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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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 September 30, 2000, there were approximately 37,732,000 shares of
common stock, no par value per share, outstanding.
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LANCASTER COLONY CORPORATION AND SUBSIDIARIES
INDEX
Page No.
--------
Part I. Financial Information
Condensed Consolidated Balance Sheets -
September 30, 2000 and June 30, 2000 3
Condensed Consolidated Statements of Income -
Three Months Ended September 30, 2000 and 1999 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended September 30, 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
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<TABLE>
LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30 June 30
2000 2000
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and equivalents $ 757,000 $ 2,656,000
Receivables - net of allowance for doubtful accounts 136,575,000 118,991,000
Inventories:
Raw materials and supplies 51,656,000 43,882,000
Finished goods and work in process 144,737,000 131,598,000
------------ ------------
Total inventories 196,393,000 175,480,000
Prepaid expenses and other current assets 20,162,000 18,768,000
------------ ------------
Total current assets 353,887,000 315,895,000
Property, Plant and Equipment - At cost 425,116,000 413,183,000
Less Accumulated Depreciation 247,648,000 240,799,000
------------ ------------
Property, plant and equipment - net 177,468,000 172,384,000
Goodwill - net of accumulated amortization 58,595,000 34,553,000
Other Assets 8,640,000 9,012,000
------------ ------------
Total Assets $598,590,000 $531,844,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term bank loans $ 48,000,000 $ 8,250,000
Current portion of long-term debt 535,000 535,000
Accounts payable 50,691,000 43,690,000
Accrued liabilities 52,728,000 44,000,000
------------ ------------
Total current liabilities 151,954,000 96,475,000
Long-Term Debt - Less current portion 2,740,000 3,040,000
Other Noncurrent Liabilities 7,283,000 6,800,000
Deferred Income Taxes 11,241,000 10,046,000
Shareholders' Equity:
Preferred stock - authorized 3,050,000 shares issuable
in series; Class A - $1.00 par value, authorized
750,000 shares; Class B and C - no par value,
authorized 1,150,000 shares each; outstanding - none
Common stock - authorized 75,000,000 shares; issued
September 30, 2000 - no par value - 47,152,852 shares;
June 30, 2000 - no par value - 47,152,852 shares 52,115,000 52,115,000
Retained earnings 638,047,000 622,660,000
Accumulated other comprehensive income 107,000 115,000
------------ ------------
Total 690,269,000 674,890,000
Less:
Common stock in treasury, at cost September 30, 2000 -
9,420,435 shares; June 30, 2000 - 9,190,435 shares 264,897,000 259,407,000
------------ ------------
Total shareholders' equity 425,372,000 415,483,000
------------ ------------
Total Liabilities and Shareholders' Equity $598,590,000 $531,844,000
============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements
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<TABLE>
LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended
September 30
2000 1999
------------ ------------
<S> <C> <C>
Net Sales $263,945,000 $260,444,000
Cost of Sales 188,666,000 181,807,000
------------ ------------
Gross Margin 75,279,000 78,637,000
Selling, General and
Administrative Expenses 39,912,000 41,523,000
------------ ------------
Operating Income 35,367,000 37,114,000
Other Income (Expense):
Interest expense (260,000) (586,000)
Interest income and other - net (181,000) (36,000)
------------ ------------
Income Before Income Taxes 34,926,000 36,492,000
Taxes Based on Income 13,488,000 13,919,000
------------ ------------
Net Income $ 21,438,000 $ 22,573,000
============ ============
Net Income Per Common Share:
Basic $ .57 $ .56
Diluted .57 .56
Cash Dividends Per Common Share $ .16 $ .15
Weighted Average Common
Shares Outstanding:
Basic 37,886,000 40,352,000
Diluted 37,893,000 40,437,000
</TABLE>
See Notes to Condensed Consolidated Financial Statements
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<TABLE>
LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Three Months Ended
September 30
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 21,438,000 $ 22,573,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 8,726,000 8,508,000
Deferred income taxes and other noncash charges 1,678,000 (1,685,000)
Loss (gain) on sale of property 21,000 (2,000)
Changes in operating assets and liabilities:
Receivables (16,743,000) (18,929,000)
Inventories (19,618,000) (17,615,000)
Prepaid expenses and other current assets (1,366,000) (1,364,000)
Accounts payable 6,297,000 9,014,000
Accrued liabilities 8,020,000 16,532,000
------------ ------------
Net cash provided by operating activities 8,453,000 17,032,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for acquisition, net of cash acquired (32,444,000)
Payments on property additions (5,200,000) (6,247,000)
Proceeds from sale of property 9,000 24,000
Other - net (618,000) (583,000)
------------ ------------
Net cash used in investing activities (38,253,000) (6,806,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock (5,490,000) (18,165,000)
Payment of dividends (6,051,000) (6,043,000)
Net change in short-term bank loans 39,750,000
Payments on long-term debt (300,000) (300,000)
Common stock issued upon exercise of stock
options including related tax benefits 490,000
------------ ------------
Net cash provided by (used in) financing activities 27,909,000 (24,018,000)
------------ ------------
Effect of exchange rate changes on cash (8,000)
------------ ------------
Net change in cash and equivalents (1,899,000) (13,792,000)
Cash and equivalents at beginning of year 2,656,000 18,860,000
------------ ------------
Cash and equivalents at end of period $ 757,000 $ 5,068,000
============ ============
SUPPLEMENTAL DISCLOSURE OF OPERATING CASH FLOWS:
Cash paid during the period for:
Interest $ 273,000 $ 1,153,000
============ ============
Income taxes $ 959,000 $ 745,000
============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements
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LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED SEPTEMBER 30, 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, 2000.
(2) Comparative first quarter unaudited results by segment are as follows:
<TABLE>
<CAPTION>
Three Months Ended
September 30
(Dollars in Thousands) 2000 1999
-----------------------------------------------------
<S> <C> <C>
NET SALES
Specialty Foods $126,609 $115,632
Glassware and Candles 77,502 86,643
Automotive 59,834 58,169
-----------------------------------------------------
Total $263,945 $260,444
=====================================================
OPERATING INCOME
Specialty Foods $ 24,344 $ 18,765
Glassware and Candles 12,094 17,866
Automotive 403 1,847
Corporate expenses (1,474) (1,364)
-----------------------------------------------------
Total $ 35,367 $ 37,114
=====================================================
</TABLE>
(3) In May 2000, the Emerging Issues Task Force ("EITF") of the Financial
Accounting Standards Board reached a consensus on Issue 00-14
"Accounting for Certain Sales Incentives." The EITF concluded that
certain consumer and trade sales promotion expenses should be
classified as a reduction of sales rather than as marketing expenses.
Similar to many consumer packaged goods companies, the Company
currently classifies certain consumer and trade sales promotion
expenses as marketing expenses. In September 2000, the EITF also
reached a final consensus on Issue 00-10 "Accounting for Shipping and
Handling Costs." The EITF concluded that these costs cannot be
reported as a reduction of revenue. The Company currently classifies
certain shipping costs as a reduction of sales. The Company is
currently evaluating the impact of these issues, which are expected to
become effective in the fourth quarter of fiscal 2001. Upon adoption,
prior period amounts will be restated to conform with the new
requirements. As reclassifications, these changes will not have a
material effect on the Company's financial position or earnings.
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LANCASTER COLONY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FOR THE PERIODS ENDED SEPTEMBER 30, 2000 AND 1999
<TABLE>
RESULTS OF OPERATIONS
<CAPTION>
Three Months Ended
September 30
(Dollars in Thousands) 2000 1999 % Change
--------------------------------------------------------------
<S> <C> <C> <C>
NET SALES
Specialty Foods $126,609 $115,632 9.5%
Glassware and Candles 77,502 86,643 (10.6%)
Automotive 59,834 58,169 2.9%
--------------------------------------------------------------
Total $263,945 $260,444 1.3%
==============================================================
</TABLE>
As reflected above, consolidated net sales for the three months ended September
30, 2000 totaled $263,945,000, a 1% increase over the $260,444,000 for the three
months ended September 30, 1999. The strongest growth occurred within the
Specialty Foods segment where fiscal 2001 sales of $126,609,000 increased in
excess of 9% compared to that of the 1999 period. This segment had greater sales
of both retail and foodservice products. Retail increases were achieved as a
result of continuing growth in frozen garlic bread products as well as in such
products as produce vegetable dips, apple dips and fruit dips. This segment's
foodservice growth was primarily attributable to increased volumes with larger
national restaurant accounts. The contribution to sales from the September 2000
acquisition of Sister Schubert's Homemade Rolls, Inc. was not material.
Net sales of the Automotive segment totaled $59,834,000 for the three months
ended September 30, 2000 and increased 3% as a result of greater volumes of
aluminum accessory products being sold to original equipment manufacturers.
Sales of this segment's automotive floormats were adversely impacted by a weaker
aftermarket volume. The Company's Glassware and Candles segment had net sales of
$77,502,000, which is a nearly 11% decline from the preceding year's comparable
sales of $86,643,000. This decline is predominantly attributable to lower sales
of candles. Consistent with a trend that began at the beginning of the calendar
year, such sales have been adversely affected by several factors including
general market softness, increased import competition and the effects of a
significant customer of this segment restructuring its approach toward marketing
candles. Management believes that certain actions have been taken, including the
sourcing of selected new products from overseas, that may help mitigate, if not
reverse, this trend beginning early in calendar 2001.
The Company's consolidated gross margins as a percentage of sales declined
between years, totaling 28.5% for the three months ended September 30, 2000 and
30.2% for the comparable period of 1999. Although food margins increased as a
result of the benefits of lower food commodity costs and higher volumes, the
Company's other two segments experienced a decline in such margins. The
Automotive segment saw a less favorable sales mix, somewhat higher raw material
prices and additional costs associated with the start-up of a new aluminum truck
accessory program for an original equipment manufacturer. Lower margins within
the Glassware and Candles segment were primarily attributable to the generally
lower mix of candle sales within the segment as well as less favorable overhead
absorption within the candle operations due to the lower sales volume. Glassware
margins were also adversely affected by higher natural gas costs, start-up costs
associated with a new pressed glassware product line and the effects of certain
operational inefficiencies at the Sapulpa, Oklahoma consumer glassware facility.
Entering the quarter ending December 31, 2000, natural gas costs continue to
remain high although the start-up costs have generally dissipated and the
Sapulpa operations have reflected improvement from the preceding twelve months.
The benefit of this improvement, however, will not be reflected until at least
the Company's fiscal third quarter, consistent with the turnover of the related
inventory.
Consolidated selling, general and administrative costs of $39,912,000 for the
three months ended September 30, 2000 declined 4% from the $41,523,000 incurred
for the three months ended September 30, 1999. Contributing
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to this decrease were lower Automotive aftermarket sales, a slightly reduced mix
of retail food sales and a planned reduction in promotional support required for
certain retail food products.
The foregoing factors contributed to consolidated operating income totaling
$35,367,000 for the three months ended September 30, 2000, a decrease of nearly
5% from the corresponding fiscal 2000 total of $37,114,000. By segment, the
Company's operating income can be summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended
September 30
(Dollars in Thousands) 2000 1999 % Change
----------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING INCOME
Specialty Foods $24,344 $18,765 29.7%
Glassware and Candles 12,094 17,866 (32.3%)
Automotive 403 1,847 (78.2%)
Corporate (1,474) (1,364) 8.1%
----------------------------------------------------------------------
Total $35,367 $37,114 (4.7%)
======================================================================
</TABLE>
With the effective income tax rate of 38.6% for the quarter ending September 30,
2000 being slightly higher than the 38.1% of the comparable period of 1999, net
income of $21,438,000 declined 5% over the preceding year's quarterly net income
of $22,573,000. However, as influenced by the Company's share repurchase program
reducing the weighted average shares outstanding by 6%, fully diluted earnings
per share increased two percent to $.57 from the preceding year's record
earnings per share of $.56.
FINANCIAL CONDITION
Net cash provided by operating activities totaled $8,453,000 for the three
months ended September 30, 2000 compared to $17,032,000 provided in the
comparable period of 1999. This change in cash flows largely resulted from
relative changes in working capital components as well as the decline in net
income. Net working capital declined from $219,420,000 at June 30, 2000 to
$201,933,000 at September 30, 2000. Affecting this change were seasonal
increases in accounts receivable and inventories as offset by increases in
accruals for accounts payable and accrued income taxes. Also reducing net
working capital, was an increase in short-term bank loans associated with the
seasonal working capital requirements as well as the funding of the September
2000 stock acquisition of Sister Schubert's Homemade Rolls, Inc.
Significant investment activities undertaken during the three months ended
September 30, 2000 included $32,444,000 paid for the Sister Schubert's business,
net of cash acquired. This purchase price is subject to future adjustment based
largely on the future level of Sister Schubert's earnings, as defined, that will
be attained through calendar 2004. Financing activities for the three months
ended September 30, 2000 included $5,490,000 expended for share repurchases and,
as discussed above, increases in short-term bank borrowings of $39,750,000
associated with the September 2000 acquisition as well as seasonal working
capital requirements. Dividends paid of $6,051,000 during the current period
remained essentially unchanged from that paid in the comparable prior year
period, as the share reduction resulting from share repurchases largely offset
the impact of a $.01 per share increase in the effective dividend rate.
Approximately 3,182,000 shares remained authorized for future buyback at
September 30, 2000. Management anticipates that cash provided from operations
and the currently available discretionary bank lines of credit should be
adequate to meet the Company's foreseeable cash requirements over the remainder
of fiscal 2001. The Company is, however, exploring the possibility of
establishing a committed credit facility that would be utilized for general
corporate purposes.
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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.
Management believes these forward-looking statements to be
reasonable; however, undue reliance should not be placed on
such statements, which are based on current expectations. The
Company undertakes no obligation to publicly update such
forward-looking statements. More detailed statements regarding
significant events which could affect the Company's financial
results are included in the Company's Form 10-K 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 September 30, 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: November 7, 2000 By: /S/ John B. Gerlach, Jr.
------------------- ----------------------------
JOHN B. GERLACH, JR.
Chairman, Chief Executive
Officer and President
Date: November 7, 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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