PART I Business Overview The Marzetti Company, formerly Lancaster Colony Corporation, rebranded on June 27, 2025, focusing on manufacturing and marketing specialty food products for retail and foodservice channels, aiming for core business growth, supply chain optimization, and expansion through licensing and acquisitions General Development of Business The company officially rebranded as The Marzetti Company on June 27, 2025, to unify its brand image and reflect its evolution as a pure-play food business, driven by a strategic growth plan focused on accelerating core business, simplifying the supply chain, and expanding through licensing and acquisitions - The company officially rebranded as The Marzetti Company on June 27, 2025, to unify its brand image and reflect its evolution and growth as a pure-play food business12 - The company's vision is to be "The Better Food Company," committed to creating delicious foods and building deep, lasting relationships with customers and consumers14 - The company's strategic growth plan has three pillars: accelerating core business growth, simplifying the supply chain to reduce costs and improve margins, and expanding the core business through retail licensing programs and complementary acquisitions1519 Available Information The company's annual, quarterly, and current reports are freely available on its investor relations website and the SEC website - The company's annual reports (Form 10-K), quarterly reports (Form 10-Q), and current reports (Form 8-K) are available free of charge on its investor relations website investors.marzetticompany.com16 - Reports, proxy statements, and other information filed by the company are also available on the SEC website www.sec.gov[17](index=17&type=chunk) Description of and Financial Information About Business Segments The company's financial performance is reported across two segments, Retail and Foodservice, each offering proprietary and licensed products through various channels, with significant customer concentration and some seasonal sales fluctuations - The company's financial performance is divided into two reporting segments: Retail and Foodservice18 - The Retail segment primarily sells proprietary and licensed brand products, such as frozen bread, refrigerated and shelf-stable dressings, and dips, in the United States through sales personnel, food brokers, and distributors20 Retail Segment Key Products and Brands | Product | Brand Name | | :--- | :--- | | Frozen Bread | New York Bakery®, Sister Schubert's® | | Refrigerated Dressings and Dips | Marzetti®, Marzetti Simply® | | Shelf-Stable Dressings and Croutons | Marzetti®, Cardini's®, Girard's®, New York Bakery®, Chatham Village® | - The Foodservice segment primarily sells proprietary and custom-formulated sauces, salad dressings, frozen bread, and yeast rolls to national chain restaurant customers, with most sales under proprietary brands2425 Foodservice Segment Key Products and Brands | Product | Brand Name | | :--- | :--- | | Dressings and Sauces | Marzetti® | | Frozen Bread and Other | New York Bakery®, Sister Schubert's®, Marzetti® Frozen Pasta | - The top five customers in the Retail segment accounted for 62%, 59%, and 59% of the segment's net sales in fiscal years 2025, 2024, and 2023, respectively21 - The top five direct customers in the Foodservice segment accounted for 53%, 53%, and 58% of the segment's net sales in fiscal years 2025, 2024, and 2023, respectively26 - Retail segment sales are subject to seasonal fluctuations, primarily in the second fiscal quarter and around the Easter holiday, while Foodservice segment operations are not significantly affected by seasonality2328 Net Sales Attributed to Significant Customer Relationships Walmart Inc. and Chick-fil-A, Inc. are significant customers, contributing substantially to consolidated net sales, with Chick-fil-A's sales including both retail licensed products and foodservice supplies Significant Customer Contribution to Consolidated Net Sales | Customer | 2025 | 2024 | 2023 | | :--- | :--- | :--- | :--- | | Walmart Inc. | 19% | 18% | 18% | | Chick-fil-A, Inc. | 29% | 28% | 26% | - Chick-fil-A sales, including licensed product sales in the retail channel and supplies in the foodservice channel, represent a significant portion of the company's consolidated net sales30 Net Sales by Class of Products The company's net sales are categorized across retail and foodservice segments, with shelf-stable dressings, sauces, and croutons, and foodservice dressings and sauces being the largest contributors Percentage of Net Sales by Product Class | Product Class | 2025 | 2024 | 2023 | | :--- | :--- | :--- | :--- | | Retail Business: |||| | Shelf-Stable Dressings, Sauces, and Croutons | 23% | 23% | 23% | | Frozen Bread | 20% | 19% | 19% | | Refrigerated Dressings, Dips, and Other | 10% | 11% | 11% | | Foodservice Business: |||| | Dressings and Sauces | 35% | 35% | 35% | | Frozen Bread and Other | 12% | 12% | 12% | Manufacturing As of June 30, 2025, most products are manufactured and packaged in 14 U.S. food plants, many serving both retail and foodservice segments, with a focus on efficient and cost-effective production - As of June 30, 2025, most of the company's products are manufactured and packaged in 14 U.S. food plants, with many producing for both the Retail and Foodservice segments32 - The company focuses on efficient and cost-effective production through cost-saving initiatives32 Competition The company faces intense competition across all food product markets, with key competitive factors including price, quality, customer service, brand positioning, product innovation, and marketing - The company faces intense competition in all food product markets, with competitive factors including price, quality, customer service, brand positioning, product innovation, and marketing activities33 Government Regulation The company's operations are subject to stringent federal, state, and local government regulations concerning production, packaging, quality, labeling, distribution, and environmental protection, with no significant impact on capital expenditures, earnings, or competitive position expected in fiscal years 2025 or 2026 - The company's business operations are subject to stringent regulation by federal, state, and local governmental entities and agencies, covering production, packaging, quality, labeling, and distribution standards, as well as environmental protection laws34 - Compliance with these laws and regulations had no material effect on capital expenditures, earnings, or competitive position in fiscal year 2025, and no material effect is anticipated for fiscal year 202634 Human Capital As of June 30, 2025, the company employs 3,700 individuals, with a focus on health and safety, talent acquisition, total rewards, employee engagement, respect and belonging, and community involvement, offering competitive compensation and benefits - As of June 30, 2025, the company has 3,700 employees, with 18% covered by collective bargaining agreements and 5% of those contracts expiring within one year35 - The company's human capital management strategy focuses on six key areas: health and safety, talent acquisition, total rewards, employee engagement, respect and belonging, and community involvement37 - The company offers competitive compensation and benefits, including medical, dental, vision, life insurance, paid parental leave, 401(k) plans, and employee assistance programs41 - The company enhances employee engagement through continuous feedback mechanisms, annual employee engagement surveys, and management action plans43 - The company engages with communities through volunteerism and philanthropic activities, focusing on reducing poverty and food insecurity, and promoting health and quality education45 Raw Materials In fiscal year 2025, the company secured adequate supplies of raw materials and packaging, primarily sourcing through open markets and short-term fixed-price contracts for key ingredients like soybean oil, sweeteners, eggs, dairy, and flour - In 2025, the company obtained adequate supplies of raw materials and packaging, with key raw materials including soybean oil, sweeteners, eggs, dairy, flour, and various packaging materials46 - Most materials are purchased through open markets, with some procured under fixed-price contracts for one year or less47 Risk Factors The company faces diverse risks including product recalls, supply chain disruptions, rising costs, labor shortages, intense competition, reliance on key customers, cybersecurity threats, and regulatory compliance Risks Related to Health and Food Safety The company faces risks of business disruption, product recalls, and reputational damage due to product safety issues or negative consumer perceptions regarding food quality and health attributes - The company may face business disruptions, product recalls, or claims due to product safety issues such as mislabeling, adulteration, contamination, or spoilage, leading to significant losses and reputational damage51 - Negative consumer perceptions regarding food safety, quality, or health attributes, even if unfounded, could lead to decreased product demand, lower prices, and lost sales52 - The food industry faces negative publicity regarding "ultra-processed foods," genetically modified organisms, added sugars, and trans fats, which could increase operating costs or harm brand image5354 Risks Related to Our Operations Operational risks include increased costs for raw materials, packaging, and transportation, supply chain disruptions, labor shortages, infrastructure limitations, and the challenges of integrating acquisitions, all potentially impacting profitability and customer satisfaction - Increased costs for raw materials, packaging, and transportation, influenced by inflation and geopolitical events, could raise production costs and adversely affect business565960 - Disruptions in production facilities, labor shortages, fluctuations in transportation and warehousing availability and costs, and reliance on third-party suppliers could lead to unmet customer demand and increased operating costs63656667 - Fluctuations in energy-related costs could increase product manufacturing and distribution expenses68 - Epidemics, pandemics, or similar public health emergencies could disrupt consumption, supply chains, management, and production processes70 - Failure to successfully renegotiate collective bargaining agreements or prolonged work stoppages could adversely affect business71 - The loss of key senior management team members could significantly and adversely impact business management and strategic execution72 - Manufacturing capacity limitations could prevent meeting customer demand, thereby affecting customer service levels and relationships7374 - Maintaining, improving, or replacing aging infrastructure and facilities may require significant capital expenditures, impacting cash flow75 - Failure to successfully complete acquisitions or divestitures, and integrating acquired businesses, could present financial, managerial, and operational challenges7677 - Climate change, including droughts, and increasingly stringent environmental regulations could affect agricultural productivity, raw material supply and costs, and increase compliance expenses78798081 Risks Related to the Brands We Sell and Customer Demand for Our Products Risks include damage to brand reputation, failure to renew key licensing agreements, intense market competition, and the loss or significant reduction of business from major customers like Walmart and Chick-fil-A, all of which could adversely affect sales and profitability - The company relies on brand reputation and value, and failure to maintain and enhance brand image, including due to negative publicity, could adversely affect business8485 - Failure to maintain or renew significant brand licensing agreements, such as with Chick-fil-A or Olive Garden, could materially and adversely affect business, operating results, and cash flow89 - Intense competition in the retail and foodservice markets could impact sales volume and operating margins, including through price pressure, insufficient product innovation, or changes in consumer preferences909192 - The loss or significant reduction of business from Walmart, the largest retail customer, or an adverse change in its financial condition, could materially and adversely affect the company's business94 - The loss or significant reduction of business from Chick-fil-A, a key Foodservice segment customer, or an adverse change in its financial condition, could materially and adversely affect the company's business95 - The company relies on the performance of major retailers, wholesalers, food brokers, distributors, and foodservice customers, and their underperformance or prioritization of other brands could adversely affect the company's business969798 Risks Related to Cybersecurity and Information Technology Cybersecurity risks, including attacks, data breaches, and IT system failures, could lead to operational disruptions, sensitive information disclosure, significant expenses, fines, and reputational damage, compounded by the need to comply with evolving data privacy regulations - Cyberattacks, data breaches, or vulnerabilities in information security systems could lead to equipment failures, operational disruptions, disclosure of sensitive information, and result in significant expenses, fines, and reputational damage101104105 - Information technology system failures could interrupt company operations and cause financial losses due to lost or misappropriated information106 - Failure to comply with current or future federal, state, and foreign privacy and data protection laws and regulations, such as CCPA and CPRA, could increase compliance costs, operational changes, and potential liabilities107108109 Risks Related to Regulatory and Legal Matters The company's operations are subject to extensive government regulations, with potential for increased compliance costs and litigation risks from evolving requirements, including environmental laws, and uncertainty from judicial decisions like the overturning of the "Chevron doctrine" - The company's business operations are subject to federal, state, and local government regulations, and potential future increased regulatory requirements, such as product labeling and environmental policies, could raise compliance costs and litigation risks111113 - The Supreme Court's overturning of the "Chevron doctrine" could lead to more companies challenging regulatory agencies, increasing industry uncertainty112 - Potential environmental liabilities and remediation costs related to environmental laws and regulations could materially and adversely affect the company's financial condition114115 Risks Related to Investments in Our Common Stock Investment risks include the significant influence of Mr. Gerlach and his family trusts, who hold approximately 27% of common stock, potentially leading to conflicts of interest, and anti-takeover provisions that could hinder changes in control or management - Mr. Gerlach and his family trusts hold approximately 27% of the company's common stock, exerting significant influence over all matters submitted to shareholder vote, and their interests may conflict with other shareholders117118 - Anti-takeover provisions in the company's charter documents and Ohio corporate law could make it more difficult for third parties to acquire the company or influence the Board of Directors, potentially delaying or preventing changes in control or management119120 - The Board of Directors has the authority to issue Class B Voting Preferred Stock and Class C Non-Voting Preferred Stock, which could affect the rights of common stock holders121 Unresolved Staff Comments There are no unresolved staff comments in this report - There are no unresolved staff comments in this report122 Cybersecurity The company has established processes for identifying, assessing, monitoring, and managing significant cybersecurity risks related to information technology, overseen by the Audit Committee, and includes incident response policies and employee training Risk Management and Strategy The company employs processes to identify, assess, monitor, and manage significant IT-related cybersecurity risks, including regular third-party assessments, vendor monitoring, incident response policies, and employee training - The company has established processes to identify, assess, monitor, and manage significant cybersecurity risks related to information technology, including threat management, vulnerability management, incident management, data protection, and recoverability123 - The company regularly engages third-party security firms and consultants to conduct cybersecurity risk assessments, with results reported to the Audit Committee123 - The company conducts cybersecurity risk assessments and monitoring of third-party service providers, requiring them to manage cybersecurity risks through contractual agreements124 - The company has adopted an incident response policy and regularly conducts information security awareness training for employees125 Governance The Audit Committee oversees cybersecurity threat risks, receiving regular reports from the Enterprise Risk Management Committee and the Chief Information Officer, who leads the cybersecurity risk management process with extensive IT and cybersecurity experience - The Audit Committee is responsible for overseeing cybersecurity threat risks and regularly receives reports from the Enterprise Risk Management Committee and the Chief Information Officer127 - The company's cybersecurity risk management process is led by the Chief Information Officer and the Vice President of Infrastructure and Security, both possessing extensive IT and cybersecurity experience128 Properties The company operates 2.9 million square feet of space, with 0.9 million square feet leased, and owns 14 primary production plants across the U.S. for retail and foodservice products, supplemented by owned and leased warehouse facilities for distribution - The company operates using 2.9 million square feet of space, of which 0.9 million square feet are leased129 Key Production Locations | Location | Primary Products | Business Segment | Occupancy Terms | | :--- | :--- | :--- | :--- | | Altoona, IA | Frozen Pasta | Retail and Foodservice | Owned | | Atlanta, GA | Sauces and Dressings | Retail and Foodservice | Owned | | Bedford Heights, OH | Frozen Bread | 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 | | Vineland, NJ | Frozen Bread | Retail and Foodservice | Owned | | Wareham, MA | Croutons | Retail and Foodservice | Leased | Key Warehouse Locations | Location | Business Segment | Occupancy Terms | | :--- | :--- | :--- | | Columbus, OH | Retail and Foodservice | Leased | | Grove City, OH | Retail and Foodservice | Owned and Third-Party Services | | Horse Cave, KY | Retail and Foodservice | Owned | | Union City, GA | Retail and Foodservice | Leased | Legal Proceedings The company is involved in various legal proceedings, but the ultimate outcome is not expected to materially impact consolidated financial statements, and there are no environmental matters requiring disclosure above the $1 million threshold - The company is involved in various legal proceedings from time to time, but the ultimate outcome of these is not expected to materially impact the consolidated financial statements132 - The company has set a disclosure threshold of $1 million for environmental matters, and currently, there are no such matters requiring disclosure133 Mine Safety Disclosures This item is not applicable - This item is not applicable134 PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq Global Select Market under MZTI, with approximately 610 shareholders of record as of August 1, 2025, and a history of 62 consecutive years of increased cash dividends, while the board-approved share repurchase authorization still has 1,083,830 shares available - The company's common stock trades on the Nasdaq Global Select Market under the symbol MZTI135 - As of August 1, 2025, approximately 27,534,000 shares of common stock were outstanding, held by approximately 610 shareholders of record7135 - The company has increased its regular cash dividend for 62 consecutive years136188 Issuer Purchases of Equity Securities for the Fourth Quarter of Fiscal Year 2025 | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Publicly Announced Plans | Maximum Number of Shares That May Yet Be Purchased Under the Plans | | :--- | :--- | :--- | :--- | :--- | | April 1-30, 2025 | 12 | $189.03 | 12 | 1,123,830 | | May 1-31, 2025 | 40,000 | $161.78 | 40,000 | 1,083,830 | | June 1-30, 2025 | — | — | — | 1,083,830 | | Total | 40,012 | $161.79 | 40,012 | 1,083,830 | - As of June 30, 2025, the board-approved share repurchase authorization still had 1,083,830 shares of common stock available for future repurchase137 Performance Graph The performance graph illustrates the five-year cumulative total shareholder return for The Marzetti Company compared to the S&P Midcap 400 and S&P 1500 Packaged Foods & Meats indices Five-Year Cumulative Total Shareholder Return (USD) | | June 2020 | June 2021 | June 2022 | June 2023 | June 2024 | June 2025 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | The Marzetti Company | 100.00 | 126.90 | 86.28 | 137.12 | 131.44 | 122.70 | | S&P Midcap 400 | 100.00 | 153.24 | 130.80 | 153.84 | 174.72 | 187.87 | | S&P 1500 Packaged Foods & Meats | 100.00 | 117.24 | 124.61 | 133.00 | 119.09 | 114.90 | Item 6. [Reserved] This item is reserved - This item is reserved143 Management's Discussion and Analysis of Financial Condition and Results of Operations In fiscal year 2025, net sales grew 2.0% to $1.9091 billion, driven by volume and product mix, with gross profit increasing 5.4% to $455.6 million due to cost savings and moderate cost deflation, and operating income rising 10.5% to $220.3 million, despite a $14 million non-cash pension settlement charge Overview The company, a specialty food manufacturer and marketer for retail and foodservice, reports financial results in two segments, with over 95% of products sold in the U.S., pursuing growth through new products, expanded distribution, licensing, and strategic acquisitions - The company is a manufacturer and marketer of specialty food products, serving both retail and foodservice channels147 - The company's financial performance is divided into two reporting segments, Retail and Foodservice, with over 95% of products sold in the United States148149 - The company achieves sales growth by introducing new products, expanding distribution, leveraging retail brand strength, extending licensing agreements, and acquiring complementary businesses149 - Recent investments include the acquisition of an Atlanta sauce and dressing manufacturing facility, a capacity expansion project at the Kentucky plant, and the completion of the Enterprise Resource Planning (ERP) system "Project Ascent" implementation149 Results of Consolidated Operations In fiscal year 2025, consolidated net sales increased 2.0% to $1.9091 billion, with gross profit up 5.4% to $455.6 million, and operating income rising 10.5% to $220.3 million, despite a $14 million non-cash pension settlement charge Summary of Consolidated Operating Results (Fiscal Years 2023-2025) | Metric (Thousands of USD) | 2025 | 2024 | 2023 | 2025 vs. 2024 Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $1,909,122 | $1,871,759 | $1,822,527 | 2.0% | | Cost of Sales | $1,453,476 | $1,439,457 | $1,433,959 | 1.0% | | Gross Profit | $455,646 | $432,302 | $388,568 | 5.4% | | Gross Margin | 23.9% | 23.1% | 21.3% | +0.8pp | | Selling, General, and Administrative Expenses | $230,227 | $218,065 | $222,091 | 5.6% | | Restructuring and Impairment Charges | $5,102 | $14,874 | $24,969 | -65.7% | | Operating Income | $220,317 | $199,363 | $141,508 | 10.5% | | Operating Margin | 11.5% | 10.7% | 7.8% | +0.8pp | | Pension Settlement Charge | $(13,968) | — | — | N/M | | Other, Net | $7,114 | $6,152 | $1,789 | 15.6% | | Income Before Income Taxes | $213,463 | $205,515 | $143,297 | 3.9% | | Income Taxes | $46,116 | $46,902 | $32,011 | -1.7% | | Effective Tax Rate | 21.6% | 22.8% | 22.3% | -1.2pp | | Net Income | $167,347 | $158,613 | $111,286 | 5.5% | | Diluted Net Earnings per Share | $6.07 | $5.76 | $4.04 | 5.4% | - Fiscal year 2025 net sales increased by 2.0% to $1.9091 billion, primarily driven by approximately 220 basis points from core volume and product mix, partially offset by 90 basis points from exiting a baked goods product line, and 80 basis points from incremental sales due to a temporary supply agreement at the Atlanta facility152153 - Fiscal year 2025 gross profit increased by 5.4% to $455.6 million, primarily benefiting from cost savings initiatives, volume growth, and moderate cost deflation155 - Fiscal year 2025 selling, general, and administrative expenses increased by 5.6% to $230.2 million, primarily including $3.8 million in incremental spending related to IT investments and the Atlanta facility acquisition156 - Fiscal year 2025 restructuring and impairment charges were $5.1 million, primarily related to the closure of the Milpitas sauce and dressing manufacturing facility and the transformation of internal transportation fleet operations158159 - Fiscal year 2025 operating income increased by 10.5% to $220.3 million, driven by higher gross profit and reduced restructuring and impairment charges161 - In fiscal year 2025, the company incurred a one-time non-cash settlement charge of $14 million due to the termination of several frozen defined benefit pension plans164 - Fiscal year 2025 diluted net earnings per share were $6.07, an increase from $5.76 in fiscal year 2024167 Results of Operations - Segments In fiscal year 2025, the Retail segment's net sales grew 1.5% to $1.0034 billion, driven by licensing programs and new product introductions, while the Foodservice segment's net sales increased 2.5% to $905.7 million due to increased demand from national chain restaurant customers Retail Segment Operating Results (Fiscal Years 2023-2025) | Metric (Thousands of USD) | 2025 | 2024 | 2023 | 2025 vs. 2024 Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $1,003,409 | $988,424 | $965,370 | 1.5% | | Operating Income | $211,695 | $207,660 | $139,464 | 1.9% | | Operating Margin | 21.1% | 21.0% | 14.4% | +0.1pp | - Fiscal year 2025 Retail segment net sales increased by 1.5% to $1.0034 billion, primarily driven by volume growth, particularly from licensing programs such as Texas Roadhouse dinner rolls, Chick-fil-A sauces, and Subway sauces, and the newly launched gluten-free New York Bakery frozen garlic bread170 Foodservice Segment Operating Results (Fiscal Years 2023-2025) | Metric (Thousands of USD) | 2025 | 2024 | 2023 | 2025 vs. 2024 Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $905,713 | $883,335 | $857,157 | 2.5% | | Operating Income | $111,579 | $97,094 | $106,349 | 14.9% | | Operating Margin | 12.3% | 11.0% | 12.4% | +1.3pp | - Fiscal year 2025 Foodservice segment net sales increased by 2.5% to $905.7 million, primarily driven by increased demand from national chain restaurant customers and growth in Marzetti branded foodservice products171 - Fiscal year 2025 corporate expenses totaled $97.9 million, an increase from $90.5 million in fiscal year 2024, primarily reflecting incremental spending related to IT investments and the Atlanta facility acquisition172 Looking Forward The company anticipates continued sales growth in the Retail segment from volume and licensing programs, while Foodservice sales will be supported by quick-service restaurant customers, with moderate input cost inflation expected to be offset by pricing and cost savings initiatives in fiscal year 2026 - The company expects fiscal year 2026 Retail segment sales to continue benefiting from volume growth, licensing programs, and the Marzetti, New York Bakery, and Sister Schubert's brands173 - Foodservice segment sales are expected to be supported by certain quick-service restaurant customers, though external factors such as U.S. economic performance and consumer behavior may impact demand173 - The company anticipates moderate input cost inflation in fiscal year 2026, planning to offset it through contractual pricing and cost savings initiatives, while continuing to focus on margin enhancement173 - The company expects the "One Big Beautiful Bill Act" (OBBBA) to primarily provide cash tax timing benefits with no material impact on the effective tax rate175 Financial Condition As of June 30, 2025, the company maintains a strong financial position with $161 million in cash and equivalents, $998 million in shareholders' equity, no debt, and a $150 million unsecured revolving credit facility, expecting sufficient liquidity for the next 12 months - As of June 30, 2025, the company held $161 million in cash and equivalents, $998 million in shareholders' equity, no debt, and maintained ample flexibility in its capital structure177 - The company has a $150 million unsecured revolving credit facility, with no outstanding borrowings as of June 30, 2025, and is in full compliance with all covenant terms178179297 - The company anticipates that cash flows from operating activities, existing cash and equivalents, and the revolving credit facility will be sufficient to meet liquidity needs for the next 12 months, including projected capital expenditures and dividend payments181182 - Fiscal year 2025 cash flow from operating activities was $261.5 million, a 4.0% increase year-over-year, primarily due to higher net income and the impact of non-cash items186 - Fiscal year 2025 cash outflow from investing activities was $148.2 million, primarily for the acquisition of the Atlanta facility in February 2025 ($78.8 million)187 - Fiscal year 2025 cash outflow from financing activities was $115.3 million, primarily for dividend payments, with a regular dividend payout of $3.75 per share188 Impact of Inflation The company's performance is significantly affected by changes in raw material, packaging, and transportation costs, which it mitigates through long-term fixed-price contracts, transportation management systems, and price adjustments in both foodservice and retail segments - The company's business performance is significantly affected by substantial changes in raw material, packaging, and transportation costs192 - The company mitigates the impact of raw material and transportation cost inflation through long-term fixed-price contracts and transportation management systems, though price adjustments may lag behind cost changes192 - Supply contracts with foodservice customers allow the company to pass on commodity price increases, further helping to reduce profit volatility194 - The Retail segment offsets inflationary costs through price increases, reduced promotions, and changes in packaging sizes, and implements value engineering initiatives to lower product costs194 Critical Accounting Policies and Estimates Key accounting policies and estimates include allowances for accounts receivable, distribution costs, asset impairment, and self-insurance reserves, with goodwill tested annually for impairment - Key accounting policies and estimates include allowances for accounts receivable, distribution costs, asset impairment, and self-insurance reserves195 - Accounts receivable are net of trade-related allowances, including sales discounts, trade promotions, and other sales incentives196 - Goodwill is not amortized and is tested for impairment annually on April 30197 Forward-Looking Statements This report contains forward-looking statements based on management's assessment of future expectations, developments, operations, or financial conditions, with actual results potentially differing significantly due to various risks and uncertainties - This report contains forward-looking statements regarding future expectations, developments, operations, or financial conditions, based on management's assessment of historical trends, current conditions, and future developments199 - Actual results may differ materially from forward-looking statements due to various risks and uncertainties, including factory operating efficiency, market competition, new product development, changes in product demand, regulatory impacts, acquisition integration, inflationary pressures, raw material and transportation cost fluctuations, changes in trade policy, reliance on key personnel, labor relations, geopolitical events, third-party reliance, cybersecurity incidents, and customer relationships199200 Quantitative and Qualitative Disclosures About Market Risk The company primarily faces market risk from raw material price fluctuations, managing this through structured forward purchasing and short-term fixed-price contracts, and passing on commodity price increases to foodservice customers, while having no interest rate risk due to absence of borrowings Raw Material Price Risk The company procures various commodities and raw materials whose market prices can fluctuate due to economic factors, managing this risk through structured forward purchasing and short-term fixed-price arrangements, and by passing on price increases to foodservice customers - The company procures various commodities and raw materials, such as soybean oil, flour, eggs, and dairy products, whose market prices can fluctuate due to various economic factors202 - The company manages price risk for key raw materials like soybean oil and flour through structured forward purchasing programs and short-term fixed-price arrangements to reduce profit volatility during commodity market fluctuations202 - Supply contracts with foodservice customers allow the company to pass on commodity price increases, further helping to reduce profit volatility202 Financial Statements and Supplementary Data This section presents the company's consolidated financial statements for the fiscal year ended June 30, 2025, and the preceding two fiscal years, including the auditor's unqualified opinions on both financial statements and internal controls, along with detailed notes on accounting policies, acquisitions, debt, leases, and other financial matters Report of Independent Registered Public Accounting Firm Deloitte & Touche LLP issued unqualified opinions on the company's consolidated financial statements for the fiscal year ended June 30, 2025, and the effectiveness of its internal control over financial reporting, identifying trade-related allowances as a critical audit matter - Deloitte & Touche LLP issued an unqualified opinion on the company's consolidated financial statements for the fiscal year ended June 30, 2025, and the preceding two fiscal years205 - Deloitte & Touche LLP issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of June 30, 2025206 - Trade-related allowances were identified as a critical audit matter due to their complexity and high volume of transactions, requiring extensive audit work on promotional programs and information systems210211 Consolidated Balance Sheets The consolidated balance sheets present the company's financial position as of June 30, 2025, and 2024, detailing assets, liabilities, and shareholders' equity Summary of Consolidated Balance Sheets (Fiscal Years 2024-2025) | Metric (Thousands of USD) | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Assets ||| | Cash and Equivalents | $161,476 | $163,443 | | Accounts Receivable | $95,817 | $95,560 | | Total Inventories | $169,301 | $173,252 | | Total Current Assets | $443,631 | $443,993 | | Property, Plant, and Equipment—Net | $534,543 | $477,696 | | Goodwill | $222,772 | $208,371 | | Total Assets | $1,274,724 | $1,206,931 | | Liabilities and Shareholders' Equity ||| | Total Current Liabilities | $186,294 | $183,969 | | Total Shareholders' Equity | $998,495 | $925,772 | | Total Liabilities and Shareholders' Equity | $1,274,724 | $1,206,931 | Consolidated Statements of Income The consolidated statements of income provide a summary of the company's financial performance for the fiscal years 2023, 2024, and 2025, detailing net sales, costs, and net income Summary of Consolidated Statements of Income (Fiscal Years 2023-2025) | Metric (Thousands of USD) | 2025 | 2024 | 2023 | | :--- | :--- | :--- | :--- | | Net Sales | $1,909,122 | $1,871,759 | $1,822,527 | | Cost of Sales | $1,453,476 | $1,439,457 | $1,433,959 | | Gross Profit | $455,646 | $432,302 | $388,568 | | Selling, General, and Administrative Expenses | $230,227 | $218,065 | $222,091 | | Restructuring and Impairment Charges | $5,102 | $14,874 | $24,969 | | Operating Income | $220,317 | $199,363 | $141,508 | | Pension Settlement Charge | $(13,968) | — | — | | Other, Net | $7,114 | $6,152 | $1,789 | | Income Before Income Taxes | $213,463 | $205,515 | $143,297 | | Income Taxes | $46,116 | $46,902 | $32,011 | | Net Income | $167,347 | $158,613 | $111,286 | | Diluted Net Earnings per Share | $6.07 | $5.76 | $4.04 | Consolidated Statements of Comprehensive Income The consolidated statements of comprehensive income present the company's net income and other comprehensive income (loss) for fiscal years 2023, 2024, and 2025 Summary of Consolidated Statements of Comprehensive Income (Fiscal Years 2023-2025) | Metric (Thousands of USD) | 2025 | 2024 | 2023 | | :--- | :--- | :--- | :--- | | Net Income | $167,347 | $158,613 | $111,286 | | Other Comprehensive Income, Net of Tax | $9,601 | $725 | $1,807 | | Comprehensive Income | $176,948 | $159,338 | $113,093 | Consolidated Statements of Cash Flows The consolidated statements of cash flows detail the company's cash movements from operating, investing, and financing activities for fiscal years 2023, 2024, and 2025 Summary of Consolidated Statements of Cash Flows (Fiscal Years 2023-2025) | Metric (Thousands of USD) | 2025 | 2024 | 2023 | | :--- | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $261,496 | $251,553 | $225,901 | | Net Cash Used in Investing Activities | $(148,206) | $(67,433) | $(90,782) | | Net Cash Used in Financing Activities | $(115,257) | $(109,150) | $(106,929) | | Net Change in Cash and Equivalents | $(1,967) | $74,970 | $28,190 | | Cash and Equivalents at End of Year | $161,476 | $163,443 | $88,473 | Consolidated Statements of Shareholders' Equity The consolidated statements of shareholders' equity provide a summary of changes in equity for fiscal years 2023, 2024, and 2025, including net income, cash dividends, and stock repurchases Summary of Consolidated Statements of Shareholders' Equity (Fiscal Years 2023-2025) | Metric (Thousands of USD) | June 30, 2025 | June 30, 2024 | June 30, 2023 | | :--- | :--- | :--- | :--- | | Total Shareholders' Equity | $998,495 | $925,772 | $862,267 | | Net Income | $167,347 | $158,613 | $111,286 | | Cash Dividends | $(103,502) | $(97,934) | $(92,368) | | Purchases of Treasury Stock | $(7,993) | $(7,645) | $(9,201) | | Common Stock | $160,886 | $153,616 | $143,870 | | Retained Earnings | $1,628,487 | $1,564,642 | $1,503,963 | | Accumulated Other Comprehensive Income (Loss) | $961 | $(8,640) | $(9,365) | Note 1 – Summary of Significant Accounting Policies This note outlines the company's significant accounting policies and estimates, including those for revenue recognition, cash equivalents, accounts receivable, inventory, property, plant and equipment, goodwill, leases, and income taxes, all prepared in accordance with U.S. GAAP - The company's consolidated financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP), involving estimates and assumptions for customer deductions, inventory net realizable value, depreciation and amortization periods, pension assumptions, and self-insurance reserves230 - The company considers liquid investments with original maturities of three months or less to be cash equivalents235 - Accounts receivable are net of trade-related allowances, including sales discounts, trade promotions, and other sales incentives236 - Inventories are valued at the lower of cost or net realizable value, using the first-in, first-out (FIFO) method to approximate actual cost240 - Property, plant, and equipment are recorded at cost and depreciated using the straight-line method241 - Goodwill is not amortized and is tested for impairment annually on April 30248 - The company records right-of-use assets and lease liabilities for operating and finance leases based on the present value of lease payments253 - Revenue is recognized when performance obligations are satisfied, typically upon product delivery or customer pickup260 - The company expenses advertising costs as incurred, and research and development expenses are also expensed as incurred271272 - The company recognizes compensation expense for stock-based compensation plans based on the fair value at the grant date273 - The company's income tax expense, deferred tax assets and liabilities, and unrecognized tax benefit reserves reflect management's best assessment of future tax payments274 - In November 2023, the FASB issued new accounting guidance requiring enhanced disclosures for reportable segments, adopted in the fiscal year 2025 annual disclosures285 - In December 2023, the FASB issued new accounting guidance requiring enhanced income tax disclosures, effective for annual disclosures in fiscal year 2026286 - In November 2024, the FASB issued new accounting guidance requiring disaggregated income statement expense disclosures, effective for annual disclosures in fiscal year 2028287289 Note 2 – Acquisition On February 18, 2025, the company acquired an Atlanta sauce and dressing manufacturing facility and related assets for $78.8 million in cash to enhance operational efficiency and capacity, resulting in $14.4 million of goodwill allocated to the Foodservice segment - On February 18, 2025, the company acquired an Atlanta sauce and dressing manufacturing facility and related assets for $78.8 million in cash to improve operational efficiency and capacity290 Preliminary Purchase Price Allocation | Item | Amount (Thousands of USD) | | :--- | :--- | | Inventories | $4,065 | | Property, Plant, and Equipment | $60,073 | | Goodwill (Tax Deductible) | $14,401 | | Other Non-Current Assets | $301 | | Current Liabilities | $(21) | | Net Assets Acquired | $78,819 | - The $14.4 million of goodwill generated from this acquisition was entirely recorded in the Foodservice segment, primarily reflecting the facility's production capabilities, future expansion potential, and the acquired workforce293 Note 3 – Long-Term Debt The company maintains a $150 million unsecured revolving credit facility, maturing on March 6, 2029, with no outstanding borrowings as of June 30, 2025, and is in full compliance with all financial covenants - The company has a $150 million unsecured revolving credit facility, expandable to $225 million with bank consent and specific conditions, which matures on March 6, 2029295 - As of June 30, 2025, and June 30, 2024, the company had no outstanding borrowings under its revolving credit facility297 - The credit facility includes financial covenants such as interest coverage and leverage ratios, and the company was in full compliance with all applicable terms and covenants as of June 30, 2025296297 Note 4 – Leases The company holds operating and finance leases for various facilities and equipment with initial non-cancelable terms exceeding one year, with a weighted-average remaining lease term of 6.7 years for operating leases and 6.1 years for finance leases as of June 30, 2025 - The company has operating and finance leases for various facilities and equipment with initial non-cancelable lease terms exceeding one year299300 Lease Expense Components (Fiscal Years 2023-2025) | Lease Type (Thousands of USD) | 2025 | 2024 | 2023 | | :--- | :--- | :--- | :--- | | Operating Lease Cost | $14,222 | $10,004 | $9,702 | | Total Finance Lease Cost | $2,234 | $2,122 | $2,325 | | Short-Term Lease Cost | $3,526 | $5,653 | $4,362 | | Total Lease Cost | $19,982 | $17,779 | $16,389 | Lease Liability Maturities (As of June 30, 2025) | Year | Operating Leases (Thousands of USD) | Finance Leases (Thousands of USD) | | :--- | :--- | :--- | | 2026 | $13,747 | $524 | | 2027 | $10,303 | $217 | | 2028 | $7,099 | $217 | | 2029 | $6,861 | $217 | | 2030 | $5,713 | $188 | | Thereafter | $21,028 | $479 | | Total Minimum Payments | $64,751 | $1,842 | | Less Interest | $(10,776) | $(264) | | Present Value of Lease Obligations | $53,975 | $1,578 | - As of June 30, 2025, the weighted-average remaining lease term for operating leases was 6.7 years, and for finance leases was 6.1 years303 Note 5 – Commitments and Contingencies The company is involved in various claims and legal proceedings, whose ultimate outcome is not expected to materially impact consolidated financial statements, and 18% of its employees are covered by collective bargaining agreements, with 5% expiring by December 31, 2025 - The company is involved in various claims and lawsuits from time to time, but their ultimate outcome is not expected to materially impact the consolidated financial statements304 - 18% of the company's employees are covered by collective bargaining agreements, with the labor contract for the Vineland, New Jersey plant, covering 5% of employees, expiring on December 31, 2025305 Note 6 – Goodwill Goodwill increased primarily due to the February 2025 acquisition of the Atlanta facility, adding $14.4 million to the Foodservice segment, reflecting its production capabilities, future expansion potential, and acquired workforce Changes in Goodwill by Reporting Segment (Fiscal Years 2024-2025) | Segment (Thousands of USD) | Retail | Foodservice | Total | | :--- | :--- | :--- | :--- | | Goodwill at Beginning of Year | $157,396 | $50,975 | $208,371 | | Goodwill Acquired During Year | — | $14,401 | $14,401 | | Goodwill at End of Year | $157,396 | $65,376 | $222,772 | - The increase in goodwill primarily resulted from the acquisition of the Atlanta facility in February 2025, which added $14.4 million in goodwill to the Foodservice segment306 Note 7 – Liabilities This note details the composition of accrued liabilities and other non-current liabilities as of June 30, 2025, and 2024, including compensation, operating leases, royalties, distribution, and various taxes Accrued Liabilities Components (As of June 30, 2025) | Item (Thousands of USD) | 2025 | 2024 | | :--- | :--- | :--- | | Compensation and Employee Benefits | $33,753 | $31,569 | | Operating Leases | $11,255 | $10,335 | | Royalties | $8,469 | $7,524 | | Distribution | $6,192 | $7,116 | | Other Taxes | $4,250 | $2,868 | | Finance Leases | $463 | $1,993 | | Other | $3,950 | $3,753 | | Total Accrued Liabilities | $68,332 | $65,158 | Other Non-Current Liabilities Components (As of June 30, 2025) | Item (Thousands of USD) | 2025 | 2024 | | :--- | :--- | :--- | | Deferred Compensation and Accrued Interest | $4,607 | $4,501 | | Workers' Compensation | $4,330 | $6,681 | | Finance Leases | $1,115 | $782 | | Total Tax Contingency Reserve | $747 | $802 | | Postretirement Benefit Liability | $554 | $576 | | Pension Benefit Liability | — | $345 | | Other | $1,747 | $1,670 | | Total Other Non-Current Liabilities | $13,100 | $15,357 | Note 8 – Income Taxes This note provides a breakdown of income tax expense, the reconciliation of the effective tax rate to the statutory federal income tax rate, and the components of deferred tax assets and liabilities for fiscal years 2023-2025 Income Tax Components (Fiscal Years 2023-2025) | Item (Thousands of USD) | 2025 | 2024 | 2023 | | :--- | :--- | :--- | :--- | | Total Current Payable | $52,205 | $57,172 | $24,125 | | Deferred Federal, State, and Local (Benefit) Expense | $(6,089) | $(10,270) | $7,886 | | Total Income Taxes | $46,116 | $46,902 | $32,011 | Effective Tax Rate Reconciliation to Statutory Federal Income Tax Rate (Fiscal Years 2023-2025) | Factor | 2025 | 2024 | 2023 | | :--- | :--- | :--- | :--- | | Statutory Rate | 21.0% | 21.0% | 21.0% | | State and Local Income Taxes | 1.1% | 1.9% | 2.4% | | Research and Development Tax Credits | (1.1)% | (0.7)% | (1.1)% | | Net Windfall Tax Benefit from Stock-Based Compensation | (0.1)% | — | (0.4)% | | Other | 0.7% | 0.6% | 0.4% | | Effective Tax Rate | 21.6% | 22.8% | 22.3% | Deferred Tax Assets and Liabilities Components (As of June 30, 2025) | Item (Thousands of USD) | 2025 | 2024 | | :--- | :--- | :--- | | Total Deferred Tax Assets | $45,662 | $43,822 | | Total Deferred Tax Liabilities | $(79,777) | $(81,098) | | Net Deferred Tax Liabilities | $(34,115) | $(37,276) | - Net cash paid for income taxes was $52.515 million in fiscal year 2025, $53.583 million in fiscal year 2024, and $26.327 million in fiscal year 2023312 - As of June 30, 2025, total unrecognized tax benefits were $0.747 million, with no significant changes anticipated within the next 12 months312313 Note 9 – Business Segment Information The company's financial performance is reported in two segments, Retail and Foodservice, with the CEO as the chief operating decision maker, evaluating segment performance based on net sales and operating income, and significant customer concentrations with Chick-fil-A and Walmart - The company's financial performance is divided into two reporting segments, Retail and Foodservice, with the Chief Executive Officer as the Chief Operating Decision Maker (CODM), who assesses segment performance based on net sales and operating income316319 Net Sales by Product Class (Fiscal Years 2023-2025) | Product Class (Thousands of USD) | 2025 | 2024 | 2023 | | :--- | :--- | :--- | :--- | | Total Retail Net Sales | $1,003,409 | $988,424 | $965,370 | | Total Foodservice Net Sales | $905,713 | $883,335 | $857,157 | | Total Net Sales | $1,909,122 | $1,871,759 | $1,822,527 | Foodservice Net Sales by Customer Type (Fiscal Years 2023-2025) | Customer Type (Thousands of USD) | 2025 | 2024 | 2023 | | :--- | :--- | :--- | :--- | | National Customers | $693,583 | $692,340 | $676,665 | | Branded and Other | $197,893 | $190,995 | $180,492 | | TSA Other Dressings and Sauces | $14,237 | — | — | | Total Foodservice Net Sales | $905,713 | $883,335 | $857,157 | Financial Information by Reporting Segment (Fiscal Year 2025) | Item (Thousands of USD) | Retail | Foodservice | Total | | :--- | :--- | :--- | :--- | | Net Sales | $1,003,409 | $905,713 | $1,909,122 | | Cost of Sales | $700,254 | $753,222 | | | Selling, General, and Administrative Expenses | $91,460 | $40,912 | | | Total Segment Operating Income | $211,695 | $111,579 | $323,274 | | Unallocated Corporate Expenses | | | $97,855 | | Unallocated Restructuring and Impairment Charges | | | $5,102 | | Operating Income | | | $220,317 | Significant Customer Contribution to Consolidated Net Sales (Fiscal Years 2023-2025) | Customer | 2025 | 2024 | 2023 | | :--- | :--- | :--- | :--- | | Chick-fil-A | 29% | 28% | 26% | | Walmart | 19% | 18% | 18% | Note 10 – Stock-Based Compensation The company grants stock-based compensation, including Stock-Settled Stock Appreciation Rights (SSSARs), restricted stock, and performance units, under its 2015 Omnibus Incentive Plan, with associated compensation expenses and tax benefits recognized over the vesting periods - The company grants stock-based compensation, including Stock-Settled Stock Appreciation Rights (SSSARs), restricted stock, and performance units, to employees and directors under its 2015 Omnibus Incentive Plan331 SSSARs Compensation Expense and Tax Benefit (Fiscal Years 2023-2025) | Item (Thousands of USD) | 2025 | 2024 | 2023 | | :--- | :--- | :--- | :--- | | Compensation Expense | — | $1,038 | $1,972 | | Tax Benefit | — | $90 | $216 | | Intrinsic Value Exercised | $(18) | $677 | $3,873 | - As of June 30, 2025, there were no unvested SSSARs and no unrecognized SSSARs compensation expense333336 Restricted Stock Compensation Expense and Tax Benefit (Fiscal Years 2023-2025) | Item (Thousands of USD) | 2025 | 2024 | 2023 | | :--- | :--- | :--- | :--- | | Compensation Expense | $5,673 | $5,479 | $4,432 | | Tax Benefit | $859 | $841 | $677 | - As of June 30, 2025, unrecognized compensation expense related to restricted stock was $7.1 million, to be recognized over the next 2 years340 - Performance units are based on two metrics: relative total shareholder return and revenue growth, with a 3-year vesting period and settlement in common stock341 Performance Unit Compensation Expense and Tax Benefit (Fiscal Years 2023-2025) | Item (Thousands of USD) | 2025 | 2024 | 2023 | | :--- | :--- | :--- | :--- | | Compensation Expense | $3,306 | $4,842 | $2,678 | | Tax Benefit | $321 | $620 | $355 | - As of June 30, 2025, unrecognized compensation expense related to performance units was $4.4 million, to be recognized over the next 2 years345 Note 11 – Pension Benefits In August 2024, the Board approved the termination of all defined benefit pension plans, effective November 30, 2024, resulting in a one-time non-cash settlement charge of $14 million in fiscal year 2025, and as of June 30, 2025, the company has no further pension benefit obligations or plan assets - In August 2024, the company's Board of Directors approved the merger and termination of all defined benefit pension plans, effective November 30, 2024, resulting in a one-time non-cash settlement charge of $14 million in fiscal year 2025346 Pension Plan Net Periodic Benefit Cost Components (Fiscal Years 2023-2025) | Item (Thousands of USD) | 2025 | 2024 | 2023 | | :--- | :--- | :--- | :--- | | Interest Cost | $659 | $1,382 | $1,344 | | Expected Return on Plan Assets | $(668) | $(1,375) | $(1,416) | | Amortization of Unrecognized Net Loss | $294 | $633 | $725 | | Settlement Cost | $13,968 | — | — | | Net Periodic Benefit Cost | $14,253 | $640 | $653 | - As of June 30, 2025, the company no longer has pension benefit obligations or plan assets350 Note 12 – Defined Contribution and Other Employee Plans The company sponsors four 401(k) defined contribution plans, incurring $8.282 million in costs in fiscal year 2025, and contributes to a multiemployer pension plan that was in "green zone" status in 2024 and 2023, along with providing a deferred compensation plan - The company sponsors four 401(k) defined contribution plans, with associated costs of $8.282 million in fiscal year 2025353 - A company subsidiary participates in a multiemployer pension plan, which was in "green zone" (well-funded) status in both 2024 and 2023354356 Multiemployer Pension Plan Contributions (Fiscal Years 2023-2025) | Plan Name | 2025 Contributions (Thousands of USD) | 2024 Contributions (Thousands of USD) | 2023 Contributions (Thousands of USD) | | :--- | :--- | :--- | :--- | | Western Conference of Teamsters Pension Plan | $277 | $215 | $250 | - The company also provides contributions
Lancaster Colony(LANC) - 2025 Q4 - Annual Report