-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, lt7vuorNaEoe9MXOBU96zBObjpvoI0L79tN6uGKBb+VBc8Qme6Gce4zUtwEDEl4D NArkQqqIb/7ZSXzpJA5ojQ== 0000950152-94-000970.txt : 19940928 0000950152-94-000970.hdr.sgml : 19940928 ACCESSION NUMBER: 0000950152-94-000970 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940923 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LANCASTER COLONY CORP CENTRAL INDEX KEY: 0000057515 STANDARD INDUSTRIAL CLASSIFICATION: 3060 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: 94550085 BUSINESS ADDRESS: STREET 1: 37 W BROAD ST CITY: COLUMBUS STATE: OH ZIP: 43215 BUSINESS PHONE: 6142247141 10-K 1 LANCASTER COLONY 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, 1994 ___ 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.___ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No_____ The aggregate market value of Common Stock held by non-affiliates on September 1, 1994 was approximately $817,000,000. As of September 1, 1994, there were approximately 30,057,000 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 1994 Annual Report to Shareholders - Parts I and II. Proxy Statement for the Annual Meeting of Shareholders to be held November 21, 1994; to be filed - Part III. The 1994 Annual Report to Shareholders and 1994 Proxy Statement shall be deemed to have been "filed" only to the extent portions thereof are expressly incorporated by reference. 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, automotive, and glassware and candles - which accounted for approximately 40%, 33% and 27%, respectively, of consolidated net sales for the fiscal year ended June 30, 1994. The financial information relating to business segments for the three years ended June 30, 1994, appearing in Exhibit 13 in this Form 10-K Annual Report, is incorporated 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," "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." 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 primarily in the midwestern and southeastern parts of the United States. The distribution of these products to other parts of the country has significantly increased over the last three years. 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. 2 3 During fiscal year 1994, the registrant obtained adequate supplies of raw materials for this segment. The registrant's firm order backlog at June 30, 1994, in this business segment, was approximately $3,089,000 as compared to a backlog of approximately $2,749,000 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. 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 and vans, truck and trailer splash guards and quarter fenders, accessories such as tissue holders, litter caddies and oil drain pans and new car components. The automotive aftermarket products are marketed primarily through mass merchandisers and automotive outlets under the name "Rubber Queen" and the registrant sells bed liners under the "Protecta" and "Line-A-Bed" trademarks, 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 32% of this segment's total net sales during 1994. 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 1994, the registrant obtained adequate supplies of raw materials for this segment. The registrant's firm order backlog at June 30, 1994, in this business segment, was approximately $12,503,000 as compared to a backlog of approximately $7,257,000 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 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. 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 scents are sold in the mass merchandise markets as well as to supermarkets, drug stores and specialty shops under 3 4 the name "Candle-lite." Private label business is also an important part of the candle market. The registrant's glass and candle 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. During 1994, sales of glassware and candles to one customer accounted for approximately 12% of this segment's total net sales. No other customer accounted for more than 10% of this segment's total net sales. During fiscal year 1994, the registrant obtained adequate supplies of raw materials for this business segment. The registrant's firm order backlog at June 30, 1994, in this business segment, was approximately $24,229,000 as compared to approximately $23,142,000 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. 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 1992 through 1994.
1994 1993 1992 - - ------------------------------------------------------------------------ Specialty Foods 40% 40% 38% Automotive: Aftermarket 18% 18% 20% Original Equipment Manufacturers 15% 14% 12% Glassware and Candles: Consumer Table and Giftware 22% 22% 23%
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. The effective date of compliance with such standards is scheduled to occur in the registrant's fiscal year ending June 30, 1996. The registrant is currently developing a compliance strategy to submit to the related Federal agency for approval. Based upon available information, compliance with the Federal Clean Air Act provisions, as well as other various Federal, state and local environmental protection laws and regulations, is not expected to have a material adverse effect upon the level of capital expenditures, earnings or the competitive position of the registrant for the remainder of the current and succeeding fiscal year. See also Item 3 for a discussion of pending environmental matters. 4 5 EMPLOYEES The registrant has approximately 5,600 employees. FOREIGN OPERATIONS AND EXPORT SALES Financial information relating to foreign operations and export sales have not been significant in the past and are not expected to be significant in the future based on existing operations. Item 2. PROPERTIES The registrant uses approximately 5,382,000 square feet of space for its operations. Of this space, approximately 1,560,000 square feet are leased. The following table summarizes facilities exceeding 50,000 square feet of space and which are considered the principal manufacturing and warehousing operations of the registrant:
Approximate Location Business Segment(s) Square Feet - - -------- ------------------- ----------- Baltimore, MD (1) Glassware and Candles 245,500 Bedford Hts., OH (2) Specialty Foods 52,800 Blue Ash, OH (3) Glassware and Candles 150,000 Columbus, OH Specialty Foods 150,500 Coshocton, OH (4) Automotive 631,400 Des Moines, IA (5) Automotive 296,000 Dunkirk, IN Glassware and Candles 933,700 Elkhart, IN Automotive 96,000 Jackson, OH Automotive and Glassware and Candles 223,000 LaGrange, GA Automotive 133,100 Lancaster, OH Glassware and Candles 465,300 Leesburg, OH Glassware and Candles 234,900 Milpitas, CA (6) Specialty Foods 130,400 Mississauga, Ontario Automotive 66,000 Newport, TN (7) Automotive 81,000 Sapulpa, OK (8) Glassware and Candles 668,500 St. George, UT Automotive 67,500 Wapakoneta, OH (9) Automotive 163,300 Waycross, GA Automotive 122,500 Wilson, NY Specialty Foods 80,000
(1) Leased until September 30, 1995. (2) Leased for term expiring 1998 with an option to purchase at specific occurrences or expiration of lease. (3) Leased for term expiring 1996. (4) Part leased on monthly basis. (5) Part subject to capital lease expiring August 1996. Part leased for term expiring April 1995. Part leased for term expiring October 1996. (6) Part leased for term expiring 1997. (7) Leased for term expiring May 1996. (8) Part leased for term expiring in 1997. (9) Part leased for term expiring 2003 with ownership passing to registrant at lease expiration. 5 6 Item 3. LEGAL PROCEEDINGS On January 28, 1991, a cost recovery action under Section 107 of the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") was filed against Pretty Products, Inc. ("Pretty Products") and the registrant in the United States District Court ("Court") for the Southern District of Ohio in a proceeding styled UNITED STATES VS. PRETTY PRODUCTS, ET AL. The complaint seeks recovery of response costs allegedly incurred or to be incurred by the EPA in connection with the cleanup of the Coshocton City Landfill. The complaint also contains a claim for penalties under Section 104(e) of CERCLA for an alleged failure to respond properly to certain information requests, but this claim has been partially settled and the Court has indicated it is not inclined to award penalties against the registrant or Pretty Products on the record before it. Pretty Products and the registrant are defending the complaint on various grounds, among them the defense that the EPA's response costs are overstated. During fiscal 1994, the parties reached a tentative settlement of all remaining claims totaling approximately $1,700,000, the full amount of which has been provided for in the registrant's consolidated financial statements as of June 30, 1994 and is exclusive of any future insurance recoveries. The tentative settlement is subject to the approval of the Department of Justice before it is presented to the Court in the form of a proposed consent decree. The consent decree will become binding on Pretty Products and the registrant when it is approved and entered by the Court, which is expected to occur prior to December 31, 1994. If approved, it is anticipated the registrant will pay the claims during fiscal 1995. It is the opinion of management that the ultimate resolution of these matters will not have a material adverse affect on its financial condition or results of operations, whether or not it obtains recovery from its insurance companies. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None 6 7 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 21, 1994. 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 September 1 Offices and Executive Name 1994 Positions Held Officer ---- ---------- -------------- --------- John B. Gerlach 67 Chairman and Chief Executive Officer 1961 John L. Boylan 39 Treasurer and Assistant Secretary 1990 John B. Gerlach, Jr. 40 President, Chief Operating Officer and Secretary 1982 Larry G. Noble 58 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 15, 1993. All such persons have been elected to serve until the next annual election of officers, which shall occur on November 21, 1994 and their successors are elected or until their earlier resignation or removal. John B. Gerlach, Jr. is the son of John B. Gerlach. Except for Mr. Boylan, each of the executive officers listed above has served the registrant or its subsidiaries in various executive capacities for the past five years. 7 8 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 registrant's common shares during 1994 and 1993. 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, 1994 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 21, 1994, 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 21, 1994 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 21, 1994 is incorporated herein by reference. 8 9 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 21, 1994, which is incorporated herein by reference. 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, 1994 and 1993 and for each of the three years in the period ended June 30, 1994, together with the report thereon of Deloitte & Touche LLP dated August 30, 1994, appearing in Exhibit 13 of this Form 10-K Annual Report are incorporated herein by reference. INDEX TO FINANCIAL STATEMENTS Consolidated Statements of Income for the years ended June 30, 1994, 1993 and 1992 Consolidated Balance Sheets at June 30, 1994 and 1993 Consolidated Statements of Cash Flows for the years ended June 30, 1994, 1993 and 1992 Consolidated Statements of Shareholders' Equity for the years ended June 30, 1994, 1993 and 1992 Notes to Consolidated Financial Statements Independent Auditors' Report (a) 2. FINANCIAL STATEMENT SCHEDULES REQUIRED BY ITEMS 8 AND 14(d) Included in Part IV of this report is the following additional financial data which should be read in conjunction with the consolidated financial statements in the 1994 Annual Report to Shareholders. Independent Auditors' Report Supplemental Consolidated Schedules for each of the three years ended June 30, 1994: Schedule V - Property, Plant and Equipment Schedule VI - Accumulated Depreciation of Property, Plant and Equipment Schedule VIII - Valuation and Qualifying Accounts Schedule X - Supplementary Income Statement Information 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. 9 10 (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, 1994. 10 11 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 21st day of September, 1994. 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 16, 1994 - - --------------------------- Executive Officer and ------------------ John B. Gerlach Principal Financial Officer /S/ John B. Gerlach, Jr. President, Chief September 19, 1994 - - --------------------------- Operating Officer ------------------ John B. Gerlach, Jr. and Secretary /S/ John L. Boylan Treasurer, Assistant September 14, 1994 - - --------------------------- Secretary and Principal ------------------ John L. Boylan Accounting Officer /S/ Frank W. Batsch Director September 14, 1994 - - --------------------------- ------------------ Frank W. Batsch /S/ Robert L. Fox Director September 15, 1994 - - --------------------------- ------------------ Robert L. Fox /S/ Morris S. Halpern Director September 17, 1994 - - --------------------------- ------------------ Morris S. Halpern /S/ Robert S. Hamilton Director September 15, 1994 - - --------------------------- ------------------ Robert S. Hamilton /S/ Edward H. Jennings Director September 14, 1994 - - --------------------------- ------------------ Edward H. Jennings /S/ Richard R. Murphey, Jr. Director September 14, 1994 - - --------------------------- ------------------ Richard R. Murphey, Jr. /S/ Henry M. O'Neill, Jr. Director September 15, 1994 - - --------------------------- ------------------ Henry M. O'Neill, Jr. /S/ David J. Zuver Director September 14, 1994 - - --------------------------- ------------------ David J. Zuver
11 12 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, 1994 and 1993, and for each of the three years in the period ended June 30, 1994, and have issued our report thereon dated August 30, 1994; such financial statements and report are included in your 1994 Annual Report to Shareholders and are incorporated herein by reference. Our audits also included the consolidated financial statement schedules of Lancaster Colony Corporation and its subsidiaries, listed in Item 14. These financial statement schedules are 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 schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein. /S/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP Columbus, Ohio August 30, 1994 13 LANCASTER COLONY CORPORATION SCHEDULE V AND SUBSIDIARIES PROPERTY, PLANT AND EQUIPMENT FOR THE THREE YEARS ENDED JUNE 30, 1994
COLUMN A COLUMN B COLUMN C COLUMN D -------- -------- -------- -------- BALANCE AT BEGINNING ADDITIONS DESCRIPTION OF YEAR AT COST RETIREMENTS - - ------------------------------------------------------------------------------------------------------------ YEAR ENDED JUNE 30, 1992: Land........................... $ 3,621,000 $ 192,000 Buildings and improvements..... 57,331,000 $ 1,016,000 11,000 Machinery and equipment........ 164,806,000 16,024,000 7,649,000 -------------------------------------------------------------- TOTAL................. $225,758,000 $17,040,000 $ 7,852,000 ============================================================== YEAR ENDED JUNE 30, 1993: Land........................... $ 4,587,000 $ 7,000 Buildings and improvements..... 59,373,000 4,060,000 $ 124,000 Machinery and equipment........ 175,035,000 14,854,000 7,774,000 -------------------------------------------------------------- TOTAL................. $238,995,000 $18,921,000 $ 7,898,000 ============================================================== YEAR ENDED JUNE 30, 1994: Land........................... $ 4,558,000 $ 329,000 $ 81,000 Buildings and improvements..... 63,202,000 2,437,000 572,000 Machinery and equipment........ 182,041,000 20,766,000 8,167,000 -------------------------------------------------------------- TOTAL................. $249,801,000 $23,532,000 $ 8,820,000 ==============================================================
COLUMN A COLUMN E COLUMN F -------- -------- -------- OTHER BALANCE CHANGES AT END DESCRIPTION ADD(DEDUCT) OF YEAR - - ------------------------------------------------------------------------------------- YEAR ENDED JUNE 30, 1992: Land........................... $ 1,186,000 (A) $ 4,587,000 (28,000)(B) Buildings and improvements..... 1,117,000 (A) 59,373,000 (80,000)(B) Machinery and equipment........ 1,965,000 (A) 175,035,000 (111,000)(B) ---------------------------------------- TOTAL................. $ 4,049,000 $238,995,000 ======================================== YEAR ENDED JUNE 30, 1993: Land........................... $ (36,000)(B) $ 4,558,000 Buildings and improvements..... (107,000)(B) 63,202,000 Machinery and equipment........ (74,000)(B) 182,041,000 ---------------------------------------- TOTAL................. $ (217,000) $249,801,000 ======================================== YEAR ENDED JUNE 30, 1994: Land........................... $ (75,000)(B) $ 4,731,000 Buildings and improvements..... (75,000)(B) 64,992,000 Machinery and equipment........ (78,000)(B) 194,974,000 412,000 (A) ---------------------------------------- TOTAL................. $ 184,000 $264,697,000 ======================================== (A) Represents the cost of property of acquired business. (B) Represents the effect of foreign currency translation. 13
14 LANCASTER COLONY CORPORATION SCHEDULE VI AND SUBSIDIARIES ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT FOR THE THREE YEARS ENDED JUNE 30, 1994
COLUMN A COLUMN B COLUMN C COLUMN D -------- -------- -------- -------- ADDITIONS BALANCE AT CHARGED TO BEGINNING COSTS AND DESCRIPTION OF YEAR EXPENSES RETIREMENTS - - --------------------------------------------------------------------------------------------------------- YEAR ENDED JUNE 30, 1992: Buildings and improvements.... $ 24,854,000 $ 2,736,000 $ 7,000 Machinery and equipment....... 102,765,000 16,085,000 6,822,000 ------------------------------------------------------------ TOTAL.............. $127,619,000 $ 18,821,000 $ 6,829,000 ============================================================ YEAR ENDED JUNE 30, 1993: Buildings and improvements.... $ 27,567,000 $ 3,666,000 $ 83,000 Machinery and equipment....... 111,971,000 15,820,000 7,678,000 ------------------------------------------------------------ TOTAL.............. $139,538,000 $ 19,486,000 $ 7,761,000 ============================================================ YEAR ENDED JUNE 30, 1994: Buildings and improvements.... $ 31,128,000 $ 2,681,000 $ 470,000 Machinery and equipment....... 120,076,000 17,464,000 7,684,000 ------------------------------------------------------------ TOTAL.............. $151,204,000 $ 20,145,000 $ 8,154,000 ============================================================
COLUMN A COLUMN E COLUMN F -------- -------- -------- OTHER BALANCE CHANGES AT END DESCRIPTION ADD (DEDUCT) OF YEAR - - ---------------------------------------------------------------------------- YEAR ENDED JUNE 30, 1992: Buildings and improvements.... $ (16,000) $ 27,567,000 Machinery and equipment....... (57,000) 111,971,000 -------------------------------- TOTAL.............. $ (73,000)(A) $139,538,000 ================================ YEAR ENDED JUNE 30, 1993: Buildings and improvements.... (22,000) $ 31,128,000 Machinery and equipment....... (37,000) 120,076,000 -------------------------------- TOTAL.............. $ (59,000)(A) $151,204,000 ================================ YEAR ENDED JUNE 30, 1994: Buildings and improvements.... $ (28,000) $ 33,311,000 Machinery and equipment....... (40,000) 129,816,000 -------------------------------- TOTAL.............. $ (68,000)(A) $163,127,000 ================================ (A) Represents the effect of foreign currency translation.
14 15 LANCASTER COLONY CORPORATION SCHEDULE VIII AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE THREE YEARS ENDED JUNE 30, 1994
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, 1992................. $1,721,000 $2,198,000 $2,034,000(A) $1,885,000 ================================================================= Year ended June 30, 1993................. $1,885,000 $2,096,000 $1,111,000(A) $2,870,000 ================================================================= Year ended June 30, 1994................. $2,870,000 $1,029,000 $1,560,000(A) $2,339,000 ================================================================= (A) Represents uncollectible accounts written off net of recoveries.
15 16 LANCASTER COLONY CORPORATION SCHEDULE X AND SUBSIDIARIES SUPPLEMENTARY INCOME STATEMENT INFORMATION FOR THE THREE YEARS ENDED JUNE 30, 1994
COLUMN A COLUMN B -------- -------- CHARGED TO COSTS AND EXPENSES ---------------------- ........YEAR ENDED JUNE 30........ ITEM 1994 1993 1992 - - -------------------------------------------------------------------------------- MAINTENANCE AND REPAIRS................$15,506,000 $13,535,000 $13,383,000 ========================================= ADVERTISING COSTS......................$11,226,000 $11,084,000 $ 9,163,000 ========================================= Other items contained in Rule 12-11 of Regulation S-X have been omitted from this schedule because such amounts are less than 1% of total net sales.
16 17 LANCASTER COLONY CORPORATION FORM 10-K JUNE 30, 1994 INDEX TO EXHIBITS
Located at Exhibit Manually Number Description Numbered Page ------- ----------- ------------- 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. (i) .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 Employee Stock Ownership Plan and Trust Agreement. (g) .5 Resolution by the Board of Directors to amend registrant's 1981 Incentive Stock Option Plan approved by the shareholders November 19, 1990. (h) .6 Key Employee Severance Agreement between Lancaster Colony Corporation and John L. Boylan. (h) .7 Consulting Agreement by and between Lancaster Colony Corporation and Morris S. Halpern (j) 13. Annual Report to Shareholders. 19-38 22. Significant Subsidiaries of Registrant. 39 23. The consent of Deloitte & Touche LLP to the incorporation by reference in Registration Statement No. 33-39102 on Form S-8 of their reports dated August 30, 1994, appearing in this Annual Report on Form 10-K of Lancaster Colony Corporation for the year ended June 30, 1994. 40 27. Financial Data Schedule 41
17 18 (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, 1987. (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, 1991. (i) Indicates the exhibit is incorporated by reference from filing as an exhibit to the Lancaster Colony Corporation report on Form 10-K for the year ended June 30, 1992. (j) Indicates the exhibit is incorporated by reference from filing as an exhibit to the Lancaster Colony Corporation report on Form 10-K for the year ended June 30, 1993. 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 1994 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 1994 Annual Report to Shareholders to the Commission upon request.
18 EX-13 2 LANCASTER COLONY 10-K EXHIBIT 13 1 Exhibit 13 MANAGEMENT'S DISCUSSION ----------------------- AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION SUMMARY OF CONSOLIDATED OPERATIONS For the third consecutive year, Lancaster Colony Corporation achieved record levels of net sales and net income. During its fiscal year ended June 30, 1994, net sales totaled $721,732,000 reflecting a 14% increase over the previous year's record total of $630,627,000. Net sales totaled $555,793,000 in fiscal 1992. These increases in consolidated net sales primarily reflect the effects of significant growth in unit volumes recorded by each of the Company's three operating segments. Consolidated gross margins, as well as the level of consolidated operating income, can be significantly affected by the relative proportion of sales contributed by each of the Company's operating segments. Generally, sales within the Specialty Foods segment provide higher gross margins but incur greater selling costs than do sales of the other operating segments. The segment sales mix and related operating income experienced over the last three years can be summarized as follows:
SEGMENT SALES MIX(1): 1994 1993 1992 - - ----------------------------------------------------------------------------------- Specialty Foods 40% 40% 38% Automotive 33% 32% 32% Glassware and Candles 27% 28% 30% OPERATING INCOME(2): - - ----------------------------------------------------------------------------------- Specialty Foods 15% 15% 14% Automotive 13% 12% 12% Glassware and Candles 16% 12% 9% (1) Expressed as a percentage of consolidated net sales (2) Expressed as a percentage of the related segment's net sales
For fiscal 1994, the consolidated gross margin percentage of 32.2% remained essentially unchanged from that of 1993. A favorable sales mix combined with productivity improvements helped offset the effects of higher raw material costs incurred within the Specialty Foods segment. Fiscal 1993 margins increased to 32.2% from 31.5% in 1992 due to an increased proportion of specialty food sales as well as productivity improvements. Selling, general and administrative expenses for 1994 totaled $131,428,000, which reflects a 5% increase in such costs from 1993. Compared to 1992 levels, such operating expenses increased 8% in 1993 primarily as a result of higher sales. As a percentage of net sales, operating expenses were 18.2%, 19.8% and 20.8% in 1994, 1993 and 1992, respectively. The 1994 percentage was affected by the curtailment of selected promotional activities within the Specialty Foods segment during the latter half of the fiscal year. As affected by increased sales and improved operating efficiencies discussed above, operating income for 1994 of $100,668,000 increased 29% over the prior year total of $78,027,000. For similar reasons, operating income in 1993 increased over the 1992 level of $59,679,000 by 31%. Interest expense during 1994 totaled $2,849,000 compared to $3,625,000 and $5,584,000 incurred in 1993 and 1992, respectively. This trend has resulted from reduced levels of borrowings during the respective periods as well as from the generally lower interest rates present in 1994 and 1993. The Company's overall effective tax rate during 1994 increased to 39% compared to 38% in 1993. This increase reflects the August 1993 enactment of the Omnibus Budget Reconciliation Act of 1993 which increased the statutory marginal Federal income tax rate to 35% from 34%. The retroactive provisions of this legislation also increased the current year's tax provision by $343,000. During fiscal 1992, the provisions of Statement of Financial Accounting Standards No. 109 were adopted although the impact to that year's financial statements was not significant. See Note 7 to the accompanying financial statements for additional information regarding income taxes provided for each period. 3 2 SEGMENT REVIEW - SPECIALTY FOODS Net sales of the Specialty Foods segment during 1994 totaled $289,734,000, a 15% increase over 1993 sales of $252,288,000. The latter year's sales had also increased over 1992 sales of $212,349,000 by 19%. Over the last five years, sales have grown at an average compound rate of approximately 14%. Contributing to growth within the last three years has been this segment's expanded geographic market penetration, particularly toward the West Coast. This effort has been assisted by the fiscal 1992 acquisition of a California manufacturing facility. The addition of new national foodservice accounts as well as new products have also played an important role in recent years, with the 1994 results also being impacted by the July 1993 acquisition of Romanoff caviars and related product lines. As a percentage of net sales, operating income of $42,542,000 for 1994 was 15% which was comparable to the same percentage in 1993 and 14% in 1992. The increase in operating income over the last three years has been driven primarily through increases in sales volumes. However, in fiscal 1994, the effects of increased raw material costs incurred within this segment were minimized by the reduction of certain promotional activities as well as by the implementation of selected price increases. 4 3 SEGMENT REVIEW - AUTOMOTIVE The Automotive segment's sales increased 16% in fiscal 1994 to $235,287,000 compared to 1993 sales of $203,079,000. The latter year's sales had increased 15% from 1992 sales of $176,762,000. Sales growth of the Company's automotive products during these periods was influenced by a pattern of increasing domestic sales of new automobiles and light trucks. The Automotive segment's sales to original equipment manufacturers over the last three years have increased as a percentage of total segment sales from 38% in fiscal 1992 to 44% in 1993 and 45% in 1994. Additionally, growth in the sales of domestic new light trucks and vans have out-paced the increase in automotive sales causing the Company's aftermarket lines of truck and van accessories to also experience strong growth. The increased sales volumes, combined with the implementation of productivity improvements, have provided manufacturing efficiencies which permitted this segment's operating income to increase from 12% of net sales in 1992 and 1993 to 13% in 1994. Operating margins within the Automotive segment are expected to remain constrained by the restrictive pricing programs present throughout much of the original equipment markets. Accordingly, continued enhancements of manufacturing processes will be important in assuring satisfactory levels of future operating margins. 5 4 SEGMENT REVIEW - GLASSWARE AND CANDLES Increased sales of candles have led the sales growth of this segment during each of the last two years. Net sales in 1994 totaled $196,711,000, a 12% increase over the 1993 total of $175,260,000. Sales of new candle products, particularly wax-filled glass items marketed under the brand name Candle-lite, have significantly contributed to this growth. Also affecting this segment's sales during 1994 was a recovery in the sales of industrial glassware products which had experienced a decline in 1993 due to unfavorable economic conditions faced by customers in this market. Operating income of the Glassware and Candles segment during 1994 increased to 16% of net sales compared to 12% during 1993 and 9% in 1992. Factors contributing to this improved operating margin include the presence of a more favorable sales mix, volume-driven efficiencies and the installation of new machinery utilized to improve manufacturing processes. With respect to the new line of wax-filled glass products, synergies are also being attained through the production of glass components used within this product line. 6 5 LIQUIDITY AND CAPITAL RESOURCES Cash flows from operating activities during 1994 totaled $61,092,000 compared to $61,733,000 in 1993. These amounts were affected by an increase in net working capital of $37,798,000 in 1994 compared to 1993 and an increase of $29,641,000 in 1993 compared to 1992. The 1994 working capital increase reflects a volume-driven increase in accounts receivable as well as a growth in inventories reflecting higher sales and a planned build of certain seasonal inventories within the Glassware and Candles segment. The Company has established a considerable degree of financial flexibility over the last five years through its reduction of debt and its profit-driven growth in equity. Including short- and long-term debt within total capitalization, the Company's debt to capital percentage was 13% at June 30, 1994 compared to 16% at June 30, 1993. For perspective, this percentage was 40% at June 30, 1989. Management believes that liquidity for internal expansion and dividend requirements during fiscal 1995 will be sufficiently provided by cash flows from operating activities. The Company also continues to maintain discretionary bank lines of credit in excess of $150,000,000 to provide additional access to liquidity if required. Significant uses of cash during 1994 included expenditures for property additions totaling $23,532,000 compared to $18,921,000 in 1993 and $17,040,000 in 1992. The Company also expended approximately $5,438,000 in July 1993 to acquire the operating assets of a specialty foods operation specializing in the distribution of caviar and related products. Other significant 1994 expenditures included $7,718,000 for the purchase of treasury stock. During fiscal 1995, management will continue to consider opportunities for additional business acquisitions and review the benefits of further treasury stock purchases. Weighted average shares outstanding during each of the last three years were impacted by the declaration of stock splits including a three-for-two stock split paid in 1992, a four-for-three stock split paid in 1993 and a four-for-three stock split declared in fiscal 1994 and paid in July 1994. Shares issued were affected in 1992 by the retirement of all the treasury shares then-outstanding. Also during 1992, common stock was converted to stock with no par value to coincide with the Company's reorganization as an Ohio corporation. This resulted in the elimination of additional capital as a separate balance sheet caption. Not unlike other companies with a significant manufacturing base, the Company continues to incur certain costs and provide for necessary capital expenditures needed to comply with various environmental laws and regulations. It is clear that the trend in recent years has been for these requirements to become increasingly more complex and stringent. The extent to which these compliance costs may be ongoing is difficult to measure but is not believed to be material to financial operations. From time to time, the Company also communicates with regulatory authorities regarding various environmental matters and is currently named as a "potentially responsible party" in a legal action brought under the Comprehensive Environmental Response, Compensation and Liability Act relating to a landfill site in Ohio. The Company believes that the resolution of this matter should occur in fiscal 1995 and will not materially affect its results of operations or financial condition. IMPACT OF INFLATION The margins of the Specialty Foods segment were affected during 1994 by increased average market prices for soybean oil, a primary ingredient in several product lines of this segment. It is anticipated that the implementation of selected price adjustments should minimize the impact of these higher costs which still persist. With the exception of soybean oil, the last three years have otherwise remained a period of relatively stable costs and inflation is therefore not believed to have had a significant impact on gross margins or operating expenses. As mentioned above, the Company attempts to adjust its selling prices to offset the effects of increased raw material costs whenever possible. However, these adjustments have historically been difficult to implement on a timely basis relative to the increase in costs incurred by the Company. The Company's presence in diverse operations tends to minimize the inflationary risks associated with reliance on a limited number and type of purchased materials. Furthermore, the continuous implementation of productivity improvements in manufacturing and distribution operations have lead to reduced unit costs of production over time. 7 6 FIVE YEAR FINANCIAL SUMMARY --------------------------- Lancaster Colony Corporation and Subsidiaries
Thousands Except Per Share Figures) 1994 1993 1992 1991 1990 - - ---------------------------------------------------------------------------------------------------------------------------------- OPERATIONS Net Sales $721,732 $630,627 $555,793 $500,475 $504,945 Gross Margin $232,096 $203,106 $175,226 $150,373 $141,395 Percent of sales 32.2% 32.2% 31.5% 30.0% 28.0% Interest Expense $ 2,849 $ 3,625 $ 5,584 $ 8,735 $ 9,392 Percent of sales 0.4% 0.6% 1.0% 1.7% 1.9% Income Before Income Taxes $ 98,093 $ 74,319 $ 53,852 $ 33,817(1) $ 27,637(3) Percent of sales 13.6% 11.8% 9.7% 6.8% 5.5% Taxes Based on Income $ 38,233 $ 28,094 $ 21,481 $ 12,623 $ 11,587 Net Income $ 59,860 $ 46,225 $ 32,371 $ 20,184(2) $ 16,050 Percent of sales 8.3% 7.3% 5.8% 4.0% 3.2% Per Common Share:(4) Net income $ 1.97 $ 1.52 $ 1.06 $ .65(2) $ .51 Cash dividends $ .44 $ .37 $ .32 $ .30 $ .29 - - ---------------------------------------------------------------------------------------------------------------------------------- FINANCIAL POSITION Total Assets $355,445 $302,050 $289,951 $286,989 $308,506 Working Capital $164,446 $126,648 $ 97,007 $ 93,570 $ 75,937 Property, Plant and Equipment--Net $101,570 $ 98,597 $ 99,457 $ 98,139 $101,423 Long-Term Debt $ 32,933 $ 34,586 $ 39,984 $ 57,176 $ 60,191 Property Additions $ 23,532 $ 18,921 $ 17,040 $ 13,517 $ 18,223 Provision for Depreciation $ 20,145 $ 19,486 $ 18,821 $ 17,458 $ 17,219 Shareholders' Equity $236,847 $192,010 $159,416 $139,385 $128,915 Per Common Share(4) $ 7.83 $ 6.34 $ 5.25 $ 4.55 $ 4.17 Weighted Average Common Shares Outstanding(4) 30,317 30,483 30,502 30,825 31,561 - - ---------------------------------------------------------------------------------------------------------------------------------- STATISTICS Price-Earnings Ratio at Year End 23.9 18.9 15.5 11.9 15.8 Current Ratio 3.2 3.1 2.3 2.3 1.7 Long-Term Debt as a Percent of Shareholders' Equity 13.9% 18.0% 25.1% 41.0% 46.7% Dividends Paid as a Percent of Net Income 22.3% 24.5% 30.5% 45.2% 55.1% Return on Average Equity 27.9% 26.3% 21.7% 15.0% 12.0% - - ---------------------------------------------------------------------------------------------------------------------------------- 1 Net of a pretax charge of $3,000 for a write-down related to property held for sale. 2 The year's income, before a charge for the cumulative effect of accounting changes of $1,010 or $.04 per share, totaled $21,194 or $.69 per share. 3 Includes pretax litigation charge of $6,750. 4 Adjusted for 4-for-3 stock splits paid July 1994 and April 1993 and the 3-for-2 stock split paid April 1992.
8 7 BUSINESS SEGMENTS ----------------- FOR THE YEARS ENDED 1994, 1993 AND 1992 The business segments of the Company are defined as Specialty Foods, Automotive and Glassware and Candles. 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. 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 and components. 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; distribution of a variety of the Company's products to commercial markets; and glass floral containers. 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 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 1992 capital expenditures of the Specialty Foods Group included property from the purchase of a California manufacturing operation totaling $4,268,000. Specialty Foods expenditures would have been $2,741,000 and total capital expenditures would have been $17,040,000 without this purchase. Foreign operations and export sales are not significant, and no single customer accounts for 10% or more of consolidated net sales. The following sets forth certain financial information attributable to the Company's business segments for the three years ended June 30, 1994, 1993 and 1992:
(Dollars in Thousands) 1994 1993 1992 - - -------------------------------------------------------------------------------- NET SALES Specialty Foods $289,734 $252,288 $212,349 Automotive 235,287 203,079 176,762 Glassware and Candles 196,711 175,260 166,682 - - -------------------------------------------------------------------------------- Total $721,732 $630,627 $555,793 ================================================================================ OPERATING INCOME Specialty Foods $ 42,542 $ 38,282 $ 30,420 Automotive 31,305 24,280 20,750 Glassware and Candles 31,353 20,546 14,869 - - -------------------------------------------------------------------------------- Total 105,200 83,108 66,039 Corporate expenses (7,107) (8,789) (12,187) - - -------------------------------------------------------------------------------- Income Before Income Taxes $ 98,093 $ 74,319 $ 53,852 ================================================================================ IDENTIFIABLE ASSETS Specialty Foods $ 71,274 $ 59,933 $ 57,446 Automotive 108,597 99,984 100,722 Glassware and Candles 136,789 118,498 117,870 Corporate 38,785 23,635 13,913 - - -------------------------------------------------------------------------------- Total $355,445 $302,050 $289,951 ================================================================================ CAPITAL EXPENDITURES Specialty Foods $ 4,516 $ 3,414 $ 7,009 Automotive 7,419 6,857 4,982 Glassware and Candles 11,565 8,592 9,247 Corporate 32 58 70 - - -------------------------------------------------------------------------------- Total $ 23,532 $ 18,921 $ 21,308 ================================================================================ DEPRECIATION AND AMORTIZATION Specialty Foods $ 3,512 $ 3,199 $ 2,896 Automotive 8,778 8,633 8,965 Glassware and Candles 10,027 9,913 9,214 Corporate 86 82 140 - - -------------------------------------------------------------------------------- Total $ 22,403 $ 21,827 $ 21,215 ================================================================================
9 8 CONSOLIDATED STATEMENTS OF INCOME --------------------------------- FOR THE YEARS ENDED JUNE 30, 1994, 1993 AND 1992 LANCASTER COLONY CORPORATION AND SUBSIDIARIES
Years Ended June 30 1994 1993 1992 - - --------------------------------------------------------------------------------------------------------------------------------- NET SALES $ 721,732,000 $ 630,627,000 $ 555,793,000 COST OF SALES 489,636,000 427,521,000 380,567,000 - - --------------------------------------------------------------------------------------------------------------------------------- GROSS MARGIN 232,096,000 203,106,000 175,226,000 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 131,428,000 125,079,000 115,547,000 - - --------------------------------------------------------------------------------------------------------------------------------- OPERATING INCOME 100,668,000 78,027,000 59,679,000 OTHER INCOME (EXPENSE): Interest expense (2,849,000) (3,625,000) (5,584,000) Interest income and other--net 274,000 (83,000) (243,000) - - --------------------------------------------------------------------------------------------------------------------------------- INCOME BEFORE INCOME TAXES 98,093,000 74,319,000 53,852,000 TAXES BASED ON INCOME 38,233,000 28,094,000 21,481,000 - - --------------------------------------------------------------------------------------------------------------------------------- NET INCOME $ 59,860,000 $ 46,225,000 $ 32,371,000 ================================================================================================================================= NET INCOME PER COMMON SHARE $1.97 $1.52 $1.06 ================================================================================================================================= WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 30,317,445 30,483,467 30,501,695 ================================================================================================================================= See Notes to Consolidated Financial Statements
10 9 CONSOLIDATED BALANCE SHEETS --------------------------- JUNE 30, 1994 AND 1993 LANCASTER COLONY CORPORATION AND SUBSIDIARIES
June 30 ASSETS 1994 1993 - - ---------------------------------------------------------------------------------------------------------------------------------- CURRENT ASSETS: Cash and equivalents $ 30,423,000 $ 16,502,000 Receivables (less allowance for doubtful accounts, 1994--$2,339,000; 1993--$2,870,000) 80,737,000 67,974,000 Inventories: Raw materials and supplies 27,614,000 22,331,000 Finished goods and work in process 90,034,000 72,900,000 - - ---------------------------------------------------------------------------------------------------------------------------------- Total inventories 117,648,000 95,231,000 Prepaid expenses and other current assets 8,995,000 8,483,000 - - ---------------------------------------------------------------------------------------------------------------------------------- Total current assets 237,803,000 188,190,000 PROPERTY, PLANT AND EQUIPMENT: Land, buildings and improvements 69,723,000 67,760,000 Machinery and equipment 194,974,000 182,041,000 - - ---------------------------------------------------------------------------------------------------------------------------------- Total cost 264,697,000 249,801,000 Less accumulated depreciation 163,127,000 151,204,000 - - ---------------------------------------------------------------------------------------------------------------------------------- Property, plant and equipment--net 101,570,000 98,597,000 OTHER ASSETS 16,072,000 15,263,000 - - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL $ 355,445,000 $ 302,050,000 ================================================================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY - - ---------------------------------------------------------------------------------------------------------------------------------- CURRENT LIABILITIES: Current portion of long-term debt $ 1,301,000 $ 1,797,000 Accounts payable 31,054,000 26,334,000 Accrued liabilities 41,902,000 33,411,000 - - ---------------------------------------------------------------------------------------------------------------------------------- Total current liabilities 74,257,000 61,542,000 LONG-TERM DEBT--Less current portion 32,933,000 34,586,000 OTHER NONCURRENT LIABILITIES 8,093,000 8,852,000 DEFERRED INCOME TAXES 3,315,000 5,060,000 SHAREHOLDERS' EQUITY: Preferred stock--authorized 2,650,000 shares; Outstanding--none Common stock--authorized 35,000,000 shares; 25,437,000 20,572,000 Shares outstanding, 1994 - 22,674,020; 1993 - 22,716,680 Retained earnings 226,412,000 179,835,000 Foreign currency translation adjustment 440,000 605,000 - - ---------------------------------------------------------------------------------------------------------------------------------- Total 252,289,000 201,012,000 Less: Common stock in treasury, at cost 11,606,000 3,888,000 Amount due from ESOP 3,836,000 5,114,000 - - ---------------------------------------------------------------------------------------------------------------------------------- Total shareholders' equity 236,847,000 192,010,000 - - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL $ 355,445,000 $ 302,050,000 ================================================================================================================================== See Notes to Consolidated Financial Statements 11
10 CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------- FOR THE YEARS ENDED JUNE 30, 1994, 1993 AND 1992 LANCASTER COLONY CORPORATION AND SUBSIDIARIES
Years Ended June 30 1994 1993 1992 - - -------------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $59,860,000 $46,225,000 $32,371,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 22,403,000 21,827,000 21,215,000 Provision for losses on accounts receivable 1,029,000 2,096,000 2,198,000 Deferred income taxes and other noncash charges (437,000) 364,000 (1,978,000) Loss on sale of property 254,000 83,000 35,000 Changes in operating assets and liabilities: Receivables (13,792,000) (5,253,000) (4,251,000) Inventories (20,752,000) (2,542,000) 3,466,000 Prepaid expenses and other current assets 216,000 (1,232,000) 375,000 Accounts payable and accrued liabilities 12,311,000 165,000 13,869,000 - - -------------------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 61,092,000 61,733,000 67,300,000 - - -------------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Payments on property additions (23,532,000) (18,921,000) (17,040,000) Acquisitions net of cash acquired (5,438,000) (5,142,000) Proceeds from sale of property 412,000 41,000 555,000 Other--net (1,506,000) (1,022,000) (311,000) - - -------------------------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (30,064,000) (19,902,000) (21,938,000) - - -------------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Payment of dividends (13,378,000) (11,336,000) (9,864,000) Purchase of treasury stock (7,718,000) (3,888,000) (6,983,000) Payments on long-term debt (2,149,000) (6,689,000) (21,206,000) Reduction of ESOP debt 1,278,000 1,279,000 1,278,000 Common stock issued upon exercise of stock options including related tax benefits 4,865,000 501,000 3,393,000 Reduction of short-term bank loans (12,500,000) (13,020,000) Proceeds of long-term debt 3,250,000 - - -------------------------------------------------------------------------------------------------------------------------------- Net cash used in financing activities (17,102,000) (32,633,000) (43,152,000) - - -------------------------------------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash (5,000) (114,000) (108,000) - - -------------------------------------------------------------------------------------------------------------------------------- Net change in cash and equivalents 13,921,000 9,084,000 2,102,000 Cash and equivalents at beginning of year 16,502,000 7,418,000 5,316,000 - - -------------------------------------------------------------------------------------------------------------------------------- Cash and equivalents at end of year $30,423,000 $16,502,000 $ 7,418,000 ================================================================================================================================ See Notes to Consolidated Financial Statements
12 11 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY ----------------------------------------------- FOR THE YEARS ENDED JUNE 30, 1994, 1993 AND 1992 LANCASTER COLONY CORPORATION AND SUBSIDIARIES
Outstanding Common Additional Retained Shares Stock Capital Earnings - - ---------------------------------------------------------------------------------------------------------------- BALANCE, JUNE 30, 1991 11,484,342 $14,916,000 $51,305,000 $ 122,263,000 YEAR ENDED JUNE 30, 1992 : Net income 32,371,000 Cash dividends--common stock ($.3250 per share) (9,864,000) Purchase of treasury shares (241,594) Shares issued upon exercise of stock options including related tax benefits 150,364 10,000 1,438,000 Retire treasury stock (47,598,000) Changes in common stock from $1 par value to no par value 5,145,000 (5,145,000) Shares issued in connection with three-for-two stock split 5,695,824 Cash paid in lieu of fractional shares in connection with three-for-two stock split (11,000) Tax benefit of cash dividends paid on ESOP unallocated shares 102,000 Reduction of ESOP debt Translation adjustment - - ---------------------------------------------------------------------------------------------------------------- BALANCE, JUNE 30, 1992 17,088,936 20,071,000 0 144,861,000 - - ---------------------------------------------------------------------------------------------------------------- YEAR ENDED JUNE 30, 1993 : Net income 46,225,000 Cash dividends--common stock ($.3725 per share) (11,336,000) Purchase of treasury shares (114,000) Shares issued upon exercise of stock options including related tax benefits 37,037 501,000 Shares issued in connection with four-for-three stock split 5,704,707 Cash paid in lieu of fractional shares in connection with four-for-three stock split (12,000) Tax benefit of cash dividends paid on ESOP unallocated shares 97,000 Reduction of ESOP debt Translation adjustment - - ---------------------------------------------------------------------------------------------------------------- BALANCE, JUNE 30, 1993 22,716,680 20,572,000 0 179,835,000 - - ---------------------------------------------------------------------------------------------------------------- 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) 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 Translation adjustment - - ---------------------------------------------------------------------------------------------------------------- BALANCE, JUNE 30, 1994 22,674,020 $25,437,000 $ 0 $ 226,412,000 ================================================================================================================
Foreign Currency Amount Translation Treasury due from Adjustment Stock ESOP - - -------------------------------------------------------------------------------------------- BALANCE, JUNE 30, 1991 $1,132,000 $42,560,000 $7,671,000 YEAR ENDED JUNE 30, 1992 : Net income Cash dividends--common stock ($.3250 per share) Purchase of treasury shares 6,983,000 Shares issued upon exercise of stock options including related tax benefits (1,945,000) Retire treasury stock (47,598,000) Changes in common stock from $1 par value to no par value Shares issued in connection with three-for-two stock split Cash paid in lieu of fractional shares in connection with three-for-two stock split Tax benefit of cash dividends paid on ESOP unallocated shares Reduction of ESOP debt (1,278,000) Translation adjustment (255,000) - - -------------------------------------------------------------------------------------------- BALANCE, JUNE 30, 1992 877,000 0 6,393,000 - - -------------------------------------------------------------------------------------------- YEAR ENDED JUNE 30, 1993 : Net income Cash dividends--common stock ($.3725 per share) Purchase of treasury shares 3,888,000 Shares issued upon exercise of stock options including related tax benefits Shares issued in connection with four-for-three stock split Cash paid in lieu of fractional shares in connection with four-for-three stock split Tax benefit of cash dividends paid on ESOP unallocated shares Reduction of ESOP debt (1,279,000) Translation adjustment (272,000) - - -------------------------------------------------------------------------------------------- BALANCE, JUNE 30, 1993 605,000 3,888,000 5,114,000 - - -------------------------------------------------------------------------------------------- YEAR ENDED JUNE 30, 1994 : Net income Cash dividends--common stock ($.4425 per share) Purchase of treasury shares 7,718,000 Shares issued upon exercise of stock options including related tax benefits Tax benefit of cash dividends paid on ESOP unallocated shares Reduction of ESOP debt (1,278,000) Translation adjustment (165,000) - - -------------------------------------------------------------------------------------------- BALANCE, JUNE 30, 1994 $440,000 $11,606,000 $3,836,000 ============================================================================================
See Notes to Consolidated Financial Statements 12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ LANCASTER COLONY CORPORATION AND SUBSIDIARIES 1. 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. CASH EQUIVALENTS The Company considers all highly liquid investments purchased with maturities of three months or less to be cash equivalents. INVENTORIES Inventories are valued at the lower of cost or market. Inventories which comprise approximately 25% and 22% of total inventories at June 30, 1994 and 1993, respectively, 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. 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. For tax purposes, the Company generally computes depreciation using accelerated methods. OTHER ASSETS Included in other assets at June 30, 1994 is the cost in excess of net assets of purchased subsidiaries. Of this cost, $10,228,000 (net of accumulated amortization of $3,338,000) relates to companies acquired after October 31, 1970, and is being amortized over fifteen to forty years. Excess cost of $2,243,000 relates to a company acquired prior to November 1, 1970, and is not being amortized because, in the opinion of management, there has been no diminution in value. The remaining other assets consist of deferred costs which are amortized over their estimated useful lives; costs of patents acquired which are amortized over their estimated remaining economic lives; and other miscellaneous assets. Management periodically evaluates the future economic benefit of its long-lived intangible assets and appropriately adjusts those assets which are 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 and April 15, 1993, 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 and March 15, 1993, respectively. Additionally, on April 30, 1992, a three-for-two stock split was effected whereby one additional common share was issued for each two shares outstanding to shareholders of record on April 2, 1992. 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 these splits 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 not material, as the Company has a large diverse customer base with no single customer accounting for a significant percentage of trade accounts receivable. BUSINESS SEGMENTS The business segments information for 1994, 1993 and 1992 included in this Annual Report is an integral part of these financial statements. 14 13 2. ACQUISITIONS In July 1993, the Company acquired substantially all of the net operating assets and customer base of a specialty foods marketer of caviar and other specialty food products for cash of approximately $5,438,000. In November 1991, the Company acquired substantially all of the assets of a California salad dressing operation for cash of approximately $5,100,000. Both aquisitions were accounted for under the purchase method of accounting. 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 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 $12,553,000 and $13,147,000 higher than reported at June 30, 1994 and 1993, 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, 1994 and 1993. 4. SHORT-TERM BANK LOANS Short-term bank loans (generally for terms not exceeding ninety days) represent unsecured borrowings under various credit arrangements. The Company had unused lines of credit for short-term borrowings from various banks at June 30, 1994, 1993 and 1992 of $169,000,000, $179,000,000 and $156,500,000, respectively. The lines of credit are granted at the discretion of the lending banks and are generally subject to periodic review. The weighted average interest rate on short-term bank borrowings at June 30, 1992 was 4.1%. The maximum aggregate short-term borrowings outstanding at any month end during the years ending June 30, 1994, 1993 and 1992 were $10,500,000, $21,000,000 and $32,500,000, respectively. The average amounts of short-term borrowings outstanding during the respective years were $1,332,000, $7,590,000 and $25,718,000 and the related weighted average interest rates (computed based on days outstanding) were 3.2%, 3.4% and 5.3%. 5. ACCRUED LIABILITIES Accrued liabilities at June 30, 1994 and 1993 are composed of:
1994 1993 - - ----------------------------------------------------------------------------------------------------------------------------------- (Dollars in Thousands) Income and other taxes $ 8,010 $ 6,899 Accrued compensation and employee benefits 17,879 13,926 Accrued marketing and distribution 6,399 5,563 Other 9,614 7,023 - - ----------------------------------------------------------------------------------------------------------------------------------- Total accrued liabilities $ 41,902 $ 33,411 ===================================================================================================================================
6. LONG-TERM DEBT Long-term debt (including current portion) at June 30, 1994 and 1993 consists of:
1994 1993 - - ------------------------------------------------------------------------------------------------------------------------------------ (Dollars in Thousands) Notes payable:: 8.9%, due in February 2000 $ 25,000 $ 25,000 Other (2% to 5%, due in installments to 1996) 119 175 Obligations with various industrial development authorities -- collateralized by real estate and equipment: 7%, due in installments to 2003 1,640 1,942 Floating rate due in installments to to 2005 6,623 7,571 Mortgages payable -- collateralized by real estate (8.5%, due in installments to 1996) 11 31 Capital lease obligations (10.0% to 15.6%, due in installments to 1998) 841 1,664 - - ----------------------------------------------------------------------------------------------------------------------------------- Total 34,234 36,383 Less current portion 1,301 1,797 - - ----------------------------------------------------------------------------------------------------------------------------------- Long-term debt $ 32,933 $ 34,586 ===================================================================================================================================
15 14 The net book value of property subject to lien at June 30, 1994 was approximately $4,327,000. The Company has entered into various capital lease agreements in connection with equipment used in its operations. Such equipment at June 30, 1994 and 1993 had a capitalized cost of approximately $2,028,000 and $2,942,000 and related net book value of $507,000 and $1,131,000, respectively. No material debt was assumed for the purchase of property additions in 1994, 1993 and 1992. Cash payments for interest were $2,868,000, $3,664,000 and $6,263,000 for 1994, 1993 and 1992, 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, 1994, the Company exceeded this net worth requirement by approximately $93,704,000. Long-term debt, including capital leases, matures as follows:
---------------------------------------------------------- (Dollars in Thousands) Year ending June 30: 1995 $ 1,301 1996 1,047 1997 632 1998 570 1999 650 After 1999 30,034 ---------------------------------------------------------- Total $34,234 ==========================================================
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 $35,100,000. 7. INCOME TAXES The Company and its domestic subsidiaries file consolidated Federal income tax returns. Taxes based on income have been provided as follows:
1994 1993 1992 --------------------------------------------------------------------- (Dollars in Thousands) Currently payable: Federal $35,441 $26,563 $21,029 State and local 5,265 4,202 3,587 --------------------------------------------------------------------- Total current provision 40,706 30,765 24,616 Deferred Federal, state and local provision (credit) (2,473) (2,671) (3,135) --------------------------------------------------------------------- Total taxes based on income $38,233 $28,094 $21,481 =====================================================================
Tax expense resulting from allocating certain tax benefits directly to common stock and retained earnings totaled $455,000, $102,000 and $480,000 for 1994, 1993 and 1992, respectively. The Company's effective tax rate varies from the statutory Federal income tax rate as a result of the following factors:
1994 1993 1992 ---------------------------------------------------------- Statutory rate 35.0% 34.0% 34.0% State and local income taxes 3.3 3.7 4.2 Change in Federal tax rate .3 Other .4 .1 1.7 ---------------------------------------------------------- Effective rate 39.0% 37.8% 39.9% ==========================================================
Deferred income taxes recorded in the consolidated balance sheets at June 30, 1994 and 1993 consist of the following:
1994 1993 ------------------------------------------------------------------ (Dollars in Thousands) Deferred tax assets (liabilities): Employee medical and other benefits $ 4,482 $4,110 Inventories 3,105 2,505 Other accrued liabilities 2,693 2,033 Receivable valuation allowances 930 1,088 ------------------------------------------------------------------ Total deferred tax assets 11,210 9,736 ------------------------------------------------------------------ Property (6,789) (7,412) Other (306) (682) ------------------------------------------------------------------ Total deferred tax liabilities (7,095) (8,094) ------------------------------------------------------------------ Net deferred tax asset (liability) $ 4,115 $1,642 ==================================================================
Cash payments for income taxes were $39,354,000, $33,106,000 and $19,596,000 for 1994, 1993 and 1992, respectively. 16 15 8. SHAREHOLDERS' EQUITY As approved by the Company's shareholders in November 1991, the Company was reincorporated in Ohio on January 2, 1992 through a merger with a newly formed Ohio subsidiary. Each of the Company's common stock then-outstanding was thereby changed from having $1.00 par value to no par value resulting in the elimination of additional capital as a separate balance sheet amount. Also pursuant to this reorganization, 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, the terms of which were unaffected by the January 1992 reorganization. This Agreement 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 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. 9. STOCK OPTIONS Under terms of an incentive stock option plan as amended and approved by the shareholders, the Company reserved 3,625,000 common shares for issuance to qualified key employees. Shares available for future grants at June 30, 1994 total 990,747 shares. All options granted are exercisable at prices not less than fair market value as of the date of grant. The following summarizes stock option activity for each of the three years ended June 30, 1994, as restated to reflect the stock split in July 1994:
Number of Option Price Options Shares Per Share Total ------------------------------------------------------------------------- Outstanding--June 30, 1991 570,533 $7.04-$8.77 $4,346,000 Exercised (400,305) $7.04-$7.97 (3,012,000) Forfeited (1,333) $7.50 (10,000) ------------------------------------------------------------------------- Outstanding--June 30, 1992 168,895 $7.50-$8.77 1,324,000 Granted 309,793 $25.59-$28.15 7,937,000 Exercised (59,817) $7.50-$25.59 (494,000) ------------------------------------------------------------------------- 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 =========================================================================
Of the 223,023 stock options outstanding at June 30, 1994, 110,448 expire in January 1995, 64,575 expire in January 1996 and 48,000 expire in January 2002. 10. PENSION AND OTHER PENSION PLANS: POSTRETIREMENT BENEFITS 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. Net pension cost relating to these plans for each of the years in the period ended June 1994 is summarized as follows:
1994 1993 1992 -------------------------------------------------------------------------------------------------- (Dollars in Thousands) Company sponsored plans -- Service cost -- benefits earned during the period $ 556 $ 449 $ 404 Interest cost on projected benefit obligations 1,442 1,347 1,273 Actual return on pension plan assets (460) (4,272) (3,024) Net amortization and deferrals (1,438) 2,688 1,654 -------------------------------------------------------------------------------------------------- Net pension cost for Company plans 100 212 307 Multiemployer plans 487 371 526 -------------------------------------------------------------------------------------------------- Net pension cost $ 587 $ 583 $ 833 ==================================================================================================
17 16 The following table summarizes the funded status of the Company's plans at June 30, 1994 and 1993:
1994 1993 --------------------------------------------------------------------------------------- (Dollars in Thousands) Actuarial present value of benefit obligation: Vested benefits $20,109 $20,676 ======================================================================================== Accumulated benefit obligation $20,240 $20,795 ======================================================================================== Projected benefit obligation $20,240 $20,795 Plan assets at fair value 22,014 22,387 ---------------------------------------------------------------------------------------- Excess of assets over projected benefit obligation 1,774 1,592 Unrecognized net gain (2,202) (1,601) Unrecognized prior service costs 1,170 711 Remaining unrecognized net transition obligation 334 366 ---------------------------------------------------------------------------------------- Net recorded pension asset $ 1,076 $ 1,068 ========================================================================================
The majority of plan assets are invested in bonds, short-term investments and common stocks including shares of the Company's common stock with a market value of $3,296,000, $4,198,000 and $3,006,000 as of June 30, 1994, 1993 and 1992, respectively. The weighted average discount rates used in determining the projected benefit obligation for 1994, 1993 and 1992 were 7.7%, 7.0% and 7.7%, respectively. The expected long-term rate of return on assets was 9.0% for the three years. EMPLOYEE STOCK OPTION PLAN: The Company sponsors an Employee Stock Ownership Plan (ESOP). In April 1990, the Company loaned $10,000,000 to the Lancaster Colony Corporation 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, 1994, 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 not more than the next three years. 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 1994, 1993 and 1992 totaled $1,008,000, $994,000 and $981,000, which is net of dividends of $270,000, $285,000 and $297,000 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. POSTRETIREMENT BENEFITS: 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, 1994, 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, 1994 and 1993 can be summarized as follows: 18 17
1994 1993 ---------------------------------------------------------------------------------------------------- (Dollars in Thousands) Accumulated postretirement benefit obligation: Retired participants $1,591 $1,853 Fully eligible active plan participants 244 325 Other active plan participants 530 800 ---------------------------------------------------------------------------------------------------- Total 2,365 2,978 Unrecognized net gain (loss) from past experience and changes in assumptions 468 (319) ---------------------------------------------------------------------------------------------------- Accrued postretirement benefit cost $2,833 $2,659 ==================================================================================================== Net postretirement benefit cost: Service cost $ 101 $ 74 Interest cost 211 195 ---------------------------------------------------------------------------------------------------- Total $ 312 $ 269 ==================================================================================================== Estimated effect of 1% increase in assumed medical cost trend rates: Increase in accumulated postretirement benefit obligation $ 251 $ 316 ==================================================================================================== Increase in net periodic postretirement benefit cost $ 56 $ 36 ==================================================================================================== Assumed weighted average discount rate 7.7% 7.0% ====================================================================================================
For 1994, annual increases in medical costs are initially assumed to total approximately 10% per year and gradually declining to 5% by approximately year 2005. Annual increases in medical costs for 1993 were assumed to total approximately 12% per year and gradually declining to 5% by approximately year 2005. 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 $996,000, $832,000 and $726,000 in 1994, 1993 and 1992, respectively. POSTEMPLOYMENT BENEFITS: The Financial Accounting Standards Board has issued SFAS No. 112, "Employers' Accounting for Postemployment Benefits," which requires employers to accrue for postemployment benefits provided to former or inactive employees, their beneficiaries and covered dependents after employment, but before retirement. This change must be implemented by the Company no later than the fiscal year beginning July 1, 1994. Management has determined that the new statement will not have a material effect on the consolidated financial statements of the Company. 11. COMMITMENTS AND CONTINGENT LIABILITIES 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 2004. 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:
---------------------------------------------------------------------------------------- (Dollars in Thousands) Year ending June 30: 1995 $ 3,959 1996 3,694 1997 2,986 1998 1,771 1999 979 Thereafter 665 ---------------------------------------------------------------------------------------- Total $14,054 ========================================================================================
Total rental expense, including short-term cancelable leases, during 1994, 1993 and 1992 is summarized as follows:
1994 1993 1992 ---------------------------------------------------------------------------------------- (Dollars in Thousands) Operating leases: Minimum rentals $4,006 $3,814 $4,117 Contingent rentals 306 540 733 Short-term cancelable leases 1,550 1,198 1,170 ---------------------------------------------------------------------------------------- Total $5,862 $5,552 $6,020 ========================================================================================
The Company and its subsidiaries are involved in various litigation, disputes and governmental proceedings including certain Environmental Protection Agency matters. In the opinion of management, the ultimate resolution of these matters is not expected to be material to the Company's financial condition or results of operations. 19 18 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, 1994 and 1993, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended June 30, 1994. 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, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 1994 in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP Columbus, Ohio August 30, 1994 SELECTED QUARTERLY FINANCIAL DATA --------------------------------- FOR THE YEARS ENDED JUNE 30, 1994 AND 1993
(Thousands Except Per Net Gross Net Earnings Stock Prices1 Dividends Paid Share Figures) Sales Margin Income Per Share1 High Low Per Share1 - - ------------------------------------------------------------------------------------------------------------------------------- 1994 FIRST QUARTER $172,821 $ 54,408 $13,020 $ .43 $31.500 $26.875 $.0975 SECOND QUARTER 192,757 62,202 15,517 .51 35.625 30.000 .1125 THIRD QUARTER 171,492 53,858 13,239 .44 34.500 31.125 .1125 FOURTH QUARTER 184,662 61,628 18,084 .60 37.375 29.000 .1200 - - ------------------------------------------------------------------------------------------------------------------------------- YEAR $721,732 $232,096 $59,860 $ 1.97 $37.375 $26.875 $.4425 =============================================================================================================================== 1993 First quarter $152,292 $ 47,580 $10,541 $ .35 $19.875 $15.750 $.0850 Second quarter 170,783 55,960 12,037 .39 22.250 17.875 .0950 Third quarter 148,795 44,677 9,627 .32 28.625 20.750 .0950 Fourth quarter 158,757 54,889 14,020 .46 29.000 22.500 .0975 - - ------------------------------------------------------------------------------------------------------------------------------- Year $630,627 $203,106 $46,225 $ 1.52 $29.000 $15.750 $.3725 =============================================================================================================================== 1 Adjusted for the 4-for-3 stock split paid July 1994.
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 September 1, 1994 was approximately 15,000. 20 EX-22 3 LANCASTER COLONY 10-K EXHIBIT 22 1 Exhibit 22 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 Canada Inc. Ontario 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.
39 EX-27 4 ART. 5 FDS FOR ANNUAL REPORT ON FORM 10-K
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REGISTRANT'S CONSOLIDATED BALANCE SHEET AND STATEMENT OF INCOME FOR THE YEAR ENDED JUNE 30, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR JUN-30-1994 JUN-30-1994 30,423 0 83,076 2,339 117,648 237,803 264,697 163,127 355,445 74,257 32,933 25,437 0 0 211,410 355,445 721,732 721,732 489,636 489,636 0 0 2,849 98,093 38,233 59,860 0 0 0 59,860 1.97 1.97
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