Earle Brown - IR Jay Gerlach - Chairman and CEO John Boylan - Vice President, Treasurer and CFO

Sarah Lester - Sidoti & Company Mitchell Pinheiro - Janney Montgomery Greg Halter - Great Lakes Review Chris Brown - Aristides Capital David Leibowitz - Horizon Asset Management

Good morning. My name is Angelina and I will be your conference operator today. At this time, I would like to welcome everyone to the Lancaster Colony Corporation Fiscal Year and Fourth Quarter 2009 Results Conference Call. Conducting today’s call will be Jay Gerlach, Lancaster Colony Chairman and CEO, and John Boylan, Vice President, Treasurer and CFO. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer period. (Operator Instructions). Thank you. And now to begin your conference, here is Earle Brown, Lancaster Colony Investor Relations.

Good morning. Let me also say thank you for joining us today for the Lancaster Colony fiscal year and fourth quarter 2009 conference call. Now please bear with me while we take care of a few details. As with other presentations of this type, today’s discussion by Jay Gerlach, Chairman and CEO, and John Boylan, Vice President, Treasurer and CFO, will contain forward-looking statements of what may happen in the future, including statements relating to Lancaster Colony’s sales prospects, growth rates, expected future levels of profitability, as well as the extent of share repurchases and business acquisitions to be made by the company. These forward-looking statements are based on numerous assumptions and are subject to uncertainties and risks. Accordingly investors are cautioned not to place undue reliance on such statements. Factors that might cause Lancaster’s results to differ materially from forward-looking statements include, but are not limited to risk relating to the economy, competitive challenges, changes in raw materials costs, the success of new product introductions, the effect of any restructurings, and other factors as are discussed from time to time in more detail in the company’s filings with the SEC, including Lancaster Colony’s report on Form 10-K. Please know that the cautionary statements contained in the Safe Harbor paragraph of today’s news release also apply to this conference call. Now, here is Jay Gerlach. Jay?

Good morning. We’re pleased to report today a strong fourth quarter finish to our 2009 fiscal year with sales up over 7% including increases from both segments of our business and good overall operating margins of 17%. We were able to report earnings per share of $1.01. For the year, sales growth was over 7% driven by 12% growth in specialty foods and offset by a decline in Glassware and Candles. Operating margin for the year was over 12% and EPS reached $3.18 per share. Shares repurchased during the year totaled 496,000 for 16.9 million, and we paid $31.9 million in dividends. While approximately 500,000 shares remain authorized for repurchase, we are not presently buying and have not repurchased shares since October of 2008. Capital expenditures for the year totaled 11.3 million, our lowest amount in years as fourth quarter expenditures were only $2.4 million. We have been cautious in our use of capital in these uncertain times feeling a strong balance sheet is appropriate. The fourth quarter saw over 7% sales growth from our specialty food segment with about one-third from pricing and two-thirds from volume and mix, good performance from our New York brand and Sister Schubert’s frozen breads, our Texas Toast croutons and the Marzetti refrigerated salad dressings, all contributed to that growth. Our food service channel was challenged by slower demand as restaurant sales have weakened in some lower prices as commodity costs have fallen. The consumer is definitely eating at home more. Operating margin showed further impact of lower material costs, good operations, favorable sales mix, and lower freight costs. Candle sales increased modestly in a non-seasonal quarter, and our reduced operating loss in the segment was less than $1 million reflecting the benefits of an improving mix in higher pricing, although results were hurt by reduced plant utilization and unfavorable wax cost. Let me ask John to make a few comments at this point.

Thank you, Jay. I’ll briefly cover several matters this morning regarding our June 30 balance sheet and fiscal 2009 cash flows. Let’s begin by taking a look at several of our major year end balance sheet components. Accounts receivable at June 30, totaled $61.2 million, which is an increase of about $2 million from a year ago. This growth primarily reflects the sales driven increase in candle related receivables. All in all, despite the obvious increase in macroeconomic financial challenges this past year, our account receivable ageings remained in reasonably good shape and were fairly comparable to year ago levels. Turning to the largest component of our working capital, inventories, we saw at June 30 total of $102.5 million that reflected a mark year-over-year decrease of over $17 million or 15%. Most of this decline was derived from lower candle inventories reflecting the particular focus we’ve had on these quantities over the last couple of years. As a result of this effort, we believe we have modified certain of our production processes to help keep these levels in better balance in the future. Moving on, other current assets declined by roughly $14 million, reflecting a lower tax balance due us this year. Also, while on the subject of taxes, I’d note that our fourth quarter’s provision for taxes reflected a pre-tax credit of approximately $600,000 related to the settlement of the state and the local tax position. Another balance sheet change worth comment is net profit, which declined about $9 million or 5%. Similar to a year ago, this year’s total capital expenditures of $11,336,000 was less than our depreciation expense. And as we look into fiscal 2010, we anticipate seeing capital expenditures perhaps totaling $15 million or so. The vast majority of these projected expenditures are food related. Finally, in wrapping up my balance sheet remarks, I’d point out that we remain financially strong with no debt, cash and equivalents exceeding $38 million, and shareholders equity of over $402 million. Turning to this year’s cash flows, cash flows from operating activities of continuing operations totaled $133,164,000, which compares to $70,932,000 for the prior year. Our higher level of net income drove this marked improvement, although we also experienced some favorable relative changes in our working capital components such as with our inventories. In arriving at this year’s cash provided from operations, the most prominent non-cash add back remained depreciation and amortization which totaled $21,870,000. As Jay alluded to some other annual cash flow distributions to shareholders were $16,894,000 for share repurchases and $31,854,000 for the payment of dividends. As has been the case for a number of years now, our share repurchase activity served to more than just offset option exercises as we reduced shares outstanding in fiscal 2009 by more than 1% year-over-year at June 30 and greater than 20% over the last five years. Given what I’ve shared this morning and our current expectations for fiscal 2010, we believe that we continue to be financially well positioned to address our anticipated cash needs whether it be for CapEx, share repurchases, dividends, or business acquisitions. Thanks again for your participation with us this morning, and I’ll now turn the call back over to Jay for his concluding remarks.

Thank you, John. Looking to fiscal 2010, our food segment’s biggest hurdle will be sales growth as our food service channel battles a slow restaurant business. However, we anticipate that our retail channel sales will benefit from the at home dining trend, continued growth of recent new product introductions and new introductions during the year. At this time, we see no increased pricing this year. During the first half of the year, we should see noticeably favorable ingredient costs versus last year. Our operations team is very focused on improving productivity and reducing costs. New products on store shelves soon will be Sister Schubert’s new mini pans, eight rolls versus 16 rolls, and a bag version of our clover-leaf roll, both bringing added convenience to the consumer. Under the New York brand, we are adding a ciabatta garlic loaf. Further additions are planned for the second half of the year. Also just starting to arrive in stores is new packaging for our Sister Schubert’s frozen bread line and our Reames frozen noodle line, which we hope will enhance consumer sell through. Our efforts to enhance our brand marketing continue with ongoing investments in people, research, and consumer promotions. We anticipate candle sales growth this year and somewhat moderating wax costs. Inventory levels will remain a focus, although we do not expect a reduction of the size accomplished this past year. Capital uses for acquisitions, share repurchase, cash dividend are visited regularly. The M&A market remains quiet, and we are cautious on share repurchase and while the cash dividend is reviewed quarterly, change usually occurs at our November meeting. We appreciate your interest. We’re now happy to take questions, Angelina.

(Operator Instructions). Our first question is from the line of Sarah Lester from Sidoti & Company. Sarah Lester - Sidoti & Company: I wanted to know how much lower were raw materials costs in the fourth quarter.

I think the fourth quarter was about $13 million roughly. Sarah Lester - Sidoti & Company: Okay. Does that include wax as well?

Wax was actually up a little bit, but together it’s in the ballpark, 12 to 13 million. Sarah Lester - Sidoti & Company: Okay. And then, I guess could we get into the food service side? Are you seeing any difference between softness in casual dining versus quick serve? Could you expand on that a little bit?

Well, I think we are seeing the quick serve side be a little more sluggish in the last couple of months than we had been seeing. So, the trend we saw really are in the casual end, it seems to also be hitting a little bit more into the quick serve side today as well. Sarah Lester - Sidoti & Company: And then for candle, for candle, the volume was out in the quarter, is that correct?

Yes, it is. Sarah Lester - Sidoti & Company: Okay. Are you expecting raw materials cost to be down in the first quarter there?

They should be down a little bit, yes.

Our next question is from the line of Mitch Pinheiro from Janney Montgomery. Mitchell Pinheiro - Janney Montgomery: Hey, that was a terrific quarter. I’m just a touch surprised, more than a touch on the margins and I wanted to just talk about that for a little bit. With the 20.6%, specialty foods margin, which if I look back historically, its one year best performances as far back as I can see.

That’s right. Mitchell Pinheiro - Janney Montgomery: And so my question is, I mean, obviously, as we look into 2010 now, as it relates to 2010, I understand you have still have some commodity maybe tailwinds for the next two quarters. And with sales growth getting tough, would you anticipate spending some of the margin back in terms of marketing to help support and drive volumes in your specialty foods business?

You know, Mitch, I think our view is that we’re not changing our promotional plans of any significance, but we are willing to react to competitive issues where need be. Having said that, we’re also continuing to invest on the consumer side, so we are spending some more money on research and other consumer marketing activities that hopefully build brand strength over the longer term. So we’re not backing off of that. So again, as I think as you might want to think about our operating margin, I’ve commented in the past that over the longer term we’d like to think the food business is a mid to upper teens margin kind of business, getting north of 20% is certainly on the high side and we did have a quarter with favorable material cost, we had good mix, it was about 54% retail business in the quarter, as well as it’s good operations, plant utilization. So many or most of the stars were aligned to help us get to that good margin. Mitchell Pinheiro - Janney Montgomery: Sure. So, if you look at 2010 excluding any unforeseen meaningful events, mid to upper teen margins in the specialty foods would be a fair assumption?

Well, again, we are not quite willing to give guidance, but again longer term we would think that’s a range we think this segment of our business have to perform in. Mitchell Pinheiro - Janney Montgomery: Okay, okay. Fair enough. Could you talk a little bit about how Marzetti refrigerated dressings and dips did relative to the category? I don’t see the category numbers. Is there anything you can share there with us?

Well, I guess first of all on the dip side, we’re basically the category and that category has been soft. So while the category is down, we’re down, our share really isn’t changing there. On the refrigerated dressing side, I think we’ve got a category that is showing very modest growth and we’re showing a little bit of growth there. So again share not really changing much. Mitchell Pinheiro - Janney Montgomery: Okay. So the dressings category, it’s growing in dollars and units. I mean, I’m just trying to get a sense. It’s a premium product, I’m just trying to get a feel for whether the at home trend is so strong that it’s lifting not only value propositions but also some of the premium products.

Yeah, I think there was growth in both unit volume as well as it’s impacted by pricing. Mitchell Pinheiro - Janney Montgomery: How about Pfeiffer, how did that do?

Oh Jeez, I don’t have that off the top of my head. Mitchell Pinheiro - Janney Montgomery: Okay.

I think it did okay, but -- Mitchell Pinheiro - Janney Montgomery: Are the Portables doing okay in general the category or --?

Well, I don’t have that category numbers right in front of me, Mitch, so I’m not sure I can answer that with any certainty. Mitchell Pinheiro - Janney Montgomery: Okay. In the frozen bread side same thing, is the category growing and how is your share within the category?

Yeah, there I think we’ve got both categories growing and our brands, our New York brand and Sister Schubert’s growing with or better than the category. So I think we’ve got a good performance on the frozen bread side. Mitchell Pinheiro - Janney Montgomery: Okay. Couple more questions. So in the press release you talked about optimism about improved consolidated margins. And obviously you’re not going to talk and give exact guidance, but with wax costs down a little bit and your volumes up in candles, is candles going to be a contributor to the improved consolidated margin outlook?

That’s certainly our hope for this current year. Mitchell Pinheiro - Janney Montgomery: And how much visibility do you have on wax costs? How far out are you bought or you’re committed or how can we think about that?

Well, not as good a visibility as we’d like. And you really can’t go out and buy it forward like we do with some of the food ingredients. So that would be a major potential risk factor I think in the performance of the candle business is further volatility in wax cost. As we’ve talked, I think, about in the past, we’ve worked hard at looking at alternate waxes, vegetable wax in particular, to offset some of the volatility in paraffin wax. But that’s got its own volatility from time to time. So we work hard on developing blends that both give us performance and hopefully lower costs as well as a greater variety of supply. But it still overall it’s a raw material cost that we’ve got limited forward visibility on. Mitchell Pinheiro - Janney Montgomery: Okay. Three more questions. First is staying with the candle side. What percentage of your candle business volume is sort of, let’s say, value candles versus mid-price and premium? Is there any way you can help?

Well, we don’t necessarily break it down like that, but we’re skewed very much to a value candle. I mean first of all, we’re selling into the mass channel, and we’re selling every day candle product. But we also do seasonal product, including gift sets and other promotional items. So I’d say it’s more than half to the value side of things. Mitchell Pinheiro - Janney Montgomery: Okay. In terms of capital spending, the 15 million, are there any discrete projects there?

No. I mean there is probably a couple of projects in there that are north of a couple of million dollars each, but nothing real huge in any one area. Mitchell Pinheiro - Janney Montgomery: Okay. Okay. And actually that’s it.

Our next question is from the line of Greg Halter from Great Lakes Review. Greg Halter - Great Lakes Review: Congrats on good results and it’s good to see you use the word optimistic in your press release. I don’t think I’ve seen that in at least nine years covering you guys. So that’s a good job.

We weren’t counting. So I hope that wasn’t bad timing. Greg Halter - Great Lakes Review: Well, good results, and the stock is certainly responding. So a good job in terms of restructuring the company as well.

Thank you. Greg Halter - Great Lakes Review: Relative to the food margin at 20.6, I went back, and your highest that I show going back to 2000 was 22.9% in 2000, obviously a very high period back then. But relative to that margin, looking at food input costs, can you comment on how far out you’re bought and in what areas? I mean is it soybean oil, wheat and dairy, eggs, if you could just run through that?

Well, where we primarily go out is in soybean oil and flour. Soybean oil, we have kind of a gradual level of coverage that kind of trends down as we go out, but we’ll go out as far as nine to 12 months. But our coverage is skewed more heavily to the first six months out. Flour, we’re covered out about nine months or so right now. Greg Halter - Great Lakes Review: And that’s a change in the strategy fairly recently in the last year. Is that correct?

Probably about a year or so ago, yes. Greg Halter - Great Lakes Review: Okay. Well, obviously it’s worked out well. If you could comment on the plants in Kentucky, how those things are operating. And based on the numbers, they must be doing quite well and you must be pleased. But I just wanted to get your sense there if you’re moving any different product lines there, or just give us some update on Kentucky.

We’ve been real happy with the performance of both of those plants. And while we haven’t moved any different product lines there, we have moved to take advantage of the efficiencies those facilities give us. So we’ve worked to utilize those as heavily as possible. Greg Halter - Great Lakes Review: And I don’t know if you measure this way, but is there any sort of return metric you look at versus your cost, your capitalized cost or based on an annual figure versus what you’re getting in terms of operating income out of that plant or those plants?

Hey, Greg, this is John. As we go through the planning process for investments that size, we do look at projected ROI. And while we haven’t done a reverse audit on the return of either of those facilities here, I think it’s fair to say that their performance would at least meet, if not exceed, our expectations in terms of throughput and operational efficiencies. Greg Halter - Great Lakes Review: Okay. And any management changes down in the plant there? That is still Jim I think.

Actually we’ve given Jim added responsibility. He is now responsible operationally for all of our dressing plants. So that would still include Horse Cave. But he is... Greg Halter - Great Lakes Review: Okay.

...overseeing all of our dressing plants today. Greg Halter - Great Lakes Review: Okay. And, John, one for you. On the tax rate going forward, should it revert back to a more normal 36-ish area?

For internal purposes, Greg, we’re looking at 35% to 36% for fiscal ‘10. Greg Halter - Great Lakes Review: Okay. And I know you don’t grant a whole lot of options, but just wondered if you could comment on the plans there for fiscal ‘10?

I can’t give you any specifics at all, but we would typically look at equity grants in February of ‘10. But I wouldn’t anticipate anything out of anything much different from our past pattern. Greg Halter - Great Lakes Review: I think that’s every other year is when you look at that?

We do some on an annual basis, a somewhat bigger group on an every other year basis. Greg Halter - Great Lakes Review: Okay. And relative to wax, I know there were some earlier questions, but are you using anything currently as an alternative to paraffin? Are you using vegetable wax now?

Yes, we are. Actually we’ve been using particularly soy wax for several years, maybe more initially for some of the perceived green aspects of using vegetable wax versus paraffin wax. But more recently, it’s also become important to mitigate some of the higher cost of the paraffin wax. Greg Halter - Great Lakes Review: Obviously soy has its own issues.

Definitely. Greg Halter - Great Lakes Review: Is that a 50-50 split there or...

No, I don’t know that it would be quite that strong, but it might be getting close to it today. Greg Halter - Great Lakes Review: Okay. And relative to the Continued Dumping and Subsidy Offset Act, I know there has been challenges and so forth. But what’s your current outlook on whether or not there will be one more distribution there?

I think, Greg, at this point, the last notice from the customs folks was issued in early May, and it suggested that there would be some smaller amount of funding available for distribution toward calendar year-end. We have submitted our annual application as we typically would, and then we just wait and see how the process evolves between now and the end of November or first part of December. Greg Halter - Great Lakes Review: And one last balance sheet item. Do you have the figure for goodwill and other intangibles as at year-end?

Goodwill essentially has remained unchanged and still approximates 90 million. And the other amortizing intangibles would be just in excess of 10 million.

Our next question is from the line of Chris Brown from Aristides Capital. Chris Brown - Aristides Capital: I’m sorry; my question had actually been answered in regards to margin. But while I have you, great job with the Cardini Light Caesar. That’s delicious. Thanks.

(Operator Instructions) Our next question is from the line of David Leibowitz from Horizon Asset Management. David Leibowitz - Horizon Asset Management: A few brief unrelated issues. One, if we leave out candle and glass, what is your plant capacity utilization at right now?

Yeah, and David that obviously is going to vary... David Leibowitz - Horizon Asset Management: Understood.

...between product lines. But probably overall in the food business, we’re probably in the mid to upper 70’s I’d ballpark it. David Leibowitz - Horizon Asset Management: So there are no facilities right now where you’re bumping against that theoretical capacity?

We think we’ve got adequate capacity for all of our current business product lines as we look out for at least the next one to two years. David Leibowitz - Horizon Asset Management: Very good. Second of all, looking at the food business again, let’s leave out gas glass and candle for all the questions that follow, do you think you have too many brands?

No, we don’t think so today or we’d probably be doing something about that. But no, I think we’re comfortable with the brands we have today. Clearly our focus is on our Marzetti brand, our New York brand of frozen breads, our Sister Schubert brand of frozen breads and our Texas Toast Croutons. David Leibowitz - Horizon Asset Management: And that leads to the next question. As we go through the brands, do you feel you have too many SKUs either companywide or within any of these brands?

Sure. You probably always have too many SKUs. That’s an every day exercise, and challenge is weeding out the stuff that shouldn’t be there. So I don’t think it’s grossly so, but we could always probably pare a few SKUs. David Leibowitz - Horizon Asset Management: Well, do you find the retailer is pushing back on you and saying, look, you want to introduce a new product to the refrigerated case or the shelf, you’re going to have to eliminate another SKU that we’re taking from you?

Well, they’re definitely monitoring shelf space and utilization of that space very closely. So, yeah, you can see that scenario certainly from time to time. David Leibowitz - Horizon Asset Management: And what about your slotting fees and your use of couponing in the current environment?

We don’t right at the moment see anything materially different than what we’ve been doing in the past on either front. David Leibowitz - Horizon Asset Management: Good. And are there any new product categories, excuse me that you’re entering via various brands you have out there right now?

Not with what we’re doing at the present time. We probably have a couple things in development that could get us there, but we’re not in a position to really talk about those yet. David Leibowitz - Horizon Asset Management: Will any of them be out before the end of the calendar year?

No. David Leibowitz - Horizon Asset Management: Okay. And as usual, there wasn’t a heck of a lot said about acquisitions on the conference call in the text. Is there anything you can tell us either by acquiring a brand, a product or manufacturing facilities, any conversations going on anywhere?

Nothing that’s real serious at this point. We continue to evaluate potential fits with us. But at the present time, it’s just such a quiet environment that very little dialogue actually going on. David Leibowitz - Horizon Asset Management: And the last thing, on the consumer side, are you discovering that some of your retailers may not be as good a credit risk as they were six months ago and you’re having to shorten up what you deliver them?

I don’t think we’ve seen that to any extent that we’ve highlighted anybody we’ve got to do that with, David. But we certainly in this environment are very mindful of the credit risk that’s out of there, and we’d like to think we’re monitoring it closely. But certainly, as you’ve seen, things can happen fast in that arena and surprise. But we’ve been fortunate so far not to have any of those kind of surprises of any significance. David Leibowitz - Horizon Asset Management: Would that answer also apply to the institutional and foodservice side of the business?

Yes. David Leibowitz - Horizon Asset Management: And the last thing, over the next three to six months, given what you’ve already spoken to and also answered in former questions, is there anything on the short-term horizon that does give you poise? In other words, you’ve locked in your commodities for the next three to six months. As people try to model the outlook for the first half of the new fiscal year, what sort of untold surprises might there be?

Well, I think it’d absolutely have to be just sales volume, David. I think we’re still in such a difficult economy and environment that we just have trouble having a high degree of confidence on the top-line number. I think we’re actually more confident on what we see coming in material costs over the next, as you said, six months or so. But the top-line will definitely be the variable that’s hard to get comfortable with. David Leibowitz - Horizon Asset Management: Following up then, and this will be my last question, if the top-line comes in 10% higher than your internal budget or 10% lower than your internal budget, what would the impact be on the after-tax line percentage-wise?

I don’t think we’d have a specific like that for you, David. But obviously, if it were to go down 10%, you would get into some issues relative to capacity utilization or just overall fixed cost absorption. So it’d be a negative impact, but I couldn’t quantify that for you. David Leibowitz - Horizon Asset Management: And on the upside likewise, since you still have the plant capacity to utilize?

Yeah, I think on the upside, all other things being equal, it should be a positive.

Our next question is from the line of Greg Halter from Great Lakes Review. Greg Halter - Great Lakes Review: Yeah, thank you for letting me back on. Two quick ones. One is on inventory. You’ve done a good job of reducing the levels there so far. I just wondered how much you think there is to go, I guess, especially on the candle side.

I think, Greg, we’ve taken out the lion’s share of what we believe was excess inventory. There is always some incremental improvement that can be made. But for the most part, the reduction that we’ve accomplished this past year has taken out the greatest concern we’ve had in that inventory. So I wouldn’t expect to see a significant reduction year-over-year as we speak again next August. Greg Halter - Great Lakes Review: And last one is on the food input cost again. In the quarter just completed, you said there were somewhere between 12 to 13 million of lower raw material costs. If the costs stay where they are now, is that approximately the types of levels you expect for the next three or six months or so relative to where the costs were last year?

I think as we look out toward the next six months, we can see reductions in most of our raw material costs that will yield enhanced operating margins. And I’d prefer not to quantify the estimated amount, but still we see reasonable year-over-year improvement from operating margins coming about from these cost reductions.

There are no further questions at this time. I would now like to turn the call back over to Mr. Gerlach for any concluding remarks.

Well, thank you for joining us this morning. Again, we appreciate your interest, and we’ll look forward to talking to you when we release our third quarter numbers here only really a couple of months out now. Thank you.

Thank you. This concludes today’s conference call. You may now disconnect.