<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, 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 September 30, 1998, there were approximately 42,330,000 shares of common
stock, no par value per share, outstanding.
1 of 9
<PAGE> 2
LANCASTER COLONY CORPORATION AND SUBSIDIARIES
INDEX
Page No.
--------
Part I. Financial Information
Condensed Consolidated Balance Sheets -
September 30, 1998 and June 30, 1998 3
Condensed Consolidated Statements of Income -
Three Months Ended September 30, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended September 30, 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 8
Signatures 8
Exhibit 27 - Financial Data Schedule 9
2 of 9
<PAGE> 3
LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30 June 30
1998 1998
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and equivalents $ 3,944,000 $ 23,224,000
Receivables - net of allowance for
doubtful accounts 130,840,000 99,870,000
Inventories:
Raw materials and supplies 49,072,000 44,915,000
Finished goods and work in process 141,882,000 130,282,000
------------ ------------
Total inventories 190,954,000 175,197,000
Prepaid expenses and other current assets 13,044,000 13,257,000
------------ ------------
Total current assets 338,782,000 311,548,000
Property, Plant and Equipment - At cost 382,587,000 374,033,000
Less Accumulated Depreciation 209,328,000 203,267,000
------------ ------------
Property, plant and equipment - net 173,259,000 170,766,000
Goodwill - net of accumulated amortization 36,675,000 37,045,000
Other Assets 10,793,000 10,008,000
------------ ------------
Total Assets $559,509,000 $529,367,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term bank loans $ 21,000,000
Current portion of long-term debt 510,000 $ 510,000
Accounts payable 45,500,000 41,804,000
Accrued liabilities 41,518,000 34,203,000
------------ ------------
Total current liabilities 108,528,000 76,517,000
Long-Term Debt - Less current portion 28,795,000 29,095,000
Other Noncurrent Liabilities 7,339,000 7,325,000
Deferred Income Taxes 3,797,000 5,867,000
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 September 30, 1998
- no par value - 47,086,616 shares; June 30, 1998 -
no par value - 47,086,091 shares 50,408,000 50,392,000
Retained earnings 491,968,000 477,587,000
Accumulated other comprehensive income 125,000 98,000
------------ ------------
Total 542,501,000 528,077,000
Less:
Common stock in treasury, at cost
September 30, 1998 - 4,757,103 shares;
June 30, 1998 - 4,332,603 shares 131,451,000 117,514,000
------------ ------------
Total shareholders' equity 411,050,000 410,563,000
------------ ------------
Total Liabilities and Shareholders' Equity $559,509,000 $529,367,000
============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements
3 of 9
<PAGE> 4
LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30
1998 1997
------------ ------------
<S> <C> <C>
Net Sales $244,080,000 $237,174,000
Cost of Sales 170,813,000 162,020,000
------------ ------------
Gross Margin 73,267,000 75,154,000
Selling, General and
Administrative Expenses 39,384,000 40,218,000
------------ ------------
Operating Income 33,883,000 34,936,000
Other Income (Expense):
Interest expense (649,000) (657,000)
Interest income and other - net 39,000 (147,000)
------------ ------------
Income Before Income Taxes 33,273,000 34,132,000
Taxes Based on Income 12,935,000 13,271,000
------------ ------------
Net Income $ 20,338,000 $ 20,861,000
============ ============
Net Income Per Common Share:
Basic $ .48 $ .48
Diluted .48 .48
Cash Dividends Per Common Share $.140 $.127
Weighted Average Common
Shares Outstanding:
Basic 42,553,000 43,518,000
Diluted 42,607,000 43,598,000
</TABLE>
See Notes to Condensed Consolidated Financial Statements
4 of 9
<PAGE> 5
LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $20,338,000 $20,861,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 8,674,000 7,688,000
Deferred income taxes and other noncash charges (1,406,000) (1,472,000)
(Gain) loss on sale of property (118,000) 5,000
Changes in operating assets and liabilities:
Receivables (30,970,000) (25,848,000)
Inventories (15,757,000) (11,699,000)
Prepaid expenses and other current assets (437,000) (1,138,000)
Accounts payable 3,696,000 16,345,000
Accrued liabilities 7,315,000 10,302,000
----------- -----------
Net cash (used in) provided by
operating activities (8,665,000) 15,044,000
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for acquisition, net of
cash acquired (19,749,000)
Payments on property additions (9,677,000) (10,809,000)
Proceeds from sale of property 171,000 149,000
Other - net (1,958,000) (2,052,000)
----------- -----------
Net cash used in investing activities (11,464,000) (32,461,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock (13,937,000) (2,357,000)
Payment of dividends (5,957,000) (5,511,000)
Net change in short-term bank loans 21,000,000
Payments on long-term debt, including
payment of acquisition debt (300,000) (3,723,000)
Common stock issued upon exercise of stock
options including related tax benefits 16,000 975,000
----------- -----------
Net cash provided by (used in)
financing activities 822,000 (10,616,000)
----------- -----------
Effect of exchange rate changes on cash 27,000 (5,000)
----------- -----------
Net change in cash and equivalents (19,280,000) (28,038,000)
Cash and equivalents at beginning of year 23,224,000 32,109,000
----------- -----------
Cash and equivalents at end of period $ 3,944,000 $ 4,071,000
=========== ===========
SUPPLEMENTAL DISCLOSURE OF OPERATING CASH FLOWS:
Cash paid during the period for:
Interest $ 1,209,000 $ 1,203,000
=========== ===========
Income taxes $ 765,000 $ 744,000
=========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
5 of 9
<PAGE> 6
LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED SEPTEMBER 30, 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, 1998.
(2) Effective July 1, 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income." SFAS No. 130 is effective for the Company's fiscal year
beginning July 1, 1998 including interim periods and requires
reclassification of financial statements for earlier periods presented
for comparative purposes. Accordingly, comprehensive income data has
been presented in accordance with SFAS No. 130 in the accompanying
condensed consolidated financial statements. Under SFAS No. 130, the
Company is required to classify items of other comprehensive income by
their nature in a financial statement and display the accumulated
balance of other comprehensive income separately from retained
earnings and additional paid-in-capital in the equity section of the
condensed consolidated balance sheet. The only component of other
comprehensive income for the Company is foreign currency translation
adjustments. Total comprehensive income quarter-to-date and
year-to-date, as of September 30, 1998 and 1997, was approximately
$20,365,000 and $20,856,000, respectively.
(3) 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 September 30, 1997 in the accompanying condensed
consolidated financial statements have been retroactively adjusted for
this split.
6 of 9
<PAGE> 7
LANCASTER COLONY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FOR THE PERIODS ENDED SEPTEMBER 30, 1998 AND 1997
RESULTS OF OPERATIONS
A record level of net sales for the Company's fiscal first quarter was achieved
during the three months ended September 30, 1998. Net sales for the current
year's quarter totaled $244,080,000, a 3% increase over the prior year's
comparable total of $237,174,000. The Specialty Foods segment contributed to
this growth, benefiting from increased sales of recently introduced retail
products, cost-driven price increases and greater sales to national foodservice
accounts. Sales of the Glassware and Candles segment increased slightly despite
a significant reduction in sales to one private label candle customer. This
reduction was offset by increased sales to mass merchants of branded candle
products. Net sales within the Automotive segment declined as adversely affected
by the strike at General Motors, the impact of certain OEM model changeovers and
a lackluster aftermarket environment.
As a percentage of net sales, consolidated gross margins declined to 30.0% for
the three months ended September 30, 1998 compared to 31.7% in the same period
of 1997. Margins of the Specialty Foods segment were reduced by higher raw
material costs, particularly soybean oil and cream, as well as a less favorable
sales mix. Going into the Company's second quarter of fiscal 1999, these
material costs are expected to remain at higher than year-ago levels through
December 31. Within the Automotive segment, operating efficiencies were
adversely impacted by the effects of the GM strike and the generally lower level
of sales. Additionally, competitive pricing pressures have affected margins in
both the Automotive and Glassware and Candles segments.
Selling, general and administrative expenses for the quarter ended September 30,
1998 totaled $39,384,000, a 2% decrease compared to $40,218,000 in 1997. Among
factors contributing to this decrease is the reduction in certain advertising
costs incurred in 1997 to support the rollout of repackaged pourable salad
dressings.
As a result of the foregoing, operating income for the 1998 quarter of
$33,883,000 reflects a 3% reduction from the 1997 total of $34,936,000.
Earnings per share for the quarters ended September 30, 1998 and 1997 totaled
$.48 and reflects the reduction in weighted average shares outstanding as such
shares outstanding totaled 42,607,000 for the 1998 quarter compared to
43,598,000 in 1997, as adjusted for the three-for-two stock split paid in
January 1998. This reduction has occurred as a result of share repurchases made
by the Company.
FINANCIAL CONDITION
Net cash used in operating activities for the three months ended September 30,
1998 totaled $8,665,000 compared to cash provided by such activities of
$15,044,000 during the three months ended September 30, 1997. This fluctuation
in cash flows largely resulted from relative changes in working capital
components. Net working capital totaled $230,254,000 at September 30, 1998
compared to $235,031,000 as of the preceding June 30. Seasonal shipping patterns
led to a $30,970,000 increase in net accounts receivable from the June 30, 1998
total of $99,870,000 to $130,840,000 at September 30, 1998.
Significant investing activities during the three months ended September 30,
1998 included $9,677,000 expended on property additions. Investing activities in
the quarter ended September 30, 1997 included $19,749,000 expended to acquire
the Chatham Village crouton business.
7 of 9
<PAGE> 8
Financing activities of the Company during the three months ended September 30,
1998 included $21,000,000 of net borrowings under discretionary bank money
market lines of credit. Management anticipates that cash provided from
operations and the currently available lines of credit will be adequate to meet
the Company's foreseeable cash requirements over the remainder of fiscal 1999.
Among other significant financing activities occurring during the three months
ended September 30, 1998 was $13,937,000 expended on the purchase of
approximately 424,000 shares of treasury stock. Additionally, $5,957,000 in
dividends were paid in the most recent quarter, which was an 8% increase over
the prior year's comparable total of $5,511,000. This increase reflects an
effective $.013 increase in the stated dividend rate between periods.
The Company continues to make investments to address Year 2000 compliance
issues. For further information regarding this matter, reference is made to the
comments under the "Year 2000" section of the Management's Discussion and
Analysis contained within the Annual Report to Shareholders for the fiscal year
ended June 30, 1998. No significant changes in scope or expected outcome have
occurred since this disclosure.
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, 1998.
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 6, 1998 BY: /S/ John B. Gerlach, Jr.
------------------------------ --------------------------
JOHN B. GERLACH, JR.
Chairman, Chief Executive
Officer and President
Date: November 6, 1998 BY: /S/ John L. Boylan
------------------------------ --------------------------
JOHN L. BOYLAN
Treasurer, Vice President,
Assistant Secretary and
Chief Financial Officer
(Principal Financial
and Accounting Officer)
8 of 9
<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 QUARTER ENDED SEPTEMBER 30, 1998 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-30-1999
<PERIOD-END> SEP-30-1998
<CASH> 3,944
<SECURITIES> 0
<RECEIVABLES> 133,484
<ALLOWANCES> 2,644
<INVENTORY> 190,954
<CURRENT-ASSETS> 338,782
<PP&E> 382,587
<DEPRECIATION> 209,328
<TOTAL-ASSETS> 559,509
<CURRENT-LIABILITIES> 108,528
<BONDS> 28,795
0
0
<COMMON> 50,408
<OTHER-SE> 360,642
<TOTAL-LIABILITY-AND-EQUITY> 559,509
<SALES> 244,080
<TOTAL-REVENUES> 244,080
<CGS> 170,813
<TOTAL-COSTS> 170,813
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 649
<INCOME-PRETAX> 33,273
<INCOME-TAX> 12,935
<INCOME-CONTINUING> 20,338
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,338
<EPS-PRIMARY> .48
<EPS-DILUTED> .48
</TABLE>
