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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 December 31, 1995
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 December 31, 1995, there were approximately 29,835,000 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
Consolidated Condensed Balance Sheets -
December 31, 1995 and June 30, 1995 3
Consolidated Condensed Statements of Income -
Three Months and Six Months
Ended December 31, 1995 and 1994 4
Consolidated Condensed Statements of Cash Flows -
Six Months Ended December 31, 1995 and 1994 5
Notes to 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
CONSOLIDATED CONDENSED BALANCE SHEETS
December 31 June 30
1995 1995
------------- -----------
(Unaudited)
ASSETS
Current Assets:
Cash and equivalents $ 11,359,000 $ 8,239,000
Receivables - net of allowance for doubtful accounts 116,757,000 88,416,000
Inventories:
Raw materials and supplies 38,501,000 34,020,000
Finished goods and work in process 101,936,000 107,866,000
----------- -------------
Total inventories 140,437,000 141,886,000
Prepaid expenses and other current assets 12,684,000 11,226,000
----------- -------------
Total current assets 281,237,000 249,767,000
Property, Plant and Equipment - At cost 298,785,000 282,525,000
Less Accumulated Depreciation 178,546,000 169,338,000
------------ ------------
Property, plant and equipment - net 120,239,000 113,187,000
Goodwill - Net of accumulated amortization 21,107,000 13,761,000
Other Assets 2,660,000 3,189,000
------------ ------------
Total Assets $425,243,000 $379,904,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 807,000 $ 1,026,000
Accounts payable 37,390,000 26,322,000
Accrued liabilities 41,544,000 33,164,000
----------- -------------
Total current liabilities 79,741,000 60,512,000
Long-Term Debt - Less current portion 31,370,000 31,840,000
Other Noncurrent Liabilities 8,273,000 8,223,000
Deferred Income Taxes 895,000 2,181,000
Shareholders' Equity:
Preferred stock - authorized 2,650,000 shares
issuable in series; Class A - $1.00 par value,
authorized 350,000 shares; Class B and C -
no par value, authorized 1,150,000 shares each;
outstanding - none
Common stock - authorized 35,000,000 shares;
issued December 31, 1995 - no par value -
31,049,000 shares; June 30, 1995 -
no par value - 30,765,000 shares 37,444,000 28,086,000
Retained earnings 308,849,000 280,538,000
Foreign currency translation adjustment 559,000 501,000
----------- -------------
Total 346,852,000 309,125,000
Less:
Common stock in treasury, at cost
December 31, 1995 - 1,214,000 shares;
June 30, 1995 - 936,000 shares 39,331,000 29,420,000
Amount due from ESOP 2,557,000 2,557,000
---------- --------------
Total shareholders' equity 304,964,000 277,148,000
----------- -------------
Total Liabilities and Shareholders' Equity $425,243,000 $379,904,000
============ ============
See Notes to Consolidated Condensed Financial Statements
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LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Six Months Ended
December 31 December 31
1995 1994 1995 1994
------------ ------------ ------------ ------------
Net Sales $239,055,000 $225,248,000 $439,957,000 $414,378,000
Cost of Sales 163,434,000 155,304,000 305,017,000 287,418,000
------------ ------------ ------------ ------------
Gross Margin 75,621,000 69,944,000 134,940,000 126,960,000
Selling, General and
Administrative Expenses 37,945,000 36,591,000 71,369,000 68,165,000
------------ ------------ ------------ ------------
Operating Income 37,676,000 33,353,000 63,571,000 58,795,000
Other Income (Expense):
Interest expense (843,000) (673,000) (1,559,000) (1,388,000)
Interest income and
other - net (194,000) (183,000) (109,000) 226,000
------------ ------------ ------------ ------------
Income Before Income Taxes 36,639,000 32,497,000 61,903,000 57,633,000
Taxes Based on Income 14,270,000 12,516,000 24,126,000 22,332,000
------------ ------------ ------------ ------------
Net Income $ 22,369,000 $ 19,981,000 $ 37,777,000 $ 35,301,000
============ ============ ============ ============
Net Income Per Common Share $ .75 $ .66 $1.27 $1.17
Cash Dividends Per Common
Share $ .17 $ .14 $ .32 $ .26
Weighted Average Common
Shares Outstanding 29,800,000 30,082,000 29,762,000 30,168,000
============ ============ ============ ============
See Notes to Consolidated Condensed Financial Statements
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LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
December 31
1995 1994
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $37,777,000 $35,301,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 11,987,000 12,031,000
Deferred income taxes and other noncash charges (1,192,000) (2,740,000)
Loss on sale of property 56,000 195,000
Changes in operating assets and liabilities:
Receivables (27,613,000) (26,036,000)
Inventories 2,189,000 (3,928,000)
Prepaid expenses and other current assets (1,280,000) (1,725,000)
Accounts payable 10,437,000 5,880,000
Accrued liabilities 8,671,000 1,907,000
----------- -----------
Net cash provided by operating activities 41,032,000 20,885,000
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments on property additions (20,140,000) (14,916,000)
Proceeds from sale of property 1,737,000 412,000
Other - net (205,000) (252,000)
----------- -----------
Net cash used in investing activities (18,608,000) (14,756,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock (9,911,000) (13,570,000)
Payment of dividends (9,510,000) (7,808,000)
Payments on long-term debt (689,000) (790,000)
Common stock issued upon exercise of stock
options including related tax benefits 738,000 644,000
----------- -----------
Net cash used in financing activities (19,372,000) (21,524,000)
----------- -----------
Effect of exchange rate changes on cash 68,000 (5,000)
----------- -----------
Net change in cash and equivalents 3,120,000 (15,400,000)
Cash and equivalents at beginning of year 8,239,000 30,423,000
----------- -----------
Cash and equivalents at end of period $11,359,000 $15,023,000
=========== ===========
SUPPLEMENTAL DISCLOSURE OF OPERATING CASH FLOWS:
Cash paid during the period for:
Interest $ 1,581,000 $ 1,375,000
=========== ===========
Income taxes $20,041,000 $24,405,000
=========== ===========
See Notes to Consolidated Condensed Financial Statements
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LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED DECEMBER 31, 1995 AND 1994
(1) The interim 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
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, 1995.
(2) Net income per common share is computed based on the weighted average
number of shares of common stock and common stock equivalents (stock
options) outstanding during each period.
(3) During the second quarter ended December 31, 1995, the Company acquired
all of the common stock of Dolefam Corporation via a stock-for- stock
transaction. Such transaction was accounted for under the purchase
method of accounting. In conjunction with the acquisition, the Company
issued approximately 273,000 shares of Lancaster Colony Corporation
common stock having a fair market value of approximately $9,000,000 in
exchange for cash of $380,000 and other assets and liabilities having a
fair market value of $1,888,000 and $841,000, respectively. The noncash
aspects of this transaction have been excluded from the accompanying
Statement of Cash Flows.
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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 DECEMBER 31, 1995 AND 1994
RESULTS OF OPERATIONS
Consolidated net sales totaling $439,957,000 and $239,055,000 for the
respective six and three month periods ended December 31, 1995 increased 6%
over the corresponding 1994 totals of $414,378,000 and $225,248,000,
respectively. Sales of the Glassware and Candles segment achieved significant
growth with particular strength demonstrated by this segment's candle products.
Greater demand for foodservice items contributed to an increase in sales within
the Specialty Foods segment. Automotive segment sales declined as they were
adversely affected by the generally unfavorable market conditions prevalent
throughout much of this segment's domestic customer base.
For the six months ended December 31, 1995, the consolidated gross
margin percentage improved slightly to 30.7% compared to 30.6% recorded in the
corresponding period of 1994. This percentage for the three month period rose
to 31.6% from 31.1% in 1994. In general, improved margins were achieved
within the Glassware and Candles segment as a result of a more beneficial sales
mix as well as volume efficiencies associated with higher production levels.
The Specialty Foods and Automotive segments experienced a decline in gross
margins. The increasing proportion of foodservice sales within the Specialty
Foods segment continues to adversely impact the comparative gross margins of
this segment. Automotive margins have been particularly affected by
competitive pricing pressures, increases in certain raw material costs and the
unfavorable effects of curtailed production schedules on overhead absorption.
Entering the Company's third fiscal quarter, customer order patterns for
Automotive segment products remain soft although some moderation in this
segment's raw material costs has occurred.
Selling, general and administrative costs totaled $71,369,000 and
$37,945,000 for the respective six and three month periods ended December 31,
1995. Such costs have increased by 5% and 4% over the corresponding periods of
1994 and have been influenced by the overall increase in consolidated net
sales.
As a result of the foregoing factors, operating income increased by 8%
to $63,571,000 for the six months ended December 31, 1995 and by 13% to
$37,676,000 for the fiscal 1996 second quarter. Similarly, net income
increased by 7% and 12% for the respective six and three months ended December
1995 to respectively total $37,777,000 and $22,369,000.
FINANCIAL CONDITION
Cash flow from operating activities totaled $41,032,000 for the six
months ended December 31, 1995 compared to $20,885,000 during the corresponding
period of 1994. This increase between periods is primarily attributable to
fluctuations in working capital components.
Net working capital at December 31, 1995 totaled $201,496,000 compared
to $189,255,000 at the preceding June 30 with the December 31 current ratio of
3.5:1.0 compared to 4.1:1.0 at June 30. Net accounts receivable of $116,757,000
increased $28,341,000 between June 30 and December 31 primarily due to the level
of seasonal sales incurred within the Glassware and Candles
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segment. Total net receivables as of December 31, 1994 were $106,773,000.
In a November 1995 transaction accounted for as a purchase, the Company
issued approximately 273,000 shares of its common stock in exchange for all the
common stock of Dolefam Corporation, a manufacturer and distributor of
specialty food products. Dolefam's results of operations have been included in
the consolidated financial statements from the date of acquisition and are
immaterial in relation to the consolidated totals.
Notable uses of cash during the six months ended December 31, 1995
include $20,140,000 paid for property additions and $9,510,000 for dividends.
The construction of additional distribution facilities at the Company's candle
operations in Leesburg, Ohio was the most significant capital expenditure
during this period. The dividend total reflects the increased per share
dividend rate which totaled $.32 for the six months ended December 31, 1995
compared to $.26 per share paid in the corresponding period of 1994.
Management anticipates that cash provided from future operating activities and
from the currently available discretionary bank credit lines will be adequate
to meet the Company's foreseeable cash requirements over the balance of fiscal
1996.
PART II. OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
The registrant held its annual meeting of the shareholders on November
20, 1995. Proxies for the meeting were solicited pursuant to Section 14(a) of
the Securities Exchange Act of 1934. Matters discussed or voted upon at the
annual meeting were the approval of a proposal to adopt the 1995 Key Employee
Stock Option Plan, for which 23,921,941 votes were cast for such approval,
891,534 votes were cast against such approval and 4,770,221 were abstained, as
well as the election of the following four directors whose term will expire in
1998:
Shares Shares
Voted Shares Not
"For" "Withheld" Voted
---------- ---------- ---------
Frank W. Batsch 24,425,167 2,316,429 2,842,100
John B. Gerlach 26,382,285 359,311 2,842,100
Richard R. Murphey, Jr. 26,234,535 507,061 2,842,100
Henry M. O'Neill, Jr. 26,553,326 188,270 2,842,100
In addition to the newly elected directors, the following individuals
continue to serve as directors of the registrant until such time that their
term expires in 1996 or 1997:
John B. Gerlach, Jr. Robert S. Hamilton
Edward H. Jennings David J. Zuver
Morris S. Halpern Robert L. Fox
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Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K - There were no reports filed on Form 8-K for
the three months ended December 31, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LANCASTER COLONY CORPORATION
Date: February 9, 1996 BY:/S/John B. Gerlach, Jr.
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JOHN B. GERLACH, JR.
President
Date: February 9, 1996 BY:/S/John L. Boylan
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JOHN L. BOYLAN
Treasurer and
Assistant Secretary
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