Our shareholders approved the adoption of and subsequent amendments to the Lancaster Colony Corporation 2005 Stock Plan (the “2005 Plan”). The 2005 Plan reserved 2,000,000 common shares for issuance to our employees and directors, and all awards granted under the 2005 Plan will be exercisable at prices not less than fair market value as of the date of the grant. The vesting period for awards granted under the 2005 Plan varies as to the type of award granted, but generally these awards have a maximum term of five years.

Stock-Settled Stock Appreciation Rights

We use periodic grants of stock-settled stock appreciation rights (“SSSARs”) as a vehicle for rewarding certain employees with long-term incentives for their efforts in helping to create long-term shareholder value. We calculate the fair value of SSSARs grants using the Black-Scholes option-pricing model. Our policy is to issue shares upon SSSARs exercise from new shares that had been previously authorized.

In February 2012 and 2011, we granted SSSARs to various employees under the terms of the 2005 Plan. The following table summarizes information relating to each of these grants:

	2012	2011
SSSARs granted..............................................................................................	185	94
Weighted average fair value per right.........................................................	$ 9.08	$ 10.12
Assumptions used in fair value calculations:
Risk-free interest rate...............................................................................	0.41%	1.27%
Dividend yield...........................................................................................	2.11%	2.28%
Volatility factor of the expected market price of our common stock..........................................................................................	24.31%	28.78%
Weighted average expected life in years..............................................	2.76	3.11
Estimated forfeiture rate...............................................................................	4.00%	4.00%

For each of these grants, the volatility factor was estimated based on actual historical volatility of our stock for a time period equal to the term of the SSSARs. The expected average life was determined based on historical exercise experience for this type of grant. The SSSARs from each of these grants vest one-third on the first anniversary of the grant date, one-third on the second anniversary of the grant date and one-third on the third anniversary of the grant date.

We recognize compensation expense over the requisite service period. Compensation cost was reflected in Cost of Sales or Selling, General and Administrative Expenses based on the grantees’ salaries expense classification and was allocated to each segment appropriately. We recorded tax benefits and gross windfall tax benefits related to SSSARs. These windfall tax benefits were included in the financing section of the Condensed Consolidated Statements of Cash Flows. The following table summarizes SSSARs compensation expense and tax benefits recorded:



	Three Months Ended March 31		Nine Months Ended March 31
	2012	2011	2012	2011
Compensation expense.................................................	$ 453	$ 289	$ 1,099	$ 843
Tax benefits.....................................................................	$ 159	$ 101	$ 385	$ 295
Intrinsic value of exercises............................................	$ 138	$ 326	$ 281	$ 344
Gross windfall tax benefits............................................	$ 58	$ 117	$ 122	$ 123

The total fair values of SSSARs vested are as follows:


	Nine Months Ended March 31
	2012	2011
Fair value of vested rights.............................................................................	$ 1,107	$ 1,095

The following table summarizes the activity relating to SSSARs granted under the 2005 Plan for the nine months ended March 31, 2012:

	Number of Rights	Weighted Average Exercise Price	Weighted Average Remaining Contractual Life in Years	Aggregate Intrinsic Value
Outstanding at beginning of period.......................	324	$ 53.98
Exercised...............................................................	(41)	$51.10
Granted..................................................................	185	$68.12
Forfeited................................................................	(1)	$ 58.79
Outstanding at end of period................................	467	$ 59.82	3.71	$ 3,403
Exercisable and vested at end of period............	167	$ 51.71	2.58	$ 2,459
Vested and expected to vest at end of period....	455	$ 59.71	3.69	$ 3,371

At March 31, 2012, there was approximately $2.5 million of unrecognized compensation cost related to SSSARs that we will recognize over a weighted-average period of approximately 2.27 years.

Restricted Stock

We use periodic grants of restricted stock as a vehicle for rewarding our nonemployee directors and certain employees with long-term incentives for their efforts in helping to create long-term shareholder value.

In February 2012 and 2011, we granted shares of restricted stock to various employees under the terms of the 2005 Plan. The following table summarizes information relating to each of these grants:

	2012	2011
Restricted stock granted................................................................................	25	7
Grant date fair value.....................................................................................	$ 1,693	$ 390
Closing stock price on grant date................................................................	$ 68.12	$ 57.78
Estimated forfeiture rate...............................................................................	4.00%	4.00%

The restricted stock under each of these grants vests on the third anniversary of the grant date. Under the terms of the grants, employees receive dividends on unforfeited restricted stock regardless of their vesting status. An additional 5,650 shares of restricted stock that were granted to various employees in February 2009 vested during the third quarter of 2012.

In November 2011, we granted a total of 7,427 shares of restricted stock to our seven nonemployee directors under the terms of the 2005 Plan. The restricted stock had a grant date fair value of approximately $0.5 million based on a per share closing stock price of $65.97. This restricted stock vests over a one-year period, and all of these shares are expected to vest. Dividends earned on the stock during the vesting period will be paid to the directors at the time the stock vests. Compensation expense related to the restricted stock award will be recognized over the requisite service period. An additional 8,155 shares of restricted stock that were granted to our seven nonemployee directors in November 2010 vested during the second quarter of 2012, and the directors were paid the related dividends.

We recognize compensation expense over the requisite service period. Compensation cost was reflected in Cost of Sales or Selling, General and Administrative Expenses based on the grantees’ salaries expense classification and was allocated to each segment appropriately. We recorded tax benefits and gross windfall tax benefits related to restricted stock. Windfall tax benefits, if any, were included in the financing section of the Condensed Consolidated Statements of Cash Flows.

The following table summarizes restricted stock compensation expense and tax benefits recorded:


	Three Months Ended March 31		Nine Months Ended March 31
	2012	2011	2012	2011
Compensation expense...........................................	$ 343	$ 270	$ 892	$ 906
Tax benefits...............................................................	$ 120	$ 94	$ 312	$ 317
Gross windfall tax benefits......................................	$ 56	$ 145	$ 71	$ 145

The total fair values of restricted stock vested are as follows:

The following table summarizes the activity relating to restricted stock granted under the 2005 Plan for the nine-month period ended March 31, 2012:


	Number of Shares	Weighted Average Grant Date Fair Value
Unvested restricted stock at beginning of period....................................	44	$ 54.86
Granted.....................................................................................................	32	$ 67.63
Vested........................................................................................................	(14)	$ 46.75
Forfeited...................................................................................................	-	$ -
Unvested restricted stock at end of period............................................	62	$ 63.26

At March 31, 2012, there was approximately $2.5 million of unrecognized compensation expense related to restricted stock that we will recognize over a weighted-average period of approximately 2.19 years.

Nine Months Ended

March 31

Fair value of vested shares...........................................................................