1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended DecemberMarch 31, 19971998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________
Commission file number 0-4065-1
LANCASTER COLONY CORPORATION
(Exact name of registrant as specified in its charter)
OHIO 13-1955943
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
37 WEST BROAD STREET, COLUMBUS, OHIO 43215
(Address of principal executive offices)
(Zip Code)
614-224-7141
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
As of DecemberMarch 31, 1997,1998, there were approximately 28,794,00043,194,000 shares of
common stock, no par value per share, outstanding.
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LANCASTER COLONY CORPORATION AND SUBSIDIARIES
INDEX
Page No.
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Part I. Financial Information
Condensed Consolidated Condensed Balance Sheets -
DecemberMarch 31, 19971998 and June 30, 1997 3
Condensed Consolidated Condensed Statements of Income -
Three Months and SixNine Months
Ended DecemberMarch 31, 1998 and 1997 and 1996 4
Condensed Consolidated Condensed Statements of Cash Flows -
SixNine Months Ended DecemberMarch 31, 19971998 and 19961997 5
Notes to Condensed Consolidated Condensed Financial Statements 6
Management's Discussion and Analysis of the Results
of Operations and Financial Condition 7-8
Part II. Other Information
Item 4 - Submission of Matters to a Vote of
Security Holders 8
Item 6 - Exhibits and Reports on Form 8-K 9
Signatures 9
Exhibit 27 - Financial Data Schedule 10
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LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
DecemberMarch 31 June 30
1998 1997
1997
---- --------------- ------------
(Unaudited)
ASSETS
Current Assets:
Cash and equivalents $ 22,389,00024,951,000 $ 32,109,000
Receivables - net of allowance for doubtful accounts 135,765,000121,906,000 102,457,000
Inventories:
Raw materials and supplies 44,447,00047,381,000 42,339,000
Finished goods and work in process 96,025,000106,326,000 118,912,000
------------ ------------
Total inventories 140,472,000153,707,000 161,251,000
Prepaid expenses and other current assets 15,158,00016,611,000 12,966,000
------------ ------------
Total current assets 313,784,000317,175,000 308,783,000
Property, Plant and Equipment - At cost 360,334,000368,304,000 337,301,000
Less Accumulated Depreciation 198,277,000202,061,000 185,992,000
------------ ------------
Property, plant and equipment - net 162,057,000166,243,000 151,309,000
Goodwill - net of accumulated amortization 37,655,00037,191,000 19,810,000
Other Assets 8,882,0009,461,000 4,492,000
------------ ------------
Total Assets $522,378,000$530,070,000 $484,394,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 550,000 $ 545,000
Accounts payable 43,519,00044,726,000 33,203,000
Accrued liabilities 44,717,00032,280,000 39,956,000
------------ ------------
Total current liabilities 88,786,00077,556,000 73,704,000
Long-Term Debt - Less current portion 30,275,000 30,685,000
Other Noncurrent Liabilities 7,810,0007,768,000 7,895,000
Deferred Income Taxes 555,0003,777,000 4,110,000
Shareholders' Equity:
Preferred stock - authorized 3,050,000 shares
issuable in series; Class A - $1.00 par value,
authorized 750,000 shares; Class B and C -
no par value, authorized 1,150,000 shares each;
outstanding - none
Common stock - authorized 75,000,000 shares;
issued DecemberMarch 31, 19971998 - no par value -
31,295,00047,072,000 shares; June 30, 1997 -
no par value - 31,247,000 shares 45,735,00049,824,000 43,573,000
Retained earnings 443,344,000460,089,000 404,783,000
Foreign currency translation adjustment 77,00089,000 75,000
------------ ------------
Total 489,156,000510,002,000 448,431,000
Less:
Common stock in treasury, at cost
DecemberMarch 31, 19971998 - 2,501,0003,878,000 shares;
June 30, 1997 - 2,230,000 shares 94,204,00099,308,000 80,431,000
------------ ------------
Total shareholders' equity 394,952,000410,694,000 368,000,000
------------ ------------
Total Liabilities and Shareholders' Equity $522,378,000$530,070,000 $484,394,000
============ ============
See Notes to Condensed Consolidated Condensed Financial Statements
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LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended SixNine Months Ended
DecemberMarch 31 DecemberMarch 31
1998 1997 19961998 1997 1996
------------ ------------ ------------ ------------
Net Sales $300,754,000 $259,023,000 $537,928,000 $477,941,000$237,628,000 $218,141,000 $775,556,000 $696,082,000
Cost of Sales 205,708,000 176,733,000 367,728,000 329,306,000161,378,000 148,984,000 529,106,000 478,290,000
------------ ------------ ------------ ------------
Gross Margin 95,046,000 82,290,000 170,200,000 148,635,00076,250,000 69,157,000 246,450,000 217,792,000
Selling, General and
Administrative Expenses 47,400,000 40,716,000 87,618,000 76,904,00039,964,000 34,499,000 127,582,000 111,403,000
------------ ------------ ------------ ------------
Operating Income 47,646,000 41,574,000 82,582,000 71,731,00036,286,000 34,658,000 118,868,000 106,389,000
Other Income (Expense):
Interest expense (701,000) (673,000) (1,358,000) (1,308,000)(637,000) (633,000) (1,995,000) (1,941,000)
Interest income and
other - net (58,000) (205,000) 41,000868,000 (11,000) 663,000 30,000
------------ ------------ ------------ ------------
Income Before Income Taxes 46,887,000 40,901,000 81,019,000 70,464,00036,517,000 34,014,000 117,536,000 104,478,000
Taxes Based on Income 17,920,000 15,496,000 31,191,000 26,799,00013,721,000 12,992,000 44,912,000 39,791,000
------------ ------------ ------------ ------------
Net Income $ 28,967,00022,796,000 $ 25,405,00021,022,000 $ 49,828,00072,624,000 $ 43,665,00064,687,000
============ ============ ============ ============
Net Income Per Common
Share:
Basic $ .67.53 $ .57 $1.15 $ .99.48 $1.68 $1.46
Diluted $ .67.53 $ .57 $1.14 $ .99.48 $1.67 $1.46
Cash Dividends Per Common
Share $ .133.140 $ .12.120 $ .26.400 $ .233.353
Weighted Average Common
Shares Outstanding:
Basic 43,183,000 44,111,000 43,351,000 44,187,000 43,434,000 44,216,00044,180,000
Diluted 43,439,000 44,244,000 43,518,000 44,268,00043,297,000 44,156,000 43,445,000 44,231,000
See Notes to Condensed Consolidated Condensed Financial Statements
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LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six
Nine Months Ended
DecemberMarch 31
1998 1997
1996
----------- -----------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $49,828,000 $43,665,000$72,624,000 $64,687,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 15,774,000 13,453,00024,351,000 20,427,000
Deferred income taxes and other noncash charges (3,640,000) (2,123,000)(2,360,000) (768,000)
Loss (gain) on sale of property 55,000 51,000(747,000) 232,000
Changes in operating assets and liabilities:
Receivables (31,543,000) (7,999,000)(17,684,000) (2,416,000)
Inventories 22,090,000 (3,993,000)8,855,000 (8,032,000)
Prepaid expenses and other current assets (2,120,000) (2,868,000)(1,673,000) (2,679,000)
Accounts payable 8,972,000 8,541,00010,179,000 5,190,000
Accrued liabilities 3,881,000 11,128,000(8,556,000) 1,240,000
----------- -----------
Net cash provided by operating activities 63,297,000 59,855,00084,989,000 77,881,000
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for acquisition, net of cash acquired (19,749,000)
Payments on property additions (22,162,000) (21,267,000)(32,919,000) (28,552,000)
Proceeds from sale of property 149,000 8,0002,016,000 38,000
Other - net (4,451,000) (2,236,000)(7,637,000) (3,091,000)
----------- -----------
Net cash used in investing activities (46,213,000) (23,495,000)(58,289,000) (31,605,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock (13,773,000) (8,051,000)(18,877,000) (16,794,000)
Payment of dividends (11,267,000) (10,315,000)(17,318,000) (15,599,000)
Payments on long-term debt, including
payment of acquisition debt (3,928,000) (470,000)(610,000)
Common stock issued upon exercise of stock
options includingand related tax benefits 2,162,000 3,360,0006,251,000 5,048,000
----------- -----------
Net cash used in financing activities (26,806,000) (15,476,000)(33,872,000) (27,955,000)
----------- -----------
Effect of exchange rate changes on cash 2,000 26,00014,000 28,000
----------- -----------
Net change in cash and equivalents (9,720,000) 20,910,000(7,158,000) 18,349,000
Cash and equivalents at beginning of year 32,109,000 4,670,000
----------- -----------
Cash and equivalents at end of period $22,389,000 $25,580,000$24,951,000 $23,019,000
=========== ===========
SUPPLEMENTAL DISCLOSURE OF OPERATING CASH FLOWS:
Cash paid during the period for:
Interest $ 1,376,0002,543,000 $ 1,315,0002,537,000
=========== ===========
Income taxes $27,186,000 $24,446,000$52,084,000 $44,376,000
=========== ===========
See Notes to Condensed Consolidated Condensed Financial Statements
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LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED DECEMBERMARCH 31, 19971998 AND 19961997
(1) The interim condensed consolidated condensed financial statements are unaudited
but, in the opinion of management, reflect all adjustments necessary
for a fair presentation of the results of operations and financial
position for such periods. All such adjustments reflected in the
interim condensed consolidated condensed financial statements are considered to
be of a normal recurring nature. The results of operations for any
interim period are not necessarily indicative of results for the full
year. Accordingly, these financial statements should be read in
conjunction with the financial statements and notes thereto contained
in the Company's annual report on Form 10-K for the year ended June
30, 1997.
(2) In December 1997, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings per Share." SFAS No.
128 is effective for financial statements for periods ending after
December 15, 1997, including interim periods, and requires restatement
of prior periods. Accordingly, all net income per share and weighted
average common shares outstanding data has been presented in
accordance with SFAS No. 128 in the accompanying consolidated
condensed financial statements. Under SFAS No. 128, the Company is
required to present basic earnings per share and diluted earnings per
share. Basic earnings per share excludes dilution and is computed by
dividing income available to common stockholders by the weighted
average number of common shares outstanding during the period.
Diluted earnings per share is computed by dividing income available to
common stockholders by the diluted weighted average number of common
shares outstanding during the period, which includes the dilutive
potential common shares associated with outstanding stock options.
There are no adjustments to net income necessary in the calculation of
basic and diluted earnings per share.
(3) On January 27, 1998, a three-for-two stock split was effected whereby
one additional common share was issued for each two shares outstanding
to shareholders of record on January 6, 1998. Accordingly, all per
share data and the weighted average common shares outstanding for the
period ended DecemberMarch 31, 1997 in the accompanying condensed consolidated
condensed
financial statements hashave been retroactively adjusted for this split.
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LANCASTER COLONY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FOR THE PERIODS ENDED DECEMBERMARCH 31, 19971998 AND 19961997
RESULTS OF OPERATIONS
Consolidated net sales of $775,556,000 and $237,628,000 for the
sixrespective nine month periodand three month periods ended DecemberMarch 31, 1997 totaled $537,928,000, a 13% increase1998 increased 11%
and 9% over the corresponding 1996 total1997 totals of $477,941,000. Net sales for the three month period ended December 31, 1997
totaled $300,754,000, a 16% increase over the 1996 total of $259,023,000.$696,082,000 and $218,141,000.
Sales of the Glassware and Candles segment benefitedincreased during both periods
primarily as a result of the 1997 periods
from the continued growth in the sales of candles and related
products. Fiscal
1998 netThe sales of the Specialty Foods segment also grew and were enhanced bybenefited during these
periods from the July 1997 acquisition of the Chatham Village crouton business,
newgreater foodservice opportunities and improved salesthe success of certain frozen product
lines. Netlines, particularly Texas Garlic Toast. Automotive sales ofwere up modestly for
the Automotive segment also increasednine months and slightly declined during each period presented due primarily
to improved OEMthe most recent quarter. Improved
demand from original equipment manufacturers for floormats and aluminum light truck
accessories.
Aftermarket sales were adversely affectedaccessories was offset by several factors including a
continuation of highlyweaker aftermarket demand as influenced by competitive
conditions existing inaffecting the market for light
truck bedliners.
The consolidated gross margin percentage was 31.6% for both the six
and three month periods ended December 31, 1997. Such percentages were 31.1% and
31.8% for the respective corresponding periods of 1996. Higherbedliner industry.
Increased gross margins within the Specialty Foods segment were realized duringcontributed to
the 1997higher consolidated gross margin percentages of 31.8% and 32.1% reported for
the respective nine month and three month periods ended March 31, 1998 compared
to 31.3% and 31.7% achieved in the corresponding periods ended March 31, 1997.
The Specialty Foods segment benefited from such factors as a
result of a more favorable sales mix, production
efficiencies, improvement in frozen food margins and generally lower raw material costs.
On the basis of current market conditions, however, these material costs are
expected to compare less favorably to fiscal 1997 costs over the remainder of
fiscal 1998.
Gross margins were adversely impacted in the 1997 periods by a decline
in the gross margin percentages ofWithin the Glassware and Candles segment.
Contributingsegment, fiscal 1998 gross margin
percentages declined. Among the factors contributing to thisthe nine month decline
was unabsorbed overhead associated with a major rebuild of a glass melting tank
and generally lower glassware production levels. Increased raw material costs
and a less favorable sales mix also contributed to a decline in the margins
onassociated with the sales of candles. The Automotive segment also reported reduced gross margin percentages
as influencedmargins were adversely
affected by such factors as the adverse marketcompetitive conditions affecting aftermarket bedliner sales as noted above.sales.
Consolidated selling, general and administrative expenses totaled
$87,618,000$127,582,000 and $47,400,000$39,964,000 for the respective sixnine and three month periods
ended DecemberMarch 31, 1997,1998 which reflects increasesreflected an increase of 14%15% and 16%, respectively, over the
corresponding 19961997 totals of $76,904,000$111,403,000 and $40,716,000. Such increases
were$34,499,000. This growth was
primarily attributable to increased consolidated sales volumes and increased
promotional activities within the Specialty Foods segment.Segment and includes certain
costs associated with the acquisition of new customers or markets.
The increase in interest and other income for the nine and three months
ended March 31, 1998 compared to the corresponding periods of fiscal 1997 is
attributable to gains on the sales of property, plant and equipment recognized
during the third quarter of fiscal 1998.
Overall, consolidated operating income increased to $82,582,000$118,868,000 and
$47,646,000,$36,286,000, a 15%12% and 5% increase over the $71,731,000$106,389,000 and $41,574,000$34,658,000
realized for the respective sixnine and three month periods ended DecemberMarch 31, 1996.1997.
Consolidated net income also increased to $49,828,000$72,624,000 and $28,967,000$22,796,000 for the
sixnine and three month periods ending DecemberMarch 31, 1997, also1998, resulting in a 14%12% and 8%
increase from the prior year's corresponding sixnine and three month period totals
of $43,665,000$64,687,000 and $25,405,000.$21,022,000.
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FINANCIAL CONDITION
Net working capital at DecemberMarch 31, 19971998 totaled $224,998,000$239,619,000 compared to
$235,079,000 as of the preceding June 30. The Company's working capital ratio
decreased slightly from 4.2:1.0 at June 30 to 3.5:4.1:1.0 as of Decemberat March 31. Influencing
these changes is the seasonal increase in accounts receivable attributable to
the Glassware and Candles segment. Consolidated
accounts receivable totaled
$135,765,000 at December 31 compared to $102,457,000 at
7increased $19,449,000 or 19%, as influenced by the relative
strength of 10
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June 30. The impactshipments in the last month of the Glassware and Candles segment's sales also
contributed to the decline in the balance of inventories which totaled
$140,472,000 at December 31 compared to $161,251,000 at June 30.most recent period.
With respect to cash flows, for the six months ended December 31,
1997, net cash provided by operating activities for
the nine months ended March 31, 1998 totaled $63,297,000$84,989,000 compared to $59,855,000$77,881,000
for the corresponding periodperiods of 1996.1997. The increase in net income
between these two periods contributed to
this increase.
Notable investing activities for the sixnine months ended DecemberMarch 31, 19971998
included $22,162,000$32,919,000 paid for property additions and $19,749,000 paid to acquire
the Chatham Village crouton business in July. These amounts were financed
through the use of internally generated funds.
The more significantSignificant financing activities of the Company during the first sixnine
months of fiscal 1998 included $13,773,000$18,877,000 paid to purchase treasury stock and
$11,267,000$17,318,000 paid in dividends. The latter amount comparescompared to $10,315,000$15,599,000 paid
during the comparable period of 1996.1997. The increase in dividends paid reflects an
increase in the stated dividend rate from $.23$.353 paid through December, 1996March, 1997 to $.26$.40
paid through December, 1997March, 1998 as adjusted for the 3 for 2 stock split which occurred
on January 27, 1998. Management anticipates that cash provided from operations
and from the currently available discretionary bank credit lines will be
adequate to meet the Company's foreseeable cash requirements over the remainder
of fiscal 1998.
The Company is currently in the process of modifying or replacing certain
management information systems in order to address issuespotential processing deficiencies
regarding the year 2000. In accordance with current accounting guidance, all
modification costs for the year 2000 will be charged to expense as incurred
while replacement costs will be capitalized and amortized over the asset's
useful life.
It is not presently believed that these changes to information systems
will have an adverse impact on operations or that the expenditures related
thereto will be material to the Company's financial position or results of
operationsoperation in any given year. PART II. OTHER INFORMATION
Item 4 - SubmissionHowever, due to the nature of Mattersthis issue, it is
possible that a failure by the Company, its customers or its suppliers to make a
Vote Of Security Holders
- ------------------------------------------------------------
The registrant held its annual meetingcomplete and timely assessment of the shareholdersnecessary requirements could have a
material adverse affect on November
17, 1997. Proxies for the meeting were solicited pursuant to Section 14(a)Company's business, results of the Securities Exchange Act of 1934. Matters voted upon at the annual meeting
were: (1) the approval of a proposal to amend Article FOURTH of the
Corporation's Articles of Incorporation to increase the number of authorized
shares of common stock from 35,000,000 to 75,000,000 and the number of
authorized shares of Class A Preferred Stock from 350,000 to 750,000, for which
20,743,623 votes were cast for such an approval, 4,574,682 votes were cast
against such approval and 3,675,686 were abstained operations and/or
not voted; (2) the
election of the following three directors whose term will expire in 2000:
Shares Shares
Voted Shares Not
"For" "Withheld" Voted
----- ---------- -----
Kerrii B. Anderson 27,099,463 202,702 1,691,826
Morris S. Halpern 27,015,617 286,548 1,691,826
Robert S. Hamilton 27,105,768 196,397 1,691,826
As of November 17, 1997, the following individuals also continued to
serve as directors of the registrant:
Frank W. Batsch Edward H. Jennings
Robert L. Fox Richard R. Murphey, Jr.
John B. Gerlach, Jr. Henry M. O'Neill, Jr.financial position.
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PART II. OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibit 27 - Financial Data Schedule.Schedule
(b) Reports onof Form 8-K - There were no reports filed on Form 8-K for
the three months ended DecemberMarch 31, 1997.1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrantregistration has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LANCASTER COLONY CORPORATION
Date: February 10,May 8, 1998 BY:/S/ /s/ John B. Gerlach, Jr.
--------------------------- ------------------------------------- ------------------------------
JOHN B. GERLACH, JR.
Chairman, Chief Executive
Officer and President
Date: February 10,May 8, 1998 BY:/S/ /s/ John L. Boylan
--------------------------- ------------------------------------- ------------------------------
JOHN L. BOYLAN
Treasurer, Vice President,
Assistant Secretary and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
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