-----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, VH9YeF2WPpFbwmb++MIaMNxRZeAgPtrvD0zL09DuyG6dFY9ttS+MKV+9NgtMJ/Xa 3ApKMX3itkPyLgH3cioj8A== 0000950152-99-000940.txt : 19990215 0000950152-99-000940.hdr.sgml : 19990215 ACCESSION NUMBER: 0000950152-99-000940 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990212 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LANCASTER COLONY CORP CENTRAL INDEX KEY: 0000057515 STANDARD INDUSTRIAL CLASSIFICATION: CANNED, FROZEN & PRESERVED FRUIT, VEG & FOOD SPECIALTIES [2030] IRS NUMBER: 131955943 STATE OF INCORPORATION: OH FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-04065 FILM NUMBER: 99535095 BUSINESS ADDRESS: STREET 1: 37 W BROAD ST CITY: COLUMBUS STATE: OH ZIP: 43215 BUSINESS PHONE: 6142247141 10-Q 1 LANCASTER COLONY CORPORATION 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission file number 0-4065-1 LANCASTER COLONY CORPORATION (Exact name of registrant as specified in its charter) OHIO 13-1955943 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 37 WEST BROAD STREET, COLUMBUS, OHIO 43215 (Address of principal executive offices) (Zip Code) 614-224-7141 (Registrant's telephone number, including area code) NONE (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- As of December 31, 1998, there were approximately 41,807,000 shares of common stock, no par value per share, outstanding. 1 of 11 2 LANCASTER COLONY CORPORATION AND SUBSIDIARIES INDEX
Page No. -------- Part I. Financial Information Condensed Consolidated Balance Sheets - December 31, 1998 and June 30, 1998 3 Condensed Consolidated Statements of Income - Three Months and Six Months Ended December 31, 1998 and 1997 4 Condensed Consolidated Statements of Cash Flows - Six Months Ended December 31, 1998 and 1997 5 Notes to Condensed Consolidated Financial Statements 6 Management's Discussion and Analysis of the Results of Operations and Financial Condition 7-9 Part II. Other Information Item 4 - Submission of Matters to a Vote of Security Holders 9 Item 6 - Exhibits and Reports on Form 8-K 9 Signatures 10 Exhibit 27 - Financial Data Schedule 11
2 of 11 3 LANCASTER COLONY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
December 31 June 30 1998 1998 ------------ ------------ (Unaudited) ASSETS Current Assets: Cash and equivalents $ 7,121,000 $ 23,224,000 Receivables - net of allowance for doubtful accounts 140,308,000 99,870,000 Inventories: Raw materials and supplies 45,481,000 44,915,000 Finished goods and work in process 109,874,000 130,282,000 ------------ ------------ Total inventories 155,355,000 175,197,000 Prepaid expenses and other current assets 14,454,000 13,257,000 ------------ ------------ Total current assets 317,238,000 311,548,000 Property, Plant and Equipment - At cost 390,535,000 374,033,000 Less Accumulated Depreciation 216,158,000 203,267,000 ------------ ------------ Property, plant and equipment - net 174,377,000 170,766,000 Goodwill - net of accumulated amortization 37,075,000 37,045,000 Other Assets 9,656,000 10,008,000 ------------ ------------ Total Assets $538,346,000 $529,367,000 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt $ 520,000 $ 510,000 Accounts payable 39,659,000 41,804,000 Accrued liabilities 41,876,000 34,203,000 ------------ ------------ Total current liabilities 82,055,000 76,517,000 Long-Term Debt - Less current portion 28,575,000 29,095,000 Other Noncurrent Liabilities 7,353,000 7,325,000 Deferred Income Taxes 2,783,000 5,867,000 Shareholders' Equity: Preferred stock - authorized 3,050,000 shares issuable in series; Class A - $1.00 par value, authorized 750,000 shares; Class B and C - no par value, authorized 1,150,000 shares each; outstanding - none Common stock - authorized 75,000,000 shares; issued December 31, 1998 - no par value - 47,086,616 shares; June 30, 1998 - no par value - 47,086,091 shares 50,408,000 50,392,000 Retained earnings 513,875,000 477,587,000 Accumulated other comprehensive income 119,000 98,000 ------------ ------------ Total 564,402,000 528,077,000 Less: Common stock in treasury, at cost December 31, 1998 - 5,280,103 shares; June 30, 1998 - 4,332,603 shares 146,822,000 117,514,000 ------------ ------------ Total shareholders' equity 417,580,000 410,563,000 ------------ ------------ Total Liabilities and Shareholders' Equity $538,346,000 $529,367,000 ============ ============
See Notes to Condensed Consolidated Financial Statements 3 of 11 4 LANCASTER COLONY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Six Months Ended December 31 December 31 1998 1997 1998 1997 ------------ ------------ ------------ ------------ Net Sales $300,590,000 $300,754,000 $544,670,000 $537,928,000 Cost of Sales 208,306,000 205,708,000 379,119,000 367,728,000 ------------ ------------ ------------ ------------ Gross Margin 92,284,000 95,046,000 165,551,000 170,200,000 Selling, General and Administrative Expenses 46,156,000 47,400,000 85,540,000 87,618,000 ------------ ------------ ------------ ------------ Operating Income 46,128,000 47,646,000 80,011,000 82,582,000 Other Income (Expense): Interest expense (866,000) (701,000) (1,515,000) (1,358,000) Interest income and other - net 48,000 (58,000) 87,000 (205,000) ------------ ------------ ------------ ------------ Income Before Income Taxes 45,310,000 46,887,000 78,583,000 81,019,000 Taxes Based on Income 17,097,000 17,920,000 30,032,000 31,191,000 ------------ ------------ ------------ ------------ Net Income $ 28,213,000 $ 28,967,000 $ 48,551,000 $ 49,828,000 ============ ============ ============ ============ Net Income Per Common Share: Basic $ .67 $ .67 $1.15 $1.15 Diluted $ .67 $ .67 $1.15 $1.14 Cash Dividends Per Common Share $ .150 $ .133 $ .290 $ .260 Weighted Average Common Shares Outstanding: Basic 42,136,000 43,351,000 42,344,000 43,434,000 Diluted 42,160,000 43,439,000 42,384,000 43,518,000
See Notes to Condensed Consolidated Financial Statements 4 of 11 5 LANCASTER COLONY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended December 31 1998 1997 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 48,551,000 $ 49,828,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 17,593,000 15,774,000 Deferred income taxes and other noncash charges (2,406,000) (3,640,000) (Gain) loss on sale of property (120,000) 55,000 Changes in operating assets and liabilities: Receivables (40,438,000) (31,543,000) Inventories 20,492,000 22,090,000 Prepaid expenses and other current assets (1,847,000) (2,120,000) Accounts payable (2,395,000) 8,972,000 Accrued liabilities 7,673,000 3,881,000 ------------ ------------ Net cash provided by operating activities 47,103,000 63,297,000 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Cash paid for acquisitions, net of cash acquired (1,825,000) (19,749,000) Payments on property additions (17,265,000) (22,162,000) Proceeds from sale of property 314,000 149,000 Other - net (2,386,000) (4,451,000) ------------ ------------ Net cash used in investing activities (21,162,000) (46,213,000) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Purchase of treasury stock (29,308,000) (13,773,000) Payment of dividends (12,263,000) (11,267,000) Payments on long-term debt, including payment of acquisition debt (510,000) (3,928,000) Common stock issued upon exercise of stock options including related tax benefits 16,000 2,162,000 ------------ ------------ Net cash used in financing activities (42,065,000) (26,806,000) ------------ ------------ Effect of exchange rate changes on cash 21,000 2,000 ------------ ------------ Net change in cash and equivalents (16,103,000) (9,720,000) Cash and equivalents at beginning of year 23,224,000 32,109,000 ------------ ------------ Cash and equivalents at end of period $ 7,121,000 $ 22,389,000 ============ ============ SUPPLEMENTAL DISCLOSURE OF OPERATING CASH FLOWS: Cash paid during the period for: Interest $ 1,518,000 $ 1,376,000 ============ ============ Income taxes $ 19,517,000 $ 27,186,000 ============ ============
See Notes to Condensed Consolidated Financial Statements 5 of 11 6 LANCASTER COLONY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS ENDED DECEMBER 31, 1998 AND 1997 (1) The interim condensed consolidated financial statements are unaudited but, in the opinion of management, reflect all adjustments necessary for a fair presentation of the results of operations and financial position for such periods. All such adjustments reflected in the interim condensed consolidated financial statements are considered to be of a normal recurring nature. The results of operations for any interim period are not necessarily indicative of results for the full year. Accordingly, these financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company's annual report on Form 10-K for the year ended June 30, 1998. (2) Effective July 1, 1998, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income." SFAS No. 130 is effective for the Company's fiscal year beginning July 1, 1998 including interim periods and requires reclassification of financial statements for earlier periods presented for comparative purposes. Accordingly, comprehensive income data has been presented in accordance with SFAS No. 130 in the accompanying condensed consolidated financial statements. Under SFAS No. 130, the Company is required to classify items of other comprehensive income by their nature in a financial statement and display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in-capital in the equity section of the condensed consolidated balance sheet. The only component of other comprehensive income for the Company is foreign currency translation adjustments. Total comprehensive income quarter-to-date, as of December 31, 1998 and 1997, was approximately $28,207,000 and $28,974,000, respectively. Total comprehensive income year-to-date, as of December 31, 1998 and 1997, was approximately $48,572,000 and $49,830,000, respectively. 6 of 11 7 LANCASTER COLONY CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION FOR THE PERIODS ENDED DECEMBER 31, 1998 AND 1997 RESULTS OF OPERATIONS For the six months ended December 31, 1998, the consolidated net sales of Lancaster Colony Corporation totaled $544,670,000, reflecting a 1% increase from the fiscal 1998 comparable total of $537,928,000. Net sales of $300,590,000 for the three months ended December 31, 1998 were essentially level with the comparable fiscal 1998 total of $300,754,000. Net sales of the Specialty Foods segment increased during the fiscal 1999 periods as such sales benefited from the sales of recently introduced products, cost-driven price increases and a growth in sales made to national foodservice accounts. The Glassware and Candles segment experienced lower sales in the current year due to a significant reduction in sales made to one private label candle customer. This decline was partially offset by greater sales of branded candle products to mass merchants. Net sales of the Automotive segment also declined during both of the current year periods presented as such sales were adversely affected by the mid-summer strike at General Motors, the impact of certain original equipment model changeovers and a generally lackluster aftermarket environment. The consolidated gross margin as a percentage of sales totaled 30.4% and 30.7% for the respective six and three months ended December 31, 1998 relative to 31.6% for the prior year comparable periods. Margins of the Specialty Foods segment were reduced by higher raw material costs, particularly soybean oil and cream, as well as by a less favorable sales mix. Within the Automotive segment, margins were adversely affected by the effects of the strike at General Motors, sales mix and the reduced extent to which overhead could be absorbed on a lower production volume. Additionally, competitive pricing pressures have affected margins in both the Automotive and the Glassware and Candles segment. Partially offsetting the preceding factors was the adverse impact on the prior year results of the unabsorbed overhead associated with a major rebuild of a glass-melting tank. Consolidated selling, general and administrative expenses totaled $85,540,000 and $46,156,000 for the respective six and three-month periods ended December 31, 1998. These totals decreased from the comparable year-ago totals of $87,618,000 and $47,400,000 by 2% and 3%, respectively. Among factors contributing to this decline was the overall sales mix and the inclusion in the prior year operating results of certain advertising costs incurred to support the rollout of repackaged pourable salad dressings. Overall, consolidated operating income and net income for each of the current year periods declined 3% from the comparable periods of 1997. However, fully diluted earnings per share of $1.15 and $.67 for the six and three months ended December 31, 1998 were at least even with the $1.14 and $.67 per share reported for the comparable periods last year, reflecting the impact of the Company's share repurchase efforts on weighted average shares outstanding. 7 of 11 8 FINANCIAL CONDITION Net cash provided by operating activities for the six months ended December 31, 1998 totaled $47,103,000 compared to $63,297,000 for the six months ended December 31, 1997. This fluctuation in cash flows largely results from relative changes in working capital components. Net working capital remained relatively level and totaled $235,183,000 at December 31, 1998 compared to $235,031,000 at June 30, 1998. Seasonal shipping patterns contributed to the $40,438,000 increase in net accounts receivable since June 30 as well as a $20,492,000 reduction in inventories. Significant investing activities that have been undertaken since June 30, 1998 included $17,265,000 expended on property additions. The six months ended December 31, 1997 included $19,749,000 expended to acquire the Chatham Village crouton business. The Company's significant financing activities during the six months ended December 31, 1998 included $29,308,000 expended for the acquisition of approximately 947,000 shares of treasury stock. Additionally, dividends paid of $12,263,000 during this period increased by 9% primarily as a result of a higher stated dividend rate being paid on common shares. Management anticipates that cash provided from operations and the currently available lines of credit will be adequate to meet the Company's foreseeable cash requirements over the remainder of fiscal 1999. The Company continues to work through the challenges the Year 2000 raises. The "Year 2000" challenges arise as a result of many automated calculations being written in computer code which do not properly recognize dates after 1999. Problems associated with this issue can occur not only on "mainframe" applications, but also with such devices as personal computers, telecommunication equipment and programmable logic controllers associated with certain manufacturing equipment. Without correction, it is possible that business and operational functions that rely on this improper code could fail and cause significant business disruption and loss. The Company is using a combination of internal and external resources to assist the Company through a multiphased concurrent approach, which encompasses identification, implementation and testing phases, to address the associated Year 2000 issues. As discussed in the "Year 2000" section of the Management's Discussion and Analysis contained within the Annual Report to Shareholders for the fiscal year ended June 30, 1998, generally, the Company has completed the identification phase and is currently engaged in the implementation and testing phases. Consistent with the year end disclosure, it is anticipated that the Company's ongoing efforts to remediate data processing systems to be Year 2000 compliant will be completed by the middle of calendar 1999. The most significant data processing expenditures are being made within the Company's Automotive segment. This segment is in the process of implementing comprehensive new third party software and hardware with Year 2000 compliance being regarded as one of several resulting benefits. The Company's aggregate costs to date are approximately $3.4 million, which include capitalized costs incurred by the Automotive segment of approximately $2.6 million. The Company estimates an additional $2.6 million of cost will be incurred, of which approximately $1.6 million will relate to the Automotive segment's data processing project. Expenditures associated with making changes to existing systems for Year 2000 compliance are being expensed as incurred. Costs associated with the Company's 8 of 11 9 efforts, both incurred and planned, are not believed to be material to the Company's consolidated results of operations, liquidity and financial condition. Due to the nature of the Company's efforts, actual costs could vary significantly from that currently anticipated and there are no guarantees regarding the timing or efficacy of completion. The Company continues to assess its Year 2000 exposure with respect to non-IT systems, which are date dependent, but is not currently aware of any significant deficiencies. There can be no assurances, however, that such deficiencies do not exist. Another risk currently being addressed by the Company is that significant customers and suppliers of the Company could fail to become fully Year 2000 compliant. The Company continues to make inquiries of its significant suppliers as to their Year 2000 readiness. It is believed that these inquiries will become increasingly more meaningful as the year 2000 approaches. Regardless, there can be no assurance that the data processing and non-IT systems utilized by these other companies will become Year 2000 compliant on a timely basis. The impact of noncompliance is not currently estimable, but it is possible that significant failures could have a material adverse effect on the Company's operations. Management will continue to diligently monitor Year 2000 efforts both internally and externally and, as needed, will develop contingency plans to address exposures, if any, as they become better clarified. The costs and business implications which might be associated with the adoption of any such contingency plan is not estimable but could be significant. PART II. OTHER INFORMATION Item 4 - Submission of Matters to a Vote of Security Holders ------------------------------------------------------------ The registrant held its annual meeting of the shareholders on November 16, 1998. Proxies for the meeting were solicited pursuant to Section 14(a) of the Securities Exchange Act of 1934. There were no matters discussed or voted upon at the annual meeting, except for the election of the following three directors whose term will expire in 2001:
Shares Shares Voted Shares Not "For" "Withheld" Voted ---------- ---------- --------- John L. Boylan 35,987,852 257,249 6,194,412 Henry M. O'Neill, Jr. 35,972,402 272,699 6,194,412 Zuheir Sofia 35,558,617 686,484 6,194,412
As of November 16, 1998, the following individuals also continued to serve as directors of the registrant: Kerrii B. Anderson Morris S. Halpern Robert L. Fox Robert S. Hamilton John B. Gerlach, Jr. Edward H. Jennings Item 6 - Exhibits and Reports on Form 8-K - ----------------------------------------- (a) Exhibit 27 - Financial Data Schedule. (b) Reports on Form 8-K - There were no reports filed on Form 8-K for the three months ended December 31, 1998. 9 of 11 10 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LANCASTER COLONY CORPORATION Date: February 10, 1999 BY:/S/John B. Gerlach, Jr. --------------------------- ----------------------- JOHN B. GERLACH, JR. Chairman, Chief Executive Officer and President Date: February 10, 1999 BY:/S/John L. Boylan --------------------------- ----------------- JOHN L. BOYLAN Treasurer, Vice President, Assistant Secretary and Chief Financial Officer (Principal Financial and Accounting Officer) 10 of 11 EX-27 2 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REGISTRANT'S CONDENSED CONSOLIDATED BALANCE SHEET AND STATEMENT OF INCOME FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS JUN-30-1999 DEC-31-1998 7,121 0 143,306 2,998 155,355 317,238 390,535 216,158 538,346 82,055 28,575 0 0 50,408 367,172 538,346 544,670 544,670 379,119 379,119 0 0 1,515 78,583 30,032 48,551 0 0 0 48,551 1.15 1.15
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