<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
----
ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED JUNE 30, 1995
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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
incorporation or organization) Identification No.)
37 WEST BROAD STREET, COLUMBUS, OHIO 43215
(Address of principal executive offices) (Zip Code)
614-224-7141
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
-------------------
COMMON STOCK--NO PAR VALUE PER SHARE
(INCLUDING SERIES A PARTICIPATING PREFERRED STOCK PURCHASE RIGHTS)
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
----
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
The aggregate market value of Common Stock held by non-affiliates on
September 1, 1995 was approximately $768,000,000.
As of September 1, 1995, there were approximately 29,583,000 shares of
Common Stock, no par value per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference to this
annual report: Registrant's 1995 Annual Report to Shareholders - Parts I and
II. Proxy Statement for the Annual Meeting of Shareholders to be held November
20, 1995; to be filed - Part III. The 1995 Annual Report to Shareholders and
1995 Proxy Statement shall be deemed to have been "filed" only to the extent
portions thereof are expressly incorporated by reference.
EXHIBIT INDEX ON PAGE 12.
1
<PAGE> 2
PART I
Item 1. Business
--------
General Development of Business
-------------------------------
Lancaster Colony Corporation was reincorporated in Ohio effective January
2, 1992. Prior to this date Lancaster Colony Corporation had been a Delaware
Corporation organized in 1961. As used herein the term "registrant," unless
the context otherwise requires, refers to Lancaster Colony Corporation and its
subsidiaries.
Description of and Financial Information About Business Segments
----------------------------------------------------------------
The registrant operates in three business segments - specialty foods,
automotive, and glassware and candles - which accounted for approximately 39%,
31% and 30%, respectively, of consolidated net sales for the fiscal year ended
June 30, 1995. The financial information relating to business segments for the
three years ended June 30, 1995, appearing in Exhibit 13 in this Form 10-K
Annual Report, is incorporated herein by reference. Further description of each
business segment the registrant operates within is provided below.
Specialty Foods
---------------
The food products manufactured and sold by the registrant include salad
dressings and sauces marketed under the brand names "Marzetti," "Pfeiffer" and
"Girard's"; frozen unbaked pies marketed under the brand names "Mountain Top"
and "Reames"; hearth-baked frozen breads marketed under the brand name "New
York Frozen Foods"; refrigerated chip and produce dips, dairy snacks and
desserts marketed under the brand names "Oak Lake Farms," "Allen" and/or
"Marzetti"; premium dry egg noodles marketed under the brand names "Inn Maid"
and "Amish Kitchen"; frozen specialty noodles, pastas, and breaded specialty
items marketed under the brand name "Reames" and caviar marketed under the
brand name "Romanoff" and "Poriloff."
The salad dressings and sauces are manufactured in Columbus, Ohio;
Wilson, New York; Atlanta, Georgia and Milpitas, California. The dressings are
sold in various metropolitan areas with sales being made both to retail and
foodservice markets.
The frozen unbaked pies are marketed principally in the midwestern United
States through salesmen and food brokers to institutional distributors and
retail outlets. A significant portion of the frozen bread sales is directed to
the foodservice market.
The refrigerated chip and produce dips, dairy snacks and desserts are
sold through food brokers and distributors in most major markets in the United
States.
The dry egg noodles are marketed by brokers principally in Ohio,
Michigan, Indiana and Kentucky.
The "Reames" line is sold through brokers and distributors in various
metropolitan areas principally in the central and midwestern United States.
This segment is not dependent upon a single customer or a few customers,
the loss of any one or more of which would have a significant adverse effect on
operating results. Although the Company is a leading producer of salad
dressings, all of the markets in which the registrant sells food products are
highly competitive in the areas of price, quality and customer service.
During fiscal year 1995, the registrant obtained adequate supplies of raw
materials for this segment.
2
<PAGE> 3
The registrant's firm order backlog at June 30, 1995, in this business
segment, was approximately $4,238,000 as compared to a backlog of approximately
$3,089,000 as of the end of the preceding fiscal year. It is expected that all
of these orders will be filled during the current fiscal year. The operations
of this segment are not affected to any material extent by seasonal
fluctuations. The registrant does not utilize any franchises or concessions in
this business segment. The trade names under which it operates are significant
to the overall success of this segment. However, the patents and licenses
under which it operates are not essential to the overall success of this
segment.
Automotive
----------
The registrant manufactures and sells a complete line of rubber, vinyl
and carpeted car mats both in the aftermarket and to original equipment
manufacturers. Other products are pickup truck bed mats, running boards, bed
liners and other accessories for pickup trucks and vans, truck and trailer
splash guards and quarter fenders, accessories such as cup holders, litter
caddies and oil drain pans and funnels. The automotive aftermarket products
are marketed primarily through mass merchandisers and automotive outlets under
the name "Rubber Queen" and the registrant sells bed liners under the
"Protecta" trademark, running boards under the "Dee Zee" name, as well as under
private labels. Although minor, rubber matting sales are also included in this
segment. The aggregate sales of two customers accounted for approximately 32%
of this segment's total net sales during 1995 and 1994. No other customer
accounted for more than 10% of this segment's total net sales. Although the
Company is a market leader in many of its product lines, all the markets in
which the registrant sells automotive products are highly competitive in the
areas of design, price, quality and customer service.
During fiscal year 1995, the registrant obtained adequate supplies of raw
materials for this segment.
The registrant's firm order backlog at June 30, 1995, in this business
segment, was approximately $6,594,000 as compared to a backlog of approximately
$12,503,000 as of the end of the preceding fiscal year. It is expected that
all of these orders will be filled during the current fiscal year. The
operations of this segment are not affected to any material extent by seasonal
fluctuations. The registrant does not utilize any significant franchises or
concessions in this segment. The patents, trademarks and licenses under which
it operates are generally not essential to the overall success of this segment.
Glassware and Candles
---------------------
Glass products include a broad range of machine pressed and machine blown
consumer glassware and technical glass products such as cathode ray tubes,
lighting components, lenses and silvered reflectors.
Consumer glassware includes a diverse line of decorative and ornamental
products such as tumblers, bowls, pitchers, jars and barware. These products
are marketed under a variety of trademarks, the most important of which are
"Indiana Glass," "Tiara," "Colony" and "Fostoria." The registrant also
purchases domestic and imported blown glassware which is sold through Colony, a
marketing division, and some domestic handcrafted ware sold through its Tiara
home party marketing plan.
Glass vases and containers are sold both in the retail and wholesale
florist markets under the trade name "Brody" as well as under private label.
Candles of all sizes, forms and scents are primarily sold in the mass
merchandise markets as well as to supermarkets, drug stores and specialty shops
under the name "Candle-lite." A portion of the registrant's candle business is
marketed under private label.
3
<PAGE> 4
The registrant's glass products are sold to discount, department, variety
and drug stores, as well as to jobbers and directly to retail customers.
Commercial markets such as foodservice, hotels, hospitals and schools are also
served by this segment's products. All the markets in which the registrant
sells houseware products are highly competitive in the areas of design, price,
quality and customer service. Sales of glassware and candles to one customer
accounted for approximately 17% and 12% of this segment's total net sales
during 1995 and 1994, respectively. No other customer accounted for more than
10% of this segment's total net sales.
During fiscal year 1995, the registrant obtained adequate supplies of raw
materials for this business segment.
The registrant's firm order backlog at June 30, 1995, in this business
segment, was approximately $33,896,000 as compared to approximately $24,229,000
as of the end of the preceding fiscal year. It is expected that all of these
orders will be filled during the current fiscal year. Seasonal retail stocking
patterns cause certain of this segment's products to experience increased sales
in the first half of the fiscal year. The registrant does not use any
franchises or concessions in this segment. The patents and licenses under
which it operates are not essential to the overall success of this segment.
However, certain trademarks are important to this segment's marketing efforts.
Net Sales by Class of Products
------------------------------
The following table sets forth business segment information with respect
to the percentage of net sales contributed by each class of similar products
which accounted for at least 10% of the Company's consolidated net sales in any
fiscal year from 1993 through 1995.
<TABLE>
<CAPTION>
1995 1994 1993
------------------------------------------------------------------------
<S> <C> <C> <C>
Specialty Foods:
Retail 22% 25% 26%
Foodservice 17% 15% 14%
Automotive 31% 33% 32%
Glassware and Candles:
Consumer Table and Giftware 25% 22% 22%
</TABLE>
General Business
----------------
Research and Development
------------------------
The estimated amount spent during each of the last three fiscal years on
research and development activities determined in accordance with generally
accepted accounting principles is not considered material.
Environmental Matters
---------------------
Certain of the registrant's operations are subject to compliance with
various air emission standards promulgated under Title V of the Federal Clean
Air Act. The effective date of compliance with such standards is scheduled to
occur in the registrant's fiscal year ending June 30, 1996. The registrant is
currently developing a compliance strategy to submit to the related Federal
agency for approval. Based upon available information, compliance with the
Federal Clean Air Act provisions, as well as other various Federal, state and
local environmental protection laws and regulations, is not expected to have a
material adverse effect upon the level of capital expenditures, earnings or the
competitive position of the registrant for the remainder of the current and
succeeding fiscal year. See also Item 3 for discussions relating to
environmental matters.
Employees
---------
The registrant has approximately 6,000 employees.
4
<PAGE> 5
Foreign Operations and Export Sales
-----------------------------------
Financial information relating to foreign operations and export sales
have not been significant in the past and are not expected to be significant in
the future based on existing operations.
Item 2. Properties
----------
The registrant uses approximately 5,907,000 square feet of space for its
operations. Of this space, approximately 1,922,000 square feet are leased.
The following table summarizes facilities exceeding 75,000 square feet of
space and which are considered the principal manufacturing and warehousing
operations of the registrant:
<TABLE>
<CAPTION>
Approximate
Location Business Segment(s) Square Feet
-------- ------------------- -----------
<S> <C> <C>
Blue Ash, OH (1) Glassware and Candles 200,000
Cincinnati, OH(2) Glassware and Candles 139,700
Columbus, OH(3) Specialty Foods 277,788
Coshocton, OH Automotive 591,400
Des Moines, IA (4) Automotive 392,000
Dunkirk, IN Glassware and Candles 933,700
Elkhart, IN Automotive 96,000
Jackson, OH Automotive and Glassware and Candles 223,000
LaGrange, GA Automotive 207,000
Lancaster, OH Glassware and Candles 465,300
Leesburg, OH Glassware and Candles 297,900
Milpitas, CA (5) Specialty Foods 130,400
Muncie, IN Glassware and Candles 153,000
Newark, OH(2) Automotive 75,000
Newport, TN (6) Automotive 82,000
Sapulpa, OK (7) Glassware and Candles 668,500
Wapakoneta, OH (8) Automotive 178,100
Waycross, GA Automotive 122,500
Wilson, NY Specialty Foods 80,000
<FN>
(1) Leased for term expiring 1996.
(2) Leased on monthly basis.
(3) Part leased for term expiring 1997. Part leased for term expiring 1998.
(4) Part subject to capital lease expiring 1996. Part leased for term expiring 1995. Part leased for term expiring 1996.
(5) Part leased for term expiring 1997.
(6) Leased for term expiring 1996.
(7) Part leased for term expiring in 1999.
(8) Part leased for term expiring 2003 with ownership passing to registrant at lease expiration. Part leased on monthly
basis.
</TABLE>
5
<PAGE> 6
Item 3. Legal Proceedings
-----------------
On January 28, 1991, a cost recovery action under Section 107 of the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA")
was filed against Pretty Products, Inc. ("Pretty Products") and the registrant
in the United States District Court ("Court") for the Southern District of Ohio
in a proceeding styled United States vs. Pretty Products, et al. The complaint
sought recovery of response costs allegedly incurred or to be incurred by the
United States Environmental Protection Agency ("EPA") in connection with the
cleanup of the Coshocton City Landfill. During the second quarter of fiscal
1995, the parties reached a settlement for all claims in an amount totaling
$1,750,000 plus interest from July 1, 1994. The settlement was approved and
entered by the Court on January 4, 1995 and the registrant paid approximately
$1,800,000 in February 1995 to the EPA as settlement of this obligation. Of
this settlement, $1,700,000 had been accrued by the registrant as of June 30,
1994, with the balance recognized in the second quarter of fiscal 1995.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G(3) of Form 10-K, the following list is
included as an unnumbered item in Part I of this Report in lieu of being
included in the Proxy Statement for the Annual Meeting of Shareholders to be
held November 20, 1995.
The following is a list of names and ages of all of the executive officers
of the registrant indicating all positions and offices with the registrant held
by such person and each person's principal occupation or employment during the
past five years. No person other than those listed below has been chosen to
become an executive officer of the registrant.
<TABLE>
<CAPTION>
First
Elected
Age as of an
September 1 Offices and Executive
Name 1995 Positions Held Officer
---- ----------- -------------- ---------
<S> <C> <C> <C>
John B. Gerlach 68 Chairman and
Chief Executive
Officer 1961
John L. Boylan 40 Treasurer and
Assistant Secretary 1990
John B. Gerlach, Jr. 41 President, Chief
Operating Officer and
Secretary 1982
Larry G. Noble 59 Vice President 1985
</TABLE>
The above named officers were re-elected to their present position at the
annual meeting of the Board of Directors on November 21, 1994. All such
persons have been elected to serve until the next annual election of officers,
which shall occur on November 20, 1995 and their successors are elected or
until their earlier resignation or removal.
John B. Gerlach, Jr. is the son of John B. Gerlach.
6
<PAGE> 7
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
----------------------------------------------------------------
Matters
-------
Reference is made to the "Selected Quarterly Financial Data", appearing
in Exhibit 13 of this Form 10-K Annual Report, for information concerning
market prices and related security holder matters on the registrant's common
shares during 1995 and 1994. Such information is incorporated herein by
reference.
Item 6. Selected Financial Data
-----------------------
The presentation of selected financial data as of and for the five years
ended June 30, 1995 is included in the "Operations" and "Financial Position"
sections of the "Five Year Financial Summary" appearing in Exhibit 13 of this
Form 10-K Annual Report and is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Results of Operations
-------------------------------------------------------------
and Financial Condition
-----------------------
Reference is made to the "Management's Discussion and Analysis of Results
of Operations and Financial Condition" appearing in Exhibit 13 of this Form
10-K Annual Report. Such information is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
The financial statements and supplementary financial information are set
forth in Exhibit 13 of this Form 10-K Annual Report and are incorporated herein
by reference.
Item 9. Disagreements on Accounting and Financial Disclosure
----------------------------------------------------
None
PART III
Item 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
For information with respect to the executive officers of the registrant,
see "Executive Officers of the Registrant" at the end of Part I of this report.
For information with respect to the Directors of the registrant, see
"Nomination and Election of Directors" in the Proxy Statement for the Annual
Meeting of Shareholders to be held November 20, 1995, which is incorporated
herein by reference.
Item 11. Executive Compensation
----------------------
Information set forth under the caption "Executive Compensation" in the
Proxy Statement for the Annual Meeting of Shareholders to be held November 20,
1995 is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
Information set forth under the captions "Nomination and Election of
Directors" and "Security Ownership of Certain Beneficial Owners" in the Proxy
Statement for the Annual Meeting of Shareholders to be held November 20, 1995
is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
For information with respect to certain transactions with Directors of
the registrant, see "Other Transactions" in the Proxy Statement for the Annual
Meeting of Shareholders to be held November 20, 1995, which is incorporated
herein by reference.
7
<PAGE> 8
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
----------------------------------------------------------------
(a) 1. Financial Statements
--------------------
The consolidated financial statements as of June 30, 1995 and 1994
and for each of the three years in the period ended June 30, 1995,
together with the report thereon of Deloitte & Touche LLP dated
August 29, 1995, appearing in Exhibit 13 of this Form 10-K Annual
Report are incorporated herein by reference.
Index to Financial Statements
-----------------------------
Consolidated Statements of Income for the years ended June 30,
1995, 1994 and 1993
Consolidated Balance Sheets at June 30, 1995 and 1994
Consolidated Statements of Cash Flows for the years ended June 30,
1995, 1994 and 1993
Consolidated Statements of Shareholders' Equity for the years
ended June 30, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
Independent Auditors' Report
(a) 2. Financial Statement Schedules Required by Items 8 and 14(d)
-----------------------------------------------------------
Included in Part IV of this report is the following additional
financial data which should be read in conjunction with the
consolidated financial statements in the 1995 Annual Report to
Shareholders:
Independent Auditors' Report
Schedule II - Valuation and Qualifying Accounts for each of the
three years ended June 30, 1995
Supplemental schedules not included with the additional
financial data have been omitted because they are not
applicable or the required information is shown in the
financial statements or notes thereto.
(a) 3. Exhibits Required by Item 601 of Regulation S-K and Item 14(c)
--------------------------------------------------------------
See Index to Exhibits attached.
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the fourth quarter of
the year ended June 30, 1995.
8
<PAGE> 9
SIGNATURES
Pursuant to the requirements of Section 13 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 on this 21st day of
September, 1995.
LANCASTER COLONY CORPORATION
(Registrant)
By /S/ John B. Gerlach
--------------------
John B. Gerlach
Chairman, Chief Executive
Officer and Principal
Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/S/ John B. Gerlach Chairman, Chief September 21, 1995
--------------------------- Executive Officer and ------------------
John B. Gerlach Principal Financial
Officer
/S/ John B. Gerlach, Jr. President, Chief September 19, 1995
--------------------------- Operating Officer ------------------
John B. Gerlach, Jr. and Secretary
/S/ John L. Boylan Treasurer, Assistant September 18, 1995
--------------------------- Secretary and Principal ------------------
John L. Boylan Accounting Officer
Director
--------------------------- ------------------
Frank W. Batsch
/S/ Robert L. Fox Director September 14, 1995
--------------------------- ------------------
Robert L. Fox
Director
--------------------------- ------------------
Morris S. Halpern
/S/ Robert S. Hamilton Director September 16, 1995
--------------------------- ------------------
Robert S. Hamilton
/S/ Edward H. Jennings Director September 15, 1995
--------------------------- ------------------
Edward H. Jennings
/S/ Richard R. Murphey, Jr. Director September 14, 1995
--------------------------- ------------------
Richard R. Murphey, Jr.
/S/ Henry M. O'Neill, Jr. Director September 18, 1995
--------------------------- ------------------
Henry M. O'Neill, Jr.
/S/ David J. Zuver Director September 14, 1995
--------------------------- ------------------
David J. Zuver
</TABLE>
9
<PAGE> 10
INDEPENDENT AUDITORS' REPORT
To the Directors and Shareholders of
Lancaster Colony Corporation:
We have audited the consolidated financial statements of Lancaster Colony
Corporation and its subsidiaries as of June 30, 1995 and 1994, and for each of
the three years in the period ended June 30, 1995, and have issued our report
thereon dated August 29, 1995; such financial statements and report are
included in your 1995 Annual Report to Shareholders and are incorporated herein
by reference. Our audits also included the consolidated financial statement
schedule of Lancaster Colony Corporation and its subsidiaries, listed in Item
14. This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, such consolidated financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/S/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Columbus, Ohio
August 29, 1995
10
<PAGE> 11
<TABLE>
SCHEDULE II
LANCASTER COLONY CORPORATION
AND SUBSIDIARIES
=============================
VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED JUNE 30, 1995
---------------------------------------------------------------------------------------------------------------------
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- -------- -------- --------
ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS OF YEAR
----------------------------------------------------------------------------------------------------------------------
RESERVES DEDUCTED FROM ASSET TO WHICH
THEY APPLY - Allowance for doubtful
accounts:
<S> <C> <C> <C> <C>
Year ended June 30, 1993................. $1,885,000 $2,096,000 $1,111,000(A) $2,870,000
========================================================================
Year ended June 30, 1994................. $2,870,000 $1,029,000 $1,560,000(A) $2,339,000
========================================================================
Year ended June 30, 1995................. $2,339,000 $ 614,000 $1,006,000(A) $1,947,000
========================================================================
<FN>
(A) Represents uncollectible accounts written off net of recoveries.
</TABLE>
11
<PAGE> 12
LANCASTER COLONY CORPORATION
----------------------------
FORM 10-K
JUNE 30, 1995
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description Located at
------- ----------- -------------
<S> <C> <C>
3.1 Certificate of Incorporation of the registrant
approved by the shareholders November 18, 1991. (a)
.2 By-laws of the registrant as amended
through November 18, 1991. (a)
.3 Certificate of Designation, Rights and
Preferences of the Series A Participating
Preferred Stock of Lancaster Colony Corporation. (b)
4.1 Specimen Certificate of Common Stock. (i)
.2 Rights Agreement dated as of April 20, 1990
between Lancaster Colony Corporation and The
Huntington Trust Company, N.A. (c)
10.1 1981 Incentive Stock Option Plan. (d)
.2 Resolution by the Board of Directors to amend
registrant's 1981 Incentive Stock Option Plan,
approved by the shareholders November 21, 1983. (e)
.3 Resolution by the Board of Directors to amend
registrant's 1981 Incentive Stock Option Plan
approved by the shareholders November 18, 1985. (f)
.4 Employee Stock Ownership Plan and Trust
Agreement. (g)
.5 Resolution by the Board of Directors to amend
registrant's 1981 Incentive Stock Option Plan
approved by the shareholders November 19, 1990. (h)
.6 Key Employee Severance Agreement between Lancaster
Colony Corporation and John L. Boylan. (h)
.7 Consulting Agreement by and between Lancaster
Colony Corporation and Morris S. Halpern. (j)
13. Annual Report to Shareholders. 1995 Form 10-K
21. Significant Subsidiaries of Registrant. 1995 Form 10-K
23. The consent of Deloitte & Touche LLP to the
incorporation by reference in Registration
Statement No. 33-39102 on Form S-8 of their
reports dated August 29, 1995, appearing in
this Annual Report on Form 10-K of Lancaster
Colony Corporation for the year ended
June 30, 1995. 1995 Form 10-K
27. Financial Data Schedule 1995 Form 10-K
</TABLE>
12
<PAGE> 13
<TABLE>
<S> <C>
(a) Indicates the exhibit is incorporated by reference from filing as an annex to the proxy statement of Lancaster Colony
Corporation for the annual meeting of stockholders held November 18, 1991.
(b) Indicates the exhibit is incorporated by reference from filing as an exhibit to the Lancaster Colony Corporation report
on Form 10-Q for the quarter ended March 31, 1990.
(c) Indicates the exhibit is incorporated by reference from filing as an exhibit to the Lancaster Colony Corporation report
on Form 8-K filed April 20, 1990.
(d) Indicates the exhibit is incorporated by reference from filing as an exhibit to the Lancaster Colony Corporation report
on Form 10-K for the year ended June 30, 1982.
(e) Indicates the exhibit is incorporated by reference from filing as an exhibit to the Lancaster Colony Corporation report
on Form 10-K for the year ended June 30, 1984.
(f) Indicates the exhibit is incorporated by reference from filing as an exhibit to the Lancaster Colony Corporation report
on Form 10-K for the year ended June 30, 1985.
(g) Indicates the exhibit is incorporated by reference from filing as an exhibit to the Lancaster Colony Corporation report
on Form 10-K for the year ended June 30, 1987.
(h) Indicates the exhibit is incorporated by reference from filing as an exhibit to the Lancaster Colony Corporation report
on Form 10-K for the year ended June 30, 1991.
(i) Indicates the exhibit is incorporated by reference from filing as an exhibit to the Lancaster Colony Corporation report
on Form 10-K for the year ended June 30, 1992.
(j) Indicates the exhibit is incorporated by reference from filing as an exhibit to the Lancaster Colony Corporation report
on Form 10-K for the year ended June 30, 1993.
Note(1) The registrant and certain of its subsidiaries are parties to various long-term debt instruments.
The amount of securities authorized under such debt instruments does not, in any case, exceed 10% of the total
assets of the registrant and its subsidiaries on a consolidated basis. The registrant agrees to furnish a copy of
any such long-term debt instrument to the Commission upon request.
Note(2) The registrant has included in Exhibit 13 only the specific Financial Statements and notes thereto of its 1995
Annual Report to Shareholders which are incorporated by reference in this Form 10-K Annual Report. The registrant
agrees to furnish a complete copy of its 1995 Annual Report to Shareholders to the Commission upon request.
</TABLE>
13
<PAGE> 1
Exhibit 13
LANCASTER COLONY CORPORATION
1995 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
of Results of Operations and Financial Condition
REVIEW OF CONSOLIDATED OPERATIONS
For its fiscal year ended June 30, 1995, Lancaster Colony Corporation
again achieved record levels of net sales and net income. Net sales of
$795,126,000 in the most recent year increased 10% over 1994 levels while net
income of $70,524,000 increased 18%. The previous record totals of net sales
and net income were attained by the Company in fiscal 1994 and such totals
increased by 14% and 29%, respectively, over the comparable amounts reported
for fiscal 1993. During the last two years, each of the three operating
segments have achieved net sales increases with the Glassware and Candles
segment providing the greatest impetus to the growth of consolidated operating
income. Over the past five years, the Company's consolidated net sales and net
income have grown at compounded annual rates of 10% and 34%, respectively.
The relative proportion of sales and operating income contributed by
each of the Company's operating segments can impact a year-to-year comparison
of the consolidated statements of income. The following table summarizes the
sales mix and related operating income percentages achieved by the operating
segments over each of the last three years:
<TABLE>
<S> <C> <C> <C>
SEGMENT SALES MIX(1): 1995 1994 1993
-------------------------------------------------------------------------------------
Specialty Foods 39% 40% 40%
Automotive 31% 33% 32%
Glassware and Candles 30% 27% 28%
OPERATING INCOME(2):
-------------------------------------------------------------------------------------
Specialty Foods 13% 15% 15%
Automotive 11% 13% 12%
Glassware and Candles 22% 16% 12%
<FN>
(1) Expressed as a percentage of consolidated net sales.
(2) Expressed as a percentage of the related segment's net sales.
</TABLE>
On a consolidated basis, the Company's gross profit margin in 1995 declined to
31.2% of net sales compared to 32.2% attained in both 1994 and 1993. The
current year decrease resulted from a less favorable sales mix and continued
high material costs present within the Specialty Foods segment, as well as
increases incurred in raw material costs within the Automotive segment. These
factors were partially offset by higher margins being present in the Glassware
and Candles segment that resulted from an improved sales mix and better
manufacturing efficiencies. Gross margins reported for 1994 were favorably
affected by an improved sales mix and productivity improvements although these
factors were moderated by significantly higher material costs occurring within
the Specialty Foods segment.
As a percentage of net sales, the Company's selling, general and administrative
expenses have declined from 19.8% in fiscal 1993 to 18.2% in 1994 and 16.5% in
1995. This decline resulted from the effects of greater sales volume, a
changing sales mix and also the Specialty Foods segment's curtailment of
selected promotional activities which occurred in the latter half of fiscal
1994 and continued throughout fiscal 1995.
Operating income of $116,518,000 for 1995 increased 16% over the comparable 1994
total of $100,668,000. Greater sales volume and improved operating margins in
the Glassware and Candles segment were largely responsible for this
improvement. Increased sales and improved operating efficiencies permitted 1994
operating income to increase 29% over 1993 levels.
Stated as a percentage of income before income taxes, the Company's effective
tax rate of 39% remained unchanged compared to 1994. The effective rate for 1993
was 38%. The increased rate over the last two years principally reflects the 1%
increase in the Federal statutory rate enacted by law in August 1993. The 1994
expense also includes a charge of $343,000 for the retroactive provisions of the
legislation enacting this tax increase.
<PAGE> 2
SEGMENT REVIEW - SPECIALTY FOODS
For fiscal 1995, net sales within the Specialty Foods segment of $309,622,000
rose 7% over the 1994 total of $289,734,000. This increase resulted from
greater sales to foodservice customers stemming from the acquisition of new
accounts as well as the expansion of existing relationships. Sales to
foodservice accounts now comprise approximately 44% of this segment's total
sales compared to 38% in 1994. Retail sales in 1995 were assisted by selected
product line extensions, although such sales were adversely impacted by
factors such as increased lettuce costs paid by consumers during the latter
half of 1995 as well as heightened competition present in certain of this
segment's markets.
Net sales in 1994 were 15% above 1993 sales of $252,288,000. Leading this
growth was the segment's continued geographic expansion of both its retail and
foodservice sales across the United States and Canada. New foodservice accounts
assisted this growth as did the July 1993 acquisition of Romanoff caviar and
related product lines.
This segment's 1995 operating income of $40,704,000 declined 4% from the 1994
level of $42,542,000. As a percentage of net sales, such income also declined
from 15% to 13%. In general, the segment's increasing proportion of foodservice
sales has tended to lower operating margins as such sales typically provide
lower margins than that provided by retail sales. Margins have also been
adversely affected by higher costs for several raw materials and an increase in
competitive pricing pressures.
<PAGE> 3
In comparison to fiscal 1993, fiscal 1994 operating income increased
11% primarily reflecting higher sales volume. Increases in soybean oil costs
were minimized by the reduction of certain promotional activities as well as by
the implementation of selected price increases.
Over the last five years, net sales and operating income of the Specialty Foods
segment have grown at respective annual compound growth rates of 14% and 12%.
In addition to exploring ways to further increase this segment's sales volume,
including through complementary strategic business acquisitions, management
will continue to consider opportunities to more efficiently manufacture and
distribute products throughout fiscal 1996.
SEGMENT REVIEW - GLASSWARE AND CANDLES
Annual sales growth within the Glassware and Candles segment totaled 21% in
1995 and 12% in 1994. Total net sales reached $237,320,000 in 1995 compared to
$196,711,000 in 1994 and $175,260,000 in 1993. Leading this segment's growth
throughout this period has been the sale of candle products, particularly
wax-filled glass items. Net sales for 1994 also reflected improved industrial
glassware volumes as influenced by improving economic conditions.
Operating income for 1995 rose 66% to $52,147,000 compared to $31,353,000 in
1994 and $20,546,000 in 1993. This segment's sales over the last two years have
trended toward a mix of higher-margined products. The segment's significant
sales growth has also provided for significant volume-driven efficiencies that
have been further magnified by the acquisition of more efficient manufacturing
equipment. An additional factor contributing to this trend has been the more
efficient loading of the glass factories resulting from the manufacture of
glass components utilized in the production of the wax-filled glass lines.
<PAGE> 4
SEGMENT REVIEW - AUTOMOTIVE
Net sales of $248,184,000 for the Automotive segment for 1995 increased by 5%
from the $235,287,000 recorded in 1994. During 1994, net sales increased by 16%
over the 1993 net sales of $203,079,000. Each of the last two years has
benefited by a trend of growth in domestic new vehicle sales which continued
into the first half of fiscal 1995. Sales of the Company's line of truck and
van accessories were particularly strong due to the increasing popularity of
these vehicles. Specifically contributing to the 1995 increase were greater
sales of aluminum accessories to original equipment manufacturers, cost-driven
increases in selling prices and a greater sales volume of heavy truck
accessories.
This segment's operating income totaled $28,027,000 in 1995 compared to
$31,305,000 in 1994 and $24,280,000 in 1993. The most recent year was adversely
affected by significant cost increases in a number of raw materials
including plastic resins, aluminum, corrugated and rubber-related products.
Where it has been competitively possible, price increases have been implemented
to offset the effects of these higher costs, but such increases have generally
lagged in time and amount the impact of the rise in costs.
Sales of the Automotive segment will continue to face significant market
competition and generally remain sensitive to the level of domestic new vehicle
sales. As noted in prior years, restrictive pricing programs present in the
ongoing relationships with most original equipment manufacturers make it
difficult to improve operating margins through increased pricing.
<PAGE> 5
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial position in recent years has clearly benefited from the
continuing increases in profitability. Just five years ago, long-term debt as
a percentage of shareholders' equity was 47% compared to 11% at June 30, 1995.
This improvement developed during a period of time in which return on average
equity also increased from 12% in 1990 to over 27% in 1995 despite shareholders'
equity having more than doubled.
Cash generated from operating activities during 1995 totaled $46,725,000
compared to $61,092,000 in 1994. Although net income increased from $59,860,000
to $70,524,000 in this period, an increase in net working capital of
$25,709,000 was required, in part, to support the recent strong growth of the
Glassware and Candles segment. This segment typically begins to build seasonal
inventories in early summer that are shipped during the fall. Automotive
inventories also increased somewhat as influenced by rising material costs and
scheduling considerations.
The Company's investment in capital expenditures reached record levels in 1995
and totaled $31,745,000 compared to $23,532,000 in 1994. It is anticipated that
fiscal 1996 expenditures will exceed that of the past year. This increase will
largely result from continuing plans of the Glassware and Candles segment to
significantly expand capacity, improve certain manufacturing processes and,
with respect to the candle facility in Leesburg, Ohio, also enlarge and enhance
distribution capabilities. Additionally, if considered of strategic value, the
Company will continue to invest in the acquisition of businesses which are
considered complementary in function to that of existing product lines.
The Company's financing activities during 1995 included treasury share
purchases of $17,814,000 compared to $7,718,000 in 1994. The corporate benefit
of further treasury share purchases will be evaluated from time to time by
management and the Company's Board of Directors. In a transaction consummated
in August 1995, the Company reacquired 250,000 common shares for a total
purchase price of $8,952,000. Also of significance to the Company's financing
activities was the Company's increased dividend rate during 1995 of $.55 per
share compared to $.44 in 1994. This higher rate served to increase total
dividends paid during 1995 by 23% over 1994 levels.
Management anticipates that cash flows from operations, combined with the
occasional use of short-term borrowings available under discretionary bank
lines of credit, will be adequate to meet foreseeable cash requirements.
With increasingly stringent environmental regulations being brought to bear
upon the Company's operations, the Company will continue to incur costs for
regulatory compliance and, upon occasion, remediation. The extent to which such
costs are ongoing is generally difficult to estimate but, to date, the
Company's expenditures in this area have not been material to the results of
operations or financial condition. The future level of anticipated expenditure
is not currently expected to increase materially from present levels. Reference
is made to Note 12 to the accompanying financial statements for further
discussion as to the accounting for such costs.
IMPACT OF INFLATION
During 1995, significant increases were noted in the cost of many raw
materials, particularly those within the Automotive segment. In addition,
higher corrugated packaging costs were prevalent throughout all segments. The
margins of the Specialty Foods segment were affected during 1994 by increased
average market prices for soybean oil, a primary ingredient in several product
lines of this segment. Such market prices remained high during fiscal 1995 as
well.
The Company generally attempts to adjust its selling prices to offset the
effects of increased raw material costs. However, these adjustments have
historically been difficult to implement on a timely basis relative to the
increase in costs incurred. Minimizing the exposure to such increased costs is
the Company's diversity of operations and its ongoing efforts to achieve
greater manufacturing and distribution efficiencies through the improvement of
work processes.
<PAGE> 6
FIVE YEAR FINANCIAL SUMMARY
Lancaster Colony Corporation and Subsidiaries
<TABLE>
(Thousands Except Per Share Figures) 1995 1994 1993 1992 1991
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS
Net Sales $795,126 $721,732 $630,627 $555,793 $500,475
Gross Margin $247,942 $232,096 $203,106 $175,226 $150,373
Percent of sales 31.2% 32.2% 32.2% 31.5% 30.0%
Interest Expense $ 2,736 $ 2,849 $ 3,625 $ 5,584 $ 8,735
Percent of sales 0.3% 0.4% 0.6% 1.0% 1.7%
Income Before Income Taxes $114,808 $ 98,093 $ 74,319 $ 53,852 $ 33,817(1)
Percent of sales 14.4% 13.6% 11.8% 9.7% 6.8%
Taxes Based on Income $ 44,284 $ 38,233 $ 28,094 $ 21,481 $ 12,623
Net Income $ 70,524 $ 59,860 $ 46,225 $ 32,371 $ 20,184(2)
Percent of sales 8.9% 8.3% 7.3% 5.8% 4.0%
Per Common Share:(3)
Net income $ 2.35 $ 1.97 $ 1.52 $ 1.06 $ .65(2)
Cash dividends $ 0.55 $ .44 $ .37 $ .32 $ .30
------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Total Assets $379,904 $355,445 $302,050 $289,951 $286,989
Working Capital $189,255 $163,546 $126,648 $ 97,007 $ 93,570
Property, Plant and Equipment-Net $113,187 $101,570 $ 98,597 $ 99,457 $ 98,139
Long-Term Debt $ 31,840 $ 32,933 $ 34,586 $ 39,984 $ 57,176
Property Additions $ 31,745 $ 23,532 $ 18,921 $ 17,040 $ 13,517
Provision for Depreciation $ 20,440 $ 20,145 $ 19,486 $ 18,821 $ 17,458
Shareholders' Equity $277,148 $236,847 $192,010 $159,416 $139,385
Per Common Share(3) $ 9.29 $ 7.83 $ 6.34 $ 5.25 $ 4.55
Weighted Average
Common Shares Outstanding(3) 30,038 30,317 30,483 30,502 30,825
------------------------------------------------------------------------------------------------------------------------------------
STATISTICS
Price-Earnings Ratio at Year End 15.2 18.0 18.9 15.5 11.9
Current Ratio 4.1 3.2 3.1 2.3 2.3
Long-Term Debt as
a Percent of Shareholders' Equity 11.5% 13.9% 18.0% 25.1% 41.0%
Dividends Paid as a Percent
of Net Income 23.4% 22.3% 24.5% 30.5% 45.2%
Return on Average Equity 27.4% 27.9% 26.3% 21.7% 15.0%
------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Net of a pretax charge of $3,000 for a write-down related to property held for sale.
(2) The year's income, before a charge for the cumulative effect of accounting changes of $1,010 or $.04 per share, totaled
$21,194 or $.69 per share.
(3) Adjusted for 4-for-3 stock splits paid July 1994 and April 1993 and the 3-for-2 stock split paid April 1992.
</TABLE>
<PAGE> 7
BUSINESS SEGMENTS
For the Years Ended 1995, 1994 and 1993
The Company operates in three business segments - Specialty Foods, Automotive,
and Glassware and Candles. The net sales of each segment are principally
domestic, and no single customer accounts for 10% or more of consolidated net
sales. A further description of each business segment follows:
SPECIALTY FOODS-includes production and marketing of a family of pourable and
refrigerated produce salad dressings, sauces, refrigerated produce vegetable
dips, chip dips, dairy snacks and desserts, dry and frozen egg noodles, caviar,
frozen ready-to-bake pies and frozen hearth-baked breads. The salad dressings,
sauces and frozen bread products are sold to both retail and foodservice
markets. The remaining products of this business segment are primarily directed
to retail markets.
AUTOMOTIVE-includes production and marketing of rubber, vinyl and
carpet-on-rubber car mats both for original equipment manufacturers and
importers and for the auto aftermarket; truck and trailer splash guards;
pickup truck bed mats and liners; aluminum running boards for pickup trucks and
vans; and a broad line of auto accessories.
GLASSWARE AND CANDLES-includes the production and marketing of table and
giftware consisting of domestic glassware, both machine pressed and machine
blown, imported glassware and candles in all popular sizes, shapes and scents;
industrial glass and lighting components; and glass floral containers. The
Company's glass and candle products are sold primarily to mass merchandisers,
discount and department stores.
Operating income represents net sales less operating expenses related to the
business segments. Expenses of a general corporate nature, including interest
expense and income taxes, have not been allocated to business segments.
Identifiable assets for each segment include those assets used in its
operations and intangible assets allocated to purchased businesses. Corporate
assets consist principally of cash, cash equivalents and deferred income taxes.
The 1995 capital expenditures of the Specialty Foods and Automotive segments
include property relating to business acquisitions totaling $36,000 and
$1,500,000, respectively.
The following sets forth certain financial information attributable to the
Company's business segments for the three years ended June 30, 1995, 1994 and
1993:
<TABLE>
(Dollars in Thousands) 1995 1994 1993
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES
Specialty Foods $ 309,622 $ 289,734 $ 252,288
Automotive 248,184 235,287 203,079
Glassware and Candles 237,320 196,711 175,260
-----------------------------------------------------------------------------------
Total $ 795,126 $ 721,732 $ 630,627
====================================================================================
OPERATING INCOME
Specialty Foods $ 40,704 $ 42,542 $ 38,282
Automotive 28,027 31,305 24,280
Glassware and Candles 52,147 31,353 20,546
-----------------------------------------------------------------------------------
Total 120,878 105,200 83,108
Corporate expenses (6,070) (7,107) (8,789)
-----------------------------------------------------------------------------------
Income Before Income Taxes $ 114,808 $ 98,093 $ 74,319
====================================================================================
IDENTIFIABLE ASSETS
Specialty Foods $ 79,297 $ 71,274 $ 59,933
Automotive 126,654 108,597 99,984
Glassware and Candles 155,484 136,789 118,498
Corporate 18,469 38,785 23,635
-----------------------------------------------------------------------------------
Total $ 379,904 $ 355,445 $ 302,050
====================================================================================
CAPITAL EXPENDITURES
Specialty Foods $ 6,582 $ 4,516 $ 3,414
Automotive 9,473 7,419 6,857
Glassware and Candles 17,182 11,565 8,592
Corporate 44 32 58
-----------------------------------------------------------------------------------
Total $ 33,281 $ 23,532 $ 18,921
====================================================================================
DEPRECIATION AND AMORTIZATION
Specialty Foods $ 4,439 $ 3,512 $ 3,199
Automotive 8,338 8,778 8,633
Glassware and Candles 9,802 10,027 9,913
Corporate 138 86 82
-----------------------------------------------------------------------------------
Total $ 22,717 $ 22,403 $ 21,827
====================================================================================
</TABLE>
<PAGE> 8
CONSOLIDATED STATEMENTS OF INCOME
Lancaster Colony Corporation and Subsidiaries
For the Years Ended June 30, 1995, 1994 and 1993
<TABLE>
Years Ended June 30
1995 1994 1993
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $795,126,000 $721,732,000 $630,627,000
COST OF SALES 547,184,000 489,636,000 427,521,000
-----------------------------------------------------------------------------------------------------------------------
GROSS MARGIN 247,942,000 232,096,000 203,106,000
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 131,424,000 131,428,000 125,079,000
-----------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 116,518,000 100,668,000 78,027,000
OTHER INCOME (EXPENSE):
Interest expense (2,736,000) (2,849,000) (3,625,000)
Interest income and other-net 1,026,000 274,000 (83,000)
-----------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 114,808,000 98,093,000 74,319,000
TAXES BASED ON INCOME 44,284,000 38,233,000 28,094,000
-----------------------------------------------------------------------------------------------------------------------
NET INCOME $ 70,524,000 $ 59,860,000 $ 46,225,000
=======================================================================================================================
NET INCOME PER COMMON SHARE $2.35 $1.97 $1.52
=======================================================================================================================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 30,038,000 30,317,000 30,483,000
=======================================================================================================================
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE> 9
CONSOLIDATED BALANCE SHEETS
Lancaster Colony Corporation and Subsidiaries
As of June 30, 1995 and 1994
<TABLE>
June 30
ASSETS 1995 1994
<S> <C> <C>
----------------------------------------------------------------------------------------------------------------------------
CURRENT ASSETS:
Cash and equivalents $ 8,239,000 $ 30,423,000
Receivables (less allowance for doubtful accounts,
1995-$1,947,000; 1994-$2,339,000) 88,416,000 80,737,000
Inventories:
Raw materials and supplies 34,020,000 27,614,000
Finished goods and work in process 107,866,000 90,034,000
----------------------------------------------------------------------------------------------------------------------------
Total inventories 141,886,000 117,648,000
Prepaid expenses and other current assets 11,226,000 8,995,000
----------------------------------------------------------------------------------------------------------------------------
Total current assets 249,767,000 237,803,000
PROPERTY, PLANT AND EQUIPMENT:
Land, buildings and improvements 73,371,000 69,723,000
Machinery and equipment 209,154,000 194,974,000
----------------------------------------------------------------------------------------------------------------------------
Total cost 282,525,000 264,697,000
Less accumulated depreciation 169,338,000 163,127,000
----------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment-net 113,187,000 101,570,000
OTHER ASSETS 16,950,000 16,072,000
----------------------------------------------------------------------------------------------------------------------------
TOTAL $379,904,000 $355,445,000
============================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
----------------------------------------------------------------------------------------------------------------------------
CURRENT LIABILITIES:
Current portion of long-term debt $ 1,026,000 $ 1,301,000
Accounts payable 26,322,000 31,054,000
Accrued liabilities 33,164,000 41,902,000
----------------------------------------------------------------------------------------------------------------------------
Total current liabilities 60,512,000 74,257,000
LONG-TERM DEBT-Less current portion 31,840,000 32,933,000
OTHER NONCURRENT LIABILITIES 8,223,000 8,093,000
DEFERRED INCOME TAXES 2,181,000 3,315,000
SHAREHOLDERS' EQUITY:
Preferred stock-authorized 2,650,000 shares;
Outstanding-none
Common stock-authorized 35,000,000 shares; 28,086,000 25,437,000
Shares outstanding, 1995 - 29,829,000; 1994 - 22,674,020
Retained earnings 280,538,000 226,412,000
Foreign currency translation adjustment 501,000 440,000
----------------------------------------------------------------------------------------------------------------------------
Total 309,125,000 252,289,000
Less:
Common stock in treasury, at cost 29,420,000 11,606,000
Amount due from ESOP 2,557,000 3,836,000
----------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 277,148,000 236,847,000
----------------------------------------------------------------------------------------------------------------------------
TOTAL $379,904,000 $355,445,000
============================================================================================================================
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE> 10
CONSOLIDATED STATEMENTS OF CASH FLOWS
Lancaster Colony Corporation and Subsidiaries
For the Years Ended June 30, 1995, 1994 and 1993
<TABLE>
Years Ended June 30
1995 1994 1993
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 70,524,000 $59,860,000 $46,225,000
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 22,717,000 22,403,000 21,827,000
Provision for losses on accounts receivable 614,000 1,029,000 2,096,000
Deferred income taxes and other noncash charges (2,086,000) (437,000) 364,000
Loss on sale of property 235,000 254,000 83,000
Changes in operating assets and liabilities:
Receivables (7,273,000) (13,792,000) (5,253,000)
Inventories (23,475,000) (20,752,000) (2,542,000)
Prepaid expenses and other current assets (1,061,000) 216,000 (1,232,000)
Accounts payable and accrued liabilities (13,470,000) 12,311,000 165,000
---------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 46,725,000 61,092,000 61,733,000
---------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments on property additions (31,745,000) (23,532,000) (18,921,000)
Acquisitions net of cash acquired (5,054,000) (5,438,000)
Proceeds from sale of property 1,002,000 412,000 41,000
Other-net (1,420,000) (1,506,000) (1,022,000)
---------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (37,217,000) (30,064,000) (19,902,000)
---------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends (16,486,000) (13,378,000) (11,336,000)
Purchase of treasury stock (17,814,000) (7,718,000) (3,888,000)
Payments on long-term debt (1,368,000) (2,149,000) (6,689,000)
Reduction of ESOP debt 1,279,000 1,278,000 1,279,000
Common stock issued upon exercise of
stock options including related tax benefits 2,649,000 4,865,000 501,000
Reduction of short-term bank loans (12,500,000)
---------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (31,740,000) (17,102,000) (32,633,000)
---------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 48,000 (5,000) (114,000)
---------------------------------------------------------------------------------------------------------------------------
Net change in cash and equivalents (22,184,000) 13,921,000 9,084,000
Cash and equivalents at beginning of year 30,423,000 16,502,000 7,418,000
---------------------------------------------------------------------------------------------------------------------------
Cash and equivalents at end of year $ 8,239,000 $30,423,000 $16,502,000
===========================================================================================================================
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE> 11
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Lancaster Colony Corporation and Subsidiaries
For the Years Ended June 30, 1995, 1994 and 1993
<TABLE>
Foreign
Currency Amount
Outstanding Common Retained Translation Treasury due from
Shares Stock Earnings Adjustment Stock ESOP
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------------
BALANCE, JUNE 30, 1992 17,088,936 $ 20,071,000 $ 144,861,000 $ 877,000 $ 0 $ 6,393,000
YEAR ENDED JUNE 30, 1993 :
Net income 46,225,000
Cash dividends-common stock
($.3725 per share) (11,336,000)
Purchase of treasury shares (114,000) 3,888,000
Shares issued upon exercise of stock
options including related tax benefits 37,037 501,000
Shares issued in connection with
four-for-three stock split 5,704,707
Cash paid in lieu of fractional
shares in connection with
four-for-three stock split (12,000)
Tax benefit of cash dividends paid
on ESOP unallocated shares 97,000
Reduction of ESOP debt (1,279,000)
Translation adjustment (272,000)
------------------------------------------------------------------------------------------------------------------------------------
BALANCE, JUNE 30, 1993 22,716,680 20,572,000 179,835,000 605,000 3,888,000 5,114,000
------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 1994 :
Net income 59,860,000
Cash dividends-common stock
($.4425 per share) (13,378,000)
Purchase of treasury shares (189,000) 7,718,000
Shares issued upon exercise of stock
options including related tax benefits 146,340 4,865,000
Tax benefit of cash dividends paid
on ESOP unallocated shares 95,000
Reduction of ESOP debt (1,278,000)
Translation adjustment (165,000)
------------------------------------------------------------------------------------------------------------------------------------
BALANCE, JUNE 30, 1994 22,674,020 25,437,000 226,412,000 440,000 11,606,000 3,836,000
------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 1995 :
Net income 70,524,000
Cash dividends-common stock
($.55 per share) (16,465,000)
Purchase of treasury shares (530,800) 17,814,000
Shares issued upon exercise of stock
options including related tax benefits 130,026 2,649,000
Shares issued in connection with
four-for-three stock split 7,555,754
Cash paid in lieu of fractional
shares in connection with
four-for-three stock split (21,000)
Tax benefit of cash dividends paid
on ESOP unallocated shares 88,000
Reduction of ESOP debt (1,279,000)
Translation adjustment 61,000
------------------------------------------------------------------------------------------------------------------------------------
BALANCE, JUNE 30, 1995 29,829,000 $28,086,000 $280,538,000 $501,000 $29,420,000 $2,557,000
====================================================================================================================================
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Lancaster Colony Corporation and Subsidiaries
1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Lancaster Colony Corporation and its wholly-owned subsidiaries, collectively
referred to as the "Company." All significant intercompany transactions have
been eliminated.
USE OF ESTIMATES
The preparation of the consolidated statements of the Company in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements, as well as their related
disclosures. Such estimates and assumptions also affect the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with
maturities of three months or less to be cash equivalents.
PROPERTY, PLANT AND EQUIPMENT
The Company uses the straight-line method of computing depreciation for
financial reporting purposes based on the estimated useful lives of the
corresponding assets, which predominantly range from 5 to 40 years. For tax
purposes, the Company generally computes depreciation using accelerated
methods.
OTHER ASSETS
Included in other assets at June 30, 1995 is unamortized goodwill attributable
to purchased companies totaling $13,761,000. Of this total, $11,518,000 (net
of accumulated amortization of $3,757,000) relates to companies acquired after
October 31, 1970, and is being amortized over fifteen to forty years. Goodwill
of $2,243,000 relates to a company acquired prior to November 1, 1970, and is
not being amortized as, in the opinion of management, there has been no
diminution in value.
The remaining other assets consist of deferred costs which are amortized over
their estimated useful lives; costs of patents acquired which are amortized
over their estimated remaining economic lives; and other miscellaneous assets.
Management periodically evaluates the future economic benefit of its long-lived
intangible assets based upon expected undiscounted cash flows of the related
assets and appropriately adjusts those items which are determined to have been
impaired.
REVENUE RECOGNITION
Net sales and related cost of sales are recognized upon shipment of products.
Net sales are recorded net of estimated sales discounts and returns.
PER SHARE INFORMATION
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.
On July 20, 1994 and April 15, 1993, a four-for-three stock split was effected
whereby one additional common share was issued for each three shares
outstanding to shareholders of record on June 20, 1994 and March 15, 1993,
respectively. Accordingly, net income per common share and all other per share
information appearing in the consolidated financial statements and notes
thereto have been retroactively adjusted for these splits where appropriate.
CREDIT RISK
Financial instruments which potentially subject the Company to concentrations
of credit risk consist primarily of cash equivalents and trade accounts
receivable. The Company places its cash equivalents with high-quality
institutions and, by policy, limits the amount of credit exposure to any one
institution. Concentration of credit risk with respect to trade accounts
receivable is not material, as the Company has a large diverse customer base
with no single customer accounting for a significant percentage of trade
accounts receivable.
BUSINESS SEGMENTS
The business segments information for 1995, 1994 and 1993 included on page 9 of
this Annual Report is an integral part of these financial statements.
<PAGE> 13
2. ACQUISITIONS
During fiscal 1995 and 1994 the Company acquired for cash the net operating
assets of various entities as follows:
<TABLE>
Business Segment 1995 1994
------------------------------------------------------------------------
<S> <C> <C>
(Dollars in Thousands)
Automotive $ 4,500
Specialty Foods 554 $ 5,438
------------------------------------------------------------------------
Total $ 5,054 $ 5,438
========================================================================
</TABLE>
All such acquisitions were accounted for under the purchase method of
accounting. The results of operations of these entities have been included in
the consolidated financial statements from the date of acquisition and are
immaterial in relation to the consolidated totals.
3. INVENTORIES
Inventories are valued at the lower of cost or market. Inventories which
comprise approximately 25% of total inventories at June 30, 1995 and 1994 are
costed on a last-in, first-out (LIFO) basis. Inventories which are costed by
various other methods approximate actual cost on a first-in, first-out (FIFO)
basis. If the FIFO method (which approximates current cost) of inventory
accounting had been used for inventories costed on a LIFO basis, these
inventories would have been $12,025,000 and $12,553,000 higher than reported at
June 30, 1995 and 1994, respectively.
It is not practicable to segregate work in process from finished goods
inventories. Management estimates, however, that work in process inventories
amount to 10% or less of the combined total of finished goods and work in
process inventories at June 30, 1995 and 1994.
4. SHORT-TERM BANK LOANS
Short-term bank loans (generally for terms not exceeding ninety days) represent
unsecured borrowings under various credit arrangements. The Company had unused
lines of credit for short-term borrowings from various banks at June 30, 1995,
1994 and 1993 of $154,000,000, $169,000,000 and $179,000,000, respectively. The
lines of credit are granted at the discretion of the lending banks and are
generally subject to periodic review. For the year ended June 30, 1995, the
Company had no short-term borrowings under its line of credit arrangements.
5. ACCRUED LIABILITIES
Accrued liabilities at June 30, 1995 and 1994 are composed of:
<TABLE>
1995 1994
---------------------------------------------------------------------------------------
<S> <C> <C>
(Dollars in Thousands)
Income and other taxes $ 2,768 $ 8,010
Accrued compensation and employee benefits 19,533 17,879
Accrued marketing and distribution 4,724 6,399
Other 6,139 9,614
---------------------------------------------------------------------------------------
Total accrued liabilities $33,164 $41,902
=======================================================================================
</TABLE>
6. LONG-TERM DEBT
Long-term debt (including current portion) at June 30, 1995 and 1994 consists
of:
<TABLE>
1995 1994
---------------------------------------------------------------------------------------
<S> <C> <C>
(Dollars in Thousands)
Notes payable (8.9%, due in February 2000) $25,000 $25,000
Obligations with various industrial development
authorities-collateralized by real
estate and equipment:
Floating rate due in installments to 2005 5,890 6,623
7%, due in installments to 2003 1,500 1,640
Capital lease obligations (10.0% to 15.6%,
due in installments to 1996) 405 841
Other (2% to 8.5%, due in installments to 1996) 71 130
---------------------------------------------------------------------------------------
Total 32,866 34,234
Less current portion 1,026 1,301
---------------------------------------------------------------------------------------
Long-term debt $31,840 $32,933
=======================================================================================
</TABLE>
The net book value of property subject to lien at June 30, 1995 was
approximately $3,100,000. The Company has entered into various capital lease
agreements in connection with equipment used in its operations. Such equipment
at June 30, 1995 and 1994 had a capitalized cost of approximately $1,866,000
and $2,028,000 and a related net book value of $220,000 and $507,000,
respectively.
<PAGE> 14
No material debt was assumed for the purchase of property additions in 1995,
1994 and 1993. Cash payments for interest were $2,739,000, $2,868,000 and
$3,664,000 for 1995, 1994 and 1993, respectively.
Various debt agreements require the maintenance of certain financial statement
amounts and ratios, including a requirement to maintain a specified minimum net
worth, as defined. At June 30, 1995, the Company exceeded this net worth
requirement by approximately $79,310,000.
Long-term debt, including capital leases, matures as follows:
<TABLE>
<S> <C>
-------------------------------------------------------------------------------------------
Year ending June 30: (Dollars in Thousands)
1996 $ 1,026
1997 610
1998 545
1999 650
2000 25,660
After 2000 4,375
-------------------------------------------------------------------------------------------
Total $32,866
===========================================================================================
</TABLE>
Based on the borrowing rates currently available for long-term debt with
similar terms and average maturities, the fair value of total long-term debt is
approximately $34,566,000.
7. INCOME TAXES
The Company and its domestic subsidiaries file a consolidated Federal income
tax return. Taxes based on income have been provided as follows:
<TABLE>
1995 1994 1993
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------------
Currently payable: (Dollars in Thousands)
Federal $40,163 $35,441 $26,563
State and local 6,425 5,265 4,202
------------------------------------------------------------------------------------------------------
Total current provision 46,588 40,706 30,765
Deferred Federal, state and local provision (credit) (2,304) (2,473) (2,671)
------------------------------------------------------------------------------------------------------
Total taxes based on income $44,284 $38,233 $28,094
======================================================================================================
</TABLE>
Tax expense resulting from allocating certain tax benefits directly to common
stock and retained earnings totaled $193,000, $455,000 and $102,000 for 1995,
1994 and 1993, respectively. The Company's effective tax rate varies from the
statutory Federal income tax rate as a result of the following factors:
<TABLE>
1995 1994 1993
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------
Statutory rate 35.0% 35.0% 34.0%
State and local income taxes 3.5 3.3 3.7
Change in Federal tax rate .3
Other .1 .4 .1
-----------------------------------------------------------------------------------------------------
Effective rate 38.6% 39.0% 37.8%
=====================================================================================================
</TABLE>
Deferred income taxes recorded in the consolidated balance sheets at June 30,
1995 and 1994 consist of the following:
<TABLE>
1995 1994
<S> <C> <C>
-----------------------------------------------------------------------------------------------------
Deferred tax assets (liabilities): (Dollars in Thousands)
Employee medical and other benefits $ 4,557 $ 4,482
Inventories 4,424 3,105
Other accrued liabilities 1,482 2,693
Receivable valuation allowances 1,424 930
-----------------------------------------------------------------------------------------------------
Total deferred tax assets 11,887 11,210
-----------------------------------------------------------------------------------------------------
Property (5,391) (6,789)
Other (77) (306)
-----------------------------------------------------------------------------------------------------
Total deferred tax liabilities (5,468) (7,095)
-----------------------------------------------------------------------------------------------------
Net deferred tax asset $ 6,419 $ 4,115
=====================================================================================================
</TABLE>
Cash payments for income taxes were $51,529,000, $39,354,000 and $33,106,000
for 1995, 1994 and 1993, respectively.
8. SHAREHOLDERS' EQUITY
The company is authorized to issue 2,650,000 shares of preferred stock
consisting of 350,000 shares of Class A Participating Preferred Stock with
$1.00 par value, 1,150,000 shares of Class B Voting Preferred Stock without par
value and 1,150,000 shares of Class C Nonvoting Preferred Stock without par
value.
<PAGE> 15
In April 1990, the Company's Board of Directors adopted a Rights Agreement which
provides for one preferred share purchase right to be associated with each share
of the Company's outstanding common stock. Shareholders exercising these rights
would become entitled to purchase shares of Class A Participating Preferred
Stock. The rights may be exercised on or after the time when a person or group
of persons without the approval of the Board of Directors acquire beneficial
ownership of 15 percent or more of the Company's common stock or announce the
initiation of a tender or exchange offer which if successful would cause such
person or group to beneficially own 30 percent or more of the common stock. Such
exercise may ultimately entitle the holders of the rights to purchase for $70
per right common stock of the Company having a market value of $140. The person
or groups effecting such 15 percent acquisition or undertaking such tender offer
will not be entitled to exercise any rights. These rights expire April 2000
unless earlier redeemed by the Company under circumstances permitted by the
Rights Agreement.
In August 1995, as approved by the Board of Directors the Company purchased
250,000 shares of common stock from the estate of the Chief Executive Officer's
father, a founder and former Chairman of the Company. The shares were acquired
at a purchase price of $35.81 per share, which represented the average quoted
closing price of the stock during the first twenty of the twenty-two business
days preceding the date of purchase. The quoted closing price of the common
stock as of the date of purchase was $36.25.
9. STOCK OPTIONS
Under terms of an incentive stock option plan as amended and approved by the
shareholders, the Company reserved 3,625,000 common shares for issuance to
qualified key employees. All options granted were exercisable at prices not less
than fair market value as of the date of grant. The Company's authority to grant
options under this plan expired in May 1995. In conjunction with the 1995 Annual
Meeting of Shareholders, the Company intends to solicit shareholder approval for
adoption of a new employee stock option plan.
The following summarizes stock option activity for each of the three years ended
June 30, 1995:
<TABLE>
Number of Option Price
Options Shares Per Share Total
<S> <C> <C> <C>
----------------------------------------------------------------------------------------------------------
Outstanding-June 30, 1992 168,895 $ 7.50-$ 8.77 $1,324,000
Granted 309,793 $25.59-$28.15 7,937,000
Exercised (59,817) $ 7.50-$25.59 (494,000)
----------------------------------------------------------------------------------------------------------
Outstanding-June 30, 1993 418,871 $ 7.50-$28.15 8,767,000
Exercised (195,119) $ 7.50-$25.59 (4,505,000)
Forfeited (729) $25.59 (19,000)
----------------------------------------------------------------------------------------------------------
Outstanding-June 30, 1994 223,023 $ 7.50-$28.15 4,243,000
Granted 216,600 $33.38-$36.71 7,236,000
Exercised (130,026) $ 7.50-$33.38 (2,544,000)
Forfeited (3,554) $25.59-$28.15 (99,000)
----------------------------------------------------------------------------------------------------------
Outstanding-June 30, 1995 306,043 $ 7.50-$36.71 $8,836,000
==========================================================================================================
</TABLE>
The stock options outstanding at June 30, 1995 expire as follows:
<TABLE>
Number of
January Shares
<S> <C>
----------------------------------------------------------------------------------------------------------
1996 41,944
1997 176,100
1999 10,000
2000 6,795
2002 47,999
2005 23,205
----------------------------------------------------------------------------------------------------------
Total 306,043
==========================================================================================================
</TABLE>
10. PENSION AND OTHER POSTRETIREMENT BENEFITS
PENSION PLANS:
The Company and certain of its operating subsidiaries sponsor five
noncontributory defined benefit plans which cover the union workers at such
locations. Additionally, the Company and certain of its operating subsidiaries
participate in two multiemployer defined benefit plans covering the union
workers at such locations. Benefits under these plans are primarily based on
negotiated rates and years of service. The Company contributes to these pension
funds at least the minimum amount required by regulation or contract.
<PAGE> 16
Net pension cost relating to these plans for each of the years in the period
ended June 1995 is summarized as follows:
<TABLE>
1995 1994 1993
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------------
Company sponsored plans - (Dollars in Thousands)
Service cost - benefits earned during the period $ 507 $ 556 $ 449
Interest cost on projected benefit obligations 1,507 1,442 1,347
Actual return on pension plan assets (2,984) (460) (4,272)
Net amortization and deferrals 1,130 (1,438) 2,688
------------------------------------------------------------------------------------------------------
Net pension cost for Company plans 160 100 212
Multiemployer plans 594 487 371
------------------------------------------------------------------------------------------------------
Net pension cost $ 754 $ 587 $ 583
======================================================================================================
</TABLE>
The following table summarizes the funded status of the Company's plans at June
30, 1995 and 1994:
<TABLE>
1995 1994
------------------------------------------------------------------------------------------------------
<S> <C> <C>
(Dollars in Thousands)
Actuarial present value
of benefit obligation:
Vested benefits $22,215 $20,109
======================================================================================================
Accumulated benefit obligation $22,223 $20,240
======================================================================================================
Projected benefit obligation $22,223 $20,240
Plan assets at fair value 23,792 22,014
------------------------------------------------------------------------------------------------------
Excess of assets over projected benefit obligation 1,569 1,774
Unrecognized net gain (1,879) (2,202)
Unrecognized prior service costs 1,103 1,170
Remaining unrecognized net transition obligation 303 334
------------------------------------------------------------------------------------------------------
Net recorded pension asset $ 1,096 $ 1,076
======================================================================================================
</TABLE>
The majority of plan assets are invested in bonds, short-term investments and
common stock including shares of the Company's common stock with a market value
of $3,325,000, $3,296,000 and $4,198,000 as of June 30, 1995, 1994 and 1993,
respectively. The weighted average discount rates used in determining the
projected benefit obligation for 1995, 1994 and 1993 were 7.25%, 7.7% and 7.0%,
respectively. The expected long-term rate of return on assets was 9.0% for the
three years.
EMPLOYEE STOCK OWNERSHIP PLAN:
The Company sponsors an Employee Stock Ownership Plan (ESOP). In April 1990,
the Company loaned $10,000,000 to the ESOP for the purpose of purchasing the
Company's common stock in furtherance of the objectives of the Plan. The
Company funded this transaction primarily through short-term bank borrowings.
With the proceeds and as adjusted for all stock splits since April 1990, the
ESOP effectively purchased 1,194,390 shares of the Company's common stock in
the open market.
The ESOP is fully paid by the Company and generally provides coverage to all
domestic employees, except those covered by a collective bargaining agreement.
Contributions to the ESOP are to be not less than that required by the terms of
the loan agreement between the Company and the ESOP. The Company uses the
shares-allocated method of accounting in determining the amount of expense
related to each contribution.
As of June 30, 1995, the amount due from the ESOP is recorded as a reduction in
shareholders' equity and represents the Company's prepayment of future
contributions to the ESOP. This amount will be expensed over not more than the
next two years. Dividends accumulated on the Company's unallocated common
stock held by the ESOP are used to repay the loan to the Company. Accordingly,
the pretax expense associated with 1995, 1994 and 1993 totaled $1,027,000,
$1,008,000 and $994,000, which is net of dividends of $252,000, $270,000 and
$285,000 on the unallocated shares, respectively.
In November 1993, the Accounting Standards Executive Committee issued Statement
of Position 93-6, "Employers' Accounting for Employee Stock Ownership Plans."
This Statement will not effect the Company's accounting treatment of existing
shares purchased by the ESOP discussed above. However, any future purchases of
the Company's stock by the ESOP will require the adoption of this Statement.
POSTRETIREMENT BENEFITS:
In addition to pension benefits, the Company also provides certain employees
other postretirement benefits including health care and life insurance
coverage. As of June 30, 1995, the Company provides such coverage under three
active benefit plans of which two relate to collectively bargained benefits. In
general, all eligible employees are entitled to receive medical and life
insurance benefits upon meeting certain age and service requirements at the
time of their retirement.
<PAGE> 17
The Company recognizes the cost of postretirement medical and life insurance
benefits as the employees render service in accordance with Statement of
Financial Accounting Standards (SFAS) No. 106. Relevant information with respect
to these postretirement benefits as of June 30, 1995 and 1994 can be summarized
as follows:
<TABLE>
<CAPTION>
1995 1994
-------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retired participants $1,845 $1,591
Fully eligible active plan participants 280 244
Other active plan participants 992 530
-------------------------------------------------------------------------------------------------------
Total 3,117 2,365
Unrecognized net gain (loss) from past experience and changes in assumptions (266) 468
-------------------------------------------------------------------------------------------------------
Accrued postretirement benefit cost $2,851 $2,833
=======================================================================================================
Net postretirement benefit cost:
Service cost $ 74 $ 101
Interest cost 167 211
-------------------------------------------------------------------------------------------------------
Total $ 241 $ 312
=======================================================================================================
Estimated effect of 1% increase in assumed medical cost trend rates:
Increase in accumulated postretirement benefit obligation $ 248 $ 251
=======================================================================================================
Increase in net periodic postretirement benefit cost $ 37 $ 56
=======================================================================================================
Assumed weighted average discount rate 7.25% 7.7%
=======================================================================================================
</TABLE>
For 1995, annual increases in medical costs are initially assumed to total
approximately 9% per year and gradually declining to 5% by approximately the
year 2003. Annual increases in medical costs for 1994 were assumed to total
approximately 10% per year and gradually declining to 5% by approximately the
year 2005.
The Company and certain of its subsidiaries participate in two multiemployer
plans that provide various postretirement health and welfare benefits to the
union workers at such locations. The Company's contributions required by its
participation in the multiemployer plans totaled $1,174,000, $996,000 and
$832,000 in 1995, 1994 and 1993, respectively.
11. COMMITMENTS
The Company has operating leases with initial noncancelable lease terms in
excess of one year, covering the rental of various facilities and equipment,
which expire at various dates through fiscal 2002. Certain of these leases
contain renewal options, some provide options to purchase during the lease term
and some require contingent rentals based on usage. The future minimum rental
commitments due under these leases are summarized as follows (in thousands):
1996-$5,077; 1997-$4,028; 1998-$2,708; 1999-$1,050; 2000-$406; thereafter-$254.
Total rental expense, including short-term cancelable leases, during 1995, 1994
and 1993 is summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C>
Operating leases:
Minimum rentals $4,225 $4,006 $3,814
Contingent rentals 457 306 540
Short-term cancelable leases 2,288 1,550 1,198
-------------------------------------------------------------------------------------------------------
Total $6,970 $5,862 $5,552
=======================================================================================================
</TABLE>
12. CONTINGENCIES AND ENVIRONMENTAL MATTERS
At June 30, 1995, the Company is a party to various legal and environmental
matters which have arisen in the ordinary course of business. Such matters did
not have a material adverse effect on the current year results of operations
and, in the opinion of management, their ultimate disposition will not have a
material adverse effect on the Company's future consolidated financial position
or results of operations.
Environmental expenditures relating to current or past operations are expensed
in the period incurred. Expenditures relating to future operations are
capitalized, provided they are recoverable and serve to improve the property.
The Company records an estimate for contingent and environmental liabilities
when costs are both probable and can be reasonably estimated. The Company
periodically evaluates and revises such estimates based upon expenditures
against such reserves and the availability of additional relevant information.
<PAGE> 18
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Directors of Lancaster Colony Corporation
We have audited the accompanying consolidated balance sheets of Lancaster
Colony Corporation and its subsidiaries as of June 30, 1995 and 1994, and the
related consolidated statements of income, shareholders' equity, and cash flows
for each of the three years in the period ended June 30, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Lancaster Colony
Corporation and its subsidiaries as of June 30, 1995 and 1994, and the results
of their operations and their cash flows for each of the three years in the
period ended June 30, 1995 in conformity with generally accepted accounting
principles.
/s/ Deloitte & Touche LLP
Columbus, Ohio
August 29, 1995
SELECTED QUARTERLY FINANCIAL DATA
For the Years Ended June 30, 1995 and 1994
<TABLE>
<CAPTION>
Net Gross Net Earnings Stock Prices(1) Dividends Paid
(Thousands Except Per Share Figures) Sales Margin Income Per Share(1) High Low Per Share(1)
<S> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------------
1995
First quarter $189,130 $ 57,016 $ 15,320 $ .51 $39.250 $32.750 $.12
Second quarter 225,248 69,944 19,981 .66 35.625 28.250 .14
Third quarter 191,975 59,205 16,413 .55 36.750 28.750 .14
Fourth quarter 188,773 61,777 18,810 .63 37.250 34.000 .15
-----------------------------------------------------------------------------------------------------------------------------------
Year $795,126 $247,942 $ 70,524 $2.35 $39.250 $28.250 $.55
===================================================================================================================================
1994
First quarter $172,821 $ 54,408 $ 13,020 $ .43 $31.500 $26.875 $.0975
Second quarter 192,757 62,202 15,517 .51 35.625 30.000 .1125
Third quarter 171,492 53,858 13,239 .44 34.500 31.125 .1125
Fourth quarter 184,662 61,628 18,084 .60 37.375 29.000 .1200
-----------------------------------------------------------------------------------------------------------------------------------
Year $721,732 $232,096 $ 59,860 $1.97 $37.375 $26.875 $.4425
===================================================================================================================================
<FN>
(1) Adjusted for the 4-for-3 stock split paid July 1994.
</TABLE>
Lancaster Colony common shares are traded in the Nasdaq National Market System
(Nasdaq Symbol: LANC). Stock quotations were obtained from the National
Association of Securities Dealers. The number of shareholders as of September
1, 1995 was approximately 9,500.
<PAGE> 1
Exhibit 21
LANCASTER COLONY CORPORATION
SIGNIFICANT SUBSIDIARIES OF REGISTRANT
<TABLE>
<CAPTION>
State or Province Percent of
Name of Incorporation Ownership
---- -------------------- ----------
<S> <C> <C>
Colony Printing & Labeling, Inc. Indiana 100%
Dee Zee, Inc. Ohio 100%
Fostoria Glass Company West Virginia 100%
Indiana Glass Company Indiana 100%
LRV Acquisition Corp. Ohio 100%
LaGrange Molded Products, Inc. Delaware 100%
Lancaster Colony Canada Inc. Ontario 100%
Lancaster Colony Commercial
Products, Inc. Ohio 100%
Lancaster Glass Corporation Ohio 100%
New York Frozen Foods, Inc. Ohio 100%
Pretty Products, Inc. Ohio 100%
T. Marzetti Company Ohio 100%
The Quality Bakery Company, Inc. Ohio 100%
Reames Foods, Inc. Iowa 100%
Waycross Molded Products, Inc. Ohio 100%
</TABLE>
All subsidiaries conduct their business under the names shown.
<PAGE> 1
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
-----------------------------
We consent to the incorporation by reference in Registration Statement No.
33-39102 of Lancaster Colony Corporation on Form S-8 of our reports dated
August 29, 1995, appearing in and incorporated by reference in this Annual
Report on Form 10-K of Lancaster Colony Corporation for the year ended June 30,
1995.
/S/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Columbus, Ohio
September 21, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANICIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S CONSOLIDATED BALANCE SHEET AND STATEMENT OF INCOME FOR THE YEAR
ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 8,239
<SECURITIES> 0
<RECEIVABLES> 90,363
<ALLOWANCES> 1,947
<INVENTORY> 141,886
<CURRENT-ASSETS> 249,767
<PP&E> 282,525
<DEPRECIATION> 169,338
<TOTAL-ASSETS> 379,904
<CURRENT-LIABILITIES> 60,512
<BONDS> 31,840
<COMMON> 28,086
0
0
<OTHER-SE> 249,062
<TOTAL-LIABILITY-AND-EQUITY> 379,904
<SALES> 795,126
<TOTAL-REVENUES> 795,126
<CGS> 547,184
<TOTAL-COSTS> 547,184
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,736
<INCOME-PRETAX> 114,808
<INCOME-TAX> 44,284
<INCOME-CONTINUING> 70,524
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 70,524
<EPS-PRIMARY> 2.35
<EPS-DILUTED> 0
</TABLE>
