<PAGE> 1
UNITED STATES
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, 1999
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
September 1, 1999 was approximately $1,030,987,000, based on the closing price
of these shares on that day.
As of September 1, 1999, there were approximately 40,307,000 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 1999 Annual Report to Shareholders - Parts I, II and
IV. Proxy Statement for the Annual Meeting of Shareholders to be held November
15, 1999; to be filed - Part III. The 1999 Annual Report to Shareholders and
1999 Proxy Statement shall be deemed to have been "filed" only to the extent
portions thereof are expressly incorporated by reference.
EXHIBIT INDEX ON PAGE 12.
-1-
<PAGE> 2
PART I
Item 1. Business
--------
General Development of Business
- -------------------------------
Lancaster Colony Corporation was reincorporated in Ohio effective January
2, 1992. Prior to this date Lancaster Colony Corporation had been a Delaware
Corporation organized in 1961. As used herein the term "registrant," unless the
context otherwise requires, refers to Lancaster Colony Corporation and its
subsidiaries.
Description of and Financial Information About Business Segments
- ----------------------------------------------------------------
The registrant operates in three business segments - "specialty foods,"
"glassware and candles" and "automotive" - which accounted for approximately
42%, 35% and 23%, respectively, of consolidated net sales for the fiscal year
ended June 30, 1999. The financial information relating to business segments for
each of the three years in the period ended June 30, 1999, 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"; fruit glazes, veggie dips and fruit dips marketed
under the brand name "Marzetti"; frozen unbaked pies principally marketed under
the brand name "Mountain Top"; hearth-baked frozen breads marketed under the
brand name "New York Frozen Foods"; refrigerated chip dips and dairy desserts
marketed under the brand names "Allen" and "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" and caviar marketed under the brand name "Romanoff."
Nearly all of this segment's product lines are manufactured by the
registrant in 11 plants located throughout the United States. Certain individual
items are manufactured and packaged by third parties located in the United
States under contractual agreements established by the registrant.
The dressings, sauces, croutons, veggie dips and fruit dips are sold in
various metropolitan areas in the United States with sales being made to retail
and/or 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 portion of the frozen bread sales is directed to the
foodservice market.
The dry egg noodles and refrigerated chip dips and dairy desserts are sold
through food brokers and distributors to retail markets principally in the
Midwestern United States.
The "Reames" line is sold through brokers and distributors in various
metropolitan areas principally in the central and Midwestern United States.
Due to distribution arrangements with several large foodservice customers,
the sales to one foodservice distributor accounted for approximately 12% of this
segment's total net sales in the current year. Although the Company is a leading
producer in several of its product categories, 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 1999, the registrant obtained adequate supplies of raw
materials for this segment.
The registrant's firm order backlog at June 30, 1999, in this business
segment, was approximately $4,125,000 as compared to a backlog of approximately
$4,195,000 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.
-2-
<PAGE> 3
Glassware and Candles
---------------------
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.
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," "Colony" and "Fostoria." The registrant also purchases domestic and
imported blown glassware which is sold under the trade name "Colony."
Glass vases and containers are sold both in the retail and wholesale
florist markets under the trade names "Brody" and "Indiana Glass" as well as
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. Although minor, rubber matting sales to
commercial markets are also included in this segment. All the markets in which
the registrant sells houseware products are highly competitive in the areas of
design, price, quality and customer service. Sales of glassware and candles to
one customer accounted for approximately 24% and 21% of this segment's total net
sales during 1999 and 1998, respectively. No other customer accounted for more
than 10% of this segment's total net sales.
During fiscal year 1999, the registrant obtained adequate supplies of raw
materials for this business segment.
The registrant's firm order backlog at June 30, 1999, in this business
segment, was approximately $38,981,000 as compared to approximately $33,327,000
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 under which it operates are not
essential to the overall success of this segment. However, certain trademarks
and licenses 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,
bedliners, 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
automotive aftermarket products are marketed primarily through mass
merchandisers and automotive outlets under the name "Rubber Queen" and the
registrant sells bedliners under the "Protecta" trademark, running boards under
the "Dee Zee" name, as well as under private labels. The aggregate sales of two
customers accounted for approximately 29% of this segment's total net sales
during 1999 and 1998. 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 1999, the registrant obtained adequate supplies of raw
materials for this segment.
The registrant's firm order backlog at June 30, 1999, in this business
segment, was approximately $6,486,000 as compared to a backlog of approximately
$6,348,000 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.
-3-
<PAGE> 4
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 1997 through 1999:
<TABLE>
<CAPTION>
1999 1998 1997
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Specialty Foods:
Retail 23% 22% 21%
Foodservice 19% 18% 17%
Glassware and Candles:
Consumer Table and Giftware 30% 31% 31%
Automotive 23% 23% 26%
</TABLE>
Combined net sales from each of the three segments to Wal-Mart Stores,
Inc. totaled approximately 10% of consolidated fiscal 1999 net sales.
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.
Employees
---------
The registrant has approximately 6,700 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.
-4-
<PAGE> 5
Item 2. Properties
----------
The registrant uses approximately 5,800,000 square feet of space for its
operations. Of this space, approximately 998,000 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>
Columbus, OH Specialty Foods 198,000
Coshocton, OH Automotive 591,000
Des Moines, IA (1) Automotive 404,000
Dunkirk, IN Glassware and Candles 729,000
Elkhart, IN Automotive 96,000
Grove City, OH Specialty Foods 195,000
Jackson, OH Automotive and Glassware and Candles 223,000
LaGrange, GA Automotive 211,000
Lancaster, OH Glassware and Candles 465,000
Leesburg, OH (2) Glassware and Candles 875,000
Milpitas, CA (1) Specialty Foods 130,000
Muncie, IN Glassware and Candles 153,000
Sapulpa, OK (3) Glassware and Candles 686,000
Wapakoneta, OH (2) Automotive 196,000
Waycross, GA (1) Automotive 142,000
Wilson, NY Specialty Foods 80,000
</TABLE>
(1) Part leased for term expiring 2000.
(2) Part leased on a monthly basis.
(3) Part leased for term expiring in 2004.
Item 3. Legal Proceedings
-----------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
-5-
<PAGE> 6
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 15, 1999.
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 31 Offices and Executive
Name 1999 Positions Held Officer
---- --------- -------------- ---------
<S> <C> <C> <C>
John B. Gerlach, Jr. 45 Chairman, Chief Executive
Officer and President 1982
John L. Boylan 44 Treasurer, Vice President,
Assistant Secretary and
Chief Financial Officer 1990
Larry G. Noble 63 Vice President 1985
Bruce L. Rosa 50 Vice President, Development -
elected July 1, 1998; Senior
Vice President of T. Marzetti
Company (a subsidiary of Lancaster
Colony Corporation) from 1993 to
1996; Executive Vice President of
T. Marzetti Company from
1996 to 1998 1998
</TABLE>
The above named officers were elected or re-elected to their present
positions at the annual meeting of the Board of Directors on November 16, 1998.
All such persons have been elected to serve until the next annual election of
officers, which shall occur on November 15, 1999 and their successors are
elected or until their earlier resignation or removal.
-6-
<PAGE> 7
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
----------------------------------------------------------------
Matters
-------
Reference is made to the "Selected Quarterly Financial Data," appearing in
Exhibit 13 of this Form 10-K Annual Report, for information concerning market
prices and related security holder matters on the registrant's common shares
during 1999 and 1998. 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, 1999 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.
The Private Securities Litigation Reform Act of 1995 provides a safe
harbor for forward-looking statements made by or on behalf of the Company. All
statements made by the Company, other than statements of historical fact, that
address activities, events or developments that the Company or management
intends, expects, projects, believes or anticipates will or may occur in the
future, are forward-looking statements. Such statements are based upon certain
assumptions and assessments made by management of the Company in light of its
experience and its perception of historical trends, current conditions, expected
future developments and other factors it believes to be appropriate. The
forward-looking statements included in this Report are also subject to a number
of risks and uncertainties, including but not limited to economic, competitive,
governmental and technological factors affecting the Company's operations,
markets, customers, products, services and prices. Specific influences relating
to these forward-looking statements include fluctuations in material costs, the
success of Year 2000 compliance efforts, the continued solvency of key
customers, efficiencies in plant operations and innumerable other factors. Such
forward-looking statements are not guarantees of future performance, and the
actual results, developments and business decisions may differ from those
contemplated by such forward-looking statements. The Company undertakes no
obligation to publicly update or revise any forward-looking statement, whether
as a result of new information, future events or otherwise.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
Not Applicable
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 15, 1999, 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 15,
1999 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 15, 1999 is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
Not Applicable
-7-
<PAGE> 8
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
----------------------------------------------------------------
(a) 1. Financial Statements
--------------------
The consolidated financial statements as of June 30, 1999 and 1998 and
for each of the three years in the period ended June 30, 1999, together
with the report thereon of Deloitte & Touche LLP dated August 25, 1999,
appearing in Exhibit 13 of this Form 10-K Annual Report are incorporated
herein by reference.
Index to Financial Statements
-----------------------------
Consolidated Statements of Income for the years ended June 30, 1999, 1998
and 1997
Consolidated Balance Sheets as of June 30, 1999 and 1998
Consolidated Statements of Cash Flows for the years ended June 30, 1999,
1998 and 1997
Consolidated Statements of Shareholders' Equity for the years ended June
30, 1999, 1998 and 1997
Notes to Consolidated Financial Statements
Independent Auditors' Report
(a) 2. Financial Statement Schedules Required by Items 8 and 14(d)
-----------------------------------------------------------
Included in Part IV of this report is the following additional financial
data which should be read in conjunction with the consolidated financial
statements in the 1999 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, 1999
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, 1999.
-8-
<PAGE> 9
SIGNATURES
----------
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized on this 23rd day of September,
1999.
LANCASTER COLONY CORPORATION
(Registrant)
By /S/ John B. Gerlach, Jr.
----------------------------
John B. Gerlach, Jr.
Chairman, Chief Executive
Officer, President and Director
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 22, 1999
- --------------------------- Executive Officer, ------------------
John B. Gerlach, Jr. President and Director
/S/ John L. Boylan Treasurer, Vice September 22, 1999
- --------------------------- President, Assistant ------------------
John L. Boylan Secretary, Chief
Financial Officer
(Principal Financial
and Accounting Officer)
and Director
/S/ Kerrii B. Anderson Director September 13, 1999
- --------------------------- ------------------
Kerrii B. Anderson
/S/ Robert L. Fox Director September 13, 1999
- --------------------------- ------------------
Robert L. Fox
/S/ Morris S. Halpern Director September 12, 1999
- --------------------------- ------------------
Morris S. Halpern
/S/ Robert S. Hamilton Director September 20, 1999
- --------------------------- ------------------
Robert S. Hamilton
/S/ Edward H. Jennings Director September 14, 1999
- --------------------------- ------------------
Edward H. Jennings
/S/ Henry M. O'Neill, Jr. Director September 10, 1999
- --------------------------- ------------------
Henry M. O'Neill, Jr.
/S/ Zuheir Sofia Director September 10, 1999
- --------------------------- ------------------
Zuheir Sofia
</TABLE>
-9-
<PAGE> 10
INDEPENDENT AUDITORS' REPORT
To the Directors and Shareholders of
Lancaster Colony Corporation:
We have audited the consolidated financial statements of Lancaster Colony
Corporation and its subsidiaries as of June 30, 1999 and 1998, and for each of
the three years in the period ended June 30, 1999, and have issued our report
thereon dated August 25, 1999; such financial statements and report are included
in your 1999 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 25, 1999
-10-
<PAGE> 11
SCHEDULE II
<TABLE>
LANCASTER COLONY CORPORATION
AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED JUNE 30, 1999
<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, 1997...................... $2,131,000 $1,813,000 $1,083,000(A) $2,861,000
==========================================================
Year ended June 30, 1998...................... $2,861,000 $1,834,000 $1,921,000(A) $2,774,000
==========================================================
Year ended June 30, 1999...................... $2,774,000 $1,789,000 $1,263,000(A) $3,300,000
==========================================================
</TABLE>
(A) Represents uncollectible accounts written off net of recoveries.
-11-
<PAGE> 12
<TABLE>
LANCASTER COLONY CORPORATION
----------------------------
FORM 10-K
JUNE 30, 1999
INDEX TO EXHIBITS
<CAPTION>
Exhibit
Number Description Located at
- ------ ----------- ----------
<S> <C> <C>
3.1 Certificate of Incorporation of the registrant
approved by the shareholders November 18, 1991. (k)
.2 Certificate of Amendment to the Articles of
Incorporation approved by the shareholders
November 16, 1992. (k)
.3 Certificate of Amendment to the Articles of
Incorporation approved by the shareholders
November 17, 1997. (k)
.4 By-laws of the registrant as amended
through November 18, 1991. (a)
.5 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)
.8 Key Employee Severance Agreement between Lancaster
Colony Corporation and Bruce L. Rosa. 1999 Form 10-K
13. Annual Report to Shareholders. 1999 Form 10-K
</TABLE>
-12-
<PAGE> 13
<TABLE>
<S> <C> <C>
21. Significant Subsidiaries of Registrant. 1999 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 25, 1999, appearing in and
incorporated by reference in this Annual Report on
Form 10-K of Lancaster Colony Corporation for the
year ended June 30, 1999. 1999 Form 10-K
27. Financial Data Schedule 1999 Form 10-K
(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.
(k) 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, 1998.
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 1999 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
1999 Annual Report to Shareholders to the Commission upon request.
</TABLE>
-13-
<PAGE> 1
EXHIBIT 10.8
BRUCE L. ROSA
-----------------------------------
Name of Key Employee
May 3, 1990
-----------------------------------
Date of Agreement
LANCASTER COLONY CORPORATION
Key Employee Severance Agreement
--------------------------------
This agreement is entered as of the date set forth above into between
Lancaster Colony Corporation ("LCC") and the undersigned key employee of LCC
named above (the "Key Employee").
1. Severance Benefits. In the event the employment of the Key Employee is
terminated within one year following a Change of Control (i) by LCC other than
for Cause, or (ii) by the Key Employee for Good Reason, the Key Employee shall
be entitled to and shall be paid the following severance benefits, which
severance benefits shall be payable in cash by LCC to the Key Employee within
thirty (30) days after such termination of employment:
(a) The amount of any unpaid base salary of the Key Employee accruing
through the date of termination of employment, determined at the base salary
rate in effect for the Key Employee at such date.
(b) An amount equal to the lesser of (i) the sum of (y) the Key Employee's
highest annual salary paid within the three full fiscal years prior to the date
of termination of employment, plus (z) the Key Employee's highest total annual
bonus paid within the three full fiscal years prior to the date of termination
of employment, and (ii) an amount equal to twice the Key Employee's annual
compensation (salary plus bonus) paid for the full fiscal year immediately
preceding the date of termination of employment.
In addition to the foregoing cash payments, the Key Employee shall be
entitled to continued coverage under such of LCC's health, disability and life
insurance plans in which the Key Employee participated on the date of
termination of employment, on the same basis as in effect on such date
(including required employee contributions, if any), for a period of one year
following the date of termination of employment.
2. Definitions. As used herein, the following terms shall have the
meanings set forth below.
"Cause" means the willful engaging by the Key Employee in malfeasance or
felonious conduct which in any material respect impairs the reputation, good
will or business position of LCC or involves misappropriation of LCC's funds or
other assets.
"Change of Control" means a change in control of LCC of a nature that
would be required to be reported in response to Item 1(a) of LCC's Current
Report on Form 8-K pursuant to Section 13 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"); provided that, without limitation, such a
Change of Control shall be deemed to have occurred at such time as (i) any
"person" within the meaning of Section 14(d) of the Exchange Act, other than
LCC; a subsidiary of LCC; John
<PAGE> 2
B. Gerlach, John B. Gerlach, Jr. or any of their "affiliates" or "associates"
(as such terms are defined in Rule 12b-2 under the Exchange Act); or any
employee benefit plan sponsored by LCC becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 30% or
more of the Common Stock of LCC or (ii) individuals who constitute the Board of
Directors of LCC as of the date hereof (the "Incumbent Board") or who are
successor members to such Incumbent Board members and whose appointment or
nomination for election was approved by action of at least three-fourths of (y)
of such Incumbent Board ("Approved Successors") or (z) by a board whose members
can trace their status as such to appointment or nomination for election which
was approved by at least three-fourths of Incumbent Board members or Approved
Successors cease for any reason to constitute at least a majority thereof; but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A under the Exchange Act) or
other actual or threatened solicitation of proxies or consents by or on behalf
of a person other than the Board.
"Good Reason" means (i) a reduction in base salary or fringe benefits
(except for a reduction in fringe benefits which is required by law to maintain
any tax benefits relating thereto or is applied universally to such fringe
benefits of all employees of LCC) paid and provided by LCC to the Key Employee,
(ii) a materially adverse change in the terms of the bonus program applicable to
the Key Employee, (iii) a reduction in the authority of the Key Employee, (iv) a
material change in the duties and responsibilities of the Key Employee, (v) the
failure by LCC to provide and credit the Key Employee with the number of paid
vacation days to which he is then entitled in accordance with LCC's normal
vacation policy as in effect immediately prior to the Change of Control or (vi)
LCC's requiring the Key Employee to be based more than 30 miles from where his
office or the place of employment is located immediately prior to the Change of
Control.
3. Disputes. If a dispute arises regarding a termination of the Key
Employee's employment with LCC or the interpretation or enforcement of this
agreement and the Key Employee obtains a final judgment in his favor from a
court of competent jurisdiction or his claim is settled by LCC prior to the
rendering of a judgment by such a court, all reasonable legal fees and expenses
incurred by the Key Employee in contesting or disputing any such termination or
seeking to obtain or enforce any right or benefit provided for in this
agreement, or in otherwise pursuing his claim, shall be paid by LCC to the
fullest extent permitted by law.
4. No Mitigation or Reduction of Benefits. The Key Employee is not
required to mitigate the amount of any benefits to be paid by LCC pursuant to
this agreement by seeking other employment or otherwise, nor shall the amount of
any benefits provided for in this agreement be reduced by any compensation
earned by the Key Employee as the result of employment by another employer after
the termination of the Key Employee's employment with LCC.
5. No Employment Rights or Obligations Established. This agreement does
not establish any rights on the part of the Key Employee to continued employment
by LCC, nor does it establish any obligations on the part of the Key Employee to
continue his employment with LCC, it being understood and agreed that this
agreement relates solely to certain benefits to be provided to the Key Employee
in the event of his termination of employment under certain circumstances as
provided herein.
6. Amendments. This agreement may not be amended or modified otherwise
than by a written agreement executed by the parties hereto.
2
<PAGE> 3
7. Other Agreements. This agreement does not supersede or affect in any
way, nor is it affected in any way by, any other existing agreement between LCC
and the Key Employee. Further, no future agreement between LCC and the Key
Employee shall supersede or affect this agreement, nor shall this agreement
affect such future agreement, unless such future agreement specifically so
provides and is executed by both LCC and the Key Employee.
8. Successors and Assigns. This agreement is personal to the Key Employee
and may not be assigned by him otherwise than by will or the laws of descent and
distribution. This agreement shall be binding upon, inure to the benefit of and
be enforceable by and against the Company and its successors and assigns.
9. Governing Law. This agreement is made and is expected to be performed
in Ohio, and the various terms, provisions, covenants and agreements, and the
performance thereof, shall be construed, interpreted and enforced under and with
reference to the laws of the State of Ohio.
IN WITNESS WHEREOF, this agreement is executed by the parties effective
the date first set forth above.
LCC: Key Employee:
- ---- -------------
LANCASTER COLONY CORPORATION
By: /S/ John B. Gerlach, Jr. /S/ Bruce L. Rosa
------------------------------- -------------------------------
(Signature) (Signature)
John B. Gerlach, Jr., Secretary BRUCE L. ROSA
- ---------------------------------- -------------------------------
(Name and Title) (Name)
3
<PAGE> 1
Exhibit 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
REVIEW OF CONSOLIDATED OPERATIONS
Consolidated net sales for the fiscal year ended June 30, 1999 totaled
$1,045,702,000. This is a record level of sales and represents the eighth
consecutive year that such a record has been achieved. The fiscal 1999 total
represents a 4% increase over the $1,008,752,000 recorded in fiscal 1998.
Expansion of both retail and foodservice sales within the Specialty Foods
segment was the primary contributor to this growth. Net sales in fiscal 1998
increased $85,939,000, or 9%, over the fiscal 1997 total of $922,813,000.
Similar to fiscal 1999, the increase in fiscal 1998 sales was led by growth in
the Specialty Foods segment, which increased by $60,361,000. This segment
benefited in fiscal 1998 from both internal volume growth and the July 1997
acquisition of the Chatham Village product lines. Sales increases driven by
pricing increases have been nominal in recent years as a result of competitive
market conditions.
Net income of $95,129,000 for fiscal 1999 declined 1% from the record level of
net income in 1998 of $96,130,000. In general, a marked decline in profitability
of the Company's Automotive segment was somewhat offset by the improvement of
the Specialty Foods segment. Additionally, operating income within the Glassware
and Candles segment declined slightly. Further impacting comparability between
these years were pretax gains of approximately $1,800,000 recognized in 1998
from the sales of long-idle manufacturing facilities. Net income in fiscal 1998
represented an 8% increase over the $88,706,000 recorded in fiscal 1997. This
improvement was primarily the result of the increased sales volume discussed
above.
The relative proportion of sales and operating income contributed by each of the
Company's business 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 business segments over
each of the last three years:
<TABLE>
<CAPTION>
Segment Sales Mix:(1) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Specialty Foods 42% 41% 38%
Glassware and Candles 35% 36% 36%
Automotive 23% 23% 26%
<CAPTION>
Segment Operating Income %:(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Specialty Foods 16% 15% 14%
Glassware and Candles 22% 22% 24%
Automotive 5% 8% 9%
</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 gross margin as a percentage of net sales was 30.8% in 1999
compared with 32.2% in 1998 and 31.5% in 1997. The decline in the most recent
year's percentage is primarily attributable to higher food ingredient costs
present in the first half of the fiscal year, and production inefficiencies
incurred in the operation of certain glassware and automotive manufacturing
facilities. Compared to fiscal 1997, fiscal 1998 benefited from a more favorable
sales mix within the Specialty Foods segment, although lower production volumes
adversely affected margins of the Automotive segment. The increasing proportion
of sales contributed by specialty food and candle products over the last two
years has positively influenced gross margin percentages during this period as
such products typically carry higher average gross margins than many of the
Company's other products.
Selling, general and administrative expenses for 1999 totaled $166,228,000, a 1%
decrease from the 1998 total of $168,526,000. This decrease was influenced by
cost reductions attained within the Glassware and Candles segment. The
consolidated total of such expenses for fiscal 1998 increased 15% over the 1997
total of $146,403,000. This increase generally resulted from the effects of
higher sales volume on sales-related costs.
In the aggregate, improved Specialty Foods results were largely offset by a
decline in Automotive performance such that consolidated operating income for
1999 totaled $155,688,000, a slight decline from the 1998 total of $155,871,000.
As most directly affected by the increased sales volume, 1998 consolidated
operating income increased by 8% over the comparable 1997 total of $144,359,000.
The effective tax rate in 1999 decreased slightly to 38.0% compared to 38.1% in
1998. The effective rate for 1997 was 37.7%.
Net income per common share totaled $2.28 on a fully-diluted basis for fiscal
1999, an increase of 3% over the comparable 1998 total of $2.22 per share. The
1998 fully-diluted earnings per share had increased 10% over the $2.01 reported
in 1997, after adjustment for the three-for-two stock split paid in January
1998. Earnings per share have been beneficially affected by the Company's share
repurchases which have totaled in excess of $133 million over the three-year
period ended June 30, 1999.
SEGMENT REVIEW - SPECIALTY FOODS
The Specialty Foods segment achieved another record level of sales during fiscal
1999. Totaling $441,470,000, these sales exceeded the prior year level of
$411,373,000 by $30,097,000 or 7%. A 17% increase in sales also occurred in 1998
relative to the 1997 total of $351,012,000. In 1999 and 1998, retail sales
comprised approximately 56% of total sales compared to 44% for foodservice. For
fiscal 1997, the sales proportions were 55% and 45%, respectively.
Retail sales growth during 1999 was provided by higher sales volumes of products
such as vegetable and fruit dips placed in grocery produce departments as well
as the recently introduced Texas Toast frozen bread products.
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
Foodservice volumes also increased in 1999 with improved sales of both
Marzetti-branded products to wholesale distributors and specialty items made for
specific restaurant chains.
The increase in retail sales during 1998 was influenced by the acquisition of
the Chatham Village crouton business in July 1997. Similar to 1999, the 1998
sales increase also benefited from greater sales of fruit and vegetable dips and
by the introductory success of the Texas Toast line.
This segment's operating income of $68,550,000 in 1999 improved 10% over the
1998 total of $62,141,000 despite significant increases in raw material costs
incurred during the first half of the fiscal year. The raw materials most
significantly contributing to these increased costs were soybean oil and cream.
Otherwise, the segment's overall improvement in both 1999 and 1998 was
influenced by such factors as higher sales volumes, better capacity utilization
and a more favorable sales mix. Relative to 1997 operating income of
$47,393,000, 1998 income increased 31%.
SEGMENT REVIEW - GLASSWARE AND CANDLES
Fiscal 1999 net sales for this segment totaled $363,617,000, which was
comparable with the $363,835,000 achieved in 1998. Adversely affecting sales in
1999 was a reduction in the sales of private-label wax-filled products, as well
as the October 1998 closing of the segment's Tiara direct selling organization,
which predominantly sold glassware. Compared to 1997 sales of $336,200,000,
segment volume in 1998 grew as a result of internally-generated sales increases
of candles and related products to mass merchants. Partially offsetting this
growth was a decline in private-label wax-filled sales. This segment's operating
income margin was relatively unchanged between years and decreased by 1% in 1999
to $79,235,000 compared to $80,350,000 achieved in 1998. Despite improved candle
contribution margins in the second half of the fiscal year, significantly and
adversely affecting this segment's fiscal 1999 margins were operating
inefficiencies that were incurred at the Sapulpa, Oklahoma glass production
facility. Lower production volumes at a second glass production facility also
impaired overhead absorption.
Among the factors adversely affecting 1998 margins were higher wax costs,
certain operating inefficiencies at the consumer glassware plants, increased
competitive pricing and promotional pressures and a less favorable sales mix.
SEGMENT REVIEW - AUTOMOTIVE
Net sales of the Automotive segment during fiscal 1999 of $240,615,000 increased
3% over the 1998 total of $233,544,000. Contributing to the volume increase was
internal growth associated with the addition of several new floor mat and
aluminum accessory programs placed with original equipment manufacturers
("OEMs"), as well as the acquisition of one significant new aftermarket customer
account. Adversely affected by a decline in aftermarket sales, fiscal 1998 net
sales of the Automotive segment declined 1% from the 1997 total of $235,601,000.
Sales of light truck bedliners were adversely impacted by significant industry
over-capacity and intense competitive pricing conditions. Sales to OEMs
increased during 1998 with particular strength in aluminum accessories for light
trucks and sport utility vehicles.
Operating income of the Automotive segment during 1999 totaled $12,861,000, a
31% decline from the comparable 1998 total of $18,700,000. This decline was
affected by operating inefficiencies (particularly in floor mat operations), the
continuation of competitive market conditions and a less favorable sales mix
with respect to certain aftermarket product lines. Efficiencies in the first
half of fiscal 1999 were also adversely affected by the disruptive effects of
unrelated work stoppages at both a major customer and at the Company's
Wapakoneta, Ohio manufacturing facility. The operating income of this segment
for 1998 declined 10% from the $20,819,000 recorded in 1997. This decline is
attributable to lower sales volume, a less favorable sales mix and pricing
pressures, particularly on sales to OEMs.
This segment's sales to OEMs are made both directly to the OEMs and indirectly
through third party, "Tier 1" suppliers. Such sales are sensitive to the overall
rate of new vehicle sales, the availability of competitive alternatives and 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 with certain products subject to annual
price reductions. During 1999, sales to OEMs comprised 50% of this segment's
sales compared to 49% and 44% in 1998 and 1997, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's balance sheet as of June 30, 1999 reflects a position of financial
strength. This posture has been accomplished through the benefit of strong cash
flows with net cash provided by operating activities totaling $126,484,000,
$120,045,000 and $113,461,000 for 1999, 1998 and 1997, respectively. The primary
influences on these amounts has been the Company's favorable levels of net
income and working capital. Cash flow generated from operations remains the
primary source of financing the Company's internal growth.
The principal use of cash flows used in investing activities over the last three
years has been for investments in property, plant and equipment. The cumulative
total of such investments during this time has been $116,267,000, including
$33,804,000 in 1999. Although the Glassware and Candles segment has been the
primary user of such funds over this
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS
period, the Specialty Foods segment had the greatest expenditures during fiscal
1999. The largest project completed during fiscal 1999 related to a food
distribution center in Grove City, Ohio. During 1998, the Glassware and Candles
segment also completed a new distribution facility adjacent to the existing
candle manufacturing facility located in Leesburg, Ohio. Additionally, during
July 1997, the Company utilized cash flows to acquire 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.
The largest financing activity conducted by the Company in each of the last
three years involved the purchase of the Company's common stock. Cash utilized
for these purchases totaled $66,792,000, $37,083,000 and $29,554,000 in 1999,
1998 and 1997, respectively. In February 1999, the Company's Board of Directors
approved a share repurchase authorization of 2,000,000 shares of which 1,041,500
remained authorized for future purchase as of June 30, 1999. An additional
significant financing activity conducted in each of the last three years has
been the payment of dividends. Total dividend payments for 1999 were $24,573,000
which was more than 5% greater than the 1998 total of $23,326,000. This increase
reflects the higher dividend payout rate of $.59 present during 1999 compared to
$.54 during 1998. Fiscal 1999 marks the 36th consecutive year in which the
Company's dividend rate was increased. The future levels of share purchases and
declared dividends are subject to the 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 balance sheet reflects a relatively low level of leverage as the
debt to total capital ratio remains low at 7% at both June 30, 1999 and 1998.
Management believes this posture 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 funds will
continue to be made available under discretionary bank lines of credit to meet
any short-term cash requirements not otherwise met by cash generated from
operations.
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. These costs have not been, and are not anticipated to
become, material.
IMPACT OF INFLATION
With the exception of certain food commodity costs, raw material costs during
fiscal 1999 did not significantly vary from the levels encountered in fiscal
1998. Soybean oil and cream costs rose markedly during the first half of fiscal
1999 but returned to more comparable levels by June 30 and are actually trending
lower as the Company enters its fiscal 2000. Generally, compared to 1997, fiscal
1998 encountered relatively moderate changes in raw material costs.
The Company generally attempts to adjust its selling prices to offset the
effects of increased raw material costs. However, these adjustments have
historically been difficult to implement on a timely basis relative to the
increase in costs incurred. Minimizing the exposure to such increased costs is
the Company's diversity of operations and its ongoing efforts to achieve greater
manufacturing and distribution efficiencies through the improvement of work
processes.
YEAR 2000
The "Year 2000" problem arises as a result of many automated calculations being
written in computer code which do not properly recognize dates after 1999.
Problems associated with this issue can occur not only on "mainframe"
applications, but also with such devices as personal computers,
telecommunication equipment and programmable logic controllers associated with
certain manufacturing equipment. Without correction, it is possible that
business and operational functions that rely on this improper code could fail
and cause significant business disruption and loss. Lancaster Colony continues
to address and prepare for the consequences that the Year 2000 may have on its
ability to rely on data processing and other automated operational functions
that are date-dependent.
The Company's existing data processing structure is decentralized in nature.
Management has created a Year 2000 team to oversee Year 2000 status at the
various business units. Management believes the Company's business units have
completed an adequate assessment of the internal Year 2000 dependencies relating
to their critical data processing functions. However, there are no assurances
that this process has identified all the existing Year 2000 exposures.
Furthermore, such a failure could result in a materially adverse impact to the
Company although the extent of this impact is not believed to be reasonably
estimable.
The Company is addressing Year 2000 compliance through a multiphased concurrent
approach encompassing identification, implementation and testing phases
utilizing a combination of internal and external resources. Depending on the
business unit's particular circumstance, the manner of resolving
<PAGE> 4
MANAGEMENT'S DISCUSSION AND ANALYSIS
the identified Year 2000 shortcomings has included strategies such as
implementing Year 2000 compliant versions of third party software, modifying
portions of existing software and replacing non-compliant business systems with
new third party software. The Company has substantially completed the
identification, implementation and testing phases. However, additional testing
of the various systems and programs may continue through the third and fourth
quarter of calendar 1999.
The most significant data processing expenditures are being made within the
Company's Automotive segment. This segment is in the process of implementing
comprehensive new third party software and hardware with Year 2000 compliance
being regarded as one of several resulting benefits. The Company's aggregate
costs to date are approximately $4.8 million, which include capitalized costs
incurred by the Automotive segment of approximately $3.7 million. The Company
estimates an additional $1.2 million of cost will be incurred, of which
approximately $1.0 million will relate to the Automotive segment's data
processing project. Expenditures associated with making changes to existing
systems specifically for Year 2000 compliance are being expensed as incurred.
Costs associated with the Company's efforts, both incurred and planned, are not
believed to be material to the Company's consolidated results of operations,
liquidity and financial condition. Due to the nature of the Company's efforts,
actual costs could vary significantly from that currently anticipated and there
are no guarantees regarding the timing or efficacy of completion.
As noted above, the Year 2000 issue may also affect systems ("non-IT systems")
not traditionally identified with information technology. For example,
production machinery, which is dependent on reading the current date, could
become inoperable if the machine's embedded code does not allow for proper
interpretation of a year beyond 1999. The Company continues to address its Year
2000 exposure with respect to non-IT systems. Remediation of non-IT equipment
will be substantially completed by the third quarter of calendar 1999 while
testing of the various systems and programs may continue through the fourth
quarter of calendar 1999. The Company is not currently aware of any significant
deficiencies. There can be no assurances, however, that such deficiencies do not
exist. The effect of not resolving these issues on a timely basis could have a
materially adverse impact on the Company.
Another risk presented by the Year 2000 issue is that significant customers and
suppliers of the Company could fail to become fully Year 2000 compliant. This
failure, in turn, could result in a significant adverse effect to the Company's
operations. The Company continues to inquire and correspond with its significant
suppliers as to the state of their Year 2000 readiness. It is believed that
these inquiries will become increasingly more meaningful as the Year 2000
approaches. Regardless, there can be no assurance that the data processing and
non-IT systems utilized by these other companies will become Year 2000 compliant
on a timely basis. The impact of noncompliance is not currently estimable, but
it is possible that significant failures could have a material adverse effect on
the Company's operations.
Management will continue to diligently monitor Year 2000 efforts both internally
and externally and, as needed, will develop contingency plans to address
exposures, if any, as they become better clarified. The costs and business
implications which might be associated with the adoption of any such contingency
plan is not estimable but could be significant.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995:
All statements made by the Company in both this annual report and in other
contexts, other than statements of historical fact, that address activities,
events or developments that the Company or management intends, expects,
projects, believes or anticipates will or may occur in the future, are
forward-looking statements. Such statements are based upon certain assumptions
and assessments made by management of the Company in light of its experience and
its perception of historical trends, current conditions, expected future
developments and other factors it believes to be appropriate. The
forward-looking statements included in this report are also subject to a number
of risks and uncertainties, including but not limited to economic, competitive,
governmental and technological factors affecting the Company's operations,
markets, customers, products, services and prices. Specific influences relating
to these forward-looking statements include fluctuations in material costs, the
success of Year 2000 compliance efforts, the continued solvency of key
customers, efficiencies in plant operations and innumerable other factors. Such
forward-looking statements are not guarantees of future performance, and the
actual results, developments and business decisions may differ from those
contemplated by such forward-looking statements. The Company undertakes no
obligation to publicly update or revise any forward-looking statement, whether
as a result of new information, future events or otherwise.
<PAGE> 5
FIVE YEAR FINANCIAL SUMMARY
Lancaster Colony Corporation and Subsidiaries
<TABLE>
<CAPTION>
(Thousands Except Per Share Figures) 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS
Net Sales $1,045,702 $1,008,752 $922,813 $855,912 $795,126
Gross Margin $ 321,916 $ 324,397 $290,762 $263,952 $247,942
Percent of Sales 30.8% 32.2% 31.5% 30.8% 31.2%
Interest Expense $ 2,718 $ 2,626 $ 2,596 $ 2,875 $ 2,736
Percent of Sales 0.3% 0.3% 0.3% 0.3% 0.3%
Income Before Income Taxes $ 153,462 $ 155,373 $142,459 $123,221 $114,808
Percent of Sales 14.7% 15.4% 15.4% 14.4% 14.4%
Taxes Based on Income $ 58,333 $ 59,243 $ 53,753 $ 47,086 $ 44,284
Net Income $ 95,129 $ 96,130 $ 88,706 $ 76,135 $ 70,524
Percent of Sales 9.1% 9.5% 9.6% 8.9% 8.9%
Per Common Share:(1)
Net Income-Basic and Diluted $ 2.28 $ 2.22 $ 2.01 $ 1.71 $ 1.57
Cash Dividends $ 0.59 $ 0.54 $ 0.48 $ 0.44 $ 0.37
- -----------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Total Assets $ 550,014 $ 529,367 $484,394 $435,359 $379,904
Working Capital $ 212,162 $ 235,031 $235,079 $203,988 $189,255
Property, Plant and Equipment--Net $ 175,617 $ 170,766 $151,309 $139,095 $113,187
Long-Term Debt $ 3,575 $ 29,095 $ 30,685 $ 31,230 $ 31,840
Property Additions $ 33,804 $ 44,935 $ 37,528 $ 50,229 $ 31,745
Depreciation and Amortization $ 35,569 $ 32,571 $ 26,981 $ 24,399 $ 22,717
Shareholders' Equity $ 414,855 $ 410,563 $368,000 $323,563 $277,148
Per Common Share(1) $ 10.23 $ 9.60 $ 8.45 $ 7.29 $ 6.19
Weighted Average
Common Shares Outstanding-Diluted(1) 41,799 43,364 44,108 44,624 45,057
- -----------------------------------------------------------------------------------------------------------------
STATISTICS
Price-Earnings Ratio at Year End 15.1 17.1 16.0 14.6 15.2
Current Ratio 2.8 4.1 4.2 3.9 4.1
Long-Term Debt as
a Percent of Shareholders' Equity 0.9% 7.1% 8.3% 9.7% 11.5%
Dividends Paid as a Percent
of Net Income 25.8% 24.3% 23.8% 25.7% 23.4%
Return on Average Equity 23.0% 24.7% 25.7% 25.3% 27.4%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Adjusted for 3-for-2 stock split paid January 1998.
<PAGE> 6
BUSINESS SEGMENTS
Lancaster Colony Corporation and Subsidiaries
For the Years Ended June 30, 1999, 1998 and 1997
IN 1999, THE COMPANY ADOPTED STATEMENT OF FINANCIAL ACCOUNTING STANDARDS
("SFAS") NO. 131, "DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED
INFORMATION." MANAGEMENT HAS EVALUATED ITS OPERATIONS IN ACCORDANCE WITH SFAS
NO. 131 AND HAS DETERMINED THAT THE BUSINESS IS SEPARATED INTO THREE DISTINCT
OPERATING AND REPORTABLE PRODUCT CATEGORIES: "SPECIALTY FOODS," "GLASSWARE AND
CANDLES" AND "AUTOMOTIVE." THE 1998 AND 1997 BUSINESS SEGMENT PRESENTATIONS HAVE
BEEN RESTATED TO CONFORM WITH THE 1999 PRESENTATION.
SPECIALTY FOODS-includes production and marketing of a family of pourable and
refrigerated produce salad dressings, croutons, sauces, refrigerated produce
vegetable and fruit 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 retail markets such as mass merchandisers 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 have not been
allocated to the business segments. All intercompany transactions have been
eliminated, and intersegment revenues are not significant. 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 1999 and 1998 capital expenditures of the segments include property
relating to business acquisitions as follows:
<TABLE>
<CAPTION>
Segments 1999 1998
- ------------------------------------------
<S> <C> <C>
Automotive $990,000
Specialty Foods $3,690,000
==========================================
</TABLE>
<PAGE> 7
BUSINESS SEGMENTS
Lancaster Colony Corporation and Subsidiaries
For the Years Ended June 30, 1999, 1998 and 1997
The following sets forth certain financial information attributable to the
Company's business segments for the three years ended June 30, 1999, 1998 and
1997:
<TABLE>
<CAPTION>
(Dollars In Thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES
Specialty Foods $ 441,470 $ 411,373 $351,012
Glassware and Candles 363,617 363,835 336,200
Automotive 240,615 233,544 235,601
- --------------------------------------------------------------------------------
Total $1,045,702 $1,008,752 $922,813
================================================================================
OPERATING INCOME
Specialty Foods $ 68,550 $ 62,141 $ 47,393
Glassware and Candles 79,235 80,350 81,859
Automotive 12,861 18,700 20,819
Corporate expenses (4,958) (5,320) (5,712)
- --------------------------------------------------------------------------------
Total $ 155,688 $ 155,871 $144,359
================================================================================
IDENTIFIABLE ASSETS
Specialty Foods $ 133,100 $ 121,659 $ 95,130
Glassware and Candles 260,359 264,569 235,154
Automotive 122,373 108,238 110,525
Corporate 34,182 34,901 43,585
- --------------------------------------------------------------------------------
Total $ 550,014 $ 529,367 $484,394
================================================================================
CAPITAL EXPENDITURES
Specialty Foods $ 13,721 $ 9,347 $ 4,625
Glassware and Candles 10,998 29,847 21,986
Automotive 9,804 9,372 10,817
Corporate 271 59 100
- --------------------------------------------------------------------------------
Total $ 34,794 $ 48,625 $ 37,528
================================================================================
DEPRECIATION AND AMORTIZATION
Specialty Foods $ 7,601 $ 7,425 $ 5,546
Glassware and Candles 18,601 16,367 12,520
Automotive 9,242 8,684 8,814
Corporate 125 95 101
- --------------------------------------------------------------------------------
Total $ 35,569 $ 32,571 $ 26,981
================================================================================
</TABLE>
Substantially all net sales and all long-lived assets are domestic.
Combined net sales from each of the three segments to one customer totaled
approximately $108,913,000 or 10% of consolidated fiscal 1999 net sales.
<PAGE> 8
CONSOLIDATED STATEMENTS OF INCOME
Lancaster Colony Corporation and Subsidiaries
For the Years Ended June 30, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Years Ended June 30
1999 1998 1997
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $1,045,702,000 $1,008,752,000 $922,813,000
COST OF SALES 723,786,000 684,355,000 632,051,000
- -------------------------------------------------------------------------------------------------------
GROSS MARGIN 321,916,000 324,397,000 290,762,000
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 166,228,000 168,526,000 146,403,000
- -------------------------------------------------------------------------------------------------------
OPERATING INCOME 155,688,000 155,871,000 144,359,000
OTHER INCOME (EXPENSE):
Interest expense (2,718,000) (2,626,000) (2,596,000)
Interest income and other--net 492,000 2,128,000 696,000
- -------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 153,462,000 155,373,000 142,459,000
TAXES BASED ON INCOME 58,333,000 59,243,000 53,753,000
- -------------------------------------------------------------------------------------------------------
NET INCOME $ 95,129,000 $ 96,130,000 $ 88,706,000
=======================================================================================================
NET INCOME PER COMMON SHARE:
BASIC $ 2.28 $ 2.22 $ 2.01
DILUTED $ 2.28 $ 2.22 $ 2.01
=======================================================================================================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
BASIC 41,759,000 43,271,000 44,060,000
DILUTED 41,799,000 43,364,000 44,108,000
=======================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 9
CONSOLIDATED BALANCE SHEETS
Lancaster Colony Corporation and Subsidiaries
as of June 30, 1999 and 1998
<TABLE>
<CAPTION>
June 30
ASSETS 1999 1998
- ------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 18,860,000 $ 23,224,000
Receivables (less allowance for doubtful accounts,
1999--$3,300,000; 1998--$2,774,000) 123,268,000 99,870,000
Inventories:
Raw materials and supplies 41,741,000 44,915,000
Finished goods and work in process 127,680,000 130,282,000
- ------------------------------------------------------------------------------------------
Total inventories 169,421,000 175,197,000
Prepaid expenses and other current assets 16,830,000 13,257,000
- ------------------------------------------------------------------------------------------
Total current assets 328,379,000 311,548,000
PROPERTY, PLANT AND EQUIPMENT:
Land, buildings and improvements 112,351,000 103,252,000
Machinery and equipment 281,710,000 270,781,000
- ------------------------------------------------------------------------------------------
Total cost 394,061,000 374,033,000
Less accumulated depreciation 218,444,000 203,267,000
- ------------------------------------------------------------------------------------------
Property, plant and equipment--net 175,617,000 170,766,000
OTHER ASSETS:
Goodwill (net of accumulated amortization,
1999--$8,884,000; 1998--$6,872,000) 35,768,000 37,045,000
Other Assets 10,250,000 10,008,000
- ------------------------------------------------------------------------------------------
TOTAL $550,014,000 $529,367,000
==========================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------
CURRENT LIABILITIES:
Current portion of long-term debt $ 25,520,000 $ 510,000
Accounts payable 45,742,000 41,804,000
Accrued liabilities 44,955,000 34,203,000
- ------------------------------------------------------------------------------------------
Total current liabilities 116,217,000 76,517,000
LONG-TERM DEBT--Less current portion 3,575,000 29,095,000
OTHER NONCURRENT LIABILITIES 7,081,000 7,325,000
DEFERRED INCOME TAXES 8,286,000 5,867,000
SHAREHOLDERS' EQUITY:
Preferred stock--authorized 3,050,000 shares;
Outstanding--none
Common stock--authorized 75,000,000 shares;
Shares outstanding, 1999--40,547,796; 1998--42,753,488 50,912,000 50,392,000
Retained earnings 548,143,000 477,587,000
Accumulated other comprehensive income 106,000 98,000
- ------------------------------------------------------------------------------------------
Total 599,161,000 528,077,000
Less common stock in treasury, at cost 184,306,000 117,514,000
- ------------------------------------------------------------------------------------------
Total shareholders' equity 414,855,000 410,563,000
- ------------------------------------------------------------------------------------------
TOTAL $550,014,000 $529,367,000
==========================================================================================
</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, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Years Ended June 30
1999 1998 1997
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 95,129,000 $ 96,130,000 $ 88,706,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 35,569,000 32,571,000 26,981,000
Provision for losses on accounts receivable 1,789,000 1,691,000 1,813,000
Deferred income taxes and other noncash charges (1,225,000) 887,000 (669,000)
(Gain) loss on sale of property (229,000) (1,965,000) 530,000
Changes in operating assets and liabilities:
Receivables (25,252,000) 2,661,000 1,133,000
Inventories 6,426,000 (12,635,000) (9,656,000)
Prepaid expenses and other current assets (173,000) 81,000 208,000
Accounts payable and accrued liabilities 14,450,000 624,000 4,415,000
- --------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 126,484,000 120,045,000 113,461,000
- --------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments on property additions (33,804,000) (44,935,000) (37,528,000)
Acquisitions net of cash acquired (2,075,000) (19,749,000)
Proceeds from sale of property 647,000 3,634,000 52,000
Other--net (4,269,000) (9,165,000) (3,629,000)
- --------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (39,501,000) (70,215,000) (41,105,000)
- --------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends (24,573,000) (23,326,000) (21,114,000)
Purchase of treasury stock (66,792,000) (37,083,000) (29,554,000)
Payments on long-term debt, including acquisition
debt payoff (510,000) (5,148,000) (610,000)
Reduction of ESOP debt 1,279,000
Common stock issued, including stock issued upon
exercise of stock options and related tax benefit 520,000 6,819,000 5,082,000
- --------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (91,355,000) (58,738,000) (44,917,000)
- --------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 8,000 23,000
- --------------------------------------------------------------------------------------------------------------
Net change in cash and equivalents (4,364,000) (8,885,000) 27,439,000
Cash and equivalents at beginning of year 23,224,000 32,109,000 4,670,000
- --------------------------------------------------------------------------------------------------------------
Cash and equivalents at end of year $ 18,860,000 $ 23,224,000 $ 32,109,000
==============================================================================================================
</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, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Accumulated
Other Amount
Outstanding Common Retained Comprehensive Treasury due from
Shares Stock Earnings Income Stock ESOP
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
($.48 per share) (21,114,000)
Purchase of treasury shares (691,882) 29,554,000
Shares issued upon exercise of stock
options including related tax benefits 145,317 5,082,000
Tax benefit of cash dividends paid
on ESOP unallocated shares 38,000
Reduction of ESOP debt (1,279,000)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE, JUNE 30, 1997 29,016,836 43,573,000 404,783,000 75,000 80,431,000
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended June 30, 1998:
Net income 96,130,000
Cash dividends--common stock
($.54 per share) (23,326,000)
Purchase of treasury shares (987,150) 37,083,000
Shares issued upon exercise of stock
options including related tax benefits 215,659 6,819,000
Shares issued in connection with
three-for-two stock split 14,508,143
Translation adjustment 23,000
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE, JUNE 30, 1998 42,753,488 50,392,000 477,587,000 98,000 117,514,000
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended June 30, 1999:
Net income 95,129,000
Cash dividends-- common stock
($.59 per share) (24,573,000)
Purchase of treasury shares (2,226,800) 66,792,000
Shares issued upon exercise of stock
options including related tax benefits 21,108 520,000
Translation adjustment 8,000
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE, JUNE 30, 1999 40,547,796 $50,912,000 $548,143,000 $106,000 $184,306,000
====================================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Lancaster Colony Corporation and Subsidiaries
1. SUMMARY OF Principles of Consolidation
SIGNIFICANT
ACCOUNTING The accompanying consolidated financial statements
POLICIES 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.
Reclassification
Certain prior year amounts have been reclassed to
conform to the current year presentation.
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 on a straight-line basis 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 when events or circumstances indicate
potential recoverability concerns. This evaluation is
based on consideration of expected future
undiscounted cash flows and other operating factors.
Carrying amounts are adjusted appropriately when
determined to have been impaired.
Revenue Recognition
Net sales and related cost of sales are recognized
upon shipment of products. Net sales are recorded net
of estimated sales discounts and returns.
Per Share Information
Net income per common share is computed based on the
weighted average number of shares of common stock and
common stock equivalents (stock options) outstanding
during each period.
Basic earnings per share excludes dilution and is
computed by dividing income available to common
shareholders by the weighted average number of common
shares outstanding during the period. Diluted
earnings per share is computed by dividing income
available to common shareholders by the diluted
weighted average number of common shares outstanding
during the period, which includes the dilutive
potential common shares associated with outstanding
stock options. There are no adjustments to net income
necessary in the calculation of basic and diluted
earnings per share.
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, per share data and weighted average
common shares outstanding for all periods presented
in the accompanying consolidated financial statements
have been retroactively adjusted for this split.
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
<PAGE> 13
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 and diverse customer base.
Business Segments
The business segments information for 1999, 1998 and
1997 included on pages 14 and 15 of this Annual
Report is an integral part of these financial
statements.
Comprehensive Income
The only component of other comprehensive income for
the Company is foreign currency translation
adjustments for which there is no related income tax
effect. The difference from net income is immaterial
in relation to the Company's financial statements for
the fiscal years ended June 30, 1999, 1998 and 1997.
Derivative Instruments, Computer Software Costs and
Start-up Costs
In June 1998, the Financial Accounting Standards
Board issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities," which revised
the accounting for derivative financial instruments.
In June 1999, the Financial Accounting Standards
Board issued SFAS No. 137 "Accounting for Derivative
Instruments and Hedging Activities-- Deferral of the
Effective Date of FASB Statement No. 133," which
deferred the effective date of SFAS No. 133 to all
fiscal quarters of all fiscal years beginning after
June 15, 2000 (i.e., the first quarter of the
Company's fiscal 2001). Management has not yet
completed its analysis of this Statement as to its
impact on the Company's financial statements and
disclosures.
In March 1998, the American Institute of Certified
Public Accountants ("AICPA") issued Statement of
Position ("SOP") 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal
Use," which revises the accounting for software
development costs. In April 1998, the AICPA issued
SOP 98-5, "Reporting on the Costs of Start-up
Activities," which requires costs of start-up
activities to be expensed as incurred. These SOPs
will be effective for the Company the first quarter
of fiscal 2000. Management does not expect the
adoption of these SOPs to have a significant impact
on the Company's financial statements.
2. ACQUISITIONS During October 1998, the Company acquired certain
assets of Southeast Mat Company, an automobile floor
mat manufacturer, for cash of approximately
$2,075,000. During July 1997, the Company acquired
all of the common stock of Chatham Village Foods,
Inc., an upscale salad crouton business, for cash of
approximately $19,749,000. This amount was financed
through the use of internally generated funds. The
related liabilities assumed totaled approximately
$5,747,000. These acquisitions were 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 these entities have been
included in the consolidated financial statements
from the dates 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 22%
of total inventories at June 30, 1999 and 1998, 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 $16,744,000 and
$14,531,000 higher than reported at June 30, 1999 and
1998, 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, 1999 and 1998.
4. SHORT-TERM BORROWINGS As of June 30, 1999, 1998 and 1997, the Company had
unused lines of credit for short-term borrowings from
various banks of $95,000,000, $85,000,000 and
$174,000,000, 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, 1999 and 1998, the Company had no short-term
borrowings under its line of credit arrangements.
<PAGE> 14
5. ACCRUED LIABILITIES Accrued liabilities at June 30, 1999 and 1998 are
composed of:
<TABLE>
<CAPTION>
(Dollars In Thousands) 1999 1998
--------------------------------------------------------------------
<S> <C> <C>
Income and other taxes $ 4,131 $(4,603)
Accrued compensation and employee benefits 29,911 27,088
Accrued marketing and distribution 5,808 4,959
Other 5,105 6,759
--------------------------------------------------------------------
Total accrued liabilities $44,955 $34,203
====================================================================
</TABLE>
6. LONG-TERM DEBT Long-term debt (including current portion) at June
30, 1999 and 1998 consists of:
<TABLE>
<CAPTION>
(Dollars In Thousands) 1999 1998
--------------------------------------------------------------------------
<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 4,095 4,605
--------------------------------------------------------------------------
Total 29,095 29,605
Less current portion 25,520 510
--------------------------------------------------------------------------
Long-term debt $ 3,575 $29,095
==========================================================================
</TABLE>
No material debt was assumed for the purchase of
property additions in 1999, 1998 and 1997. Cash
payments for interest were $2,722,000, $2,646,000 and
$2,603,000 for 1999, 1998 and 1997, 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, 1999, the
Company exceeded this net worth requirement by
approximately $45,623,000.
<TABLE>
<CAPTION>
Long-term debt matures as follows: (Dollars In Thousands)
-------------------------------------------------------------
<S> <C>
Year ending June 30:
2000 $25,520
2001 535
2002 545
2003 555
2004 565
After 2004 1,375
-------------------------------------------------------------
Total $29,095
=============================================================
</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 $29,525,000 and
$30,497,000 at June 30, 1999 and 1998, respectively.
7. INCOME TAXES The Company and its domestic subsidiaries file a
consolidated Federal income tax return. Taxes based
on income for the years ended June 30, 1999, 1998 and
1997, have been provided as follows:
<TABLE>
<CAPTION>
(Dollars In Thousands) 1999 1998 1997
-----------------------------------------------------------------
<S> <C> <C> <C>
Currently payable:
Federal $53,245 $49,798 $49,063
State and local 6,420 7,612 5,579
-----------------------------------------------------------------
Total current provision 59,665 57,410 54,642
Deferred Federal, state and
local provision (credit) (1,332) 1,833 (889)
-----------------------------------------------------------------
Total taxes based on income $58,333 $59,243 $53,753
=================================================================
</TABLE>
<PAGE> 15
Tax expense resulting from allocating certain tax
benefits directly to common stock and retained
earnings totaled $22,000, $647,000 and $323,000 for
1999, 1998 and 1997, respectively. The Company's
effective tax rate varies from the statutory Federal
income tax rate as a result of the following factors:
<TABLE>
<CAPTION>
1999 1998 1997
---------------------------------------------------------
<S> <C> <C> <C>
Statutory rate 35.0% 35.0% 35.0%
State and local income taxes 2.9 3.1 2.5
Other 0.1 0.2
---------------------------------------------------------
Effective rate 38.0% 38.1% 37.7%
=========================================================
</TABLE>
Deferred income taxes recorded in the consolidated
balance sheets at June 30, 1999 and 1998 consist of
the following:
<TABLE>
<CAPTION>
(Dollars In Thousands) 1999 1998
-----------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets (liabilities):
Inventories $ 7,013 $ 5,729
Employee medical and other benefits 5,033 5,079
Receivable and other valuation allowances 3,976 2,421
Other accrued liabilities 3,631 3,031
-----------------------------------------------------------------------------
Total deferred tax assets 19,653 16,260
-----------------------------------------------------------------------------
Total deferred tax liabilities - property and other (13,538) (11,477)
-----------------------------------------------------------------------------
Net deferred tax asset $ 6,115 $ 4,783
=============================================================================
</TABLE>
Cash payments for income taxes were $51,119,000,
$63,633,000 and $54,225,000 for 1999, 1998 and 1997,
respectively.
8. SHAREHOLDERS' EQUITY The Company is authorized to issue 3,050,000 shares
of preferred stock consisting of 750,000 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 $17.50 per right, common stock of the
Company having a market value of $35. The person or
groups effecting such 15 percent acquisition or
undertaking such tender offer will not be entitled to
exercise any rights. These rights expire April 2000
unless earlier redeemed by the Company under
circumstances permitted by the Rights Agreement.
In February 1999, the Company's Board of Directors
approved a share repurchase authorization of
2,000,000 shares of which 1,041,500 remained
authorized for future purchase as of June 30, 1999.
9. STOCK OPTIONS Under terms of an incentive stock option plan
approved by the shareholders in November 1995, the
Company has reserved 3,000,000 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, 1999, 2,449,104 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. Both reserved common shares
and shares available for future grants have been
restated to reflect the stock split in January 1998.
In October 1995, the Financial Accounting Standards
Board issued SFAS No. 123, "Accounting for
Stock-Based Compensation." As permitted by 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. 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.
<PAGE> 16
The following summarizes for each of the three years
in the period ended June 30, 1999 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, as restated
to reflect the stock split in January 1998:
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Number Average Number Average Number Average
of Exercise of Exercise of Exercise
Shares Price Shares Price Shares Price
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of period 277,986 $27.78 497,095 $28.18 335,121 $21.16
Exercised (21,108) 23.62 (215,659) 28.62 (217,976) 21.95
Granted 293,350 27.15 383,100 30.78
Forfeited (120,079) 30.85 (3,450) 30.75 (3,150) 27.71
-------------------------------------------------------------------------------------------------------
Outstanding at end of the period 430,149 $26.75 277,986 $27.78 497,095 $28.18
=======================================================================================================
Exercisable at end of period 318,449 $27.32 186,692 $29.73 354,179 $30.01
=======================================================================================================
</TABLE>
The weighted average fair value of options granted
during fiscal years 1999 and 1997 were $5.27 and
$5.00 per share, respectively.
The following table summarizes information about the
options outstanding at June 30, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------------------------- -----------------------------
Weighted Average
Range of Number Remaining Exercise Number Weighted Average
Exercise Prices Outstanding Contractual Life Price Exercisable Exercise Price
-------------------------------------------------------- -----------------------------
<S> <C> <C> <C> <C> <C>
$30.75 82,500 2.59 $30.75 63,946 $30.75
$27.13 - $29.84 282,043 2.58 $27.15 236,915 $27.15
$17.06 - $22.25 65,606 4.18 $19.81 17,588 $17.06
======================================================== =============================
</TABLE>
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 options granted in 1999 and 1997,
respectively: risk free interest rate of 5.77% and
6.04%; dividend yield of 1.7% and 1.6%; volatility
factors of the expected market price of the Company's
common stock of 27.39% and 20.60%; and a weighted
average expected option life of 2.71 and 2.29 years.
Had compensation cost for the Company's stock option
plan been determined based on the fair value at the
grant dates for awards under the Plan consistent with
the method of SFAS No.123, the Company's net income
and earnings per share would have been reduced to the
pro forma amounts indicated below:
<TABLE>
<CAPTION>
(Dollars In Thousands Except For Years Ended
Per Share Figures) June 30, 1999 June 30, 1998 June 30, 1997
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income As reported $95,129 $96,130 $88,706
Pro forma $94,555 $96,057 $87,746
Earnings per Share
Basic and Diluted As reported $ 2.28 $ 2.22 $ 2.01
Pro forma $ 2.26 $ 2.22 $ 1.99
===================================================================================
</TABLE>
10. PENSION AND OTHER The Company and certain of its operating subsidiaries
POSTRETIREMENT BENEFITS provide multiple defined benefit pension and
postretirement medical and life insurance benefit
plans. Benefits under the defined benefit pension
plans are primarily based on negotiated rates and
years of service and cover the union workers at such
locations. The Company contributes to these pension
plans at least the minimum amount required by
regulation or contract. The Company recognizes the
cost of postretirement medical and life insurance
benefits as the employees render service in
accordance with SFAS No. 106, "Employers' Accounting
for Postretirement Benefits Other than Pensions."
Benefits are funded as incurred. Relevant information
with respect to these defined benefit pension and
postretirement medical and life insurance benefits as
of June 30, can be summarized as follows:
<PAGE> 17
<TABLE>
<CAPTION>
OTHER
PENSION BENEFITS POSTRETIREMENT BENEFITS
----------------------------------------------------------------- -----------------------
(Dollars In Thousands) 1999 1998 1999 1998
----------------------------------------------------------------- -----------------------
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year $28,409 $24,361 $2,850 $2,875
Service cost 491 559 109 102
Interest cost 1,851 1,785 192 215
Amendments 808 18
Actuarial loss (gain) (1,526) 3,165 (192) (119)
Benefits paid (1,760) (1,479) (202) (223)
----------------------------------------------------------------- -----------------------
Benefit obligation at end of year 28,273 28,409 2,757 2,850
----------------------------------------------------------------- -----------------------
CHANGE IN PLAN ASSETS
Fair value of plan assets at
beginning of year 34,794 30,262
Actual return on plan assets 1,738 5,927
Employer contribution 294 84 202 223
Benefits paid (1,760) (1,479) (202) (223)
----------------------------------------------------------------- -----------------------
Fair value of plan assets at end of year 35,066 34,794
----------------------------------------------------------------- -----------------------
Funded status 6,793 6,385 (2,757) (2,850)
Unrecognized net actuarial (gain) (6,436) (6,430) (643) (463)
Unrecognized prior service cost 2,797 2,189
Unrecognized net transition obligation 177 208
----------------------------------------------------------------- -----------------------
Prepaid (accrued) benefit cost $ 3,331 $ 2,352 ($3,400) ($3,313)
================================================================= =======================
WEIGHTED-AVERAGE ASSUMPTIONS AS OF JUNE 30
---------------------------------------------------------------------------------------------
Discount rate 7.25% 6.75% 7.25% 6.75%
Expected return on plan assets 9.00% 9.00%
</TABLE>
For measurement purposes, annual increases in medical
costs are initially assumed to total approximately 7%
per year and gradually decline to 5% by approximately
the year 2003 and remain level thereafter.
<TABLE>
<CAPTION>
OTHER
PENSION BENEFITS POSTRETIREMENT BENEFITS
------------------------------------------------------------------------ -----------------------
(Dollars In Thousands) 1999 1998 1997 1999 1998 1997
------------------------------------------------------------------------ -----------------------
<S> <C> <C> <C> <C> <C> <C>
COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost $491 $559 $537 $109 $102 $ 99
Interest cost 1,851 1,785 1,681 192 215 227
Expected return on plan assets (3,056) (2,649) (2,268)
Amortization of unrecognized net gain (202) (230) (45) (11) (4)
Amortization of prior service cost 200 148 147
Amortization of unrecognized
net obligation existing at transition 31 31 31
------------------------------------------------------------------------ -----------------------
Net periodic benefit cost (benefit) ($685) ($356) $ 83 $290 $313 $326
======================================================================== =======================
</TABLE>
The majority of the pension 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 $4,814,000, $5,284,000 and $4,500,000
as of June 30, 1999, 1998 and 1997, respectively.
<PAGE> 18
Assumed health care cost rates can have a significant
effect on the amounts reported for the health care
plans. A one-percentage-point change in assumed
health care cost trend rates would have the following
effect:
<TABLE>
<CAPTION>
1-Percentage- 1-Percentage-
(Dollars in Thousands) Point Increase Point Decrease
---------------------------------------------------------------------------------------
<S> <C> <C>
Effect on total of service and interest cost components $29 ($25)
Effect on postretirement benefit obligation as of June
30, 1999 $175 ($152)
</TABLE>
The Company and certain of its subsidiaries also
participate in multiemployer plans that provide
pension and postretirement health and welfare
benefits to the union workers at such locations. The
Company's contributions required by its participation
in the multiemployer plans totaled $2,904,000,
$2,723,000 and $2,488,000 in 1999, 1998 and 1997,
respectively.
During fiscal 1998, the Company adopted the Lancaster
Colony Corporation 401(k) Profit Sharing Plan and
Trust ("401(k) Plan"). In general, the 401(k) Plan
extends participation to all domestic employees,
except those covered by a collective bargaining
agreement. The Company's contribution is 40% of the
participant's contribution up to a maximum of 4% of
the participant's annual compensation and is funded
annually at the end of the 401(k) Plan year, December
31. The funds are invested in mutual funds with the
exception of the Company contribution which is
invested in Company stock. The Company's 401(k) Plan
contributions totaled approximately $800,000 and
$174,000 for the years ended June 30, 1999 and 1998,
respectively.
The Company also sponsors an Employee Stock Ownership
Plan ("ESOP"). Effective January 1, 1998, the ESOP
was frozen and all benefit accruals under and further
contributions to the ESOP ceased. All participants in
the plan at that time were immediately 100% vested.
The ESOP was fully paid by the Company and generally
provided coverage to all domestic employees, except
those covered by a collective bargaining agreement.
Previously, 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 1,791,585 shares of the Company's common
stock in the open market. Contributions to the ESOP
were to be not less than that required by the terms
of the loan agreement between the Company and the
ESOP. The Company used the shares-allocated method of
accounting in determining the amount of expense
related to each contribution. The loan to the ESOP
was paid in full in fiscal 1997. The pretax expense
associated with 1997 totaled $1,169,000 which is net
of dividends of $110,000 on the unallocated shares.
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 2005. 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): 2000 - $4,259; 2001 - $2,985; 2002 -
$1,970; 2003 - $1,535; 2004 - $1,041; thereafter -
$118.
Total rent expense, including short-term cancelable
leases, during 1999, 1998 and 1997 is summarized as
follows:
<TABLE>
<CAPTION>
(Dollars In Thousands) 1999 1998 1997
----------------------------------------------------------------
<S> <C> <C> <C>
Operating leases:
Minimum rentals $4,844 $5,477 $4,545
Contingent rentals 328 534 558
Short-term cancelable leases 2,172 2,113 2,808
----------------------------------------------------------------
Total $7,344 $8,124 $7,911
================================================================
</TABLE>
<PAGE> 19
12. CONTINGENCIES AND At June 30, 1999, the Company is a party to various
ENVIRONMENTAL MATTERS 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
consolidated financial statements.
INDEPENDENT AUDITORS' REPORT
To the Directors and Shareholders of Lancaster Colony Corporation
We have audited the accompanying consolidated balance sheets of Lancaster Colony
Corporation and its subsidiaries as of June 30, 1999 and 1998, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended June 30, 1999. 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, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
June 30, 1999 in conformity with generally accepted accounting principles.
/S/ DELOITTE & TOUCHE LLP
Columbus, Ohio
August 25, 1999
<PAGE> 20
SELECTED QUARTERLY FINANCIAL DATA
Lancaster Colony Corporation and Subsidiaries
For the Years Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
Diluted
(Thousands Except Per Net Gross Net Earnings Stock Prices(1) Dividends Paid
Share Figures) Sales Margin Income Per Share(1) High Low Per Share(1)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1999
First quarter $ 244,080 $ 73,267 $20,338 $ .48 $40.000 $27.750 $ .140
Second quarter 300,590 92,284 28,213 .67 32.125 24.063 .150
Third quarter 247,227 76,519 21,834 .53 32.000 26.500 .150
Fourth quarter 253,805 79,846 24,744 .61 35.813 24.688 .150
- ---------------------------------------------------------------------------------------------------------
Year $1,045,702 $321,916 $95,129 $2.28 $40.000 $24.063 $ .590
=========================================================================================================
1998
First quarter $ 237,174 $ 75,154 $20,861 $ .48 $36.167 $32.000 $ .127
Second quarter 300,754 95,046 28,967 .67 38.500 31.833 .133
Third quarter 237,628 76,250 22,796 .53 44.750 37.333 .140
Fourth quarter 233,196 77,947 23,506 .55 45.375 36.750 .140
- ---------------------------------------------------------------------------------------------------------
Year $1,008,752 $324,397 $96,130 $2.22 $45.375 $31.833 $ .540
=========================================================================================================
</TABLE>
(1) Adjusted for the 3-for-2 stock split paid January 1998.
Lancaster Colony common stock trades on The Nasdaq Stock Market(R) under the
symbol LANC. Stock prices were provided by The Nasdaq Stock Market(R). The
number of shareholders as of September 17, 1999 was approximately 8,700. The
highest and lowest prices for the Company's common stock from July 1, 1999 to
September 17, 1999 were $36.94 and $29.00.
<PAGE> 1
Exhibit 21
<TABLE>
LANCASTER COLONY CORPORATION
SIGNIFICANT SUBSIDIARIES OF REGISTRANT
<CAPTION>
State Percent of
Name of Incorporation Ownership
---- ---------------- ----------
<S> <C> <C>
Colony Printing & Labeling, Inc. Indiana 100%
Dee Zee, Inc. Ohio 100%
E. O. Brody Company Ohio 100%
Fostoria Glass, LLC Ohio 100%
Indiana Glass Company Indiana 100%
Jackson Plastics Operations, Inc. Ohio 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 25, 1999, appearing in and incorporated by reference in
this Annual Report on Form 10-K of Lancaster Colony Corporation for the year
ended June 30, 1999.
/S/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Columbus, Ohio
September 23, 1999
<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, 1999 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-30-1999
<PERIOD-END> JUN-30-1999
<CASH> 18,860
<SECURITIES> 0
<RECEIVABLES> 126,568
<ALLOWANCES> 3,300
<INVENTORY> 169,421
<CURRENT-ASSETS> 328,379
<PP&E> 394,061
<DEPRECIATION> 218,444
<TOTAL-ASSETS> 550,014
<CURRENT-LIABILITIES> 116,217
<BONDS> 3,575
0
0
<COMMON> 50,912
<OTHER-SE> 363,943
<TOTAL-LIABILITY-AND-EQUITY> 550,014
<SALES> 1,045,702
<TOTAL-REVENUES> 1,045,702
<CGS> 723,786
<TOTAL-COSTS> 723,786
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,718
<INCOME-PRETAX> 153,462
<INCOME-TAX> 58,333
<INCOME-CONTINUING> 95,129
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 95,129
<EPS-BASIC> 2.28
<EPS-DILUTED> 2.28
</TABLE>
