<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 March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number 0-4065-1
LANCASTER COLONY CORPORATION
(Exact name of registrant as specified in its charter)
OHIO 13-1955943
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
37 WEST BROAD STREET, COLUMBUS, OHIO 43215
(Address of principal executive offices)
(Zip Code)
614-224-7141
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
As of March 31, 1998, there were approximately 43,194,000 shares of
common stock, no par value per share, outstanding.
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LANCASTER COLONY CORPORATION AND SUBSIDIARIES
INDEX
Page No.
--------
Part I. Financial Information
Condensed Consolidated Balance Sheets -
March 31, 1998 and June 30, 1997 3
Condensed Consolidated Statements of Income -
Three Months and Nine Months
Ended March 31, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended March 31, 1998 and 1997 5
Notes to Condensed Consolidated 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 9
Signatures 9
Exhibit 27 - Financial Data Schedule 10
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<PAGE> 3
LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31 June 30
1998 1997
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and equivalents $ 24,951,000 $ 32,109,000
Receivables - net of allowance for doubtful accounts 121,906,000 102,457,000
Inventories:
Raw materials and supplies 47,381,000 42,339,000
Finished goods and work in process 106,326,000 118,912,000
------------ ------------
Total inventories 153,707,000 161,251,000
Prepaid expenses and other current assets 16,611,000 12,966,000
------------ ------------
Total current assets 317,175,000 308,783,000
Property, Plant and Equipment - At cost 368,304,000 337,301,000
Less Accumulated Depreciation 202,061,000 185,992,000
------------ ------------
Property, plant and equipment - net 166,243,000 151,309,000
Goodwill - net of accumulated amortization 37,191,000 19,810,000
Other Assets 9,461,000 4,492,000
------------ ------------
Total Assets $530,070,000 $484,394,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 550,000 $ 545,000
Accounts payable 44,726,000 33,203,000
Accrued liabilities 32,280,000 39,956,000
------------ ------------
Total current liabilities 77,556,000 73,704,000
Long-Term Debt - Less current portion 30,275,000 30,685,000
Other Noncurrent Liabilities 7,768,000 7,895,000
Deferred Income Taxes 3,777,000 4,110,000
Shareholders' Equity:
Preferred stock - authorized 3,050,000 shares
issuable in series; Class A - $1.00 par value,
authorized 750,000 shares; Class B and C -
no par value, authorized 1,150,000 shares each;
outstanding - none
Common stock - authorized 75,000,000 shares;
issued March 31, 1998 - no par value -
47,072,000 shares; June 30, 1997 -
no par value - 31,247,000 shares 49,824,000 43,573,000
Retained earnings 460,089,000 404,783,000
Foreign currency translation adjustment 89,000 75,000
------------ ------------
Total 510,002,000 448,431,000
Less:
Common stock in treasury, at cost
March 31, 1998 - 3,878,000 shares;
June 30, 1997 - 2,230,000 shares 99,308,000 80,431,000
------------ ------------
Total shareholders' equity 410,694,000 368,000,000
------------ ------------
Total Liabilities and Shareholders' Equity $530,070,000 $484,394,000
============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements
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LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31 March 31
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Sales $237,628,000 $218,141,000 $775,556,000 $696,082,000
Cost of Sales 161,378,000 148,984,000 529,106,000 478,290,000
------------ ------------ ------------ ------------
Gross Margin 76,250,000 69,157,000 246,450,000 217,792,000
Selling, General and
Administrative Expenses 39,964,000 34,499,000 127,582,000 111,403,000
------------ ------------ ------------ ------------
Operating Income 36,286,000 34,658,000 118,868,000 106,389,000
Other Income (Expense):
Interest expense (637,000) (633,000) (1,995,000) (1,941,000)
Interest income and
other - net 868,000 (11,000) 663,000 30,000
------------ ------------ ------------ ------------
Income Before Income Taxes 36,517,000 34,014,000 117,536,000 104,478,000
Taxes Based on Income 13,721,000 12,992,000 44,912,000 39,791,000
------------ ------------ ------------ ------------
Net Income $ 22,796,000 $ 21,022,000 $ 72,624,000 $ 64,687,000
============ ============ ============ ============
Net Income Per Common
Share:
Basic $ .53 $ .48 $1.68 $1.46
Diluted $ .53 $ .48 $1.67 $1.46
Cash Dividends Per Common
Share $ .140 $ .120 $ .400 $ .353
Weighted Average Common
Shares Outstanding:
Basic 43,183,000 44,111,000 43,351,000 44,180,000
Diluted 43,297,000 44,156,000 43,445,000 44,231,000
</TABLE>
See Notes to Condensed Consolidated Financial Statements
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LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
March 31
1998 1997
----------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $72,624,000 $64,687,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 24,351,000 20,427,000
Deferred income taxes and other noncash charges (2,360,000) (768,000)
Loss (gain) on sale of property (747,000) 232,000
Changes in operating assets and liabilities:
Receivables (17,684,000) (2,416,000)
Inventories 8,855,000 (8,032,000)
Prepaid expenses and other current assets (1,673,000) (2,679,000)
Accounts payable 10,179,000 5,190,000
Accrued liabilities (8,556,000) 1,240,000
----------- -----------
Net cash provided by operating activities 84,989,000 77,881,000
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for acquisition, net of cash acquired (19,749,000)
Payments on property additions (32,919,000) (28,552,000)
Proceeds from sale of property 2,016,000 38,000
Other - net (7,637,000) (3,091,000)
----------- -----------
Net cash used in investing activities (58,289,000) (31,605,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock (18,877,000) (16,794,000)
Payment of dividends (17,318,000) (15,599,000)
Payments on long-term debt, including
payment of acquisition debt (3,928,000) (610,000)
Common stock issued upon exercise of stock
options and related tax benefits 6,251,000 5,048,000
----------- -----------
Net cash used in financing activities (33,872,000) (27,955,000)
----------- -----------
Effect of exchange rate changes on cash 14,000 28,000
----------- -----------
Net change in cash and equivalents (7,158,000) 18,349,000
Cash and equivalents at beginning of year 32,109,000 4,670,000
----------- -----------
Cash and equivalents at end of period $24,951,000 $23,019,000
=========== ===========
SUPPLEMENTAL DISCLOSURE OF OPERATING CASH FLOWS:
Cash paid during the period for:
Interest $ 2,543,000 $ 2,537,000
=========== ===========
Income taxes $52,084,000 $44,376,000
=========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
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LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED MARCH 31, 1998 AND 1997
(1) The interim condensed consolidated financial statements are unaudited
but, in the opinion of management, reflect all adjustments necessary
for a fair presentation of the results of operations and financial
position for such periods. All such adjustments reflected in the
interim condensed consolidated 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) On January 27, 1998, a three-for-two stock split was effected whereby
one additional common share was issued for each two shares outstanding
to shareholders of record on January 6, 1998. Accordingly, all per
share data and the weighted average common shares outstanding for the
period ended March 31, 1997 in the accompanying condensed consolidated
financial statements have been retroactively adjusted for this split.
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<PAGE> 7
LANCASTER COLONY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FOR THE PERIODS ENDED MARCH 31, 1998 AND 1997
RESULTS OF OPERATIONS
Consolidated net sales of $775,556,000 and $237,628,000 for the
respective nine month and three month periods ended March 31, 1998 increased 11%
and 9% over the corresponding 1997 totals of $696,082,000 and $218,141,000.
Sales of the Glassware and Candles segment increased during both periods
primarily as a result of the growth in the sales of candles and related
products. The sales of the Specialty Foods segment also benefited during these
periods from the July 1997 acquisition of the Chatham Village crouton business,
greater foodservice opportunities and the success of certain frozen product
lines, particularly Texas Garlic Toast. Automotive sales were up modestly for
the nine months and slightly declined during the most recent quarter. Improved
demand from original equipment manufacturers for floormats and aluminum truck
accessories was offset by weaker aftermarket demand as influenced by competitive
conditions affecting the bedliner industry.
Increased gross margins within the Specialty Foods segment contributed to
the higher consolidated gross margin percentages of 31.8% and 32.1% reported for
the respective nine month and three month periods ended March 31, 1998 compared
to 31.3% and 31.7% achieved in the corresponding periods ended March 31, 1997.
The Specialty Foods segment benefited from such factors as production
efficiencies, improvement in frozen food margins and lower raw material costs.
On the basis of current market conditions, however, these material costs are
expected to compare less favorably to fiscal 1997 costs over the remainder of
fiscal 1998.
Within the Glassware and Candles segment, fiscal 1998 gross margin
percentages declined. Among the factors contributing to the nine month decline
was unabsorbed overhead associated with a major rebuild of a glass melting tank
and generally lower glassware production levels. Increased raw material costs
and a less favorable sales mix also contributed to a decline in the margins
associated with the sales of candles. Automotive segment margins were adversely
affected by the competitive conditions affecting aftermarket bedliner sales.
Consolidated selling, general and administrative expenses totaled
$127,582,000 and $39,964,000 for the respective nine and three month periods
ended March 31, 1998 which reflected an increase of 15% and 16% over the
corresponding 1997 totals of $111,403,000 and $34,499,000. This growth was
primarily attributable to increased consolidated sales volumes and increased
promotional activities within the Specialty Foods Segment and includes certain
costs associated with the acquisition of new customers or markets.
The increase in interest and other income for the nine and three months
ended March 31, 1998 compared to the corresponding periods of fiscal 1997 is
attributable to gains on the sales of property, plant and equipment recognized
during the third quarter of fiscal 1998.
Overall, consolidated operating income increased to $118,868,000 and
$36,286,000, a 12% and 5% increase over the $106,389,000 and $34,658,000
realized for the respective nine and three month periods ended March 31, 1997.
Consolidated net income also increased to $72,624,000 and $22,796,000 for the
nine and three month periods ending March 31, 1998, resulting in a 12% and 8%
increase from the prior year's corresponding nine and three month period totals
of $64,687,000 and $21,022,000.
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<PAGE> 8
FINANCIAL CONDITION
Net working capital at March 31, 1998 totaled $239,619,000 compared to
$235,079,000 as of the preceding June 30. The Company's working capital ratio
decreased slightly from 4.2:1.0 at June 30 to 4.1:1.0 at March 31. Consolidated
accounts receivable increased $19,449,000 or 19%, as influenced by the relative
strength of shipments in the last month of the most recent period.
With respect to cash flows, net cash provided by operating activities for
the nine months ended March 31, 1998 totaled $84,989,000 compared to $77,881,000
for the corresponding periods of 1997. The increase in net income contributed to
this increase.
Notable investing activities for the nine months ended March 31, 1998
included $32,919,000 paid for property additions and $19,749,000 paid to acquire
the Chatham Village crouton business in July. These amounts were financed
through the use of internally generated funds.
Significant financing activities of the Company during the first nine
months of fiscal 1998 included $18,877,000 paid to purchase treasury stock and
$17,318,000 paid in dividends. The latter amount compared to $15,599,000 paid
during the comparable period of 1997. The increase in dividends paid reflects an
increase in the stated dividend rate from $.353 paid through March, 1997 to $.40
paid through March, 1998 as adjusted for the 3 for 2 stock split which occurred
on January 27, 1998. Management anticipates that cash provided from operations
and from the currently available discretionary bank credit lines will be
adequate to meet the Company's foreseeable cash requirements over the remainder
of fiscal 1998.
The Company is currently in the process of modifying or replacing certain
information systems in order to address potential processing deficiencies
regarding the year 2000. In accordance with current accounting guidance, all
modification costs for the year 2000 will be charged to expense as incurred
while replacement costs will be capitalized and amortized over the asset's
useful life.
It is not presently believed that these changes to information systems
will have an adverse impact on operations or that the expenditures related
thereto will be material to the Company's financial position or results of
operation in any given year. However, due to the nature of this issue, it is
possible that a failure by the Company, its customers or its suppliers to make a
complete and timely assessment of the necessary requirements could have a
material adverse affect on the Company's business, results of operations and/or
financial position.
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<PAGE> 9
PART II. OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule
(b) Reports of Form 8-K - There were no reports filed on Form 8-K for
the three months ended March 31, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registration has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LANCASTER COLONY CORPORATION
Date: May 8, 1998 BY: /s/ John B. Gerlach, Jr.
-------------- ------------------------------
JOHN B. GERLACH, JR.
Chairman, Chief Executive
Officer and President
Date: May 8, 1998 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 CONDENSED CONSOLIDATED BALANCE SHEET AND STATEMENT OF INCOME FOR
THE NINE MONTHS ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 24,951
<SECURITIES> 0
<RECEIVABLES> 125,602
<ALLOWANCES> 3,696
<INVENTORY> 153,707
<CURRENT-ASSETS> 317,175
<PP&E> 368,304
<DEPRECIATION> 202,061
<TOTAL-ASSETS> 530,070
<CURRENT-LIABILITIES> 77,556
<BONDS> 30,275
0
0
<COMMON> 49,824
<OTHER-SE> 360,870
<TOTAL-LIABILITY-AND-EQUITY> 530,070
<SALES> 775,556
<TOTAL-REVENUES> 775,556
<CGS> 529,106
<TOTAL-COSTS> 529,106
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,995
<INCOME-PRETAX> 117,536
<INCOME-TAX> 44,912
<INCOME-CONTINUING> 72,624
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 72,624
<EPS-PRIMARY> 1.68
<EPS-DILUTED> 1.67
</TABLE>
