##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D. C. 20549
 Form 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended June 30, 2007
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from            to
 Commission file number 000-04065
 Lancaster Colony Corporation
 (Exact name of registrant as specified in its charter)
 Ohio
    
    13-1955943(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)37 West Broad Street
    
    43215Columbus, Ohio
    
    (Zip Code)(Address of principal executive offices)
 614-224-7141  (Registrants telephone number, including area code)
 Securities registered pursuant to Section 12(b) of the Act:
 Title of each class
    
    Name of each exchange on which registeredCommon Stock, Without Par Value
    
    The NASDAQ Stock Market LLC(including Series A Participating
    
    (NASDAQ Global Select Market)Preferred Share Purchase Rights)
 Securities registered pursuant to Section 12(g) of the Act:
None
 þ o
 o þ
 þ o
 þ
  þ o o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



LANCASTER COLONY CORPORATION AND SUBSIDIARIES
 TABLE OF CONTENTS
 PART IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Submission of Matters to a Vote of Security HoldersPART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity SecuritiesItem 6. Selected Financial DataItem 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements With Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPART IIIItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related Transactions, and Director IndependenceItem 14. Principal Accounting Fees and ServicesPART IVItem 15. Exhibits, Financial Statement SchedulesSignaturesIndex to ExhibitsEX-10.10EX-21EX-23EX-31.1EX-31.2EX-32
  2




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PART I
 
 Item 1. Business
 GENERAL
   Available Information
  DESCRIPTION OF AND FINANCIAL INFORMATION ABOUT BUSINESS SEGMENTS
  
 Specialty Foods
 BRAND BRAND
  3




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Glassware and Candles
      4




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Automotive
     NET SALES BY CLASS OF PRODUCTS
  2007
    
    2006
    
    2005Specialty Foods:Retail
    
    
    34
    %
    
    
    35
    %
    
    
    33
    %Foodservice
    
    
    32
    %
    
    
    31
    %
    
    
    32
    %Glassware and Candles:Consumer Table and Giftware
    
    
    16
    %
    
    
    16
    %
    
    
    18
    %Automotive:Original Equipment Manufacturers
    
    
    11
    %
    
    
    11
    %
    
    
    7
    %
 5




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RESEARCH AND DEVELOPMENT
  BACKLOG
  ENVIRONMENTAL MATTERS
  EMPLOYEES AND LABOR RELATIONS
  FOREIGN OPERATIONS AND EXPORT SALES
  RAW MATERIALS
   
 Item 1A. Risk Factors
  6




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Competitive conditions within our markets could impact our sales volumes and operating margins.
   Wal-Mart is our largest customer, and the loss of its business could cause our sales and net
income to decrease.
  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.
   A disruption of production at certain of our manufacturing facilities could result in an
inability to provide adequate levels of customer service.
  7




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We may be subject to product recalls or product liability claims for misbranded, adulterated,
contaminated or spoiled food products or defective consumer products.
     Increases in energy-related costs could negatively affect our business by increasing our costs to
produce goods.
  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 inability to bring production online and efficiently operate our new frozen yeast roll
manufacturing facility could have a material adverse effect on our business and results of
operations.
  8




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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.
   There is no certainty regarding the amount of future CDSOA distributions.
  Impairment charges could have a material adverse effect on our financial results.
  We may not be able to successfully consummate proposed acquisitions or divestitures or integrate
acquired businesses.
  9




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A future increase in our indebtedness could adversely affect our profitability and operational
flexibility.
  We are subject to federal, state and local government regulations that could adversely affect our
business and results of operations.
   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.
  
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
  10




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Approximate
    
    Terms ofLocation
    
    Business Segment
    
    Square Feet
    
    OccupancyAltoona, IA (3)
    
    Specialty Foods
    
    
    109,000
    
    
    Owned/LeasedBedford Heights, OH (3)
    
    Specialty Foods
    
    
    91,000
    
    
    Owned/LeasedColumbus, OH (3)
    
    Specialty Foods
    
    
    392,000
    
    
    Owned/LeasedGrove City, OH
    
    Specialty Foods
    
    
    195,000
    
    
    OwnedHorse Cave, KY
    
    Specialty Foods
    
    
    225,000
    
    
    OwnedLuverne, AL
    
    Specialty Foods
    
    
    91,000
    
    
    OwnedMilpitas, CA (4)
    
    Specialty Foods
    
    
    130,000
    
    
    Owned/LeasedWilson, NY
    
    Specialty Foods
    
    
    80,000
    
    
    OwnedDunkirk, IN
    
    Glassware and Candles
    
    
    622,000
    
    
    OwnedLeesburg, OH (1)
    
    Glassware and Candles
    
    
    875,000
    
    
    Owned/LeasedSapulpa, OK (3)
    
    Glassware and Candles
    
    
    680,000
    
    
    Owned/LeasedJackson, OH
    
    Glassware and Candles
    
    
    122,000
    
    
    OwnedDes Moines, IA (2)(4)
    
    Automotive
    
    
    698,000
    
    
    Owned/Leased
 
 (1)
    
    Part leased on a monthly basis(2)
    
    Part leased for term expiring in calendar year 2007(3)
    
    Part leased for term expiring in calendar year 2009(4)
    
    Part leased for term expiring in calendar year 2010  
 Item 3. Legal Proceedings
  Real
Estate Matters
  11




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Item 4. Submission of Matters to a Vote of Security Holders
  
 PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
  DividendsStock Prices
    
    
    PaidHigh
    
    
    Low
    
    
    Per Share2007First quarter
    
    $
    46.00
    
    
    $
    37.28
    
    
    $
    .26Second quarter
    
    
    47.38
    
    
    
    39.31
    
    
    
    .27Third quarter
    
    
    45.96
    
    
    
    39.99
    
    
    
    .27Fourth quarter
    
    
    45.09
    
    
    
    41.23
    
    
    
    .27Year
    
    
    
    
    
    
    
    
    
    $
    1.072006First quarter
    
    $
    46.24
    
    
    $
    41.93
    
    
    $
    .25Second quarter
    
    
    44.16
    
    
    
    36.35
    
    
    
    2.26
    (1)Third quarter
    
    
    42.20
    
    
    
    37.10
    
    
    
    .26Fourth quarter
    
    
    42.30
    
    
    
    37.37
    
    
    
    .26Year
    
    
    
    
    
    
    
    
    
    $
    3.03
 
 (1)
    
    Includes special cash dividend of $2.00 per common share. This dividend was approved by our
Board of Directors (Board) on November 21, 2005 and was paid on December 30, 2005 to
shareholders of record on December 9, 2005.   Issuer Purchases of Equity Securities
  Total NumberTotal
    
    Average
    
    of Shares
    
    Maximum NumberNumber
    
    Price
    
    Purchased as
    
    of Shares That Mayof Shares
    
    Paid Per
    
    Part of Publicly
    
    Yet be PurchasedPeriod
    
    Purchased
    
    Share
    
    Announced Plans
    
    Under the PlansApril 1-30, 2007
    
    
    15,013
    
    
    $
    44.329
    
    
    
    15,013
    
    
    
    1,890,225May 1-31, 2007
    
    
    240,250
    
    
    $
    43.394
    
    
    
    240,250
    
    
    
    1,649,975June 1-30, 2007
    
    
    305,238
    
    
    $
    42.186
    
    
    
    305,238
    
    
    
    1,344,737Total
    
    
    560,501
    
    
    $
    42.761
    
    
    
    560,501
    
    
    
    1,344,737
  12




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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
  
 Cumulative Total Return (Dollars)
 6/02
    
    
    6/03
    
    
    6/04
    
    
    6/05
    
    
    6/06
    
    
    6/07Lancaster Colony Corporation
    
    
    
    100.00
    
    
    
    
    110.68
    
    
    
    
    121.69
    
    
    
    
    128.40
    
    
    
    
    127.27
    
    
    
    
    138.49S&P Midcap 400
    
    
    
    100.00
    
    
    
    
    99.29
    
    
    
    
    127.07
    
    
    
    
    144.90
    
    
    
    
    163.71
    
    
    
    
    194.01Dow Jones U.S. Food Producers
    
    
    
    100.00
    
    
    
    
    97.83
    
    
    
    
    118.05
    
    
    
    
    124.06
    
    
    
    
    134.93
    
    
    
    
    158.04
  13




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Item 6. Selected Financial Data
 LANCASTER COLONY CORPORATION AND SUBSIDIARIES
 FIVE YEAR FINANCIAL SUMMARY
 Years Ended June 30(Thousands Except Per Share Figures)
    
    2007
    
    2006
    
    2005
    
    2004
    
    2003OperationsNet Sales(1)
    
    $
    1,091,162
    
    
    $
    1,073,585
    
    
    $
    1,028,328
    
    
    $
    977,740
    
    
    $
    979,488Gross Margin(1)
    
    $
    193,560
    
    
    $
    205,461
    
    
    $
    204,591
    
    
    $
    205,471
    
    
    $
    225,681Percent of Sales
    
    
    17.7
    %
    
    
    19.1
    %
    
    
    19.9
    %
    
    
    21.0
    %
    
    
    23.0
    %Interest Expense
    
    $
    (150
    )
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Percent of Sales
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Other Income  Continued Dumping
and Subsidy Offset Act
    
    $
    699
    
    
    $
    11,376
    
    
    $
    26,226
    
    
    $
    1,987
    
    
    $
    39,177Income from Continuing OperationsBefore Income Taxes(1)
    
    $
    102,003
    
    
    $
    130,674
    
    
    $
    144,219
    
    
    $
    122,380
    
    
    $
    173,440Percent of Sales
    
    
    9.3
    %
    
    
    12.2
    %
    
    
    14.0
    %
    
    
    12.5
    %
    
    
    17.7
    %Taxes Based on Income(1)
    
    $
    37,322
    
    
    $
    46,253
    
    
    $
    53,445
    
    
    $
    46,045
    
    
    $
    64,867Income from Continuing Operations(1)
    
    $
    64,681
    
    
    $
    84,421
    
    
    $
    90,774
    
    
    $
    76,335
    
    
    $
    108,573Percent of Sales
    
    
    5.9
    %
    
    
    7.9
    %
    
    
    8.8
    %
    
    
    7.8
    %
    
    
    11.1
    %(Loss) Income from Discontinued
Operations, Net of Tax
    
    $
    (3,877
    )
    
    $
    (1,467
    )
    
    $
    2,314
    
    
    $
    3,667
    
    
    $
    3,973Loss on Sale of Discontinued Operations,
Net of Tax
    
    $
    (15,120
    )
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Net Income
    
    $
    45,684
    
    
    $
    82,954
    
    
    $
    93,088
    
    
    $
    80,002
    
    
    $
    112,546Percent of Sales
    
    
    4.2
    %
    
    
    7.7
    %
    
    
    9.1
    %
    
    
    8.2
    %
    
    
    11.5
    %Diluted Income (Loss) per Common Share:Continuing Operations(1)
    
    $
    2.05
    
    
    $
    2.52
    
    
    $
    2.60
    
    
    $
    2.13
    
    
    $
    3.00Discontinued Operations
    
    $
    (.60
    )
    
    $
    (.04
    )
    
    $
    .07
    
    
    $
    .10
    
    
    $
    .11Net Income
    
    $
    1.45
    
    
    $
    2.48
    
    
    $
    2.67
    
    
    $
    2.24
    
    
    $
    3.11Cash Dividends per Common Share
    
    $
    1.07
    
    
    $
    3.03
    
    
    $
    0.98
    
    
    $
    0.89
    
    
    $
    0.78Financial PositionCash, Equivalents and
Short-Term Investments
    
    $
    8,318
    
    
    $
    41,815
    
    
    $
    184,580
    
    
    $
    178,503
    
    
    $
    142,847Total Assets
    
    $
    598,497
    
    
    $
    628,021
    
    
    $
    731,278
    
    
    $
    712,885
    
    
    $
    667,716Working Capital
    
    $
    137,121
    
    
    $
    235,283
    
    
    $
    370,559
    
    
    $
    358,274
    
    
    $
    329,462Property, Plant and Equipment-Net(1)
    
    $
    208,431
    
    
    $
    178,351
    
    
    $
    144,387
    
    
    $
    146,890
    
    
    $
    145,228Long-Term Debt
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Property Additions(1)
    
    $
    55,823
    
    
    $
    60,068
    
    
    $
    22,103
    
    
    $
    16,546
    
    
    $
    27,568Depreciation and Amortization(1)
    
    $
    28,766
    
    
    $
    29,656
    
    
    $
    30,118
    
    
    $
    27,082
    
    
    $
    26,844Shareholders Equity
    
    $
    444,309
    
    
    $
    494,421
    
    
    $
    587,726
    
    
    $
    586,785
    
    
    $
    547,665Per Common Share
    
    $
    14.45
    
    
    $
    15.33
    
    
    $
    17.17
    
    
    $
    16.54
    
    
    $
    15.31Weighted Average Common Shares
OutstandingDiluted
    
    
    31,603
    
    
    
    33,502
    
    
    
    34,925
    
    
    
    35,778
    
    
    
    36,243
 
 (1)
    
    Amounts exclude the impact of certain discontinued automotive operations sold in the
fiscal year ended June 30, 2007. 14




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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 in the periods ended June 30, 2007, 2006 and 2005 and our liquidity
and capital resources as of June 30, 2007 and 2006. 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, 2007
refers to fiscal 2007, which is the period from July 1, 2006 to June 30, 2007. 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 have made, which 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 report.
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
     
    
    leveraging the strength of our retail brands to increase current product sales and
introduce new products;
    
    continuing to grow our foodservice business through the strength of our reputation in
product development and quality; and
    
    pursuing acquisitions that meet our strategic criteria.
 15




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
    
    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;
    
    demonstrated experience in integrating complementary business acquisitions; and
    
    historically strong cash flow generation that supports growth opportunities.
     Summary of 2007 Results
   16




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Business Divestitures/Closure
   Looking Forward
  17




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REVIEW OF CONSOLIDATED OPERATIONS
 Segment Sales Mix
  2007
    
    2006
    
    2005Segment Sales Mix:(1)Specialty Foods
    
    
    67
    %
    
    
    66
    %
    
    
    66
    %Glassware and Candles
    
    
    20
    %
    
    
    20
    %
    
    
    23
    %Automotive
    
    
    13
    %
    
    
    14
    %
    
    
    12
    %
 
 (1)
    
    Expressed as a percentage of consolidated net sales; may not add to 100% due to rounding. Net Sales and Gross Margin
    
    
    
    
    
    Year EndedJune 30
    
    
    
    
    
    
    Change(Dollars in thousands)
    
    2007
    
    
    2006
    
    
    2005
    
    
    2007 vs. 2006
    
    
    2006 vs. 2005Net SalesSpecialty Foods
    
    $
    728,657
    
    
    $
    708,029
    
    
    $
    673,840
    
    
    $
    20,628
    
    
    
    3
    %
    
    $
    34,189
    
    
    
    5
    %Glassware and Candles
    
    
    217,153
    
    
    
    216,542
    
    
    
    233,505
    
    
    
    611
    
    
    
    0
    %
    
    
    (16,963
    )
    
    
    (7
    )%Automotive
    
    
    145,352
    
    
    
    149,014
    
    
    
    120,983
    
    
    
    (3,662
    )
    
    
    (2
    )%
    
    
    28,031
    
    
    
    23
    %Total
    
    $
    1,091,162
    
    
    $
    1,073,585
    
    
    $
    1,028,328
    
    
    $
    17,577
    
    
    
    2
    %
    
    $
    45,257
    
    
    
    4
    %Gross Margin
    
    $
    193,560
    
    
    $
    205,461
    
    
    $
    204,591
    
    
    $
    (11,901
    )
    
    
    (6
    )%
    
    $
    870
    
    
    
    0
    %Gross Margin as a
Percent of Sales
    
    
    17.7
    %
    
    
    19.1
    %
    
    
    19.9
    %
   18




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Selling, General and Administrative Expenses
 Year EndedJune 30
    
    
    
    
    
    
    Change(Dollars in thousands)
    
    2007
    
    
    2006
    
    
    2005
    
    
    2007 vs. 2006
    
    
    2006 vs. 2005Selling, General and
Administrative Expenses
    
    $
    90,979
    
    
    $
    90,053
    
    
    $
    89,484
    
    
    $
    926
    
    
    
    1
    %
    
    $
    569
    
    
    
    1
    %SG&A Expense as a
Percent of Sales
    
    
    8.3
    %
    
    
    8.4
    %
    
    
    8.7
    %
  Restructuring and Impairment Charge
    Accrual at
    
    
    
    
    
    
    2007
    
    
    Accrual atJune 30,
    
    
    2007
    
    
    Cash
    
    
    June 30,2006
    
    
    Charge
    
    
    Outlays
    
    
    2007Restructuring and Impairment ChargeEmployee Separation Costs
    
    $
    
    
    
    $
    467
    
    
    $
    (201
    )
    
    $
    266Other Costs
    
    
    
    
    
    
    275
    
    
    
    (56
    )
    
    
    219Subtotal
    
    $
    
    
    
    
    742
    
    
    $
    (257
    )
    
    $
    485Pension Curtailment Charges
    
    
    
    
    
    
    287Accelerated Depreciation
    
    
    
    
    
    
    1,130Inventory Write-Down
    
    
    
    
    
    
    1,400Total Restructuring and Impairment Charge
    
    
    
    
    
    $
    3,559
   19




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Operating Income
 Year EndedJune 30
    
    
    
    
    
    
    Change(Dollars in thousands)
    
    2007
    
    
    2006
    
    
    2005
    
    
    2007 vs. 2006
    
    
    2006 vs. 2005Operating IncomeSpecialty Foods
    
    $
    101,518
    
    
    $
    113,796
    
    
    $
    111,392
    
    
    $
    (12,278
    )
    
    
    (11
    )%
    
    $
    2,404
    
    
    
    2
    %Glassware and Candles
    
    
    5,712
    
    
    
    3,614
    
    
    
    7,247
    
    
    
    2,098
    
    
    
    58
    %
    
    
    (3,633
    )
    
    
    (50
    )%Automotive
    
    
    545
    
    
    
    4,926
    
    
    
    2,341
    
    
    
    (4,381
    )
    
    
    (89
    )%
    
    
    2,585
    
    
    
    110
    %Corporate Expenses
    
    
    (7,320
    )
    
    
    (6,928
    )
    
    
    (6,808
    )
    
    
    (392
    )
    
    
    6
    %
    
    
    (120
    )
    
    
    2
    %Total
    
    $
    100,455
    
    
    $
    115,408
    
    
    $
    114,172
    
    
    $
    (14,953
    )
    
    
    (13
    )%
    
    $
    1,236
    
    
    
    1
    %Operating Income as
a Percent of SalesSpecialty Foods
    
    
    13.9
    %
    
    
    16.1
    %
    
    
    16.5
    %Glassware and Candles
    
    
    2.6
    %
    
    
    1.7
    %
    
    
    3.1
    %Automotive
    
    
    0.4
    %
    
    
    3.3
    %
    
    
    1.9
    %Consolidated
    
    
    9.2
    %
    
    
    10.7
    %
    
    
    11.1
    %
  Interest Expense
  Other Income  Continued Dumping and Subsidy Offset Act
  20




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##### Table of Contents



Interest Income and Other  Net
  Income from Continuing Operations Before Income Taxes
  Income from Continuing Operations
  Discontinued Operations
  Net Income
  SEGMENT REVIEW  SPECIALTY FOODS
   21




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##### Table of Contents



SEGMENT REVIEW  GLASSWARE AND CANDLES
    SEGMENT REVIEW  AUTOMOTIVE
  22




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
   Cash Flows from Continuing Operations
 Year EndedJune 30
    
    
    
    
    
    
    
    
    
    Change(Dollars in thousands)
    
    2007
    
    2006
    
    2005
    
    2007 vs. 2006
    
    2006 vs. 2005Provided by Operating Activities
    
    $
    89,133
    
    
    $
    98,996
    
    
    $
    107,008
    
    
    $
    (9,863
    )
    
    
    (10
    )%
    
    $
    (8,012
    )
    
    
    (7
    )%Used in Investing Activities
    
    
    (33,121
    )
    
    
    (23,261
    )
    
    
    (33,641
    )
    
    
    (9,860
    )
    
    
    (42
    )%
    
    
    10,380
    
    
    
    31
    %Used in Financing Activities
    
    
    (58,871
    )
    
    
    (178,849
    )
    
    
    (82,467
    )
    
    
    119,978
    
    
    
    67
    %
    
    
    (96,382
    )
    
    
    (117
    )%
  23




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##### Table of Contents



24




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##### Table of Contents



OFF-BALANCE SHEET ARRANGEMENTS, CONTRACTUAL OBLIGATIONS AND COMMITMENTS
    Payment Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    More thanContractual Obligations
    
    Total
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 YearsOperating Lease Obligations (1)
    
    $
    18,137
    
    
    $
    5,598
    
    
    $
    9,019
    
    
    $
    2,824
    
    
    $
    696Purchase Obligations (2)
    
    
    68,407
    
    
    
    63,876
    
    
    
    3,257
    
    
    
    1,241
    
    
    
    33Minimum Required Pension Contributions
    
    
    48
    
    
    
    38
    
    
    
    10
    
    
    
    
    
    
    
    Other Long-Term Liabilities (as reflected
on Consolidated Balance Sheet) (3)
    
    
    1,465
    
    
    
    60
    
    
    
    1,284
    
    
    
    121
    
    
    
    Total
    
    $
    88,057
    
    
    $
    69,572
    
    
    $
    13,570
    
    
    $
    4,186
    
    
    $
    729
 
 (1)
    
    Operating leases are primarily entered into for warehouse and office facilities and certain
equipment. See Note 15 to the consolidated financial statements for further information.(2)
    
    Purchase obligations represent purchase orders and longer-term purchase arrangements related
to the procurement of ingredients, supplies, raw materials, and property, plant and equipment.(3)
    
    This amount does not include approximately $8.8 million of other noncurrent liabilities
recorded on the balance sheet, which consist of the underfunded pension liability, other post
employment benefit obligations, and deferred compensation and interest on deferred
compensation. These items are excluded, as it is not certain when these liabilities will
become due. See Notes 12, 13 and 14 to the consolidated financial statements for further
information. IMPACT OF INFLATION
   25




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##### Table of Contents



CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  Revenue Recognition
  Receivables and the Allowance for Doubtful Accounts
  Valuation of Inventory
  Long-Lived Assets
  Goodwill and Intangible Assets
  26




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##### Table of Contents



Accrued Marketing and Distribution
  Accruals for Self-Insurance
  Accounting for Pension Plans and Other Postretirement Benefit Plans
  RECENTLY ISSUED ACCOUNTING STANDARDS
   27




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##### Table of Contents



RECENTLY ADOPTED ACCOUNTING STANDARDS
   Forward-Looking Statements
   
    
    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;
 28




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##### Table of Contents




    
    changes in market trends;
    
    the extent to which future business acquisitions are completed and acceptably integrated;
    
    the possible occurrence of product recalls;
    
    efficiencies in plant operations, including the ability to optimize overhead
utilization in 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;
    
    maintenance of competitive position with respect to other manufacturers, including
import sources of production;
    
    dependence on key personnel;
    
    stability of labor relations;
    
    fluctuations in energy costs;
    
    dependence on contract copackers;
    
    effect of governmental regulations, including environmental matters;
    
    legislation and litigation affecting the future administration of CDSOA;
    
    access to any required financing;
    
    changes in income tax laws;
    
    start-up of our new food production facility in Kentucky in 2008;
    
    the uncertainty regarding the effect or outcome of our decision to explore strategic
alternatives among our nonfood operations;
    
    changes in estimates in critical accounting judgments; and
    
    innumerable other factors.
 
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 8. Financial Statements and Supplementary Data
 29




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    Employers Accounting for Defined Benefit Pension and Other Postretirement Plans
 Internal Control  Integrated
Framework
 /s/ Deloitte & Touche LLP

     Deloitte & Touche LLP
 
 30




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##### Table of Contents



LANCASTER COLONY CORPORATION AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS
 June 30(Amounts in thousands, except share data)
    
    2007
    
    
    2006ASSETSCurrent Assets:Cash and equivalents
    
    $
    8,318
    
    
    $
    6,050Short-term investments
    
    
    
    
    
    
    35,765Receivables (less allowance for doubtful accounts,
2007$916; 2006$867)
    
    
    92,635
    
    
    
    91,525Inventories:Raw materials
    
    
    40,358
    
    
    
    36,214Finished goods and work in process
    
    
    109,359
    
    
    
    112,525Total inventories
    
    
    149,717
    
    
    
    148,739Deferred income taxes and other current assets
    
    
    28,241
    
    
    
    24,937Current assets of discontinued operations
    
    
    
    
    
    
    31,767Total current assets
    
    
    278,911
    
    
    
    338,783Property, Plant and Equipment:Land, buildings and improvements
    
    
    162,276
    
    
    
    129,755Machinery and equipment
    
    
    350,357
    
    
    
    338,739Total cost
    
    
    512,633
    
    
    
    468,494Less accumulated depreciation
    
    
    304,202
    
    
    
    290,143Property, plant and equipmentnet
    
    
    208,431
    
    
    
    178,351Other Assets:Goodwill
    
    
    89,590
    
    
    
    79,219Other intangible assetsnet
    
    
    13,111
    
    
    
    4,416Other noncurrent assets
    
    
    8,454
    
    
    
    17,879Noncurrent assets of discontinued operations
    
    
    
    
    
    
    9,373Total
    
    $
    598,497
    
    
    $
    628,021LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Short-term bank loans
    
    $
    42,500
    
    
    $
    Accounts payable
    
    
    48,423
    
    
    
    43,193Accrued liabilities
    
    
    50,867
    
    
    
    52,791Current liabilities of discontinued operations
    
    
    
    
    
    
    7,516Total current liabilities
    
    
    141,790
    
    
    
    103,500Other Noncurrent Liabilities
    
    
    10,702
    
    
    
    21,734Deferred Income Taxes
    
    
    1,696
    
    
    
    8,366Shareholders Equity:Preferred stockauthorized 3,050,000 shares;
outstandingnoneCommon stockauthorized 75,000,000 shares;
outstanding, 200730,748,390; 200632,245,735
    
    
    81,665
    
    
    
    78,017Retained earnings
    
    
    937,376
    
    
    
    925,388Accumulated other comprehensive loss
    
    
    (5,167
    )
    
    
    (5,277
    )Common stock in treasury, at cost
    
    
    (569,565
    )
    
    
    (503,707
    )Total shareholders equity
    
    
    444,309
    
    
    
    494,421Total
    
    $
    598,497
    
    
    $
    628,021
  31




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##### Table of Contents



LANCASTER COLONY CORPORATION AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF INCOME
 Years Ended June 30(Amounts in thousands, except per share data)
    
    2007
    
    
    2006
    
    
    2005Net Sales
    
    $
    1,091,162
    
    
    $
    1,073,585
    
    
    $
    1,028,328Cost of Sales
    
    
    897,602
    
    
    
    868,124
    
    
    
    823,737Gross Margin
    
    
    193,560
    
    
    
    205,461
    
    
    
    204,591Selling, General and Administrative Expenses
    
    
    90,979
    
    
    
    90,053
    
    
    
    89,484Restructuring and Impairment Charge
    
    
    2,126
    
    
    
    
    
    
    
    935Operating Income
    
    
    100,455
    
    
    
    115,408
    
    
    
    114,172Other Income (Expense):Interest expense
    
    
    (150
    )
    
    
    
    
    
    
    Other incomeContinued Dumping and Subsidy
Offset Act
    
    
    699
    
    
    
    11,376
    
    
    
    26,226Interest income and othernet
    
    
    999
    
    
    
    3,890
    
    
    
    3,821Income from Continuing Operations
Before Income Taxes
    
    
    102,003
    
    
    
    130,674
    
    
    
    144,219Taxes Based on Income
    
    
    37,322
    
    
    
    46,253
    
    
    
    53,445Income from Continuing Operations
    
    
    64,681
    
    
    
    84,421
    
    
    
    90,774Discontinued Operations, Net of Tax:(Loss) Income from Discontinued Operations
    
    
    (3,877
    )
    
    
    (1,467
    )
    
    
    2,314Loss on Sale of Discontinued Operations
    
    
    (15,120
    )
    
    
    
    
    
    
    Total Discontinued Operations
    
    
    (18,997
    )
    
    
    (1,467
    )
    
    
    2,314Net Income
    
    $
    45,684
    
    
    $
    82,954
    
    
    $
    93,088Income Per Common Share from
Continuing Operations:Basic and Diluted
    
    $
    2.05
    
    
    $
    2.52
    
    
    $
    2.60(Loss) Income Per Common Share from
Discontinued Operations:Basic and Diluted
    
    $
    (.60
    )
    
    $
    (.04
    )
    
    $
    .07Net Income Per Common Share:Basic and Diluted
    
    $
    1.45
    
    
    $
    2.48
    
    
    $
    2.67Weighted Average Common Shares Outstanding:Basic
    
    
    31,576
    
    
    
    33,471
    
    
    
    34,868Diluted
    
    
    31,603
    
    
    
    33,502
    
    
    
    34,925
  32




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##### Table of Contents



LANCASTER COLONY CORPORATION AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Years Ended June 30(Amounts in thousands)
    
    2007
    
    
    2006
    
    
    2005Cash Flows From Operating Activities:Net income
    
    $
    45,684
    
    
    $
    82,954
    
    
    $
    93,088Adjustments to reconcile net income
to net cash provided by operating activities:Loss (income) from discontinued operations
    
    
    18,997
    
    
    
    1,467
    
    
    
    (2,314
    )Depreciation and amortization
    
    
    28,766
    
    
    
    29,656
    
    
    
    30,118Deferred income taxes and other noncash charges
    
    
    (4,207
    )
    
    
    (1,114
    )
    
    
    884Restructuring and impairment charge
    
    
    3,302
    
    
    
    
    
    
    
    930Gain on sale of property
    
    
    (64
    )
    
    
    (1,147
    )
    
    
    (30
    )(Gain) loss on sale of business
    
    
    (8
    )
    
    
    178
    
    
    
    Pension plan activity
    
    
    (485
    )
    
    
    (2,853
    )
    
    
    (999
    )Changes in operating assets and liabilities:Receivables
    
    
    (500
    )
    
    
    (6,661
    )
    
    
    (9,363
    )Inventories
    
    
    (1,345
    )
    
    
    1,340
    
    
    
    (10,921
    )Other current assets
    
    
    (3,751
    )
    
    
    (1,064
    )
    
    
    321Accounts payable and accrued liabilities
    
    
    2,744
    
    
    
    (3,760
    )
    
    
    5,294Net cash provided by operating activities
from continuing operations
    
    
    89,133
    
    
    
    98,996
    
    
    
    107,008Cash Flows From Investing Activities:Cash paid for acquisitions
    
    
    (23,000
    )
    
    
    
    
    
    
    (492
    )Payments on property additions
    
    
    (55,823
    )
    
    
    (60,068
    )
    
    
    (22,103
    )Proceeds from sale of discontinued operations
    
    
    12,143
    
    
    
    
    
    
    
    Proceeds from sale of property
    
    
    199
    
    
    
    1,619
    
    
    
    658Proceeds from sale of business
    
    
    8
    
    
    
    466
    
    
    
    Purchases of short-term investments
    
    
    (5,000
    )
    
    
    (31,350
    )
    
    
    (52,695
    )Proceeds from short-term investment sales,
calls and maturities
    
    
    40,765
    
    
    
    66,900
    
    
    
    46,650Othernet
    
    
    (2,413
    )
    
    
    (828
    )
    
    
    (5,659
    )Net cash used in investing activities
from continuing operations
    
    
    (33,121
    )
    
    
    (23,261
    )
    
    
    (33,641
    )Cash Flows From Financing Activities:Net change in short-term borrowings
    
    
    42,500
    
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    (65,858
    )
    
    
    (84,343
    )
    
    
    (56,721
    )Payment of dividends
    
    
    (33,696
    )
    
    
    (101,760
    )
    
    
    (34,055
    )Proceeds from the exercise of stock options
    
    
    3,515
    
    
    
    3,835
    
    
    
    3,785(Decrease) increase in cash overdraft balance
    
    
    (5,332
    )
    
    
    3,419
    
    
    
    4,524Net cash used in financing activities
from continuing operations
    
    
    (58,871
    )
    
    
    (178,849
    )
    
    
    (82,467
    )Cash Flows From Discontinued Operations:Net cash provided by (used in) operating activities
from discontinued operations
    
    
    5,025
    
    
    
    (1,982
    )
    
    
    9,670Net cash provided by (used in) investing activities
from discontinued operations
    
    
    114
    
    
    
    (2,133
    )
    
    
    (521
    )Net cash provided by (used in)
discontinued operations
    
    
    5,139
    
    
    
    (4,115
    )
    
    
    9,149Effect of exchange rate changes on cash
    
    
    (12
    )
    
    
    14
    
    
    
    (17
    )Net change in cash and equivalents
    
    
    2,268
    
    
    
    (107,215
    )
    
    
    32Cash and equivalents at beginning of year
    
    
    6,050
    
    
    
    113,265
    
    
    
    113,233Cash and equivalents at end of year
    
    $
    8,318
    
    
    $
    6,050
    
    
    $
    113,265
  33




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##### Table of Contents



LANCASTER COLONY CORPORATION AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
 AccumulatedCommon Stock
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    Total(Amounts in thousands,
    
    Outstanding
    
    
    Retained
    
    
    Comprehensive
    
    
    Treasury
    
    
    Shareholdersexcept per share data)
    
    Shares
    
    
    Amount
    
    
    Earnings
    
    
    Loss
    
    
    Stock
    
    
    EquityBalance, June 30, 2004
    
    
    35,472
    
    
    $
    69,809
    
    
    $
    885,161
    
    
    $
    (5,542
    )
    
    $
    (362,643
    )
    
    $
    586,785Net income
    
    
    
    
    
    
    
    
    
    
    93,088
    
    
    
    
    
    
    
    
    
    
    
    93,088Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17
    )
    
    
    
    
    
    
    (17
    )Minimum pension liability,
net of $2,812 tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,346
    )
    
    
    
    
    
    
    (5,346
    )Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    87,725Cash dividends common
stock ($0.98 per share)
    
    
    
    
    
    
    
    
    
    
    (34,055
    )
    
    
    
    
    
    
    
    
    
    
    (34,055
    )Purchase of treasury stock
    
    
    (1,348
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (56,721
    )
    
    
    (56,721
    )Shares issued upon exercise
of stock options including
related tax benefits
    
    
    112
    
    
    
    3,992
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,992Balance, June 30, 2005
    
    
    34,236
    
    
    
    73,801
    
    
    
    944,194
    
    
    
    (10,905
    )
    
    
    (419,364
    )
    
    
    587,726Net income
    
    
    
    
    
    
    
    
    
    
    82,954
    
    
    
    
    
    
    
    
    
    
    
    82,954Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    
    
    
    
    14Minimum pension liability,
net of $3,125 tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,614
    
    
    
    
    
    
    
    5,614Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88,582Cash dividends common
stock ($3.03 per share)
    
    
    
    
    
    
    
    
    
    
    (101,760
    )
    
    
    
    
    
    
    
    
    
    
    (101,760
    )Purchase of treasury stock
    
    
    (2,092
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (84,343
    )
    
    
    (84,343
    )Shares issued upon exercise
of stock options including
related tax benefits
    
    
    102
    
    
    
    3,829
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,829Stock compensation expense
    
    
    
    
    
    
    387
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    387Balance, June 30, 2006
    
    
    32,246
    
    
    
    78,017
    
    
    
    925,388
    
    
    
    (5,277
    )
    
    
    (503,707
    )
    
    
    494,421Net income
    
    
    
    
    
    
    
    
    
    
    45,684
    
    
    
    
    
    
    
    
    
    
    
    45,684Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12
    )
    
    
    
    
    
    
    (12
    )Minimum pension liability,
net of $1,427 tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,578
    
    
    
    
    
    
    
    2,578Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48,250Cash dividends  common
stock ($1.07 per share)
    
    
    
    
    
    
    
    
    
    
    (33,696
    )
    
    
    
    
    
    
    
    
    
    
    (33,696
    )Purchase of treasury stock
    
    
    (1,589
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (65,858
    )
    
    
    (65,858
    )Shares issued upon exercise
of stock options including
related tax benefits
    
    
    88
    
    
    
    3,515
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,515Stock compensation expense
    
    
    
    
    
    
    42
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42Adjustment to initially apply
SFAS 158, net of
$1,502 tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,456
    )
    
    
    
    
    
    
    (2,456
    )Restricted stock issued
    
    
    3Restricted stock compensation
expense
    
    
    
    
    
    
    91
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    91Balance, June 30, 2007
    
    
    30,748
    
    
    $
    81,665
    
    
    $
    937,376
    
    
    $
    (5,167
    )
    
    $
    (569,565
    )
    
    $
    444,309
  34




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##### Table of Contents



LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except share and per share data)
 Note 1  Summary of Significant Accounting Policies
 Principles of Consolidation
  Use of Estimates
  Cash and Equivalents
  Short-Term Investments
  Receivables and the Allowance for Doubtful Accounts
  Credit Risk
  35




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##### Table of Contents



LANCASTER
COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Tabular amounts in thousands, except share and per share data)
  Property, Plant and Equipment
  Long-Lived Assets
  Goodwill and Intangible Assets
  Revenue Recognition
  Advertising Expense
  Shipping and Handling
  Stock-Based Employee Compensation Plans
  36




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##### Table of Contents



LANCASTER
COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Tabular amounts in thousands, except share and per share data)
    Net income
    
    As reported
    
    $
    93,088Pro forma
    
    $
    90,984Net Income per Share:Basic and Diluted
    
    As reported
    
    $
    2.67Basic and Diluted
    
    Pro forma
    
    $
    2.61
 Other Income
  Per Share Information
   Comprehensive Income and Accumulated Other Comprehensive Loss
  37




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##### Table of Contents



LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Tabular amounts in thousands, except share and per share data)
  2007
    
    
    2006
    
    
    2005Cumulative translation adjustments
    
    $
    131
    
    
    $
    143
    
    
    $
    129Minimum pension liability
    
    
    
    
    
    
    (5,420
    )
    
    
    (11,034
    )Adoption of SFAS 158
    
    
    (5,298
    )
    
    
    
    
    
    
    $
    (5,167
    )
    
    $
    (5,277
    )
    
    $
    (10,905
    )
  Recently Issued Accounting Standards
     Note 2  Discontinued Operations
  38




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##### Table of Contents



LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Tabular amounts in thousands, except share and per share data)
    June 302006Assets of Discontinued OperationsReceivables
    
    $
    17,462Inventories
    
    
    13,210Other current assets
    
    
    1,095Total current assets of discontinued operations
    
    
    31,767Property, plant and equipment, net
    
    
    8,920Other noncurrent assets
    
    
    453Total noncurrent assets of discontinued operations
    
    
    9,373Total assets of discontinued operations
    
    $
    41,140Current Liabilities of Discontinued OperationsAccounts payable
    
    $
    4,491Accrued liabilities
    
    
    3,025Total current liabilities of discontinued operations
    
    $
    7,516
 Note 3  Acquisitions
   39




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##### Table of Contents



LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Tabular amounts in thousands, except share and per share data)
  Balance Sheet Captions
    
    AllocationInventories
    
    $
    1,033Other Current Assets
    
    
    11Property, Plant and Equipment
    
    
    1,212Goodwill (tax deductible)
    
    
    11,385Other Intangible Assets
    
    
    9,260Current Liabilities
    
    
    (25
    )Total
    
    $
    22,876
   Note 4  Short-Term Investments
   Note 5  Inventories
   Note 6  Goodwill and Other Intangible Assets
  40




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##### Table of Contents



LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Tabular amounts in thousands, except share and per share data)
  2007
    
    
    2006Specialty FoodsTrademarks (40-year life)Gross carrying value
    
    $
    370
    
    
    $
    370Accumulated amortization
    
    
    (149
    )
    
    
    (140
    )Net Carrying Value
    
    $
    221
    
    
    $
    230Customer Relationships (12-15-year life)Gross carrying value
    
    $
    13,020
    
    
    $
    4,100Accumulated amortization
    
    
    (1,233
    )
    
    
    (854
    )Net Carrying Value
    
    $
    11,787
    
    
    $
    3,246Non-compete Agreements (5-8-year life)Gross carrying value
    
    $
    1,540
    
    
    $
    1,200Accumulated amortization
    
    
    (531
    )
    
    
    (375
    )Net Carrying Value
    
    $
    1,009
    
    
    $
    825Glassware and Candles  Customer Lists(12-year life)Gross carrying value
    
    $
    250
    
    
    $
    250Accumulated amortization
    
    
    (156
    )
    
    
    (135
    )Net Carrying Value
    
    $
    94
    
    
    $
    115Total Net Carrying Value
    
    $
    13,111
    
    
    $
    4,416
  Note 7  Short-Term Borrowings
  Note 8  Accrued Liabilities
  2007
    
    
    2006Accrued compensation and employee benefits
    
    $
    27,665
    
    
    $
    25,847Accrued marketing and distribution
    
    
    8,216
    
    
    
    7,310Income and other taxes
    
    
    4,288
    
    
    
    5,422Book cash overdrafts
    
    
    5,386
    
    
    
    10,718Other
    
    
    5,312
    
    
    
    3,494Total accrued liabilities
    
    $
    50,867
    
    
    $
    52,791
 41




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LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Tabular amounts in thousands, except share and per share data)
 Note 9  Income Taxes
  2007
    
    
    2006
    
    
    2005Currently payable:Federal
    
    $
    39,073
    
    
    $
    38,419
    
    
    $
    47,411State and local
    
    
    4,591
    
    
    
    6,532
    
    
    
    6,244Total current provision
    
    
    43,664
    
    
    
    44,951
    
    
    
    53,655Deferred Federal, state and local (benefit) provision
    
    
    (6,342
    )
    
    
    1,302
    
    
    
    (210
    )Total taxes based on income
    
    $
    37,322
    
    
    $
    46,253
    
    
    $
    53,445
  2007
    
    
    2006
    
    
    2005Statutory rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %State and local income taxes
    
    
    2.4
    %
    
    
    2.5
    %
    
    
    2.8
    %ESOP dividend deduction
    
    
    (0.3
    )%
    
    
    (0.8
    )%
    
    
    (0.2
    )%Section 199 deduction
    
    
    (0.7
    )%
    
    
    (0.9
    )%
    
    
    
    %Other
    
    
    0.2
    %
    
    
    (0.4
    )%
    
    
    (0.5
    )%Effective rate
    
    
    36.6
    %
    
    
    35.4
    %
    
    
    37.1
    %
  2007
    
    
    2006Deferred tax assets:Inventories
    
    $
    4,731
    
    
    $
    5,055Employee medical and other benefits
    
    
    10,550
    
    
    
    10,954Receivable and other allowances
    
    
    5,341
    
    
    
    5,487Other accrued liabilities
    
    
    4,311
    
    
    
    3,773Total deferred tax assets
    
    
    24,933
    
    
    
    25,269Total deferred tax liabilitiesproperty and other
    
    
    (8,125
    )
    
    
    (14,672
    )Net deferred tax asset
    
    $
    16,808
    
    
    $
    10,597
    42




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##### Table of Contents



LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Tabular amounts in thousands, except share and per share data)
  Note 10  Shareholders Equity
      Note 11  Stock-Based Compensation
   Stock Options
  43




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LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Tabular amounts in thousands, except share and per share data)
     2007
    
    
    2006
    
    
    2005Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedNumber
    
    
    Average
    
    
    Number
    
    
    Average
    
    
    Number
    
    
    Averageof
    
    
    Exercise
    
    
    of
    
    
    Exercise
    
    
    of
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding stock options
vested and expected to
vest at beginning of period
    
    
    470,982
    
    
    $
    39.92
    
    
    
    590,104
    
    
    $
    38.77
    
    
    
    380,664
    
    
    $
    34.93Exercised
    
    
    (88,290
    )
    
    
    37.63
    
    
    
    (102,272
    )
    
    
    33.81
    
    
    
    (112,160
    )
    
    
    33.74Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    326,550
    
    
    
    41.52Forfeited
    
    
    (21,192
    )
    
    
    40.82
    
    
    
    (16,850
    )
    
    
    36.92
    
    
    
    (4,950
    )
    
    
    38.53Outstanding stock options
vested and expected to
vest at end of period
    
    
    361,500
    
    
    $
    40.42
    
    
    
    470,982
    
    
    $
    39.92
    
    
    
    590,104
    
    
    $
    38.77Exercisable and vested stock
options at end of period
    
    
    353,713
    
    
    $
    40.40
    
    
    
    454,667
    
    
    $
    39.88
    
    
    
    531,255
    
    
    $
    38.59
   Options Outstanding
    
    Options ExercisableWeighted AverageRemainingGrant
    
    Exercise
    
    Number
    
    Contractual
    
    Exercise
    
    Number
    
    Weighted AverageYears
    
    Prices
    
    Outstanding
    
    Life in Years
    
    Price
    
    Exercisable
    
    Exercise Price2003
    
    $
    37.23
    
    
    
    92,500
    
    
    
    .75
    
    
    $
    37.23
    
    
    
    92,500
    
    
    $
    37.232005
    
    $
    41.52
    
    
    
    269,000
    
    
    
    2.67
    
    
    $
    41.52
    
    
    
    261,213
    
    
    $
    41.52
 44




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##### Table of Contents



LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Tabular amounts in thousands, except share and per share data)
  Year EndedJune 30, 2007WeightedNumber
    
    
    Averageof
    
    
    Grant DateShares
    
    
    Fair ValueUnvested stock options at beginning of period
    
    
    16,315
    
    
    $
    7.82Granted
    
    
    
    
    
    
    Vested
    
    
    (8,528
    )
    
    
    7.52Forfeited
    
    
    
    
    
    
    Unvested stock options at end of period
    
    
    7,787
    
    
    $
    8.14
  Restricted Stock
   WeightedNumber
    
    
    Averageof
    
    
    Grant DateShares
    
    
    Fair ValueUnvested restricted stock at beginning of period
    
    
    
    
    
    
    Granted
    
    
    3,500
    
    
    $
    42.70Vested
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Unvested restricted stock at end of period
    
    
    3,500
    
    
    $
    42.70
   Note 12  Pension Benefits
 Defined Benefit Pension Plans
  45




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##### Table of Contents



LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Tabular amounts in thousands, except share and per share data)
  2007
    
    2006Weighted-average assumption as of June 30Discount rate
    
    
    6.35
    %
    
    
    6.45
    %
  2007
    
    2006
    
    2005Discount rate
    
    
    6.45
    %
    
    
    5.25
    %
    
    
    6.25
    %Expected long-term return on plan assets
    
    
    8.00
    %
    
    
    8.00
    %
    
    
    8.00
    %
   Percentage ofNoncash Plan Assetsat June 30Asset Category
    
    2007
    
    
    2006Equity securities
    
    
    73
    %
    
    
    79
    %Fixed income
    
    
    27
    %
    
    
    21
    %Total
    
    
    100
    %
    
    
    100
    %
   2007
    
    
    2006Change in benefit obligationBenefit obligation at beginning of year
    
    $
    40,796
    
    
    $
    48,534Service cost
    
    
    510
    
    
    
    752Interest cost
    
    
    2,499
    
    
    
    2,542Amendments
    
    
    431
    
    
    
    123Actuarial loss (gain)
    
    
    1,116
    
    
    
    (7,041
    )Benefits paid
    
    
    (3,387
    )
    
    
    (4,114
    )Benefit obligation at end of year
    
    $
    41,965
    
    
    $
    40,796Change in plan assetsFair value of plan assets at beginning of year
    
    $
    38,445
    
    
    $
    37,094Actual return on plan assets
    
    
    5,038
    
    
    
    2,612Employer contributions
    
    
    1,439
    
    
    
    2,853Benefits paid
    
    
    (3,387
    )
    
    
    (4,114
    )Fair value of plan assets at end of year
    
    $
    41,535
    
    
    $
    38,445
 46




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##### Table of Contents



LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Tabular amounts in thousands, except share and per share data)
 2007
    
    
    2006Reconciliation of funded statusUnderfunded status
    
    $
    (430
    )
    
    $
    (2,351
    )Unrecognized net actuarial loss
    
    
    
    
    
    
    9,308Unrecognized prior service cost
    
    
    
    
    
    
    2,308Unrecognized net transition asset
    
    
    
    
    
    
    (1
    )Net (accrued) prepaid benefit cost
    
    $
    (430
    )
    
    $
    9,264Amounts recognized in the consolidated balance sheets consist ofPrepaid benefit cost(1)
    
    $
    1,490
    
    
    $
    9,264Accrued benefit liability(2)
    
    
    (1,920
    )
    
    
    (10,584
    )Intangible asset(1)
    
    
    
    
    
    
    2,000Accumulated other comprehensive loss
    
    
    
    
    
    
    8,584Net amount recognized
    
    $
    (430
    )
    
    $
    9,264Accumulated benefit obligation
    
    $
    41,965
    
    
    $
    40,796
 
 (1)
    
    Recorded in other noncurrent assets(2)
    
    Recorded in other noncurrent liabilities  2007
    
    2006Benefit obligations
    
    $
    14,789
    
    
    $
    33,376Fair value of plan assets at end of year
    
    $
    12,869
    
    
    $
    30,613
  Balances Before
    
    
    
    
    
    Balances AfterAdoption of
    
    
    
    
    
    Adoption ofSFAS 158
    
    Adjustments
    
    SFAS 158Other noncurrent assets
    
    $
    15,465
    
    
    $
    (7,011
    )
    
    $
    8,454Other noncurrent liabilities
    
    $
    13,758
    
    
    $
    (3,056
    )
    
    $
    10,702Deferred income tax liabilities
    
    $
    6,432
    
    
    $
    (4,736
    )
    
    $
    1,696Accumulated other comprehensive loss
    
    $
    2,712
    
    
    $
    2,455
    
    
    $
    5,167Total assets
    
    $
    605,508
    
    
    $
    (7,011
    )
    
    $
    598,497Total liabilities
    
    $
    161,980
    
    
    $
    (7,792
    )
    
    $
    154,188Total shareholders equity
    
    $
    446,764
    
    
    $
    (2,455
    )
    
    $
    444,309
  2007Net actuarial loss
    
    $
    7,674Prior service cost
    
    
    861Net transition asset
    
    
    (2
    )Income taxes
    
    
    (3,236
    )Total
    
    $
    5,297
 47




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##### Table of Contents



LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Tabular amounts in thousands, except share and per share data)
  2008Net actuarial loss
    
    $
    171Prior service cost amortization
    
    
    102Net transition obligation
    
    
    3Total
    
    $
    276
  2007
    
    
    2006
    
    
    2005Components of net periodic benefit costService cost
    
    $
    510
    
    
    $
    752
    
    
    $
    554Interest cost
    
    
    2,499
    
    
    
    2,542
    
    
    
    2,531Expected return on plan assets
    
    
    (2,987
    )
    
    
    (2,889
    )
    
    
    (2,775
    )SFAS 88 curtailment/settlement charges
    
    
    2,068
    
    
    
    574
    
    
    
    Amortization of unrecognized net loss
    
    
    276
    
    
    
    694
    
    
    
    410Amortization of prior service cost
    
    
    232
    
    
    
    245
    
    
    
    234Amortization of unrecognized net
obligation existing at transition
    
    
    2
    
    
    
    35
    
    
    
    35Net periodic benefit cost
    
    $
    2,600
    
    
    $
    1,953
    
    
    $
    989
       2008
    
    $
    2,4202009
    
    $
    2,3932010
    
    $
    2,2512011
    
    $
    2,2892012
    
    $
    2,6132013  2017
    
    $
    16,486
 48




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##### Table of Contents



LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Tabular amounts in thousands, except share and per share data)
 Note 13  Postretirement Benefits
 Postretirement Medical and Life Insurance Benefit Plans
   2007
    
    2006Weighted-average assumption as of June 30Discount rate
    
    
    6.35
    %
    
    
    6.45
    %
  2007
    
    2006
    
    2005Discount rate
    
    
    6.45
    %
    
    
    5.25
    %
    
    
    6.25
    %Health care cost trend rate
    
    
    11.00
    %
    
    
    12.00
    %
    
    
    12.00
    %
  2007
    
    
    2006Change in benefit obligationBenefit obligation at beginning of year
    
    $
    6,746
    
    
    $
    6,764Service cost
    
    
    133
    
    
    
    175Interest cost
    
    
    423
    
    
    
    346Actuarial gain
    
    
    (260
    )
    
    
    (252
    )Plan amendments
    
    
    
    
    
    
    (22
    )Effect of curtailment
    
    
    (2,938
    )
    
    
    Benefits paid
    
    
    (300
    )
    
    
    (265
    )Benefit obligation at end of year
    
    $
    3,804
    
    
    $
    6,746Change in plan assetsEmployer contributions
    
    $
    300
    
    
    $
    265Benefits paid
    
    
    (300
    )
    
    
    (265
    )Fair value of plan assets at end of year
    
    $
    
    
    
    $
    Reconciliation of funded statusUnderfunded status
    
    $
    (3,804
    )
    
    $
    (6,746
    )Unrecognized net actuarial loss
    
    
    
    
    
    
    2,717Unrecognized prior service asset
    
    
    
    
    
    
    (86
    )Accrued benefit cost
    
    $
    (3,804
    )
    
    $
    (4,115
    )Amounts recognized in the consolidated balance sheets consist ofCurrent accrued benefit liability
    
    $
    (330
    )
    
    $
    Noncurrent accrued benefit liability
    
    $
    (3,474
    )
    
    $
    (4,115
    )Accumulated benefit obligation
    
    $
    3,804
    
    
    $
    6,746
  49




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##### Table of Contents



LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Tabular amounts in thousands, except share and per share data)
  Balances Before
    
    
    
    
    
    Balances AfterAdoption of
    
    
    
    
    
    Adoption ofSFAS 158
    
    Adjustments
    
    SFAS 158Other noncurrent liabilities
    
    $
    10,698
    
    
    $
    4
    
    
    $
    10,702Deferred income tax liabilities
    
    $
    1,694
    
    
    $
    2
    
    
    $
    1,696Accumulated other comprehensive loss
    
    $
    5,166
    
    
    $
    1
    
    
    $
    5,167Total liabilities
    
    $
    154,182
    
    
    $
    6
    
    
    $
    154,188Total shareholders equity
    
    $
    444,310
    
    
    $
    (1
    )
    
    $
    444,309
  2007Net actuarial loss
    
    $
    53Prior service benefit
    
    
    (50
    )Income taxes
    
    
    (2
    )Total
    
    $
    1
  2008Prior service cost amortization
    
    $
    (5
    )
  2007
    
    
    2006
    
    
    2005Components of net periodic benefit costService cost
    
    $
    133
    
    
    $
    175
    
    
    $
    135Interest cost
    
    
    423
    
    
    
    346
    
    
    
    323Amortization of unrecognized net loss
    
    
    128
    
    
    
    143
    
    
    
    75Amortization of prior service asset
    
    
    (8
    )
    
    
    (6
    )
    
    
    (7
    )SFAS 88 curtailment benefit
    
    
    (691
    )
    
    
    
    
    
    
    Net periodic benefit (benefit) cost
    
    $
    (15
    )
    
    $
    658
    
    
    $
    526
     2008
    
    $
    3302009
    
    $
    2892010
    
    $
    2832011
    
    $
    2782012
    
    $
    2952013  2017
    
    $
    1,493
 50




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LANCASTER COLONY CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Tabular amounts in thousands, except share and per share data)
   1-Percentage-Point
    
    1-Percentage-PointIncrease
    
    DecreaseEffect on total of service and interest cost components
    
    $
    20
    
    
    $
    (17
    )Effect on postretirement benefit obligation as of June 30, 2007
    
    $
    309
    
    
    $
    (269
    )
 Note 14  Defined Contribution and Other Employee Plans
    Note 15  Commitments
   2007
    
    
    2006
    
    
    2005Operating leases:Minimum rentals
    
    $
    5,683
    
    
    $
    5,839
    
    
    $
    5,236Contingent rentals
    
    
    435
    
    
    
    554
    
    
    
    376Short-term cancelable leases
    
    
    1,994
    
    
    
    2,012
    
    
    
    1,909Total
    
    $
    8,112
    
    
    $
    8,405
    
    
    $
    7,521
 Note 16 Contingencies
  51




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LANCASTER COLONY CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Tabular amounts in thousands, except share and per share data)
     Note 17  Restructuring and Impairment Charge
   52




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LANCASTER COLONY CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Tabular amounts in thousands, except share and per share data)
  Accrual at
    
    
    
    
    
    
    2007
    
    
    Accrual atJune 30,
    
    
    2007
    
    
    Cash
    
    
    June 30,2006
    
    
    Charge
    
    
    Outlays
    
    
    2007Restructuring and Impairment ChargeEmployee Separation Costs
    
    $
    
    
    
    $
    467
    
    
    $
    (201
    )
    
    $
    266Other Costs
    
    
    
    
    
    
    275
    
    
    
    (56
    )
    
    
    219Subtotal
    
    $
    
    
    
    
    742
    
    
    $
    (257
    )
    
    $
    485Pension Curtailment Charges
    
    
    
    
    
    
    287Accelerated Depreciation
    
    
    
    
    
    
    1,130Inventory Write-Down
    
    
    
    
    
    
    1,400Total Restructuring and Impairment Charge
    
    
    
    
    
    $
    3,559
   Note 18  Business Segments Information
  Specialty Foods
 Glassware and Candles
 Automotive
 53




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LANCASTER COLONY CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Tabular amounts in thousands, except share and per share data)
  2007
    
    
    2006
    
    
    2005Specialty FoodsRetail
    
    $
    375,987
    
    
    $
    375,255
    
    
    $
    343,658Foodservice
    
    
    352,670
    
    
    
    332,774
    
    
    
    330,182Total Specialty Foods
    
    $
    728,657
    
    
    $
    708,029
    
    
    $
    673,840Glassware and CandlesConsumer Table and Giftware
    
    $
    171,935
    
    
    $
    170,845
    
    
    $
    189,071Nonconsumer Ware and Other
    
    
    45,218
    
    
    
    45,697
    
    
    
    44,434Total Glassware and Candles
    
    $
    217,153
    
    
    $
    216,542
    
    
    $
    233,505AutomotiveOriginal Equipment Manufacturers
    
    $
    114,998
    
    
    $
    116,933
    
    
    $
    76,163Aftermarket
    
    
    30,354
    
    
    
    32,081
    
    
    
    44,820Total Automotive
    
    $
    145,352
    
    
    $
    149,014
    
    
    $
    120,983Total
    
    $
    1,091,162
    
    
    $
    1,073,585
    
    
    $
    1,028,328
   2007
    
    
    2006
    
    
    2005Net Sales(1)Specialty Foods
    
    $
    728,657
    
    
    $
    708,029
    
    
    $
    673,840Glassware and Candles
    
    
    217,153
    
    
    
    216,542
    
    
    
    233,505Automotive
    
    
    145,352
    
    
    
    149,014
    
    
    
    120,983Total
    
    $
    1,091,162
    
    
    $
    1,073,585
    
    
    $
    1,028,328Operating IncomeSpecialty Foods
    
    $
    101,518
    
    
    $
    113,796
    
    
    $
    111,392Glassware and Candles
    
    
    5,712
    
    
    
    3,614
    
    
    
    7,247Automotive
    
    
    545
    
    
    
    4,926
    
    
    
    2,341Corporate Expenses
    
    
    (7,320
    )
    
    
    (6,928
    )
    
    
    (6,808
    )Total
    
    $
    100,455
    
    
    $
    115,408
    
    
    $
    114,172Identifiable Assets(1)Specialty Foods
    
    $
    348,637
    
    
    $
    274,652
    
    
    $
    231,219Glassware and Candles
    
    
    147,232
    
    
    
    171,553
    
    
    
    187,707Automotive
    
    
    67,463
    
    
    
    126,755
    
    
    
    106,461Corporate
    
    
    35,165
    
    
    
    55,061
    
    
    
    205,891Total
    
    $
    598,497
    
    
    $
    628,021
    
    
    $
    731,278
 54




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LANCASTER COLONY CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Tabular amounts in thousands, except share and per share data)
 2007
    
    
    2006
    
    
    2005Capital ExpendituresSpecialty Foods
    
    $
    51,746
    
    
    $
    47,984
    
    
    $
    15,152Glassware and Candles
    
    
    1,786
    
    
    
    3,847
    
    
    
    3,621Automotive
    
    
    2,245
    
    
    
    8,208
    
    
    
    3,211Corporate
    
    
    46
    
    
    
    29
    
    
    
    119Total
    
    $
    55,823
    
    
    $
    60,068
    
    
    $
    22,103Depreciation and AmortizationSpecialty Foods
    
    $
    12,433
    
    
    $
    9,767
    
    
    $
    9,589Glassware and Candles
    
    
    11,333
    
    
    
    14,850
    
    
    
    16,387Automotive
    
    
    4,874
    
    
    
    4,873
    
    
    
    3,983Corporate
    
    
    126
    
    
    
    166
    
    
    
    159Total
    
    $
    28,766
    
    
    $
    29,656
    
    
    $
    30,118
 
 (1)
    
    Net sales and long-lived assets are predominantly domestic.   Note 19  Selected Quarterly Financial Data (Unaudited)
 First
    
    Second
    
    Third
    
    Fourth
    
    FiscalQuarter
    
    Quarter(1)
    
    Quarter(2)
    
    Quarter(3)
    
    Year(4)2007Net Sales
    
    $
    262,064
    
    
    $
    292,332
    
    
    $
    265,692
    
    
    $
    271,074
    
    
    $
    1,091,162Gross Margin
    
    $
    44,649
    
    
    $
    54,927
    
    
    $
    45,701
    
    
    $
    48,283
    
    
    $
    193,560Income from
Continuing Operations
    
    $
    14,490
    
    
    $
    20,360
    
    
    $
    13,595
    
    
    $
    16,236
    
    
    $
    64,681Loss from Discontinued
Operations, Net of Tax
    
    $
    (709
    )
    
    $
    (2,531
    )
    
    $
    (96
    )
    
    $
    (15,661
    )
    
    $
    (18,997
    )Net Income
    
    $
    13,781
    
    
    $
    17,829
    
    
    $
    13,499
    
    
    $
    575
    
    
    $
    45,684Diluted Income (Loss) per Share:Continuing Operations
    
    $
    .45
    
    
    $
    .64
    
    
    $
    .43
    
    
    $
    .52
    
    
    $
    2.05Discontinued Operations
    
    $
    (.02
    )
    
    $
    (.08
    )
    
    $
    
    
    
    $
    (.50
    )
    
    $
    (.60
    )Net Income
    
    $
    .43
    
    
    $
    .56
    
    
    $
    .43
    
    
    $
    .02
    
    
    $
    1.452006Net Sales
    
    $
    262,604
    
    
    $
    289,646
    
    
    $
    257,038
    
    
    $
    264,297
    
    
    $
    1,073,585Gross Margin
    
    $
    50,020
    
    
    $
    58,236
    
    
    $
    40,512
    
    
    $
    56,693
    
    
    $
    205,461Income from
Continuing Operations
    
    $
    17,536
    
    
    $
    30,728
    
    
    $
    12,990
    
    
    $
    23,167
    
    
    $
    84,421Income (Loss) from Discontinued
Operations, Net of Tax
    
    $
    510
    
    
    $
    (498
    )
    
    $
    (1,216
    )
    
    $
    (263
    )
    
    $
    (1,467
    )Net Income
    
    $
    18,046
    
    
    $
    30,230
    
    
    $
    11,774
    
    
    $
    22,904
    
    
    $
    82,954Diluted Income (Loss) per Share:Continuing Operations
    
    $
    .51
    
    
    $
    .91
    
    
    $
    .39
    
    
    $
    .71
    
    
    $
    2.52Discontinued Operations
    
    $
    .01
    
    
    $
    (.01
    )
    
    $
    (.04
    )
    
    $
    (.01
    )
    
    $
    (.04
    )Net Income
    
    $
    .53
    
    
    $
    .89
    
    
    $
    .35
    
    
    $
    .70
    
    
    $
    2.48
 55




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##### Table of Contents



LANCASTER COLONY CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Tabular amounts in thousands, except share and per share data)
 
 (1)
    
    Included in the second quarter earnings is income of approximately $0.4 million, net of
taxes, or approximately $.01 per share, related to funds received under CDSOA.(2)
    
    Included in the third quarter earnings is expense of approximately $1.5 million, net of
taxes, or approximately $.05 per share, related to the planned closing of our industrial glass
operation in Lancaster, Ohio.(3)
    
    Included in the fourth quarter earnings are (A) income of approximately $0.6 million, net of
taxes, or approximately $.02 per share, related to a bad debt recovery and (B) expense of
approximately $0.7 million, net of taxes, or approximately $.02 per share, related to the
planned closing of our industrial glass operation in Lancaster, Ohio.(4)
    
    Basic and diluted earnings per share are calculated independently for each of the quarters
presented. Accordingly, the sum of the quarterly earnings per share amounts may not agree with
the fiscal year.(5)
    
    Included in the second quarter earnings are (A) income of approximately $7.4 million, net of
taxes, or approximately $.22 per share, related to funds received under CDSOA and (B) income
of approximately $0.5 million, net of taxes, or approximately $.02 per share, related to the
sale of idle real estate in the Automotive segment.(6)
    
    Included in the third quarter earnings is income of approximately $0.8 million, net of taxes,
or approximately $.02 per share, related to a bad debt recovery.(7)
    
    Included in the fourth quarter earnings is income of approximately $0.7 million, net of
taxes, or approximately $.02 per share, related to our annual actuarial review of our
self-insured workers compensation. 56




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##### Table of Contents



Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
   REPORT OF MANAGEMENT
  1.
    
    Pertain to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of our assets;2.
    
    Provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting
principles, and that our receipts and expenditures are being made only in accordance with
authorizations of management and our directors; and3.
    
    Provide reasonable assurance regarding prevention or timely detection of an
unauthorized acquisition, use or disposition of our assets that could have a material
effect on the financial statements.
  Internal
Control  Integrated Framework
  57




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Internal
Control  Integrated Framework
    Internal Control  Integrated Framework Internal Control  Integrated Framework
 Employers Accounting for Defined Benefit Pension and Other Postretirement Plans
 /s/ Deloitte & Touche LLP

   Deloitte & Touche LLP
 
 58




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##### Table of Contents



Item 9B. Other Information
  
 PART III
  
 PART IV
 
 Item 15. Exhibits, Financial Statement Schedules
 Financial Statements
 
 Financial Statement Schedules Required by Item 8.
   Exhibits Required by Item 601 of Regulation S-K and Item 15(b
 59




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##### Table of Contents



SIGNATURES
  Lancaster Colony Corporation(Registrant)By:
    
    /s/John B. Gerlach, Jr.

  John B. Gerlach, Jr.Chairman, Chief Executive Officer,President and DirectorDate:       August 28, 2007
  Signatures
    
    Title
    
    Date/s/ John B. Gerlach, Jr.
    
    Chairman,
    
    August 28, 2007John B. Gerlach, Jr.
    
    Chief
Executive Officer,President and Director(Principal Executive Officer)/s/ John L. Boylan
    
    Treasurer, Vice President,
    
    August 28, 2007John L. Boylan
    
    Assistant
Secretary,Chief Financial Officerand Director(Principal Financial andAccounting Officer)/s/James B. Bachmann
    
    Director
    
    August 18, 2007James B. Bachmann/s/ Neeli Bendapudi
    
    Director
    
    August 22, 2007Neeli Bendapudi/s/Robert L. Fox
    
    Director
    
    August 20, 2007Robert L. Fox/s/ Robert S. Hamilton
    
    Director
    
    August 22, 2007Robert S. Hamilton/s/ Edward H. Jennings
    
    Director
    
    August 23, 2007Edward H. Jennings/s/ Henry M. ONeill, Jr.
    
    Director
    
    August 27, 2007Henry M. ONeill, Jr./s/ Zuheir Sofia
    
    Director
    
    August 22, 2007Zuheir Sofia
 60




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##### Table of Contents



LANCASTER COLONY CORPORATION AND SUBSIDIARIES
 SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
For each of the three years in the period ended June 30, 2007
 Column A
    
    Column B
    
    
    Column C
    
    
    Column D
    
    
    Column EAdditionsBalance at
    
    
    Charged to
    
    
    
    
    
    
    BalanceBeginning
    
    
    Costs and
    
    
    
    
    
    
    at EndDescription
    
    of Year
    
    
    Expenses(B)
    
    
    Deductions(A)(B)
    
    
    of YearReserves deducted from asset to which they
apply  Allowance for doubtful accounts
(amounts in thousands):Year ended June 30, 2005
    
    $
    1,515
    
    
    $
    (602
    )
    
    $
    (685
    )
    
    $
    1,598Year ended June 30, 2006
    
    $
    1,598
    
    
    $
    (1,105
    )
    
    $
    (374
    )
    
    $
    867Year ended June 30, 2007
    
    $
    867
    
    
    $
    (846
    )
    
    $
    (895
    )
    
    $
    916
 
 Notes:(A)
    
    Represents uncollectible accounts written-off net of recoveries.(B)
    
    Includes recovery of previously written-off bad debt related to the 2002 bankruptcy of Kmart
Corporation of approximately $1.0 million, $1.2 million and $1.5 million for 2007, 2006 and
2005, respectively. 61




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##### Table of Contents



LANCASTER COLONY CORPORATION AND SUBSIDIARIES
FORM 10-K
JUNE 30, 2007
 
 INDEX TO EXHIBITS
 ExhibitNumber
    
    Description
    
    Located at3.1
    
    
    Articles of Incorporation of Lancaster Colony Corporation approved by
the shareholders November 18, 1991
    
    (e).2
    
    
    Certificate of Amendment to the Articles of Incorporation of Lancaster
Colony Corporation approved by the shareholders November 16, 1992
    
    (e).3
    
    
    Certificate of Amendment to the Articles of Incorporation of Lancaster
Colony Corporation approved by the shareholders November 17, 1997
    
    (e).4
    
    
    Regulations of Lancaster Colony Corporation as amended through
November 18, 1991
    
    (o).5
    
    
    Certificate of Designation, Rights and Preferences of the Series A
Participating Preferred Stock of Lancaster Colony Corporation
    
    (b)4.1
    
    
    Specimen Certificate of Common Stock
    
    (h).2
    
    
    Rights Agreement dated as of April 20, 2000 by and between Lancaster
Colony Corporation and The Huntington National Bank
    
    (g).3
    
    
    Credit Agreement dated as of February 13, 2001 among Lancaster
Colony Corporation, The Lenders and Bank One, NA, as Agent
    
    (i).4
    
    
    First Amendment to Credit Agreement dated as of June 24, 2003 among
Lancaster Colony Corporation, the Lenders and Bank One, NA as LC Issuer
and Agent
    
    (j).5
    
    
    Second Amendment to Credit Agreement dated as of March 3, 2005
among Lancaster Colony Corporation, the Lenders and J. P. Morgan
Chase Bank, N.A. as LC Issuer and as Agent
    
    (n)10.1
    *
    
    Key Employee Severance Agreement between Lancaster Colony
Corporation and John L. Boylan
    
    (c).2
    *
    
    Lancaster
Colony Corporation 1995 Key Employee Stock Option Plan
    
    (d).3
    *
    
    Key Employee Severance Agreement between Lancaster Colony
Corporation and Bruce L. Rosa
    
    (f).4
    *
    
    Lancaster Colony Corporation Executive Employee Deferred
Compensation Plan
    
    (h).5
    *
    
    Description of Registrants Executive Bonus Arrangements
    
    (k).6
    
    
    Design/Build Agreement between Sister Schuberts Homemade Rolls, Inc.
and Shambaugh & Son, LP
    
    (p).7
    *
    
    2004 Amendment to the Lancaster Colony Corporation Executive
Employee Deferred Compensation Plan
    
    (l).8
    *
    
    Lancaster Colony Corporation 2005 Executive Employee Deferred
Compensation Plan
    
    (m).9
    *
    
    Lancaster Colony Corporation 2005 Stock Plan
    
    (a).10
    *
    
    Form of
Restricted Stock Award Agreement under the Lancaster Colony
Corporation 2005 Stock Plan
    
    Filed herewith21
    
    
    Subsidiaries of Registrant
    
    Filed herewith23
    
    
    Consent of Deloitte & Touche LLP
    
    Filed herewith
 62




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##### Table of Contents



ExhibitNumber
    
    Description
    
    Located at31.1
    
    
    Certification of CEO Pursuant to Rule 13a-14(a)/15d-14(a) of the
Securities Exchange Act of 1934
    
    Filed herewith31.2
    
    
    Certification of CFO Pursuant to Rule 13a-14(a)/15d-14(a) of the
Securities Exchange Act of 1934
    
    Filed herewith32
    
    
    Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
    
    Filed herewith
 
 *
    
    Indicates a management contract or compensatory plan, contract or arrangement in which any
Director or any Executive Officer participates.(a)
    
    Indicates the exhibit is incorporated by reference to Appendix C to the Proxy
Statement on Schedule 14A (000-04065) of Lancaster Colony Corporation for the Annual Meeting of Shareholders held
November 21, 2005.(b)
    
    Indicates the exhibit is incorporated by reference from filing as an exhibit to Lancaster
Colony Corporations Quarterly Report on Form 10-Q (000-04065) for the quarter ended March 31, 1990.(c)
    
    Indicates the exhibit is incorporated by reference to Exhibit 10.6 to Lancaster Colony
Corporations Annual Report on Form 10-K (000-04065) for the year ended June 30, 1991.(d)
    
    Indicates the exhibit is incorporated by reference to Exhibit
A to the Proxy Statement (000-04065) of Lancaster Colony Corporation for the
Annual Meeting of Shareholders held November 20, 1995.(e)
    
    Indicates the exhibit is incorporated by reference from filing as an exhibit to Lancaster
Colony Corporations Annual Report on Form 10-K (000-04065) for the year ended June 30, 1998.(f)
    
    Indicates the exhibit is incorporated by reference to Exhibit 10.8 to the Lancaster Colony
Corporations Annual Report on Form 10-K (000-04065) for the year ended June 30, 1999.(g)
    
    Indicates the exhibit is incorporated by reference to Exhibit 1 to Lancaster Colony
Corporations report on Form 8-A (000-04065) filed April 20, 2000.(h)
    
    Indicates the exhibit is incorporated by reference from filing as an exhibit to Lancaster
Colony Corporations Annual Report on Form 10-K (000-04065) for the year ended June 30, 2000.(i)
    
    Indicates the exhibit is incorporated by reference to Exhibit 4.3 to Lancaster Colony
Corporations Quarterly Report on Form 10-Q (000-04065) for the quarter ended March 31, 2001.(j)
    
    Indicates the exhibit is incorporated by reference to Exhibit 4.4 to Lancaster Colony
Corporations Annual Report on Form 10-K (000-04065) for the year ended June 30, 2003.(k)
    
    Indicates the exhibit is incorporated by reference to Exhibit 10.9 to Lancaster Colony
Corporations Annual Report on Form 10-K (000-04065) for the year ended June 30, 2004.(l)
    
    Indicates the exhibit is incorporated by reference to Exhibit 10.1 to Lancaster Colony
Corporations Current Report on Form 8-K (000-04065) filed January 3, 2005.(m)
    
    Indicates the exhibit is incorporated by reference to Exhibit 99.2 to Lancaster Colony
Corporations Current Report on Form 8-K (000-04065) filed February 25, 2005.(n)
    
    Indicates the exhibit is incorporated by reference to
Exhibit 99.1 to Lancaster Colony
Corporations Current Report on Form 8-K (000-04065) filed March 7, 2005.(o)
    
    Indicates the exhibit is incorporated by reference to Exhibit 3.4 to Lancaster Colony
Corporations Annual Report on Form 10-K (000-04065) for the year ended June 30, 2006.(p)
    
    Indicates the exhibit is incorporated by reference to Exhibit 10.1 to Lancaster Colony
Corporations Current Report on Form 8-K (000-04065) filed March 16, 2007. 63