<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
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 March 31, 2000, there were approximately 39,209,000 shares of
common stock, no par value per share, outstanding.
1 of 10
<PAGE> 2
LANCASTER COLONY CORPORATION AND SUBSIDIARIES
INDEX
Page No.
--------
Part I. Financial Information
Condensed Consolidated Balance Sheets -
March 31, 2000 and June 30, 1999 3
Condensed Consolidated Statements of Income -
Three Months and Nine Months
Ended March 31, 2000 and 1999 4
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended March 31, 2000 and 1999 5
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of the Results
of Operations and Financial Condition 7-9
Part II. Other Information
Item 6 - Exhibits and Reports on Form 8-K 9
Signatures 9
Exhibit 27 - Financial Data Schedule 10
2 of 10
<PAGE> 3
<TABLE>
LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31 June 30
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and equivalents $ 2,187,000 $ 18,860,000
Receivables - net of allowance for doubtful accounts 124,762,000 123,268,000
Inventories:
Raw materials and supplies 45,413,000 41,741,000
Finished goods and work in process 121,202,000 127,680,000
------------ ------------
Total inventories 166,615,000 169,421,000
Prepaid expenses and other current assets 22,363,000 16,830,000
------------ ------------
Total current assets 315,927,000 328,379,000
Property, Plant and Equipment - At cost 410,109,000 394,061,000
Less Accumulated Depreciation 236,814,000 218,444,000
------------ ------------
Property, plant and equipment - net 173,295,000 175,617,000
Goodwill - net of accumulated amortization 34,629,000 35,768,000
Other Assets 9,411,000 10,250,000
------------ ------------
Total Assets $533,262,000 $550,014,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 535,000 $ 25,520,000
Accounts payable 44,235,000 45,742,000
Accrued liabilities 40,766,000 44,955,000
------------ ------------
Total current liabilities 85,536,000 116,217,000
Long-Term Debt - Less current portion 3,040,000 3,575,000
Other Noncurrent Liabilities 6,859,000 7,081,000
Deferred Income Taxes 9,791,000 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 March 31,
2000 - no par value - 47,144,743 shares; June 30, 1999 no
par value - 47,107,199 shares 51,951,000 50,912,000
Retained earnings 605,251,000 548,143,000
Accumulated other comprehensive income 104,000 106,000
------------ ------------
Total 657,306,000 599,161,000
Less:
Common stock in treasury, at cost
March 31, 2000 - 7,935,335 shares;
June 30, 1999 - 6,559,403 shares 229,270,000 184,306,000
------------ ------------
Total shareholders' equity 428,036,000 414,855,000
------------ ------------
Total Liabilities and Shareholders' Equity $533,262,000 $550,014,000
============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements
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<PAGE> 4
<TABLE>
LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended
March 31 March 31
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Sales $262,764,000 $247,227,000 $847,615,000 $791,897,000
Cost of Sales 184,241,000 170,708,000 588,913,000 549,827,000
------------ ------------ ------------ ------------
Gross Margin 78,523,000 76,519,000 258,702,000 242,070,000
Selling, General and
Administrative Expenses 45,913,000 40,563,000 134,640,000 126,103,000
------------ ------------ ------------ ------------
Operating Income 32,610,000 35,956,000 124,062,000 115,967,000
Other Income (Expense):
Interest expense (245,000) (600,000) (1,503,000) (2,115,000)
Interest income and other - net 187,000 (140,000) (35,000) (53,000)
------------ ------------ ------------ ------------
Income Before Income Taxes 32,552,000 35,216,000 122,524,000 113,799,000
Taxes Based on Income 12,450,000 13,382,000 46,729,000 43,414,000
------------ ------------ ------------ ------------
Net Income $ 20,102,000 $ 21,834,000 $ 75,795,000 $ 70,385,000
============ ============ ============ ============
Net Income Per Common Share:
Basic $ .51 $ .53 $ 1.90 $ 1.67
Diluted $ .51 $ .53 $ 1.90 $ 1.67
Cash Dividends Per Common Share $ .16 $ .15 $ .47 $ .44
Weighted Average Common Shares
Outstanding:
Basic 39,360,000 41,519,000 39,855,000 42,069,000
Diluted 39,410,000 41,541,000 39,926,000 42,103,000
</TABLE>
See Notes to Condensed Consolidated Financial Statements
4 of 10
<PAGE> 5
<TABLE>
LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Nine Months Ended
March 31
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 75,795,000 $ 70,385,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 25,589,000 26,534,000
Provision for losses on accounts receivable 5,334,000 1,233,000
Deferred income taxes and other noncash charges (2,317,000) (2,213,000)
Loss (gain) on sale of property 120,000 (117,000)
Changes in operating assets and liabilities:
Receivables (6,828,000) (27,866,000)
Inventories 2,806,000 16,496,000
Prepaid expenses and other current assets (1,933,000) (1,341,000)
Accounts payable (1,507,000) 898,000
Accrued liabilities (4,189,000) 8,971,000
------------ ------------
Net cash provided by operating activities 92,870,000 92,980,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for acquisitions, net of cash acquired (1,825,000)
Payments on property additions (18,628,000) (26,652,000)
Proceeds from sale of property 33,000 327,000
Other - net (2,814,000) (2,320,000)
------------ ------------
Net cash used in investing activities (21,409,000) (30,470,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock (44,964,000) (49,579,000)
Payment of dividends (18,687,000) (18,468,000)
Payments on long-term debt (25,520,000) (510,000)
Common stock issued upon exercise of stock
options and related tax benefits 1,039,000 192,000
------------ ------------
Net cash used in financing activities (88,132,000) (68,365,000)
------------ ------------
Effect of exchange rate changes on cash (2,000) 13,000
------------ ------------
Net change in cash and equivalents (16,673,000) (5,842,000)
Cash and equivalents at beginning of year 18,860,000 23,224,000
------------ ------------
Cash and equivalents at end of period $ 2,187,000 $ 17,382,000
============ ============
SUPPLEMENTAL DISCLOSURE OF OPERATING CASH FLOWS:
Cash paid during the period for:
Interest $ 2,433,000 $ 2,690,000
============ ============
Income taxes $ 55,682,000 $ 41,079,000
============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements
5 of 10
<PAGE> 6
LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED MARCH 31, 2000 AND 1999
(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 third quarter and year-to-date unaudited
results by segment are as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31 March 31
(Dollars in Thousands) 2000 1999 2000 1999
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET SALES
Specialty Foods $117,832 $102,174 $362,912 $328,225
Glassware and Candles 74,251 83,772 291,849 291,599
Automotive 70,681 61,281 192,854 172,073
-------------------------------------------------------------------------------------------
Total $262,764 $247,227 $847,615 $791,897
===========================================================================================
OPERATING INCOME
Specialty Foods $ 14,356 $ 13,532 $ 57,931 $ 48,834
Glassware and Candles 15,900 19,889 64,677 63,079
Automotive 3,686 3,879 5,770 8,022
Corporate expenses (1,332) (1,344) (4,316) (3,968)
-------------------------------------------------------------------------------------------
Total $ 32,610 $ 35,956 $124,062 $115,967
===========================================================================================
</TABLE>
(3) 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). The Company is in the process of
reviewing contracts to assess the impact of this statement on its
financial statements and disclosures. While this review has not yet
been completed, the Company is not aware of any contracts that would
have a significant impact on its financial statements and disclosures,
at this time.
(4) Certain prior year amounts have been reclassed to conform to the
current year presentation.
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<PAGE> 7
LANCASTER COLONY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FOR THE PERIODS ENDED MARCH 31, 2000 AND 1999
<TABLE>
RESULTS OF OPERATIONS
<CAPTION>
Three Months Ended Nine Months Ended
March 31 March 31
(Dollars in Thousands) 2000 1999 2000 1999
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET SALES
Specialty Foods $117,832 $102,174 $362,912 $328,225
Glassware and Candles 74,251 83,772 291,849 291,599
Automotive 70,681 61,281 192,854 172,073
-------------------------------------------------------------------------------------------
Total $262,764 $247,227 $847,615 $791,897
===========================================================================================
</TABLE>
As reflected above, consolidated net sales of $262,764,000 and $847,615,000 for
the respective three and nine-month periods ended March 31, 2000 increased 6%
and 7%, respectively, over the corresponding fiscal 1999 totals of $247,227,000
and $791,897,000. Net sales for the Specialty Foods segment increased 15% and
11% for the respective three and nine-month periods as a result of improved
sales of foodservice and retail products. Foodservice growth was attributable to
the acquisition of new accounts and expanded sales to existing customers.
Leading the retail improvement were increased sales of frozen bread products and
of produce dips and dressings. Net sales of the Automotive segment also
increased 15% and 12% for the respective three and nine-month periods. This
segment benefited from increased demand by original equipment manufacturers
("OEM") for floor mats and for aluminum truck and van accessories. Net sales of
the Glassware and Candles segment for the fiscal 2000 nine-month period were
essentially level with that of the prior year. However, this segment's net sales
for the three months ended March 31, 2000 declined 11% from the comparable 1999
period due to lower candle sales made to various customers. This decline in
candle sales is not specifically attributable to any one factor but appears to
have been influenced by increased retail sales in advance of the year 2000
millennium, competitive import alternatives and less promotional activity
conducted by certain customers. This trend has continued into the Company's
fiscal fourth quarter.
The Company's consolidated gross margins as a percentage of net sales of 29.9%
and 30.5% for the respective three and nine-month periods ended March 31, 2000
compared to 31.0% and 30.6% noted for the comparable periods of fiscal 1999.
Higher margins were achieved within the Specialty Foods segment during both of
the current fiscal year's comparable periods. This improvement resulted from
decreases in certain raw material costs, particularly soybean oil and cream, as
well as a more favorable sales mix. Within the Automotive segment, a substantial
decline of gross margins occurred within the floor mat operations as influenced
by a less favorable sales mix, manufacturing and distribution inefficiencies, as
well as increased provisions for slow-moving inventory. These inefficiencies
largely resulted from the current mix and higher volume of OEM floor mats being
sold. However, the adverse operating conditions did moderate in the three months
ended March 31, 2000 relative to the first six months of fiscal 2000. Gross
margins of the Glassware and Candles segment were also impacted by lower
glassware margins as affected by a less favorable sales mix and operational
performance.
Consolidated selling, general and administrative costs of $45,913,000 and
$134,640,000 increased 13% and 7%, respectively, over the corresponding fiscal
1999 three and nine-month totals of $40,563,000 and $126,103,000. A portion of
this increase has been volume-driven. Further increase in such expenses was
mitigated in the nine-month period by certain cost reduction efforts implemented
within the Glassware and Candles segment during December 1998 that continued
into the current fiscal year. Also included in both periods of fiscal 2000 is a
provision for doubtful accounts of approximately $5 million relating to a
customer of the Specialty Foods segment that was the designated distributor for
a number of quick serve and casual dining restaurants using products
manufactured by the segment. This customer filed for reorganization under
Chapter 11 of the Bankruptcy Code on January 31, 2000. The recovery, if any, of
the fully reserved pre-petition indebtedness related to this account will be
recognized when received.
7 of 10
<PAGE> 8
After the foregoing bad debt provision, a decline of 9% occurred in the
Company's operating income for the three months ended March 31, 2000 compared to
that of the corresponding period of 1999. Operating income for the nine months
ended March 31, 2000 of $124,062,000 increased 7% from the 1999 total of
$115,967,000. By segment, the Company's operating income can be summarized as
follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31 March 31
(Dollars in Thousands) 2000 1999 2000 1999
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING INCOME
Specialty Foods $14,356 $13,532 $ 57,931 $ 48,834
Glassware and Candles 15,900 19,889 64,677 63,079
Automotive 3,686 3,879 5,770 8,022
Corporate expenses (1,332) (1,344) (4,316) (3,968)
------------------------------------------------------------------------------------------------
Total $32,610 $35,956 $124,062 $115,967
================================================================================================
</TABLE>
Similar to operating income, net income for the three-month period ended March
31, 2000 declined 8% to $20,102,000 compared to the $21,834,000 reported in
1999. Net income for the nine-month period ended March 31, 2000 increased 8% to
$75,795,000 from $70,385,000 reported in 1999. As further affected by the
Company's share repurchase program, fully diluted earnings per share of $.51 and
$1.90 for the three and nine-month periods decreased 4% and increased 14%,
respectively, relative to the preceding year's comparable totals of $.53 and
$1.67. On a proforma basis, excluding the effects of the bad debt provision
noted above, fully diluted earnings per share would have been $.59 and $1.98 for
the respective three and nine-month periods of fiscal 2000.
FINANCIAL CONDITION
Net cash provided by operating activities for the nine months ended March 31,
2000 totaled $92,870,000, which did not substantially differ from the
$92,980,000 provided in the nine months ended March 31, 1999. The working
capital provided by a higher level of net income in fiscal 2000 was essentially
offset by various changes in working capital components. Net working capital
increased from $212,162,000 at June 30, 1999 to $230,391,000 at March 31, 2000.
Significant investment activities for the first nine months included $18,628,000
expended on property additions. The Company's most significant financing
activities during the nine months ended March 31, 2000 included $44,964,000
expended for the acquisition of approximately 1,375,000 shares of Company stock.
Shares remaining authorized for future buyback at March 31, 2000 totaled
1,667,000. Another significant financing activity was the reduction in the
current portion of long-term debt of $24,985,000 due to payment of a $25,000,000
note due February 2000. Additionally, dividends paid during the current year of
$18,687,000 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.
8 of 10
<PAGE> 9
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.
PART II. OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K - There were no reports filed on Form 8-K
for the three months ended March 31, 2000.
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: May 10, 2000 BY: /S/ John B. Gerlach, Jr.
----------------- ------------------------------
JOHN B. GERLACH, JR.
Chairman, Chief Executive
Officer and President
Date: May 10, 2000 BY: /S/ John L. Boylan
----------------- ------------------------------
JOHN L. BOYLAN
Treasurer, Vice President,
Assistant Secretary and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
9 of 10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S CONDENSED CONSOLIDATED BALANCE SHEET AND STATEMENT OF INCOME FOR
THE NINE MONTHS ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,187
<SECURITIES> 0
<RECEIVABLES> 133,512
<ALLOWANCES> 8,750
<INVENTORY> 166,615
<CURRENT-ASSETS> 315,927
<PP&E> 410,109
<DEPRECIATION> 236,814
<TOTAL-ASSETS> 533,262
<CURRENT-LIABILITIES> 85,536
<BONDS> 0
0
0
<COMMON> 51,951
<OTHER-SE> 376,085
<TOTAL-LIABILITY-AND-EQUITY> 533,262
<SALES> 847,615
<TOTAL-REVENUES> 847,615
<CGS> 588,913
<TOTAL-COSTS> 588,913
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,503
<INCOME-PRETAX> 122,524
<INCOME-TAX> 46,729
<INCOME-CONTINUING> 75,795
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 75,795
<EPS-BASIC> 1.90
<EPS-DILUTED> 1.90
</TABLE>
