<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 0-4065-1
LANCASTER COLONY CORPORATION
(Exact name of registrant as specified in its charter)
OHIO 13-1955943
(State or other jurisdiction of (I.R.S. Employer
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, including area code)
NONE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
As of December 31, 1999, there were approximately 39,606,000 shares of
common stock, no par value per share, outstanding.
1 of 10
<PAGE> 2
LANCASTER COLONY CORPORATION AND SUBSIDIARIES
<TABLE>
INDEX
<CAPTION>
Page No.
--------
<S> <C>
Part I. Financial Information
Condensed Consolidated Balance Sheets -
December 31, 1999 and June 30, 1999 3
Condensed Consolidated Statements of Income -
Three Months and Six Months
Ended December 31, 1999 and 1998 4
Condensed Consolidated Statements of Cash Flows -
Six Months Ended December 31, 1999 and 1998 5
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of the Results
of Operations and Financial Condition 7-8
Part II. Other Information
Item 4 - Submission of Matters to a Vote of
Security Holders 9
Item 6 - Exhibits and Reports on Form 8-K 9
Signatures 9
Exhibit 27 - Financial Data Schedule 10
</TABLE>
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<PAGE> 3
LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31 June 30
1999 1999
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and equivalents $ 16,887,000 $ 18,860,000
Receivables - net of allowance for doubtful accounts 154,915,000 123,268,000
Inventories:
Raw materials and supplies 48,573,000 41,741,000
Finished goods and work in process 111,700,000 127,680,000
------------ ------------
Total inventories 160,273,000 169,421,000
Prepaid expenses and other current assets 19,363,000 16,830,000
------------ ------------
Total current assets 351,438,000 328,379,000
Property, Plant and Equipment - At cost 403,550,000 394,061,000
Less Accumulated Depreciation 230,112,000 218,444,000
------------ ------------
Property, plant and equipment - net 173,438,000 175,617,000
Goodwill - net of accumulated amortization 35,003,000 35,768,000
Other Assets 9,505,000 10,250,000
------------ ------------
Total Assets $569,384,000 $550,014,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 25,535,000 $ 25,520,000
Accounts payable 49,963,000 45,742,000
Accrued liabilities 52,714,000 44,955,000
------------ ------------
Total current liabilities 128,212,000 116,217,000
Long-Term Debt - Less current portion 3,040,000 3,575,000
Other Noncurrent Liabilities 6,999,000 7,081,000
Deferred Income Taxes 4,499,000 8,286,000
Shareholders' Equity:
Preferred stock - authorized 3,050,000 shares issuable in series; Class A
- $1.00 par value, authorized 750,000 shares; Class B and C - no par
value, authorized 1,150,000 shares each; outstanding - none
Common stock - authorized 75,000,000 shares; issued December 31, 1999 -
no par value - 47,143,643 shares; June 30, 1999 - no par value -
47,107,199 shares 51,921,000 50,912,000
Retained earnings 591,439,000 548,143,000
Accumulated other comprehensive income 108,000 106,000
------------ ------------
Total 643,468,000 599,161,000
Less:
Common stock in treasury, at cost
December 31, 1999 - 7,537,188 shares;
June 30, 1999 - 6,559,403 shares 216,834,000 184,306,000
------------ ------------
Total shareholders' equity 426,634,000 414,855,000
------------ ------------
Total Liabilities and Shareholders' Equity $569,384,000 $550,014,000
============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements
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<PAGE> 4
LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31 December 31
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Sales $324,407,000 $300,590,000 $584,851,000 $544,670,000
Cost of Sales 222,865,000 208,306,000 404,672,000 379,119,000
------------ ------------ ------------ ------------
Gross Margin 101,542,000 92,284,000 180,179,000 165,551,000
Selling, General and
Administrative Expenses 47,204,000 46,156,000 88,727,000 85,540,000
------------ ------------ ------------ ------------
Operating Income 54,338,000 46,128,000 91,452,000 80,011,000
Other Income (Expense):
Interest expense (672,000) (866,000) (1,258,000) (1,515,000)
Interest income and other - net (186,000) 48,000 (222,000) 87,000
------------ ------------ ------------ ------------
Income Before Income Taxes 53,480,000 45,310,000 89,972,000 78,583,000
Taxes Based on Income 20,360,000 17,097,000 34,279,000 30,032,000
------------ ------------ ------------ ------------
Net Income $ 33,120,000 $ 28,213,000 $ 55,693,000 $ 48,551,000
============ ============ ============ ============
Net Income Per Common Share:
Basic $ .83 $ .67 $ 1.39 $ 1.15
Diluted $ .83 $ .67 $ 1.39 $ 1.15
Cash Dividends Per Common Share $ .16 $ .15 $ .31 $ .29
Weighted Average Common Shares
Outstanding:
Basic 39,854,000 42,136,000 40,103,000 42,344,000
Diluted 39,931,000 42,160,000 40,184,000 42,384,000
</TABLE>
See Notes to Condensed Consolidated Financial Statements
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<PAGE> 5
LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
December 31
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 55,693,000 $ 48,551,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 17,022,000 17,593,000
Deferred income taxes and other noncash charges (3,869,000) (2,406,000)
Loss (gain) on sale of property 21,000 (120,000)
Changes in operating assets and liabilities:
Receivables (31,647,000) (40,438,000)
Inventories 9,148,000 20,492,000
Prepaid expenses and other current assets (2,533,000) (1,847,000)
Accounts payable 4,221,000 (2,395,000)
Accrued liabilities 7,759,000 7,673,000
------------ ------------
Net cash provided by operating activities 55,815,000 47,103,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for acquisitions, net of cash acquired (1,825,000)
Payments on property additions (11,651,000) (17,265,000)
Proceeds from sale of property 31,000 314,000
Other - net (1,734,000) (2,386,000)
------------ ------------
Net cash used in investing activities (13,354,000) (21,162,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock (32,528,000) (29,308,000)
Payment of dividends (12,397,000) (12,263,000)
Payments on long-term debt (520,000) (510,000)
Common stock issued upon exercise of stock
options including related tax benefits 1,009,000 16,000
------------ ------------
Net cash used in financing activities (44,436,000) (42,065,000)
------------ ------------
Effect of exchange rate changes on cash 2,000 21,000
------------ ------------
Net change in cash and equivalents (1,973,000) (16,103,000)
Cash and equivalents at beginning of year 18,860,000 23,224,000
------------ ------------
Cash and equivalents at end of period $ 16,887,000 $ 7,121,000
============ ============
SUPPLEMENTAL DISCLOSURE OF OPERATING CASH FLOWS:
Cash paid during the period for:
Interest $ 1,253,000 $ 1,518,000
============ ============
Income taxes $ 29,763,000 $ 19,517,000
============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements
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<PAGE> 6
LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED DECEMBER 31, 1999 AND 1998
(1) The interim condensed consolidated financial statements are unaudited
but, in the opinion of management, reflect all adjustments necessary
for a fair presentation of the results of operations and financial
position for such periods. All such adjustments reflected in the
interim condensed consolidated financial statements are considered to
be of a normal recurring nature. The results of operations for any
interim period are not necessarily indicative of results for the full
year. Accordingly, these financial statements should be read in
conjunction with the financial statements and notes thereto contained
in the Company's annual report on Form 10-K for the year ended June 30,
1999.
(2) 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." Comparative second quarter and year-to-date unaudited
results by segment are as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31 December 31
(Dollars in Thousands) 1999 1998 1999 1998
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET SALES
Specialty Foods $129,448 $118,646 $245,080 $226,051
Glassware and Candles 130,955 123,714 217,598 207,826
Automotive 64,004 58,230 122,173 110,793
- ------------------------------------------------------------------------------------
Total $324,407 $300,590 $584,851 $544,670
====================================================================================
OPERATING INCOME
Specialty Foods $ 24,810 $ 19,168 $ 43,575 $ 35,302
Glassware and Candles 30,911 26,292 48,777 43,190
Automotive 237 2,118 2,084 4,143
Corporate expenses (1,620) (1,450) (2,984) (2,624)
- ------------------------------------------------------------------------------------
Total $ 54,338 $ 46,128 $ 91,452 $ 80,011
====================================================================================
</TABLE>
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<PAGE> 7
LANCASTER COLONY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FOR THE PERIODS ENDED DECEMBER 31, 1999 AND 1998
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31 December 31
(Dollars in Thousands) 1999 1998 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET SALES
Specialty Foods $129,448 $118,646 $245,080 $226,051
Glassware and Candles 130,955 123,714 217,598 207,826
Automotive 64,004 58,230 122,173 110,793
- --------------------------------------------------------------------------------
Total $324,407 $300,590 $584,851 $544,670
================================================================================
</TABLE>
As reflected above, consolidated net sales of $324,407,000 and $584,851,000 for
the respective three and six-month periods ended December 31, 1999 increased 8%
and 7%, respectively, over the corresponding fiscal 1999 totals of $300,590,000
and $544,670,000. Net sales of the Specialty Foods segment increased 9% and 8%
for the respective three and six-month periods as a result of improved sales of
both retail and foodservice products. Retail growth was achieved through
increased sales of frozen bread items, produce dips and dressings. The Glassware
and Candles segment realized increased sales of 6% and 5% for the respective
three and six-month periods and benefited from greater sales of both consumer
glassware and candles. New glass drinkware and increased candle sales to
private-label customers led this growth. Net sales of the Automotive segment
achieved 10% growth for both of the comparable periods as driven by increased
demand from original equipment manufacturers ("OEM") for floor mats and aluminum
truck and van accessories.
The Company's consolidated gross margins as a percentage of net sales of 31.3%
and 30.8% increased for both the respective three and six-month periods ended
December 31, 1999 relative to the 30.7% and 30.4% noted for the comparable
periods of fiscal 1999. Higher margins were achieved within the Specialty Foods
segment during the current fiscal year due in part to decreases in certain raw
material costs, particularly soybean oil and cream, as well as a more favorable
sales mix. The Glassware and Candles segment also saw improved margins as a
result of higher sales volume and greater plant and distribution efficiencies
occurring within the candle manufacturing operations. Continuing inefficiencies
at the Oklahoma glassware manufacturing operations, however, impeded further
improvement. A substantial decline of gross margins within the floor mat
operations of the Automotive segment further offset the strengthened margins of
the other two segments. This decline was influenced by a less favorable sales
mix, manufacturing and distribution inefficiencies, as well as increased
provisions for slow-moving inventory. The inefficiencies largely resulted from
the current mix and higher volume of OEM floor mats being sold. Among the
increased costs being incurred are express freight and overtime premiums.
Consolidated selling, general and administrative costs of $47,204,000 and
$88,727,000 increased 2% and 4%, respectively, over the corresponding fiscal
1999 three and six-month totals of $46,156,000 and $85,540,000. Most of this
increase has been volume-driven, and further increase was mitigated by factors
associated with the product mix and certain cost reduction efforts implemented
within the Glassware and Candles segment during December 1998.
The foregoing factors contributed to the Company's consolidated operating income
totaling $54,338,000 and $91,452,000 for the respective three and six-month
periods ended December 31, 1999. These amounts represent increases of 18% and
14% over the corresponding fiscal 1999 totals of $46,128,000 and $80,011,000. By
segment, the Company's operating income can be summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31 December 31
(Dollars in Thousands) 1999 1998 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING INCOME
Specialty Foods $24,810 $19,168 $43,575 $35,302
Glassware and Candles 30,911 26,292 48,777 43,190
Automotive 237 2,118 2,084 4,143
Corporate expenses (1,620) (1,450) (2,984) (2,624)
- --------------------------------------------------------------------------------
Total $54,338 $46,128 $91,452 $80,011
================================================================================
</TABLE>
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<PAGE> 8
Net income of $33,120,000 and $55,693,000 for the three and six-month periods
ended December 31, 1999 increased 17% and 15% over the corresponding periods of
fiscal 1999. As further affected by the Company's share repurchase program,
fully diluted earnings per share of $.83 and $1.39 for the three and six-month
periods increased 24% and 21% compared to the preceding year's comparable totals
of $.67 and $1.15.
On January 31, 2000, AmeriServe Food Distribution, Inc. ("AmeriServe") filed for
reorganization under Chapter 11 of the Bankruptcy Code. AmeriServe, one of the
largest foodservice distribution companies in the United States, has been the
designated distributor for a number of quick serve and casual dining restaurants
using products sold by the Specialty Foods segment. As of January 31, 2000, this
segment's potentially uncollectible balance of gross accounts receivable due
from AmeriServe approximated $5 million. This balance predominately relates to
sales made in January 2000 and the Company believes that adequate reserves have
been established for uncollected receivables outstanding at December 31, 1999.
Due to the uncertainties associated with collection of the remaining balance, it
is anticipated that a nonrecurring charge to operating earnings will be required
in the quarter ended March 31, 2000. The Company, AmeriServe and the customers
of AmeriServe are engaged in discussions to maintain ongoing continuity of
service. The extent, if any, to which the Company's sales and income may be
adversely affected by service disruptions is not presently estimable.
FINANCIAL CONDITION
Net cash provided by operating activities for the six months ended December 31,
1999 totaled $55,815,000, which was $8,712,000 greater than the $47,103,000
provided in the six months ended December 31, 1998. This fluctuation in cash
flows largely resulted from the increase in net income and relative changes in
working capital components. Net working capital increased from $212,162,000 at
June 30, 1999 to $223,226,000 at December 31, 1999. Affecting this change were
seasonal increases in accounts receivable.
Significant investment activities for the first half included $11,651,000
expended on property additions. The Company's most significant financing
activities during the six months ended December 31, 1999 included $32,528,000
expended for the acquisition of approximately 977,000 shares of Company stock.
Shares remaining authorized for future buyback at December 31, 1999 totaled
2,064,935. Additionally, dividends paid during the current year of $12,397,000
increased 1% as a result of the effect of a higher stated dividend rate being
paid on common shares. However, much of this effect was offset by the impact of
a reduction in shares outstanding. Management anticipates that cash provided
from operations and the currently available lines of credit will be adequate to
meet the Company's foreseeable cash requirements over the remainder of fiscal
2000.
YEAR 2000
As of the date of this report, the Company has not experienced any significant
Year 2000 related issues. Mainframe applications, personal computers,
telecommunications equipment and programmable logic controllers associated with
certain manufacturing equipment are operating effectively. In addition, the
Company is not aware of any third-party vendors or principal suppliers that are
not Year 2000 compliant. Management will continue to monitor its critical
systems over the remainder of the year and will utilize contingency plans, if
the need arises. The costs and business implications which might be associated
with the adoption of such contingency plans is not estimable, but could be
significant.
SAFE HARBOR STATEMENT
UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995:
This Form 10-Q contains forward-looking statements related to future
growth and earnings opportunities. Such statements are based upon
certain assumptions and assessments made by management of the Company
in light of its experience and perception of historical trends,
current conditions, expected future developments and other factors it
believes to be appropriate. Actual results may differ as a result of
factors over which the Company has no control including the strength
of the economy, slower than anticipated sales growth, price and
product competition, and increases in raw materials costs. More
detailed statements regarding significant events which could affect
the Company's financial results are included in the Company's Forms
10-K and 10-Q filed with the Securities and Exchange Commission.
8 of 10
<PAGE> 9
PART II. OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
------------------------------------------------------------
The registrant held its annual meeting of the shareholders on November
15, 1999. Proxies for the meeting were solicited pursuant to Section 14(a) of
the Securities Exchange Act of 1934. There were no matters discussed or voted
upon at the annual meeting, except for the election of the following three
directors whose term will expire in 2002:
<TABLE>
<CAPTION>
Shares Shares
Voted Shares Not
"For" "Withheld" Voted
---------- ---------- ---------
<S> <C> <C> <C>
Robert L. Fox 34,081,433 97,940 6,038,006
John B. Gerlach, Jr. 34,081,275 98,098 6,038,006
Edward H. Jennings 34,076,881 102,492 6,038,006
</TABLE>
As of November 15, 1999, the following individuals also continued to
serve as directors of the registrant:
Kerrii B. Anderson Robert S. Hamilton
John L. Boylan Henry M. O'Neill, Jr.
Morris S. Halpern Zuheir Sofia
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K - There were no reports filed on Form 8-K
for the three months ended December 31, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LANCASTER COLONY CORPORATION
Date: February 9, 2000 BY: /S/ John B. Gerlach, Jr.
-------------------------- ------------------------------
JOHN B. GERLACH, JR.
Chairman, Chief Executive
Officer and President
Date: February 9, 2000 BY: /S/ John L. Boylan
-------------------------- ------------------------------
JOHN L. BOYLAN
Treasurer, Vice President,
Assistant Secretary and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S CONDENSED CONSOLIDATED BALANCE SHEET AND STATEMENT OF INCOME FOR
THE SIX MONTHS ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> DEC-31-1999
<CASH> 16,887
<SECURITIES> 0
<RECEIVABLES> 158,429
<ALLOWANCES> 3,514
<INVENTORY> 160,273
<CURRENT-ASSETS> 351,438
<PP&E> 403,550
<DEPRECIATION> 230,112
<TOTAL-ASSETS> 569,384
<CURRENT-LIABILITIES> 128,212
<BONDS> 3,040
0
0
<COMMON> 51,921
<OTHER-SE> 374,713
<TOTAL-LIABILITY-AND-EQUITY> 569,384
<SALES> 584,851
<TOTAL-REVENUES> 584,851
<CGS> 404,672
<TOTAL-COSTS> 404,672
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,258
<INCOME-PRETAX> 89,972
<INCOME-TAX> 34,279
<INCOME-CONTINUING> 55,693
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 55,693
<EPS-BASIC> 1.39
<EPS-DILUTED> 1.39
</TABLE>
