-----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, G0xBcFd30+cjHqCYYBVNxR04ud2523oaS1ONeBu6lkw3bhkgYkB7Q9ZCksjA/lug 4C/mfbfZZ0pmNDIZKeOeOA== 0000950152-99-004234.txt : 19990512 0000950152-99-004234.hdr.sgml : 19990512 ACCESSION NUMBER: 0000950152-99-004234 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990511 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: 99617094 BUSINESS ADDRESS: STREET 1: 37 W BROAD ST CITY: COLUMBUS STATE: OH ZIP: 43215 BUSINESS PHONE: 6142247141 10-Q 1 LANCASTER COLONY CORPORATION FORM 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 March 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ----- ----- Commission file number 0-4065-1 LANCASTER COLONY CORPORATION (Exact name of registrant as specified in its charter) OHIO 13-1955943 (State or other jurisdiction of (I.R.S. Employer 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 March 31, 1999, there were approximately 41,098,000 shares of common stock, no par value per share, outstanding. 1 of 12 2 LANCASTER COLONY CORPORATION AND SUBSIDIARIES INDEX Page No. -------- Part I. Financial Information Condensed Consolidated Balance Sheets - March 31, 1999 and June 30, 1998 3 Condensed Consolidated Statements of Income - Three Months and Nine Months Ended March 31, 1999 and 1998 4 Condensed Consolidated Statements of Cash Flows - Nine Months Ended March 31, 1999 and 1998 5 Notes to Condensed Consolidated Financial Statements 6 Management's Discussion and Analysis of the Results of Operations and Financial Condition 7-10 Part II. Other Information Item 6 - Exhibits and Reports on Form 8-K 10 Signatures 11 Exhibit 27 - Financial Data Schedule 12 2 of 12 3 LANCASTER COLONY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
March 31 June 30 1999 1998 ------------ ------------ (Unaudited) ASSETS Current Assets: Cash and equivalents $ 17,382,000 $ 23,224,000 Receivables - net of allowance for doubtful accounts 126,503,000 99,870,000 Inventories: Raw materials and supplies 44,095,000 44,915,000 Finished goods and work in process 115,256,000 130,282,000 ------------ ------------ Total inventories 159,351,000 175,197,000 Prepaid expenses and other current assets 13,948,000 13,257,000 ------------ ------------ Total current assets 317,184,000 311,548,000 Property, Plant and Equipment - At cost 399,349,000 374,033,000 Less Accumulated Depreciation 222,620,000 203,267,000 ------------ ------------ Property, plant and equipment - net 176,729,000 170,766,000 Goodwill - net of accumulated amortization 36,655,000 37,045,000 Other Assets 8,088,000 10,008,000 ------------ ------------ Total Assets $538,656,000 $529,367,000 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt $ 25,520,000 $ 510,000 Accounts payable 42,952,000 41,804,000 Accrued liabilities 43,174,000 34,203,000 ------------ ------------ Total current liabilities 111,646,000 76,517,000 Long-Term Debt - Less current portion 3,575,000 29,095,000 Other Noncurrent Liabilities 7,367,000 7,325,000 Deferred Income Taxes 2,962,000 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 March 31, 1999 - no par value - 47,095,892 shares; June 30, 1998 no par value - 47,086,091 shares 50,584,000 50,392,000 Retained earnings 529,504,000 477,587,000 Accumulated other comprehensive income 111,000 98,000 ------------ ------------ Total 580,199,000 528,077,000 Less: Common stock in treasury, at cost March 31, 1999 - 5,997,903 shares; June 30, 1998 - 4,332,603 shares 167,093,000 117,514,000 ------------ ------------ Total shareholders' equity 413,106,000 410,563,000 ------------ ------------ Total Liabilities and Shareholders' Equity $538,656,000 $529,367,000 ============ ============
See Notes to Condensed Consolidated Financial Statements 3 of 12 4 LANCASTER COLONY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Nine Months Ended March 31 March 31 1999 1998 1999 1998 ------------ ------------ ------------ ------------ Net Sales $247,227,000 $237,628,000 $791,897,000 $775,556,000 Cost of Sales 170,708,000 161,378,000 549,827,000 529,106,000 ------------ ------------ ------------ ------------ Gross Margin 76,519,000 76,250,000 242,070,000 246,450,000 Selling, General and Administrative Expenses 40,563,000 39,964,000 126,103,000 127,582,000 ------------ ------------ ------------ ------------ Operating Income 35,956,000 36,286,000 115,967,000 118,868,000 Other Income (Expense): Interest expense (600,000) (637,000) (2,115,000) (1,995,000) Interest income and other - net (140,000) 868,000 (53,000) 663,000 ------------ ------------ ------------ ------------ Income Before Income Taxes 35,216,000 36,517,000 113,799,000 117,536,000 Taxes Based on Income 13,382,000 13,721,000 43,414,000 44,912,000 ------------ ------------ ------------ ------------ Net Income $ 21,834,000 $ 22,796,000 $ 70,385,000 $ 72,624,000 ============ ============ ============ ============ Net Income Per Common Share: Basic $ .53 $ .53 $1.67 $1.68 Diluted $ .53 $ .53 $1.67 $1.67 Cash Dividends Per Common Share $ .15 $ .14 $ .44 $ .40 Weighted Average Common Shares Outstanding: Basic 41,519,000 43,183,000 42,069,000 43,351,000 Diluted 41,541,000 43,297,000 42,103,000 43,445,000
See Notes to Condensed Consolidated Financial Statements 4 of 12 5 LANCASTER COLONY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended March 31 1999 1998 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 70,385,000 $ 72,624,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 26,534,000 24,351,000 Deferred income taxes and other noncash charges (2,213,000) (2,360,000) Gain on sale of property (117,000) (747,000) Changes in operating assets and liabilities: Receivables (26,633,000) (17,684,000) Inventories 16,496,000 8,855,000 Prepaid expenses and other current assets (1,341,000) (1,673,000) Accounts payable 898,000 10,179,000 Accrued liabilities 8,971,000 (8,556,000) ------------ ------------ Net cash provided by operating activities 92,980,000 84,989,000 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Cash paid for acquisitions, net of cash acquired (1,825,000) (19,749,000) Payments on property additions (26,652,000) (32,919,000) Proceeds from sale of property 327,000 2,016,000 Other - net (2,320,000) (7,637,000) ------------ ------------ Net cash used in investing activities (30,470,000) (58,289,000) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Purchase of treasury stock (49,579,000) (18,877,000) Payment of dividends (18,468,000) (17,318,000) Payments on long-term debt, including payment of acquisition debt (510,000) (3,928,000) Common stock issued upon exercise of stock options and related tax benefits 192,000 6,251,000 ------------ ------------ Net cash used in financing activities (68,365,000) (33,872,000) ------------ ------------ Effect of exchange rate changes on cash 13,000 14,000 ------------ ------------ Net change in cash and equivalents (5,842,000) (7,158,000) Cash and equivalents at beginning of year 23,224,000 32,109,000 ------------ ------------ Cash and equivalents at end of period $ 17,382,000 $ 24,951,000 ============ ============ SUPPLEMENTAL DISCLOSURE OF OPERATING CASH FLOWS: Cash paid during the period for: Interest $ 2,690,000 $ 2,543,000 ============ ============ Income taxes $ 41,079,000 $ 52,084,000 ============ ============
See Notes to Condensed Consolidated Financial Statements 5 of 12 6 LANCASTER COLONY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS ENDED MARCH 31, 1999 AND 1998 (1) The interim condensed consolidated financial statements are unaudited but, in the opinion of management, reflect all adjustments necessary for a fair presentation of the results of operations and financial position for such periods. All such adjustments reflected in the interim condensed consolidated financial statements are considered to be of a normal recurring nature. The results of operations for any interim period are not necessarily indicative of results for the full year. Accordingly, these financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company's annual report on Form 10-K for the year ended June 30, 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 March 31, 1999 and 1998, was approximately $21,826,000 and $22,808,000, respectively. Total comprehensive income year-to-date, as of March 31, 1999 and 1998, was approximately $70,398,000 and $72,638,000, respectively. 6 of 12 7 LANCASTER COLONY CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION FOR THE PERIODS ENDED MARCH 31, 1999 AND 1998 RESULTS OF OPERATIONS Consolidated net sales of Lancaster Colony Corporation totaled $791,897,000 for the nine-month period ended March 31, 1999 and represented a 2% increase over the $775,556,000 in net sales reported for the corresponding period ended March 31, 1998. Net sales for the three months ended March 31, 1999 of $247,227,000 increased 4% above the comparable 1998 total of $237,628,000. The Specialty Foods segment has benefited throughout fiscal 1999 from increased sales to national foodservice accounts as well as from retail growth provided by the success of recently introduced products. Net sales of the Glassware and Candles segment have been adversely affected in fiscal 1999 by a decline in the sales of private label candle products as well as by the effects of terminating the Company's direct selling of certain glassware products. The impact of these declines, however, has been mitigated by increased sales of candle products to mass merchants. Automotive segment sales increased in the latest three-month period due in part to new OEM programs and improved aftermarket volumes. For the nine-month period, however, Automotive segment sales declined as influenced by such factors as the General Motors Corporation labor strike occurring during mid-1998, the effects of certain original equipment model changeovers at customer facilities and a more competitive market for light truck bedliners. The Company's consolidated gross margin as a percentage of net sales totaled 30.6% and 31.0% for the respective nine and three months ended March 31, 1999 compared to 31.8% and 32.1% for the corresponding periods of fiscal 1998. Impacting fiscal 1999 periods were competitive pricing pressures affecting all segments. Within the Glassware and Candles segment, fiscal 1999 results have been adversely affected by operating inefficiencies present at one of the segment's glass manufacturing facilities. Margins of the Automotive segment within the nine-month period ended March 31 were also impacted by the General Motors strike, sales mix and the reduced extent to which overhead could be absorbed on a lower production volume. Higher food commodity costs present during the latter half of calendar 1998, particularly for soybean oil and cream, contributed to lower nine-month gross margin percentages within the Specialty Foods segment. Partially offsetting the foregoing factors was the impact on fiscal 1998 nine-month results of the rebuild of a glass melting tank in December 1997. For the nine- and three-month periods ended March 31, 1999, consolidated selling, general and administrative expenses totaled $126,103,000 and $40,563,000, respectively, compared to $127,582,000 and $39,964,000 incurred in the corresponding periods of a year ago. Factors contributing to the decline in the nine-month amounts were sales mix and certain advertising costs 7 of 12 8 incurred during the latter half of calendar 1997 attributable to the introduction of repackaged pourable salad dressings. The foregoing factors contributed to operating income totaling $115,967,000 and $35,956,000 for the respective nine- and three-month periods ended March 31, 1999 representing a decline of 2% and 1% from the corresponding fiscal 1998 totals of $118,868,000 and $36,286,000. In the three-month period ended March 31, 1998, nonrecurring gains were recorded on the sales of real estate totaling approximately $726,000. These gains contributed to the fluctuation in the amounts of interest income and other items between comparable periods and contributed to the declines of 3% and 4% in net income for the respective nine- and three-month periods ended March 31, 1999 compared to the corresponding year-ago periods. However, bolstered by the impact of the Company's share repurchase efforts on weighted average shares outstanding, fully-diluted earnings per share of $1.67 and $.53 for the nine and three months ended March 31, 1999 were even with the amounts reported for the comparable periods of fiscal 1998. FINANCIAL CONDITION Net cash provided by operating activities for the nine months ended March 31, 1999 totaled $92,980,000 compared to $84,989,000 for the nine months ended March 31, 1998. This fluctuation in cash flows largely results from relative changes in working capital components. Net working capital declined from $235,031,000 at June 30, 1998 to $205,538,000 at March 31, 1999. Affecting this change is the inclusion in the March 31 liabilities of $25,000,000 of senior notes due February 2000. Consolidated accounts receivable increased $26,633,000, or 27%, as influenced by the relative strength of shipments in the last month of the most recent reporting period. Significant investing activities that have been undertaken since June 30, 1998 included $26,652,000 expended on property additions. The largest capital expenditure during the current fiscal year was for the construction of a distribution center for operations of the Specialty Foods segment. Investing activities for the nine months ended March 31, 1998 included $19,749,000 expended to acquire the Chatham Village crouton business. The Company's significant financing activities during the nine months ended March 31, 1999 included $49,579,000 expended for the acquisition of approximately 1,665,000 shares of Company stock. Shares remaining authorized for future buyback at March 31, 1999 totaled 1,603,000. Additionally, dividends paid of $18,468,000 during the current year increased by 7% 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. YEAR 2000 The "Year 2000" problem arises as a result of many automated calculations being written in computer code which do not properly recognize dates after 8 of 12 9 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. Lancaster Colony continues to address and prepare for the consequences that the Year 2000 may have on its ability to rely on data processing and other automated operational functions that are date-dependent. The Company's existing data processing structure is decentralized in nature. Management has created a Year 2000 team to oversee Year 2000 status at the various business units, and to keep management apprised thus allowing potential concerns to be addressed timely. Management believes the Company's business units have completed an adequate assessment of the internal Year 2000 dependencies relating to their critical data processing functions. However, there are no assurances that this process has identified all the existing Year 2000 exposures. Furthermore, such a failure could result in a materially-adverse impact to the Company although the extent of this impact is not believed to be reasonably estimable. The Company is addressing Year 2000 compliance through a multiphased concurrent approach encompassing identification, implementation and testing phases utilizing a combination of internal and external resources. Depending on the business unit's particular circumstance, the manner of resolving the identified Year 2000 shortcomings has included strategies such as implementing Year 2000 compliant versions of third-party software, modifying portions of existing software and replacing noncompliant business systems with new third-party software. Generally, the Company has completed the identification phase and is currently engaged in the implementation and testing phases. Based on existing plans, it is anticipated that the Company's ongoing efforts to remediate data processing systems to be Year 2000 compliant will be substantially completed by the middle of calendar 1999. However, additional testing of the various systems and programs may continue through the third and fourth quarter 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 $3.7 million, which include capitalized costs incurred by the Automotive segment of approximately $2.8 million. The Company estimates an additional $2.3 million of cost will be incurred, of which approximately $1.2 million will relate to the Automotive segment's data processing project. Expenditures associated with making changes to existing systems specifically for Year 2000 compliance are being expensed as incurred. Costs associated with the Company's 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. 9 of 12 10 As noted above, the Year 2000 issue may also affect systems ("non-IT systems") not traditionally identified with information technology. For example, production machinery, which is dependent on reading the current date, could become inoperable if the machine's embedded code does not allow for proper interpretation of a year beyond 1999. The Company continues to address its Year 2000 exposure with respect to non-IT systems. Remediation of non-IT equipment will be substantially completed by the third quarter of calendar 1999 while testing of the various systems and programs may continue through the fourth quarter of calendar 1999. The Company is not currently aware of any significant deficiencies. There can be no assurances, however, that such deficiencies do not exist. The effect of not resolving these issues on a timely basis could have a materially-adverse impact on the Company. Another risk presented by the Year 2000 issue is that significant customers and suppliers of the Company could fail to become fully Year 2000 compliant. This failure, in turn, could result in a significant adverse effect to the Company's operations. The Company continues to inquire and correspond with its significant suppliers as to the state of 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 materially-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 6 - Exhibits and Reports on Form 8-K - ----------------------------------------- (a) Exhibit 27 - Financial Data Schedule. (b) Reports on Form 8-K - There were no reports filed on Form 8-K for the three months ended March 31, 1999. 10 of 12 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LANCASTER COLONY CORPORATION Date: May 10, 1999 BY:/S/John B. Gerlach, Jr. --------------------------- ------------------------- JOHN B. GERLACH, JR. Chairman, Chief Executive Officer and President Date: May 10, 1999 BY:/S/John L. Boylan --------------------------- -------------------------- JOHN L. BOYLAN Treasurer, Vice President, Assistant Secretary and Chief Financial Officer (Principal Financial and Accounting Officer) 11 of 12 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 NINE MONTHS ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS JUN-30-1999 MAR-31-1999 17,382 0 129,696 3,193 159,351 317,184 399,349 222,620 538,656 111,646 3,575 0 0 50,584 362,522 538,656 791,897 791,897 549,827 549,827 0 0 2,115 113,799 43,414 70,385 0 0 0 70,385 1.67 1.67
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