<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
FOR THE FISCAL YEAR ENDED JUNE 30, 1997
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934
For the transition period from ................. to .................
COMMISSION FILE NUMBER 0-4065-1
LANCASTER COLONY CORPORATION
(Exact name of registrant as specified in its charter)
OHIO 13-1955943
(State or other jurisdiction of (I.R.S. Employer
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
August 29, 1997 was approximately $1,158,394,000.
As of August 29, 1997, there were approximately 29,024,000 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 1997 Annual Report to Shareholders - Parts I,
II and IV. Proxy Statement for the Annual Meeting of Shareholders to be held
November 17, 1997; to be filed - Part III. The 1997 Annual Report to
Shareholders and 1997 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
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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,
glassware and candles, and automotive - which accounted for approximately 38%,
36% and 26%, respectively, of consolidated net sales for the fiscal year ended
June 30, 1997. The financial information relating to business segments for each
of the three years in the period ended June 30, 1997, 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,"
"Cardini's," "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"; croutons
and related products marketed under the brand name "Chatham Village Foods" and
caviar marketed under the brand name "Romanoff."
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 1997, the registrant obtained adequate supplies of raw
materials for this segment.
2
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The registrant's firm order backlog at June 30, 1997, in this business
segment, was approximately $4,261,000 as compared to a backlog of approximately
$3,706,000 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.
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 and other home fragrance products of all sizes, forms and
fragrance 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.
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
two customers accounted for approximately 25% and 32% of this segment's total
net sales during 1997 and 1996, respectively. No other customer accounted for
more than 10% of this segment's total net sales.
During fiscal year 1997, the registrant obtained adequate supplies of
raw materials for this business segment.
The registrant's firm order backlog at June 30, 1997, in this business
segment, was approximately $44,599,000 as compared to approximately $32,527,000
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.
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, tool boxes and other accessories for pickup trucks, vans and sport
utility vehicles, truck and trailer splash guards and quarter fenders,
accessories such as cup holders, litter caddies and floor consoles. The
3
<PAGE> 4
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 29% of this segment's total net sales
during 1997 and 1996. 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 1997, the registrant obtained adequate supplies of
raw materials for this segment.
The registrant's firm order backlog at June 30, 1997, in this business
segment, was approximately $6,180,000 as compared to a backlog of approximately
$6,865,000 as of the end of the preceding fiscal year. Such backlogs do not
reflect certain orders by original equipment manufacturers as, due to its
nature, such information is not readily available. 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.
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 1995 through 1997:
<TABLE>
<CAPTION>
1997 1996 1995
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Specialty Foods:
Retail 21% 21% 22%
Foodservice 17% 17% 17%
Glassware and Candles:
Consumer Table and Giftware 31% 30% 25%
Automotive 26% 27% 31%
</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. Pursuant to this Act, with respect to certain of its facilities, the
Company is required to submit compliance strategies to various regulatory
authorities for review and 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.
4
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EMPLOYEES
The registrant has approximately 6,400 employees.
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 6,100,000 square feet of space for
its operations. Of this space, approximately 1,515,000 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 198,000
Columbus, OH (2) Specialty Foods 370,000
Coshocton, OH Automotive 591,000
Des Moines, IA (3) Automotive 344,000
Dunkirk, IN Glassware and Candles 934,000
Elkhart, IN Automotive 96,000
Jackson, OH Automotive and Glassware and Candles 223,000
LaGrange, GA Automotive 211,000
Lancaster, OH Glassware and Candles 465,000
Leesburg, OH (4) Glassware and Candles 600,000
Milpitas, CA (5) Specialty Foods 130,000
Muncie, IN Glassware and Candles 153,000
Sapulpa, OK (6) Glassware and Candles 669,000
Wapakoneta, OH (7) Automotive 178,000
Waycross, GA (5) Automotive 142,000
Wilson, NY Specialty Foods 80,000
Washington Court
House, OH (8) Glassware and Candles 134,000
</TABLE>
(1) Leased for term expiring 1998.
(2) Part leased for term expiring 1998.
(3) Part leased for terms expiring 1997 and 1998.
(4) Part leased on a monthly basis.
(5) Part leased for term expiring 1997.
(6) Part leased for term expiring in 1999 and 2001.
(7) Part leased for term expiring 2003 with ownership passing to
registrant at lease expiration. Part leased on monthly basis.
(8) Leased for term expiring 1999.
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Item 3. LEGAL PROCEEDINGS
None
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 17, 1997.
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
AUGUST 29 OFFICES AND EXECUTIVE
NAME 1997 POSITIONS HELD OFFICER
---- ----------- -------------- --------
<S> <C> <C> <C>
John B. Gerlach, Jr. 43 Chairman, Chief Executive
Officer and President 1982
John L. Boylan 42 Treasurer, Vice President,
Assistant Secretary and 1990
Chief Financial Officer
Larry G. Noble 61 Vice President 1985
David M. Segal 45 Corporate Secretary 1997
</TABLE>
Except for David M. Segal and John B. Gerlach, Jr., the above named
officers were elected to their present positions at the annual meeting of the
Board of Directors on November 18, 1996. All such persons have been elected to
serve until the next annual election of officers, which shall occur on November
17, 1997 and their successors are elected or until their earlier resignation or
removal.
6
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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 1997 and 1996. 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, 1997 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. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS 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 17, 1997, 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
17, 1997 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 17, 1997
is incorporated herein by reference.
7
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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 17, 1997, which is incorporated
herein by reference.
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, 1997 and
1996 and for each of the three years in the period ended June
30, 1997, together with the report thereon of Deloitte & Touche
LLP dated August 26, 1997, appearing in Exhibit 13 of this Form
10-K Annual Report are incorporated herein by reference.
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report
Consolidated Statements of Income for the years ended June 30,
1997, 1996 and 1995
Consolidated Balance Sheets at June 30, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended
June 30, 1997, 1996 and 1995
Consolidated Statements of Shareholders' Equity for the years
ended June 30, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
(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 1997 Annual Report to
Shareholders:
Independent Auditors' Report
Schedule II - Valuation and Qualifying Accounts for each of the
three years in the period ended June 30, 1997
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, 1997.
8
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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 23rd day of
September, 1997.
LANCASTER COLONY CORPORATION
(Registrant)
By /S/ John B. Gerlach, Jr.
----------------------------------
John B. Gerlach, Jr.
Chairman, Chief Executive Officer
and President
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, Jr. Chairman, Chief September 17, 1997
- --------------------------- Executive Officer ------------------
John B. Gerlach, Jr. and President
/S/ John L. Boylan Treasurer, Vice September 17, 1997
- --------------------------- President, Assistant ------------------
John L. Boylan Secretary and Chief
Financial Officer
(Principal Financial
and Accounting Officer)
Director
- --------------------------- ------------------
Frank W. Batsch
/S/ Robert L. Fox Director September 15, 1997
- --------------------------- ------------------
Robert L. Fox
Director
- --------------------------- ------------------
Morris S. Halpern
/S/ Robert S. Hamilton Director September 15, 1997
- --------------------------- ------------------
Robert S. Hamilton
/S/ Edward H. Jennings Director September 15, 1997
- --------------------------- ------------------
Edward H. Jennings
/S/ Richard R. Murphey, Jr. Director September 16, 1997
- --------------------------- ------------------
Richard R. Murphey, Jr.
/S/ Henry M. O'Neill, Jr. Director September 18, 1997
- --------------------------- ------------------
Henry M. O'Neill, Jr.
/S/ David J. Zuver Director September 18, 1997
- --------------------------- ------------------
David J. Zuver
</TABLE>
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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, 1997 and 1996, and for each of
the three years in the period ended June 30, 1997, and have issued our report
thereon dated August 26, 1997; such financial statements and report are
included in your 1997 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 26, 1997
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SCHEDULE II
LANCASTER COLONY CORPORATION
AND SUBSIDIARIES
============================
VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED JUNE 30, 1997
<TABLE>
<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
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RESERVES DEDUCTED FROM ASSET TO WHICH
THEY APPLY - Allowance for doubtful
accounts:
Year ended June 30, 1995................. $2,339,000 $ 614,000 $1,006,000(A) $1,947,000
==========================================================
Year ended June 30, 1996................. $1,947,000 $2,089,000 $1,905,000(A) $2,131,000
==========================================================
Year ended June 30, 1997................. $2,131,000 $1,813,000 $1,083,000(A) $2,861,000
==========================================================
</TABLE>
(A) Represents uncollectible accounts written off net of recoveries.
11
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LANCASTER COLONY CORPORATION
FORM 10-K
JUNE 30, 1997
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. (j)
.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 Resolution by the Board of Directors to amend
registrant's 1981 Incentive Stock Option Plan
approved by the shareholders November 19, 1990. (g)
.5 Key Employee Severance Agreement between Lancaster
Colony Corporation and John L. Boylan. (g)
.6 Consulting Agreement by and between Lancaster
Colony Corporation and Morris S. Halpern. (h)
.7 1995 Key Employee Stock Option Plan. (i)
13. Annual Report to Shareholders. 1997 Form 10-K
21. Significant Subsidiaries of Registrant. 1997 Form 10-K
23. The consent of Deloitte & Touche LLP to the
incorporation by reference in Registration
Statements No. 33-39102 and 333-01275
on Form S-8 of their reports dated August
26, 1997, appearing in and incorporated by
reference in this Annual Report
on Form 10-K of Lancaster Colony Corporation
for the year ended June 30, 1997. 1997 Form 10-K
27. Financial Data Schedule 1997 Form 10-K
</TABLE>
12
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(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, 1991.
(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, 1993.
(i) Indicates the exhibit is incorporated by reference from the
Lancaster Colony Corporation filing on Form S-8 of its 1995 Key
Employee Stock Option Plan (Registration Statement No.
333-01275).
(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, 1996.
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 1997 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 1997 Annual Report to Shareholders to the Commission
upon request.
13
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Exhibit 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
Of Results of Operations and Financial Condition
Review of Consolidated Operations
Consolidated net sales for fiscal 1997 totaled $922,813,000, which was a record
high and an 8% increase above fiscal 1996 net sales of $855,912,000. Leading
this increase in consolidated net sales was the Glassware and Candles segment,
which achieved a 13% growth in its net sales stemming primarily from greater
unit sales of its Candle-lite product lines. The Company's Specialty Foods and
Automotive segments also contributed increased net sales. Generally, on a
corporate basis, competitive conditions have minimized the effect of any year
over year increases in unit selling prices. Increased sales of the Glassware
and Candles segment were also primarily responsible for fiscal 1996
consolidated net sales increasing 8% over the fiscal 1995 total of
$795,126,000.
Benefiting from the increase in sales, consolidated net income also attained a
record high during fiscal 1997 and totaled $88,706,000. Net income for 1997 was
17% above the fiscal 1996 total of $76,135,000. Similarly, 1996 net income
increased 8% over the fiscal 1995 total of $70,524,000.
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>
<CAPTION>
Segment Sales Mix(1): 1997 1996 1995
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Specialty Foods 38% 38% 39%
Glassware and Candles 36% 35% 30%
Automotive 26% 27% 31%
Operating Income(2):
- -------------------------------------------------------------------------
Specialty Foods 13% 11% 13%
Glassware and Candles 24% 26% 22%
Automotive 9% 8% 11%
</TABLE>
(1) Expressed as a percentage of consolidated net sales.
(2) Expressed as a percentage of the related segment's net sales.
The Company's consolidated gross margin increased to 31.5% of net sales in 1997
compared to 30.8% in 1996 and 31.2% in 1995. This increase was largely the
result of improved Specialty Foods margins as influenced by such factors as a
more beneficial sales mix and lower raw material costs. Automotive margins also
improved slightly on higher production volumes. During 1997, the Glassware and
Candles segment experienced a decline in margins resulting from increases in
certain raw material costs and production inefficiencies. Compared to 1995, the
1996 margins were adversely affected in the Specialty Foods segment by higher
raw material costs and a less favorable sales mix.
For 1997, total selling, general and administrative expenses of $146,403,000
increased 6% over the 1996 total of $138,206,000. This increase is similar in
size to the 1996 increase of 5% over the 1995 total of $131,424,000 for such
expenses. These increases generally result from the effects of higher sales
volumes.
The foregoing factors contributed to consolidated operating income in 1997
increasing by 15% to $144,359,000 compared to $125,746,000 recorded in 1996. The
prior year's operating income had increased 8% over the 1995 total of
$116,518,000.
Stated as a percentage of pretax income, the Company's effective tax rate
declined slightly to 37.7% compared to 38.2% in 1996 and 38.6% in 1995.
Earnings per share of $3.02 increased $.46 in 1997 over 1996, an improvement of
18%. Similarly, 1996 earnings per share of $2.56 increased $.21, or 9%, over
the 1995 total of $2.35. In addition to the increased levels of corporate
earnings, earnings per share have been beneficially affected by the Company's
share repurchases that have totaled in excess of 1,800,000 shares over the
three-year period ended June 30, 1997.
Segment Review - Glassware and Candles
This segment continued to experience significant internally generated growth
with net sales in 1997 totaling $336,200,000 which was a 13% increase over the
1996 total of $297,937,000. Net sales in 1996 increased 26% over the
$237,320,000 recorded in 1995. Throughout this period, the sales of candles and
related products have been principally responsible for this growth. Of
particular note is the volume generated by wax-filled glass products for which
much of the related glassware is also produced by
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
this segment. Growth in 1997 was assisted by a significant increase in sales of
private label wax-filled candle products.
Operating income recorded during 1997 totaled $81,455,000, exceeding the 1996
total of $76,068,000 by 7%. This increase is primarily attributable to the
effect of increased sales volumes. Offsetting this effect were such factors as
a less favorable sales mix, higher wax and natural gas costs and certain
production inefficiencies occurring in both the candle and glassware
manufacturing operations.
Compared to 1995 operating income of $52,147,000, the corresponding total for
1996 increased by 46%. This improvement was generated by increased volume, a
more favorable sales mix, the increased utilization of plant capacity and the
effect of significant additional investment in more productive machinery and
equipment.
Segment Review - Specialty Foods
Record net sales of the Specialty Foods segment during fiscal 1997 of
$351,012,000 increased 7% over the $329,420,000 achieved in 1996. Compared to
1995 sales of $309,622,000, 1996 sales had increased 6%. The majority of this
segment's sales continue to be made to retail customers as is reflected in the
following table:
<TABLE>
<CAPTION>
1997 1996 1995
- -------------------------------------------------------------------------
<S> <C> <C>
Proportion of retail sales 55% 55% 56%
Proportion of foodservice sales 45% 45% 44%
</TABLE>
Sales made into retail distribution channels during the last two years have
increased as a result of greater volume of products sold in produce
departments, increased private label sales and the growth in product lines sold
through specialty distributors. The November 1995 purchase of the Cardini lines
of food products significantly contributed to the growth of the latter category
of products. Sales of non-refrigerated, pourable dressings have declined during
this period as a result of new market entrants and heightened competitive
pricing pressures. Foodservice sales have also improved during this period as
influenced by the expansion of sales to both national restaurant chains and to
wholesale distributors.
This segment enjoyed a recovery in operating margins during 1997 as operating
income totaled $47,308,000, which was 13% of segment sales. The current year's
income increased 33% above the 1996 operating income of $35,579,000, which
represented 11% of net sales. Compared to this segment's 1995 operating income
of $40,704,000, the 1996 total reflected a 13% decrease.
Reflecting this segment's reliance of raw materials having price volatility, a
generally broad-based reduction in raw material costs contributed to the
improvements in fiscal 1997 margins. One of the raw materials significantly
influencing this trend was soybean oil, which had its cost return to more
historic norms after having spent three years at considerably higher levels.
The 1997 margins were also positively affected by an improved sales mix as well
as capital improvements completed in calendar 1996 which provided notable
improvements in certain operating efficiencies. Factors, which led to the
decline in 1996 margins compared to 1995, included generally higher raw material
costs, a less favorable sales mix and increased competitive pricing pressures.
Segment Review - Automotive
After a year of sales decline, the Automotive segment recorded a 3% increase in
sales during 1997 compared to 1996. Sales during these past two years totaled
$235,601,000 and $228,555,000, respectively. Compared to 1995 sales totaling
$248,184,000, this segment's 1996 sales decreased 8%. Sales of automotive floor
mats and aluminum truck and van accessories led the 1997 increase. Offsetting
this increase was a decline in the sales of truck bed liners as a result of
competitive market conditions reflecting increased industry capacity and
eroding prices. Sales during fiscal 1996 were adversely affected by
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS
several factors including a shifting in the floor mat supply arrangements with
certain original equipment manufacturers and a decline in the heavy truck and
trailer industry to which the company is a leading supplier of splash guards.
An improved sales mix, greater production efficiencies and generally lower raw
material costs assisted this segment's operating income to increase by 9%
during fiscal 1997 and total $20,310,000 compared to $18,561,000 in 1996.
Increased plastic costs in 1997 mitigated this improvement. The operating
income recorded in 1996 decreased by 34% from the $28,027,000 achieved in 1995.
Contributing to this decline were the decline in sales and less efficient
overhead absorption resulting from lower production volumes. Plastic costs,
however, during 1996 were significantly lower than during much of 1995.
This segment's sales to original equipment manufacturers ("OEMs") are made both
directly to the OEMs and indirectly through a third party, "Tier 1" supplier.
Such sales are sensitive to the overall rate of new vehicle sales as well as
the Tier 1 supplier's ongoing ability to maintain its relationship with the
OEMs. Additionally, the extent of pricing flexibility associated with these
sales continues to be particularly limited. During 1997, sales to OEMs
comprised 44% of this segment's sales compared to 43% and 44% in 1996 and 1995,
respectively.
Liquidity and Capital Resources
The Company's last seven years of increasing profitability has served to
provide a basis for improved cash flows and a strong financial condition at
June 30, 1997. Compared to the fiscal 1996 total of $84,474,000, net cash
provided by operating activities in fiscal 1997 increased by 34% to total
$113,461,000. Similarly, in 1996, such cash generated from operations
increased 81% from the $46,725,000 in fiscal 1995. Increased net income and
reduced needs for investments in working capital growth during this three-year
period contributed to this improvement. This cash flow generated from
operations remains the primary source of financing the Company's internal
growth.
Investments in property, plant and equipment during 1997 totaled $37,528,000.
As has been the case over the last three years, the majority of these
expenditures went to the Glassware and Candles segment to support its recent
strong growth. Total expenditures during 1996 of $50,229,000 included funding
for a new distribution facility which is located adjacent to the existing
candle manufacturing facility located in Leesburg, Ohio. A similarly sized
expansion of this new facility is anticipated to be completed during fiscal
1998 to support this segment's growth. Additionally, during July 1997, the
Company acquired the outstanding stock of Chatham Village Foods, Inc., a
manufacturer and marketer of croutons and related products. The total of cash
paid and debt assumed by the Company in consummating this acquisition exceeded
$20,000,000.
Among significant financing activities conducted during 1997 was the purchase
of $29,554,000, or 692,000 shares, of the Company's common stock. Total
dividend payments for 1997 were $21,114,000, which was 8% greater than the 1996
total of $19,591,000. This increase reflects the higher dividend payout rate of
$.72 present during 1997 as compared to $.66 during 1996. The future levels of
share purchases and declared dividends continue to be subject to periodic
review of the Company's Board of Directors and are generally determined after
an assessment is made of such factors as anticipated earnings levels, cash flow
requirements and general business conditions.
The Company's debt to total capital ratio was 8% at June 30, 1997 compared to
9% at June 30, 1996. This relatively low level of debt provides the Company
with considerable flexibility to acquire businesses complementary in function
to that of the Company's existing operations. It is anticipated that adequate
borrowings will continue to be available under discretionary bank lines of
credit to meet any foreseeable cash requirements not otherwise met by cash
generated from operations.
<PAGE> 4
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Company's ongoing business activities continue to be subject to compliance
with various laws, rules and regulations as may be issued and enforced by
various Federal, state and local agencies. With respect to environmental
matters, costs are incurred pertaining to regulatory compliance and, upon
occasion, remediation. Such costs have not been, and are not anticipated to
become, material. See Note 12 to the accompanying financial statements for
further discussion as to the accounting for such costs.
Impact of Inflation
On a consolidated basis, material cost changes during both 1997 and 1996 were
mixed and generally moderate. However, a markedly lower level of food commodity
costs were present in the latter half of 1997 while plastics, wax and natural
gas costs were prevalently higher throughout the year. Reduced plastic costs
benefited the Company during fiscal 1996, particularly within the Automotive
segment. During 1996, soybean oil, a significant ingredient of the Specialty
Foods segment, also averaged slightly lower from 1995 levels.
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. The Company's diversity of operations and its
ongoing efforts to achieve greater manufacturing and distribution efficiencies
through the improvement of work processes minimizes the exposure to such
increased costs.
<PAGE> 5
BUSINESS SEGMENTS
Lancaster Colony Corporation and Subsidiaries
For the Years Ended 1997, 1996 and 1995
The Company operates in three business segments - Specialty Foods, Glassware
and Candles, and Automotive. The net sales of each segment are principally
domestic. A further description of each business segment follows:
SPECIALTY FOODS--includes production and marketing of a family of pourable and
refrigerated produce salad dressings, croutons, 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.
GLASSWARE AND CANDLES--includes the production and marketing of table and
giftware consisting of domestic glassware, both machine pressed and machine
blown; imported glassware; candles in all popular sizes, shapes and scents;
potpourri and related scented products; industrial glass and lighting
components; and glass floral containers. This segment's products are sold
primarily to mass merchandisers, discount and department stores.
AUTOMOTIVE--includes production and marketing of rubber, vinyl and
carpet-on-rubber car mats for original equipment manufacturers, 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.
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 the 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 1996 and 1995 capital expenditures of the Specialty Foods segment includes
property relating to business acquisitions totaling $213,000 and $36,000,
respectively. The 1995 capital expenditures of the Automotive segment includes
property relating to business acquisitions totaling $1,500,000.
The following sets forth certain financial information attributable
to the Company's business segments for the three years ended
June 30, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
(Dollars in Thousands) 1997 1996 1995
- -----------------------------------------------------------------------------------
<S> <C>
Net Sales
Specialty Foods $351,012 $329,420 $309,622
Glassware and Candles 336,200 297,937 237,320
Automotive 235,601 228,555 248,184
- -----------------------------------------------------------------------------------
Total $922,813 $855,912 $795,126
===================================================================================
Operating Income
Specialty Foods $ 47,308 $ 35,579 $ 40,704
Glassware and Candles 81,455 76,068 52,147
Automotive 20,310 18,561 28,027
- -----------------------------------------------------------------------------------
Total 149,073 130,208 120,878
Corporate expenses (6,614) (6,987) (6,070)
- -----------------------------------------------------------------------------------
Income Before Income Taxes $142,459 $123,221 $114,808
===================================================================================
Identifiable Assets
Specialty Foods $ 95,130 $102,606 $ 79,297
Glassware and Candles 235,154 205,232 155,484
Automotive 110,525 113,003 126,654
Corporate 43,585 14,518 18,469
- -----------------------------------------------------------------------------------
Total $484,394 $435,359 $379,904
===================================================================================
Capital Expenditures
Specialty Foods $ 4,625 $ 8,856 $ 6,582
Glassware and Candles 21,986 33,038 17,182
Automotive 10,817 8,501 9,473
Corporate 100 47 44
- -----------------------------------------------------------------------------------
Total $ 37,528 $ 50,442 $ 33,281
===================================================================================
Depreciation and Amortization
Specialty Foods $ 5,546 $ 4,753 $ 4,439
Glassware and Candles 12,520 10,767 9,802
Automotive 8,814 8,749 8,338
Corporate 101 130 138
- -----------------------------------------------------------------------------------
Total $ 26,981 $ 24,399 $ 22,717
===================================================================================
</TABLE>
<PAGE> 6
FIVE YEAR FINANCIAL SUMMARY
Lancaster Colony Corporation and Subsidiaries
<TABLE>
<CAPTION>
(Thousands Except Per Share Figures) 1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS
Net Sales $922,813 $855,912 $795,126 $721,732 $630,627
Gross Margin $290,762 $263,952 $247,942 $232,096 $203,106
Percent of sales 31.5% 30.8% 31.2% 32.2% 32.2%
Interest Expense $ 2,596 $ 2,875 $ 2,736 $ 2,849 $ 3,625
Percent of sales 0.3% 0.3% 0.3% 0.4% 0.6%
Income Before Income Taxes $142,459 $123,221 $114,808 $ 98,093 $ 74,319
Percent of sales 15.4% 14.4% 14.4% 13.6% 11.8%
Taxes Based on Income $ 53,753 $ 47,086 $ 44,284 $ 38,233 $ 28,094
Net Income $ 88,706 $ 76,135 $ 70,524 $ 59,860 $ 46,225
Percent of sales 9.6% 8.9% 8.9% 8.3% 7.3%
Per Common Share:(1)
Net income $ 3.02 $ 2.56 $ 2.35 $ 1.97 $ 1.52
Cash dividends $ 0.72 $ 0.66 $ 0.55 $ 0.44 $ 0.37
- ----------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Total Assets $484,394 $435,359 $379,904 $355,445 $302,050
Working Capital $235,079 $203,988 $189,255 $163,546 $126,648
Property, Plant and Equipment--Net $151,309 $139,095 $113,187 $101,570 $ 98,597
Long-Term Debt $ 30,685 $ 31,230 $ 31,840 $ 32,933 $ 34,586
Property Additions $ 37,528 $ 50,229 $ 31,745 $ 23,532 $ 18,921
Provision for Depreciation $ 24,732 $ 22,007 $ 20,440 $ 20,145 $ 19,486
Shareholders' Equity $368,000 $323,563 $277,148 $236,847 $192,010
Per Common Share(1) $ 12.68 $ 10.94 $ 9.29 $ 7.83 $ 6.34
Weighted Average
Common Shares Outstanding(1) 29,405 29,749 30,038 30,317 30,483
- ----------------------------------------------------------------------------------------------------------------------
STATISTICS
Price-Earnings Ratio at Year End 16.0 14.6 15.2 18.0 18.9
Current Ratio 4.2 3.9 4.1 3.2 3.1
Long-Term Debt as
a Percent of Shareholders' Equity 8.3% 9.7% 11.5% 13.9% 18.0%
Dividends Paid as a Percent
of Net Income 23.8% 25.7% 23.4% 22.3% 24.5%
Return on Average Equity 25.7% 25.3% 27.4% 27.9% 26.3%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Adjusted for 4-for-3 stock splits paid July 1994 and April 1993.
<PAGE> 7
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, 1997 and 1996, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended June 30, 1997. 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, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
June 30, 1997 in conformity with generally accepted accounting principles.
/S/ DELOITTE & TOUCHE LLP
Columbus, Ohio
August 26, 1997
<PAGE> 8
CONSOLIDATED STATEMENTS OF INCOME
Lancaster Colony Corporation and Subsidiaries
For the Years Ended June 30, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Years Ended June 30
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $922,813,000 $855,912,000 $795,126,000
COST OF SALES 632,051,000 591,960,000 547,184,000
- ---------------------------------------------------------------------------------------------------------------------------
GROSS MARGIN 290,762,000 263,952,000 247,942,000
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 146,403,000 138,206,000 131,424,000
- ---------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 144,359,000 125,746,000 116,518,000
OTHER INCOME (EXPENSE):
Interest expense (2,596,000) (2,875,000) (2,736,000)
Interest income and other--net 696,000 350,000 1,026,000
- ---------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 142,459,000 123,221,000 114,808,000
TAXES BASED ON INCOME 53,753,000 47,086,000 44,284,000
===========================================================================================================================
NET INCOME $ 88,706,000 $ 76,135,000 $ 70,524,000
===========================================================================================================================
NET INCOME PER COMMON SHARE $3.02 $2.56 $2.35
===========================================================================================================================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 29,405,000 29,749,000 30,038,000
===========================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 9
CONSOLIDATED BALANCE SHEETS
Lancaster Colony Corporation and Subsidiaries
As of June 30, 1997 and 1996
<TABLE>
<CAPTION>
June 30
ASSETS 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 32,109,000 $ 4,670,000
Receivables (less allowance for doubtful accounts,
1997-- $2,861,000; 1996--$2,131,000) 102,457,000 105,403,000
Inventories:
Raw materials and supplies 42,339,000 33,148,000
Finished goods and work in process 118,912,000 118,447,000
- ---------------------------------------------------------------------------------------------------------------------------
Total inventories 161,251,000 151,595,000
Prepaid expenses and other current assets 12,966,000 11,674,000
- ---------------------------------------------------------------------------------------------------------------------------
Total current assets 308,783,000 273,342,000
PROPERTY, PLANT AND EQUIPMENT:
Land, buildings and improvements 89,232,000 82,882,000
Machinery and equipment 248,069,000 234,013,000
- ---------------------------------------------------------------------------------------------------------------------------
Total cost 337,301,000 316,895,000
Less accumulated depreciation 185,992,000 177,800,000
- ---------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment--net 151,309,000 139,095,000
OTHER ASSETS:
Goodwill (net of accumulated amortization,
1997-- $5,438,000; 1996--$4,562,000) 19,810,000 20,715,000
Other Assets 4,492,000 2,207,000
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL $484,394,000 $435,359,000
===========================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
- ---------------------------------------------------------------------------------------------------------------------------
CURRENT LIABILITIES:
Current portion of long-term debt $ 545,000 $ 610,000
Accounts payable 33,203,000 34,303,000
Accrued liabilities 39,956,000 34,441,000
- ---------------------------------------------------------------------------------------------------------------------------
Total current liabilities 73,704,000 69,354,000
LONG-TERM DEBT--Less current portion 30,685,000 31,230,000
OTHER NONCURRENT LIABILITIES 7,895,000 7,714,000
DEFERRED INCOME TAXES 4,110,000 3,498,000
SHAREHOLDERS' EQUITY:
Preferred stock--authorized 2,650,000 shares;
Outstanding--none
Common stock--authorized 35,000,000 shares;
Shares outstanding, 1997--29,016,836; 1996--29,563,401 43,573,000 38,491,000
Retained earnings 404,783,000 337,153,000
Foreign currency translation adjustment 75,000 75,000
- ---------------------------------------------------------------------------------------------------------------------------
Total 448,431,000 375,719,000
Less:
Common stock in treasury, at cost 80,431,000 50,877,000
Amount due from ESOP 1,279,000
- ---------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 368,000,000 323,563,000
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL $484,394,000 $435,359,000
===========================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 10
CONSOLIDATED STATEMENTS OF CASH FLOWS
Lancaster Colony Corporation and Subsidiaries
For the Years Ended June 30, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Years Ended June 30
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 88,706,000 $ 76,135,000 $70,524,000
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 26,981,000 24,399,000 22,717,000
Provision for losses on accounts receivable 1,813,000 2,089,000 614,000
Deferred income taxes and other noncash charges (669,000) (190,000) (2,086,000)
Loss on sale of property 530,000 233,000 235,000
Changes in operating assets and liabilities:
Receivables 1,133,000 (18,478,000) (7,273,000)
Inventories (9,656,000) (8,982,000) (23,475,000)
Prepaid expenses and other current assets 208,000 334,000 (1,061,000)
Accounts payable and accrued liabilities 4,415,000 8,934,000 (13,470,000)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 113,461,000 84,474,000 46,725,000
- ---------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments on property additions (37,528,000) (50,229,000) (31,745,000)
Acquisitions net of cash acquired (5,054,000)
Proceeds from sale of property 52,000 1,784,000 1,002,000
Other--net (3,629,000) (638,000) (1,420,000)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (41,105,000) (49,083,000) (37,217,000)
- ---------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends (21,114,000) (19,591,000) (16,486,000)
Purchase of treasury stock (29,554,000) (21,457,000) (17,814,000)
Payments on long-term debt (610,000) (1,026,000) (1,368,000)
Reduction of ESOP debt 1,279,000 1,278,000 1,279,000
Common stock issued, including stock issued upon
exercise of stock options and related tax benefit 5,082,000 1,785,000 2,649,000
- ---------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (44,917,000) (39,011,000) (31,740,000)
- ---------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 51,000 48,000
- ---------------------------------------------------------------------------------------------------------------------------
Net change in cash and equivalents 27,439,000 (3,569,000) (22,184,000)
Cash and equivalents at beginning of year 4,670,000 8,239,000 30,423,000
- ---------------------------------------------------------------------------------------------------------------------------
Cash and equivalents at end of year $ 32,109,000 $ 4,670,000 $ 8,239,000
===========================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 11
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Lancaster Colony Corporation and Subsidiaries
For the Years Ended June 30, 1997, 1996 and 1995
<TABLE>
<CAPTION>
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, 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
- ---------------------------------------------------------------------------------------------------------------------------
Year Ended June 30, 1996 :
Net income 76,135,000
Cash dividends--common stock
($.66 per share) (19,591,000)
Purchase of treasury shares (601,955) 21,457,000
Shares issued upon exercise of stock
options including related tax benefits 63,629 1,405,000
Tax benefit of cash dividends paid
on ESOP unallocated shares 71,000
Shares issued in business acquisition 272,727 9,000,000
Reduction of ESOP debt (1,278,000)
Translation adjustment (426,000)
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE, JUNE 30, 1996 29,563,401 38,491,000 337,153,000 75,000 50,877,000 1,279,000
- ---------------------------------------------------------------------------------------------------------------------------
Year Ended June 30, 1997 :
Net income 88,706,000
Cash dividends--common stock
($.72 per share) (21,114,000)
Purchase of treasury shares (691,882) 29,554,000
Shares issued upon exercise of stock
options including related tax benefits 145,317 5,082,000
Tax benefit of cash dividends paid
on ESOP unallocated shares 38,000
Reduction of ESOP debt (1,279,000)
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE, JUNE 30, 1997 29,016,836 $43,573,000 $404,783,000 $75,000 $80,431,000
===========================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Lancaster Colony Corporation and Subsidiaries
1. SUMMARY OF SIGNIFICANT PRINCIPLES OF CONSOLIDATION
ACCOUNTING POLICIES
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 financial
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. Estimated useful
lives for buildings and improvements range
from ten to forty years while machinery and
equipment range from three to ten years. For
tax purposes, the Company generally computes
depreciation using accelerated methods.
GOODWILL
For financial reporting purposes goodwill is
being amortized over ten to forty years, with
the exception of $2,243,000 which relates to a
company acquired prior to November 1, 1970.
Such amount is not being amortized as, in the
opinion of management, there has been no
diminution in value. Management periodically
evaluates the future economic benefit of its
recorded goodwill and other long-term assets
and appropriately adjusts such amounts when
determined to have been impaired based on the
difference between the fair value of the asset
and its carrying amount.
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. In February 1997, the Financial
Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No.
128, "Earnings per Share" which when adopted,
will replace the current methodology for
calculating and presenting earnings per share
under the Accounting Principles Board ("APB")
Opinion No. 15, "Earnings per Share." Under
SFAS No. 128, companies with complex capital
structures will be required to present basic
earnings per share and diluted earnings per
share while companies with simple capital
structures will only be required to present
basic earnings per share. Basic earnings per
share excludes dilution and is computed by
dividing income available to common
stockholders by the weighted average number of
common shares outstanding for the period.
Diluted earnings per share is computed
similarly to the current computation of fully
diluted earnings per share required under APB
Opinion No. 15. The standard, which is
effective for financial statements for periods
ending after December 15, 1997, including
interim periods, requires restatement of all
prior-period earnings per share data. Earlier
application is not permitted. The presentation
required by SFAS No. 128 will not materially
differ from the current presentation of
earnings per share.
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
limited by the Company having a large diverse
customer base.
BUSINESS SEGMENTS
The business segments information for 1997,
1996 and 1995 included on page 11 of this
Annual Report is an integral part of these
financial statements. In June 1997, the
Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information."
This Statement establishes standards to be
<PAGE> 13
utilized by public business enterprises in
reporting information about operating segments
in annual financial statements and requires
reporting of selected information about
operating segments in interim financial
reports to shareholders. It also establishes
standards for related disclosures regarding
products and services, geographic areas and
major customers. This Statement supersedes
FASB Statement No. 14, "Financial Reporting
for Segments of a Business Enterprise," and
amends FASB Statement No. 94, "Consolidation
of All Majority-Owned Subsidiaries" and
Accounting Principles Board Opinion No. 28,
"Interim Financial Reporting."
The Statement will be effective for the
Company for fiscal 1999 and will require
comparative information for earlier years.
Interim financial information will not be
required during the initial year of
application, however comparative interim
financial information will be required for
interim periods in the second year of
application. Management has not yet completed
its analysis of this Statement as to its
impact on the Company's financial disclosures.
2. ACQUISITIONS During fiscal 1996, the Company acquired all
of the common stock of a specialty foods
marketer of upscale salad dressings via a
stock-for-stock transaction. This transaction
resulted in the issuance of approximately
273,000 shares of Lancaster Colony Corporation
common stock having a fair market value of
approximately $9,000,000 in exchange for cash
of $380,000 and other assets and liabilities
having a fair market value of $1,718,000 and
$825,000, respectively. This acquisition
was accounted for under the purchase method of
accounting and the non-cash aspects have been
excluded from the accompanying Consolidated
Statements of Cash Flows. The results of
operations of this entity 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 21% of total inventories at June
30, 1997 and 1996 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 $14,704,000
and $14,014,000 higher than reported at June
30, 1997 and 1996, respectively.
It is not practicable to segregate work in
process from finished goods inventories.
Management estimates, however, that work in
process inventories amount to less than 10% of
the combined total of finished goods and work
in process inventories at June 30, 1997 and
1996.
4. SHORT-TERM BORROWINGS As of June 30, 1997, 1996, and 1995, the
Company had unused lines of credit for
short-term borrowings from various banks of
$174,000,000, $199,000,000 and $154,000,000,
respectively. The lines of credit are granted
at the discretion of the lending banks and are
generally subject to periodic review. As of
June 30, 1997 and 1996, the Company had no
short-term borrowings under its line of credit
arrangements.
5. ACCRUED LIABILITIES Accrued liabilities at June 30, 1997 and
1996 are composed of:
<TABLE>
<CAPTION>
(Dollars in Thousands) 1997 1996
-----------------------------------------------------------------------------
<S> <C> <C>
Income and other taxes $ 2,496 $ 2,297
Accrued compensation and employee benefits 25,103 22,747
Accrued marketing and distribution 8,037 4,894
Other 4,320 4,503
-----------------------------------------------------------------------------
Total accrued liabilities $39,956 $34,441
=============================================================================
</TABLE>
<PAGE> 14
6. LONG-TERM DEBT Long-term debt (including current portion)
at June 30, 1997 and 1996 consists of:
<TABLE>
<CAPTION>
(Dollars in Thousands) 1997 1996
-----------------------------------------------------------------------
<S> <C> <C>
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 5,010 5,405
7%, due in installments to 2003 1,220 1,360
Other (5% to 15.6%, due in installments
to 1996) 75
-----------------------------------------------------------------------
Total 31,230 31,840
Less current portion 545 610
-----------------------------------------------------------------------
Long-term debt $30,685 $31,230
=======================================================================
</TABLE>
The net book value of property subject to lien
at June 30, 1997 was approximately $2,496,000.
No material debt was assumed for the purchase
of property additions in 1997, 1996 and 1995.
Cash payments for interest were $2,603,000,
$2,875,000 and $2,739,000 for 1997, 1996 and
1995, 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, 1997, the
Company exceeded this net worth requirement by
approximately $95,015,000.
<TABLE>
<CAPTION>
Long-term debt matures as follows: (Dollars in Thousands)
---------------------------------------------------------------------------
<S> <C>
Year ending June 30:
1998 $ 545
1999 650
2000 25,660
2001 675
2002 685
After 2002 3,015
---------------------------------------------------------------------------
Total $31,230
===========================================================================
</TABLE>
Based on the borrowing rates currently
available for long-term debt with similar
terms and average maturities, the estimated
fair value of total long-term debt is
approximately $32,179,000 and $32,785,000 at
June 30, 1997 and 1996, respectively.
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>
<CAPTION>
(Dollars in Thousands) 1997 1996 1995
---------------------------------------------------------------------------------
<S> <C> <C> <C>
Currently payable:
Federal $49,063 $40,476 $40,163
State and local 5,579 5,863 6,425
---------------------------------------------------------------------------------
Total current provision 54,642 46,339 46,588
Deferred Federal, state and local
provision (credit) (889) 747 (2,304)
---------------------------------------------------------------------------------
Total taxes based on income $53,753 $47,086 $44,284
=================================================================================
</TABLE>
Tax expense resulting from allocating certain
tax benefits directly to common stock and
retained earnings totaled $323,000, $427,000
and $193,000 for 1997, 1996 and 1995,
respectively. The Company's effective tax rate
varies from the statutory Federal income tax
rate as a result of the following factors:
<TABLE>
<CAPTION>
1997 1996 1995
--------------------------------------------------------------------
<S> <C> <C> <C>
Statutory rate 35.0% 35.0% 35.0%
State and local income taxes 2.5 3.0 3.5
Other 0.2 0.2 0.1
--------------------------------------------------------------------
Effective rate 37.7% 38.2% 38.6%
====================================================================
</TABLE>
<PAGE> 15
Deferred income taxes recorded in the
consolidated balance sheets at June 30, 1997
and 1996 consist of the following:
<TABLE>
<CAPTION>
(Dollars in Thousands) 1997 1996
--------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets (liabilities):
Inventories $4,797 $4,910
Employee medical and other benefits 5,010 4,525
Receivable valuation allowances 2,195 1,545
Other accrued liabilities 3,519 1,112
--------------------------------------------------------------------
Total deferred tax assets 15,521 12,092
--------------------------------------------------------------------
Total deferred tax liabilities - Property
and other (8,930) (6,390)
--------------------------------------------------------------------
Net deferred tax asset $6,591 $5,702
====================================================================
</TABLE>
Cash payments for income taxes were
$54,225,000, $46,547,000 and $51,529,000 for
1997, 1996 and 1995, 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.
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.
9. STOCK OPTIONS Under terms of an incentive stock option plan
approved by the shareholders in November 1995,
the Company has reserved 2,000,000 common
shares for issuance to qualified key
employees. All options granted under the plan
are exercisable at prices not less than fair
market value as of the date of grant. At June
30, 1997, 1,745,950 shares were available for
future grants under the plan. In general,
options granted under the plan vest
immediately and have a maximum term of 10
years.
In October 1995, the Financial Accounting
Standards Board issued Statement of Financial
Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS") No. 123
which in accordance with the Statement, the
Company adopted in fiscal 1997. In accordance
with SFAS No. 123, the Company has elected to
follow Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued
to Employees" and related interpretations, in
accounting for its stock based compensation
because, as discussed below, the alternative
fair value provided for under SFAS No. 123
requires use of option valuation models that
were not developed for use in valuing stock
options. Under APB Opinion No. 25, because the
exercise price of the Company's stock options
was at least equal to the market price of the
underlying stock on the date of grant, no
compensation expense was recognized.
The following summarizes for each of the three
years in the period ended June 30, 1997 the
activity relating to stock options granted
under the 1995 plan mentioned above as well as
those granted under a separate plan that
expired in May 1995:
<PAGE> 16
<TABLE>
<CAPTION>
Number Weighted Average
of Shares Exercise Price
-------------------------------------------------------------------------------
<S> <C> <C>
Outstanding-June 30, 1994 223,023 $18.93
Granted 216,600 $33.41
Exercised (130,026) $19.56
Forfeited (3,554) $27.84
-------------------------------------------------------------------------------
Outstanding-June 30, 1995 306,043 $28.87
Exercised (80,478) $20.82
Forfeited (2,150) $33.38
-------------------------------------------------------------------------------
Outstanding-June 30, 1996 223,415 $31.73
Granted 255,400 $46.17
Exercised (145,317) $32.92
Forfeited (2,100) $41.57
-------------------------------------------------------------------------------
Outstanding-June 30, 1997 331,398 $42.28
===============================================================================
Exercisable at end of period 236,120 $45.01
===============================================================================
</TABLE>
The weighted average fair value of options
granted during the fiscal year 1997 was $8.52.
Exercise prices for options outstanding
totaling 253,550 and 77,848 at June 30, 1997,
ranged from $46.13 to $50.74 and from $25.59
to $33.38, respectively. The weighted average
remaining contractual life of these options is
3.42 years.
The fair value of the options presented above
was estimated at the date of grant using the
Black-Scholes option pricing model with the
following assumptions for 1997: risk free
interest rate of 6.07%; dividend yield of
1.6%; volatility factors of the expected
market price of the Company's common stock of
21.83%; and a weighted average expected option
life of 2.67 years. Because the effect of
applying the fair value method to the
Company's stock options results in net income
and earnings per share that are not materially
different from amounts reported in the
consolidated statements of income, pro forma
information has not been provided.
10. PENSION AND OTHER DEFINED BENEFIT PENSION PLANS:
POSTRETIREMENT
BENEFITS 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.
Net pension cost relating to these plans for
each of the three years in the period ended
June 30, 1997 is summarized as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands) 1997 1996 1995
----------------------------------------------------------------------------
<S> <C> <C> <C>
Company sponsored plans-
Service cost - benefits earned during
the period $ 537 $ 472 $ 507
Interest cost on projected benefit
obligations 1,681 1,662 1,507
Actual return on pension plan assets (5,361) (2,895) (2,984)
Net amortization and deferrals 3,226 889 1,130
-----------------------------------------------------------------------------
Net pension cost for Company plans 83 128 160
Multiemployer plans 886 806 594
-----------------------------------------------------------------------------
Net pension cost $ 969 $ 934 $ 754
=============================================================================
</TABLE>
The following table summarizes the funded
status of the Company's plans at June 30, 1997
and 1996:
<TABLE>
<CAPTION>
(Dollars in Thousands) 1997 1996
-------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit
obligation:
Vested benefits $24,230 $22,743
===================================================================
Accumulated benefit obligation $24,361 $22,846
===================================================================
Projected benefit obligation $24,361 $22,846
Plan assets at fair value 30,262 25,803
-------------------------------------------------------------------
Excess of assets over projected
benefit obligation 5,901 2,957
Unrecognized net gain (6,548) (2,827)
Unrecognized prior service costs 2,318 1,045
Remaining unrecognized net transition
obligation 240 271
-------------------------------------------------------------------
Net recorded pension asset $ 1,911 $ 1,446
===================================================================
</TABLE>
<PAGE> 17
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 $4,500,000, $3,476,000
and $3,325,000 as of June 30, 1997, 1996 and
1995, respectively. The weighted average
discount rates used in determining the
projected benefit obligation was 7.50% for
1997 and 1996 and 7.25% for 1995. 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, 1996, the amount due from the
ESOP was recorded as a reduction in
shareholders' equity and represented the
Company's prepayment of future contributions
to the ESOP. This amount was expensed in
fiscal 1997. 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 1997, 1996 and 1995 totaled
$1,169,000, $1,077,000, and $1,027,000, which
is net of dividends of $110,000, $201,000, and
$252,000 on the unallocated shares,
respectively.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS:
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,
1997, 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.
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. Benefits
are funded as incurred. Relevant information
with respect to these postretirement benefits
as of June 30, 1997 and 1996 can be summarized
as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands) 1997 1996
------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retired participants $1,768 $1,920
Fully eligible active plan participants 214 243
Other active plan participants 892 895
------------------------------------------------------------------------
Total 2,874 3,058
Unrecognized net gain (loss) from past
experience and changes in assumptions 348 (62)
------------------------------------------------------------------------
Accrued postretirement benefit cost $3,222 $2,996
========================================================================
Net postretirement benefit cost:
Service cost $ 99 $ 111
Interest cost 227 226
------------------------------------------------------------------------
Total $ 326 $ 337
========================================================================
Estimated effect of 1% increase in assumed
medical cost trend rates:
Increase in accumulated postretirement
benefit obligation $ 230 $ 245
========================================================================
Increase in net periodic postretirement
benefit cost $ 47 $ 50
========================================================================
Assumed weighted average discount rate 7.50% 7.50%
========================================================================
</TABLE>
For 1997, annual increases in medical costs
are initially assumed to total approximately
8% per year and gradually decline to 5% by
approximately the year 2003. Annual increases
in medical costs for 1996 were assumed to
total approximately 9% per year and gradually
decline to 5% by approximately the year 2003.
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
<PAGE> 18
contributions required by its participation in
the multiemployer plans totaled $1,602,000,
$1,463,000 and $1,174,000 in 1997, 1996 and
1995, 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 2003. 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):
1998-$4,627; 1999-$2,110; 2000-$707;
2001-$417; 2002-$286; thereafter-$136.
Total rent expense, including short-term
cancelable leases, during 1997, 1996 and 1995
is summarized as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1997 1996 1995
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating leases:
Minimum rentals $4,545 $4,393 $4,225
Contingent rentals 558 579 457
Short-term cancelable leases 2,808 2,330 2,288
-----------------------------------------------------------------------------------
Total $7,911 $7,302 $6,970
===================================================================================
</TABLE>
12. CONTINGENCIES AND At June 30, 1997, the Company is a party to
ENVIRONMENTAL MATTERS 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.
SELECTED QUARTERLY FINANCIAL DATA
Lancaster Colony Corporation and Subsidiaries
For the Years Ended June 30, 1997 and 1996
<TABLE>
<CAPTION>
(Thousands Except Per Net Gross Net Earnings Stock Prices Dividends Paid
Share Figures) Sales Margin Income Per Share High Low Per Share
- ----------------------------------------------------------------------------------------------------------------------------
1997
<S> <C> <C> <C> <C> <C> <C> <C>
First quarter $218,918 $66,345 $18,259 $ .62 $38.750 $35.250 $.17
Second quarter 259,023 82,290 25,405 .86 46.000 36.125 .18
Third quarter 218,141 69,157 21,022 .71 48.375 43.250 .18
Fourth quarter 226,731 72,970 24,020 .82 48.875 39.250 .19
- ----------------------------------------------------------------------------------------------------------------------------
Year $922,813 $290,762 $88,706 $3.02 $48.875 $35.250 $.72
============================================================================================================================
1996
First quarter $200,902 $59,319 $15,408 $ .52 $37.750 $33.500 $.15
Second quarter 239,055 75,621 22,369 .75 38.000 31.000 .17
Third quarter 200,459 60,308 17,767 .60 39.250 36.250 .17
Fourth quarter 215,496 68,704 20,591 .69 38.500 33.000 .17
- ----------------------------------------------------------------------------------------------------------------------------
Year $855,912 $263,952 $76,135 $2.56 $39.250 $31.000 $.66
============================================================================================================================
</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
10, 1997 was approximately 11,000. The highest and lowest prices for the
Company's common shares from July 1, 1997 to September 10, 1997 was $53.50 and
$48.00.
<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 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 Statements No.
33-39102 and 333-01275 of Lancaster Colony Corporation on Form S-8 of our
reports dated August 26, 1997, appearing in and incorporated by reference in
this Annual Report on Form 10-K of Lancaster Colony Corporation for the year
ended June 30, 1997.
/S/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Columbus, Ohio
September 23, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S CONSOLIDATED BALANCE SHEET AND STATEMENT OF INCOME FOR THE YEAR
ENDED JUNE 30, 1997 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-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 32,109
<SECURITIES> 0
<RECEIVABLES> 105,318
<ALLOWANCES> 2,861
<INVENTORY> 161,251
<CURRENT-ASSETS> 308,783
<PP&E> 337,301
<DEPRECIATION> 185,992
<TOTAL-ASSETS> 484,394
<CURRENT-LIABILITIES> 73,704
<BONDS> 30,685
0
0
<COMMON> 43,573
<OTHER-SE> 324,427
<TOTAL-LIABILITY-AND-EQUITY> 484,394
<SALES> 922,813
<TOTAL-REVENUES> 922,813
<CGS> 632,051
<TOTAL-COSTS> 632,051
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,596
<INCOME-PRETAX> 142,459
<INCOME-TAX> 53,753
<INCOME-CONTINUING> 88,706
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 88,706
<EPS-PRIMARY> 3.02
<EPS-DILUTED> 0
</TABLE>
