##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D. C. 20549
 
 Form 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 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)
 þ o
  þ o o
 o þ




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##### 



LANCASTER COLONY CORPORATION AND SUBSIDIARIES
 TABLE OF CONTENTS
  
 PART I  FINANCIAL INFORMATIONItem 1.
    
    Consolidated Financial Statements:Consolidated Balance Sheets  September 30, 2007 and June 30, 2007Consolidated Statements of Income  Three Months Ended September 30, 2007 and 2006Consolidated Statements of Cash Flows  Three Months Ended September 30, 2007 and 2006Notes to Consolidated Financial StatementsItem 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 4.
    
    Controls and ProceduresPART II  OTHER INFORMATIONItem 1A.
    
    Risk FactorsItem 2.
    
    Unregistered Sales of Equity Securities and Use of ProceedsItem 6.
    
    ExhibitsSIGNATURESINDEX TO EXHIBITSEX-31.1EX-31.2EX-32
  2




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PART I  FINANCIAL INFORMATION
 
 Item 1. Consolidated Financial Statements
 
 LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS  UNAUDITED
 September 30
    
    
    June 30(Amounts in thousands, except share data)
    
    2007
    
    
    2007ASSETSCurrent Assets:Cash and equivalents
    
    $
    14,505
    
    
    $
    8,318Receivables (less allowance for doubtful accounts,
September  $1,002 and June  $916)
    
    
    114,610
    
    
    
    92,635Inventories:Raw materials
    
    
    39,544
    
    
    
    40,358Finished goods and work in process
    
    
    113,677
    
    
    
    109,359Total inventories
    
    
    153,221
    
    
    
    149,717Deferred income taxes and other current assets
    
    
    25,456
    
    
    
    28,241Total current assets
    
    
    307,792
    
    
    
    278,911Property, Plant and Equipment:Land, buildings and improvements
    
    
    163,387
    
    
    
    162,276Machinery and equipment
    
    
    354,503
    
    
    
    350,357Total cost
    
    
    517,890
    
    
    
    512,633Less accumulated depreciation
    
    
    308,882
    
    
    
    304,202Property, plant and equipment  net
    
    
    209,008
    
    
    
    208,431Other Assets:Goodwill
    
    
    89,590
    
    
    
    89,590Other intangible assets  net
    
    
    12,803
    
    
    
    13,111Other noncurrent assets
    
    
    8,733
    
    
    
    8,454Total
    
    $
    627,926
    
    
    $
    598,497LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Short-term bank loans
    
    $
    87,500
    
    
    $
    42,500Accounts payable
    
    
    47,175
    
    
    
    48,423Accrued liabilities
    
    
    50,863
    
    
    
    50,867Total current liabilities
    
    
    185,538
    
    
    
    141,790Other Noncurrent Liabilities
    
    
    14,847
    
    
    
    10,702Deferred Income Taxes
    
    
    158
    
    
    
    1,696Shareholders Equity:Preferred stock  authorized 3,050,000 shares;
outstanding  noneCommon stock  authorized 75,000,000 shares;
outstanding 
September 30, 2007  30,175,682 shares;
June 30, 2007  30,748,390 shares
    
    
    81,708
    
    
    
    81,665Retained earnings
    
    
    943,606
    
    
    
    937,376Accumulated other comprehensive loss
    
    
    (5,121
    )
    
    
    (5,167
    )Common stock in treasury, at cost
    
    
    (592,810
    )
    
    
    (569,565
    )Total shareholders equity
    
    
    427,383
    
    
    
    444,309Total
    
    $
    627,926
    
    
    $
    598,497
  3




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LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME  UNAUDITED
 Three Months EndedSeptember 30(Amounts in thousands, except per share data)
    
    2007
    
    
    2006Net Sales
    
    $
    285,570
    
    
    $
    262,064Cost of Sales
    
    
    236,399
    
    
    
    217,415Gross Margin
    
    
    49,171
    
    
    
    44,649Selling, General and Administrative Expenses
    
    
    23,940
    
    
    
    22,203Restructuring and Impairment Charge
    
    
    136
    
    
    
    Operating Income
    
    
    25,095
    
    
    
    22,446Other Income (Expense):Interest expense
    
    
    (958
    )
    
    
    Interest income and other  net
    
    
    162
    
    
    
    362Income from Continuing Operations Before Income Taxes
    
    
    24,299
    
    
    
    22,808Taxes Based on Income
    
    
    8,729
    
    
    
    8,318Income from Continuing Operations
    
    
    15,570
    
    
    
    14,490Loss from Discontinued Operations, Net of Tax
    
    
    
    
    
    
    (709
    )Net Income
    
    $
    15,570
    
    
    $
    13,781Income Per Common Share from Continuing Operations:Basic and Diluted
    
    $
    .51
    
    
    $
    .45Loss Per Common Share from Discontinued Operations:Basic and Diluted
    
    $
    
    
    
    $
    (.02
    )Net Income Per Common Share:Basic and Diluted
    
    $
    .51
    
    
    $
    .43Cash Dividends Per Common Share
    
    $
    .27
    
    
    $
    .26Weighted Average Common Shares Outstanding:Basic
    
    
    30,412
    
    
    
    31,919Diluted
    
    
    30,420
    
    
    
    31,936
  4




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LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 Three Months EndedSeptember 30(Amounts in thousands)
    
    2007
    
    
    2006Cash Flows From Operating Activities:Net income
    
    $
    15,570
    
    
    $
    13,781Adjustments to reconcile net income to net
cash provided by operating activities:Loss from discontinued operations
    
    
    
    
    
    
    709Depreciation and amortization
    
    
    7,810
    
    
    
    6,982Deferred income taxes and other noncash changes
    
    
    (1,324
    )
    
    
    (357
    )Restructuring and impairment charge
    
    
    (56
    )
    
    
    Gain on sale of property
    
    
    (42
    )
    
    
    (25
    )Pension plan activity
    
    
    (171
    )
    
    
    (53
    )Changes in operating assets and liabilities:Receivables
    
    
    (21,974
    )
    
    
    (15,720
    )Inventories
    
    
    (3,521
    )
    
    
    (5,900
    )Other current assets
    
    
    3,001
    
    
    
    (2,378
    )Accounts payable and accrued liabilities
    
    
    3,330
    
    
    
    10,605Net cash provided by operating activities from
continuing operations
    
    
    2,623
    
    
    
    7,644Cash Flows From Investing Activities:Payments on property additions
    
    
    (8,258
    )
    
    
    (9,977
    )Proceeds from sale of property
    
    
    41
    
    
    
    34Proceeds from short-term investment sales, calls and maturities
    
    
    
    
    
    
    35,765Other  net
    
    
    (865
    )
    
    
    (184
    )Net cash (used in) provided by investing activities from
continuing operations
    
    
    (9,082
    )
    
    
    25,638Cash Flows From Financing Activities:Net change in short-term borrowings
    
    
    45,000
    
    
    
    Purchase of treasury stock
    
    
    (23,245
    )
    
    
    (17,529
    )Payment of dividends
    
    
    (8,165
    )
    
    
    (8,276
    )Proceeds from the exercise of stock options
    
    
    
    
    
    
    2,266Decrease in cash overdraft balance
    
    
    (948
    )
    
    
    (2,201
    )Net cash provided by (used in) financing activities from
continuing operations
    
    
    12,642
    
    
    
    (25,740
    )Cash Flows From Discontinued Operations:Net cash used in operating activities from discontinued operations
    
    
    
    
    
    
    (1,613
    )Net cash used in investing activities from discontinued operations
    
    
    
    
    
    
    (222
    )Net cash used in discontinued operations
    
    
    
    
    
    
    (1,835
    )Effect of exchange rate changes on cash
    
    
    4
    
    
    
    (7
    )Net change in cash and equivalents
    
    
    6,187
    
    
    
    5,700Cash and equivalents at beginning of year
    
    
    8,318
    
    
    
    6,050Cash and equivalents at end of period
    
    $
    14,505
    
    
    $
    11,750Supplemental Disclosure Of Operating Cash Flows:Cash paid during the period for income taxes
    
    $
    1,014
    
    
    $
    1,260
  5




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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
 Basis of Presentation
  Property, Plant and Equipment
  Significant Accounting Policies
  Note 2  Impact of Recently Issued Accounting Standards
    Note 3  Goodwill and Other Intangible Assets
  6




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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)
  September 30
    
    
    June 302007
    
    
    2007Specialty FoodsTrademarks (40-year life)Gross carrying value
    
    $
    370
    
    
    $
    370Accumulated amortization
    
    
    (151
    )
    
    
    (149
    )Net Carrying Value
    
    $
    219
    
    
    $
    221Customer Relationships (12-15-year life)Gross carrying value
    
    $
    13,020
    
    
    $
    13,020Accumulated amortization
    
    
    (1,479
    )
    
    
    (1,233
    )Net Carrying Value
    
    $
    11,541
    
    
    $
    11,787Non-compete Agreements (5-8-year life)Gross carrying value
    
    $
    1,540
    
    
    $
    1,540Accumulated amortization
    
    
    (585
    )
    
    
    (531
    )Net Carrying Value
    
    $
    955
    
    
    $
    1,009Glassware and Candles  Customer Lists (12-year life)Gross carrying value
    
    $
    250
    
    
    $
    250Accumulated amortization
    
    
    (162
    )
    
    
    (156
    )Net Carrying Value
    
    $
    88
    
    
    $
    94Total Net Carrying Value
    
    $
    12,803
    
    
    $
    13,111
  Note 4  Short-Term Borrowings
   Note 5  Pension Benefits
  7




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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)
  Three MonthsEndedSeptember 302007
    
    
    2006Components of net periodic benefit costService cost
    
    $
    39
    
    
    $
    127Interest cost
    
    
    647
    
    
    
    632Expected return on plan assets
    
    
    (805
    )
    
    
    (748
    )Amortization of unrecognized net loss
    
    
    43
    
    
    
    65Amortization of prior service cost
    
    
    26
    
    
    
    61Amortization of unrecognized net obligation existing at transition
    
    
    1
    
    
    
    1Net periodic (benefit) cost
    
    $
    (49
    )
    
    $
    138
    Note 6  Postretirement Benefits
   Three MonthsEndedSeptember 302007
    
    
    2006Components of net periodic benefit costService cost
    
    $
    6
    
    
    $
    33Interest cost
    
    
    58
    
    
    
    106Amortization of unrecognized net loss
    
    
    --
    
    
    
    32Amortization of prior service asset
    
    
    (1
    )
    
    
    (2
    )Net periodic benefit cost
    
    $
    63
    
    
    $
    169
   8




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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 7  Stock-Based Compensation
   Stock Options
     WeightedWeighted
    
    
    AverageNumber
    
    
    Average
    
    
    Remaining
    
    
    Aggregateof
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
    Life
    
    
    ValueOutstanding stock options vested and
expected to vest at beginning of period
    
    
    361,500
    
    
    $
    40.42Exercised
    
    
    
    
    
    
    Granted
    
    
    
    
    
    
    Forfeited
    
    
    (3,650
    )
    
    
    39.82Outstanding stock options vested and
expected to vest at end of period
    
    
    357,850
    
    
    $
    40.43
    
    
    
    1.93
    
    
    $
    86Exercisable and vested stock options
at end of period
    
    
    350,063
    
    
    $
    40.40
    
    
    
    1.92
    
    
    $
    86
 9




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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)
  WeightedNumber
    
    
    Averageof
    
    
    Grant DateShares
    
    
    Fair ValueUnvested stock options at beginning of period
    
    
    7,787
    
    
    $
    8.14Granted
    
    
    
    
    
    
    --Vested
    
    
    
    
    
    
    --Forfeited
    
    
    
    
    
    
    --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
    
    
    3,500
    
    
    $
    42.70Granted
    
    
    
    
    
    
    --Vested
    
    
    
    
    
    
    --Forfeited
    
    
    
    
    
    
    --Unvested restricted stock at end of period
    
    
    3,500
    
    
    $
    42.70
   Note 8  Restructuring and Impairment Charge
   10




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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
    
    
    
    
    
    
    2008
    
    
    Accrual atJune 30,
    
    
    2008
    
    
    Cash
    
    
    September 30,2007
    
    
    Charge
    
    
    Outlays
    
    
    2007Restructuring and Impairment ChargeEmployee Separation Costs
    
    $
    266
    
    
    $
    126
    
    
    $
    (195
    )
    
    $
    197Other Costs
    
    
    219
    
    
    
    
    
    
    
    (13
    )
    
    
    206Subtotal
    
    $
    485
    
    
    
    126
    
    
    $
    (208
    )
    
    $
    403Accelerated Depreciation
    
    
    
    
    
    
    10Inventory Write-Down
    
    
    
    
    
    
    17Total Restructuring and Impairment Charge
    
    
    
    
    
    $
    153
  Note 9  Income Taxes
  Note 10  Business Segment Information
  Three Months EndedSeptember 302007
    
    
    2006Net SalesSpecialty Foods
    
    $
    184,789
    
    
    $
    172,287Glassware and Candles
    
    
    59,169
    
    
    
    54,506Automotive
    
    
    41,612
    
    
    
    35,271Total
    
    $
    285,570
    
    
    $
    262,064Operating IncomeSpecialty Foods
    
    $
    23,774
    
    
    $
    24,182Glassware and Candles
    
    
    2,413
    
    
    
    (801
    )Automotive
    
    
    1,441
    
    
    
    563Corporate expenses
    
    
    (2,533
    )
    
    
    (1,498
    )Total
    
    $
    25,095
    
    
    $
    22,446
 11




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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 11  Commitments and Contingencies
    Note 12  Comprehensive Income
  12




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 LANCASTER COLONY CORPORATION AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Tabular dollars in thousands)
 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 months ended September 30, 2007 and our financial condition as of
September 30, 2007. 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, 2008 refers to fiscal 2008, which is
the period from July 1, 2007 to June 30, 2008. In the discussion that follows, we analyze the
results of our operations for the three months ended September 30, 2007, including the trends in
our overall business, followed by a discussion of our financial condition.
 The following discussion should be read in conjunction with 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.
 
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Forward-Looking Statements
  Summary of 2008 Results
   14




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RESULTS OF CONSOLIDATED OPERATIONS
 Net Sales and Gross Margin
 Three Months EndedSeptember 302007
    
    
    2006
    
    
    ChangeNet SalesSpecialty Foods
    
    $
    184,789
    
    
    $
    172,287
    
    
    $
    12,502
    
    
    
    7
    %Glassware and Candles
    
    
    59,169
    
    
    
    54,506
    
    
    
    4,663
    
    
    
    9
    %Automotive
    
    
    41,612
    
    
    
    35,271
    
    
    
    6,341
    
    
    
    18
    %Total
    
    $
    285,570
    
    
    $
    262,064
    
    
    $
    23,506
    
    
    
    9
    %Gross Margin
    
    $
    49,171
    
    
    $
    44,649
    
    
    $
    4,522
    
    
    
    10
    %Gross Margin as a Percent of Sales
    
    
    17.2
    %
    
    
    17.0
    %
         15




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Selling, General and Administrative Expenses
 Three Months EndedSeptember 302007
    
    
    2006
    
    
    ChangeSelling, General and Administrative Expenses
    
    $
    23,940
    
    
    $
    22,203
    
    
    $
    1,737
    
    
    
    8
    %SG&A Expenses as a Percent of Sales
    
    
    8.4
    %
    
    
    8.5
    %
  Restructuring and Impairment Charge
     Accrual at
    
    
    
    
    
    
    2008
    
    
    Accrual atJune 30,
    
    
    2008
    
    
    Cash
    
    
    September 30,2007
    
    
    Charge
    
    
    Outlays
    
    
    2007Restructuring and Impairment ChargeEmployee Separation Costs
    
    $
    266
    
    
    $
    126
    
    
    $
    (195
    )
    
    $
    197Other Costs
    
    
    219
    
    
    
    
    
    
    
    (13
    )
    
    
    206Subtotal
    
    $
    485
    
    
    
    126
    
    
    $
    (208
    )
    
    $
    403Accelerated Depreciation
    
    
    
    
    
    
    10Inventory Write-Down
    
    
    
    
    
    
    17Total Restructuring and Impairment Charge
    
    
    
    
    
    $
    153
  16




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Operating Income
  Three Months EndedSeptember 302007
    
    
    2006
    
    
    ChangeOperating IncomeSpecialty Foods
    
    $
    23,774
    
    
    $
    24,182
    
    
    $
    (408
    )
    
    
    (2
    )%Glassware and Candles
    
    
    2,413
    
    
    
    (801
    )
    
    
    3,214
    
    
    
    401
    %Automotive
    
    
    1,441
    
    
    
    563
    
    
    
    878
    
    
    
    156
    %Corporate Expenses
    
    
    (2,533
    )
    
    
    (1,498
    )
    
    
    (1,035
    )
    
    
    69
    %Total
    
    $
    25,095
    
    
    $
    22,446
    
    
    $
    2,649
    
    
    
    12
    %Operating Income as a Percent of SalesSpecialty Foods
    
    
    12.9
    %
    
    
    14.0
    %Glassware and Candles
    
    
    4.1
    %
    
    
    (1.5
    )%Automotive
    
    
    3.5
    %
    
    
    1.6
    %Consolidated
    
    
    8.8
    %
    
    
    8.6
    %
 Interest Expense
  Interest Income and Other  Net
  Income from Continuing Operations Before Income Taxes
  Income from Continuing Operations
   Discontinued Operations
  17




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Net Income
  FINANCIAL CONDITION
       CONTRACTUAL OBLIGATIONS
   18




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CRITICAL ACCOUNTING POLICIES
  RECENTLY ISSUED ACCOUNTING STANDARDS
   RECENTLY ADOPTED ACCOUNTING STANDARDS
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures.
 Changes in Internal Control Over Financial Reporting.
 
 PART II OTHER INFORMATION
 
 Item 1A. Risk Factors
  19




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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Total Number
    
    
    Maximum NumberTotal
    
    
    Average
    
    
    of Shares
    
    
    of Shares That MayNumber
    
    
    Price
    
    
    Purchased as
    
    
    Yet be Purchasedof Shares
    
    
    Paid Per
    
    
    Part of Publicly
    
    
    Under the Plans orPeriod
    
    Purchased
    
    
    Share
    
    
    Announced Plans
    
    
    ProgramsJuly 1-31, 2007
    
    
    267,220
    
    
    $
    41.28
    
    
    
    267,220
    
    
    
    1,077,517August 1-31, 2007
    
    
    210,215
    
    
    $
    40.69
    
    
    
    210,215
    
    
    
    2,867,302September 1-30, 2007
    
    
    95,273
    
    
    $
    38.44
    
    
    
    95,273
    
    
    
    2,772,029Total
    
    
    572,708
    
    
    $
    40.59
    
    
    
    572,708
    
    
    
    2,772,029
  
 Item 6. Exhibits .
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##### Table of Contents



SIGNATURES
  Lancaster Colony Corporation(Registrant)Date: November 7, 2007
    
    By:
    
    /s/ John B. Gerlach, Jr.John B. Gerlach, Jr.Chairman, Chief Executive Officer,
President and Director
(Principal Executive Officer)Date: November 7, 2007
    
    By:
    
    /s/ John L. BoylanJohn L. BoylanTreasurer, Vice President,
Assistant Secretary,
Chief Financial Officer
and Director
(Principal Financial
and Accounting Officer)
 21




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##### Table of Contents



LANCASTER COLONY CORPORATION AND SUBSIDIARIES
FORM 10-Q
SEPTEMBER 30, 2007
INDEX TO EXHIBITS
 ExhibitNumber
    
    Description
    
    Located at31.1
    
    Certification of CEO under Section 302 of the Sarbanes-Oxley Act of 2002
    
    Filed herewith31.2
    
    Certification of CFO under Section 302 of the Sarbanes-Oxley Act of 2002
    
    Filed herewith32
    
    Certification of CEO and CFO under Section 906 of the Sarbanes-Oxley
Act of 2002
    
    Filed herewith
 22