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What changed in MARZETTI CO's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of MARZETTI CO's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+168 added−175 removedSource: 10-K (2024-08-22) vs 10-K (2023-08-23)

Top changes in MARZETTI CO's 2024 10-K

168 paragraphs added · 175 removed · 131 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest change(“Chick-fil-A”), one of our national chain restaurant accounts, also represents a significant portion of our consolidated net sales. In Foodservice, we primarily supply Chick-fil-A indirectly through distributors, including McLane. A portion of our Foodservice sales represent direct sales to Chick-fil-A.
Biggest changeThe 2024 decline in sales to McLane primarily reflects certain national chain restaurant accounts shifting their purchases from McLane to other distributors or to direct purchases. Our relationship with Chick-fil-A, Inc. (“Chick-fil-A”), one of our national chain restaurant accounts, also represents a significant portion of our consolidated net sales. In Foodservice, we primarily supply Chick-fil-A indirectly through distributors, including McLane.
In 2023, our teams mobilized to support Pelotonia, Toys for Tots, and the United Way. We regularly donate funds and volunteer time to a range of other community organizations and foundations as well, including the Children’s Hunger Alliance, National Veterans Memorial and Museum, Jobs for America’s Graduates, and local food banks.
In 2024, our teams mobilized to support Pelotonia, Toys for Tots, and the United Way. We regularly donate funds and volunteer time to a range of other community organizations and foundations as well, including the Children’s Hunger Alliance, National Veterans Memorial and Museum, Jobs for America’s Graduates, and local food banks.
Based upon available information, compliance with these laws and regulations did not have a material effect upon the level of capital expenditures, earnings or our competitive position in 2023 and is not expected to have a material impact in 2024. HUMAN CAPITAL As of June 30, 2023, we had 3,400 employees.
Based upon available information, compliance with these laws and regulations did not have a material effect upon the level of capital expenditures, earnings or our competitive position in 2024 and is not expected to have a material impact in 2025. HUMAN CAPITAL As of June 30, 2024, we had 3,400 employees.
Consistent with this purpose, our human capital management strategy emphasizes six key areas of focus: Health and Safety; Talent Acquisition; Total Rewards; Employee Engagement; Diversity, Equity and Inclusion (“DEI”); and Community Engagement. Our Board of Directors oversees this strategy and dedicates one Board meeting each year to a full review of talent.
Consistent with this purpose, our human capital management strategy emphasizes six key areas of focus: Health and Safety; Talent Acquisition; Total Rewards; Employee Engagement; Diversity and Inclusion; and Community Engagement. Our Board of Directors oversees this strategy and dedicates one Board meeting each year to a full review of talent.
Unless otherwise noted, references to “year” pertain to our fiscal year which ends on June 30; for example, 2023 refers to fiscal 2023, which is the period from July 1, 2022 to June 30, 2023. Available Information Our Internet website address is https://www.lancastercolony.com.
Unless otherwise noted, references to “year” pertain to our fiscal year which ends on June 30; for example, 2024 refers to fiscal 2024, which is the period from July 1, 2023 to June 30, 2024. Available Information Our Internet website address is https://www.lancastercolony.com.
RAW MATERIALS During 2023, we obtained adequate supplies of raw materials and packaging. We rely on a variety of raw materials and packaging for the day-to-day production of our products, including soybean oil, various sweeteners, eggs, dairy-related products, flour, various films and plastic and paper packaging materials.
RAW MATERIALS During 2024, we obtained adequate supplies of raw materials and packaging. We rely on a variety of raw materials and packaging for the day-to-day production of our products, including soybean oil, various sweeteners, eggs, dairy-related products, flour, various films and plastic and paper packaging materials.
Each of our ERGs is sponsored by a member of our leadership team to ensure top-down accountability for our DEI initiatives. 6 Table of Contents Community Engagement Our volunteering and philanthropic efforts align with United Nations Sustainable Development Goals, with a particular focus on reducing poverty and food insecurity while promoting good health and quality education for all.
Each of our ERGs is sponsored by a member of our leadership team to ensure top-down accountability for the associated initiatives. 6 Table of Contents Community Engagement Our volunteering and philanthropic efforts align with United Nations Sustainable Development Goals, with a particular focus on reducing poverty and food insecurity while promoting good health and quality education for all.
Although the availability and price of certain of these materials are influenced by weather, disease and the level of global demand, we anticipate that future sources of supply for 2024 will generally be available and adequate for our needs.
Although the availability and price of certain of these materials are influenced by weather, disease and the level of global demand, we anticipate that future sources of supply for 2025 will generally be available and adequate for our needs.
The financial information relating to our business segments for the three years ended June 30, 2023, 2022 and 2021 is included in Note 9 to the consolidated financial statements, and located in Part II, Item 8 of this Annual Report on Form 10-K. Further description of each business segment within which we operate is provided below.
The financial information relating to our business segments for the three years ended June 30, 2024, 2023 and 2022 is included in Note 8 to the consolidated financial statements, and located in Part II, Item 8 of this Annual Report on Form 10-K. Further description of each business segment within which we operate is provided below.
The honesty, integrity and sound judgment of our people in following our Code of Business Ethics are what enable us to be successful and live our company’s purpose To Nourish Growth With All That We Do .
The honesty, integrity and sound judgment of our people in following our Code of Business Ethics are what enable us to be successful and fulfill our company’s purpose To Nourish Growth With All That We Do .
NET SALES BY CLASS OF PRODUCTS The following table sets forth business segment information with respect to the percentage of net sales contributed by our primary classes of similar products: 2023 2022 2021 Retail Segment: Shelf-stable dressings, sauces and croutons 23% 22% 21% Frozen breads 19% 20% 21% Refrigerated dressings, dips and other 11% 13% 15% Foodservice Segment: Dressings and sauces 35% 34% 32% Frozen breads and other 12% 11% 11% MANUFACTURING As of June 30, 2023, the majority of our products were manufactured and packaged at our 15 food plants located throughout the United States.
NET SALES BY CLASS OF PRODUCTS The following table sets forth business segment information with respect to the percentage of net sales contributed by our primary classes of similar products: 2024 2023 2022 Retail Segment: Shelf-stable dressings, sauces and croutons 23% 23% 22% Frozen breads 19% 19% 20% Refrigerated dressings, dips and other 11% 11% 13% Foodservice Segment: Dressings and sauces 35% 35% 34% Frozen breads and other 12% 12% 11% MANUFACTURING As of June 30, 2024, the majority of our products were manufactured and packaged at our 13 food plants located throughout the United States.
In general, these national chain restaurants have direct relationships with us for culinary research and development, menu development and production needs, but choose to buy our products through McLane, who acts as their distributor. McLane orders our products on behalf of these national chain restaurants, and we invoice McLane for these sales. Our relationship with Chick-fil-A, Inc.
In general, these national chain restaurants have direct relationships with us for culinary research and development, menu development and production needs, but choose to buy our products through McLane, who acts as their distributor. McLane orders our products on behalf of these national chain restaurants, and we invoice McLane for these sales.
The resulting impacts on working capital are not significant. We do not utilize any franchises or concessions. In addition to the owned and licensed trademarked brands discussed above, we also own and operate under innumerable other intellectual property rights, including patents, copyrights, formulas, proprietary trade secrets, technologies, know-how processes and other unregistered rights.
The resulting impacts on working capital are not significant. In addition to the owned and licensed trademarked brands discussed above, we also own and operate under innumerable other intellectual property rights, including patents, copyrights, formulas, proprietary trade secrets, technologies, know-how processes and other unregistered rights.
Total net sales attributed to Chick-fil-A, including the Retail sales resulting from the exclusive license agreement and the Foodservice sales, totaled 26%, 24% and 21% of consolidated net sales for 2023, 2022 and 2021, respectively.
Total net sales attributed to Chick-fil-A, including the Retail sales resulting from the exclusive license agreement and the Foodservice sales, totaled 28%, 26% and 24% of consolidated net sales for 2024, 2023 and 2022, respectively.
Most of these plants produce products for both the Retail and Foodservice segments. Efficient and cost-effective production remains a key focus as evidenced by our lean six sigma initiative. Certain items are also manufactured and packaged by third parties located in the United States, Canada and Europe.
Most of these plants produce products for both the Retail and Foodservice segments. Efficient and cost-effective production remains a key focus as evidenced by our cost savings initiatives. Certain items are also manufactured and packaged by third parties located in the United States, Canada and Europe.
We consider our owned and licensed intellectual property rights to be essential to our Retail business. Foodservice Segment The majority of our Foodservice sales are products sold under private label to restaurants. We also manufacture and sell various branded Foodservice products to distributors.
We consider our owned and licensed intellectual property rights to be essential to our Retail business. Foodservice Segment The majority of our Foodservice sales are products sold under private label to national chain restaurant accounts. We also manufacture and sell various branded Foodservice products to distributors.
Chick-fil-A is also a significant contributor to our Retail sales as we sell their sauce and dressing products into the retail channel through an exclusive license agreement.
A portion of our Foodservice sales represent direct sales to Chick-fil-A. Chick-fil-A is also a significant contributor to our Retail sales as we sell their sauce and dressing products into the retail channel through an exclusive license agreement.
Most of the products we sell in the Foodservice segment are custom-formulated and include salad dressings, sandwich and dipping sauces, frozen breads and yeast rolls. Our top five Foodservice direct customers accounted for 58%, 58% and 61% of this segment’s total net sales in 2023, 2022 and 2021, respectively.
Most of the products we sell in the Foodservice segment are custom-formulated sauces, salad dressings, frozen breads and yeast rolls. Our top five Foodservice direct customers accounted for 53%, 58% and 58% of this segment’s total net sales in 2024, 2023 and 2022, respectively.
We also have products typically marketed in the shelf-stable section of the grocery store, which include salad dressings, slaw dressing, sauces and croutons. Within the frozen food section of the grocery store, we sell yeast rolls and garlic breads.
We have products typically marketed in the shelf-stable section of the grocery store, which include licensed sauces and dressings, along with our own branded salad dressings and croutons. Within the frozen food section of the grocery store, we sell yeast rolls and garlic breads.
Additionally, a small portion of our Retail sales are products sold under private label to retailers. The vast majority of the products we sell in the Retail segment are sold through sales personnel, food brokers and distributors in the United States. We have placement of products in grocery produce departments through our refrigerated salad dressings, vegetable dips and fruit dips.
Additionally, a small portion of our Retail sales are products sold under private label to retailers. The vast majority of the products we sell in the Retail segment are sold through sales personnel, food brokers and distributors in the United States.
Our category-leading retail brands and commitment to new product development help drive increased consumer demand in our Retail segment. We have also expanded Retail segment growth by leveraging our strong Foodservice customer relationships to establish exclusive licensing agreements for the retail channel. Strategic acquisitions are also part of our future growth plans, with a focus on fit and value.
We have also expanded Retail segment growth by leveraging our strong Foodservice customer relationships to establish exclusive licensing agreements for the retail channel. Strategic acquisitions are also part of our future growth plans, with a focus on fit and value.
Diversity, Equity and Inclusion We foster a collaborative working environment where all our employees can thrive and feel they belong. We believe our commitment to diversity, equity, inclusion and belonging enhances our ability to attract and retain a high-performing and diverse team.
Diversity and Inclusion We foster a collaborative working environment where all our employees can thrive and feel they belong. We believe our commitment to diversity, inclusion and belonging enhances our ability to attract and retain a high-performing and diverse team. We monitor the diversity of our organization to identify areas of improvement and measure the effectiveness of our efforts.
We have already seen a positive impact with the percentage of women at levels of Vice President and above increasing by 58% from January 2020 to January 2023 and the percentages of non-white representation for positions of director and above nearly doubling in the same period.
We have already seen a positive impact with the percentage of women at levels of Vice President and above doubling from January 2020 to January 2024 and the percentages of non-white representation for positions of director and above nearly doubling in the same period. We encourage employee-led initiatives to promote diversity within the organization.
McLane is a large, national distributor that sells and distributes our products to several of our foodservice national chain restaurant accounts, principally in the quick service, fast casual and casual dining channels.
(“McLane”), a wholesale distribution subsidiary of Berkshire Hathaway, Inc., totaled 8%, 11% and 11% of consolidated net sales for 2024, 2023 and 2022, respectively. McLane is a large, national distributor that sells and distributes our products to several of our foodservice national chain restaurant accounts, principally in the quick service, fast casual and casual dining channels.
In 2020, we adopted our Diversity Hiring Statement, which sets out our pledge to include women and minorities in the pool of candidates for new leadership positions.
Our goal is to establish a continuous improvement trend. In 2024, our workforce was 36% female and 44% of our employees represented minority races or ethnicities. In 2020, we adopted our Diversity Hiring Statement, which sets out our pledge to include women and minorities in the pool of candidates for new leadership positions.
Of those employees, 23% are represented under various collective bargaining contracts and 6% are represented under a collective bargaining contract that will expire within one year. 5 Table of Contents Our people are essential to our vision to be The Better Food Company — better people, driven by purpose, making better food, in a better more collaborative culture, working in unison to make the world around us a little bit better place, every day.
Of those employees, 22% are represented under various collective bargaining contracts and 8% are represented under a collective bargaining contract that will expire within one year. 5 Table of Contents Our people are essential to our vision to be The Better Food Company — the industry leader in creating great tasting food and cultivating deep and lasting relationships with customers and consumers.
We own and operate under innumerable intellectual property rights, including patents, copyrights, formulas, proprietary trade secrets, technologies, know-how processes and other unregistered rights. We consider our owned intellectual property rights to be essential to our Foodservice business. 4 Table of Contents NET SALES ATTRIBUTED TO SIGNIFICANT CUSTOMER RELATIONSHIPS Net sales attributed to Walmart Inc.
We consider our owned intellectual property rights to be essential to our Foodservice business. 4 Table of Contents NET SALES ATTRIBUTED TO SIGNIFICANT CUSTOMER RELATIONSHIPS Net sales attributed to Walmart Inc. (“Walmart”) totaled 18% of consolidated net sales for 2024, 2023 and 2022. Net sales attributed to McLane Company, Inc.
Strategic acquisitions are also part of our future growth plans, with a focus on fit and value. The operations of this segment are not affected to any material extent by seasonal fluctuations. We do not utilize any franchises or concessions.
Strategic acquisitions may also contribute to the future growth of the Foodservice segment, with a focus on fit and value. The operations of this segment are not affected to any material extent by seasonal fluctuations. We own and operate under innumerable intellectual property rights, including patents, copyrights, formulas, proprietary trade secrets, technologies, know-how processes and other unregistered rights.
Our top five Retail customers accounted for 59%, 57% and 55% of this segment’s total net sales in 2023, 2022 and 2021, respectively. We continue to rely upon our strong retail brands, innovation expertise, geographic and channel expansion and customer relationships for future growth.
We continue to rely upon our strong retail brands, innovation expertise, geographic and channel expansion and customer relationships for future growth. Our category-leading retail brands and commitment to new product development help drive increased consumer demand in our Retail segment.
Our vision is to be The Better Food Company – better people, driven by purpose, making better food, in a better more collaborative culture, working in unison to make the world around us a little bit better place, every day – while fulfilling our corporate purpose To Nourish Growth With All That We Do .
Our vision is to be The Better Food Company – the industry leader in creating great tasting food and cultivating deep and lasting relationships with customers and consumers – while fulfilling our corporate purpose To Nourish Growth With All That We Do .
These affinity-based groups provide a support network for colleagues from diverse backgrounds and help to raise awareness of DEI topics.
Several employee resource groups (“ERGs”) have been established in the last few years. These affinity-based groups provide a support network for colleagues from diverse backgrounds.
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(“Walmart”) totaled 18% of consolidated net sales for 2023, 2022 and 2021. Net sales attributed to McLane Company, Inc. (“McLane”), a wholesale distribution subsidiary of Berkshire Hathaway, Inc., totaled 11%, 11% and 13% of consolidated net sales for 2023, 2022 and 2021, respectively.
Added
We also have placement of products in grocery produce departments through our refrigerated salad dressings, licensed dressings, vegetable dips and fruit dips. Our top five Retail customers accounted for 59%, 59% and 57% of this segment’s total net sales in 2024, 2023 and 2022, respectively.
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We monitor the diversity of our organization to identify areas of improvement, advance our DEI strategy and measure the effectiveness of our efforts. Our goal is to establish a continuous improvement trend. In 2023, our workforce was 36% female and 44% of our employees represented minority races or ethnicities.
Removed
To unlock opportunities for high school students from diverse backgrounds, we have committed to a work-study program that provides tuition support and work-study mentorship to high school students from low-income families. We also encourage employee-led initiatives to promote diversity within the organization. Several employee resource groups (“ERGs”) have been established in the last few years.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeCertain negative publicity regarding the food industry or our products could also increase our cost of operations. The food industry has been subject to negative publicity concerning the health implications of genetically modified organisms, added sugars, trans fat, salt, artificial growth hormones, ingredients sourced from foreign suppliers and other supply chain concerns.
Biggest changeThe food industry has been subject to negative publicity concerning the health implications of genetically modified organisms, added sugars, trans fat, salt, artificial growth hormones, ingredients sourced from foreign suppliers and other supply chain concerns. 7 Table of Contents Consumers may increasingly require that our products and processes meet stricter standards than are required by applicable governmental agencies, thereby increasing the cost of manufacturing our products.
As a result, substantial negative publicity concerning one or more of our products, or other foods similar to or in the same food group as our products, could lead to lower demand for our products and/or reduced prices and lost sales.
As a result, substantial negative publicity concerning one or more of our products, or other foods similar to or in the same food group as our products, could lead to lower demand for our products, reduced prices and lost sales.
The cost and efforts expended in our attempts to prevent cyber security attacks and data breaches may continue to be significant, and our efforts to prevent these attacks may not be successful. New data security laws and regulations are being implemented rapidly, are evolving, and may not be compatible with our current processes.
The cost and efforts expended in our attempts to prevent cyber attacks and data breaches may continue to be significant, and our efforts to prevent these attacks may not be successful. New data security laws and regulations are being implemented rapidly, are evolving, and may not be compatible with our current processes.
We may not have purchased sufficient insurance to cover all material costs and losses, and in the future, we may not be able to obtain adequate liability insurance on commercially desirable or reasonable terms or at all. Any of these occurrences could have a material adverse effect on our business, results of operations, financial condition and cash flows.
We may not have purchased sufficient insurance to cover all material costs and losses, and in the future, we may not be able to obtain adequate liability insurance on commercially desirable or reasonable terms or at all. Any of these occurrences could have a material adverse effect on our business strategy, results of operations, financial condition and cash flows.
Labor shortages, increased labor costs, and increased labor turnover could adversely impact our business, results of operations, financial condition, and cash flows. We have recently experienced labor shortages, increased labor costs and increased employee turnover, which were due in part to the COVID-19 pandemic and the related policies and mandates and exacerbated by inflationary costs.
Labor shortages, increased labor costs, and increased labor turnover could adversely impact our business, results of operations, financial condition and cash flows. We have experienced labor shortages, increased labor costs and increased employee turnover, which were due in part to the COVID-19 pandemic and the related policies and mandates and exacerbated by inflationary costs.
During fiscal 2022, the overall global economy experienced significant inflation in packaging materials, fuel, energy, and commodities. Inflation has and may continue to adversely affect us by increasing our costs of raw materials, packaging and freight, as well as wage and benefit costs.
During fiscal 2023 and fiscal 2022, the overall global economy experienced significant inflation in packaging materials, fuel, energy, and commodities. Inflation has and may continue to adversely affect us by increasing our costs of raw materials, packaging and freight, as well as wage and benefit costs.
Our ability to avoid the adverse effects of a pronounced, sustained price increase in our raw materials is limited. We have observed increased volatility in the costs of many of these raw materials in recent years. During fiscal 2023, we faced continued industry-wide inflation for various inputs, including commodities, ingredients, packaging materials, transportation and labor.
Our ability to avoid the adverse effects of a pronounced, sustained price increase in our raw materials is limited. We have observed increased volatility in the costs of many of these raw materials in recent years. During fiscal 2023 and fiscal 2022, we faced industry-wide inflation for various inputs, including commodities, ingredients, packaging materials, transportation and labor.
In addition, the impacts of a widespread public health emergency may include, but are not limited to, a shift in demand between our Retail and Foodservice segments or a significant reduction in overall demand resulting from forced or temporary curtailment of business operations; a disruption or shutdown of one or more of our manufacturing, warehousing or distribution facilities; failure of third parties on which we rely to meet their obligations to us; disruption to or loss of essential manufacturing and supply elements; and incurrence of additional labor, operating, and administrative costs, including insurance costs.
In addition, the impacts of a widespread public 9 Table of Contents health emergency may include, but are not limited to, a shift in demand between our Retail and Foodservice segments or a significant reduction in overall demand resulting from forced or temporary curtailment of business operations; a disruption or shutdown of one or more of our manufacturing, warehousing or distribution facilities; failure of third parties on which we rely to meet their obligations to us; disruption to or loss of essential manufacturing and supply elements; and incurrence of additional labor, operating, and administrative costs, including insurance costs.
The effects of the CCPA, the CPRA, and laws, rules or regulations of other jurisdictions relating to privacy, data protection and information security that apply now or in the future, particularly any new or modified laws or regulations that require enhanced protection of certain types of data or new obligations with regard to data retention, transfer or disclosure, are significant, may require us to modify 15 Table of Contents our data processing practices and policies, and could increase our costs, require significant changes to our operations, prevent us from providing certain offerings or cause us to incur potential liability in an effort to comply with such legislation.
The effects of the CCPA, the CPRA, and laws, rules or regulations of other jurisdictions relating to privacy, data protection and information security that apply now or in the future, particularly any new or modified laws or regulations that require enhanced protection of certain types of data or new obligations with regard to data retention, transfer or disclosure, are significant, may require us to modify our data processing practices and policies, and could increase our costs, require significant changes to our operations, prevent us from providing certain offerings or cause us to incur potential liability in an effort to comply with such legislation.
For example, the negative impacts of COVID-19 on our Company included higher hourly 9 Table of Contents wage rates paid to our front-line employees, increased costs for personal protective equipment, higher expenditures attributed to incremental co-manufacturing volumes, increased complexity and uncertainty in production planning and forecasting, and overall lower levels of efficiency in our production and distribution network.
For example, the negative impacts of COVID-19 on our Company included higher hourly wage rates paid to our front-line employees, increased costs for personal protective equipment, higher expenditures attributed to incremental co-manufacturing volumes, increased complexity and uncertainty in production planning and forecasting, and overall lower levels of efficiency in our production and distribution network.
Poor performance by our customers, or our inability to collect accounts receivable from our customers, could have a material adverse effect on our business, results of operations, financial condition and cash flows. In addition, our future growth and profitability may be unfavorably impacted by recent changes in the competitive landscape for our Retail segment customers.
Poor performance by our customers, or our inability to collect accounts receivable from our customers, could have a material adverse effect on our business, results of operations, financial condition and cash flows. 13 Table of Contents In addition, our future growth and profitability may be unfavorably impacted by recent changes in the competitive landscape for our Retail segment customers.
Further, unfavorable changes in Chick-fil-A’s financial condition or other 13 Table of Contents disruptions to its business, such as decreased consumer demand or stronger competition, could also have a material adverse effect on our business, results of operations, financial condition and cash flows. McLane is our largest Foodservice customer.
Further, unfavorable changes in Chick-fil-A’s financial condition or other disruptions to its business, such as decreased consumer demand or stronger competition, could also have a material adverse effect on our business, results of operations, financial condition and cash flows. McLane is our largest Foodservice customer.
The loss of, or a significant reduction in, Walmart’s business, or an adverse change in the financial condition of Walmart, could result in a material adverse effect on our business, results of operations, financial condition and cash flows. Our net sales to Walmart represented 18% of consolidated net sales for each of the years ended June 30, 2023 and 2022.
The loss of, or a significant reduction in, Walmart’s business, or an adverse change in the financial condition of Walmart, could result in a material adverse effect on our business, results of operations, financial condition and cash flows. Our net sales to Walmart represented 18% of consolidated net sales for the years ended June 30, 2024 and 2023.
Sales to Chick-fil-A in our Foodservice segment, which are primarily made indirectly through several foodservice distributors including McLane, represented 20% and 18% of consolidated net sales for the years ended June 30, 2023 and 2022, respectively. We cannot ensure that we will be able to maintain good relationships with key national chain restaurant accounts in the future.
Sales to Chick-fil-A in our Foodservice segment, which are primarily made indirectly through several foodservice distributors including McLane, represented 21% and 20% of consolidated net sales for the years ended June 30, 2024 and 2023, respectively. We cannot ensure that we will be able to maintain good relationships with key national chain restaurant accounts in the future.
We seek to maintain and enhance our brands through a variety of efforts, including the delivery of quality products, extending our brands into new markets and new products and investing in marketing and advertising. The costs of maintaining and enhancing our brands, including maintaining our rights to brands under license agreements, may increase.
We seek to maintain and enhance our brands through a variety of efforts, including the delivery of quality products, extending our brands into new markets and new products and investing in marketing and advertising. The costs of maintaining and enhancing our brands, including maintaining our rights to brands under license 11 Table of Contents agreements, may increase.
After the three-year waiting period, such a transaction may require additional approvals under the Interested Shareholder Transactions Act, including approval by two-thirds of our voting shares and a majority of our voting shares not 16 Table of Contents owned by the interested shareholder.
After the three-year waiting period, such a transaction may require additional approvals under the Interested Shareholder Transactions Act, including approval by two-thirds of our voting shares and a majority of our voting shares not owned by the interested shareholder.
Our accounts receivable balance from McLane as of June 30, 2023 was $9.9 million. McLane is a large, national distributor that sells and distributes our products to several of our foodservice national chain restaurant accounts, principally in the quick service, fast casual and casual dining channels.
Our accounts receivable balance from McLane as of June 30, 2024 was $3.6 million. McLane is a large, national distributor that sells and distributes our products to several of our foodservice national chain restaurant accounts, principally in the quick service, fast casual and casual dining channels.
The costs associated with a significant cyber attack could include increased expenditures on cyber security measures, lost revenues from business interruption, litigation, regulatory fines and penalties and substantial damage to our reputation, any of which could have a material adverse effect on our business, results of operations, financial condition and cash flows.
The costs associated with a significant cyber attack could include increased expenditures on cybersecurity measures, lost revenues from business interruption, litigation, regulatory fines and penalties and 14 Table of Contents substantial damage to our reputation, any of which could have a material adverse effect on our business strategy, results of operations, financial condition and cash flows.
An adverse change in the financial condition of McLane could have a material adverse effect on our business, results of operations, financial condition and cash flows. Our net sales to McLane represented 11% of consolidated net sales for each of the years ended June 30, 2023 and 2022.
An adverse change in the financial condition of McLane could have a material adverse effect on our business, results of operations, financial condition and cash flows. Our net sales to McLane represented 8% and 11% of consolidated net sales for the years ended June 30, 2024 and 2023, respectively.
RISKS RELATED TO INVESTMENTS IN OUR COMMON STOCK Mr. Gerlach, Executive Chairman of our Board of Directors, has a significant ownership interest in our Company. As of June 30, 2023, Mr. Gerlach and the Gerlach family trusts owned or controlled approximately 28% of the outstanding shares of our common stock. Accordingly, Mr.
RISKS RELATED TO INVESTMENTS IN OUR COMMON STOCK Mr. Gerlach, a member of our Board of Directors, has a significant ownership interest in our Company. As of June 30, 2024, Mr. Gerlach and the Gerlach family trusts owned or controlled approximately 28% of the outstanding shares of our common stock. Accordingly, Mr.
In addition, an allegation of noncompliance with federal or state food laws and regulations could force us to cease production, stop selling our products or create significant adverse publicity that could harm our credibility and decrease market acceptance of our products.
In addition, an allegation of noncompliance with federal or state food laws and regulations could force us to cease production, delay the delivery or stop the sale of our products or create significant adverse publicity that could harm our credibility and decrease market acceptance of our products.
While we do not expect our operations to be directly impacted by the conflict at this time, changes in global grain and commodity flows could impact the markets in which we operate, which may in turn negatively impact our business, results of operations, supply chain and financial condition.
While we do not expect our operations to be directly impacted by the conflicts in Ukraine or the Middle East at this time, changes in global grain and commodity flows could impact the markets in which we operate, which may in turn negatively impact our business, results of operations, supply chain and financial condition.
The interests of Mr. Gerlach may conflict with the interests of other holders of our common stock. This conflict of interest may have an adverse effect on the price of our common stock. For instance, sales of a substantial number of shares of our common stock into the public market, particularly shares held by Mr.
This conflict of interest may have an adverse effect on the price of our common stock. For instance, sales of a substantial number of shares of our common stock into the public market, particularly shares held by Mr.
Cyber attacks, data breaches or other breaches of our information security systems, as well as those of our third-party service providers, including cloud service providers, and other third parties with which we do business, may cause equipment failures or disruptions to our operations.
Cyber attacks, data breaches or other breaches of our information security systems, as well as those of our third-party service providers, including cloud service providers, and other third parties with which we do business, may cause equipment failures, disruptions to our operations and access to or exfiltration of supplier, customer, employee or other confidential and personal information.
We believe that our labor relations with employees under collective bargaining contracts are satisfactory, but our inability to negotiate the renewal of any collective bargaining agreements, including the agreement at our Bedford Heights, Ohio facility, which is currently scheduled to expire in April 2024, or any prolonged work stoppages or other types of labor unrest could in some cases impair our ability to supply our products to customers, which could result in reduced sales and may distract our 10 Table of Contents management from focusing on other aspects of our business and strategic priorities.
We believe that our labor relations with employees under collective bargaining contracts are satisfactory, but our inability to negotiate the renewal of any collective bargaining agreements, including the agreement at one of our Columbus, Ohio facilities, which is currently scheduled to expire in March 2025, or any prolonged work stoppages or other types of labor unrest could in some cases impair our ability to supply our products to customers, which could result in reduced sales and may distract our management from focusing on other aspects of our business and strategic priorities.
Our accounts receivable balance from Walmart as of June 30, 2023 was $33.1 million. We may not be able to maintain our relationship with Walmart, and Walmart is not contractually obligated to purchase from us.
Our accounts receivable balance from Walmart as of June 30, 2024 was $26.7 million. We may not be able to maintain our relationship with Walmart, and Walmart is not contractually obligated to purchase from us.
Our inability to successfully renegotiate collective bargaining contracts and any prolonged work stoppages could have an adverse effect on our business, results of operations, financial condition and cash flows.
As a result, such public health emergencies could have a material adverse effect on our business, results of operations, financial condition and cash flows. Our inability to successfully renegotiate collective bargaining contracts and any prolonged work stoppages could have an adverse effect on our business, results of operations, financial condition and cash flows.
We may incur liabilities related to a multiemployer pension plan which could adversely affect our financial results. We make periodic contributions to a multiemployer pension plan related to our facility in Milpitas, California under a collective bargaining contract. The multiemployer pension plan provides pension benefits to employees and retired employees participating in the plan.
We make periodic contributions to a multiemployer pension plan related to our facility in Milpitas, California under a collective bargaining contract. The multiemployer pension plan provides pension benefits to employees and retired employees participating in the plan.
If we do incur or discover any material environmental liabilities or potential environmental liabilities in the future, we may face significant remediation costs and find it difficult to sell or lease any affected properties.
If we do incur or discover any material environmental liabilities or potential environmental liabilities in the future, we may face significant remediation costs and find it difficult to sell or lease any affected properties. We may incur liabilities related to a multiemployer pension plan which could adversely affect our financial results.
In addition, we may be subject to decreased availability or less favorable pricing of soybean oil as a result of increased demand for soybean oil in the production of alternative fuels, such as biodiesel. 11 Table of Contents Increases in the frequency and severity of extreme weather and natural disasters, such as drought, have in the past and may in the future result in material damage and disruptions to our manufacturing operations and distribution channels or our third-party manufacturers’ operations, particularly where a product is primarily sourced from a single location impacted by a climate event.
Increases in the frequency and severity of extreme weather and natural disasters, such as drought, have in the past and may in the future result in material damage and disruptions to our manufacturing operations and distribution channels or our third-party manufacturers’ operations, particularly where a product is primarily sourced from a single location impacted by a climate event.
We manufacture and sell numerous products pursuant to brand license agreements, including Chick-fil-A ® sauces and dressings, Olive Garden ® dressings and Buffalo Wild Wings ® sauces. Maintaining license agreements under which we market and sell certain brands is important to our business. Our brand license agreements are typically for a fixed term with no automatic renewal options or provisions.
Maintaining license agreements under which we market and sell certain brands is important to our business. Our brand license agreements are typically for a fixed term with no automatic renewal options or provisions.
We may not be able to successfully consummate proposed acquisitions or divestitures, and integrating acquired businesses may present financial, managerial and operational challenges. We continually evaluate the acquisition of other businesses that would strategically fit within our operations.
We may not be able to successfully consummate proposed acquisitions or divestitures, and integrating acquired businesses may present financial, managerial and operational challenges. We look for and evaluate potential opportunities to acquire other businesses or assets that would strategically fit within our operations. We may be unable to identify businesses that complement our strategy for growth.
If we are unable to adequately protect against these vulnerabilities, our operations could be disrupted, or we may suffer financial damage or loss because of lost or misappropriated information.
Our information technology systems could also be adversely affected by changes relating to remote work arrangements for our employees. If we are unable to adequately protect against these vulnerabilities, our operations could be disrupted, or we may suffer financial damage or loss because of lost or misappropriated information.
Failure to adequately address privacy and security concerns, even if unfounded, or comply with applicable privacy and data security laws, rules, regulations and policies could result in additional cost and liability to us, administrative actions, damage our reputation, inhibit growth, and otherwise adversely affect our business.
Failure to adequately address privacy and security concerns, even if unfounded, or comply with applicable privacy and data security laws, rules, regulations and policies could result in additional cost and liability to us, administrative actions, damage our reputation, inhibit growth, and otherwise adversely affect our business. 15 Table of Contents RISKS RELATED TO REGULATORY AND LEGAL MATTERS We are subject to federal, state and local government regulations that could adversely affect our business and results of operations.
Gerlach has significant influence on all matters submitted to a vote of the holders of our common stock, including the election of directors. Mr. Gerlach’s voting power may also have the effect of discouraging transactions involving an actual or a potential change of control of our Company, regardless of whether a premium is offered over then-current market prices.
Gerlach’s voting power may also have the effect of discouraging transactions involving an actual or a potential change of control of our Company, regardless of whether a premium is offered over then-current market prices. 16 Table of Contents The interests of Mr. Gerlach may conflict with the interests of other holders of our common stock.
Further, negative opinions or commentary posted online regarding our brands, regardless of their underlying merits or accuracy, could diminish the value of our brands and have a material adverse effect on our business, results of operations, financial condition and cash flows. 12 Table of Contents We manufacture and sell numerous products pursuant to license agreements and failure to maintain or renew these agreements could adversely affect our business.
Further, negative opinions or commentary posted online regarding our brands, regardless of their underlying merits or accuracy, could diminish the value of our brands and have a material adverse effect on our business, results of operations, financial condition and cash flows.
For example, our sales group and our production and distribution facilities utilize information technology to increase efficiencies and limit costs. Furthermore, a significant portion of the communications between our personnel, customers, and suppliers depends on information technology and an uninterrupted and functioning infrastructure, including telecommunications.
Furthermore, a significant portion of the communications between our personnel, customers, and suppliers depends on information technology and an uninterrupted and functioning infrastructure, including telecommunications.
As a result, any such increased expenditures may not maintain or enhance our market share and could result in lower profitability. Walmart is our largest Retail customer.
The success of marketing, advertising and new product innovation is subject to risks, including uncertainties about trade and consumer acceptance. As a result, any such increased expenditures may not maintain or enhance our market share and could result in lower profitability. Walmart is our largest Retail customer.
Furthermore, any sudden and dramatic increases in electricity or natural gas costs could have a material adverse effect on our business, results of operations, financial condition and cash flows. We limit our exposure to price fluctuations in energy-related costs by periodically entering into longer-term, fixed-price contracts for natural gas and electricity supply for some of our manufacturing facilities.
We limit our exposure to price fluctuations in energy-related costs by periodically entering into longer-term, fixed-price contracts for natural gas and electricity supply for some of our manufacturing facilities.
Our failure to anticipate and respond to changing consumer preferences on a timely basis or in line with our competitors could result in reduced demand and price decreases for our products, which could have a material adverse effect on our business, financial condition, and results of operations.
Our failure to anticipate and respond to changing consumer preferences on a timely basis or in line with our competitors could result in reduced demand and price decreases for our products, which could have a material adverse effect on our business, financial condition, and results of operations. 12 Table of Contents In order to maintain our existing market share or capture increased market share among our retail and foodservice channels, we may decide to increase our spending on marketing and promotional costs, advertising and new product innovation.
As a result, such public health emergencies could have a material adverse effect on our business, results of operations, financial condition and cash flows. Cyber attacks, data breaches or other breaches of our information security systems have had, and in the future could have, an adverse effect on our business, results of operations, financial condition and cash flows.
Our ultimate success in these channels and the resulting impacts to our financial results are uncertain. RISKS RELATED TO CYBERSECURITY AND INFORMATION TECHNOLOGY Cyber attacks, data breaches or other breaches of our information security systems have had, and in the future could have, an adverse effect on our business strategy, results of operations, financial condition and cash flows.
Our information technology systems may be vulnerable to a variety of interruptions due to events beyond our control, including, but not limited to, natural disasters, terrorist attacks, telecommunications failures, cyber attacks and other security issues. Our information technology systems could also be adversely affected by changes relating to remote work arrangements for our employees.
Our information technology systems may be vulnerable to a variety of interruptions due to events beyond our control, including, but not limited to, natural disasters and other severe weather events, terrorist attacks, telecommunications failures, cyber attacks and other security issues. Furthermore, the rapid evolution and increased adoption of artificial intelligence technologies may intensify our cybersecurity risks.
Any of these events could have a material adverse effect on our business, results of operations, financial condition and cash flows.
If we fail to adequately respond to any such consumer concerns, we could suffer lost sales and damage our brand image or our reputation. Any of these events could have a material adverse effect on our business, results of operations, financial condition and cash flows.
If such losses are greater than expected or if we lose distribution due to price increases, our business, financial condition and results of operations may be materially and adversely affected. The Russia-Ukraine conflict is fast-moving and uncertain.
If such losses are greater than expected or if we lose distribution due to price increases, our business, financial condition and results of operations may be materially and adversely affected. Geopolitical instability could lead to unavailability, shortages or higher costs of raw materials due to supply chain disruptions, delays in delivery, or the imposition of sanctions or increased tariffs.
Our ultimate success in these channels and the resulting impacts to our financial results are uncertain. 14 Table of Contents RISKS RELATED TO INFORMATION TECHNOLOGY Technology failures could disrupt our operations and negatively impact our business. We increasingly rely on information technology systems to conduct and manage our business operations, including the processing, transmitting, and storing of electronic information.
Technology failures could disrupt our operations and negatively impact our business. We increasingly rely on information technology systems to conduct and manage our business operations, including the processing, transmitting, and storing of electronic information. For example, our sales group and our production and distribution facilities utilize information technology to increase efficiencies and limit costs.
We are subject to volatility in energy-related costs that affect the cost of producing and distributing our products, including our petroleum-derived packaging materials. For example, the conflict in the Ukraine has resulted in and may continue to cause market disruptions, including significant volatility in the price and availability of energy.
We are subject to volatility in energy-related costs that affect the cost of producing and distributing our products, including our petroleum-derived packaging materials. Furthermore, any sudden and dramatic increases in electricity or natural gas costs could have a material adverse effect on our business, results of operations, financial condition and cash flows.
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Consumers may increasingly require that our products and processes meet stricter standards than are required by applicable 7 Table of Contents governmental agencies, thereby increasing the cost of manufacturing our products. If we fail to adequately respond to any such consumer concerns, we could suffer lost sales and damage our brand image or our reputation.
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Certain negative publicity regarding the food industry or our products could also increase our cost of operations.
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Global grain markets have exhibited increased volatility as sanctions have been imposed on Russia by the United States, the United Kingdom, the European Union, and others in response to Russia’s invasion of Ukraine.
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If we do succeed in 10 Table of Contents identifying a company with such a business, we may not be able to acquire the company or an interest in the company on terms that are favorable to us for many reasons, including: • a failure to agree on the terms of the acquisition or investment; • incompatibility between us and the management of the company that we wish to acquire or invest; • competition from other potential acquirers; • a lack of capital to make the acquisition or investment; or • the unwillingness of the company to partner with us.
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In order to maintain our existing market share or capture increased market share among our retail and foodservice channels, we may decide to increase our spending on marketing and promotional costs, advertising and new product innovation. The success of marketing, advertising and new product innovation is subject to risks, including uncertainties about trade and consumer acceptance.
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In addition, we may be subject to decreased availability or less favorable pricing of soybean oil as a result of increased demand for soybean oil in the production of alternative fuels, such as biodiesel.
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For more information about risks related to cyber attacks and data privacy, see the “Risks Related To Our Operations” section above and the “Risks Related to Regulatory and Legal Matters” section below. RISKS RELATED TO REGULATORY AND LEGAL MATTERS We are subject to federal, state and local government regulations that could adversely affect our business and results of operations.
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We manufacture and sell numerous products pursuant to license agreements and failure to maintain or renew these agreements could adversely affect our business. We manufacture and sell numerous products pursuant to brand license agreements, including Chick-fil-A ® sauces and dressings, Olive Garden ® dressings and Buffalo Wild Wings ® sauces.
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For example, consumers have increasingly focused on well-being, including reducing sodium and added sugar consumption or using weight-loss drugs to reduce consumption overall or change consumption patterns, as well as the source and authenticity of ingredients in the foods they consume.
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The rapid ongoing evolution and increased adoption of emerging technologies, such as artificial intelligence and machine learning, may make it more difficult to avoid unauthorized disclosure and misappropriation of proprietary information and to anticipate and implement protective measures to recognize, detect, and prevent the occurrence of any of the cyber attacks.
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The imposition or proposed imposition of additional product labeling or warning requirements could reduce overall consumption of our products, lead to negative publicity (whether based in scientific fact or not) or leave consumers with the perception (whether or not valid) that our products do not meet their health and wellness needs.
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Further, now that the Supreme Court of the United States has overturned the Chevron doctrine of deference to regulatory agencies in litigation against those agencies, more companies may bring lawsuits against regulatory agencies to challenge longstanding decisions and policies, which could undermine the agency’s authority, and disrupt its normal operations, lead to uncertainty in the industry, and delay the review or implementation of our marketing plans.
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It is difficult to predict how current and future legislation, executive actions, and litigation, including the executive orders, will be implemented, and the extent to which they will impact our business and regulatory agencies’ ability to exercise their authority.
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To the extent any legislative or executive actions impose constraints on a regulatory agency’s ability to engage in oversight and implementation activities in the normal course, our business may be negatively impacted.
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Gerlach has significant influence on all matters submitted to a vote of the holders of our common stock, including the election of directors. Mr.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following table summarizes our principal manufacturing locations (including aggregation of multiple facilities): Location Principal Products Produced Business Segment(s) Terms of Occupancy Altoona, IA Frozen pasta Retail and Foodservice Owned Bedford Heights, OH Frozen breads Retail and Foodservice Owned Columbus, OH Sauces, dressings, dips Retail and Foodservice Owned Cudahy, WI Sprouted grain bakery products Retail Owned Horse Cave, KY Sauces, dressings, frozen rolls Retail and Foodservice Owned Luverne, AL Frozen rolls Retail and Foodservice Owned Milpitas, CA Sauces and dressings Retail and Foodservice Owned Saline, MI Flatbread products Retail and Foodservice Owned Vineland, NJ Frozen breads Retail and Foodservice Owned Wareham, MA (1) Croutons Retail and Foodservice Leased (1) Fully leased for term expiring in fiscal 2024.
Biggest changeThe following table summarizes our principal manufacturing locations (including aggregation of multiple facilities): Location Principal Products Produced Business Segment(s) Terms of Occupancy Altoona, IA Frozen pasta Retail and Foodservice Owned Bedford Heights, OH Frozen breads Retail and Foodservice Owned Columbus, OH Sauces, dressings, dips Retail and Foodservice Owned Horse Cave, KY Sauces, dressings, frozen rolls Retail and Foodservice Owned Luverne, AL Frozen rolls Retail and Foodservice Owned Milpitas, CA Sauces and dressings Retail and Foodservice Owned Vineland, NJ Frozen breads Retail and Foodservice Owned Wareham, MA (1) Croutons Retail and Foodservice Leased (1) Fully leased for term expiring in fiscal 2029. 18 Table of Contents The following table summarizes our principal warehouses (including aggregation of multiple facilities), which are used to distribute products to our customers: Location Business Segment(s) Terms of Occupancy Columbus, OH (1) Retail and Foodservice Leased Grove City, OH Retail and Foodservice Owned and third-party service Horse Cave, KY Retail and Foodservice Owned Tracy, CA Retail and Foodservice Third-party service Union City, GA (2) Retail and Foodservice Leased (1) Fully leased for terms expiring in fiscal 2025 and fiscal 2027.
Item 2. Properties We use 2.6 million square feet of space for our operations. Of this space, 0.7 million square feet are leased. These amounts exclude facilities operated by third-party service providers.
Item 2. Properties We use 2.7 million square feet of space for our operations. Of this space, 0.9 million square feet are leased. These amounts exclude facilities operated by third-party service providers.
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The following table summarizes our principal warehouses (including aggregation of multiple facilities), which are used to distribute products to our customers: Location Business Segment(s) Terms of Occupancy Columbus, OH (1) Retail and Foodservice Leased and third-party service Grove City, OH Retail and Foodservice Owned Horse Cave, KY Retail and Foodservice Owned McDonough, GA Retail and Foodservice Third-party service Tracy, CA Retail and Foodservice Third-party service (1) Leased portions have terms expiring in fiscal 2025 and fiscal 2027.
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(2) Fully leased for term expiring in fiscal 2034.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAn unfavorable ruling could include monetary damages or an injunction prohibiting us from manufacturing or selling one or more products or could lead to us altering the manner in which we manufacture or sell one or more products, which could have a material impact on net income for the period in which the ruling occurs and future periods. 17 Table of Contents We are required to disclose certain environmental matters when a governmental authority is a party to the proceedings and such proceedings involve potential monetary sanctions that we reasonably believe will be in excess of an applied threshold not to exceed $1 million.
Biggest changeAn unfavorable ruling could include monetary damages or an injunction prohibiting us from manufacturing or selling one or more products or could lead to us altering the manner in which we manufacture or sell one or more products, which could have a material impact on net income for the period in which the ruling occurs and future periods.
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We are required to disclose certain environmental matters when a governmental authority is a party to the proceedings and such proceedings involve potential monetary sanctions that we reasonably believe will be in excess of an applied threshold not to exceed $1 million.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIn the fourth quarter, we made the following repurchases of our common stock: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans Maximum Number of Shares that May Yet be Purchased Under the Plans April 1-30, 2023 (1) 10 $ 202.88 10 1,176,794 May 1-31, 2023 — $ — — 1,176,794 June 1-30, 2023 (1) 55 $ 198.33 55 1,176,739 Total 65 $ 199.03 65 1,176,739 (1) Represents shares that were repurchased in satisfaction of tax withholding obligations arising from the vesting of restricted stock granted to employees under the Lancaster Colony Corporation 2015 Omnibus Incentive Plan. 19 Table of Contents PERFORMANCE GRAPH COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN OF LANCASTER COLONY CORPORATION, THE S&P MIDCAP 400 INDEX, THE S&P 1500 PACKAGED FOODS & MEATS INDEX AND THE DOW JONES U.S.
Biggest changeIn the fourth quarter, we made the following repurchases of our common stock: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans Maximum Number of Shares that May Yet be Purchased Under the Plans April 1-30, 2024 (1) 14 $ 204.17 14 1,131,676 May 1-31, 2024 (1) 26 $ 191.51 26 1,131,650 June 1-30, 2024 (1) 86 $ 188.97 86 1,131,564 Total 126 $ 191.18 126 1,131,564 (1) Represents shares that were repurchased in satisfaction of tax withholding obligations arising from the vesting of restricted stock granted to employees under the Lancaster Colony Corporation 2015 Omnibus Incentive Plan. 20 Table of Contents PERFORMANCE GRAPH COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN OF LANCASTER COLONY CORPORATION, THE S&P MIDCAP 400 INDEX, AND THE S&P 1500 PACKAGED FOODS & MEATS INDEX The graph set forth below compares the five-year cumulative total return from investing $100 on June 30, 2019 in each of our Common Stock, the S&P Midcap 400 Index and the S&P 1500 Packaged Foods & Meats Index.
This is not the actual number of beneficial owners of our common stock, as shares are held in “street name” by brokers and others on behalf of individual owners. We have increased our regular cash dividends for 60 consecutive years. Future dividends will depend on our earnings, financial condition and other factors.
This is not the actual number of beneficial owners of our common stock, as shares are held in “street name” by brokers and others on behalf of individual owners. We have increased our regular cash dividends for 61 consecutive years. Future dividends will depend on our earnings, financial condition and other factors.
The information regarding compensation plans under which equity securities are authorized for issuance is incorporated by reference to the information contained in our definitive proxy statement for our November 2023 Annual Meeting of Shareholders to be filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act.
The information regarding compensation plans under which equity securities are authorized for issuance is incorporated by reference to the information contained in our definitive proxy statement for our November 2024 Annual Meeting of Shareholders to be filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock trades on The NASDAQ Global Select Market under the symbol LANC. The number of shareholders of record as of August 1, 2023 was approximately 640.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock trades on The NASDAQ Global Select Market under the symbol LANC. The number of shareholders of record as of August 1, 2024 was approximately 620.
Issuer Purchases of Equity Securities In November 2010, our Board of Directors approved a share repurchase authorization of 2,000,000 common shares, of which 1,176,739 common shares remained authorized for future repurchases at June 30, 2023. This share repurchase authorization does not have a stated expiration date.
Issuer Purchases of Equity Securities In November 2010, our Board of Directors approved a share repurchase authorization of 2,000,000 common shares, of which 1,131,564 common shares remained authorized for future repurchases at June 30, 2024. This share repurchase authorization does not have a stated expiration date.
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FOOD PRODUCERS INDEX The graph set forth below compares the five-year cumulative total return from investing $100 on June 30, 2018 in each of our Common Stock, the S&P Midcap 400 Index, the S&P 1500 Packaged Foods & Meats Index and the Dow Jones U.S. Food Producers Index.
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The total return calculation assumes that all dividends are reinvested, including any special dividends.
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The total return calculation assumes that all dividends are reinvested, including any special dividends. Going forward, the Dow Jones U.S. Food Producers Index will be replaced by the S&P 1500 Packaged Foods & Meats Index, which is a published industry index used to determine certain components of our stock-based compensation.
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Cumulative Total Return (Dollars) 6/19 6/20 6/21 6/22 6/23 6/24 Lancaster Colony Corporation 100.00 106.16 134.72 91.60 145.57 139.54 S&P Midcap 400 100.00 93.30 142.98 122.05 143.54 163.02 S&P 1500 Packaged Foods & Meats 100.00 104.53 122.55 130.26 139.03 124.49 There can be no assurance that our stock performance will continue into the future with the same or similar trends depicted in the above graph.
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Cumulative Total Return (Dollars) 6/18 6/19 6/20 6/21 6/22 6/23 Lancaster Colony Corporation 100.00 109.10 115.82 146.98 99.93 158.81 S&P Midcap 400 100.00 101.36 94.58 144.93 123.71 145.49 S&P 1500 Packaged Foods & Meats 100.00 106.85 111.69 130.95 139.18 148.55 Dow Jones U.S.
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Food Producers 100.00 103.72 106.15 132.36 137.00 147.09 There can be no assurance that our stock performance will continue into the future with the same or similar trends depicted in the above graph.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeItems which could impact these forward-looking statements include, but are not limited to, those risk factors identified in Item 1A and: • efficiencies in plant operations and our overall supply chain network; • the reaction of customers or consumers to pricing actions we take to offset inflationary costs; • price and product competition; • adequate supply of labor for our manufacturing facilities; • the impact of customer store brands on our branded retail volumes; • inflationary pressures resulting in higher input costs; • adverse changes in freight, energy or other costs of producing, distributing or transporting our products; • fluctuations in the cost and availability of ingredients and packaging; • dependence on contract manufacturers, distributors and freight transporters, including their operational capacity and financial strength in continuing to support our business; • stability of labor relations; • dependence on key personnel and changes in key personnel; • cyber-security incidents, information technology disruptions, and data breaches; • capacity constraints that may affect our ability to meet demand or may increase our costs; • geopolitical events, such as Russia’s invasion of Ukraine, that could create unforeseen business disruptions and impact the cost or availability of raw materials and energy; • the potential for loss of larger programs or key customer relationships; • failure to maintain or renew license agreements; • significant shifts in consumer demand and disruptions to our employees, communities, customers, supply chains, production planning, operations, and production processes resulting from the impacts of epidemics, pandemics or similar widespread public health concerns and disease outbreaks; • changes in demand for our products, which may result from loss of brand reputation or customer goodwill; • the possible occurrence of product recalls or other defective or mislabeled product costs; • the success and cost of new product development efforts; • the lack of market acceptance of new products; • the extent to which business acquisitions are completed and acceptably integrated; • the ability to successfully grow acquired businesses; • the effect of consolidation of customers within key market channels; • maintenance of competitive position with respect to other manufacturers; • the outcome of any litigation or arbitration; • changes in estimates in critical accounting judgments; • the impact of any regulatory matters affecting our food business, including any required labeling changes and their impact on consumer demand; • the impact of fluctuations in our pension plan asset values on funding levels, contributions required and benefit costs; and • certain other risk factors, including those discussed in other filings we have submitted to the Securities and Exchange Commission. 29 Table of Contents
Biggest changeItems which could impact these forward-looking statements include, but are not limited to, those risk factors identified in Item 1A and: • efficiencies in plant operations and our overall supply chain network; • price and product competition; • changes in demand for our products, which may result from changes in consumer behavior or loss of brand reputation or customer goodwill; • the impact of customer store brands on our branded retail volumes; • adequate supply of labor for our manufacturing facilities; • stability of labor relations; • adverse changes in freight, energy or other costs of producing, distributing or transporting our products; • the reaction of customers or consumers to pricing actions we take to offset inflationary costs; • inflationary pressures resulting in higher input costs; • fluctuations in the cost and availability of ingredients and packaging; • capacity constraints that may affect our ability to meet demand or may increase our costs; • dependence on contract manufacturers, distributors and freight transporters, including their operational capacity and financial strength in continuing to support our business; • the impact of any regulatory matters affecting our food business, including any additional requirements imposed by the FDA or any state or local government; • dependence on key personnel and changes in key personnel; • cyber-security incidents, information technology disruptions, and data breaches; • the potential for loss of larger programs or key customer relationships; • failure to maintain or renew license agreements; • geopolitical events that could create unforeseen business disruptions and impact the cost or availability of raw materials and energy; • significant shifts in consumer demand and disruptions to our employees, communities, customers, supply chains, production planning, operations, and production processes resulting from the impacts of epidemics, pandemics or similar widespread public health concerns and disease outbreaks; • the possible occurrence of product recalls or other defective or mislabeled product costs; • the success and cost of new product development efforts; • the lack of market acceptance of new products; • the extent to which good-fitting business acquisitions are identified, acceptably integrated, and achieve operational and financial performance objectives; • the effect of consolidation of customers within key market channels; • maintenance of competitive position with respect to other manufacturers; • the outcome of any litigation or arbitration; • changes in estimates in critical accounting judgments; • the impact of fluctuations in our pension plan asset values on funding levels, contributions required and benefit costs; and • certain other risk factors, including those discussed in other filings we have submitted to the Securities and Exchange Commission. 29 Table of Contents
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” and those set forth in Item 1A of this Annual Report on Form 10-K. Our discussion of results for 2023 compared to 2022 is included herein.
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” and those set forth in Item 1A of this Annual Report on Form 10-K. Our discussion of results for 2024 compared to 2023 is included herein.
See Note 4 to the consolidated financial statements for further information about our lease obligations, including the maturities of minimum lease payments. It is not certain when the liabilities for the underfunded defined benefit pension liability, other post-employment benefit obligations, tax liabilities, noncurrent workers compensation obligations, deferred compensation and interest on deferred compensation will become due.
See Note 3 to the consolidated financial statements for further information about our lease obligations, including the maturities of minimum lease payments. It is not certain when the liabilities for the underfunded defined benefit pension liability, other post-employment benefit obligations, tax liabilities, noncurrent workers compensation obligations, deferred compensation and interest on deferred compensation will become due.
At June 30, 2023, we were in compliance with all applicable provisions and covenants of this facility, and we exceeded the requirements of the financial covenants by substantial margins. At June 30, 2023, there were no events that would constitute a default under this facility. We currently expect to remain in compliance with the Facility’s covenants for the foreseeable future.
At June 30, 2024, we were in compliance with all applicable provisions and covenants of this facility, and we exceeded the requirements of the financial covenants by substantial margins. At June 30, 2024, there were no events that would constitute a default under this facility. We currently expect to remain in compliance with the Facility’s covenants for the foreseeable future.
If we were to borrow outside of the Facility under current market terms, our average interest rate may increase and have an adverse effect on our results of operations. Based on our current plans and expectations, we believe our capital expenditures for 2024 could total between $70 and $80 million.
If we were to borrow outside of the Facility under current market terms, our average interest rate may increase and have an adverse effect on our results of operations. Based on our current plans and expectations, we believe our capital expenditures for 2025 could total between $70 and $80 million.
For discussion of results for 2022 compared to 2021, see our 2022 Annual Report on Form 10-K. OVERVIEW Business Overview Lancaster Colony Corporation is a manufacturer and marketer of specialty food products for the retail and foodservice channels. Our financial results are presented as two reportable segments: Retail and Foodservice.
For discussion of results for 2023 compared to 2022, see our 2023 Annual Report on Form 10-K. OVERVIEW Business Overview Lancaster Colony Corporation is a manufacturer and marketer of specialty food products for the retail and foodservice channels. Our financial results are presented as two reportable segments: Retail and Foodservice.
Examples of such obligations are commitments to purchase raw materials or packaging inventory that has not yet been received as of June 30, 2023, as well as purchase orders and longer-term purchase arrangements related to the procurement of services, including IT service agreements, and property, plant and equipment.
Examples of such obligations are commitments to purchase raw materials or packaging inventory that has not yet been received as of June 30, 2024, as well as purchase orders and longer-term purchase arrangements related to the procurement of services, including IT service agreements, and property, plant and equipment.
Due to the nature of its terms, when we have outstanding borrowings under the Facility, they will be classified as long-term debt. The Facility contains certain restrictive covenants, including limitations on indebtedness, asset sales and acquisitions, and financial covenants relating to interest coverage and leverage.
Due to the nature of its terms, when we have outstanding borrowings under the Facility, they will be classified as long-term debt. The Facility contains certain restrictive covenants, including limitations on liens, asset sales and acquisitions, and financial covenants relating to interest coverage and leverage.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Our fiscal year begins on July 1 and ends on June 30. Unless otherwise noted, references to “year” pertain to our fiscal year; for example, 2023 refers to fiscal 2023, which is the period from July 1, 2022 to June 30, 2023.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Our fiscal year begins on July 1 and ends on June 30. Unless otherwise noted, references to “year” pertain to our fiscal year; for example, 2024 refers to fiscal 2024, which is the period from July 1, 2023 to June 30, 2024.
We had no borrowings outstanding under the Facility at June 30, 2023. At June 30, 2023, we had $2.8 million of standby letters of credit outstanding, which reduced the amount available for borrowing under the Facility. The Facility expires in March 2025, and all outstanding amounts are then due and payable.
We had no borrowings outstanding under the Facility at June 30, 2024. At June 30, 2024, we had $2.2 million of standby letters of credit outstanding, which reduced the amount available for borrowing under the Facility. The Facility expires in March 2029, and all outstanding amounts are then due and payable.
See Notes 8, 11 and 12 to the consolidated financial statements for further information about these liabilities. Certain other contractual obligations are not recognized as liabilities in our consolidated financial statements.
See Notes 7, 10 and 11 to the consolidated financial statements for further information about these liabilities. Certain other contractual obligations are not recognized as liabilities in our consolidated financial statements.
In Foodservice, we expect sales volumes to be led by growth from select quick-service restaurant customers in our mix of national chain restaurant accounts, while external factors, including U.S. economic performance and potential changes in consumer sentiment, may impact demand.
In the Foodservice segment, we expect sales volumes to be led by growth from select quick-service restaurant customers in our mix of national chain restaurant accounts, while external factors, including U.S. economic performance and consumer behavior, may impact demand.
Sales in the current year were unfavorably impacted by advance orders accounting for an estimated $11 million in Retail net sales near the end of fiscal 2022 ahead of our ERP go-live, which commenced on July 1, 2022. Retail segment sales volumes, measured in pounds shipped, declined 4% in the current year.
The increase in 2024 Retail net sales also reflects that prior-year sales were unfavorably impacted by advance orders accounting for an estimated $11 million in Retail net sales near the end of fiscal 2022 ahead of our ERP go-live, which commenced on July 1, 2022. Retail segment sales volumes, measured in pounds shipped, increased 1.4% in the current year.
For 2023 and 2022, the impact of net windfall tax benefits from stock-based compensation reduced our effective tax rate by 0.4% and 0.1%, respectively. Earnings Per Share As influenced by the factors discussed above, diluted net income per share totaled $4.04 in 2023, an increase from the 2022 total of $3.25 per diluted share.
For 2024 and 2023, the impact of net windfall tax benefits from stock-based compensation reduced our effective tax rate by less than 0.1% and 0.4%, respectively. Earnings Per Share As influenced by the factors discussed above, diluted net income per share totaled $5.76 in 2024, an increase from the 2023 total of $4.04 per diluted share.
Our balance sheet maintained fundamental financial strength during 2023 as we ended the year with $88 million in cash and equivalents, along with shareholders’ equity of $862 million and no debt. Under our unsecured revolving credit facility (“Facility”), we may borrow up to a maximum of $150 million at any one time.
Our balance sheet maintained fundamental financial strength during 2024 as we ended the year with $163 million in cash and equivalents, along with shareholders’ equity of $926 million and no debt. Under our unsecured revolving credit facility (“Facility”), which we renewed in March 2024, we may borrow up to a maximum of $150 million at any one time.
We completed the final wave of the implementation phase in August 2023 as planned and will shift our focus towards leveraging the capabilities of our new ERP system in the coming year.
We completed the final wave of the implementation phase in August 2023 as planned and have shifted our focus towards leveraging the capabilities of our new ERP system.
The regular dividend payout rate for 2023 was $3.35 per share, as compared to $3.15 per share in 2022. This past fiscal year marked the 60 th consecutive year of increased regular cash dividends.
The regular dividend payout rate for 2024 was $3.55 per share, as compared to $3.35 per share in 2023. This past fiscal year marked the 61 st consecutive year of increased regular cash dividends.
Recent examples of resulting investments include: • a significant capacity expansion project for our Marzetti dressing and sauce facility in Horse Cave, Kentucky that reached substantial completion in March 2023; • a capacity expansion project for one of our Marzetti dressing and sauce facilities in Columbus, Ohio that was completed in January 2022; • a significant infrastructure improvement and capacity expansion project for our frozen pasta facility in Altoona, Iowa that was completed in March 2022; and • the establishment of a Transformation Program Office in 2019 that serves to coordinate our various capital and integration efforts, including our enterprise resource planning system (“ERP”) project and related initiatives, Project Ascent, that is currently in the implementation phase. 21 Table of Contents Project Ascent commenced in late 2019 and entails the replacement of our primary customer and manufacturing transactional systems, warehousing systems, and financial systems with an integrated SAP S/4HANA system.
Recent examples of resulting investments include: • a significant capacity expansion project for our Marzetti dressing and sauce facility in Horse Cave, Kentucky that reached substantial completion in March 2023; • a capacity expansion project for one of our Marzetti dressing and sauce facilities in Columbus, Ohio that was completed in January 2022; • a significant infrastructure improvement and capacity expansion project for our frozen pasta facility in Altoona, Iowa that was completed in March 2022; and • our enterprise resource planning system (“ERP”) project and related initiatives, Project Ascent, that reached completion of the implementation phase in August 2023. 22 Table of Contents Project Ascent entailed the replacement of our primary customer and manufacturing transactional systems, warehousing systems, and financial systems with an integrated SAP S/4HANA system.
The operations of this business were not classified as discontinued operations as the closure did not represent a strategic shift that would have a major effect on our operations or financial results.
The operations of these facilities have not been classified as discontinued operations as the closures do not represent a strategic shift that would have a major effect on our operations or financial results.
Sales in the current year were unfavorably impacted by the advance ordering that occurred near the end of fiscal 2022 ahead of our ERP go-live, which reduced Foodservice net sales in the current year by an estimated $14 million. Foodservice segment sales volumes, measured in pounds shipped, decreased 5% in the current year.
Deflationary pricing was a headwind to Foodservice segment sales growth. Sales in the prior year were unfavorably impacted by the advance ordering that occurred near the end of fiscal 2022 ahead of our ERP go-live, which reduced Foodservice net sales in the prior year by an estimated $14 million.
These allowances can fluctuate based on the level of sales and promotional programs as well as the timing of deductions. Goodwill and Other Intangible Assets Goodwill is not amortized. It is evaluated annually at April 30 by applying impairment testing procedures.
These allowances can fluctuate based on the level of sales and promotional programs as well as the timing of deductions. Goodwill Goodwill is not amortized. It is evaluated annually at April 30 by applying impairment testing procedures. We evaluate the future economic benefit of the recorded goodwill when events or circumstances indicate potential recoverability concerns.
Financing activities used net cash totaling $106.9 million and $97.3 million in 2023 and 2022, respectively. The vast majority of the cash used in financing activities is attributed to the payment of dividends, and the 2023 increase in cash used in financing activities primarily reflects higher levels of dividend payments, tax withholdings for stock-based compensation and share repurchases.
The vast majority of the cash used in financing activities is attributed to the payment of dividends, and the 2024 increase in cash used in financing activities primarily reflects higher levels of dividend payments, as partially offset by lower levels of share repurchases and tax withholdings for stock-based compensation.
RESULTS OF CONSOLIDATED OPERATIONS (Dollars in thousands, except per share data) Years Ended June 30, Change 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Net Sales $ 1,822,527 $ 1,676,390 $ 1,467,067 $ 146,137 9 % $ 209,323 14 % Cost of Sales 1,433,959 1,320,671 1,080,344 113,288 9 % 240,327 22 % Gross Profit 388,568 355,719 386,723 32,849 9 % (31,004) (8) % Gross Margin 21.3 % 21.2 % 26.4 % Selling, General and Administrative Expenses 222,091 212,098 205,363 9,993 5 % 6,735 3 % Change in Contingent Consideration — (3,470) (5,687) 3,470 (100) % 2,217 (39) % Restructuring and Impairment Charges 24,969 35,180 1,195 (10,211) (29) % 33,985 N/M Operating Income 141,508 111,911 185,852 29,597 26 % (73,941) (40) % Operating Margin 7.8 % 6.7 % 12.7 % Other, Net 1,789 477 (107) 1,312 275 % 584 546 % Income Before Income Taxes 143,297 112,388 185,745 30,909 28 % (73,357) (39) % Taxes Based on Income 32,011 22,802 43,413 9,209 40 % (20,611) (47) % Effective Tax Rate 22.3 % 20.3 % 23.4 % Net Income $ 111,286 $ 89,586 $ 142,332 $ 21,700 24 % $ (52,746) (37) % Diluted Net Income Per Common Share $ 4.04 $ 3.25 $ 5.16 $ 0.79 24 % $ (1.91) (37) % 22 Table of Contents Net Sales Consolidated net sales for the year ended June 30, 2023 increased 9% to a new record of $1,823 million from the prior-year record total of $1,676 million, reflecting higher net sales for both the Retail and Foodservice segments driven by pricing to offset inflationary costs.
RESULTS OF CONSOLIDATED OPERATIONS (Dollars in thousands, except per share data) Years Ended June 30, Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Net Sales $ 1,871,759 $ 1,822,527 $ 1,676,390 $ 49,232 2.7 % $ 146,137 8.7 % Cost of Sales 1,439,457 1,433,959 1,320,671 5,498 0.4 % 113,288 8.6 % Gross Profit 432,302 388,568 355,719 43,734 11.3 % 32,849 9.2 % Gross Margin 23.1 % 21.3 % 21.2 % Selling, General and Administrative Expenses 218,065 222,091 212,098 (4,026) (1.8) % 9,993 4.7 % Change in Contingent Consideration — — (3,470) — N/M 3,470 (100.0) % Restructuring and Impairment Charges 14,874 24,969 35,180 (10,095) (40.4) % (10,211) (29.0) % Operating Income 199,363 141,508 111,911 57,855 40.9 % 29,597 26.4 % Operating Margin 10.7 % 7.8 % 6.7 % Other, Net 6,152 1,789 477 4,363 243.9 % 1,312 275.1 % Income Before Income Taxes 205,515 143,297 112,388 62,218 43.4 % 30,909 27.5 % Taxes Based on Income 46,902 32,011 22,802 14,891 46.5 % 9,209 40.4 % Effective Tax Rate 22.8 % 22.3 % 20.3 % Net Income $ 158,613 $ 111,286 $ 89,586 $ 47,327 42.5 % $ 21,700 24.2 % Diluted Net Income Per Common Share $ 5.76 $ 4.04 $ 3.25 $ 1.72 42.6 % $ 0.79 24.3 % Net Sales Consolidated net sales for the year ended June 30, 2024 increased 2.7% to a new record of $1,871.8 million from the prior-year record total of $1,822.5 million, reflecting higher net sales for both the Retail and Foodservice segments driven primarily by volume gains.
Although typically less notable, we are also exposed to the unfavorable effects of general inflation beyond material and freight costs, especially in the areas of labor rates, including annual wage adjustments and benefit costs.
While we attempt to pass through sustained increases in these costs, any such price adjustments can lag the changes in the related input costs. 27 Table of Contents Although typically less notable, we are also exposed to the unfavorable effects of general inflation beyond material and freight costs, especially in the areas of labor rates, including annual wage adjustments and benefit costs.
Selling, General and Administrative Expenses Year Ended June 30, Change (Dollars in thousands) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 SG&A Expenses - Excluding Project Ascent $ 192,225 $ 172,771 $ 167,480 $ 19,454 11 % $ 5,291 3 % Project Ascent Expenses 29,866 39,327 37,883 (9,461) (24) % 1,444 4 % Total SG&A Expenses $ 222,091 $ 212,098 $ 205,363 $ 9,993 5 % $ 6,735 3 % Selling, general and administrative (“SG&A”) expenses increased 5% to $222.1 million in 2023.
Selling, General and Administrative Expenses Year Ended June 30, Change (Dollars in thousands) 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 SG&A Expenses - Excluding Project Ascent $ 209,829 $ 192,225 $ 172,771 $ 17,604 9.2 % $ 19,454 11.3 % Project Ascent Expenses 8,236 29,866 39,327 (21,630) (72.4) % (9,461) (24.1) % Total SG&A Expenses $ 218,065 $ 222,091 $ 212,098 $ (4,026) (1.8) % $ 9,993 4.7 % Selling, general and administrative (“SG&A”) expenses decreased 1.8% to $218.1 million in 2024 compared to $222.1 million in 2023.
We have various contractual and other obligations that are appropriately recorded as liabilities in our consolidated financial statements, including finance lease obligations, operating lease obligations, the underfunded defined benefit pension liability, other post-employment benefit obligations, tax liabilities, noncurrent workers compensation obligations, deferred compensation and interest on deferred compensation.
This source, combined with our existing balances in cash and equivalents and amounts available under the Facility, is expected to be sufficient to meet our overall cash requirements. 26 Table of Contents We have various contractual and other obligations that are appropriately recorded as liabilities in our consolidated financial statements, including finance lease obligations, operating lease obligations, the underfunded defined benefit pension liability, other post-employment benefit obligations, tax liabilities, noncurrent workers compensation obligations, deferred compensation and interest on deferred compensation.
The relative proportion of sales contributed by each of our business segments can impact a year-to-year comparison of the consolidated statements of income.
Excluding the impact of last year’s shift in sales due to our ERP go-live, consolidated sales volumes increased 2.1%. The relative proportion of sales contributed by each of our business segments can impact a year-to-year comparison of the consolidated statements of income.
Taxes Based on Income Our effective tax rate was 22.3% and 20.3% in 2023 and 2022, respectively. See Note 8 to the consolidated financial statements for a reconciliation of the statutory rate to the effective rate. We include the tax consequences related to stock-based compensation within the computation of income tax expense.
See Note 7 to the consolidated financial statements for a reconciliation of the statutory rate to the effective rate. 24 Table of Contents We include the tax consequences related to stock-based compensation within the computation of income tax expense.
Nonetheless, we are subject to events and trends in the marketplace that will impact our costs for raw materials, packaging and freight. While we attempt to pass through sustained increases in these costs, any such price adjustments can lag the changes in the related input costs.
Nonetheless, we are subject to events and trends in the marketplace that will impact our costs for raw materials, packaging and freight.
Foodservice Segment Year Ended June 30, Change (Dollars in thousands) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Net Sales $ 857,157 $ 761,180 $ 638,104 $ 95,977 13 % $ 123,076 19 % Operating Income $ 106,349 $ 82,745 $ 89,048 $ 23,604 29 % $ (6,303) (7) % Operating Margin 12.4 % 10.9 % 14.0 % In 2023, Foodservice segment net sales increased 13% to a record $857.2 million from the 2022 total of $761.2 million driven by inflationary pricing and volume gains from certain quick-service restaurant customers in our mix of national chain restaurant accounts.
Foodservice Segment Year Ended June 30, Change (Dollars in thousands) 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Net Sales $ 883,335 $ 857,157 $ 761,180 $ 26,178 3.1 % $ 95,977 12.6 % Operating Income $ 97,094 $ 106,349 $ 82,745 $ (9,255) (8.7) % $ 23,604 28.5 % Operating Margin 11.0 % 12.4 % 10.9 % In 2024, Foodservice segment net sales increased 3.1% to a record $883.3 million from the 2023 total of $857.2 million driven by increased demand from several of our national chain restaurant account customers and growth for our branded Foodservice products.
Sales in the current year were unfavorably impacted by approximately $25 million in incremental sales attributed to advance ordering that occurred near the end of fiscal 2022 ahead of our ERP go-live that commenced on July 1. Consolidated sales volumes, measured in pounds shipped, decreased 5% in 2023. In the prior year, consolidated sales volumes increased 2%.
Deflationary pricing was a headwind to Foodservice segment sales growth. Sales in the prior year were unfavorably impacted by an estimated $25 million in net sales attributed to advance ordering that occurred near the end of fiscal 2022 ahead of our ERP go-live that commenced on July 1, 2022.
The majority of these obligations is expected to be due within one year. 26 Table of Contents Cash Flows Year Ended June 30, Change (Dollars in thousands) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Provided By Operating Activities $ 225,901 $ 101,813 $ 174,189 $ 124,088 122 % $ (72,376) (42) % Used In Investing Activities $ (90,782) $ (132,240) $ (88,977) $ 41,458 31 % $ (43,263) (49) % Used In Financing Activities $ (106,929) $ (97,345) $ (95,430) $ (9,584) (10) % $ (1,915) (2) % Cash provided by operating activities and our existing balances in cash and equivalents remain the primary sources for funding our investing and financing activities, as well as financing our organic growth initiatives.
Cash Flows Year Ended June 30, Change (Dollars in thousands) 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Provided By Operating Activities $ 251,553 $ 225,901 $ 101,813 $ 25,652 11.4 % $ 124,088 121.9 % Used In Investing Activities $ (67,433) $ (90,782) $ (132,240) $ 23,349 25.7 % $ 41,458 31.4 % Used In Financing Activities $ (109,150) $ (106,929) $ (97,345) $ (2,221) (2.1) % $ (9,584) (9.8) % Cash provided by operating activities and our existing balances in cash and equivalents remain the primary sources for funding our investing and financing activities, as well as financing our organic growth initiatives.
In 2022, the adjustments to Bantam’s contingent consideration increased diluted earnings per share by $0.10. 24 Table of Contents RESULTS OF OPERATIONS - SEGMENTS Retail Segment Year Ended June 30, Change (Dollars in thousands) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Net Sales $ 965,370 $ 915,210 $ 828,963 $ 50,160 5 % $ 86,247 10 % Operating Income $ 139,464 $ 151,627 $ 188,403 $ (12,163) (8) % $ (36,776) (20) % Operating Margin 14.4 % 16.6 % 22.7 % In 2023, net sales for the Retail segment reached a record $965.4 million, a 5% increase from the prior-year total of $915.2 million, including the favorable impact of our pricing actions.
RESULTS OF OPERATIONS - SEGMENTS Retail Segment Year Ended June 30, Change (Dollars in thousands) 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Net Sales $ 988,424 $ 965,370 $ 915,210 $ 23,054 2.4 % $ 50,160 5.5 % Operating Income $ 207,660 $ 139,464 $ 151,627 $ 68,196 48.9 % $ (12,163) (8.0) % Operating Margin 21.0 % 14.4 % 16.6 % In 2024, net sales for the Retail segment reached a record $988.4 million, a 2.4% increase from the prior-year total of $965.4 million, including the carryover benefit from pricing actions that were taken in 2023.
A portion of the costs that have been classified as Project Ascent expenses represent ongoing costs that will continue subsequent to the completion of our ERP implementation. Change in Contingent Consideration In 2022, the change in contingent consideration resulted in a benefit of $3.5 million.
A portion of the costs classified as Project Ascent expenses represent ongoing costs that have continued subsequent to the completion of our ERP implementation. Beginning in 2025, these ongoing costs will no longer be classified separately as Project Ascent expenses.
Cash provided by operating activities in 2023 totaled $225.9 million, an increase of 122% as compared with the 2022 total of $101.8 million. The 2023 increase was primarily due to the year-over-year changes in net working capital, particularly receivables and accrued liabilities.
Cash provided by operating activities in 2024 totaled $251.6 million, an increase of 11.4% as compared with the 2023 total of $225.9 million. The 2024 increase was primarily due to higher net income, as partially offset by the year-over-year changes in deferred income taxes and lower noncash restructuring and impairment charges in the current year.
LOOKING FORWARD For 2024, we anticipate Retail segment sales will benefit from volume growth led by our licensing program, including incremental growth from the new products, flavors and sizes we introduced in 2023, along with some new items we have planned for 2024. We also foresee continued positive momentum for our New York BRAND ® Bakery frozen garlic bread products.
LOOKING FORWARD For 2025, we anticipate Retail segment sales will continue to benefit from volume growth led by our licensing program, including increased sales from the new products, flavors and sizes we introduced in 2024 along with the recent addition of Subway ® and Texas Roadhouse ® as license partners.
Over time, we attempt to minimize the exposure to such cost increases through ongoing improvements and greater efficiencies throughout our manufacturing operations, including benefits gained through our lean six sigma program and strategic investments in plant equipment. 27 Table of Contents With regard to the impact of commodity and freight costs on Foodservice segment operating income, most of our supply contracts with national chain restaurant accounts incorporate pricing adjustments to account for changes in ingredient and freight costs.
With regard to the impact of commodity and freight costs on Foodservice segment operating income, most of our supply contracts with national chain restaurant accounts incorporate pricing adjustments to account for changes in ingredient and freight costs.
Diluted weighted average common shares outstanding for each of the years ended June 30, 2023 and 2022 have remained relatively stable. In 2023 and 2022, expenditures for Project Ascent reduced diluted earnings per share by $0.84 and $1.09, respectively, and restructuring and impairment charges reduced diluted earnings per share by $0.70 and $0.98, respectively.
Diluted weighted average common shares outstanding for each of the years ended June 30, 2024 and 2023 have remained relatively stable. In 2024, costs related to our decision to exit our perimeter-of-the-store bakery product lines reduced diluted earnings per share by a total of $0.49.
Beyond the next 12 months, we expect that cash provided by operating activities will be the primary source of liquidity. This source, combined with our existing balances in cash and equivalents and amounts available under the Facility, is expected to be sufficient to meet our overall cash requirements.
Beyond the next 12 months, we expect that cash provided by operating activities will be the primary source of liquidity.
The following table summarizes the sales mix over each of the last three years: 2023 2022 2021 Segment Sales Mix: Retail 53% 55% 57% Foodservice 47% 45% 43% See discussion of net sales by segment following the discussion of “Earnings Per Share” below.
The following table summarizes the sales mix over each of the last three years: 2024 2023 2022 Segment Sales Mix: Retail 53% 53% 55% Foodservice 47% 47% 45% See discussion of net sales by segment following the discussion of “Earnings Per Share” below. 23 Table of Contents Gross Profit Consolidated gross profit increased 11.3% to $432.3 million in 2024 compared to $388.6 million in 2023 as influenced by favorability in pricing net of commodity costs, our cost savings programs and the higher sales volumes.
We ultimately exited the Bantam business near the end of fiscal 2022. See further discussion in Note 2 to the consolidated financial statements. Restructuring and Impairment Charges In 2023, we recorded impairment charges of $25.0 million related to the intangible assets of Flatout, Inc. (“Flatout”) due to lowered expectations for the projected sales and profitability of the Flatout business.
In 2023, we recorded impairment charges of $25.0 million related to the intangible assets of Flatout due to lowered expectations for the projected sales and profitability of the Flatout product lines that we subsequently exited in 2024. These impairment charges were reflected in our Retail segment.
Cash used in investing activities totaled $90.8 million in 2023 as compared to $132.2 million in 2022. The 2023 decrease primarily reflects a lower level of payments for property additions, which totaled $90.2 million in 2023 compared to $132.0 million in 2022.
The 2024 decrease primarily reflects a lower level of payments for property additions, which totaled $67.6 million in 2024 compared to $90.2 million in 2023, as the capacity expansion project at our dressing and sauce facility in Horse Cave, Kentucky reached substantial completion in March 2023.
Corporate Expenses In 2023, corporate expenses totaled $104.3 million as compared to $97.0 million in 2022. This increase primarily reflects increased investments in personnel and IT, as well as some nonrecurring legal charges for closed operations. Lower expenditures for Project Ascent partially offset these higher expenses. Project Ascent expenses totaled $29.9 million and $39.3 million in 2023 and 2022, respectively.
Foodservice segment operating income for 2024 also compares to a strong prior-year result. Corporate Expenses In 2024, corporate expenses totaled $90.5 million as compared to $104.3 million in 2023. This decrease reflects lower expenditures for Project Ascent, as partially offset by higher expenditures to support the continued growth of our business, including investments in personnel and IT.
This increase reflects increased investments in personnel and IT; higher brokerage costs associated with the increased sales; higher travel expenses; and some nonrecurring legal charges for closed operations. Project Ascent expenses decreased $9.5 million to $29.9 million. Project Ascent expenses are included within Corporate Expenses.
This decrease reflects lower expenditures for Project Ascent, largely offset by higher expenditures to support the continued growth of our business, including investments in personnel, a more normalized level of consumer promotions, higher brokerage costs and IT investments. Project Ascent expenses totaled $8.2 million in 2024 compared to $29.9 million in 2023. Project Ascent expenses are included within Corporate Expenses.
The restructuring and impairment charges of $24.8 million included impairment charges for intangible assets, fixed assets and an operating lease right-of-use asset, as well as other closure-related costs. Due to their unusual nature, these charges were not allocated to our two reportable segments. As noted above, we ultimately exited the Bantam business near the end of fiscal 2022.
The restructuring and impairment charges, which consisted of impairment charges for fixed assets and intangible assets, one-time termination benefits and other closing costs, were not allocated to our two reportable segments due to their unusual nature whereas the $2.6 million write-down of inventories was recorded in our Retail segment.
Operating Income Operating income increased 26% to $141.5 million in 2023 driven by the increase in gross profit as our pricing actions served to offset the significant inflationary costs we have experienced for commodities, packaging, labor and warehousing, as well as the impact of lower restructuring and impairment charges.
Operating Income Operating income increased 40.9% to $199.4 million in 2024 compared to $141.5 million in 2023 driven by the increase in gross profit, reduced expenditures for Project Ascent and lower restructuring and impairment charges. See discussion of operating results by segment following the discussion of “Earnings Per Share” below.
Removed
Project Ascent will evolve into an on-going Center of Excellence that will provide oversight for all future upgrades of the S/4HANA environment, evaluation of future software needs to support the business, acquisition integration support and master data standards.
Added
Breaking down the 2.7% increase in consolidated net sales, approximately 1.8% is attributed to volume/mix impacts, approximately 1.4% is attributed to the ERP go-live sales shift and the remaining offset is net pricing. Consolidated sales volumes, measured in pounds shipped, increased 3.7% in 2024.
Removed
BUSINESS TRENDS Dating back to the onset of the COVID-19 pandemic in 2020, the effects of COVID-19 on consumer behavior have impacted the relative demand for our Retail and Foodservice products. More specifically, beginning in March 2020, consumer demand shifted towards increased at-home food consumption and away from in-restaurant dining.
Added
In the prior year, gross profit was unfavorably impacted by an estimated $5 million due to the aforementioned shift of net sales into the quarter ended June 30, 2022 ahead of our ERP go-live.
Removed
Over the course of the following two years, while this shift in demand was inconsistent and volatile, on balance it positively impacted our Retail segment sales volumes and negatively impacted our Foodservice segment sales volumes.
Added
Restructuring and Impairment Charges In 2024, we committed to a plan to exit our perimeter-of-the-store bakery product lines and close our Flatout flatbread facility in Saline, Michigan and our Angelic Bakehouse sprouted grain bakery facility in Cudahy, Wisconsin.
Removed
From an operations standpoint, the shift in demand over the two-year period, combined with other COVID-19-related issues, unfavorably impacted the operating results of both our segments. Beginning near the end of 2022, the volatility and shifts in demand between our Retail and Foodservice products subsided and our operating environment became more predictable and stable.
Added
Due to a lack of scale and direct-to-store distribution capabilities for these products, we were not able to achieve the desired operational or financial performance. Production at these facilities ceased in March 2024, and we completed the divestiture of the real estate and manufacturing equipment at these locations during the quarter ended June 30, 2024.
Removed
The inflationary cost environment we experienced during 2022 resulted in significantly higher input costs for our business. During 2022, we endured unprecedented inflationary costs for commodities, particularly soybean oil and flour, in addition to notably higher costs for packaging, freight and warehousing, and labor.
Added
In 2024, we recorded restructuring and impairment charges of $14.9 million related to these closures, as well as $2.6 million recorded in Cost of Sales for the write-down of inventories.
Removed
This cost inflation was attributed to numerous factors such as the impacts of the COVID-19 pandemic, the war in Ukraine, climate and weather conditions, supply chain disruptions, including some raw material and packaging shortages, a tight labor market, and government policy decisions. We continued to experience significant cost inflation through 2023, particularly for soybean oil, eggs and flour.
Added
Other, Net Other, net resulted in a benefit of $6.2 million in 2024 compared to a benefit of $1.8 million in 2023. This change reflects higher interest rates for our cash holdings and increased balances of cash and equivalents. Taxes Based on Income Our effective tax rate was 22.8% and 22.3% in 2024 and 2023, respectively.
Removed
However, our pricing actions served to offset these inflationary costs. In addition, the operating environment stabilized as we did not experience the supply chain disruptions and demand swings of the preceding years.
Added
These exit costs included restructuring and impairment charges, which reduced diluted earnings per share by $0.42, and the inventory write-down, which reduced diluted earnings per share by $0.07. In 2023, impairment charges related to Flatout’s intangible assets reduced diluted earnings per share by $0.70.
Removed
Gross Profit Consolidated gross profit increased 9% to $388.6 million in 2023 compared to $355.7 million in 2022 as our pricing actions effectively offset the significant inflationary costs we have experienced for commodities, packaging, labor and warehousing. The higher gross profit also reflects the benefits of a more stable operating environment, improved manufacturing efficiencies and reduced reliance upon co-manufacturers.
Added
In 2024 and 2023, expenditures for Project Ascent reduced diluted earnings per share by $0.23 and $0.84, respectively.
Removed
The current-year gross profit compares to a challenging prior-year period characterized by escalating inflationary costs across our entire supply chain, the unfavorable effects of supply chain disruptions, demand volatility and uncertainty, suboptimal capacity utilization, and overall lower productivity resulting in substantially higher costs to produce our products and service our customers.
Added
Retail sales volume growth was driven by the continued success of our program for licensed sauces and dressings. Our New York BRAND ® Bakery frozen garlic bread products also contributed to the increase in the Retail sales volumes.
Removed
Note that last year’s gross profit included an estimated $5 million impact from the advance customer orders ahead of our ERP go-live.
Added
Excluding the impact of last year’s shift in sales due to our ERP go-live, the impact of a value engineering initiative we implemented in 2024, and all sales attributed to the perimeter-of-the-store bakery product lines we exited in 2024, Retail segment sales volumes increased 1.7%. In 2024, Retail segment operating income increased $68.2 million, or 48.9%, to $207.7 million.
Removed
This benefit was attributed to a reduction in the fair value of the contingent consideration liability for Bantam Bagels, LLC (“Bantam”) based on our fair value measurements, resulting in a zero balance at March 31, 2022. We recorded $2.6 million in our Foodservice segment and $0.9 million in our Retail segment.
Added
Beyond the impacts of last year’s impairment charges and this year’s write-down of inventories, which combined to contribute a net increase to Retail segment operating income of $22.4 million, the growth in Retail segment operating income was driven by: favorability in our pricing net of commodity costs, including pricing impacts from investments in trade spending; our cost savings programs; and the beneficial impact of higher sales volumes.
Removed
These impairment charges were reflected in our Retail segment. 23 Table of Contents In 2022, we recorded restructuring and impairment charges totaling $35.2 million related to the following items: • our decision to explore strategic alternatives and ultimately exit the Bantam business; • the impact of a revision to the forecasted cash flows of Bantam on the intangible assets of this business; • the impact of a revision to the forecasted branded sales of Angelic Bakehouse, Inc.
Added
Foodservice segment sales volumes, measured in pounds shipped, increased 5.3% in the current year.
Removed
(“Angelic”) on the intangible assets of this business; and • the closure of our frozen garlic bread facility in Baldwin Park, California. Based on our decision to explore strategic alternatives for the Bantam business, impairment testing was triggered for the related long-lived assets of the asset group.
Added
Excluding the impact of last year’s shift in sales due to our ERP go-live, Foodservice segment sales volumes increased 3.5%. 25 Table of Contents In 2024, Foodservice segment operating income decreased 8.7% to $97.1 million driven by higher supply chain costs, as partially offset by the beneficial impact of higher sales volumes.
Removed
In 2022, prior to our decision to explore strategic alternatives for the Bantam business, we also recorded an impairment charge of $0.9 million related to Bantam’s Retail customer relationships intangible asset, which reflected lower projected cash flows for Bantam’s Retail business. This impairment charge was reflected in our Retail segment.
Added
Project Ascent expenses totaled $8.2 million and $29.9 million in 2024 and 2023, respectively.
Removed
In 2022, we also recorded an impairment charge of $8.8 million related to the tradename intangible asset of Angelic, which reflected the impact of lower projected sales for Angelic’s branded Retail business. This impairment charge was reflected in our Retail segment.
Added
We also anticipate continued positive sales momentum for our New York BRAND ® Bakery frozen garlic bread products in 2025 as well as volume growth for our Marzetti ® refrigerated dressings.
Removed
In 2022, we committed to a plan to close our frozen garlic bread facility in Baldwin Park, California in support of our ongoing efforts to better optimize our manufacturing network.
Added
With respect to our input costs, in aggregate we do not foresee significant impacts from commodity cost inflation or deflation in the coming year. We also expect to drive margin improvement through our cost savings programs.
Removed
The operations of this facility were not classified as discontinued operations as the closure did not represent a strategic shift that would have a major effect on our operations or financial results. We recorded restructuring and impairment charges of $0.7 million, which consisted of one-time termination benefits and impairment charges for fixed assets and an operating lease right-of-use asset.
Added
The majority of these obligations is expected to be due within one year.

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