<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-4065-1
LANCASTER COLONY CORPORATION
(Exact name of registrant as specified in its charter)
OHIO 13-1955943
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
37 WEST BROAD STREET, COLUMBUS, OHIO 43215
(Address of principal executive offices)
(Zip Code)
614-224-7141
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
As of September 30, 1997, there were approximately 28,996,000 shares of common
stock, no par value per share, outstanding.
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LANCASTER COLONY CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
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<S> <C>
Part I. Financial Information
Consolidated Condensed Balance Sheets -
September 30, 1997 and June 30, 1997 3
Consolidated Condensed Statements of Income -
Three Months Ended September 30, 1997 and 1996 4
Consolidated Condensed Statements of Cash Flows -
Three Months Ended September 30, 1997 and 1996 5
Notes to Consolidated Condensed Financial Statements 6
Management's Discussion and Analysis of the Results
of Operations and Financial Condition 7-8
Part II. Other Information
Item 6 - Exhibits and Reports on Form 8-K 8
Signatures 8
Exhibit 27 - Financial Data Schedule 9
</TABLE>
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LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30 June 30
1997 1997
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(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and equivalents $ 4,071,000 $ 32,109,000
Receivables - net of allowance for
doubtful accounts 130,070,000 102,457,000
Inventories:
Raw materials and supplies 46,677,000 42,339,000
Finished goods and work in process 127,584,000 118,912,000
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Total inventories 174,261,000 161,251,000
Prepaid expenses and other current assets 14,176,000 12,966,000
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Total current assets 322,578,000 308,783,000
Property, Plant and Equipment - At cost 350,995,000 337,301,000
Less Accumulated Depreciation 192,005,000 185,992,000
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Property, plant and equipment - net 158,990,000 151,309,000
Goodwill - net of accumulated amortization 38,100,000 19,810,000
Other Assets 5,888,000 4,492,000
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Total Assets $525,556,000 $484,394,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 545,000 $ 545,000
Accounts payable 50,892,000 33,203,000
Accrued liabilities 51,138,000 39,956,000
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Total current liabilities 102,575,000 73,704,000
Long-Term Debt - Less current portion 30,485,000 30,685,000
Other Noncurrent Liabilities 7,853,000 7,895,000
Deferred Income Taxes 2,680,000 4,110,000
Shareholders' Equity:
Preferred stock - authorized 2,650,000 shares issuable in series; Class
A - $1.00 par value, authorized 350,000 shares; Class B and C - no par
value, authorized 1,150,000 shares each; outstanding - none
Common stock - authorized 35,000,000 shares; issued September 30, 1997
- no par value - 31,272,000 shares; June 30, 1997 -
no par value - 31,247,000 shares 44,548,000 43,573,000
Retained earnings 420,133,000 404,783,000
Foreign currency translation adjustment 70,000 75,000
------------ ------------
Total 464,751,000 448,431,000
Less:
Common stock in treasury, at cost
September 30, 1997 - 2,276,000 shares;
June 30, 1997 - 2,230,000 shares 82,788,000 80,431,000
------------ ------------
Total shareholders' equity 381,963,000 368,000,000
------------ ------------
Total Liabilities and Shareholders' Equity $525,556,000 $484,394,000
============ ============
</TABLE>
See Notes to Consolidated Condensed Financial Statements
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LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30
1997 1996
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<S> <C> <C>
Net Sales $237,174,000 $218,918,000
Cost of Sales 162,020,000 152,573,000
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Gross Margin 75,154,000 66,345,000
Selling, General and
Administrative Expenses 40,218,000 36,188,000
------------ ------------
Operating Income 34,936,000 30,157,000
Other Income (Expense):
Interest expense (657,000) (635,000)
Interest income and other - net (147,000) 41,000
------------ ------------
Income Before Income Taxes 34,132,000 29,563,000
Taxes Based on Income 13,271,000 11,304,000
------------ ------------
Net Income $ 20,861,000 $ 18,259,000
============ ============
Net Income Per Common Share $ .72 $ .62
===== =====
Cash Dividends Per Common Share $ .19 $ .17
===== =====
Weighted Average Common
Shares Outstanding 29,065,000 29,528,000
========== ==========
</TABLE>
See Notes to Consolidated Condensed Financial Statements
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LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 20,861,000 $ 18,259,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 7,688,000 6,916,000
Deferred income taxes and other noncash charges (1,472,000) (384,000)
Loss on sale of property 5,000 373,000
Changes in operating assets and liabilities:
Receivables (25,848,000) (20,633,000)
Inventories (11,699,000) (21,417,000)
Prepaid expenses and other current assets (1,138,000) (2,324,000)
Accounts payable 16,345,000 21,953,000
Accrued liabilities 10,302,000 11,830,000
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Net cash provided by operating activities 15,044,000 14,573,000
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CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for acquisition, net of
cash acquired (19,749,000)
Payments on property additions (10,809,000) (8,873,000)
Proceeds from sale of property 149,000 7,000
Other - net (2,052,000) (491,000)
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Net cash used in investing activities (32,461,000) (9,357,000)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock (2,357,000) (5,087,000)
Payment of dividends (5,511,000) (5,008,000)
Payments on long-term debt, including
payment of acquisition debt (3,723,000) (275,000)
Common stock issued upon exercise of stock
options including related tax benefits 975,000 514,000
------------ ------------
Net cash used in financing activities (10,616,000) (9,856,000)
------------ ------------
Effect of exchange rate changes on cash (5,000)
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Net change in cash and equivalents (28,038,000) (4,640,000)
Cash and equivalents at beginning of year 32,109,000 4,670,000
------------ ------------
Cash and equivalents at end of period $ 4,071,000 $ 30,000
============ ============
SUPPLEMENTAL DISCLOSURE OF OPERATING CASH FLOWS:
Cash paid during the period for:
Interest $ 1,203,000 $ 1,176,000
============ ============
Income taxes $ 744,000 $ 531,000
============ ============
</TABLE>
See Notes to Consolidated Condensed Financial Statements
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LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED SEPTEMBER 30, 1997 AND 1996
(1) The interim consolidated condensed financial statements are unaudited
but, in the opinion of management, reflect all adjustments necessary
for a fair presentation of the results of operations and financial
position for such periods. All such adjustments reflected in the
interim consolidated condensed financial statements are considered to
be of a normal recurring nature. The results of operations for any
interim period are not necessarily indicative of results for the full
year. Accordingly, these financial statements should be read in
conjunction with the financial statements and notes thereto contained
in the Company's annual report on Form 10-K for the year ended June
30, 1997.
(2) Net income per common share is computed based on the weighted average
number of shares of common stock and common stock equivalents (stock
options) outstanding during each period.
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 as
prescribed by 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 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.
(3) During the first quarter ended September 30, 1997, the Company
acquired for cash, the Chatham Village salad crouton business. Such
transaction was accounted for under the purchase method of accounting.
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.
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LANCASTER COLONY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FOR THE PERIODS ENDED SEPTEMBER 30, 1997 AND 1996
RESULTS OF OPERATIONS
For the three months ended September 30, 1997, consolidated net sales totaled
$237,174,000, an 8% increase above the $218,918,000 reported for the comparable
period of 1996. The majority of this increase was provided by the Company's
Specialty Foods segment. Contributing to this segment's increase were increased
foodservice sales, growth in the sales of refrigerated and frozen retail lines,
and the July acquisition of the Chatham Village crouton business. The Glassware
and Candles segment also continued its growth as led by the sales of candles and
related products. Weaker aftermarket demand in 1997 resulted in Automotive
segment sales being relatively flat compared to the year-ago results.
The Company's consolidated gross margin percentage during the three months
ending September 30, 1997 was 31.7% compared to 30.3% in the preceding year's
comparable quarter. This improvement was attributable to higher margins achieved
in the Specialty Foods segment. Generally lower material costs and a more
favorable sales mix were largely responsible for this improvement. Somewhat
offsetting these gains were lower margins in the Glassware and Candles segment
resulting from higher wax costs, production inefficiencies at the glass plants
and a less favorable sales mix. Automotive margins were also adversely affected,
particularly by competitive pressures present in the aftermarket for light truck
bed liners.
Total selling, general and administrative costs for the quarter ended September
30, 1997 were $40,218,000 which is an 11% increase above the prior year's
comparable total of $36,188,000. As a percentage of net sales, these costs
totaled 17.0% in 1997 compared to 16.5% in 1996. This increase reflects a higher
proportion of consolidated 1997 sales being attributable to the Specialty Foods
segment. The Specialty Foods segment also incurred greater than normal selling
costs during this period which were needed to support selected retail sales
efforts.
As affected by the foregoing factors, consolidated income before income taxes
totaled $34,132,000 for the three months ended September 30, 1997 and increased
15% over the comparable 1996 total of $29,563,000. After reflecting the effects
of a slightly higher income tax rate, the Company's net income also increased by
14% to total $20,861,000 compared to $18,259,000 in 1996. With the average
shares outstanding being reduced by the Company's repurchase of
shares, net income per share increased 16% from $.62 in 1996 to $.72 in
1997.
FINANCIAL CONDITION
For the three months ended September 30, 1997, net cash provided by operating
activities totaled $15,044,000 compared to $14,573,000 reported for the three
months ended September 30, 1996. Seasonal working capital requirements and the
July acquisition of Chatham Village contributed to the $28,038,000 reduction in
cash since June 30, 1997. These factors also affected the Company's working
capital ratio which decreased from 4.2:1.0 at June 30 to 3.1:1.0 at September
30.
Significant investing activities for the quarter ended September 30, 1997
included $19,749,000 expended to acquire the Chatham Village crouton business
and $10,809,000 for payments on property additions. These amounts were financed
through the use of internally generated funds.
Among the Company's significant financing activities for the three months ended
September 30, 1997, was the payment of $5,511,000 in dividends which compared
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to $5,008,000 paid during the comparable period of 1996. The increase is due to
the dividend rate per common share increasing from $.17 per share to $.19 per
share between these two periods. Another financing activity involved the payment
of $3,723,000 of third party debt, principally consisting of the assumed debt of
Chatham Village which was prepaid. Management anticipates that cash provided
from operations and from the currently available discretionary bank credit lines
will be adequate to meet the Company's foreseeable cash requirements over the
remainder of fiscal 1998.
PART II. OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K - There were no reports filed on Form 8-K
for the three months ended September 30, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LANCASTER COLONY CORPORATION
Date: November 7, 1997 BY:/S/John B. Gerlach, Jr.
----------------------------- -----------------------
JOHN B. GERLACH, JR.
Chairman, Chief Executive
Officer and President
Date: November 7, 1997 BY:/S/John L. Boylan
----------------------------- -----------------------
JOHN L. BOYLAN
Treasurer, Vice President,
Assistant Secretary and
Chief Financial Officer
(Principal Financial
and Accounting Officer)
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S CONSOLIDATED CONDENSED BALANCE SHEET AND STATEMENT OF INCOME FOR
THE QUARTER ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> SEP-30-1997
<CASH> 4,071
<SECURITIES> 0
<RECEIVABLES> 133,585
<ALLOWANCES> 3,515
<INVENTORY> 174,261
<CURRENT-ASSETS> 322,578
<PP&E> 350,995
<DEPRECIATION> 192,005
<TOTAL-ASSETS> 525,556
<CURRENT-LIABILITIES> 102,575
<BONDS> 30,485
0
0
<COMMON> 44,548
<OTHER-SE> 337,415
<TOTAL-LIABILITY-AND-EQUITY> 525,556
<SALES> 237,174
<TOTAL-REVENUES> 237,174
<CGS> 162,020
<TOTAL-COSTS> 162,020
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 657
<INCOME-PRETAX> 34,132
<INCOME-TAX> 13,271
<INCOME-CONTINUING> 20,861
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,861
<EPS-PRIMARY> .72
<EPS-DILUTED> 0
</TABLE>
