-----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, ISSjCkG86WeY2HVsmqj2HH5sJ2dUSKqzFO8WRmyOhxGo1wplYuBLpuSuiPJxIDxS H4gA8ySJX4r938jBC4hbsA== 0000950152-96-004860.txt : 19960925 0000950152-96-004860.hdr.sgml : 19960925 ACCESSION NUMBER: 0000950152-96-004860 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960924 SROS: NASD 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-04065 FILM NUMBER: 96633759 BUSINESS ADDRESS: STREET 1: 37 W BROAD ST CITY: COLUMBUS STATE: OH ZIP: 43215 BUSINESS PHONE: 6142247141 10-K 1 LANCASTER COLONY CORPORATION 10-K 1 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 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED JUNE 30, 1996 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - --- EXCHANGE ACT OF 1934 [NO FEE REQUIRED] 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. X ----- 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 August 30, 1996 was approximately $824,957,000. As of August 30, 1996, there were approximately 29,468,000 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 1996 Annual Report to Shareholders - Parts I, II and IV. Proxy Statement for the Annual Meeting of Shareholders to be held November 18, 1996; to be filed - Part III. The 1996 Annual Report to Shareholders and 1996 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 38%, 35% and 27%, respectively, of consolidated net sales for the fiscal year ended June 30, 1996. The financial information relating to business segments for the three years ended June 30, 1996, 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," "Pfeiffer" and "Girard's"; frozen unbaked pies marketed under the brand names "Mountain Top" and "Reames"; hearth-baked frozen breads marketed under the brand name "New York Frozen Foods"; refrigerated chip and produce dips, dairy snacks and desserts marketed under the brand names "Oak Lake Farms," "Allen" and/or "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" and caviar marketed under the brand name "Romanoff" and "Poriloff." The salad dressings and sauces are manufactured in Columbus, Ohio; Wilson, New York; Atlanta, Georgia and Milpitas, California. The dressings are sold in various metropolitan areas with sales being made both to retail and 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 significant portion of the frozen bread sales is directed to the foodservice market. The refrigerated chip and produce dips, dairy snacks and desserts are sold through food brokers and distributors in most major markets in the United States. The dry egg noodles are marketed by brokers principally in Ohio, Michigan, Indiana and Kentucky. The "Reames" line is sold through brokers and distributors in various metropolitan areas principally in the central and midwestern United States. This segment is not dependent upon a single customer or a few customers, the loss of any one or more of which would have a significant adverse effect on operating results. Although the Company is a leading producer of salad dressings, 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 1996, the registrant obtained adequate supplies of raw materials for this segment. 2 3 The registrant's firm order backlog at June 30, 1996, in this business segment, was approximately $3,706,000 as compared to a backlog of approximately $4,238,000 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 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 --------------------- 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, lenses and silvered reflectors. 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," "Tiara," "Colony" and "Fostoria." The registrant also purchases domestic and imported blown glassware which is sold through Colony, a marketing division, and some domestic handcrafted ware sold through its Tiara home party marketing plan. Glass vases and containers are sold both in the retail and wholesale florist markets under the trade name "Brody" as well as under private label. Candles 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 name "Candle-lite." A portion of the registrant's candle business is marketed 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 two customers accounted for approximately 32% and 26% of this segment's total net sales during 1996 and 1995, respectively. No other customer accounted for more than 10% of this segment's total net sales. During fiscal year 1996, the registrant obtained adequate supplies of raw materials for this business segment. The registrant's firm order backlog at June 30, 1996, in this business segment, was approximately $32,527,000 as compared to approximately $33,896,000 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 and licenses under which it operates are not essential to the overall success of this segment. However, certain trademarks 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, bed liners and other accessories for pickup trucks, vans and sport utility vehicles, truck and trailer splash guards and quarter fenders, accessories such as cup holders, litter caddies and oil drain pans and funnels. The automotive aftermarket products are marketed primarily through mass 3 4 merchandisers and automotive outlets under the name "Rubber Queen" and the registrant sells bed liners under the "Protecta" trademark, running boards under the "Dee Zee" name, as well as under private labels. Although minor, rubber matting sales are also included in this segment. The aggregate sales of two customers accounted for approximately 29% and 32% of this segment's total net sales during 1996 and 1995, 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 1996, the registrant obtained adequate supplies of raw materials for this segment. The registrant's firm order backlog at June 30, 1996, in this business segment, was approximately $6,865,000 as compared to a backlog of approximately $6,594,000 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 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 Company's consolidated net sales in any fiscal year from 1994 through 1996.
1996 1995 1994 - ------------------------------------------------------------------------------- Specialty Foods: Retail 21% 22% 25% Foodservice 17% 17% 15% Glassware and Candles: Consumer Table and Giftware 30% 25% 22% Automotive 27% 31% 33%
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. During fiscal 1996, the registrant submitted a compliance strategy for one manufacturing facility to the applicable state agency for approval. It is anticipated the approval process will take approximately one year to complete. In fiscal 1997 and 1998 the registrant will be required to submit compliance strategies on two additional manufacturing facilities to the applicable state agencies. 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. 4 5 Employees --------- The registrant has approximately 6,300 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. Item 2. Properties ---------- The registrant uses approximately 5,800,000 square feet of space for its operations. Of this space, approximately 1,524,000 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 - -------- ------------------- ----------- Blue Ash, OH (1) Glassware and Candles 198,000 Columbus, OH(2) Specialty Foods 258,000 Coshocton, OH Automotive 591,000 Des Moines, IA (3) Automotive 344,000 Dunkirk, IN Glassware and Candles 934,000 Elkhart, IN Automotive 96,000 Jackson, OH Automotive and Glassware and Candles 223,000 LaGrange, GA Automotive 211,000 Lancaster, OH Glassware and Candles 465,000 Leesburg, OH (4) Glassware and Candles 600,000 Milpitas, CA (5) Specialty Foods 130,000 Muncie, IN Glassware and Candles 153,000 Sapulpa, OK (6) Glassware and Candles 669,000 Wapakoneta, OH (7) Automotive 178,000 Waycross, GA (5) Automotive 142,000 Wilson, NY Specialty Foods 80,000 (1) Leased for term expiring 1998. (2) Part leased for term expiring 1998. (3) Part subject to capital lease expiring 1996. Part leased for terms expiring 1996 and 1998. (4) Part leased on a monthly basis. (5) Part leased for term expiring 1997. (6) Part leased for term expiring in 1999. (7) Part leased for term expiring 2003 with ownership passing to registrant at lease expiration. Part leased on monthly basis.
5 6 Item 3. Legal Proceedings ----------------- None Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- None 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 18, 1996. 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 30 Offices and Executive Name 1996 Positions Held Officer ---- ----------- -------------- -------- John B. Gerlach 69 Chairman and Chief Executive Officer 1961 John L. Boylan 41 Treasurer and Assistant Secretary 1990 John B. Gerlach, Jr. 42 President, Chief Operating Officer and Secretary 1982 Larry G. Noble 60 Vice President 1985
The above named officers were re-elected to their present position at the annual meeting of the Board of Directors on November 20, 1995. All such persons have been elected to serve until the next annual election of officers, which shall occur on November 18, 1996 and their successors are elected or until their earlier resignation or removal. John B. Gerlach, Jr. is the son of John B. Gerlach. 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 1996 and 1995. 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, 1996 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. 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. Disagreements 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 18, 1996, which is incorporated herein by reference. 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 18, 1996 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 18, 1996 is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions ---------------------------------------------- For information with respect to certain transactions with Directors of the registrant, see "Other Transactions" in the Proxy Statement for the Annual Meeting of Shareholders to be held November 18, 1996, which is incorporated herein by reference. 7 8 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, 1996 and 1995 and for each of the three years in the period ended June 30, 1996, together with the report thereon of Deloitte & Touche LLP dated August 28, 1996, appearing in Exhibit 13 of this Form 10-K Annual Report are incorporated herein by reference. Index to Financial Statements ----------------------------- Independent Auditors' Report Consolidated Statements of Income for the years ended June 30, 1996, 1995 and 1994 Consolidated Balance Sheets at June 30, 1996 and 1995 Consolidated Statements of Cash Flows for the years ended June 30, 1996, 1995 and 1994 Consolidated Statements of Shareholders' Equity for the years ended June 30, 1996, 1995 and 1994 Notes to Consolidated Financial Statements (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 1996 Annual Report to Shareholders: Independent Auditors' Report Schedule II - Valuation and Qualifying Accounts for each of the three years ended June 30, 1996 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, 1996. 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 23rd day of September, 1996. LANCASTER COLONY CORPORATION (Registrant) By /S/ John B. Gerlach ---------------------------- John B. Gerlach Chairman, Chief Executive Officer and Principal Financial Officer 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 Chairman, Chief September 20, 1996 - --------------------------- Executive Officer and ------------------ John B. Gerlach Principal Financial Officer /S/ John B. Gerlach, Jr. President, Chief September 20, 1996 - --------------------------- Operating Officer ------------------ John B. Gerlach, Jr. and Secretary /S/ John L. Boylan Treasurer, Assistant September 20, 1996 - --------------------------- Secretary and Principal ------------------ John L. Boylan Accounting Officer Director - --------------------------- ------------------ Frank W. Batsch /S/ Robert L. Fox Director September 16, 1996 - --------------------------- ------------------ Robert L. Fox Director - --------------------------- ------------------ Morris S. Halpern /S/ Robert S. Hamilton Director September 16, 1996 - --------------------------- ------------------ Robert S. Hamilton /S/ Edward H. Jennings Director September 16, 1996 - --------------------------- ------------------ Edward H. Jennings /S/ Richard R. Murphey, Jr. Director September 16, 1996 - --------------------------- ------------------ Richard R. Murphey, Jr. /S/ Henry M. O'Neill, Jr. Director September 19, 1996 - --------------------------- ------------------ Henry M. O'Neill, Jr. /S/ David J. Zuver Director September 20, 1996 - --------------------------- ------------------ David J. Zuver
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, 1996 and 1995, and for each of the three years in the period ended June 30, 1996, and have issued our report thereon dated August 28, 1996; such financial statements and report are included in your 1996 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 28, 1996 10 11 SCHEDULE II LANCASTER COLONY CORPORATION AND SUBSIDIARIES ============================ VALUATION AND QUALIFYING ACCOUNTS FOR THE THREE YEARS ENDED JUNE 30, 1996
- ----------------------------------------------------------------------------------------------- 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, 1994 ......... $ 2,870,000 $ 1,029,000 $ 1,560,000(A) $2,339,000 ======================================================= Year ended June 30, 1995 ......... $ 2,339,000 $ 614,000 $ 1,006,000(A) $1,947,000 ======================================================= Year ended June 30, 1996 ......... $ 1,947,000 $ 2,089,000 $ 1,905,000(A) $2,131,000 ======================================================= (A) Represents uncollectible accounts written off net of recoveries.
11 12 LANCASTER COLONY CORPORATION ---------------------------- FORM 10-K JUNE 30, 1996 INDEX TO EXHIBITS
Exhibit Number Description Located at ------ ----------- ---------- 3.1 Certificate of Incorporation of the registrant approved by the shareholders November 18, 1991. (a) .2 By-laws of the registrant as amended through November 18, 1991. (a) .3 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. 1996 Form 10-K .2 Rights Agreement dated as of April 20, 1990 between Lancaster Colony Corporation and The Huntington Trust Company, N.A. (c) 10.1 1981 Incentive Stock Option Plan. (d) .2 Resolution by the Board of Directors to amend registrant's 1981 Incentive Stock Option Plan, approved by the shareholders November 21, 1983. (e) .3 Resolution by the Board of Directors to amend registrant's 1981 Incentive Stock Option Plan approved by the shareholders November 18, 1985. (f) .4 Resolution by the Board of Directors to amend registrant's 1981 Incentive Stock Option Plan approved by the shareholders November 19, 1990. (g) .5 Key Employee Severance Agreement between Lancaster Colony Corporation and John L. Boylan. (g) .6 Consulting Agreement by and between Lancaster Colony Corporation and Morris S. Halpern. (h) .7 1995 Key Employee Stock Option Plan. (i) 13. Annual Report to Shareholders. 1996 Form 10-K 21. Significant Subsidiaries of Registrant. 1996 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 28, 1996, appearing in this Annual Report on Form 10-K of Lancaster Colony Corporation for the year ended June 30, 1996. 1996 Form 10-K 27. Financial Data Schedule 1996 Form 10-K
12 13 (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 8-K filed April 20, 1990. (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, 1982. (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, 1984. (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, 1985. (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, 1991. (h) 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. (i) 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). 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 1996 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 1996 Annual Report to Shareholders to the Commission upon request. 13 EX-4.1 2 EXHIBIT 4.1 1 COMMON STOCK COMMON STOCK NUMBER SHARES CX INCORPORATED UNDER THE LAWS THIS CERTIFICATE IS TRANSFERABLE OF THE STATE OF OHIO IN NEW YORK, NEW YORK LANCASTER COLONY CORPORATION CUSIP 513847 10 SEE LEGEND ON REVERSE SIDE SEE REVERSE SIDE FOR CERTAIN DEFINITIONS THIS IS TO CERTIFY THAT IS THE OWNER OF CERTIFICATE OF STOCK FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK WITHOUT PAR VALUE OF LANCASTER COLONY CORPORATION 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. LANCASTER COLONY CORPORATION Date: SEAL John L. Boylan John B. Gerlach, Jr. ____________________ STATE OF OHIO ___________________ TREASURER PRESIDENT COUNTERSIGNED AND REGISTERED: AMERICAN STOCK TRANSFER & TRUST COMPANY (NEW YORK, N.Y.) TRANSFER AGENT AND REGISTRAR BY AUTHORIZED SIGNATURE 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 of certain Rights as set forth in a Rights Agreement between the Company and The Huntington Trust Company, N.A. (the "Rights Agent") dated as of April 20, 1990 (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-13 3 EXHIBIT 13 1 Exhibit 13 2 MANAGEMENT'S DISCUSSION AND ANALYSIS Of Results of Operations and Financial Condition Review of Consolidated Operations For the fifth consecutive year, the Company has reported record levels of consolidated net sales and net income. Net sales for the fiscal year ended June 30, 1996 totaled $855,912,000, or approximately 8% higher than the previous year's total of $795,126,000. Net income of $76,135,000 achieved in the most recent year also increased 8% over fiscal 1995 net income. Similarly, 1995 net sales increased 10% over fiscal 1994 sales of $721,732,000 and 1995 net income of $70,524,000 increased 18% over the 1994 total of $59,860,000. The majority of the sales growth occurring over the past two years has been provided by the increased sales of the Glassware and Candles segment. This segment has also been responsible for the growth in consolidated net income. The relative proportion of sales and operating income contributed by each of the Company's operating 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 operating segments over each of the last three years:
Segment Sales Mix(1): 1996 1995 1994 - ----------------------------------------------------- Specialty Foods 38% 39% 40% Glassware and Candles 35% 30% 27% Automotive 27% 31% 33% Operating Income(2): - ----------------------------------------------------- Specialty Foods 11% 13% 15% Glassware and Candles 26% 22% 16% Automotive 8% 11% 13% (1) Expressed as a percentage of consolidated net sales. (2) Expressed as a percentage of the related segment's net sales.
Despite an overall improvement in the gross margins of the Glassware and Candles segment, the Company's consolidated gross margin percentage in 1996 declined to 30.8% of net sales compared to 31.2% in 1995 and 32.2% in 1994. An unfavorable sales mix and competitive pricing pressures combined to lower the most recent year's margins in the Specialty Foods segment. Additionally, Automotive segment margins in 1996 were adversely affected by lower production volume. Relative to 1994, 1995 margins were adversely affected by the less favorable sales mix and higher material costs present within the Specialty Foods segment, as well as by increases in raw material costs within the Automotive segment. 3 Selling, general and administrative expenses of $138,206,000 in 1996 increased approximately 5% from the prior year total of $131,424,000. Fiscal 1995 expenses were essentially unchanged from the 1994 total of $131,428,000. These expenses have been influenced by several factors including changes in sales volume, sales mix and the timing and extent by which promotional activities are conducted, particularly in the Specialty Foods segment. Corresponding to the change in consolidated net sales and reflecting the factors noted above, consolidated operating income in 1996 of $125,746,000 increased by 8% over the 1995 total of $116,518,000. Consolidated operating income for 1995 increased 16% over the 1994 total of $100,668,000. Greater sales volume and improved operating margins in the Glassware and Candles segment were largely responsible for this improvement. The Company's effective tax rate, stated as a percentage of pretax income, has been 38.2%, 38.6% and 39.0% in fiscal 1996, 1995 and 1994, respectively. The 1994 rate would have been approximately .3% lower had not a charge of $343,000 been recorded to reflect the retroactive provisions of legislation enacting an increase in Federal income taxes. Segment Review - Glassware and Candles Over the last five years, the Glassware and Candles segment had net sales and operating income increase at annual compound growth rates of approximately 13% and 39%, respectively. The product line primarily responsible for this growth has been candles. Of particular note has been the increase in the sales of wax-filled glass items, a popular choice among consumers for inexpensively providing a means of enhancing the appearance, if not also the fragrance, of the home. Much of the glassware used for these items is also produced by the Company. During fiscal 1996, the trends discussed above resulted in net sales of this segment totaling $297,937,000 which was a 26% increase over 1995 net sales of $237,320,000. For similar reasons, 1995 sales had increased by 21% over 1994 sales of $196,711,000. For fiscal 1996, the Glassware and Candles segment's operating income totaled $76,068,000 which reflects a 46% improvement over the 1995 total of $52,147,000. Compared to 1994 operating income of $31,353,000, 1995 operating margins increased by 66%. Operating margins for this segment have increased primarily as a result of a more favorable sales mix, the increased utilization of plant capacity and the effects of significant additional investment in more productive machinery and equipment. The improvement in 1996 margins was achieved despite production inefficiencies occurring at the Dunkirk, Indiana glass manufacturing plant which resulted from the introduction of new products and manufacturing processes. 4 Segment Review - Specialty Foods Net sales of the Specialty Foods segment during fiscal 1996 totaled $329,420,000, a 6% increase over the 1995 total of $309,622,000. Net sales for 1995 were 7% greater than 1994 net sales of $289,734,000. This segment's increased sales are primarily attributable to foodservice customers as sales to these accounts have climbed from 38% of segment sales in 1994 to 44% in 1995 and 45% in 1996. The segment's retail sales of specialty food products over the last three years have been adversely impacted by increased competitive market conditions, particularly with respect to pourable salad dressings. For 1995, sales were also affected by increased lettuce costs paid by consumers during the latter half of the fiscal year which reduced the demand for salad dressings. Helping to offset these conditions have been various product line extensions, continued geographic expansion and business acquisitions such as the Romanoff caviar product line purchased in July 1993 and the Cardini's salad dressing line acquired in November 1995. Foodservice sales have grown during the last two years as a result of the addition of new customer accounts, the expansion of sales to existing accounts and the development of new products. Operating income of this segment totaled $35,579,000 in 1996, a 13% decrease from the 1995 total of $40,704,000. Segment operating income for 1995 declined 4% from the 1994 total of $42,542,000. Contributing to this decline has been the increasing proportion of foodservice sales to total segment sales. Such sales typically provide lower operating margins compared to that of sales made to retail customers. Further affecting margins has been a combination of generally higher material costs and pronounced competitive pricing pressures. These latter conditions generally persist into the first quarter of fiscal 1997. Segment Review - Automotive Net sales of the Automotive segment for 1996 totaled $228,555,000, an 8% decrease from 1995 net sales that totaled $248,184,000. The 1995 sales level increased 5% from the 1994 total of $235,287,000. The significant growth in new vehicle sales, particularly light trucks and vans, contributed to this segment's 1995 increase. Adversely affecting 1996 sales growth were several factors including a generally sluggish aftermarket environment, a shifting in the floor mat supply arrangements with certain original equipment manufacturers and a decline in the heavy truck and trailer industry to which the Company is a leading supplier of splash guards. This segment's decline was reversed in the fourth quarter of fiscal 1996 as net sales for this segment increased 1% above the comparable period of 1995. For 1996, operating income of the Automotive segment decreased 34% to $18,561,000 compared to $28,027,000 recorded in 1995. Compared to 1994 operating income of $31,305,000, 5 the 1995 total decreased by 10%. The 1996 margins were affected by the segment's decline in sales, as well as by lower production levels which resulted in a less efficient absorption of overhead costs. Somewhat offsetting this impact was a decline in most raw material costs related to plastic resins. During 1995, these plastics costs, as well as those related to corrugated, aluminum and rubber significantly increased over the levels present during 1994. Sales to original equipment manufacturers comprised 43% of total segment sales in 1996 compared to 44% in fiscal 1995 and 45% in 1994. As a result, this segment's sales are sensitive to the overall rate of new vehicle sales. Pricing flexibility associated with original equipment products also continues to remain limited as a result of competitive market conditions. Furthermore, as certain original equipment manufacturers attempt to consolidate the number of direct "Tier 1" suppliers from which they buy, the Company has become a "Tier 2" supplier with respect to selected original equipment products. Sales made under this form of relationship tend be sensitive to the Tier 1 supplier's ongoing assessment of alternative sourcing opportunities and may also be dependent on the continuity of the Tier 1 supplier's relationship with the original equipment manufacturer. Liquidity and Capital Resources The financial condition of the Company remained strong through June 30, 1996. Cash generated from operations totaled $84,474,000 in fiscal 1996 compared to $46,725,000 in fiscal 1995. This improvement resulted primarily from increased net income and a reduced need for investment in working capital growth. As has been the case in recent years, cash flow from operations continues to be the primary source of financing the Company's internal growth. During fiscal 1996, the Company invested a record $50,229,000 in property, plant and equipment. The majority of this investment was utilized to support growth opportunities in the Glassware and Candles segment. The single largest such addition consisted of a new distribution facility which is adjacent to the existing candle manufacturing facility located in Leesburg, Ohio. Within the new facility, the use of automated material handling equipment is anticipated to commence during fiscal 1997. This equipment should provide for enhanced customer service as well as additional distribution efficiencies. Financing activities of the Company during fiscal 1996 included significant purchases of the Company's common stock. Such purchases totaled $21,457,000 in fiscal 1996 compared to $17,814,000 in fiscal 1995. Additionally, total dividends paid on common stock increased to $19,591,000 in 1996 from $16,486,000 in 1995. This increase resulted from the dividend payout rate between these years increasing 20% from $.55 in fiscal 1995 to $.66 during the past year. The future levels of share purchases and declared dividends are subject to the discretion of the Company's Board of Directors and are generally determined after an assessment is made of 6 various factors such as anticipated earnings levels, cash flow requirements and general business conditions. The total short- and long-term debt of the Company relative to total capitalization has continued to decline over the last five years as illustrated in the following table:
Financial Leverage: June 30, 1996 %(1) June 30, 1991 %(1) - --------------------------------------------------------------------------------------------- Total short- and long-term debt $ 31,840,000 9% $ 86,548,000 38% Total shareholders' equity 323,563,000 91 139,385,000 62 - --------------------------------------------------------------------------------------------- Total Capitalization $ 355,403,000 100% $ 225,933,000 100% ============================================================================================= (1) Expressed as a percentage of total capitalization.
Management believes that this relatively low level of financial leverage provides considerable flexibility as well as the capability to invest in businesses which are considered complementary in function to that of the Company's existing operations. Absent large cash acquisitions, management anticipates that cash flows from operations, combined with the occasional use of short-term borrowings available under discretionary bank lines of credit, will be adequate to meet foreseeable cash requirements. As would be expected, many of the Company's ongoing business activities are subject to compliance with laws subject to the promulgation and oversight by various Federal, state and local agencies. Principal areas of compliance include environmental matters, workplace and product safety, and income taxes. With respect to environmental matters, the Company will continue to incur costs for regulatory compliance and, upon occasion, remediation. The future level of anticipated expenditures is not expected to increase materially from present levels. Reference is made to Note 12 to the accompanying financial statements for further discussion as to the accounting for such costs. Impact of Inflation Generally, on a consolidated basis, material cost changes during 1996 were mixed and moderate. However, markedly lower level of plastic costs benefited the Company during fiscal 1996, particularly within the Automotive segment. Soybean oil, a significant ingredient of the Specialty Foods segment, averaged slightly lower compared to 1995 levels but stayed at levels significantly greater than often present in the years before fiscal 1994. During fiscal 1995, a significant increase in corrugated packaging costs also adversely affected all segments. 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. Minimizing 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 continuous improvement of work processes. 7 BUSINESS SEGMENTS Lancaster Colony Corporation and Subsidiaries For the Years Ended 1996, 1995 and 1994 The Company operates in three business segments - Specialty Foods, Glassware and Candles, and Automotive. The net sales of each segment are principally domestic. A further description of each business segment follows: SPECIALTY FOODS--includes production and marketing of a family of pourable and refrigerated produce salad dressings, sauces, refrigerated produce vegetable 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 and candles in all popular sizes, shapes and scents; industrial glass and lighting components; and glass floral containers. The Company's glass and candle products are sold primarily to mass merchandisers, discount and department stores. AUTOMOTIVE--includes production and marketing of rubber, vinyl and carpet-on-rubber car mats both for original equipment manufacturers and 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, including interest expense and income taxes, have not been allocated to the business segments. 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 1996 and 1995 capital expenditures of the Specialty Foods segment includes property relating to business acquisitions totaling $213,000 and $36,000, respectively. The 1995 capital expenditures of the Automotive segment includes property relating to business acquisitions totaling $1,500,000.
The following sets forth certain financial information attributable to the Company's business segments for the three years ended June 30, 1996, 1995 and 1994: (Dollars in Thousands) 1996 1995 1994 - ------------------------------------------------------------------------------------ NET SALES Specialty Foods $ 329,420 $ 309,622 $ 289,734 Glassware and Candles 297,937 237,320 196,711 Automotive 228,555 248,184 235,287 - ------------------------------------------------------------------------------------ Total $ 855,912 $ 795,126 $ 721,732 ==================================================================================== OPERATING INCOME Specialty Foods $ 35,579 $ 40,704 $ 42,542 Glassware and Candles 76,068 52,147 31,353 Automotive 18,561 28,027 31,305 - ------------------------------------------------------------------------------------ Total 130,208 120,878 105,200 Corporate expenses (6,987) (6,070) (7,107) - ------------------------------------------------------------------------------------ Income Before Income Taxes $ 123,221 $ 114,808 $ 98,093 ==================================================================================== IDENTIFIABLE ASSETS Specialty Foods $ 102,606 $ 79,297 $ 71,274 Glassware and Candles 205,232 155,484 136,789 Automotive 113,003 126,654 108,597 Corporate 14,518 18,469 38,785 - ------------------------------------------------------------------------------------ Total $ 435,359 $ 379,904 $ 355,445 ==================================================================================== CAPITAL EXPENDITURES Specialty Foods $ 8,856 $ 6,582 $ 4,516 Glassware and Candles 33,038 17,182 11,565 Automotive 8,501 9,473 7,419 Corporate 47 44 32 - ------------------------------------------------------------------------------------ Total $ 50,442 $ 33,281 $ 23,532 ==================================================================================== DEPRECIATION AND AMORTIZATION Specialty Foods $ 4,753 $ 4,439 $ 3,512 Glassware and Candles 10,767 9,802 10,027 Automotive 8,749 8,338 8,778 Corporate 130 138 86 - ------------------------------------------------------------------------------------ Total $ 24,399 $ 22,717 $ 22,403 ====================================================================================
8 FIVE YEAR FINANCIAL SUMMARY Lancaster Colony Corporation and Subsidiaries
(Thousands Except Per Share Figures) 1996 1995 1994 1993 1992 - ------------------------------------------------------------------------------------------------------------------- OPERATIONS Net Sales $855,912 $795,126 $721,732 $630,627 $555,793 Gross Margin $263,952 $247,942 $232,096 $203,106 $175,226 Percent of sales 30.8% 31.2% 32.2% 32.2% 31.5% Interest Expense $ 2,875 $ 2,736 $ 2,849 $ 3,625 $ 5,584 Percent of sales 0.3% 0.3% 0.4% 0.6% 1.0% Income Before Income Taxes $123,221 $114,808 $ 98,093 $ 74,319 $ 53,852 Percent of sales 14.4% 14.4% 13.6% 11.8% 9.7% Taxes Based on Income $ 47,086 $ 44,284 $ 38,233 $ 28,094 $ 21,481 Net Income $ 76,135 $ 70,524 $ 59,860 $ 46,225 $ 32,371 Percent of sales 8.9% 8.9% 8.3% 7.3% 5.8% Per Common Share:(1) Net income $ 2.56 $ 2.35 $ 1.97 $ 1.52 $ 1.06 Cash dividends $ 0.66 $ 0.55 $ 0.44 $ 0.37 $ 0.32 - ------------------------------------------------------------------------------------------------------------------- FINANCIAL POSITION Total Assets $435,359 $379,904 $355,445 $302,050 $289,951 Working Capital $203,988 $189,255 $163,546 $126,648 $ 97,007 Property, Plant and Equipment--Net $139,095 $113,187 $101,570 $ 98,597 $ 99,457 Long-Term Debt $ 31,230 $ 31,840 $ 32,933 $ 34,586 $ 39,984 Property Additions $ 50,229 $ 31,745 $ 23,532 $ 18,921 $ 17,040 Provision for Depreciation $ 22,007 $ 20,440 $ 20,145 $ 19,486 $ 18,821 Shareholders' Equity $323,563 $277,148 $236,847 $192,010 $159,416 Per Common Share(1) $ 10.94 $ 9.29 $ 7.83 $ 6.34 $ 5.25 Weighted Average Common Shares Outstanding(1) 29,749 30,038 30,317 30,483 30,502 - ------------------------------------------------------------------------------------------------------------------- STATISTICS Price-Earnings Ratio at Year End 14.6 15.2 18.0 18.9 15.5 Current Ratio 3.9 4.1 3.2 3.1 2.3 Long-Term Debt as a Percent of Shareholders' Equity 9.7% 11.5% 13.9% 18.0% 25.1% Dividends Paid as a Percent of Net Income 25.7% 23.4% 22.3% 24.5% 30.5% Return on Average Equity 25.3% 27.4% 27.9% 26.3% 21.7% - -------------------------------------------------------------------------------------------------------------------- (1) Adjusted for 4-for-3 stock splits paid July 1994 and April 1993 and the 3-for-2 stock split paid April 1992.
9 INDEPENDENT AUDITORS' REPORT To the Shareholders and Directors of Lancaster Colony Corporation We have audited the accompanying consolidated balance sheets of Lancaster Colony Corporation and its subsidiaries as of June 30, 1996 and 1995, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended June 30, 1996. 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 generally accepted auditing standards. 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, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 1996 in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP Columbus, Ohio August 28, 1996 10 CONSOLIDATED STATEMENTS OF INCOME Lancaster Colony Corporation and Subsidiaries For the Years Ended June 30, 1996, 1995 and 1994
Years Ended June 30 1996 1995 1994 - ---------------------------------------------------------------------------------------------------------------------- NET SALES $ 855,912,000 $ 795,126,000 $ 721,732,000 COST OF SALES 591,960,000 547,184,000 489,636,000 - ---------------------------------------------------------------------------------------------------------------------- GROSS MARGIN 263,952,000 247,942,000 232,096,000 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 138,206,000 131,424,000 131,428,000 - ---------------------------------------------------------------------------------------------------------------------- OPERATING INCOME 125,746,000 116,518,000 100,668,000 OTHER INCOME (EXPENSE): Interest expense (2,875,000) (2,736,000) (2,849,000) Interest income and other--net 350,000 1,026,000 274,000 - ---------------------------------------------------------------------------------------------------------------------- INCOME BEFORE INCOME TAXES 123,221,000 114,808,000 98,093,000 TAXES BASED ON INCOME 47,086,000 44,284,000 38,233,000 - ---------------------------------------------------------------------------------------------------------------------- NET INCOME $ 76,135,000 $ 70,524,000 $ 59,860,000 ====================================================================================================================== NET INCOME PER COMMON SHARE $2.56 $2.35 $1.97 ====================================================================================================================== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 29,749,000 30,038,000 30,317,000 ======================================================================================================================
See Notes to Consolidated Financial Statements 11 CONSOLIDATED BALANCE SHEETS Lancaster Colony Corporation and Subsidiaries As of June 30, 1996 and 1995
June 30 ASSETS 1996 1995 - ----------------------------------------------------------------------------------------------------------------------- CURRENT ASSETS: Cash and equivalents $ 4,670,000 $ 8,239,000 Receivables (less allowance for doubtful accounts, 1996--$2,131,000; 1995--$1,947,000) 105,403,000 88,416,000 Inventories: Raw materials and supplies 33,148,000 34,020,000 Finished goods and work in process 118,447,000 107,866,000 - ----------------------------------------------------------------------------------------------------------------------- Total inventories 151,595,000 141,886,000 Prepaid expenses and other current assets 11,674,000 11,226,000 - ----------------------------------------------------------------------------------------------------------------------- Total current assets 273,342,000 249,767,000 PROPERTY, PLANT AND EQUIPMENT: Land, buildings and improvements 82,882,000 73,371,000 Machinery and equipment 234,013,000 209,154,000 - ----------------------------------------------------------------------------------------------------------------------- Total cost 316,895,000 282,525,000 Less accumulated depreciation 177,800,000 169,338,000 - ----------------------------------------------------------------------------------------------------------------------- Property, plant and equipment--net 139,095,000 113,187,000 OTHER ASSETS: Goodwill (net of accumulated amortization, 1996--$4,562,000; 1995--$3,757,000) 20,715,000 13,761,000 Other Assets 2,207,000 3,189,000 - ----------------------------------------------------------------------------------------------------------------------- TOTAL $ 435,359,000 $ 379,904,000 ======================================================================================================================= LIABILITIES AND SHAREHOLDERS' EQUITY - ----------------------------------------------------------------------------------------------------------------------- CURRENT LIABILITIES: Current portion of long-term debt $ 610,000 $ 1,026,000 Accounts payable 34,303,000 26,322,000 Accrued liabilities 34,441,000 33,164,000 - ----------------------------------------------------------------------------------------------------------------------- Total current liabilities 69,354,000 60,512,000 LONG-TERM DEBT--Less current portion 31,230,000 31,840,000 OTHER NONCURRENT LIABILITIES 7,714,000 8,223,000 DEFERRED INCOME TAXES 3,498,000 2,181,000 SHAREHOLDERS' EQUITY: Preferred stock--authorized 2,650,000 shares; Outstanding--none Common stock--authorized 35,000,000 shares; 38,491,000 28,086,000 Shares outstanding, 1996-- 29,563,401; 1995-- 29,829,000 Retained earnings 337,153,000 280,538,000 Foreign currency translation adjustment 75,000 501,000 - ----------------------------------------------------------------------------------------------------------------------- Total 375,719,000 309,125,000 Less: Common stock in treasury, at cost 50,877,000 29,420,000 Amount due from ESOP 1,279,000 2,557,000 - ----------------------------------------------------------------------------------------------------------------------- Total shareholders' equity 323,563,000 277,148,000 - ----------------------------------------------------------------------------------------------------------------------- TOTAL $ 435,359,000 $ 379,904,000 =======================================================================================================================
See Notes to Consolidated Financial Statements 12 CONSOLIDATED STATEMENTS OF CASH FLOWS Lancaster Colony Corporation and Subsidiaries For the Years Ended June 30, 1996, 1995 and 1994
Years Ended June 30 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $76,135,000 $70,524,000 $59,860,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 24,399,000 22,717,000 22,403,000 Provision for losses on accounts receivable 2,089,000 614,000 1,029,000 Deferred income taxes and other noncash charges (190,000) (2,086,000) (437,000) Loss on sale of property 233,000 235,000 254,000 Changes in operating assets and liabilities: Receivables (18,478,000) (7,273,000) (13,792,000) Inventories (8,982,000) (23,475,000) (20,752,000) Prepaid expenses and other current assets 334,000 (1,061,000) 216,000 Accounts payable and accrued liabilities 8,934,000 (13,470,000) 12,311,000 - ------------------------------------------------------------------------------------------------------------------ Net cash provided by operating activities 84,474,000 46,725,000 61,092,000 - ------------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM INVESTING ACTIVITIES: Payments on property additions (50,229,000) (31,745,000) (23,532,000) Acquisitions net of cash acquired (5,054,000) (5,438,000) Proceeds from sale of property 1,784,000 1,002,000 412,000 Other--net (638,000) (1,420,000) (1,506,000) - ------------------------------------------------------------------------------------------------------------------ Net cash used in investing activities (49,083,000) (37,217,000) (30,064,000) - ------------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM FINANCING ACTIVITIES: Payment of dividends (19,591,000) (16,486,000) (13,378,000) Purchase of treasury stock (21,457,000) (17,814,000) (7,718,000) Payments on long-term debt (1,026,000) (1,368,000) (2,149,000) Reduction of ESOP debt 1,278,000 1,279,000 1,278,000 Common stock issued, including stock issued upon exercise of stock options and related tax benefit 1,785,000 2,649,000 4,865,000 - ------------------------------------------------------------------------------------------------------------------ Net cash used in financing activities (39,011,000) (31,740,000) (17,102,000) - ------------------------------------------------------------------------------------------------------------------ Effect of exchange rate changes on cash 51,000 48,000 (5,000) - ------------------------------------------------------------------------------------------------------------------ Net change in cash and equivalents (3,569,000) (22,184,000) 13,921,000 Cash and equivalents at beginning of year 8,239,000 30,423,000 16,502,000 - ------------------------------------------------------------------------------------------------------------------ Cash and equivalents at end of year $ 4,670,000 $ 8,239,000 $30,423,000 ==================================================================================================================
See Notes to Consolidated Financial Statements 13 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Lancaster Colony Corporation and Subsidiaries For the Years Ended June 30, 1996, 1995 and 1994
Foreign Currency Amount Outstanding Common Retained Translation Treasury due from Shares Stock Earnings Adjustment Stock ESOP - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE, JUNE 30, 1993 22,716,680 $20,572,000 $179,835,000 $605,000 $ 3,888,000 $5,114,000 Year Ended June 30, 1994 : Net income 59,860,000 Cash dividends--common stock ($.4425 per share) (13,378,000) Purchase of treasury shares (189,000) 7,718,000 Shares issued upon exercise of stock options including related tax benefits 146,340 4,865,000 Tax benefit of cash dividends paid on ESOP unallocated shares 95,000 Reduction of ESOP debt (1,278,000) Translation adjustment (165,000) - ------------------------------------------------------------------------------------------------------------------------------------ BALANCE, JUNE 30, 1994 22,674,020 25,437,000 226,412,000 440,000 11,606,000 3,836,000 - ------------------------------------------------------------------------------------------------------------------------------------ Year Ended June 30, 1995 : Net income 70,524,000 Cash dividends--common stock ($.55 per share) (16,465,000) Purchase of treasury shares (530,800) 17,814,000 Shares issued upon exercise of stock options including related tax benefits 130,026 2,649,000 Shares issued in connection with four-for-three stock split 7,555,754 Cash paid in lieu of fractional shares in connection with four-for-three stock split (21,000) Tax benefit of cash dividends paid on ESOP unallocated shares 88,000 Reduction of ESOP debt (1,279,000) Translation adjustment 61,000 - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE, JUNE 30, 1995 29,829,000 28,086,000 280,538,000 501,000 29,420,000 2,557,000 - ----------------------------------------------------------------------------------------------------------------------------------- Year Ended June 30, 1996 : Net income 76,135,000 Cash dividends--common stock ($.66 per share) (19,591,000) Purchase of treasury shares (601,955) 21,457,000 Shares issued upon exercise of stock options including related tax benefits 63,629 1,405,000 Tax benefit of cash dividends paid on ESOP unallocated shares 71,000 Shares issued in business acquisition 272,727 9,000,000 Reduction of ESOP debt (1,278,000) Translation adjustment (426,000) - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE, JUNE 30, 1996 29,563,401 $38,491,000 $337,153,000 $75,000 $50,877,000 $1,279,000 ===================================================================================================================================
See Notes to Consolidated Financial Statements 14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Lancaster Colony Corporation and Subsidiaries 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The accompanying consolidated financial statements include the accounts of Lancaster Colony 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 land, 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 over fifteen 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 diminution in value. Management periodically evaluates the future economic benefit of its recorded goodwill and appropriately adjusts such amounts 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. On July 20, 1994, a four-for-three stock split was effected whereby one additional common share was issued for each three shares outstanding to shareholders of record on June 20, 1994. Accordingly, net income per common share and all other per share information appearing in the consolidated financial statements and notes thereto have been retroactively adjusted for this split where appropriate. 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 diverse customer base. Business Segments The business segments information for 1996, 1995 and 1994 included on page 11 of this Annual Report is an integral part of these financial statements. 2. ACQUISITIONS During fiscal 1996 the Company acquired all of the common stock of a specialty foods marketer of upscale salad dressings via a stock-for-stock transaction. This transaction resulted in the issuance of approximately 273,000 shares of Lancaster Colony Corporation common stock having a fair market value of approximately $9,000,000 in exchange for cash of $380,000 and other assets and liabilities having a fair market value of $1,718,000 and $825,000, respectively. During fiscal 1995 the Company 15 acquired the net operating assets of automotive and specialty foods entities for cash of approximately $4,500,000 and $554,000, respectively. All such acquisitions were accounted for under the purchase method of accounting and the non-cash aspects of the fiscal 1996 acquisition 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 date of acquisition and are immaterial in relation to the consolidated totals. 3. INVENTORIES Inventories are valued at the lower of cost or market. Inventories which comprise approximately 21% and 25% of total inventories at June 30, 1996 and 1995 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 $14,014,000 and $12,025,000 higher than reported at June 30, 1996 and 1995, respectively. It is not practicable to segregate work in process from finished goods inventories. Management estimates, however, that work in process inventories amount to 10% or less of the combined total of finished goods and work in process inventories at June 30, 1996 and 1995. 4. SHORT-TERM BANK LOANS Short-term bank loans (generally for terms not exceeding ninety days) represent unsecured borrowings under various credit arrangements. As of June 30, 1996, 1995 and 1994, the Company had unused lines of credit for short-term borrowings from various banks of $199,000,000, $154,000,000 and $169,000,000, 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, 1996 and 1995, the Company had no short-term borrowings under its line of credit arrangements. 5. ACCRUED LIABILITIES Accrued liabilities at June 30, 1996 and 1995 are composed of:
(Dollars in Thousands) 1996 1995 - ------------------------------------------------------------------------------------- Income and other taxes $ 2,297 $ 2,768 Accrued compensation and employee benefits 22,747 19,533 Accrued marketing and distribution 4,894 4,724 Other 4,503 6,139 - ------------------------------------------------------------------------------------- Total accrued liabilities $34,441 $33,164 =====================================================================================
6. LONG-TERM DEBT Long-term debt (including current portion) at June 30, 1996 and 1995 consists of:
(Dollars in Thousands) 1996 1995 - ------------------------------------------------------------------------------------- Notes payable (8.9%, due in February 2000) $25,000 $25,000 Obligations with various industrial development authorities-collateralized by real estate and equipment: Floating rate due in installments to 2005 5,405 5,890 7%, due in installments to 2003 1,360 1,500 Other (2% to 15.6%, due in installments to 1996) 75 476 - ------------------------------------------------------------------------------------- Total 31,840 32,866 Less current portion 610 1,026 - ------------------------------------------------------------------------------------- Long-term debt $31,230 $31,840 =====================================================================================
The net book value of property subject to lien at June 30, 1996 was approximately $2,683,000. No material debt was assumed for the purchase of property additions in 1996, 1995 and 1994. Cash payments for interest were $2,875,000, $2,739,000 and $2,868,000 for 1996, 1995 and 1994, respectively. Various debt agreements require the maintenance of certain financial statement amounts and ratios, including a requirement to maintain a specified minimum net worth, as defined. At June 30, 1996, the Company exceeded this net worth requirement by approximately $88,088,000. 16
Long-term debt matures as follows: (Dollars in Thousands) - ------------------------------------------------------------------------------ Year ending June 30: 1997 $ 610 1998 545 1999 650 2000 25,660 2001 675 After 2001 3,700 - ------------------------------------------------------------------------------ Total $31,840 ==============================================================================
Based on the borrowing rates currently available for long-term debt with similar terms and average maturities, the fair value of total long-term debt is approximately $32,785,000 and $34,566,000 at June 30, 1996 and 1995, respectively. 7. INCOME TAXES The Company and its domestic subsidiaries file a consolidated Federal income tax return. Taxes based on income have been provided as follows:
(Dollars in Thousands) 1996 1995 1994 - ------------------------------------------------------------------------------------------ Currently payable: Federal $40,476 $40,163 $35,441 State and local 5,863 6,425 5,265 - ------------------------------------------------------------------------------------------ Total current provision 46,339 46,588 40,706 Deferred Federal, state and local provision (credit) 747 (2,304) (2,473) - ------------------------------------------------------------------------------------------ Total taxes based on income $47,086 $44,284 $38,233 ==========================================================================================
Tax expense resulting from allocating certain tax benefits directly to common stock and retained earnings totaled $427,000, $193,000 and $455,000 for 1996, 1995 and 1994, respectively. The Company's effective tax rate varies from the statutory Federal income tax rate as a result of the following factors:
1996 1995 1994 - -------------------------------------------------------------------- Statutory rate 35.0% 35.0% 35.0% State and local income taxes 3.0 3.5 3.3 Change in Federal tax rate 0.3 Other 0.2 0.1 0.4 - -------------------------------------------------------------------- Effective rate 38.2% 38.6% 39.0% ====================================================================
Deferred income taxes recorded in the consolidated balance sheets at June 30, 1996 and 1995 consist of the following:
(Dollars in Thousands) 1996 1995 - ------------------------------------------------------------------------------------ Deferred tax assets (liabilities): Inventories $4,910 $4,424 Employee medical and other benefits 4,525 4,557 Receivable valuation allowances 1,545 1,424 Other accrued liabilities 1,112 1,482 - ------------------------------------------------------------------------------------ Total deferred tax assets 12,092 11,887 - ------------------------------------------------------------------------------------ Total deferred tax liabilities - Property and other (6,390) (5,468) - ------------------------------------------------------------------------------------ Net deferred tax asset $5,702 $6,419 ====================================================================================
Cash payments for income taxes were $46,547,000, $51,529,000 and $39,354,000 for 1996, 1995 and 1994, respectively. 8. SHAREHOLDERS' EQUITY The Company is authorized to issue 2,650,000 shares of preferred stock consisting of 350,000 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. In April 1990, the Company's Board of Directors adopted a Rights Agreement which provides for one preferred share purchase right to be associated with each share of the Company's outstanding common stock. Shareholders exercising these rights would become entitled to purchase shares of Class A 17 Participating Preferred Stock. 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. Such exercise may ultimately entitle the holders of the rights to purchase for $70 per right common stock of the Company having a market value of $140. The person or groups effecting such 15 percent acquisition or undertaking such tender offer will not be entitled to exercise any rights. These rights expire April 2000 unless earlier redeemed by the Company under circumstances permitted by the Rights Agreement. In August 1995, as approved by the Board of Directors the Company purchased 250,000 shares of common stock from the estate of the Chief Executive Officer's father, a founder and former Chairman of the Company. The shares are being held in treasury and were acquired at a purchase price of $35.81 per share, which approximated the quoted closing price of the common stock as of the date of purchase. 9. STOCK OPTIONS Under terms of an incentive stock option plan approved by the shareholders in November 1995, the Company has reserved 2,000,000 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, 1996, all such shares were available for future grants under the plan. The following summarizes for each of the three years in the period ended June 30, 1996 the activity relating to stock options granted under a separate plan that expired in May 1995:
Number of Option Price Options Shares Per Share Total - -------------------------------------------------------------------------------- Outstanding-June 30, 1993 418,871 $ 7.50-28.15 $8,767,000 Exercised (195,119) $ 7.50-25.59 (4,505,000) Forfeited (729) $ 25.59 (19,000) - -------------------------------------------------------------------------------- Outstanding-June 30, 1994 223,023 $ 7.50-28.15 4,243,000 Granted 216,600 $ 33.38-36.71 7,236,000 Exercised (130,026) $ 7.50-33.38 (2,544,000) Forfeited (3,554) $ 25.59-28.15 (99,000) - -------------------------------------------------------------------------------- Outstanding-June 30, 1995 306,043 $ 7.50-36.71 8,836,000 Exercised (80,478) $ 7.50-33.38 (1,674,000) Forfeited (2,150) $ 33.38 (72,000) - -------------------------------------------------------------------------------- Outstanding-June 30, 1996 223,415 $ 25.59-36.71 $7,090,000 ================================================================================
The stock options outstanding at June 30, 1996 expire as follows:
Number of January Shares - ------------------------------------------------------------------------------- 1997 135,416 1999 10,000 2000 6,795 2002 47,999 2005 23,205 - ------------------------------------------------------------------------------- Total 223,415 - -------------------------------------------------------------------------------
The Company accounts for stock options in accordance with APB Opinion No. 25, "Accounting For Stock Issued to Employees." In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," effective in fiscal 1997. As permitted by SFAS 123, the Company will continue to account for stock options under APB 25 and provide the necessary disclosures required by SFAS 123 in the notes to its consolidated financial statements. 10. PENSION AND OTHER POSTRETIREMENT BENEFITS Defined Benefit Pension Plans: The Company and certain of its operating subsidiaries sponsor five noncontributory defined benefit plans which cover the union workers at such locations. Additionally, the Company and certain of its operating subsidiaries participate in two multiemployer defined benefit plans covering the union workers at such locations. Benefits under these plans are primarily based on negotiated rates and years of service. The Company contributes to these pension funds at least the minimum amount required by regulation or contract. 18 Net pension cost relating to these plans for each of the three years in the period ended June 30, 1996 is summarized as follows:
(Dollars in Thousands) 1996 1995 1994 - ------------------------------------------------------------------------------------------------ Company sponsored plans- Service cost - benefits earned during the period $ 472 $ 507 $ 556 Interest cost on projected benefit obligations 1,662 1,507 1,442 Actual return on pension plan assets (2,895) (2,984) (460) Net amortization and deferrals 889 1,130 (1,438) - ------------------------------------------------------------------------------------------------ Net pension cost for Company plans 128 160 100 Multiemployer plans 806 594 487 - ------------------------------------------------------------------------------------------------ Net pension cost $ 934 $ 754 $ 587 ================================================================================================
The following table summarizes the funded status of the Company's plans at June 30, 1996 and 1995:
(Dollars in Thousands) 1996 1995 - ------------------------------------------------------------------------------------ Actuarial present value of benefit obligation: Vested benefits $22,743 $22,215 ==================================================================================== Accumulated benefit obligation $22,846 $22,223 ==================================================================================== Projected benefit obligation $22,846 $22,223 Plan assets at fair value 25,803 23,792 - ------------------------------------------------------------------------------------ Excess of assets over projected benefit obligation 2,957 1,569 Unrecognized net gain (2,827) (1,879) Unrecognized prior service costs 1,045 1,103 Remaining unrecognized net transition obligation 271 303 - ------------------------------------------------------------------------------------ Net recorded pension asset $1,446 $1,096 ====================================================================================
The majority of 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 $3,476,000, $3,325,000 and $3,296,000 as of June 30, 1996, 1995 and 1994, respectively. The weighted average discount rates used in determining the projected benefit obligation for 1996, 1995 and 1994 were 7.50%, 7.25% and 7.70%, respectively. The expected long-term rate of return on assets was 9.0% for the three years. Employee Stock Ownership Plan: The Company sponsors an Employee Stock Ownership Plan (ESOP). In April 1990, the Company loaned $10,000,000 to the ESOP for the purpose of purchasing the Company's common stock in furtherance of the objectives of the Plan. The Company funded this transaction primarily through short-term bank borrowings. With the proceeds and as adjusted for all stock splits since April 1990, the ESOP effectively purchased 1,194,390 shares of the Company's common stock in the open market. The ESOP is fully paid by the Company and generally provides coverage to all domestic employees, except those covered by a collective bargaining agreement. Contributions to the ESOP are to be not less than that required by the terms of the loan agreement between the Company and the ESOP. The Company uses the shares-allocated method of accounting in determining the amount of expense related to each contribution. As of June 30, 1996, the amount due from the ESOP is recorded as a reduction in shareholders' equity and represents the Company's prepayment of future contributions to the ESOP. This amount will be expensed over the next year. Dividends accumulated on the Company's unallocated common stock held by the ESOP are used to repay the loan to the Company. Accordingly, the pretax expense associated with 1996, 1995 and 1994 totaled $1,077,000, $1,027,000 and $1,008,000, which is net of dividends of $201,000, $252,000 and $270,000 on the unallocated shares, respectively. In November 1993, the Accounting Standards Executive Committee issued Statement of Position 93-6, "Employers' Accounting for Employee Stock Ownership Plans." This Statement will not effect the Company's accounting treatment of existing shares purchased by the ESOP discussed above. However, any future purchases of the Company's stock by the ESOP will require the adoption of this Statement. 19 Postretirement Benefits Other Than Pensions: In addition to pension benefits, the Company also provides certain employees other postretirement benefits including health care and life insurance coverage. As of June 30, 1996, the Company provides such coverage under three active benefit plans of which two relate to collectively bargained benefits. In general, all eligible employees are entitled to receive medical and life insurance benefits upon meeting certain age and service requirements at the time of their retirement. The Company recognizes the cost of postretirement medical and life insurance benefits as the employees render service in accordance with Statement of Financial Accounting Standards (SFAS) No. 106. Relevant information with respect to these postretirement benefits as of June 30, 1996 and 1995 can be summarized as follows:
(Dollars in Thousands) 1996 1995 - ------------------------------------------------------------------------------------------------ Accumulated postretirement benefit obligation: Retired participants $1,920 $1,845 Fully eligible active plan participants 243 280 Other active plan participants 895 992 - ------------------------------------------------------------------------------------------------ Total 3,058 3,117 Unrecognized net loss from past experience and changes in assumptions (62) (266) - ------------------------------------------------------------------------------------------------ Accrued postretirement benefit cost $2,996 $2,851 ================================================================================================ Net postretirement benefit cost: Service cost $ 111 $ 74 Interest cost 226 167 - ------------------------------------------------------------------------------------------------ Total $ 337 $ 241 ================================================================================================ Estimated effect of 1% increase in assumed medical cost trend rates: Increase in accumulated postretirement benefit obligation $ 245 $ 248 ================================================================================================ Increase in net periodic postretirement benefit cost $ 50 $ 37 ================================================================================================ Assumed weighted average discount rate 7.50% 7.25% ================================================================================================
For 1995 and 1996, annual increases in medical costs are initially assumed to total approximately 9% per year and gradually declining to 5% by approximately the year 2003. The Company and certain of its subsidiaries participate in two multiemployer plans that provide various 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 $1,463,000, $1,174,000 and $996,000 in 1996, 1995 and 1994, respectively. 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 2002. 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): 1997-$4,737; 1998-$3,530; 1999-$1,312; 2000-$453; 2001-$217; thereafter-$86. Total rent expense, including short-term cancelable leases, during 1996, 1995 and 1994 is summarized as follows:
(Dollars in thousands) 1996 1995 1994 - ------------------------------------------------------------------------------------------------ Operating leases: Minimum rentals $4,393 $4,225 $4,006 Contingent rentals 579 457 306 Short-term cancelable leases 2,330 2,288 1,550 - ------------------------------------------------------------------------------------------------ Total $7,302 $6,970 $5,862 - ------------------------------------------------------------------------------------------------
12. CONTINGENCIES AND ENVIRONMENTAL MATTERS At June 30, 1996, the Company is a party to various legal and environmental matters which have arisen in the ordinary course of business. Such matters did not 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 future consolidated financial position or results of operations. Environmental expenditures relating to current or past operations are expensed in the period incurred. Expenditures relating to future operations are capitalized, provided they are recoverable and serve to improve the property. The Company records an estimate for contingent and environmental liabilities when costs are both probable and can be reasonably estimated. The Company periodically evaluates and revises such estimates based upon expenditures against such reserves and the availability of additional relevant information. 20 SELECTED QUARTERLY FINANCIAL DATA Lancaster Colony Corporation and Subsidiaries For the Years Ended June 30, 1996 and 1995
(Thousands Except Net Gross Net Earnings Stock Prices Dividends Paid Per Share Figures) Sales Margin Income Per Share High Low Per Share - ------------------------------------------------------------------------------------------------------------------------------------ 1996 First quarter $200,902 $ 59,319 $15,408 $ .52 $37.750 $33.500 $.15 Second quarter 239,055 75,621 22,369 .75 38.000 31.000 .17 Third quarter 200,459 60,308 17,767 .60 39.250 36.250 .17 Fourth quarter 215,496 68,704 20,591 .69 38.500 33.000 .17 - ------------------------------------------------------------------------------------------------------------------------------------ Year $855,912 $263,952 $76,135 $2.56 $39.250 $31.000 $.66 ==================================================================================================================================== 1995 First quarter $189,130 $ 57,016 $15,320 $ .51 $39.250 $32.750 $.12 Second quarter 225,248 69,944 19,981 .66 35.625 28.250 .14 Third quarter 191,975 59,205 16,413 .55 36.750 28.750 .14 Fourth quarter 188,773 61,777 18,810 .63 37.250 34.000 .15 - ------------------------------------------------------------------------------------------------------------------------------------ Year $795,126 $247,942 $70,524 $2.35 $39.250 $28.250 $.55 ====================================================================================================================================
Lancaster Colony common shares are traded in the Nasdaq National Market System (Nasdaq Symbol: LANC). Stock quotations were obtained from the National Association of Securities Dealers. The number of shareholders as of August 30, 1996 was approximately 9,000. EX-21 4 EXHIBIT 21 1 Exhibit 21 LANCASTER COLONY CORPORATION SIGNIFICANT SUBSIDIARIES OF REGISTRANT --------------------------------------
State or Province Percent of Name of Incorporation Ownership ---- ---------------- --------- Colony Printing & Labeling, Inc. Indiana 100% Dee Zee, Inc. Ohio 100% Fostoria Glass Company West Virginia 100% Indiana Glass Company Indiana 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. EX-23 5 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 28, 1996, appearing in and incorporated by reference in this Annual Report on Form 10-K of Lancaster Colony Corporation for the year ended June 30, 1996. /S/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP Columbus, Ohio September 23, 1996 EX-27 6 EXHIBIT 27
5 1,000 YEAR JUN-30-1996 JUN-30-1996 4,670 0 107,534 2,131 151,595 273,342 316,895 177,800 435,359 69,354 31,230 38,491 0 0 285,072 435,359 855,912 855,912 591,960 591,960 0 0 2,875 123,221 47,086 76,135 0 0 0 76,135 2.56 0
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