-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KmRxCY4Me+ryvZTfxd2nKOtPduF5EUIp54Au368FpCsmhSG3Wkgz4UriBNVquBq9 LoQ/HXWgSczOzuuhCzGOag== /in/edgar/work/0000950152-00-006940/0000950152-00-006940.txt : 20000928 0000950152-00-006940.hdr.sgml : 20000928 ACCESSION NUMBER: 0000950152-00-006940 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000926 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LANCASTER COLONY CORP CENTRAL INDEX KEY: 0000057515 STANDARD INDUSTRIAL CLASSIFICATION: [2030 ] IRS NUMBER: 131955943 STATE OF INCORPORATION: OH FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-04065 FILM NUMBER: 728770 BUSINESS ADDRESS: STREET 1: 37 W BROAD ST CITY: COLUMBUS STATE: OH ZIP: 43215 BUSINESS PHONE: 6142247141 10-K 1 l83916ae10-k.txt LANCASTER COLONY CORPORATION 10-K 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, 2000 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, 2000 was approximately $655,552,000, based on the closing price of these shares on that day. As of September 1, 2000, there were approximately 37,772,000 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 2000 Annual Report to Shareholders - Parts I, II and IV. Proxy Statement for the Annual Meeting of Shareholders to be held November 20, 2000; to be filed - Part III. The 2000 Annual Report to Shareholders and 2000 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- 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 44%, 33% and 23%, respectively, of consolidated net sales for the fiscal year ended June 30, 2000. The financial information relating to business segments for each of the three years in the period ended June 30, 2000, 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 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 names "Chatham Village" and "Marzetti" and caviar marketed under the brand name "Romanoff." A significant portion of this segment's product lines is 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, fruit glazes, veggie dips, fruit dips and hearth-baked frozen breads 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 small portion of this product line is directed to the foodservice market. The dry egg noodles and refrigerated chip dips are sold through food brokers and distributors to retail markets principally in the Midwestern United States. The "Reames" line is sold through food 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 fiscal 1999. 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 2000, the registrant obtained adequate supplies of raw materials for this segment. The registrant's firm order backlog at June 30, 2000, in this business segment, was approximately $11,349,000 as compared to a backlog of approximately $4,125,000 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 -2- 3 success of this segment. However, the patents and licenses under which it operates are not essential to the overall success of this segment. 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 names "Candle-lite" or "Lancaster Colony." 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 and lenses. 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. 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 23% and 24% of this segment's total net sales during 2000 and 1999, respectively. No other customer accounted for more than 10% of this segment's total net sales. During fiscal year 2000, the registrant obtained adequate supplies of raw materials for this business segment. The registrant's firm order backlog at June 30, 2000, in this business segment, was approximately $36,164,000 as compared to approximately $38,981,000 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; tube steps; bedliners; tool boxes and other accessories for pickup trucks, vans and sport utility vehicles; truck and trailer splash guards and quarter fenders; and 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 32% and 29% of this segment's total net sales during fiscal 2000 and 1999, respectively. 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 2000, the registrant obtained adequate supplies of raw materials for this segment. The registrant's firm order backlog at June 30, 2000, in this business segment, was approximately $5,168,000 as compared to a backlog of approximately $6,486,000 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 -3- 4 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. 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 registrant's consolidated net sales in any fiscal year from 1998 through 2000: 2000 1999 1998 - -------------------------------------------------------------------------------- Specialty Foods: Retail 25% 23% 22% Foodservice 19% 19% 18% Glassware and Candles: Consumer Table and Giftware 28% 30% 31% Automotive 23% 23% 23% Combined net sales from the three segments to Wal-Mart Stores, Inc. totaled approximately 10% of consolidated fiscals 2000 and 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 6,600 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- 5 Item 2. Properties ---------- The registrant uses approximately 5,900,000 square feet of space for its operations. Of this space, approximately 1,068,000 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:
Approximate Location Business Segment(s) Square Feet - -------- ------------------- ----------- Bedford Heights, OH(4) Specialty Foods 81,000 Columbus, OH Specialty Foods 237,000 Coshocton, OH(4) Automotive 630,000 Des Moines, IA(2) 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(1) Glassware and Candles 875,000 Milpitas, CA(2) Specialty Foods 130,000 Muncie, IN Glassware and Candles 148,000 Sapulpa, OK(5) Glassware and Candles 686,000 Wapakoneta, OH(1) Automotive 226,000 Waycross, GA(3) Automotive 152,000 Wilson, NY Specialty Foods 80,000
(1) Part leased on a monthly basis. (2) Part leased for term expiring in 2000. (3) Part leased for term expiring in 2001. (4) Part leased for term expiring in 2002. (5) 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- 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 20, 2000. 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:
First Elected Age as of an August 31 Offices and Executive Name 2000 Positions Held Officer ---- ------------ -------------- --------- John B. Gerlach, Jr. 46 Chairman, Chief Executive Officer, President and Director 1982 John L. Boylan 45 Treasurer, Vice President, Assistant Secretary, Chief Financial Officer and Director 1990 Larry G. Noble 64 Vice President 1985 Bruce L. Rosa 51 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
The above named officers were elected or re-elected to their present positions at the annual meeting of the Board of Directors on November 15, 1999. All such persons have been elected to serve until the next annual election of officers, which shall occur on November 20, 2000 and their successors are elected or until their earlier resignation or removal. -6- 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 2000 and 1999. 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, 2000 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 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 20, 2000, which is incorporated herein by reference. -7- 8 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 20, 2000 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 20, 2000 is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions ---------------------------------------------- Not Applicable 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, 2000 and 1999 and for each of the three years in the period ended June 30, 2000, together with the report thereon of Deloitte & Touche LLP dated August 23, 2000, 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, 2000, 1999 and 1998 Consolidated Balance Sheets as of June 30, 2000 and 1999 Consolidated Statements of Cash Flows for the years ended June 30, 2000, 1999 and 1998 Consolidated Statements of Shareholders' Equity for the years ended June 30, 2000, 1999 and 1998 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 2000 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, 2000 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, 2000. -8- 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 25th day of September, 2000. 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.
Signatures Title Date ---------- ----- ---- /S/ John B. Gerlach, Jr. Chairman, Chief September 19, 2000 - --------------------------- Executive Officer, ------------------ John B. Gerlach, Jr. President and Director /S/ John L. Boylan Treasurer, Vice President, September 18, 2000 - --------------------------- Assistant Secretary, ------------------ John L. Boylan Chief Financial Officer (Principal Financial and Accounting Officer) and Director /S/ Kerrii B. Anderson Director September 15, 2000 - --------------------------- ------------------ Kerrii B. Anderson /S/ Robert L. Fox Director September 12, 2000 - --------------------------- ------------------ Robert L. Fox /S/ Morris S. Halpern Director September 13, 2000 - --------------------------- ------------------ Morris S. Halpern /S/ Robert S. Hamilton Director September 15, 2000 - --------------------------- ------------------ Robert S. Hamilton /S/ Edward H. Jennings Director September 13, 2000 - --------------------------- ------------------ Edward H. Jennings /S/ Henry M. O'Neill, Jr. Director September 13, 2000 - --------------------------- ------------------ Henry M. O'Neill, Jr. /S/ Zuheir Sofia Director September 12, 2000 - --------------------------- ------------------ Zuheir Sofia
-9- 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, 2000 and 1999 and for each of the three years in the period ended June 30, 2000, and have issued our report thereon dated August 23, 2000; such financial statements and report are included in your 2000 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 23, 2000 -10- 11 SCHEDULE II LANCASTER COLONY CORPORATION AND SUBSIDIARIES ============================ VALUATION AND QUALIFYING ACCOUNTS FOR THE THREE YEARS ENDED JUNE 30, 2000
- --------------------------------------------------------------------------------------------------------------------------- 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 - --------------------------------------------------------------------------------------------------------------------------- RESERVES DEDUCTED FROM ASSET TO WHICH THEY APPLY - Allowance for doubtful accounts: 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 ====================================================================== Year ended June 30, 2000....................... $3,300,000 $5,081,000 $5,986,000(A) $2,395,000 ======================================================================
(A) Represents uncollectible accounts written off net of recoveries. -11- 12 LANCASTER COLONY CORPORATION ---------------------------- FORM 10-K JUNE 30, 2000 INDEX TO EXHIBITS
Exhibit Number Description Located at - ------ ----------- ---------- 3.1 Certificate of Incorporation of the registrant approved by the shareholders November 18, 1991. (i) .2 Certificate of Amendment to the Articles of Incorporation approved by the shareholders November 16, 1992. (i) .3 Certificate of Amendment to the Articles of Incorporation approved by the shareholders November 17, 1997. (i) .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. 2000 Form 10-K .2 Rights Agreement dated as of April 20, 2000 between Lancaster Colony Corporation and The Huntington Trust Company, N.A. (k) 10.1 1981 Incentive Stock Option Plan. (c) .2 Resolution by the Board of Directors to amend registrant's 1981 Incentive Stock Option Plan, approved by the shareholders November 21, 1983. (d) .3 Resolution by the Board of Directors to amend registrant's 1981 Incentive Stock Option Plan approved by the shareholders November 18, 1985. (e) .4 Resolution by the Board of Directors to amend registrant's 1981 Incentive Stock Option Plan approved by the shareholders November 19, 1990. (f) .5 Key Employee Severance Agreement between Lancaster Colony Corporation and John L. Boylan. (f) .6 Consulting Agreement by and between Lancaster Colony Corporation and Morris S. Halpern. (g) .7 1995 Key Employee Stock Option Plan. (h) .8 Key Employee Severance Agreement between Lancaster Colony Corporation and Bruce L. Rosa. (j) .9 Lancaster Colony Corporation Executive Employee Deferred Compensation Plan. 2000 Form 10-K
-12- 13
13. Annual Report to Shareholders. 2000 Form 10-K 21. Significant Subsidiaries of Registrant. 2000 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 23, 2000, appearing in and incorporated by reference in this Annual Report on Form 10-K of Lancaster Colony Corporation for the year ended June 30, 2000. 2000 Form 10-K 27. Financial Data Schedule. 2000 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 10-K for the year ended June 30, 1982. (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, 1984. (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, 1985. (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, 1991. (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, 1993. (h) 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). (i) 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. (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, 1999. (k) Indicates the exhibit is incorporated by reference from filing as an exhibit to the Lancaster Colony Corporation report on Form 8-A filed April 20, 2000. 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 2000 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 2000 Annual Report to Shareholders to the Commission upon request.
-13- EX-4.1 2 l83916aex4-1.txt EXHIBIT 4.1 1 EXHIBIT 4.1 page 1 [GRAPHIC] COMMON STOCK [PICTURE] COMMON STOCK NUMBER SHARES CX__________ INCORPORATED UNDER THE LAWS THIS CERTIFICATE IS OF THE STATE OF OHIO TRANSFERABLE IN NEW YORK, NEW YORK LANCASTER COLONY CORPORATION CUSIP 513847 10 3 SEE LEGEND ON REVERSE SIDE THIS IS TO CERTIFY THAT [BLANK BOX] SEE REVERSE SIDE FOR CERTAIN DEFINITIONS IS THE OWNER OF [END BLANK BOX] FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, WITHOUT PAR VALUE, OF LANCASTER COLONY CORPORATION CERTIFICATE OF STOCK transferable in person or by duly authorized attorney upon surrender of this certificate properly endorsed. This Certificate and the shares represented hereby are subject to all the terms, conditions, and limitations of the Certificate of Incorporation and all amendments thereto. This Certificate is not valid unless countersigned by a Transfer Agent and registered by a Registrar. WITNESS the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. DATED: /s/ John L. Boylan /s/ John B. Gerlach, Jr. ------------------ ------------------------ TREASURER PRESIDENT LANCASTER COLONY CORPORATION Seal State of Ohio COUNTERSIGNED AND REGISTERED: AMERICAN STOCK TRANSFER & TRUST COMPANY (NEW YORK, N.Y.) TRANSFER AGENT AND REGISTRAR BY AUTHORIZED SIGNATURE 2 page 2 LANCASTER COLONY CORPORATION Lancaster Colony Corporation (the "Company") will furnish without charge to each shareholder who so requests the designations, preferences and relative, participating, optional, or other special rights of each class of stock or series thereof and the qualifications, limitations, or restrictions of such preferences and/or rights. Requests may be directed to the Secretary of the Company. This certificate also evidences and entitles the holder to certain Rights as set forth in a Rights Agreement between the Company and The Huntington National Bank (the "Rights Agent") dated as of April 20, 2000 (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal offices of the Company. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. The Company will mail to the holder of this certificate a copy of the Rights Agreement as in effect on the date of mailing, without charge after receipt of a written request therefor. Transfer of the shares represented by this Certificate is subject to the provisions of Article TENTH of the Company's Articles of Incorporation as the same may be in effect from time to time. Upon written request delivered to the Secretary of the Company at its principal place of business, the Company will mail to the holder of the Certificate a copy of such provisions without charge within five (5) days after receipt of written request therefor. By accepting this Certificate the holder hereof acknowledges that it is accepting same subject to the provisions of said Article TENTH as the same may be in effect from time to time and covenants with the Company and each shareholder thereof from time to time to comply with the provisions of said Article TENTH as the same may be in effect from time to time. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - _______ Custodian _______ TEN ENT - as tenants by the entireties (Cust) (Minor) JT TEN - as joint tenants with right under Uniform Gifts to Minors of survivorship and not Act _________________________ as tenants in common (State) Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, _________ HEREBY SELL, ASSIGN AND TRANSFER UNTO PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE [ ] - -------------------------------------------------------------------------------- (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - ---------------------------------------------------------------------- SHARES OF THE CAPITAL STOCK REPRESENTED BY THE WITHIN CERTIFICATE AND DO HEREBY IRREVOCABLY CONSTITUTE AND APPOINT ____________________________________________ ATTORNEY TO TRANSFER THE SAID STOCK ON THE BOOKS OF THE WITHIN NAMED CORPORATION WITH FULL POWER OF SUBSTITUTION IN THE PREMISES. DATED_________________________ NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. ----------------------------------------------------------- ----------------------------------------------------------- EX-10.9 3 l83916aex10-9.txt EXHIBIT 10.9 1 EXHIBIT 10.9 LANCASTER COLONY CORPORATION EXECUTIVE EMPLOYEE DEFERRED COMPENSATION PLAN --------------------------------------------- ARTICLE I ESTABLISHMENT AND PURPOSE ------------------------- 1.1 ESTABLISHMENT. Lancaster Colony Corporation, an Ohio corporation ("Lancaster Colony") hereby establishes effective as of January 1, 2000, a deferred compensation plan for certain of its executive and its Subsidiaries' employees, which shall be known as the Lancaster Colony Corporation Executive Employee Deferred Compensation Plan (the "Plan"). 1.2 PURPOSE. The purpose of the Plan is to provide certain executive employees of Lancaster Colony with the opportunity to voluntarily defer a portion of their annual compensation they otherwise would receive for services performed for Lancaster Colony or its Subsidiaries. The Plan is intended to be a "top-hat" plan (i.e., an unfunded deferred compensation plan maintained for a select group of management or highly compensated employees) under Sections 201(2), 301(a)(3), and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). ARTICLE II DEFINITIONS ----------- Whenever the following initially capitalized words and phrases are used in this Plan, they shall have the meanings specified below unless the context clearly indicates otherwise: 2.1 "BENEFICIARY" shall mean such person or legal entity as may be designated by a Participant under Section 7.1 to receive benefits hereunder after such Participant's death. 2.2 "BOARD" and "BOARD OF DIRECTORS" shall mean the Board of Directors of Lancaster Colony, as constituted from time to time. 2.3 "CHANGE IN CONTROL" shall mean a change in the control of Lancaster Colony of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act"); provided that, without limitation, such a Change in Control shall be deemed to have occurred if and at such times as (i) any "person" (as such term is used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes the beneficial owner, directly or indirectly, of securities of Lancaster Colony representing twenty-five percent (25%) or more of the combined voting power of Lancaster Colony's then outstanding voting securities; or (ii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of Lancaster Colony and any new director (other than a director designated by a person who has entered into an agreement or arrangement with Lancaster Colony to effect a transaction described in clause (i) or 2 (iii) of this sentence) whose appointment, election, or nomination for election by Lancaster Colony's shareholders, was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose appointment, election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the Board of Directors of Lancaster Colony; or (iii) there is consummated a merger or consolidation of Lancaster Colony or a subsidiary thereof with or into any other corporation, other than a merger or consolidation which would result in the holders of the voting securities of Lancaster Colony outstanding immediately prior thereto holding securities which represent immediately after such merger or consolidation more than 50% of the combined voting power of the voting securities of either Lancaster Colony or the other entity which survives such merger or consolidation or the parent of the entity which survives such merger or consolidation; or (iv) there is consummated the sale or disposition by Lancaster Colony of all or substantially all Lancaster Colony's assets. 2.4 "CODE" shall mean the Internal Revenue Code of 1986, as amended. 2.5 "COMMITTEE" shall mean a committee of one or more individuals designated by the Board to administer the Plan pursuant to the terms hereof. 2.6 "COMPENSATION" shall mean the Employee's total W-2 compensation for a calendar year. 2.7 "DEFERRED COMPENSATION" shall mean that portion, not in excess of Fifty Thousand Dollars ($50,000), of the Participant's annual Compensation which the Participant voluntarily and irrevocably elects to defer pursuant to Section 4.1 of this Plan in accordance with a Deferred Compensation Agreement. 2.8 "DEFERRED COMPENSATION ACCOUNT" shall mean the recordkeeping account established by Lancaster Colony for each Participant to which a Participant's Deferred Compensation is credited and from which distributions to the Participant or to his or her Beneficiary are debited. 2.9 "DEFERRED COMPENSATION AGREEMENT" shall mean a document (or documents) as provided from time to time by Lancaster Colony or the Committee pursuant to which an Executive Employee voluntarily enrolls as a Participant and irrevocably elects to defer a portion of his or her annual Compensation pursuant to Section 4.1 of this Plan. 2.10 "DISABILITY" shall mean a physical or mental impairment which results in the Participant's inability to perform the tasks of his or her position with Lancaster Colony or a Subsidiary and which is expected to last for at least twelve (12) months, as determined by medical authority selected by Lancaster Colony. 2.11 "EXECUTIVE EMPLOYEE" shall mean an individual who is employed by Lancaster Colony or its Subsidiaries, and who is a key senior management employee. 2.12 "PARTICIPANT" shall mean an Executive Employee (i) who is selected by the Committee to participate in the Plan, as evidenced by the Committee's execution of a Deferred Compensation Agreement, (ii) who elects to participate in the Plan and defer a portion of his or her -2- 3 Compensation pursuant to a signed Deferred Compensation Agreement, and/or (iii) who has amounts credited under a Deferred Compensation Account. 2.13 "PLAN YEAR" shall mean the twelve consecutive month calendar year beginning each January 1, and ending each December 31. The first Plan Year of the Plan shall commence January 1, 2000. 2.14 "RETIREMENT" shall mean termination of employment with Lancaster Colony on or after becoming age sixty-five (65). 2.15 "SUBSIDIARY" shall mean any entity in which Lancaster Colony has more than fifty percent (50%) ownership interest that adopts this Plan pursuant to the requirements of Section 11.9. 2.16 "VALUATION DATE" shall mean the last day of each Plan Year and any other date that Lancaster Colony, in its sole discretion, designates from time to time, including, without limitation, a Participant's last day of employment by Lancaster Colony or a Subsidiary. ARTICLE III PARTICIPATION BY EXECUTIVE EMPLOYEES ------------------------------------ 3.1 PARTICIPATION. Participation in this Plan is limited to Executive Employees selected by the Committee. An Executive Employee shall become a Participant in the Plan as of the first day of a Plan Year upon selection by the Committee and upon the execution by the Committee and such Executive Employee of a Deferred Compensation Agreement pursuant to Section 4.1 hereof. 3.2 CESSATION OF PARTICIPATION. A Participant who (i) separates from service with Lancaster Colony, or (ii) ceases to be an Executive Employee, or (iii) is determined by the Committee to be ineligible to participate in the Plan, shall immediately thereupon cease active participation in this Plan. 3.3 CASH-OUT OF INELIGIBLE EMPLOYEE. This Plan is intended to be an unfunded "top hat" plan, maintained primarily for purposes of providing deferred compensation for a select group of management or highly compensated employees. Accordingly, if the Committee determines that any Participant does not qualify as a member of such select group, the Committee, in the Committee's sole discretion, may terminate such Participant's participation in the Plan effective as of the date such Participant ceased to be a member of such select group and terminate the Participant's Deferred Compensation Agreement, and may either immediately pay such Participant an amount of cash equal to one hundred percent (100%) of the amount credited to such Participant's Deferred Compensation Account, or retain the Participant's Deferred Compensation Account for future distribution pursuant to Article VI. -3- 4 ARTICLE IV ANNUAL COMPENSATION DEFERRALS ----------------------------- 4.1 ANNUAL COMPENSATION DEFERRAL ELECTION. No later than December 31 of each calendar year, each Executive Employee who is selected by the Committee to participate in the Plan may irrevocably elect, by completing and executing a Deferred Compensation Agreement and delivering it to the Committee, to defer any portion, up to Fifty Thousand Dollars ($50,000) or such other amount determined by the Committee in its sole discretion, of his or her Compensation to be earned for the following Plan Year. For the initial Plan Year commencing January 1, 2000, such Deferred Compensation Agreement must be completed, executed and delivered no later than December 31, 1999. 4.2 EFFECTIVE PERIOD. A Participant's deferral election under Section 4.1 with respect to his or her Compensation shall be effective only for the Plan Year specified in the Deferred Compensation Agreement. A Participant must file a separate Deferred Compensation Agreement by December 31 of each Plan Year in order to make Compensation deferrals for the Plan Year subsequent thereto. ARTICLE V ACCOUNTS --------- 5.1 DEFERRED COMPENSATION ACCOUNTS. Lancaster Colony shall establish and maintain a separate Deferred Compensation Account for each Participant who executes a Deferred Compensation Agreement pursuant to Section 4.1. Each such Participant's Deferred Compensation shall be separately accounted for and credited with earnings pursuant to Section 5.2 hereof, for recordkeeping purposes only, to his or her Deferred Compensation Account. A Participant's Deferred Compensation Account shall be solely for the purpose of measuring the amounts to be paid under the Plan. Lancaster Colony and its Subsidiaries shall not fund, and shall not be required to fund or secure the Deferred Compensation Account in any way, and Lancaster Colony's and its Subsidiaries obligations to Participants under this Plan shall be solely contractual. 5.2 CREDITING OF EARNINGS. Each Participant's Deferred Compensation Account shall be credited semiannually (as of June 30 and December 31 of each year) with hypothetical earnings computed and determined by the Committee using an annual rate of interest equal to the prime rate of interest reported in the Wall Street Journal as in effect on the first business day (i) in January of each Plan Year for the period January 1 through June 30, and (ii) in July of each Plan Year for the period July 1 through December 31. After the end of each Plan Year, Lancaster Colony shall furnish each Participant with a statement of the balance credited to the Participant's Deferred Compensation Account as of the last day of the preceding Plan Year. -4- 5 ARTICLE VI DISTRIBUTIONS ------------- 6.1 IN GENERAL. Except as otherwise provided in this Article VI, the amount credited to a Participant's Deferred Compensation Account shall be payable to a Participant (or, in the case of Participant's death, the Participant's Beneficiary) as soon as practicable after the earlier of the Participant's Retirement, death, Disability, or other termination of employment with Lancaster Colony for any reason. 6.2 DISTRIBUTIONS TO INCOMPETENTS. If the Committee determines in its discretion that a payment under this Plan is to be made to a minor, a person declared incompetent or to a person incapable of handling his or her property, the Committee may direct such payment to the guardian, legal representative or person having the care and custody of such minor, incompetent or incapable person. The Committee may require proof of minority, incompetence, incapacity or guardianship, as it may deem appropriate prior to making such payment. Any such payment shall be a payment for the account of the Participant and the Participant's Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Plan for such payment amount. 6.3 COURT ORDERED DISTRIBUTIONS. The Committee is authorized to make any payments directed by court order in any action in which the Plan or the Committee has been named as a party. In addition, if a court determines that a spouse or former spouse of a Participant has an interest in the Participant's Deferred Compensation Account under the Plan in connection with a property settlement or otherwise, the Committee, in its sole discretion, shall have the right, notwithstanding any election made by a Participant, to immediately distribute the spouse's or former spouse's interest in the Participant's Deferred Compensation Account under the Plan to that spouse or former spouse. 6.4 CHANGE IN CONTROL DISTRIBUTIONS. At the time a Participant completes his Deferred Compensation Agreement, the Participant may elect that, if a Change in Control occurs, the Participant (or, in the event of the Participant's death, his or her Beneficiary) shall receive a lump sum payment of the amount credited to the Participant's Deferred Compensation Account within thirty (30) days after the Change in Control. In the event such a distribution is so elected, such amount credited to the Participant's Deferred Compensation Account shall be determined as of the end of the calendar month immediately preceding the month in which the Change in Control occurs, such end of the calendar month being the Valuation Date for purposes of such distribution. 6.5 METHOD OF PAYMENT. Unless otherwise elected by a Participant in a Deferred Compensation Agreement, distributions shall, as determined by the Committee, be paid in cash in the form of either a single lump sum or installments not in excess of ten (10) years. 6.6 VALUATION OF DISTRIBUTIONS. All distributions under this Plan shall be based upon the amount credited to a Participant's Deferred Compensation Account as of the Valuation Date immediately preceding the date of distribution. The amount of any installments payable to a Participant under Section 6.5 shall be determined by dividing the amount credited to the Participant's Deferred Compensation Account by the number of installment payments to be made. -5- 6 6.7 NO HARDSHIP OR LOAN DISTRIBUTIONS. There shall be no distributions of Participants' Deferred Compensation Accounts due to hardship, and Participants may not borrow from their Deferred Compensation Accounts. ARTICLE VII BENEFICIARIES ------------- 7.1 BENEFICIARY DESIGNATION. Each Participant from time to time may designate any person or persons (who may be named contingently or successively) to receive such benefits as may be payable under the Plan upon or after the Participant's death, and such designation may be changed from time to time by the Participant by filing a new designation. Each designation will revoke all prior designations by the same Participant, shall be in a form prescribed by Lancaster Colony, and will be effective only when filed in writing with Lancaster Colony during the Participant's lifetime. 7.2 NO BENEFICIARY DESIGNATION. In the absence of a valid Beneficiary designation, or if, at the time any Plan payment is due to a Beneficiary, there is no living Beneficiary validly named by the Participant, Lancaster Colony, or its Subsidiary, shall pay any such Plan payment to the Participant's spouse, if then living, but otherwise to the Participant's estate. In determining the existence or identity of anyone entitled to receive a Plan payment as aforesaid, or if a dispute arises with respect to any such payment, then, notwithstanding the foregoing, Lancaster Colony, in its sole discretion, may distribute (or cause its Subsidiary to distribute) such payment to the Participant's estate without liability for any taxes or other consequences which might flow therefrom, or may take such other action as Lancaster Colony deems to be appropriate. ARTICLE VIII FUNDING AND PARTICIPANT'S INTEREST ---------------------------------- 8.1. PLAN UNFUNDED. This Plan shall be unfunded and no trust or special deposit shall be created, or deemed to be created, by the Plan or Lancaster Colony or a Subsidiary. The crediting of amounts to each Participant's Deferred Compensation Account, as the case may be, shall be made through recordkeeping entries. No actual funds shall be segregated, reserved, or otherwise set aside; provided, however, that nothing herein shall prevent Lancaster Colony from establishing one or more grantor trusts from which distributions due under this Plan may be paid in certain instances. All distributions shall be paid by Lancaster Colony or a Subsidiary from its general assets and a Participant or his or her Beneficiary shall have the rights of a general, unsecured creditor against Lancaster Colony for any distributions due hereunder. The Plan constitutes a mere promise by Lancaster Colony or a Subsidiary to make payments in the future. 8.2 PARTICIPANT'S INTEREST IN PLAN. A Participant has an interest only in the cash value of the amount credited to his Deferred Compensation Account. A Participant has no rights or interests in any specific funds, stock or securities. -6- 7 ARTICLE IX ADMINISTRATION AND INTERPRETATION --------------------------------- 9.1 ADMINISTRATION. The Plan shall be administered by the Committee which may delegate its duties to one or more employees of Lancaster Colony. The Committee has, to the extent appropriate and in addition to the powers described elsewhere in this Plan, full discretionary authority to construe and interpret the terms and provision of the Plan; to adopt, alter and repeal administrative rules, guidelines and practices governing the Plan; to perform all acts, including the delegation of its administrative responsibilities to advisors or other persons who may or may not be employees of Lancaster Colony; and to rely upon the information or opinions of legal counsel or experts selected to render advice with respect to the Plan, as it shall deem advisable, with respect to the administration of the Plan. 9.2 INTERPRETATION. The Committee may take any action, correct any defect, supply any omission or reconcile any inconsistency in the Plan, or in any election hereunder, in the manner and to the extent it shall deem necessary to carry the Plan into effect or to carry out the Board's purposes in adopting the Plan. Any decision, interpretation or other action made or taken by the Committee arising out of or in connection with the Plan, shall be within the absolute discretion of the Committee, and shall be final, binding and conclusive on Lancaster Colony, and all Participants and Beneficiaries and their respective heirs, executors, administrators, successors and assigns. The Committee's determinations hereunder need not be uniform, and may be made selectively among Executive Employees, whether or not they are similarly situated. 9.3 RECORDS AND REPORTS. The Committee shall keep a record of proceedings and actions and shall maintain or cause to be maintained all such books of account, records, and other data as shall be necessary for the proper administration of the Plan. Such records shall contain all relevant data pertaining to individual Participants and their rights under the Plan. 9.4 PAYMENT OF EXPENSES. Lancaster Colony shall bear all expenses incurred by it and by the Committee in administering this Plan. 9.5 INDEMNIFICATION FOR LIABILITY. Lancaster Colony shall indemnify the Committee, and the employees of Lancaster Colony to whom the Committee delegates duties under this Plan against any and all claims, losses, damages, expenses and liabilities arising from their responsibilities in connection with the Plan. 9.6 CLAIMS PROCEDURE. If a claim for benefits or for participation under this Plan is denied in whole or in part, a Participant will receive written notification. The notification will include specific reasons for the denial, specific reference to pertinent provisions of this Plan, a description of any additional material or information necessary to process the claim and why such material or information is necessary, and an explanation of the claims review procedure. If the Committee fails to respond within 90 days, the claim is treated as denied. 9.7 REVIEW PROCEDURE. Within 60 days after the claim is denied or, if the claim is deemed denied, within 150 days after the claim is filed, a Participant (or his duly authorized -7- 8 representative) may file a written request with the Committee for a review of his denied claim. The Participant may review pertinent documents that were used in processing his claim, submit pertinent documents, and address issues and comments in writing to the Committee. The Committee will notify the Participant of its final decision in writing. In its response, the Committee will explain the reason for the decision, with specific references to pertinent Plan provision on which the decision was based. If the Committee fails to respond to the request for review within 60 days, the claim is treated as denied. ARTICLE X AMENDMENT AND TERMINATION ------------------------- 10.1 IN GENERAL. Subject to Section 10.2 hereof, Lancaster Colony may at any time amend or terminate any or all of the provisions of the Plan, subject to the following limitations: (a) The amendment will not be effective unless the Plan will continue to operate for the exclusive benefit of employees. (b) The amendment or termination will not adversely affect the right of any Participant or Beneficiary to a payment under the Plan on the basis of amounts allocated to the Participant's Deferred Compensation Account. If the Plan is discontinued with respect to future deferrals, amounts credited to Participants' Deferred Compensation Accounts shall be distributed in accordance with Article VI. If the Plan is completely terminated, each Participant shall receive distribution of amounts credited to his or her entire Deferred Compensation Account in a single lump sum cash payment as of the date of the Plan termination designated by the Board. 10.2 TERMINATION AFTER CHANGE IN CONTROL. Notwithstanding the foregoing, Lancaster Colony shall not amend or terminate the Plan without the prior written consent of all Participants for a period of two (2) calendar years following a Change in Control. ARTICLE XI MISCELLANEOUS PROVISIONS ------------------------ 11.1 INFORMATION TO BE FURNISHED BY PARTICIPANTS AND BENEFICIARIES AND INABILITY TO LOCATE. Any communication, statement or notice addressed to a Participant or to a Beneficiary at his last post office address as shown on Lancaster Colony's or the Committee's records shall be binding on the Participant or Beneficiary for all purposes of the Plan. Neither Lancaster Colony nor the Committee shall be obliged to search for any Participant or Beneficiary beyond the sending of a certified or registered mail letter to such last known address. If Lancaster Colony or the Committee notifies any Participant or Beneficiary that he is entitled to an amount under the Plan and the Participant or Beneficiary fails to claim such amount or make his location known to Lancaster Colony or the Committee within three (3) years thereafter, then, except as -8- 9 otherwise required by law, if the location of one or more of the next of kin of the Participant is known to Lancaster Colony or the Committee, Lancaster Colony or the Committee may direct distribution of such amount to any one or more or all of such next of kin, and in such proportions as Lancaster Colony or the Committee, in its sole discretion, determines. If the location of none of the foregoing persons can be determined, Lancaster Colony or the Committee shall have the right to direct that the amount payable shall be deemed to be a forfeiture, except that the dollar amount of the forfeiture, unadjusted for deemed earnings in the interim, shall be paid by Lancaster Colony if a claim for the payment subsequently is made by the Participant or the Beneficiary to whom it was payable. If a distribution payable to a Participant or Beneficiary that cannot be located is subject to escheat pursuant to applicable state law, neither Lancaster Colony nor the Committee shall be liable to any person for any payment made in accordance with such law. 11.2 RIGHT OF LANCASTER COLONY TO TAKE EMPLOYMENT ACTIONS. The adoption and maintenance of this Plan shall not be deemed to constitute a contract between Lancaster Colony (or any Subsidiary) and any Executive Employee, or to be a consideration for, or an inducement or condition of, the employment of any Executive Employee. Nothing herein contained, or any action taken hereunder, shall be deemed to give an Executive Employee the right to be retained in the employ of Lancaster Colony (or any Subsidiary) or to interfere with the right of Lancaster Colony (or any Subsidiary) to discipline or discharge an Executive Employee at any time, nor shall it be deemed to give to Lancaster Colony (or any Subsidiary) the right to require the Executive Employee to remain in its employ, nor shall it interfere with any rights of the Executive Employee's to terminate his or her employment at any time. 11.3 NO ALIENATION OF ASSIGNMENT OF BENEFITS. A Participant's rights and interest under the Plan shall not be assigned or transferred, either voluntarily or by operation of law or otherwise, except as otherwise provided herein, and the Participant's rights to payments under the Plan shall not be subject to alienation, attachment, execution, levy, pledge or garnishment by or on behalf of creditors (including heirs, beneficiaries, or dependents) of the Participant or of a Beneficiary. 11.4 RIGHT TO WITHHOLD. To the extent required by law in effect at the time a distribution is made from the Plan, Lancaster Colony (or a Subsidiary) or its agents shall have the right to withhold or deduct from any distributions or payments any taxes required to be withheld by federal, state or local governments. 11.5 CONSTRUCTION. All legal questions pertaining to the Plan shall be determined in accordance with the laws of the State of Ohio, to the extent such laws are not superseded by ERISA, or any other federal law. 11.6 HEADINGS. The headings of the Articles and Sections of this Plan are for reference only. In the event of a conflict between a heading and the contents of an Article or Section, the contents of the Article or Section shall control. 11.7 NUMBER AND GENDER. Whenever any words used herein are in the singular form, they shall be construed as though they were also used in the plural form in all cases where -9- 10 they would so apply, and references to the male gender shall be construed as applicable to the female gender where applicable, and vice versa. 11.8 AGENT FOR LEGAL PROCESS. Lancaster Colony shall be the agent for service of legal process with respect to any matter concerning the Plan, unless and until Lancaster Colony designates some other person as such agent. 11.9 PARTICIPATION BY SUBSIDIARIES. Any entity in which Lancaster Colony has more than a fifty percent (50%) ownership interest may adopt the Plan as a participating Subsidiary and thereby enable its Executive Employees who are selected by the Committee to participate in the Plan. IN WITNESS WHEREOF, Lancaster Colony has caused this Plan to be executed this 2nd day of December, 1999, effective as of January 1, 2000. LANCASTER COLONY CORPORATION 37 West Broad Street Columbus, Ohio 43215-4177 By: /s/ John L. Boylan ----------------------------------- Title: Treasurer -------------------------------- -10- EX-13 4 l83916aex13.txt EXHIBIT 13 1 EXHIBIT 13 MANAGEMENT'S DISCUSSION AND ANALYSIS Of Results of Operations and Financial Condition - ------------------------------------------------ REVIEW OF CONSOLIDATED OPERATIONS Fiscal 2000 marked the Company's ninth consecutive year that a record level of consolidated net sales has been established. Such sales totaled $1,104,258,000, a 6% increase over the fiscal 1999 total of $1,045,702,000. This growth was internally generated and resulted primarily from increased sales levels of specialty food products to both retail and foodservice customers as well as from greater sales of automotive floor mats and aluminum light truck accessories to original equipment manufacturers ("OEMs"). These same factors generally contributed to 1999 sales increasing 4% over fiscal 1998 sales of $1,008,752,000. 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: Segment Sales Mix:(1) 2000 1999 1998 - -------------------------------------------------------------------------------- Specialty Foods 44% 42% 41% Glassware and Candles 33% 35% 36% Automotive 23% 23% 23% Segment Operating Income %:(2) - -------------------------------------------------------------------------------- Specialty Foods 17% 16% 15% Glassware and Candles 21% 22% 22% Automotive 3% 5% 8% (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 30.4% in 2000 compared with 30.8% in 1999 and 32.2% in 1998. The decline in the current year's percentage reflects operational inefficiencies and a less favorable sales mix affecting certain automotive floor mat and glassware operations. Margins on specialty food products actually improved as a result of such factors as generally lower food commodity costs and a more favorable sales mix. The decline in the 1999 percentage compared to that of 1998 is primarily attributable to higher food ingredient costs present in the first half of fiscal 1999, although certain glassware and automotive operations also experienced lower efficiencies during 1999. The increasing proportion of sales contributed by specialty food 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 2000 totaled $173,449,000 and increased 4% over the 1999 total of $166,228,000. Such expenses in 2000 include a bad debt provision of approximately $5 million relating to the January 2000 bankruptcy of a large national foodservice distributor. The 1999 level of selling, general and administrative costs declined 1% from the 1998 total of $168,526,000. This decrease was influenced by cost reductions attained within the Glassware and Candles segment. In the aggregate, improved Specialty Foods results were partially offset by a decline in performance of the Automotive and, to a lesser extent, the Glassware and Candles segments such that consolidated operating income for 2000 totaled $161,949,000, a 4% improvement from the 1999 total of $155,688,000. In 1999, improved results of the Specialty Foods segment were largely offset by a decline in Automotive segment performance resulting in 1999 operating income being essentially unchanged from the $155,871,000 recorded in 1998. The effective tax rate in 2000 remained constant at 38.0% compared to 1999. The effective rate for 1998 was 38.1%. Net income per common share totaled a record $2.51 on a fully-diluted basis for fiscal 2000, an increase of 10% over the comparable 1999 total of $2.28 per share. Fully diluted earnings per share in 1999 increased 3% over the 1998 total of $2.22 per share. Earnings per share have been beneficially affected by the Company's share repurchases which totaled $179 million over the three-year period ended June 30, 2000. SEGMENT REVIEW - SPECIALTY FOODS Record levels of net sales and earnings were again achieved by the Specialty Foods segment during fiscal 2000. This segment's net sales during 2000 increased by 11% to total $489,962,000 compared to $441,470,000 in fiscal 1999. Relative to the fiscal 1998 total of $411,373,000, fiscal 1999 net sales increased 7%. In each of the last three fiscal years, the percentage of retail sales to total sales was essentially unchanged at 56%, with the remaining 44% of segment sales being made to foodservice accounts. 2 MANAGEMENT'S DISCUSSION AND ANALYSIS - ------------------------------------ The growth in retail sales over the last two years has been influenced by both the strength of the recently-introduced Texas Toast garlic bread product line and a continued increase in produce department offerings such as vegetable dips and produce dressings. Foodservice sales during this period benefited from new business with several large national restaurant chains as well as from greater sales of Marzetti-branded products to foodservice distributors. Operating income of the Specialty Foods segment in fiscal 2000 totaled $83,372,000, a 22% increase from the 1999 total of $68,550,000. Compared to operating income of $62,141,000 reported in fiscal 1998, the 1999 total increased 10%. Among the factors contributing to these increases were the greater sales volumes, better capacity utilization and a favorable sales mix. Raw material costs in fiscal 2000 were also substantially lower than in fiscal 1999, especially for soybean oil and cream. Costs for these materials were particularly high during the first half of fiscal 1999. Adversely affecting 2000 results was a bad debt provision of approximately $5,000,000 relating to the bankruptcy of a large foodservice distributor that primarily serviced restaurant chains. This bankruptcy also impaired 2000 cash flows, but did not materially impact the segment's net sales. SEGMENT REVIEW - GLASSWARE AND CANDLES Net sales of the Glassware and Candles segment during fiscal 2000 totaled $357,525,000, a 2% decline from the $363,617,000 achieved in 1999. Most of this decline was attributable to a decline in candle sales to mass merchants that occurred during the second half of fiscal 2000. This decline 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, a growth in competitive import alternatives and less promotional activity conducted by certain customers. Sales of private-label candle products and consumer glassware to mass merchants increased in 2000. Compared to 1998 sales of $363,835,000, 1999 sales remained essentially even as affected by a reduction in the sales of private-label wax-filled products and the closing of the segment's glassware direct selling organization in October 1998. This segment's operating income in 2000 totaled $76,756,000, a 3% decline from the 1999 total of $79,235,000. Similarly, operating income in 1999 declined 1% from the 1998 operating income level of $80,350,000. Adversely affecting fiscal 2000 results were the reduced sales volume of candles and, within the consumer glassware operations, a less favorable sales mix and substantial production inefficiencies at the Sapulpa, Oklahoma glass production facility. Compared to 1998, lower production volumes in 1999 at a second glass production facility also adversely impacted results due to lower overhead absorption. SEGMENT REVIEW - AUTOMOTIVE A record level of net sales was achieved by this segment during fiscal 2000 with total net sales of $256,771,000 exceeding the 1999 total of $240,615,000. Compared to 1998 net sales of $233,544,000, a 3% increase in net sales occurred in 1999. Contributing to the volume increase was internal growth associated with the addition of several new aluminum accessory and floor mat programs placed with OEMs, as well as the volume associated with a new aftermarket customer. Sales of light truck bedliners were adversely impacted throughout this period as a result of factors such as significant industry over-capacity and intense competitive pricing conditions. Operating income of the Automotive segment during 2000 totaled $7,452,000, a 42% decline from the comparable 1999 total of $12,861,000. This decline is attributable to lower contribution from the sales of floor mats as affected by operating inefficiencies, a less favorable sales mix, certain raw material cost increases, reduced pricing to OEMs and more competitive aftermarket conditions. Freight and overtime costs were also unusually high in the first half of fiscal 2000 due to capacity constraints. The extent of the decline was mitigated by improved contribution from aluminum truck accessory operations. The operating income of the Automotive segment for 1999 declined 31% from the $18,700,000 recorded in 1998. In addition to the presence of the general conditions noted above, operating 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 facility. 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 3 MANAGEMENT'S DISCUSSION AND ANALYSIS - ------------------------------------ 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 2000, sales to OEMs comprised 58% of this segment's sales compared to 50% and 49% in 1999 and 1998, respectively. LIQUIDITY AND CAPITAL RESOURCES In general, the Company's noteworthy balance sheet strength at June 30, 2000 is substantially similar in composition to that of June 30, 1999. This was reflected in short and long-term debt comprising less than 10% of total capitalization at both dates. Management believes that this relatively low level of leverage 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 bank lines of credit to meet any short-term cash requirements not otherwise met by cash generated from operations. Short-term bank loans utilized at June 30, 2000 increased $8,250,000. Over the last three years, the Company's financial position has benefited from net cash provided by operating activities totaling $128,445,000, $126,484,000 and $120,045,000 for 2000, 1999 and 1998, respectively. The primary influence on these amounts has been the Company's favorable levels of net income and working capital. This 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 fiscal 2000 total of $24,564,000 declined from the $33,804,000 expended in fiscal 1999 due to 1999 including large expenditures for the completion of a food distribution facility. No similarly-sized projects were undertaken in 2000. Fiscal 1998 included the acquisition of all 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. Subsequent to June 30, 2000, the Company utilized cash of approximately $33,000,000 to acquire the outstanding stock of Sister Schubert's Homemade Rolls, Inc., a manufacturer and marketer of frozen, partially baked yeast rolls and related products. The selling shareholders may ultimately receive additional cash payments from the Company contingent upon the future annual level of Sister Schubert's earnings, as defined, that will be attained through calendar 2004. Financing activities of the Company used net cash totaling $115,915,000, $91,355,000 and $58,738,000 in fiscals 2000, 1999 and 1998, respectively. The largest such 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 $75,101,000, $66,792,000 and $37,083,000 in 2000, 1999 and 1998, respectively. In May 2000, the Company's Board of Directors approved a share repurchase authorization of 3,000,000 shares which, when combined with the amount of shares remaining subject to repurchase under a previous authorization, provided a total of 3,412,000 shares authorized for future purchase as of June 30, 2000. An additional significant financing activity conducted in each of the last three years has been the payment of dividends. Total dividend payments for 2000 were $24,747,000 which was approximately 1% greater than the 1999 total of $24,573,000. This increase reflects the higher dividend payout rate of $.63 present during 2000 as compared to $.59 during 1999. Fiscal 2000 marks the 37th 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. Compared to June 30, 1999, the current portion of long-term debt decreased approximately $25 million by June 30, 2000 as a result of the maturity of a $25 million note which was paid in February 2000. This payment was effectively funded by cash 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. Such costs have not been, and are not anticipated to become, material. 4 MANAGEMENT'S DISCUSSION AND ANALYSIS - ------------------------------------ IMPACT OF INFLATION The most significant change in costs during fiscal 2000 related to declines in soybean oil and cream costs which benefited the results of the Specialty Foods segment. Certain cost increases in the second half of fiscal 2000, including those for freight, natural gas and corrugated, trended above the general inflation rate and may adversely affect fiscal 2001 results if not abated. Raw material costs in fiscal 1999, with the exception of certain food commodity costs, 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. 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. Reducing 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 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 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: 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 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. 5 FIVE YEAR FINANCIAL SUMMARY Lancaster Colony Corporation and Subsidiaries - ---------------------------------------------
(Thousands Except Per Share Figures) 2000 1999 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------- OPERATIONS Net Sales $1,104,258 $1,045,702 $1,008,752 $ 922,813 $ 855,912 Gross Margin $ 335,398 $ 321,916 $ 324,397 $ 290,762 $ 263,952 Percent of Sales 30.4% 30.8% 32.2% 31.5% 30.8% Interest Expense $ 1,588 $ 2,718 $ 2,626 $ 2,596 $ 2,875 Percent of Sales 0.1% 0.3% 0.3% 0.3% 0.3% Income Before Income Taxes $ 160,189 $ 153,462 $ 155,373 $ 142,459 $ 123,221 Percent of Sales 14.5% 14.7% 15.4% 15.4% 14.4% Taxes Based on Income $ 60,925 $ 58,333 $ 59,243 $ 53,753 $ 47,086 Net Income $ 99,264 $ 95,129 $ 96,130 $ 88,706 $ 76,135 Percent of Sales 9.0% 9.1% 9.5% 9.6% 8.9% Per Common Share:(1) Net Income- Basic and Diluted $ 2.51 $ 2.28 $ 2.22 $ 2.01 $ 1.71 Cash Dividends $ 0.63 $ 0.59 $ 0.54 $ 0.48 $ 0.44 - ------------------------------------------------------------------------------------------------------------- FINANCIAL POSITION Total Assets $ 531,844 $ 550,014 $ 529,367 $ 484,394 $ 435,359 Working Capital $ 219,420 $ 212,162 $ 235,031 $ 235,079 $ 203,988 Property, Plant and Equipment--Net $ 172,384 $ 175,617 $ 170,766 $ 151,309 $ 139,095 Long-Term Debt $ 3,040 $ 3,575 $ 29,095 $ 30,685 $ 31,230 Property Additions $ 24,564 $ 33,804 $ 44,935 $ 37,528 $ 50,229 Depreciation and Amortization $ 34,340 $ 35,569 $ 32,571 $ 26,981 $ 24,399 Shareholders' Equity $ 415,483 $ 414,855 $ 410,563 $ 368,000 $ 323,563 Per Common Share(1) $ 10.94 $ 10.23 $ 9.60 $ 8.45 $ 7.29 Weighted Average Common Shares Outstanding- Diluted(1) 39,554 41,799 43,364 44,108 44,624 - ------------------------------------------------------------------------------------------------------------- STATISTICS Price-Earnings Ratio at Year End 7.8 15.1 17.1 16.0 14.6 Current Ratio 3.3 2.8 4.1 4.2 3.9 Long-Term Debt as a Percent of Shareholders' Equity 0.7% 0.9% 7.1% 8.3% 9.7% Dividends Paid as a Percent of Net Income 24.9% 25.8% 24.3% 23.8% 25.7% Return on Average Equity 23.9% 23.0% 24.7% 25.7% 25.3% - -------------------------------------------------------------------------------------------------------------
(1) Adjusted for 3-for-2 stock split paid January 1998. 6 BUSINESS SEGMENTS Lancaster Colony Corporation and Subsidiaries For the Years Ended June 30, 2000, 1999 and 1998 - ------------------------------------------------ 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 business segment presentation has been restated to conform with the 2000 and 1999 presentations. SPECIALTY FOODS-includes the 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 the 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 2000 and 1999 capital expenditures of the segments include property relating to business acquisitions as follows: Segment 2000 1999 - -------------------------------------------------------------------------------- Glassware & Candles $150,000 Automotive $990,000 - -------------------------------------------------------------------------------- 7 BUSINESS SEGMENTS Lancaster Colony Corporation and Subsidiaries For the Years Ended June 30, 2000, 1999 and 1998 - ------------------------------------------------ The following sets forth certain financial information attributable to the Company's business segments for the three years ended June 30, 2000, 1999 and 1998:
(Dollars In Thousands) 2000 1999 1998 - ------------------------------------------------------------------------------- NET SALES Specialty Foods $ 489,962 $ 441,470 $ 411,373 Glassware and Candles 357,525 363,617 363,835 Automotive 256,771 240,615 233,544 - ------------------------------------------------------------------------------- Total $ 1,104,258 $ 1,045,702 $ 1,008,752 =============================================================================== OPERATING INCOME Specialty Foods $ 83,372 $ 68,550 $ 62,141 Glassware and Candles 76,756 79,235 80,350 Automotive 7,452 12,861 18,700 Corporate Expenses (5,631) (4,958) (5,320) - ------------------------------------------------------------------------------- Total $ 161,949 $ 155,688 $ 155,871 =============================================================================== IDENTIFIABLE ASSETS Specialty Foods $ 131,657 $ 133,100 $ 121,659 Glassware and Candles 253,659 260,359 264,569 Automotive 126,819 122,373 108,238 Corporate 19,709 34,182 34,901 - ------------------------------------------------------------------------------- Total $ 531,844 $ 550,014 $ 529,367 =============================================================================== CAPITAL EXPENDITURES Specialty Foods $ 5,753 $ 13,721 $ 9,347 Glassware and Candles 11,301 10,998 29,847 Automotive 7,544 9,804 9,372 Corporate 116 271 59 - ------------------------------------------------------------------------------- Total $ 24,714 $ 34,794 $ 48,625 =============================================================================== DEPRECIATION AND AMORTIZATION Specialty Foods $ 7,927 $ 7,601 $ 7,425 Glassware and Candles 16,939 18,601 16,367 Automotive 9,327 9,242 8,684 Corporate 147 125 95 - ------------------------------------------------------------------------------- Total $ 34,340 $ 35,569 $ 32,571 ===============================================================================
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 $112,000,000 and $109,000,000 or 10% of consolidated fiscal 2000 and 1999 net sales, respectively. 8 CONSOLIDATED STATEMENTS OF INCOME Lancaster Colony Corporation and Subsidiaries For the Years Ended June 30, 2000, 1999 and 1998 - ------------------------------------------------
Years Ended June 30 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------- NET SALES $ 1,104,258,000 $ 1,045,702,000 $ 1,008,752,000 COST OF SALES 768,860,000 723,786,000 684,355,000 - ---------------------------------------------------------------------------------------------------------------- GROSS MARGIN 335,398,000 321,916,000 324,397,000 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 173,449,000 166,228,000 168,526,000 - ---------------------------------------------------------------------------------------------------------------- OPERATING INCOME 161,949,000 155,688,000 155,871,000 OTHER INCOME (EXPENSE): Interest expense (1,588,000) (2,718,000) (2,626,000) Interest income and other--net (172,000) 492,000 2,128,000 - ---------------------------------------------------------------------------------------------------------------- INCOME BEFORE INCOME TAXES 160,189,000 153,462,000 155,373,000 TAXES BASED ON INCOME 60,925,000 58,333,000 59,243,000 - ---------------------------------------------------------------------------------------------------------------- NET INCOME $ 99,264,000 $ 95,129,000 $ 96,130,000 ================================================================================================================ NET INCOME PER COMMON SHARE: Basic $ 2.51 $ 2.28 $ 2.22 Diluted $ 2.51 $ 2.28 $ 2.22 ================================================================================================================ WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: Basic 39,498,000 41,759,000 43,271,000 Diluted 39,554,000 41,799,000 43,364,000 ================================================================================================================
See Notes to Consolidated Financial Statements 9 CONSOLIDATED BALANCE SHEETS Lancaster Colony Corporation and Subsidiaries As of June 30, 2000 and 1999 - ---------------------------------------------
June 30 ASSETS 2000 1999 - ------------------------------------------------------------------------------------------- CURRENT ASSETS: Cash and equivalents $ 2,656,000 $ 18,860,000 Receivables (less allowance for doubtful accounts, 2000--$2,395,000; 1999--$3,300,000) 118,991,000 123,268,000 Inventories: Raw materials and supplies 43,882,000 41,741,000 Finished goods and work in process 131,598,000 127,680,000 - ------------------------------------------------------------------------------------------- Total inventories 175,480,000 169,421,000 Prepaid expenses and other current assets 18,768,000 16,830,000 - ------------------------------------------------------------------------------------------- Total current assets 315,895,000 328,379,000 PROPERTY, PLANT AND EQUIPMENT: Land, buildings and improvements 113,959,000 112,351,000 Machinery and equipment 299,224,000 281,710,000 - ------------------------------------------------------------------------------------------- Total cost 413,183,000 394,061,000 Less accumulated depreciation 240,799,000 218,444,000 - ------------------------------------------------------------------------------------------- Property, plant and equipment--net 172,384,000 175,617,000 OTHER ASSETS: Goodwill (net of accumulated amortization, 2000--$10,354,000; 1999--$8,884,000) 34,553,000 35,768,000 Other assets 9,012,000 10,250,000 - ------------------------------------------------------------------------------------------- TOTAL $531,844,000 $550,014,000 =========================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------------------------------------------------------------- CURRENT LIABILITIES: Short-term bank loans $ 8,250,000 Current portion of long-term debt 535,000 $ 25,520,000 Accounts payable 43,690,000 45,742,000 Accrued liabilities 44,000,000 44,955,000 Total current liabilities 96,475,000 116,217,000 LONG-TERM DEBT--less current portion 3,040,000 3,575,000 OTHER NONCURRENT LIABILITIES 6,800,000 7,081,000 DEFERRED INCOME TAXES 10,046,000 8,286,000 SHAREHOLDERS' EQUITY: Preferred stock--authorized 3,050,000 shares; Outstanding--none Common stock--authorized 75,000,000 shares; Outstanding, 2000--37,962,417; 1999--40,547,796 52,115,000 50,912,000 Retained earnings 622,660,000 548,143,000 Accumulated other comprehensive income 115,000 106,000 - ------------------------------------------------------------------------------------------- Total 674,890,000 599,161,000 Less common stock in treasury, at cost 259,407,000 184,306,000 - ------------------------------------------------------------------------------------------- Total shareholders' equity 415,483,000 414,855,000 - ------------------------------------------------------------------------------------------- TOTAL $531,844,000 $550,014,000 ===========================================================================================
See Notes to Consolidated Financial Statements 10 CONSOLIDATED STATEMENTS OF CASH FLOWS Lancaster Colony Corporation and Subsidiaries For the Years Ended June 30, 2000, 1999 and 1998 - ------------------------------------------------
Years Ended June 30 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 99,264,000 $ 95,129,000 $ 96,130,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 34,340,000 35,569,000 32,571,000 Provision for losses on accounts receivable 5,081,000 1,789,000 1,691,000 Deferred income taxes and other noncash charges (121,000) (1,225,000) 887,000 Loss (gain) on sale of property 89,000 (229,000) (1,965,000) Changes in operating assets and liabilities: Receivables (804,000) (25,252,000) 2,661,000 Inventories (6,059,000) 6,426,000 (12,635,000) Prepaid expenses and other current assets (338,000) (173,000) 81,000 Accounts payable and accrued liabilities (3,007,000) 14,450,000 624,000 - ------------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 128,445,000 126,484,000 120,045,000 - ------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Payments on property additions (24,564,000) (33,804,000) (44,935,000) Acquisitions net of cash acquired (400,000) (2,075,000) (19,749,000) Proceeds from sale of property 78,000 647,000 3,634,000 Other--net (3,857,000) (4,269,000) (9,165,000) - ------------------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (28,743,000) (39,501,000) (70,215,000) - ------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net change in short-term bank loans 8,250,000 Payment of dividends (24,747,000) (24,573,000) (23,326,000) Purchase of treasury stock (75,101,000) (66,792,000) (37,083,000) Payments on long-term debt, including acquisition debt payoff (25,520,000) (510,000) (5,148,000) Common stock issued, including stock issued upon exercise of stock options and related tax benefit 1,203,000 520,000 6,819,000 - ------------------------------------------------------------------------------------------------------------------------- Net cash used in financing activities (115,915,000) (91,355,000) (58,738,000) - ------------------------------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash 9,000 8,000 23,000 - ------------------------------------------------------------------------------------------------------------------------- Net change in cash and equivalents (16,204,000) (4,364,000) (8,885,000) Cash and equivalents at beginning of year 18,860,000 23,224,000 32,109,000 - ------------------------------------------------------------------------------------------------------------------------- Cash and equivalents at end of year $ 2,656,000 $ 18,860,000 $ 23,224,000 =========================================================================================================================
See Notes to Consolidated Financial Statements 11 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Lancaster Colony Corporation and Subsidiaries For the Years Ended June 30, 2000, 1999 and 1998 - ---------------------------------------------------
Accumulated Common Stock Other Outstanding Retained Comprehensive Treasury Shares Amount Earnings Income Stock - ----------------------------------------------------------------------------------------------------------------------------------- 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 - ----------------------------------------------------------------------------------------------------------------------------------- Year Ended June 30, 2000: Net income 99,264,000 Cash dividends-common stock ($.63 per share) (24,747,000) Purchase of treasury shares (2,631,032) 75,101,000 Shares issued upon exercise of stock options including related tax benefits 45,653 1,203,000 Translation adjustment 9,000 - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE, JUNE 30, 2000 37,962,417 $52,115,000 $622,660,000 $115,000 $259,407,000 ===================================================================================================================================
See Notes to Consolidated Financial Statements 12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Lancaster Colony Corporation and Subsidiaries - --------------------------------------------- 1. SUMMARY OF Principles of Consolidation SIGNIFICANT The accompanying consolidated financial statements ACCOUNTING include the accounts of Lancaster Colony POLICIES 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. 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 dimunition 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. 13 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 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 2000, 1999 and 1998 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, 2000, 1999 and 1998. Derivative Instruments, Computer Software Costs, Start-Up Costs and Revenue Recognition In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This Statement establishes accounting and reporting standards requiring that every derivative instrument be recorded on the balance sheet as either an asset or liability measured at its fair value. This Statement also requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. 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-an amendment 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). In June 2000, the Financial Accounting Standards Board issued SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities-an amendment of FASB Statement No. 133," which, among other changes, permitted contracts for the purchase and sale of an item other than a financial instrument or a derivative which contained normal terms and where physical delivery was probable to be excluded from the scope of SFAS No. 133. Management has completed its analysis relating to the adoption of these Statements and has concluded that the Company did not have any freestanding or embedded derivatives as defined by the Statement at July 1, 2000. In July 1999, the Company adopted Statement of Position ("SOP") No. 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," which revised the accounting for software development costs and SOP No. 98-5, "Reporting on the Costs of Start-up Activities," which requires costs of start-up activities to be expensed as incurred. Adoption of these SOPs had no significant impact on the Company's financial statements. 14 In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements," which effectively summarizes certain of the staff's views in applying generally accepted accounting principles to revenue recognition in financial statements. In March 2000, the SEC issued SAB No. 101A to provide additional time for implementation of SAB No. 101 and in June 2000, the SEC issued SAB No. 101B, which defers the implementation of SAB No. 101 until the fourth quarter of fiscal years beginning after December 15, 1999 (the fourth quarter of the Company's fiscal 2001). Management has not yet completed its analysis of this SAB as to its impact on the Company's consolidated financial statements and disclosures. 2. ACQUISITIONS During January 2000, the Company acquired certain assets of a glass container distributor for cash of approximately $400,000. During October 1998, the Company acquired certain assets of 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. Subsequent to June 30, 2000, the Company utilized cash of approximately $33,000,000 to acquire the outstanding stock of Sister Schubert's Homemade Rolls, Inc., a manufacturer and marketer of frozen, partially baked yeast rolls and related products. The selling shareholders may ultimately receive additional cash payments from the Company contingent upon the future annual level of Sister Schubert's earnings, as defined, that will be attained through calendar 2004. 3. INVENTORIES Inventories are valued at the lower of cost or market. Inventories which comprise approximately 22% of total inventories at June 30, 2000 and 1999, 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 $17,315,000 and $16,744,000 higher than reported at June 30, 2000 and 1999, respectively. It is not practicable to segregate work in process from finished goods inventories. Management estimates, however, that work in progress inventories amount to approximately 10% of the combined total of finished goods and work in process inventories at June 30, 2000 and 1999. 4. SHORT-TERM BORROWINGS During fiscal 2000, the Company entered into a short-term revolving credit agreement in which a credit line of $20,000,000 was established. This agreement permits the Company to borrow funds on a variety of interest rate terms and, as has been subsequently extended, will terminate on December 31, 2000. The Company must remain in compliance with certain convenants included in the agreement. As of June 30, 2000, the Company had outstanding borrowings totaling $8,250,000 against the line provided by this agreement. The weighted average interest rate on these borrowings was 6.8% at June 30, 2000. As of June 30, 2000, 1999 and 1998, the Company had unused lines of credit for short-term borrowings from various banks of $70,000,000, $95,000,000 and $85,000,000, 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, 2000 and 1999, the Company had no short-term borrowings under these lines of credit arrangements. 5. ACCRUED LIABILITIES Accrued liabilities at June 30, 2000 and 1999 are composed of:
(Dollars In Thousands) 2000 1999 ------------------------------------------------------------------------------------------- Accrued compensation and employee benefits $29,569 $29,911 Accrued marketing and distribution 7,208 5,808 Income and other taxes 1,019 4,131 Other 6,204 5,105 ------------------------------------------------------------------------------------------- Total accrued liabilities $44,000 $44,955 ==========================================================================================
15 6. LONG-TERM DEBT Long-term debt (including current portion) at June 30, 2000 and 1999 consists of:
(Dollars In Thousands) 2000 1999 -------------------------------------------------------------------------------------------- Notes payable (8.9%, paid in February 2000) $25,000 Obligations with various industrial development authorities - collateralized by real estate and equipment - floating rate due in installments to 2005 $3,575 4,095 -------------------------------------------------------------------------------------------- Total 3,575 29,095 Less current portion 535 25,520 -------------------------------------------------------------------------------------------- Long-term debt $3,040 $ 3,575 ===========================================================================================
No material debt was assumed for the purchase of property additions in 2000, 1999 and 1998. Cash payments for interest (including interest paid on short-term borrowings) were $2,511,000, $2,722,000 and $2,646,000 for 2000, 1999 and 1998, respectively. At June 30, 2000, the Company met or exceeded various covenant requirements related to the outstanding debt.
Long-term debt matures as follows: (Dollars In Thousands) -------------------------------------------------------------------------------------------- Year ending June 30: 2001 $ 535 2002 545 2003 555 2004 565 2005 680 After 2005 695 -------------------------------------------------------------------------------------------- Total $ 3,575 ===========================================================================================
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, 2000, 1999 and 1998, have been provided as follows:
(Dollars In Thousands) 2000 1999 1998 -------------------------------------------------------------------------------------------- Currently payable: Federal $53,623 $53,245 $49,798 State and local 7,142 6,420 7,612 -------------------------------------------------------------------------------------------- Total current provision 60,765 59,665 57,410 Deferred Federal, state and local provision (credit) 160 (1,332) 1,833 -------------------------------------------------------------------------------------------- Total taxes based on income $60,925 $58,333 $59,243 ===========================================================================================
Tax expense resulting from allocating certain tax benefits directly to common stock and retained earnings totaled $85,000, $22,000 and $647,000 for 2000, 1999 and 1998, respectively. The Company's effective tax rate varies from the statutory Federal income tax rate as a result of the following factors:
2000 1999 1998 -------------------------------------------------------------------------------------------- Statutory rate 35.0% 35.0% 35.0% State and local income taxes 2.9 2.9 3.1 Other 0.1 0.1 0.0 -------------------------------------------------------------------------------------------- Effective rate 38.0% 38.0% 38.1% ============================================================================================
16 Deferred income taxes recorded in the consolidated balance sheets at June 30, 2000 and 1999 consist of the following:
(Dollars In Thousands) 2000 1999 -------------------------------------------------------------------------------------------- Deferred tax assets (liabilities): Inventories $ 6,389 $ 7,013 Employee medical and other benefits 7,336 5,033 Receivable and other valuation allowances 3,468 3,976 Other accrued liabilities 3,606 3,631 -------------------------------------------------------------------------------------------- Total deferred tax assets 20,799 19,653 -------------------------------------------------------------------------------------------- Total deferred tax liabilities - property and other (14,845) (13,538) -------------------------------------------------------------------------------------------- Net deferred tax asset $ 5,954 $ 6,115 ============================================================================================
Net current deferred tax assets totaled $16,000,000 and $14,400,000 for 2000 and 1999, respectively, and were included in prepaid expenses and other current assets. Cash payments for income taxes were $63,862,000, $51,119,000 and $63,633,000 for 2000, 1999 and 1998, 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. As authorized by the Company's Board of Directors in February 2000, each share of the Company's outstanding common stock includes a nondetachable stock purchase right that provides, upon becoming exercisable, for the purchase of one-hundredth of a share of Series A Participating Preferred Shares at an exercise price of $185, subject to certain adjustments. Alternatively, once exercisable, each right will also entitle the holder to buy shares of the Company's common stock having a market value of twice the exercise price. 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. The person or group effecting such 15 percent acquisition or undertaking such tender offer will not be entitled to exercise any rights. If the Company is acquired in a merger or other business combination, each right will entitle the holder, other than the acquiring person, to purchase securities of the surviving company having a market value equal to twice the exercise price of the rights. Until the rights become exercisable, they may be redeemed by the Company at a price of one cent per right. These rights expire in April 2010 unless earlier redeemed by the Company under circumstances permitted by the Rights Agreement. In November 1999, the Company's Board of Directors approved a share repurchase authorization of 2,000,000 shares of which 411,688 remained authorized for future purchase as of June 30, 2000. In May 2000, the Company's Board of Directors authorized an additional 3,000,000 shares for future purchases, all of which remain authorized for future purchase at June 30, 2000. 9. STOCK OPTIONS Under terms of an incentive 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, 2000, 2,452,654 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. 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. 17 The following summarizes for each of the three years in the period ended June 30, 2000 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:
2000 1999 1998 ---------------------------------------------------------------------------------------------------- Weighted Weighted Weighted Number Average Number Average Number Average of Exercise of Exercise of Exercise Shares Price Shares Price Shares Price ---------------------------------------------------------------------------------------------------- Outstanding at beginning of period 430,149 $26.75 277,986 $27.78 497,095 $28.18 Exercised (45,653) 24.54 (21,108) 23.62 (215,659) 28.62 Granted 293,350 27.15 Forfeited (3,550) 27.13 (120,079) 30.85 (3,450) 30.75 ---------------------------------------------------------------------------------------------------- Outstanding at end of the period 380,946 $26.98 430,149 $26.75 277,986 $27.78 ==================================================================================================== Exercisable at end of period 294,437 $27.46 318,449 $27.32 186,692 $29.73 ====================================================================================================
The weighted average fair value of options granted during fiscal 1999 was $5.27 per share. The following table summarizes information about the options outstanding at June 30, 2000:
Options Outstanding Options Exercisable ------------------------------------------------------------- ----------------------------------- Weighted Average Range of Number Remaining Exercise Number Weighted Average Exercise Prices Outstanding Contractual Life Price Exercisable Exercise Price ------------------------------------------------------------- ----------------------------------- $30.75 82,500 1.59 $30.75 74,434 $30.75 $27.13 - $29.84 244,556 1.73 $27.15 202,412 $27.16 $17.06 - $22.25 53,890 3.53 $20.41 17,591 $17.06 ============================================================= ==================================
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: risk free interest rate of 5.77%; dividend yield of 1.7%; volatility factor of the expected market price of the Company's common stock of 27.39%; and a weighted average expected option life of 2.71 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:
For Years Ended June 30 (Dollars In Thousands Except Per Share Figures) 2000 1999 1998 ---------------------------------------------------------------------------------------------------- Net income As reported $99,264 $95,129 $96,130 Pro forma $99,078 $94,555 $96,057 Earnings per Share: Basic and Diluted As reported $2.51 $2.28 $2.22 Basic Pro forma $2.51 $2.26 $2.22 Diluted Pro forma $2.50 $2.26 $2.22 ====================================================================================================
10. PENSION The Company and certain of its operating subsidiaries AND OTHER provide multiple defined benefit pension and postretirement POSTRETIREMENT medical and life insurance benefit plans. Benefits under BENEFITS 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. 18 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:
OTHER PENSION BENEFITS POSTRETIREMENT BENEFITS ------------------------------------------------------------------ --------------------------- (Dollars In Thousands) 2000 1999 2000 1999 ------------------------------------------------------------------ --------------------------- CHANGE IN BENEFIT OBLIGATION Benefit obligation at beginning of year $28,273 $28,409 $2,757 $2,850 Service cost 625 491 111 109 Interest cost 1,954 1,851 199 192 Amendments 808 Actuarial (gain) (804) (1,526) (125) (192) Benefits paid (2,073) (1,760) (285) (202) ------------------------------------------------------------------ -------------------------- Benefit obligation at end of year 27,975 28,273 2,657 2,757 ------------------------------------------------------------------ --------------------------- CHANGE IN PLAN ASSETS Fair value of plan assets at beginning of year 35,066 34,794 Actual return on plan assets (177) 1,738 Employer contribution 65 294 286 202 Benefits paid (2,073) (1,760) (286) (202) ------------------------------------------------------------------ --------------------------- Fair value of plan assets at end of year 32,881 35,066 ------------------------------------------------------------------ --------------------------- Funded status 4,906 6,793 (2,657) (2,757) Unrecognized net actuarial (gain) (3,788) (6,436) (743) (643) Unrecognized prior service cost 2,598 2,797 Unrecognized net transition obligation 146 177 ------------------------------------------------------------------ --------------------------- Prepaid (accrued) benefit cost $3,862 $3,331 ($3,400) ($3,400) ================================================================== =========================== WEIGHTED-AVERAGE ASSUMPTIONS AS OF JUNE 30 ------------------------------------------------------------------ --------------------------- - Discount rate 7.60% 7.25% 7.60% 7.25% Expected return on plan assets 9.00% 9.00%
For measurement purposes, annual increases in medical costs for fiscal 2000 are assumed to total approximately 6.5% per year and gradually decline to 5% by approximately the year 2003 and remain level thereafter. Annual increases in medical costs for fiscal 1999 were assumed to total approximately 7% per year and gradually decline to 5% by approximately the year 2003 and remain level thereafter.
OTHER PENSION BENEFITS POSTRETIREMENT BENEFITS ------------------------------------------------------------------ ------------------------------ (Dollars In Thousands) 2000 1999 1998 2000 1999 1998 ------------------------------------------------------------------ ------------------------------ COMPONENTS OF NET PERIODIC BENEFIT COST Service cost $625 $491 $559 $111 $109 $102 Interest cost 1,954 1,851 1,785 199 192 215 Expected return on plan assets (3,072) (3,056) (2,649) Amortization of unrecognized net gain (203) (202) (230) (25) (11) (4) Amortization of prior service cost 199 200 148 Amortization of unrecognized net obligation existing at transition 32 31 31 ------------------------------------------------------------------- --------------------------- Net periodic benefit cost (benefit) ($465) ($685) ($356) $285 $290 $313 ------------------------------------------------------------------- ---------------------------
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 $2,721,000 and $4,814,000 as of June 30, 2000 and 1999, respectively. 19 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:
1-PERCENTAGE- 1-PERCENTAGE- (Dollars In Thousands) POINT INCREASE POINT DECREASE -------------------------------------------------------------------------------------------------------- Effect on total of service and interest cost components $29 ($25) Effect on postretirement benefit obligation as of June 30, 2000 $168 ($147)
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 $2,920,000, $2,904,000 and $2,723,000 in 2000, 1999 and 1998, 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 $811,000, $800,000 and $174,000 for the years ended June 30, 2000, 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. 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 2011. 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): 2001-$3,724; 2002-$2,800; 2003-$2,144; 2004-$1,489; 2005-$513; thereafter-$2,290. Total rent expense, including short-term cancelable leases, during 2000, 1999 and 1998 is summarized as follows:
(Dollars In Thousands) 2000 1999 1998 -------------------------------------------------------------------------------------------------------- Operating leases: Minimum rentals $4,877 $4,844 $5,477 Contingent rentals 452 328 534 Short-term cancelable leases 2,246 2,172 2,113 -------------------------------------------------------------------------------------------------------- Total $7,575 $7,344 $8,124 ========================================================================================================
12. CONTINGENCIES At June 30, 2000, the Company is a party to various AND ENVIRON- legal and environmental matters which have arisen in MENTAL the ordinary course of business. Such matters did not MATTERS 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. 20 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, 2000 and 1999, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended June 30, 2000. 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 auditing standards generally accepted in the United States of America. 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, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2000 in conformity with accounting principles generally accepted in the United States of America. /S/ Deloitte & Touche LLP Columbus, Ohio August 23, 2000 SELECTED QUARTERLY FINANCIAL DATA Lancaster Colony Corporation and Subsidiaries For the Years Ended June 30, 2000 and 1999 - ---------------------------------------------
Diluted (Thousands Except Per Net Gross Net Earnings Stock Prices Dividends Paid Share Figures) Sales Margin Income Per Share High Low Per Share - ----------------------------------------------------------------------------------------------------------------------------------- 2000 First quarter $ 260,444 $ 78,637 $22,573 $ .56 $36.938 $29.000 $.15 Second quarter 324,407 101,542 33,120 .83 37.000 29.500 .16 Third quarter 262,764 78,523 20,102 .51 34.750 26.563 .16 Fourth quarter 256,643 76,696 23,469 .61 32.000 18.500 .16 - ----------------------------------------------------------------------------------------------------------------------------------- YEAR $1,104,258 $335,398 $99,264 $2.51 $37.000 $18.500 $.63 =================================================================================================================================== 1999 First quarter $ 244,080 $ 73,267 $20,338 $ .48 $40.000 $27.750 $.14 Second quarter 300,590 92,284 28,213 .67 32.125 24.063 .15 Third quarter 247,227 76,519 21,834 .53 32.000 26.500 .15 Fourth quarter 253,805 79,846 24,744 .61 35.813 24.688 .15 - ----------------------------------------------------------------------------------------------------------------------------------- YEAR $1,045,702 $321,916 $95,129 $2.28 $40.000 $24.063 $.59 ===================================================================================================================================
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 14, 2000 was approximately 6,900. The highest and lowest prices for the Company's common stock from July 1, 2000 to September 14, 2000 were $26.250 and $20.625. EX-21 5 l83916aex21.txt EXHIBIT 21 1 Exhibit 21 LANCASTER COLONY CORPORATION SIGNIFICANT SUBSIDIARIES OF REGISTRANT -------------------------------------- State Percent of Name of Incorporation Ownership ---- ---------------- --------- Colony Printing & Labeling, Inc. Indiana 100% Dee Zee, Inc. Ohio 100% E. O. Brody Company Ohio 100% Fostoria Glass, LLC Ohio 100% Fragrance De-Lite, Inc. 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% All subsidiaries conduct their business under the names shown, with the exception of Fragrance De-Lite, Inc., which conducts business under the name "Candle-net." EX-23 6 l83916aex23.txt EXHIBIT 23 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 23, 2000, appearing in and incorporated by reference in this Annual Report on Form 10-K of Lancaster Colony Corporation for the year ended June 30, 2000. /S/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP Columbus, Ohio September 25, 2000 EX-27 7 l83916aex27.txt EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REGISTRANT'S CONSOLIDATED BALANCE SHEET AND STATEMENT OF INCOME FOR THE YEAR ENDED JUNE 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR JUN-30-2000 JUN-30-2000 2,656 0 121,386 2,395 175,480 315,895 413,183 240,799 531,844 96,475 3,040 0 0 52,115 363,368 531,844 1,104,258 1,104,258 768,860 768,860 0 0 1,588 160,189 60,925 99,264 0 0 0 99,264 2.51 2.51
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