing. Retail net sales declined approximately 1% as influenced by the prior year rationalization of some product lines associated with the mid-year 2010 closing of one of our dressing facilities. Also, sales of produce dips declined, reflecting a weaker category and the loss of placement for certain products at one of our customers. Mitigating these declines were higher retail sales of frozen rolls and the success of several recently-introduced products. The decline in net sales of the Specialty Foods segment in 2010 reflected generally flat volumes and lower pricing to customers in foodservice channels. Higher sales to retail channel customers were more than offset by lower foodservice sales. Foodservice sales declined by approximately 7% for the year ended June 30, 2010, with contributing factors including weaker chain restaurant demand and downward pricing adjustments in certain of our customer supply arrangements that occurred as a result of lower key ingredient costs. Net sales to retail channel customers increased 3% in 2010 on volume growth from several product lines, as partially offset by the exiting of less profitable dressing lines with the closing of our Wilson, New York operation.

Operating income of the Specialty Foods segment in 2011 totaled approximately $155.2 million, a 12% decrease from the 2010 record level of $176.2 million. The 2010 level was 21% higher than the 2009 level of $145.8 million. The 2011 decrease reflected broadly higher ingredient and freight costs, a less favorable sales mix and increased marketing costs. We estimate that higher material costs adversely affected the segment’s

comparative results by approximately 3% of net sales. The 2010 increase reflected lower commodity costs, a stronger retail sales mix and operating efficiency improvements. We estimate that the favorable year-over-year impact of commodity costs approximated 5% of 2010 net sales.

SEGMENT REVIEW — GLASSWARE AND CANDLES

Glassware and Candles segment net sales totaled approximately $167.1 million during 2011, as compared to $163.4 million in 2010 and $141.6 million in 2009. The 2011 increase reflected higher candle sales volumes, mainly product placement into new accounts that began in the fourth quarter of 2010. In 2010, the increase in net sales reflected higher unit volume on improved consumer demand for high-quality, value-priced candles and the introduction, expanded product placement and the success of various new products.

The segment recorded operating income of approximately $3.8 million in 2011 and $9.4 million in 2010 compared to an operating loss of $5.7 million during 2009. Despite the benefits of achieving higher sales volumes in 2011, operating results were adversely affected by higher wax costs and, to a lesser extent, lower production volumes. We estimate that higher wax costs in the Glassware and Candles segment adversely affected the segment’s comparative results in 2011 by approximately 5% of net sales. Operating results of the Glassware and Candles segment improved in 2010 due to lower material costs, especially for paraffin wax, and higher sales and production levels. We estimate the favorable year-over-year impact of wax costs for the year ended June 30, 2010 approximated 4% of the segment’s net sales.

CORPORATE EXPENSES

The 2011 corporate expenses totaled approximately $12.0 million as compared to $11.4 million in 2010 and $10.5 million in 2009. The higher level of corporate expenses for 2011 and 2010 related to costs associated with our idle real estate holdings while the increase in expenses in 2011 from 2010 related to increased professional fees and personnel related costs.

FINANCIAL CONDITION

Liquidity and Capital Resources

In order to ensure that our capitalization is adequate to support our future internal growth prospects, acquire food businesses consistent with our strategic goals, and maintain cash returns to our shareholders through cash dividends and share repurchases, we will need to maintain sufficient flexibility in our future capital structure. Our balance sheet retained fundamental financial strength during 2011, and we ended the year with approximately $132.3 million in cash and equivalents, along with shareholders’ equity of nearly $518 million and no debt.

Under our unsecured revolving credit facility, we may borrow up to a maximum of $160 million at any one time. Loans may be used for general corporate purposes. We had no borrowings outstanding under this facility at June 30, 2011. The facility expires in October 2012, and all outstanding amounts are then due and payable. At June 30, 2011, we had approximately $6.6 million of standby letters of credit outstanding, which reduced the amount available for borrowing on the unsecured revolving credit facility.

The facility contains certain restrictive covenants, including limitations on indebtedness, asset sales and acquisitions, and financial covenants relating to interest coverage and leverage. At June 30, 2011, we were in compliance with all applicable provisions and covenants of the facility, and we met the requirements of the financial covenants by substantial margins.

We currently expect to remain in compliance with the facility’s covenants for the foreseeable future. A default under the facility could accelerate the repayment of any outstanding indebtedness and limit our access to additional credit available under the facility. Such an event could require 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. At June 30, 2011, we were not aware of any event that would constitute a default under the facility.

We believe that internally generated funds and our existing aggregate balances in cash and equivalents, in addition to our currently available bank credit arrangements, should be adequate to meet our foreseeable cash requirements. If we were to borrow outside of our credit facility under current market terms, our average interest rate may increase significantly and have an adverse effect on our results of operations.

For additional information regarding our credit facility, see Note 4 to the consolidated financial statements.

Cash Flows

		Year Ended
		June 30												Change
(Dollars in thousands)		2011				2010				2009				2011 vs. 2010								2010 vs. 2009
Provided by Operating Activities		$	147,454			$	107,691			$	133,164			$	39,763				37	%		$	(25,473	)			(19	)%
Used in Investing Activities		$	(35,758	)		$	(14,100	)		$	(10,974	)		$	(21,658	)			(154	)%		$	(3,126	)			(28	)%
Used in Financing Activities		$	(80,320	)		$	(31,185	)		$	(103,123	)		$	(49,135	)			(158	)%		$	71,938				70	%

Our cash flows for the years 2009 through 2011 are presented in the Consolidated Statements of Cash Flows. Cash flow generated from operations remains the primary source of financing for our internal growth. Cash provided by operating activities in 2011 totaled approximately $147.5 million, an increase of 37% as compared with the prior-year total of $107.7 million, which decreased from the 2009 total of $133.2 million. The 2011 increase in cash provided by operating activities reflected favorable changes in working capital, especially within accounts receivable, inventory and other current assets, as partially offset by the decrease in net income. The 2010 decrease resulted from comparatively unfavorable changes in working capital components, especially inventory, prepaid Federal income taxes and receivables, as partially offset by a higher level of net income and comparatively favorable changes in accounts payable and accrued liabilities. Most notably, consolidated inventories increased approximately $19 million during 2010 primarily as a result of anticipating larger seasonal sales of candles and frozen breads in 2011. Conversely, despite broadly higher material costs, such inventories declined approximately $10 million in 2011 due to a reduced need for building seasonal inventories.

Cash used in investing activities totaled approximately $35.8 million in 2011, $14.1 million in 2010 and $11.0 million for 2009. The 2011 increase in cash used in investing activities reflected a higher level of capital expenditures in 2011 due to the expansion of our frozen yeast roll facility in Kentucky. The 2010 increase in cash used in investing activities reflected lower proceeds from the sale of property and an increase in capital expenditures in 2010. Capital expenditures totaled approximately $35.3 million in 2011, compared to $12.8 million in 2010 and $11.3 million in 2009. Capital spending allocations during 2011 by segment approximated 97% for Specialty Foods and 3% for Glassware and Candles. Based on our current plans and expectations, we believe that our total capital expenditures for 2012 will be approximately $25 million.

Financing activities used net cash totaling approximately $80.3 million, $31.2 million and $103.1 million in 2011, 2010 and 2009, respectively. The 2011 increase in cash used in financing activities reflected a higher level of share repurchases, lower proceeds from the exercise of stock awards and a lower cash overdraft balance. The 2010 decrease in cash used in financing activities was due primarily to a decrease in treasury share repurchases, the net change in borrowing activity and an increase in the cash overdraft balance. The total payment for cash dividends for the year ended June 30, 2011 was approximately $35.7 million. The dividend payout rate for 2011 was $1.29 per share as compared to $1.185 per share during 2010, and $1.135 per share in 2009. This past fiscal year marked the 48th consecutive year in which our dividend rate was increased. Cash utilized for share repurchases totaled approximately $43.1 million, $4.4 million and $16.9 million in 2011, 2010 and 2009, respectively. Our Board approved a share repurchase authorization of 2,000,000 shares in November 2010. Approximately 1,618,000 shares from this authorization remained authorized for future purchase at June 30, 2011.

The future levels of share repurchases and declared dividends are subject to the periodic review of our Board and are generally determined after an assessment is made of such factors as anticipated earnings levels, cash flow requirements and general business conditions.

Our ongoing business activities continue to be subject to compliance with various laws, rules and regulations as may be issued and enforced by various Federal, state and local agencies. With respect to

environmental matters, costs are incurred pertaining to regulatory compliance and, upon occasion, remediation. Such costs have not been, and are not anticipated to become, material.

We are contingently liable with respect to lawsuits, taxes and various other matters that routinely arise in the normal course of business. Except as discussed above, we do not have any related party transactions that materially affect our results of operations, cash flow or financial condition.

OFF-BALANCE SHEET ARRANGEMENTS, CONTRACTUAL OBLIGATIONS AND COMMITMENTS

We do not have off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “Variable Interest Entities,” that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital expenditures.

We have various contractual obligations that are appropriately recorded as liabilities in our consolidated financial statements. Certain other items, such as purchase obligations, are not recognized as liabilities in our consolidated financial statements. Examples of items not recognized as liabilities in our consolidated financial statements are commitments to purchase raw materials or inventory that has not yet been received as of June 30, 2011 and future minimum lease payments for the use of property and equipment under operating lease agreements.

The following table summarizes our contractual obligations as of June 30, 2011 (dollars in thousands):

		Payment Due by Period
						Less than												More than
Contractual Obligations		Total				1 Year				1-3 Years				3-5 Years				5 Years
Operating Lease Obligations (1)		$	11,211			$	3,680			$	5,482			$	2,049			$	—
Purchase Obligations (2)			91,750				90,451				1,299				—				—
Other Noncurrent Liabilities (as reflected on Consolidated Balance Sheet) (3)			2,227				—				2,227				—				—
Total		$	105,188			$	94,131			$	9,008			$	2,049			$	—

IMPACT OF INFLATION

In recent years, we have been exposed to significant fluctuations in certain manufacturing input costs, including materials such as food commodities and paraffin wax. In 2011, we experienced comparatively higher ingredient costs (including for soybean oil, dairy products, sugar, eggs and paraffin wax). We estimate that higher material costs adversely affected our results by approximately 3% of net sales. We also experienced higher distribution costs, which were, in part, influenced by higher diesel costs. For 2010, our overall manufacturing costs reflected favorable improvement over prior years, with the year-over-year contribution derived from lower materials costs approximating 5% of net sales. These lower costs occurred primarily in the first half of 2010, with our cost comparisons becoming progressively less favorable as the year progressed. As noted above, some of this benefit was offset by contractual adjustments existing within certain foodservice pricing arrangements. Entering 2012, we expect higher material and freight costs to persist.

Over the course of 2011 and 2009, we were generally able to adjust various selling prices of food products to offset the effects of increased raw-material costs. However, these adjustments generally lagged the increase in our costs, having a net negative impact on our 2011 operating margins and a net positive impact in 2009. Our 2012 operating results will also be impacted by our ability to offset any higher input costs through pricing adjustments with our customers. We do expect to realize higher pricing in 2012, but we believe that the related income may ultimately be less than the total increase from higher material and freight costs.

We also attempt to minimize the exposure to increased costs through our ongoing efforts to achieve greater manufacturing and distribution efficiencies through the improvement of work processes.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

This MD&A discusses our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates and judgments, including, but not limited to, those related to accounts receivable, inventories, marketing and distribution costs, asset impairments and self-insurance reserves. We base our estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Historically, the aggregate differences, if any, between our estimates and actual amounts in any year have typically not had a significant impact on our consolidated financial statements. While a summary of our significant accounting policies can be found in Note 1 to the consolidated financial statements, we believe the following critical accounting policies, among others, affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition

We recognize revenue upon transfer of title and risk of loss, provided that evidence of an arrangement exists, pricing is fixed or determinable, and collectability is probable. Net sales are recorded net of estimated sales discounts, returns and certain sales incentives, including coupons and rebates.

Receivables and the Allowance for Doubtful Accounts

We provide an allowance for doubtful accounts based on the aging of accounts receivable balances, historical write-off experience and on-going reviews of our trade receivables. Measurement of potential losses requires credit review of existing customer relationships, consideration of historical loss experience, including the need to adjust for current conditions, and judgments about the probable effects of relevant observable data, including present economic conditions such as delinquency rates and the economic health of customers. In addition to credit concerns, we also evaluate the adequacy of our allowances for customer deductions considering several factors including historical losses and existing customer relationships.

Valuation of Inventory

When necessary, we provide allowances to adjust the carrying value of our inventory to the lower of cost or net realizable value, including any costs to sell or dispose. The determination of whether inventory items are slow moving, obsolete or in excess of needs requires estimates about the future demand for our products. The estimates as to future demand used in the valuation of inventory are subject to the ongoing success of our products and may differ from actual due to such factors as changes in customer and consumer demand. A decrease in product demand due to changing customer tastes, consumer buying patterns or loss of shelf space to competitors could significantly impact our evaluation of our excess and obsolete inventories.

Long-Lived Assets

We monitor the recoverability of the carrying value of our long-lived assets by periodically considering whether indicators of impairment are present. If such indicators are present, we determine if the assets are

recoverable by comparing the sum of the undiscounted future cash flows to the assets’ carrying amount. Our cash flows are based on historical results adjusted to reflect our best estimate of future market and operating conditions. If the carrying amounts are greater, then the assets are not recoverable. In that instance, we compare the carrying amounts to the fair value to determine the amount of the impairment to be recorded.

Goodwill and Intangible Assets

Goodwill is not amortized. It is evaluated annually at April 30, through asset impairment testing, as appropriate. Intangible assets with lives restricted by contractual, legal, or other means are amortized over their useful lives. We periodically evaluate the future economic benefit of the recorded goodwill and intangible assets when events or circumstances indicate potential recoverability concerns. Carrying amounts are adjusted appropriately when determined to have been impaired.

Accrued Marketing and Distribution

Various marketing programs are offered to customers to reimburse them for a portion or all of their promotional activities related to our products. Additionally, we often incur various costs associated with shipping products to the customer. We provide accruals for the costs of marketing and distribution based on historical information as may be modified by estimates of actual costs incurred. Actual costs may differ significantly if factors such as the level and success of the customers’ programs, changes in customer utilization practices, or other conditions differ from expectations.

Accruals for Self-Insurance

Self-insurance accruals are made for certain claims associated with employee health care, workers’ compensation and general liability insurance. These accruals include estimates that may be based on historical loss development factors. Differences in estimates and assumptions could result in an accrual requirement materially different from the calculated accrual.

Accounting for Pension Plans and Other Postretirement Benefit Plans

To determine our ultimate obligation under our defined benefit pension plans and our other postretirement benefit plans, we must estimate the future cost of benefits and attribute that cost to the time period during which each covered employee works. To record the related net assets and obligation of such benefit plans, we use assumptions related to inflation, investment returns, mortality, employee turnover, medical costs and discount rates. To determine the discount rate, we, along with our third-party actuaries, considered several factors, including the June 30, 2011 rates of various bond indices, such as the Moody’s Aa long-term bond index, yield curve analysis results from our actuaries based on expected cash flows of our plans, and the past history of discount rates used for the plan valuation. We, along with our third-party actuaries, review all of these assumptions on an ongoing basis to ensure that the most reasonable information available is being considered. Changes in assumptions and future investment returns could potentially have a material impact on pension expense and related funding requirements. We recognize the overfunded or underfunded status of our defined benefit plans as an asset or liability in our Consolidated Balance Sheet. Any changes in that funded status caused by subsequent plan revaluations are recognized through comprehensive income. We may also experience future plan settlements or curtailments having unanticipated effects on operating results.

RECENTLY ISSUED ACCOUNTING STANDARDS

In June 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-05, “Comprehensive Income: Presentation of Comprehensive Income” (“ASU 11-05”). This ASU amends current comprehensive income guidance to eliminate the option to present the components of other comprehensive income as part of the statement of shareholders equity. Instead, it requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. ASU 11-05 will be effective for public companies during the interim and annual periods beginning after December 15, 2011, with early adoption permitted. We do not expect the adoption of this update to have a material impact on our financial position or results of operations.

RECENTLY ADOPTED ACCOUNTING STANDARDS

Effective July 1, 2009, we adopted the provisions of a FASB FSP on the FASB’s EITF Issue No. 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities,” which is now part of Accounting Standards Codification (“ASC”) Topic 260, “Earnings Per Share.” This FSP addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting, and therefore need to be included in the earnings allocation in computing earnings per share (“EPS”) under the two-class method. The restricted stock we previously granted to employees was deemed to meet the definition of a participating security as the employees receive nonforfeitable dividends before the stock becomes vested. Our adoption of this FSP required that we retrospectively restate EPS and diluted weighted average common shares outstanding for all periods presented. This resulted in a $.01 reduction in basic and diluted net income per common share for 2009. See further discussion in Note 1 to the consolidated financial statements.

In 2010, we adopted FSP No. FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets” (“FSP FAS 132(R)-1”), which is now part of ASC Topic 715, “Compensation-Retirement Benefits.” FSP FAS 132(R)-1 provides guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. This FSP expands the disclosure for retirement benefits by adding required disclosures about (1) how investment allocation decisions are made by management, (2) major categories of plan assets, and (3) significant concentration of risk. Additionally, the FSP requires an employer to disclose information about the valuation of plan assets similar to that required for fair value measurements. See further discussion in Note 7 to the 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 Annual Report on Form 10-K contains various “forward-looking statements” within the meaning of the PSLRA and other applicable securities laws. Such statements can be identified by the use of the forward-looking words “anticipate,” “estimate,” “project,” “believe,” “intend,” “plan,” “expect,” “hope” or similar words. These statements discuss future expectations; contain projections regarding future developments, operations or financial conditions; or state other forward-looking information. Such statements are based upon assumptions and assessments made by us in light of our experience and perception of historical trends, current conditions, expected future developments and other factors we believe to be appropriate. These forward-looking statements involve various important risks, uncertainties and other factors that could cause our actual results to differ materially from those expressed in the forward-looking statements. Actual results may differ as a result of factors over which we have no, or limited, control including, without limitation, the specific influences outlined below. Management believes these forward-looking statements to be reasonable; however, you 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:

	•		the potential for loss of larger programs or key customer relationships;
	•		the effect of consolidation of customers within key market channels;
	•		the continued solvency of key customers;
	•		the success and cost of new product development efforts;
	•		the lack of market acceptance of new products;
	•		the reaction of customers or consumers to the effect of price increases we may implement;

•

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

	•		changes in market trends;
	•		the extent to which future business acquisitions are completed and acceptably integrated;
	•		the possible occurrence of product recalls or other defective or mislabeled product costs;

	•		efficiencies in plant operations, including the ability to optimize overhead utilization in candle operations;
	•		the overall strength of the economy;
	•		changes in financial markets;
	•		slower than anticipated sales growth;
	•		the extent of operational efficiencies achieved;
	•		price and product competition;
	•		the uncertainty regarding the effect or outcome of any decision to explore further strategic alternatives among our nonfood operations;
	•		fluctuations in the cost and availability of raw materials;
	•		adverse changes in energy costs and other factors that may affect costs of producing, distributing or transporting our products;
	•		the impact of fluctuations in our pension plan asset values on funding levels, contributions required and benefit costs;
	•		maintenance of competitive position with respect to other manufacturers, including import sources of production;
	•		dependence on key personnel;
	•		stability of labor relations;
	•		dependence on contract copackers and limited or exclusive sources for certain goods;
	•		effect of governmental regulations, including environmental matters;
	•		legislation and litigation affecting the future administration of the Continued Dumping and Subsidy Offset Act of 2000;
	•		access to any required financing;
	•		changes in income tax laws;
	•		unknown costs relating to the holding or disposition of idle real estate;
	•		changes in estimates in critical accounting judgments;
	•		the outcome of any litigation or arbitration; and
	•		innumerable other factors.

Item 7A.		Quantitative and Qualitative Disclosures About Market Risk

We have exposure to market risks primarily from changes in interest rates and ingredient prices. We have not had exposure to market risk associated with derivative financial instruments or derivative commodity instruments.

INTEREST RATE RISK

We are subject to interest rate risk primarily associated with our borrowings. Interest rate risk is the risk that changes in interest rates could adversely affect earnings and cash flows. Rates under our credit facility are set at the time of each borrowing and are based on predetermined formulas connected to certain benchmark rates. Increases in these rates could have an adverse impact on our earnings and cash flows. At the end of 2011, we had no borrowings outstanding under our credit facility. The nature and amount of our borrowings may vary as a result of business requirements, acquisitions, market conditions and other factors.

COMMODITY PRICE RISK

We purchase a variety of commodities and other materials, such as soybean oil, flour, wax and packaging materials, which we use to manufacture our products. The market prices for these commodities are subject to fluctuation based upon a number of economic factors and may become volatile at times. While we do not use any derivative commodity instruments to hedge against commodity price risk, we do actively

manage a portion of the risk through a structured purchasing program for certain future requirements. This program gives us more predictable input costs, which may help stabilize our margins during periods of volatility in commodity markets.

Item 8.		Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
Lancaster Colony Corporation:

We have audited the accompanying consolidated balance sheets of Lancaster Colony Corporation and subsidiaries (the “Company”) as of June 30, 2011 and 2010, and the related consolidated statements of income, cash flows, and shareholders’ equity for each of the three years in the period ended June 30, 2011. Our audits also included the financial statement schedule listed in the table of contents at Item 15. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as, evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company and subsidiaries as of June 30, 2011 and 2010, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2011, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of June 30, 2011, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August 29, 2011 expressed an unqualified opinion on the Company’s internal control over financial reporting.

/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Columbus, Ohio
August 29, 2011

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

		June 30
(Amounts in thousands, except share data)		2011				2010
ASSETS
Current Assets:
Cash and equivalents		$	132,266			$	100,890
Receivables (less allowance for doubtful accounts, 2011—$570; 2010—$516)			63,762				67,766
Inventories:
Raw materials			36,785				36,812
Finished goods and work in process			75,100				84,697
Total inventories			111,885				121,509
Deferred income taxes and other current assets			25,283				27,234
Total current assets			333,196				317,399
Property, Plant and Equipment:
Land, buildings and improvements			141,175				129,747
Machinery and equipment			263,449				242,024
Total cost			404,624				371,771
Less accumulated depreciation			219,342				205,674
Property, plant and equipment—net			185,282				166,097
Other Assets:
Goodwill			89,840				89,840
Other intangible assets—net			8,350				9,514
Other noncurrent assets			5,421				3,603
Total		$	622,089			$	586,453
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable		$	42,570			$	41,904
Accrued liabilities			33,586				36,049
Total current liabilities			76,156				77,953
Other Noncurrent Liabilities			13,646				19,138
Deferred Income Taxes			14,748				4,454
Shareholders’ Equity:
Preferred stock—authorized 3,050,000 shares; outstanding—none
Common stock—authorized 75,000,000 shares; outstanding, 2011—27,385,781 shares; 2010—28,167,549 shares			97,197				94,885
Retained earnings			1,150,683				1,080,015
Accumulated other comprehensive loss			(7,043	)			(9,797	)
Common stock in treasury, at cost			(723,298	)			(680,195	)
Total shareholders’ equity			517,539				484,908
Total		$	622,089			$	586,453

See accompanying notes to consolidated financial statements.

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

		Years Ended June 30
(Amounts in thousands, except per share data)		2011				2010				2009
Net Sales		$	1,089,946			$	1,056,608			$	1,051,491
Cost of Sales			847,517				786,276				835,999
Gross Margin			242,429				270,332				215,492
Selling, General and Administrative Expenses			95,425				93,821				84,238
Restructuring and Impairment Charges			—				2,312				1,606
Operating Income			147,004				174,199				129,648
Other (Expense) Income:
Interest expense			—				—				(1,217	)
Other income—Continued Dumping and Subsidy Offset Act			14,388				893				8,696
Interest income and other—net			114				46				(121	)
Income Before Income Taxes			161,506				175,138				137,006
Taxes Based on Income			55,142				60,169				47,920
Net Income		$	106,364			$	114,969			$	89,086
Net Income Per Common Share:
Basic		$	3.84			$	4.08			$	3.17
Diluted		$	3.84			$	4.07			$	3.17
Weighted Average Common Shares Outstanding:
Basic			27,664				28,144				28,033
Diluted			27,689				28,174				28,044

See accompanying notes to consolidated financial statements.

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

		Years Ended June 30
(Amounts in thousands)		2011				2010				2009
Cash Flows From Operating Activities:
Net income		$	106,364			$	114,969			$	89,086
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			18,940				20,533				21,870
Deferred income taxes and other noncash changes			10,977				3,415				3,767
Restructuring and impairment charges			—				677				(1,221	)
Loss (gain) on sale of property			14				(40	)			(861	)
Pension plan activity			(1,326	)			(289	)			(2,316	)
Changes in operating assets and liabilities:
Receivables			3,615				(7,421	)			(2,287	)
Inventories			9,624				(19,166	)			17,780
Other current assets			317				(6,755	)			13,868
Accounts payable and accrued liabilities			(1,071	)			1,768				(6,522	)
Net cash provided by operating activities			147,454				107,691				133,164
Cash Flows From Investing Activities:
Payments on property additions			(35,343	)			(12,833	)			(11,336	)
Proceeds from sale of property			19				69				2,000
Other—net			(434	)			(1,336	)			(1,638	)
Net cash used in investing activities			(35,758	)			(14,100	)			(10,974	)
Cash Flows From Financing Activities:
Proceeds from debt			—				—				25,000
Payments on debt			—				—				(80,000	)
Purchase of treasury stock			(43,103	)			(4,398	)			(16,894	)
Payment of dividends			(35,696	)			(33,430	)			(31,854	)
Proceeds from the exercise of stock awards, including tax benefits			479				4,643				5,407
(Decrease) increase in cash overdraft balance			(2,000	)			2,000				(4,782	)
Net cash used in financing activities			(80,320	)			(31,185	)			(103,123	)
Net change in cash and equivalents			31,376				62,406				19,067
Cash and equivalents at beginning of year			100,890				38,484				19,417
Cash and equivalents at end of year		$	132,266			$	100,890			$	38,484

See accompanying notes to consolidated financial statements.

LANCASTER COLONY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

														Accumulated
		Common Stock												Other								Total
(Amounts in thousands,		Outstanding								Retained				Comprehensive				Treasury				Shareholders’
except per share data)		Shares				Amount				Earnings				Loss				Stock				Equity
Balance, June 30, 2008			28,452			$	82,652			$	941,244			$	(5,775	)		$	(658,903	)		$	359,218
Net income											89,086												89,086
Net pension and postretirement benefit losses, net of $1,897 tax effect															(3,310	)							(3,310	)
Comprehensive Income																							85,776
Cash dividends — common stock ($1.135 per share)											(31,854	)											(31,854	)
Purchase of treasury stock			(496	)															(16,894	)			(16,894	)
Stock-based plans			146				5,347																5,347
Stock-based compensation expense							963																963
Balance, June 30, 2009			28,102				88,962				998,476				(9,085	)			(675,797	)			402,556
Net income											114,969												114,969
Net pension and postretirement benefit losses, net of $430 tax effect															(712	)							(712	)
Comprehensive Income																							114,257
Cash dividends — common stock ($1.185 per share)											(33,430	)											(33,430	)
Purchase of treasury stock			(80	)															(4,398	)			(4,398	)
Stock-based plans			146				4,274																4,274
Stock-based compensation expense							1,649																1,649
Balance, June 30, 2010			28,168				94,885				1,080,015				(9,797	)			(680,195	)			484,908
Net income											106,364												106,364
Net pension and postretirement benefit gains, net of $1,776 tax effect															2,754								2,754
Comprehensive Income																							109,118
Cash dividends — common stock ($1.29 per share)											(35,696	)											(35,696	)
Purchase of treasury stock			(810	)															(43,103	)			(43,103	)
Stock-based plans			28				(4	)															(4	)
Stock-based compensation expense							2,316																2,316
Balance, June 30, 2011			27,386			$	97,197			$	1,150,683			$	(7,043	)		$	(723,298	)		$	517,539